Before determining which course is most attractive to the American company, the company must seek to determine why these claims are being put forth by the Austrian partner. If the cause is truly a misunderstanding of the contractual terms, then mediation may well solve the problem. This costs less money than litigation, and also does not sully the name of the American company as being eager to sue Austrian partners. If the American company intends to continue to do business in Austria, this is a key consideration.
At this point, 35 companies have brought claims of approximately $20 billion. The first company to prevail won approximately 50 percent of what it sought. If that trend holds for other companies, the country is looking at a liability that is nearly the equivalent of its entire discretionary spending in 2004. Clearly, the country is ill-prepared to pay such settlements.
If, on the other hand, the American company suspects that more nefarious purposes are at work in the Austrian partner's claim, then litigation may indeed be the route the company chooses. Litigation affords a more public approach than mediation, and provides other Austrian companies with the opportunity to witness the American company clear its good name. Long-term, this can work to the benefit of the American company as it continues to operate in Austria.
Any time the government of a nation is involved, there are political overtones for the nation where the dispute is occurring as well as the nation whose companies are affected. This is the case in Argentina. President Kirchner is an elected official who must be mindful of the needs of his electorate. This is a country that suffered a severe currency crisis only a few years ago, and the populace is not willing to undergo additional economic hardships. If there are power outages, for example, because of the course of action that Kirchner chooses, his own chances of re-election could be significantly reduced.
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