Here are the factors to weigh up when you are considering whether it is worth the investment to use country specific legal documents when trading internationally.

It is worth using country specific documents when:

  1. You are looking to set up in a new country and expect to grow the business in that country significantly over time (ie, you are making a long term commitment to growing your business in that country);
  2. Your products are expensive (mining machinery for example) – each contract requires a substantial financial commitment on your part, so that one failed transaction will cause you significant losses;
  3. You rely heavily on the limitation of liability and exclusion clauses (especially consequential loss) in your contracts to keep contractual losses to a minimum.

It may not be worth using country specific documents when:

  1. You are trading in a country which does not have an established and trustworthy legal system, and where it is unlikely you will be able to enforce any agreement adequately in any event;
  2. You have a lots of small contracts in many different countries, none of which represent a huge investment;
  3. You do not have staff on the ground (or only 1 or 2); and
  4. You do not expect to invest in growing your business in those countries for the long term (at this stage).

Here are some questions to ask when making the decision which way to go (knowing you can always revise the decision if circumstances change):

  1. How big do you expect your business to grow in the new country and how quickly – how much time and energy are you planning to invest in growing the business in this country – the bigger the investment and growth you want, the more likely it will be best to use country specific documents from the outset;
  2. What will the gross and net values of your business be in the new jurisdiction – the more your business is worth in that country, the more it is worth investing in proper documentation to protect your investment if something goes wrong;
  3. What is each transaction worth? Can you afford to wear the loss if something goes wrong and you can’t enforce your contract? – if you can’t afford the loss (as with insurance), you need to ensure you can enforce your agreements as far possible;
  4. What is the legal system of the country you want to trade in? How reliable is it? What is the likelihood of a fair hearing and a transparent legal process taking place in the event something goes wrong? – if there is no chance of a proper legal process taking place to resolve any dispute, there is no real point using the local legal system. You may just need to wear the risk, or try to find ways to bring the law of your home country to bear on the agreements;
  5. How different is the legal system from your own (civil law for example is different in many significant respects from common law)? Do those differences make using one-size-fits-all documents difficult?;
  6. If you are working across many jurisdictions, are there some countries where your business is worth more to you than others? – that is, are there some countries where your business is fairly insignificant and you are not planning to invest in growing it there in the foreseeable future and some countries which are powerhouses for your business? – it may be worth considering country-specific documents for those powerhouse countries, with one-size-fits-all for the others.

It all comes down to where you want to place your risk. It is a risk not to have country-specific documents in every case, but that risk might be outweighed by other factors. There is no one right answer, as with all things in business, it is about balancing risk and cost against the opportunity to grow and expand your business and developing your legal strategy around those commercial objectives.

Share This Story...

Key Contact

Fiona Henderson

Read profile

Related Articles

  • Find out more
  • Find out more
  • Find out more