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Lesson 2: Resolving International Commercial Disputes (Conflict of Laws…
Lesson 2: Resolving International Commercial Disputes
Avoiding Business Disputes
3 Methods of Resolution:
1.Aribitration
Advantages
:
Resolution through impartial arbitrater
Choice of Arbitrators.
Arbitrating Organization's rules are law
Quicker, less delays, less expensive
Limited right to appeal
Disadvantages
Losing party, limited appeal right.
Not much transparency
Lax procedural rules
Less sophisticated parties may struggle to choose arbitrator.
Cannot rely on previous arbitration cases for future.
Formal process with court judgments being enforced in many countries. :
Incorporate Arbitration clause into business contracts and remove uncertainties.
Long term business relationships based on trust = Most profitable
Avoiding Business Disputes
2nd Method
2.Mediation
Final resolve to settle remains with parties.
Advantage: No media / press records or negative publicity.
Voluntary, Non Binding Process of Reconciliation
Impartial mediator chosen to assist in mediation.
Reference
Schaffer, R. Agusti, F. Dhooge, L. 2019. Principles of Business 12. Chapter3: Resolving International Commercial Disputes. Part 1:The Legal Environment of International Business. p56 - 80.
Avoiding Business Disputes
3rd Method
3.Litigation
Legal systems differ:
Procedural- & Substantive (case) law
Judges functions, evidence and testimony collection, appeal rights may all differ by country.
Rules or process to be followed during litigation.
Jurisdiction
Power of court to hear and decide upon a case.
In Rem Jurisdiction
Court power over property in geographical boundary.
Subject Matter Jurisdiction
Court authority over types of cases (contracts/ torts)
Territorial Jurisdiction
Criminal court power to hear and rule a case (competent court)
Lawsuit heard before a court with jurisdiction by parties involved (litigants) for resolution.
"In Personam" Jurisdiction
Courth authority over individual or coporation.
No party cannot be hauled into a court unless there is some connection to country & court has jurisdiction.
Based upon justice and fairness.
Due process clause expanded to territories outside geographical area of court in favor of afore mentioned.
Factors determining extent of connection needed:
Defendant presence in state.
Nature of business conducted.
Burden on defendant.
Interest of state to resolve case
Type of goods shipped
Fairness to plaintiff.
Any employees or agents of business in state?
Obtaining Jurisdiction: Service of process
Defendant must have knowledge of legal proceedings
Defendant may be informed by:
a. Registered mail
b. Personal agent/ attorney signing affidavit confirming summons was served.
c. Letter rogatory - request through diplomatic channels.
Requirement of most countries: Summons written in English and local language.
Forum "Non Conveniens"
Courts discretionary power to refuse to hear a case even though venue and jurisdiction are in order.
Done in favor of another jurisdiction or location where court can serve justice better and it be more convenient or better suited for witnesses/ defendant etc.
Factors influencing above:
Private factors:
Public Factors
Forum shopping
"Shopping around" of legal counsel on basis of "forum non conveniens" to find courts that are more favorable, profitable and sympathetic to their case.
Forum Selection Clause
Provision in contract that fixes jurisdiction that will be enforced in contract in case of arbitration or litigation.
Conflict of Laws
Rules where courts decide applicable jurisdiction law to certain cases.
No law clause present: Court applies law of jurisdiction/ country with closest relationship to dealings.
Factors conerning different types of conflicts -
Breach of contract:
Place where acceptance took place.
Negotiation of contract location.
Place where was performed.
Subject matter location.
Domicile, nationality, incorporation place , residence and business place of parties involved.
Torts
Place of injury occurrence
Place where conduct of injury took place.
Domicile, nationality, incorporation place, residence, place of parties involved.
Place where parties relationship is centered.
Law Clauses:
Contract provisions stating jurisdiction/ courts whose law applies when hearing a case or enforcing the outcome.
Choices of law clauses often used with forum selections.
Choices of law mostly upheld and enforced, only if enforcement is just, reasonable and not considered overreaching.
Enforcement of foreign judgemenst:
Most importantly judgement must be enforced but can only occur if:
Defendant was given notice of action and provided an opportunity to appear.
Court had jurisdiction over the case.
Disputes amongst nations:
a. Nations following
Sovereign Immunity
doctrine (political entities):
Courts of another country cannot hear the case and cannot be involved in international affairs of that country.
b.Foreign governments entering commercial field in business:
Can be sued in courts of another country for damages and breach of contract..
Cases can be heard and enforced.