For Abbas Sumar, the future of global business is not defined by the exchange of goods alone, but by the ripple effects those exchanges create across societies and industries.

He believes that every trade initiative, no matter how local it may seem, has the potential to influence economic growth, advance social development, and shape geopolitical relationships on a global scale.

“Impact comes in all shapes and forms,” he says, adding “people of all stripes and backgrounds can and do play an integral role in supporting their own communities to develop as part of a larger ecosystem of actors.”

An early window into diplomacy, development, and global growth

Abbas’ journey into this global ecosystem began not long after he completed grad school. In 2008, he secured an opportunity as a parliamentary staffer to the Hon. Navdeep Bains, whose portfolio included international trade and was linked to the Government of Canada’s Standing Committee on International Trade (CIIT).

Armed with a freshly earned degree that immersed him in the theory of international trade law and treaty negotiation, he suddenly found himself on the front lines of policy and diplomacy.

“I was now being exposed to what it meant to operationalize trade between countries and regions, with direct access to policy makers and elected officials, debating the best path forward on how to balance Canadian trade, diplomatic, defence, and development priorities against our closely held national values.”

It was a fascinating atmosphere for the budding trade professional and, instantly, he was fully convinced that international trade, development, and diplomacy were his calling.

Seeing the world through the eyes of its global citizens

Abbas supported and participated in trade negotiations with Colombia and the European Union. There, he witnessed firsthand how trade creates opportunity at every level of society.

“I had the opportunity to see beyond the glitz and glamour of boardrooms and ballrooms to meet the people who make global trade possible and drive economic growth.”

Meeting local community members doing the groundwork in international business reshaped his understanding of what economic partnership truly means, and who it impacts most.

Those experiences remain some of his most cherished, reinforcing the notion that international trade touches lives, identities, and futures—not only markets.

Strengthening Canada’s role in a globally connected future

Throughout his career, Abbas has contributed to major initiatives spanning the international trade,  education and development sectors. His work in each of those sectors consistently unearthed a common theme: pride in being a part of teams committed to advancing Canada’s position abroad.

Abbas felt he contributed to this development by:

• delivering development assistance and humanitarian programming through Global Affairs Canada
• working with provincial and federal-level exporting education abroad and using this knowledge to tap into the entrepreneurial spirit at colleges and universities
• creating connections and pathways to strengthen trade and economic growth between Canada’s smaller communities and other countries.

In all cases, he was motivated to advance prosperity in Canada and internationally, while empowering communities to shape their own futures as part of the global economy.

Advice for professionals ready to make an impact

Abbas is a strong believer in taking initiative and embracing the unexpected. He encourages anyone interested in the field of international trade to “think about the impact—economic, social and geo-political—that you are seeking to have today and tomorrow.”

“think about the impact—economic, social and geo-political—that you are seeking to have today and tomorrow.”

He also encourages individuals to “connect with CITP I FIBP professionals and other experts for coffee chats to get a sense of what the day-to-day looks like,” and to “seek out opportunities, voluntary or paid, to test the waters before diving in too deep.”

Don’t forget to embrace adventure

With his own career path being “a bit of an uncharted adventure,” Abbas thinks that embracing adventure is a great professional learning experience too, adding that he has been fortunate to work on international trade and development in many different ways. This has given him the advantage of seeing trade issues from multiple angles and, more importantly, recognizing their impact in on a wider scale.

Confirming global expertise through the CITP designation

Abbas’ path to the CITP designation came, unsurprisingly, through the ecosystem of international trade.

“Both as faculty and senior administration, I had been exposed to the FITT program and its many benefits for several years.”

“For many past students and instructors alike, the FITTskills courses effectively manage to synthesize the complexity of international trade management into an easy-to-comprehend professional development program with opportunities for practical application.”

He also knew that its program design, content focus, and global recognition served as a key differentiator to many full-time graduate programs. So much so that “many reputable post-secondary institutions across Canada recognize its professional efficacy and have elected to align undergraduate and graduate program curriculum to FITT and CITP requirements to increase the overall competitiveness of program graduates.” This serves high praise and testament to the program’s quality and market relevance, he believes.

Earning the designation felt particularly meaningful too:

“I am thrilled to join an illustrious group of global professionals with the CITP designation and to be recognized for my experience and knowledge in the field.”

Amplifying opportunities between Canada and the world

Dean, International Education of Durham College, and Principal of Sumar + Associates Ltd., Abbas sees the CITP designation as a powerful enabler—one that reinforces his expertise and opens doors to new collaborations.

He believes it will continue to support his efforts as a validator of capability and a way to increase trade and development opportunities between Canada and the global economy.

A future shaped by purpose, partnership, and possibility

Abbas enters the next chapter of his career with a clear vision: a future where international trade operates as a tool for shared progress, ensuring both Canada and its partners around the world thrive together.

Whether he is advising, teaching, or empowering others to step confidently into international markets, he remains focused on creating impact in the broader ecosystem from all angles.

The post CITP Spotlight: Abbas Sumar, Dean, International Education of Durham College, and Principal of Sumar + Associates Ltd. appeared first on Trade Ready.

Trade-related organizations play a critical role in ensuring the viability of businesses all around the world. They set and create needed median standards for all trade professionals and the broader business community. This community benefits from the comprehensive and strict oversight in regards to rules, laws, regulation and access to trade and business-related resources.

The Forum for International Trade Training (FITT), for example, has developed global competency standards for the knowledge and training required to succeed internationally, supported by educational credentials and the CITP®|FIBP® professional designation. In this way, we ensure that professional standards and educational resources are always relevant and current for the changing needs of international trade.

In the same way that our organization creates fair and formalized standards and processes for trade training, other trade organizations set standards for the global community in a broad range of other categories. Most people recognize the names of the organizations such as the World Trade Organization (WTO) and the International Monetary Fund, but may be surprised to find out that there are many others.

What are the other key organizations that international businesses and business people should be aware of and how exactly do they govern trade and impact international businesses?

To help answer these important questions, we’ve compiled a quick guide to international trade organizations that touches on some of the most important players and how they influence international trade and business ecosystems. Here they are:

World Trade Organization

Since 1994, the World Trade Organization (WTO) has worked to maintain open lines of communication regarding international trade with its 164 member countries. It oversees existing trade agreements, ensuring that countries are upholding the terms of their agreements, and also helps settle disputes about those agreements.

The WTO also helps countries negotiate and forge new agreements, and it calls out unfair trade practices. With its current membership, the WTO serves all major world economies. Through the WTO, international businesses and organizations can find data and regulatory information related to trade.

International Monetary Fund

While the WTO focuses on supporting the international economy by facilitating trade, the International Monetary Fund (IMF) focuses on establishing sound monetary and economic policies to support the global economy. To do so, the IMF monitors economic policies within its 190 countries to identify potential risks and provide advice. IMF also issues loans to countries to help stabilize economies and provides training programs that help countries modernize their economic policies and workforces to spur economic growth. The IMF also upholds the system that allows for foreign monetary exchanges.

World Customs Organization

The World Customs Organization (WCO) brings customs officials from around the world together to work toward making customs processes easier to navigate for international businesses. It also influences the WTO’s rules of origin and customs valuation processes. International businesses may recognize the work of the WCO through the Harmonized System—the numeric system that is now used by more than 200 countries to help code and classify internationally traded goods.

