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5 Ways Corporations Can Avoid International Liability

5 Ways Corporations Can Avoid International Liability



This presentation discusses 5 ways corporations can minimize their risk when operating in foreign markets.

This presentation discusses 5 ways corporations can minimize their risk when operating in foreign markets.



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    5 Ways Corporations Can Avoid International Liability 5 Ways Corporations Can Avoid International Liability Presentation Transcript

    • Florida Bar Continuing Legal Education Committee International Law Section of the Florida Bar Santiago A. Cueto, Esq. Board Certified International Attorney 1 1
    • Top 5 Areas of International Liability Risk1. 1. Employment Laws2. 2 Privacy and Data Laws3. 3. Products Liability4. 4. Alien Tort Claims Act5. 5. Import/Export Control Laws 2 2
    • Sources of International Liabilityfor U.S. Companies: Extraterritorial application of U.S. Law Application of Foreign Law 3 3
    • U.S. Law Presumes NoExtraterritorial Application UnlessCongressional Intent as Reflected inPlain Meaning of Statute. 4 4
    • Many U.S. laws have extraterritorial applicationthat may apply if your business:• Employs U.S. citizens abroad;• Has subsidiaries or affiliated organizations operating abroad;• Enters into contracts to supply products with international parties;• Exports goods or services; or• Has business operations that could implicate human rights issues. 5 5
    • Extraterritorial Application of U.S. Employment Law 1. Title VII of 1964 Civil Rights Act 2. Americans with Disabilities Act 3. Age Discrimination and Employment Act 6 6
    • Who’s Covered?A U.S. Citizen employed Outside the U.S.. 7 7
    • Threshold Question How many employees employed by employer? ADEA--- 20 or more Title VII and ADA --- 15 or more. Count = total employed in U.S and Foreign Branches 8 8
    • Still Must Meet Several Factors 1. Employer incorporated in U.S. or foreign branch of U.S. company. 2. Not incorporated in U.S. but sufficient minimum contacts. 3. Non U.S. company controlled by a U.S. Company 9 9
    • Defenses 1. Foreign Law Defense 2. Foreign Sovereign Compulsion Defense 10 10
    • 1st Way to Avoid International Liability: Comply with U.S. Employment Laws Overseas.• Educate• Establish Written Policies for nondiscrimination• Set-up Complaint Handling Mechanism• Investigate complaints• Review Employment Agreements 11 11
    • Foreign Privacy/Data LawsCountries across the world have a variety of data protection laws, inthe form of secrecy laws, privacy statutes and blocking statutes.Commercial secrecy laws typically protect corporate and banking data.Privacy statutes typically protect consumers and their personalinformation. Blocking statutes have typically been enacted for theexpress purpose of frustrating U.S. discovery. 12 12
    • European Union Privacy LawsPrivacy laws in the European Union derive from EUDirective 95/46/EC and protect personal data fromdisclosure in virtually all cases.Switzerland, France and the United Kingdom, forexample, have enacted blocking statutes that restrictdiscovery of information meant for disclosure in a foreignjurisdiction. 13 13
    • E European Union Privacy LawsTwo important ways to legitimize the release of data in in the EU:1. Data may be released if the data subject gives their unambiguous consent.2. Data may be released if necessary to comply with a “legalobligation.” Although this provision is strictly interpreted, a US court orderdirecting a company to produce data from a European subsidiary would mostlikely constitute a legal obligation. This may vary among EU member states.France, for example, has demonstrated an unwillingness to authorize the releaseof data pursuant to a foreign court order. 1414 14
    • Other Data Protection Laws Affecting U.S. CompaniesChina: The State Secrecy Law is implicated when any information is deemed by the Chinese governmentto be a state secret, which may include civil matters when the government is involved (e.g., as an owner).The Unfair Competition Law is for the protection of commercial secrets.Hong Kong: The Personal Data (Privacy) Ordinance of 1995 has a provision for the onward transfer ofpersonal data that requires that there be a reasonable belief that any personal data transferred outsideHong Kong without consent is transmitted only to a recipient operating under similar privacy laws. Banksecrecy is contractual instead of statutory.Japan: The Personal Information Protection Act of 2003 protects personal data and does not allow un-consented transfers of personal data to third parties, with the exception of certain outsourcing companies(e.g., payroll processing). It also has notice and opt-out provisions. Japan protects commercial secrets underthe Unfair Competition Prevention Act. 15 15
