DISPUTE RESOLUTION

Moneymakers Ltd. from England contracted to by goods from a French company Tresbien SA. The buyer received the delivery and paid for it. However, now the seller claims that the payment was delayed and demands for compensation. The buyer disagrees. Problem?

§? ? 1. CHOICE OF FORUM 2. CHOICE OF LAW §§ §§ BUSINESS AGREEMENT Tresbien Money- Makers 1. CHOICE OF FORUM 2. CHOICE OF LAW

? §§ §§ 1. CHOICE OF FORUM Sources (determinants): 1. Contract CONVENTION §§ §§ BUSINESS AGREEMENT Forum selection clause Tresbien Money- Makers 1. CHOICE OF FORUM Sources (determinants): 1. Contract 2. International conventions 3. National laws

PROBLEMS ARISING Choice of forum Forum shopping Homeward trend = the claimant’s tendency to choose the forum he expects will offer best prospects for a successful lawsuit Homeward trend = court’s tendency to apply its own law (lex fori) Favouring the domestic party

REMEDIES TO THE PROBLEMS Choice of forum Harmonization of laws Internationalization of judges and lawyers Recognition of foreign court rulings Forum non conveniens A court may refuse to exercise its power to hear a case if hearing the case is either inconvenient or unfair, the case has no connection with the forum state AND there is an alternative court

STATUTORY CHOICE OF FORUM All EU member states but Denmark Lugano Convention European countries Brussels Convention EU member states Brussels I Regulation All EU member states but Denmark 1. Recognition and enforcement of foreign court rulings 2. Forum is Stipulated by the contract Defendant’s domicile Appointed by the defendant

§ ? §§ §§ 2. CHOOSING THE APPLICABLE LAW 1. Contract CONVENTION §§ §§ BUSINESS AGREEMENT Reference Provision Tresbien Money- Makers 2. CHOOSING THE APPLICABLE LAW 1. Contract 2. International conventions 3. National laws 4. Common trade practices

1. CONTRACTUAL CHOICE-OF-LAW Referece provision Possible in dispositive matters Must be explicit or otherwise clear Most profitable option!

Choice of law Reference provisions, examples: ” This contract shall be governed by and construed in accordance with the laws of France.” “Governing law: This contract shall be governed in all respects by the laws of Germany.” “This contract shall be subject to and shall be construed and enforced pursuant to the laws of Japan, which is the location of the headquarters of the seller (or buyer).” “This agreement shall be governed by and construed in accordance with the laws of the State of Delaware, United States of America without regard to conflicts of laws principles.”

REJECTING FOREIGN LAW Choice of law Ordre Public A court may reject foreign law being in conflict with the state’s Ordre Public = the public policy and the basic legal principles of the state E.g. Contracts regarded as illegal Acts violating human rights Social norms Provisions with public interest Territorial provisions Choice of law

”..applicable law is that of ”…the law of the seller’s RENVOI Choice of law §§ BUYER’S state §§ SELLER’S state CONTRACT Reference provision: ”..law of the buyer’s state” BUYER SELLER LAW OF BUYER’S STATE: ”..applicable law is that of the seller’s state” LAW OF SELLER’S STATE: ”…law of the contract” §§ LAW OF BUYER’S STATE: ”…the law of the seller’s state”…

2. STATUTORY CHOICE-OF-LAW HAGUE CONVENTION 1955 Appoints the applicable law ROME CONVENTION 1980 Applied in trade in movables If the forum state is: Belgium Denmark Finland France Italy Norway Switzerland Sweden Niger in contracts generally If the forum state is an EU member state And If there is no more specific convention applicable

1. The law stipulated by the Choice of Law Clause in the contract 1) Hague Convention The Hague International Sales Convention, 1955 The applicable law is: 1. The law stipulated by the Choice of Law Clause in the contract 2. The law of the country of the seller, unless the order was taken in the buyer’s country Choice of law

Applied in lack of more specific conventions Not applied to Choice of law 2) Rome Convention The European Communities Convention on the law applicable to contractual obligations, 1980 Applied in lack of more specific conventions Not applied to E.g. Status or legal capacity of natural persons Bills of exchange, cheques, promissory notes Family law Procedural law, arbitration agreements Law of companies, foundations, associations Authority of an agent or a representative

Choice of law By the Rome Convention, the applicable law is: The law of the contract The law of the country with which the contract is most closely connected => the country where the party, who is to effect the performance which is characteristic of the contract, has his habitual residence or central administration unless it appears from the circumstances as a whole that the contract is more closely connected with another country

Rome Convention, specific provisions: Trade of immovable property => The law of the country where the immovable property is situated Consumer trade => the minimum protection of the mandatory rules of the consumer’s country’s law if the seller knew that the buyer is a consumer Choice of law

Choice of law Rome Convention, specific provisions (cont.): Employment contracts 1. The law of the contract but the choice of law shall not have the result of depriving the employee of the protection afforded to him by the mandatory rules of the law which would be applicable in the absence of choice 2. If no choice of law was made, the law of the country where the employee habitually carries out his work in performance of the contract 3. If no such country can be appointed, the law of the country in which the place of business through which he was engaged is situated Unless it appears from the circumstances as a whole that the contract is more closely connected with another country Choice of law

3. PRINCIPLES OF NATIONAL LAWS AND COMMON TRADE PRACTICE Choice of law Applicable law is that of the state with Most significant relationship with the case E.g. Place of act or injury, nationality, domicile, residence, place of incorporation, where the relationship between the parties was centered, location of property etc. Governmental interest The law of the forum state The law of the state that has the most interest in determining the outcome of the dispute

…SO, Moneymakers Ltd. from England contracted to by goods from a French company Tresbien SA. The buyer received the delivery and paid for it. However, now the seller claims that the payment was delayed and demands for compensation. The buyer disagrees. Your instructions?

