Question 3
As a result of expansion and globalization, Colossal Corporation is expected to find itself in some complex relationships with its partners. Inevitably some of these relations will break down along the way. As a consequence, the corporation must choose the best means to resolve the disputes which are expected to arise. In many of the cases, arbitration will be the best dispute resolution method. The following factors make arbitration the best choice for Colossal. The first is that the awards arising from arbitration are more readily enforceable as opposed to other means like the court processes. The ease of enforceability is owed to the 1958 New York Convention treaty which over 150 states are a party (Arfazadeh, 2014). Another advantage of arbitration is that it provides a neutral forum, especially if the dispute is between Colossal and another party in another country. Ideally, parties do not like to submit to the laws of another jurisdiction. The other advantage of arbitration is that it allows for the flexibility of the processes ensuring that the dispute resolution process does not impact the operations of Colossal. The rules of arbitration are flexible, streamlined and less complex than other civil procedures (Guthrie, Franck, Aaken, Freda & Rachlinski, 2017). The flexibility extends to the point where the disputing parties can select the governing body they would want the resolution to be based on, the place and timing as well as the aspects that should be covered. It ensures that the parties are convinced of receiving a fair hearing and judgment.
Question 5
If Colossal accepts to the request by Edfin that Colossal has to pay them by opening a letter of credit, there are expected ramifications. To begin with, payment will be made by documentation as opposed to the earlier basis where payment was being paid by verification as far as quality and quantity are concerned. Unless the letter has a condition appointing an inspector, Colossal would have no right to inspect the raw materials coming from Edfin. Additionally, for any reason, Colossal will not be in a position to stop the order as the letter of credit, once opened, is irrevocable (Alavi, 2017). Another ramification is that the costs of this mode of payment are higher when compared to other modes of payment. The letter of credit could include negotiation and amendment which adds to the original importation costs. Opening an irrevocable letter of interest will be impacted by currency fluctuations (Alavi, 2017). With currency fluctuations, any loss due to the fluctuations will be beard by the buyer, in this case, Colossal Corporation. Additionally, currency fluctuations would lead to price variation in the local market. If Colossal has to adjust the price for finished goods to cover these costs, it might be forced to lose some of its consumers.
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Response to Question 3
Arbitration is getting more recognition in recent times as organizations and individuals realize the advantages that the mode of dispute resolution has over litigation. Arbitration is appropriate both in the national and international business. Litigation is known to take long which in a way I feel that it waters down the gains, even if the judgment goes the Colossal Corporation way. However, with arbitration, the parties can decide on how fast they would want the process to be carried out. The fears that people have about arbitration is the enforceability of the rewards, and as you indicate, there are methods of enforcement which ensure that both parties receive justice. In addition to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the 1958 New York Convention to has stipulations which ensure that parties follow through the outcomes of the dispute resolution.
References
Alavi, H. (2017). Risk Analysis in Documentary Letter of Credit Operation. Financial Law Review , 2016(1(4)).
Arfazadeh, H. (2014) Arbitrability under the New York Convention: The lex fori revisted. Arbitration International 17(1), 73-88.
Guthrie, C., Franck, S. D., Aaken, A.V., Freda, J., & Rachlinski, J. J. (2017). Inside the Arbitrators Mind.