    • 2nd Way to Avoid International Liability:Comply with Foreign Privacy/Data Laws.For example, one often overlooked mechanism to streamline issues concerningthe exchange of data in the EU is the US-European Union Safe HarborFramework. The Framework offers a more simple and efficient means ofcomplying with the adequacy requirements of EU privacy laws, which shouldparticularly benefit small and medium enterprises.The Framework applies only to US companies and allows for transfers of datawithout prior approval. A certification form can be found at the U.S. Departmentof Commerce’s Safe Harbor Self-Certification website. 16 16
    • U.S. Liability for Foreign-Made GoodsManaging suppliers and preventing supply-chain failures iscritical for U.S. manufacturers because of the potential riskthat many products pose to their end-users. 17 17
    • U.S. Liability for Foreign-Made ProductsGenerally, anyone in the chain of commercial distribution of a consumer product,including manufacturers, importers or other intermediate distributors, and retailsellers, may be liable if the product is defective and injures someone .U.S. companies that provide product design specifications to foreignmanufacturers or that put their own name on a foreign-made product so that itappears to consumers that the importer is actually the product’s manufacturerface additional risk potential.Because U.S. companies potentially bear the burden of litigation, they may beimporting liability along with the products they receive from foreign suppliers.Even if no lawsuit, result in substantial expense for U.S. importers. 18 18
    • 3rd Way to Avoid International Liability: Take Control of Your Global Supply Chain• Improve Supplier Qualification Practices.• Expand the Use of Audit Procedures.• Verify Supply Chain Integrity and Safety.• Shifting Risk Back to the Supplier. 19 19
    • International Liability under the Alien Tort Claims ActEnacted by the First Congress in 1789 as part of the originalJudiciary Act.The statute simply provides that “[t]he district courts shall haveoriginal jurisdiction over any civil action by an alien for a tortonly, committed in violation of the law of nations or a treatyof the United States.” 20 20
    • Alien Tort Claims ActForeign citizens are increasingly targeting US companies in lawsuitswhich claim that the company acted in concert with foreigngovernments, or rogue elements within a foreign country, to committorture, rape, murder, genocide or a host of other human rightsviolations.Current circuit split will likely lead to a continued increase in ATCAfilings against corporations in the U.S. courts for events having noconceivable relation to the corporations’ primary business activities orto the United States. 21 21
    • 4th Way to Avoid International Liability: Use Strategic Contract LanguageLimit exposure to "aiding and abetting liability" claims by including contractuallanguage that:• expressly defines the duties of each party;• puts in place limitations on liability, and, where appropriate,• states that the US company has no authority to direct, supervise or otherwise control any actions of any foreign government employee; and• mandates that all parties shall comply with all applicable domestic and international laws.These same contractual provisions should be included in agreements with foreigncontractors that US companies hire. 22 22
    • Import/Export Control LawsMost countries impose some form of legal controlon the export of goods from within theirjurisdiction and on the import of physical goodsinto their jurisdictions. 23 23
    • Import RequirementsDutiesAll imports into the US are subject to customs duty unless specifically exempted by law asdetermined by their classification under the applicable items in the Harmonized TariffSchedule of the US unless otherwise exempted.Other Regulations• Labeling & marking regulations, e.g. country of origin.• Products Standards• Anti-dumping actions• Textiles• Toys• Electrical Product Standards• Food 24 24
    • Export RegulationsThe core distinction between the rules that govern exports is whetherthe controlled product or service is “commercial” or “defense-related.”May also be classified as “dual use.” 25 25
    • Export Regulations The consequences of violating the EAR may be severe. Violators may be subject to both criminal and administrative penalties. Administrative penalties may also include denial of export privileges. Not only will you be prohibited from export activities, but also others may not participate in an export transaction with you as a “denied person.” 26 26
    • 5th Way to Avoid International Liability: Comply with Import/Export Control LawsImportsDuties, Product Standards, other RegulationsExportsCommercial, Defense, Dual-use, End User 27 27
    • Summary: 5 Ways U.S. Corporations CanLimit Their International Liability.1. Comply with U.S. Employment Laws Overseas.2. Comply with Foreign Data/Privacy Laws.3. Take Control of the Supply Chain.4. Use Strategic Contract Language.5. Comply with Import/Export Control Laws. 28 28
    • THANK YOU Santiago A. Cueto, Esq.Board Certified International Attorney4000 Ponce de Leon Blvd., Suite 470 Coral Gables, FL 33146 +1 305 777 0377 sc@cuetolawgroup.com 29 29