In the fast-paced world of commercial transactions, parties tend to focus on substantive deal terms—price, scope of work, deliverables, and timelines—while giving comparatively little attention to dispute resolution. Too often, the dispute resolution clause is treated as boilerplate. Yet whether in construction contracts, shareholders’ agreements, or purchase and sale agreements, the chosen dispute resolution mechanism can significantly affect how disputes are managed, the costs incurred, and the ultimate enforceability of outcomes. When outdated, vague, or ill-suited provisions are used, parties may face unnecessary procedural disputes, delay, and expense, sometimes before the merits are ever reached.

Why alternative dispute resolution (ADR) clauses matter

Disputes are an inevitable part of commercial relationships. When they arise, the parties’ ability to resolve them efficiently and effectively often hinges on the dispute resolution clause in their contract. A well-drafted ADR clause can:

  • Provide certainty and predictability about the process to be followed;
  • Reduce the time and cost associated with resolving disputes;
  • Preserve business relationships by encouraging less adversarial processes;
  • Allow for specialized decision-makers with expertise relevant to the dispute; and
  • Ensure enforceability of outcomes, particularly in cross-border transactions.

By contrast, poorly drafted or inappropriate clauses can give rise to jurisdictional skirmishes, procedural deadlock, and increased legal costs. In some cases, parties find themselves litigating not the substance of the dispute, but the preliminary question of how and where the dispute must be resolved.

Common pitfalls in dispute resolution clauses

Despite their importance, dispute resolution provisions are frequently an afterthought. Common pitfalls include:

  • Using outdated precedents: Parties may copy clauses from old contracts without considering whether they are suitable for the current transaction.
  • Lack of specificity: Vague or ambiguous clauses can create uncertainty and lead to satellite litigation over their interpretation.
  • Inappropriate selection of forum: For example, mandating arbitration for a simple debt collection matter may be unnecessary, while requiring litigation for a highly technical dispute may not be ideal.
  • Failure to address multi-tiered processes: Some contracts require negotiation or mediation before arbitration or litigation, but fail to specify timelines or procedures, leading to confusion, delay, and even potential limitation issues.

The risks of relying on boilerplate or ill-suited clauses were highlighted in Fisher v Airfoam Industries Ltd. (Quad-Lock Building Systems), 2025 BCSC 758, where the Court stayed proceedings in favour of arbitration, finding that the defendant established an arguable case that the sales orders, which incorporated terms and conditions including an arbitration clause from a website, constituted a binding contract. The decision serves as a reminder that dispute resolution mechanisms can be incorporated in unexpected ways, and that parties may find themselves bound by processes they did not meaningfully turn their minds to at the time of contracting.

Litigation vs. arbitration: Key differences

When drafting a dispute resolution clause, parties typically choose between litigation (court proceedings) and arbitration (a private adjudicative process). Each has its advantages and disadvantages, and the choice should be informed by the nature of the contract, the parties’ relationship, and the types of disputes that are likely to arise.

1. Formality and procedure

  • Litigation is governed by strict procedural rules (e.g., the Supreme Court Civil Rules in BC), with formal pleadings, discovery, and evidentiary requirements.
  • Arbitration offers greater flexibility. Parties can tailor the procedure to suit their needs, including timelines, evidence, and confidentiality.

2. Expertise of decision-maker

  • Judges in litigation are generalists and may not have a great deal of experience in the subject matter of a given dispute.
  • Arbitrators can be chosen for their expertise in the subject matter, which can be invaluable in technical or industry-specific disputes.

3. Confidentiality

  • Court proceedings are generally public, and filings become part of the public record.
  • Arbitration is private and confidential, which can be important for parties wishing to protect sensitive information or trade secrets.

4. Enforceability

  • Court judgments are enforceable within the jurisdiction and, through reciprocal arrangements, in some other jurisdictions.
  • Arbitral awards benefit from the New York Convention, making them more readily enforceable internationally.

