Think about a game of poker. It?s pretty tough trying to account for; all the cards in a deck, the possible hands that each player may have and mannerisms of the dealer while abiding by the rules of the table.
Now imagine, that poker game represents doing business inside your own country.? The one deck of cards represents economic and political variables impacting your business.? The players represent your competition or potential business partners.? The dealer represents the bank or financial intuitions that your money passes through.? The rules of the table represent the law of the country that you?re bound by.? Here, you have to worry about variables related only to your market, but at least you have one table, or one law, to worry about and you can hedge your risk pretty easily.
Now, add; several more decks, a few new players, which you have never seen before, many more dealers, and a few new tables.? Think of this as doing business at the international level.? Here, the decks represent many markets and political climates that you have to worry about adding their own economic and political variables.? The players represent new and foreign competition or potential business partners.? The dealers represent the numerous banks or financing institutions that you?re money has to pass through. The tables represent new laws you must abide by. ?Now go ahead and play.
Sounds risky, right?? If you are anything like me, at this point, you?re either folding or hesitantly calling each round.? There are just too many factors and variables to navigate.
The international business transaction industry of legal counsels is here to help businesses limit or mitigate their risk as much as possible.? All cross border transactions require discussion between the legal counsels of each state that businesses are conducting business in.
For example, in English based legal systems such as Australia, Canada, United Kingdom and the United States, penalty clauses are void, but in states such as South Africa, banks and businesses are accustomed to seeing penalty clauses in finance agreements and commercial agreements which impose liquidated penalties in default scenarios.? This is a tidbit I was able to pluck from my brain with ease, imagine how a legal counsel could help by proffering a little more effort.
Most of the legal risk mitigation techniques available in international contracts are similar, regardless of jurisdiction. Such as, choosing your business partner with care is one of the first steps and most crucial steps in protecting yourself.? To do this, you must understand your business and the other?s business and how they both fit together. Finding how your business models fit may also lead to discovery of how you and your partner?s business do not fit, thus, exposing some possible areas to negotiate.
It is amazing how often in sale or purchase transactions, issues associated with allocation of risk and warranties are not fleshed out and negotiated. While transactions occur in such a numerous quantity each day, business owners may be weary of skeptical attorneys who wish to flesh these issues out, but the truth at the end of the day is, if you are that business owner who did not allow your counsel to negotiate these terms to your contract, you can be left holding the bag in the end.
The legal risk of international transactions can be substantially mitigated by lawyers who have the international political clout, understanding of international trade, understanding of conflict of laws, and perhaps most importantly, the savvy to construct a contract geared to the specific needs of the deal while being able to build in an amicable dispute resolution mechanism.
So for all of you who actually do like my analogy, you?re probably wondering how the lawyer fits into the game of poker? Normally, in a poker game, you do not ask the person what hand he has, nor would honestly he tell you.
Imagine a lawyer behind some of the poker players (the reality is that there will always be a business that believes it does not need a lawyer). Each lawyer is discussing ways through or around the rules imposed by the various tables (laws of each country), potentially selecting the optimal table to play on because of the rules that conform to the purpose of the deal. While they look at each card (economic and political variables) assessing the impact of that card on your hand as it relates to the hands of other players (the deal).? Furthermore, the lawyers can vet the tables for the dealers (banks), because each dealer may deal differently or require a different tip amount.
Here the lawyers are able to talk freely among one another, thereby getting a feel for which players are cooperative (conducive for business relations), and which are not. Furthermore they will find the best table to play on and the dealer that requires the smallest tip.? The result is that, with the lawyers who came to an agreement, you and your new business partners are able to work together and beat the other players who are still competing amongst themselves instead of collaborating.
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For all of you poker enthusiasts, keep in mind, I?m not much of a poker player, I just used this as an analogy for the complexities and risks involved in international business transactions.
Source: http://plawg.com/2012/03/24/international-business-transactions-around-the-poker-table/
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