1. Changing context, new challenges

Global markets and especially globalized competition are creating new challenges for governments, intergovernmental bodies, international business organizations and, not least of all, companies. To meet these challenges, the business world needs appropriate structures and strategies. The International Chamber of Commerce (ICC) has been active in raising awareness of these needs. In its 1998 Geneva Business Declaration1 it defined a number of priorities to prepare the way for global governance in the twentyfirst century.

Crossborder, international and even global rules and institutions will be essential to business operations in the years ahead. So too will flexibility. An area where this is particularly the case is dispute settlement. Below we shall look at the two principal systems for settling disputes in international commerce: the World Trade Organization's system for StatetoState disputes and private arbitration. To put them into the context of business needs and aims in an increasingly globalized economy, consideration will first be given to those needs and aims as defined by ICC in its 1998 Geneva Business Declaration.

1.1 Balance between freedom and rules

Business requires the free flow of goods and services, investment, knowhow, technology and information in order to work efficiently. To that end, deregulation and market access must be gradually developed, especially where discriminatory double standards are still being used to defend entrenched interests. Ultimately, liberalization fosters competitiveness and prosperity as the most reliable basis for individual freedom and dignity. [Page501:]

Freedom can only work within rules, and the same holds good for markets. Business needs the backing of effective laws, rules and institutions for its own operations and to ensure overall civil stability. Governments and intergovernmental organizations are the main rulesetters. In both industrialized and emerging economies considerable advances have been made in recent years. Emerging economies, for instance, have taken steps to modernize rules of special significance to business, such as those governing stock exchanges and rules protecting physical assets, equity investments and intellectual property.

These efforts need to be pursued and broadened, so as to give business the rulebased freedom it requires. In particular, a truly global framework of rules for crossborder investment is needed. Competition policies should impede neither trade nor investment across borders (whether greenfield or acquisition). A consensus on basic rules concerning labour standards should be sought within the International Labour Organization. Crossborder environmental problems should be resolved in a responsible manner through multilateral environmental agreements and not by trade measures. Neither isolated national or regional efforts nor emotional and irrational arguments are satisfactory ways of addressing global problems.

1.2 Market understanding

Agreement on basic economic goals to ensure the coherence of policies worldwide presupposes a common understanding of key market mechanisms and business tools. 2 Two aspects are worth highlighting:

(a) The opening and deregulation of markets and the modernization and globalization of rules and institutions relevant to business should no longer be seen as concessions to foreign investors. A truly global framework for investment is advantageous to all concerned. Multinational corporations have a wellproven record of improving social and environmental conditions in countries where they invest. In the recent Asian crisis, their longterm vision and commitment had a significant stabilizing impact. The removal of stumbling blocks impeding local and international business leads to increased competition and wealth as the economy opens up. Consideration should now be given to creating instruments for continuous regulatory reform in a market setting (such as public policy benchmarking). This too will help local economies. [Page502:]

(b) Practical business tools such as marketing, advertising and financial instruments are important means of creating wealth in the global economy. Their potential still needs to be better understood by public policymakers.

1.3 Knowledge economy

The past has seen great improvements in physical production and rising levels of exchange and efficiency. Now, the world is moving towards a global knowledge economy, which creates a new challenge for countries and companies alike. Business contributes to this development through research and innovation, the free flow of knowledge and by encouraging learning and relearning. These factors have become key drivers of prosperity. International firms are becoming networks of nodes and highways for transmitting knowledge and advancing research and technology in a global perspective.

The knowledge economy needs an appropriate framework. In recent years, developing countries have facilitated the creation and flow of technology and ideas through better enforcement of intellectual property rights. This deserves further encouragement. One major task will be to clarify business requirements for protecting intellectual property in the digital environment. Another is to speak up in response to increasing hostility towards technological progress in highcost industrialized countries, particularly in Europe.

1.4 The reality of globalization

A better understanding of globalization and its impact on jobs and wealth is necessary. ICC has been speaking out on the benefits of globalization and this message needs to be strengthened.3Allegations of social dumping should be countered with the reality of greater overall wealth and the rapidly increasing number of people living above the poverty line.

