Please enable JavaScript.
Coggle requires JavaScript to display documents.
RESOLVING INTERNATIONAL COMMERCIAL DISPUTES - Coggle Diagram
RESOLVING INTERNATIONAL COMMERCIAL DISPUTES
AVOIDING BUSINESS DISPUTES AND ALTERNATIVE DISPUTE RESOLUTION (ADR)
Offers faster, cheaper and more efficient alternative to resolving international commercial disputes than litigation
Parties must voluntarily submit to the resolution process
GENERAL
Long-term business relationships are the most profitable
Long-term relationships are built on trus
Disputes threaten the bonds of trust and impact future business opportunities
Terms of the contract are vital for dispute resolution
MEDIATION
Voluntary and nonbinding conciliation process
Final decision to settle rests with parties
No public records or negative publicity (private)
Parties reserve rights to resort to binding arbitration or litigation
ARBITRATION
A more formalized process resulting in a binding award that the courts of law in many countries will enforce
Parties must agree to arbitration
Parties may not withdraw
ADVANTAGES
The case may be heard in a more impartial tribunal
Arbitration may occur in a third "neutral" country, rather than the country of one of the parties
Parties are generally allowed to choose a location that is convenient for both
The arbitrator may be chosen by the parties from a roster of impartial industry experts or distinguished lawyers, who may also be from a third country
The case may be resolved using impartial and clear rules of the arbitrating organization, rather than more complex procedures of a court
Pretrial discovery - resulting in less expense and delay
Private process; records of proceedings are not publicly available
Fees are less
DEFINITIONS
Arbitration rules:
Rules of arbitration tribunals that address issues such as the qualification and appointment of arbitrators, the conduct of proceedings, procedures for finding the facts and applying the law, and the making of awards
Arbitration clauses:
A clause in a contract that requires the resolution of disputes through an arbitration process
United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention):
Requires that an arbitral award made in one country be honored and enforced by the courts of another country, where both countries are party to the Convention
DISADVANTAGES
Costly, even though it is less costly than litigation
The losing party has a limited right to appeal (usually reserved for rare cases where there is misconduct or fraud by the arbitrator, or where the arbitrator exceeds their authority, or refuses to consider material evidence)
Discovery is limited; and parties do not have to have full awareness all the facts and the other party's case
Arbitration clauses in contracts may limit the right to initiate litigation for an unwary party who did not read the agreement carefully
Less sophisticated parties are disadvantaged, due to limited experience in selecting an arbitrator
No precedential value to an arbitrator's decision - it cannot be relied on in future proceedings to the same extent as judicial opinions
ENFORCEMENT OF ARBITRATION AWARDS
The courts of most nations recognize and enforce arbitral awards.. In the US, an arbitral award will usually be enforced if the following conditions are met:
The award is enforceable under the local law of the country where the award was made
The defendant was properly subject to the jurisdiction of the arbitral tribunal
The defendant was given notice of the arbitration proceeding and an opportunity to be heard
Enforcement of the award is not contrary to public policy
The subject matter of the contract is not unlawful
The contract is not void for reasons of fraud or the incapacity of one of the parties
LITIGATION
A case/suit/lawsuit brought before a court of law with jurisdiction to hear the case, by the litigants (parties involved) for judgement (the resolution)
GENERAL
The final alternative for resolving a dispute
Used more frequently in the US than in any other country
DEFINITIONS
Substantive law (the law of the case):
The law that creates the right being claimed, or the law under which charges are brought
Procedural law:
Sets out when, where and how the claims are made and how the case is handed before the court
Choice of law clause:
Allows parties to a contract some control over the choice of substantive law and procedural rules
Forum selection clause:
Allows parties to a contract some control over where the litigation takes pace
Venue:
Geographical location of a court of competent jurisdiction
JURISDICTION
The power of a court to hear and decide a case (one of the key concepts of jurisprudence)
A court with jurisdiction is a
competent court
Territorial jurisdiction:
The power of criminal courts to hear cases involving crimes committed within their territory
In rem jurisdiction:
A court's power over property within its geographical boundaries
Subject matter jurisdiction:
The court's authority to hear a certain type of legal matter, such as tort cases or breach of contract
Diversity jurisdiction:
Cases arising between citizens of different states or between citizens of the US and citizens of foreign countries (where the amount in controversy exceeds $75,000)
In Personam Jurisdiction (jurisdiction over the person):
The court's power over a certain individual or corporation
No party can be made to appear before a court unless that court has personal urisdiction
If there is no personal jurisdiction, the case will be dismissed upon the defendant's motion
Jurisdiction is typically obtained by having a summons served on an individual or the legal agent of a corporation
Due Process Clauses of the 5th and 14th Amendments to the US Constitution
- Require obtaining service of process on a defendant in a case, and of having jurisdiction over them; the method used must be authorised by statute and be fundamentally fair
Service of process
- In the US legal system, service of process is the procedure by which a party to a case gives an appropriate notice of initial legal action to another party in an effort to exercise jurisdiction over that person so a to force them o respond to the proceeding before the court (Wikipedia)
Requirement for In Personam Jurisdiction
The concept has been broadened to allow jurisdiction over persons who are not present within the court's geographical territory, but who, for reasons of justice and fairness, should be held to answer a complaint there
US Supreme Court decision: "Due process requires only that in order to subject a defendant to a judgement in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice".
