This article originally appeared in the October 2021 issue of Security Business magazine. When sharing, don’t forget to mention Security Business magazine on LinkedIn and @SecBusinessMag on Twitter.
I remember years ago when I got a new car with GPS navigation. I drove the car home from the dealer for the first time, following the path detailed by new friend, the GPS navigation voice lady. As I slowed to turn up my driveway, the voice lady declared (almost triumphantly), “You have arrived.”
It felt as if I had – and not just geographically.
Maybe your business has arrived. Maybe now you are finally in the right place at the right time, and your business is expanding – even internationally.
If this is true, it is time to step up your sophistication level and make sure your growth and success are properly guarded. This means investing in your company and getting your legal house in order.
I worked on a project for just such a client recently – one that has enjoyed an expansion of its business. The client was called on by a large company to secure the client’s facilities uniformly across the world. To accomplish this, the client needed to engage subcontractors in many different countries, including Japan, Australia, Italy, France and others.
The client very wisely sought my counsel to ensure that their relationships with the various international subcontractors was documented properly. The client supplied me with their existing subcontract and asked me to review and update it. It needed a lot of work.
It was incomplete, unfavorable to the company in multiple respects, and certainly did not account for their international expansion. So, we edited the draft agreement, added missing terms and otherwise created a more sophisticated contract (and more enforceable too).
Unique Aspects of International Agreements
When it comes to international agreements, one of the key differences is how the parties intend to resolve disputes. When contracting with a domestic company, you should consider such issues as: Choice of law (meaning which state law will govern any disputes under the contract); and choice of forum (meaning where any disputes will adjudicated). Disputes can be adjudicated in federal court (assuming federal court has jurisdiction over the parties and/or issues in dispute), state court, an arbitration forum (like the American Arbitration Association).
Thus, if you are a New York company (in Manhattan, for example), you may prefer that New York law govern your contracts and that any disputes be resolved in a federal or state court sitting in Manhattan. This may be far more convenient, as your witnesses, evidence and lawyers may be in or near Manhattan. Assuming your counterparty consents to these provisions, then you may be in a good position to have leverage over them – at least logistically – in any resulting dispute.
On the other hand, when contracting with international counterparties, the analysis differs. Yes, just as with domestic counterparties, you can and should specify the governing law (U.S. state or foreign), but the forum where any disputes will be adjudicated can be tricky.
Again, as with domestic counterparties, you can specify either federal court, state court or arbitration in your international contracts; however, if the counter-party has no contacts to the U.S., and a dispute results, they may be able to avoid the reach of the federal or state court. That could mean you end up without a viable remedy against them; thus, selecting a federal or state court as your chosen forum may put your company at risk.
In such a case, agreeing to arbitrate any disputes before an international arbitration forum may be preferable. That way, the resolution of disputes is a function of the contract – and the general procedure is set forth in the contract (and supplemented by any governing rules of the international arbitration forum).
If your company has “arrived” (as my car did all those years ago), it is time for you to get smart on structuring your contracts – particularly if you are working with international counterparties and doing business across international boundaries. A few smart words on a page can make the difference between success or failure for your company.
Timothy J. Pastore, Esq., is a Partner in the New York office of Montgomery McCracken Walker & Rhoads LLP (www.mmwr.com), where he is Vice-Chair of the Litigation Department. Before entering private practice, Mr. Pastore was an officer and Judge Advocate General (JAG) in the U.S. Air Force and a Special Assistant U.S. Attorney with the U.S. Department of Justice. Reach him at (212) 551-7707 or by e-mail at [email protected].
