Notes from the Field - Negotiating around the World The consultations behind the 'ICC Principles to facilitate Commercial Negotiation'

27 Pages·2014·1.433 MB·English

Notes from the field
Negotiating Around the World
The consultations behind the ICC Principles to Facilitate Commercial Negotiation
Edited by
Emily O’Connor
NOTES FROM THE FIELD: NEgOTIaTINg aROuND THE WORLD
Notes from the field: Negotiating Around the World
Copyright © 2014
International Chamber of Commerce (ICC)
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ICC Publication No. 762E
ISbN: 978-92-842-0260-7
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Contents
introduction ........................................................................................................................................3
1 mNe, energy, United Kingdom .......................................................................................................3
2 domestic department store chain, the Netherlands ................................................................5
3 mNe, Power/transport, france/China/russia ..........................................................................5
4 legal services, sweden ....................................................................................................................6
5 sme, transport, Ukraine ...................................................................................................................7
6 Professional association, United Kingdom ..................................................................................8
7 legal services, Bahrain .....................................................................................................................9
8 sme, Games/entertainment, United states ..............................................................................10
9 legal services, Georgia ..................................................................................................................10
10 mNe, Automotive, Germany .........................................................................................................11
11 legal services, Nigeria ...................................................................................................................12
12 mNe, telecommunications, United Kingdom............................................................................12
13 legal services, latvia .....................................................................................................................13
14 mNe, music/ entertainment, United states ...............................................................................13
15 legal services, israel .......................................................................................................................14
16 mNe, technology, Belgium ...........................................................................................................14
17 legal services, Angola ...................................................................................................................15
18 Business and government interpreter, mongolia......................................................................15
19 sme, Agriculture, south Korea .....................................................................................................16
20 industrial relations, United states ................................................................................................17
21 legal services, france/latin America ........................................................................................17
22 mNe, Apparel/footwear, the Netherlands ...............................................................................18
23 Business association, Colombia ...................................................................................................18
24 legal services, United Kingdom/China ......................................................................................19
Annex 11 iCC Principles to facilitate Commercial Negotiation.........................................................21
Commission on Commercial law and Practice (ClP) ............................................................24
iCC at a glance .................................................................................................................................25
Negotiation tools from iCC ...........................................................................................................26
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introduction
JJ In 2013, ICC released the ICC Principles to Facilitate Commercial Negotiation, which were
developed based on consultations with negotiators around the world on what was working in
international commercial negotiations, and what could be improved.1
JJ from Israel to mongolia, from Colombia to bahrain, from Nigeria to the United States to China,
we consulted with businesspeople and lawyers engaged in commercial negotiation from
organizations large and small, across a range of industries, to hear about their experiences at the
negotiating table.
JJ What follows in the Notes from the Field is a series of snapshots provided by negotiators who
have been kind enough to share some of-the-moment insights and experiences drawn from
their current practice.2
JJ many of the negotiators to whom we spoke discussed cultural differences based on their
personal negotiating experiences. these elements of the Notes are not intended to represent
generalized ‘truth’ about a particular culture, but rather to serve as examples of the kinds of
issues that may arise when negotiating across cultures.
JJ there is a rich and robust literature on the discipline of negotiating, which is outside the scope
of the Notes. the aim of this publication is to give readers a glimpse into negotiating rooms
around the world and allow them to benefit from others’ experiences regarding good — and less
good — practice, and thereby avoid common hindrances to efficient and fruitful negotiations.
JJ As you read, you’ll see that common themes emerge from the anecdotes, as well as differing
perspectives on the same issues, all of which we hope will inspire you to do additional reading
on the constellation of issues at play in contemporary international commercial negotiation.
JJ those who were generous enough to share their time and insights are not identified by name.
their organizations are described by structure (mNE, SmE, major domestic chain, legal services,
etc.) and/or industry sector; and relevant location(s) (for example, the consultation with a lawyer
at a london-based satellite of a Chinese law firm is categorized as ‘legal services, United
Kingdom/China’).
