Causes for Disputes

Reasons for disputes, in international trade,  between  exporter  and  importer  can  be many. Generally, the primary reason for disputes is quality of the goods exported. Under contractual terms in many export contracts, importer gets the opportunity  to  inspect  the quality of goods only when the consignment reaches him. In many cases, by that time, the exporter would have got money. Even if the consignment is sent on collection basis, importer can check the quality only after retiring the documents. Other reasons for the disputes can be delayed shipment or non-shipment due to change in government regulations or market conditions, restricting exports, etc.

Methods: There are two basic methods for disputes settlement viz. Litigation and arbitration. Litigation is highly unsuitable due to the proverbial delayed process, prohibitive costs and uncertainty of decision.

Basic Limitations of Litigation

  1. Slow Process: Court process is proverbially slow, time consuming and
  2. Avoidable Necessity of Expert Witness and other Evidence: In international contracts, practices, procedures and customs are different. A judge however well versed may be, in law, can not be expected to know all these intricate So, in courts, to educate the judge about these practices, witnesses who are experts and having knowledge in the field have to be produced to prove the practices, even before the evidence is established.
  3. Inconvenience to the Parties: Court timing and date of hearings may not be convenient to the Most of the time, cases are postponed and in that process months drag on even for completion of one witness. Even after day’s long waiting for hearing, one may know, at the end of the day, that the case is adjourned for two months due to non availability of the other advocate!
  1. Adverse Public Image: Court proceedings are never secret. Media always covers the developments in important Even the superior court judgments are published. Matters, which have been confidential till the case is brought to a court of law, become topics for public discussion that may bring notoriety, loss of goodwill and long-standing reputation.
  2. Bitterness and Disruption of Trade Relationships: When a matter goes to a court of law, it is immaterial which party may win as the age old established relationship, after the case is brought to litigation in a court, comes to an end with only acrimony and
  3. Different Laws and Procedures: International trade laws and procedures are more complicated. Litigation in foreign courts is more expensive and difficult in comparison to the domestic

Basic Advantages of Arbitration

In comparison to litigation, the basic advantages of arbitration are:

  1. Quickness: Definitely, arbitration is quicker than    Process  of  arbitration can be completed as fast  as  the  concerned  parties’  desire.  Under  Arbitration  Act, the arbitrators have to make the award within four months from the date  of completion of all proceedings. Usually, arbitration is settled within a period of four months to one year.
  2. Inexpensiveness: Total incidental expenditure in arbitration is always much lower than Arbitration fees is around 2% of the claim value or less in institutional arbitration.
  3. Promotes Goodwill: As the arbitrator is chosen by both the parties, based on their faith and his competence, arbitration becomes a normal process of goodwill. Arbitration proceedings and its outcome do not disturb the existing friendly relations between the exporter and
  4. Choice of Appropriate Arbitrator: As the arbitrator is chosen by both the parties and name incorporated in the contract, who has the knowledge of customs and procedures of international trade, so separate expert witness for educating the judge does not
  5. Privacy: Arbitration proceedings are not open to public. Arbitrator’s award is not published in any This preserves privacy of the parties. So, trade secrets as well as disputes arising from the contracts do not become public.


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