Comparative business and European law
Understanding the Framework
• Transnational Business Law
• Face-to-face national business transactions vs. international business transactions
Penetration in International Markets
1.Direct export-import sale
2.Agency and distributorships
3. Technology transfer and licensing. Franchising
4. Foreign Direct Investment
International trade largely relates to physical goods. Although increasing, trade in services
accounts for a much lower share. In 2019 world trade in goods was valued at close to US$19
trillion, while trade in services accounted for about US$6 trillion.
The COVID-19 pandemic of 2020 has severely disrupted the world economy. World GDP is
expected to contract by an unprecedented amount in 2020: about 5 per cent. The value of
international trade is expected to fall by about 8 per cent.
Import and Export Trends
For most of the major economies, the months that recorded the sharpest drop were April and May
of 2020.
A slow recovery took hold in July and August, with a further improvement in September, when
trade in some of the economies returned to growth on a year- over-year basis.
China’s trade patterns have been notably di erent relative to other economies. China’s economy
was the rst to be a ected by COVID-19 and after falling in the early months of the pandemic,
Chinese exports were already stabilizing in Q2 2020 and then rebounding strongly during Q3
2020, with YoY growth rates of almost 10 per cent. Overall, the level of Chinese exports for the
rst nine months of 2020 was comparable to that of 2019 over the same period. On the import
side, the Chinese demand for imported products also recovered, but less than exports.
Economic disruptions brought about by COVID-19 have a ected international trade in some
sectors signi cantly more than others. For example, the value of global trade in the in the
automotive sectors ((motor vehicles and transport equipment) fell into decline.
Conversely, most of the agri-food sectors (with the exception of tobacco and beverages) have
been stable or recorded a small increment. Trade signi cantly increased in the textile sectors (10
per cent relative to the same period of 2019). Such increases are linked to the COVID-19
pandemic as these sectors include protective equipment such as surgical masks. To a lesser
degree COVID-19 also a ected the trade of o ce machinery which bene ted from increased
demand for home o ce equipment.
Some Ideas on Comparative Law
• Legal families:
– Common law
– Civil law (French legal origins /German legal origins)
– Scandinavian legal systems
– Socialist legal systems
– Religious legal systems (e.g., Sharia)
• How do we divide legal families?
– E.g. common law vs. civil law: stare decisis so di erent?
– Usually based on “private” law, if you look at constitutional/public law might nd surprises
1
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, Negotiation and drafting international contracts
Negotiation
Very di cult to o er general rigid rules that apply to any situation, lots of variables:
– Type of negotiation: contract, settlement of a dispute, treaty ...
– Goals: single transaction or repeated game? Short or long term relationship?
– Personal style: aggressive, cooperative? Focus on the issue, not the person (up to a certain
point...)
– Bargaining power of the parties
But some general rules and tactics can be identi ed, for example:
– clearly identify the speci c goals: how important is it to reach an agreement?
– have a clear understanding of the “reservation price” and of unrenounceable elements, try to
gure out the info for the other party
– information is often incomplete: sometimes you can use it to your advantage
– time is often limited: sometimes you can use it to your advantage (e.g. put pressure on the
other party)
- The «temptation» to lie, omit information, etc.: legal risks
Psychology
Detecting lies
-Facial and body language
• Right-handed people: eyes up and to the left if they are remembering things, eyes up and to the
right when they are telling a lie.
• Mouth and nose touching, blinking;
• Eye-contact is not an indicator of sincerity; and sweating not necessarily an indicator of a lie;
• “Incongruence”:slightly shaking the head when saying “yes”;
– What people say:
• Exaggerated details;
• Repeating things verbatim;
– Interactive strategies:
• Ask to repeat the story;
• Stare at the person with disbelief: liars become uncomfortable, people telling the truth become
upset;
• Casually suggest, in a non-o ensive way that makes it sound innocent, that you will check the
story with third parties (often liars give you reasons not to do that).
Beware of cultural di erences!
How to E ectively Negotiate
Some people gave the following advice: “When you’re dealing – and that’s what I am, I’m a dealer
– You don’t go in with plans. You go in with a certain exibility. And you sort of wheel and deal.”
– Donald Trump, as quoted by the NYT, August 11, 2015
Prepare, prepare, and prepare:
– Terms and history of proposed transaction from a legal (one of the rst questions: applicable
law?) and economic point of view;
– Goals of the client (especially, unrenounceable elements, reservation price);
– Other parties, their possible goals;
– Timetable for nalizing the transaction;
– Client’s business and industry (for example, industry uses), how this deal ts in the larger
picture;
– Consult examples of similar contracts, but attention: tailor-made is better, especially for
complex and unique transactions.
2
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, • Location: being the host or the guest?
