When Business Is Not Just About Money – Rethinking Effective Dispute Resolution For Asian Deals.
As opposed to the traditional perception that business-to-business (B2B) transactions are purely functional and rational, research has revealed that culture plays a critical role in business relationships, calling businesses and law firms to rethink their global trade practices and dispute resolution strategies.
Cultural Dynamics in Collaboration and Communication
The global research report The Truth about Cross-Cultural B2B Relationships, issued by the International Chambers of Commerce (ICC), Jus Connect and McCann Truth Central, compares nine major economies across the world and explores how cultural factors influence the success of multinational business relationships. The study was conducted through desk research, conducting 1,701 new quantitative surveys with business leaders and over 20 in-depth interviews with global experts in B2B relationships.
For Asia, the focus was on two major emerging markets – China and India. Although China and India are geographically proximate, some of their business culture could be completely opposite. For example, when giving feedback, Chinese businesses tend to be more subtle to avoid direct conflict. In contrast, the businesses of its neighbour, India, prefer direct and transparent feedback, even if it may offend others. The study finds that Chinese businesses are more prone to be “Pragmatic Realist” – they are practical, prefer meeting agendas, clear expectations and giving second chances, while Indian businesses are more likely to be “Strategic Balancer” and prefer creativity, calculated risk, realistic goals and proven track records.
Understanding cultural dynamics helps businesses and lawyers predict their partners’ and clients’ reactions and behaviours, and implement more effective business and dispute resolution strategies. For example, in a negotiation, one may focus on projecting the expectation for Chinese businesses, while the other may focus on risk assessment for Indian businesses. It facilitates communication and reduces friction in developing long-term relationships.
Dispute resolution strategies – What are businesses looking for?
The report discussed three main ways to approach disputes – (i) interest-based approach, by searching the best interest of the parties; (ii) right-based approach, by determining legal rights of the parties; and (iii) power-based approach, by using power and influence over a party to impact on its decision making.
Culture does not seem to impact the choice of approach. Unsurprisingly, the interest-based approach, which could yield a win-win solution, receives the most support from businesses, followed by the right-based approach and the power-based approach. Further, where businesses opt for the right-based approach, research shows that more businesses prefer arbitration over court litigation.
However, the reasons and motives for resorting to a right-based approach vary culturally. While business leaders generally consider reaching a fair and final resolution to be important for legal proceedings, Chinese businesses, for example, place more emphasis on ensuring enforceability and ability to satisfy the claims, while Indian businesses focus more on keeping sensitive commercial information private and finding errors by the other party.
Therefore, being culturally sensitive helps lawyers understand their clients’ ultimate goal in dispute resolution so they can tailor their dispute resolution strategies.
Key takeaways for conflict management
Based on the findings, businesses and lawyers should consider:
- adopting business strategies and communication styles with cultural sensitivity to reduce friction in multinational collaboration;
- prioritising facilitating direct negotiation channels as the first line of dispute resolution and reserving legal proceedings for when negotiations fail; and
- Understanding how culture impacts the motives and goals for dispute resolution is essential for developing dispute resolution strategies that suit their needs.
Resolving Disputes through ICC Arbitration
The experience, rigorous approach, efficient processes, and innovative rules made ICC the world’s leading arbitral institution for dispute resolution. The ICC Rules are recognised and respected as the benchmark for international dispute resolution and provide businesses with a premium framework for fair and final dispute resolution.
- Professionalism Established in 1923, the International Court of Arbitration of the ICC (ICC Court) has administered over 28,000 arbitration cases and leverages its extensive experience to make important procedural decisions pursuant to the ICC Rules including determining the place of arbitration, confirmation, appointment and challenges against arbitrators and whether an ICC arbitration agreement exists on a prima facie basis.
- Expertise in Multiple Jurisdictions The ICC Court has 191 arbitration specialists as Court Members from 119 jurisdictions, offering insights from multiple jurisdictions.
- Diversity and Global Reach The Secretariat, which is responsible for the day-to-day administration, has 12 case management teams with headquarters in Paris and five regional offices in other popular seats of arbitration: Hong Kong, Singapore, New York, São Paulo, and Abu Dhabi. The members of the teams have diverse nationalities and are conversant with major legal traditions. The entire arbitral process is well-monitored from the initial request for arbitration to scrutiny of the draft final award.
Enforceability Scrutiny of draft awards is a salient feature of ICC arbitration. The three-level scrutiny process by Counsel, Management, and Court Members maximizes the legal effectiveness and increases the enforceability of an award.
For further information, please contact:
Winnie Wat, Deputy Counsel, ICC International Court of Arbitration
ica8@iccwbo.org
