Doing business in a foreign country means adapting to a foreign legal system. Often, laws surrounding commerce in the market you want to infiltrate will be quite different from those you are accustomed to. Assuming a legal system in a different country, even one similar to Canada in business culture, will function similarly to Canada’s is a dangerous misconception.
In addition abiding by foreign laws, depending on the trading relationship between Canada and the country you’re looking to do business in, there might be international laws that affect your operations. These laws are defined by treaties and conventions, but usually only apply to countries that have signed onto those agreements.
EDC recommends the following tips for negotiating international contracts:
Taking a dispute to a foreign court is usually inadvisable. Even if you think you are in the right, legal action may not be worth your time:
You can avoid litigation in an international business dispute by using international commercial arbitration, or alternative dispute resolution.
This process uses independent arbiters to find a solution the problem, but both parties have to agree to it. Working an arbitration clause into your contract is a good idea.
This process is beneficial because the arbiter’s decision is normally binding, preventing appeals from either side. The decisions are also recognized under international law. There is also less chance of bias against you, because the arbiter operates outside of the local legal system. Arbitration is also faster and cheaper than litigation.
In many countries, consumers can sue for compensation for injuries that have resulted from a product.
Litigation can be carried out on the basis of manufacturer negligence, breach of warranty or failure to warn of defects in manufacturing.
Product liability damages can be very high, depending on the jurisdiction:
This is especially true in the United States. For this reason, product liability insurance in the U.S. is very expensive.
To protect your business, you should seek advice from a lawyer on how to word your product warranties and assess the risk your company faces.
Rigorous quality control during manufacturing is also important, as is complying with all governmental and industry standards in the market you are operating in.