Here’s the scenario. You have spent weeks negotiating a contract, working with commercial colleagues. You have worked with them before on similar contracts, and understand fully what is required for the contract from both a commercial and legal perspective. But there is just a small catch. You are qualified to give legal advice in country X. The contract is to be made under the laws of country Y, on which you cannot advise. What do you do?
There is a purist approach to professional ethics, which is to say that you should not advise on the contract if it is to be made under another country’s laws. There are situations in which that may be true, but in most situations that we encounter, it is commercial nonsense:
- you have built up experience of the client’s priorities and general approach; the client does not want to incur the transaction costs of training up another lawyer, and may not be able to afford to do so;
- being a good transactional lawyer is a multi-faceted role, in which deep knowledge of one country’s laws is only one aspect (albeit an important aspect) of the role;
- it may not be obvious when you take on the project what the law of the contract is going to be, as this will be the subject of negotiation.
What should you do in this situation? Clearly, you should not say that you are competent to advise on the laws of country Y. A commonly-encountered approach is to ask a lawyer in country Y to give the draft contract a “quick once over”. In other words, the overseas lawyer is asked to read the draft contract (usually it is a late draft, close to the final version) and let you know if any major issues “jump out” at him or her under the laws of country Y. The cost of such advice will vary, but in a simple case might be in the region of UK£500 – UK£1,000.
This approach is not risk-free for the client. The overseas lawyer cannot be expected to pick up on subtle points of drafting that the parties have negotiated at length based on their respective understandings of how the words used would be interpreted under the laws of countries W and X. The words may mean something different under the laws of country Y (“best efforts” and similar phrases spring to mind). All the overseas lawyer can really do on a tight budget is identify major legal problems. These might include, for example:
- potential breaches of national or supra-national competition laws
- requirements to register the contract with a regulatory body
- problems that cause the contract not to be legally binding
Depending on the budget, it might also be appropriate to identify problems with the drafting of the contract, which lead to an uncertain or ambiguous meaning. But this may be a delicate issue to raise. Is it really an issue of national law, or just poor draftsmanship?
We have commissioned overseas lawyers to perform this task, and we have performed the task ourselves for overseas clients. Recently, we gave an English-law review to a collaboration agreement for a US client. The main issues that we identified were:
- A non-compete clause continued beyond the duration of the collaboration, and was apparently in conflict with Article 5(a) of the EU Research and Development Agreements Block Exemption Regulation. We suggested wording to try to achieve a similar outcome. We recommended some further wording to try to bring the agreement more clearly within the scope of the block exemption. We also referred the client to a checklist on the regulation, which appears on our website.
- The agreement was being backdated in an inappropriate way. As a quick fix for an agreement close to signature, we recommended that the first line read “This Agreement takes effect from…” rather than “This Agreement dated…”
The IP terms of the contract had clearly been the subject of considerable discussion, so we suggested only a couple of carefully-chosen tweaks to those terms, to bring out the apparent intention more clearly in a way that we thought would not cause problems in the negotiations.
We would be interested to know what experiences readers have of either commissioning overseas advice of this kind, or of giving it.