1. © 2009 Charles A. Krugel1 Legal & Cultural Considerations for International Trade Charles A. Krugel Human Resources Attorney & Counselor Labor & Employment Law on Behalf of Management www.charlesakrugel.com Latin American Trade Conference World Trade Center Illinois March 4, 2009

2. © 2009 Charles A. Krugel2 General Concepts (Slide 1of 3) : Due Diligence (DD) is Key to Addressing Legal & Cultural Considerations No matter which resources you use, whether people or documents, verify credibility. Create an alliance or relationship with a trustworthy foreign based contact or contacts.

3. © 2009 Charles A. Krugel3 General Concepts (Slide 2 of 3) : Due Diligence (DD) Concluded But, conducting DD doesn’t always mean hours spent researching & analyzing More specifically, if you have a trusted resource that makes recommendations for you, then that could = DD –Use the WTCs, contacts, chambers of commerce, government agency or private company resources, matchmakers, databases, etc. –Let others conduct the DD for you Do DD on contractors & subcontractors

4. © 2009 Charles A. Krugel4 General Trade/Legal Concepts: Due Diligence Concluded (Slide 3/3) –Do due diligence on those contacts Invest at least 1-3 hours of research on each contact –Research name, addresses, legal actions, property ownership, how many other people have that name in that nation, region, province, city, etc., talk to references and ask those references for additional references. –Use Lexis/Nexis, Westlaw, ProQuest, Factiva, FirstSearch, ERIC, any other legal, news, property databases. –If possible, meet contacts in person along with the referee or a trustworthy 3 rd party.

5. © 2009 Charles A. Krugel5 Understanding the Legal & Business Climate (Slide 1/3) Must understand the differences in their legal system versus ours –Is it a common law &/or civil law nation? –Most Latin American countries are civil law. Some are hybrid (most becoming more civil law focused). –Do they have a uniform code of commercial or trade regulations? Transparency in transactions is an issue (e.g., disclosure, statements, audits, independence). –Do they respect property rights/ownership? Real property Intellectual property

6. © 2009 Charles A. Krugel6 Legal & Business Climate (Slide 2/3) –Government tend to play a broader role in regulating Latin American workplaces while cooperating with management. There’s more regulation, but many governments are also open to experimenting with reform measures (part of transition to civil law). –“For cause” terminations take precedence over “employment at will.” Government takes a “paternalistic” perspective regarding employees/labor. “Notice” to employees prior to action is crucial. –Labor policy tends to play a major role in government & change in Latin America.

7. © 2009 Charles A. Krugel7 Legal & Business Climate (Slide 3/3) –Does our system of business entity designation mean the same there as here? I.e., is a corporation, partnership, trust, sole proprietorship, etc., treated the same there as here –Does the country, state, region or province honor/uphold/enforce contracts between individuals or businesses? What’s required to be in writing? How are contracts or agreements honored, upheld, enforced or terminated? –Understand the importance of family in Latin American businesses (operations & governance). This is a key element.

8. © 2009 Charles A. Krugel8 Government Structure Must understand the differences in government structure and bureaucracies –How long does it take to obtain the needed recognition or licensing to legally conduct business? How many procedures are involved? Offices/people to visit? –What agencies/bureaus license? –What licenses, certifications, etc. are required? –What are the fees? When are fees due? –What paperwork is required? –What are the penalties for mistakes, unethical or illegal conduct? –What’s the “underground economy” like & how do you deal with that? Are bribes necessary? How much & to whom?

9. © 2009 Charles A. Krugel9 Protect Yourself in Writing- If Possible Slide 1/2 It’s impossible to document everything There’s no such thing as an impenetrable contract or agreement But, IF POSSIBLE you want to capture your intentions is as much detail as possible –And you want the other party to acknowledge your intentions in writing too—initialize, signature, notarized (increasingly becoming antiquated), signed agreements, side agreements, etc. –You might need to account for cultural differences in the meaning/interpretation of concepts via long or wordy explanations within the contract/agreement.

10. © 2009 Charles A. Krugel10 Protect Yourself in Writing- If Possible Slide 2/2 IF POSSIBLE, include language for exiting or terminating the agreement or contract IF POSSIBLE means does that country, province, region, state, etc., treat oral agreements or contracts the same as written agreements; what takes priority? END