Practical tips for dealing with international disputes

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Dos and Donts of dealing with international legal disputes based on thirty years experience of in-house counsel for a corporation with international operations.

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Practical tips for dealing with international disputes

  1. 1. Practical Tips for Dealing with International Disputes (or any other legal matter) June 2013 Andrew C. Spacone, Esq. Adler Pollock & Sheehan P.C. Formerly Deputy General Counsel & Assistant Secretary, Textron Inc. Copyright 2013, Andrew C. Spacone . All rights reserved.
  2. 2. 2 The Landscape • What’s the same? • What’s different? Representative Samples:
  3. 3. 3 Non-U.S. Transaction and Litigation Risk Assessment Issues Summary Russia Civil Justice Common law System Civil law Rule of law accepted/adhered to Relevant court(s) Quality/experienced judiciary -Trial level -Appellate level Objective/independent judicial system China Mexico India Brazil U.A.E. Italy Generally No (1) Generally No (1) Generally No (1) Yes (1) No No (1) No Generally Yes (2) Yes Yes No Yes Yes Yes No No No Yes Yes Yes Yes Arbitrazh People's courts; courts (2) civil courts More or Less Federal Supreme and state Court; courts of High ordinary Courts; jurisdictio lower civil n courts (2) (2) Federal Civil Supreme courts; Court; Shari' a Superior courts (2) Court of Justice Tribunal, Court of Appeal, Supreme Court (1) No No Yes More or Less No Yes More or Less Better (3) Better Yes Yes Better (3) Yes Sometimes No (4) No Yes (3) Yes (1) Usually yes Yes (2)
  4. 4. 4 India Brazil U.A.E. Italy No No (4) Somewhat (2) No No (3) Yes (5) Yes (6) No Yes (3) No (5) Yes (6) Yes Yes (3) No Yes (4) No Yes (4) Yes No (7) No Yes No Sometimes (8) Yes (8) No No Generally Yes (5) Yes Yes (9) Yes Yes No (6) Yes (9) Sometimes Yes (4) No Generally No (10) No (10) No No (10) Witnesses at trial/hearing Yes Yes (5) Yes Yes Court may question witnesses Yes Sometimes (11) Yes Yes Yes Parties may question witnesses Yes (11) Yes Yes Yes Yes Russia China Efficient System Yes (5) Yes Timely decisions by courts Broad grounds for appeal of lower level decisions Yes (6) Yes (7) Costly Judicial panels presiding over cases Judge/court controls the judicial process as opposed to parties Judge/court participates in process of proof taking/gathering of evidence US style discovery Court may appoint experts Mexico Yes (6) Sometimes Sometimes (7) Yes (8) Yes (4) No (9) Somewhat (5) Generally Sometimes, No (6) via courtappointed experts No (7) No (5) No (7) No Yes Yes Sometimes (6) Yes Yes No (8) Yes (7) No Yes Yes Yes (8) Yes Yes
  5. 5. 5 Russia China Mexico India Brazil U.A.E. Italy Parties may appoint experts No (12) Yes (12) Yes Yes (11) No (9) Yes (9) Yes Expedited/summary proceedings available Civil juries Yes (13) Yes (13) No Yes (12) Yes Yes (10) No No No No No No Standard of proof No (14) No (14) No No Yes No (11) No Burden of proof Initiating party (15) Claimant Both parties (7) Claimant (13) Plaintiff Claimant (10) Attorney client privilege recognized Yes (16) Somewhat Somewhat Yes Usually the Claimant (10) Yes Yes Yes (11) Foreign lawyers allowed Yes No (17) No No (14) Yes (11) Yes Lawyers need to be licensed to appear in court Quality local law firms No Yes (18) Yes (8) Yes (15) Yes Yes (12) Yes (12) Some Some Yes Yes Yes Some Yes Provisional/interim/property preservation measures available Yes Yes Yes Yes (16) Yes Yes (13) Yes (13) Contingency fees allowed No Yes (19) Yes No Yes, in certain cases No No Yes (20) Some (20) No Yes (17) Yes No Yes Cost-shifting allowed Yes (8) No (9) No
