Short Paper - International Regulations

Having a full understanding of the regulations of any International business venture in which you may be dealing with, it will be valuable to the procurement specialist to understand the regulations that are in place. These regulations will be able to set the tone for any negotiations that are being held concerning the contract allowing for a painless transition throughout the process. In this paper, I will discuss the contract differences a procurement specialist may encounter while operating in a foreign country which was shown in the case study conducted by the World Bank Group, Doing Business 2015 Going Beyond Efficiency. I will then describe a scenario in which a procurement specialist may encounter problems while performing a procurement in another country. A person that is performing International business transactions can prove to be difficult if the person doesn’t fully understand the regulations that are in place within the country of operation. The recent case study, conducted by the World Bank Group titled “Doing Business 2015 Going Beyond efficiency”, had involved 34 different countries across 7 regions of the world. This case study had shown the variables that one may face when dealing with international negotiations for procurements of any type. While performing this study, World Bank Group had found that none of the economies had allowed the parties involved to enter a contract that would exclude liability for damages resulting in personal injury or gross negligence. In addition to this, none of the studied economies allowed contracts to be agreed upon which would undermine public policy or was agreed upon while under duress, fraud or coercion (World Bank Group Staff, 2015). There were other issues that one could be confronted with when dealing with properties needed. It was found that many countries have different regulations in place concerning the alienation of real property which forbids the buyer from selling the property for a predetermined amount of years. Of the 34 countries that had be reviewed, 14 of them had regulations in place that had prohibited this with 9 of them allowing restrictions on the alienation of real property when foreigners are involved in the transaction. Furthermore, the case study shows that there are differences between the regions that were reviewed. The group had found that “Among the regions covered, Europe and Central Asia is the only one in which no variation was found in the number and type of limitations imposed on freedom of contract” [ CITATION Wor15 \l 1033 ]. It was found that there was a total of 6 limitations found within all regions that had been reviewed by the group: 1. 2. 3. A cap is imposed by law on interest rates. Courts can exercise scrutiny on the adequacy of consideration. The determination of a contract price cannot be left to a future agreement, unless the contract already establishes how the price will be determined. 4. Limitations are imposed by law on clauses that can be included in standardform contracts. 5. Liability for gross negligence cannot be excluded through mutual agreement of the parties. 6. A contract cannot be agreed upon if its terms are against public policy or if one of the parties does not have full legal capacity. When looking at the other end of the spectrum, the remaining regions display various regulations/limitations that are enforced. The regions located in Africa’s Sub-Saharan region, such as the Democratic Republic of Congo had the lowest amount of limitations in place with 3 while Togo has one of the largest amounts of limitations in place with 7. “Across all regions, only 3 economies forbid choice-of-law clauses in international contracts. All 3—Brazil, Colombia and Uruguay—are in Latin America and the Caribbean” (World Bank Group, 2015). In the country of Singapore, the parties involved in the contract have very broad negotiating power which provides for a certainty that the contract will be quickly enforced in a time frame of 150 days but it can take upwards of 4 years for resolving a dispute through the courts. On the opposite end of this is Sri Lanka. Sri Lanka is among the countries with the lowest limitations with 3in place but the time for the enforcement of the contract jumps considerably to more than 1350 days. The Doing Business 2015 case study states “Parties might be able to include a wide array of covenants in their agreements, but long enforcement times can nullify the utility of those covenants. A slow contract resolution process frustrates freedom of contract” (World Bank Group Staff, 2015). The country that had been found to present a higher amount of limitations had also presented an astronomically high amount of time, reaching 4 years, for enforcing the contract yet in Tunisia, there are 8 limitations in place yet it takes only 565 days to enforce a contract. The best way for combatting these types of setbacks is to ensure that the procurement specialist has a firm grasp of what the International Regulations are when entering negotiations in order to alleviate the headaches that may become present throughout the process. If I were to be expanding a carbonated beverage business into El Salvador, I would first have to consider certain limitations that could delay the start of the business. The first limitation that would need to be considered is the initial land purchase which is not present therefore that limitation will not be an issue. The financing of the land, if needed, is available with a capped loan interest rate in place. An agreement must be in place with a supplier that will allow the price for the needed supplies to be set by the current market price at the time of the procurement of the supplies. The Labor laws are an area that must be adhered to very closely which will make the operations of the business abide by the local labor and minimum wage laws. The area does have a pro-union stance and therefore prohibits any type of retaliation against an employee discussing or attempting to organize a union within the business. After identifying these possible limitations, I can then initiate the procurement of the land, either through purchase or leasing from the owner due to the lack of limitations imposed from the government. If the need to purchase the land is present, then there would be a need to have a credit line through a local bank that will provide the best rate available due to a capped interest rate in place. The contract that is implemented with the many suppliers for resources needed to make soft drinks, such as sugar and corn syrup, must have the correct wording that states that the market price will vary and the current price of the resources at the time of ordering them is what will be paid making the cost a non-fixed price. The importance of fully understanding each regulation that is in place when operating in a foreign country cannot be dismissed. It is only when there is an understanding of the regulations that the procurement can begin with the specialist having the knowledge of possible setbacks that could occur. This will allow for a very seamless procurement that will exhibit a minimal level of setbacks from operating on an International level.