Trade Disputes Solving Mechanisms – Poram Course (July 2009)

The flow of goods and services in a modern economy and international trade is based on contracts agreed by the parties. Such contracts are in turn based on trust that the other party will carry out the contracts as agreed. Should a dispute arise, it is possible to take legal action against a offending party. Commercial disputes may range from small to large ones.

Although there are no statistics, it is generally accepted that a large number of disputes never get anywhere near lawyers. It is inevitable that parties will try to turn away from allowing disputes to fester until they mature into a state in which third party interventions become the only available option. It is now common in international trade for commercial entities to evaluate risks and develop mechanisms for early dispute evaluation and prevention.

The procedures available for the resolution of trade disputes extend over a wide spectrum. Either, the parties resolve the disputes promptly by reaching an agreement on an “interest basis” rather than a “rights basis” or they are nipped in the bud before they can burst into flower.

In such circumstances, the parties assess whether it would be advantageous to implement a solution reflecting elements such as fairness, maintenance of long-term relationships and which of them will feel less pain in taking a hit.

It is suggested that an interest-based approach is not confined to a resolution that is based on rights claimed by the parties and remedies offered by the legal system, the mediator and the parties can probe more deeply to meet the disputants real interest and needs.