WHICH COMES FIRST IN CROSS-BORDER CONTRACTS, THE CHICKEN OR THE EGG?

One of the areas of a cross-border contract which US businesses tend to overlook is that of the choice of law.  It is relegated to an area at the end of the contract, hidden in so-called boilerplate clauses.  You know, the one you stole off the internet from some other company.  You know, clause 72(a)(3)(ii).  Nobody reads that junk.  Nobody cares what it says, right?

Wrong.

Wrong. Wrong. Wrong.

Many businesspeople, regardless of whether they are the sole owner of a small company, a Vice President of International Affairs for a growing mid-size business, or a contract negotiator for a Fortune 500 company, think the most important aspect of the international deal to negotiate is the monetary part.  After all, if you get concessions on your price, that means you are going to bring in more money.  Be a hero in the eyes of your boss.  Ultimately grow the business.  Maybe receive a promotion or a raise.

However, the law that you choose for the contract governs much more than just what a judge is going to apply if you end up in court.  It is a mistake to say "We will never sue them, so the choice of law doesn't matter!".  Initially, you must remember that the other party could sue you, and so a court might be called upon to apply the law while you are a defendant. 

But, more importantly, every single clause of the contract you took so long to negotiate (including those very important price provisions) will be interpreted according to the chosen law.  So, if you negotiate a contract thinking you are applying New York law, and you then say "OK, OK, we will give in and let them apply Chinese law just to get them to shut up and sign the darn contract", then you have changed the meaning of EACH AND EVERY SINGLE CLAUSE IN THE CONTRACT THAT YOU JUST SPENT A MONTH NEGOTIATING.

When you are negotiating a cross-border contract, it is extremely important to know how your chosen law will affect the clauses in your contract, how the other party's home country law will affect the clauses, and if there is a possibility you will choose to apply a neutral country's law, how that neutral country's law will affect the clauses.  Only by understanding all of those issues can you make an informed decision about which country's law should apply to your contract, and whether it is acceptable to negotiate away your preferred law because the changes will not make a difference to you, considering the risks you perceive in this transaction.

We have a saying here at our law firm.

The point is that you need to learn what you don't know.  That is, at essence, the purpose of a business lawyer.  Before you sign a cross-border contract, you should know the implications of the clauses in that contract, based upon the risks that you, in that deal, actually have.  If you don't know how the law (from whichever country) will interpret your contract, then you are "writing evil" and really have no idea what you are signing. 

Every once in a while, something happens that makes you recognize and respect your own mortality. As you have probably noticed, the top international story this weekend was the murder of ‪#‎LukeSomers‬, a photojournalist kidnapped in Sana'a, #Yemen in September 2013. Where was I in September 2013? That's right -- in Sana'a, Yemen, giving lectures to their commercial law judges about how to apply international law in their courts. Before leaving the US, I had a meeting with my staff to give them instructions about how to handle cases and administrative issues in the office while I was gone. We had to plan for all contingencies and called it the "Vacation, Kidnap, Death" memo and meeting. Now I feel sick in the pit of my stomach, knowing that there but for the grace of God go I.

For those who are unaware, for two weeks in September and October 2013, I was the special guest of the Yemen Ministry of Justice at the High Judicial Institute in Sanaa, Yemen. I was appointed by the International Development Law Organisation (Rome, Italy) to teach 60 commercial law judges presiding in the Yemeni trial and Appellate courts how to apply international laws in their courts. I taught the judges about cross border contract enforcement, global Anti-Bribery laws (such as the Foreign Corrupt Practices Act and the UK Bribery Act 2010), protection of intellectual property rights, and international arbitration.

The people I met in Yemen were wonderful. I would do this type of guest speaking engagement again in a heartbeat (who knows, maybe something in Havana now that Cuba's restrictions on professional visits are relaxing #TravelToCuba). The people I met (mostly judges and those who worked to bring me to Yemen) were the most hospitable, friendly and lovely people. However, I was definitely insulated from the factors that resulted in Somers' kidnapping. I had 24 hour security. I could not go anywhere without my personal security team. Also, I was the guest of the Minister of Justice and so the people who I met were not likely to be anywhere around AQAP people. The only time I was in public was when I went to the market just before I left, to shop for items to bring home. I had my security team with me that entire time. But still it is crazy to think how close I was to having to invoke our "Kidnap" portion of the VKD memo.

You want to do WHAT?

Everybody can grasp how global our economy has become when they look at manufacturing industries. But have you ever thought about the impact of globalization upon the practice of your hometown lawyer?

I am not talking about the mega-firms charging mega-prices. We all know they have special departments which deal with international legal issues; heck, they even have subspecialties on this specialty (international employment, international tax, international business, international litigation, international arbitration, customs laws, etc). Their attorneys often work for one client for many years, tend to focus in one small area of law, and never deviate from that area.

