Dispute Resolution in Cross-Border International Contracts
I recently was advising a U.S. client who was entering into a service business with a company based in Florence, Italy (yes, I wish I had due diligence to perform there). The question arose, in a Memorandum of Understanding, regarding where disputes between the parties would be resolved, and which law would apply.
Now, the United Nations Convention on the Internal Sale of Goods (CISG) governs most contracts for the sale of goods between buyers and sellers from more than one country, unless CISG rules are expressly not to be applied.
In this instance, my U.S. client was offering services, and as usual with international contracts, the parties wanted to include a provision for the arbitration of disputes.
In many instances, to resolve disputes amicably, contracts provide that any arbitration will occur in the country of the party who did not commence the arbitration proceedings. I find that many parties are often reluctant to have an arbitration conducted in the other party’s backyard under any circumstances. It is for that reason that I often will suggest a neutral place for the arbitration to take place, basically strategically located to be a bit of a pain in the neck for both parties to get to, and call for a certain set of established international arbitration rules to apply. In the instance of the transaction described above, I chose to have London as the site of binding arbitration, and the commercial rules of the London Court of International Arbitration to govern. In many instances, a neutral site for the arbitration will foster parties to resolve the dispute between them through discussion and negotiation, in order to avoid the neutral site.
Particularly in sale of good situations, when a company enters into a contract involving a cross-border transaction, the company should seek to retain a lawyer who has experience with laws of each country.