International orders do not exactly serve the same function as they did some decades back. This is due to some evolution in the political, social and economic hemispheres. This development means that, unlike former times when strict rules and certain tariffs have had to be adhered to before goods and services could cross an international border, today, such restrictions are less rigid than they were before.
This means that the influx or passage of goods and services between countries tend to increase, thereby, amongst other things, increases the flow of labor and investment between countries, boosts the partner countries’ exchange rate, as well as aid in the movement of businesses location to areas where the cost of production is relatively cheaper. This benefit is already being noticed by member countries in the European Union.
This article seeks to highlight some principles of cross border partnership and collaboration, and also to highlight the role of international arbitration in all of these. Some limitations to international arbitration in this context will also be treated, as well as proffered solutions.
Let’s dig in.
Principles of Cross-Border Partnership and Collaboration
Some principles guide cross-border partnership and collaboration. This is as proposed by the council of Europe.
These principles are thus:
– Cross-border partnerships and collaboration should provide the engaging parties with an avenue to exercise the freely their legal rights and should not be an added burden on them.
– Parties on both sides of the border should only enter into a collaboration based on a shared area of expertise.
– Cross border partnerships should only involve projects that are beneficial to both parties’ local communities, as well as be hinged on a common interest.
– Parties should only enter into a partnership or collaboration concerning the governing rules of both countries, which oversee their procedural issues as well as review their decisions. Both national and international laws should be respected.
– Enforcement laws, as well as regulatory powers, are to be excluded from any cross-border partnership. However, parties coming into collaboration may agree on coordinating their strategies as well as policies concerning each other’s domestic law.
– Parties coming into collaboration may formalize details of their partnership legally by signing agreements of co-operation or setting up such relevant bodies who may or may not have a legal personality. Also, parties should come to an agreement on which of the domestic laws from either of parties is to be applicable in the agreement- this is the law of the state, where the partnership’s headquarters is located.
The Role of International Commercial Arbitration in Cross Border Partnership
Economic relations and growth between member states have been a top priority of the Commonwealth of Nations. This is fostered by international business dealings. However, it brings along with it, the resulting disputes or conflicts synonymous with such collaboration.
Small and medium-sized enterprises (SMEs) are particularly hesitant to risk cross border partnerships due to uncertainty in the means of dispute resolution should it arise. Direct foreign investments are affected by this factor.
However, international arbitration is a sure way of resolving any of these disputes. For this to be so, key players or decision-makers in these establishments have to be privy to the advantages that international arbitration brings when it comes to resolving any cross border partnership related dispute. Some of these are flexibility in choosing neutral arbitrators, the venue and medium of communication, as well as international enforcement of the resulting arbitral award at the end of the process and an overall theme of confidentiality.
Challenges facing international arbitration in Cross Border Partnerships
According to numerous research, surveys and an analysis of comparative law, the following challenges have been identified with international arbitration when it comes to cross border partnerships and collaboration:
Inefficiency in the arbitrary process
International commercial arbitration processes in many countries do not reflect the best modern practices, and this poses a great challenge to international arbitration.
Cost-effectiveness is one reason why international arbitration is not being utilized to the full. Some of the facts that buttress this challenge is that of over 57% of commonwealth countries who do not have an international arbitration structure that boasts of best modern practices, and those who do not have a legal framework at all, including the 30% of commonwealth countries who are yet to be members of the New York convention.
These facts alone can drive away foreign investments, as well as lead to a loss in revenue from potential trades due to the lack of a modern-day dispute resolution strategy.
Limited knowledge of international arbitration
This is another challenging factor that impedes the use of international arbitration in cross border partnerships and collaboration.
Up until a few decades ago, International arbitration was not a known concept. Hence lawyers trained in that era were not introduced to it. There are three sets of people, who are also stakeholders, who need an in-depth knowledge of how international arbitration works. These are the judiciary, the business hubs as well as legal practitioners.
*When the judiciary is not aware of its duty towards international arbitration, it will discourage its use in disputes resolution,
*Also, lots of businesses, especially SMEs, particularly lack a solid knowledge of international arbitration.
*And the legislative arm is a bit behind in its knowledge of International arbitration because as earlier stated, many of its key lawyers were trained in a time when international arbitration was not a familiar concept, given that it’s a relatively new one.
Also, many international arbitrators today, lack enough caseload, to gain enough experience in the field.
Lack of quality and diversity in arbitration
This is another disturbing challenge in international arbitration matters. Surveys show that the quality of the arbitrators can vary, as arbitrators tend to have limited knowledge in the specialized field relating to disputes.
Also, as regards diversity in international arbitration, there is a hindrance to its spread to other countries by the community itself. And this often affects the ability of the international arbitration system to bring to bear, its full weight with regards to certain cultural and geographical factors that would have proved advantageous in the resolution of the disputes.
The use of technology in arbitration
This plays an important role in the effectiveness of arbitration. Features such as artificial intelligence, video conferencing, and cloud storage are some of the benefits of technology in this context. Adequate knowledge, access to technology plus knowledge of cybersecurity are essentials that should characterize international arbitration. But unfortunately, this doesn’t seem to be the case.
Solutions to the Challenges of International Arbitration in Cross-Border Partnerships
Below are some solutions to the outlined challenges confronting international arbitration when it comes to cross-border partnerships and collaboration?
– All countries should adopt an approach to international arbitration that employs the best modern practices and promotes cost-effectiveness. This can be further buttressed by their joining the New Convention.
– Cost-effectiveness can be heightened by; the provision of aid for businesses in legal matters and international arbitration, by ensuring that access to and promotion of third party funding is available, by allowing for arrangement of contingency fees as well as provision for legal expense insurance covering both before and after the arbitrary process has taken place.
– More awareness should be made about international arbitration both in the legal profession, among government officials and SMEs. It should also be taught in law schools
– Heightened use of technology would prove an added advantage, so this should be immensely encouraged.
– Scholarships should be made available for practitioners to gain more expertise in international commercial arbitration. Exchange programs would aid in this
– Foreign counsel should be allowed participation in arbitration. Tax and visa restrictions should be eased to allow for increased participation in international commercial arbitration across geographical locations and promote diversity in arbitration.
Cross border partnership and collaboration has many advantages. But as is the case in most cross-border collaborations, disputes are bound to ensue, which is why adequate plans must be made beforehand to tackle this. Also, collaborating parties should make plans and provisions for the effective usage of international arbitration in the resolution of disputes as it proves to be a very effective tool wherever cross border partnerships and collaboration disputes are concerned.
Thinking of going into a cross-border agreement or partnership and want to put in place an effective dispute resolution strategy? Why not contact Rattsakuten today and let’s help you with that process.