Negotiation American Style

Jonathan M. Lourie

Your non-U.S. client might not have the same ideas about how to negotiate with a U.S. business that you have. You need to help the client learn about American negotiating styles, and you need to learn a little from the client, too.

SUPPOSE YOU REPRESENT a non-U.S. client, and that client wants you to negotiate a business deal with a domestic company in the United States. This should be easy enough, shouldnt it? Youll be doing the negotiation, so it doesnt matter what the client does or doesnt know about the United States. So its a big country? There are a lot of regional differences? It doesnt make a difference, since youll be doing

the negotiating, not the client, correct? And so what if the client has some ideas and assumptions about the United States that might not square with reality? (How likely is this given the wonderful impressions of the United States to be gleaned from the media?) Again, so long as you are in the drivers seat during the negotiation, it really doesnt matter much, right?

Jonathan M. Lourie is a Partner in the Boston office of Edwards & Angell LLP and head of the firms Licensing Practice Group. Mr. Lourie represents foreign technology companies in negotiating acquisitions, complex licenses and joint ventures in the United States.

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Wrong! To the contrary, it makes an enormous amount of difference. To do a good job of negotiating on behalf of a non-U.S. client you need to rethink certain assumptions that would not otherwise play a role in a wholly domestic context. (To put it another way, you need to be aware of the fact that your culture affects the way you think, and that thinking like an American may not be the best thing to do at every stage of this process.) The converse can be true, too. There are assumptions and misconceptions held by non-U.S. businesses about the subtleties of negotiating and transacting business in the United States, which may adversely affect how the client wants you to negotiate the deal. The very process of negotiation is very different across cultures. If your client has expectations that are not met, or insists on things that are at odds with American-style negotiation, the process can collapse in short order. Obviously the intricacies of this topic go far beyond this short article, but the following Rules of Thumb can be helpful in planning the representation of the non-U.S. client in negotiations with U.S. business interests. RULE OF THUMB NO. 1: DONT ASSUME KNOWLEDGE Due to a U.S.-centric approach to business, U.S. attorneys may be prone to assume that the non-U.S. client, even one that as had significant business in the United States, understands U.S. laws, markets, regionalism and other attributes of doing business in the United States. This is not always the case. Therefore, a key step in assisting the non-U.S. client in understanding U.S. laws is to educate the non-U.S. client in advance of negotiations on this matter as well as others. Some of the areas that are unique to the United States are discussed below. Employment Law While the employment-at-will doctrine is common in the United States, it is not common

in Europe, where the dismissal of an employee can be a far more arduous task. However, the laws in the United States addressing illegal reasons for dismissal are peculiar to the United States and will need to be understood by the non-U.S. business if a business transaction involves the hiring and firing of employees. Furthermore, the forms used by the non-U.S. client, which may be suitable for non-U.S. purposes may need to be substantially revised to avoid creating an employment contract where one is not needed or customary. Restraints on Trade Antitrust and other restraints on trade, including noncompetition agreements, need to be explained from both a federal perspective and a state perspective, as some states do not permit certain restraints on trade. Securities Law Disclosure standards under the securities laws of that country may be less rigorous than U.S. disclosure laws. When a non-U.S. client is preparing a disclosure document for its home country that will be reviewed by the U.S. negotiator, assist the non-U.S. in creating a disclosure document which will satisfy the concerns of the U.S. negotiator (especially when that opposing U.S. negotiator has greater negotiating leverage). The U.S. negotiator may be concerned that such disclosure will adversely affect the type of disclosure that the U.S. negotiators company may be required to make and resulting in a delay to the effectiveness of a transaction. There are a number of other areas that the U.S. attorney must be specifically focused on such as environmental laws, contract law, and other areas, but these often require explanation in domestic-only transactions and therefore should be discussed in the normal course of the deal.

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RULE OF THUMB NO.2: UNDERSTAND THE NONVERBAL CUES OF YOUR CLIENT It seems obvious to state that people from different countries have different nonverbal cues that contain significant subtext, but this may be one of the hardest things for a U.S. attorney to understand when working with a non-U.S. client. These cues can be as subtle as the cluck of the tongue or the nod of the head. The U.S. attorney needs to understand these non-verbal cues before proceeding to negotiations. Careful observation during negotiations will also help the U.S. lawyer understand these non-verbal cues and gestures. By understanding these cues, the U.S. lawyer representing the non-U.S. client can avoid misunderstandings of his or her clients position during negotiations. If the lawyer has spent significant time within the country of origin of his non-U.S. client then this task will be easier. However if the attorney has not spent significant time inside the borders of that country, then the attorney will need to use a combination of secondary sources and careful observation to ensure that the attorney understands the non verbal cues of his or her client and responds appropriately. RULE OF THUMB NO. 3: EXPLAIN THE VARIOUS NEGOTIATING STRATEGIES EMPLOYED BY AMERICAN LAWYERS U.S. lawyers employ a number of negotiation tactics that may be unfamiliar to or difficult for a non-U.S. clients to comprehend. Simple tactics, such as good cop-bad cop, turning a client against their lawyer or intimidation, are so familiar to U.S. lawyers that one could wrongfully assume that the non-U.S. client is prepared for these tactics. Lawyers in the United States are often very involved in the business interests of their clients and therefore have the freedom to act aggressively for their clients business interests. The non-U.S. business interests depending on their experience with U.S.

