The Hague Law Blog recently did a post extolling the virtues of arbitration for international disputes. The post is entitled, Arbitration– a bright idea for international dispute resolution and it nicely sets out reasons to consider arbitration for your international disputes, including the following that I view as the big three:
- It’s far cheaper than litigating a dispute.
- Decisions are made by specialized neutrals selected by the parties.
- Arbitral awards are more acceptable to foreign courts if the losing party doesn’t pay up. Awards won in U.S. litigation… much harder to enforce.
The post makes clear arbitration is not always the best way to go for your international disputes and it even calls out an article I wrote on why it usually (but not always!) does not make sense to arbitrate against Chinese companies:
Now, to be sure, it isn’t always the way to go. Dan Harris argues, quite lucidly and from much experience, that arbitration clauses are a waste of time in Chinese contracts. Despite China’s accession to the New York Arbitration Convention , they don’t follow through on their obligations to enforce awards. Accordingly, Dan continues, the best thing you can do in China is choose (1) Chinese courts as the venue, (2) Chinese law as the controlling doctrine, and (3) Chinese as the operative language of the contract.
The post then rightly notes that China is just one country and then makes the point that most big trading countries—China excepted—believe in arbitration, and their courts are far more likely to compel a losing party to pay on an arbitral award than on a verdict.
My firm’s international lawyers always tell our clients that we need all sorts of information before we can decide on the best method of dispute resolution. At minimum, we need to know the countries involved, the nature of the contract, our client’s goals (both with respect to the contract and enforcement) and information regarding the counter-party. And then we decide on the best method for resolving potential disputes.
Arbitration is usually not the best way to go when dealing with Chinese companies, but sometimes it is. And though I agree with the Hague Law Blog that arbitration is usually the best way to go when dealing with most companies from most other countries, oftentimes it isn’t, and here are two common reasons why:
- Arbitration is not always less expensive than litigating. Sometimes it is way, way, way more expensive. It would be far cheaper to litigate a case in Vietnam or in Thailand than to arbitrate it before three arbitrators in London or in Geneva. Like maybe 50 times cheaper. Sometimes it makes sense for our clients to have dispute resolution be incredibly expensive (like if they believe they are more likely to get sued than the reverse) but sometimes the exact opposite will make sense. It really must be reviewed on a case by case basis.
- There are countries where getting a US court judgment enforced is super easy. Canada, England and South Korea immediately spring to mind. Enforcing a US judgment in those three countries is barely more difficult than enforcing a California judgment in New York. So again, these issues must be examined on a case by case basis.
Arbitration or litigation? It’s country by country and case by case.