Settlement of International Commercial Disputes
Due to the constantly growing number of international transactions, companies are increasingly facing the need to resolve their commercial differences. There are many factors influencing the emergence of disputes, and not all of them include purely commercial disagreements. Very often, disputes may arise in connection with cultural differences, which can manifest themselves in the way representatives of different countries do business.
It’s not not always possible to accurately determine the legitimacy of an action, which is why parties tend to resort to alternative methods of resolving disputes. And mediation is, undoubtedly, sits firmly on top of the list of their favourite dispute resolution tools. The main advantages of mediation over other ADR methods can be summed up as follows:
- advantages over litigation;
- advantages over other forms of ADR.
Advantages Over Litigation
Being at the core of any commercial activity, money is the main factor forcing the parties to sit down at the negotiating table. While participating in a tial that drags on for months & even years, the parties face the need to pay procedural costs. Of course, legal costs shouldn’t exceed the award, but taking into account the inevitable delays, the costs can sometimes be equal to the amount awarded. Therefore, resolution of disputes through mediation helps the parties reach a compromise without facing any financial risks.
Litigation is notorious for its delays. Ultimately, this makes the whole process more tedious, complicated, lengthy & expensive. With mediation, the parties do not have to spend their precious time on meaningless hearings & proceed directly to discussing the issue at hand.
Myth of Judicial Infallibility
How confident are you that a judge, laden with dozens of different cases, will make the right decision in your case? The same applies to jury trials. The judge will, most likely, not be able to understand all the details of the case and take into account all the details known to the parties. A decision rendered by the judge can sometimes be unexpected, inappropriate to the circumstances of the case, incorrect and unfair. Therefore, the parties should not rely on chance in resolving disputes through litigation, but resort to mediation, where the decision is in the hands of the parties themselves. Pre-trial settlement of disputes is, therefore, an effective mechanism for avoiding litigation-related costs.
Agreements reached as a result of mediation can include a wide range of measures, including agreements on joint activities in the future, agreements on non-competition, structured settlements, payments based on performance & apologies. Apologies play a significant role in international commercial relations, especially in Asia. That is precisely why mediation is a very effective tool of resolving commercial disputes worldwide.
Direct Participation of the Parties
In mediation, decisions taken are a priori agreed by the parties. This is due to the fact that the parties are involved in the process of developing a common solution to the dispute. It’s hard to imagine in the courtroom, where it is impossible to make petitions and perform other formal procedures.
Unlike court proceedings where a court decision is made public, decisions taken through mediation are kept confidential. A public decision to recognize one party as an offender may adversely affect their reputation. Also, there’s a risk of uniform claims being filed against the defendant. In mediation, the parties enter into a confidentiality agreement, which makes the dispute a private matter.
Parties are Interested in a Mutually Beneficial Result.
Of course, the “winner gets it all” approach is detrimental to both sides. It reflects the inflexibility of the trial itself. Therefore, it makes more sense for the parties to reach a consensus on separate issues than compete with each other. Mediation allows you to understand a specific situation, evaluating the behavior of both parties that led to the dispute.
Advantages Over Other Forms of ADR
Despite having a number of advantages, arbitration has many disadvantages, too. Some of them include excessive duration, financial losses & stress. And all these make mediation a more suitable method of resolving disputes than other forms of ADR.
No Appeal vs. No Need for Appeal
The parties to an international contract include in it an arbitration clause, which obliges them to appeal to arbitration in the event of a dispute. Undoubtedly, arbitration takes less time, but is it more efficient? Does it make settling a dispute easier or is it a direct analogue of litigation? After all, the rules remain the same - the winner gets it all. Moreover, arbitration often doesn’t imply a right of appeal, which makes it even more inflexible than litigation. Mediation, in turn, does not involve an appeal, because if repeated disputes arise, the parties can resume negotiations.
Participation in Mediation is Voluntary
Taking a joint decision through mediation entails no risks, and this is something that makes mediation really attractive & gives it a serious advantages over other forms of ADR.
Mediation is Informal
In many ways, arbitration resembles a trial. Parties are required to comply with the procedure for the presentation of evidence and submission of arguments. Moreover, the procedure prohibits any communication between the arbitrator and one of the parties ex parte. In mediation, the mediator can interact with the parties without any restrictions. They do not have to follow any formal procedures for collecting information.
Mediation is applicable to absolutely any category of disputes, including multi-party ones. The parties can resort to mediation at any stage of a dispute, regardless of whether a dispute is currently being considered in court. A wide range of techniques used by the mediator also makes provides the parties with more flexibility.
Thanks to mediation, the parties can come to agreements that couldn’t be reached using traditional forms of dispute resolution. It is also risk-free, and if the parties failed to get the expected results, they can always return to the courtroom & settle their differences there.
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