BISNIS Bulletin, May 2003

 

Running into Problems?  Let Us Know

 

by Matthew Edwards

 

As U.S. companies have become more experienced in Russia and the other emerging markets of Eurasia, and as public and private market information resources have grown, companies are better able to avoid pitfalls encountered in earlier post-Soviet days. In many respects, clearer laws and regulations and more consistent enforcement have also helped make business in the region more routine. However, business disputes and other market barriers are still a part of the commercial landscape in the region as in other emerging markets. 

 

The U.S. Department of Commerce works to advise and, if possible, assist U.S. firms facing such hurdles. The best “solution” is preempting problems via careful planning and due diligence. BISNIS (www.bisnis.doc.gov), based in Washington, D.C., and U.S. Commercial Service offices located in U.S. embassies and consulates abroad (www.usatrade.gov) offer a wealth of information as well as individual counseling that can help companies steer clear of problems.

 

Commercial Disputes 

If your company has encountered a problem, there are several paths to consider, depending on the type of problem. Often, problems fall into the category of contract disputes between private companies. Resolution of these disputes—including payment arrears—generally must be pursued according to dispute resolution provisions stipulated in the contract (thus, companies that rely on “handshake” deals are at a big disadvantage). Dispute resolution in local courts is by no means predictable; and in several high-profile cases, authorities in Russia and other countries have failed to follow up on rulings by international arbitration panels, even when international panels’ rulings were upheld by local courts. In July 2000, the Commerce Department published a Handbook on Commercial Dispute Resolution in the Russian Federation (www.mac.doc.gov/internet/handbook_july_2000.pdf) to help companies navigate Russia’s evolving arbitration system. The U.S. government can approach foreign officials to intervene when authorities have failed to enforce local court decisions in favor of American companies. However, prior to this stage, it is up to companies to ensure that they obtain qualified legal counsel as they exercise arbitral provisions in their contracts

 

Problems Related to Foreign Governments

Another category of problems involves foreign government officials or agencies practicing policies that adversely affect many U.S. companies, violating an existing intergovernmental trade agreement, or taking measures that unfairly disadvantage a single American company or threaten its business. The country desks of Commerce’s Market Access and Compliance unit specialize in working with U.S. companies in these cases to make senior foreign government officials aware of cases of discriminatory policies, to press for compliance with trade agreements where applicable, and to seek fair market access for U.S. companies.

 

Each year, Market Access and Compliance desk officers help U.S. companies battle market hurdles in Eurasia. In 2002, they helped a medium-sized exporter of clothing turn back an attempt by Russian trademark pirates to take over several million dollars in sales, helped move a small U.S. franchise investor several steps toward closure on an unenforced arbitration decision, and intervened to expedite construction and other permits for a major oil project. They also worked with other U.S. agencies to reverse a discriminatory application of VAT on certain products in Ukraine and assisted telecommunications firms in two Central Asian countries in resolving disputes involving currency regulations and other issues.

 

In many cases, even with U.S. government support, satisfaction is hard to obtain. Changing unfair laws and regulations can be a lengthy and convoluted process. Complaining about mistreatment causes some U.S. companies to fear bureaucratic retaliation against other aspects of their business. Foreign politicians must be prodded to take on vested interests in their countries.  Smaller companies, especially, are vulnerable to having their cases ignored or discounted by foreign officials, as experience has shown. Foreign officials can be reluctant to act against a decision of a local court, even when the court is alleged to have acted improperly.

 

Nevertheless, if your company has encountered a problem with which you think Market Access and Compliance staff might be able to help, please contact us. In some cases, when a group of companies faces a similar problem, it may be easier for the companies and the U.S. government to get attention and favorable action than in instances in which a single company pursues its case alone.

 

Market Access and Compliance country desk officers can be reached at the following email addresses:

Ukraine, Belarus, & Moldova: Christine Lucyk, christine_lucyk@ita.doc.gov

Central Asia & Caucasus: Matt London, matt_london@ita.doc.gov

Russia: Matthew Edwards, matthew_edwards@ita.doc.gov

 

Matthew Edwards is senior Russia desk officer for the U.S. Commerce Department’s Market Access and Compliance unit.