When it's time to expand an organization's horizons — literally — and hold a meeting outside the United States, there is no need for a meeting planner to panic. While there are numerous issues unique to international contracts, many familiar principles apply to negotiating and entering into contracts for non-U.S. meetings.
The goal in contract negotiations is to reach a meeting of the minds — both parties must agree on and understand each party's rights and obligations. To do this, it is important to follow three basic principles: Everything is negotiable, ask for what you want, and get it in writing. Nothing takes the place of thorough negotiations upfront, with a clear contract that both parties can understand.
There are differences between U.S. and international hotel contracts. Certain items that are easy to negotiate with U.S. hotels may be less negotiable overseas, including comp room ratios, room upgrades, meal plan options, and free meeting space. It never hurts to ask, however. Even a request that is turned down may make it easier to bargain for another provision. If possible, you may want to deal with a local affiliate of a U.S. hotel or an international hotel chain, particularly for first-time overseas meetings, to ease the negotiations.
In some countries, preliminary contract discussions or letters of intent may be binding on the parties. (In the United States, a letter of intent is typically not binding unless its terms say so.) It is important, therefore, to specify in documents, letters, and e-mail correspondence which terms are agreed upon and which are still pending.
Once negotiations are complete, carefully review the contract to ensure that it reflects the parties' agreement and spells out each party's obligations. To the extent possible, avoid the language “to be mutually agreed.” While some terms such as final F&B prices can't be finalized until close to the meeting date, all provisions that can be finalized in advance should be. Moreover, even if you can't agree on final room rates upfront, the formula for determining those rates should be clear in the written contract. Once the contract has been signed and sealed, your ability to negotiate decreases dramatically.
Because the contract deals with more than one jurisdiction, it is important to include clear and detailed provisions. Saying exactly what you mean helps minimize potential differences in interpretation. Read — and make certain that you clearly understand — the document before you sign it or recommend someone else sign it. And, if the parties later make changes, document those changes in writing.
What is included in the room rate may differ from country to country, so always confirm exactly what the quoted price covers — breakfast, taxes, gratuities or other charges, for example. If it is important that certain items be included (e.g., full breakfast rather than continental), then be specific.
The contract should define breach by each party and the consequences for nonperformance. Spell out liquidated damages, or the formula for determining them. Damages for attrition may or may not be part of the contract. In many European countries, for example, hotel contracts have no attrition provisions because 90 percent to 100 percent of the charges for sleeping rooms must be paid upfront.
Foreign entities are unlikely to be willing to come to the United States to resolve a dispute or have U.S. law apply. In many international contracts, a neutral, third-party country is chosen as the venue for the hearing. For a meeting in Spain, London might be selected as the venue for all disputes, and U.K. law would apply. However, some countries do not enforce such clauses, and an improper choice of law or forum clause may result in the host country's laws and forum prevailing. Consulting with local counsel is advised.
Arbitration is the method chosen to resolve most international contract disputes. The contract should spell out how the arbitrators will be selected (e.g., each party selects one arbitrator, and the two arbitrators select a third), the general rules for the arbitration, and whether the parties have any right of appeal. Be careful not to rely on an arbitration clause, however, as a substitute for thorough negotiations upfront. Also, be aware that an arbitration clause usually prohibits one party from taking quick action against the other, such as obtaining an injunction to force performance.
This clause should establish the circumstances under which the agreement may be terminated without liability to either party, including force majeure or “acts of God.” Reasons might include civil strife, terrorist attacks, earthquakes, fire, other natural disasters, disease outbreaks or severe health concerns, transportation strikes preventing a certain percentage of attendees from attending, government or military actions, travel restrictions to the host country, and even severe fluctuations in currency exchange rates. Regardless of the reason, the contract should state that deposits will be returned in the event of termination. Note, however, that in some countries, force majeure and acts of God clauses will be difficult to include.
If the meeting venue or another vendor will have any responsibility for promoting the event, the use of the organization's name, logo, and other trademarks should be controlled in the agreement, typically through licensing their use solely for the event. The organization should have the right to approve all materials using its trademarks. Moreover, it may be advisable or necessary to register the organization's marks locally, particularly if the venue is one to which the organization expects to return.
The contract should state that each party will indemnify the other if its own negligence or wrongful acts cause damage to the other party. Spell out insurance requirements. The organization's insurance professional should review the agreement before signing. Insurance obtained in the United States may or may not extend to an overseas meeting, so make certain your organization is covered.
The contract should specify whether payments are to be made in U.S. dollars or local currency. You can probably negotiate better with foreign suppliers if your organization opens a local bank account and pays in local currency. Define payment schedules and the circumstances requiring the return of deposits. In some cases, payments from a foreign entity may be subject to tax, governmental approval, or currency control laws. For example, in China, government approval may be required before you can use local currency to pay certain expenses. Foreign businesses also may require substantial advance deposits to reserve exhibit halls, labor, or hotel space. To protect against the foreign provider's insolvency or inability to perform, make deposits through interest-bearing escrow accounts or letters of credit. (For more, see page 37.)
A good interpreter is essential in negotiations. Some countries require the use of the language of the host country in the contract, leading in many cases to both an English and non-English version. Obviously, careful and precise written translation of the contract terms is important. Finally, determine and specify in the contract the official language to apply in any contract disputes.
Even among English-speaking countries, terminology may differ. For example, in the United Kingdom, a requirement to act “in good faith” sets a higher standard than in the United States. Because terminology may differ, describe requirements in detail and provide sketches or drawings of meeting room and exhibit hall setups, dimensions, and other features important to the look and feel of your meeting.
International treaties, conventions, and federal or local laws may apply. For example, the contract should confirm that the foreign party realizes its obligations under the U.S. Foreign Corrupt Practices Act. International tax and sales treaties may affect the structure of international agreements.
Engaging the help of local volunteers — the local chapter or members residing in the host country — can help immensely not only in understanding cultural issues but also in negotiating and coming to agreement on contract terms. And, in countries where written contracts are rarely, if ever, used, using locals to negotiate may help seal the deal and ensure that the other party lives up to its obligations.
A professional congress organizer or destination management company can help with planning an overseas meeting, including addressing cultural issues. The contract with the PCO should clearly spell out the rights and obligations of the PCO in negotiating and signing agreements with hotels and other vendors. For example, the sponsoring organization should sign major hotel and exhibit hall contracts to retain control over their terms. Relationships with vendors may run more smoothly if the PCO negotiates and signs contracts with local vendors of printing services, audiovisual, security, and the like. Still, the organization must ensure that contracted expenses are reasonable and within budget — and that it maintains the ultimate say over its contractual commitments.
Another essential resource is counsel located in and familiar with the laws of the country where the event will take place. To ensure compliance with all local laws — and that there are no surprises — it is a good idea to have local counsel review contracts before their signing.
Consult other resources as well, such as the U.S. Department of Commerce (www.commerce.gov), which has a network of country desk officers to assist with foreign transactions; the Bureau of Consular Affairs (www.travel.state.gov); and the Overseas Security Advisory Council (www.ds-osac.org).
With knowledge of the basics, preparation, and local help, you can successfully plan and negotiate contracts for an international meeting.
Lisa A. Stegink, Esq., is a partner with the law firm of Neal, Gerber & Eisenberg LLP, Chicago, where she specializes in the representation of trade associations, professional societies, and other not-for-profit organizations. You can reach her by phone at (312) 269-8475 or via e-mail at lstegink@ngelaw.com.