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 TheAmerican 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.
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.