When representing a client with significant business activities in foreign jurisdictions, what are some key risk-related concerns that arise in a cross-border context and how can a parent company minimise such risk?

When advising such a client, we carry out a legal risk analysis and base our approach on the results thereof. In this regard, we specifically pay attention to several key concerns.

A major matter is the contractual implications of such business activities since it is of the utmost importance that the client is prepared for uncertain, unforeseeable and/or unknown problems that may occur and give rise to liability risks. Contractual relationships must – as much as possible – also take into account such factors via the use of clauses. For example, clauses dealing with a change in market circumstances and force majeure. Doing business overseas may sometimes entail that the business is exploited in areas that can lead to political, social, cultural and legal unpredictability. It is our task to prepare the client as much as possible for this.

Another key area of concern we deal with is the applicable law and competent court. Although globalisation may result in similarities between internal markets and business practices in different countries, this does not necessarily apply to legal aspects. For example, in this field, we can see that legal proceedings and outcomes might vastly differ depending on the applicable law and competent court or arbitral tribunal in question. Furthermore, the legal culture of a country dictates whether you are dealing with a settlement or litigation culture. This can have also a major impact on the risk analyses, depending on the preference of the client and the underlying business sector.

A parent company can minimise risks by piercing the corporate veil. Having an insight into the business of the subsidiary and clear-cut agreements concerning the responsibilities, risks, and liabilities is also necessary. Lastly, if possible, it is highly advisable to investigate the possibility of taking out insurance for certain risks.