Risk and Governance: Global Procurement Models, Structures, Practices and Trends. Baker & McKenzie. Adrian Lawrence Partner. Peter George Partner

Transcription

1 Risk and Governance: Global Procurement Models, Structures, Practices and Trends Baker & McKenzie Adrian Lawrence Partner Peter George Partner

2 Risk and Governance Global Procurement Models, Structures, Practices and Trends Adrian Lawrence, Partner, Baker & McKenzie LLP, Sydney Peter George, Partner, Baker & McKenzie LLP, Chicago Baker & McKenzie LLP is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an office of any such law firm Baker & McKenzie LLP

3 Our Global Reach Baker & McKenzie covers the world over. With our expansive global footprint, our clients tell us they rely on our ability to provide a deep level of local expertise while ensuring a global perspective to their business and legal needs. Baker & McKenzie facts 77 offices in 47 countries More than 4,200 lawyers admitted to practice in over 250 jurisdictions and fluent in 75+ languages We are in markets that matter 37 of the world s 50 largest economies 13 of the top 15 global financial centers 12 of the 15 most resource-rich markets Ranked Band 1 for Data Protection by Chambers Global 2015, 2014, 2013, 2012, 2011, 2010, 2009, 2008 Ranked Band 1 for Technology & Communications by Chambers Global 2015, 2014, 2013, 2012, 2011, 2010, 2009, 2008 Ranked Band 1 in Chambers Global for Outsourcing in 2015, 2014, 2013, 2012, 2011, 2010, 2009, Baker & McKenzie LLP 3

4 Setting the Stage Key Risk Areas in Global Sourcing Identification and Mitigation Trends Agenda

5 Setting the Stage Modern Supply chains are extremely complex. Board level attention to key supply and distribution relationships. Surprising how little attention is paid to Contract terms. Many companies content to do business on Purchase Orders / Acceptances. Not considering "GAP Fill" provisions of applicable law or conflicting laws Baker & McKenzie LLP 5

6 Contracting Structures Local - Local Regional Purchasing Agreement Regional - Local Buyer A PO Acceptance Seller Buyer PO Acceptance Seller COUNTRY X Region A Buyer Buyer Buyer ENTERPRISE Buyer A COUNTRY X Local - PO Acceptance Offshore Offshore Seller COUNTRY Y Buyer Enterprise SUB A LEA / LPO Seller Enterprise SUB A SUB B LEA / LPO SUB B 2015 Baker & McKenzie LLP 6

7 Opportunity Well-oiled supply chain includes perspectives from : Business Lenders Sourcing Professionals Procurement Professionals Risk Management Legal Global scale Flexibility by Design Capability Structure Process 2015 Baker & McKenzie LLP 7

8 Key Risks in Global Sourcing* Routine Supply Chain Risk Shortage Damage/Quality Deficiency Delays Payment Issues Cross Border Risks Conflict of Law Mandatory Laws Transfer Risks Transfer of People (Exec Mobility) Transfer of Data (Data Privacy) Transfer of Goods (Import/Export) Transfer of Funds (FX, Currency Controls) Non-Routine Risk Force Majeure Cyber Threat Political / Civil Unrest Bankruptcy IP Loss (Piracy) Third Party Risks Subcontractors Agents Competitors * J. Paul Dittman, PHP, Managing Risk in the Supply Chain, A Report by the Supply Chain Management Faculty at the University of Tennessee, Summer Baker & McKenzie LLP 8

9 Legal Gap Analogy Different payment and collection terms in Supply Chain Agreements may lead to mismatch between commitments to pay suppliers versus collection terms from buyers. Mismatch in legal terms resulting from difference in applicable law may lead to different obligations between upstream suppliers and downstream buyers. For example, penalty cause commonly entered in a civil law jurisdiction may be enforceable in common law jurisdiction. Best efforts to supply downstream buyer and best efforts from upstream supplier may mean different things depending on applicable law. Under one law Best Efforts may mean commercially reasonable efforts and under another law may mean that performance is required even if it is unprofitable Baker & McKenzie LLP 9

