The three partners of an international joint venture, located in the Asian count

Question

The three partners of an international joint venture, located in the Asian country of one of the partners, are locked in a profit distribution dispute that repeated negotiations between the partners have failed to resolve. They are beginning to think about formal dispute resolution methods. In this context, what strategy would you implement? What are the advantages and disadvantages of the strategy? The three partners of an international joint venture, located in the Asian country of one of the partners, are locked in a profit distribution dispute that repeated negotiations between the partners have failed to resolve. They are beginning to think about formal dispute resolution methods. In this context, what strategy would you implement? What are the advantages and disadvantages of the strategy?

Explanation / Answer

Legal proceedings are still the default method of resolving contract disputes.

Below are the advantages and disadvantages of various methods of dispute resolution and the considerations for deciding which is most appropriate.

Negotiation: A quick, inexpensive and binding resolution is almost always the desired way to settle a dispute. The way to achieve this is by negotiation. The problem is that negotiation is far from guaranteed to succeed before it is necessary to resort to some other more formal and structured method of dispute resolution. This may take the form of mediation.

Mediation: Although more expensive than a simple negotiation, mediation will allow you to retain control over the outcome of the resolution. This is because, like negotiation, it is non-binding. This means that decision will not be imposed, unless you reach a binding agreement. This is unlike going to Court where, like it or not, the judge will ultimately make a binding decision as to who wins and who loses (i.e. the judgment). Mediation will be relatively inexpensive in comparison to other more formal methods of dispute resolution.

Both mediation and negotiation give you much greater control over the outcome than any other method of dispute resolution.

Other methods of dispute resolution: When it comes to other forms of dispute resolution, the decision may be out of your hands, in that the contract may say that any dispute must be resolved by court proceedings or by arbitration.

Particulars for finding suitable dispute resolution method

1. Do you require a traditional tried and tested method that can be used for all types of dispute (e.g. ones with lots of factual evidence, or ones with lots of technical evidence, or ones with lots of legal issues)?

2. Do you need the dispute resolution process to be confidential?

3. Is the other party based abroad?

4. Do you want a quick and lower cost process?

5. Do you want a decision that you cannot appeal, even if you lose (often referred to as a final and binding decision)?

Each method of ADR has its own drawbacks and often you will end up choosing between arbitration and court proceedings. In large, long running complex contracts, it is possible to choose more than one type of ADR, depending on the type of dispute. For example, you could allow the option for a party to choose litigation or arbitration; or, you could provide that certain technical disputes to go to expert determination.

Conclusion

Any dispute is likely to settle through negotiation or mediation, before it is referred to any formal resolution process (such as Court proceedings). If it doesn’t settle, the chances are that it will be dealt with by Court proceedings; but, there are other alternatives which may be appropriate. Even if your contract says that the dispute must be dealt with by Court proceedings, it may still be possible to agree an alternative approach with your opponent. However, the best time to consider the most appropriate methods of dispute resolution is at the outset, when you are entering into the contract.

In the next article we look at how to maximise your chances of resolving the dispute without needing to resort to a formal dispute resolution process, by exploring Early Dispute Resolution.

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