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How to settle an International Dispute

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How to settle an International Dispute article image

dispute_refereeConflict is challenging at the best of times but what happens when disputes cross international borders? Settling an international dispute starts with prevention but there are also non-adversarialcures for disagreements Avoid getting into a dispute to begin with by contracting clearly, equitably and unambiguously, getting legal advice early and conducting due diligence. "That’s the first thing anyone can do to protect themselves. Due diligence can be done through Austrade offices overseas, and with the assistance of your accountant and law firms here and overseas," explains Andrew Hudson, partner at law firm Hunt & Hunt. "You will need to ensure that they can provide assistance here and overseas in the jurisdiction in which you are going to trade. Local information is vital." Ask for legal, commercial and financial references, make sure you check them and keep accurate documentation of your due diligence process. "I often hear, ‘I found them on the internet so they should be all right’. People can’t be bothered with due diligence and it’s always those ones who are back within a week saying they have a problem," says Hudson.

Careful contracting

When contracting, ensure the agreement is properly drafted in English and legally effective. You can have versions in English and in another language, but the agreement must reflect that the English version takes precedence.  Performance reviews should also be stated, accompanied by clear benchmarks. Don’t forget to be explicit regarding intellectual property (IP). "Regarding intellectual property, the most important thing you can do is ensure you’ve registered your IP in all the relevant jurisdictions. This gives you a better ability to enforce your rights," says Hudson. Also ensure the agreement includes a proper dispute resolution clause covering cost, jurisdiction and enforcement. "One popular option is a cascade process based on alternative dispute resolution given that there can be difficulties in using court systems overseas," says Hudson. "In the event of a dispute, the first step is to have nominated representatives meet to negotiate in good faith. Should that fail, the parties have mediation, and failing that, they then, perhaps with the ICC rules. If no success with mediation, then they have arbitration to an agreed set of rules. "Parties can elect to adopt the rules set to resolve disputes by the International Chamber of Commerce, the United Nations or , for instancethose of the Australian Commercial Disputes Centre for Dispute Resolution. However, before proceeding it is important to understanding  the content of the which arbitration rules you are to adopt willing to submit to is critical as well; don’t just rely on the ‘brand’, actually check the rules before referencing them in the agreement." He adds: "You also need to reserve your right to urgent interlocutory action, for instance, to get an urgent court order to stop the other party behaving badly by breaching non -- competition, or confidentiality obligations or your IP rights." Make sure the governing law is Australian and the governing language is English for dispute resolution, even if you’re arguing the dispute overseas. Also, if you have to go to mediation or arbitration, "you’d like to make sure that it is accordance with Australian jurisdiction ideally. Or Singapore, Hong Kong or London," he suggests. Be aware that if you are selling particular commodities, they may already be governed by standard forms of agreement and arbitration. For instance if you sell grain, there are grain trader forms and processes already in place.

What's a dispute?

In legal terms, a dispute must have occurred for a resolution process to begin. In 1924, the Permanent Court of Justice held in the Mavrommatis Palestine Concessions case: "A dispute is a disagreement on a point of law or fact, a conflict of legal views or of interests between two persons. "This seems obvious but is important. The absence of overt disagreement, or a failure to respond or silence, does not negate the existence of a dispute according to the International Court of Justice. Even if one party acknowledges the other side’s position without providing remedy, the parties may still be held to be in dispute.

Marking territory

Fundamental to the dispute resolution process is the need to articulate exactly the what law to which the agreement contract is subject to. Ideally this should be stated in the initial agreement. This will affect what laws are applicable, which can have a massive impact on the result. For instance, in some countries the agreement contract may need to be in writing, in others it may not. In some countries, the law implies certain terms and conditions into agreements that need to be known and considered as to whether they are appropriate.   A court, or a tribunal or arbitrator will look to the intention of the parties, and any international agreements and conventions, which can have an impact.

Dispute resolution

So you’re sure a dispute exists and you’ve got an idea as to the territory it should be resolved in. What happens now? Many disputes are covered by international conventions, for instance sending cargo by airfreight is governed by the Warsaw Convention, and more recently the Montreal Convention, which Australia has just signed. "These conventions will have an impact on your ability to recover from an airline if your cargo gets damaged in transit. In the same vein, the Hague-Visby Rules are an international convention governing liability for damage to goods carried by sea," says Hudson. 1. Litigation: Once the jurisdiction is established, the parties can lay claim in an appropriate court or tribunal according to the laws of the state therein. Court decisions are enforceable. 2. Arbitration: This is a private method of settling disputes, based on an agreement between the parties to be bound by the result. Though traditionally non-binding, an agreement can reflect that such arbitratal awards are enforceable.  ,"Arbitrable awards are enforceable in certain jurisdictions, at international and state level," says Hudson. "For instance, if you go to arbitration and get an award for payment, but the other party doesn’t pay, you can take that award to court and get a court order in that country for payment. You could also use the order to wind the company up, as has been done in China." Note the distinction between state international arbitration and private international arbitration. "State international arbitration helps with industry-wide and national issues.  However that manner of dispute will traditionally not advance the interests of specific companies," explains Hudson. At an international level, there are entities such as the International Chamber of Commerce’s Court of Arbitration. The WIPO Arbitration and Mediation Center also provides services appropriate for the resolution of technology, entertainment and other disputes involving intellectual property.

