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2. What If There is a Dispute Between a Seller and Purchase?
While transactions, generally, do not prompt controversy, it is still not uncommon for disputes to arise that need to be resolved. For the most part, all international contracts of sale include forum selection and law selection clauses that provide what law should apply and in what forum the dispute would be adjudicated.
Because of complexities associated with the use of foreign legal systems and the enforcement of damages awards, arbitration clauses are frequently used. Driving their popularity is that unlike judgments entered by a court of law, arbitration awards can be enforced internationally pursuant to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards to which numerous nations, including the U.S., are parties.
Arbitration clauses need careful drafting, and still must address the issue of what law should be applied, but, essentially, commit the parties to a binding process under the aegis of an international arbitral body, such as the International Centre of Dispute Resolution of the American Arbitration Association, or the International Chamber of Commerce.
Alternatively, parties can agree to choose a judicial form such as a particular court to apply the selected law.
Under U.S. law, choice of law and forum selection provisions are afforded considerable deference but are not full proof.
For example, certain jurisdictions may require at least minimal contacts between the transaction and the national forum. The same may also be true when it comes to selecting a certain nation’s law. In other words, some research should be performed by the parties to ascertain whether selecting a certain law and a certain forum can be done.
National laws may also have rules that could end up affecting how a dispute is resolved, i.e. burdens of proof could be different, what constitutes actionable conduct could be different, concepts like fraud could vary as could definitions of contract terms like “offer” or “acceptance.”
3. The Take Away:
Letters of Credit and choice of law and forum selection clauses are almost universally employed in international commercial transactions.
What this means from a practical standpoint is that clear and precisely drafted documents can be crucial to getting paid and enforcing rights and, for this reason, obtaining experienced professional assistance can end up being critical to the success of an international transaction.
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Small Business International Trade: Issues to Consider Part 1
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Don’t Underestimate How Global Issues Can Affect Your Company