Globalization does not swallow up everything in its path. Although supply will become global, consumption will not. The greater choice open to the consumer increases the diversity of local demand. Some critics of globalization say that countries entering world markets lose their societal and ethical values; they warn that civilizations will clash. Societal values will indeed be increasingly exposed to global competition and dialogue, but this will enrich mankind by offering choice and crossfertilization and strengthen ideas and values that are respected by all cultures and societies. Globalization enhances trust and nourishes a wider range of values than shareholder value alone. [Page503:]

1.5 Global decisionmaking

As trade and markets become global, many problems can no longer be solved at a national level. There is a need for global decisionmaking and institutions and a meaningful dialogue with business on international policy. The distribution of competences needs to be reorganized from a broader perspective to ensure that the complex and interrelated problems encountered today are handled in an effective and coordinated manner. Intergovernmental organizations will need additional authority, but at the same time must pay closer attention to the contribution of business and competition to the creation of wealth, recognize the need for less bureaucracy, and bring a clear focus to really important global problems. Clarification over leadership and shared responsibility is necessary, with roles for an extended G7, the European Union and key areas of the developing world.

Although new challenges have arisen since 1998 and the Geneva Business Declaration, many of those defined then still apply, as reflected in ICC's 2004 Marrakech Business Declaration.4 In this context of increasing exchanges and growing interdependence effective means of dealing with differences and disputes are essential. At different levels, the WTO and private arbitration have in this respect an essential role to play.

2. WTO dispute settlement

It is within the WTO and its predecessor the General Agreement on Trade and Tariffs (GATT) that the main instruments of intergovernmental dispute resolution relating to matters of trade and investment have been established. There have also been important initiatives with respect to interState trade disputes in Latin America: MERCOSUR, the Andean Community, the Central American Common Market, and ALADI.

2.1 A short history of the GATT and WTO dispute settlement

The GATT-General Agreement on Tariffs and Trade-was signed in Geneva on 30 October 1947. Conceived as a forum for multinational negotiations on a variety of international trade issues, including tariff and quota policy and trading practices, it became the major arbiter of world trade for almost fifty years. GATT established the following basic principles: [Page504:]

- mostfavourednation (MFN): every member nation is entitled to the same trade conditions as apply to any other member's 'most favoured trading partner' (except, in certain circumstances, where regional free trade agreements apply).

- protectionism: trade protection should be given to domestic industries only through customs tariffs and not through other measures.

- national treatment clause: an imported product should be treated in the same way as competing domestic products.

Although provisional and limited in scope, the GATT was undeniably successful in promoting and securing the liberalization of world trade through eight successive trade rounds over fortyseven years. Repeated reductions in tariffs helped spur very high rates of world trade growth during the 1950s and 1960s. However, the GATT's very success in reducing tariffs to a low level, combined with a series of economic recessions in the 1970s and early 1980s, drove governments to devise other means of protecting sectors faced with increasing foreign competition. Bilateral marketsharing agreements were made with competitors, and subsidies spiralled as governments strove to keep a hold on agricultural trade. These changes, plus the introduction of three new sectors- services, intellectual property rights and market access concessions5-in the 1986-1993 Uruguay Round, created new challenges for the world trade forum heralding the birth of its successor, the WTO. 6

Like the WTO, the GATT included procedures for settling disputes. During its fortyseven year history some two hundred disputes were treated,7 as compared to just over three hundred referred to the WTO during its first nine years. GATT procedures for settling disputes were not always as effective as expected. In particular, they were timeconsuming, as the country against which a complaint was made could effectively block or delay every stage of the dispute resolution process. Nevertheless, the discussions that took place when settling these disputes helped to clarify weak points, which were then taken up in further rounds of negotiation and thus helped to improve the entire free trade regime. [Page505:]

The bulk of the WTO's current work comes from the Uruguay Round and earlier GATT negotiations. Whereas the GATT had mainly dealt with trade in goods, the WTO and its agreements also cover trade in services (GATS) and in intellectual property such as inventions, creations and designs (TRIPS).

The WTO Dispute Settlement Understanding provides for a multilayer scheme combining diplomatic and, at the highest level, courtlike elements. The first level consists of consultations between the conflicting parties. If the consultations do not lead to a settlement, the case will be submitted to a group of experts (panel) for scrutiny. If their final report and their interpretation of WTO rules do not please one of the conflicting parties, they will submit the case to the Appellate Body. The final report of the Appellate Body is submitted to the Dispute Settlement Body, a political organ where all WTO members are represented. A ruling is automatically adopted unless rejected by general consensus, which means that any country wishing to block a ruling must persuade all other WTO members, including its adversary in the case, to accept its view. The Dispute Settlement Body has sole authority to set up panels of experts to consider a case and to accept or reject the panel's findings and recommendations. It also has the power to authorize sanctions when a country does not comply with a ruling.

