LEGAL
Before too many steps are taken down the road in pursuing a particular “going global” transaction or activity, companies need two important things: an overview of the legal framework that will govern the transaction or activity, both domestic and foreign, and local counsel in each of the foreign countries in which the transaction or activity will take place. Responsibility for making sure that the members of the executive team are well informed and carefully counseled with respect to each of these issues falls on the general counsel and other members of the in-house legal team. While there is no need for the general counsel to become an expert on foreign law – that is the whole point of using local counsel – he or she should have enough understanding of the applicable law and relevant legal issues so as to be able to carry on a useful and efficient conversation with local counsel and manage the costs associated with engaging local counsel.
Local counsel in a foreign country can serve as an invaluable aid on matters relating to local law and procedures, and can also be the primary contact with local officials and regulatory bodies. Local counsel can be particularly helpful in advising on issues of local law and practice; dealing with foreign government officials, courts, and regulators; advising on government policies and developments relating to legislation, regulations, and caselaw in the local market; advising on local customs, culture, and business practices; advising on the legality of contracts under local law; assisting in negotiations with other local residents and firms; and resolving any issues arising from language differences between the parties. Given the importance of all these matters, local counsel should be selected carefully, and the general counsel needs to make every effort to develop a good working relationship with the foreign lawyer and to establish a clear set of procedures for managing the activities of the foreign lawyer, including clear instructions on the scope of a particular problem or engagement.
The choice of local counsel depends greatly on the particular needs of the company, and the company’s objectives and prior experience with the specific transaction or activity and the local market are key factors in this decision. While the choice may be made simpler if the company has a prior relationship with local counsel, this convenience is not available to most outside companies new to a foreign market. When looking to hire local counsel, it is advisable to seek out someone with experience representing companies in similar industries, and experience representing foreign firms would be even better. In some developing countries, there has emerged a split between the old, established law firms (which often have the connections to get certain deals done) and the younger firms (which often have attorneys trained in the West who may have a greater understanding of a U.S. company’s legal, business, and ethical concerns). Depending on the situation, a U.S. party may have to retain both types of firms to handle all of its needs.
There are several good sources of information that a general counsel can use to put together a list of candidates for a foreign counsel relationship. Martindale.com (often referred to as Martindale-Hubbell) is a frequently used source for information regarding foreign lawyers. Visitors to the site can find listings of major law firms on a country and city basis. Each listing describes the practice areas of the firms and may also include the names of representative clients. Another source is the ABA Guide to Foreign Law Firms published by the American Bar Association. The information in the Guide is based on the suggestions and personal experiences of ABA members, but the ABA is not officially recommending the firms that have been included. The latest edition of the Directory of Members of the International Bar Association should also be consulted.
The general counsel might also turn to one or more of his, her or its outside law firms for assistance since those firms may have multinational clients who have had good experiences with local counsel in the country of interest. Of course, the outside law firm itself may have foreign branch offices or affiliates who can provide recommendations and introductions. Another option is to contact one of several international networks of law firms, such as Lex Mundi or TerraLex. This can be done by getting in touch with a lawyer at a domestic firm that is a member of the network and asking that lawyer for recommendations. Finally, a list of local law firms can often be obtained from the commercial officer of the United States embassy in the foreign country of interest. The establishment of overseas and affiliate offices of major U.S. law firms, as well as some small and mid-sized firms, has aided the search for local counsel somewhat. More foreign attorneys have been coming to U.S. universities to earn LL.M. and J.D. degrees, and more foreign firms have been adding American attorneys to their rosters. This expansion of alternatives available in seeking out local counsel is likely to continue to increase the availability of effective legal assistance for U.S. companies engaged in business overseas through joint ventures or otherwise.
In addition to legal counsel, companies may wish to consider using the services of a global accounting firm, many of which offer both business and legal consulting services in most major foreign cities. The majority of these firms are prepared to offer advice about not only U.S. law, but also the applicable foreign rules and regulations.
In reviewing potential candidates for foreign counsel, consideration should be given to the type of transaction or activity for which assistance is required. For example, when foreign counsel needs to draft or review a sales or distribution agreement, inquiries should be made to ensure that the foreign lawyer has experience in commercial transactions, preferably with other American clients. If the company needs to obtain local government approvals to introduce a new product or establish a subsidiary or joint venture in the foreign country, the search should focus on lawyers who have good contacts with the local government; however, in that situation it is important to consider issues of agency under the U.S. Foreign Corrupt Practices Act since local counsel could be deemed an “agent” of the U.S. party and thus create exposure to liability for the local counsel’s activities. If assistance is needed to resolve a dispute in a foreign country, look for a law firm with a strong litigation practice and all necessary qualifications to practice in the local courts.
It is also important that the attorneys from the foreign law firm be able to communicate effectively, in English, with the general counsel and other members of the in-house legal team, and the nonlegal company executives and managers involved in the transaction or activity if necessary. Language capabilities within the firm sometimes will be listed in the various directories and/or the firm’s marketing materials. Additional common ground may exist if one or more of the lawyers at the local firm have had experience with the American legal system, either as attorneys or interns with a U.S. firm or perhaps through training at an American law school. Once again, prior experience representing U.S. clients can be helpful in this area.
Once foreign counsel has been identified, the general counsel needs to work hard to establish the scope of the relationship and the mutual expectations of the parties regarding the type of work that is to be done, billing practices, deadlines, and other matters. The following tips may be useful in this regard:
In addition, the general counsel should find out what protections (i.e., privilege) exist for its communications with local counsel. It is worth noting that, in some jurisdictions, communications between a company and corporate counsel do not enjoy the same level of protection as in the U.S. For example, in the European Union the attorney-client privilege is limited to independent counsel registered to practice law in a Member State of the EU. Counsel should also effectively communicate the sort of ethical practices that should be maintained.
Solid communication between the general counsel and foreign counsel is essential, and cultural issues may have a significant impact on this communication. In industrialized, Western countries, cultural mores are not necessarily that significant, since local counsel may have a great deal of experience dealing with U.S. clients. But, in some areas – particularly in Asia – it is not uncommon for local counsel to tell a foreign client what they believe the client wants to hear, rather than the real facts. The concept of “face” may also require some sophistication on the general counsel’s part – “face” may result in great loyalty from local counsel, and he or she may take extraordinary efforts on the client’s behalf, but it may also lead to great stubbornness that can interfere with effective legal assistance. Suffice it to say that maintaining good communications with local counsel will frequently require flexibility, sensitivity to subtle cues, and the ability to reiterate even the most minute details of a transaction repeatedly.
In most cases, the foreign lawyer should communicate with the general counsel, rather than with nonlegal executives and managers of the company. In this way, the general counsel can be sure that the foreign law firm is addressing all the issues and can integrate the advice on foreign law with the general counsel’s own research to develop an answer that is in a form which is most familiar to the executive/management team.
Alan S. Gutterman is a regular contributor to Corporate Counsel Connect and is the executive director and founder of the Business Counselor Institute and the International Center for Growth-Oriented Entrepreneurship. Mr. Gutterman has served as the general counsel for several companies during his career including a large distributor of consumer electronics with operations in several foreign countries. Additional commentary and practice tools that a general counsel can use in guiding his or her company down the road of “going global” can be found in Mr. Gutterman’s Westlaw database, Business Transactions Solution.
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