Kiwi research does a great deal for international trade

By Nikki Mandow

One of the biggest nightmares for business people considering or doing business overseas is trying to work out what will happen if a deal falls apart.

In looking at impediments or risks to foreign trade there are questions such as: "Are clauses in my contract enforceable in country X?"; "Is a New Zealand court judgment in my favour valid in country Y?" And, with court-based solutions increasingly time-consuming and expensive, does country Z have reliable arbitration or alternative dispute resolution procedures in place?

The Apec (Asia-Pacific Economic Cooperation) interest in reducing the costs of doing cross-border business by increasing transparency and consistency of business and trade laws across the 21 member economies is still some way off.

But as New Zealand begins its year as Apec host economy when the value of Apec is being questioned in some quarters, proponents point out that Apec-funded research is delivering practical benefits in many areas.

One of these is international disputes resolution.

The major hand behind this disputes resolution research is Kiwi diplomat-turned-international-consultant Rodney Gates.

In 1997 Gates and the Apec Dispute Mediation Experts' Group published a comprehensive directory of disputes resolution procedures in all Apec economies.

This directory is now leading to some of the countries whose laws cause the most problems for overseas business people bringing their ADR systems in line with international norms.

This year Gates' project will go one step further, with an updated version of "Commercial Disputes: A Guide to Arbitration and Alternative Disputes Resolution in Apec Member Economies" being available on the Web. The Internet project will also provide direct links from the guide site to international commercial dispute resolution centres in individual Apec economies and ultimately to their law books.

Take a Kiwi business person embroiled in a dispute over payment with a Japanese partner but unwilling to try to resolve it through an uncertain and expensive legal process.

From the middle of this year he or she will be able to hone in on Gates' "what's what" of alternative disputes resolution in Japan, and find out whether Japan is a signatory to international treaties that would allow a New Zealand arbitration award to be enforced by a Japanese court. For a more in-depth insight, he or she can click from this site straight into a Website showing the rules of Japan's commercial arbitration centre.

"Once you start comparing different countries' laws it becomes apparent that the poor old businessman doing business overseas has not only to understand his own laws, but could have to come to grips with the crucial parts of two or three other legal systems," Gates says.

"This increases the risks and that increases the cost."

This is particularly important when dealing with countries with less sophisticated or fundamentally different business laws, such as those economies whose business laws evolved in a socialist system. In these countries the chances of something going wrong are greater, and therefore the potential profit has to be far larger to make a business deal worthwhile.

The Gates/Apec project had its beginnings in a series of Pacific Economic Cooperation Council (Pecc) meetings on harmonising international business law in the early 1990s, including a meeting in Auckland in 1995 convened by the New Zealand committee of Pecc to look at ways of harmonising disputes resolutions procedures.

The Pecc initiative was picked up by Apec's Dispute Mediation Experts' Group and Gates, an NZPecc member, volunteered for the task of putting together a questionnaire that could be sent to all Apec economies to gather consistent information on their disputes resolution procedures. Once the information was in, he was to put it together in a guidebook aimed primarily at business people.

The motivation from Gates' side was a career-long interest in international disputes resolution - "Dispute resolution and diplomacy have a lot in common," he says.

Disputes resolution clauses are often called "the midnight clause" in business contracts. They are reluctantly put in at the last minute when the euphoria of a successful outcome is strong and the anticipation of problems at its lowest.

Western business people and their professional advisers will often choose a standard arbitration clause - the sort of thing that has been popular in Europe for centuries in commercial contracts.

At its best, arbitration - a kind of privatised litigation where the parties choose their own arbitrator and hold the hearing in private - is quicker and cheaper than going to court.

But not always.

And as so much business involving New Zealand companies now involves an Asian partner, it is foolhardy to assume that Western norms for dispute resolution will be appropriate, Gates says. Going to court over a dispute in Asia is always an option but one which might well involve unknown and expensive lawyers who do not necessarily speak your language. The outcome may be unpredictable and could be politically motivated rather than determined on independent legal grounds.

Asians are no less reluctant to get into our courts for some of the same reasons. Additionally, they have a cultural dislike of airing their business disputes in public. And because they place high store on trust and respect in their personal business relationships, they dislike adversarial procedures for resolving disputes since these could destroy the relationship.

Because it too, is adversarial, arbitration is not as popular in Asia as it is in Europe and North America. Other forms of resolution, such as mediation, conciliation and facilitated negotiation are more in tune with Asian business culture and have been growing in popularity in New Zealand in recent years.

Gates' guide aims to provide practical information about some of the main questions concerning arbitration and disputes resolution, so that business people can maintain more control over dispute management through a wider range of dispute resolution options. While the book will not tell you that a particular country's judges can be bribed or that the local courts are unlikely to enforce foreign judgments against a local company, it aims to reassure or strike warning bells over questions such as:

* Will I have to use a lawyer from the country where the problem has happened, or can I bring my own?

* Are the laws for settling international disputes different from those for local disputes?

* How easy is it for a party intent on deflecting or stalling the arbitration process to do so?

* To what extent is disputes resolution recognised in the legal system of a particular country?

* If I get a decision or an award, can I enforce it?

"Generally business people recognise there are higher risks in some countries than in others and these risks need to be calculated and built in," Gates says.

"But it's not always easy to know what those risks are. That's the point of this exercise - making it easier to identify risk factors and making them more public."

Moreover, as economies in the region become more integrated, the importance of exploring different ways of resolving disputes must increase, comments NZPecc Chair Kerrin Vautier.

* Nikki Mandow is manager, external relations at the University of Auckland's New Zealand Asia Institute.