Precautions Essential in Multinational Agreements

General counsel and CFOs know about the high cost of litigation, including the cost of litigating such avoidable issues as choice of forum or law. But they should also be aware that such costs can be much higher when the contract involves parties from multiple countries, in which case it is important to consider carefully the potential issues and incorporate precautions into the contract that will save the company time and money if there is a breach.

The first issue to consider is where a dispute will be heard. Absent a contract provision specifying the forum, courts may undertake an unpredictable selection process in which multiple factors are weighed. A well-drafted provision will designate or at least delimit the forum.

Along with forum, any company entering into a multinational agreement should consider what body of law will be applied to decide a dispute. The choice of law will have an impact on other elements of the agreement, including a mandatory arbitration provision.

There are many benefits to including an arbitration provision in any contract, but those benefits are magnified in a multinational scenario. Like a forum selection clause, an arbitration clause can dictate where the arbitration will proceed.

Another issue is attorney’s fees, which are in many venues outside the United States paid by the losing party.

The authors caution that selection of a law firm in multinational deals can be tricky and suggest various strategies for making the selection.