International Contract Disputes

This is a case where a contracting party does not perform the contract as agreed, or performs it late or incompletely.

It is important to specify international norms such as the UN Convention on Contracts for the International Sale of Goods (CISG) and INCOTERMS in the contract so as to clarify the standards of interpretation when a dispute arises.

This is a case where the parties differ in opinion on the interpretation of the contract wording or the method of its application.

In an international contract, the interpretation of a single wording can determine the scope of the entire obligation, so clear interpretive criteria and governing law should be set when concluding the contract.

These are disputes arising in technology transfer, joint development, license contracts, and the like.

The key is to clearly set out confidentiality, the scope of technology use, and the vesting of rights after contract termination in the contract clauses.

These are cases in which, due to a difference in bargaining power during the contracting process, a party is forced to accept unfavorable terms or is subjected to abuse of a dominant position.

In such cases, a review of the fairness of the contract is required, along with a response through international arbitration or mediation procedures.

Judicial dispute resolution procedures are conducted in accordance with the legal systems of each country and the rules of private international law, and generally have the following characteristics.

However, international litigation procedures can be burdensome due to differences in the legal systems of each country, the complexity of language and procedure, long litigation periods, high costs, and similar factors.

In addition, in connection with the enforcement of judgments, there are issues of multinational jurisdiction and of recognizing the international effect of a judgment.

ADR procedures may, in some cases, have legal binding force, but in principle they take effect only between the parties who participated in the procedure.

Accordingly, this differs from the compulsory force of a court.

The ADR methods mainly used in international transactions include negotiation (conciliation), intermediation, mediation, and arbitration.

Here, arbitration is a means of dispute resolution outside the courts, but an arbitral award has legal binding force and can be enforced internationally, so it is also classified as a quasi-judicial dispute resolution system.

The contract should clearly state the applicable governing law and the dispute resolution procedure (for example, arbitration, litigation, or ADR) to prevent confusion if a dispute arises.

In addition, reflecting internationally recognized norms such as the UN Convention on Contracts for the International Sale of Goods (CISG) and INCOTERMS in the contract can unify the standards for contract interpretation and performance.

In particular, because the CISG may apply automatically unless the parties exclude it, the contract should make clear whether it is to be applied or excluded.

Finally, by stating specific and clear content for the main clauses of the contract (such as payment, delivery of goods, and technology transfer), the room for interpretive disputes can be reduced.

It is advisable to establish a monitoring system so that signs of problems arising in the course of contract performance can be detected early.

In addition, before a dispute grows, the parties should seek the possibility of resolution through direct dialogue.

It is advisable to include non-judicial dispute resolution procedures such as arbitration, conciliation, and mediation in the contract in advance, in order to promote prompt and flexible dispute resolution.

In addition, determining jurisdiction and governing law in advance in preparation for a legal dispute can be expected to reduce the uncertainty of a dispute and allow the procedure to proceed promptly.

When an international contract dispute arises, the contract is the first thing to be examined.

For a prompt and efficient resolution, it is advantageous to review the following items when drafting the contract.

1. Recitals

An international contract dispute is not a mere case of breach of contract but a matter intertwined with a complex legal, cultural, and business environment.

It is important to carefully design clear provisions on rights and obligations, the choice of governing law, and the method of dispute resolution from the stage of drafting the contract.

Please cooperate with attorneys well versed in the legal systems of each country and international transaction practices to carefully review the effectiveness of the plan and the possibility of preventing disputes.