CHAPTER 3

DISPUTE SETTLEMENT
Reasons of disputes
• İnevitable
• understand rights and obligations differently from another no matter
how carefully a contract is written.
• This could lead to
+ delayed shipments,
+ complaints about the quality of the work,
+ claims of non-performance of the terms of the contract and
+ similar misunderstandings.
• There may be gaps, conflicts, or subtle ambiguities. This causes
protests, claims and disputes.

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Jurisdiction
in International Legal Disputes
• No judicial body exists to deal with legal commercial problems arising between
citizens of different countries
• Legal disputes can arise in three situations
• Between governments
• Between a company and a government
• Between two companies

• Jurisdiction is generally determined on the basis of:

• Jurisdictional clauses included in contracts
• Where a contract was entered into
• Where the provisions of the contract were performed
• Most clear-cut decisions can be made:
• When contracts or legal documents supporting a business transaction include a jurisdictional clause

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Alternative methods for dispute resolution
principal methods available for resolution of
disputes :
• Negotiation
• Mediation
• Arbitration
• Litigation

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International Dispute
Resolution – Conciliation
• Conciliation is a nonbinding agreement between parties to resolve
disputes by asking a third party to mediate differences
• Sessions are private
• All conferences between parties and the mediator are confidential
• Although conciliation may be the friendly route to resolving disputes
• It is not legally binding
• An arbitration clause should be included in all conciliation agreements

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International Dispute
Resolution – Arbitration
• Contracts and other legal documents should include clauses
specifying the use of arbitration to settle disputes
• Arbitration clauses require agreement on two counts
• To arbitrate in the case of a dispute according to the rules and procedures of
some arbitration tribunal
• To abide by the awards resulting from the arbitration

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International Dispute
Resolution – Litigation
• The best advice is to seek settlement
• Deterrents to litigation
• Fear of creating a poor image and damaging public relations
• Fear of unfair treatment in a foreign court
• Difficulty in collecting a judgment that may otherwise have been collected in
a mutually agreed settlement through arbitration
• The relatively high cost and time required when bringing legal action
• Loss of confidentiality

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Negotiation
• Negotiation involves compromise
• it should be entered into with that in mind.
• Put up a good fight,
• do some hard bargaining,
• be prepared to compromise.

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Mediation
• Mediation is a process in which a trained third-party neutral
attempts to assist the parties to a dispute in reaching an
agreement that resolves the dispute.
• a trained third-party neutral intervenes by agreement of the
parties in order to guide and facilitate the parties’
negotiations toward an agreement that resolve the disputes.

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Arbitration
• Arbitration is the voluntary submission of a dispute to one or
more impartial persons for final and binding determination.
It is private, informal, and is designed for quick, practical,
inexpensive settlement. But at the same time, arbitration is
an orderly proceeding, governed by the rules of procedure
and standards of conduct that are prescribed by law.

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Litigation
• Litigation means to apply to the court to resolve
the dispute.

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 3 DIFFERENT WAYS OF SOLVING BUSINESS DISPUTES
•Litigation: disputes can be resolved in court. The court has the right
to decide disputes between parties based on the law (constitution)
•Arbitration: authority of an arbitral tribunal comes from the
parties’ agreement.
•arbitration agreement: what kind of arbitration institution to
choose, what should be the place and language of the arbitration,
how many arbitrators should solve the dispute etc
•Mediation: settle their dispute through mediation with the help of
a mediator. A mediator is an unbiased person, who tries to identify
the needs of both parties and helps them reach an agreement. If
the mediation fails, the parties have to turn to court or arbitration.