Where to File Legal Action in Commercial Dispute with a Foreign Party

Cross-border commercial disputes, with their wide range of issues, demand a thorough evaluation on a case-by-case basis. From straightforward trade or corporate disagreements to significant failures in natural resource management and major construction projects, the complexity of a case necessitates a meticulous approach. This article delves into the most basic and relatively uncomplicated matters that involve two parties located in different jurisdictions, with transactions that may occur within their respective states or involve the cross-border transfer of goods or services.

Initial Considerations

In an ideal scenario, where the parties have thoroughly negotiated and executed a commercial contract, the process for dispute resolution is typically outlined in great detail. This roadmap, embedded within the contract, normally allows the parties to avoid most of the potential pitfalls. In such cases, the parties need to follow the specified steps to escalate their issues and engage with the designated dispute resolution body according to the terms of the contract.

A different approach is required when the parties have conducted their business using basic commercial documents, missing the jurisdictional clauses or any guidelines regarding how and where disputes should be resolved.

Looking for a correct course of action

Whenever the contract provides, it is essential to comply with the dispute resolution mechanism selected by the parties. As a general rule, the contract prescribes that disputes be resolved by the courts of the state of one of the parties or by arbitration (venue of the dispute). In addition to a dispute venue, the contract often sets out pre-action procedures that are essential to observe.

Pre-legal steps

Pre-legal steps are crucial to the parties in most jurisdictions and often are advantageous as well. This phase can facilitate the reconciliation of accounts, potentially leading to an early recovery of the agreed-upon outstanding amounts. On the other hand, bypassing this pre-litigation stage— even when it is apparent that resolution in this manner is unlikely—may result in the court or tribunal dismissing the case without consideration of its merits.

To ensure a thorough approach at this stage, the following key questions should be answered:

• What does the contract say regarding the dispute escalation process?
• Did the parties consent to enter mediation proceedings?
• Is there a stipulated minimal waiting period following notification of the intent to pursue legal action?
• What are the accurate addresses or contact details required for notifying the other party?

All these questions should be answered by conducting a thorough review of the written agreement. This comprehensive understanding of the dispute resolution process, as outlined in the agreement, is crucial. In the absence of clear guidance in the agreement, the procedural rules of the country where the case will be litigated need to be consulted.

In most scenarios, the next step will be to serve a contractual notice of dispute to the defaulting party. The contract can also stipulate a waiting period or mandate active engagement in settlement discussions or go into mediation. It is essential to take all necessary steps in compliance with the required formalities before advancing the legal claim.

Addressing Relevant Authorities

Certain disputes must be presented to the concerned authorities prior to being escalated to a court or tribunal, regardless of whether this requirement is explicitly stated or omitted within the contract. This step is particularly crucial in jurisdictions that impose specific protocols for certain disputes. For instance, in the case of matters arising from insurance contracts in the United Arab Emirates, it is mandatory to initiate proceedings with the Federal Insurance Authority first. Neglecting to adhere to such requirements may result in the dismissal of the case purely on procedural grounds.

Filing a Case

After attempting all pre-legal steps and measures, there may still be a need for one party to secure a formal, enforceable order—a court judgment—to recover under the contract.

When selecting the court to initiate your legal proceedings, several key factors need to be taken into account:

1. Any exclusive jurisdiction specified in the contract;
2. Alternative dispute resolution methods agreed upon by the parties;
3. The location where the contract was to be performed;
4. The domicile of the defendant or where the majority of their assets are located.

Ideally, the contract will direct the dispute to the courts of a country where the judgment shall be subsequently enforced. Suppose a court judgment from one country must be enforced in another. In that case, it's crucial to review any international treaties that allow for the mutual enforcement of court judgments and documents between the relevant jurisdictions. Key treaties may include:

The Hague Convention "On the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters", as between Ukraine and England; and

The Bilateral Treaty "On Judicial Assistance in Civil and Criminal Matters" between Ukraine and the UAE.

Besides committing to respect each other's court judgments, the treaties also provide valuable guidance on procedural matters that could affect the judgment's enforceability in either country.

The country where the dispute is adjudicated is important not only for litigation but also for arbitration. In arbitration, the legal seat will determine how procedural aspects are handled. Unlike litigation, arbitration does not require proceedings to be physically held at the legal seat, and parties enjoy greater flexibility in choosing their representation.

If arbitration isn't an option, the claimant must file their case in a state court that is competent to hear the subject matter under local procedural law.

Choosing the right court can be more complex than it seems at first. Claimants might instinctively think that the jurisdiction lies with the country's most prominent court, such as the Dubai Courts in the UAE. However, upon further examination, they may find that the defendant is located in Sharjah or Ras Al Khaimah, or that a significant part of the contract was performed there, leading to the lack of jurisdiction by the Dubai Courts. Even greater confusion can arise when deciding between the Commercial Court of Kyiv City and the Commercial Court of Kyiv Oblast. The weight of this decision and its potential consequences for the case cannot be overstated.

Representation in Court

In Ukraine and the UK, the lower courts permit parties to represent themselves. For corporate entities, this representation can be handled by management bodies, such as a general manager. To make the process more accessible, these courts allow parties to file and defend cases remotely using electronic means of communication.

However, while this may be manageable in a familiar jurisdiction, self-representation could introduce unnecessary challenges during litigation and the execution phase, especially for cases that hold substantial value or significance to the party involved. Therefore, when the stakes are higher, it's always advisable to involve a local practitioner for guidance and support.

Enforcement of the decision

See our article about foreign judgments enforcement here