How much of a connection to a foreign country does it take for the courts to require one to defend a case there?
This is answered on a case-by-case basis. Many factors are considered when determining whether it would be fair to require a nonresident to come to their jurisdiction
The extent of the defendant's presence in the state
What business they have conducted in the state
The burden on the defendant
Fairness to the plaintiff
The interest of the state in having the case resoved there
Did the defendant have an office, branch location, or salespeople in the territory?
Did ay of their employees or agents travel there on business?
Did it advertise or therwise solicit business there?
Did it ship goods there?
Did it enter into a contract there, or was the contract to be performed there?
Jurisdiction in the European Union
The general rule is that jurisdiction is determined by the domicile of the defendant, specifically, their habitual or ordinary residence. Corporations are domiciled in the Member State where they are incorporated, where they have their primary administrative offices, or where they have their principal place of business
Exceptions
Cases involving commercial contracts for the sale of goods within the EU will be heard in the country where the goods were or should have been delivered
Cases involving a breach of contract for services (other than insurance or employment) within the EU will be heard where the services were or shouuld have been provided
Tort cases will be heard before the courts in the country where the wrong occured
In consumer contract cases, a consumer may bring an action against the other party either in the country in which that party is domiciled or in the country where the consumer is domiciled; lawsuits against a consumer to enforce the contract can only be brought in the courts of the consumer's home country
An employer may sue its employee or former employee only in the employee's place of domicile; but an employee may bring a lawsuit against an employer either in the country where the employee is domiciled, where the employer is domiciled, or, if not domiciled in the EU, where a branch or agent is located, or in the country where the employee regularly or last worked
Where at least one of the parties is domiciled in the EU, by an agreement specifying the courts of a certain EU country, provided that the agreement is written or electric form, or in international cases, in a form that the parties should have known amounted to a forum selection
Jurisdiction in China
Chinese courts may not exercise jurisdiction over nonresident defendants who are merely present in China. Rather, the nonresident defendant must have a meaningful connection to China which provides a sufficient ground
The
Civil Procedure Law
grants jurisdiction to Chinese courts based upon a nonresident defendant's conduct or property (for example, if a contract was concluded or performed in China)
A nonresident defendant may be subject to personal jurisdiction if the subject matter of a claim is located in China, if the defendant has property in China, or maintains a representative office in China
If the nonresident defendant committed a tort in China
Definitions
Letter rogatory:
A letter of request sent through diplomatic channels
Forum Non Conveniens (inconvenient forum):
The discretionary power of a court to refuse to hear a case, even though jurisdiction and venue are otherwise proper, because a court in another jurisdiction or location would be more convenient and justice would be better served
Forum shopping:
Requests to transfer on the basis of forum non conveniens are often attempts by counsel to shop around for a better legal deal
Forum selection clause:
A provision in a contract that fixes in advance the jurisdiction in which any disputes will be arbitrated or litigated (eliminates forum shopping attempts)
CONFLICT OF LAWS
The rules by which countries determine which jurisdiction's laws apply to a case and how to reconcile differences between laws
The Restatement (Second) of the Conflict of Laws (drafted under the auspices of the American Law Institute)
As a general rule, courts apply he law of the state, country, or jurisdiction that has the closest relationship to the action before them
APPLICATION TO CONTRACTS - SOME FACTORS:
Place of contracting
Place where the contract was negotiated
Place of contract performance
Location of the subject matter
Domicile, residence, nationality, place of incorporation, and place of business of the parties
DEFINITIONS
Tort:
A wrongful act or an infringement of a right (other than under a contract) leading to legal liability - includes personal injuries, product liability, wrongful death, fraud, etc
Traditionally, the law in the US and in most countries has been that tort actions should be governed by the law of the place where the injury or damage occurred
(lex loci delicti)
In the US, many courts are adopting the broader view taken by the Restatement (Second) that tort liability should be governed by the law of the jurisdiction that has the
most significant relationship
to the tort and to the parties
Factors to be considered by the Restatement (Second)
The place where the injury occured
The place where the conduct causing the injury occurred
The domicile, residence, nationality, place of incorporation, and place of business of the parties
The place where the relationship between the parties is centered
Choice of law clauses:
Contract provisions that stipulate the country or jurisdiction whose law will apply in interpreting the contract or enforcing its terms
Generally, the choice of law selection will be upheld as long as there is a
reasonable relationship
between the transaction ad the jurisdiction chosen
Comity:
Courts of one state respecting the laws and judicial decisions of other jurisdictions, not as a matter of obligation but out of deference and mutual respect
THE APPLICATION OF FOREIGN LAW IN AMERICAN COURTS
Foreign law was required to be proven in court as fact
Courts are ow free to determine as a matter of law what the foreign law is
Federal courts will follow the
Federal Rules of Civil Procedure
:
"A party who intends to raise an issue about a foreign country's law must give notice by a pleading or other writing. In determining foreign law, the court may consider relevant material or source, including testimony, whether or not submitted by a party or admissible under the Federal Rules of Evidence. The court's determination must be treated as a ruling on a question of law."
