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Disputes between companies are resolved on a ladder: negotiation, mediation and, if there is no agreement, arbitration or a lawsuit. A clear clause in the contract decides how much time and money each step will cost.
Goal: Put in order the ladder for resolving a commercial dispute and decide whether arbitration is worth it by comparing its cost with the amount in dispute.
Most disputes start from ambiguous contracts: the goods arrived different, the payment was late or the deadline was missed. It is best to prevent them. Describe the goods precisely, agree on an inspection and set a deadline for claims. Keep all the evidence: photos, inspection reports, emails and transport documents. If the cargo was damaged during the trip, the claim usually goes to the carrier or the insurer; that is covered in the International cargo transport and insurance course. This topic deals with disputes between companies. Disputes between States over trade barriers are covered in topic 1-3.
When the dispute appears, there is a ladder. First, direct negotiation: a written claim, with proof and a proposed solution, such as a discount, a replacement or a refund. Second, mediation or conciliation, where a neutral third party helps the parties reach an agreement, but does not impose a decision. Third, arbitration or a lawsuit, where a third party decides. Each rung costs more time and money than the previous one.
Arbitration is a private procedure. The parties agree, in a written clause of the contract, that one or three arbitrators will decide their disputes, and that the decision, called an award, will be final and binding. They choose the language, the seat (the city of the arbitration) and the rules of a center, such as the ICC's or the Lima Chamber of Commerce's. In Peru, arbitration is governed by the Arbitration Law (Legislative Decree 1071). Its great advantage is that the award can be enforced in many countries, thanks to the 1958 New York Convention.
A lawsuit before a country's courts has a limit. The judgment of a Peruvian judge is not enforced on its own in another country: you have to request its recognition there, a procedure called exequatur, with requirements that change depending on the country and the treaties in force. That is why, in international contracts, many companies prefer arbitration. Courts are still useful when the customer has assets in the same country where the case is litigated.
A good dispute resolution clause states the governing law of the contract, the method (for example, negotiation for 30 days and then arbitration), the rules or center, the seat, the language and the number of arbitrators. An incomplete or contradictory clause creates a dispute over how to resolve the dispute. Ask a lawyer to review it: it is short and it is the one that weighs most when everything goes wrong. Before litigating, compare the cost of the process with the amount in dispute.
| Mechanism | Who decides | Cost and duration | What happens outside the country |
|---|---|---|---|
| Direct negotiation | The parties | Low and fast | It is an agreement; if it is breached, another route must be used |
| Mediation or conciliation | The parties, with the help of a neutral third party | Low to medium | It is an agreement; if it is breached, another route must be used |
| Arbitration | Arbitrators chosen by the parties | Medium to high, depending on complexity | The award can be enforced in the Contracting States of the New York Convention |
| Lawsuit before courts | A judge of the competent country | High, depending on the instances | The judgment must be recognized in the other country (exequatur) |
Result: The US$ 9,000 claim was resolved by negotiation: the evidence placed the damage in transit, the buyer claimed from the insurance and the seller gave a US$ 1,800 credit. Arbitration would have cost more than what was claimed.
2025
According to the International Chamber of Commerce (ICC) dispute resolution statistics for 2025, the institution received 894 new requests: 881 under its Arbitration Rules and 13 under its rules as an appointing authority. There were parties from 147 countries or territories. The report records 25 parties from Peru, 12 as claimants and 13 as respondents. Contracts for goods, such as distribution, franchise and sales, make up 20.6% of the cases.
International arbitration is a commonly used route, also for Peruvian companies: define its clause from the contract, not when there is already a dispute.
07/07/1988
According to the UNCITRAL registry, Peru acceded on 07/07/1988 to the 1958 New York Convention on the recognition and enforcement of foreign arbitral awards, and it entered into force for the country on 05/10/1988. The Convention has 172 Contracting States, among them China (in force since 22/04/1987), Brazil (since 05/09/2002) and Chile (since 03/12/1975). An award made in a Contracting State can be recognized and enforced in another, except for the limited grounds for refusal that the Convention itself provides.
If your customer is in a Contracting State of the Convention, arbitration gives you an international route of enforcement that a local lawsuit does not have.
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