May 10, 2012 Articles

Young Lawyers: Is the Arbitration Domestic or International in Scope?

By P. Jean Baker

Five years ago, the global marketplace was not accessible to medium- and small-sized businesses. Today, with the arrival of the Internet and growing acceptance of e-commerce, global markets are open to almost everyone. Attorneys need to recognize and understand how international arbitration can come into play in what may seem the most basic of domestic business disputes.

Consider the Following Hypothetical
Two small businesses, Business A and Business B, both headquartered in the state of Bliss, execute a contract via the Internet for Business B to deliver at a fixed price by a specified date ceramic pottery to be obtained from Mexico for resale by Business A to third-party retail outlets in the United States. The arbitration clause in the contract specifies that all disputes must be submitted to the American Arbitration Association (AAA) for binding arbitration in the state of Bliss. The clause does not reference use of a specific set of the AAA's rules. Instead of shipping the pottery to Business A, Business B enters into an agreement with a Mexican company to ship the pottery directly to the U.S. retail outlets. Business A wants you to immediately file a demand for arbitration with the AAA, alleging breach of contract and tortuous interference. Business A is seeking punitive damages.

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