Distribution Strategy – Legal Perspective

DOMINIQUE LEMOINE, MANAGING PARTNER AT CARRERAS & LEMOINE, LLP

DL

Dominique, introduce your firm and expertise?

Our firm is an international boutique firm which focuses on representing European businesses and high net worth individuals in the United States. All of our attorneys and staff are fluent in at least one language, and some are admitted in foreign jurisdictions. We cover the areas of international litigation and arbitration, international taxation, M&A, corporate work, business contracts, immigration, and international family law.

What are your legal recommendations for a foreign company entering the US market?

Do not do anything before you hire an attorney and an accountant, even to incorporate a company (the sole choice of the form of the company has important international tax consequences). Then remember that despite what you see on television, the culture is very, very different. Never assume that Americans think like Europeans.

Drafting sales conditions, NDA, contracts, … Which documents should be used and drafted and under which circumstances?

In the United States there is no Civil Code to fall back on. As a result, you need solid contracts to govern your business relationships, because what is not regulated by the contract is generally allowed. As soon as you start talking to a potential partner, you need an NDA to protect your intellectual property. As soon as you start selling, you need sales terms and conditions (otherwise the other party’s purchase conditions may apply!).

In case of a disagreement, negotiations, arbitrations or law suits?

Good question. It depends. It is generally better to negotiate and avoid the cost of litigation. Arbitration will be possible only if it is agreed upon by contract, otherwise a lawsuit will ensue. The choice of arbitration or courts varies from case to case really. It is not necessarily true that arbitration is cheaper (ICC arbitration is actually more expensive). When the time comes, your attorney will advise you on that choice.

American based or foreign based lawyer, what is your perspective as being qualified for both?

If you do business here you generally need an American based attorney. There are foreign based American attorneys, but they are generally in very large firms with a much higher hourly rate. Above all, do not let you foreign law attorney draft a contract for the American market, it is the equivalent of asking your pharmacist to do surgery.

Foreign companies are sometimes frightened with the US legal system and lawyers’ fees, how do you answer such concerns?

It is a concern, but you have to learn how to use the attorney.

For example, do not bring the attorney to the negotiation unless it is a large deal or it is very technical. It is often enough to negotiate the business terms first, and then to ask the attorney to put them into form. The large legal costs are often associated with litigation. American litigation becomes very intense, very fast. This being said, the cost of litigation in Europe is often as high, it is just more spread in time. In the United States, you spend in 12 months what you will spend in 5 years in France or Belgium. The upside is that in the United States, you are usually done with your case in 18 months. In some European countries it can sometimes drag on for 10 years.

Remember that the best way to avoid litigation is to have a solid contract to begin with. So do not shy away from spending $5000 upfront to have a good contract, it may save you a lot more down the road.

How to choose a lawyer?

Go where your market and/or potential partners are. It is an illusion to set up shop in expensive places like New York or San Francisco, unless you have very solid business reasons.

Any other recommendations?

Yes. In most cases you DO NOT need to incorporate in Delaware. And NO, Delaware is NOT a tax heaven: you still pay the federal income taxes there. And anyway, you will have to pay state taxes in states where you have operations (employees, inventory, …).

For specific answers and information, contact Dominique Lemoine,

Tel: +1 770 351 0099 / dlemoine@cbr-uslaw.com

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