Trade Disputes Can End Positively

Following the recent revision of the International Chamber of Commerce (ICC) DOCDEX rules, Georges Affaki, chairman of the Legal Committee of the ICC Banking Commission and chairman of the DOCDEX Drafting Group, explains how dispute resolution mechanisms , such as DOCDEX, are a friendly alternative to costly and protracted litigation or arbitration in trade finance

In an ideal world, trade transactions would always self-liquidate in a peaceful manner. Yet this is not always the reality for banks and businesses.Instead, differences between parties can at times lead to disputes– jeopardising future deals and damaging potentially valuable trading relationships.

Good faith negotiation often takes care of the difference, but some disputes may require submission to a neutral forum for successful resolution – with litigation and arbitration often the route of choice. Neither are perfect solutions however.

While litigation or arbitration present an adequate solution for complex cases requiring detailed legal analysis,they can be costly and protracted.

Not only does litigation often involve judge sun familiar with trade finance instruments and documentation, it also forces parties to go through a specific court or legal system –occasionally leading to decisions which are difficult to enforce on an international scope. Airing their disputes in public would also be seen as a last resort for many.

And while arbitration proceedings are conducted privately– and enable disputants to choose arbitrators who are experts in trade finance– it remains an adversarial process by which partnerships could be damaged.

Fortunately, a friendly and effective alternative exists: Alternative Dispute Resolution (ADR).Yet, as ADR mechanisms grow more popular, it is vital that the rules defining them continue to evolve as global trends emerge, adapting to meet ever-changing corporates’ needs. Hence the new rules for DOCDEX–  anICC ADR mechanism – released in May this year.

Revamping the rules

Created by the ICC Banking Commission and administered by the ICC Centre for ADR, DOCDEX offers a private, quick and cost-effective means to settle disputes involving trade finance-related instruments.

First issued in 1997, and revised in 2002, DOCDEX  – whereby a panel of three impartial experts examines the documents involved in a claim – is distinctively not binding, unless both parties otherwise agree at any stage of the dispute. This characteristic frees neutral experts from the constraints of due process, therefore allowing them to devise a flexible approach to forming a decision.

Another key characteristic of DOCDEX is the appointment of a Banking Commission technical adviser – whose role is to scrutinize the decision made by the panel of experts. This not only ensures the verdict is in-keeping with ICC rules, DOCDEX precedents and International Standard Banking Practice, but it also adds credibility to the result.

Yet, despite the success of DOCDEX since its launch in 1997, its original rules have shown some limitations – particularly in terms of the process of appointing experts, dealing with unwarranted delays and finding solutions to procedural challenges. It became clear that a more comprehensive solution was needed.

Consequently, in May, ICC revised the rules surrounding DOCDEX –in both scope and administration. The aim: to serve more companies and cases faster than ever before, and with greater transparency.

Broadening the scope

Until now, DOCDEX panels were only able to resolve disputes in relation to instruments governed by ICC rules – leaving large segments of trade finance transactions, and therefore many banks and corporates seeking DOCDEX decisions, outside its scope.

As a result – and building on the untapped capabilities in the Banking Commission – the new DOCDEX rules offer an enlarged scope that now makes them available to anytrade finance-related dispute.

And this includes transactions such as, trade loans, syndications, negotiable instruments and risk purchase agreements.

A boost to transparency and efficiency

To increase transparency around its dispute resolution services, the appointment of expert process has also been revised to ensure impartiality. Now, any candidate hoping to become an expert on a case is required to file a statement to the ICC confirming their availability, independence and neutrality – ensuring they do not have any additional involvement in the case beyond their decision-making duties.

Similarly, in the interest of transparency – but also serving to set future precedents – the new rules provide that redacted decisions are published more frequently and quickly.

Until now, DOCDEX decisions have only been available through a compilation published bi-annually and sold by ICC. The hope is that now, however, all redacted decisions will be made available for free on a dedicated website to ensure they can be accessed by anyone.

A bright and digital future

DOCDEX has also traditionally been a paper-based process – slowing down the capacity for resolution and not necessarily streamlining the process.

Now, the implementation of electronic submissions – according to standard templates available on-line – are significantly minimizing the impact of administrative delays, thus resulting in faster and more efficient proceedings.

In today’s trade and economic landscape, trade finance disputes remain inevitable. The key is to ensure that they are dealt with in a cost-effective, swift and flexible manner. And, most important of all, they must be a friendly act.