If your business is starting an international partnership, don’t rush into this. You must make sure any and all legal contracts account for each party’s own national laws. In this article, we’ll show you how due diligence helps you get ahead of a legal challenge.
The Need for a Clear Contract
International business deals are sometimes a minefield. This makes your legal agreement even more important than ever. Your contract must be in plain language while maintaining a high level of detail. It has to cover your situation in enough depth, meaning it should account for a range of possibilities.
An online template can help you with this. These pre-made documents come with every field or clause you’re likely to need. This is paramount, even before you broach the topic of international law. Clear, plain-language contracts go a long way toward shutting down legal challenges that might arise.
Determining Choice of Law
Another preemptive measure you may take is deciding which jurisdiction your contract operates within. Always negotiate the laws you’ll be using well in advance of signing the agreement. You’ll likely want to use your home country here.
If you enter a conflict with the other party, this decides which country’s courts will hear it. In fact, depending on the situation, using another country’s jurisdiction might actually be more helpful.
Without accounting for the choice of law, a US business that sues a foreign partner could struggle to get restitution. Even if they win in an American court, their partner’s country might not recognize it. This would then lead to a second lengthy case in the other country’s courts.
Your Partner’s Language and Culture
Before signing a contract, you and your partner(s) should agree on a lingua franca. International businesses generally use English for these dealings. It’s also possible to provide a translation of your contract in the partner’s first language. But this can’t be anything less than 100% accurate.
Regardless, the language you use will cut down on misinterpretations. If you think there are any translation errors or uncertainties, address these right away. Failing to do so can easily lead to a dispute. Cultural differences surrounding business etiquette are also worth bearing in mind.
For example, a Japanese supplier may offer conservative delivery estimates. They would rather under-promise and over-deliver just to be safe. Their products could then arrive earlier than you expect. For some businesses, this could seriously affect their inventory management. You must understand your partner’s cultural nuances before entering into a contract.
Navigating International Trade Law
International trade and shipping can pose a number of challenges, especially as every potential partner has its own regulations. There are usually four main considerations here:
- Export controls: What limits does your partner have on the goods you’re sending? You must check this with the International Trade Administration.
- Customs processes: Check with local customs agencies before exporting the products. Similarly, anything a partner sends must comply with your import laws.
- Trade laws: Familiarize yourself with the World Trade Organization agreements. It’s also worth reading Free Trade Agreements and other relevant regional trade agreements.
- Item standards: Make sure every item complies with international standards, such as ISO. It’s likely your industry will have more specific global certification systems.
Arbitration and Mediation
Even in a best-case scenario, international court cases are long and complicated. Your contract must do everything to avoid these. This means setting out clear arbitration measures. A neutral forum (perhaps with a third-party mediator) will take care of most minor disputes.
The New York Convention recognizes foreign arbitration awards across borders. This means it’s possible to get restitution similar to a court case but on a much quicker timetable. Your contract must have a robust arbitration clause that lets you settle disputes on a more neutral plane.
Always select arbitrators who have experience in your industry. They must also have a thorough knowledge of both your national laws and those of your partner. Some even choose arbitrators from a neutral third country.
Defining Intellectual Property Rights
You can only protect your property by enforcing your IP rights, especially in countries where you plan to establish a market presence. Make sure the contract clearly states who owns your deal’s results. Are you releasing a product together? Uncertainty about the ownership split could cause serious trouble.
Check that your contract fully complies with the Patent Cooperation Treaty and Madrid Protocol. These agreements deal with global IP rights, letting you register your property in other countries with ease. If you’re granting your partner an IP license, always outline its scope and duration.
Conclusion
International contracts bring many additional complications — up to and including possible legal challenges. Navigating these issues involves making sure they don’t arise in the first place. In a situation where this is untenable, arbitration can help. But it all starts with a robust contract.