The negotiation stage or middle stage of the negotiation process involves numerous decisions too. Once parties have finalized the pre-negotiation stage, decisions still have to be made involving such issues as when, where, and how negotiations will take place.
For instance, parties may start negotiations via e-mail to negotiate minor items before concluding negotiations over the phone. Or they may start negotiations over the phone and wrap up with face-to-face negotiations. Or they may start with using email to negotiate minor items, phone conferences to settle some other items and then meet face to face to conclude the most important items and issues. Therefore, decisions have to be made on how to negotiate to one’s own advantage.
During the negotiation stage, internal and/or external parties and stakeholders may play a part in the outcome. Decisions must be made whether to include them or not. If third parties are involved in negotiations, one or both of the main parties may try to develop coalitions. Third parties may, in fact, add more problems and issues to negotiations or at least bring an added dimension to the discussions.
Parties must also decide upon a venue for negotiations. Many parties prefer a neutral site. However, those negotiators in a strong position may prefer negotiations to be held in their own office. It is all about tactics and to a certain degree perception of the other party’s position.
An equally important stage is the last stage of negotiations or the post-negotiation stage. This stage results in an agreement or resolution. Hopefully an enforceable one at that.
Parties must also decide whether to reduce an agreement to writing or leave it verbal—or a little bit of both. There are several sub- processes in this stage, such as concluding an agreement, drafting it in writing, and having the parties review it and approve it. Of course, each party may need its home office or upper management to approve the agreement as well.
Parties may want their respective Law Departments or outside lawyers to review the negotiated agreements. Agreements need to be reviewed to determine if they indeed resolve the dispute, and if the agreements are enforceable. A non-enforceable agreement usually does not solve the matter in dispute.
There are a number of miscellaneous issues that parties need to consider when using negotiations as a legal risk management or LRM tool. As negotiations are in fact voluntary, they require the informed consent or assent of the parties. This leads to a number of questions that must be asked.
So both parties must decide if they want to negotiate, and if so, when, where, and how. Maybe delays will benefit one or the other party or maybe not.
It is obvious that negotiation is an important LRM tool. However, to be adequately used as a method to decrease risk of litigation, the parties on both sides (of the negotiation) must be adequately trained in negotiation techniques and must have a proper negotiation mind-set. If the parties come to the table properly prepared, ready to negotiate and seek an amicable outcome, negotiation can be a powerful resolution process and risk mitigation tool. If not, it may lead to a lost opportunity and an unfavorable result.
What Are Negotiations?
Negotiations are an often underutilized Legal Risk Management (LRM) tool. Used as a dispute resolution mechanism, negotiations can be used to resolve disputes, internal and external to a corporation, prior to such disputes turning into litigation. It is another tool to avoid the risk of litigation or arbitration and can minimize legal costs and expenses that might otherwise occur.
Negotiations can be simple or complex, depending on the subject matter. International negotiations are the most complex as they involve different cultures, languages, legal systems, and viewpoints. Nonetheless, all negotiations, whether domestic or international, will involve strategies, knowledge of the facts and issues, an understanding of the other side’s viewpoints, and, above all else, an understanding of the problems and risks at hand.
Stages of Negotiations
Negotiation can be defined primarily as a decision-making process whereby two or more parties resolve their disputes or differences by advancing their interest’s vis-à-vis each other. Negotiations may be broken down into several distinct stages:
The beginning or pre-negotiation stage
The middle or negotiation stage
The final or post- negotiation stage
All three stages are crucial to successful resolution of a dispute or potential dispute that could lead to the risk of litigation.
The beginning stage is just as important as the middle or final stage and deserves some consideration.
The Pre-negotiation Stage
Prior to negotiating with the other party or disputant, a party must understand the facts, identify the issues involved, and map out a strategy to deal with negotiations. Though it may seem easy, this stage actually involves numerous steps. Each step may involve several processes or sub-processes as well. The basic steps are as follows:
Determining the problem at hand
Determining the interests of all parties involved
Identifying possible solutions
Deciding upon negotiation strategies
Understanding your best alternative to a negotiated agreement—sometimes called the BATNA.
Knowing your BATNA sets the bottom floor of any deal, as it will set the range of a possible settlement. No party will agree to a negotiation that offers less than the party’s BATNA.
Many people fail to consider their BATNA before entering into negotiations. Only when one truly knows his or her BATNA, can one enter into effective negotiations. After all, how can you really negotiate if you don’t know your BATNA?
