In of traditional courts, perception that ADR imposes

In this complex world,
disputes are also complex whether at national level or international level. So,
to resolve these disputes we normally say, ‘see you in court’. But apart from
this traditional mode of resolving disputes i.e. litigation, there are
alternative means commonly known as alternative dispute resolution (ADR)
mechanism. ADR includes
dispute resolution processes and techniques that act as a means for disagreeing
parties to come to an agreement short of litigation. The rising popularity of
ADR can be explained by the increasing caseload of traditional courts, perception
that ADR imposes fewer costs than litigation, a preference of confidentiality
and control over the process. The best and amicable methods of ADR are
arbitration, conciliation, mediation and negotiation. Mostly, international
negotiations are preferred in Air disputes, water disputes, disputes between
countries, climate change disputes and business transactions. In this paper we
will discuss about the Negotiation at international level, particularly in
business transactions or in short we will discuss about the international
business negotiations with case studies.

Why we need ADR in international disputes?

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International disputes
give rise to tensions and sometimes even cause outbreak of violence. In actual
practice, there has been modification of traditional techniques of conflict
resolution and evolution of new techniques for resolving international disputes.
There are several reasons1
for evolution of ADR techniques which also explains reasons for having these
techniques. These are as follows:

1.     
Globalization: With the increase in
globalization, the states, individuals, communities, companies, etc. are
interacting at international levels which lead to the creation of
relationships. As long
there is relation commercial or other, disputes will arise due to many differences
between the parties. So, it will be wise to look for effective means of dispute
settlement for such kind of dispute where the outcome will get recognition from
all parties and be resolved at a faster rate. At this time ADR can be thought
as a best alternative.

2.     
Limitations
of domestic courts: State courts might not have jurisdiction to matters raised
in international disputes as the other party is not clearly under the
jurisdiction of the court so that enforcements of such kinds of court decision
will be obstacles.

3.     
To
promote access to justice: It may happen that there is denial of the right to
have access to courts when none of the domestic courts of the disputants assume
the jurisdiction over the matter. In that case parties will not get access to
any of the courts and the only alternative for them be to look for ADR based on
their free consent.

4.     
Influence
of the UN charter: Article 33 of the UN Charter provides for resolving disputes
through negotiation, enquiry, mediation, conciliation, arbitration, judicial
settlement etc.

5.     
Other
reasons: Tribunals like ICJ, CCJ try to cover most of the possible cases but
there are a lot more parties who do not have the right before these tribunals
like, individuals, NGOs, Companies etc. There are subject matters like
ownership of property, tort claims etc. which are not covered by these
tribunals.  ADR tries to fill these gaps
and provides faster, amicable and cost efficient alternative.

Negotiation at
international level

Negotiations are the
simplest method of peaceful settlement of disputes in the sense that in negotiations
the parties to the dispute alone are involved in the procedure. In contrast,
all other mechanism of dispute settlement brings other states or individuals
who are not themselves parties to the dispute in the procedure. Negotiations
consists of continuing dialogues between the parties and even in the
complicated cases, it helps to narrow down the differences to more manageable proportions.
The success of the negotiation depends on the gap between the two opposing
parties held by the disputing parties and diplomatic skill of the parties. The
international judicial pronouncements have also emphasized upon the importance
of the negotiation. For instance in the North
Sea Continental Shelf Cases2,
“the court held that negotiations are more than a formality; they must be pursued
with an intention to resolve dispute… while there is no duty to reach
agreement, negotiations must be meaningful. According to this standard,
inflexible bargaining positions are unacceptable”.

It is always fair to
say that international law has always considered its fundamental purpose to be
the maintenance of peace. Basically the techniques of conflict management fall
into two categories: diplomatic procedures and adjudication. The former involves an attempt
to resolve differences either by the contending parties themselves or with the
aid of other entities by the use of the discussion and the fact finding methods.
Adjudication procedures involve the determination by a disinterested third
party of the legal and factual issues involved3.

