Alternative dispute resolution (ADR) in international business transactions and beyond is a mechanism for settling disputes by other means that the usual litigation.
Generally speaking, there are three methods by which a company can enforce the terms and conditions of an agreement pertaining to an international transaction. The three mechanisms are negotiation, mediation and arbitration. Although arbitration and mediation are both considered forms of alternative dispute resolution, arbitration and mediation are fundamentally different. While mediation is a form of facilitated negotiation by a third party, arbitration leads to a binding determination of rights and obligations. In the last 30 years, alternative dispute resolution in international business transactions has become an important topic.
In order to properly serve companies in international commerce, in-house counsel and outside counsel and staff should become familiar with arbitration and mediation in the international setting. After briefly introducing the alternative dispute resolution mechanisms, this article further analyzes mediation and arbitration as forms of alternative dispute resolution in international business transactions.
According to the International Chamber of Commerce (the “ICC”), “[m]ediation is a flexible settlement technique, conducted privately and confidentially, in which a mediator acts as a neutral facilitator to help the parties try to arrive at a negotiated settlement of their dispute…In mediation proceedings, parties remain in control of the outcome by negotiating a contractually binding, win-win agreement based on their business interests.” ICC further notes that, “[s]ince control over the decision to settle and the terms of any settlement agreement remains with the parties, the mediator has no power to impose a settlement on the parties but facilitates the parties’ settlement negotiations.” As a result, the parties maintain control over how they want to solve their dispute. Mediation has become increasingly popular in recent years because of the advantage of reaching a win-win resolution of an international transaction dispute. However, if the parties are not able to have a fruitful mediation then mediation is a weak dispute resolution tool. For instance, the injured party may spend more time and money and incur additional damages if the breaching party is acting in bad faith and failing to even make an attempt to mediate.
According to the ICC, “[a]rbitration is a flexible, consensual process for resolving business disputes in a binding, enforceable manner. The decision makers are called arbitrators, or collectively the arbitral tribunal, [which] comprises of one or more independent individuals selected by the parties or appointed through a mechanism that the parties have agreed upon. An arbitral tribunal’s substantive decision is called an award. Awards in international arbitration are not subject to any appeal (except in a very limited number of jurisdictions) and can be enforced under both domestic and international enforcement regimes including, notably, the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.”
International Center for the Settlement of Investment Disputes (ICSID) is an ad hoc tribunal based in Washington DC, United States, charged with arbitrating International Investment Agreements and providing foreign investors with a mean for redress against nations for breaches of contract. ICSID handles relatively few cases and has jurisdiction to hear only legal disputes arising out of an investment between a contracting state or agency of a contracting state and a national (natural or juridical person) of another contracting state, and the parties to the dispute consent in writing to submit to the jurisdiction of ICSID. ICSID awards cannot be reviewed by domestic courts but state immunity to lawsuits and judgments poses a barrier to collection.
Lately, international arbitration has been a generally favored approach for dispute resolution in the international context, especially because of the fact that courts of foreign jurisdictions may not honor the orders rendered by the courts of other jurisdictions.
Contact us or schedule a consultation with your international business attorney in Miami, Florida USA to help you choose the best alternative dispute resolution in international business transactions.
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