YOUR CONCLUSION?

Tresbien v. Moneymakers, solution Claimant: Tresbien (seller), defendant: Moneymakers (buyer) Forum: 1. As contracted If contract is silent 2. Brussels Convention: Defendant’s country => British court Law: 1. As contracted 2. Statutory choice: Rome Convention => Law of the country with which the contract is most closely connected

Tresbien v. Moneymakers, solution (cont.) The Rome Convention: The law of the country with which the contract is most closely connected => the country where the party, who is to effect the performance which is characteristic of the contract, has his habitual residence or central administration unless it appears from the circumstances as a whole that the contract is more closely connected with another country => Seller’s performance is characteristic, buyer just pays => French law

ALTERNATIVE MEANS OF DISPUTE RESOLUTION

ARBITRATION Arbitration agreement always in writing Award is binding Agreement is voluntary Solution in the form of a contract A M I C B L E N S MINI-TRIAL MEDIATION NEGOTIATION

Negotiation The parties renegotiate to straighten up the situation Provides for a sincere effort of the parties to arrive at a solution Agreement is voluntary The solution is in the form of a contract

Mediation The parties appoint a neutral third party, a mediator to help them find a solution Agreement is voluntary The solution is in the form of a contract

Mini-trial Lawyers from both sides present legal and factual arguments and try to solve the problem with the help of a neutral third party Agreement is voluntary The solution is in the form of a contract

PROS AND CONS ?

Arbitration

1. AD HOC ARBITRATION The parties furnish all of the administrative services needed Agree on the procedural rules Formulate a mechanism for choosing the arbitrators > an odd number (1,3,5) Proceedings are confidential Not a commonly used procedure

UNCITRAL ARBITRATION RULES (=United Nations Commission for International Trade and Law) Originally intended for Ad Hoc arbitration Abided by arbitration institutions if the parties call for the procedures in their agreement No time limit for issuing a decision The arbitrators must consider custom and trade usage Considerable discretion to the arbitrators in determining the admissibility of evidence and witnesses The losing party will bear all of the costs unless the arbitrator believes they should be shared

2. INSTITUTIONAL ARBITRATION The parties appoint the arbitration institution The institution conducts the proceedings and manages the administrative aspects in accordance with its own sets of rules

Model Arbitration Clause or Separate Arbitration Agreement  Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as present in force. Parties may wish to consider adding: (a) The appointing authority shall be __________ (name of institution or person); (b) The number of arbitrators shall be __________ (one or three); (c) The place of arbitration shall be __________ (town or country); (d) The language(s) to be used in the arbitral proceedings shall be __________.

American Arbitration Association AAA (NY) Arbitrators make a decision within 30 days Arbitrators may consider custom and trade usage in deciding the case The parties may present evidence and call witnesses or they may agree that the arbitrators’ decision will be based exclusevely on documentary evidence

International Chamber of Commerce ICC (Paris) Proceedings in any of its locations around the world Decision within 6 months, extension possible Under whatever law the parties select Custom and trade usage may be considered The right to present evidence and call on witnesses is left to the arbitrators’ discretion The parties may stipulate that decisions must be based on documents only

London Court of International Arbitration LCIA No set time limit, ”as soon as practicable” No provision on taking custom and trade usage into consideration The parties may present evidence but the arbitrators can prevent the cross-examination of witnesses The parties may stipulate that decisions must be based on documents only

ENFORCEMENT OF ARBITRATION AWARDS Arbitration Agreement must be in writing Made before or after the dispute has arisen Arbitration Award is binding If one of the parties refuses to abide by the award, it can be confirmed by a court in the country where it is intended to be enforced

New York Convention, 1958 Applies to arbitral awards made in = The UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards Applies to arbitral awards made in any country adopting the Convention any non-signatory country when the arbitrating parties are from signatory countries The holder of a valid, binding arbitral award does not need to seek confirmation in the country where the award was made may take the award to another signatory country where it will be enforced

NEW YORK CONVENTION ENFORCEMENT Country B Court recognizes and confirms Country A Company wins award Not necessary Court enforces Court confirms

PROS AND CONS ?

Pros and Cons of Arbitration International enforcement of awards Arbitrators are usually experts in the field => handling is professional Litigation is faster than court trials Procedure is confidential, not public Institutional arbitration is easy to the disputing parties Expensive Ad hoc arbitration is often cheaper but can be difficult to conduct