Default Arbitration Provisions: One Step to Making “Great Trade Deals” - Dispute Resolution Journal - Vol. 72, No. 2
Originally from Dispute Resolution Journal
There is much uncertainty as to how the recent results of the United Kingdom’s “Brexit” Referendum and the United States Presidential Election will impact international trade. Particularly, if the U.K. is denied access to the European Union’s Single Market, it will likely have to negotiate new trade deals with its European counterparts. Similarly, if President Donald Trump makes good on his campaign promises, the U.S. either will renegotiate the Trans-Pacific Partnership and the North American Free Trade Agreement, or will negotiate new trade deals altogether. Thus, both the U.K. and U.S. are faced with renegotiating trade deals with large portions of the world. Though the circumstances and impact of these negotiations are largely speculative for now, both countries have an opportunity to improve the resolution of international commercial disputes through these negotiations.
Improvements in trade deals can be achieved by negotiating Default Arbitration Provisions (“DAPs”) into the agreements. DAPs are provisions of trade agreements that would require commercial disputes between nationals and/or business entities of the state-parties to the trade agreement to be heard before an arbitration tribunal when the parties to the dispute have not otherwise agreed to a dispute resolution mechanism. This default mandatory dispute resolution mechanism would replace the current default mechanism of litigation before national courts. Arbitration, as opposed to litigation, offers a more sensible default dispute resolution mechanism when dealing with international commercial disputes because it offers an impartial and enforceable means to dispute resolution. Indeed, this is why many business entities engaged in transnational commerce choose to negotiate for arbitration agreements in advance of disputes. By requiring certain transnational commercial disputes to be resolved through arbitration in the absence of an agreed dispute resolution mechanism, DAPs provide a fair and efficient dispute resolution mechanism that national litigation cannot provide otherwise. For this reason, DAPs would increase confidence and predictability, thereby lowering risk and costs, for parties engaged in transnational commerce, an important step towards making “great trade deals.”