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LEGAL PERSPECTIVES ON DOING BUSINESS ABROAD

 CHARLOTTE, N.C., Sept. 8 /PRNewswire/ -- A critical legal decision faced by Carolinas companies in their ever growing foreign operations, be they acquisitions, divestitures or license or distribution agreements, is whether to engage U.S. counsel in addition to local foreign counsel. Many U.S. companies may be tempted to bypass the expense of U.S. counsel and rely solely upon foreign counsel in these and other international matters. The decision whether to involve U.S. counsel is not as simple as it may first appear, depending in part upon the experience of the U.S. executives in dealing with foreign counsel and their ability to transact business in a foreign culture and legal system.
 The first consideration in making this decision is whether the American executives want to document the transaction with an American-style contract or an abbreviated European version (Europe is used as an example here although the same is generally applicable to many other parts of the world). The American approach specifies all the salient legal and other details of the transaction in an all encompassing agreement. The European practice (particularly in continental Europe) uses a very short contract setting forth only essential business terms, leaving most of the legal details, such as representations and warranties, to the foreign country's applicable statutory provisions. This European approach tends to keep initial legal expenses down as less time is devoted to document revisions and to detailed negotiations regarding covenants and other legal niceties.
 This method, however, may not be best suited for U.S. business persons unfamiliar with the statutory provisions governing the short-form European contracts and with European legal customs and traditions generally. Also, these statutory provisions are often not well suited to complex multinational transactions and are unlikely to reflect the particular business needs of U.S. companies.
 Should the American client opt for the American approach, strong consideration should be given to engaging U.S. counsel, as they generally have more experience in drafting and negotiating lengthy American-style contracts than their European counterparts. In addition, continental European counsel often lack the word processing staff, night secretaries and advanced office automation necessary to draft and revise such documents on a timely basis.
 A second consideration in deciding whether to by-pass U.S. counsel is whether the U.S. business persons and the local foreign counsel are comfortable determining alone, in a multinational context, the most advantageous dispute and remedy provisions to be incorporated in the contract. This question requires decisions to be made concerning: (a) which country's law is to apply to the contract; (b) whether one country's courts should be given exclusive jurisdiction over contract disputes or whether disputes should be arbitrated, and if so where and in what language; (c) whether judgments obtained in one country can be enforced in the other without a new trial; and (d) the desirability of requiring escrowed funds or an international letter of credit to secure a party's obligations and avoid any concern about the enforceability of a judgment in the other country.
 Without first consulting American counsel, U.S. business persons may be uncomfortable determining if a foreign country's substantive law and courts adequately protect the American client's interests. For example, U.S. law and the U.S. court system provide some of the best intellectual property protection available anywhere in contrast to that available, at least until recently, in Germany. Thus, many American licensors of intellectual property insist that U.S. and California law govern any international supply and licensing arrangements and that any related litigation or other dispute resolution be conducted in the U.S.
 Other considerations for U.S. business persons are whether they are confident: (a) about selecting the right foreign law firm for the task; (b) communicating directly with European-trained continental lawyers, whose native tongue is not English, several time zones away; (c) analyzing the extraterritorial application of certain U.S. laws such as the Foreign Corrupt Practices Act passed in 1977, the Export Administration Amendments Act of 1985, and various state antitrust statutes; (d) understanding and analyzing often complex, uniquely European legal issues; and (e) coordinating and supervising multiple foreign counsel, where appropriate (until the advent of the single market in the European Community, most continental European counsel have had little experience in this regard).
 Experienced American counsel can provide valuable assistance in these areas by, for instance, aiding U.S. executives in understanding such uniquely foreign concepts as France's "Comblement de Passif," whereby directors can become personally liable for the debts of a corporation. U.S. counsel can also help to select the best foreign counsel for the task, based often upon prior first hand dealings with the firm in question. Finally, American counsel can frequently be helpful to their U.S. clients in multinational transactions by ensuring that their knowledge of their client's business approach and their client's risk tolerances are properly communicated to foreign counsel and reflected in the contracts. This may be especially important because under certain European legal cultures there is a tendency to apply their own traditional legal approach to a multinational transaction even if such an approach is not well suited to the U.S. client's circumstances.
 Greerson McMullen is an attorney with Kennedy Covington Lobdell & Hickman (KCLH) who recently spent over a year in Paris, France with the law firm of Sullivan & Cromwell. He practices in the areas of international law, securities laws, mergers and acquisitions and general corporate law. KCLH has offices in Rock Hill and Charlotte.
 -0- 9/8/93
 /EDITOR'S NOTE: This article appeared in a slightly different version in the Business Journal in Charlotte, N.C., but we thought it had wider interest and your readers might like to see it./
 /CONTACT: Alex Coffin of Coffin Associates, 704-333-2348, for Kennedy Covington Lobdell & Hickman/


CO: Kennedy Covington Lobdell & Hickman ST: South Carolina IN: SU:

MM-SB -- CH007 -- 9931 09/08/93 15:27 EDT
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