Dispute Resolution Procedures for U.S. Exporters
(Article appeared in the 1996 Official Export Guide)
All Rights Reserved
The primary concern of all U.S. exporters is getting paid for the exports they make. A cash in advance payment or a confirmed letter of credit is generally perceived in the U.S. export community as an "all risk" insurance policy against problems in exporting. But this perception is not totally accurate.
Any U.S. exporter -- even a U.S. exporter who has succeeded in structuring payment for his or her exports via cash in advance or via a confirmed letter of credit -- can find himself or herself in the midst of an export related dispute. Such a dispute could arise for example, if a foreign importer is dissatisfied with an exported product or if an exported product fails to live up to its warranty or causes harm to the importer or the importer. s customers. Alternatively, a U.S. exporter may have his or her own need to initiate a dispute against a foreign importer. This latter example is not the focus of this article, but clearly all the dispute resolution issues and procedures discussed in this article can also be employed by a U.S. exporter who feels a need to initiate a dispute against a foreign importer.
U.S. exporters who find themselves faced with an export related dispute initiated by a foreign importer may elect to ignore the dispute and risk a default judgment and a foreign enforcement action, especially if they have already received payment for their export. A U.S. exporter. s ignorance of an export related dispute in this manner is possible if the foreign importer has initiated the dispute in a foreign court, because foreign courts do not automatically have jurisdiction over U.S. exporters. Furthermore, foreign judgments are not automatically enforced in the U.S., as the U.S. Federal Government is not party to any foreign judgment recognition conventions and as not all U.S. states have enacted the Uniform Foreign Money Judgment Recognition Act. Should a U.S. exporter have a presence (dependent agent, rep office, branch or subsidiary) in the importer. s country or should the U.S. exporter have any assets in the importer. s country, however, the jurisdictional and judgment enforcement issues may swing against the U.S. exporter and force the U.S. exporter to deal with his or her export related dispute. Additionally, a U.S. exporter may be forced to deal with his or her export related dispute if a foreign importer succeeds in initiating an export related dispute in a U.S. court. Dealing with an export related dispute is generally good policy in any case, especially if the U.S. exporter involved in the dispute has any serious intentions of continuing and \ or expanding his or her international export programs.
U.S. exporters who intend to deal with their export related disputes do not have to allow the dispute resolution process to take on a life of its own. Instead, they can attempt to control the dispute resolution process by reaching agreement with their foreign importers on the dispute resolution method to be employed in any export related dispute.
Litigation is generally the "default" dispute resolution method, i.e., the dispute resolution method that will be employed if no other dispute resolution method has been elected by the parties. It can, however, also be selected by the U.S. exporter and the foreign importer as the dispute resolution method of choice. Litigation takes place in a court room and involves a foreign judge, foreign lawyers, foreign substantive law and foreign procedural law. Sometimes a jury will be involved in litigation, but this is not always the case. Something else which is also not always the case with litigation is the recognition and enforcement of foreign court judgments in the U.S.. Recognition and enforcement of foreign court judgments in the U.S. varies on a state by state basis and is dependent on a particular state. s position vis a vis the Uniform Foreign Money Judgment Recognition Act. This is because the U.S. federal government has not entered into any treaties with other countries regarding the recognition and enforcement of foreign court judgments. The fact that foreign court litigation may or may not involve a jury and the fact that the results of foreign court litigation may or may not be recognized and enforced in the U.S. generally work against litigation being considered the optimal dispute resolution method for U.S. export related disputes. Other dispute resolution methods which are available to U.S. exporters and which are more appropriate for U.S. export related disputes include conciliation, mediation and arbitration. Each of these alternative dispute resolution methods, which are discussed in turn below, must be the subject of an agreement between the U.S. exporter and the foreign importer.
