Commercial disputes are not only about winning in court or arbitration, but also about the successful recovery of the debts or damages awarded. We are often asked if it makes any sense at all to commence proceedings: the amount of the claim may be small, the debtor may vanish and dissipate its assets, or the proceedings may seem to be time-consuming and expensive.
Is it worth the effort if the case does not look good at first sight? Our recent arbitration case shows that sometimes it certainly is.
Our Client was providing freight-forwarding services related to container shipments of feldspar from Lithuania to Ukraine. As frequently happens, the Customer paid for only part of the services and then just disappeared. The Client contacted Fortior to clarify its chances to get things moving.
We had several factors to consider:
- the Contract provided for resolution of the dispute at ICAC at the Ukrainian CCI;
- the Contract was governed by the law of Lithuania;
- the dispute should have been decided by the Sole Arbitrator appointed by the Claimant.
The debtor’s only property was its bank accounts, and it was unclear whether the company was still operative. However, upon preliminary analysis, we recommended to our Client that it was worth pursuing the arbitration. We were considering the following factors:
- ICAC arbitration is relatively cheap (US$600 registration fee and US$1600 + 6% for claims between US$10,001 - US$50,000. There is also a 20% discount for Sole Arbitrator cases);
- ICAC Rules provide for the recovery of legal costs from the unsuccessful party;
- the dispute was quite straightforward and of low complexity, and there was low risk of a counterclaim.
Just two weeks after service of our claim submission, an affiliated company of the debtor contacted our Client and offered to settle the dispute amicably. We prepared an appropriate Settlement Agreement, and our Client recovered the debt, including legal expenses, in full.
Prior to taking any action, one needs to soberly assess the risks and the real chances of success also as a businessman, but not as a lawyer only. An arbitral award obtained in your favor is not a panacea for successful debt recovery, but there are certain separate mechanisms to use that will increase your chances: due diligence of the counter-parties, freezing and disclosure orders (instruments allowing to disclose and freeze debtor’s assets worldwide) etc.
Danil Hristich, Senior Associate, and Sergey Platonov, Associate represented the successful Claimant in this case. For more information, please get in touch with firstname.lastname@example.org, email@example.com or your usual contact at Fortior.