US.-Recht: International Civil Procedure Glossary : Terms as used in all contracts and the issue whether to go for litigation or arbitration

Wirtschaft und Gewerbe
25.04.20081422 Mal gelesen

International Civil Procedure Glossary : Terms as used in all contracts and the issue whether to go for litigation or arbitration


Jurisdiction. A plaintiff wishing to bring proceedings in a particular court must not only decide whether he wants to sue there but also whether the local court is prepared to let him. All forums have rules as to the degree of connection required before hearing a case. Generally, it is either the forum's own rules of private international law, or, in cases where the parties are located in states thate are signatories to the various international conventions, the particular provisions of the relevant convention will govern.

Rules of procedure for domestic legal systems based on the English model apply the common law doctrine of forum conveniens. The court's jurisdiction will be closely connected to service the originating legal process on the defendant as well as to the subject matter of the suit. As a general rule, if legal process is served on a defendant in accordance with the local rules of procedure, the court will regard itself as competent to deal with the matter.

Under international conventions, the basic general rule is that a defendant residing the contracting state must be sued in the courts of that state. Alternatively, under these international conventions, parties sometimes have the ability to agree to the courts of a particular contracting state for the resolution of the dispute.

Many countries such as Canada also have state immunity legislation that gives a foreign state immunity from the jurisdiction of any local court except with respect to commercial activities by the foreign state or its agents carried out in that country.

Forum. A second consideration for a plaintiff once jurisdiction can be assumed concerns that suitability of the proposed forum from a procedural point of view. Issues such as court structure, the value of precedent, the nature of the procedure, its expediency, mode of trial, availability of class actions, and the rules with respect to pre-trial evidence gathering and interlocutory remedies and orders will be key factors to weigh when deciding on the most advantageous place to sue. Unfortunately, however, a plaintiff will not be entirely free to choose the forum that suits him best if another is legally required, or is more suitable, legally speaking.

Choice of Law. A third element in deciding in which court to sue is the system of law that the court would be applying in the case. It is of critical importance to know at the outset of a lawsuit the relevant terms of the international conventions that deal with choice of law in contracts as well the rules of the particular national court that will (or might) govern the dispute. Under Canadian law, for example, the proper law of the contract is determined either by the express actions of the parties or, failing this, by judicial determination of the system of law with which the transaction has the closest or the most real connection. When a court must decide a case governed by a system of law other than its own, it will generally apply that law in relation to substantive questions but will apply its own law with respect to procedure. In any case, the plaintiff must satisfy itself to the degree possible that the law to be applied to the dispute will reasonably favor or at least not unduly hamper the claims being advanced in the lawsuit.

Remedies. All else become secondary if a plaintiff cannot ultimately get what it needs or wants from the lawsuit. In international litigation in particular, interlocutory proceedings can be as important as the main proceedings. Issues such as whether extra-territorial orders (particularly injunctions) are available in the course of a proceeding are often deciding factors for a party as far as where to pursue the claim. Therefore, at the outset of the litigation, a party must canvass the nature of the interlocutory remedies that may be available in the particular forum and the requirements for obtaining them.

International conventions provide that a plaintiff may apply to the court of a contracting state for provisional and protective measures even if the courts of another contracting state have jurisdiction as to the substance of the dispute. Conventions also make injunctions and final judgments enforceable (unde the convention).

As far as final remedies are concerned, the plaintiff should assess early on whether it will ultimately be able to obtain from the particular court the remedy that best suits its interests. Will the court, for example, have jurisdiction to grant declaratory relief, or a permanent injunction, or order a defendant to give an indemnity to protect against some future contingency?

Evidence Taking and Service of Process. The means of collecting evidence both locally and elsewhere are also central to a claim's success. Evidence located abroad is frequently the key to the outsome in international and trade commercial litigation. There will be delicate issues of culture and tradition if one hopes to secure or compel evidence located elsewhere - for example, differences with respect to each country's perception of what evidence a party is entitled to demand, different ideas as to what constitutes probative evidence, and different concepts of confidentiality and of the role of governments and institutions that are parties, or have information relevant, to the litigation. Again, international conventions such as the Hague Convention on taking evidence abroad assist here. On the other hand, local rules typically provide for orders against a recalcitrant nonparty and from a party outside of the jurisdiction but only through the assistance for the foreign local court.