1 mNe, eNerGy, UNited KiNGdom
JJ Preparation is key
JJ Imagine how things might go; know as much as possible about context of the negotiation,
about negotiators, every element you can think of
JJ Culture is critical — make sure to have local people on your team
—J language capability must be secured, interpreters may be needed
—J Gift- giving and hospitality may be very important (be careful with government officials —
they likely can’t accept gifts, but won’t want to give offense)
—J time may be viewed differently — when to arrive at a meeting, when to start talking business
once you’ve arrived
—J hierarchy is important in various ways, e.g. awkwardness among Korean counterparties when
junior members of the Korean team unwittingly ordered beer that arrived in larger vessels
than that ordered by their senior colleague
—J location — where will business be done? bar, conference room, etc.?
JJ Seek advice on local law/formalities –in some parts of latin America, for example, people will
accept your power to negotiate only if you have power of attorney from local counsel
JJ research the people you’ll be meeting
—J Valuable for building rapport, knowing weaknesses
1 the interviews were conducted, and the ICC Principles, drafted by Emily O’Connor, Senior Policy manager of the ICC Commission
on Commercial law and Practice.
2 the views expressed in the Notes are personal and do not reflect the views of ICC or the organizations with which the interviewees
were affiliated.
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“too good a win isn’t a win”
—J tap into your own organization’s institutional knowledge, historical relationship between
parties; know the range of people in your organization interacting with the other party and at
which levels
JJ role play in advance
—J With colleagues playing counterparties. See how your lines might work, be received
JJ Put yourself in other side’s shoes — what are their interests?
JJ Get authority within your own organization
—J formal or informal buy-in, do work in advance, determine what are your boundaries
JJ be creative about results — make the pie bigger
JJ figure out what other side can give, what type of authority they have, are the right people there?
JJ Ensure you have the right people on your team regarding
—J Subject matter
—J Dynamics of negotiation (cultural, personal)
—J language
JJ Ensure you have the right people on standby for, e.g.,
—J translation of business agreement into legal language
—J Grant of authority
—J legal advice
—J Accountancy advice
JJ have a realistic plan for what can be achieved
JJ budget enough time for a big negotiation - you may have to change a return flight rather than
cut discussions short because your flight leaves in 2 hours
JJ Probably best commercially if one side doesn’t come out very unhappy — you may not foster
conditions for a supplier being a good partner
—J Suppliers who have been crushed may try to avoid observing black letter of agreement to
make more money, or may try to get out of the deal
—J too good a win isn’t a win
JJ regarding unequal bargaining power
—J try to find the right person in the stronger organization, someone with a vested interest in
the deal and the relationship who may be able to be more even-handed/generous
JJ re good faith/misrepresentation
—J be open about the context, be as open-handed as you can be
—J Cultural differences
—J be clear about what has been agreed
—J be patient, don’t judge by your own yardstick. for example, don’t jump to the conclusion
that someone’s reopening an issue you thought was closed is bad faith
JJ I’ve been impressed by an organization sticking to its guns, holding firm on its position but in a
way that was not damaging to the relationship. this inspired respect — often people will give
something they don’t really want to give because they want to be seen to move
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2 domestiC dePArtmeNt store ChAiN, the NetherlANds
JJ We find ourselves on both sides of the power differential, often negotiating with fashion
conglomerates who have greater power, but also with smaller brands that have less power
JJ Obstacles/irritants encountered, simple things:
—J Not lining up all relevant people on time: three months of negotiation before the other side
involves its legal department, and then even later, their outside counsel
—J this implicates good faith because you have trusted that certain things were agreed and so
trading has already started before the contract is concluded
—J Perhaps this is a strategy of the other side, waiting until trading has started and then trying
to shift liabilities
—J Smaller companies may be less slow, but more genuinely bumbling
JJ Sometimes big companies stick with their standard terms out of fear
JJ be open about goals and expectations of a meeting. be transparent, put things on the table:
—J Who is there and why, which team members are lawyers
—J Don’t waste the other side’s preparation time - once our It department spent lots of time
and expense preparing for a meeting and then it turned out the information was not wanted
at the meeting and the other side had forgotten to tell us
—J No last-minute surprises
JJ take the other party seriously
—J have an open mind
—J Answer their questions
—J Work on contracts as partners rather than adversaries
—J Don’t give the other party the sense that they are already behind 1-0 and they are going to
stay there
3 mNe, PoWer/trANsPort, frANCe/ChiNA/rUssiA
JJ translation is a critical issue
—J Ideally each side brings its own translator rather than using someone mutually-agreed
—J translators cannot be participating in the negotiations
—J A translator needs to understand the business; you may need different translators for
different parts of the deal based on knowledge of the subject (e.g., purchase price
adjustment v. scope of work)
—J Don’t look at the translator when speaking, address your counterparty directly
—J Keep in mind the limitations of working with a translator
—J Speak in digestible outline form, gauge your speed, take pauses
—J Also use body language to express your point
JJ Avoid rhetoric/hyperbole - explain yourself clearly
JJ be careful about how you say ‘No’ — a misstep can hurt goodwill and waste a huge amount
of time
JJ Avoid cliffhangers, don’t say: ‘We can’t accept this!’ Instead, say, ‘We can’t accept this for three
reasons, first….’
