DISPUTES AND INTERNATIONAL DISPUTE RESOLUTION MECHANISMS

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The Dispute resolution is an important part of international trade, as cultural differences or disagreements may arise between parties. There are three basic means of dispute resolution: judicial proceedings, arbitration and mediation.

Court proceedings are of unpredictable duration and can be costly, while arbitration is binding and offers a final resolution, but its costs can also be high. Mediation is a non-binding system that seeks equitable solutions through negotiation led by an objective third party.

It is essential to analyse the pros and cons of each of the dispute resolution systems from the outset of the business relationship, in order to make a properly informed decision and reflect it in the contractual documents. In addition, it is essential to agree on which law should apply to the commercial relations in order to avoid later surprises arising from the application of international treaties in the absence of contractual provision in this regard.

In international contracts, it may be difficult to agree on the submission of the parties to their own courts or to domestic arbitral institutions. In such cases, it is advisable to submit to international institutional arbitration, but to provide for submission to a single arbitrator from the outset in order to avoid tripling the costs of appointing three-member arbitral tribunals, which are unnecessary in practice.

In summary, it is important to take into account the different dispute resolution mechanisms in order to make the right decision when drafting contracts, with the aim of avoiding potential disagreements and problems in the future.

Advantages and disadvantages of each form of resolution

Each form of conflict resolution has its advantages and disadvantages, here are some of them:

LEGAL PROCEEDINGS

• ADVANTAGES

  • It offers a binding and definitive solution.
  • The process is regulated by the judicial system, which guarantees the legality of the procedure.
  • In some cases, legal costs can be recovered if the case is won.

• DISADVANTAGES

  • The process can be lengthy and costly.
  • Decisions may be unpredictable or unfair, especially in the case of foreign juries or courts.
  • Decisions can be appealed and further prolong the process.

ARBITRATION

• ADVANTAGES

  • It allows the parties to choose an arbitrator or panel of arbitrators who are experts in the subject matter in question.
  • The process is confidential and decisions are final and binding.
  • Resolution times are generally quicker than court proceedings.

• DISADVANTAGES

  • It can be costly, especially if a panel of arbitrators is appointed.
  • Flexibility in the choice of arbitrator can be a disadvantage if someone with the necessary experience is not chosen.
  • Decisions are final and cannot be appealed.

MEDIATION

• ADVANTAGES

  • The parties have more control over the process and can reach a voluntary agreement.
  • The process is quicker and less costly than court or arbitration proceedings.
  • The mediator is a neutral third party who can help resolve the dispute.

• DISADVANTAGES

  • The agreement reached may be non-binding.
  • If the parties cannot reach an agreement, they may still have to go to court or to arbitration.
  • If the mediator is not an expert in the matter in question, he or she may not be able to resolve the dispute.

How can the artificial intelligence (see+ TIP) help conflict resolution?

As a language model, it can help provide you with general information and recommendations on how to resolve a conflict. However, it is important to keep in mind that each conflict is unique and may require a personalised approach.

IN GENERAL, I CAN OFFER SUGGESTIONS ON THE FOLLOWING TOPICS RELATED TO CONFLICT RESOLUTION:

• Identification of the interests and needs of both parties.
• Assessment of available conflict resolution options.
• Analysis of the pros and cons of each conflict resolution option.
• Tips on how to communicate effectively with the other party.
• Assistance in drafting and reviewing dispute resolution agreements.
• Provide information on available legal and mediation resources.

In any case, it is important to remember that conflict resolution requires a collaborative effort and clear and effective communication between the parties involved. Business relationships with third parties are usually initiated with enthusiasm, common objectives and expectations of benefits for all parties involved, in the short, medium or long term. 

But, unfortunately, market circumstances, cultural differences or the simple separation of initially common objectives can lead to disputes between parties, whether they are customers, suppliers, agents, distributors, etc.  In the face of such disputes, there are three basic means of conflict resolution, apart from the actual negotiation between the disputing parties: judicial proceedings, arbitration and mediation. 

Even if the moment of initiation of relations may not seem to be the right moment to consider how to resolve hypothetical future disputes, practice shows that what is not foreseen initially ends up in court proceedings, not necessarily satisfactory, either because of the circumstances of the proceedings (competent court, applicable law) or of the court (potential slowness of the competent court, etc.) or simply because of the costs.

It is therefore essential to analyse the pros and cons of each of the dispute resolution systems from the outset, so that a well-founded decision can be made and properly reflected in the contractual documents. 

It is also essential to agree (if possible) on which law should apply to commercial relations, beyond what is contractually provided for, in order to avoid later surprises arising from the application of international treaties in the absence of contractual provision in this respect. 

Thus, it is important to know that:

• Arbitration is the binding procedure that allows the parties to know in advance when they will obtain a final decision (arbitral decisions are not subject to appeal on the merits, but only to annulment), which usually does not exceed a period of one and a half years and whose content is confidential and cannot be transmitted to third parties outside the procedure. Their costs - especially in the case of international arbitration - tend to be high. 
• The judicial procedure is of unpredictable duration and, in the Spanish case, it can take years to obtain a final (non-appealable) judgment. This is a consequence of the appeals system, which allows the legal or factual assessment made by the judge to be challenged in the event of material or interpretative errors on his part. 
• Mediation is a non-binding system of conflict resolution, thus contributing to an objective, third-party "guided negotiation", which can allow for empathy of the parties despite adverse positions to try to reach equitable solutions.

PRACTICAL ADVICE

Analyse the company's interest by considering both the benefits and disadvantages of each of the dispute resolution systems. In other words, not only think about "if I have a well-founded claim, I want to be able to get a quick resolution", but also in cases where the claims are doubtful or simply lack a legal basis, even though they are essential from a business point of view. 

EXPERT ADVICE:

In international contracts it is difficult to agree on the submission of the parties to the country's own courts or arbitral institutions, unless one of the parties is particularly weak, in which case it usually has greater protection (e.g. agency contracts). 

In such cases, it is advisable to submit to international institutional arbitration (e.g. before the International Chamber of Commerce in Paris), but to make provision for submission to a single arbitrator from the outset in order to avoid tripling the costs of appointing three-member arbitration tribunals, which in practice are unnecessary. 

SPANISH ARBITRATION CLUB (VER+).