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Thursday, October 06, 2005

[ALI] [Article] What To Do When Things Go Wrong?

Special Report China: What To Do When Things Go Wrong?

Business relationships are complex, and global shipping is among the most
likely to encounter disputes. Philip Yang strongly recommends an arbitration
clause in every contract.

When it comes to disputes among business partners, shipping has the longest
history of disputes and arbitration, says Philip Yang, chairman of the Hong
Kong International Arbitration Centre. One of the best things shippers can
do to avoid problems is to start with a thorough understanding of the rules
and terms of an agreement. But, he adds, include an arbitration clause that
defines how disputes will be resolved and, if arbitration is to be used,
where that arbitration will take place.
Called venue shopping in U.S. legal circles, litigants will often look for a
jurisdiction that has a history of favorable decisions for their position.
Another element may be to make defense difficult for the other party. Thus,
international companies may each want to file a court case in their own
country. Selecting a venue for arbitration can avoid some of these problems.
In issues involving Asia trade and shipping claims, says Yang, Hong Kong or
Singapore are the best places for arbitration because they are common-law
systems in a region where business is largely governed by civil law. Common
law is based on the English system, explains Yang, and is used in the U.S.
and in most international disputes.
Hong Kong's unique position with a foot in China and another in the West,
suggests a good understanding of both systems. The goal when Hong Kong
reverted to Chinese rule in 1997 was one country, two systems. Under that
structure, Hong Kong retained its legal system, form of government and
currency. But a long history of trade with Mainland China has provided a
foundation in those legal systems and culture.
In addition to specifying where arbitration will take place, sales contracts
and shipping documents should indicate the "governing law." In other words,
according to Yang, which country's legal system will be used to govern the
Facts and sufficiency of evidence are also important to dispute resolution,
and, says Yang. Many decisions in shipping disputes will be based on
documents, but the location of physical evidence will also come into play.
If you can get your way on the venue for dispute resolution, do what is in
your best interest, but if you have to choose a location for arbitration,
Yang feels Hong Kong offers the best venue. One reason, he points out, is
that the Final Court of Appeal in Hong Kong is international in its make up.

Yang's comments are is encouraging for shippers who have import or export
relationships with China. China is moving closer to international practices
as it grows in its role as a member of the global economy, he says.

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