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What laws govern arbitration in the U.S.? In Russia?

Monarch Associates entered into a joint venture with Vladir Unlimited. Before signing this
agreement did both parties really understand what a joint venture was going to entail. According
to Jane Mallor a joint venture is a form of business organization identical to a partnership,
except that it is engaged in a single project, not carrying on a business (Mallor, 2013). When
individuals, partnerships, or corporations make a private agreement to finance, produce, and sell
goods, securities, or commodities for a limited purpose and/or a limited time, they have formed a
joint venture. Joint ventures are a popular way for developing nations to attract foreign capital.
(2008, Kubasek). The benefits and risks associated with a joint venture can be both beneficial
and/or destructive. Some benefits can be as follows:
1) access to new markets and distribution networks
2) increased capacity, sharing the risks with a partner
3) access to greater resources and technology
Some risks associated with joint ventures are:
1) The objectives of the venture are not 100 per cent clear and communicated to all those
involved
2) The partners have different objectives for the venture
3) Different cultures and management styles resulting in poor integration and cooperation of the
parties involved.
These are just a few of the benefits and risks for those who are interested in joint ventures.

In your opinion, in which country should the dispute be handled?

In the joint venture agreement Vladir Unlimited had an arbitration clause set into place which
gave them the choice to have all disputes both legal and non-legal heard in Russia, by members
of the Russian Arbitration Institute.
In the United States, arbitration agreements made by or between those involving
international parties or subject matter are subject to three sources of national law. The first being
the Arbitration Act, which includes the New York Convention. Secondly, the United States is a
party to the New York Convention, which governs agreements in contracts involving interstate
and foreign commerce and maritime transactions as well. Lastly, the arbitration agreement is
subject to all applicable state law. Every state, the District of Columbia and Puerto Rico, have
their own statutes concerning arbitration. These intrastate statutes govern all interstate
arbitration to the exclusion of the Arbitration Act. Moreover, the Arbitration Act prevails if there
is substantive conflict between the Arbitration Act and intrastate statue in an interstate or foreign
case. (1989, Mills).
In Russia, the framework for arbitration includes the following:
1)
2)
3)
4)

The New York Convention on the Enforcement an Recognition of Foreign Arbitral Awards 1958,
European Convention on International Commercial Arbitration 1961,
Law on International Commercial Arbitration 1993,
Arbitrazh Procedure Code 2002.
Russias Law on International Commercial Arbitration of 1993 is based on the UNCITRAL
Model Law on international commercial arbitration and applies to arbitration with respect to the
international commercial disputes that take place in the Russian Federation. This law governs
arbitrations that arise out of foreign trade or economic contracts between parties, at least one of

which has its place of business abroad, or is an international organization or a company with
foreign investments in Russia. (2010 Russian European Chamber of Commerce).

What are the advantages and disadvantages for Monarch Associates under the arbitration
arrangement?

Advatages and disadvantages for Monarch Associates under the arbitration agreement might
be something like the following: Advantages could be: less expensive than going to court or
taking it to trail, more discreet than court proceedings, less confrontational. Some disadvantages
could be: the lack of a jury might be intimidating when going to arbitration because they may see
it as overwhelming that one person is making the decisions and not a group of people. And
another disadvantage would not having enough time for discovery that is the allotted time each
company has to request information from each other before going to court.
Even though Vladir Unlimited created the contract for the joint venture they should have
conferred with Monarch Associates as to how they would handle both legal and non-legal
disputes between the two companies. If it were me I would request that the arbitrations be
handled by a neutral country like Sweden, so there was no favoritism shown to the either
company if the arbitration was to be held in the United States or Russia. This would give both
the companies involved an equal and fair outcome to the final decision rendered in the end.

If you were Monarch Associates in-house counsel, what advice would you give them on
negotiating future joint ventures with Russian businesses?

As in-house counsel for Monarch Associates, I would advise them that they need to have all
contracts for joint ventures read by office personnel, and to make sure every issue with the
written agreement is fully understood by both parties and is in complete agreement by both

parties before anything is signed and if no agreement can be made, it is definitely not in their
best interest to do business with that specific company. They should also look into different
prospects that might be great business partners. Dont always go with the first choice. I would
most definitely make sure to look over each and every document for loopholes and clauses that
may allow for patent and copyright infringements. Would make that none of Monarchs trade
secrets were vulnerable by any means when contracting joint ventures with other Russian
companies in the future.

What other considerations should Monarch Associates keep in mind in the formation of
any future contracts with foreign companies?

When deciding to do business with other foreign countries they may want to read any and all
contracts that are made and make sure they agree with what is contained in those contracts. If
they dont agree then they need to communicate their wishes to those that are making the
contract and state their intentions until they can agree on everything in the contract if either side
cannot agree on the contents of the contract then they may want to look elsewhere to do business.

REFERENCES
Joint Ventures and Partnering

Retrieved from: http://www.infoentrepreneurs.org/en/guides/joint-ventures-and-partnering/


Kubasek; Brennan; Browne, N. (2008). Legal Environment of Business
[Vital Source bookshelf version]. Retrieved from:
http://digitalbookshelf.argosy.edu/books/0558228925/id/ch16
Mallor, Jane, A. Barnes, L. Bowers, Arlen W. Langvardt. Business Law, 15th Edition. McGrawHill Learning Solutions, 01/2012. VitalBook file
Mills III, W. P. (1989). State International Arbitration Statutes and the US Arbitration Act:
Unifying the Availability of Interim Relief. Fordham International Law Journal, 13(4), 604.
Russian European Chamber of Commerce (2010)
Retrieved from: http://www.ruscham.com/en/rossinfo/db/9.html

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