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The Laws That Govern International Business Transactions

What Illinois companies need to know if they merge, expand, or invest abroad

The business world is growing more globalized by the year. According to data provided by the International Trade Administration (ITA), the United States set record highs for both imports and exports in 2018. Not only are more companies doing international business, but cross-border mergers and acquisitions are also on the rise.

David Kay, an international attorney at Drinker Biddle & Reath in Chicago, believes data protection and privacy are amongst the most important issues as international business booms. “Particularly these days,” he says, “where you’ve got global clients with offices in many countries including the U.S. and Europe. That’s probably one of the most concerning issues for general counsel at the moment.”

If you own or operate a business in Illinois, it is crucial that you have a basic understanding of the rules and procedures that govern your transactions. Here, you will find an overview of some of the most important key things you need to know about the laws that regulate international business transactions.

Six Things to Know About International Law and Commercial Transactions

1. You Must Comply with the Foreign Corrupt Practices Act (FCPA)

As a starting point, all American businesses have a legal duty to comply with the Foreign Corrupt Practices Act (FCPA). Essentially, the FCPA prohibits American individuals and American companies from bribing or otherwise unlawfully influencing foreign officials. The FCPA as international trade law is enforced by both the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ). Violators of the FCPA could find themselves facing serious civil or criminal penalties.

2. The United Nations Convention on Contracts for the International Sale of Goods

Ratified by more than 90 countries—including most of the world’s largest economies—the United Nations Convention on Contracts for the International Sale of Goods (CISG) creates a basic legal framework for international commerce and international contracts. The standards set forth in the CISG provide a foundation for the sale of goods on much of the global market. Among other things, CISG governs contract formation, the delivery of items, and remedies for nonperformance of the agreement.

3. The Committee on Foreign Investment in the United States and the International Traffic in Arms Regulations

“In the U.S., you need certain approvals for investments concerning national security,” says Kay. “The Committee on Foreign Investment in the United States (CFIUS) reviews national security implications of foreign investments in the U.S. so that if a foreign company is investing in the U.S. you need an analysis to decide whether or not you need that approval.

“Then there’s the International Traffic in Arms Regulations (ITAR), which restricts and controls the export of defense and military-related technologies—just to ensure that there’s nothing inhibiting U.S. foreign policy and safeguarding U.S. national security,” he continues. “That’s become increasingly important over the past couple of years.”

4. A Trade Agreement May Affect Your Transactions

The United States has trade agreements with many different countries. If your Illinois business is engaged in international transactions, it is imperative that you consider any specific trade agreements that could potentially impact the transactions and your rights and obligations.

5. Remember that Foreign Legal Systems May Have Additional Requirements

It is always advisable to consider the laws in foreign nations. While international treaties can often help to provide some structure and simplicity, it is still possible that legal system or choice of law in the other country could cause problems. Not only do you have to ensure that your firm is in compliance with the regulations in other countries that you are doing business in, you will also want to confirm that you can rely on their legal system should something go wrong.

6. Be Ready to Seek Professional Guidance

“An attorney who has international experience is important,” says Kay. “They understand the differences in doing business—including cultural differences—in a foreign country. A lot of people think the U.S. is like other countries, it’s actually not. You obviously need to have a lawyer who is very familiar with foreign companies investing in the U.S., and all of the issues that entails.”

International commerce is complicated; with global opportunities comes global risks. Professional guidance and support, however, is available. If your company is preparing to merge, expand, or make a significant investment abroad or other legal issues, an experienced Illinois international law attorney will be able to assess your transaction, explain the risks, and take action to protect your rights and interests.

For more information on this area of law, see our overview of international law, business and corporate law, and mergers and acquisitions.

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