How to Manage a Cross-border Dispute

Increased globalisation brings a wealth of new commercial opportunities and other advantages to businesses that develop the capacity to operate in more than one country.  Expansion overseas into neighbouring countries can enable a business to replicate its initial commercial success in its home country across other markets.  It goes without saying that entering an overseas market requires research and planning, that much is obvious. 

However, the drive to gain a commercial foothold in a new overseas market should be balanced with a strategy, considered in advance, to diminish risk, wherever possible, to limit and minimise the potential for foreseeable problematic issues to arise.

No business enjoys facing a commercial dispute, a commercial dispute of any description is the single most disruptive, costly and time-consuming situation for any organisation. Conflicts that extend across more than one jurisdiction are notorious for escalating into extremely costly long-term matters.  European disputes have been made infinitely more demanding now that the UK has left the EU and the reciprocal arrangements across the EU Member States no longer apply and cannot assist UK businesses in the unraveling complex disputes and enforcement of judgments.

There are ways to mitigate the impact of a dispute both before and after it arises.  Your commercial contract is a major part of the armour that protects your business from risk and should be reviewed frequently to ensure it is current, comprehensive and resilient to attack.  When embarking on a new business collaboration, elementary due diligence such as ensuring that the party you are dealing with actually has the legal capacity to enter into a contract, as well as evaluating the commercial soundness of a new business partner and understanding its business model provides the initial elementary information to enable a decision as to whether to advance the collaboration and what measures are needed to protect the business.

It is prudent to add a jurisdiction clause in the contract that determines the court and jurisdiction in which a dispute is dealt with, should one arise.  The choice of jurisdiction can give a business an edge in certain circumstances in that a jurisdiction such as England and Wales, globally a most popular choice, informs your business partner that disputes will be dealt with promptly and fairly.  In the absence of such a clause, the rules of private international law will be applied.  Not only can this result in uncertainty, but it can also lead to delay and spiraling costs. 

Gonzalo Butori, a senior associate commented “jurisdiction clauses should always be written into the contract to expressly record the agreement of the jurisdiction by the parties. Relying on the small print on invoices sent once the transaction has been completed may not have sufficient effect.  As previously mentioned the jurisdiction of England & Wales is frequently the jurisdiction of choice, due to the fact that the London judiciary has a reputation for delivering incorruptible justice. English commercial law is built on well-founded principles and provides legal certainty, and fairness.”

A consideration that is frequently overlooked by new entries to a foreign market is to appoint legal advisors with both the legal capacity to appear before a number of jurisdictions as well as having the language capacity for clear communication with their clients and also within those jurisdictions.  This is a key factor, as many businesses based in the UK rely on their England and Wales law firm and then face finding and appointing an overseas law firm should a cross-border dispute arise and then face three-way multi-lingual discussions where it is not unheard of for important subtleties surrounding negotiations to be lost in translation. 

Equally important, it is highly advantageous for your legal advisors to have a comprehensive understanding of the cultural landscape and an understanding of how to do business in the country in which the other party to the dispute is based.  Such cultural knowledge and perception can considerably reduce the exposure to risk and misunderstanding from the start. This insight is particularly important during mediation where cultural knowledge of the nuances and subtle shades of meaning of the arguments put forward can make all the difference between early resolution and the potential salvation of the business relationship, as opposed to a march towards lengthy and costly cross-border litigation.

The expedient of appointing UK based lawyers with reach in the country in which the other party is based and a comprehensive understanding of all aspects involved in a cross-border dispute cannot be over-emphasised.  The ability to step in, negotiate and resolve a dispute and at the same time hopefully save the potential for future business is a significant advantage.

The lawyers in Giambrone & Partners corporate and commercial and cross-border litigation practice focuses on contentious complex disputes with an emphasis on corporate and commercial matters such as shareholder disputes, cross-border commercial contract conflicts as well litigation arising between businesses and their clients. 

For more information on a wide range of cross-border contentious issues please click here