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THE ROLE OF YOUR
U.S. COUNSEL IN INTERNATIONAL LITIGATION
Introduction:
It was perhaps
twenty years ago and my client had never sued anyone in Belgium before.
Now he was going to trial in Brussels the next day and had just been
told by his Belgian lawyer that not only would there be no cross
examination of witnesses-but that there would be no real trial at all.
The judge would decide predicated on papers delivered to the Court.
There might not even be a court appearance. He called me the night
before the trial (his night, my day) and he was as close to hysterical
as this staid elderly scientist-businessman had ever been.
He was no stranger
to litigation. He had been in litigation in United States and
Californian courts half a dozen times. It was an inherent and perhaps
inevitable part of his business since he dealt with high tech devices
easily copied and worth quite a bit of money and was constantly forced
to go to court to stop illegal competition.
His decision to
expand to Europe was a good one and he had selected what he thought were
experienced and honest joint venturers to help him enter that market.
They wined and dined each other, and during an excellent dinner in
Paris, executed a one page hand written agreement that was half in Dutch
and half in English, saying to each other that they would have legal
counsel create a “true final agreement” in the next week.
Business being
business, they never quite got around to the final agreement and three
years later were at loggerheads with our client claiming that his now
former partners had stolen his ideas and started their own business
using them. They responded they had that right in the contract, indeed,
had exclusive rights both under the contract and EEC law, as stated (in
Dutch) in the contract.
Since EEC law
applied and the defendants were Belgian, our client was compelled to
commence litigation in Brussels. Since we had not reviewed or approved
the contract, there were no safeguards such as arbitration in a neutral
locale, awarding of attorneys fees to the prevailing party, or even
appropriate selection of the law to apply to the contract. The contract
was bad but our client was facing a much worse surprise. EEC law and the
Belgian system of courts made his ability to present his case and win
problematical, indeed.
His European lawyer,
Belgian and used to excitable Americans, had not bothered to explain in
detail either the contractual laws or the type of trials that exist in
Brussels and our client had assumed that the full panoply of tools of
American litigation (depositions, cross examination of witnesses, jury
trials, opening and closing arguments, etc.) would apply.
None of those tools
exist in Belgium. The judge normally decides on briefs and papers
submitted. Seldom…very seldom…a witness can be asked by the judge to
testify on a particular issue but the judge asks the questions and there
is no cross examination. No legal discovery at all. Just papers
delivered to a judge. “I didn’t know,” our client cried, “My lawyer
didn’t even tell me.”
Our client assumed
that his lawyer knew that our client was ignorant of the differences in
American and European litigation, of course, with the unconscious
arrogance that we Americans often have. Since we have our legal system,
the whole world should emulate us and, at the least, would know all
about our system. We suspect his European lawyer did not even know that
our client expected a much different type of trial. If he had known, he
probably would not have cared a great deal in any event. One European
attorney, over drinks, once commented that one of the few enjoyments he
had in life was telling Americans that when in Europe, one does as the
Europeans do and that their court system works quite well for them.
Unstated, he expressed the resentment that many Europeans feel when
their American clients bellow about the lack of “protection” they claim
exists in the European court system.
But the lesson was
not just the lack of communication between a foreign lawyer and his
client. The entire case radically alters when one goes into another
court system. One cannot depend on the discovery tools described in our
article
The
American System of Litigation. One must adjust to a very
different world and attorneys who never put their clients on the witness
stand, never cross examine witnesses, never try to sway a jury. The
system is different, the lawyers are different, the judges are
different…and the results can be very different.
And any smart
business person will recognize that and adjust. Which is where United
States counsel comes into the picture.
This article will
describe the role of United States legal counsel in supervising as
strategic counsel your case in another foreign locale. It will
describe why it is needed, what is done, and why the cost benefit of the
decision to use United States counsel to oversee and direct the matter
is well worth it in any major piece of litigation. The reader may also
wish to first read our article,
International Business Transactions for the
United States Business.
Why Two Law
Firms to Try One Case?
Another client, who
was building a beach front home in Hawaii, taught me this lesson. He had
wisely hired a local contractor, understanding that dealing with the
building department and local subcontractors required local knowledge.
