What if a simple contract clause could help prevent your joint research project, licensing or supply agreement, acquisition, or outsourcing arrangement from becoming a costly dispute?
The American Arbitration Association®-International Center for Dispute Resolution® (AAA-ICDR) now offers Life Sciences Dispute Review Boards (DRBs), bringing a proven dispute-avoidance tool to complex life sciences collaborations.
These agreements are designed to advance business objectives, not to position parties for arbitration or litigation. By including a DRB clause at the contracting stage, life sciences companies can establish a practical process to address issues early, preserve commercial relationships, and keep deals on track. Free, two-page AAA-ICDR model clauses are available online.
Why Do Life Sciences Companies Need a DRB?
Life sciences companies often depend on complex collaborations with research partners, manufacturers, distributors, licensors, acquirers, and other commercial counterparties. These relationships can involve scientific uncertainty, regulatory obligations, commercialization goals, and operational dependencies, all of which can create pressure points over time.
Common sources of disagreement include:
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Differing business priorities or communication breakdowns
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Safety signal reporting obligations in clinical trials or post-approval pharmacovigilance agreements
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Promotional and marketing compliance issues, including off-label promotion, out-of-territory sales, drug claims for nutraceutical products, or noncompliant web messaging
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Disputes over whether contractual milestones have been met
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Unresolved questions about licensing rights and obligations
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Quality or Good Manufacturing Practice compliance concerns
Traditional escalation clauses can help, but they may not be enough when a disagreement involves technical complexity, commercial pressure, or an imbalance in decision-making authority. A DRB gives parties access to an independent board that is already familiar with the collaboration and can help address issues before positions become entrenched.
The timing can make a significant difference. Once a dispute moves into arbitration or litigation, costs, management time, and relationship strain can build quickly. A disagreement that might have been resolved earlier can begin to interfere with the business objective the parties were trying to achieve, whether that is regulatory approval, commercialization, product supply, or another shared goal.
The View from Inside: Why In-House Counsel and Business Leaders Should Champion the Use of DRB Clauses
More than an upgraded dispute resolution mechanism, a DRB can serve as a risk management tool long before a formal dispute arises. Here’s why it deserves consideration in your life sciences collaboration contracts:
It protects time and reduces business disruption. Disputes are expensive in ways that don’t always show up in an invoice. When issues arise in a collaboration, senior executives and in-house lawyers may get pulled into strategy sessions, document reviews, and internal meetings that can consume weeks of productive time — time that would otherwise be spent on development, commercialization, and moving the business forward. A DRB creates a defined, efficient channel for dispute resolution, keeping management focused on running the business.
It can reduce outside counsel expenses. Retaining litigation or arbitration counsel in a complex life sciences dispute is not a modest undertaking. Even a relatively contained arbitration or litigation can run into seven figures after accounting for document exchange/discovery, expert witnesses, hearing preparation, and specialized disputes counsel. A DRB does not require outside lawyers at the hearing stage. The savings, even from a single avoided arbitration, can dwarf the modest cost of standing up a board.
It provides an early, independent third-party perspective. One of the most underappreciated benefits of a DRB is what happens before a dispute is formally declared. Because board members are kept informed of the collaboration’s progress twice a year, they develop an independent, expert view of the arrangement and are keenly aware of its goals, its friction points, and its trajectory. When tensions begin to surface, that informed outside perspective can help reframe a developing conflict in ways that internal stakeholders, who are often too close to the situation, cannot. Fresh eyes from credible, independent industry experts can defuse a dispute before either side has hardened its position.
It creates a more neutral forum. Internal escalation processes are rarely neutral. Senior managers bring their own relationships, biases, and organizational pressures to any dispute that reaches their level. A DRB provides an independent forum, giving both sides a face-saving path to resolution that doesn’t require either party to back down.
It preserves the relationship and the deal. In-house counsel knows better than anyone that the goal of a collaboration agreement is not to position the company for litigation. Rather, the purpose of the agreement is to move the company’s business forward by getting a drug approved, a device to market, or a supply chain functioning. A DRB keeps those objectives front and center. Resolving disputes quickly and quietly gives the collaboration the best possible chance of surviving intact, which is almost always the better business outcome for both sides.
It signals good faith at the contract table. Proposing a DRB clause during negotiations signals that a company is serious about making an arrangement work. It demonstrates confidence in the relationship and a commitment to problem-solving over escalation, qualities that sophisticated counterparties will notice and appreciate.
How Does a DRB Work?
By establishing an expert board of one to three members through a two-page clause in the contract, and by keeping those board members up to date on the business twice a year, parties can create a process for resolving, and in some cases avoiding, disputes at an early stage without immediately moving into arbitration or litigation.
The process is straightforward:
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Step 1: Insert the Clause. The parties include an AAA-ICDR model contract clause in their agreement, selecting either a one-member or three-member board, with the AAA-ICDR managing the administrative process.
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Step 2: Choose the Board. The parties choose the board member(s). The AAA-ICDR maintains a list of suggested board members and offers a free model board retention agreement.
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Step 3: Keep the Board Informed. Twice a year, the parties update the board on progress in the venture covered by the agreement. Board members will develop familiarity with the goals and pressure points of the collaboration well in advance of a dispute.
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Step 4: Early Consultation. If disagreements begin to simmer, the board can be consulted to help defuse tension and attempt to avoid a formal dispute proceeding.
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Step 5: Formal Dispute Process. If a formal dispute arises, the parties will notify the board, which will request brief written submissions from the parties regarding the issue, and then the board will convene a hearing with no lawyers required.
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Step 6: Written Recommendation. The board will issue a written recommendation within 30 days of the hearing, with business objectives remaining the focus.
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Step 7: Appeal to Arbitration. If either party wishes to challenge the board recommendation, it has the right to appeal to arbitration immediately.
The Bottom Line
Many disputes that reach arbitration may have benefited from earlier intervention. A DRB gives parties access to an objective, informed third party before positions harden and before the dispute begins to consume time, resources, and attention.
A DRB does not replace arbitration for the disputes that require it. Rather, it helps reserve arbitration for matters that can’t be resolved earlier while giving parties a faster, less expensive, and more collaborative path to address issues before they disrupt the underlying business relationship. A DRB is a valuable tool that can help keep life sciences collaborations on track while avoiding the expense, relational harm, and business disruption commonly experienced with traditional approaches to dispute resolution.
For more information and to access the free model clauses, visit the AAA-ICDR Life Sciences DRB webpage.