The Choice Between Forum Selection, Mediation and Arbitration Clauses: European Perspectives - ARIA Vol. 20 No. 1 2009

Otto Sandrock - Emeritus of the Law School of the University of Muenster; attorney in Duesseldorf; of counsel at Orrick Hoelters & Elsing, Duesseldorf.

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Originally from American Review of International Arbitration - ARIA

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I. INTRODUCTION

Before parties enter into international contracts, attorneys often advise them on the procedural forum in which disputes eventually arising between them could best be resolved.

A. Several Options

In that respect, several options are open to the parties. Their counsel, if aware of them, may advise their clients to insert into their contracts a forum selection clause -- requiring eventual disputes between the parties to be referred to the national state court of a specific state, be it the home state of one of the parties or a third state that is neutral with regard to each of the parties. Another option would be to include in the contract a mediation clause whereby an eventual dispute between the parties would have to be submitted to a panel of mediators, sitting, again, either in the home state of one of the parties or in a third, "neutral" state. A further recommendation might be to draft an arbitration clause, with an arbitral tribunal domiciled in one of the states just indicated. Finally, a combination of two or three of these options -- by way, for example, of a "pre-arb," "med-arb," "escalation" -- or other clause of that kind -- might be appropriate. All these alternatives are possible, of course, only if the client either has the power to impose upon its contractual partner the forum it prefers or if its contractual partner is at least open to negotiations on theses issues, to persuade its counterpart to accept the solution it prefers.

In the following, these options will be examined in order to elucidate the way European lawyers, notably those from the European continent, view these problems, which is certainly in a manner different from their American counterparts.

Table of Contents:

I. Introduction

A. Several Options

1. Practical Consequences Following from the U.S./European Divide

2. Differences Between the Various European National Laws

B. The Procedural Optimum to be Attained

1. Costs

2. Time

3. Effectiveness

C. Conclusion

II. Forum Selection Clauses

A. Vesting Jurisdiction in U.S. Federal or State Courts

1. Advantages: Time and Filing Fees

2. Disadvantages: The Danger of Non-Recognition Abroad, the American Rule, Discovery and the Jury Trial

3. Conclusion

B. Vesting Jurisdiction in State Courts from other Common-Law Countries

1. Disputes Involving International Contracts Before the English High Court

2. Disputes Involving International Contracts Before State Courts of Other Common-Law Countries

C. Vesting Jurisdiction in German, French or Italian State Courts

1. Disputes Involving International Contracts before French or German Courts

a. Effectiveness and time

b. Costs

(i) Filing fees and other court fees

(ii) Attorneys’ fees

(iii) Costs of translations and interpreters

2. Disputes Involving International Contracts Before Italian Courts

3. Disputes Involving International Contracts Before Other European State Courts

D. Vesting Jurisdiction in State Courts Sitting in Countries Other than EU Member and Common-Law States

III. Mediation Clauses

A. Advantages

1. No Problems with Language, Proper Law of the Contract and Expert Knowledge

2. Incompatibility Between the Role of Mediator and Arbitrator Has in Many Cases Been Removed

3. Summary

B. Disadvantages

1. Successful Mediations: Problems with the Execution of Settlements

2. Unsuccessful Mediations

C. Conclusion

IV. Arbitration Clauses

A. The Choice of the Place of Arbitration

B. The Choice Between Institutional Arbitration and

Ad Hoc Arbitration

V. Final Results