Cross-border work in an emerging market

What I am about to say is not new … I have been saying this kind of thing to my clients for decades. But it warrants repetition, because every year there are new players in the markets, and many are new to the game. So some guidance always helps.

Transactional work carried out in the emerging markets often involves parties from different legal jurisdictions, for example England, with its common law basis, and Qatar, with its civil law and Sharia heritage.

Let me illustrate.

As legal counsel to Qatargas[1], a few years ago, I worked on a number of transactions where there was a potential for mismatches between two or more systems of law. We negotiated complex joint venture contracts with Qatari governing law, project financing governed by English law, EPC contracts based on the FIDIC suites but governed by Qatari law, SPAs governed by English law, and in some cases Qatari law, with a need to ensure uniformity of terms and conditions.

This was a lawyer’s paradise, but in the wrong hands could easily have been a lawyer’s nightmare!

In Oman[2], we negotiated major construction contracts, which again were based on a standard form (in some cases the FIDIC, or NEC forms) but also the ‘forms’ created by a major player in the energy sector[3], which themselves were based on an industry standard form, and amended them so as to be “governed by Omani law”[4].

Also in Oman, we negotiated a government back-in agreement (a form of acquisition agreement, or ‘SPA’), major components of which had clearly ‘common law’ roots, but the agreement itself was governed by Omani law.

In Vietnam[6], we negotiated a sale and purchase contract for shares in a Vietnamese corporate entity, structured on the basis of a common law SPA, but the contract for sale was governed by Vietnam law.

In Indonesia, during the decade or so I lived and worked there, I must have negotiated numerous contracts, some major and some quite small, for a very broad range of commercial activities, for example project financing[7], where the governing law in question was different from the legal system prevailing in Indonesia.

So, what is the moral of this story?

Whether your own transaction is large or small, complex or simple, if you are doing cross-border work (essentially, a transaction between two or more legal jurisdictions), you cannot just patch together legal concepts from different jurisdictions to create a ‘Frankenstein’ contract, nor can you just use a contractual document or contractual structure from a jurisdiction other than the jurisdiction where the contract will be performed, without any amendment or due consideration.

And that is why when doing cross-border work, which involves a mix of legal structures or concepts, it is crucial to get legal advice not just from the lawyers in the host country, but also lawyers from the jurisdictions from which you are ‘importing-in’ structures or concepts.

In every jurisdiction I have worked in, there are really not that many of us who have the capability and experience to effectively manage contract preparation as I have described this in this post.

Only very few lawyers’ groupings or alliances have the appropriate mix of ‘local’ and ‘offshore’ capability and experience, to ensure that the contract you need is not a ‘Frankenstein’ monster, but a effective and enforceable legal document.

A key part of your due diligence, when exploring a new market, especially a developing one, must be your search for a competent legal adviser, with the relevant skills sets.

[1] My brief was to advise the Operating Company, so my interface was with not only Qatar Petroleum, as the parent company, but also each of the Qatargas joint venture partners, each from different jurisdictions. Exxon-Mobil from the USA, Shell with its UK/Dutch origin, Total from France, Marubeni from Japan, and so on.

[2] Acting for Petroleum Development Oman, or ‘PDO’.

[3] Royal Dutch Shell, as PDO’s 34% shareholder.

[4] Like Qatari law, a civil law system based closely on the Egyptian legal system.

[5] Acting for a major UK-based operator/developer.

[6] One particular project finance deal resulted in protracted litigation, on the issue of governing law, and the mismatch between this and ‘local’ law.

This blog is for information purposes only. It is not meant to constitute legal advice.

DECEMBER 20, 2020

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s