Is International Arbitration the Best Method for Resolving Cross-Border Disputes?

Is International Arbitration the Best Method for Resolving Cross-Border Disputes?

Breached contracts and failed investments know no borders. As global business continues to grow, arbitration is becoming an important method of dispute resolution.In New Jersey, Gov. Chris Christie recently signed the New Jersey International Arbitration, Mediation, and Conciliation Act into law. The new law aims to make the international arbitration process easier for businesses that operate in New Jersey. 

Benefits of International Arbitration

U.S. businesses are increasingly turning to arbitration to resolve disputes with foreign governments and multi-national corporations. The benefits include:

• Neutrality: Arbitration avoids the potential disadvantages of resolving a dispute in a foreign legal system that may favor its own citizens.
• Confidentiality: Unlike litigation, arbitration is generally a confidential process in which financial data and proprietary information is shielded from public view.
• Predictability: Through arbitration provisions, parties are able to decide the forum in which their dispute will be resolved, whether it be the International Chamber of Commerce, London Court of International Arbitration or American Arbitration Association.
• Finality: Arbitration decisions are generally final and not subject to a protracted appeals process that can cause cases to drag on for several years.
• Enforceability: U.S. court judgments may not be recognized outside of our borders. Under the New York Convention, an international arbitration award can be enforced in any of the 149 signatory countries.

Of course, arbitration is not perfect. Like litigation, it can be costly and time-consuming. However, U.S. companies are finding the benefits far outweigh the disadvantages.

New Jersey International Arbitration, Mediation, and Conciliation Act

The new law (Senate Bill 602) is intended to attract international businesses to New Jersey by easing the resolution of global business disputes. It will also benefit corporations that call the state home.

“When we talk about the need to grow our economy and create good, high-paying jobs, one of the surest ways to do that is to create a climate that is friendly to companies doing international business. Globalization has made this a must,” Assemblyman Jamel Holley, a co-sponsor of the bill, said in a statement.

The New Jersey International Arbitration, Mediation, and Conciliation Act authorizes certain non-profit entities to organize centers, whose principal purpose is to facilitate the resolution of international business, trade, commercial, and other disputes via arbitration, mediation, conciliation, and alternatives to litigation. The Act applies to the arbitration, mediation and conciliation of disputes between: two or more persons, at least one of whom is a nonresident of the United States; or two or more persons, all of whom are residents of the United States if the dispute: (1) involves property located outside the United States; (2) relates to a contract which envisages enforcement or performance in whole or in part outside the United States; or (3) bears some other relation to one or more foreign countries.

Participants will be able to select any set of rules and procedures to govern the proceeding, including those prepared by private arbitral organizations, created by the participants themselves, or by the center.  Notably, the law also authorizes arbitral tribunals or other panels to conduct discovery, such as issuing subpoenas for witnesses to testify and/or requests for the production of books, papers, records, and other documents.

The law provides that conducting arbitration in New Jersey, or making a written agreement to arbitrate within the state, will constitute a consent by the parties to the exercise of in personam jurisdiction by New Jersey courts, but only for the purposes of that arbitration. In addition, arbitral awards or settlements issued by a center authorized under SB 602 can be enforced by any court of competent jurisdiction as permitted by law and consistent with the Federal Arbitration Act and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. If the parties specifically submit to jurisdiction, a center may require those parties residing in countries not signatories to the New York Convention and not having sufficient assets otherwise within the jurisdiction of the New Jersey courts, to post bonds or other security.

Do you have any questions? Would you like to discuss the matter further? If so, please contact me, Joel Kreizman, at 201-806-3364.