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Selecting New York To Resolve International Disputes

International businesses that wish to eliminate the "home field" advantage in litigation or arbitration, take note: New York can serve as both the host forum and the source of law for international business disputes.  This is true even if the dispute has no connection to New York or even the United States.

Because so many judges, arbitrators and attorneys in New York have participated in complex business litigation, New York is considered a sophisticated and desired forum for the resolution of international business disputes.  Courts and arbitrators recognize the importance of facilitating international commerce and, in a city that has proclaimed itself as a melting pot for decades, they are not known for discriminating against foreigners.

Recognizing its status as a hub of international commerce, New York has codified the right of commercial parties in involved in contractual disputes of at least $250,000 to select New York as the governing law for future litigation regardless of whether the underlying transaction bears any relationship to New York.  This guarantee is codified in New York General Obligation Law ("GOL") § 5-1401.

New York law goes even further, and guarantees to serve as the host forum if the transaction or agreement also involves $1 million or more, and the parties agree to submit to the jurisdiction of New York courts. In such cases, New York courts will entertain lawsuits against a foreign corporation, non-resident, or foreign state, and the aggrieved party may bring suit in New York.  GOL § 5-1402.  This means that foreign parties, by contract, can agree to have a dispute adjudicated under New York law and litigated in New York even where the agreement otherwise does not relate to New York.  

An example of how these statutes play out is contained a 2013 case styled Credit Suisse v. URBI Desarollos Urbanos (decided in New York County’s Supreme Court).  Credit Suisse sued a Mexican company, alleging the Mexican company defaulted on a credit swap agreement.  Seeking to force Credit Suisse to bring suit in Mexico, URBI moved to dismiss on the basis that Credit Suisse was a foreign corporation not licensed to do business in New York. Credit Suisse admitted its New York registration was not current, but nonetheless opposed the motion to dismiss on the basis that the parties had a contract that satisfied with requirements of GOL § 5-1402. 

The Court maintained jurisdiction over the case, giving Credit Suisse sixty days to renew its registration to do business in New York, and allowing it to maintain the lawsuit in the interim. The Court wrote, “it is well established that the operative effect of GOL § 5–1402 is to preclude a New York Court from declining jurisdiction even where the only nexus is the contractual agreement.”

The ruling had two primary benefits for Credit Suisse. First, it prevented URBI from avoiding accountability, and second, it saved Credit Suisse from having to sue a Mexican business in Mexican court, where it likely feared an inhospitable forum.

In addition to New York courts, international businesses can also select New York as the locale for arbitration.   The International Centre For Dispute Resolution (ICDR) maintains offices in New York and is utilized to resolve cross-border commercial disputes.  Arbitration in New York is particularly advantageous as the majority of the world’s nations have ratified the New York Convention, which provides for enforcement of arbitral decisions.

Takeaway: While there are some exceptions, including contracts involving labor, personal, family or household services, the two New York General Obligation statutes ensure that parties to many international transactions can obtain a measure of predictability in contracting, enforcement and dispute resolution. Parties can also eliminate the worry of having to litigate in jurisdictions that are either outright hostile to foreigners or do not have a well-developed body of law to address a particular dispute. The goal of avoiding these uncertainties can be achieved simply by drafting well-crafted choice of law and choice of forum provisions referring the dispute to New York, as a source of law and either a judicial arbitral forum.  Such choices are not difficult to put into effect, but require a little advance planning by contracting parties to ensure that their agreements properly provide for these options. 

For more information or assistance, please contact Andy Lustigman, Olshan Frome Wolosky, New York law firm.  +1 212 451 2300 alustigman@olshanlaw.com   www.olshanlaw.com

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