While government officials in the United States and China enact policies to “decouple” their economies, the question for business is how to navigate the shifting geopolitical landscape.  Even changes impacting trade between the two largest economies will not be one-dimensional. 

Some US companies are expected to pull out of China all together or will diversify and set up production in other countries, such as India, Mexico, Turkey and Vietnam.  For other companies, the technological investment and know-how in China cannot easily be replicated. Chinese companies will look to strengthen their trading position, particularly in ASEAN, resulting in greater regional integration.

Unchartered waters require new risk mitigation strategies.  To avoid disruption, businesses large and small, as well as states and state-owned enterprises, need to be proactive to protect their supply chains and protect their investments.

Key to risk mitigation is assuring that if the deal falls apart, there is an effective avenue of recourse.  Absent careful planning, businesses involved in cross-border business may find that their only option to pursue a claim is in courts of their counter-parties.  Those procedures may be slow, hard to navigate or just not trustworthy. 

According to a study conducted by Queen Mary University, international arbitration is the preferred method for resolving cross-border disputes, and the International Chamber of Commerce International Court of Arbitration is the world’s leading arbitral institution. 

International arbitration enables business to resolve disputes in an efficient and cost-effective manner.  It is an independent and neutral process, free from political dynamics and influences. 

The primary benefit of arbitration is the ease of enforcing arbitral awards, under the New York Convention, signed by more than 170 countries, including China and the United States.  There is no global treaty which provides for the enforcement of court judgments.

Other benefits of international arbitration are procedural flexibility and confidentiality.  Parties also value the opportunity to have a say in the composition of the arbitral tribunal.

Expedited procedures, such as those under the ICC Rules of Arbitration, enable parties to reduce the time and costs of resolving their disputes, with an award issued within six months.  And emergency arbitrator proceedings can provide rapid interim relief to prevent operational disruption in urgent cases.

Unlike litigation, arbitration is a consensual process. Companies engaged in cross-border business therefore must carefully consider the arbitration clause in their contracts to ensure the process meets their needs if a dispute arises.

A poorly drafted dispute resolution clause, sometimes called a “pathological clause” can cause significant costs and delay, as the parties fight over what disputes are to be resolved in arbitration versus litigation.   Gaps or ambiguities in an agreement are all an obstructive counter-party needs to derail or delay any claim. 

For 100 years, the ICC Court has been at the forefront of making arbitration the preferred method for resolving disputes between parties from different countries. 25% of the parties using ICC arbitration come the Asia-Pacific region. And ICC has established a strong foothold in Asia-Pacific, with the case management office in Hong Kong celebrating its 15th anniversary, and offices in Singapore and Shanghai.

Asian parties also rely on mediation and other amicable procedures to reach an amicable resolution of their dispute, when the fast-paced business landscape leaves no room for litigation or arbitration.

Some companies include mediation in their general company policy, pledging as a first option to try to resolve commercial disputes before they escalate. Facing negotiation roadblocks, a neutral third party can bridge gaps, especially in a cross-cultural context. 

Expansion into new markets to build more resilient supply chains requires heightened risk management and mitigation. Arbitration and mediation are essential tools every business needs to consider – before the dispute arises – to assure they have the dispute resolution process that meets their needs.

Thanks to Kysen PR for sponsoring this post.

Posted by Claudia Salomon

Claudia Salomon is the President of the ICC International Court of Arbitration, which is holding its Asia-Pacific Conference on International Arbitration in Hong Kong on 26-27 June, celebrating the Centenary of the ICC Court and the 15th Anniversary of the ICC case management team in Hong Kong.

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