The international court in Georgia v. Russian federation4
has observed that negotiations are distinct from mere protests or disputations
and require at the least, ‘a genuine attempt by one of the disputing parties to
engage in discussions with the other disputing party with a view to resolving
the dispute’. In certain circumstances there may exist a duty to
enter into negotiations arising out of particular bilateral or multilateral
agreements’.

The downside of this approach is that if this the sole
dispute resolution provision in the agreement, the complaining party will
either have no other legal recourse to force the breaching
party to honor its obligation, or it will be forced to litigate or to pursue
alternative dispute resolution in foreign and unfriendly jurisdiction.

The Principles of
negotiation5

The fact that
negotiations are flexible and free from extensive formality does not mean that
there is no system to negotiation. There are widely accepted principles of
negotiation which are enumerated as follows:

1.     
Separation of interest from position

2.     
Application of objective criteria

3.     
Readiness to make concessions

4.     
The identification of common grounds

North
Sea Continental Shelf Cases6
are
often cite as an authority for stating that an obligation to negotiate implies
an obligation to reach an agreement. But this is not so. All the court said was
that once the parties agree to negotiate, then they do so in fairness and with
a view to arrive at an agreement. The obligation is to pursue negotiation with
the intention of possibly, not mandatorily, reaching an agreement.7

Negotiation in
commercial or business transactions:

Business people and
corporate counsel often seem not to pay much attention towards their choice of dispute
resolution when negotiating a contract. This means that any disputes which
arise will be reso.ve by the litigation, which is often the worst possible
alternative. Hence, the business people should try to consider carefully the
kinds of dispute which are likely to arise during the course of business and to
choose a method of dispute resolution.

Business negotiations
are deliberations that ensue from different motivating factors and whose agenda
have a common ground. Such a phenomenon brings the conflicting sides together
in the aim of seeking a lasting solution to the conflict. The issue of business
negotiation is a common phenomenon these days especially on the matters of
patents and royalties.

 Mostly the private international disputes are
regarding the matters of trade and commerce. These matters are concerned with
the business transactions between the trading and investment entities from
different countries, private individuals, MNCs and governments. Areas of
disputes in international transactions can be the international sale of goods,
carriage of goods, baking and finance, licensing agreements, construction work
and foreign investments.8
These commercial disputes usually occurs due to the breakdown of commercial
relationship between the parties for example, an argument over the payment for
goods that were alleged o be defective by the purchaser.9

Litigation is the
tradition method of resolving commercial disputes at international level and a
formal approach of resolving the disputes by going to court with counsels but,
in recent times increasingly, ADR methods are being used. This may be because
of the disadvantages of the litigation like, huge backlog of cases, delay in deciding
the disputes, huger costs.

The advantages of ADR
are many, the obvious question arises will the litigation disappear? The answer
to this is NO because of the following reasons:

1.     
Litigation is an automatic right because
when the interests of the parties are adversely affected then he/she can have
access to the court.

2.     
Courts do more than just resolving the
disputes. They can refer the matter to any ADR mode which finds suitable and
can have the judicial control over arbitrators.

Negotiation at
international level is considered as the quickest way of resolving Commercial disputes
because the parties themselves are in the best position to know the strengths
and weaknesses of their own cases. It is more preferred because of having soft
approach as its characteristic and having the ability of maintain harmonious
and good business relationship between people. Although negotiation has proven
to be the best method of resolving commercial disputes but there are certain
difficulties faced by the parties to international commercial disputes.

Challenges or
difficulties in international commercial disputes:

1.     
Compromise and Cooperation: For a
successful negotiation parties need to be detached and be objective about the issues.
It is also essential that the parties are willing to compromise and have the
feeling of cooperation. However, there qualities are not easy to find and hence
negotiation is always not possible.