JJ make sure your side fully understands your position and decide who communicates to the other
side — don’t break ranks
JJ Decide whether or not you want your decision-maker in the room/available
JJ Establish your authority and flexibility
JJ Understand the culture where you’re going
JJ local counsel can be very useful as cultural translator. tell counterparties, ‘I am accompanied by
outside counsel’. A perfect candidate would be:
—J local
—J Native of local language
—J has worked or been educated in your jurisdiction (thus culturally ‘bi-lingual’)
JJ Don’t bring your home style of negotiating to foreign places
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—J US negotiators tend to be very detailed, heavy and serious
—J Do it the local way
—J rules of engagement may be different where you are going — don’t become angry, use the
rules to your advantage
—J You need bi-cultural intermediaries, someone who can understand your expectations
JJ In China, the most important person (the decision-maker, or as close as is present) is assumed
to be the one in the center; shake hands with this person first
JJ In a Chinese deal, mutuality of obligation is critical, things must look fair, be presented as
mutual obligations
JJ Note-taking/drafting decisions need to be agreed
—J Shared drafting on a screen is ideal
—J If minutes are required, best that they simply mark positions rather than set out
the negotiation
—J In China and russia, drafting dual-language documents is common
—J Ideal regarding contract language, in descending order:
1. English only
2. Dual-language with English governing (but sometimes law requires the local foreign
language to govern)
3. Dual-language with both languages having equal validity
4. Never want foreign language to govern solely
JJ Include language in an arbitration clause to ensure that arbitrators are perfectly fluent in both
negotiating/contract languages, and consider specifying nationality and location of arbitrators
JJ Sometimes people reject something purely for emotional reasons. You need to know that and
how to get around it. Don’t get pulled into their state
JJ make sure your counterparty is well represented by counsel
JJ When each side has outside counsel, it’s helpful if they establish rapport so they can work
together without the emotionality of the clients
JJ Identify the powers and protections of each party and use them
JJ Aim to provide a fair contract model to begin
JJ Set up rules of engagement regarding shared travel
—J both sides should travel
—J Prepare meeting agendas in advance with all topics clearly identified so that the traveling
team can bring the right people (or have them available by phone)
—J When others have traveled to you, don’t take advantage by holding them hostage/play
games to waste the time of the travelers
—J Don’t change time of meeting at last minute
4 leGAl serviCes, sWedeN
JJ If trust is established, problems are easier to avoid or work around, how to establish trust?
