DISPUTE SETTLEMENT IN EXPORTS AND IMPORTS BUSINESS

Litigations and Arbitration in Export and Import Business 

I hope this article helps all traders in a business especially those who are in to Import Export business - how to handle disputes in import and export trade?

I sell goods to you, you buy them, you pay bill, you use my goods. Simple. Both are happy. Right? But is it that much simple in an international trade? I will say ‘YES’ depends up on how fast you are untying the knot. In other words, I will say, ‘Removing hindrances with least time and least money is business’ . Am I right?

Let me discuss firstly about causes for disputes under export import business. What are the reasons for Disputes in international business?

Reasons for disputes in international trade between exporter and importer can be many. 

As per my experience in import export trade for the past 25 years, the primary reason for disputes is quality of the goods exported. Under contractual terms in many export contracts, importer gets the opportunity to inspect the quality of goods only when the consignment reaches him. In many cases, by that time, the exporter would have got money. Even if the consignment is sent on collection basis, importer can check the quality only after retiring the documents. Other reasons for the disputes can be delayed shipment or non-shipment due to change in government regulations or market conditions, restricting exports, etc.

What are the methods of settling dispute? 

In any business there are two basic methods for dispute settlement - Litigation and arbitration. 

Litigation is highly suitable due to the proverbial delayed process, prohibition costs and uncertainty of decision. 

• But what are the basic Limitations of Litigation? 
• How fast a litigation can be in export import business? 
• Is it easy to educate and convince on judgments with proper documentary proof? 
• How convenient to both exporter and importer under Litigation in international business?
• Will it effect both importer and exporter on their business due to bad image among public? 
• How to effect trade relationship for both seller and buyer under litigation? 
• Are international laws and procedures simple to handle?  

Let me discuss these area also here:

Slow Process: As you know, almost all civil process of litigation is slow. Court process proverbially takes huge time consuming and formalistic.

Avoidable Necessity of Export Witness and other Evidence: In international contracts, practices, procedures and customs are different. A judge however well versed may be, in law, can not be expected to know all these intricate matters. So, in courts, to educate the judge about these practices, witnesses who are experts and having knowledge in the field have to be produced to prove the practices, even before the evidence is established.

disputes in international business Inconvenience to the Parties: Court timing and date of hearings may not be convenient to litigants. Most of the time, cases are postponed and in that process months drag on even for completion of one witness. Even after day’s long waiting for hearing, one may know, at the end of the day, that the case is adjourned for two months due to non availability of the other advocate!

Adverse Public Image: Court proceedings are never secret. Media always covers the developments in important cases. Even the superior court judgments are published. Matters, which have been confidential till the case is brought to a court of law, become topics for public discussion that may bring notoriety, loss of goodwill and long-standing reputation.

Bitterness and Disruption of Trade Relationships: When a matter goes to a court of law, it is immaterial which party may win as the age old established relationship, after the case is brought to litigation in a court, comes to an end with only acrimony ad bitterness.

Different Laws and Procedures: International trade laws and procedures are more complicated. Litigation in foreign courts is more expensive and difficult in comparison to the domestic courts.

OK, Now let us discuss about Arbitration under Imports and Exports. 

• How does arbitration helps exporters and importers if dispute arises? 
• How fast arbitration can take place under a dispute between buyer and seller in export import business? 
• How expensive compared to litigation under export import dispute between seller and buyer? 
• How does an arbitration under international business effect Goodwill of both exporter and importer? 
• What about the confidentiality about the dispute between importer and exporter in an international trade?
• What are the basic Advantages of Arbitration under a dispute between seller and buyer in export import business of international trade? 

Let me explain basic advantages of arbitration in Export Import dispute compared to Litigation:

Quickness: Definitely, arbitration is quicker than litigation. Process of arbitration can be completed as fast as the concerned parties desire. Under Arbitration Act, the arbitrators have to make the award within four months from the date of completion of all proceedings. Usually, arbitration is settled within a period of four months to one year.

Inexpensiveness: Total incidental expenditure in arbitration is always much lower than litigation. Arbitration fees is around 2% of the claim value or less in institutional arbitration.

Promotes Goodwill: As the arbitrator is chosen by both the parties, based on their faith and his competence, arbitration becomes a normal process of goodwill. Arbitration proceedings and its outcome do not disturb the existing friendly relations between the exporter and importer.

Choice of Appropriate Arbitrator: As the arbitrator is chosen by both the parties and name incorporated in contract, who has the knowledge of customs and procedures of international trade, so separate expert witness for educating the judge does not arise.

Privacy: Arbitration proceedings are not open to public. Arbitrator’s award is not published in any newspapers. This preserves privacy of the parties. So, trade secrets as well as disputes arising from the contracts do not become public.

I have explained about Litigation and Arbitration under dispute between Exporter and Importer in an International Business. 

• Had you experienced Litigation and Arbitration under dispute between you and your customer? 
• Would you like to add more information about dispute between importer and exporter in International Business? 

Share below your experience in handling dispute between you and your customer in Export Import Business. 

at info@rmslog.com