Dispute Prevention

Options in reducing later Court action 

Before concluding a contract

Each conflict, each lawsuit, is not only financially burdensome through trial and attorney costs, but also tax your company in lost managerial time, demotivation, therefore taking time away from positive business advancements. Learn from experience: companies that engage in disputes frequently have the tendency to declare bankruptcy earlier.

In a great many situations, disputes, litigation and arbitration cases have root problems originating in the terms and spirit of a contract. Take the Treaty of Versailles, a prime example of an unbalanced ‘contract’ if you will - the unequal terms were a very important factor in causing the unrest and then the war between 1930s and 1945.

On the other hand, there are countless agressive executives and lawyers who are willing to take advantage of their dominant positions to shamelessly exact brutally tough conditions in contracts, and practically blackmail their business partners. This usually results in extended negotiations and higher legal fees, but also sows discontent and distrust in the long-run between the two parties, setting the stage for future disputes.

What the negotiator playing ‘hardball‘ often overlooks:

• that only a reasonably balanced contract, which workers on all strata of both companies accept in the long-run both emotionally and physically, can be positively effective over a long period of time
• that the submissive, ‘blackmailed‘ partner will eventually attempt to squirm out, or will simply not have the motivation to fulfill the contract to its optimal level in the long-run; both leading to conflict and possibly legal disputes between the two partners
• costs associated with starting legal action in disputes are immensely high
• frustrated workers experience flagging morale and demotivation
• new business opportunities are passed over as efforts and energies are expended in conflict
• in case your partner does drop out, with the dispute acting as a wedge, consider the costs, time, and effort required in finding a new partner, negotiate every last detail again, and then implement these again
• seeing as they earn fantastically in lawsuits, some lawyers have little interest in negotiating a ‘win-win‘ deal, as long as they represent their client’s position in stellar fashion. Also the question of whether the short- or long-term interests of the client are being represented have massive implications in resolving a dispute.

Also, many of the costs one thinks to save when closing a so called adhesion contract will come around afterwards in different shapes.

It is precisely in the infrastructure sector that thinking in the long-run is critical. Here partners do not allow themselves to be exchanged like laundry. However, an interruption in public services is hardly acceptable. Therefore it is important to seek said ‘win-win‘ solutions from the outset. This means that choice of negotiating tactics and team is particularly important, as the Infrastructure sector is filled with demanding, multi-faceted topics to clear.

The following considerations should apply to strategic preparations:

• Work out the negotiation strategy: in simplest terms: ‘win-win‘, ‘win-lose‘, or ‘lose-lose‘
• What type are you, your team, your product? The counterparts in your partner firm?
• How can the psychological foundations when starting negotiations and the communications that follow be improved?
• Are my negotiating goals compatible with the characters of my negotiating team?
• Is there that certain 'chemistry' between the department leaders and management of both firms? Would they interact smoothly?
• How transparent am I when negotiating? Or do I also employ 'tricks'?
• Does the training of body language also play a part in my negotiating tactics?
• What role do I assign my advisors?
• How do I react in difficult situations? Apply pressure?

This list is a very short one, food for thought in the preparation for contract negotiations.

The time immediately after the conclusion of a contract is also of great importance: many firms are of the opinion that all is set, and return to their daily routines - a terrible mistake! A contract must be brought to life! How does your management relate to the various stratas of company employees? (Japanese firms, for instance, are very serious in encouraging contact and good relations between all levels of employees, to build a personal relationship. This is designed to help prevent future conflicts).

Market conditions are constantly changing. Often, the famously long hundred-page contracts churned out by American lawyers have become slightly ‘inaccurate‘ through changing market conditions, and therefore theoretically not enforceable. How do partners deal with these constant condition changes? Co-operatively, as the negotiations were, one would presume. However, if the contract was one-sided, it is likely that the weaker partner would seek to renegotiate the terms in his favour, or not fulfil his end of the contract - leading simply to higher costs!

ICC Austria - International Chamber of Commerce
Wiedner Hauptstrasse 57, 1040 Wien
Tel: +43-1-504 83 00
E-Mail: icc(at)icc-austria.org