None would like to encounter disputes while doing business with other companies in other countries. The disputes faced by the company weaken the business relations and are hard to sort out some times. It happens because the counterparty doesn’t will to resolve the matter with peace. There are always scenarios where both the importers and exporters are disagreeing.  These disputes are unavoidable, moreover, time consuming and costly. One has to accept the fact that they are a reality of doing business. Even if the partners sign a proper trading contract or agreement, there can still be consequences against their will. Disputes can either end up by the importer delaying or decreasing the payment or the exporter might violate the delivery terms and conditions. Two main types of disputes that can occur between the parties engaged in international trade finance:

Financial dispute: It arises when the parties do not agree on the outstanding amount among them.

Contractual disputes: It arises when the parties do not obey the contractual agreements, they signed.

The four common causes of international trade finance disputes are:

  1. Payment Terms

In accordance with payment terms normal disputes are as follows:

  1. Quality of the products delivered, doesn’t match the standards promised.
  2. The delay in delivery duration.
  3. Modifications without consent of engaged parties
  1. Letter of Guarantee

At the time of contract, parties might require letters of guarantee and letters of credit as proof to secure them against any contractual term. However, the dispute arises when the seller is doing right but the buyer may draw a letter of guarantee in order to gain extra funds for liquidity purposes.

  1. Foreign Exchange Rates

Whenever an international business is done, the counterparties are not using their home currency for the investment.  The foreign currency is chosen, hence, the buyers and sellers face many risks related to foreign exchange. The market is always unexpected. The margin of profit can decrease with a minor decrease in percent’s. Resulting in the buyer side to pay comparatively more.

  1. Documentation Error

All of the important documents while trading for instance; letter of credit, letter of guarantee and forward contracts are or can be subject to errors. A Letter of credit is issued by the importers bank for payment. It can simply mean to issue the rectification that the exporter should receive the money after the delivery.


 Solution suggestions:

  1. Drafting proper contracts to avoid disputes

It is quite impossible to foresee all the possible disputes that may occur. To avoid them, proactive measures are essential. It is wise to have a clear and definite plan for the resolution of disputes. It reduces the time and money involvement.


  1. Arbitration

A third rather neutral party enters to resolve the dispute. The benefit is the fast and cheap facility of the arbitrator than litigation.

  1. Conciliation

Litigation must be avoided; therefore, a conciliator listens to the concerns of both parties. In order to determine the dispute, their needs and the way out.

  1. Mediation

The main purpose of the mediator is more like a facilitator. He is interested in bringing the parties to a realistic point which further becomes an acceptable agreement.


It is very common to encounter disputes while doing any type of small or big business. Whereas, the trade between two countries become an issue when the importer and exporter cheat by any aspect of the contract. Chinese companies trust the new markets emerging in Iraq. Even after the corrupted scenario of Korek and the Barzanies, Iraq is seeking the opportunity to make Chinese Companies invest in the country. The risk of disputes occurring might be high but due to the fear of disputes companies do not and cannot leave doing businesses. It is a part of business and will probably be there always.