Judges may conduct their own research on foreign law, they may request briefs provided by the parties' lawyers, or they may rely on the testimony of foreign lawyers in or out of court
ENFORCEMENT OF FOREIGN JUDGEEMNTS
What if a judgement is won in a country where that party has no money or property? In the US, judgements taken against a party by a court of competent jurisdiction in one state will be enforced by all other states under the
Full Faith and Credit Clause of the US Constitution
(it does not apply to judgements from foreign countries - this issue is governed by state law)
Many states have statutes specifically permitting the enforcement of foreign judgements
More than 30 states have adopted either the
Uniform Foreign Money Judgements Recognition Act or its successor the Uniform Foreign-Country Money Judgements Recognition Act
Remaining states rely on the requirements or
comity
in determining whether to recognize a foreign judgement
European Union Regulation 1215/2012
requires mutual recognition of court judgements among EU member countries, without any special procedures
Foreign judgements may be recognized and enforced in
China
in accordance with a specific bilateral treaty with the jurisdiction in question or through application of the principle of reciprocity
The
Code of Civil Procedure
, adopted when
India
was a British colony, governs recognition of some foreign judgements in India
Judgements from
reciprocating
territories may be enforced directly before an Indian court
Judgements from
nonreciprocating
territories may only be enforced by filing a lawsuit in India seeking entry of an Indian judgement based on the non-Indian judgement. The non-Indian judgement only has
evidentiary effect
. The lawsuit must be filed within 3 years of the date of entry of the non-Indian judgement
Uniform Foreign Money Claims Act
Generally, courts award money judgements in their own currencies. However, fluctuations in currency exchange rates may have distorted the value of judgements relative to contract terms
The Uniform Foreign Money Claims Act gives state courts the authority to issue a judgement in a foreign currency
COMMERCIL DISPUTES WITH NATIONS
It is easier to bring governments to answer in court when they act in a commercial capacity, than when they act in their capacity as sovereign
SOVEREIGN IMMUNITY
Sovereignty is the supreme and absolute power that governs an independent state or nation
All independent countries are equal with one another and each has the exclusive right over its citizens, its territory, all property within that territory, and its internal affairs
The
doctrine of sovereign immunity
states that the courts of one country cannot hear cases brought against the government of another country and that courts cannot involve themselves in the internal affairs of a foriegn country
Commercial Activity Exception
- Sovereign immunity protects foreign governments from suit when they are acting as political entities
ABSTENTION DOCTRINES
Comity
- based on the desire for courtesy and reciprocity between nations
Act of State
- A principle of domestic law that prohibits the courts of one country from inquiring into the validity of the legislative or executive acts of another country
Political Question Doctrine
- Requires courts to consider 6 different factors before dismissing a lawsuit on political question grounds
Constitutional commitment of the question to the executive or legislative branch
A lack of judicially manageable and discoverable standards for resolving the question
The impossibility of resolving the question without making a policy determinaion of a kind clearly for nonjudicial determination
The determination of the question will result in the expression of lack of judicial respect for the executive or legislative branches
The need for adherence to a previously made political decision
The potential for embarrassment of the US government by differing pronouncements of policy by multiple branches of government
REFERENCES
Chapter 2 and 3 of Schaffer, R.; Agusti, F & Dhooge, L. (2020). International Business Law and its Environment, 10th edition, Hampshire, UK: Cengage.
https://en.wikipedia.org/wiki/Service_of_process
https://study.com/learn/lesson/substantive-law-vs-procedural-law-differences-examples.html#:~:text=Substantive%20law%20is%20the%20law,is%20handled%20before%20the%20court
.