The early days of the WTO dispute settlement system were dominated by unfinished cases from the GATT period, especially between the European Union and the United States. The beef hormone and banana cases, in particular, raised strong feelings over the legitimacy of the WTO. Highprofile cases against the US relating to environmental legislation-notably the gasoline and shrimp/turtle disputes-aroused much protest over WTO procedures and rules, especially from US nongovernment environmental organizations. 8

Experience has shown that the dispute settlement system can help mitigate power disparities between the countries involved in a dispute. Up to mid2004, sixtyeight complaints had been made by middle and lowincome members against highincome members, suggesting that smaller countries use the system to address concerns they have with the policies or practices of some of their more powerful trading partners. [Page506:]

The system has proved useful in managing disputes between the largest powers, too. For instance, it has played an important part in helping to manage relations between the United States and the European Union. Indeed, although there have been difficult moments, it would appear to be the only system capable of fulfilling this role. There is little doubt that it will also play a major role in managing disputes involving China. In many cases, it is the mere fact of its existence, and thus the possibility that it will be invoked, that facilitates agreement on a solution. 9

2.2 An overview of cases

As the number of cases brought before the WTO Dispute Settlement Body continues to grow, politically contentious subjects are increasingly frequent. It is a tribute to the efficacy of the system that countries have sufficient faith in its robustness to feel able to bring such cases. The caseload can be expected to increase as the number of member States increases and these States feel confident that they have both the expertise and resources to bring cases. Also, new-and, in some cases, politically sensitive-areas of controversy are likely to arise as past agreements come to an end (e.g. the 'peace clause' relating to farm subsidies, in January 2004; and the quota restrictions in the MultiFiber Agreement, in January 2005). The WTO Director General has recently warned that the success of the WTO dispute settlement system could lead to overuse, with less attempt being made to seek amicable solutions to conflict.

In mid2004, fortyfour countries or groups of countries, including thirty developing countries, had initiated cases under the WTO dispute settlement system. However, least developed countries, mostly in SubSaharan Africa, have had almost no involvement in the scheme.10The countries/groups of countries that had brought most cases were: USA (75 cases), European Union (49), Canada (22), Brazil (19), Japan (19), India (13), South Korea (10), Mexico (9), Argentina (8). The countries/group of countries against which complaints have been directed are: USA (70), European Union/EU countries (57), India (13), South Korea (13), Japan (11). Complainants overwhelmingly win (88 per cent of cases).11 Approximately a third of cases concerned food products (raw materials & processed foods). 12[Page507:]

By May 2003, only about a third of cases had reached the full panel process. Most of the rest were either reported as having been settled 'out of court' or remained in a prolonged consultation phase. According to ICC, the vast majority of complaints brought in the first seven years of the WTO's existence were efficiently resolved. 13 In many cases they have set precedents that trading countries have followed to resolve their disputes without bringing them to the attention of the WTO.

The scheme can be said to have brought legal mechanics to international trade politics. In the course of its frequent use, ad hoc panels have issued many rulings of violation. Although the Appellate Body has altered many of these rulings, it has done so using legal principles rather than bowing to political pressures, and governments have for the most part complied with the rulings that have been adopted.

A cooperative balance exists between the United States and the European Union within the WTO. Both benefit from the existence of an effective system of dispute settlement. They have occasionally decided not to push contentious disputes through the WTO system for fear of undermining its credibility. The bestknown example is the European Union's decision to withdraw its complaint against the US Helms Burton Act concerning trade between Cuba and third parties. 14Another example has been the absence of suits contesting largescale government subsidies to Airbus and Boeing.15And thirdly, despite its growing frustration with the European Union's ban on geneticallymodified organisms, the United States initially chose not to litigate the issue in the WTO because of widespread concerns about food safety in Europe and hence the likelihood of noncompliance, as in the beef hormones dispute.

However, two transatlantic disputes-EUbananas and USFSCS-stand out as examples of failed restraint. In the EUbananas case, it was only in April 2001, nearly four years after the original panel ruling, that the United States reached a settlement with the European Union providing for its gradual transition[Page508:]

to a tariffonly regime by 2006. In the USFSCS case, which concerned a complaint by the European Union against legislation offering tax subsidies to major US exporters, the outcome remains uncertain, but bilateral negotiations are underway to determine the form and timing of US compliance. 16

An analysis of the cases provides an interesting insight into the functioning of the WTO dispute resolution scheme and the many considerations taken into account. The reality behind the WTO and the thinking underlying the positions taken by the panels is much more differentiated than the image of unbalanced liberalism that critiques of the organization sometimes portray.