5. Appeal rights

  • Litigation allows for appeals as of right (subject to leave in some cases), which can prolong the dispute, but offer the parties more opportunity to challenge the judge’s findings.
  • Arbitration generally offers limited or no grounds for appeal or review, promoting finality but reducing recourse for errors.

6. Cost and speed

  • Litigation can be lengthy and expensive, particularly in complex, multi-party disputes. Court availability and congested trial calendars can make it difficult to secure timely hearing and trial dates, contributing to delay and increased costs.
  • Arbitration is often viewed as faster and more efficient, in part because parties can implement tailored procedural schedules and more readily coordinate hearing time directly with an arbitrator than obtain court dates. While arbitration may be less costly than litigation in some cases, that is not always so. Parties must pay the arbitrator’s fees (typically on an hourly basis), as well as the costs of any administering institution and hearing facilities. If the process is not carefully managed, or if parties engage in extensive procedural wrangling, arbitration can rival or even exceed the cost and duration of litigation.

Recent British Columbia decisions continue to shape the enforceability and operation of arbitration clauses. In Vandenbosch v Rogers Communications Canada Inc., 2025 BCSC 1199, the Court stayed proceedings in favour of arbitration except for claims under the Business Practices and Consumer Protection Act. The decision reflects legislative changes prohibiting arbitration clauses in certain consumer contracts and highlights the importance of ensuring that ADR provisions remain compliant with current statutory frameworks.

Drafting effective ADR clauses

Given the material differences between litigation and arbitration, dispute resolution clauses should be tailored to the specific contract, the parties’ relationship, and the types of disputes that are likely to arise. The following best practices can help reduce uncertainty and avoid unintended consequences:

  • Assess the likely disputes: Consider the nature of disputes that may arise and whether they would benefit from a particular forum, procedure, or subject-matter expertise.
  • Be explicit: Clearly specify whether disputes will be resolved through litigation, arbitration, or a multi-tiered process (for example, negotiation followed by mediation and then arbitration).
  • Define the process: Identify the governing rules (such as those under VanIAC, ICC, or UNCITRAL), the place of arbitration, and the number of arbitrators.
  • Address confidentiality: If privacy is a priority, include express confidentiality obligations rather than assuming they will apply by default.
  • Consider enforceability: In cross-border agreements, ensure the clause is structured to facilitate recognition and enforcement in the relevant jurisdictions.
  • Review and update precedents: Avoid reliance on outdated templates. Standard clauses should be regularly reviewed and revised to reflect evolving best practices and legal developments.

The Supreme Court of Canada’s decision in Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41, illustrates that even carefully drafted arbitration clauses are not absolute. The Court held that the arbitration agreements were “inoperative” in the context of a receivership under the Bankruptcy and Insolvency Act, where enforcing multiple arbitral proceedings would undermine the orderly and efficient resolution of the receivership. The decision serves as a reminder that, in exceptional circumstances, courts may decline to enforce ADR clauses where doing so would conflict with overarching statutory objectives or public policy.

Conclusion

Dispute resolution clauses are far more than boilerplate; they are essential risk-management tools that can materially shape the trajectory and outcome of commercial disputes. Thoughtful consideration of the appropriate forum (litigation, arbitration, or a hybrid process) combined with clear, tailored drafting can help parties avoid unnecessary procedural disputes, control costs, and preserve commercial relationships.

Recent BC case law underscores the importance of specificity, statutory compliance, and the risks associated with relying on outdated or generic precedents. As commercial transactions become increasingly complex and cross-border in nature, the stakes associated with dispute resolution planning continue to rise. Investing the time to draft effective ADR clauses at the outset is a relatively modest effort that can yield significant dividends when disputes inevitably arise.

Should you have questions about selecting or drafting effective dispute resolution clauses, or require assistance navigating litigation or arbitration arising from a commercial dispute, a member of Miller Thomson’s Commercial Litigation Group would be pleased to assist.