Arbitration and Mediation Clauses: Helpful Tools for Managing International Disputes

At a time when companies and individuals find themselves making difficult decisions about how to allocate their legal dollars when a dispute arises, it is important to remember alternatives to traditional litigation, such as arbitration and mediation. This is particularly true when disputes arise in the international context. In our increasingly global economy, U.S. companies face numerous challenges when conducting business abroad, including intellectual property and tax issues, contract enforceability and changing political environments that influence legislation. These issues—and many others—can give rise to international disputes. The important question for U.S. companies is how to level the playing field so as to avoid bias, unfamiliar court procedures and delays in rulings far greater than those we might expect at home.

One way to level the playing field is to provide for arbitration (and possibly mediation) in all contracts. A key benefit of this approach is that arbitration clauses can be tailored (in the beginning of the relationship) to meet the needs of both parties—including establishing when the arbitration will take place, where it will take place, parameters for discovery and motion practice, and when the arbitration decision must be made.

There are many options when it comes to choosing the appropriate forum for international arbitration. Many of these administrative bodies can also suggest appropriate language for arbitration clauses that can be used in contracts. Here are a few of the most noteworthy:

• The American Arbitration Association (AAA), which has cooperative agreements with a number of foreign arbitration institutions
• The Commercial Arbitration and Mediation Center for the Americas (CAMCA)—the creation of the AAA, the British Columbia International Commercial Arbitration Centre, the Québec National and International Commercial Arbitration Centre and the Mexico City National Chamber of Commerce—which has its own arbitration rules and offers multinational panels of arbitrators and mediators
• The International Chamber of Commerce (ICC) Court of Arbitration
• The United States Council for International Business
• The Inter-American Commercial Arbitration Commission (IACAC)

In addition to an arbitration clause, U.S. companies should consider inserting a mediation clause into their international contracts to provide for a step before arbitration. Such a clause can include (1) which entity, if any, will administer the mediation, (2) where it will take place (ideally somewhere neutral and convenient for both parties) and (3) a time frame within which the mediation must be completed after one party to the dispute makes a written demand for mediation. For any number of reasons, parties to a dispute may need resolution in a much shorter time frame than traditional litigation can provide. Given how long it can take for a dispute to make its way through the court systems in most jurisdictions, the parties simply may not have the time to wait.

The bottom line is that U.S. companies must be prepared in advance for disputes arising out of their international business relationships. Going to court in the United States is difficult enough. Trying to resolve a dispute on foreign soil has additional layers of complications. The attorneys at Much Shelist can assist in drafting the appropriate arbitration and mediation clauses for international contracts. Moreover, the firm has the benefit of its membership in the International Alliance of Law Firms, a network of small and midsize business-oriented law firms with 60 members in 48 countries across North and South America, Europe, Asia, Africa, Australia and New Zealand.

In May 2011, Much Shelist will welcome nearly 100 attorneys to Chicago from across the world for the Annual Global Meeting (AGM) of the International Alliance of Law Firms. Click here to learn more about how the Alliance and AGM 2011 might benefit your business.

Edward D. Shapiro, Chair of the firm's Litigation & Dispute Resolution group, focuses his practice on the efficient prevention, management and resolution of disputes for commercial entities, organizations and individuals. Ed advises and represents clients in state and federal court, before administrative agencies, and in mediation and arbitration in a full range of business matters. He can be reached at 312.521.2421 or eshapiro@muchshelist.com.