Chapter I
Implementation of Alternative Dispute
Resolution mechanisms required
While completing the initial transaction, the optimistic visions
that guided each of the merging companies are often questioned and uncertainty
often follows during the negotiations.
One efficient way to manage the amalgamation is to implement
alternative dispute resolution methods that could lessen these
uncertainties. Since international business merger activity
generates a huge variety of disputes associated during the merger negotiations
and ADR procedures are various, implementing these problem solving mechanisms
must be adapted to meet the particularities of the transaction involved.
In the first section we will discuss the necessities of the ADR'
implementation (sectionl) and in the second section we will explore its
potential adaptation within the merger transaction (section 2)
Section 1: Necessities of implementing Alternative
Dispute Resolution mechanisms
The quest for the development of alternatives to litigation to
resolve international business disputes is rooted in uncertainties associated
with litigation (1) which have brought businesses to seek more confidence in
using ADR mechanisms (2)
Pargi: uncertainty of litigating international business
disputes: General Abstract
Litigating international business disputes has generates not only
legal uncertainties (.A) but also business uncertainties (B)
A- Legal uncertainty
When litigating internationally, several legal systems are
involved, which may increase the uncertainties associated with litigation in
general. The main elements of uncertainty in transnational litigation are
relating to the jurisdiction, the conduct of procedure and to the substantive
law.
These issues shall be analyzed from civil law and common law
approach.
First, research has demonstrated that rules under which courts
assume jurisdiction over a dispute vary from country to country and frequently
lead to conflicting results. Since courts can base their jurisdiction on
different grounds in particular with respect to business disputes as the
corporate headquarters of the defendant, the nationality of the plaintiff,
parties often have to choose between numbers of
jurisdictions when deciding where to bring suit.
The choice if often motivated by the desire to take advantage of
the particular procedural or substantive rules or simply to get before a
neutral forum. Since uniform international standards about the assertion of
jurisdiction do not exist, different bases of jurisdiction and different
interpretations of the same bases can lead to multiple lawsuits in different
jurisdictions. Accordingly, parallel litigation in different countries can
cause considerable costs, delays and uncertainty. As was remarkably stated by
Lowenflend, A: "one way to prevent this would be though the stipulation of an
unambiguous "forum selection clause" 146. In the United States for
example, a forum selection clause is defined as "a provision in a contract
providing that all disputes arising out or relating to this agreement shall
be resolved in the Supreme Court of the County or other named
forum".
Another way to reduce uncertainties associated with litigating
international business disputes would be when the chosen forum may accept the
jurisdiction or may refuse to do so on the basis of "forum non
conveniens"147 , theory with the possible consequence of leaving the
parties with no forum at all. In other words, when litigants will confront
difficulties to find an appropriate forum, the prospect of having to litigate
in the home courts of the opponent is perceived as one of the major
disadvantages of transnational litigation. The litigation of international
business disputes inevitably forces one party (the foreign party) to deal with
laws procedures and practices which are unfamiliar to that party and its
regular legal lawyers.
146 Lowenflend, A. , "International litigation and
Arbitration", second edition , American case books series , West group , St
Paul Minn , 2002, p 281
147 Lowenflend , A. "International litigation and
Arbitration"Id
Some distinctive traits that distinguish Common law and civil law
procedure might illustrate uncertainties in litigating international business
disputes and , be helpful as a background for certain persistent issues in the
practice of alternatives to litigation.
Firstly it is well-established that Common law system follows the
archetype of adversarial procedure whereas civil law system follows the
inquisitorial model. In the adversary system like in the US, the parties
present alternative versions of the facts and interpretations of the law to the
judge who mainly listens and ultimately chooses one of the two versions. By
contrast in the civil law tradition of inquisitorial procedure, like in the
majority of the European Countries, particularly in Tunisia, the judge plays a
very active role in conducting the proceedings and findings the facts. Secondly
civil law rules tend to attach greater importance to documents drafted than
oral testimony during the course of the proceedings while common law rules give
prevailing importance to oral evidence. Ironically, this does not prevent
common law proceedings from giving rise to an often gigantic mountain of paper.
Thirdly, in the classical common law procedure the judge has more of an
observer role while the actual proceedings are in the hands of the lawyers who
in a dialectical process develop the facts in front of the mainly passive
judge. For instance in a French or German court the taking of evidence rests
under the exclusive control of the judge. By contrast in common law trial the
gathering of evidence is conducted by the parties and is very broad in scope.
Much more emphasis is placed on the actual hearing and an oral testimony.
It is important to note that the dramatic differences between
these two legal systems in the methods and scope of evidence gathering in
litigation have led to significant problems in the conduct of transnational
litigation which emerged primarily when American courts when they
decided to issue orders for discovery148 abroad, based
on the personal jurisdiction over foreign litigants. In response, many civil
law countries have enacted what they call "blocking statutes" 149 to
defend against the excessively intrusive American discovery methods.
Finally, additional source of uncertainty in litigating business
disputes is the multiplicity of substantive laws. In the absence of a clear and
unmistakable contractual stipulation of the applicable law, particularly during
the negotiations and drafting phases, in case of dispute, national courts will
apply their own choice of law clauses in order to determine which law to apply.
Often this will be a difficult decision because many transnational disputes
have connections with several legal systems. Even where the determination of
the applicable law has been effectuated by the parties it may be hard to
predict any outcome when national courts have to apply foreign law.
Uncertainties of litigating international business disputes are
not only of legal nature, but can also deduced from the business practice.
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