978-1285427041 Chapter 3

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CHAPTER 3

RESOLVING INTERNATIONAL COMMERCIAL DISPUTES

CASES IN THIS CHAPTER

Scherk v. Alberto-Culver

Asahi Metal Ind. v. Superior Court of California, Solano County

Pebble Beach Company v. Caddy

Iragorri v. United Technologies Corp. & Otis Elevator Co.

M/S Bremen v. Zapata Off-Shore Co.

Finnish Fur Sales Co., Ltd. v. Juliette Shulof Furs, Inc.

TEACHING SUMMARY

Dispute resolution in international disputes must be cognizant of various cultures, legal systems,

and mechanisms for resolution. In terms of procedure, international legal disputes begin with

questions of jurisdiction, venue, and conflict of laws. The recent popularity of the Internet

(advertising items on Web sites and on-line ordering and contract-negotiation) has added a

wrinkle to these issues.

Alongside procedural issues are practical choices of which available mechanism or forum is

best suited for the parties. In business disputes, parties may choose to have their dispute heard

in their home or foreign court, or instead select mediation, arbitration, or inquiry. The choice of

where to hear a dispute, what law applies to resolving it and how a decision will be enforced are

factors that need to be considered. If an international business dispute is against a foreign

government or one of its agencies, special defenses may shield the governmental organization

from liability.

CASE QUESTIONS AND ANSWERS

Scherk v. Alberto-Culver

1. What were the Court’s reasons for upholding the arbitration provision?

2. What needs of international businesses were served by the Court’s holding? How were

these needs addressed?

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Chapter 3: Resolving International Commercial Disputes

3. What factors would Alberto-Culver need to have shown in order to have overturned the

arbitration provision?

Asahi Metal Ind. v. Superior Court of California, Solano County

1. Why did the Court refuse to hold that the California courts had personal jurisdiction over

Asahi?

2. What activities would Asahi need to have engaged in order for the Court to determine

that it had purposefully availed itself of California law? Are some of these activities more

important than others? If so, which ones?

3. Did the Court give adequate weight to California’s interest in the safety of products dis-

tributed in the state? Why or why not?

1. On what basis did the court hold that Caddy had insufficient minimum contacts with the

United States such as to support the exercise of personal jurisdiction?

2. Is the court’s focus on the passivity of Caddy’s website valid? What factors determine

whether a website is interactive or passive?

3. Is the Internet sufficiently different from non- electronically-based businesses to merit

different treatment for purposes of jurisdiction? Why or why not?

Answer: No. There still needs to be some action in the jurisdiction to meet minimum

contacts test.

Iragorri v. United Technologies Corp. & Otis Elevator Co.

1. What were the court’s reasons for refusing to apply forum non conveniens to the case

and requiring refilling of the litigation in Colombia?

2. Does the court’s opinion reward forum shopping to the extent the plaintiffs were likely to

receive a larger damages award in the United States than in Colombia? Why or why

not?

3. The court cited concern regarding the unstable political situation in Colombia as a

reason for refusing to apply forum non conveniens. Given the changes that have

occurred in the country in the past decade, would the court reach the same conclusion

today?

Answer: This question calls for student opinion. However, students may be requested to

review analyses of the Colombian judicial system prepared by the U.S. government and

the World Bank in formulating their opinions.

M/S Bremen v. Zapata Off-Shore Co.

1. What was the Court’s holding with respect to the general enforceability of forum

selection clauses?

Chapter 3: Resolving International Commercial Disputes

2. How would you define “public policy reasons” or “serious inconvenience” for purposes of

refusing to uphold a forum selection clause? What factors would you take into

consideration?

Answer: This question calls for student opinion.

Finnish Fur Sales Co., Ltd. v. Juliette Shulof Furs, Inc

1. What was the court’s holding with respect to the enforceability of the choice of law

clause?

2. What factors did the court utilize in its decision to uphold the choice of law provision?

3. How would you define a “fundamental” public policy that would cause a court to refuse to

enforce a choice of law provision?

Answer: This question calls for student opinion.