2.3 Individual cases

A number of landmark cases have set important precedents and had a bearing on the substance of negotiations in WTO Trade Rounds.

Australia v.EuropeanCommunity (EC) (1979) relating to the EC's granting ofrefunds on sugar exports and its resulting share in the world sugar market. The panel of experts was not in a position to determine whether the EC's increased share in the world sugar market could be interpreted as 'more than an equitable share of world export trade in that product', but noted that the Community system of granting refunds on sugar exports had contributed to the fall in world sugar prices. This had indirectly caused serious prejudice to Australia, although the extent of the prejudice could not be quantified exactly.17 A panel report dated 14 October 2004 referring to complaints not only from Australia, but also from Brazil and Thailand, found that the European Union was exceeding export subsidy limits. The European Union is expected to appeal. The implications of this negative finding are unclear, as the European Union has already agreed on the reform of the Common Agricultural Policy concerning the sugar sector. 18

USA v. European Economic Community (EEC) (1981) concerning subsidies on the export of wheat flour. The USA claimed that EEC subsidies on exports of wheat flour were applied in a manner inconsistent with the GATT in that they have resulted in the EEC having more than an equitable share of the world export trade in wheat flour. The panel of experts considered the export subsidies to be highly unsatisfactory from an economic and trade policy perspective, for[Page509:]

they had enabled the European Community, which would not normally have been in a position to export substantial quantities of wheat flour, to increase its share of the world market to the point of becoming the largest exporter. 19

USA v.Canada (1982) relating to the obligation for foreign investors to purchase goods and services from Canadian suppliers or to export a certain percentage of their Canadian production. The panel of experts found Canada's practice of obliging certain investors to purchase goods of Canadian origin, or goods from Canadian sources, to be inconsistent with the GATT. However, with regard to export undertakings, it found that Canada was not acting inconsistently with the GATT by forcing investors to export a specified amount or proportion of their production. 20

USA v. Japan (1986) relating to quantitative restrictions on imports of agricultural products. The case resulted in Japan agreeing to lift certain quantitative restrictions. It also contributed to the move to replace all quantitative protection on agricultural products by customs tariffs in the Uruguay Round. 21

Canada v.European Union (1998) relating to asbestos. Canada challenged a1996 French decree banning the manufacture, sale and import of all forms of asbestos. The European Union defended the measure as necessary to protect human health from a known carcinogen. The ad hoc panel concluded that the French violation was justified under Article XX of the GATT. Canada appealed, but the Appellate Body reiterated that WTO rules permit France to choose whatever level of protection it considers appropriate. This was the first time in the history of the multilateral trade regime that a health regulation clearly restricting trade was upheld as a justifiable exception under Article XX. 22

Brazil v.European Union (2000) relating to measures affecting soluble coffee.After being gradually reduced, the preferential treatment accorded to Brazilian soluble coffee was eliminated on 1 January 1999. However, preferential treatment for products originating in the Andean and Central American Common Market was maintained, which adversely affected the importation of soluble[Page510:]

coffee from Brazil into the European Union. Brazil regarded this as inconsistent with the European Union's obligations under its Generalized System of Preferences and sought consultations with the European Union. 23

Peru v.European Union (2001) relating to fishery products, particularly the description of sardines. The European Commission had issued a regulation limiting the use of the term 'sardines' to the species sardina pilchardus commonly found in the waters of the European Atlantic coast, the Mediterranean and the Black Sea. By contrast, for purposes of consumer protection against deceptive practices, market transparency and fair competition, the use of the term 'sardines' was prohibited for marketing the species sardinox sagax, which displays similar organoleptic properties and is found along the SouthAmerican Pacific coast. Peru requested consultations with the European Union in March 2001. A panel was established in July 2001 and issued a report in May 2002. Following the European Union's appeal against the panel's report, the Appellate Body issued a report in September 2002, in which it basically sided with Peru, endorsing the position taken by the panel.

