Historically, people from all civilizations and cultures have somehow needed mechanisms to settle disputes. From Solomon in the bible to numerous ancient societies, mankind has had to settle disputes in order to avoid war or infringement of rights. Several processes of solving disputes can be seen in countries such as Japan, China, India, and Mongolia. Numerous ancient societies have been referring disputes to tribal elders and village councils. In ancient Greece, and particularly under Solon, disputes were being referred to magistrates. Moreover, the disputes could be appealed to the citizens’ assembly or Areopagus, which referred to an assembly of ex-magistrates. Conflicting subjects in Medieval England used to request the Sovereign’s ruling at his court while business entities in Roman colonies took their disputes to the Praetor Peregrinus. These are just a few examples of dispute settlement throughout History. Most of these procedures, which are still in use to date, share one common model; which is resolution of conflict between citizens after intervention from a third party. This text seeks to compare between diplomatic means and judicial settlement in solving international trade dispute.
The integration and globalization of the world economy has led to an increase in the trading of business between numerous countries in the world over (Scherer, 1999) (Lawrence, 1995). Nonetheless, as foreign investors increase their investments into other diverse countries, quality disputes continue to arise in a few of the international trading businesses. Such quality disputes in international trade can be solved in an effective manner through reasonable means.
The legal system, in effect, offers the needed structure for the ruling of numerous international disputes. Conversely, some other disputants may not reach an agreement via a collaborative process. Such disputes, therefore, require the coercive authority of the state to implement a resolution that has already been passed (Fox, 1998, 34). Essentially, many entities would like to have a professional advocate when they become engaged in a dispute, principally if the dispute entails legal unlawful activity, legal rights or threat of legal action. The most common type of judicial dispute settlement is referred to as litigation, which is usually initiated when one entity files against the other. Litigation in the US is facilitated by the government within the municipal, state and federal courts. More often than not, the proceedings are formal in nature since they are governed by certain rules and regulations. One example is the rule of evidence and procedure established by the legislature. Conclusions are usually decided by an impartial jury or judge, based on the application law and factual questions presented in the case. The verdict is never advisory but binding; nevertheless, the two parties can appeal the judgment to the next higher court. Notably, dispute resolution using judicial means is naturally adversarial, for instance, it may involve opposing interests or antagonistic entities that seek an outcome that will be most positive to their stance (Sheard, 1997). Private lawyers or retired judges sometimes play the role of mediators or arbitrators. However, skilful and competent non-legal dispute resolution experts make up a growing body in the field of Alternative Dispute Resolution (ADR).
Arguably, gone are the days when national courts were being chosen explicitly by the entities as their venue for settling disputes that steam out of international trade (Ury, 2000). Their part in solving global trade conflicts now arises when the parties in conflicts have failed to make an explicit choice of forum in their agreement. Arguably, national courts usually do an excellent job when the jurisdiction in question has a specific commercial court made up of judges promoted on merit from the normal commercial bar. This happens in numerous common law nations, as well as, in developed civil law nations. However, such situations are not present in some countries or regions, for instance, in Eastern and Central European state in the previous Soviet bloc. The judiciaries in these countries never trained in commercial law. Instead, they administered criminal justice besides adjudicating on matrimonial disputes, as well as several other obligations and rights of citizens. Trade disputes were referred to “arbitration courts” of the chambers of commerce, which resembled arbitral institution in the capitalist world.
The general inclination towards arbitration in international trade is not about cost saving or speed advantage (Sherwyn, Tracey, & Eigen, 1999. 54). In view, such advantages apply merely in domestic arbitrations and in specific fields like rent reviews, commodities, maritime and others, as well. Arbitration clauses are present in international trade contracts because governmental entities and corporations involved in the trade are just not willing to take legal action in the court home to the other party (David, 1998, 34). There are several reasons why entities do not prefer getting involved in an “away game” unless they cannot avoid it. For instance, every witness testimony and document has to be translated into the national language that the court in question uses. Essentially, lawyers have to be engaged in the local rights of all the audience involved in the case. This means that one of the parties involved in the dispute cannot have its personal trusted lawyers in control.
One other positive characteristic of arbitration is the treaty obligation for implementing adjudication awards across state borders. On the other hand, it will be somehow hard to implement a favourable judgment from a national court in a new country since there will be no multilateral treaties that cover the reciprocal implementation of court outcomes. Towards the end of 1991, more than 121 nations had approved the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. In addition, 29 nations had put in place legislation referring on the 1985 UNCITRAL Model Law on International Commercial Arbitration. It offers a synchronized system of national legislation to control private settlement processes. For all the reasons discussed above, arbitration will continue to favor situations where enforceable outcomes are needed. International arbitration is always costly and lengthy in nature. The results will be more of “rights-based” than “interest-based”.
Mediation as Part of Diplomatic Means
Most people prefer the use of mediation is settling disputes because of the lesser cost and time involved when compared to litigation measures. Moreover, many international traders usually feel that interest-based resolutions can end in better outcomes when compared to rights based resolutions. A number of institutions like the ICC, AAA, WIPO, LCIA, and the ICSID uphold their personalized sets of mediations and conciliation rules (Scherer, 1994, 67). Consequently, there are now numerous domestic institutions all over the world that offer their mediation services, especially in the common law world. Mediators come with explicit skills to the table. In essence, they come with neutrality and structured informality in all the proceedings. Moreover, they may possess information that neither of the entities is willing to pass on to the other. Therefore, they may use such information to strategize on how to bring the parties towards a common ground. Notably, just like arbitration, mediation has a valuable and genuine place in the array of present dispute resolution techniques.
Other diplomatic means may include negotiation, collaborative law or conciliation, which are more or less the same with mediation (Fox, 1998). These processes mainly depend on some form of agreement by all the parties involved to use these processes. Notably, such an agreement may come before or after a dispute has occurred. Mediation and other diplomatic processes have come to be accepted and utilized because of many perceive the methods to be flexible, and cost below the traditional litigation measure (Greenwald, 1996, 196). Diplomatic means are also speedy in resolving disputes since the parties involved have to come to an agreement within the least time possible. Going to the courts, on the other hand, may take time because it involves certain court procedures and entities like juries, lawyers and judges. There are also other perceived advantages of ADR (alternative dispute resolution) processes; however, some disapprove of these ways because, according to them, they take away the right to look for redress of grievances in the judiciary system. They suggest that, such resolution methods may be unfair to parties that cannot afford an equal bargaining power, for instance, in a trade dispute involving a huge corporation and a consumer. Additionally, other ADR processes may be even more expensive that litigation or court processes.
Despite all the arguments, international business will continue to grow, which means that dispute will keep on coming up every now and then (Serra, 1997, 117). In view, third party intervention will continue to be the only viable option. Therefore, all the parties and organizations involved have to come up with the most efficient and fairest means of settling international disputes. The main issue in looking for ideas to deal with international trade disputes appears to be in the desire for enforceable fortitude by proficient unbiased entities to bind sovereign states and nations. An efficient dispute resolution mechanism has to confront and understand all the main issues discussed above. Notably, both diplomatic and judicial settlement techniques seem their own advantages and disadvantages. Nevertheless, disputes can never resolve themselves. A system that places emphasis on ingenuity and speed can offer a better ending that what is currently available. But between the two, diplomatic means appear to be fair because it takes little time and is less costly when compared to judicial procedures.