Dispute Settlement

What happens if there is a breach of commercial contract? 


If your business trades with a company based in another country or customs territory, 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 courts where you are based. It is important that you get the right commercial agreements in place, and confirm the law applicable to the contract, and a dispute resolution mechanism, at the very start of trading internationally.


Although you hope it will never happen, should a dispute arise, it is always better if you can have it resolved in your local court, with your own lawyers and in your own language.


If this is not possible and the dispute involves an overseas jurisdiction, this can complicate things and you would need to obtain legal advice familiar with commercial law in both country’s jurisdictions.


Points to consider when drawing up a contract:

  • Look to minimise your risk with fair and transparent contracts and terms and conditions.
  • Appoint a legal professional / specialist international trade lawyer to help guide you.
  • Ensure you have a clear understanding of what all your obligations will be under the finalised contract.
  • Don’t accept “standard terms” with which you cannot comply.
  • Ensure you have a clear understanding of what all your obligations will be under the finalised contract.
  • Be clear on the extent of your potential liabilities. It would usually be sensible to try and agree a cap on liability – in many cases this comprises a multiple of the contract value.
  • Deliver on time to the terms of the contract


When a breach of an international contract occurs, the parties encounter issues such as:

  • What type of case it is.
  • Where the case will be decided.
  • Which law will be used to decide


It is also important to agree on a dispute resolution mechanism at the start, choices can include:

  • Judicial Proceedings
  • Alternative Dispute Resolution ADR mechanisms
    • Arbitration
    • Mediation


While choosing the mode of resolution, another factor to consider is where and whether the ensuing judgment or arbitral award will be recognized and enforced. It would not be helpful if, for example, the judgment or the arbitral award was in your favour but cannot be recognised and/or enforced in another state where your other contractual party has assets.


The law applicable to the contract will be applied to settle the dispute arising from the negotiation, conclusion, performance, interpretation, or execution of the contractual terms.


Links to Supporting Information


The International Trade Centre ITC  Model Contracts for Small Firms | ITC Model contracts are available free of charge


WIPO (World Intellectual Property Organization) Alternative Dispute Resolution  Alternative Dispute Resolution (wipo.int)


New York Convention for arbitral awards 1958 New York Convention


The UN (UNCITRAL)  United Nations Commission on International Trade Law  and  Online Dispute Resolution: On-line Resources | United Nations Commission On International Trade Law

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