Matt Crouch recently took to the stage at the MEA conference in KL to discuss legal issues affecting international business. He provides a snapshot of the subject here.
Doing business overseas is potentially lucrative and has all that added excitement that the prospect of jumping on a plane can generate. And it also has some special problems that need special thought – and special legal attention.
The first thing to remember is that your legal obligations will be governed, of the most part, by your contracts, just as here in Oz. Other laws will apply of course, and you’ll also have your duty of care to avoid negligence – but your contracts will be the key to protecting yourself.
The following is a list of issues that will need attention: What law applies to the contract? We will generally want Australian law to apply. It is more familiar to us; we understand it better. Not all jurisdictions will apply Australian law, or if they do, it may be but a faint impersonation of Australian law – but it is almost always best to expressly choose Australian law as the governing law of the contract.
Where will disputes be resolved? This is equally important. The legal costs of travelling to foreign parts and running litigation there can be horrendous. Consider the huge legal bills that you might receive in the USA to the translation and evidentiary costs you might incur in a non-English speaking place – to say nothing of the fact that the court procedures overseas can be very different and the outcomes unexpected.
Enforcement of legal rights overseas can be very difficult. Even if you get a court judgement in Australia, having it enforced overseas can involve additional legal proceedings and in some countries Australian judgements are not automatically recognised; it depends on whether the country is a signatory to international treaties on the recognition of judgements.
Watch your credit risk. Given the cost and difficulties of taking legal action overseas, make sure that you are paid up-front or by other secure means – and don’t have to go galavanting off to recover what you are owed.
Watch your exchange risk. If you are being paid in the foreign currency, you will need to convert that to Australian dollars. If the value of the Aussie dollar rises against that currency, you’ll suffer an exchange loss. It is always best to be paid in your own currency – that way the other part bears the risk. If you hit a stalemate on that issue, there are some compromise options – or you could (at a cost you could pass on to the other party) buy a hedging contract.
Insurance. This is a big issue. Do your insurance policies cover you for liability to overseas claimants? Do your policies cover you for legal actions commenced overseas? Insurance policies often have a “North American” exclusion that denies cover in such circumstances. You may need to get an extension of cover.
Local laws may differ from ours. If you are doing work in a country – say, The Grand Duchy of Fenwick, then the laws of the Grand Duchy of Fenwick apply to that activity. Work health and safety, anti-trust, tax… you name it! You may need to brief a lawyer in the Grand Duchy of Fenwick to assist.
Privacy laws, recently amended substantially here in Australia, differ all over the world. Sending personal information about individuals from Australia to overseas recipients can be a breach of our Privacy Act.
Tax is another obviously important issue – get advice!
Language and culture are different – that’s precisely why overseas travel is interesting and exciting. But language and cultural differences can have a huge impact. For example, in Australia, we hold the sanctity of the contract dear. In other countries, a contract is not upheld as such a binding set of obligations – more of a guideline for what the parties had in mind, but fluid and up for re-negotiation at any time. It’s a risk that you need to consider, so do some homework; ask colleagues who may have worked or done deals there.
Sovereign risk needs to be considered in some places. Your business plans may come adrift if there is a coup, general strike, terrorism, war, civil commotion or change of law or government.
Geo-planetary stuff, such as bird flu, unpronouncable volcanic eruptions, asteroid impact, earthquake, nuclear accident, etc, can happen (and recently have done). What does your contract say about this – and about cancellation generally?
A lot to think about, isn’t there? I return to my starting point. Having well written contracts is soooooo important! Happy travels! m