Outsource Magazine Issue 34 - (Page 64)

InternatIonal CommerCIal DIsputes In outsourCIng agreements If your agreement breaks down to the point where legal action is required, where is the contract enforceable? Moving work across international boundaries increases complexity and risk - so what can you do to protect your organisation? Cynthia O'Donoghue, Reed Smith Cynthia O'Donoghue is a partner and co-head of the Data Privacy, Security and Management group at Reed Smith. She specialises in technology and large, complex IT and business process outsourcing transactions. T here are many good reasons why businesses are drawn to international outsourcing. It is a strategy which can help achieve greater efficiencies, reduce operating costs and enable businesses to refocus on their core activities and strengths. It can also provide the extra flexibility needed to respond to changing market trends, business models and developments in technology. For all those reasons the volume of outsourcing activities has risen even more in response to the current challenging economic conditions. Despite the pros to outsourcing, businesses choosing to outsource need to be aware that doing so carries the risk of a dispute. In fact, current trends show that international outsourcing arrangements are particularly susceptible to such risk. There are, however, ways in which businesses deciding to outsource can prepare themselves for such an eventuality. Recent numbers show just how common international commercial disputes are. The Economist Intelligence Unit (EIU), working with global law firm Reed Smith, recently conducted a global survey of executives. It revealed that one in four companies was involved in an international commercial dispute in past two years. The most common causes of disputes were breaches of contract, many of which resulted from incorrect interpretation of the agreements. As for the most common underlying substance of disputes, infrastructure, which was on the top of the list in the early 20th century, has been replaced by technology and intellectual property (IP). This is hardly surprising if we consider that a recent survey conducted by ASIS International estimates the value of stolen corporate IP to be as high as US$1tn worldwide. At the same time there are big differences between approaches to IP regulation in different regions, while even the most developed jurisdictions, such as US, are still figuring out the exact limits of IP law. The EIU survey shows that 35 per cent of respondents who were not recently involved in international disputes see the theft of IP as the most likely cause of disputes they may face in the next two years in the BRIC markets. Such trends do not bode well for international outsourcing agreements. Technology and IP issues usually lie at the very heart of such contracts, and they are notoriously long and complex, which increases the potential for misinterpretation. "What do I care about law? Ain't I got the power?" - Cornelius Vanderbilt 64 ● www.outsourcemagazine.co.uk http://www.outsourcemagazine.co.uk

Table of Contents for the Digital Edition of Outsource Magazine Issue 34

Challenges and Champions
Outsourcing in a Troubled Economic Environment
Richard Jones
High Stakes
In Transition
The Bigger Picture
Numbers, Numbers Everywhere...
NOA Round-Up
Struggling To Get Through?
International Commercial Disputes In Outsourcing Agreements
Is Infrastructure Necessary?
Global Freelance Platforms Grow Up
Trumping Price – Only with Best value
Kerry Hallard
Technology Investment in 2014
Water Will Always Find A Way
The Right Time Is Now
You, Robot?
The Legal View
Top Ten
NelsonHall Round-Up
Online Round-Up
The Deal Doctor
Inside Source
The Last Word

Outsource Magazine Issue 34