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Primer on International Alternative Dispute Resolutions

 Information on Dispute Settlement  

• There are several ways that parties may resolve disputes arising from a business relationship. Traditionally, parties turn to the court system when they cannot come to an amicable solution by themselves. However, when disputes arise between parties in international business transactions, often neither party is comfortable using a foreign court system to resolve their dispute. 

• Therefore, parties entering an international contract may wish to consider alternative methods of resolving disputes without going to court. These methods, which are generally known as Alternative Dispute Resolution (ADR), offer neutral mechanisms for resolving disputes that may arise. To resolve future disputes without resorting to a foreign legal system, parties should plan ahead by including an ADR clause in their contract.

 Alternative Dispute Resolution (ADR)  

• ADR is a means of solving disputes outside of the court system. There are many forms of ADR, such as arbitration, conciliation, and mediation.

 Arbitration  

• Arbitration is a primary form of ADR by which the parties agree to submit their disputes to an arbitrator or a panel of arbitrators. Arbitrators have binding authority to render awards which are enforceable in the courts of most countries.

• Parties agree to arbitration in the event of a dispute in the contracting stage by including an arbitration clause in their contract. Depending on what the parties have agreed to, either the parties will choose their own arbitrators and procedures (ad hoc arbitration) or submit their dispute to an arbitral institution. 

• There are many different arbitral institutions to which parties may turn in the event of a dispute, such as the American Arbitration Association (AAA), the Commercial Arbitration and Mediation Center for the Americas (CAMCA), or the International Chamber of Commerce (ICC). A number of regional institutions may be found at http://www.doc.gov/ogc/occic/arb-98.html 

• Arbitration has many benefits. It is often less costly, less litigious, less time consuming, and offers more privacy to the parties than litigation.

 Mediation and Conciliation  

• Mediation, also known as conciliation, is a process in which parties to a dispute appoint a neutral third party to assist them in resolving their disputes. Unlike a judge or an arbitrator, the mediator does not have the power to compel the parties to accept a recommended solution. The goal of mediation is a voluntary negotiated settlement. 

• Mediation depends upon good faith by both parties to succeed. The benefits of mediation are that it is fast, inexpensive, consensual and confidential.

 Importance of Providing for ADR in Contracts  

• It is very important that parties provide for ADR in their contracts before a dispute arises. If the parties do not include an arbitration or mediation clause in their contract, they will have little choice but to use the court system to resolve their dispute. After a dispute arises, it is usually very difficult to agree on ADR. 

• If the parties do choose to insert an ADR clause in their contract, they should decide whether they would prefer arbitration or mediation, or a combination thereof. 

• If the parties choose to include an arbitration clause in their contract, they should decide whether they would like to use an arbitral institution, such as the AAA, the ICC or one of many regional institutions, or whether they want to use ad hoc arbitration without submitting to the administration by that institution. 

• Parties that choose to go to an arbitral institution benefit from established facilities, experienced staff and administrative support. Most institutions also have procedural rules and rosters of qualified arbitrators from which the parties can choose.

 Ad Hoc Arbitration  

• This form allows parties to choose rules of an arbitral association without submitting to the administration by that institution, or rules which are not associated with any arbitral institution, such as the UNCITRAL Arbitration Rules. Parties that do not choose an institution must make their own arrangements for procedures, arbitrators, and administrative support.

 Practical Sources of Information  

• A brochure on alternative dispute resolution, produced by the NAFTA Advisory Committee on Private Commercial Disputes, which contains sample arbitration and mediation clauses and lists the major arbitral institutions. The NAFTA Committee was established in October 1994 under Article 2022 of the NAFTA to advise the NAFTA Trade Ministers on the availability, use and effectiveness of arbitration and other procedures for the resolution of private international commercial disputes in the free trade area. It does not resolve individual disputes. More information on the NAFTA Committee may be found at the Office of the Chief Counsel for Int'l Commerce Home Page: www.doc.gov/ogc/occic

• A Guide to Arbitration and Dispute Resolution in APEC Member Economies.

 Useful Web Sites  

There are many web sites concerning ADR, such as:
 
    American Arbitration Association: www.adr.org

    International Chamber of Commerce: www.iccwbo.org

    CPR Institute for Dispute Resolution: www.cpradr.org

    American Stock Exchange: www.AMEC.com

    Office of the Chief Counsel for Int'l Commerce Home Page: www.doc.gov/ogc/occic

    Section of Dispute Resolution/American Bar Association: www.abanet.org

    Technical Arbitration &Conflict Resolution (TACR): www.batnet.com/oikoumene/tacr.html

    World Intellectual Property Organization: www.wipo.org/eng/index.htm

    Commercial Arbitration and Mediation Center for the Americas: www.adr.org/rules/camca_rules.html

Assistance with Disputes

• When attempting to advise parties to a trade dispute, first determine whether or not they have a contract which provides for a form of ADR, such as arbitration or mediation. 

• If the parties have an arbitration clause in their contract, ask them whether it specifies an arbitral institution, such as the ICC or the AAA. If it does, they should contact the arbitral institution and proceed by its rules. 

• If there is an arbitration clause, but it does not indicate the forum for the arbitration and specifies no rules, then the parties must decide whether they would like to go to an arbitral institution or whether they would simply like to select the rules of an arbitral institution without submitting to the administration by that institution. 

• If the parties have not provided for the use of ADR in their contract, there is little assistance that may be offered, other than to seek resolution through the court system. 

• Depending on the dispute, the Embassy or consulate offices may be contacted to attempt to assist the parties in resolving their disputes. 

• The U.S. government may provide informal assistance in resolving trade disputes arising between American and foreign businesses at the request of either party. 

• Such assistance is limited to informal, conciliatory efforts directed toward removing misunderstandings between the businesses concerned so that they may settle their differences through friendly relations. 

• The U.S. government cannot adjudicate, arbitrate, mediate or provide any kind of ADR to parties in trade disputes, nor may it serve in an advocacy role on behalf of any party.

 
 For additional information, contact:
 
Kathryn Helne Nickerson
Senior Counsel
Tel.: (202) 482-0937
Fax: (202) 482-4076
E-mail: occic@doc.gov

 
REVISED March 2005

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