There is a new kid on the block to settle cross-border commercial disputes.

At the moment, when businesses negotiate a cross-border contract, they can choose between agreeing to cross-border litigation, international arbitration, or international commercial mediation. However, that requires a willing counterpart. If the parties do not agree on a dispute resolution process, international litigation is the default. 

Not many businesses agree on a way to resolve disputes before they happen. When they do, the clause is often invalid or wide open to interpretation which is unhelpful. This happens even during high-stakes negotiations when businesses have good legal advice. The consequence is getting caught up in unwanted, unfamiliar, and unfavourable litigation in foreign courts. And, when the dust has settled, foreign judgments can be difficult to enforce. This is time-consuming, expensive and inefficient.

A solution is on the horizon: the Bilateral Arbitration Treaty, or BAT. The BAT is an agreement based on international arbitration principles that would operate between New Zealand and other countries. While businesses are free to opt out, the BAT would replace international litigation as the default dispute resolution regime between the treaty parties.

The BAT incorporates the neutral principles and capitalises on the flexibility of international arbitration. Businesses are free to choose the procedure to solve their dispute under the BAT. Importantly, the BAT will allow for the quick enforcement of awards in more than 150 jurisdictions.

Like its animal counterparts, the BAT is of economic importance. The former is essential to reduce the need for pesticides, whereas the latter is vital to reduce the costs of cross-border trade and to expand the potential of New Zealand’s enterprises. SMEs in particular will benefit from the BAT. The BAT removes some of the significant costs associated with cross-border litigation.

By providing a predictable dispute resolution regime, businesses will not have to learn about one foreign justice system one day and another the next. They will only need to familiarise themselves with the BAT. In countries where the enforcement of judgments has been traditionally rather difficult, like China, the BAT will span its wings. It will make the enforcement of decisions child’s play.

The New Zealand Initiative will be hosting international arbitration expert Gary Born, where he will speak on the BAT regime. To attend, register here for Auckland on 6 May at 5:30, or here for Wellington on 8 May at 12:15.