If your business trades with a company based in another country, this is classed as ‘cross-border trade’ and effectively it means, in legal terms, that the other party is not necessarily subject to the jurisdiction of the English courts – in other words, is not subject to the official powers of the English courts to make legal decisions and judgements. This adds a layer of complexity to the situation when disputes arise, and this area – particularly in a post-Brexit world – can be littered with technical jargon and confusing terminology. To help you, we have decided to create a simple guide covering some of the top-level key points to be aware of if your business is faced with a cross-border commercial dispute.
Contents:
- Common examples of cross-border disputes
- How to determine what law applies to a cross-border commercial dispute
- What if there is no choice of law clause in the contract?
- Finding out what court or other forum would hear the dispute
- What if there’s no arbitration provision in place?
- What happens if no jurisdiction is specified in a contract
- Remedies for cross-border disputes
- Time limits in cross-border disputes
- Summary
Common examples of cross-border disputes
Our team of business disputes solicitors commonly see cross border business disputes occurring due to:
- Non-payment for goods and services
- Disputes over the quality or quantity of goods
- Damage to goods, or goods lost in transit
- Delivery delays
- Breaches of contract
How to determine what law applies to a cross-border commercial dispute
Which law applies to a cross-border commercial dispute is of fundamental, but it’s not always immediately clear until a further investigation of the details of the relationship between you and the other company is carried out.
The first step you will need to take, is to check the terms of the commercial contract between yourself and the other party in order to establish whether it contains what’s referred to as a choice of law clause, which is also sometimes referred to as a governing law clause. The purpose of this kind of clause is to express the parties’ agreement as to which country’s law governs the contractual relationship and will ideally have been inserted when the contract was drawn up.
What if there is no choice of law clause in the contract?
If there is no choice of law clause in the contract, or if the clause is not drafted clearly, the situation can become more complicated. Certain international conventions may be invoked; for example, where at least one of the parties is based in a European Union (EU) member state then a regulation entitled ‘Rome I’ will apply and in this scenario will have the effect that the applicable law will be the law of the country where the party performing the service/selling the goods characterising the contract has its administrative base (subject to a few exceptions).
Put simply, this means there’s a risk that English law might not apply to your dispute, and it’s strongly recommended that you seek legal advice from a business dispute lawyer on the best way forward if you believe this to be the case. You are likely to need advice from a business disputes lawyer in the country whose law applies. We can assist in finding you the right person.
Finding out what court or other forum would hear the dispute
It’s important to highlight that it may well be possible for court action to be avoided if the dispute can be resolved by alternative means. Again, the terms of the contract between you and the other party will be of significance here, because another item to check will be whether there is arbitration agreement within it. Arbitration is a formal method of resolving a dispute outside of the arena of the court and it results in a legally binding decision, made by a qualified arbitrator (paid for by the parties), which can be enforced, and is likely to be a compulsory course of action to take if an arbitration agreement is present. It is a common provision in cross-border trade contracts.
What if there’s no arbitration provision in place?
If there’s no mandatory term within the contract to compel the parties to engage with this process, then the next factor to consider is whether the contract contains a jurisdiction clause – which in turn would indicate which country’s court has the jurisdiction to deal with the dispute. It’s frequently the case that commercial contracts incorporate jurisdiction clauses that define where a dispute should be litigated and as such, it’s recommended that thought is given to this at the outset of the contract being drawn up. Jurisdiction and choice of law clauses are often found together in commercial contracts.
What happens if no jurisdiction is specified in a contract
If your contract is silent on the issue of jurisdiction and in determining whether the courts of England & Wales hold that jurisdiction, the first consideration will be whether the contract impliedly provides for this to be the case. This will require an analysis of the specific facts of the matter centring on where each party is based, and may not be straightforward.
In circumstances where an obvious implication cannot be found, the court’s role then will be to look at where the ‘natural and appropriate forum’ with the closest and most real connection to the dispute is and make a decision based on this.
Remedies for cross-border disputes
As is inevitable with the sheer breadth and depth of the nature of international and cross-border commercial disputes, the appropriate remedy for your case will ultimately depend upon which country’s law applies to it. What’s important is that you seek legal advice tailored to the relevant country so that the enforcement options for any judgement can be properly assessed. Again, the situation has become more complicated since Brexit, but broadly speaking it’s recommended that advice is obtained on this as early as possible in the litigation process so that time and money is not wasted commencing proceedings in the UK if enforcement in the defendant’s home country will prove difficult.
Time limits in cross-border disputes
The time limit for bringing a cross-border claim will very much depend on the nature of the dispute and the applicable law of the country governing it. If, for example, it’s determined by a choice of law clause that the law of England & Wales applies to a breach of contract claim with an international element, then it will follow that there is a six-year time limit from the alleged breach within which to commence litigation proceedings. However, time limits could well be different (and possibly shorter) when another country’s law applies
Summary
It’s safe to say that taking legal action against a party based overseas can be a complex and time-consuming process. The starting point for any action will be to look to the written contract for guidance if one is in place, and then a preliminary analysis will be required to decide upon next steps – if it’s the case that it appears feasible and cost-effective for your business to go ahead and take legal action. At Harper James, our business disputes solicitors work with a network of overseas lawyers to assist with advising and conducting cross-border claims, so you can rest assured that your international dispute will be handled in the most effective and pragmatic way possible.
