Jan 052011

US companies operating internationally face many complex legal issues, including the most basic duty of ensuring compliance with US, international and domestic laws.  A corporation’s duty becomes more complex when the corporation operates in a nation experiencing domestic or international turmoil.

Responsible multinational corporations spend millions in legal fees to ensure they not only meet legal obligations, but also to ensure that the company promotes the welfare of their employees and the community in which they operate.

Stephen F. Gates, Senior Counsel at Mayer Brown LLP, has contributed an excellent article to the Harvard Law Review’s ongoing series, Corporate Accountability in Conflict Zones.  The series focuses on “corporate accountability mechanisms in situations of conflict and turmoil.”

Gates’ article begins:

U.S. corporations, especially those in the mining and oil and gas industries, face many challenges in operating in difficult locations around the world.  With the imperative to go where the natural resources occur, these challenges can be geographical, operational, legal, and ethical depending on remoteness, terrain, political stability, governing regime, and cultural differences.  Absent a developed concept of “rule of law,” there is often no assurance of impartial courts, predictable enforcement of contracts, or due process in the treatment of employees or assets.  Changes in regimes or economic conditions can result in an environment that has deteriorated significantly from the time a company made its initial country entry decision.  Creeping expropriation through tax, royalty, or regulatory changes or total expropriation of assets is a potential risk.  Expatriate employees are often asked to take local assignments, and local employees may be hired.  Their safety and security is a central concern.  Reputational risk is also a key consideration.

Mr. Gates does a great job laying out key issues facing multinational corporations operating in unstable regions.

For more, read Gate’s article, Challenges in Lawyering: Business Operations in Troubled Jurisdictions and Conflict Zones.

Stephen F. Gates, Challenges in Lawyering: Business Operations in Troubled Jurisdictions and Conflict Zones, 52 Harv. Int’l L.J. Online 136 (2010), http://www.harvardilj.org/2010/11/online_52_gates/.