– Pros and cons: authority, control of the environment (good food? smoking?), excuse for
leaving or for not having information or documents
• Seating and location arrangements
– More competitive, more cooperative
– Use of evidence and data, e.g. slides, documents? – “Audience”?
• Timing issues
– Lenght (empirical evidence shows that after a few hours without progress... it’s better to
reschedule); deadlines
– Preparing an agenda? (control over when you discuss what)
• How many people?
– Advantages of having as many as the other party, plus one (time to speak, fatigue...). But not
necessarily...
• Opening o er: better to make it or to receive it?
– High or reasonable? Risk of breaking the deal, risk of losing credibility (e.g. glass vase in Venice
from $700 to $70)
– Attention: when a gure is uttered, even if quickly retracted, it lingers
• Negotiation “games”:
– Establish dominance (experience…); or hidei t!
– Wooden leg: «What would you expect from a person with a wooden leg?»: impossible client
game, negotiator not responsible for rejecting (e.g. lack of nancial resources of the client, or legal
limitations)
– Yes, but... (beware of cultural issues, e.g. in some countries “yes” might simply mean “I
understand”)
– Red herring: presenting a minor issue as a big one to make a concession;
- Minimizing: presenting a major issue as a small one (indicators: “by the way...”, “before I
forget...” often preceed something important)
• Do not personalize, focus on the issue!
• – and of course, formulate a strategy
Parts of a contract
1. Preamble (name of agreement, date, parties involved)
2. Recitals (why the parties are contracting – could be important!)
3. Words of Agreement (parties’ intent to manifest their agreement to the contract)
4. De nitions
5. Actions (e.g. goods or services to be provided and payment terms)
6. Representations and Warranties
7. “Boilerplate” (Standardized pieces of text for use as clauses in contracts. But they rarely are
so standardized! E.g. con dentiality, choice of law... Etimology: boiler plates standard in ship
building, or syndicated articles for local newspapaers after Civil War)
8. Signatures
9. Schedules (list of information, e.g. list of materials contracts, not included in the
representations. Reasons: keep contract shorter and easy to read; often not prepared by
lawyers drafting the agreement, e.g. bank)
10. Exhibits (agreements or other documents treated as part of the contracts, e.g. nancial
statements)
3
fi ff fi fi fi fi
, Drafting
• Clear, unanbiguous, plain English
• Common mistakes
– Use of “will”: “The laws of Spain will govern this Agreement”, from when? Write instead: “The
laws of Spain govern this Agreement”
– Not to use “shall” to signal obligations, covenants
“Boilerplate” Provisions
• Con dentiality
• Force majeure
• Choice of law
• Forum selection clause
Con dentiality
• Some protections in the absence of a contract, but weak, di cult to enforce and generally
limited to “trade secrets” (“su ciently valuable and kept secret”)
• Speci c agreement:
– Broadens and clari es the protection
– Attention: there might be competing disclosure obligations
– Applicable laws or regulation that trump contractual con dentiality provisions
Negotiating a Con dentiality Agreement: Practical Tips
• Costs and bene ts of a lenghty discussion at this early stage of negotiation (might be worth if
your client really has con dential information that requires protection)
• Pros and cons of showing up with an already drafted provision/agreement (a common problem
also for other clauses)
Examples:
Force Majeure
“A party is not liable for failure to perform the party's obligations if such failure is as a result of
Acts of God (including re, ood, earthquake, storm, hurricane or other natural disaster), war,
invasion, act of foreign enemies, hostilities (regardless of whether war is declared), civil war,
rebellion, revolution, insurrection, military or usurped power or con scation, terrorist activities,
nationalization, government sanction, blockage, embargo, labor dispute, strike, lockout or
interruption or failure of electricity or telephone service.
If the nonperforming party asserts Force Majeure as an excuse for failure to perform its obligation,
then the nonperforming party must prove that it took reasonable steps to minimize delay or
damages caused by foreseeable events, that the party substantially ful lled all non-excused
obligations, and that the other party was timely noti ed of the likelihood or actual occurrence of
an event of force majeure described in the paragraph above.”
Choice of Law
“ This contract is governed by and interpreted in accordance with the laws of [the designated
State] ...”
Forum Selection Clause
“In the event of any dispute concerning this Contract, suit can be brought only in the courts of
[the designated State]”
Getting Ready . . . How to Brief a Case
A brief might include, in outline form, the following items:
• Title, date, court (. . . this is the easiest part!)
• Parties: P(s): plainti (s); D(s): defendant(s)
• Issue: De ne the dispute before the court (e.g. Can a plainti get damages for late delivery of
goods?)
