How are private international agreements enforced?

Enforcing International Contracts

Updated at April 8th, 2023

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How are private international business agreements generally enforced?

The first method of enforcing ones rights pursuant to an international agreement is through a lawsuit or judicial action. When a dispute involves multiple parties from multiple countries, it becomes an issue as to how and where to handle the dispute. In the United States, the Alien Tort Claims Act grants jurisdiction to US federal district courts over any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States. The following limitations apply to bringing a civil action against a foreigner party in US Courts.

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How to Sue Foreign Firms in the US?

Plaintiffs may bring a legal action in federal court (the US District Court) against a foreign individual or business if the requirements for personal and subject-matter jurisdiction are met. That is, the Plaintiff must show that the foreign defendant has minimum contacts with the United States. In some cases, having significant assets in the United States will be sufficient to exercise jurisdiction over the foreign party. Service of process must be completed in accordance with the Hague Service Convention.

Note: Under the Foreign Sovereign Immunities Act, a foreign government is immune from suit in the United States for public acts, but may be subject to suit for private or commercial activity.

What is International Arbitration?

Enforcing ones rights in a foreign court is often difficult. It may be difficult to access the court because of procedural rules; the court may not be independent and fair to foreign plaintiffs; and accessing the court could be prohibitively expensive. Aware of these concerns, parties frequently seek alternative methods of settling disputes or dictate the specific rules and procedures that will be applicable to the interpretation and resolution of the international business agreement. Two major international agreements with this purpose are:

What is the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention)?

Parties to an international business agreement often employ alternative dispute resolution (ADR) clauses in their agreements. The most common ADR clause is an arbitration clause directing that any unresolved dispute be submitted to arbitration for resolution. The New York Convention is a treaty between many signatory countries (approximately 50 in total) that agree to recognize and enforce arbitration awards. Within the US, the recognition and collection of arbitration awards are carried out by filing the arbitration award with the countrys judicial system.

Note: Other notable international arbitration bodies include, the China International Economic and Trade Arbitration Commission, which arbitrates trade disputes arising in China that are voluntarily submitted to Commission. The World Intellectual Property Organization sponsors a voluntary arbitration and mediation center for disputes involving intellectual property. The international Centre for Settlement of Investment Disputes is an international arbitration body frequently used in disputes regarding international investment under Bilateral Investment Treaties.

What is the Convention on the International Sale of Goods (CISG)?

As previously discussed, UNCITRAL promulgates the CISG. Most member countries of the UN have adopted the terms of the CISG. Further, individuals (even in non-CISG countries) regularly agree to abide by the terms outlined in this agreement. In CISG-signatory countries, the CISG is the default rule when an international agreement fails to indicate a different controlling law. Parties to an agreement, however, may opt out of the provisions of the CISG. The CISG specifically provides methods and procedures for dispute resolution.

It is important to remember that arbitration of most international disputes is voluntary. There may, however, be limited situations in which foreign activity becomes subject to mandatory arbitration provisions of a party's home country.

Discussion Question

Why do you think dispute resolution is difficult for parties to international agreements? What do you think are the advantages and disadvantages of each method of enforcement?

Practice Question

Jane enters into an agreement to sell goods to Will. Jane is in the United States, Will is in Sweden. When a dispute arises between Will and Jane, what are some of the methods that each party could pursue in resolving the dispute?

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