• QA 006
    Seeking redress through arbitration - how easy is it really?
    Many wonder how often exporters win arbitrations. How many do they lose and why? How to gain insight into arbitration awards? It would be educational to be able to read both complaints and judgements.
    Asked by:
    An exporter in Costa Rica.

    It is well known in coffee circles that over the years the number of arbitrations has fallen steadily with most disputes being resolved amicably. This is understandable considering that amicable settlement is always much better in that it may even help to cement the relationship with a buyer, whereas arbitration often results in the opposite. Winning an arbitration is all very well but what if it results in the loss of a (substantial) client? 

    Unfortunately, no records are published concerning the number of arbitrations held in different locations, therefore the win or loose record for exporters is not known either. But, it is possible to identify some of the more common errors that might cause an exporter to lose. The buyer is not the enemy! Keeping buyers informed usually means that most if not all of a problem can be resolved amicably! Hiding 'bad news' on the other hand guarantees trouble. Knowingly shipping sub-standard quality demonstrates disregard for contract integrity, or a lack of quality knowledge, or both! And not reporting promptly that a shipment may be delayed can cause much greater damage to the buyer than may immediately be obvious. 

    Buyer and seller are partners in a transaction: both are obliged to play their role to ensure the successful completion and to minimize the impact of potentially harmful situations. Keeping the buyer informed of any problems enables timely corrective action to be taken, thereby saving costs and damages. Arbitrators will take this into account when it comes to making an award. And if a claim is received, deal with it! Promptly and efficiently! Do not ignore a claim in the belief that it will 'go away'. And if a claim does result in arbitration proceedings being initiated, co-operate fully because otherwise the exercise will proceed without your input. 

    Remember also that those who see the coffee trade from only one side, such as exporters, do not always appreciate why and how certain actions or lack of actions can cause their counterpart to suffer loss or damage. It is not uncommon therefore for some to feel subsequently that they have been treated unfairly in the arbitration proceedings. Look for local assistance therefore in the place or country where the proceedings will be held. This because local representatives usually have more experience with the arbitration system and can guide an exporter through some of the details. A local representative might not know exactly how an arbitration award was decided, but he or she should clearly understand the proceedings and be able to explain more or less how the outcome was determined. This is very helpful for an exporter in deciding whether or not to appeal against an award. For more go to 07, Arbitration (Link below).

    Arbitration awards are normally never published, certainly not so in the United States, the United Kingdom and Germany. This is so first of all because they are considered to be confidential between the parties to the dispute, and do not concern anyone else. And even if individual parties agreed to their publication, then still the arbitral body under whose auspices and rules the arbitration was held might not encourage publication. This because even with the names of the parties and arbitrators deleted, the nature of the dispute could still lead to the identification of any of them. This in turn could have unwanted spin-off effects. Yet it can also be argued that especially awards in arbitrations of principle, i.e. arbitrations that are held with the willing consent of both parties to determine a question of principle, would provide useful guidance to many. We agree with you that it would be helpful if existing award archives were available for review but at this stage such access is not available.

    Posted 11 December 2004

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