Monday, June 22, 2015

International Business Agreement Drafting Tips

I draft, review and help clients negotiate international contracts. These are my top general recommendations for when you sign an agreement with somebody in a foreign country.

1. Prevailing Language clause clarifies what language version of the contract shall control in case smth gets lost in translation.

“In case of any conflict between the English version of this Agreement and any translation, the [language] version shall prevail and be binding upon the parties.”

This is especially important in countries with legal systems different from that of the US, and a lot of the American legal concepts don't translate well or simply don’t exist. For example, injunctive relief, intellectual property concepts in countries like Russia, China and India. In China, a contract executed in Chinese will prevail even if the English version says that the English version shall prevail. So, if you sign a dual language contract, make sure you understand the “prevailing language” clause in all relevant languages.

Sometimes dual language contracts contain a clause saying, “both language versions shall have equal weight.” This is, of course, an ineffective clause because, in case of a conflict, both languages, having equal weight, deadlock 50/50 with no way to break the tie. Insist the parties pick one language or the other.

2.  Simple English. You want people to understand what you are trying to convey. Professionals that can relay complex concepts in easy to understand terms are perceived as more intelligent than those who daunt their audience with professional jargon.

So, avoid confusing synonyms that might not have exact equivalent in foreign law (“right, title, and interest”). Avoid double negatives, legalese and Latin. Put related sections close together. Use short sentences.

3.  Specify. What’s “reasonable” in one country might not be so in another. “Bimonthly” can be either two times a month or once every two months.

4.  Is e-signature valid there? If so, are there any special requirements? For example, Russian law recognizes two types of e-signatures: simple and reinforced. For a simple e-signature to be valid, the parties shall expressly agree to it.

5.  Governing Law and Jurisdiction are important to state in the contract to ensure you will not have to go to a foreign country (or hire a lawyer there) if anything goes wrong.

6.  Non-appearance based arbitration provision also ensures that neither party will have to shoulder the expense of traveling to resolve disputes. It’s when the disputes are to be resolved solely by submission of documents, phone communication and other electronic means, without any personal appearances. This can save both parties money and time. The American Arbitration Association offers non-appearance based arbitration in their helpful online clause builder.

7.  Force Majeure clause shall not be overlooked as one of the boilerplate provisions. How likely are calamities and conflicts to happen in that country? Should they entitle the other party to suspend performance (e.g. delay/avoid paying you)?

8.  Be mindful of hot-button provisions. Those differ from jurisdiction to jurisdiction and from industry to industry. However, certain common issues are often contested. Always double check the other jurisdiction’s treatment of disclaimer of warranty; limitation of liability; non-compete, reverse engineering. For an overview of hot button issues in international tech contracts, see my Dangerous Terms:  Software Licensing Issues for U.S. Businesses in Europe and Japan.