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Contract Deals Structure Management Essay

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Updated: May 16th, 2022

Introduction

It is becoming a common phenomenon for companies investing in foreign countries to have their contracts reworked in favor of host countries’ companies. In the recent past alone, people have witnessed quite a number of such cases across all continents including Asia where Russia reworked a contract it had with Chevron on a pipeline venture, and Africa too where DR Congo has reworked contracts of foreign mining companies and Europe. This practice is becoming a bad plague in the global economy since the spirit of investment, which is the basis of all business and economic activities, is being strangled to a slow and painful death. It therefore calls for a quick action from the investors to structure their contracts in ways that will prevent them from being caught in such malicious practice. Several working strategies are in place to help companies as well as the management to minimize the evident surprises. Dispute resolution is among them as highlighted next.

Dispute resolution

Since most reworking of contracts arises from disputes, the contracts should contain agreement between the company and the host country on the choice and forum for settlement of disputes. This can take the option of a neutral country. In addition, a choice of the procedure for solving the dispute should be included. For instance, arbitration can work out well since it has the advantage of enforceability, which litigation does not have. Furthermore, majority of countries have signed the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards where they have agreed to recognize and enforce arbitration awards of other signatory states. But for this to be useful, it is important to inquire if the host country is a signatory to the convection (Duncan & Dixon, 2008). Public relation is another way worth considering when structuring deals.

Public Relations

In some instances, contracts are reworked because of continuous public outcry against the company. Such arise due to poor relations between the company and the public and may happen inform of misuse of workers, mismanagement of wastes or depletion of the environment. It is in these situations that local organizations and Non Governmental Organizations come out and protest even to the point of forcing the government to rework such a contract. A company’s management is therefore supposed to take up initiative to befriend the company and sell itself as a caring and concerned member of the public thus qualifying for the public’s trust and support. This usually happens through ensuring a strong board and executive leadership on environmental health and sanitation matters, understand legal obligations adopt as a best practice a “no blame” approach to ensure excellent communication between employees and management on health and safety issues (Duncan & Dixon, 2008, p.12). In addition, the company can take up the duty of providing for the community social services like health care, education institutions, public recreational joints and awareness programs. By doing this, it will in fact be the public and the community who will protest against the reworking of their contract especially if it is on malicious grounds. The issue of bribery is worth checking by a company’s management pursuit to minimize the surprises in question.

Bribery and corruption

Many a time, companies obtain their contracts through corrupt ways usually in collaboration with the top government officers of the concerned ministry. Such a scenario will occur, when tenders are issued and a company, which is not the best finds ways and means of seducing the owners of the tender to grant it to them with the promise of sharing the gains. As such, when the truth finally becomes known, the government or the responsible authority will have no option but to push for the rework of the contract. In addition, a company, which acquired its tender through honest ways, may find its contract being jeopardized by the actions of its officers and employees. A company should therefore strive to keep honest principles and this may include limiting the value of acceptable gifts or entertainment and disallowing the receipt or payment of gifts if they may create an appearance of impropriety. If need be, laws should be set to control contributions and it may also be wise to ban political contributions and gifts as they may depict the country to be politically aligned to one side.

Economic Integration

A company investing in a foreign country should have as one of its core objective, the desire to uplift the host country’s economy. This should be done such that the company though with the intention to make maximum profit still lets a little of the gains trickle down to the host country. A sure way of achieving this is employing nationalities of the host country in various ranks and paying taxes, as they should be (O’Flaherty, 2010, p.3). Many companies usually opt for their fellow nationalities causing the community to feel no benefit from them. The gains are all channeled back home and the government in such a situation prefers to have a local company take up that opportunity. Therefore, companies need to structure their deals within the brackets of the afore-discussed expositions if at all they need to curb the prevailing risks.

Reference List

Duncan, J., & Dixon, M. (2008). Striking a Balance: Risk Mitigation and Corporate & Social Responsibility (CSR) in Africa. Oxford: Oxford UP. Print.

O’Flaherty, B. (2010). Vietnams China backslash: The Diplomat. New York: Word Press. Print.

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