• Facts: short description of the determinative facts (list the facts that the court considered
important). Distinguish the “facts” from the “legal rules” applied to those facts
4
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Understanding the Framework
• Transnational Business Law
• Face-to-face national business transactions vs. international business transactions
Penetration in International Markets
1.Direct export-import sale
2.Agency and distributorships
3. Technology transfer and licensing. Franchising
4. Foreign Direct Investment
International trade largely relates to physical goods. Although increasing, trade in services
accounts for a much lower share. In 2019 world trade in goods was valued at close to US$19
trillion, while trade in services accounted for about US$6 trillion.
The COVID-19 pandemic of 2020 has severely disrupted the world economy. World GDP is
expected to contract by an unprecedented amount in 2020: about 5 per cent. The value of
international trade is expected to fall by about 8 per cent.
Import and Export Trends
For most of the major economies, the months that recorded the sharpest drop were April and May
of 2020.
A slow recovery took hold in July and August, with a further improvement in September, when
trade in some of the economies returned to growth on a year- over-year basis.
China’s trade patterns have been notably di erent relative to other economies. China’s economy
was the rst to be a ected by COVID-19 and after falling in the early months of the pandemic,
Chinese exports were already stabilizing in Q2 2020 and then rebounding strongly during Q3
2020, with YoY growth rates of almost 10 per cent. Overall, the level of Chinese exports for the
rst nine months of 2020 was comparable to that of 2019 over the same period. On the import
side, the Chinese demand for imported products also recovered, but less than exports.
Economic disruptions brought about by COVID-19 have a ected international trade in some
sectors signi cantly more than others. For example, the value of global trade in the in the
automotive sectors ((motor vehicles and transport equipment) fell into decline.
Conversely, most of the agri-food sectors (with the exception of tobacco and beverages) have
been stable or recorded a small increment. Trade signi cantly increased in the textile sectors (10
per cent relative to the same period of 2019). Such increases are linked to the COVID-19
pandemic as these sectors include protective equipment such as surgical masks. To a lesser
degree COVID-19 also a ected the trade of o ce machinery which bene ted from increased
demand for home o ce equipment.
Some Ideas on Comparative Law
• Legal families:
– Common law
– Civil law (French legal origins /German legal origins)
– Scandinavian legal systems
– Socialist legal systems
– Religious legal systems (e.g., Sharia)
• How do we divide legal families?
– E.g. common law vs. civil law: stare decisis so di erent?
– Usually based on “private” law, if you look at constitutional/public law might nd surprises
1
fi fi fi ffi
ff ff ff ffi ff fi ff fi fi
, Negotiation and drafting international contracts
Negotiation
Very di cult to o er general rigid rules that apply to any situation, lots of variables:
– Type of negotiation: contract, settlement of a dispute, treaty ...
– Goals: single transaction or repeated game? Short or long term relationship?
– Personal style: aggressive, cooperative? Focus on the issue, not the person (up to a certain
point...)
– Bargaining power of the parties
But some general rules and tactics can be identi ed, for example:
– clearly identify the speci c goals: how important is it to reach an agreement?
– have a clear understanding of the “reservation price” and of unrenounceable elements, try to
gure out the info for the other party
– information is often incomplete: sometimes you can use it to your advantage
– time is often limited: sometimes you can use it to your advantage (e.g. put pressure on the
other party)
- The «temptation» to lie, omit information, etc.: legal risks
Psychology
Detecting lies
-Facial and body language
• Right-handed people: eyes up and to the left if they are remembering things, eyes up and to the
right when they are telling a lie.
• Mouth and nose touching, blinking;
• Eye-contact is not an indicator of sincerity; and sweating not necessarily an indicator of a lie;
• “Incongruence”:slightly shaking the head when saying “yes”;
– What people say:
• Exaggerated details;
• Repeating things verbatim;
– Interactive strategies:
• Ask to repeat the story;
• Stare at the person with disbelief: liars become uncomfortable, people telling the truth become
upset;
• Casually suggest, in a non-o ensive way that makes it sound innocent, that you will check the
story with third parties (often liars give you reasons not to do that).
Beware of cultural di erences!
How to E ectively Negotiate
Some people gave the following advice: “When you’re dealing – and that’s what I am, I’m a dealer
– You don’t go in with plans. You go in with a certain exibility. And you sort of wheel and deal.”
– Donald Trump, as quoted by the NYT, August 11, 2015
Prepare, prepare, and prepare:
– Terms and history of proposed transaction from a legal (one of the rst questions: applicable
law?) and economic point of view;
– Goals of the client (especially, unrenounceable elements, reservation price);
– Other parties, their possible goals;
– Timetable for nalizing the transaction;
– Client’s business and industry (for example, industry uses), how this deal ts in the larger
picture;
– Consult examples of similar contracts, but attention: tailor-made is better, especially for
complex and unique transactions.
2
fi ffi ff fiff ff fi ff fi fl fi fi
, • Location: being the host or the guest?
