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Skip to 0 minutes and 9 secondsIdeally, disputes are resolved as inexpensively and quickly as possible, with both or all parties achieving a result they can live with. The best way to resolve disputes quickly is to deal with them before they arise. Gilles Menguy elaborates on this in the expert video.

Skip to 0 minutes and 33 secondsFranchise agreements at all levels should provide for dispute resolution. The contract will also include a choice of law clause and possibly a choice of forum. The best law to be applied in a dispute will not always automatically be the stronger party's law. It's important to consider the remedies each country's law can deliver and whether their courts respect the judgement from another country, before assuming that the law that is the most familiar will automatically be the best to adopt. An agreement between parties in different jurisdictions will also state which language version of the contract will prevail if there are inconsistencies. Before going to court, it is often possible to choose less expensive dispute resolution paths.

Skip to 1 minute and 22 secondsThe franchise legislation of some countries mandates pre-litigation alternatives, such as mediation or arbitration.

Skip to 1 minute and 36 secondsIf the parties are not able to negotiate a solution, they might try mediation. This is favoured by Australia and is increasingly acceptable in the USA. A mediator is not able to impose a solution in the same way an arbitrator or judge can, but will help the parties to negotiate an acceptable solution. Mediation is cheaper and quicker than arbitration or litigation. At the conclusion of mediation, the parties document their agreement in a contract and they sign it. If one party does not comply with its obligations under the contract, the other can sue for breach of contract.

Skip to 2 minutes and 20 secondsArbitration is a more traditional dispute resolution method in situations where parties are from different countries. An arbitrator does get to make a final decision and arbitral awards cannot usually be appealed. Arbitration can be just as expensive as litigation. Some countries recognise the arbitral laws of other countries and others don't, so the franchisor needs to be clear about this before choosing arbitration. In some countries, such as China, parties much prefer to ask a court to resolve a dispute. The Chinese courts have a reputation for speed and efficiency. You will find plenty of information about the resolution of franchise disputes in the readings for this module.

Skip to 3 minutes and 8 secondsThere is an excellent paper by Paul Jones on non-litigation issues relevant to enforcing international franchise agreements in the list of readings for this module.

How are disputes resolved?

Ideally disputes are resolved as inexpensively, quickly and finally as possible, with both or all parties achieving a result they can live with. It goes without saying that the best way to resolve disputes quickly is to deal with them before they arise, and certainly before they escalate.

Franchise agreements at all levels should address dispute resolution. It is much easier to agree on the dispute resolution process in the contract formation stage, when parties are calm and cooperative, than when a dispute occurs. The contract will also need to include a choice of law clause and possibly a choice of forum.

The law to be applied in a dispute will not always automatically be the law from the franchisors home country. It is important to consider the remedies each country’s law can deliver, and whether their courts respect the judgment or arbitral awards of another country, before assuming that the law that is the most familiar will automatically be the best to adopt. A good first step is to check whether the target country is signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York Convention).

An agreement between parties in different jurisdictions will also state which language version of the contract will prevail if there are inconsistencies.

Before going to court it is often possible to choose less expensive dispute resolution paths. These alternative forms of dispute resolution include negotiation, mediation and conciliation.

In this video we discuss mediation and arbitration in more detail.

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This video is from the free online course:

International Franchise Law: the World is Yours

UNSW Sydney

Get a taste of this course

Find out what this course is like by previewing some of the course steps before you join:

  • Brand due diligence
    Brand due diligence
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    This video discusses the specific due diligence considerations and concerns for franchisors, master franchisees, area developers and unit franchisees.

  • International franchise regulations
    International franchise regulations
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    Jenny Buchan explains important legal considerations when expanding - taxation, property, employees’ rights, environmental protection & registration.

  • Protection of intellectual property
    Protection of intellectual property
    video

    Franchisors should not skimp, and should be proactive, protecting their trademarks. They should utilise the internet to expose a brand globally.

  • What causes franchise disputes?
    What causes franchise disputes?
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    Franchise contracts are ‘relational’ and are left incomplete on purpose. Influence of these relational aspects of franchise agreements are discussed.

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