In cross-border deals—whether an acquisition, a financing or a new project—non-U.S. aspects may have  unanticipated impacts on the economic model and negotiations. A transaction may be "cross-border" for any number of reasons, including foreign deal participants, non-U.S. assets or the application of non-U.S. laws, to name a few. Identifying, assessing and mitigating deal risk in this environment requires an understanding of these potential impacts. Though by no means an exhaustive list, following are some useful reminders of issues for the negotiating team to consider:

1. Be Attuned to Potential Differences Early On. Avoid pitfalls during the "pre-contractual" phase by ensuring you do not inadvertently assume unwanted risks or become committed earlier than you intend (for example, under letters of intent). In some countries, such as France, the parties may be subject to a duty to negotiate in good faith to reach agreement on a transaction once discussions commence. Verify requirements under local law for parties to be contractually bound as these may differ from country to country. Failure to include required contract provisions (for example, omitting a "purpose" clause) or signing without adequate evidence of your legal authority can sometimes call into question the validity of the agreement and limit available remedies. Engaging effective local counsel early on to assist in navigating these waters can avoid unintended consequences.

2. Choice of Law Clauses Matter. Choice of law to govern your agreement matters if a term turns out to be unclear and a court must ultimately decide. U.S. courts may look to the parties' behavior to establish intent, but many foreign courts in civil law countries look only to the four corners of the contract. You may encounter "mandatory" laws that parties cannot waive or "opt out" of, even if they agree to another (U.S.) law to govern their agreement. When possible and practicable, seek to negotiate application of laws with established commercial precedents (such as New York, U.K. or Dutch laws) that offer greater certainty if a contract is challenged in court.

3. Formalities of Contract. In many foreign jurisdictions, noncompliance with required procedural formalities may impair the validity of a contract. Formalities may include a requirement to appear before a notary in order for the contract to be transcribed into a "public" deed. Notaries in civil law jurisdictions often play a greater role than do their U.S. counterparts, and their presence may be required under local law for your transaction to close.

4. Dispute Resolution. Related to choice of law is specifying which dispute resolution mechanism will apply to your contract. One way to avoid having a dispute filed in local courts is to agree to international arbitration, preferably in a neutral forum under established rules. If the foreign investment may be protected under bilateral treaty investment regimes, these protections should be expressly built into the contract.

5. Ownership of Property. Proper structuring of ownership of foreign property, along with determining the attendant tax consequences, may determine the economic success of a transaction. Local law issues to consider include choices of entity available for the investment, authorizations needed to do business and any prohibitions (and any incentives available) for the investment. In some civil law jurisdictions, for example, common law trusts may not be recognized and therefore cannot be used to hold or secure property. Increasingly, some developing countries, have laws or practices requiring local content—meaning the development of local skills, technology transfer, and the use of local manpower and local manufacturing—that may impact the economics for development of a "greenfield" project, effectively require the transfer of assets or otherwise affect the ownership of property.

6. Contracting with States. If the counterparty is a sovereign state (or a state-owned enterprise), it may not always be possible to provide for foreign law or international arbitration. Whether or not sovereign immunities can be legally waived by the governmental counterparty needs to be carefully assessed, as well as the possibility of providing for dispute resolution under arbitration regimes that the state has agreed by treaty or law may apply to its contracts. Watch for specific sovereign rights, such as (in a few countries) a unilateral termination right of the state under local law that is not waivable by contract.

7. Change in Law; Hardship of Contract. The parties may negotiate protection from adverse changes in local law through so-called "stabilization clauses" aimed at restoring the economic equilibrium of the parties. In common law systems, these provisions  generally are not binding on the parties unless negotiated and reflected in the contract. However, in many civil law countries, similar principles are codified in local law and will apply whether or not agreed to by contract. An unaware party may thus find itself obligated by its counterparty to renegotiate a contract under local law based on changed economic circumstances.

8. FCPA Compliance and Similar Regulatory Issues. U.S. companies doing business abroad are subject to the Foreign Corrupt Practices Act and similar U.S. regulatory regimes in their dealings with agents and foreign counterparties, especially businesses that are wholly or partly owned by foreign governments. U.S. parties must make sure their existing due diligence and compliance programs support the cross-border transaction as well as the related record-keeping requirements.

9. Currency and Repatriation Issues. For any cross-border investment, identify barriers to repatriation of profits and seek to mitigate these through proper contract structuring, insurance, payment arrangements or other avenues. Depending on local law, resolution may be as straightforward as registering with a central bank (for example, to repatriate dividends) or may require obtaining assurances from a governmental party as to currency availability and convertibility (to ensure foreign currency can be repatriated). Currency exposure or changes in currency exchange rates may make the transaction uneconomic unless the risks can be hedged on acceptable terms.

10. Force Majeure. The old adage is that things happen when least expected. To avoid surprises in case of a force majeure event, include a well-drafted, country-specific force majeure clause. In the absence of a negotiated provision, less advantageous force majeure provisions in local law may apply.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.