As an international business law firm in Miami, Florida, we specialize in providing services to businesses and clients interested in expanding their presence across borders, whether in the United States or outside of the United States. In this respect, our international business lawyers and advisors provide services to U.S. companies who want to expand beyond the United States and enter a new foreign market, but also inbound services to foreign companies and investors who want to expand their businesses to the United States and immigrate through their business and commercial activities to the US.
Oftentimes, for firms, the possibility of expanding beyond national borders, is inspired by the successful execution of an international project. For example, a US-based company doing business in Miami, Florida as an audio video services company is contracted by one of their customers in New York to redesign and integrate audio video equipment in Paris. Once in France, the Florida company starts considering the possibility of generating more business in France and expanding into Europe. Similarly, an Italy-based company completing a project in the US contracted by a US company may consider at the completion of the project to enter the United States market. For these firms, engaging in international business and executing successful international projects plays an important role in their decision to set up shop in or acquire a company in another country.
Once companies decide to do business internationally, their success is determined by how they address legal issues and regulatory considerations early in the process. The legal complexities of international business can be challenging, and without proper legal advice firms can be subject to fines and penalties. From a practical stand point, the legal aspects of international business are often overlooked initially but the reality is that every time a firm decides to conduct business in another country it is subject to that country’s laws and regulations and anything shorter than compliance with the foreign laws can be costly. Moreover, these foreign laws and regulations can be more complex and more burdensome and punitive than what the company may be used to in its own jurisdiction. Finally, when entering a new jurisdiction foreign-owned companies can be subject to different and often more stringent regulations. For example, in order to start a business in Florida, the company must have a registered agent in the State of Florida and the registered agent can be any private company or individual who meets the legal requirements. However, to duly form a business in the Netherlands, the company must use a registered agent that is licensed by the Dutch government as such or otherwise can incur penalties. Further, foreign-owned companies doing business in the United States are subject to Anti-Money Laundering regulations placing additional reporting requirements for opening and maintaining bank accounts.
Another aspect in international business are contractual agreements between foreign companies known as international business contracts. These contracts with a foreign company are different from contracts between parties from the same jurisdiction and present an array of unique challenges and legal considerations we discuss below.
Top considerations in international business contracts and transactions.
Lawyers often debate what law to choose to govern an international contract, whether we refer to an international joint venture agreement, a merger and acquisition agreement, an international sale agreement or an international licensing of intellectual property. When parties from different countries enter into a contract, they may agree to be governed by international contract law or abide by the laws of one of the countries or by the laws of a third country (non-party to the contract).
Under a contract every legal issue is determined in accordance with a system on law and parties can choose the jurisdiction governing their contract. In the United States there are as many jurisdictions as states, meaning that the parties can choose from 51 different jurisdictions. Simply put, in an international contract, companies can opt to have the contract written and interpreted under Florida law, New York law, California law, or any other state law. The laws of each US state share common aspects and ideologies, but they are very different from other jurisdictions such as France, Italy, Germany, Belgium, Sweden, Switzerland, England, Hong Kong, Singapore and others.
When the parties to an international contract choose a governing law, they also typically choose the courts of the country of the governing law as well, either exclusively or non-exclusively. This means that the courts are interpreting their own law.
The top considerations when choosing a law in international business contracts and transactions are:
- Freedom of contract. The Unites States generally favors freedom of contract in business dealings, but sometimes courts override the parties’ choices. This is similar in Germany, France and Australia.
- Certainty of contract terms. The parties to an international commercial contract usually cooperate in good faith and do not read every letter of their contract before they sign it. Normally, even if the business relation faces issues, they try to work together to resolve the problems before calling it quits. However, if the relationship breaks down, they need to know where they stand. Under the laws of the US states, the courts generally uphold what the parties agreed to in the contract. However, under the law of some states, Germany and France, the courts can override the terms of the contract in certain situations for good faith. To ensure predictability, the US courts have a doctrine that lower courts follow higher courts (precedent) so that the parties usually know where they stand. However, this is not the case for Germany or France. The result in these other jurisdictions is that the courts seem inherently less predictable so that the parties are exposed to potentially large losses if they get in the wrong court.
- Language. Today, English is the lingua franca of international business. It is hard to be involved in litigation or for the parties to protect their rights when the statute, laws and courts proceedings are in a foreign language. In addition, the United States has a large and developed literature on international business and the key points have been decided.
- High market acceptability. The United States laws enjoy high market acceptability. Business parties know what an offer is and the law is familiar from constant use by international parties.
- Stability and the rule of law. The US courts adhere to the rule of law and are stable in their legal direction. The litigation system in the US is oriented in favor of the Plaintiff with class actions, jury trials, unlimited discovery of documents, punitive damages, very high award of damages and no costs even if the Plaintiff loses.
The legal complexities of international business can be challenging and require proper legal advice for firms to be successful. Our international business lawyers can assist with business formation in Florida for non-US companies, international company structure, international business contracts, business immigration and advise US companies expanding abroad.
Malescu Law P.A. – Business Lawyers