10 Strategies Context Understanding where transaction sits in the supply chain. Supply Chain Policy Consistent choice of law Code of Conduct (CSR) Recall Obligations Multi-Vendor Governance Gap analysis of mandatory law against choice of law Localization to address legal gaps Audit / remediation policies 2015 Baker & McKenzie LLP 10

11 Bankruptcy Multiple levels of buyers and suppliers Across related entities Buyer A owes $ to Seller B. Buyer B owes $ to Seller A Company Group A goes Bankrupt Can Buyer B offset against Seller A. COMPANY GROUP A COMPANY GROUP B Buyer A Seller A owes $ owes $ Seller B Buyer B 2015 Baker & McKenzie LLP 11

12 Damage Provisions Blue Pencil versus Disaggregation EXCEPT FOR EITHER PARTY S BREACH OF SECTION 7, UNDER NO CIRCUMSTANCES WILL EITHER PARTY, ITS RELATED PERSONS OR SUBCONTRACTORS, BE LIABLE FOR ANY CONSEQUENTIAL, INDIRECT, SPECIAL, PUNITIVE OR INCIDENTAL DAMAGES, WHETHER FORESEEABLE OR UNFORESEEABLE, BASED ON CLAIMS OF THE OTHER PARTY OR ITS RELATED PERSONS (INCLUDING, BUT NOT LIMITED TO, CLAIMS FOR LOSS OF DATA, GOODWILL, PROFITS, USE OF MONEY OR USE OF THE DELIVERABLES, INTERRUPTION IN USE OR AVAILABILITY OF DATA, STOPPAGE OF OTHER WORK OR IMPLEMENTATION OF OTHER ASSETS), ARISING OUT OF BREACH OR FAILURE OF EXPRESS OR IMPLIED WARRANTY, BREACH OF CONTRACT, MISREPRESENTATION, NEGLIGENCE, US STRICT LIABILITY Style IN TORT OR OTHERWISE. IN NO EVENT WILL THE AGGREGATE LIABILITY THAT ABC, ITS SUBCONTRACTORS AND THEIR RELATED PERSONS MAY INCUR IN ANY ACTION OR PROCEEDING EXCEED THE TOTAL AMOUNT THAT ABC ACTUALLY RECEIVED FROM CUSTOMER FOR THE SPECIFIC SERVICES OR DELIVERABLES UNDER A SOW THAT DIRECTLY CAUSED THE DAMAGE. THIS SECTION WILL NOT APPLY ONLY WHEN AND TO THE EXTENT THAT APPLICABLE LAW REQUIRES LIABILITY BEYOND AND DESPITE THE FOREGOING DISCLAIMER AND LIMITATION. Ever wonder why the difference? AU Style 2015 Baker & McKenzie LLP 12

13 Intellectual Property Strictly Territorial Rights are irrespective of parties choice of law Moral Rights Unwaivable Inalienable Lapse and reversion Commercial exploitation in one (1) year 2015 Baker & McKenzie LLP 13

14 Risk Mitigation Strategies Enterprise Agreements Joint and Several Liability Guarantees Assignment/ Novation Consistent choice of law Localization Understanding differences based on mandatory law Addressing differences through local agreements Baker & McKenzie LLP 14

15 Trends Know Your Supplier California Act Class action lawsuits based on supply chain commitments Industry Self Regulation Control over third parties Audit and remediation ERP Increased collection, sharing, access to information versus concerns over cross border data transfer issues 2015 Baker & McKenzie LLP 15

16 Evaluation How-to: Why? Your feedback drives SIG Event content By signing and submitting your evaluation, you are automatically entered into a prize drawing How? Option 1: App 1. Select Schedule 2. Select Schedule by Day 3. Select Day 4. Select Session 5. Scroll to Description 6. Click on the Evaluation link Option 2: Browser 1. Go to 2. Select Session (#22) COMPLETE & SUBMIT EVAL

17 Session #22 Risk and Governance: Global Procurement Models, Structures, Practices and Trends Speakers: Baker & McKenzie Peter George Baker & McKenzie Adrian Lawrence Download the App: bit.ly/sigcaapp Tweet: #SIGfall15

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