Managing legal disputes abroad

Those of us who do business in developing countries often find ourselves thinking: If only it could be like back home. However, if one plans ahead and recognizes, in advance, that one has to do things differently in different jurisdictions, a lot of headaches can be prevented.

Legal counsel is key, and for a company that finds itself in local disputes in Africa or Latin America, a lawyer’s role is more than managing risks. By leveraging regional institutions and trading blocs, he can further the spread of minimum legal protection for a foreign company and enhance its security.

When difficulties arise, there are several ways a company can protect itself and its shareholders:

• manage the corporate structure;
• ensure local banks and “elites” are involved;
• establish a multi-jurisdictional legal team;
• establish a relationship with the media; and
• utilize multinational legal conventions and organizations to create a national impact and neutralize whatever advantage local adversaries might have.

There has never been a greater opportunity for multinationals to mould the politico-legal environment. Yet, there is a perception that “good corporate citizenship” is based on a put-up-or-shut-up philosophy. The U.S. Foreign Corrupt Practices Act (FCPA) has put American-based business in a position of local impotence, based largely on a lack of understanding of the act itself. Even though a multinational organization may think it is in control, its shareholders are actually at a much greater risk than they realize.

For example, there has been an increase in the number of constitutional injuctions against companies in the resource sector. These injunctions are often used in transactions with private parties when there is an accusation of constitutional impingement. Recent cases in Brazil and Venezuela have shown minimal results.

Unfortunately, the growth in local empowerment is not necessarily a sign of a budding democracy. In the absence of democratic institutions, so-called “free” elections are often a masquerade for repressive elites. The local counsel and team often wield tremendous power in corrupt judiciaries and hostile political environments. This is unfortunate since aggressive representation can limit the employment prospects of your local advisor. From due diligence to dispute management, a multi-national team is a legal prerequisite.

The multinational approach should be reflected in the lobbying and legal approach developed for each project. It should include recourse to transnational bodies. Companies are also advised to familiarize themselves with bilateral investment treaties negotiated between countries for investment protection.

Mining executives doing business in developing countries want to know, How do we prepare for potential disputes? Since rights run concurrently with obligations, protect yourselves. Develop an exit strategy in the original due diligence, and be willing to fight. Build a strong cross-cultural team at the outset and identify the regional or global institutions that can be used to leverage your position. Protecting foreign investors’ expectations, even for repatriation and global pricing for local resources, requires an innovative and often unconventional approach.

— The author is a lawyer with Toronto-based Amsterdam & Peroff. He has handled legal disputes for clients in Africa, South America, and the U.S.