Q & A’s – The Importance of a Correct Arbitration Clause

| DRC

Q. We are a Mexican grower/shipper but are not a member of DRC. We are negotiating a Marketing Agreement with a US distributor who is a DRC member. The Marketing Agreement includes an arbitration clause indicating that if there is a dispute we agree to use the services of DRC. If both parties sign this contract and encounter problems related to the contract, would we be able to immediately take action through DRC.

A. (Answer provided by Jaime Bustamante, Trading Assistance Manager): Prior to signing a contract, you have to make sure that the arbitration clause included in the Marketing Agreement follows the wording of our suggested DRC Arbitration Clause. While arbitration clauses can be modified or have additions, there are some parts that cannot be changed. You can give us a call and we can advise you on correct wording to the arbitration clause to help ensure that the clause is binding. Secondly, if, after signing the contract, you have a dispute, you would need to join DRC or pay the non-member fee to access our dispute resolution system. We will provide both parties with the options and procedures to resolve the issue through our dispute resolution system.

However, be aware that if one of the parties decides to take the dispute to a court of law, the judge will be the one deciding the avenue for recourse: DRC or court. In our experience, if the contract has a valid arbitration clause, the courts will enforce it and oblige the parties to go to arbitration.

To avoid involvement of the court for enforcement of the clause, DRC always recommends that before you begin a commercial relationship, you join or invite your customer to join DRC. If you become a DRC member and deal with other members both parties will be protected in case of a contract dispute.