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century, has been replaced by technology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
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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
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