Clearly, a plaintiff cannot afford to focus only on the rules of the state where the proceedings are to take place if it hopes to enforce the judgment in other countries. As with the gathering of evidence, service of process abroad is governed by two principal multilateral conventions and a variety of bilateral ones. Where no convention exists, the possible means of serving a defendant in that country will be through the foreign government, judicial authority, or consular authorities, or by the plaintiff's agent in that country. In every case, however, to be effective, service must be made in accordance, or at least not inconsistent, with the applicable rules of the defendant's jurisdiction.

Enforcement of Judgments. The last important area to be considered concerns the conditions and procedures for enforcement of judgments (as opposed to their recognition, which deals with whether a court will treat the decision of another as binding on it). In any international lawsuit, the first real question is always whether the defendant has assets and can be sued there. Even if so, one must also ask whether that is the best place in which to sue. Enforcement is often the most important factor to consider when assessing the attractiveness of any given forum. The rules of each relevant country as to when its courts will enforce a judgment of a foreign court, together with the rules as to when foreign judgments will be enforced, must therefore be carefully considered as part of the process of determining whether to sue at all.

A number of conventions govern enforcement of judgment. When no convention applies, the international rules of the forum in which enforcement will be sought will be applied. Two principal issues should be considered: first, the jurisdiction of the court giving judgment with respect to the defendant involved; second, the jurisdiction of the enforcing court. This issue is not without significance, because frequently before a judgment can be enforced the defendant has to be given notice of the application and served with the proceedings. This is often problematic. A hard-won victory can be rendered meaningless if questions of enforcement are not properly considered at the outset.

Arbitral Proceedings

Arbitration as a means of settling commercial and trade disputes is probably as old as trade between nations. In the domestic context, arbitration has only recently come to be regarded as a viable substitute for litigation in national courts. This is likely because of a tradition judicial hostility to "private" systems as well as the lack of a modern legislative framework for the conduct of arbitrations in some jurisdictions.

At the international level, on the other hand, merchants have been attracted to the arbitration process for centuries because it provides a mechanism to settle disputes without either party having to be subjected to the courts, traditions, and biases of the other - something that is particularly important if one of the parties is a state or state-run enterprise.

The rules and procedure of arbitration can be built by the parties from the outset of the relationship. The arbitration proceeding can take into account diverse legal systems, requirements of different legal and political cultures and different business practices, as well as the particular expectations and interests of the parties in a way the litigation simply cannot.

Unlike several other forms of alternative dispute resolution, arbitration does involve adjudication. The parties by agreement submit a dispute existing between them for resolution to a neutral third party. Essential to the process are the concepts of an existing dispute, submissions of evidence and argument and an impartial decision based on the facts and applicable law. Therefore, arbitration remains somewhat adversarial, is quasi-judicial in its decision making, and, to be effective, must be final and binding in some way. As in litigation, there will be a winner and a loser. The key, and arguably its defining feature, is that the decision making be done in the specific circumstances in which the parties intended it to be done. Adherence to the parties' agreement is central to the enterprise.

Constructing the Arbitration. It is the potential for flexibility in the parties' agreement that renders arbitration a superior alternative for the resolution of most international commercial and trade disputes. For example, an arbitration tribunal may settle a dispute without a violation of someone's rights having occurred, or on the basis of what is fair in the circumstances without complete regard to the strict legal rights and duties of the parties. In this last instance, the matter could simply be determined on the basis of what appears to be right and just in the circumstances. All that is required is the agreement of the parties.