International Chamber of Commerce

While the above organizations deal with world governments,

the International Chamber of Commerce (ICC) represents companies that do business on an international scale. The ICC seeks to promote the free trade of goods internationally. It advocates on behalf of businesses to the WTO, United Nations and other organizations that affect international trade and business.

Organizations for trade development, trade law, sea and air transportation and economic funding

There are many other organizations that enable international trade and support businesses that trade globally. The United Nations Conference on Trade and Development (UNCTAD) helps developing countries find entry points to international markets, and the United Nations Commission on International Trade Law (UNCITRAL) brings nations together to modernize their economic policies and workforces to spur economic growth.

For shipping companies, the International Maritime Organization and the International Air Transport Association provide guidance and support to marine and air logistics companies, respectively. Meanwhile, The World Bank seeks to reduce poverty globally by offering loans and other support to developing nations.

All of the organizations that impact global trade play specific roles in creating a healthy international economy. While they are all separate, they also coordinate their efforts and support one another to reach their common goals.

Want to learn more about international organizations and business law? Read our article The role of international organizations in international business law.

The post A quick guide to international trade organizations appeared first on Trade Ready.

Responsibility for a product defect that results in injury lies with all the sellers of the product within the distribution chain. Generally, given regulations that manufacturers must comply with, a product is expected to meet the ordinary expectations of the consumer. When a product does not meet these expectations, manufacturers and sellers are vulnerable to legal action from consumers.

A product can be found liable by contract breach or by law. Where the issue of product liability cannot be answered by the contract or the governing laws, private international law must be deferred to in order to fill in the gaps.

Product liability tort covers lawsuits to settle claims of injury or dispute due to negligence or strict liability on the part of the manufacturer or those responsible for the product in question.

As a result, product liability standards have steadily increased in most parts of the world including Europe, Asia and North America.

As with other aspects of both public and private international law, there is a need to govern or harmonize disparate national laws and proceedings more uniformly with respect to product liability.

This includes evidentiary standards, uniform reward of damages and punitive actions.

Many governments have passed legislation to limit the occurrence of product liability. The following examples provide a brief description of some of the legislative measures implemented by various governments around the world.

1. U.S.

Most product liability laws are enacted at the state level and while they vary from state to state with regard to standards of proof, since the 1960s most are based on strict liability as opposed to proving the manufacturer’s negligence.

Under the theory of strict liability, the manufacturer, regardless of whether or not they caused the defect, is liable for a defective product and must pay or compensate the injured parties. There is no manufacturer liability cap to date.

2. EU

As of 1977, the EU also began to move toward the theory of strict liability to reinforce its commitment to a common market where all members have common laws. The 1981 preamble to the Treaty of the European Union states, “liability without fault on the part of the producer is the sole means of adequately solving the problem, peculiar to our age of increasing technicality, of a fair apportionment of the risks inherent in modern technological production”.

Recent EU Court of Justice rulings regarding risk in the absence of proof of physical injury with regards to cardiac pacemakers and defibrillators that belong to a defective series will impact product liability proceedings moving forward.

Signed in 1985 and implemented in 1988, the Product Liability Directive holds producers and manufacturers responsible for damages caused by product defects.

The legislation only applies to products put on the market from the time the directive was enacted. The Directive provides a 10 year statute, and caps manufacturer compensation (per defect) at EUR 70 million.

3. Australia

Replacing the common law principles of tort that had governed compensation due to loss or injury from product defects, Australia’s product liability law enacted in 1992, closely resembles the EU directive of strict liability.

There is a 20-year statute of limitation in the Australian law as well as directives for representative action to be taken by the Trade Practices Commission on behalf of consumers.

Interested in a broader look at the topic that also includes service development? Then the FITTskills Products & Services for a Global Market course is for you!

4. Taiwan

In 1994, Taiwan imposed a strict liability law to replace the existing negligence-based laws that required injured parties to prove the manufacturer was at fault or negligent.

5. Japan

Going into effect January 1, 1995, Japan’s Product Liability Law holds a manufacturer (which also includes the processor and importer) responsible for property damage or personal injury caused by a defect (here, defect means a lack of safety a product should normally provide) in a product.

Instead of strict liability, Japan’s legislation provides manufacturers with a defence on the grounds of not knowing about the defect when the product was sold. Japan also puts a claim limit of 3 years from the time of injury for injured parties to seek compensation. Similarly, manufacturers cannot be held responsible if it has been more than ten years since the product was delivered.

6. China

Quality legislation enacted in China’s 1993 Product Quality Control Law holds manufacturers, producers and importers responsible to uphold national and international standards for products and their packaging, and to see that unreasonable danger is not posed to people or property. If found liable, manufacturers are responsible for damages or injuries to people and property.

Like Japanese laws, China’s claims have time limitations and are defensible if the manufacturer did not put the product on the market, did not know about the defect at the time due to scientific or technical limitations or the defect was not present when the product was put on the market.

A major amendment of the Law on Protection of Consumer Rights and Interests entered into effect in March 2014—the first major development in the product liability regime since the implementation of the Law in 1994.

The Law puts in place new consumer-friendly provisions, reversing the burden on the consumer to prove non-conformity with quality warranties where such non-conformity is discovered within six months of receipt of the goods or services and conferring a right of return within seven days of consumers buying goods at a distance.

7. Hong Kong

The only product safety law in Hong Kong is the Toys and Children’s Product Safety Ordinance (1993), which states that reasonable safety is required for all toys manufactured, imported or supplied.

Manufacturers, importers and suppliers must ensure that general safety requirements are met according to one of a number of international toy standards (for example, the International Committee of Toy Industries’ Voluntary Toy Safety Standard).

While defensible, if found liable, enforcement and penalties start at a HKD 100,000 fine and a year in prison and grow with each subsequent offence.

The post 7 examples of how product liability laws change from country to country appeared first on Trade Ready.

The art of reaching true agreement with a foreign distributor is a delicate dance. At the beginning, the relationship is full of possibilities and enthusiasm. Both companies want to reach agreement and get down to the business of selling things as soon as possible.

But, when it comes to negotiating international distribution agreements there is a lot of room for error, which can lead to some major hiccups and ultimately cost your business time, money and customers.

Here are the top ten misconceptions floating around out there, and the solutions to protect your bottom line in distribution agreements.

Myth #1: We don’t have time for a contract – we need to get busy selling!

Many companies will only do a legal agreement if their legal department insists on it, and if they don’t have a legal department, it probably won’t happen.

Even companies with written agreements may think of the contract as something to be done at the end of the negotiations—a necessary evil to tidy up the little details, but that delays getting on with the business at hand.

But they’re missing a great opportunity: the contract negotiation process ensures the parties truly have clarity and consensus, and as an added benefit, builds the all-important relationship between supplier and distributor.

Through the contract negotiation process, a good international lawyer helps reveal gaps in understanding that are never an issue in domestic negotiations, and coaches and guides the parties to a better partnership. Working through small conflicts as part of the negotiation builds trust as they gain confidence they can successfully work through inevitable disagreements.

Myth # 2: How we found our distributor is totally separate from our contract

Many may ask: what does that have to do with the distribution contract?

It matters because the best foreign distribution agreements start long before sitting down with a written document.

A supplier with a distributor recruitment process has thought pretty carefully about its objectives for its distribution business. These objectives can be clearly articulated, which leads to discussions with distributors that are more productive for both companies. They see mutual interest right from the outset of the relationship (or the lack of real interest becomes clear very quickly).