  6. 6. 6 Russia China Mexico Yes (21) Yes (21) No Compensatory damages lower than US Yes Yes Yes Punitive or exemplary damages allowed No Enforcement of Yes Class actions allowed India Brazil U.A.E. Italy No bar (18) Yes No Yes (14) Yes (19) Definitely Yes Yes No (12) No (14) No Yes Yes Yes Sometimes No Generally No (20) (22) Sometimes Sometimes Yes Difficult Difficult judgments More Difficult (22) No (23) Yes Yes (21) Yes (13) More Difficult (15) Yes (15) Mediation encouraged/required during litigation Yes Yes (24) Yes Yes Yes Yes Yes (16) Arbitration well Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes (9) Yes Yes Yes Yes Yes No (25) Yes Yes Yes Yes Yes Domestic -Foreign Alternative Dispute Resolution accepted Domestic Foreign Ad hoc arbitration allowed
  7. 7. 7 Russia Preferred arbitral body/location Mexico Brazil U.A.E. Italy ICA, LCIA, SIAC (22) DIAC, ADCCI (16) CAM, Milan (17) Yes Yes (18) Yes (24) Somewhat (27) Yes Yes (23) Costly No No No Sometimes Yes Sometimes Yes NY Convention signatory Yes Yes Yes Yes Yes Yes Yes Yes (25) Yes (28) Yes Yes (24) Yes Yes Yes (19) Yes, with some exceptions where state immunity applies No (26) Yes No (29) Yes (27) Yes (30) Arbitration rules well-developed Government entities subject to arbitration Local litigation preferred to arbitration Arbitration statute ICC, ICC, outside of CAM, mainland CANAC China O (26) (10) India ICC, CCBC, FGV or ANCHAM in Rio de Janeiro or Sao Paulo Yes Respected arbitrators ICAC, or foreign arbitration venue (23) China Yes (11) No Yes (12) Yes Maybe in Yes, within some limits specific cases Yes No Generally Sometimes no (14) Yes Yes (25) Yes Yes (17) Yes (20)
  8. 8. 8 Russia Broad exceptions to finality/grounds for appeal Broad subject matter (e.g., contract and tort) Enforcement of arbitration China Mexico India Brazil No (28) Sometimes No (13) Sometimes (26) No (15) Yes (29) Yes Yes (14) Generally yes (27) Yes (16) Yes Sometimes Difficult Yes Yes Yes Sometimes Difficult Yes (15) Generally Yes Generally Yes No Yes No Yes (29) Yes Yes Yes (33) Generally Yes (16) Yes (34) Yes (17) Yes (30) Yes (28) Yes Yes (31) -Domestic Contracts -Foreign Well-developed contract law Yes, but not all clauses enforceable (32) Sometimes Sometimes Yes Yes (21) Yes Yes Yes (22) Yes (18) -Foreign Parties free to establish choice of law governing arbitration Italy Yes awards -Domestic Yes (30) U.A.E. Yes Yes Yes Somewhat Yes
  9. 9. 9 Respect for contracts -Adherence to contract terms China Mexico India Brazil U.A.E. Italy Yes Russia Yes Yes Yes, with some restrictions Yes Somewhat No Yes Sometimes (19) Case-bycase basis Somewhat Somewhat -Lax attitude to contract terms -Extrinsic evidence admissible Case-bycase basis Yes, to interpret ambiguities Freedom of contract recognized Yes (34) Priority of law over contract Yes (35) Yes, to interpret ambiguities Yes Generally No (31) Generally Yes (17) Yes (20) Yes, to interpret ambiguities Yes (37) Yes (18) Yes Yes Yes Yes (25) Yes Yes Yes Sometimes Sometimes Sometimes Parties free to establish Yes Generally choice of law governing Yes (38) contracts Different rules for contracts with Generally Sometimes governments No (39) Yes (19) Generally Yes (32) Generally no (18) Yes, in principle Yes Yes No (33) Yes Yes Sometimes Extensive formalities for contracts Yes (20) No (34) Yes No Sometimes Generally No (36) No (40)
  10. 10. 10 Russia "Doing Business" 2010 Ranking for Enforcing Contracts (ranked from numbers 1 through 183), available at www.doingbusiness.org 2 China Mexico India Brazil U.A.E. Italy 19 18 81 182 100 134 156 The information in the table and notes regarding Russia was confirmed and supplemented by Kent Gross of Orrick, Herrington & Sutcliffe.
