Copyright The Law Office of Eric L. Crump, PLLC, 2007, All rights reserved
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In the past few years the number of business operating
across international borders has increased at an
exponential rate.  Advances in communications, logistics
and deregulation of trade means that small and medium
size businesses have the opportunity and ability to
compete in global markets right along-side the big
multinationals, and in some cases, those smaller
companies can operate with serious competitive
advantages.  Today, more and more small and medium
size businesses are finding themselves operating in
parts of the world that they never imagined they’d be
doing business in five or ten years ago.  

While those companies that do foray out into the realm
of international trade give themselves the opportunity to
reap tremendous profits, they are also faced with unique
challenges that companies limited to domestic markets
may not share.  One specific question that often comes
to the forefront, even with companies who have
operated abroad for years, is where do I turn when a
good deal goes bad?  In other words how do I protect
my rights when those rights have been compromised by
a foreign business partner?

Fortunately, there are a number of things that a
company can do to protect itself in the event of a
commercial dispute with an overseas customer or
supplier.  The most effective time to handle such issues
is at the start of the transaction- well before problems
arise.  By including certain clauses and conditions in
your contracts, agreements, and purchase order forms,
you can take steps to ensure that you choose ahead of
time where, how and under who’s law your dispute will
be decided.

Businesses, whether they are operating overseas or
purely domestically, should always include a choice of
law provision in their contracts and agreements.  These
provisions, if properly drafted, give you (and your
foreign business partner) the ability to choose ahead of
time what standards will be employed to determine the
outcome a dispute.  The benefits of a well drafted choice
of law clause will be readily apparent to you if you are a
Kentucky based company selling pretzels to an
Indonesia concern who refuses to pay, especially if you’
re not accustomed to doing business in that part of the
world.  By choosing to be bound by the Convention on
Contracts for the International Sale of Goods [CISG] (or
another mutually acceptable and enforceable legal
standard) you can avoid many of the pitfalls that you
would otherwise face if you left this issue to chance.

Another issue that every business should address at the
beginning of their transaction is the forum that a
potential dispute will be decided within.  An Ohio
company purchasing products from Poland may not
necessarily be prepared to be hauled into court in that
country should their deal go bad.   However, if their
business partner is willing to make certain concessions
with regard to dispute resolution, the Ohio company may
be able to mitigate its risks to acceptable levels while
protecting its interests.  If the parties can agree at the
start of the transaction that all disputes arising from the
sale will be resolved in Cincinnati by arbitrators selected
through the American Arbitration Association, the Ohio
company can limit its risk of becoming subject to
potentially expensive legal proceedings in front of
unfamiliar and courts in distant locations.  

Of course, a one size fits all approach should not be
adopted with regard to such important contractual
issues.  An agreement to limit the forum of a dispute to
Kentucky state courts will not likely be honored by a
Honduran court if the matter is raised in that forum;
however, an agreement to arbitrate a dispute before the
AAA in Miami probably will be enforceable.  Also, you
need to know whether the forum you may be dealing
with will be willing to apply the legal standards that you
have specified in your contract, or whether they are
equipped to do so effectively.  Also, you need to know
which legal standards and forums best fit your specific
business needs.  You should consult legal counsel on
these matters BEFORE you decide to business so that
you can include appropriate contractual provisions
which adequately protect your interests and mitigate the
risks that you face while doing business abroad.  By
specifying who, where and how, potential disputes
between you and your business associates will be
resolved, you can go a long way toward protecting
yourself from a myriad of unforeseeable legal pitfalls
that await the unprepared companies who engage in
trade abroad.

If you feel that you could benefit from the use of these or
other protective provisions in your business contracts,
please call the Law Office of Eric L. Crump, PLLC, for a
consultation today.   We'd love to see how these tools
can be put to use for your specific needs.
620 South Third Street, Louisville, Kentucky 40202
Phone: (502) 540-9958; Fax: (502) 540-9957