Asia represents one of the most exciting and fast paced markets in the world. Containing almost two thirds of the world’s population, the potential to drive growth and revenue is clear to see.
However, for UK businesses, selling into Asia brings with it some pretty serious risks (risks which are significantly greater than would be faced if trading in more established markets). These risks are complex and there’s a lot a business will need to consider before entering an Asian market. This article, whilst only scratching the surface, intends to provide you with a brief overview of some of the most significant risks a UK business might face if it chose to do business in Asia.
Local laws
You’ll likely want to trade on your existing terms and conditions. Whilst your terms may be suitable for doing business in the UK, it’s possible that they may fall foul of local law applicable in the market into which you intend to sell. It’s therefore crucial that you engage local lawyers to establish if there are any specific local laws you need to be aware of (for example laws relating to product standards). Thereafter, you’ll need to update your terms and commercial processes to make sure that you’ll be operating in accordance with local law.
Also, to the extent to which you’re selling goods, it’s important to consider whether you’ll need any special licence or permit to export your goods. Commonly food, medicines, chemicals and certain antiques and artefacts can require special consents. If you’re selling directly to end users it’s likely that you’ll need to be responsible for ensuring the appropriate licence or permit is in place (although you could engage and export agent to do this for you). If you’re selling through a local distributor, you need to make it absolutely clear in the distribution agreement who’ll be responsible for this (and how associated costs are to be apportioned). The use of Incoterms can help here, but if relying on Incoterms you need to be completely sure that the chosen Incoterm reflects what you have agreed with the counter party, and that you’re fully aware of your obligations under it.
Governing law and jurisdiction
It’s likely that you’ll want your terms (and any other contracts you may enter into with local agents or distributors) to be subject to English law and jurisdiction. This, in many ways is sensible; it’ll be easier for you to bring any claim under the contract without having to worry about dealing with local lawyers, courts and translators. However, if you do bring a successful claim for breach through the English courts, you’ll still have the issue of enforcing the judgment in the local courts of your chosen market. This, even if legally possible, may not be commercially justifiable when taking into account the time and costs you’ll likely incur in doing so. Therefore, you’ll need to accept that, other than where the most serious breaches have occurred, you’ll most likely have no remedy for breach of contract.
Intellectual property rights
Whilst many Asian countries have updated their intellectual property laws to bring them up to a standard more equivalent to western markets, counterfeiting and trade mark infringements continue to be common. Therefore, you’ll need to ensure you IP is appropriately protected and this will involve ensuring any trade marks, designs or other registrable IP is locally registered. This can be costly and timely and will require the involvement of local lawyers.
Moreover, if registering your trademark, you’ll also need to take advice from local lawyers as to whether you’ll need to register a version of it in local script; it’s possible that the registration of your trade mark in roman characters will not automatically protect you from the same, or a similar, mark in local script being used or registered.
Bribery and corruption
Finally, it’s important that you have appropriate processes in place to ensure that any person who acts on behalf of your business in your chosen market is not engaging in any bribery or corruption. The UK Bribery Act has “extraterritorial” effect which means that a business in the UK could be liable under the Act if someone acting on its behalf in a different jurisdiction engages in corrupt practices (e.g., pays bribes). However, as a business you’ll be able to rely on the so called “due diligence” defence if you can demonstrate that you had adequate processes and procedures in place to prevent bribery. What is considered adequate will vary case by case, but is based on the size of your business, the sector you are selling into and the level of potential risk in the local market. It’s therefore important that you have appropriate anti-bribery policies and procedures in place.
In addition to thinking about UK law, it’s also important to consider whether there are any local anti-corruption laws which could apply to your operations and you’ll need to take advice from local lawyers on this.