companies may not always understand these tactics. Therefore it is incumbent on the U.S. lawyer to anticipate these tactics and explain such tactics to his or her client along with strategies to overcome them. If necessary, an attorney should not hesitate to interrupt negotiations to describe in private to his or her client the tactics that opposing counsel is employing and how to overcome them. This will also prepare the nonU.S. client for the strategies that may be used by his or her lawyer in overcoming these negotiation tactics. RULE OF THUMB NO. 4: KNOW WHEN NO MEANS NO When does no mean no in negotiations in the United States? This may be a hard concept for a non-U.S. client to understand. A common saying outside the United States is that you cant be sure that an American really means no until his plane has taken off. There are many situations in which U.S. negotiators may say no to a proposition and not mean it. U.S. negotiators have a reputation for directness. So it may not be apparent to a non-U.S. client that when a U.S. negotiator says No, or We cant do that, what it really means is Suggest an alternative or Offer us a compromise position. Conversely, a U.S. negotiator may say no to a proposal due to a misunderstanding of the proposal or because the U.S. negotiator has assumed that the proposal included things that the non-U.S. party did not intend. It is incumbent upon the U.S. lawyer to explain that U.S. negotiators frequently take a hard-line approach that obscures what is, in reality, a willingness to keep negotiating. Similarly, the negotiator has to be sure to understand what does or does not really mean no in other cultures, and how to explore possible avenues of renegotiation when the message and the reality are at odds.

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Dont Let Your Client Get Flustered by Bluster It is equally possible, however, that because U.S. negotiators often do not hesitate to say no or even to walk out of meetings as part of negotiations, an act which would be considered rude in many cultures, the attorney representing the non-U.S. client must be vigilant and explain to his or her non-U.S. client when they believe that such a ploy is being used. If the attorney is not vigilant, then the attorney may find his client conceding critical points that they would not have been likely to otherwise concede had the attorney intervened earlier. Becoming the Facilitator If you must intervene when the U.S. negotiator has been recalcitrant, one useful strategy is to assume the role of the facilitator. The facilitator seeks to identify the respective interests of the parties and lead the negotiation table to an equitable solution that balances all interests. Since most negotiators do not want to appear unreasonable, this may lead to a constructive dialogue and, ultimately, a satisfactory solution arrived at on a collective basis. RULE OF THUMB NO. 5: UNDERSTAND THE CONCEPTS OF COLLECTIVISM VS. INDIVIDUALISM There are aspects of collectivism and individualism in most negotiations. But there tends to be more individualismthe authority of the individual negotiatorin U.S.-style negotiating. (For example, Americans view behaviors such as face saving as personal to the individual as opposed to saving the face of the organization.) A key concept for the non-U.S. client to understand is the role of the individual U.S. negotiator within the organization.

American Negotiators Typically Have Significant Authority An American negotiator usually has the authority to return to the home office with the best resolution that he or she can negotiate. This is a typical individualist approach. A collectivist approach, however, is much different. A non-U.S. negotiator is more likely to have less authority. Deal points are discussed in negotiations, but must be considered by the home office before they can be approved, or more likely renegotiated. Non-U.S. clients might no be aware of difference, nor of the fact that U.S. organizations may stress the success of the individual over the success of the group. Prepare the Client for American Lawyers When negotiating against a U.S. lawyer this will of course be magnified, as U.S. lawyers are often even more direct in their attempts to resolve every ambiguity and address every issue as part of a deal checklist. Thus it is important for the U.S. attorney representing non-U.S. interests to assess quickly the authority of the U.S. negotiator within his or her organization that is engaged in the negotiation and communicating this position to his or her non-U.S. client. It is important to prepare the non-U.S. client that the U.S. negotiator may take a direct, linear and task-based approach to negotiation; the U.S. negotiator will seek to establish a foundation of facts on which to base the negotiations, identify issues, and proceed quickly to risk reduction and goal maximization of those issues identified. By doing so, the opposing U.S. negotiator will seek to leave negotiations having achieved a concrete set of deal points and therefore win personal approval within his or her organization. When preparing the non-U.S. client for this likelihood, the U.S. attorney should take into consideration whether cross cultural issues can be used to the benefit of his or her client so long

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as his or her client is aware made aware in advance that this tactic will be attempted. RULE OF THUMB NO. 6: TUNE INTO ASSUMPTIONS America is viewed by commentators as a low context society; all aspects of a deal need to be specified in detail and all parts of the relationship between two or more parties need to be completely and unambiguously described. In certain cultures, however, it is not common for all aspects of a deal to be specified in detail but instead it is assumed that the commonalities between the parties will complete the interstices of the deal. The conflict between these two different approaches can lead to negotiation impasses and misunderstandings not only between the parties but also between the U.S. attorney and his or her nonU.S. client. It is incumbent on the attorney representing the non-U.S. client to recognize when these differences are interfering with a transaction and to assist the client in understanding the reason for the perceived difficulty. In this manner, the attorney is better positioned to facilitate an agreement between the parties that will lead to a successful resolution.

THE FINAL RULE OF THUMB: ADOPT THE ROLE OF THE PEACEMAKER If the U.S. attorney representing the non-U.S. client understands the cross cultural differences in negotiation, then that attorney can position him- or herself in the enviable position as the peacemaker or diplomat in the negotiations. The peacemaker will work with opposing counsel in softening the direct approach of the U.S. negotiator, to lessen the chance that the U.S. negotiator will appear rude or too direct. The peacemaker will work to focus and bring to resolution the less than direct approach of the non-U.S. client and thereby address the U.S. negotiators need for resolution and solution. The attorney representing the non-U.S. client can anticipate that certain points that the American negotiator may have considered to be closed are in fact not closed and therefore may be renegotiated resolving potential impasses. In the end, by recognizing potential cross cultural issues, the attorney that first addresses these as part of the process will have an advantage in understanding the relative motivations of the two sides and be better positioned to seek a viable and sustainable pathway to final resolution.