This is frequently referred to as Alternate Dispute Resolution. Essentially the parties agree when they are constructing the MSA or Project Documents on a set of rules and procedures that wish to use in the event of a dispute. The benefit is that they are far more reasonable when they are constructing the Project, after something goes wrong in the Project. Typically what you would stipulate is that in the event of an issue formally raised by the Project Managers, that executive sponsors from both the Customer and the Consultant will first meet and try to resolve the issue as step 1 of ADR. The executive Sponsors must be at an appropriate level of authority but neither one should have a direct role in the Project Delivery; i.e. it should not be the Director of the Customer Group receiving the Project nor should it be anyone from the Consultant that is assigned to the Project delivery. The idea here is to allow cooler heads to intervene early and try to sort things out, before running to court.

Generally ADR would provide the Executives with a certain period of time in order to help resolve the issue. By including this in the Project documents both parties are obligated to comply, i.e. the named executive sponsor must make the ADR participation a priority. If the issue cannot be resolved you could then stipulate binding arbitration, as an alternative to a legal action. You would specify what rules such as the American Arbitration Association, the background the arbitrators must have such as specific industry experience. Often the Customer and the Consultant select one arbitrator from a list of qualified non-affiliated arbitrators provided by the AAA and those two select a 3 arbitrator. If you elect to mandate arbitration you would typically state that their finding is binding and can be entered as a judgment in a court of competent jurisdiction. You might also stipulate that in the event of a license or IP breach either party could seek injunctive relief, to address those emergency situations.

Opinions vary, but the goal of arbitration is a swift, less expensive yet fair way to resolve disputes. Many will tell you that it is not necessarily less expensive, and attorneys generally don’t like the prospect of trying to resolve a dispute without the court’s powers of discovery. There are pros and cons that you would need to carefully consider, but in any event the first piece of starting with the executive sponsors trying to sort things out is a very good 1^st step. You can always agree that parties may litigate if those efforts fail.