Foreign Legal Matters: Think Different

Table of Contents

I was deleting some old files this weekend and I came across the outline for a talk I used to give to mostly U.S. and foreign Bar Associations, entitled, What Lawyers Should Know about Representing Their Clients in Foreign Legal Matters. Though I have not given this talk for nearly a decade, all of it remains true and so I am publishing the core of it below. In re-looking at the title I used for this speech, and with the benefit of many years of hindsight, I wish I had subtitled it: “the biggest mistakes foreign lawyers make when representing clients with overseas businesses”. Oh well.

Here’s the outline I used, with a few additions/clarifications in italics and some links to help those seeking additional information. This is very much a bare-bones outline, written for my eyes only, but it does highlight some of the most common and dangerous mistakes made by lawyers — many of whom still seem to think that the laws in foreign countries “just can’t be that different.” Trust me, they can be and they often are.

My goal with this talk was never to explain the laws in various countries so that they could handle all of their clients’ foreign legal matters. More than anything, my goal was to get the lawyers in the audience to (with apologies to Apple and to grammarians everywhere) think different. I wanted to get the lawyers in the room (and I mean this literally, these talks being pre-COVID) uncomfortable about representing companies on foreign legal matters. I wanted their discomfort to get them not to lazily assume things.

1. Company Formation

Spend after formation. Companies too often spend money too soon for their expenditures to apply to minimum capital requirement for new entities. When I would give this speech in the United States, I would use this to explain the concept of minimum capital. When I would give this speech in countries that have minimum capital requirements, I would explain how things work so differently in countries without this, especially since these talks were usually slanted towards U.S. law issues.
Is it legal? On a number of occasions, my firm has been called in to register a legal entity overseas for a US company that has already spent substantial sums scoping out the market, without knowing that what they propose to do cannot be done by foreigners.

2. International Contracts

Who’s your counter-party? Spend a little, save a lot. Be diligent with your Due Diligence.
Arbitration is the only solution, except when it’s not. I just yesterday wrote here on how complicated it is to choose between arbitration and litigation in China contracts. Nearly all that I wrote about China in that post holds true in varying degrees for most countries.
Can you say litigation carve out?
Arbitration clauses ain’t easy.
How to get your Christmas lights before Christmas. The courts in many countries are of the view that if something is not in the contract, it essentially does not exist.
Contract language/Governing Law/Arbitration language. Do not try this at home.