With international communications and money transactions now easier than ever, international trade is becoming an increasingly important part of modern businesses. Deals can be concluded relatively easily with parties all around the globe. However, what happens when you get into a commercial dispute with someone abroad? You may try to negotiate the issue, but the other party might not be willing to compromise. This article will explain what you should do in the event of an international commercial dispute to ensure that your business is protected.

Should I Take the Matter to Court?

While court is probably the last thing on your mind when running your business, knowing that the legal system is available to assist you during a dispute can influence how a party behaves.

For example, when fighting with your siblings as a child, sometimes even the threat of telling a parent or teacher was enough to spark a negotiation.

This idea can sometimes be reflected during commercial disputes. Even the threat of legal action may be enough to convince the other party to fulfil their legal duties.

However, it can be extremely difficult and expensive to engage in an international legal proceeding. Furthermore, even if you get a judgment, it may not be enforceable in the other party’s home country. This would make the entire process a waste of time and money. Therefore, international commercial arbitration may be the best option for your business’ dispute.

What is International Commercial Arbitration?

International commercial arbitration is a form of alternative dispute resolution that you can use to resolve conflicts with a party in a different country. During this process, an arbitrator hears the cases of both parties. They will then render a final and binding decision, called an ‘award’. This is much like a court gives a judgment.

International arbitration awards are generally enforceable in any country that is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, known as the New York Convention. Currently, 159 countries are parties.

How Do I Use International Commercial Arbitration?

As with domestic arbitration, parties need to agree to submit their dispute to arbitration. You cannot force a party to arbitrate unless they have agreed to. Although it is possible to agree to file a dispute to international arbitration once it has arisen, the chances doing so at this point are slim. This is because the other party is unlikely to want to engage in proceedings for the dispute.

Therefore, the best way to ensure that you have access to this mechanism is to include an arbitration clause in all of your contracts with international parties.

What Should My Arbitration Clause Contain?

Arbitration clauses can vary greatly in complexity and detail. However, when drafting the arbitration clause, you will always need to consider:

  • which laws govern the contract and apply to the dispute (for example, if you are contracting with a party in China, do you want the deal to be governed by Chinese law or the law of New South Wales?);
  • where to hold the arbitration;
  • the number of arbitrators; and
  • if any additional rules apply (such as the Australian Centre for International Commercial Arbitration (ACICA) Rules).

By including all of this information, you will be able to better ensure the protection of your business. Furthermore, if you decide to engage in international commercial arbitration, the process should run smoothly as each party understands what is expected of them.

Key Takeaways

It can be very frustrating if you become involved in a commercial dispute with someone overseas. When dealing with someone in another country, you have little options to take the matter to court. However, international commercial arbitration can be a powerful mechanism to utilise if you wish to resolve a dispute.

A carefully drafted arbitration clause will ensure you have access to justice in the event of a dispute. Therefore, it is important to your contract is drafted correctly from the outset. If you have any questions about drafting your contract or whether international commercial arbitration is right for your business, contact LegalVision’s dispute resolution lawyers on 1300 544 755 or fill out the form on this page.

Taylor Gray
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