International arbitration News, analytics and practice

Arbitration is better than litigation, but proven business partners are the best

Conducting business internationally it is extremely important to be sure about the bona fide status of your counterparty. This factor is significant for potential disputes and may be considered in two main aspects. First of all the unclear legal status of counterparty may hide certain problems which may cause disputes. Secondly, the outcome of any arbitration or litigation against that party with unclear legal status may be ineffective due to impossibility to enforce an award or court decision.

It is better to have the information about the counterparty before your company enters in contractual relations with that counterparty, than it would be useful to have actual data each time when your company makes significant payments or unsecured shipments. And if the problems with a counterparty reveal you’d probably have accurate information to chose the way of settlement of that problem. In majority of cases the creditors are willing to be aware of the current legal status of a debtor before they submit their claims to a court or arbitration.

There are several organizations worldwide that conduct screening of potential business partners. In Ukraine this activities are performed by the Investment and Trade Foundation. As part of its main activities the ITF conducts a free of charge initial screening of information about potential local partners upon the request of foreign applicants.

According to the ITF it is critically important to be sure about the legal status of a local partner in Ukraine before a foreign investor or a company enters into the investment or trade relations, and even after that. There is also a detailed screening conducted under the auspices of the ITF that allows foreign companies:

• Have detailed information about the legal status of the Ukrainian company and persons that are authorized to act on its behalf;
• Obtain the legal assessment of litigations in which the potential partner is involved;
• Obtain other important information that may help to decide whether the partner is trustworthy or not

The detailed information you may find here