A little while back I wrote about choosing the law which applies to your transaction in an international setting. While often the party which initiates the transaction (and provides the first draft of the contract) will dictate the law and venue, that’s not always the best option. Indeed, in some cases it’s wildly impractical, particularly where far-flung parties want to compromise on a central location for litigation but want to keep their own law. It’s going to be hard to find a New York arbitrator who can effectively apply Estonian law to a contract between an Estonian and a Thai company. Even larger countries like Germany or France can’t always count on reliable interpretation of their laws in faraway locations.
One alternative is to choose a “neutral” forum, often one physically located between the parties, to reduce the burden of travel and allow the application of one set of laws which are readily understandable by both parties. There are many different options for neutral venues, but a few examples include:
- United Kingdom. The UK, particularly London, has long marketed itself as a reliable and convenient venue for the resolution of legal disputes, and has the advantage of the English language and ready access from much of the world. UK law also reduces the burden of discovery which would otherwise be available in the US, and remains the most popular “neutral” law for international transactions.
- New York. As a global center of international business, readily accessible from much of the world, New York has long been seen as a good neutral forum for international disputes, particularly for finance transactions. And yes, in the US you have to choose the law of a particular state.
- Delaware. Long the choice of corporations in the US, Delaware is also a viable choice for resolution of international disputes which otherwise have no connection to the state, as long as there is some reasonable link to the state or if the value of the contract is above $100,000. Delaware’s dedicated business court (the Court of Chancery) is also seen as a plus, streamlining litigation in comparison to other US jurisdictions.
- Switzerland. Switzerland has historically been considered a viable neutral venue for international disputes, in large part because of a general sense of reliability and neutrality, although the complexity of some Swiss laws and the need to litigate in a language other than English may well be an obstacle for some.
- Singapore. Singapore is an increasingly popular venue for international dispute resolution, particularly in Asia, gaining in popularity over neighboring Hong Kong. Again, efficiency and ready use of the English language are pluses, as well as ready access from international markets.
Whatever venue or law you choose, arbitration can limit some of the risk of choosing a venue which is not otherwise related to the transaction at hand, and the adoption of international definitions (like INCOTERMS) and international legal frameworks (like CISG) can help ensure consistent resolution of disputes which may arise.
A lot goes into the choice of law, much more than can be covered in a single blog post. Whatever choice you make, be sure that the chosen venue will be amenable to hearing your case if and when the time comes.