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Commercial Update: Paying fines, cutting costs and negotiating choice of law

May 8, 2018

This update offers a summary of contracts and commercial news from the last week. In this edition:

  • FCPA – Agents & Consultants strike again
  • Complexity and Partnering in Construction Projects
  • In-house legal and technology adoption
  • Continuing momentum for blockchain
  • Choice of Law in Cross-Border Sales

Panasonic Avionics settled for total fines of $280m for breaches of the Foreign Corrupt Practices Act. It was accused on entering into agreements with a third-party service provider in China and making payments to ‘consultants’ who never performed consulting work. This is the latest in a long series of accusations against corporations in the defense and aerospace sector, typically involving various forms of third-party intermediaries. Contracts and commercial staff must be vigilant and be ready to question the legitimacy of third-party involvement in major transactions.

In-house legal groups are working harder to control their budgets – in particular through increased use of technology. E-billing and automated invoice review, together with greater use of measured KPIs, are being used to improve the management of spend with external law firms, which represents over 60% of the typical legal department budget, according to research by The Blickstein Group and Exterro. A similar percentage of legal departments report that they are under pressure to cut costs – a topic that is also being explored by IACCM in a current survey (to participate, click here).

Blockchain and the Supply Chain show continuing signs of convergence, with committees from the US Congress due to hold a hearing on the use of the technology this week. Recent announcements from major corporations have confirmed the rapid spread of blockchain, especially in the filed of logistics, where is can automate many steps in the process, especially around traditional paperwork. Among potential break-throughs, blockchain clearly could be a key element in the continuing deabate between the European Union and the UK over how to manage customs controls post-Brexit.

Construction projects are well-known for long delays and substantial cost overruns. IACCM has not been alone in its investigations into why these issues occur with such regularity – and, more important, how they can be avoided. Already we have evidence that traditional contracting practices are a major element in driving the adversarial behaviors that tend to typify the industry. An article on Complexity & Partnering in Construction Projects has just been published in the latest edition of Connect, the magazine of the ICCPM. Members of IACCM will also benefit shortly from the release of findings from an IACCM study of successful major projects in the construction and oil and gas sectors, indicating the contract and commercial practices that underpin that success.

Choice of law in cross-border sales is often a point of contention and a new book seeks to offer guidance on the best ways to determine and resolve the issue. It makes the point that decisions are often not rational and the book seeks to provide negotiators with guidance on how to evaluate the issues and facilitate more efficeint outcomes. IACCM’s research indicates the importance of htis topic in assisting the development of more balanced agreements and also in reducing cycle times for concluding contracts. The book is called ‘Rethinking Choice of Law in Cross-Border Sales’ and is written by Gustavo Moser.

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