2.     
Culture as a barrier: Commercial
disputes at international level involve the difficulty of culture as the
parties involved are from different cultures. Negotiator’s culture is expressed
in their negotiating styles. Hence, the different negotiating styles due to
different cultural influences may make the parties more difficult to reach to
an agreement. 

3.     
Language as a barrier: Commercial
disputes at the international level also involve the difficulty in the form of
language. Most international businesses are conducted in the English, which is
helpful for English speakers but can be difficult for non-native English
speakers. English in international disputes can be at different levels,
different vocabulary and phrases, accent dialects etc…this can add to
obstructions in negotiation process when the negotiators do not have efficient
translators.

4.     
Distance as a barrier: Distance between
the parties can cause difficulties in determining the place or venue for the
discussion.

Phyllis E. Bernard, in
his article Bringing Soul to
international negotiation10,
discussed a shift in training for international commercial negotiation, away
from standard western linear, rational, fact-oriented style towards training
that makes room for “soul”. Here soul represents three components: emption and
subjectivity; deep narratives rooted in faith and ethnic traditions; and
cultural intelligence.

Negotiation strategies
for creating value when dealing with difficult people

1.     
Make multiple offers simultaneously: It
Signals your willingness to be accommodating and flexible, and your desire to
understand the other party’s preferences and needs.

2.     
Search for post settlement settlements:
When a deal is over, consider asking the other side whether he would be willing
to take another look at the agreement to see if it can be improved. Because you
might find new sources of value to divide between you.

3.     
Avoid cultural conflicts by avoiding
stereotypes when negotiating across cultures: Instead of relying on
stereotypes, try to focus on Prototypes-cultural averages on dimensions of behavior
or values.

4.     
Try not to interpret other’s behaviors, Values
and beliefs through lens of your own culture, rather research on other party’s
culture with understanding why people follow those customs and exhibit these behaviors
in the first place.

Case Studies

In recent years there
are number of disputes among businesses, organizations and individuals made
headlines in all over the world and demonstrated the importance of negotiation
in business world. As we earlier stated that negotiation does not mean the
definite success. Hence, following are the examples of combination of both
successful and unsuccessful negotiations.

Case Study 1: Apple and
Samsung’s dispute resolution over patent issues11

In April 2011, Apple
filed a suit accusing Samsung of Copying the “look and feel” feature of the iPhone
when the Samsung created its series of Galaxy phones. Samsung also accused
Apple for not paying royalties for using its wireless transmission technology.
Since then, the dispute over the patent issues increased as has the number of
courts involved in various countries. They repeatedly accused each other of
copying the appearances and functions of each other’s smart phones and tablet
devices.

At the California
court’s suggestion for negotiation/mediation between the two CEOs in 2012 ended
in impasse. And the disputants continued to fight in courts worldwide. In
negotiation, Apple argued that it has lost significant profits in Smartphone
market to its competitor, Samsung due to blatantly copied features. But Samsung
contended that consumers had purchased its phones for other reasons such as Samsung’s
bigger screens and cheaper price. Ultimately, the battle was won by Apple in
the form of advantage going to Apple in U.S. Hence, in August 2012, a
California jury ruled that Samsung would have to pay Apple more than $1 billion
in damages for patent violations. The judge eventually reduced the payout to
$600 million. In November 2013, another jury ruled that Samsung would have to
pay Apple $290 million of the amount overruled by the judge in the 2012 case.

Lesson: when the
parties are grudging participants the negotiation/mediation is less likely to
succeed than when they are actively engaged in finding a solution. The longer
they spend in finding each other, the more contentious and uncooperative they
become.

Case Study 2: Michael
Bloomberg versus the New York Teacher’s Union12

In 2010, New York
passes a law which stated that old teachers will be replaced and evaluation
systems with more stringent systems. It was assumed that if new agreement
reached then the New York City will gain about $ 250 million in aid and $200
million in Grants. But as 2012 drew to a close, talks between both were
deadlocked. On the deadline date, on which school districts and their unions
were required to submit certain aspects of their new system, both announced
that a final late night negotiating talks had been unsuccessful.

