Regarding choice of law clauses, Delaware and New York are commonly chosen due to their well-developed business laws, which provide clear guidance and protections for commercial transactions. Companies also frequently choose the applicable law of the state where their business operations are located. On another note, forum selection clauses dictate where disputes will be litigated. Selecting a favorable forum—one with predictable legal precedents, experienced judges, business- friendly statutes, and/or one in a convenient location for the parties involved, with procedural advantages such as limited discovery requirements or streamlined litigation timelines— can impact case outcomes, costs, and procedural rules, helping parties avoid litigation in unpredictable or unfavorable jurisdictions. U.S. courts generally uphold choice of forum and governing law clauses unless they are found to be unfair, unreasonable, or contrary to public policy. 8.4 Litigation Costs and Timelines Litigation in the U.S. can be time-consuming and costly, making it a significant consideration for businesses engaged in commercial disputes. Unlike in some other jurisdictions, U.S. courts do not follow a “loser pays” model, meaning that each party is typically responsible for its own legal costs unless specified otherwise by contract or statute. Business disputes can take months to several years to resolve, particularly if appeals are involved. Discovery procedures, including document production and depositions, can be lengthy and expensive, often requiring substantial financial and human resources. Given the high costs and uncertainty of litigation, businesses may benefit from including alternative dispute resolution (ADR) clauses in contracts, such as arbitration or mediation, to control expenses and expedite dispute resolution. These options are explored in the following section. 8.5 Alternative Dispute Resolution (ADR): Arbitration and Mediation For international businesses, resolving disputes through litigation can be costly, time- consuming, and uncertain. Alternative dispute resolution (ADR) methods, such as arbitration and mediation, provide a way to settle disputes more efficiently. The choice between arbitration and mediation depends on factors such as enforceability, costs, and the nature of the dispute. The key difference between arbitration and mediation is that arbitration results in a binding decision, while mediation is a non-binding negotiation process. Businesses should carefully review contract provisions to ensure that their dispute resolution mechanisms align with their strategic interests and jurisdictional requirements.
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