JJ Preparation helps lessen trust problems because it limits the ability of the other side to trick you
JJ If you tell me something, I’ll work on that basis. I take what people say at face value, won’t make
assumptions
“rules of engagement
may be different
where you are going
— don’t become
angry, use the rules to
your advantage”
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“remember that in
multi-party, international
negotiations, people
may have completely
different understandings
of the same issues”
JJ You can apportion the truth as you want to, don’t have to reveal everything
JJ regarding dispute resolution: both sides must be wrong in some way — if they were both
‘whole’ or ‘reasonable’, they would have worked things out. Warring parties often don’t trust the
other side, think their counterparties are lying
JJ People come to negotiation wanting something. Understand and don’t be easily swayed from
your own objectives. that doesn’t mean you shouldn’t be flexible, but that you can stick with
your own objectives
JJ regarding aggression, be prepared and keep calm. People may forget what they came for and
do things they regret. In the face of aggression, don’t be phased — it takes two to build up that
kind of tension
JJ I don’t reply to aggression. I reply to understanding
JJ Important to figure out how to signal to someone from another culture that you mean what you
say, to enable them to meet in a more trusting atmosphere. People may initially be nervous
about opening up
JJ ‘Negotiation’ writ large should take a back seat. Get the relationship going first, but it takes time
and you can’t force it
JJ for contracts, don’t use lawyers too much. A contract is the object (services, goods) and price,
which is not lawyers’ business. most lawyers’ issues are best dealt with outside of the meeting.
And there is always the drama of kicking the lawyers out of the room
JJ for efficiency’s sake, get the frills out of the way early
5 sme, trANsPort, UKrAiNe
JJ Closed communities have a narrow view of how to deal with people
JJ With technology, speed has increased exponentially, and we must change our mindsets.
We can’t compare our lives with any previous lives; can’t abide by long cultural traditions,
including religion
JJ In a negotiation taking place in a middle Eastern country during very hot weather, the lone
woman — who happened to be the head of the legal department of her company — was forced
by the hosts to wear a heavy garment worn by local women. She was effectively driven out
because it was unbearably hot and hard to communicate — you can’t behave like that with
international partners
JJ the easiest negotiations I’ve had have been between the people from the EU and North
America because they have been clear, simple, and with no backyard drama
JJ In the US, people say what they mean. be careful: in some countries, people may not mean what
they say
JJ Of course, don’t always tell everything
JJ In CIS/baltic countries, it’s tradition that before local parties start to talk, they examine how
strong you are. this is typically done through drinking alcohol. these are much younger
countries than those in Europe. Civilization didn’t start developing until the 17th century
JJ the people are of mixed European and mongolian descent, this is a wild mix. the climate is
harsh. the mongolian side makes the people wild, but the European side makes people wish to
be powerful
JJ the typical management model in the region: results are never in on time, best option is always at
the last moment, or to delay the process. If people feel freedom, they’ll take advantage of it, use it
JJ businesspeople from russia and the Ukraine are open-minded and hospitable; the personal
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“All that vodka
is a test of
strength — are you
strong enough to
do business
with, can you be
respected?”
relationship is much more important than the commercial relationship
JJ A good business proposal is not enough. All communications start with hospitality. first, you
eat. too much food is given to show hospitality. Second, vodka, which brings new perspectives
to your negotiations. Every kind of alcohol has its own effect: wine — smooth, calm
communications; vodka — you must empty your glass in one try
JJ You must drink to show respect to negotiating partners. With every drink, there is a toast — to
the hosts, to family, to those who have died. Several bottles of vodka will be drunk with a meal.
If you ask for wine instead, it will be seen as an affront
JJ All that vodka is a test of strength — are you strong enough to do business with, can you
be respected?
JJ the new generation is taking a similar approach, but they want faster solutions with the use
of technology
JJ Parties must understand the key issue[s] of the negotiation, or waste a lot of time. Sometimes
there is a problem with language, so parties need to accommodate that
JJ Create a clear, simple agenda for what the parties have to do and issues to be agreed upon
JJ remember that in multi-party, international negotiations, people may have completely different
understandings of the same issues
JJ Someone should act as a moderator to clarify terms and understanding of the key elements of
the negotiation, or else everyone discusses only the issues that are important to them
JJ to be a good international negotiator, know the level of your counterparty so you know
how to speak to him or her. If you have international experience, you can behave like a ship in
the ocean (rolling with the waves) and you must understand that some people have little of
such experience
JJ You may need to educate your negotiating partners, even if they seem not to care
about something
JJ be on your partner’s level. You bring people to solutions slowly
JJ If you have some staff that are experienced with international negotiations, they can teach
others with less such experience how to conduct negotiations internationally and be understood
JJ Exchange students came to and from the United States and Ukraine in the 1980s and 1990s. the
US kids seemed like space men — their jeans, pens, pencils — it was all fabulous novelty. It was
clear there was a totally different understanding of good/bad, rich/poor, they had different
problems than their Ukrainian counterparts
JJ People are more or less the same, but the conditions of where they live change their minds.
