Te Whare Wānanga | University of Canterbury began researching Small and Medium Enterprise (SME) access to commercial law over 10 years ago, after identifying a worrying gap in both legal research and practice.
Her primary concern is that many SMEs don’t have proper written contracts with overseas organisations they trade with, with potentially disastrous consequences if there is a dispute.
“We as a country talk a lot about entrepreneurship and Free Trade Agreements, but we don’t really talk about how to support SMEs in dispute resolution,” Professor Butler says. “This becomes a human rights issue, since SMEs struggle to have access to justice.”
Barriers to engaging in formal commercial legal process include cost, lack of knowledge, access to expertise and a paucity of awareness and research.
Kiwi SMEs may not realise the necessity of a contract, as Professor Butler previously explored in a paper with Eldrede T. Kahiya for the tellingly titled: “Forget it, let’s go with a handshake”: contracting practices of exporting small to medium size enterprises (SMEs).
This was the case with Nelson Honey, which provides a good example of the difficulty of resolving a dispute when there is no contract, Professor Butler says.
“In 2015, Nelson Honey, which is a relatively large honey producer, sent over $200,000 worth of manuka honey to China, via a Singaporean distributor.
“When the product arrived in Shanghai, the Singaporean distributor rejected it and refused to pay. Nelson Honey stood their ground on the quality of their product and requested the purchase price. Nelson Honey then sued in the Nelson High Court for purchase price payment, and the Singaporean distributor counter-sued in the Singaporean High Court.
“There was no written contract document. Rather they had a couple of phone calls, a couple of Skype meetings, a completed order form, and couple of emails back and forth.
“Both courts decided they were responsible for that dispute, which is ludicrous, because it could lead to potentially different resolutions in two different countries. Fortunately, given that there are no judgments in either court on the merits of the dispute, they must have settled the dispute, otherwise the case may have been in court for the next 10 to 20 years.”
The case shows that the stakes are potentially high for SMEs. “A case like that could cost millions and destroy a business. From the 40 SMEs we interviewed in New Zealand only about five were using single written contract documents – and they all had high value products.”
Her advice to Kiwi SMEs is to “take the time and spend the money on good legal advice to develop a master contract and get a good explanation and tools for when and how to change the master contract”.
Professor Butler’s international research projects demonstrate that New Zealand is similar to Singapore, Spain and the United Kingdon in being more trusting in conducting business internationally, while higher awareness in the United States could be attributed to companies having to be familiar with the different contract laws across different states.
Professor Butler, who is Amo Matua | Executive Dean of Law at UC, contributed a chapter on international dispute resolution solutions for SMEs to the International Council for Commercial Arbitration (ICCA) conference proceedings publication, based on the ICCA conference in 2024 in Hong Kong. She is also general rapporteur and general editor for the International Academy of Comparative Law: Access to Commercial Justice project, coordinating 18 country rapporteurs writing about access to commercial justice in their respective countries, which include Japan, Ukraine, Singapore, Austria, United States and Canada. She also recently contributed a chapter on public funding of commercial disputes to the Max Planck Institute Luxembourg’s global project on “Comparative Procedural Law and Justice”.
