Nature and Effect of Multi-tier dispute resolution Clause in Contracts.

Usage of Multi-tiered dispute resolutions clauses in commercial contracts , in particular long-term contracts is very common. Theses clauses comprise different stages of ADR (Alternative Dispute Resolution) with Arbitration or litigation. Agreement or decision made in these pre-arbitral or pre-litigation stages such as the mediator`s opinion are not binding upon the parties. So the issue is if it is mandatory for parties to follow all steps contemplated in these clauses or not? And what makes these pre-arbitral or pre-litigation steps binding? In this article different relevant opinions will be illustrated. Through comparative studying the case law of ICC, English courts and other countries requirements for pre-arbitral or pre-litigation steps will be illustrated. It is concluded that parties agreement has a binding nature and arrangement must be followed as provided in these clauses and requirements that make different tiers of these clauses as enforceable are clarified. Findings show that if relevant requirements including Usage of binding words,exact drawing of each step and parties` good faith are met, judicial and arbitral authorities take agreed steps in these clauses as binding. In authors` opinions this practice which is in consistent with the principle of freedom of Contracts is correct.