Agribusiness in a Global Environment Lesson 9

Global Legal Disputes

Determining whose legal system has jurisdiction in a dispute is another serious potential problem of global business. Unfortunately no judicial body exists to rule on legal commercial problems. The World Court at The Hague and the International Court of Justice solve disputes between sovereign nations rather than private citizens. International commercial disputes must be settled under the laws of one of the concerned countries in one of three ways:

	On the basis of jurisdictional clauses included in the contracts
	On the basis of where a contract was entered into
	On the basis of where the provisions of the contract were performed.

If a settlement is unreachable, more determined action can be taken.

Conciliation is a nonbinding agreement between parties to resolve disputes by asking a third party to mediate differences. This is especially effective in resolving disputes with Chinese business partners, because it is perceived as less threatening. Conciliation can be either formal or informal.

Arbitration involves the parties selecting a disinterested and informed party or parties to act as referee to determine the merits of the case and make a judgment both parties agree to honor. However, most arbitration is conducted under the auspices of formal domestic or international arbitration groups. Such groups include the:

	Inter-American Commercial Arbitration Commission
	Canadian-American Commercial Arbitration Commission (for disputes between Canadian and U.S. businesses)
	London Court of Arbitration
	American Arbitration Association
	International Chamber of Commerce (ICC). When a request for arbitration is received, the ICC attempts a conciliation between the disputants. If this fails, the arbitration process starts. The plaintiff and defendant select one person each from a list of acceptable arbitrators to defend their cases, and the ICC Court of Arbitration appoints a third member. Most arbitration is successful, but this depends on the willingness of both parties to accept the arbitrator's ruling.

Difficulty arises when a party fails to honor the agreements. Companies may refuse to name arbitrators, refuse to arbitrate, or after arbitration awards are made, may refuse to honor the award. However, in most countries, arbitration clauses are recognized by the courts and are enforceable by law within those countries.

Litigation is a last resort and should be avoided for many reasons. Many believe the victories are deceptive because the cost, delays, and aggravation far outweigh any benefits received. Other deterrents include the fear of creating a poor image and damaging public relations, fear of unfair treatment in a foreign court, difficulty in collecting a judgment, relatively high cost and time required, and the loss of confidentiality. The best advice is to seek a settlement rather than a law suit.

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