International Business and Agreements: Learning about Legal Culture
Over the years I have negotiated a number of international agreements, typically representing domestic clients. My more recent work with EU-based clients, however, has given me additional insights about the U.S. and other legal systems.
These clients have established technology businesses in Europe. Each recently set up operations here in the Bay Area and asked that I adapt existing agreements for use in the U.S. As I work with these clients, two differences between the U.S. and the European Union jump out at me.
Length of Agreements
First, in the U.S. we often have longer agreements. European contracts tend to rely on, and implicitly or explicitly incorporate, detailed statutory provisions that do not exist here in the U.S. Furthermore, agreements here tend to include more business details and legal protections in case the relationship sours and ends up in litigation. For example, one client shared its existing reseller agreement. I found the document charming in its brevity and the abundance of white space on the page. By the time I added everything that is considered normal here in the U.S., the new version had four times as many words!
Still, not every agreement need take on Brobdingnagian proportions. One client’s European license agreement covered very much the same ground as license agreements here in the U.S. After I tightened and simplified it, the new version ended up 15% shorter than the original.
Protection of Data
Second, there are major differences in data protection laws. The EU takes a comprehensive approach based on the European Directive on Data Protection (Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data).
The Directive sets extensive guidelines for protecting personal data, but each EU Member State creates its own national laws to implement those guidelines. As a result, restrictions and requirements vary from country to country, creating compliance challenges for multinational European businesses.
The U.S. approach, in contrast, is both less comprehensive and more complex. At the federal level, privacy laws and regulations apply only to certain industries. For example, HIPAA (the Health Insurance Portability and Accountability Act of 1996) governs individually identifiable health information. Similarly, the Gramm-Leach-Bliley Act of 1999 (15 U.S.C. Sections 6801-6809) governs personally identifiable financial information.
In addition to national laws, states can add their own privacy requirements. For example, dozens of California privacy laws are described at the Office of Privacy Protection website. The complex interaction of federal and state laws – with federal superseding state in certain instances – sometimes makes privacy compliance here even more difficult than in the EU.
Working with these clients reminds me of a point that I have known for years: Just as a company should learn about the local human culture before doing business in a new country, it should learn about the local legal culture, too.
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
Dana Shultz is a business-savvy lawyer located in Northern California's San Francisco Bay Area (in the East Bay, near Oakland) who has in-depth knowledge of law, business, technology, and the needs of startup and early-stage companies.
Great post. If you have worked with Asian clients, what have you found similar or different with European clients? With Asian business dealings, I have seen deals done over a matter of days with each party getting to know each other more over food and drinks; less about business and more about the relationship.
@Dan X. Nguyen, Esq.
Thanks. I’m afraid I’ve had less exposure to Asian companies. Regarding contracts, what I have seen is similar to what I see in the EU (fewer words, more white space). I am not in a position to comment first-hand on Asian cultural issues, but what you have experienced comports with everything that I have read.
I’d add my two rubles for US-EastEurope contract drafting and negotiations.
1/ Main difference is in a role of a contract itself for parties: Eastern europeans (especially CIS ones) are more likely will appeal not to a contract wording but to oral agreements or even common (local style) sense. And US party hunded percent will arguing with reference to a contract.
It means that if US party want to have a sucessful cooperation with Easterns, contract MUST include all oral agreements and wording like “Parties confirmes that entire contract comply with a meaning and common [insert territory] business practices…” and;
2/ Do not hesitate to add simpliest things such as procedure of notify or a moment of payment – even if it is described in local or implied legislation it is essental to write it down in a contract – Eastern Europeans are not fans of Codes and law books so for them: “If there is no my signature on it, it means that i’m not obliged to”.
there are a lot of more tips and tricks in cross-border and cross-cultral interconnections, but you will be able to invent and use them only practicing :)
Regards,
Sergey Avetikov
@interested
Thanks, Sergey – great info! I don’t have a lot of contact with people in Eastern Europe / CIS, so I appreciate the input.