PRIVATE
INTERNATIONAL LAW:
INTERNATIONAL CONTRACTS
When parties transact in multiple
jurisdictions, additional issues arise and ought be addressed. These issues
may pertain to
A simple sale of goods or distribution
agreement may touch on issues pertaining to the rights of the seller to distribute
products in the jurisdiction due to those rights having been licensed to another
by the holder of the patents, trademarks or other applicable intellectual
property.
In a global economy, markets may
be limited and resale and redistribution rights will likely be impacted. An
unwitting purchaser may find themselves at the receiving end of an injunction
or administrative order at customs prohibiting the delivery of the goods at
the border due to the holder of the right to distribute those products in
that jurisdiction enforcing those rights.
Technology, whether in the form
of tangible goods, or intangible software may be restricted and subject to
the imposition of restrictions throughout its distribution.
Goods may be lawful to own and
hold in the vendor�s jurisdiction but quite unlawful to own, possess or view
in the jurisdiction wherein the goods may be received.
This may pertain to the manufacture
or distribution of alcohol, art, and antiquities, upon which a cultural heritage
prohibition on export may exist, or goods made from rare or endangered species
which cannot be made, sold, received or distributed.
Images and products offered for
sale on the internet may be legal where distributed, but unlawful or restricted
where the image is viewed.
GOING OFF SHORE
Offshore refers to outside the
jurisdiction of the domestic jurisdiction.
There are many reasons people
move their assets off shore. The offshore jurisdiction is typically one which
has historically been known for low or zero taxes on domestic and foreign
transactions, secrecy, confidentiality, privacy and anonymity. These
jurisdictions have also been known for theft, fraud, scams and pirates.
In the past, business had often
been conducted with anonymity through the use of offshore trusts, offshore
corporations, layering of corporations, layering of accounts, banks and jurisdictions,
allowing capital to accumulate in a fashion not tied to the beneficial owners
of the fund who may or may not be exercising control over the enterprise.
The enterprise in theory, together
with its assets and income, would be free from claims against creditors, spouses,
grasping heirs and domestic taxing authorities.
That may have been then, this is
now and the rules have changed.
Should you be a party to civil
litigation in matters or transactions offshore, you may find yourself compelled
to disclose information and documentation to the extent you may have the power
or control to do so. This
may include directing the persons having control offshore to respond to the
demands for productions and information which had been put upon you.
You may also suffer a repatriation
order, which may entail dispositions and resulting capital gains. It is no
response to state that the information is offshore and the offshore jurisdiction
prohibits the disclosure.
Governments and in particular the
tax authorities have become aggressive in their desire to stop the hemorrhaging
of tax dollars due to offshore structuring which otherwise would be monies
received in the domestic treasury.
Notwithstanding the enterprise
may be wholly offshore, the domestic tax payer must be able to demonstrate
the bona fide business purpose for which the enterprise serves, with offshore
direction and control. It should not be a file folder corporation. It should
not be controlled directly or indirectly from domestic sources.
The enterprise may be found, notwithstanding
its offshore charter and activities, that it is a domestic enterprise for
taxable and income reporting purposes
Should the tax authorities challenge
the transactions with the offshore enterprise, and you not substantiate the
bona fides, you may find yourself facing serious criminal and tax offences,
penalties, liens, fines and the like.
You may also find yourself facing
significant fines and incarceration until information, documentation, and
monies are repatriated notwithstanding the disclosures may be unlawful in
the jurisdiction wherein such information and documentation may be kept.
Going offshore is not an enterprise
to simply save a few bucks on taxes or to have an offshore “anonymous” credit
card. Offshore havens have also been used to launder proceeds of criminal
activities to the appearance of legitimate monies.
In aid of stopping what is considered
a global issue, most jurisdictions, including Canada and the offshore jurisdictions
have enacted anti money laundering legislation which requires bankers, lawyers,
accountants, financial advisors to know their clients, to maintain records
pertaining to their clients and their clients� activities and to report to
the governmental authorities large money transactions and suspicious transactions.
The records are available to authorities
for inspection at any time. Failure to report, and advising a client that
a report had been made are offences. The obligation to report and permit inspection
of records applies to lawyers notwithstanding what otherwise was thought of
as solicitor client privilege and confidentiality. The
issue is currently before the courts in Canada.
Solicitor-client privilege applies
only to communications between a lawyer and the client. It does not apply
to what the lawyer does, the transactions through the lawyers trust account
or the advice given if that advice is counseling criminal activities.
The legislation in Canada provides
that the information reported to the governmental agency will be maintained
confidential unless it appears that it may tend to disclose an enterprise
crime or tax offence, and if so, the agency may forward that information to
any domestic and foreign governmental agency the agency finds appropriate.
Going offshore should not be contemplated
lightly. It is costly, fraught with risks due to ongoing legislative changes
domestically and abroad, risks of changes in the political climate wherein
the offshore enterprise may be established, risks of theft and fraud by those
persons retained to manage, supervise, operate or direct the enterprise.
Notwithstanding the risks, for
some, and for some circumstances, there are valid reasons and significant
benefits to go offshore. The offshore waters are filled with many hazards
and you will need good domestic and offshore legal and tax advice to chart
those waters.
I would be pleased to consult with
you on any of your non tax offshore concerns at [email protected]
Please note that these commentaries
do not constitute legal advice. If you are contemplating any offshore transaction,
please seek the advice of competent legal counsel and a tax accountant.
These
commentaries are not legal advice. To consult
with us, contact [email protected]
- legality of the contract
- legality of the subject matter
of the contract - the governing law
- the means by which parties
may be paid - currency restrictions
- duties
- letters of credit
- insurance
- burden of risk
- transportation
- war
- transfer of title domestic and
foreign guarantors - currency fluctuations
- dispute resolution through courts
or arbitration - taxes and applicable taxing
authorities and applicable treaties