This was the first time the panel and the Appellate Body had expressed their views on the substance of the Agreement on Technical Barriers to Trade (TBT Agreement). The TBT Agreement obliges countries to accord treatment no less favourable than that accorded to like products of national origin (national treatment) and like products originating in any other countries (most favoured nation treatment). By thus establishing a right to market access, the TBT Agreement goes much further than the GATT, which simply calls for nondiscrimination. 24

Brazil v.USA (2002) relating to subsidies for upland cotton. A panel was set up in 2003 and issued its report in September 2004, which found against a variety of cotton sector support programmes. The USA has announced that it will appeal. 25

Argentina, Canada & USA v. EuropeanUnion (2003) relating to measures affecting the approval and marketing of biotechnology products. Argentina, Canada and the USA requested that a panel be set up to investigate the European Union's de facto moratorium on the approval of agricultural biotechnology products since October 1998. A panel was established in August 2003 to examine the European Union's approval procedures and restrictions relating to GMO products; it has announced that before deciding it will seek scientific advice. 26[Page511:]

USA v.Mexico (2004) relating to tax measures on soft drinks and other beverages. Mexico levies a 20 per cent tax on soft drinks and other beverages containing any sweetener other than cane sugar. This tax has severely restricted US exports to Mexico of beverages containing a cornbased sweetener. 27

2.4 ICC proposals for improvements to the WTO Dispute Settlement Understanding28

As the world economy changes, so the WTO dispute settlement scheme must evolve and adapt. To this end, ICC has made a number of proposals, including the following:

- Composition of panels: (i) the combination of ad hoc panellists with professional fulltime panellists and (ii) the inclusion of at least one panellist from a developing country.

- Transparency: a more effective exchange of information.

- Predictability: panel rulings and recommendations should not increase or diminish the rights and obligations of WTO members.

- Duration of proceedings: the aim should be to keep them as short as possible (proceedings currently last from three to six years).

- Compliance: opposition to any retroactive remedy should be applied directly to private parties (as in the Australian leather case).

More generally, it is necessary to address challenges associated with the proliferation of dispute settlement mechanisms worldwide, the risk of fragmentation, and the special needs of developing countries.

3. Private commercial dispute resolution

The proliferation and growing complexity of regulations-national, regional and global-and codes of conduct make the functioning of national courts increasingly difficult. Domestic proceedings are becoming increasingly inadequate for resolving international disputes. A truly global and universally accessible business environment requires, as a corollary, access to flexible, efficient and appropriate processes for resolving the disputes that from time to time arise even in the most amicable of commercial relationships. [Page512:]

Although many initiatives have been and are being taken to harmonize the regulation of global business and adapt regulations to the new opportunities opened up by ecommerce and trade liberalization, the fact remains that most of the laws that regulate trade and commerce are either local or regional. In many instances, international agreements are implemented through domestic laws, which may lead to procedural and substantive differences. National courts applying those laws may therefore come to different and maybe inconsistent results, which is unsatisfactory for international business. Moreover, national court proceedings are timeconsuming and expensive, which is a serious handicap to businesses operating in a fastmoving global environment. And those proceedings may be unsuited to the particularities of international business disputes, where there is often some merit to each side's case.

Fortunately, alternatives exist. Dispute resolution techniques and processes other than litigation are commonly grouped together under the label 'Alternative Dispute Resolution' (ADR). This catchall phrase covers a range of practical and flexible processes in which a neutral party is involved in resolving a dispute. Two of the best known and most commonly used are arbitration and mediation. Mediation is sometimes confused with conciliation. However, it could be said that a conciliator takes a more proactive, interventionist approach in suggesting a settlement than a mediator.29The fact that these processes have been described as 'alternative' should not be interpreted as meaning that they are marginal. On the contrary, their use is increasing and evolving, and there is a growing trend towards mediation, which, in our view, offers the greatest opportunities.

ICC has long been the leading institution for the resolution of international business disputes, notably through its International Court of Arbitration, founded in the early years of the twentieth century. Arbitration is a suitable alternative to litigation for the resolution of commercial disputes in the global economy. Unlike court judgments, arbitral awards are enforceable in over 130 jurisdictions, due to the combined effect of a range of international agreements, the most important of which is the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Under this Convention, national courts are required to give effect to arbitral awards, subject only to a limited number of narrow exceptions. Litigation via the courts, on the other hand, can (and often is) subject to multiple rights of appeal on procedural and substantive points and is therefore often incapable of delivering within a reasonable time frame the legal certainty that business requires. [Page513:]

For a large international corporation doing business in many jurisdictions, arbitration also has several other advantages. Knowledge of the proceedings and any ensuing awards is usually confined to the parties alone, whereas litigation is a very public, and potentially embarrassing, process and may thus give rise to a public relations battle alongside the trial. However, even in arbitration, confidentiality can never be fully guaranteed, for if an award is challenged in a national court, the case inevitably becomes public. 30

In arbitration, parties have the flexibility to fashion the proceedings in the most efficient way. For example, they may limit the number of witnesses and submissions so as to avoid the risk of lengthy processes of discovery, characteristic of common law proceedings, that can prolong the preliminary stages even before the trial begins.

