Foreign Law in Transactions between the United States and Latin America

Article excerpt

I. INTRODUCTION: ONE INTERNATIONAL PERSPECTIVE AMONG MANY

The topic of Foreign Law in International Legal Practice is often discussed primarily in the context of litigation, conflict of laws, and the extraterritorial application of the laws of a country. Another perspective arises from international business transactions. In this context, the international transactional lawyer is to a large extent a corporate generalist who must take into account and address the additional legal issues inherent in a cross-border transaction.

My perspective on the application of foreign law in an international legal practice is the product of twelve years of transactional experience representing U.S. clients in Latin America and Latin American clients in the United States. Four of those years were spent opening and working in the Mexico City branch office of Gardere Wynne Sewell LLP, which has been in operation since 1992. With Mexico's entry into the General Agreement on Tariffs and Trade (GATT) in 1986 and since the adoption of the North American Free Trade Agreement (NAFTA) in 1992, there has been more than a one hundred percent increase in cross-border investment between the United States and Mexico.1 After President Ernesto Zedillo and Central Bank Governor Guillermo Ortiz adopted tough macroeconomic policies, an improving infrastructure, growing skilled labor pool, and close proximity to the world's largest marketplace pushed Mexico, in 1999, to become the eighth largest exporter in the world.2 Naturally, much of the expansion in Mexico's export capacity is a result of the sustained level of investment by U.S. companies in the past ten years. It is this type of economic activity that has been the "bread and butter" of the Mexican offices of U.S. law firms. Much of this investment activity has taken place through traditional merger and acquisition transactions such as purchases of Mexican companies by U.S. investors, or U.S. companies establishing either wholly-owned local operations or forming equity joint ventures. It is these types of transactions, particularly joint ventures with privately-owned Latin American businesses, that are in large part the context for my discussion of foreign law in international business law practice.

This article is not intended to be an exhaustive review of how foreign law may play a role in an international business transaction. Instead, this article focuses on a group of issues that can arise in an inbound investment from the United States to Latin America. This article discusses how these issues may need to be addressed in the underlying documentation reflecting the investment. A U.S. lawyer working on a cross-border investment can expect that some of these issues will arise and should work to spot these issues and provide his client with practical solutions. As the U.S. economy becomes further linked to other economies in this hemisphere, U.S. counsel will need to become better acquainted with doing business in Latin America and better prepared to help their clients be successful in these markets.

II. FOREIGN COUNSEL: RELATIONS wITH YOUR LATIN COUNTERPART

Throughout Latin America, many businesses employ in-house lawyers to handle routine corporate matters (e.g., maintenance of corporate books and records, documenting powers of attorney, and contracts), deal with labor disputes arising from the termination of employees, and attend to routine litigation matters, particularly those dealing with the collection of unpaid accounts. While many in-house lawyers are well-trained in the civil law tradition of practicing law, few have substantial experience in cross-border matters with U.S. companies and investors who operate in common law jurisdictions. These Latin American businesses may retain outside legal counsel for those non-routine matters. These outside firms may range from small boutique firms to the largest local firms located in the country's commercial centers. …