Once you know this, you know how to talk to people
6 ProfessioNAl AssoCiAtioN, UNited KiNGdom
JJ Our global research focuses on commercial negotiation and creating contracts, including:
—J Organizational issues
—J Significant degree to which legal agenda dominates negotiations - emphasis on risk-aversion
can create risk of contract failure
—J Annual study of most-frequently-negotiated contract terms:
—J Disheartening, demonstrates negativity — many b2b contracts are driven by issues
related to consequences of things going wrong
—J most negotiated issues: limitation of liability; confidentiality; non-disclosure; data
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protection - notably, not the typical causes of contract failure
—J most common causes of contract failure are
—J lack of clarity as to scope and goals
—J Weaknesses re change management
—J 70% of respondents think current focus of negotiations do not lead to best
business outcomes
—J focus should be on governance and management principles
—J People seem to know intrinsically what they should be doing, but can’t seem to make the
transition ostensibly because the other side won’t do it (finger-pointing)
—J major characteristics of companies most admired for their negotiation:
—J Standard/optimized/documented negotiation process
—J Cross-organizational system for internal stakeholder involvement
—J Data collection and analysis to support negotiation strategy
JJ Discipline of negotiation is not well recorded or handled - often executive staff don’t want to get
too precise, lest they find that the negotiating counterparty is not a good match, so instead they
focus on how not to get badly hurt if there’s a dispute
JJ In long-term relationships, there’s a dramatic increase these days in frequency of change (due to
business climate, geopolitical issues, et al.)
—J Need for regular renegotiation is becoming more frequent
—J Poses challenge to stereotypical Western ideas of certainty
—J more lifecycle activity, more reflective of Eastern views - in China, contracting tends to be
more relational, better adjusted to the realities of life as it unfolds
—J No one talks about the high rate of decommitment by Western companies in, e.g., Asia
JJ Cultural differences, broadly speaking:
—J In more relational cultures (even common law India), most deals are done without written
contracts. You choose a trading partner from a common culture and trust rather than
expecting litigation
—J today’s negotiating environment seems to driven largely by US/EU mNEs
JJ look at process with holistic business eyes, not related to any jurisdiction, culture
7 leGAl serviCes, BAhrAiN
JJ Difficult behavior by a negotiator on the other side may include: arrogance, over-confidence and
unclarity — what exactly does he or she want to say?
JJ On the other hand, I respect strong people - they know what they are talking about, are well
educated about the subject
JJ Preparation is critically important, as it allows you to know what tools you have available in a
negotiation, and what issues you should keep in mind during the negotiation:
—J take time to prepare deeply, have good knowledge of all aspects of the subject, all relevant
facts and events. Everything is important -- even seemingly small things may be very useful
to know
—J One should have a full knowledge and understanding of the laws governing the subject
matter: what are the respective obligations of each party
—J Negotiators must read all relevant documents. If it’s a new deal, get all the preliminary
materials, early correspondence, every meeting minute. Ask about telephone calls,
conversations over lunch
—J Understand very carefully what the interest of your client/principal is and what is the
‘bottom line’
—J learn the prevailing practices and customs — both public and private — in the trade or pro -
fession related to the subject of negotiation. how do people understand things in this particular
field and kind of agreement? Sometimes the prevailing cultural customs in a profession are
almost equivalent to law and may be part of the governing contractual principles
—J find out about precedents of similar deals from any resources you can, ask friends,
colleagues, et al.
—J before meeting the other party, find out how he or she would like to be treated (e.g., kiss on
the cheeks, bow, shake hands, etc.) and learn about any relevant dietary restrictions (no
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