Arbitration is also capable of creating a level playing field for all parties involved. This is achieved through the choice of a neutral arbitrator without any national or other connections to either party. As a result, neither party has the advantage of 'playing on its home ground', as would be the case if the dispute were referred to the courts in the country of one or other of the parties. This is an important consideration for large multinationals doing business in emerging markets that may not have a fully developed legal system capable of guaranteeing a fair hearing before independent and impartial judges. If multinationals are to contribute to sustainable growth by making longterm commitments in an uncertain environment, then they need the assurance of a credible, neutral forum for resolving disputes.

Global business is no longer the preserve of a few select multinationals. Technological innovations have helped to open up the world stage to many more players, including small and mediumsized businesses. They too may not be well served by having to resort to different courts in foreign countries to resolve disputes. They need a process that is faster, more flexible and yet capable of offering the necessary certainty.

Thanks to the commercial synergies resulting from globalization, businesses now interface with suppliers across the world for services that were once done in house. The cost and complexity of unravelling a global customer/supplier[Page514:]

relationship means that parties will be better served by a process that facilitates dialogue, cooperation and mutual understanding.31 This is why ADR, and mediation in particular, will become more important in the coming years.

Mediation shares many of the characteristics that make arbitration attractive. However, the fact that it puts the decisionmaking process in the parties' hands means that it offers a degree of flexibility that arbitration cannot match. Statistics show that mediation works: according to best estimates, around 80 per cent of cases submitted to mediation settle at that stage or within a reasonable period thereafter. 32

Mediation is emerging as a fastgrowing and efficient tool for resolving international commercial disputes. It has come to the fore chiefly in common law jurisdictions, such as the United Kingdom, where the cost and complexity of litigation had spiralled out of control to the point that for many small and mediumsized businesses litigation was no longer an option. While mediation could be considered to be more in keeping with the less interventionist approach of common law judges, its sibling, conciliation, has been more closely associated with civil law jurisdictions. However, mediation is becoming increasingly common in civil law countries, too.

Unlike arbitration, mediation does not result in a binding ruling that is enforceable. It is a voluntary process in which the mediator uses a range of problemsolving techniques to help the parties find a negotiated solution to their dispute. This has led to mediation being rather unfairly described as uncertain and to its users being equally unfairly described as weak. When used properly, mediation can, on the contrary, be a powerful tool. It is essentially a forwardlooking process and focuses on the preservation of relationships beyond the dispute. Adversarial proceedings, on the other hand, focus on the dispute alone and the outcome may kill a key commercial relationship in the process.

As in arbitration, the parties to a mediation are able to shape the conduct of the proceedings themselves and to choose matters such as the place of the mediation and the person to act as mediator. However, in addition, they have the opportunity to fashion a settlement in accordance with their wishes, which [Page515:]

allows them to devise remedies and solutions that a court or arbitral tribunal would not have the power to impose upon them. These remedies and solutions can then be confirmed in a written settlement agreement.

In a sense, mediation is not a legal process. The mediator does not need to be-and frequently is not-a lawyer. Nor is it necessary for lawyers to be present to assist the parties. However, insofar as legal issues are in dispute, the parties may benefit from the involvement of lawyers, so that each party has a proper understanding of the other's case. As a consensual process based on communication and understanding, mediation lends itself to dealing with cultural differences and interpersonal problems that may sometimes stand in the way of the real issues.

Large companies are increasingly recognizing that mediation is particularly suitable for intellectual property disputes, where it is not only effective but also makes financial sense given the relatively high costs of intellectual property litigation. 33Trade mark conflicts and technology disputes usually involve many different countries, which makes it necessary for parties choosing litigation to initiate multiple proceedings at local level. For those that go to the effort and expense of doing so, there is no guarantee that local courts will give identical results, as approaches continue to vary despite the many conventions and treaties that exist in this field. In such circumstances, the use of mediation to seek a negotiated solution to all the disputes, wherever they are located, has an immediate appeal.

