The Complete Lawyer

Just as you always want to make sure that you know the basics about your prospective client’s business and industry prior to calling on him, you will want to know the basics about the country in which you will be representing him or her. If you are “fluent” in the national history, politics and current events of that country, you will enjoy yourself more and your business and legal partners will, in turn, be more motivated.

Travel books serve as a basic introduction to other countries, but you’ll do better to ask foreign colleagues about local customs. The Internet is also a good place to start. The U.S. government’s The World Fact Book describes all countries—and it’s free.

The Business Culture In Latin America Differs From Ours

Keith Rosenn, the pre-eminent academician on Latin American law, states that the Latin American legal environment is characterized by idealism, paternalism, legalism and formalism.1 From a practical point of view, the region’s tendency toward legalism and formalism will “get in the way” of the typical American’s assumptions more than anything else.

Don’t Assume Anything

Before doing business in Latin America, throw out the legal assumptions you would normally bring to the table. At the onset of the deal, ascertain whether foreign counsel is familiar with a particular kind of agreement, which would most likely be used in your client’s transaction. Frequently, it will be easier to adapt your special concerns to their form agreements than to have your agreement translated into their language or legal system.

The Latin American country in which you intend to do business may have protectionist laws for working with foreign corporations. As such, take special care with those rights of yours, which you would typically expect to be protected by equitable remedies—for example, injunctive relief as may be found in non-competition agreements. Other issues, particularly those relating to the start-up or dissolution of a company, are more formal and time-consuming.

Be Aware Of Three Fallacies

Fallacy #1: The contracting parties’ “choice of law” provision will be applied to my transaction.

In truth, a choice of your state’s law may not result in its application in a foreign court. You may then establish a corollary assumption: “I’ll just use a forum selection clause to assure my U.S. court will apply U.S. law in the event of a dispute.” Sorry, but certain foreign courts as a matter of law (and others as a matter of policy) will refuse to:

Recognize choice of law provisions

Recognize forum selection provisions

Forego hearing a lawsuit based upon a similar lawsuit being filed in advance on the same facts in another court abroad (i.e., the U.S.).

As a result, you may have selected U.S. law and forum in your sales representative contract, decided that the representative has not complied with quotas or sales efforts and that there are clear-cut reasons (i.e., “good cause”) to terminate the contract. You give notice to the representative without effect and thus begin litigation. The representative begins litigation in its home country, wins, and (if you decide not to appear or pay), buys your trademark on the courthouse steps in enforcement of his judgment.

Under the laws of certain countries, a sales representative (commission agent) or distributor (one who takes title and purchases for resale to the consumer) of goods or services will be protected under his or her law from a large foreign (i.e., U.S.) multinational corporation that wants to test out the market. Past experience has shown foreign governments that after the multinational corporation gets its product accepted within the marketplace through the local company (which had taken most of the risk of the start-up), the multinational has frequently terminated the local representative pursuant to the terms of the contract, for example within 90 days without cause.

Due to uneven bargaining power, the local protectionist laws were established to “reasonably” indemnify the representative. These laws are difficult to draft around in many circumstances. They will preclude both the termination without cause (and cause is difficult to find by a local judge) and the applicability of foreign law; and impose exclusive jurisdiction upon the local courts, not to mention awarding substantial damages to a terminated sales representative or distributor.

Pertinent issues for discussions with local counsel include alternatives (opening of subsidiaries—but be careful with labor law differences and difficulty or inability to enforce non-competition and trade secret provisions) or the use of arbitration (the New York Convention has been recently adopted by several countries—although idiosyncrasies may exist in drafting issues and enforceability).