A Handy Tool for the Settlement of International Commercial Disputes

Penn State International Law Review Volume 27 Number 3 Penn State International Law Review Article 12 5-1-2009 A Handy Tool for the Settlement of International Commercial Disputes Eva Horvath Follow this and additional works at: http://elibrary.law.psu.edu/psilr Part of the International Law Commons Recommended Citation Horvath, Eva (2009) "A Handy Tool for the Settlement of International Commercial Disputes," Penn State International Law Review: Vol. 27: No. 3, Article 12. Available at: http://elibrary.law.psu.edu/psilr/vol27/iss3/12 This Article is brought to you for free and open access by Penn State Law eLibrary. It has been accepted for inclusion in Penn State International Law Review by an authorized administrator of Penn State Law eLibrary. For more information, please contact . A Handy Tool for the Settlement of International Commercial Disputes Dr. Eva Horvath* I. THE "COCA-COLA PHENOMENON" The Coca-Cola Company was established in 1886, employs 9500 worldwide, and it operates in more than 200 countries. Let's imagine that you are a successful senior in-house counsel in the Legal Department of the Coca-Cola. Your job as head of the department's litigation unit is interesting work. Recently, disputes have arisen regarding the usage of Coca-Cola's trademarks in some countries. Over the course of a few weeks, you bring claims against partners in Mexico, Hungary, India, New-Zealand, and Zimbabwe. Naturally, the first task of a lawyer in this situation is to look at the contract signed with the above-mentioned partners to establish the proper venue. Should you file a claim in the state court of the relevant country or is your choice governed by an arbitration clause included in one of the contracts signed with the partners? If the contracts do not contain any provision regarding jurisdiction and/or if the case falls within the competence of a state court (or courts) seated in the country of the relevant partner, the lawyer may struggle to establish how and in which state court to initiate proceedings according to the applicable national code of civil procedure. Even if the lawyer can contact local counsel, the parties will still be eager to follow the progress of the case. Thus, their lawyer(s) must be familiar, to a certain extent, with the applicable legal provisions in the forum's court. If we assume that countries tend to possess different legal traditions and that Coca-Cola has to initiate proceedings in the counter parties' state courts, the room for manoeuvring will not be forgiving. Should, however, our esteemed colleague from Atlanta be lucky enough to find that the relevant contracts provide for arbitration and the place of * Former president of the Hungarian Chamber of Commerce's Arbitration Court; professor at the Pdzmdny Pter Catholic University in Budapest; and Hungary's national correspondent to UNCITRAL. PENN STATE INTERNATIONAL LAW REVIEW [Vol. 27:3,4 arbitration is in one of the above countries, she/he can avoid nightmares during the weekend before preparing and submitting the claims. This article explains and illustrates why arbitration, as a "rediscovered" tool for the resolution of international commercial disputes, might be more convenient than filing claims before national state courts. II. ROOTS When speaking about the most popular means of alternative dispute resolution ("ADR")-i.e., mediation and arbitration-lawyers tend to think that these ways of dispute resolution are "phenomena" of our modern, globalised epoch. In fact, the origins of ADR can be traced back to ancient China, 2500 B.C. The schools of Confucianism and Taoism might be responsible for the endeavour of trying to handle controversies in a less aggressive way, to attempt to settle disputes and create harmony between partners again. This may remain true today. According to statistics from the Arbitration Court of the International Chamber of Commerce, of Asian parties who participated in ICC cases, only one-third initiated the proceedings. The remaining two-thirds ("preferring to be claimed against") were defendants. And even skipping the history of private and public arbitration proceedings in the Greek and Roman Empires, the Middle Ages include examples of ADR practice. During this time, even in Europe, one can see that disputes between merchants and/or craftsmen were resolved within the competent guilds-by the master or some other "senior" colleague(s)-instead of allowing commercial disputes to be decided by "functionaries" exercising judicial power. Dispute resolution by laymen was in most cases more professional, less expensive, and less timeconsuming than the proceedings of judges. That ancient pattern of alternative dispute resolution (as described above) might convince the experts of the United Nations Commission on International Trade Law ("UNCITRAL") to adopt and use these traditional methods of jurisdiction once again: that is, UNCITRAL could encourage businessmen to make use of ADR to eliminate difficulties caused by state court proceedings based on national codes of civil proceedings. III. THE MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION The divergences among provisions in different national procedure laws are sources of insecurity and uncertainty in the field of international commercial disputes. This explains why even the United Nations has moved toward harmonisation in this field. In 1958, the U.N. General Assembly adopted the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This Convention has been 20091 A HANDY TOOL very successful, and it has served to illustrate the necessity of unification of law regarding international commercial arbitration. At the same time, it has also stressed the importance of arbitration in the development of world trade. This phenomenon could well have influenced the U.N. Economic and Social Council ("ECOSOC") in its passing of resolution No. 708 in 1959, which invited governments "to consider sympathetically any measures for improving their arbitration legislation and institutions to encourage interested organizations in the development of arbitration facilities."' Of course, the establishment of UNCITRAL was a determinant step toward the unification and harmonization of international trade law. 2 This Resolution provided that ". . . [t]he commission shall further the progressive harmonisation and unification of the law of international trade by... preparing or promoting the adoption of new international conventions, model laws and uniform laws."3 According to the Secretary General's report on the development of international trade law, "Commercial Arbitration" was included in this concept. During its successful activities, UNCITRAL achieved progress in the area of international arbitration. First, it drafted the UNCITRAL Arbitration Rules, which were endorsed by the U.N. General Assembly in 1976. 4 The mission of these rules was to lend a helping hand to parties in "ad (...truncated)