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Primary Considerations for Foreign Investment in the United States (Part 2)

on Friday, 2 June 2017 in The Closer - M&A, Securities and Corporate Counsel: Kevin P. Tracy, Editor

This is the second installment in a two-part series which provides a brief overview of some important considerations for foreign business people and foreign companies considering investment in the United States.

Employees

In connection with organizing your business structure in the U.S., U.S. Visa requirements should be a consideration early in the planning process.  Depending on whether your key employees will be U.S. or foreign nationals, this could affect the organization and structure of your U.S. Entity.  

With respect to employees, it is advisable to have written employment contracts with key employees, such as executives, officers and other key personnel.  Competent counsel should be retained to prepare a definitive employment agreement that addresses termination (including termination for cause), non-disclosure obligations, and non-competition provisions.  Competent U.S. counsel can advise you on the effect of applicable law on such provisions and their enforceability.  For example, post-employment non-compete clauses tend to require careful drafting to prevent the provisions from being overly broad, which could result in such provisions being deemed unenforceable, in whole or in part.  

Consider Arbitration in Cross-Border Transactions

As mentioned previously in this series, the United States tends to be more litigious than other jurisdictions.  While arbitration has advantages and disadvantages, the advantages often outweigh any disadvantages in the cross-border context.  

One of the key advantages of arbitration in regard to international disputes is the ability to enforce an arbitral award across borders.  For cross-border disputes, most parties choose arbitration for this reason.  Over 140 countries have ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”), which generally requires signatory states to recognize and enforce awards rendered in other countries that are parties to the treaty.  While the ability to enforce judgments within the U.S. is fairly simple, there is not a treaty such as the New York Convention that provides for recognition of foreign judgments.  As a result, there is less uniformity and certainty in the actual enforcement of court judgments in foreign countries than in the enforcement of arbitral awards.

Care should be taken when crafting a mandatory arbitration clause in order to ensure both enforceability, fairness and proper management of costs, e.g. arbitral fees and costs of translation.  In considering a mandatory arbitration clause, the parties also have the ability to choose an arbitration venue, or the “seat” of the venue.  Choice of venue is important to ensure the most efficient and reliable arbitration process.  The decision of where to hold a cross-border arbitration proceeding can have several implications on the outcome.  While the substantive law of the issue is usually specified in the arbitration clause, the law of the seat will govern the procedural arbitration law, unless the parties agree otherwise.  Therefore, parties should consider choosing a seat that is in a country that is a party to the New York Convention.  Factors that should influence the choice of seat include supportiveness of the local arbitration law, neutrality of the seat, hardship and expense for the parties related to travel to the venue, nature of mandatory rules of the law of the seat, and enforceability of arbitral awards.   

Please do not hesitate to contact us if you have questions or interest in these topics.

Sylvester J. Orsi

Samantha M. Ritter

1700 Farnam Street | Suite 1500 | Omaha, NE 68102 | 402.344.0500