Then he hired a California general contractor (he called a “construction
supervisor”) to oversee the overall construction work. I asked why
double the cost and hire two contractors. “I don’t know the Hawaiian
contractor or what they do and don’t do. He doesn’t know me and I don’t
speak construction talk. I need a translator and I need someone I trust
to understand my plans. I won’t scuba dive without a guide. Building in
a out of state location is more dangerous than diving in unknown waters.
I need a guide and that guide has to know enough about construction to
interact with the local builder and ask the right questions and give me
the right warnings.” That job went well.
Litigation is more
complex and ultimately more dangerous than building a house in a
foreign locale and the differences in culture, the legal community, the
laws, and the business climate are such that very careful analysis of
all those elements are going to be required. Some foreign counsel are
so well versed in interacting with Americans and their expectations that
such interaction goes smoothly. Most are not and it often makes sense to
retain experienced American counsel used to dealing with foreign
counsel. One professional dealing with another-especially a professional
used to interaction with legal counsel from other jurisdictions-
facilitates communication and, most importantly, allows concurrence of
expectations and planning.
Again, an example
perhaps best exemplifies the benefits. A client had hired local counsel
to collect on a commercial debt owed to it by a Chinese importer of
their materials in Indonesia. English was spoken by the local counsel so
language was not the problem. What was a problem, however, was the fact
that the local counsel also worked for the parent company of the
defendant, both unknown to our client and not a matter particularly
remarkable in the mind of the Indonesian attorney. After tens of
thousands of dollars of fees and two years of delay in the local courts,
our client finally came to us to ask if there was a problem.
There was. Our
client’s counsel had neglected (or, just perhaps, intentionally failed)
to file a particular pleading which had led to the entry of default
against our client and most of the money he had spent in fees had been
spent trying to remove that default. This was made known to us by
replacement Indonesian counsel we had retained (referred by Australian
counsel we worked with often) and while our client never did obtain a
cent, at least it avoided the massive verdict that the opposing party
had been likely to get from that default.
From the inception
of the case in selecting the correct counsel, to oversight of the case
in determining what really happened, to strategic planning of the real
value of the potential law suit, it can be very useful to have counsel
one trusts and who can impose upon local counsel the requisite
diligence.
Keep in mind that
attorneys are engaged in continuous mutual business and a bad reputation
can cut off business quite quickly. To affront a client unlikely to
appear in the country again is one thing-to affront an attorney who does
international law and likely to be before the same courts with other
local counsel is quite another matter.
Again, you need the
guide before entering the water to dive…
What Does
the US Legal Counsel Actually Do?
1. ADVISE ON
WHETHER TO COMMENCE ACTION AT ALL The first step is to consult as
to what is realistically possible in the nation at issue. For instance,
seeking to enforce intellectual property rights in China or Khuzestan is
a waste of time and money. Alternative non-legal means to protect
yourself must be considered. Local counsel, when asked, is likely to
advise a law suit simply to earn money. United States counsel should
have a broader out look.
2. SELECTION OF
COUNSEL AND JURISDICTION: Often various jurisdictions may be
available and most international attorneys have a stable of counsel that
can either take the case or obtain other counsel they know to take the
case. Personal interaction with counsel is important. Most nations
depend far more on personal connections than the United States does. And
those personal connections lower the chance for dishonest or lax local
counsel and allow frank and full discussion of which jurisdiction within
a nation may be the one to select. (For example, choosing Milano as the
best business court system in Italy is preferable to suing in Rome. For
example, Madrid has an excellent court system while Barcelona may not be
for most business cases, etc. etc.)
Long term
relationships between your counsel and local counsel can also help and
most international attorneys form friendships with the lawyers they work
with abroad. That can be invaluable.
3. INSTRUCTION TO
LOCAL COUNSEL: Once selected, your United States counsel should
work with you to develop the overall strategy of the case which will be
implemented by the local counsel. Your United States counsel should have
the overview of the entire situation involving your company and case-not
just the situation within a particular jurisdiction-and should be able
to guide local counsel accordingly. Again, an example:
A client of ours had
commenced bitter litigation in England against a former distributor and
our English solicitor was doing quite well, setting an early trial date,
when we discovered that the defendants were likely to be bought by a
principal of our own client. The politics immediately became complex and
intense and while we negotiated the matter with their corporate
headquarters in New York (involving concessions in yet another
territory) our English solicitor continued his procedures in England
until we called him off. He had no way to know the internal politics of
the defendants nor the interconnection that effected numerous
jurisdictions outside his own. That was a job for strategic, not
tactical, counsel.
