Entering international markets opens up new financial horizons, but at the same time exposes a company to legal, currency, and operational risks. In cross-border B2B transactions, a standard contract template downloaded from the internet or drafted without taking into account the specifics of foreign law can lead to frozen assets, lengthy litigation, or complete financial losses.

To ensure that a transaction generates profit rather than lawsuits, legal protection should be built on two pillars: a thorough audit of the counterparty by a lawyer (Due Diligence) and a carefully structured contract itself.

Comprehensive Counterparty Due Diligence: Verification Before Signing

Even a perfectly drafted contract will not provide protection if your partner turns out to be a “shell company” or is on the verge of bankruptcy. In international B2B relationships, a standard tax identification number check is not sufficient.

Stages of Verifying a Foreign Partner

  • Verification of legal status and founders:
    • Request an extract from the commercial register of the country of registration (for example, Companies House in the UK, Handelsregister in Germany, KVK in the Netherlands).
    • Verification of the ownership structure: identification of the ultimate beneficial owners (UBO).
  • Verification of financial indicators:
    • Analysis of financial statements for the last 2–3 years.
    • Assessment of the level of credit risk through specialized agencies (Dun & Bradstreet, Creditreform, Experian).
  • Sanctions audit and Compliance:
    • Checking the company, its key directors, and beneficiaries against global sanctions lists (OFAC, EU Sanctions Map, UK Sanctions List).
    • Analysis of supply chains for secondary sanctions and compliance with export control rules.
  • Reputational check and litigation history:
    • Checking commercial court registers in the counterparty’s country of operation.
    • Searching for information on debts, tax disputes, and ongoing bankruptcy proceedings.

Key Clauses of an International B2B Contract

When drafting a contract, the wording of each clause determines the allocation of financial and legal risks. Three areas require particular attention.

Force Majeure

Standard provisions concerning “natural disasters and wars” no longer fully reflect the realities of modern business. The clause should describe in detail the mechanisms for interaction between the parties when unforeseen circumstances arise.

  • List of events: Clearly distinguish between natural disasters, decisions by government authorities, the imposition of sanctions, embargoes, disruptions in banking systems or logistics hubs.
  • Notification procedure: Establish strict deadlines (for example, no later than 5 business days) and the method for sending a force majeure notice, as well as the authority confirming these circumstances (for example, the Chamber of Commerce and Industry of the relevant country).
  • Maximum waiting period: Set a maximum duration for the force majeure event (usually from 30 to 90 days), after which the parties have the right to terminate the contract unilaterally without payment of damages.

Governing Law & Dispute Resolution

Choosing the wrong governing law and dispute resolution body is one of the most costly mistakes in international law.

  • Choice of governing law: Clearly specify which country’s substantive law governs the contract (for example, English law, Swiss law, Singapore law). Avoid referring to the law of a country with which you are not familiar.
  • Court vs. Arbitration:
    • National courts: Make sense only if there is an international treaty between the countries of the parties providing for the mutual recognition and enforcement of court judgments.
    • International commercial arbitration (ICC, LCIA, SIAC, VIAC, HKIAC): Preferred for B2B transactions. Arbitral awards are recognized in more than 170 countries under the 1958 New York Convention.
  • Language and place of proceedings: Specify a neutral place for hearings and the language of the proceedings (usually English).

Penalties and Limitation of Liability

Legal systems around the world treat penalties differently. For example, in Common Law countries, a “penalty” may be considered invalid if it does not reflect a genuine pre-estimate of loss (liquidated damages).

  • Cap on Liability: Set a maximum amount of the party’s aggregate liability under the contract (for example, no more than 100% of the total contract value or the amount actually paid during the last 12 months).
  • Exclusion of indirect damages: Be sure to exclude lost profits (lost profits), consequential damages (consequential damages), and reputational harm from the scope of liability.
  • Withholding and set-off: Regulate the conditions under which one party has the right to suspend the performance of its obligations or set off claims.

Our lawyer specializes in full legal support for B2B transactions and comprehensive audits of foreign counterparties.