Full arbitration proceedings are not always necessary to resolve a dispute. In a recent matter handled by Aceris Law, our team effectively achieved a favorable resolution in a complex international dispute without initiating arbitration. The dispute concerned multiple contracts for the sale of industrial machinery, where one party consistently failed to meet its payment obligations despite repeated extensions and good-faith renegotiations.
Over several years, the parties entered into a series of sales agreements governed by the United Nations Convention on Contracts for the International Sale of Goods (CISG). The seller fully performed its obligations by delivering the goods, while the buyer failed to make the required payments. Despite numerous reminders, revised payment schedules, and even offers to defer or finance part of the debt, the payments remained largely outstanding.
After years of unsuccessful attempts to reach an amicable settlement, the American seller retained Aceris Law to assist with the recovery of the amounts owed. A final notice of dispute was sent in compliance with the contractual clause requiring negotiation prior to arbitration. The Notice of Arbitration to formally commence arbitration proceedings was also ready to be filed.
The Final Notice and the Threat of Arbitration
In that final notice, Aceris Law laid out the contractual breaches, calculated the principal sums due, contractual penalties, and accrued interest, and expressly stated that if the buyer did not comply, arbitration would be initiated under the Swiss Rules of International Arbitration before the Swiss Arbitration Centre in Zurich.
The notice made clear that initiating arbitration would expose the defaulting party to not only the outstanding principal and penalties but also damages, interest, and both sides’ arbitration and legal costs.
This clear and credible threat of arbitration, supported by detailed legal reasoning and evidence, prompted the other party to reopen negotiations in earnest.
Why the Threat of Arbitration Often Leads to Settlement
In international commercial disputes, the mere threat of arbitration can be a powerful incentive to resolve disputes. Arbitration proceedings are costly, time-consuming, and carry reputational and financial risks. For a party in breach, the likelihood of losing and being ordered to pay the opposing party’s costs can make settlement the more attractive option.
Receiving a well-structured notice of dispute from experienced arbitration counsel signals seriousness and readiness to act. It shows that the claimant is fully prepared to pursue its rights and has gathered the documentary and legal foundation to do so effectively. This changes the negotiation dynamics and often leads to constructive settlement discussions.
However, credibility is essential. An empty threat can quickly backfire if the opposing party calls the bluff. Clients must always be ready to proceed with arbitration if settlement efforts fail, bearing in mind that the prevailing party in arbitration typically recovers a substantial portion of its costs.
Achieving an Amicable Resolution
In this matter, after the notice was sent and following further discussions facilitated by Aceris Law, the parties were able to reach a negotiated settlement that avoided the need for formal arbitration proceedings. This outcome saved significant time and costs while preserving the possibility of a continued commercial relationship.
Experienced Counsel Makes a Difference
This case illustrates the importance of strategic dispute resolution: knowing when to negotiate, when to apply pressure, and when to act. At Aceris Law, our approach always begins with a good-faith attempt to settle disputes amicably while ensuring our clients’ rights are fully protected and enforceable.
The matter was handled primarily by William Kirtley and Justine Codo, who led the negotiations that ultimately brought the dispute to a successful close without arbitration. Aceris Law has acted as lead counsel in numerous arbitrations involving Kazakhstan and other Central Asian States, consistently achieving positive outcomes for its clients.