Unfortunately, both had
much to gain in form of better teachers and more state funding but the failed
negotiations hindered this agreement.

Lesson: business
negotiations, seeking to resolve a dispute should foster a cooperative spirit,
framing negotiations around gains rather than losses. And when business
negotiators are far apart, it may take a professional mediator or other
independent party to help bridge the divide.

Case Study 3: Fiat’s &
Chrysler13

In 2009, the U.S.
Government negotiated with Chrysler to save it from extinction. It was
tentative that Chrysler would go into bankruptcy and its ownership would be
divided with majority stake going to Chrysler’s union welfare healthcare trust,
Fiat, US Government and Canadian government. Chrysler also gave a $4.59 billion
not the health care trust. The fiat negotiated a plan to acquire all Chrysler
by buying the health care trust and the stake of us government. But when the
fiat started buying the health care trust’s stake, the voluntary employee
beneficiary association and fiat reached altogether different calculations of
Chrysler’s value. When hastily drawing up their contract to save Chrysler, the
lawyers failed to take note of the $4.59 billion note issued to the health care
trust and errorred in specifying whether that note should be calculated while
determining the value of Chrysler.

Lesson: The above error
points out the risks involved in the negotiating deals. Business negotiators
should not wrap up the deal in hurry but to work carefully.

Case Study 4:  Apple’s Defeat in price fixing14

In 2007, when Apple was
about to launch its iPad, unhappy with the low prices by Amazon, the 5 U.S.
publishers negotiated a new model of e-book pricing with Apple. They adopted the
so called agency model in which the publishers can set their own prices with
30% commission of Apple. After threatening Amazon that there will delay in
e-book edition to Amazon, it reluctantly agreed and prices of books was rose across
the industry. The U.S. Department accused the parties of artificially
increasing the prices. The five publishers reached a settlement with the U.S.
Government but Apple did not. In us district court, the parties demonstrated
their discussion as a negotiation in which each side pushed hard for
concessions. On July 10, 2013, the court ruled that Apple and publishers had
indeed engaged in price fixing conspiracy that resulted in consumers paying
more for e-books.

Lesson: The negotiator
in reaching mutually beneficial agreements often forgets to think about the
parties which are away from the negotiating tables for example, consumers.

Case Study 5: JP Morgan
and Its C.E.O, Dimon and its DOJ settlement15

In July, 2013, U.S. Associate
Attorney General Tony West outlined the civil and criminal investigations of JP
Morgan Chase, the nation’s largest bank related to its sale of troubled mortgaged
investments during financial crisis. Dimon was anxious to head off the formal
charges, which can be fatal for its reputation. At 8:00 a.m. on 24.09.2013, few
hours before announcing of charges by Department of justice (DoJ) called west
and asked him to meet in person. Dimon backed down and negotiated settlement in
the form of payment of $13 billion to the DOJ.

Lesson: when the
negotiation stalls, “sending in the big guns” can be an effective means of
moving forward.

Case Study 6: Simon & Schuster versus Barnes &
Noble16

In 2013, when the
months of negotiation with publishing house Simon & Schuster reached a
standoff, Barnes & Noble tried to gain leverage by reducing its orders of Simon
and Schuster title. The largest retail bookstore chain asked the publishers to
give steep concession and charging high to display its title in the book stores,
in order to service against Amazon. The publishers simply said that they cannot
afford to abide by the terms of Barnes and noble. In August, the two issued a
joint statement saying that they had resolved their dispute.

Lesson: in this case,
the details of agreement are missing, but any gains they achieved would be
undercut by the profits each side lost during the negotiation period, when
books were missing from display tables and shelves. Such penalties often end up
undercutting both parties to a negotiation.

