Magazine article Dispute Resolution Journal

The Power of Mediation to Resolve International Commercial Disputes and Repair Business Relationships

Magazine article Dispute Resolution Journal

The Power of Mediation to Resolve International Commercial Disputes and Repair Business Relationships

Article excerpt

This article examines some of the impediments to using mediation to resolve international commercial disputes. It also suggests ways to overcome these impediments in order to obtain the benefits that mediation has to offer-flexibility, privacy, creative business-oriented solutions, speed, less cost and preservation of the business relationship.

Free trade agreements are intended to encourage foreign investment by nationals of the state parties. The United States is a party to a number of free trade agreements. Ecuador is in the midst of negotiating a free trade agreement with the United States. Certainly, Ecuador hopes that this agreement will nurture the business relationships between investors from the two countries.

All business ventures, however, are likely to experience disputes. This is almost inevitable. For the most part, parties involved in international transactions have used international arbitration to resolve disputes. Yet mediation is an even better method of dispute resolution. But regrettably, it is not yet an accepted method of resolving international disputes. This article examines the impediments to mediation's use and ways to overcome them. It also outlines a special "med-arb" procedure for high-risk international disputes.

What is Mediation?

In the United States mediation (called conciliation in some countries1) is a popular means of commercial dispute resolution.2 Mediation is a dispute resolution process that helps parties end their problems more efficiently and at less cost than adversarial processes like litigation and arbitration.3

When we consider the many advantages of mediation, including control over the outcome, flexibility, privacy, speed, less cost, and the preservation of business relationships, we feel compelled to ask why isn't mediation the preferred method of resolving international business disputes? Some possible reasons and what we can do about them are discussed below.

Cross-Cultural Differences

Mediation is mostly about communication-effective communication. The mediator's principle goal is to open up a channel of communications so the parties can explore possible resolutions that might be acceptable to them both.

However, cultural differences may make it seem impossible for this to happen. People from different cultures often resolve internal and external conflicts in different ways.4 Some cultures communicate in a more rational, linear way, while others communicate emotionally, focusing on their feelings.5 Because of cultural differences, there can be a gap between what a person from one culture intends by an action and what a person from another culture perceives as the impact of that action. Thus, an action taken with positive intent can be perceived negatively by another person.6

Jeswald Salacuse, in his book Making Global Deals,7 offers these 10 ways that cultural differences could impede a settlement with Americans.

1. Different goals: He says Americans tend to see the goal as coming up with a signed contract but the other side comes from a culture that prefers to establish a relationship first.

2. Different bargaining styles. Because of culture or personality, Americans may take a win/lose approach to negotiations (i.e., distributive bargaining) while other cultures takes a win/win approach (integrative negotiation).

3. Different styles of conduct. Salacuse observes that Americans are more informal than other cultures in the way that they talk, dress and interact. For example, in negotiations, American men often take off their jacket and roll up their sleeves. Many do not hesitate to ask personal questions of other negotiators, such as about their family. Americans also quickly move to a first name basis. Other cultures are much more formal. To them, certain informal behaviors come across as disrespectful. An example is using the first name right away.

4. Different modes of communication. …

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