2 Why is dispute settlement more difficult in an international transaction? Spans continents Different legal systems Possible litigation in multiple forums Question of enforcement
3 Methods of Resolution Alternative dispute resolution (ADR) arbitration mediation other Litigation
4 Arbitration Provides neutral “third country” forum Parties choose location and forum Parties choose arbitrator(s) Procedural rules of arbitration organization Limited discovery Cost Issues Flexible rules of evidence Privacy Agreements to arbitrate: national laws support enforceability Scherk v. Alberto–Culver Limited right of appeal Enforcement of Awards: UN 1958 Convention on Recognition & Enforcement of Foreign Arbitral Awards (NY Convention)
5 Enforcement of Agreements to Arbitrate under the 1958 NY Convention US judicial approach to enforcing international agreements to arbitrate – 4 questions: Is there a written agreement to arbitrate the dispute? Does the agreement provide for arbitration in the territory of a signatory to the convention? Does the agreement arise out of a legal relationship considered commercial? Is a party to the agreement not a US citizen, or does the commercial relationship have some connection to a foreign state?
Enforcement of Arbitration Awards US Courts will enforce arbitration awards under the 1958 Convention if: Award would be enforceable under local law where award made D was properly subject to jurisdiction of arbitration tribunal D had proper notice and opportunity to participate in proceedings Enforcement not contrary to public policy US Courts won’t enforce award if: Contract with arbitration clause in unlawful under applicable law The agreement is void for fraud or incapacity of one party Arbitration procedure violates law where the arbitration took place 6
7 Arbitration: Plusses & Minuses Plusses: More reliability of enforcement due to the New York Convention Parties choose forum and rules Speed of Process Confidentiality Minuses: Limited appeal Limited discovery and pretrial procedures Rules of evidence don’t apply as in a court of law “Adhesion” – was choice of arbitration voluntary and knowing?
8 Litigation Jurisdiction: does the court have the power to hear the case? Jurisdiction over dispute: subject matter jurisdiction In Personam Jurisdiction: over the parties Based on Minimum Contacts Due process clause of the Fourteenth Amendment of the U.S. Constitution has been interpreted to require that before a person or company be brought before a court, it must have had some contacts with the place or forum. Based upon a notion of “fairness” Many other countries have similar concept Service of Process: Hague Convention or use letters rogatory Venue: which court will hear the case
US Recognition of Foreign Court Decisions US courts may enforce foreign court decision if: Foreign court had competent jurisdiction Subject matter jurisdiction Personal jurisdiction D had notice and opportunity to participate in proceedings Court was neutral adjudicator – no bias or fraud Court decision does not violate a fundamental public policy 9
10 Illustration of “Minimum contacts”: Asahi v. Court of California Agreement btwn Cheng Shin( Taiwanese tire manufacturer) and Asahi ( Japanese valve maker) Zurcher sues Cheng Shin in California; CS settles suit with Z Cheng Shin seeks indemnification from Asahi in California court – should Cal. Court hear dispute?
11 Asahi v. Court of California Issue: Did Asahi’s sale of valves to Cheng Shin which were then placed into tires that were sold in California sufficient contacts to warrant the California court to take jurisdiction over Asahi consistent with the Fourteenth Amendment of the constitution?
12 Asahi v. Court of California No. “Considering the international context, the heavy burden on the alien defendant, and the slight interests of the plaintiff and the forum state, the exercise of personal jurisdiction by a California court over Asahi in this instance would be unreasonable and unfair.
Jurisdiction in the E.U. EU Council Reg. No. 44/2001: Jurisdiction is generally determined by the domicile of the defendant Exceptions: Cases involving commercial contracts for sale of goods: where the goods were or should have been delivered Cases involving contracts for services (other than insurance or employment): where the services were or should have been provided Tort cases: where the wrong occurred Consumer contract cases: where the other party is domiciled or where the consumer is domiciled; lawsuits against consumers can only be brought in the consumer’s home country Employers may sue employee or former employee only where the employee is domiciled; employees may sue employer where the employee is domiciled, where the employer is domiciled, where a branch or agent is located, or where the employee regularly or last worked Where at least one party is domiciled in the EU, pursuant to an agreement / forum selection clause specifying the courts of a specific EU country 13
14 Jurisdiction and the Internet When has the person or company met the test of minimum contacts? Graduate Mgmt. Admission Council v. Raju (E.D.Va. 2003): Zippo test – look to nature and quality of commercial activity conducted over Internet Sliding Scale of contacts: passive site, “interactive site”, or “clearly doing business”
15 Litigation Forum Non Conveniens: Concept in US as well as other countries Discretionary refusal to hear case in particular forum because another court would be more convenient – closer connection Factors: (Gulf Oil v. Gilbert): access to sources of proof, availability of witnesses, costs of obtaining attendance, choice not vexatious or oppressive Avoid “Forum Shopping”: In re Union Carbide (Bhopal case) Iragorri v. United Technologies Corp. & Otis Elevator Co.
16 Choice of Forum Clauses Parties provide in contract for forum in which to resolve disputes Eliminate uncertainty and “forum shopping” Changing judicial attitudes towards forum selection clauses Bremen v. Zapata example – policies behind recognition of such clauses Effect of clauses on 3rd parties?
17 Conflict of laws Which law to apply? Restatement (2 nd ) of Conflict of Laws: Use law of jurisdiction with closest relationship to action Contracts: where acceptance took place; where contract negotiated; where performed; location of subject matter; domicile, place of incorporation, residency, nationality or place of business of parties Torts: where injury occurred; where conduct causing harm occurred; place of incorporation, residency, domicile, nationality, or place of business; place where the relationship btwn parties is centered
18 Choice of Law Clauses Choice of Law Clauses: Parties choose in contract the law to apply US courts free to determine what foreign law is as a question of law (Finnish Fur Sales Co., Ltd. V. Juliette Shulof Furs, Inc.) Procedures for pretrial discovery and collection of evidence (Hague Convention or US Federal Rules of Civil Procedure) Letters rogatory Anti-suit injunctions
19 Enforcement of Foreign Judgments Not automatic -- depends on principles of “comity” Reciprocity Fairness of procedures No general treaty as to enforcement of judgments US: “Full faith and credit” doctrine among states Uniform Recognition of Foreign Money Judgments adopted by states Manches & Co. v. Gilby – which exchange rate to use
20 How do businesses manage conflict? Try to minimize the chance of litigating in two countries Forum selection and choice of law clauses Consider ADR Business may be able to deter litigation with a prompt response