The contract negotiation process is consistently smoother when suppliers do a lot of the contract pre-work by thinking carefully about what they want in their distributors, envision what a great distributor looks like, and then go find those distributors.

Due diligence also helps create better agreements because it weeds out distributors that are bad fits long before wasting time finding that out through a painful contract negotiation process.

Myth # 3: Contract templates are great, because that way we can skip the legal review costs.

Templates are a great place to start. But they are only the START, and should not replace competent legal review.

These days, it’s easy to find templates on the internet. You can purchase them online, or obtain them from colleagues, trade associations, or government agencies. Even most lawyers will admit they start with a document repurposed from somewhere. Make sure the one you use fits your situation.

Some questions to ask to ensure you’re starting with a good template:

Do I have an agent or a distributor? The legal agreements for the two types of arrangement are totally different. If you pull a “distribution agreement” off the internet, but you have an agent, you’re not even starting with the right kind of agreement.

Does the template cover all the key points? Make sure your template is comprehensive.

Does it adequately address services or software? Distribution templates are typically product-focused, and may not address related service and software issues. Today, there is often a service component to many product sales. For example, is installation required for your products? What about trouble-shooting, maintenance, upgrades, and warranty repairs?

Second, templates are NOT a substitute for competent legal review

Used wisely, a good template can facilitate the negotiation process. Unless you’re very experienced with legal agreements, however, you’ll benefit immensely from having a qualified lawyer review the document with you.

Agreements without legal review often omit important provisions. Many are worded poorly and the interpretation is subject to dispute.

Myth #4: We Can Just Have Our Local Contracts Lawyer Review Our Agreements

Just because a signed contract says something doesn’t make it so.

When you have a contract with a foreign distributor, you now have two completely different legal systems—yours, and that of your distributor. The contract interpretation becomes much more complicated and much less predictable. Expert legal advice is needed to sort out the rules that will apply, and how they will apply.

Balancing all this is complicated, and depending on the amount at stake, requires not only an experienced international attorney in your home country, but selective consultation with their counterpart in the distributor’s country. And the lawyer in the distributor’s country cannot be just any local commercial lawyer, but a lawyer who also is experienced with cross-border transactions.

For these reasons, you should NOT have your international distribution agreement reviewed by the local lawyer who helps your company with other business, even other contracts—unless they also happen to be an experienced international lawyer, which is unlikely.

Myth #5: We hope our foreign distributors don’t hand out bribes, but if they do, it’s really not our problem.

Most companies today know that foreign bribery is bad and  illegal. They may have heard of the U.S. Foreign Corrupt Practices Act (FCPA), or the UK Bribery Act, and other similar laws.

But there are plenty of companies that export using distributors still don’t understand that they can be held accountable for bribes their distributors make. Maybe it’s because it seems far-fetched that a completely independent company like your distributor can put you at risk for their actions. Maybe it’s because it seems unlikely your distributor or you will get caught.

Whatever the reason, the truth is: more and more companies are finding themselves subject to FCPA enforcement because of their distributor’s bribes.

According to the U.S. government, here’s what every U.S. company needs to do with their foreign distributors to avoid liability:

• Conduct thorough due diligence, which may include regular background checks and investigations on distributors.
• Include anti-bribery language in all distributor agreements (which presumes you must have written contracts) that clearly allows you to terminate if you discover bad behavior.
• Train your distributors (as well as your employees who interact with them) regularly on anti-bribery compliance.
• Clearly understand how your products are reaching the end customers and confirm if there are any other intermediaries.
• Prohibit use of sub-distributors, agents, or other intermediaries by your distributor unless you have investigated appropriately and provided written approval.
• Make sure your distributors’ customer margins, and any other compensation you pay them, are reasonable and customary.
• Have controls in place to make sure any red flags are raised and addressed.
• Have your internal audit or finance function monitor this program regularly.
• Document everything that you verified, as well as how any issues or problems were investigated and resolved.

By the way, bribes are still pretty common in many countries. So make sure you get good legal advice when exporting so that you can assess bribery risks and create an anti-corruption program that works for your company.

Myth #6: Two extremes: We never give exclusivity unless forced to, or, we give exclusivity freely.

Virtually every international distributor will ask for (or insist on) exclusivity. A frequent question in contract negotiations is whether you can or should give it to them. It’s an issue worth weighing carefully.

There is no single rule about granting exclusivity. It depends on the geography, local laws, what is customary in your industry, and practical business considerations.

The best we can do is set out some of the most common factors to consider.

Does local law permit the type and extent of exclusivity you are considering?

When granting exclusivity, it is expected to have minimum purchase requirements. You will still want to understand which these will be enforceable under local law, especially regarding “take or pay” minimum purchase provisions.

If a distributor insists on exclusivity, but is unwilling to agree to enforceable minimums, think long and hard before moving forward with this partner.

You will also need to weigh the practical and business considerations. In some cases, you may have no real choice on exclusivity. If there are only two qualified distributors in a market and your competitor already works with one, you have limited negotiating leverage.

Are you are willing to invest in the distributor, and vice versa?

Ensure that you contract allows you to terminate exclusivity without terminating the entire agreement. 

Understand clearly the local law requirements for terminating exclusivity, including the grounds for termination and whether any payments will be due.

Myth #7: If We Set Aggressive Deadlines to Finalize Our International Contracts, We’ll All Stay Focused and Get it Done More Quickly!

Negotiating a cross-border agreement flat out takes a lot more time to negotiate than the same agreement within your country, or between a U.S. and a Canadian company. Expecting negotiations to move at the pace of a typical domestic agreement is almost guaranteed to result in disappointment and frustration.

This concept is simple on its face, but in reality is often very difficult for some to accept. The reasons these agreements take so much longer varies. Time zone differences and language issues definitely play a role. Differing cultural expectations, though, usually have a larger impact. To effectively negotiate great distributor relationships in the international arena, you need to get a bit zen. Negotiating styles vary widely from country to country, and you must accept that your distributor is not going to change their culture suddenly to meet your arbitrary timelines.

It helps a lot to relax, and just enjoy the process of seeing the many different styles of negotiation. Getting frustrated will not force your foreign partner to be more like you!

In the end, continuing to build a good relationship with the distributor is most important – if you have that, you are much more likely to have a productive business partner and a better agreement than by simply rushing to meet artificial deadlines. And you may also need to help educate your own bosses to help manage their expectations.

Myth #8: We don’t need to spell out operational details in the contract—that’s business stuff, not legal!

Operational issues generally make or break client-distributor relationships. And the time to think through and discuss them is during contract negotiations. If the parties have detailed discussion and put their agreement in writing, there tends to be fewer issues later.

Here are some of the most common sources of disputes, and some questions to consider:

Investments: How many people will the distributor dedicate to selling and supporting your products? What kind of skill sets do they need? Do you want the right to interview, veto, or replace these people? When there is turnover of personnel, how quickly should these positions be filled, and what recourse should you, the manufacturer have, if the positions aren’t replaced? Which of you will pay for product training, congresses to promote your products, or the creation of localized marketing materials?

Forecasting & Demand Planning: There is nothing worse than having your distributor provide you an aggressive sales forecast, and you purchase or make products based on this forecast, only to find the orders never come. The reverse is equally bad: the distributor suddenly wants lots of unforecasted products shipped immediately, and you don’t have them available.