QUESTIONS AND CASE PROBLEMS

1. Answer: Jurisdiction refers to the power of a particular court to hear and decide a

2. Answer: The U.S. Court of Appeals for the Second Circuit vacated the district

Chapter 3: Resolving International Commercial Disputes

record was unclear as to the manner of protection afforded Feraud’s fashion shows by

French law as well as the protections afforded to alleged infringers generally, and

photographers specifically, under French law. The determination of whether the

protections provided by French law were sufficiently comparable to that required by the

public policy of New York was a question best addressed by the district court on a fully-

3. Answer: No. The subsidiaries of Goodyear did not have the necessary “

continuous and systematic” affiliation with the state of North Carolina so they could not be

sued there.

5. Answer: The favorability of a suit in U.S. courts depends on the interests of the

7. Answer: There is no correct answer to this question. The reciprocity requirement

has been subject to much criticism. These criticisms include the absence of similar

8. Answer: The court of appeals affirmed the district court’s dismissal of the case

Chapter 3: Resolving International Commercial Disputes

other economic and cultural values. The court held that it would be inappropriate for a U.S.

9. Answer: The district court dismissed Hy Cite’s complaint for lack of personal

jurisdiction. The court held that badbusinessbureau did not have “continuous and systematic

MANAGERIAL IMPLICATIONS

1. Answer: Yes, I would include mandatory, binding arbitration provisions in the

contract with United States law and venue governing the transaction. My plans would not

2. Answer: The existence of a Web site, alone, will not confer foreign jurisdiction in

Alaska. The question, however, makes it appear that the consumer has now purchased the

Chapter 3: Resolving International Commercial Disputes

ETHICAL CONSIDERATIONS

The answer to this scenario depends on the ethical theory one applies to the question. For

example, applying the theory of ethical egoism, it is clear that Union Carbide acted in its own

self-interest in forcing the litigation to India. Applying the teleological framework of moral

relativism, it may be contended that the terms of the settlement were proper given the location

of the catastrophe and financial circumstances of the largely poor and undereducated victims of

the gas leak. Applying utilitarianism, the financial well-being of the victims may have been

enhanced had the litigation been permitted to proceed in the United States, although it is equally

possible that this well-being would have been diminished by procedural delays and appeals. On

the other hand, if one determines that the greater good resides with those interested in the

continued financial well-being of Union Carbide, then the outcome was ethically defensible.

Applying deontological frameworks, in particular, the categorical imperative, it may be seriously

questioned whether anyone would want Union Carbide’s conduct to serve as an example for

confronted with similar catastrophes in the future. Furthermore, the settlement may be viewed

as a means to the end of preserving the company’s assets and shareholder value at the

expense of the victims.

Finally, applying contractarianism, it may be asked whether Union Carbide abided by its duties

and responsibilities to the community, especially given the lethal nature of its product and the

information gap between itself and the surrounding inhabitants.

TEACHING SUGGESTIONS / COOPERATIVE LEARNING ACTIVITIES

1. Internet Jurisdiction

An interesting issue of late is whether a company that maintains an Internet presence is,

by virtue of that presence, subject to the jurisdiction of various fora. While the law is still

evolving, courts have begun to follow a “spectrum analysis.” The spectrum analysis considers

the extent of interactivity and affirmative commercial aspects of sites

Provide students with the names of two-four Web sites, or make up your own, that fall on

this spectrum of activity (i.e., an informational site that does not allow on-line orders, a site that

provides an e-mail address and answers questions, an on-line store, such as

www.amazon.com).

a) Ask students to assess whether a customer in Germany could sue the respective

businesses in Germany.

b) Do any of the sites include forum selection or choice of law clauses?

Internet Exercises

1. Arbitration continues to enjoy popularity as a method of international dispute

resolution. Nonetheless, the arbitration process will be only as good as the arbitration clause

drafted agreeing to it. Dividing students into groups (perhaps as part of a larger contract

negotiation exercise), ask paired groups to negotiate and draft an arbitration clause. One helpful

link to various international ADR sites is: http://www.cpradr.org/

2. Once a party obtains a foreign arbitral award, it still must be able to enforce that

award. As apparent from jurisdictional cases concerning due process and minimum contacts,

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use.

Chapter 3: Resolving International Commercial Disputes

countries may enforce awards to differing extents and under differing circumstances. To provide

some clarity, several countries adhere to the UN Conventions on Arbitral Recognition and

Enforcement. Using www.google.com, find the text of U.N.C.A.R.E. and apply it to one of the

cases discussed in Chapter 3 or one of your own. Ask students to research and consider

whether the arbitration award would be enforced under this convention.

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom

use.