For example- if you are trying to buy a new car and are relying on trading in your used car for the down payment, you need to know the true value of your used car before you negotiate the purchase of the new car. If you are thinking of buying a house but are relying on the proceeds of the sale of your current house to fund the down payment, you can’t really negotiate the purchase of the new house without knowing the approx. value of your current house.
Therefore, when a company or organization negotiates a contract, it must first understand its BATNA before it negotiates with its counterpart. Only when you understand your alternatives do you really understand what the floor or the bottom is. Afterall, why negotiate a deal for less money than your best alternative- or BATNA?
Remember- knowing your BATNA ensures you won’t leave money on the table. Take the time to understand your BATNA.
E-discovery- Document Protocols
One of the most onerous facets of US litigation is E-discovery. Many non US companies are unaware of the requirements of E-discovery which places a non US company at a distinct disadvantage if it is involved in US litigation. Though some non US companies are forced to learn about E-Discovery because of numerous lawsuits in the US, many companies outside of the US still do not understand the basic concepts. However, as more and more international companies are finding out, the cost of doing business in the US happens to be the cost of litigation. More and more foreign companies doing business in the US are embroiled in lawsuits. And more and more companies are having to deal with E-discovery. The problem is that failure to follow E-discovery rules when involved in US litigation can not only lead to sanctions and fines but to the loss of the lawsuit itself.
What is discovery? It is the process of exchanging information and documents between parties in litigation. What is E-discovery? It is the process of exchanging electronic documents and information in litigation. As I point out above, E-discovery in the US is subject to certain requirements, many of them onerous, that if not complied with can lead to burdensome and invasive sanctions by the court. Therefore, it is extremely important that a detailed E-discovery process be implemented prior to litigation as part of an overall legal risk management process.
I suggest that companies need to follow a number of steps to ensure compliance with E-discovery rules but to have a good handle on the document production process. What are the basic steps?
Initial Steps
Collection
Besides the above steps, additional steps must be put in place to ensure proper collection of documents.
Staging
Review
Production
These are the basic steps of E-discovery. As you can see it is quite complicated. In order to adequately handle handle E-discovery in US litigation it is important to retain an E-discovery vendor or outside provider that can provide E-discovery solutions and help with the collection of ESI. This however, must be part of a E-discovery process. Failure to implement an E-discovery process as part of an overall Risk Management plan can spell disaster, especially for those companies involved with US litigation on a regular basis.
I found myself wandering around Seoul today. I stumbled upon a backstreet of Itaewon filled with European restaurants, new coffee shops, boutiques with coffee shops, boutiques with restaurants and even a boutique that would take care of your dog while you shopped. One coffee shop had a French bakery inside and another coffee shop was inside a French bakery. (more…)
Recently the news is filled with M&A activity. Companies are acquiring or merging with other companies on a global scale. What some companies fail to do, however, is to consider the FCPA implications of a M&A transaction.
The FCPA?
Yes, the Foreign Corrupt Practices Act (FCPA) plays a major role when considering the acquisition of another company, especially a foreign owned company. Specifically, due diligence needs to cover FCPA concerns. There are several reasons for this:
What may seem to be a reasonable acquisition may turn to be a nightmare of government fines and investigations if the acquiring party fails to adequately investigate a target company’s potential FCPA violations. Anti-bribery laws, especially the US FCPA and the UK Anti-Bribery Act are now very important and must be considered in the context of a merger or acquisition. Not only are U.S. companies liable for the acts of non US affiliates when it comes to the FCPA, but if they a successor in interest to a non US company that has committed FCPA violations, they may very well inherit liability for FCPA violations. And sanctions levied by the DOJ for FCPA violations may be very invasive.
So, make certain your due diligence covers the FCPA. Make certain your due diligence covers the target’s 3rd party vendor relationships and agreements, especially if they operate in high risk jurisdictions. Look at the target’s FCPA rules if any? Has an assessment been done on the effectiveness of the FCPA policies? What accounting controls are in place? What FCPA training, if any, was performed at the target company? Do they even know what the FCPA is?
Remember, when considering M&A transactions, especially involving a foreign owned company or a company that does business in high risk jurisdictions, FCPA due diligence is a must!
Therefore, when structuring your Legal Risk Management processes for M&A transactions, I highly recommend due diligence processes that also consider potential FCPA issues. FCPA due diligence these days is a given!
Most organizations know it is hard to see what is coming around the bend. In today's complex society, organizations face a myriad of obstacles including regulatory issues, government fines and investigations, scandals,crisis and lawsuits. How do companies prepare for whats coming around the bend before it hits them in the face. (more…)
