Resolving international disputes present attorneys with unique issues that are atypical of domestic dispute resolution mechanisms. There are numerous solutions available to those in international disputes, each with their own benefits and risks. Among these considerations are whether to litigate in the U.S., the enforceability of any judgment given, whether to litigate abroad, whether to use arbitration, the difference in conflict of law rules, and the differences in substantive law. In general, it is best to consider each one of these elements before making the decision of how to handle an international dispute. We briefly skim over these in turn:
Litigating the international dispute in the United States:
Choosing the forum in which to litigate is generally the first consideration given to an international dispute. If choosing a U.S. court, the first obstacle is often obtaining personal jurisdiction over the foreign person or entity. This determination changes on a case by case basis but still follows the constitutional limitations and considerations that are given in a domestic setting. As such, the difficulty is often based around finding sufficient minimum contacts or consent to establish personal jurisdiction in a U.S. court. Assuming that a court does have personal jurisdiction, the next determination is whether or not the judgment can be enforced in the U.S. or will be enforced abroad.
Enforcement of Judgments:
Most judgments within the U.S. will be honored by other U.S. courts under the Full Faith & Credit Clause of the United States Constitution. However, as a practical matter, a U.S. judgment will not be of much help or value if the foreign party has no assets against which to enforce the judgment within the United States. In addition, the United States has no present treaties with any other countries by which to enforce their judgments. Rather, the enforcement is usually reviewed under general principles of international law and other considerations that may vary from one jurisdiction to another. As such, U.S. counsel will have to coordinate with foreign counsel in order to ensure that the U.S. proceedings are carried out in a manner that will maximize chances of enforcement in a foreign jurisdiction and to begin enforcement proceedings in the foreign jurisdiction where assets are located.
Litigating the dispute in a foreign jurisdiction:
Often, a party will be forced to consider litigation in a foreign forum if a foreign party has no assets within the U.S, litigating the particular dispute in the U.S. is unfavorable, or if the foreign party will not agree to and/or cannot be compelled to submit to arbitration. As with the enforcement of judgments, U.S. counsel will have to coordinate with foreign attorneys in order to determine the best foreign jurisdiction in which to file suit. Unlike with the U.S, many foreign countries have treaties to enforce the judgments of the courts (e.g. the enforcement of many European judgments will be honored by other members who have signed on to “the hague convention on the recognition and enforcement of foreign judgments”). Depending on the situation, the existence of such a treaty may be a determining factor in where to file a lawsuit.
Using international arbitration:
The use of arbitration has become a prevalent practice in resolving international disputes. In particular, the development of the UNCITRAL model rules, UNCITRAL model law, and the increased use of institutional arbitration, such as ICC arbitration (International Chamber of Commerce), have helped add uniformity and flexibility to resolving legal disputes. In particular, the use of arbitration is increasing due to its association with flexibility, decreased legal costs, enforceability, and faster resolutions. Arbitrations are flexible and accommodate the needs of businesses by granting them the freedom of having their proceedings in a different place than where the substantive law and other rules are derived from. Generally, the process is also considered to take less time and less money to resolve than the use of litigation. Perhaps one of the most attractive features that arbitration provides is its award enforcements.
In 1958, The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as “The New York Convention”), provided that foreign nations would enforce and recognize arbitration awards that were given by another country that is also party to the convention. Typically, all that is needed to enforce an award under the convention is 1) an arbitral award, and 2) a valid arbitration agreement. Further, a valid arbitration agreement can take place even after a dispute has begun and does not necessarily have to exist at the time of contracting. There are about 146 states that are currently parties to this convention, which often makes the chances of having an arbitral award enforced greater than that of a court judgment.
Conflicts of law and substantive law:
Too often, lawyers and their clients presume that a lawsuit will turn out more favorably if filed in a home jurisdiction. While this may be the most “convenient” place to file, it is often not the “best”. Conflict of law rules, otherwise known as “general principles of international law”, should be given serious consideration. These rule determine whether the U.S. court will apply U.S. or foreign law and vice versa. In some situations, application of foreign law may be more favorable than U.S. law. As such, coordination with foreign counsel may be necessary to help determine what substantive law is most favorable and which forum is most likely to lead to the application of that law.
By: Alejandro Felce, November 14th, 2013.