This flexibility can be applied to broad issues - such as the basic nature of the proceeding - as well as to other issues, including service of process, jurisdiction, subject matter of dispute, parties and their capacity, language and location, applicable law both substantive (dispute) and procedural (arbitration agreement), appointment and qualification of panel, time limits, documentary production, disclosure, evidence taking, mode of hearing, type of relief both interlocutory and final, monetary limits, interest and costs, challenges to and finality of decisions, resort to local court consequences of breach of agreement, and confidentiality. On each of these, the parties can put their own stamp.

An important and particular advantage of arbitration has to do with expertise and sensitivity. Well-chosen, knowledgeable arbitrators with the appropriate political and cultural sensitivities to the parties and their issues provide a far more effective forum for dispute resolution than a judge who might have little or no experience in the particular field, is not particularly concerned with the parties' relationship, does not share their background, and is focused primarily on the correct application of the local law. In addition, the parties can retain counsel of choice with the right type of expertise, background and sensitivity for the case without the requirement of retaining local legal counsel.

Arbitration works best when there is a reluctance on the part of one party or both to submit to the court and systems of the other, where there is an ongoing and long term relationship to be protected, and where control, expediency, and confidentiality are important to the parties. Often the mere presence of an arbitration clause in the agreement is a powerful incentive to early and amicable resolution of any issues that may arise. However, where these factors are not valued in the same way by both parties, the requirement of agreement at every turn can spell the beginning of the slide toward litigation. The best time to consider arbitration is when the contract is entered into and the leval of goodwill and the willingness to make the relationship a successful one are at their highest.

The considerations may be different if there is already litigation. The suggestion that the issue be arbitrated may be perceived as a weakness by the other side. Arbitration is sometime seen as representing a compromise to the extent it involves relinquishing one's rights to resorting to the court systems. Naturally, after a dispute has arisen, consent and agreement will be more difficult to come by.

An inevitable feature of arbitration is the lack of coercive powers where there is no agreement. Is it here that the arbitral process may have to reach out and rely to varying degrees on the local legal system to provide a framework for the enforcement of a variety of issues throughout the process as well as the enforcement of the ultimate award. To the extent is does this, arbitration risks losing much of its value as a viable alternative to traditional litigation.

From the point of two parties planning for a long term relationship, arbitration as a mechanism for resolving disputes holds the better promise of producing a business-like decision - one that will minimally impair the long-term relationship, avoid multiple disputes, and provide a clear roadmap for the resolution of future disputes between the parties.


In arbitration, and particularly in the international context, which is less constrained by local law, the parties have the opportunity to construct from the ground up just the right environment for the resolution of that particular dispute between the parties. As a dispute resoltution mechanism, the features that commend arbitration over other mechanisms relate to control (in the widest sense) by the parties over the proceeding, the choice of arbitrator, timeliness, efficiency and, of course, finality.

However, arbitration is not for all cases. Case involving or requiring injunctive or other interim relief are best left to the courts who are better equipped to deal with them. Similarly so with respect to statute-based remedies. Here there is a risk of simply duplicating the court process and doing so ineffectively.

The principal disadvantage of arbitration is the lack of enforcement and contempt powers that may make it necessary to resort to the very court system that the parties strove to avoid by agreeing to arbitrate in the first place. Without goodwill or a certain commonality of interest throughout the process, arbitration can easily be rendered either ineffective or virtually indistinguishable from litigation.

Some of the principal disadvantages of litigation, on the other hand, are cost, in most national systems, delay, together with the risks inherent in submitting the dispute to a third party who will make a binding decision in accordance with rules not of the parties' making. Litigating takes both the process and the decision out of the hands of the parties: At best is has the advantages as well as the disadvantages of a ready-made public dispute resolution system; at worst it can easily become a powerful tool in the hands of the economically stronger party the questionable ends. Often even the winner is dissatisfied. Almost the relationship is damaged.

But in any and all cases the decision to go for arbitration or litigation clauses in contracts need careful consideration of all circumstances of the relationship, countries involved, possible costs, special expert knowledge required to come to reasonable solutions, etc. There is no ready to go solution.