Logistics and Supply Chain: When are rush or air freight shipments appropriate? How long are manufacturing lead times? How are product shortages rationalized? Will the distributor incur penalties in their customer contracts if delivery is delayed? What shipping metrics will you use?

Reporting and Business Reviews: Will there be an agreed business plan? Will there be quarterly business reviews? Will there be minimum purchases, and how and under what circumstances will they be adjusted? What metrics, besides minimums, are you expecting your distributor to meet? Do you expect sales tracings reports? If so, how often, and in what format?

After-Sales Support: How will returns and repairs be handled? What tasks are the distributor able to handle? Should they receive special training to do certain after-sales support activities? Will the manufacturer or a third party handle? How quickly can repairs be done? When is replacement appropriate?

Take the time to discuss these and any other relevant operational detail with your new distributor. Memorialize these in your contract. Think of your distribution contract less as a document you pull out of the dusty files when things have gone wrong, and more like a blueprint for governing your distributor relationship.

Myth #9: We don’t spend much time negotiating termination, because it will spoil the enthusiasm.

No one (except, of course, the lawyers) want to think about how to end a relationship when it is only just beginning and full of promise. However, most agreements eventually end, and that’s why it’s worth spending time thinking about termination—especially while the relationship is amicable.

You should always plan for termination in the context of how you would transition to a different distributor or your own stand-alone sales office. (It’s always easier to torch and run from the market, but the reality is that you should think hard about entering a market if you think that’s how it will end.)

Goodwill payments: Make sure you clearly understand any goodwill payments that may be due on termination. Think about how long-term customer contracts and government tenders should be managed to avoid disruption to the customer.

Inventory: Think through how the distributor’s existing inventory should be handled. Consider buying back some or all the inventory (other than maybe excess no-move inventory) to essentially buy their goodwill so that your brand isn’t ruined.

Product registrations and other key files: If you’re in a highly-regulated industry, think through how all the registration documents and files should be handed over. This can significantly shorten your new partner’s time to market, and may be worth a generous payment to your old distributor.

Customers: Ultimately, protecting your brand is about making sure the end customers are happy or at least accommodated. Agreeing that your distributor will provide a list of customers and key contract terms will allow a much smoother termination.

Myth #10: We’ve Invested So Much Time in This Relationship – We Can’t Give Up Now!

Whether in contract negotiations or in a long-term business relationship, human psychology is definitely at work.

Companies often feel like they’ve invested so much already that they need to slog through and finish the negotiation or continue the relationship.

All too often, suppliers keep distributors around whose poor results suggest they should be replaced. If you are clear about your exit strategy (even if that strategy evolves over time), it will guide you to a decision about whether it’s time to put in place a direct sales force, find a new distributor, or leave a market altogether if certain results aren’t met over a specific time.

Similarly, having a backup plan (again, it’s OK if that plan morphs over time) helps you keep you’re your walk-away point clearly in focus. If you don’t have Plan B, human psychology again will come into play, and you’re likely to settle for sub-par results because making change is hard and requires focus.

Having a Plan B is especially important in emerging markets. Huge currency fluctuations, political unrest, and sudden regulatory changes can happen, and the market that was once attractive no longer is. But it’s also important almost everywhere in today’s business environment, where technology changes, mergers and acquisitions, and factors have accelerated the pace of change. Being flexible and adaptable is one of the most important attributes for success in global markets.

Your distribution business will be more successful if you always keep your walkaway point in mind, and know when it’s time to pull the plug, regardless of the investment made already—that’s a sunk cost that can’t be recovered. Know when you want to exit, and how you want to exit by being prepared with a backup plan.

This article series originally appeared in Global Trade Magazine. You can view the series here.

The post Debunking the top 10 myths about international distribution agreements appeared first on Trade Ready.

As with domestic contracts for supplies, investments or other business endeavours, an international dispute between contracting parties can occur.

In the event of a dispute, the international element compounds the already complicated, lengthy and costly process of contract dispute resolution.

The conflict of laws, also called private international law, and its categories of contracts and torts concern disputes between individuals from different nations, whereas public international law governs relationships between states.

Individual contracts, whether commercial or personal, increasingly contain an international element. The judgment in an international lawsuit could vary depending on which national law is applied. The realm of conflict of laws is working toward resolving the barriers to these decisions.

So what exactly is the conflict of laws?

Because there is no definitive international law to govern transnational relationships between individuals; there are only domestic laws of nations that attempt to balance national sovereignty with international agreement.

Conflict of laws is a phrase used when the laws of different countries on a specific topic are dissimilar. When this happens, courts need to decide which law will be followed.

The general principles of conflict of laws that apply to contracts that cross national boarders, like other international principles, are grounded in principles and customs recognized in almost all nations. The following are some of the principles of the conflict of laws:

1. Party autonomy: Parties are free to choose the law governing their contracts.
2. Sovereignty: A state or government is free from the external control of other states or governments. Every country has exclusive control and authority inside its borders. Domestic laws influence and direct all material goods and all people residing in the country, and also all contracts completed and actions taken inside the country. The laws within a country cannot influence or direct property located outside of its borders or people living outside of its borders. This principle has to do with the independence of all sovereignties.
3. Comity: Respect, consideration, adoption and/or enforcement by one country of the laws of another country.
4. Uniformity: Laws will not vary from one nation’s jurisdiction to another; rather, they will be the same or universal.
5. Good faith: Completing an action or a task, including entering into a contract, with honourable intent and resolved to a sincere effort to obtain the desired results.

The effect of one country’s laws on another country depends on whether one country recognizes the power of the other country’s laws. If one country’s statute fails to recognize the foreign law, the latter has no power.

If both countries are silent, how do the courts decide which of the conflicting laws takes precedence? The answer to this question depends on many factors that do not point to one common rule. When dealing with the conflict of laws, doubt must exist as to which country’s law takes precedence. When there is doubt, the deciding court will choose its own laws over the foreign country’s laws.

Taking a deeper look at the conflict of laws

Conflicts can be separated into three sections: jurisdiction, choice of law and judgments. The problem of domicile constantly surfaces in conflicts. Domicile is an important consideration in jurisdiction and choice of law.

Jurisdiction

Jurisdiction deals with the power of legal courts to sit in judgment of a person or thing. To properly employ jurisdiction, courts need to be adequately connected to a problem so they can satisfy both constitutional and statutory requirements. To validate the legal courts’ exercise of power, the defendant and the state must be adequately connected.

Choice of Law

Legal courts must choose the legal rules that will control court proceedings when a legal problem involves more than one state. The first approach to choice of law involved vested rights/territorial factors. Then choice of law began to investigate the interests at stake in specific legal problems.

The Effect of a Judgment

A judgment in favour of a defendant does not mean an end to the legal problem. The plaintiff who lost the case might decide to sue in a new jurisdiction, which will prompt the winning defendant to use a win in the first case as a defense in this second case. Alternatively, if the judgment of the case was in favour of the plaintiff, the plaintiff might levy on the loser’s assets in another state.

Choosing which laws apply to your international dispute

Courts cannot exercise authority or proceedings over an individual if he or she is not within their jurisdiction. Most nations have a set of rules to determine their jurisdiction in the event of an international dispute.