– Pros and cons: authority, control of the environment (good food? smoking?), excuse for
leaving or for not having information or documents
• Seating and location arrangements
– More competitive, more cooperative
– Use of evidence and data, e.g. slides, documents? – “Audience”?
• Timing issues
– Lenght (empirical evidence shows that after a few hours without progress... it’s better to
reschedule); deadlines
– Preparing an agenda? (control over when you discuss what)
• How many people?
– Advantages of having as many as the other party, plus one (time to speak, fatigue...). But not
necessarily...
• Opening o er: better to make it or to receive it?
– High or reasonable? Risk of breaking the deal, risk of losing credibility (e.g. glass vase in Venice
from $700 to $70)
– Attention: when a gure is uttered, even if quickly retracted, it lingers
• Negotiation “games”:
– Establish dominance (experience…); or hidei t!
– Wooden leg: «What would you expect from a person with a wooden leg?»: impossible client
game, negotiator not responsible for rejecting (e.g. lack of nancial resources of the client, or legal
limitations)
– Yes, but... (beware of cultural issues, e.g. in some countries “yes” might simply mean “I
understand”)
– Red herring: presenting a minor issue as a big one to make a concession;
- Minimizing: presenting a major issue as a small one (indicators: “by the way...”, “before I
forget...” often preceed something important)
• Do not personalize, focus on the issue!
• – and of course, formulate a strategy
Parts of a contract
1. Preamble (name of agreement, date, parties involved)
2. Recitals (why the parties are contracting – could be important!)
3. Words of Agreement (parties’ intent to manifest their agreement to the contract)
4. De nitions
5. Actions (e.g. goods or services to be provided and payment terms)
6. Representations and Warranties
7. “Boilerplate” (Standardized pieces of text for use as clauses in contracts. But they rarely are
so standardized! E.g. con dentiality, choice of law... Etimology: boiler plates standard in ship
building, or syndicated articles for local newspapaers after Civil War)
8. Signatures
9. Schedules (list of information, e.g. list of materials contracts, not included in the
representations. Reasons: keep contract shorter and easy to read; often not prepared by
lawyers drafting the agreement, e.g. bank)
10. Exhibits (agreements or other documents treated as part of the contracts, e.g. nancial
statements)
3
fi ff fi fi fi fi
, Drafting
• Clear, unanbiguous, plain English
• Common mistakes
– Use of “will”: “The laws of Spain will govern this Agreement”, from when? Write instead: “The
laws of Spain govern this Agreement”
– Not to use “shall” to signal obligations, covenants
“Boilerplate” Provisions
• Con dentiality
• Force majeure
• Choice of law
• Forum selection clause
Con dentiality
• Some protections in the absence of a contract, but weak, di cult to enforce and generally
limited to “trade secrets” (“su ciently valuable and kept secret”)
• Speci c agreement:
– Broadens and clari es the protection
– Attention: there might be competing disclosure obligations
– Applicable laws or regulation that trump contractual con dentiality provisions
Negotiating a Con dentiality Agreement: Practical Tips
• Costs and bene ts of a lenghty discussion at this early stage of negotiation (might be worth if
your client really has con dential information that requires protection)
• Pros and cons of showing up with an already drafted provision/agreement (a common problem
also for other clauses)
Examples:
Force Majeure
“A party is not liable for failure to perform the party's obligations if such failure is as a result of
Acts of God (including re, ood, earthquake, storm, hurricane or other natural disaster), war,
invasion, act of foreign enemies, hostilities (regardless of whether war is declared), civil war,
rebellion, revolution, insurrection, military or usurped power or con scation, terrorist activities,
nationalization, government sanction, blockage, embargo, labor dispute, strike, lockout or
interruption or failure of electricity or telephone service.
If the nonperforming party asserts Force Majeure as an excuse for failure to perform its obligation,
then the nonperforming party must prove that it took reasonable steps to minimize delay or
damages caused by foreseeable events, that the party substantially ful lled all non-excused
obligations, and that the other party was timely noti ed of the likelihood or actual occurrence of
an event of force majeure described in the paragraph above.”
Choice of Law
“ This contract is governed by and interpreted in accordance with the laws of [the designated
State] ...”
Forum Selection Clause
“In the event of any dispute concerning this Contract, suit can be brought only in the courts of
[the designated State]”
Getting Ready . . . How to Brief a Case
A brief might include, in outline form, the following items:
• Title, date, court (. . . this is the easiest part!)
• Parties: P(s): plainti (s); D(s): defendant(s)
• Issue: De ne the dispute before the court (e.g. Can a plainti get damages for late delivery of
goods?)
• Facts: short description of the determinative facts (list the facts that the court considered
important). Distinguish the “facts” from the “legal rules” applied to those facts
4
fifi fi fi fifi fffi fi fi fl ffi fi fi ff ffi fi fi