Those who remain unconvinced by the merits of mediation and turn instead to litigation may be in for a surprise in some jurisdictions like the United Kingdom, where judges actively promote mediation as a way of efficiently settling cases and reducing their caseload. As a result of recent amendments to the UK Civil Procedure Rules, based on a comprehensive review by Lord Chief Justice Woolf, parties who resist a judge's recommendation to mediate risk having an adverse order on costs made against them, even if they win. In one recent decision the winning party had its costs award reduced by 50 per cent for refusing to mediate. 34[Page516:]

In a world of increasing interdependency between commercial entities trading across national boundaries, corporations would be well advised to take a proactive role in dispute resolution matters and give them due consideration when negotiating international contracts. Agreeing on such matters at the outset provides a clear road map in the event of a dispute and avoids the risk of forum shopping by parties in search of the most sympathetic jurisdiction connected with the dispute. Effective dispute resolution clauses will usually provide for a graduated approach beginning with direct negotiation between key managers of the entities in dispute, followed by mediation if facetoface negotiation is unsuccessful, and finally arbitration if mediation does not lead to a settlement. Bodies such as the International Chamber of Commerce, the World Intellectual Property Organization and the Centre for Effective Dispute Resolution can assist by providing model dispute resolution clauses and procedural rules for the conduct of ADR processes. In addition to specific dispute resolution provisions in contracts, some dispute resolution bodies have encouraged the use of pledges by their corporate members. By signing such a pledge, companies agree to try ADR techniques before embarking upon litigation. Nestlé USA, for example, has signed the CPR Corporate Policy Statement on Alternatives to Litigation. 35

Global business deserves and requires access to dispute resolution rules and processes that can adapt to a changing regulatory and commercial environment while offering sufficient certainty and credibility to inspire confidence amongst users. International organizations, including ICC and WIPO, are leading the way with innovative mediation solutions, and in this context the European Union's initiative of a Code of Conduct for Mediators is to be welcomed. The challenge now is for legal advisors- especially inhouse-to be more flexible and open to creative solutions to solve commercial disputes. This is already happening but probably not fast enough. If effective dispute resolution techniques can reduce litigation and other costs associated with a business conflict and preserve key relationships, it makes clear business sense to use them. Indeed, the earlier ADR processes are implemented in the conflict cycle, the less risk there is of the dispute escalating out of control. A 2003 survey by the American Arbitration Association suggested that companies with 'disputewise' business management practices had higher than average profitstoearning ratios than other companies.36 The approach a company has to conflict management could therefore become a corporate governance issue and conflict management skills perhaps could even become a criterion for assessing the performance of senior managers. [Page517:]

Nestlé offers a concrete illustration of a corporation that has adopted the approach outlined above. Convinced that solid commercial relationships are built on mutual trust, respect, tolerance and understanding, Nestlé favours consensual dispute resolution processes that preserve rather than dismantle relations with its many longterm suppliers and customers. There may be exceptions-as when a court decision is needed on some legal uncertainty affecting our business or where we believe there is not enough mutual trust and understanding to reach an agreement (e.g. a dispute with a counterfeiter whose conduct threatens the integrity and value of our brands and potentially undermines relationships with our consumers)-but as a general rule Nestlé prefers to resolve disputes through negotiation rather adversarial proceedings. We do not regard this as a sign of weakness but see it as consistent with the flexible and pragmatic approaches we take to our business and the conflicts that arise. Many of our conflicts have thus been resolved through negotiation without the assistance of external bodies. However, we also have practical experience of mediation in a number of jurisdictions, both civil and common law, and in intellectual property cases. Not all of the mediations have been successful, but we nonetheless continue to believe that the process offers more certainty, control and efficiency than alternatives such as litigation or arbitration.

4. Conclusion

The world is changing: economic relations are growing in number and complexity and becoming increasingly international. The resulting globalization has the potential of improving prosperity worldwide. To realize this potential, we need to adapt rules and institutions and provide the necessary social support for those who may lose out from the changes.

In this changing context, the WTO and other intergovernmental organizations will acquire greater prominence, helping to ensure future global economic progress. With China as a member and India and other countries playing a more active role, the WTO has taken on a new importance.

The development of economic relations inevitably brings with it the risk of conflict and the need for effective means of dispute resolution. ICC's position as an independent and international organization closely linked to industry, its strong trackrecord of dispute resolution in practice, and the influence it exerts on worldwide rulesetting in areas that matter for business make it ideally placed to respond to this need. [Page518:]

1
<www.iccwbo.org/home/shared_pages/geneva_business_declaration.asp>

2
H. Oberhänsli, 'Driving Liberalisation: Companies or the Consumer?' in P. Griffith & J. Thurston, eds., Free and Fair: Making the Progressive Case for Removing Trade Barriers (The Foreign Policy Centre, 2004) 174.

