Navigating international business negotiations:
Four challenges

By Germán Morales

This article was originally published by The Lawyer’s Daily, part of LexisNexis Canada Inc.

We lawyers are often criticized for being too parochial. This is certainly not an appealing attribute for legal advisers who work internationally. We need to be unprejudiced and open-minded. Acting as in-house or external counsel for an international company is a fascinating experience. It requires refined preparation and sensitivity to successfully perform as a trusted adviser in a global business and legal environment.

Finding the magic compass to navigate international business transactions is an adventure. And as any adventure, it offers challenges. Four important challenges in international negotiations are overcoming preconceptions, understanding cultural differences, embracing language barriers and managing different laws.

Making mistakes in these areas will have an impact on the negotiation, and a mediocre negotiation will have an impact on the company’s business. It can also directly hurt the reputation of the company, especially if it is known as an international company doing business globally. Stakeholders who deal with international companies understandably assume that their representatives have the necessary experience and knowledge to carry out international transactions. Actions or omissions that prove this wrong will not reflect well in the company’s status.

Overcoming preconceptions

I have been involved in numerous international negotiations and have frequently encountered the same preliminary view from both sides of the table: “We are the good folks and they are the bad folks.” Well, in business negotiations there are typically good people trying to get a good deal. That’s all. But we tend to think that our systems, our clients, our principles are better or superior than the others. If the transaction involves companies in the western and the eastern hemispheres, our initial reaction is to westernize the negotiations, and if the hemispheres that are involved are north and south, then we tend to think that the northern principles should be the guiding ones. After all, we say convincingly to ourselves, a compass will always point toward the north. And so, we embark on our international transactions with a faulty compass.

Overcoming preconceptions is particularly important for in-house counsel of companies that have operations or branches in different parts of the world. Preconceptions tend to generate a “silo” working environment which is detrimental to the vision of a global company. In order to build a worldwide corporate teamwork spirit, we need to humbly overcome preconceptions without claiming superiority from headquarters.

Understanding cultural differences

Interacting with different cultures is always an enriching experience. However, for many legal counsel, managing cultural differences is not only a challenge but also a very stressful situation they fear.

For instance, sometimes the basic concept of time is questionable when dealing internationally. Leaving aside the time differences among regions, when you say that the contract will be ready tomorrow at 5 p.m. you expect the contract to be ready at that time. However, in certain jurisdictions, the concept of time is more elastic. Being flexible in those instances is not only opportune but also pragmatic. You are not going to change the local culture and therefore you must work with it and learn from it by keeping an open mind. The key is to be receptive to different perspectives.

As counsel, we need to remember that cultural and social reasons are typically the basis for legislation (be it statutory or case law) and most likely for the interpretation of certain agreements.

Understanding and respecting cultural differences is crucial when structuring foreign direct investments with a long-term view, be it by way of joint ventures, greenfield projects or mergers and acquisitions. It is impossible to have affectio societatis with a foreign partner if you do not truly understand your partner’s culture.

Embracing language barriers

Somebody said that language is the key to a people’s culture. The same can be said about an international negotiation. If you want to start with the right foot, you must speak the same language.

In-house counsel to Canadian companies are used to speaking and communicating in English or French. However, for those regions of the world where neither of these languages is the local tongue, counsel should be prepared to communicate in other languages. If they do not speak the local language, they should get a translator or interpreter. Learning some of the languages where the company does business it is totally advisable and, in today’s global world, a must.

Speaking the same language facilitates the negotiations and helps build a stronger lasting relationship with clients, partners and local stakeholders. Be prepared to be accommodating in accepting documents written in Spanish, Portuguese, Russian, Italian, German, Mandarin. … Trying to impose our own languages not only can be regarded as offensive, but also as an indication that we are not the international global citizens that we think we are.

Managing different laws

There are different legal systems and families of laws. In an international context, one of the most problematic legal issues is the selection of the governing law for a contract or the jurisdiction to incorporate a new entity. These issues should not be taken lightly by the legal adviser. Selecting the governing law has a direct impact on the performance of the obligations under the contract and the rules and norms that a court or an arbitral tribunal will consider if a dispute arises (e.g. interpretation of the contract, availability of injunctive relief and amount of damages). Deciding on the governing law or applicable jurisdiction is a risk management exercise. If there is not sufficient knowledge or experience in the relevant foreign laws, local counsel and expert assistance should be engaged.

Negotiations of cross-border contracts and international business transactions are challenging and require an effective communication with all the relevant stakeholders for the success of the project. This can be achieved by overcoming preconceptions, understanding cultural differences, embracing language barriers and managing different laws.

Germán Morales is an experienced international legal corporate counsel and business adviser. He is the program director for the Professional LL.M. in International Business Law at OPD-Osgoode Hall Law School at York University and teaches international business transactions and comparative legal systems. You can e-mail him at moralesgerman@hotmail.com.

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This article was originally published by The Lawyer's Daily – providing Canadian legal news, analysis and current awareness for lawyers and legal professionals who need a real-time view on the shifting legal landscape.