3. Alternative dispute resolution (ADR): As the adversarial system fell foul of favour in the second half of the 20th century, methods of ADR evolved to find solutions outside of the courts. The term ‘alternative’ is now slightly inaccurate as today these methods are more popular than litigation. Voluntary and non-binding except by agreement, ADR comprises methods of direct or facilitated negotiation, mediation by a neutral party, arbitration and more. ADR offers the possibility of a win-win outcome and is a more cost-effective and timesaving process than using the courts. The power to find a solution rests with the participants, rather than external authority. Methods of ADR include well-known paths such as direct negotiation and mediation by neutral party, available nationally and internationally. Dispute Bboards are another example, comprising one or three members who are intimately acquainted with the contract, the parties and the performance of the agreement. The International Chamber of Commerce (ICC) has a Centre for Expertise available, founded more than 25 years ago. It provides access to the world’s best experts in every field of business operations and has become an area of high demand with the advance of technology and globalisation. Another arm of ADR is Domain Name Dispute Resolution, set up by the Internet Corporation for Assigned Names and Numbers (ICANN) following WIPO recommendation in 1999. The Uniform Domain Name Dispute Resolution Policy provides an efficient remedy against the bad faith, abusive registration of domain names that violate trademark rights. The WIPO Arbitration and Mediation Center acts as one of the leading ICANN-accredited domain name dispute resolution service providers and has processed more than 15,000 UDRP cases. The WIPO Center also provides domain name dispute resolution services for a number of country code top-level domains, including .au domains in Australia. 4. Online dispute resolution (ODR): This is the application of ADR practices and theories, with networked information technology, to manage conflict. ODR does not alter the rights of parties to access formal legal processes and remedies. ODR really comes to the fore with consumer-to-consumer online transactions, for example, eBay. There are two basic approaches: dispute avoidance and dispute resolution. Avoidance is where information technology is used to prevent disputes arising including credit card chargebacks, online money transfer, payment systems, or escrow services facilitating a wide range of online transactions. Other mechanisms include providing consumer and seller information profiles derived from data about transaction related behaviour such as the eBay feedback rating system. Trustmarks and trustseals are also used for DA. Resolution is where ADR approaches are applied to the online environment, such as direct negotiation, mediation, arbitration and various hybrid systems. Mixing online and offline models is also possible. Email, video-conferencing, chat, document handling, database applications and other methods are all employed with the eventual aim of providing a structure for solutions to be found, relationships to be repaired and ultimately, the dispute to be resolved. IT applications can also be used to assist in finding solutions. If mediation, arbitration and negotiation fail, virtual courts are also available. Judgements are not enforceable however except through contractual agreement.

Best behaviour

Being aware of potentially offensive behaviour is a key factor to Australian business success abroad, believes Taine Moufarrige, executive director of virtual office provider Servcorp. "Australians are very natural in their business style, perhaps more so than any other country in the world," he says. However, this can lead to Australian business people being fooled by the ‘friendship’ element of international business relations. "In many countries it is essential to establish a personal relationship with business partners in order to establish trust and understanding. Australian businesspeople need to be careful not to mistake this as encouragement of a casual approach, as the formalities of the deal and negotiations are still crucial to the success of any transaction," Moufarrige warns. "As Australians, we find it easy to be casual, but this will not benefit the business at the end of the day. Make sure that all the terms and conditions are clear and that your business can walk away if it all goes pear shaped." Moufarrige recommends Australian businesspeople research the business and cultural trends of the country in which they wish to work to ensure business success. "Austrade representatives in Australia and overseas provide a great touch point on the meeting formats and negotiation etiquette in a large number of countries. Similarly, Servcorp employs trade commissioners with local knowledge that help their clients negotiate in a way that demonstrates their understanding of the cultural norms of that particular foreign market," he says. -Adeline Teoh

Helpful links

Australian International Commercial Dispute Resolution: www.icdr.gov.au International Chamber of Commerce: www.iccwbo.org Australian Commercial Disputes Centre : https://www.acdcltd.com.au Electronic Information System for International Law: www.eisil.org National Center for Technology and Dispute Resolution: www.odr.info WIPO Arbitration and Mediation Center: www.wipo.int/amc

How to avoid disputes

  1. Always contract clearly, equitably and unambiguously.
  2. Complete due diligence thoroughly before entering any relationship.
  3. Get expert legal advice from the start.
  4. Ensure your properly drafted agreement is legally effective.
  5. Remember a contract is a living entity; keep it updated at all times.
  6. Keep a clear record of all communications and actions.

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