Many years ago, a client in Spain sent me a U.S. Government list of what the government called “Essential Advice for Doing Business Overseas.” That article no longer exists, but I came across the email where the client and I discussed the list and I am reprising it below, along with some of my own comments. The suggestions are basic, but important and our international lawyers far too often see them ignored.
1. Diverse Markets Require Careful Research. Spain is not the United States and the United States is not Canada and Canada is not Mexico and Mexico is not Colombia and none of these countries are Thailand2021 or Vietnam or China. Every country (and even most regions within every country) are a diverse market in terms of their topographies, climates, and cultures, and each therefore has its own consumer preferences and business needs.
2. Speak the Same Language. Companies that are serious about doing business in a foreign should be prepared to initiate contact in the language of that foreign country and to conduct business in that language as well. I am convinced that at least 25% of all cross-border disputes stem from miscommunications arising from language differences.
3. Find the Right Partner. It is better to have a bad contract with a good partner than a great contract with a crook. Try to be certain that partner is able and willing to do all it says it will do in the contract. Ensure that it is in your partner’s best interest to perform as agreed. Is it in its interest to assist you to protect your brand or other intellectual property rights? Be careful that your partner is allowed by law to fulfill the promises in the contract. Check the reliability of information on your partner or customer by using independent sources. See Foreign Company Due Diligence Reports.
4. Have Clear Contract Terms. Do not enter into an agreement without sound legal advice. Have your own legal counsel. Your contracts should specify exact terms of payment and performance standards. Set time lines. Pay careful attention to details, such as initialing pages of contracts and signing properly. Do not rely on legal advice from your overseas partner. Beware of claims that the foreign country’s laws requires specific covenants in your contract; verify this with your own counsel. Do not assume that local or provincial officials actually have the authority to give you permits and permissions; verify their claims of authority through independent sources. It generally (but not always) makes sense to have your contracts in both the language of the foreign country and in English or in your own country’s language, but with only one language clearly designated as the official language.
5. Ensure Project Viability. Do not rely on promises of subsidies, special considerations, or non-market sources of income to create a profit. If subsidies are offered, they should be used to augment your profits, not create them. Make certain your partner has the authority to offer subsidies and verify from independent sources that the subsidies will actually be paid.
6. Avoid Prohibited Agreements. Be familiar with the overarching rules governing agreements at all levels of jurisdiction. Be incredibly wary of entering into a contract based on promises from local government officials that government rules will not be enforced. It is important that you know both the laws of the country in which you are doing business and the laws of your home country.
7. Practice Problem Prevention. Try to anticipate possible problem areas and have an escape strategy for each stage of the project, even if you do not plan to use it. As an example of what I mean here, check out How to Prepare for the Worst in China and Why You Should.
8. Do a Thorough Risk Analysis. Use more than news media sources or your immediate partners to evaluate the market. Us independent sources that know the country or the industry or even your partner. If a project is too risky, do not do it, no matter how sexy it first seemed.
9. Protect Your Intellectual Property. If you have a successful product or brand name you need to protect those with your contracts and with proper IP registrations. See How To Protect Your IP Internationally: The Extreme Basics.
10. Getting Paid. Pay careful attention to how you get paid, when you get paid, and in what currency. Inquiring about a company’s payment process should be an important part of screening for partners. Use letters of credit and other financial instruments when appropriate to protect yourself. If you do not want to use a letter of credit, require your partner to make advance payment.
Anyone have anything to add?