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Legal Considerations for Cross-Border Transactions

by Global Link Law
Jun 18, 2024
cross-border transactions

The United States is at the center of the global economy. For reference, nearly one-third of our country’s GDP is linked directly to international trade (The World Bank). That represents trillions of dollars of business each year. For many different types of companies, the international market offers incredible opportunities. At the same time, cross-border transactions are extremely complex. A proactive approach to legal compliance is a must. Here, our international contract attorney explains some of the most important legal considerations to be aware of with cross-border transactions. 

Know the Legal Considerations that Can Affect Cross-Border Transactions in 2024

International business is complicated. There is a broad range of legal and logistical issues that require attention through each and every stage of the business cycle. Cross-border can carry significant risks—especially when there is a lack of proper planning. Not only do the laws of multiple nations come into play, there may also be applicable international agreements. Legal considerations for cross-border transactions include: 

  • Compliance Risk: Compliance is essential. It should always be a high priority for companies engaged in international commerce. Indeed, cross-border transactions can be governed by multiple laws/regulations. What happens if a company fails to comply with the relevant law? The result could be a big fine and other sanctions. It could also lead to a dispute between the parties. Notably, the compliance risk is heightened in certain sectors like finance and healthcare. Given the legal conditions, all businesses need a robust compliance program. 
  • Conflict of Laws: Which law applies to a cross-border agreement? It is not always clear—and that can be especially challenging if the laws of different countries are in conflict with each other. Conflict of laws occurs when different legal systems come into play. There can be issues raised about which jurisdiction’s rules should apply to a specific part of a transaction. Uncertainty can be a problem. 
  • Tax Challenges: Cross-border transactions often create complex, even counterintuitive tax issues. In some cases, businesses must contend with double taxation—where the same income may be subject to taxation by two different jurisdictions. Effective tax planning is a must in order to limit over liability and ensure the success of the transaction. 
  • Governing Law: If your company is engaged in a commercial relationship with a company from another country, you may need to determine the governing law as part of the contract. The governing law in an international contract determines which legal system will be used to interpret the terms of the contract and resolve any disputes. Choosing an appropriate governing law can provide predictability and security for the parties involved. All parties to a cross-border transaction should be on the same page. 
  • Insurance Issues: Insurance in international transactions helps manage the risk of loss from various sources—from transportation delays to political risks. Different jurisdictions have different insurance requirements and regulatory frameworks, which can complicate obtaining adequate coverage. Companies must ensure that their insurance policies are valid across all jurisdictions. 
  • Data Security: The rules around data vary considerably from jurisdiction to jurisdiction. For example, if you are working with a company from the European Union (EU), you may need to deal with the General Data Protection Regulation (GDPR). It is a more comprehensive data security law than exists in the United States. Remember, data breaches can lead to serious liability risks. If you have any questions about data security requirements, an experienced attorney can help.  
  • Intellectual Property Rights: Intellectual property (IP) rights should always get some additional attention in international transactions. Businesses need to proactively protect innovative inventions (patents), their brands (trademarks), and other creative works (copyrights). Some major challenges can arise related to IP protection and IP enforcement 
  • Contract Enforcement: Finally, enforcing contracts in international transactions can be more challenging than with domestic transactions. For this reason, effective enforcement mechanisms—such as an agreement to adhere to international arbitration regulations—can provide additional certainty and make it easier to resolve disputes. Businesses should work with an attorney who has experience handling cross-border transactions. Your lawyer will help you ensure that you have the right agreement in place. 

Contact Our Attorney for Cross-Border Transactions Today

At Global Link Law, we are committed to providing solutions-focused guidance and support to clients. If you have any specific questions or concerns about cross-border transactions, our team is here as a resource. Call us now or contact us online to arrange a confidential initial consultation. We handle the full range of cross-border transactions. 

Sources: 

https://data.worldbank.org/indicator/NE.TRD.GNFS.ZS?locations=US

The information provided on this website is for general informational purposes only and should not be considered legal advice. No attorney-client relationship is created by accessing or using this website. Please consult with a qualified attorney before making any legal decisions. Global Link Law is not liable for any reliance on the information provided. Prior results do not guarantee a similar outcome.

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