International deals frustrated by jurisdiction confusion

The survey, carried out in March 2003 by the International Chamber of Commerce (ICC) also found that 60% of companies prefer arbitration over court proceedings in disputes over international agreements, 15% prefer court and 25% expressed no preference.

Arbitration is popular because it can be faster and less expensive than court proceedings, the arbitrator can be chosen by the parties, and the result can be kept confidential. Like a court, the decision of the arbitrator is binding - unlike mediation, where the parties must agree to a solution.

Accordingly, contracts often have clauses that say the parties shall resort to arbitration in the event of a dispute. Of 103 respondents to the ICC survey, 37% said all or virtually all their international contracts contain arbitration clauses; another 27% said more than half contain them.

Another issue is enforcement of decisions. Since the introduction of a 1958 New York Convention, arbitral awards have become more easily enforceable. However, there is still no international convention on the recognition of foreign court judgments.

A meeting took place this week with the hope of redressing that problem, the latest step towards the proposed Hague Convention on Jurisdiction and Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters. Government officials at the meeting were presented with the ICC's survey results.

Under the proposed Convention, signatory states would agree to follow a set of rules regarding jurisdiction for cross-border litigation. Every country agrees to enforce nearly all of the member country judgments, subject only to a narrow exception for judgments that are "manifestly incompatible with public policy," or to specific treaty exceptions, such as the one for certain antitrust claims.

The Convention would apply only to business-to-business (B2B) contracts. The latest draft excludes consumer contracts and proceedings related to the validity of patents and trade marks.

An ICC statement addressed to the negotiators in The Hague said:

"Business' principal expectations are that the Convention will respect choice of court and enforceability of judgments. ICC assumes that the Convention will only address choice of court provisions between businesses (B2B), an approach strongly supported by ICC as a means of achieving more predictability and certainty in international contracts within a reasonable time frame."

The ICC added that the right of the court of choice to dismiss proceedings should be limited in order to improve the predictability of judgments.