The questions then become:

• Which law should be applied?
• Which court should hear the case?
• What is the effect of the national jurisdiction in the foreign country?

The choice of what law governs a contract does not usually become an issue unless there is an international dispute between contracting parties. The rules come into play only when a question cannot be decided by examining the contract or by reviewing the conduct or practices of the parties or their industry. However, it is best to make the choice during contract negotiations to understand the rights and obligations of each party. This can limit surprises or additional costs in the event of dispute resolution.

When courts must decide on a choice of law issue, they usually have two choices:

1. Employ the law of the forum (lex fori). When the issue of what law to apply is procedural, courts usually choose this law.
2. Employ the law of the site of the transaction or occurrence that resulted in the legal action (lex loci). When the issue of what law to apply is substantive, courts usually choose this controlling law.

The traditional way to approach choice of law dictates that courts must defer to the territorial sovereignty of states. When an incident occurs in a state that leads to a legal action, the state where the incident took place provides the people involved with “vested rights”. Selected examples of vested rights include the right of a plaintiff to file a legal action; enforcing a statute of limitations; limitations on how much money can be won in a legal action; and particular burdens of evidence. Each state promotes the application of its own vested rights.

As with most aspects of business negotiations, entrepreneurs should keep in mind that the reality of applicable law is that the final choice is typically dictated by the dominant party in contract negotiations.

If an entrepreneur is not the dominant party, it is essential to understand what the possible outcome of a dispute will be and how it will ultimately impact the bottom line of your business. In other words, does the business prospect potential outweigh the risks of losing an international dispute?

The post How do you know which laws apply during an international dispute? appeared first on Trade Ready.

Competition laws can limit the business practices an entrepreneur may engage in, yet they may also provide some protection for international businesses. In short, these laws are essential to help entrepreneurs navigate through the complexity of competition while protecting the consumer’s right to obtain the best goods and services at fair market value.

The question facing most modern economies is this: what business practices are acceptable within an intensely competitive business environment?

Countries attempt to distinguish between the activities that eliminate business rivals through efficiency-promoting competitive process and those that threaten the reduction or elimination of competition itself.

In a competitive business environment, it is unacceptable to drive a competitor out of business by price fixing. Yet it is usually acceptable to do so through superior management, marketing or products. Similarly, the individual’s ability to enter freely into contracts is “benefit enhancing”, that is, presumably anyone who enters into a contract benefits from it.

However, while certain contractual arrangements, such as cartels, are freely entered into by the contracting parties, they are not beneficial to a competitive market.

Competition policy must somehow enable a society to establish appropriate parameters of competitive behaviour in order to ensure the interest of the consumer is protected.

Get familiar with the no-nos before you go global

The following activities are considered unfair business practices believed to adversely affect competition:

1. Dominance and monopoly

When an industry has exclusive selling, trading or dealing power, the lack of competition enables the seller to fix the price of the commodity at an artificially high rate for an undetermined period of time.

 2. Mergers and acquisitions

When competitors merge, either through an amalgamation or through a sale, there is always a risk to competition as the consumer now has fewer choices.

 3. Collusion

A type of merger, usually lacking transparency, in which industry rivals work together toward a common end, most often to commit fraud (e.g., wage fixing) or other illegal activities.

4. Cartels

A type of collusion in which a small number of sellers (oligopoly) agree to dominate a market in order to fix wages or prices or to rig bids.

5. Price fixing

Agreement in which at least two sellers decide to sell products at the same price (typically an inflated price) to ensure both profit. Minimum price fixing can also be a factor when larger competitors sell below manufacturing costs long enough to put smaller competitors out of business but re-inflate the price when consumers no longer have a choice.

6. Product bundling and tying

Common in software packages (office suites) and cable or communication companies, bundling occurs when products are exclusively sold as a package deal, or when companies refuse to sell bundled products separately. If you get a free music player as part of a bundle, why would you buy one elsewhere?

7. Refusal to deal

When competitors convince suppliers not to sell or to restrict the supply of goods to their rivals.

8. Exclusive dealing

This market entry barrier occurs where a distributor has sole selling power to retailers or wholesalers in a particular territory.

9. Bid rigging

A type of price fixing in which competitors agree amongst themselves to underbid, rotate who wins the bid or otherwise make the bid process artificial.

10. Dividing markets

Agreements between competitors to do business only in certain territories, or with certain customers or products. In this situation, Company X agrees to only sell in the northern part of a marketplace and Company Y only sells in the south.

Who enforces international competition laws, and how?

As the pace of international trade, globalization and government deregulation of national industries (e.g. electricity, natural gas) accelerates, companies increasingly extend their supply chains abroad and are also seizing opportunities to merge across borders.

Following the U.S. antitrust legislation lead, nations and in some cases regions (e.g., EU) around the world have passed competition laws in an effort to preserve the freedom of competition and to reinforce consumer protection. As within other fields in the international arena, increased legislation brings the challenge of enforcing laws and ideas of jurisdictions that sometimes conflict.

And what about those nations, many of which are developing, that do not have competition laws? How does the international community protect competition without barring these nations from participating in the global economy?

While there is no single international authority responsible for the enforcement of international competition laws, the following are some of the organizations enabling their fair and uniform implementation:

• World Trade Organization (WTO)
• United Nations Conference on Trade and Development (UNCTAD)
• Organization for Economic Cooperation and Development (OECD)
• Asian-Pacific Economic Cooperation (APEC)
• Free Trade Area of the Americas (FTAA)
• International Chamber of Commerce: ICC Commission on Competition
• Global Competition Form (GCF)
• The International Competition Network (ICN)

Competition laws can be applied beyond national borders

Generally, countries do not attempt to apply their laws beyond their borders. Strong exceptions are the U.S. and EU, which often consider the effects that activities outside of their borders have on their internal economy.

When one country attempts to apply its law to another, this is known as “extraterritorial application”. If two countries are affected by a restrictive trade practice, each country may claim jurisdiction over the enforcement of its antitrust laws.

For example, an exporter from New Zealand may enter into an agreement with a European exporter who contravenes U.S. antitrust laws. If a U.S. company or industry is affected by the agreement, the U.S. authorities may choose to investigate or prosecute.

The U.S. and German antitrust laws take aggressive extraterritorial positions, while Commonwealth countries take modest positions. It may be that if countries enforced their existing competition laws to create freer market dynamics, businesses in countries with free markets would feel less pressed to reach outside their borders.

Recognizing the potential for mischief, the U.S. Foreign Trade Antitrust Improvements Act tries to make it clear that if questionable foreign activity has only remote and insubstantial consequences to the United States, there is no basis for U.S. antitrust actions.

While extraterritorial enforcement is not common, the antitrust laws of every affected jurisdiction should always be considered in negotiating restrictive agreements with competitors.

Although we are far from harmonizing the competition laws of all nations (some nations don’t even have competition laws), there have been some notable steps in the right direction. Many countries are entering into both formal and informal agreements regarding the potential extraterritorial application of their competition laws.

The post Breaking any of these 10 competition laws will get your business in big trouble appeared first on Trade Ready.

The United Nations Convention on Contracts for the International Sale of Goods (“CISG”), sometimes referred to as the Vienna Convention, is a treaty intended to provide a uniform body of laws relating to the sale of goods between nations.

The CISG aims to substantially reduce barriers to international sales by creating modern, substantive rules to govern the respective rights and obligations of parties to an international sales contract.

