Life Sciences: Contracts and Dispute Resolution
Manufacturing and distributing products in the life sciences sector is complex and challenging. Life sciences companies frequently engage in cross-border partnerships and collaborations. Under these circumstances, international disputes often arise. Supply chain interruptions, differences in expectations, changes in direction and environment, can affect long-term collaboration. However, there are various options for resolving disputes.
Renegotiation and Settlement
If there is a long-term collaboration between parties, it might be preferred to reach an amicable settlement. Most companies in the life sciences industry include some form of negotiation in their contracts as a first dispute resolution step. Parties can try to find an amicable solution for the remainder of the term of the contract, before escalating the dispute to ligation or arbitration.
Also the need to keep disputes confidential (if inventions, know-how and reputation reasons are involved) can be an incentive to renegotiate the contract and reach a settlement. If a settlement is found, this can preserve the business relationship and provide a sustainable solution for the future.
Mediation is a useful tool when the dispute involves some kind of long-term business relationship. Parties may be close competitors, partners in a long-term project or parties to a long-term contract. An increasing number of life sciences companies provide for mediation in their contracts as a dispute resolution step. Mediation is private and confidential, which is often the reason why parties choose for mediation.
Mediation is a similar process to negotiating a settlement. The key difference between negotiation and mediation is that the latter is conducted with the assistance of a neutral third party (the mediator). The mediator assists the parties in reaching a voluntary settlement.
For disputes in the life sciences industry, the most common form of dispute resolution is arbitration. One of the advantages of choosing arbitration for the resolution of disputes is that the parties to the dispute can provide that the procedure and result of the proceedings remain confidential. This is critical for life sciences disputes that often involve commercially sensitive information. Arbitration also tends to be quicker than court proceedings.
Furthermore, arbitration is useful when the dispute is technically complex and has to be decided by an expert. Business relationships in the life sciences industry often involve complex scientific, technological, or regulatory issues. Effective dispute resolution therefore requires special expertise. This is particularly true for contracts relating to the production and marketing of products, and licensing. In such case, arbitration provides a solution as an arbitrator generally has a professional background in the same field as the dispute.
Another advantage that arbitration may present for the resolution of disputes in the life sciences sector is that multinational litigation can be prevented. Life sciences contracts often involve parties from different countries, which increases the risk of multinational litigation. Companies may need to seek the enforcement of decisions in several foreign countries. This is not necessary if the parties involved choose to solve their dispute through arbitration. The dispute can then be settled by one arbitration instead of several proceedings spread over several countries.
Litigation is more familiar to many companies than arbitration and has several advantages for the resolution of life sciences disputes. Litigation is preferable if a party wants to establish a legal precedent or obtain a public decision for future disputes. In the Netherlands, litigation is also a good choice for disputes, as courts generally have procedures in place to deal with disputes quickly and effectively.
For questions, please contact Michelle Krekels.