Should the Dispute Go to Arbitration or Court?

Question from Ted, Should the Dispute Go to Arbitration or Court?

Answer from AI:

When a dispute arises between a foreign investor and a local company, the decision whether to pursue arbitration or litigation in court can significantly impact the resolution process. In the case of MLSP and Oasis Pharmaceutical Company, several factors influence the choice between these two avenues. Here, we will explore arguments for both arbitration and court litigation, referencing general legal principles and hypothetical scenarios similar to the one described.

Arguments for Arbitration

• Contractual Agreement: The shareholders’ agreement and share subscription agreement specify that disputes should be resolved through arbitration according to the Singapore arbitration rules. This contractual stipulation is generally binding and enforceable, suggesting that arbitration is not only recommended but required.
• Expertise: Arbitration panels often consist of experts in the field relevant to the dispute, which can be beneficial in complex investment and corporate governance issues.
• Confidentiality: Unlike court proceedings, which are typically public, arbitration can be conducted in a confidential manner, helping to protect sensitive business information and reputational interests.
• Efficiency: Arbitration can be faster than court litigation, which is often bogged down by procedural requirements and backlogs.

Arguments for Court Litigation

• Enforcement: Court judgments are generally easier to enforce domestically than arbitration awards, especially when assets or operations are primarily located within the country where the court is situated.
• Impartiality Concerns: Given that two of the three directors might have conflicts of interest, MLSP may argue that an arbitration process, particularly if influenced by these directors, might not be impartial.
• Legal Precedents and Interpretation: Courts are better suited to handle disputes involving interpretation of local laws, such as the Companies Act under which Oasis operates. This might be crucial if the dispute involves statutory interpretation or application.

Relevant Legal Considerations

Both arbitration and court litigation have their places in international business disputes. The choice often depends on the specific terms of the contract and the legal frameworks involved. For instance, the Singapore International Arbitration Act provides a framework for the enforcement of arbitration agreements and awards, which might influence the decision to choose arbitration if the contract stipulates Singapore as the seat of arbitration.

However, local laws, such as the Nepalese Companies Act 2063, might also influence the proceedings, especially in terms of procedural rights and the enforcement of corporate governance standards. Courts in the jurisdiction where the company operates typically have the authority to interpret and enforce local laws directly affecting the company’s operations.

Conclusion

Deciding whether to pursue arbitration or litigation in court involves careful consideration of the legal, procedural, and strategic aspects of the case. MLSP and Oasis should consider not only the contractual obligations but also the practical implications of each option. Consulting with legal professionals who have expertise in international business disputes and local corporate law will be crucial in making an informed decision.

For personalized advice, it is recommended to consult with a legal expert who can provide guidance based on the specifics of the case and the relevant legal frameworks.