There are currently approximately 84 countries who have adopted the CISG. By formally adopting the Convention, countries undertake to treat its rules as part of their laws.

In other words, the CISG aims to simplify the process of buying and selling goods in international commerce.

How is the CISG useful to international businesses?

The laws governing sales can differ widely from one country to another. As such, there is often confusion as to which country’s law will govern the contract. This uncertainty is frequently cause for conflict, and certainly does not encourage or assist in facilitating international trade.

The CISG was created to eliminate some of that uncertainty and to provide a body of rules that parties could choose to adhere to in their commercial dealings, outlining obligations and remedies for the parties to international transactions. By applying the CISG, parties can often avoid difficult conflict-of-law issues and fill in gaps in contracts.

Some of the most significant provisions of the CISG address:

• Sellers’ obligations regarding the quality of the goods;
• The buyers’ obligations to take delivery, examine goods and provide notice of any lack of conformity; and
• The buyers’ remedies for breach of contract by the seller.

But when does the CISG come into play?

First, for the CISG to apply, the parties to the contract must have places of business in different countries.

In simpler terms, the CISG will not apply to contracts for the sale of goods between two Canadian corporations.

The Convention could, however, apply to a sales contract between entities from Canada and the U.S.

It is also important to note that the CISG does not apply to contracts for the sale of services alone, nor does it generally apply to the sale of goods purchased for personal use.

A few scenarios to highlight when CISG rules might apply:

• When both parties to the sales contract’s places of business are in countries who have adopted the CISG (the “Contracting States”), the CISG can apply automatically to your transaction.
• When one party is from a Contracting State and the contract expressly states that the law of that Contracting State will govern the agreement, the CISG can apply.
• When neither party is from a Contracting State, but the parties agree in their contract to have the CISG apply.

Keep in mind that parties are free to opt out of applying the CISG, either partially or in its entirety. As such, in the first scenario above where both parties are from Contracting States, they can decide to opt out of the CISG’s otherwise automatic application by so stating within their contract.

Know your country’s domestic laws to make most advantageous contracts

When determining which law will govern the contract, countries will typically look to have their own domestic laws take precedence.

For example, if you are a Canadian company contracting with a company from Japan, it may be in your interest to have Canadian law apply to and govern the contract, as opposed to Japanese law.

This often leads to conflicts between negotiating parties as to which law to apply. The CISG provides an alternative and neutral option to this dilemma.

For a complete list of countries who have adopted the CISG, see https://www.cisg.law.pace.edu/cisg/countries/cntries.html.

Before signing a contract it is crucial to know which countries are Contracting States, and whether or not your transaction may be subject to the CISG’s provisions.

Canada has adopted the CISG, and as such, if you are contracting with another Contracting State, the CISG can automatically apply to your transaction.

Even where the other party is not from a Contracting State, the fact that one side of the transaction is Canadian is enough for the CISG apply, if Canadian law governs the contract.

That’s why it’s so important to look carefully at all laws and conventions before signing a contract, to know which rules and regulations will apply to you.

If you have any questions regarding the CISG and its potential application to your business feel free to contact Catherine Walsh at cwalsh@conlinbedard.com.

Have you solved any contract issues using the CISG provisions?

The post You need to know about this important treaty before signing international contracts appeared first on Trade Ready.

Other countries were less willing to use trade policies and agreements to address these issues, unless their concerns about privacy, surveillance and domestic regulation of the Internet are effectively addressed.

However, in 2015, some 12 nations found common ground on rules to both govern digital trade and limit digital protectionism in the Trans-Pacific Partnership (TPP), which was signed February 4, 2016.

The TPP is the first trade agreement to include binding commitments that facilitate cross-border information flows and limit digital protectionism.

It will therefore have a huge effect on the Internet and Internet governance for 3 reasons:  First, the 11 negotiating parties have a population of some 800 million people, or 11.4% of the Earth’s total and almost 25% of all Internet users as of June 2015 (some 3.27 billion).

Moreover, TPP includes important and growing markets for digital products and services in countries such as Vietnam.

Second, countries including Colombia, Indonesia, the Philippines, South Korea, Taiwan, and Thailand have expressed interest in joining TPP should it come into effect. Thus, they would adhere to TPP’s e-commerce provisions.

Third, because of the size and scope of TPP member states’ Internet markets, other countries sending and receiving information flows from TPP nations will have to comply with its rules.

They will also probably need to build on and copy its rules in future trade agreement if they want to keep costs down and minimize frictions.

In a recent study of how governments use trade policy to regulate the Internet for the Global Commission on Internet Governance, here’s what I found:

1. The Internet has empowered more people to participate in trade. As a result, digital trade, which offers important benefits to society, is booming.

More trade will promote more competition in the digital economy, which over time will provide producers and consumers with more options and better services, at lower prices.

However, this competition cannot occur when governments use local laws and regulations to undermine foreign competitors.

Most officials recognize that the best place to address trade-distorting policies is in trade agreements, which have a positive record in establishing trust and the rule of law among market actors.

While TPP countries are still allowed to give grants or subsidies to companies engaged in digital trade, the deal guarantees the cross-border flow of information related to digital trade and ensures countries cannot discriminate among foreign and domestic providers. It will also ensure they cannot create more favorable conditions for local digital products to put those of other countries at a disadvantage.

2. Internet demographics will have important implications for trade policies and agreements.

The largest and fastest-growing Internet markets are in highly populated developing and middle-income countries, such as India, Brazil, China and Indonesia. In these countries, absolute numbers of users are high but the percentage of penetration is still relatively low.

Internet firms from Canada, the United States and the European Union operating in these markets increasingly find contradictions between the norms that govern their business practices and the requirements of the jurisdictions where they now operate.

Trade agreements could help clarify how governments regulate cross-border information flows and how firms sending, processing or using such flows should behave.

3. Nonetheless, trade agreements might not be the best venue for governing cross-border information flows.

Trade agreements regulate the behavior of states, not of individuals or firms. Companies and citizens therefore have no direct way to influence trade agreement bodies.

Trade agreements are also negotiated in secret by governments. These negotiations move slowly and the public is not directly involved. In contrast, the Internet is governed in a more ad hoc, bottom-up and transparent manner.

Stakeholders from civil society, business, government, academia and national and international organizations make Internet governance rules in a timely, open and collaborative manner without a central governing body.

Many Internet activists would not take kindly to the WTO or other mega regional trade agreements becoming major venues for the regulation of cross-border information flows, given their secretive, slow, top-down and closed processes.

Moreover, many Internet issues that involve information flows, such as privacy or the security of data, are not market-access issues.

However, they are regulatory issues, and finding common ground on cross-border regulations has become important for twenty-first-century trade agreements.

Finally, trade agreements are not designed to achieve market access and not to facilitate interoperability and universal standards, which is how Internet policies have traditionally been designed.

4. Trade agreements are sometimes perceived as favoring U.S. interests and actors.

During most of the twentieth century, the United States was the world’s largest and most important market.

The WTO’s GATS and its predecessor agreement, the GATT, as well as many other trade agreements, reflect U.S. norms (such as transparency and due process), as well as U.S. priorities (such as protecting intellectual property rights).

However, other market actors, such as China or Russia, might view these priorities and language as skewed to meet U.S. needs, instead of the needs of other countries. Government officials from these countries probably do not want to use trade policy to perpetuate US digital dominance.

