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B3B Dispute resolution clauses
These clauses set out how the parties have agreed to go about resolving any disputes that arise between
them under the reinsurance contract.
Arbitration clause
This clause is invariably found in brokered reinsurance contracts, and sets out the terms and conditions
This clause is
invariably found in of the parties’ agreement to arbitrate certain disputes arising in relation to the contract. This procedure,
brokered reinsurance a form of alternative dispute resolution (ADR), is concerned with the resolution of disputes outside
contracts
courts of law. It is confidential and, subject to the right of appeal, any award is binding and remains
private.
The important points to note about an arbitration clause are as follows:

• The parties agree to arbitrate before litigating any dispute between them. This requirement is often
expressed as a condition precedent to any right of (court) action under the contract. In most common
law territories it is mandatory to use arbitration if there is an arbitration clause in the policy prior to
commencing litigation.
• The arbitration clause should describe the number of arbitrators to be used, typically three but
sometimes a sole arbitrator is used, and any required qualifications or experience. This can either be
from an existing panel of qualified arbitrators or by listing the particular experience required, for
example, ten years insurance or reinsurance underwriting experience.
• The clause should address the issue of the procedure to be followed in the arbitration by the panel (or
tribunal) once constituted. It may do this by outlining the procedure within the clause itself or by
reference to a tried and tested set of rules, for example, those of the reinsurance and insurance
arbitration society of the International Association for Insurance Law (ARIAS) (that is, the ARIAS rules).
Alternatively and more usually, the procedure is left for the panel to decide as they see fit in the
circumstances.
An example of an extensive arbitration clause can be found in appendix 7.1, available on RevisionMate,
at paragraph 16 of the latest edition of JELC Excess Loss Clauses (01/11/2003).
Mediation clause Reference copy for CII Face to Face Training
Another way of resolving disputes is to mediate them. Here, a trusted third party attempts by various
means to broker a settlement between the parties with particular emphasis on principled negotiation,
and away from strict legal rules and procedures:

Where any dispute or difference between the parties arising out of or in connection with this Reinsurance,
7 including formation and validity and whether arising during or after the period of this Reinsurance, has not
Chapter been settled through negotiation, both parties may agree to try in good faith to settle such dispute by non-

binding mediation. The commencement of mediation will not prevent or preclude the parties from
commencing, or continuing arbitration/court proceedings unless the parties so agree.

In this clause, the parties may mediate at any time. Sometimes, the parties mandate mediation before
arbitration and agree to seek to resolve the dispute within a particular period, say 30 days, before
commencing arbitration proceedings. Also, to provide some rubric to the mediation process, the parties
may agree to apply a model procedure and, in widespread use, is the Centre for Effective Dispute
Resolution (CEDR) Model Mediation Procedure.

Activity
Visit the CEDR website (www.cedr.com) and review the 2016 edition of the CEDR Model Mediation Procedure.
Identify three main advantages of mediating over litigating. What do you consider to be the main disadvantage?

Service of suit clause
This clause is a legal requirement for certain reinsurance contracts where the reinsured is domiciled in
Legal requirement for
certain reinsurance certain states of the USA and the reinsurer elsewhere, and names a local organisation that the reinsurer
contracts has authorised to accept service of suit on its behalf, in the event of dispute with the reinsured. Its main
purpose is to avoid the inevitable delay and expense that would otherwise be associated with the
reinsured suing, and therefore having to serve papers on, an entity that could be located anywhere in the
world. This is achieved by the reinsurer naming an entity in the relevant area to represent its interests
and to accept service of a lawsuit, if necessary.