  11. 11. 11 Now That We Have the Legal Landscape, Practical Suggestions for Dealing with International Legal Issues • Accept the fact that there is a lot you don’t know • Accept the fact that you and your client will need to be educated and the same for foreign counsel • Be prepared to spend more time and money than you would if it were purely a domestic matter
  12. 12. 12 Now That We Have the Legal Landscape, Practical Suggestions for Dealing with International Legal Issues (Cont’d) • Many of the lawyers and law firms you will work with are used to dealing with U.S. clients but not all, and this increases the risk profile and need for their education • Language, Language, Language...do not underestimate the problems (or more diplomatically, barriers) this can create ditto for culture
  13. 13. 13 Now That We Have the Legal Landscape, Practical Suggestions for Dealing with International Legal Issues (Cont’d) • The practice of law may be different in important respects (e.g. privilege, civil justice system, courts) understand the differences early • Get the right* local lawyer/law firm – absolutely critical because as a general proposition you will rely more heavily on their advice than you would with U.S. counsel  local with good English capability? Or  U.S. ex-pat with excellent language capacity? *Right: requisite legal skills and trust form a solid relationship
  14. 14. 14 Now That We Have the Legal Landscape, Practical Suggestions for Dealing with International Legal Issues (Cont’d) Experience with U.S. clients helps greatly • Don't fall into the trap of thinking (and you will) that because foreign counsel doesn't speak English as well as you that they are any less smart  humility helps because they have a perception of you as well • Don’t assume local counsel understands your client’s business including accounting and the regulatory nuances (e.g. FASB 5 reserve rules for contingent liability)  Setting out the ground rules/objectives early (e.g. “litigation plan”) is important And reduce the information/education gap
  15. 15. 15 Now That We Have the Legal Landscape, Practical Suggestions for Dealing with International Legal Issues (Cont’d) • Try to understand the relevant court/criminal justice system but recognize that you may never fully understand it — which again, makes selection of the right local counsel absolutely critical common law v. civil law with all due apologies, some civil/criminal justice systems are corrupt • Build trust with local counsel by trying to learn something about their culture and even language, and above, earn their respect  but don't overdue the language bit unless you are fluent (it can be patronizing)  And can lead to even more confusion
  16. 16. 16 Now That We Have the Legal Landscape, Practical Suggestions for Dealing with International Legal Issues (Cont’d) • Understand the quality of the judiciary  how does the court process work?  how long do matters take to resolve? • Expect the unexpected and be patient  here is an area where rework is critical • Get advice in writing on important issues — and ask questions if you don't understand — and ask again  see ―rework‖ above • Unless your client is very sophisticated, he or she is not going to understand the differences, especially when bad outcomes occur  prepare and educate your client early • Be patient – ―rework‖ is not necessarily a bad thing
  17. 17. 17 Now That We Have the Legal Landscape, Practical Suggestions for Dealing with International Legal Issues (Cont’d) Bottom line: As you move from east to west and north to south across the globe, the "differences" that will impact your issue increase. Recognize and understand the differences and similarities early With proper due diligence, planning, and patience including attention to the nuances, (and getting the "right" lawyer/law firm) you can get through the matter in good shape (or at least significantly increase the chances of a good result)

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