If the United States and other proponents of using trade agreements to regulate cross-border information flows want to change these perceptions, they must re-frame the rationale for including such language in trade agreements.

Rather than focusing solely on the economic benefits of reducing barriers to digital trade, proponents should also explain how rules designed to foster cross-border information flows will build trust and yield benefits to human welfare and the Internet as a whole.

5. If policy makers want to use trade agreements to govern information flows, they must include language that ensures that governments also work to meet their human rights obligations.

Human rights are a key element of the rule of law online and thus should be included in international efforts to govern the Internet.

However, the WTO agreements (and most trade agreements) do not contain language that links government obligations to protect, respect and remedy violations of human rights to government obligations for trade.

Trade agreements such as the WTO have no authority to prod member states to provide an enabling regulatory context for the protection of these rights.

Accordingly, should they choose to include binding rules governing cross-border information flows in trade agreements, policy makers should also include language clarifying the relationship of trade obligations to human rights obligations delineated in international law.

Moreover, the TPP includes provisions that could limit censorship and Internet filtering, because TPP makes the free flow of information a default.

Nations cannot disrupt the free flow of information unless they justify exceptions as necessary for national security, public morals, public health or privacy.

TPP member states could use these provisions to challenge censorship or filtering in a trade dispute, which are by definition limits on the free flow of information.

6. Trade negotiations could have positive implications for global Internet governance.

Should negotiations under TiSA or other trade agreements succeed, they could provide an impetus to the development of globally coordinated policies on a wide range of global issues that policy makers must address, from privacy to cyber security.

A system of shared rules builds greater trust and could reduce costs for firms and individuals who must deal with different rules about how and where data can be collected, stored and transferred. A system of shared rules is needed for collection, storage and transfer.

7. Policy makers need to take steps to ensure trade agreements establish clear rules to reduce online barriers.

Moreover, those rules should complement and support other international agreements and treaties such as those governing human rights.

Trade negotiations could also clarify whether domestic policies to restrict the Internet, protect privacy, utilize local content and services, etc., are truly “protectionist” in intent.

Until policy makers devise a set of rules governing information flows, and clear exceptions to those rules, countries will continue to argue about the trade-distorting effects and legitimacy of such policies.

In sum, if policy makers choose to use trade agreements to regulate cross-border trade, they must find ways to balance trade and human rights obligations and, in so doing, make a broader case that such rules enhance human welfare.

They may find that by so doing, they encourage information flows that expand opportunities for more of the world’s people.

The post 7 things you need to know about how trade agreements affect cross-border information flows appeared first on Trade Ready.

Cross-border information flows are also the fastest growing component of trade.

Using International Monetary Fund data from 2008 to 2012, economist Michael Mandel found that such flows increased 49 percent, while trade in goods and services grew some 2.4 percent.

Digitization of goods (such as music and movies) is changing the mix of flows, transforming global logistics and enabling new and smaller players to participate in trade.

Policy makers can do a lot to hamper or encourage cross-border information flows. Individuals and firms currently move data from one location, in one country, with one set of rules, to another location with another set of rules.

If policy makers could form shared rules to encourage the free flow of information, more people would have greater access to information and more information would be created and exchanged, fostering economic growth.

Domestic needs versus the Internet’s global public goods nature

Some nations, such as Brazil and India, believe that governments should do more to exercise direction over the Internet. Often officials in these countries argue that greater government control will help them to provide public goods online, such as education or health care, and to foster innovation and economic growth.

Other governments, such as China and Russia, want a rethink of Internet governance and propose greater international control over the Internet. And still other governments, such as Vietnam, are just beginning to set the ground rules for the Internet within their countries.

Governments might have good reasons for restricting information flows, but doing so could result in unanticipated negative side effects on the Internet, as well as economic growth.

Economists generally agree that information is a global public good that governments should provide and regulate effectively.

When states restrict the free flow of information, they shrink access to information, which can reduce economic growth, productivity and innovation, not just in their own country, but globally.

Moreover, when officials place limitations on which firms can participate in the network, they might reduce the overall size of the network, which could also raise costs.

Why do governments use trade agreements to regulate information flows?

Trade agreements and policies could provide a framework to govern cross-border information flows.  The U.S., for example, made digital trade a top priority for the Trans Pacific Partnership a trade agreement signed by 12 Pacific nations) because of the importance of information technologies to the U.S. economy.

Specifically, the U.S. wanted to establish clear rules governing when nations could limit information flows and rules limiting digital protectionism, which can include restrictions on data flows such as censorship or filtering, data localization requirements, and server location requirements among others.

Moreover, policy makers recognize that when we travel the information superhighway, we are often trading.

Second, officials understand that digital trade creates wealth. There is huge potential if nation states can find common ground on not only what nations must do to encourage trade, but also the exceptions to the rules. For example: when nations can breach their obligations and how they must engage in trade policy making when doing so.

The most important and internationally accepted trade agreement, the WTO, already governs digital trade to some extent. The WTO has 161 member states that agree to adhere to its rules and to bring disputes that they cannot settle to its binding system of dispute resolution.

The WTO and other trade agreements have a long history of promoting trust between buyers and sellers who do not know each other. When we go online, just as when we trade, we operate on trust.

Producers and consumers of information often do not know each other. Thus, Internet producers and consumers must trust that others will protect personal or business confidential information.

The WTO contains several agreements covering issues affecting digital trade.

They include:

• The Information Technology Agreement, which eliminates duties for trade in digital products;
• The Agreement on Trade-Related Aspects of Intellectual Property Rights, which protects trade-related intellectual property pertinent to information technology, such as computer programs;
• and The General Agreement on Trade in Services (GATS), which has chapters on financial services, telecommunications and e-commerce

The GATS e-commerce chapter sets rules governing how nations can trade services that are electronically delivered.

These rules also explain exceptions: how and when signatory nations can restrict trade in the interest of protecting public health, public morals, privacy, national security or intellectual property, as long as such restrictions are necessary and proportionate, and do not discriminate among WTO member states.

However, the language in the chapter predates the World Wide Web; the Internet; mobile and cloud computing; and the Internet of Things, among other developments.

Member states designed the GATS language to ensure it would remain relevant as technology changed, but several member states have said that they need clarification on specific points and want to update these rules to avoid misunderstanding.

How will the TPP affect this?

The TPP has clear language making the free flow of information the default for member states.

The Australian Department of Foreign Affairs and Trade asserted that:

“For the first time in a trade agreement, TPP countries will guarantee the free flow of data across borders for service suppliers and investors as part of their business activity. This ‘movement of information’ or ‘data flow’ is relevant to all kinds of businesses …TPP countries have retained the ability to maintain and amend regulations related to data flows, but have undertaken to do so in a way that does not create barriers to trade.”

The TPP recognizes that there are times when nations must limit information flows; these times are protected by rules called “exceptions.”

The USTR notes that “the General Exceptions chapter ensures that the United States and the other TPP Parties” are guaranteed “the full right to regulate in the public interest, including for national security and other policy reasons.”

The TPP incorporates the general exceptions delineated in the GATS. Chapter 29 contains the General Exceptions and General Provisions.

If a government censors or filters, it may cause rerouting of information flows and such actions often distort trade between entities within and among nations.

Hence, one TPP party could use the agreement to challenge censorship or filtering in nations that might do so in a discriminatory manner.