Conciliation is a dispute resolution process in which the disputants attempt to resolve their export related dispute on their own, i.e., without the involvement of a third party. It is difficult to estimate how successful conciliation is as a dispute resolution method, since knowledge of success does not go generally beyond the disputants. Nonetheless, conciliation should always be the first stop on the dispute resolution trail. It should never, however, be a stand alone dispute resolution method and should always be backed up by an alternative method of dispute resolution in the event that the conciliation process does not successfully resolve a dispute. In agreeing to start the dispute resolution process with conciliation, the U.S. exporter and the foreign importer should address the following issues:
* the nature and source of disputes that can be resolved by conciliation
* the structure and composition of the conciliation committee
* the timing for the commencement of the conciliation process
* the process for relaying the conciliation committee. s recommendations to the disputants
* the timing for the termination of the conciliation process
* the next step in the dispute resolution process, should conciliation not produce a successful resolution of a dispute
The last issue should never be overlooked. Furthermore, U.S. exporters and foreign importers should recognize that the recommendations of the conciliation committee are not in any way binding on the disputants.
Mediation, unlike conciliation, involves at least one neutral third party (a mediator) in the dispute resolution process. Similar to conciliation, however, the mediator. s recommendations are not binding on the disputants. In agreeing to use mediation as a dispute resolution procedure, the U.S. exporter and the foreign importer should address the following issues:
* the nature and source of disputes that can be resolved by mediation
* the number of mediators to be involved in the mediation process
* the qualifications of the mediators
* the selection of the mediators
* a commitment by the mediators not to unreasonably delay the mediation process
* the language in which the mediation process is to be conducted
* the location of the mediation proceedings
* the disputants. individual responsibilities for the costs of the mediation
Arbitration, like mediation, involves at least one neutral party (an arbitrator) in the dispute resolution process. Unlike mediation, however, the arbitrator. s decisions are binding on the disputants. The arbitrator. s decisions can be reasoned (explained) or unreasoned (unexplained). Arbitrators typically prefer unreasoned opinions, but disputants generally prefer reasoned opinions. Reasoned opinions, in fact, offer the disputants one of their only opportunities to review the arbitrator. s thought process, should the disputants be dissatisfied with the arbitrator. s decision and desire to have an arbitrator. s award judicially vacated. Judicial vacation of arbitrator. s awards, however, rarely occurs. This finality principal is based on the premise that judicial review of arbitral awards undermines the purpose of arbitration and reduces it to a phase in the litigation process, as opposed to an alternative to the litigation process.
In agreeing to use arbitration in the dispute resolution process, U.S. exporters and foreign importers should address the following issues:
* the nature and source of disputes that can be resolved by arbitration
* the number of arbitrators to be involved in the arbitration process
* the qualifications of the arbitrators
* the selection and appointment of the arbitrators
* a commitment by the arbitrators not to unreasonably delay the arbitration process
* the procedural rules to be followed in the arbitration process
* the substantive law to be applied in the arbitration process
* the language in which the arbitration process is to be conducted
* the location of the arbitration proceedings
* whether the arbitration proceedings are to be ad hoc or administered by an arbitral institute
* a waiver of sovereign immunity if the foreign importer is a foreign governmental entity
* the disputants. individual responsibilities for the costs of the arbitration
* whether the arbitrator. s award should be reasoned on unreasoned
* where a judgment upon an arbitral award may be entered
* whether or not the arbitration award may be confirmed by a judicial proceeding
Of the four dispute resolution methods considered in this article, arbitration is generally the dispute resolution method of choice in export related disputes. This is because arbitration decisions are binding on the disputants and because many countries, including the U.S., have entered into one or more multilateral or bilateral agreements to enforce each others. arbitration awards. The method in which arbitration awards are enforced varies country by country, in that some countries require judicial acceptance of an arbitral award, whereas others do not.
Summary: As indicated by this article, U.S. exporters and foreign importers are not always able to avoid export related disputes. They do, however, have an opportunity to control the dispute resolution process. This control occurs outside the payment process in a separate agreement between the parties. The experience of this author clearly indicates that U.S. exporters and foreign importers are well advised to attempt to control the dispute resolution process to the greatest extent possible and to select a dispute resolution method appropriate for their needs.