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BlackBay Insights

  • Writer's pictureYianni van Gelder

How to avoid legal disputes when doing business with foreign entities

Doing business with foreign entities can unlock exciting new opportunities and markets. However, it also introduces untold risks and uncertainties that are not present when doing business solely in Australia. With careful planning and strategic measures, you can minimise the risk of costly and disruptive legal disputes and ensure smooth international operations.


While your strategy will need to vary on a country-by-country basis, use these general strategies to avoid or mitigate international legal disputes:

Draft clear and comprehensive contracts


A well-drafted, clear and thorough contract is the bedrock of any successful business relationship.


Here’s what to include:

  • Specific terms: Clearly outline the terms and conditions of the agreement. Avoid vague language to prevent misunderstandings.

 

  • Jurisdiction and governing law: Specify which country’s laws will govern the contract and which courts will have jurisdiction in case of a dispute. If possible, designate Australia as the applicable law and jurisdiction, for familiarity and predictability.

 

  • Dispute resolution clauses: Include provisions for arbitration or mediation as alternatives to litigation. These methods are faster and less expensive.

 

  • Force Majeure clause: Incorporate a Force Majeure clause to cover unforeseen events like natural disasters, political instability, or pandemics that could interrupt contract performance.


Understand local customs


Do not underestimate the significance of local customs. Cultural differences can lead to misunderstandings and conflicts if not properly managed.


Use these strategies to manage cultural differences:

  • Cultural training: Provide your team with training on the cultural norms and practices of the countries you’re operating in. This includes etiquette, communication styles, and business protocols.

 

  • Respect for traditions: Show respect for local traditions and customs. This can help build strong relationships and trust with your international partners.


  • Adaptation and flexibility: Be willing to adapt your business practices to align with local customs. Flexibility can prevent cultural missteps that might lead to disputes.


Understand local laws and regulations


Each country has its own set of laws and regulations governing business operations that will inevitably affect your business relationships.


Here’s what you can do:

  • Hire local experts: Engage local legal and financial experts to ensure compliance with local laws and regulations.

 

  • Stay updated Keep abreast of any changes in the legal landscape that could affect your business. Regular updates from local experts can be invaluable.

 

  • Employee training Train your team on the legal and regulatory requirements of the countries you’re operating in.


Conduct thorough due diligence


Ensure to conduct due diligence on your potential business partners.


This includes:

  • Background checks: Investigate the company’s history and financial stability. Look for any red flags, such as past litigation or financial issues.


  • Legal compliance Ensure that your partner complies with local laws and regulations. Non-compliance can lead to legal issues that could affect your business.


Build strong relationships


Strong, trust-based relationships with your international partners can prevent many disputes.


Foster these relationships through:

  • Open communication Maintain regular and transparent communication. Address any concerns promptly and clarify misunderstandings early.

  • Mutual respect Show respect for foreign business practices and cultural norms. This helps build trust and goodwill.


  • Regular check-ins Schedule regular meetings to discuss the progress of your business relationship and address any potential issues before they escalate.


Plan for alternate dispute resolution


Despite your best efforts, disputes may still arise. Planning for alternate dispute resolution can save time and money.


These strategies include:

  • Negotiation: Generally, the first step in resolving an international business dispute should be to directly negotiate with your international business partners. This requires good faith efforts and clear communication. While not involving formal institutions, negotiation often benefits from the guidance of experienced legal counsel or advisers who can facilitate the process.

 

  • Arbitration and Mediation In the event of a dispute, international arbitration and mediation are less adversarial than litigation and often lead to much faster and cheaper resolutions.

 

a.      Arbitration: International arbitration institutions review disputes and make binding decisions with confidence and speed. The key institutions are the International Chamber of Commerce, the London Court of International Arbitration and the Singapore International Arbitration Centre.

 

b.     Mediation: Mediation uses a neutral ‘mediator’ to help the parties reach a mutually acceptable agreement. It is less formal and allows for more flexible solutions. The key international mediation institutions are the International Centre for Dispute Resolution and the Centre for Effective Dispute Resolution.

 

Conclusion


Avoiding legal disputes when doing business overseas requires a proactive approach. By drafting clear contracts, understanding local customs, laws and regulations, conducting due diligence, building strong relationships and planning for alternate dispute resolution, you can significantly reduce the risk of conflicts and the time and money spent resolving them. These steps not only protect your business but also foster long-lasting and successful international partnerships.


For specific legal concerns, consulting with a qualified lawyer is recommended. BlackBay Lawyers are equipped to provide tailored guidance to address the unique challenges of international business.



 


Profile of Sally Westlake, BlackBay Lawyers Associate.

ABOUT THE AUTHOR

Yianni Van Gelder is an accomplished member of the team, excelling in handling complex litigation cases particularly commercial, employment and defamation law. His practice primarily focuses on providing representation and legal guidance to clients involved in intricate legal disputes. 


With a strong commitment to fostering enduring relationships with his clients, Yianni employs his experience to deliver both strategic advisory services and efficient dispute resolution in court. Through meticulous attention to detail and staying abreast of the latest developments in his areas of expertise, Yianni is dedicated to shielding his clients' interests and empowering them to navigate their legal challenges with confidence and assurance.

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