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Foreign Investments abroad in Healthcare manufacturing

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As often as corporations seek to expand their markets in our 21st century global environment, is as often as investments and more important, time is lost due to a lack of proper regulatory due diligence. Many corporations in mature markets today seek to expand their zero sum game as well as reduce costs to manufacture by considering overseas manufacturing. It is not usual to see lost money and again lost time as internal corporate attorney’s seek local in-country law firms where new markets appear to be potential growth arenas. Understanding the terms of business in any country is a prerequisite to doing business in that country. However most in-house corporate staff attorneys who are chartered to seek regulatory requirements in order to register and do business in their new target markets rather seem to relegate their research to in-country law firms and prefer to focus more deeply on how to do and conduct business as their first priority. This leaves these new emerging multinational corporate endeavors to expand their markets at RISK to the true aims of most in-country local law firms.

Most in-country law firms understand the growth opportunities of multinationals seeking entry to new markets but unfortunately more the rule, than the exception, they see new multinational contacts myopically, as a new billing revenue fund rather than as an opportunity to build a foreign reputation to attract other new emerging multinationals to seek them out. In emerging markets the usual course of business, where the predominant demographics reflect a lack of a middle class, is to secure local in-country attorneys who understand who is in power and how to connect with the power brokers to do business. If you consider that this mindset comes from a lack of a middle class then you can appreciate this is not much different than a land of “haves and have not’s” where the law firms business is in a mature situation with few new opportunities for growth. Having this mindset leads to greed and less than unscrupulous attitudes as most of their business has been earned by who they know rather than what they know. This type of mentality leaves expanding corporations to fall afield and be at risk to a local in-country law firm’s primary goal of building their billing rates as opposed to building a reputation. Your firm’s becoming mired in labour litigation due to a lack of your precognition of labour law in that country only means deeper expenses, loss of productivity and more revenue for the in-country law firm. These local in-country law firms see your firm as a green ticket to an ongoing relationship which gets very deep as the investments grow and your firm is now committed to this venture. They rarely explain how the court systems and contract law works.

Understanding contract law and national court judicial systems are vital and the very first critical assessment that needs to be made by in-house corporate staff attorneys charged with researching an in-country law firm for your new market. While vistas of opportunities for your new markets may seem very green from a tax point of view and low cost inputs such as labor but your highest and first priority needs to be to assess the viability of your foreign investment based on how the court system enforces contract law and how it functions. Your investment in capital and time depends on it! Can you be blocked from government contracts unless you bring in local equity partners? Can your corporate expatriates get clearance for permanent visas? How do the courts see your local employees? Is it an “at will” work environment? Are severance packages burdensome beyond a year’s salary for even clerical workers? If local contractors fail to deliver intermediate goods, what is the time line process to obtain remedies?

The judicial system and how they enforce contract law can often mean more than simple lost capital but lost position in being a first mover. The old world law firms who grew through their contacts have changed, as democracy has allowed for more innovation and growth. This has led to new middle class markets which has led to new democratic governments leaving 20th century crony style government fading. New markets are anxious to see in-country multinational investment but contract law can be onerous. As an example, many laws in India are still the same since the British granted independence in 1947. As a new 21st century multination seeks to expand its markets, while capital can be re-earned, time can never be recaptured. In-house staff attorneys need to consider in-country law firms whose history is not based on the contacts in government but solid knowledge and experience on “how the courts enforce foreign as well as in-country contract law”.

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