International business law is fascinating. Unlike the U.S. where the laws of each state are relatively uniform, the laws of the world’s 196 countries vary dramatically. Because of this dynamic, there is no end to the complex and challenging issues that come up every day in our law firm.
Different Countries. Different Issues.
One day we’ll analyze investment issues arising out of a dispute in Kyrgyzstan and another day we’ll tackle an issue concerning the breach of a military contract in Ecuador.
Yet another day we’ll deal with the employment status of a foreign national under contract with a U.S. employer in Brazil and then turn around to address the theft of intellectual property in Russia.
This stuff never gets old.
Same Problems with Litigation
I mention this because time and time again, I see that many of these international disputes and lawsuits could have been resolved had the parties incorporated an arbitration clause into their business agreements.
When an international business dispute arises, litigation is usually the least appealing method to resolve the conflict. The extensive, well-documented problems with litigation of ordinary commercial disputes include high cost, the likelihood of injury to the underlying commercial relationship and the uncertainty of the outcome.
Adding an international component to litigation presents an additional set of interrelated problems, such as forum shopping, procedural complexities, enforcement, added costs and sovereign immunity.
International Arbitration Superior Over Litigation
The most effective mechanism by far in resolving international dispute is international arbitration. Why? International arbitration levels the playing field by taking away the home court advantage of parties on either side of a transaction.
But the most attractive aspect of arbitration is that the awards issued by an international arbitration tribunal will receive worldwide recognition by countries that are members of one of the international conventions on the enforcement of tribunal awards.
Given the superior advantages arbitration has over litigation in resolving international disputes, it’s essential that you include an international arbitration agreement in your international business contracts.
Your clients will thank you and you’ll soon be on your way to becoming an international dispute resolution rockstar.
You and your counterpart(s) can provide for arbitration of future disputes by inserting the following sample clause into your contract or agreement:
“Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be determined by arbitration administered by the International Centre for Dispute Resolution in accordance with its International Arbitration Rules.”
“Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be determined by arbitration administered by the American Arbitration Association in accordance with its International Arbitration Rules.”
You should also consider adding:
(a) “The number of arbitrators shall be (one or three)”;
(b) “The place of arbitration shall be (city and/or country)”; or
(c) “The language(s) of the arbitration shall be ________________.”
By including an arbitration provision in your international business contracts or agreements, you’ll be well on your way to resolving disputes much more efficiently than traditional means.
For best practices for drafting your international arbitration clause, be sure to read my earlier post, 7 Ways to Bulletproof Your International Arbitration Agreement.
Follow these steps, and you’ll have earned your reputation as an international dispute resolution rockstar.