But does that mean the rest of the profession is restricted to a local practice? Not so. It is not realistic to expect that firms with less than 100, less than 50, less than 15, less than 2 attorneys will never face an international issue.

The real question is: How do local attorneys handle the client who comes into the office with a unique problem? What questions do they need to address with local businesses (or individuals) who suddenly go global?

REAL ESTATE: Are there tax and non-tax implications to representing a foreign citizen purchasing or selling real estate in the U.S.? What are the implications if you are attempting to set up a business entity (corporation, LLC or equivalent) for the holding of that real estate?
ESTATE PLANNING: If you represent globetrotting individuals with residences in the U.S. and abroad, what are the tax implications of the dual residence? Does the estate plan you drafted take into account enforceability under international, U.S. and foreign laws? Are there certain documents your clients will need to have authenticated for use abroad?
FAMILY LAW: Are you familiar with how foreign laws regarding marriage and divorce affect enforceability of the U.S.? What do you do if a client advises you his/her spouse took their child to a foreign country? How do you counsel a client regarding obtaining child support from a foreign resident?
LITIGATION: How do you serve a foreign business or individual with a summons and Complaint? Are you able to engage in discovery in a foreign country where a party or non-party is resident, and, if so, what are the limitations? Can you enforce in the U.S. a judgment obtained abroad in either litigation or arbitration? Can you enforce in another country a judgment obtained in the U.S.?
SMALL BUSINESS: Obviously, there is the forward-looking small business owner who has a dream, and wants to expand into the international arena. Maybe the company will be a U.S. agent or distributor of an international corporation; maybe the company wants to dangle its own toe into another country's pond, where it will soon learn how foreign laws, U.S. laws, international laws will impact upon contracts with vendors, clients, agents and distributors.

I'd love to hear about other times where someone's traditional, local clients have suddenly and unexpectedly gone global. Over the next few weeks I will be taking a look at these situations more closely, and provide resources for small and mid-size law firms facing these new, sophisticated, worldly clients.

HOW U.S. DOCUMENTS CAN BE AUTHENTICATED FOR USE ABROAD

The traditional request for legalization of documents used abroad required certification up the chain of line -- starting with the notary public (authenticating the document and signature), then moving on to the court clerk of the jurisdiction in which the notary public serves, and finally by the office of the state's secretary of state. The document would then have to be sent to the Authentication Office of the U.S. Department of State, where you would pay a nominal fee and tell them where the document was intended to be used, and the document would be authenticated for use abroad, and ultimately transmitted to the other state's embassy or consulate.

Luckily that process is rarely used anymore because most countries are members of the Hague Legalization Convention. For a list of members of the Convention, click here, http://www.hcch.net/index_en.php?act=conventions.status&cid=41 This Convention streamlines the procedure for international acceptance of document through use of a convention apostille. The apostille is appended to the document, and allows it to be accepted in other Hague Convention member country. When requesting a certifying body in the U.S. for an apostille for your document, you will have to advise them of the country in which you intend to use the document.

Where do I get an Apostille?

The Administrative Office of the Federal Courts issues apostilles for U.S. federal court documents.

Apostilles for state-issued documents can be obtained from the Secretary of State's office (notary office/document authentication office) in your state. Apostilles can be obtained for documents issued by state or local courts, birth/death/marriage records, documents issued by state or local government agencies, and documents signed before a notary public. Wills, powers of attorney, attestations, affidavits and other documents that have been sworn to before a notary public are all covered by the Hague Legalization Convention.

The Convention does not apply to commercial documents, such as a bill of lading, since those documents were not originally sworn to before a notary public, and did not otherwise undergo a certification process. Therefore, if you wish to have commercial documents authenticated for use outside of the U.S., you will need to follow the more onerous "traditional" procedure for legalization of documents.

Welcome to my new blog, where we can discuss issues burning in the minds of business owners. I'd like to hear from any of you who are thinking of building gift baskets in your basement and selling them to hungry German grandmothers, and want to discuss the practical, legal and other confusing issues that surround how to take your business global.

Do you own a manufacturing company and want someone in Timbuktu to sell your goods? Do you want to be a distributor in Podunk, Texas for a Chinese manufacturing company? What do you want to do? What problems have you faced doing them? Let me hear them all!

Disclaimer time! None of the information provided in this blog should be construed as legal advice for any particular situation. This is an information forum only, and is a place for sharing, discussion and dissemination of information and resources. In order to determine which laws will be applicable to your business, you should sit down with a lawyer. I am not licensed to practice law anywhere except Illinois, and the laws in your jurisdiction may vary significantly.