The two nations that have some record of censorship and filtering, Malaysia and Vietnam, were given two years to revise their policies and after that could be subject to such challenges.

The binding language in the e-commerce chapter is disputable under the rules in Chapter 28 of TPP.

The law firm Covington and Burling also notes “a government measure that violates a commitment in the e-commerce chapter might also violate an investment commitment in Chapter 9, and to that extent could be subject to investor-state dispute settlement.”

The TPP will have an impact on Internet governance simply because it covers so many Internet providers and users and because its commitments will affect how governments can behave when regulating cross-border information flows.

TPP parties have a population of some 800 million people, or 11.4% of the Earth’s total. Many of these individuals are already active on the Internet.

Moreover, the TPP includes important and growing markets for digital products and services such as Vietnam.  Colombia, Indonesia, the Philippines, South Korea, Taiwan, and Thailand have expressed interest in joining TPP should it come into effect.

Moreover, if TPP is approved, it could have significant spillover effects upon how other governments deal with cross-border information flows. They will have to comply with TPP rules when they exchange information with TPP parties.

At minimum, the US will want to use TPP as a guidepost for other trade agreements including TTIP and TISA under negotiation.

Meanwhile, other governments too will need to consider this language and what it means for their firms’ cross-border flows.

However, the US may be overselling the benefits of the agreement to the Internet just as critics are exaggerating the agreement’s costs to the Internet and Internet governance.

What needs to be updated with global trade laws for the Internet?

In 2011, the United States wrote that the WTO must update its work program (and ultimately the system of rules) on electronic commerce “if the WTO is to remain relevant to the innovative technologies and business models that can support economic growth and opportunity.”

The United States also expressed concerns that governments still lack guidance as to whether electronic commerce should be governed by WTO commitments under trade in goods or services and if these rules could cover the mobile Internet and cloud computing.

The WTO Deputy Director-General Harsha V. Singh, in 2013, admitted that “the issues we need to address at the WTO are fairly distinct and legalistic, including, for example: classification dilemmas, the implications of technological neutrality for the trade rules, when does a ‘challenge’ or ‘obstacle’ to e-commerce also fit within our definitions of a restriction on trade?”

Academics and business leaders have also argued that the WTO’s rules are incomplete, out of date and in need of clarification.

Meanwhile, although the GATS states nothing explicitly about information flows, WTO members have begun to apply these obligations when settling disputes about cross-border information flows.

The WTO’s Dispute Settlement Body has adjudicated two trade disputes related to information flows.

After Antigua challenged the United States’ ban on Internet gambling, the WTO ruled that governments could restrict service exports to protect public morals if these barriers were necessary, proportionate and non-discriminatory (not discriminating between foreign and domestic providers).

The WTO’s Appellate Body also examined China’s restrictions on publications and audiovisual products, noting that commitments for distribution of audiovisual products must extend to the distribution of such products by the Internet.

However, neither dispute has provided clarity regarding key issues such as whether governments can, for example, restrict sales of offensive items such as Nazi memorabilia, or if they can censor and filter websites.

Until members challenge these policies in a trade dispute or negotiate new rules, we will not have clarity on why, how and when governments can restrict cross-border flows.

The post Why turn to trade agreements and policies to regulate the Internet? appeared first on Trade Ready.

Taking your business abroad can be a great way to expand your customer base, increase market share and lower production costs.

Although the benefits of an international business venture are plentiful, they are accompanied by a significant amount of risk, which, if not properly mitigated, can far outweigh the rewards.

Due diligence is your best ally in risk mitigation, even more so when it comes to international contracts.

The contract is king

Your contract, whether national or international, is always the first point of reference when a dispute arises between two commercial parties, and will guide an arbitrator or judge in determining your respective rights, obligations and remedies.

If you are conducting business internationally, an airtight contract is by far the best way to ensure predictability and efficiency in your business transactions, and properly protect your interests in the case of a disagreement.

An international contract can take on many forms, but all solid contracts have this one thing in common: they clearly outline the detailed rights and obligations of the parties involved.

Unfortunately, it’s common for entrepreneurs, in a rush to close a deal and get their business up and running, to neglect taking the proper time to review the agreements that will govern their business relationships, much to their detriment.

Although your contract is unique in that it will reflect your company’s specific needs and goals, there are at least two provisions which you should always include in your agreement:

(1) governing law; and

(2) dispute resolution. 

In my experience, these are the clauses that are most often overlooked, and that have the potential to cause the most damage when not properly addressed in your contract.

Clearly identify the jurisdiction of authority in your “Governing Law Clause”

Governing law, otherwise known as “choice of law”, is a fundamental component of an international contract.

What this means is that somewhere in your contract, you should clearly state the mutually agreed upon law of a jurisdiction that will apply to and govern the terms of your contract in the event of a challenge.

An example of what this would look like in your contract is:

1.1 Governing Law – This Agreement shall be governed, construed and enforced in accordance with the laws of the Province of Ontario. Any dispute arising between the parties shall be dealt with exclusively in the courts of that Province.

In international trade, the contracting parties are typically able to choose the law that will govern their contract. Whether it be U.S. law, Ontario law, or Shari’a law, the choice is open to the parties. You are not limited to choosing the domestic law(s) of one of the contracting parties.

For instance, if your business is in Ontario and you are contracting with a Japanese company for the supply of widgets, you can choose to have Ontario law, Japanese law, or the law of any other jurisdiction apply to govern your contract, that might be advantageous to your situation (i.e. U.S. law).

Avoid a geographical headache

If a dispute arises without a clearly defined choice of law clause in your contract, you will face additional time and expense in determining which country, state or province has jurisdiction.

It is therefore imperative that that all parties to the contract properly negotiate and mutually agree on the governing law at the outset, so that there are no surprises down the line and expectations are clear.

Litigation? Arbitration? Choose the best option in your “Dispute Resolution Clause”

A dispute resolution clause is important in any international contract because it clearly defines the methods and procedures for the resolution of disputes between the parties, whether it is through arbitration, litigation, or any number of other available options.

Although you may have an established business relationship with a partner you can trust, disputes, although not intentional, can still sometimes arise.

Simply put, having a dispute resolution clause is somewhat comparable to having an insurance policy on your car. You don’t expect to have an accident, but if you do, you’re protected.

Similarly, in the contract scenario, you don’t anticipate having any issues with your partner, but if you do, you are both aware of what process you will follow and what remedies are available to you.

Including a clear dispute resolution plan in your contract will reduce both the time and the cost of international litigation.

More and more international contracts provide for arbitration as an effective and efficient way to resolve disputes between contracting parties.

An arbitration clause could read something like this:

“All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.”

You will also want your clause to address the governing law to be applied to the arbitration, the place and language of the arbitration, and the number of arbitrators to be involved.

Avoid a referee headache

A strong dispute resolution clause that is enforceable and clear is a critical step in the conclusion of commercial conflicts. Always keep in mind that your contract is what governs the relationship between you and your commercial partners.

A contract is not something to be taken lightly and not something that you will have an opportunity to correct retroactively.

Do your due diligence, and engage experts, when necessary, to make sure your contract properly protects you and your interests.

Have you ever missed a step in a contract that ended up costing you? What other items are crucial to a fair and protective contract?

The post Nail down these two international contract clauses to save yourself future legal headaches appeared first on Trade Ready.