4. COORDINATION
OF MULTIPLE JURISDICTIONS AND STRATEGY: Few cases are only involved
with a single jurisdiction abroad. The nature of international
transactions (and the propensity of defendants in such cases) is to be
involved in several countries at once and quite often action is
commenced in two or three nations. For example, a sale into Indonesia
would normally have an arbitration agreement in the commercial agreement
providing for arbitration in a third nation such as Japan or Singapore
which would be more “neutral.” But to simply hire an attorney in Japan
or Singapore to bring the matter to arbitration does little since the
judgment would have to be enforced in Indonesia whose laws are quite
different. Some jurisdictions do not even allow enforcement of
arbitration awards. Thus your US counsel should not only coordinate the
strategy in both jurisdictions, but should be able to make sure the
various counsel in the separate jurisdictions work in conjunction and
share their own concepts and plans.
5. INTEGRATION OF
UNITED STATES LAW AS REQUIRED: United States law applies to actions
that United States citizens or entities engage in abroad and can have
direct effect on foreign jurisdictions. Such laws as the
Foreign Corrupt Practices Act or restrictions on exports
can not only expose the United States entity to criminal or civil
liability in the United States, but can destroy the strategy of foreign
counsel who may have no idea that such laws exist. Tax and treaty
restrictions can also apply to particular transactions and even the
settlement discussion need the input of knowledgeable international
counsel.
6. COMFORT AND
COMMUNICATION WITH FOREIGN COUNSEL: In many jurisdictions the
attorneys that go to court (“barristers”) do not work with clients but
are hired and interact only with attorneys that hire them
(“solicitors.”) Such counsel will not only be uncomfortable working with
laypeople…but will not.
Even in those
jurisdictions such as the United States which have attorneys who can
argue in court or not at their discretion, most foreign counsel are much
more comfortable dealing with United States counsel who are familiar
with the basics of law and can normally grasp concepts in a case faster
than a layperson. The language barrier and the amount of experience in
court make such communication more effective and create a better
relationship with counsel from other countries.
7. ENFORCEMENT OF
JUDGMENT IN THIRD OR FOURTH JURISDICTIONS. Once a local judgment is
obtained, it is merely a piece of paper issued by a court or arbitrator.
To convert that into cash often involves entry of the judgment in
numerous jurisdictions, including the United States. Foreign counsel
will usually be unfamiliar with that task and the requirements needed
and, once again, United States counsel is vital to coordinate the
strategy and implementation of the task. Also critical is the effect on
the industry and reputation of the client as a whole. To enforce the
judgment by attaching assets owed by third parties to the judgment
debtor may be a good litigation tool, but may actually hurt the client.
One of our clients
was advised by foreign counsel that the judgment could be used to attach
inventory of the judgment debtor and, indeed, he had already commenced
that process. We had to halt such action since the inventory was meant
to be delivered to an even more important customer of our client who
would have been outraged.
Conclusion:
International
transactions and resultant litigation is an increasing aspect of most
business life. Look around your home or office and seventy percent of
what you are viewing derives from a foreign manufacturer or importer and
Mexico and Canada are among the largest buyers of United States goods.
To master the new
skill set necessary to take advantage of those products and customers
requires an increase in the imagination and dedication of the United
States business person. The rewards can be great but the skill set must
simply be expanded or financial setbacks are inevitable.
And one of those
skill sets is to create and hone the team designed to draft the
requisite documents and enforce them…and to defend yourself form the
likely litigations deriving from the customers and vendors abroad.
International
litigation used to have a glamour aspect to it-something that only the
conglomerates and international entities had to understand. The
“globalization” of the market place now means that each and every
business should know the basics of international transactions and have
the expertise ready to use to engage in such lucrative aspects of
business.
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