the risk management in the international trade through the contracts
DESCRIPTION
Kansainvälisen Kaupan Riskien Hallinta SopimuksinTRANSCRIPT
The Risk Management In The International Trade
Through The Contracts15.11.2012
Aalto UniversitySchool of Business
Jukka-Pekka NiemeläAttorney at Law
Law Firm Lindblad Ltd
Risks
• No business contract exists without risks
• Minimization of risks is utmost important
• Risks may be managed to a certain extent through a risk control
– Careful choice of a good business party
– Good and careful drafting of a business contract
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CAREFUL CHOICE OF A BUSINESS PARTY
• Careful choice of a business party
– Reliability of a business party
– Obtaining the relevant information of a business party• E.g. Credit Agencies, Trade Registrar, Creditors, Bankruptcy and Restructering Agencies,
bankruptcy information from the Courts of Law, Trade Associations, Commercial Embassies, Competitors
• Protection of Good Faith and Fair Dealing• Protection recognised all over in the world
– Principle of Loyalty • Principle of loyalty recognised all over in the world
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GENERAL COMMENTS
• Trade customs– Vary from country to country– Vary from business to business– Established trade customs
• between parties• in business field concerned
• Culture– Traditions
• Language– Communication– Choosing the negotiation and contract language
• Other Customs – Manners and habits
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GENERAL COMMENTS
• Legislation of a foreign country
• Right and same understanding of issues between the parties
– Terms and provisions of a business contract
– Linguistic understanding
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FREEDOM OF CONTRACT
• Freedom of Contract– Freedom to conclude or not to conclude business contracts– Freedom to choose the form of a business contract
• Verbal contracts• Written contracts• Standard contracts (ICC, Orgalime, IT etc. )
– Freedom of contents• Freedom to choose the terms and provisions of the business contract e.g.
– buyer´s rights and obligations– seller´s rights and obligations– contract price– payment terms and currency– payment delay– inspection of goods and reclamation– Warranties– delivery terms (Incoterms, NL, Finnterms, ECE etc) – applicable law– dispute settlement – etc.
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FREEDOM OF CONTRACT
• Non-disclosure agreements
– Business and trade secrets
– Validity period
• before negotiations
• after negotiations
– Insertion of a secrecy clause in the business contract
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COMMERCIAL RISKS AND RISK CONTROL
• Payment of the Contract Price– before delivery
• Down payment• Advance payment• Installments
• Open account– e.g. open account 30 days
• Documentary Credit i.e. Letter of Credit (ICC, International Chamber of Commerce)– Indication of the buyer´s solvency
• The buyer´s creditworthiness in the buyer´s bank
• Debt Collection• The seller´s bank collects the contract price from the buyer
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COMMERCIAL RISKS AND RISK CONTROL
• Payment currency– currency clause against currency fluctuation
• Delay intrest for the late payment– e.g. 8 % per annum
• Delivery terms and payment terms- Incoterms (ICC, International Chamber of Commerce)
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GUARANTEES
• Retention of title– Transfer of the title to the goods against the full payment of the contract
price
• Payment bond or Bank guarantee– to ensure the payment of the contract price
• Performance bond– to ensure the performance of the obligations of the business contract
• Advance payment bond
• Escrow account
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INSURANCES
• Property
• Delivery and Transportation
• Product liability
• Credit risks
• Political risks
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DISTRIBUTORSHIP AGREEMENTS
• Object of the Agreement
• Agreement between the Supplier and the Distributor– the Distributor is an independent trader
• Supplier´s rights and obligations e.g.– to demand the payment of the delivered goods– reports from the distributor– production changes– training– information duty– sales targets– trademarks
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DISTRIBUTORSHIP AGREEMENT
• Territory• Products• Exclusivity/ non-exclusivity• Validity period• Termination• Rescission• Applicable law• Dispute settlement• Etc.
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AGENCY AGREEMENT
• Object of the Agreement• The Agreement is between the Principal and the Agent• The Principal´s rights and obligations e.g.
– commission payment to the Agent– commission calculations– marketing information to the Agent– the Principal´s information duty of production changes etc.– sales targets– immaterial property rights
• The Agent´s rights and obligations e.g.– sales promotion– attainment of sales targets– reports
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AGENCY AGREEMENTS
• Non-competition• Secrecy• Territory• Products• Exclusivity/non-exclusivity• Validity period• Termination• Rescission• Applicble law• Dispute settlement• Etc.
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