INTERNATIONAL BUSINESS ARBITRATION

Be careful when handling international business deals!

Alfredo Zuloaga is a lawyer who specializes in international business law and business arbitration matters. He is a member of the Spanish Arbitration Club (CEA for its acronym in Spanish), and is an arbitrator at the Arbitration Center of the Chamber of Commerce in Caracas, Venezuela. He spoke to us about this subject in a special interview for weLanguages.

When one is doing business and signing an agreement or a contract with a company abroad, it is very important to determine the jurisdiction (or country) where the contract will be enforced, so that in case of any disputes, the contract has an arbitration clause that indicates that the dispute would be resolved in an independent jurisdiction, which is different from the jurisdiction of the respective civil courts.

An international business arbitration is the mechanism most commonly used to resolve private disputes regarding business matters due to its broad scope, its flexibility, and promptness in resolving disputes. It is a matter of particular interest for business people: it creates more confidence in the markets, and it provides greater certainty in the legal frameworks and judicial systems regarding the standards that regulate international business arbitration.

Several countries in the Americas have moved forward consolidating attractive investment environments and international commerce by revising their arbitration laws.

-          Is arbitration optional?

AZ: Yes, it is. International business arbitration as an alternative to an ordinary judicial process is voluntarily chosen by the parties (companies with a contractual agreement), and must therefore be expressly established in the respective contract (arbitration clause) or be subsequently agreed upon when a business  dispute arises.

For those cases where the contract does not contain an arbitration clause, if a conflict or controversy arises, it is still possible to resolve it. In this case, both parties must come to an agreement and establish an arbitration agreement “a posteriori.” It can also be done without before any disputes arise: when the parties want to “ex-post” the original contract.

There are several entities that carry out arbitration processes, including: the United Nations Commission on International Trade Law, the Inter-American Commercial Arbitration Commission, the International Chamber of Commerce (ICC) https://iccwbo.org/about-us/who-we-are/dispute-resolution/ , International Investment Dispute Settlement Institution (ICSID), and the London Court of International Arbitration (LCIA). However, Zuloaga explains that “the parties that uphold an international business contract can decide to be ruled by an institutional international arbitration even though the countries where they come from are not signatories.”

-          The arbitration process begins once the negotiationphase between the parties has failed.

-          The arbitration process carried out by the International Chamber of Commerce (ICC) has several phases.

-          The arbitrators are chosen by the parties at the time of a controversy and the Court President is chosen by mutual agreement between them.

-          After paying for the cost: the Court arbitrator receives the file and the arbitration proceedings process begins by a “Missions Act;” a document where the task is defined and which must be signed by the parties and submitted to the arbitration Court within a two-month period. Likewise, it defines for the Court, the interim calendar it intends to follow.

-          How are the costs established?

AZ: “It will depend on the institutional structure and the fees of the chosen arbitrators. Generally, these costs and fees will have a percentage relationship with the amount or estimate of the arbitration lawsuit and are included in the Guidelines of the different arbitration institutions in order to have an approximate cost for a specific arbitration process. The cost will be shared equally among the parties in conflict.”

Since an international business arbitration deals with controversies among parties domiciled, or with residence in different countries, the language chosen and the translation of legal documents that will be presented during the arbitration process, are very important for the parties. Therefore, choosing translation professionals or companies with specific knowledge of legal matters and arbitration processes is a very important step for the work of attorneys and firms dedicated to this specialty, as well as for transnational companies. At weLanguages we have vast experience with legal translations: therefore,  we consider ourselves your ally in these processes.

Take Notice: before “Globalizing” your brand

In a previous installment, we talked about globalizing your brand and its advantages: "a world of opportunities." In this post, we list a number of considerations to be taken into account before opening up to international markets:  

 -       IN ORDER TO GO "ABROAD," FIRST YOU HAVE TO BE WELL ESTABLISHED AT HOME.

You need to have a clear business philosophy: Vision - Mission - Ethics, based on a solid strategy. This involves understanding the brand and knowing the answer to these questions: What are you selling?  Beyond the product itself, the point lies in the concept and the consumer’s experience. How do you sell it? Not only are your communication means important, but also the message you are delivering and how it is delivered, in addition to attributes that make you stand out over your local competitors, i.e. the classic SWOT analysis (Strengths, Weaknesses, Opportunities, Threats).

PLEASE NOTE: After this process has taken place locally in your “home” base, it must be repeated by adapting it to the new target market. PRODUCTS THAT ARE SOLD AT HOME ARE NOT ALWAYS SOLD ABROAD. It is important to give it a global rollover. And here is where a very important step takes place: considering the LANGUAGE. This is why you’ve found this post on our website. Because at weLanguages we understand that the key to a globalization strategy is to speak to the consumer in their own language. At the same time, markets are globalized and personalized. This phenomenon is achieved through new technologies. This is not about automatically going from one language to the other: Being familiar with the distinctive cultural features behind each language is a must.

1. Explain the reasons WHY you are entering an international market, and turn them into medium to long-term goals.

2.Take into account: macroeconomic variables, legal and judicial frameworks, and how they allow foreign investment in the new market.

Regarding studies on these variables, we have developed several baseline posts, where we constantly refer to the World Bank guide on Doing Business. 

In addition, we have vast experience in translating legal documents and contracts. We are certified and will save you money with our speedy and reliable process. Mistakes in legal translations can result in costly consequences.

 -       Run a detailed target-market study for the market you want to enter: consumer habits, media, trends, etc. Currently, there are many technological tools available that can help in case you do not have the resources to carry out your own market survey. Social networks are also a great database.  

-       Take into account market introduction costs and the advantages of the digital communication age.

 -       Take into account product distribution (logistics), production needed to meet the demand, and the possibility that more staff may be required. Be prepared to offer customers a full service up to the post-sale: every detail must be taken care of, since the point is for customers to be satisfied so they return and refer.

 Regarding these considerations, we are also sharing 5 QUESTIONS BEFORE EMBARKING ON AN INTERNATIONALIZATION PROCESS, posed by Carlos Jimenez, an expert in market research studies.

 1.    What is the competitive advantage of the company? 

 What makes you win customers over? Is it your prices or how you sell your product? Or is it the quality? I suggest using Michael Porter’s competitive strategy viewpoint: differentiation, leadership on costs or on high segmentation.  

 2.    How can competitive advantage be taken out of context and applied towardsforeign markets?

 This question leads to the decision of which market(s) to address: a single market or multiple markets? I recommend starting out by gaining experience with a single market.

3.    Does my company really know those markets?

 4.How much is the company willing to invest in such a process?

It may be that the company is not well known in those destination markets, that is why it is important to invest in marketing and advertisement, including social media. Then, defining the financial plan for the company regarding this process is key: private funds, debt, partnership with third parties, etc.

 5.    Should I collaborate with local entrepreneurs?

 Which internationalization model should the company adopt? Should exports be done through a target-market distributor? Or should a branch be set up with a local partner? The company’s best interests and needs will lead to the right answer.