Case study 7: NHL
lockout17

In July 2012, the
National hockey league (NHL) opened negotiations for a new collective
bargaining agreement with a proposal to reduce the player’s percentage of
hockey-related revenue from 57% to 43% among other demands. After a month, the
NHL players association (NHLPA) put forth an offer that separated player
salaries from the league revenue, slowing the growth of player salaries and
dividing revenues saved among financially struggling teams. After heated
negotiations, the final deal hinged on the issue of player pension that whose
careers are often short, to concede on the short term issue of salary in return
for peace of mind regarding their long term financial future.

Lesson: Consider
offering a long term gain for the other side in return for a short term
concession. By looking beyond the immediate future, you may be able to identify
new sources of leverage and resolve your dispute.

Conclusion

When compared to
litigation, ADR methods are more superior in resolving commercial disputes
because of their low cost, speed of resolution, flexibility privacy and the
ability to allow the parties to maintain the business relationships to be
continued. The international negotiations are much more complex than the
negotiations which are conducted domestically. The above enumerated case
studies illustrate the importance of negotiation in business transactions by
giving us lessons. Negotiations are the best possible ways of resolving
commercial disputes and a good negotiator should always keep in mind the above
lessons and make the like strategies as enumerated above for the best possible
results of negotiation for overcoming the challenges like cultural differences,
language barrier etc.

1Tefera
Eshetu and Mulugeta Getu, The need for ADR in international Disputes, (last
updated Feb 18, 2012) http://www.abyssinialaw.com/index.php?option=com_k2=item=343:the-need-for-adr-in-international-disputes  

2
National Sea Continental shelf (Federal republic of Germany v. Denmark; Federal
republic of Germany v. Netherlands), ICJ Rep 1969, 3

3
Malcolm N. Shaw QC, International Law, p.732, 7th ed. 2014

4
Georgia v. Russian federation, ICJ Reports, 2011, pp. 70, 132.

5
Ademola Abass, International Law text, cases, and Materials (Oxford University
Press, 2012), p.437-438

6
National Sea Continental shelf (Federal republic of Germany v. Denmark; Federal
republic of Germany v. Netherlands), ICJ Rep 1969, 3

7
Ademola Abass, International Law text, cases, and Materials (Oxford University
Press, 2012), p.440-441

8 I.
Turley, International Commercial Law Study Guide (Deakin
University, 1997), at p. 180.

9 K.
Mackie, D. Miles and W. Marsh, Commercial Dispute resolution (BUtterworths,
1995), p. 18.

10 Bernard,
P.E. (2009), Bringing soul to international Negotiation, Negotiation Journal,
25:147-159.

11
Pon Staff, Top negotiation case studies in business: Apple and Samsung Dispute
Resolution, (Last updated Aug 15, 2017

Example of Negotiation in Business: Apple and Samsung’s Dispute Resolution Case Study

12
Pon Staff, Top business negotiation: Michael
Bloomberg versus the New York Teacher’s Union, (Last updated April 6,
2017)

Top Business Negotiations: Michael Bloomberg versus the New York Teachers’ Union

13Pon
Staff, Top business negotiation of 2013: Fiat’s Pursuit of Chrysler, (Last
updated December 26, 2013)

Top Business Negotiations of 2013: Fiat’s Pursuit of Chrysler

14Pon
Staff, Top business negotiation: Apple’s Price fixing defeat, (Last updated Feb
21, 2017)

Top Business Negotiations: Apple’s Price-Fixing Defeat

15
Pon Staff, Top business negotiation of 2013: JP Morgan’s DOJ Settlement, (Last
updated December 26, 2013)

Top Business Negotiations of 2013: JPMorgan’s DOJ settlement

16Pon
Staff, Top business negotiation of 2013: Simon
& Schuster versus Barnes & Noble, (Last updated December 26, 2013)

Top Business Negotiations of 2013: Simon & Schuster versus Barnes & Noble

17
Pon Staff, A business negotiation case study: Ending the NHL Lockout, (Last
Updated Jan 24, 2017)

A Business Negotiation Case Study: Ending the NHL Lockout

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