Meaning
Conflicts between owners of a company that involve multiple jurisdictions require a sophisticated understanding of international law and local corporate statutes. Resolving cross-border shareholder disputes often involves parallel proceedings in different courts or a combination of litigation and arbitration. These cases frequently arise from disagreements over management control and dividend policies.
Conflict Forum
Choice of law clauses in the shareholders agreement determine which country’s rules apply to the internal governance of the firm. Because cross-border shareholder disputes may be heard in a venue far from the company’s headquarters, the cost and complexity of the legal battle increase significantly. Parties must navigate different rules regarding the production of evidence and the examination of witnesses.
Governance Friction
Minority shareholders use local laws to protect themselves against oppression by a foreign majority.
Remedy Complexity
Enforcing a court order in one country against assets located in another presents a significant hurdle. Since cross-border shareholder disputes often involve temporary injunctions to stop a board meeting or a share issuance, the speed of the court system is a major factor. A judgment in favor of a shareholder is only useful if it can be effectively executed in the place where the company is registered.
This geographic disconnect adds a layer of risk to any international investment.
