Two recent decisions have clarified how dispute resolution clauses will be interpreted by the courts.

In AGL Energy Limited v Jemena Gas Networks (NSW) Ltd [2017] NSWSC 765, the NSW Supreme Court ruled that a dispute resolution clause which provided that the parties must go to mediation “before having recourse to arbitration or litigation” was not a binding arbitration agreement.

The relevant clause stated:

"In the event that discussions under clause 30.4 fail to resolve the Dispute, each Party expressly agrees to endeavour to settle the Dispute by mediation administered by the Australian Commercial Disputes Centre (ACDC) before having recourse to arbitration or litigation."Jemena argued that the clause was an arbitration agreement because by expressly restricting the parties’ recourse to arbitration until after mediation, the clause necessarily implied that after mediation they will have that recourse.

Justice Hammerschlag held that the clause did not disclose any agreement for compulsory arbitration because it contained no “critical” provision for either party to refer the dispute to arbitration or litigation, or for arbitration to have primacy. The clause contains no words of election and no words giving one party a right to compel the other in one direction.

In Fitzpatrick v Emerald Grain Pty Ltd [2017] WASC 206, the WA Supreme Court stayed proceedings commenced by the plaintiff and referred the matter to arbitration in reliance on an arbitration agreement contained in the Grain Trade Australia (GTA) Trade Rules, which were incorporated into the contract.

The Growers sought to argue that the arbitration agreement should be interpreted narrowly or read down when read in the context of the non-exclusive jurisdiction clause and the GTA Trade Rules’ reference to disputes of a ‘technical or mercantile nature’. In the alternative, the Growers argued that the dispute was non-arbitrable due to it relating to a trust, the arbitrator being unable to grant all the relief sought (i.e. removal of Emerald as trustee), and that it was not possible to join all the appropriate parties to the arbitration. Chief Justice Martin rejected each of these points, holding that arbitration agreements drafted in the relevant terms should be construed broadly, and the factors raised by the Growers did not render the dispute inarbitrable.

These cases highlight that the courts are concerned to hold parties to the dispute resolution process to which they have agreed. In AGL v Jemena, the purported arbitration clause did not demonstrate a clear intention that disputes under the agreement should be arbitrated as a precondition to litigation. In Fitzpatrick v Emerald, the clause was drafted broadly enough to encompass the dispute at hand and so the plaintiff was not able to circumvent arbitration. When drafting dispute resolution clauses, it is important to ensure that the parties’ intentions are clear both in regard to the process by which disputes should be resolved, and the kinds of disputes which should be resolved by that process.