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A multinational spends 5 million a year on legal disputes

When thinking about doing business outside of Spain, companies have to include in their budget the cost of disagreements and legal conflicts that may occur with partners, clients or suppliers.
Annually, a large company spends, on average, 6.6 million dollars (5.2 million euros) to manage this type of problem, without taking into account the cost that the dissolution of a contract or the loss of business may entail. an investment.
Globalization, in addition to opportunities, has brought with it an increase in cross-border litigation, in which several jurisdictions mix. In this legal Tower of Babel, the companies' legal advisors opt for different strategies to deal with a problem that has a direct impact on the income statement, since legal certainty is decisive for a business to conclude successfully.
According to the survey Trends in complex cross-border disputes, prepared by the firm Hogan Lovells, practically half of the companies consider that these conflicts will increase in the coming years. Currently, multi-jurisdictional problems already represent 30% of the legal battles in which large companies are immersed.

JurisdictionWhen working abroad, one of the most important points is to choose, whenever possible, the legislation of the country by which the contract will be governed.
"Except for countries in which the legislation or courts do not offer the minimum guarantees of legal certainty, in the event that guarantees are going to be accepted, it is better to work with the local jurisdiction, since otherwise it is very difficult to enforce them" if The problems materialize, considers Beatriz Martínez-Falero, director of the legal department and secretary of the Mahou council.
There are sectors, such as the naval sector, where the options are more limited, since it is a market historically subject to English law. It also depends, for example, on the nationality of the investor. According to the Hogan Lovells report, while Americans, despite preferring their judicial system, are open to accepting British legislation, in the United Kingdom they are much more reluctant to sign a contract under US guidelines. Even so, these two systems are the most used throughout the world when resolving any type of business dispute.
One of the reasons is that, precisely, these two countries are the ones that are involved in the most cross-border conflicts, followed, although far away, by Germany and China.
Regarding the nature of the problems, commercial or contractual disputes are the most common, since they account for 44% of the cases. Next in the ranking are intellectual property problems or competition problems.
When it comes to proposing solutions, everything depends on the type of company. While some prefer to break the contract and look for another partner or supplier, "in the construction sector it is more profitable to keep the client than to terminate the contract," says Alfonso Aguirre, director of the legal department of ACS Industrial. In this type of case, it is decided, for example, to reach a commercial agreement.
In general, the consensus of companies is committed to prevention by including clauses in contracts, such as arbitration, or choosing safe jurisdictions. Even so, the objective in any of these disputes is always to reach a solution without having to go through the courts, which are seen as a last resort, both due to the cost in time and reputation.
Arbitration does not convince large firmsAlthough governments around the world are striving to expand the use of arbitration in commercial disputes between companies, it does not really catch on, especially when it comes to conflicts in several jurisdictions.
Although the arguments in favor of arbitration are its speed and lower cost, the directors of the legal offices of large Spanish companies assure that this is not always the case. For example, Alfonso Aguirre, director of the legal department of ACS Industrial, considers that "a London award is difficult to apply in some countries", where this type of decision is not recognized.
For Jaime de Miguel, director of legal services at Cesce, "the problem with arbitration is getting certain countries to execute the award, without going back into the substance of the matter."
Raimundo Fernández-Villaverde, director of corporate legal advice at Acciona, considers that the cost and lack of speed are some of the drawbacks of arbitration, in addition to pointing out that "the choice of arbitrators represents a bottleneck due to the recurring incompatibilities of the arbitrators", which in the end delay the processes.
Even so, at least seven out of ten companies include arbitration clauses in their contracts in case a conflict arises, but only 25% of these are resolved using this means, according to the Hogan Lovells report.

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