Chapter 3

Resolving International Commercial Disputes

I. Avoiding Business Disputes

A. Cultural Attitudes Toward Disputes

B. Methods of Resolution

II. Alternate Dispute Resolution

A. Mediation

B. Arbitration

1. National Arbitral Laws

2. Arbitration Bodies

3. Arbitration Clauses

Scherk v. Alberto-Culver, 417 U.S. 506 (1974)

Facts: Scherk (German and Liechtenstein) and Alberto-Culver (Delaware and Illinois) entered into an agreement regarding cosmetics. The agreement called for arbitration in France under Illinois law. A dispute arose over the trademarks, and Alberto-Culver filed suit in federal court in Illinois. Scherk asked for a stay pending arbitration.

Issue: Should the case go to arbitration?

Holding: Yes, under international treaties and Federal Arbitration Act case should go to arbitration.

Note: This is not even a close call any more. The old presumption against arbitration clauses is long gone.

4. Enforcement of Arbitration Awards

III. Litigation

A. Jurisdiction

1. In Personam Jurisdiction

a. Requirement for In Personam Jurisdiction

Asahi Metal Ind. v. Sup. Ct., 107 SCt 1026 (1987)

Facts: Asahi (Japan) sold tire valve assemblies to Cheng Shin (Taiwan). Cheng Shin sold tires all over the world, including in California.

Z and his wife were in a motorcycle accident. Z was injured, W killed. Z sued Cheng Shin alleging product liability. Cheng Shin filed an indemnity complaint against Asahi. California Supreme Court held that there was jurisdiction.

Issue: Can Cheng Shin’s cross complaint be heard in California?

Holding: No, there are not sufficient minimum contacts.

Reasoning: It is not enough that Asahi knew some of its valves might be put in tires going to America. Asahi did not “purposefully avail itself” of the California market. There were no offices, agents, or other physical contacts. Also, it does not appear there were any special design aspects or marketing directed at California.

b. Minimum Contacts: Intern’l Shoe, Worldwide VW

c. Jurisdiction in the Internet Age

GMAC v. Raju, 241 F.Supp2d 589 (2003)

Facts: GMAC makes the GMAT test for graduate school admissions, owning all the rights in the U.S. Raju operated websites GMATplus.com and .net from India. He sold test questions to be used for preparation for the exam. GMAC sued for violation of its trademarks and copyrights and obtained default judgment.

Issue: Can the court assert jurisdiction over Raju?

Holding: Yes. Raju aimed his website at Americans seeking their business.

Reasoning: Court distinguishes passive websites, that just put up information, from active websites that actively sell products or services in a particular market. Raju’s website was in between, an “interactive” website. The court believed that because Raju had special instructions for Americans to purchase his questions, he had directed his activities at the U.S. and therefore the Court had jurisdiction.

d. Obtaining Jurisdiction by Service of Process

B. Venue

1. Forum Non Conveiens

a. Forum shopping

Iragorri v. United Technologies Corp. & Otis Elevator, 274 F.3d 65 (2001)

Facts: P resided in Florida from 1981-1993. In 1989, he became U.S. citizen. In 1993, P visited mother in Columbia and fell through elevator shaft and died. P’s estate sued in U.S.

Issue: Should court dismiss in favor of litigation in Columbia?

Holding: Yes. Accident happened there, evidence is there, and Columbia has more of a direct interest than Florida.

Reasoning: Court believed there was some forum shopping going on. Even so, the court noted that it would be very inconvenient for the defendant to try to defend the case this far from where it happened, and where all the key witnesses reside.

b. Union Carbide Disaster

2. Forum Selection Clauses

M/S BREMEN v. Zapata Off-Shore Co., 407 U.S. 1 (1972)

Facts: Zapata entered into a contract with Unterweser (German) for towage of a oil drilling rig. Contract called for London forum. Rig was damaged in storm, and ordered Unterweser’s tug BREMEN to tow rig to Tampa. Zapata sued Unterweser and vessel for $3.5m. Unterweser and vessel raised the forum selection clause.

Issue: Should court enforce London forum selection clause.

Holding: Yes. This clause was reached at arm’s length between commercial parties.

Reasoning: Zapata was unable to show cause to avoid the clause, such as overreaching or serious inconvenience.

IV. Conflicts of Law

A. Restatement Rules

1. Contracts

2. Torts

B. Choice of Law Clauses

C. Application of Foreign Law in American Courts

Finnish Fur Sales v. Juliette Shulof Furs, 770 F.Supp 139 (1991)

Facts: American company sent guy to bid for purchase of furs at auction in Finland. Terms of sale and Finnish law made obligation personal to bidder (not just a corporate liability).

Issue: Should court enforce Finnish contract under Finnish law?

Holding: Yes.

Reasoning: Transaction occurred in Finland, this is a commercial party who should know what he is doing. Transaction had far more to do with Finland than New York, therefore choice of law rules favored Finnish law.

D. Judicial Assistance: Discovery and the Collection of Evidence

1. Letters Rogatory

E. Anti-suit Injunctions

V. Enforcement of Foreign Judgments

A. Uniform Foreign Money Claims Act

Manches & Co. v. Gilby, 646 N.E.2d 86 (Mass 1995)

Facts: Manches were solicitors in England. They provided legal services to Gilby in connection with father’s estate. Gilby did not pay, and Manches sued in England for £30k. At time of entry of judgment, value was $58k. At time of entry of judgment in U.S. based on English judgment, value was $45k.

Issue: How much should the judgment be in U.S. dollars?

Holding: Court adopted the date of payment rule, as opposed to the time of the original judgment or entry of the U.S. judgment.

Reasoning: Gilby could satisfy the English court by paying in pounds. The judgment should reflect that reality. To set a U.S. dollar amount by one of the other two methods would be to set up a possible windfall for one side or the other if the exchange rate moves.

VI. Commercial Disputes with Nations