Advantages and Disadvantages of Franchise Agreements with Suitable Example - PowerPoint

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					   DISPUTE RESOLUTION STRATEGIES
    IN INTERNATIONAL FRANCHISING;
ARBITRATION OR ORDINARY JURISDICTION?


             JOHN R. F. BAER
           Chicago, Illinois U.S.A.
                13 June 2009
                 Venue Choices

1. Ordinary jurisdiction (litigation)

2. Arbitration

3. Mediation




                                        2
 Ordinary Jurisdiction: Advantages

1. Established procedures

2. Discovery

3. Appeal rights

4. Best protects intellectual or industrial property
   rights

                                                   3
Ordinary Jurisdiction: Disadvantages
1.   Discovery in U.S.A. can be extensive and expensive

2.   Possibility of jury trial in U.S.A.

3.   Favoritism of local courts

4.   Unknown or unfamiliar procedures

5.   Can be very expensive in many jurisdictions



                                                     4
  Ordinary Jurisdiction: Efficiency
  Of Enforcing Or Defending Claims

1. No U.N. treaty yet on enforcement of foreign judgments
    (unlike EU Council Regulation (EC) No. 44/2001 of 22 December 2000 on
    jurisdiction and the recognition and enforcement of judgments in civil and
    commercial matters)


2. Plaintiff may want to sue in its own jurisdiction – but
   enforcing judgment may be difficult unless defendant
   has assets in that jurisdiction

3. Plaintiff probably should sue in jurisdiction where
   contract will be enforced or where defendant has
   assets

                                                                           5
      Arbitration Venues and Rules

1. American Arbitration Association (AAA): Commercial
   Arbitration Rules, with International Commercial
   Arbitration Supplementary Procedures

2. International Centre for Dispute Resolution (AAA):
   International Arbitration Rules

3. JAMS: Comprehensive or Streamlined Arbitration
   Rules and Procedures, or International Arbitration
   Rules


                                                        6
4. International Chamber of Commerce: ICC Rules of
   Arbitration

5. London Court of International Arbitration: LCIA Rules

6. UNCITRAL Arbitration Rules (No Administrative
   Authority)




                                                       7
7. Swiss Chamber of Commerce: Rules of International
   Arbitration

8. Arbitration Institute of the Stockholm Chamber of
   Commerce: Rules of the Arbitration Institute of the
   Stockholm Chamber of Commerce

9. China International Economic and Trade Arbitration
   Commission (“CIETAC”): Arbitration Rules



                                                         8
          Arbitration: Advantages

1. Sometimes faster and sometimes less costly

2. Limited discovery or information exchange

3. Final and binding awards

4. Generally not appealable

5. Use of arbitrator(s) experienced in subject matter


                                                        9
        Arbitration: Disadvantages

1. Filing fees and arbitrator’s fees

2. Sometimes as costly as ordinary jurisdiction (litigation)

3. Not suitable to enforce intellectual or industrial property
   rights

4. Generally not appealable

5. Limited discovery or information exchange

                                                           10
          Arbitration: Local Laws
Check local arbitration laws to see if they would apply to
your proceeding. For example:

•      U.S.A.: Federal Arbitration Act or state arbitration
       law

•      Mexico: Book 5, title 4 of Commerce Code
       regulates commercial arbitration

•      England: Arbitration Act 1996


                                                              11
       Arbitration: Efficiency Of
     Enforcing Or Defending Claim

1. U.N. Convention on Recognition and Enforcement of
   Foreign Arbitral Awards (New York Convention)

2. Sometimes local courts are reluctant to enforce foreign
   arbitral awards despite the New York Convention




                                                       12
               Arbitration:
      Drafting The Contract Clause
1. Arbitration agreement must be in writing and define
   clearly what is to be arbitrated

2. Specify arbitration rules to be used and appointing
   authority

3. Number of arbitrators (1 or 3) and, if 3, how selected

4. Experience of arbitrators

5. Language of the arbitration

                                                            13
6. Arbitrator’s powers

7. Carve out: Allow intellectual or industrial property
   rights to be enforced in courts

8. Choice of law (including federal or state arbitration law
   if U.S.A. law is chosen)

9. Scope of discovery

10. Location


                                                          14
11.   Award to be final and binding

12.   Reasoned award or opinion

13.   Fees and costs

14.   Enforcement of award

15.   Any appeal rights



                                      15
  Arbitration: Choice Of Law Issues

1. Bad idea to specify neutral third country’s law to apply

2. Application of mandatory laws by arbitrator

3. Exclusion of identified local laws




                                                         16
      Arbitration: Informal Survey

1. Most franchise lawyers used arbitration clauses in
   international franchise agreements rather than ordinary
   jurisdiction (litigation) to resolve disputes

2. Few actually arbitrated disputes

3. Lesson: business solutions usually reached




                                                       17
                     Mediation

1. Most arbitration bodies have mediation rules

2. Mediation more likely to be used in U.S.A.

3. Confidential and non-binding

4. Can be effective with experienced mediator




                                                  18
5. The Franchise Mediation Program (Administered by
   CPR International Institute for Conflict Prevention &
   Resolution)

6. EU Directive 2008/52/EC (21 May 2008) on certain
   aspects of mediation in civil and commercial matters




                                                           19

				
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