3
ICC, Standing up for the global economy (2004); see also <www.humanglobalization.org>.

4
<www.iccwbo.org/home/news_archives/2004/Marrakesh%20Business%20Declaration.pdf>

5
S. Wroblewski, History of GATT and WTO (2002).

6
WTO, The GATT years: from Havana to Marrakech (2004), <www.wto.org/english/thewto_e/tife/fact4_e.htm>.

7
The Elliott School of International Affairs, The George Washington University, A ThreeYear Review of the WTO, Chapter 2, 'The Dispute Resolution Mechanism' (1998), <internationalecon.com/wto/ ch2.html >.

8
P. Holmes, J. Rollo & A R. Young, 'Emerging Trends in WTO Dispute Settlement: back to the GATT?', Policy Research Working Paper No. 3133 (World Bank, September 2003) at 3.

9
J. M. Weekes, 'The External Dynamics of the Dispute Settlement Understanding: An Initial Analysis of its Impact on Trade Relations and Trade Negotiations' in J. Lacarte & J. Granados, eds., InterGovernmental Trade Dispute Settlement: Multilateral and Regional Approaches (2004) at 56.

10
See P. Holmes, J. Rollo & A R. Young, supra note 8 at 7.

11
See supra note 8.

12
104 out of a total of 313; see the 2004 list of WTO cases at <http://www.wto.org/english/tratop_e/dispu_e/dispu_status_e.htm>.

13
'ICC's expectations regarding a WTO investment agreement', ICC policy statement, Commission on Trade and Investment Policy, 7 March 2003, <www.iccwbo.org/home/statements_rules/statements/ 2003/wto_investment_agreement.asp>.

14
G. Garrett & J. McCall Smith, The Politics of WTO Dispute Settlement (2002) at 2.

15
However, in October 2004, the BBC reported Robert Zoellick, the US trade representative, as saying that it is possible the US government would take the European Union to the WTO in an effort to stop Member States 'subsidizing' Airbus.

16
See G. Garrett & J. McCall Smith, supra note 14 at 13-17.

17
J. Weekes, supra note 9 at 10.

18
ERT Foreign Economic Relations Working Group, October 2004.

19
Although no GATT panel has ever found that a situation existed in which a GATT contracting party obtained 'more than an equitable share of world trade', the problems raised have been taken into account in negotiations in the Uruguay Round. See J.M. Weekes, supra note 9 at 11.

20
Ibid. at 5.

21
Ibid. at 12.

22
See G. Garrett & J. McCall Smith, supra 14 at 24.

23
WTO commentary, 19 October 2002, <http://docsonline.wto.org>.

24
WTO News No. 8, Swiss Institute for International Economics and Applied Economic Research, April 2003.

25
ERT Foreign Economic Relations Working Group, October 2004.

26
ERT Foreign Economic Relations Working Group, October 2004.

27
WTO commentary, 18 February 2004¸ <http://docsonline.wto.org>.

28
See supra note 13.

29
J. Singer, The EU Mediation Atlas: Practice and Regulation (LexisNexis, 2004) at 139 and generally for a comprehensive summary of mediation practice and regulation across the EU.

30
There is much case law in this area but for a recent consideration of the principles see Department of Economic Policy and Development of the City of Moscow et al. v. Bankers Trust Co et al., [2004] All E.R. (D) 476.

31
For a comprehensive discussion of the challenges of modern conflict management see J. Liew, The Challenge of Conflict Management (Kluwer Law International, 1996) especially at 4.

32
E. Carroll & K. Mackie, International Mediation, The Art of Business Diplomacy (Kluwer Law International, 1999) at 18 and 106.

33
R. Nelson & M. Bailey, 'Intellectual Property in the 21st Century - The ADR Option' (Paper presented to the Canadian Bar Association's Symposium on Intellectual Property and Alternate Dispute Resolution, 2002), <www.gowlings.com/resources/PublicationPDFs/IP_ADR.pdf>.

34
Yorkshire Bank plc and Clydesdale Bank Asset Finance Ltd v. RDM Asset Finance and J.B Coach Sales, Langan J, High Court, 30 June 2004, <www.cedr.co.uk/library/edr_law/Yorkshire_bank_ v_ Clydesdale_Bank_Asset_Finance.pdf>.

35
www.cpadr.org

36
'DisputeWise Business Management, Improving Economic and Non Economic Outcomes', <www.adr.org>.