Globalization of business and trade creates opportunity but oftentimes opportunity breads challenges. From shipping vessels blocking the Suez Canal to delays in work product as entire offices shut down, many business owners with international business dealings became all too familiar with the issues during the pandemic.
Even without the added stress of a global pandemic, most of today’s business owners will face issues which cross borders and generate multi-layered disruptions during the life cycle of their company. And, global disasters aren’t the only impetus for a business dispute. From minor disagreements to major breaches of contract, a business should always be prepared to mitigate risks and having a solid dispute resolution plan must be at the forefront.
You may be saying, “Domestic disputes also vary in size and scope so why do I need a separate game plan when dealing with international business relationships?” Let’s dig in.
Why do contracts between multinational companies require additional considerations?
Any contract between foreign countries instantaneously raises the question of which country’s laws apply to the contract and the resolution, which country has court jurisdiction, and how will the court’s judgement be enforced. Additional obstacles to consider when disputing an issue in a foreign court are their customs, traditions, prejudices and corruption. As well as the education of the final decision maker, most often a judge, who may have little to no understanding of your particular industry or technology and may not grasp the issues being presented.
These problems can typically be addressed by the inclusion of international arbitration as the dispute resolution method of choice stated in the business contract upon its signing. An experienced international arbitration counselor can advise on the specifics of an arbitration clause in a multinational contract and should always be consulted.
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If arbitration wasn’t added to the initial contract and a dispute has already arisen, it is not too late. Both parties may still opt for arbitration. Again, an experienced counselor can provide guidance on how best to proceed
Why is arbitration one of the best options for solving an international business dispute?
As stated, arbitration allows multi-jurisdictional disputes to be resolved without involving the courts of the different countries. Arbitrators are also neutral parties chosen by the individuals involved in the dispute therefore they can be as experienced and knowledgeable about the specific industry, circumstances, legal issue or other variables as you’d like.
Litigation can also be costly and lengthy, a fact hated by most busy business owners. On the other hand, the general costs and length of time an arbitration may take are laid out ahead of time and agreed upon by the parties involved.
Additionally, arbitrations are for the most part private whereas a court case could be made public. This is particularly important to businesses who are afraid trade secrets could be revealed as a result of the dispute.
Still wondering what an arbitration is? For more information, view our Arbitration Espresso video.