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23 November, 2014
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Another Country

In different countries, different rules apply. Yet we tend to think that everywhere people are like us and that our own rules apply. Unless we are careful, this can lead us to assume some unexpected risks.

“The past is another country. They do things differently there”. So starts the book The Go-Between by L. P. Hartley and the movie of the same name. It's a succinct reminder that the norms we apply to our environment, be they social or business, do not apply elsewhere.

I was reminded of this recently when I read news reports about the risks the Government of British Columbia identified (or had pointed out to them) when they considered out-sourcing some of their data processing operations to a company in the USA. The countries are generally close allies with not too dissimilar cultures, so why was there a problem?

When in Canada, Canadian law applies. When in the US, US law applies. When in the European Community, EC and local law applies and so forth. So if data travels across national boundaries, a different set of rules starts to apply.

While many problems can be worked around with a suitable contract, not all of them can. The law of the land takes precedence over any contract law. For example, EC rules prohibit the transfer of personal data to countries which do not have legislation which protect that data. If you've ever tried to get a North American credit card based upon a good European credit rating, you'll probably have encountered that one.

What was the risk identified by British Columbia? The US Patriot act can be interpreted as giving the US government a free look at almost any data a company has without judicial oversight. So by outsourcing a data processing operation the BC government is potentially distributing private data on its citizens to US government officials. No contract can solve this problem, and presumably the US company will lose the work as a result.

If you transfer work abroad, different legislative rules apply. You may contract that the work and data be kept confidential, but that point may be moot because foreign legislation will trump the contract. Indeed, even if it does not, local patriotism and good business sense will certainly encourage the foreign company to cooperate with the local authorities even if legislation does not require it. Even when contract law applies, foreign courts may prove reluctant to enforce the contract.

The Yukos oil company recently persuaded a US court to grant an injunction against the sale of its assets for alleged tax arrears in Russia. It didn't have any effect: the sale went ahead as planned. It seems surprising that anybody thought that a Russian court would defer to a US court any more than a US court would defer to a Russian one.

In the play The Jew of Malta by Christopher Marlowe, Barabas excuses his fornication by pointing out “… that was in another country, and besides, the wench is dead”. We tend to assume that other countries are like us, that foreign customs and laws don't apply to us, and that the things that happen or we do in foreign countries don't really matter. But when you outsource to another country, this just isn't true.

Don't overlook this risk.

And remember that when people abroad think of another country, they may well be thinking of you.

Michael Z. Bell
February, 2005

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