Buffalo, NY asked in International Law and Contracts for New York

Q: How can you enforce a contract against a company based in another country?

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2 Lawyer Answers
Richard Sternberg
Richard Sternberg
  • International Law Lawyer
  • Potomac, MD

A: Doing that successfully remains as much an art as it is a matter of commerce. Some of the choices include letters of credit, bills of laden, surety bonds, and escrow accounts. Those choices tend to have expensive overhead burdens in which third parties, like banks and sureties, make a percentage. Nevertheless, those are the most common techniques. The really cool choices are the ones where you've individualized the answer to the parties involved. For example, if foreign company, A, also owns another company in the US named B, the contract between your company and A states that B guarantees the debt and that exclusive jurisdiction is in the local state court where your company is located. You will still need to collect from B where it has assets, but you will already have an easy judgment, and -- more significantly -- you will have the tools to pressure compliance. You will need to keep an eye on the health of B, and there will be other risks. But, my point here isn't that particular technique. The point is that the coolest ideas are individualized.

My favorite story on this was about the time I negotiated a rather large deal with a major British insurer for services to be provided in an African nation. It was costly flying me to London for three days of negotiations, and there was no money on the table at the time, so my client was digging deep into his pockets. Years later, when the contract was generating hundreds of millions of dollars, the British company decided that they could cut my guy out -- the guy who had brokered the deal and was getting paid a super cut of everything. They were sure that they could smother him in legal expenses, and none of the payments were going through letters of credit, because none of those techniques applied to this deal. We had a brief call as I stepped out of a CLE class for ten minutes, and I asked them to ask their lawyer about a particular paragraph I had "hidden" in the contract years before. My client called three hours later, and told me that they had decided to pay him in full. Hidden traps are really cool. The best traps with Third World parties snap in Washington, DC, because Third World countries are worried about how they appear in Washington, DC.

Tim Akpinar
Tim Akpinar
  • Little Neck, NY
  • Licensed in New York

A: This is a concisely phrased question whose answer can be complex. A place to start could be to show the contract to an attorney who is experienced in contract disputes. If the other party to the contract is in breach (which might be presumed from your inquiry as to how to enforce a contract), it is possible the contract could stipulate conditions for adjudication of disputes. These can include which jurisdiction’s laws will apply, whether disputes are to be adjudicated through arbitration, etc. These are only some of the issues which might arise. Because contracts can be complex, the guidance of an experienced attorney could be helpful, or even necessary, depending on the situation.

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