Parties that are set to form new contracts together usually have a positive attitude towards the new relationship, and both want it to work for the benefit of the two parties, whether international or domestic. Despite many of these contract participants taking a little time to plan for what should happen when things turn sour, disputes do happen. This can be challenging, especially when it is an international contract. Therefore, it is crucial to develop dispute resolution clauses in the contracts to allow a smooth procedure to deal with disagreements that may happen in the way quickly and cost-effectively. This paper will help understand the importance of dispute resolution clauses in international contracts and also in consideration of the International Trade Law in the UK.
Basic Options for Dispute Resolution
To benefit from a dispute resolution clause, one has to find a win-win by the use of a structured negotiation or mediation. There are different ways through which one can find a solution that benefits both parties other than the litigation and arbitration ways that are mainly used today. Win-win situations are quick and faster and are highly considered when the two parties want the business relationship to continue. However, in many situations, these parties that form contracts have a hard time compromising hence requiring a better way to solve their problems in the many cases where negotiations fail. Where arbitrations and litigation are required, it is important to ensure that the dispute resolution clauses are right. This ensures that the clause is concise and clear as the tribunals and courts work to see the terms that were set by the parties upheld. Therefore, if a clause is ambiguous, there is a chance of not finding a solution over a short period of time and high costs.
The advantages of dispute resolution contracts are that it allows non-binding forms of dispute resolution, including negotiation, early neutral evaluation, and mediation. Negotiations can happen between the representatives of the parties, and if this fails, the senior executives can take over the negotiations. Mediations involve independent third parties to identify areas that can be compromised, while early neutral evaluation uses an impartial evaluator to highlight specific points of the case that help during negotiations. In the binding forms of contracts that are used in dispute resolution see litigation, arbitration, and adjudication help solve arising issues where a third-party decision-maker is required.
London has long been declared the best place for those in need of solving international disputes. This is from the reports got from significant arbitration institutions and the London commercial court. The English law provides a transparent and solid background to resolve these issues. Statistically, cases involving parties from 72 countries were heard in the year ending 2020, while the International Arbitration Court of London referred 406 cases in 2019 for 138 different nations. The reason for this popularity is that English law provides the freedom of contracts compared to many other countries and has a pro-business approach. There is also speed and efficiency in solving the disputes that are brought forward to the courts. Judicial independence also plays a major role in great reputation.
The Arbitration Act of 1996 offers a solid framework for arbitration taking place in the UK. It shows how arbitration should be conducted in such a way it is transparent and fair to all parties involved. Arbitration is a private means of settling differences that is an alternative to legal action or other forms of alternative dispute resolution. Arbitration also has the advantage of empowering the participants to choose an arbitrator who is a specialist in the subject matter of the conflict, and the procedure can be tailored to their specific requirements.
Choice of Forum
Depending on whichever forum parties choose, whether arbitration or litigation, they stand to some advantages and disadvantages. This means that to benefit from the dispute resolution clauses, one must focus on the details of their engagement. In terms of enforceability, arbitration awards are easier compared to litigation or court judgments’ arbitration act of 1996 in the UK provides well-stipulated guidelines for arbitration. In the case of litigation, the ease of enforcement lies with the jurisdiction of the court and the speed by which the case moves. Parties also stand to benefit from privacy and confidentiality from arbitrations. Litigations are primarily done in the public eye unless otherwise, and judgments and documents are available for review by anyone. Arbitration, on the other end, is held behind closed rooms, and the awards are confidential. In this case, there is no potential harm to the parties due to the exposure of dirty linen.
In the UK, the top quality of judges provides a situation where the judgment offered in jurisdictions is correct, sensible and justifiable. In arbitration, this may not be the case if arbitrators fail to uphold fairness, especially as parties have the freedom to choose their own arbitrators. Where disputes raise scientific or technical issues, the use of arbitration allows a tribunal to be chosen as it provides the relevant technical expertise. Based on the nature of the (likely) conflict, this may have significant advantages over a court, where you could face a trial before a judge who lacks such experience and must justify what might otherwise be evident at length and at a cost.
Domicile in Jurisdictional Purposes
The importance of dispute resolution clauses in international contracts cannot be mentioned without the consideration of domicile. In the UK, the law provides that the parties’ issues should be solved in the member state where they are domiciled. This would mean that if a defendant, for instance, is domiciled in England, English courts should have jurisdiction over the arising dispute, and the defendant cannot state that such a case should be taken over by different jurisdiction. A person can only be domiciled in England if they fulfill various conditions. They should be residents of the jurisdiction, and their residence existence and circumstances should suggest a significant relation to the jurisdiction.
International dispute resolution clauses play an essential role in solving issues that arise between parties working together. Without these clauses, it may be difficult, costly, and time-consuming where issues arise. Parties need to clearly identify the methods to solve their differences in the right way that is fair to all. Litigation and arbitration have proved the most preferred methods through which parties solve their problems. However, the arbitration method seems the most appropriate as it also enables parties to go back to their businesses. The main point of consideration is to ensure that before finalizing an international contract, both parties consider the amicable ways to solve disputes in case they arise in the future
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Sharp N, ‘London Has Been Declared The Number One Location For Those Looking To Resolve International Disputes – Litigation, Mediation & Arbitration – UK’ (Mondaq.com, 2020) <https://www.mondaq.com/uk/arbitration-dispute-resolution/986912/london-has-been-declared-the-number-one-location-for-those-looking-to-resolve-international-disputes> accessed 5 May 2021