Cautions for Contractors Embarking on Overseas Projects: Due Diligence

Submitted by hastihejazi on Thu, 01/13/2022 - 21:13
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One is by requesting that they complete a background\nquestionnaire, which should include questions that identify:"]]],[1,"p",[[0,[],0,"\u00b7 the foreign business (such as date and\nplace of incorporation)"]]],[1,"p",[[0,[],0,"\u00b7 the foreign business\u2019 representative\nfor contractual and construction matters (to ensure that the representative is\nnot on a Politically Exposed Persons (PEP) list)"]]],[1,"p",[[0,[],0,"\u00b7 information about parent companies,\nshareholders and other beneficial owners, and relationships to government\nofficials (this is important in terms of anti-corruption requirements)"]]],[1,"p",[[0,[],0,"\u00b7 references"]]],[1,"p",[[0,[],0,"\u00b7 disclosure of civil or criminal\nmatters"]]],[1,"p",[[0,[],0,"\u00b7 a history of bankruptcy or insolvency"]]],[1,"p",[[0,[],0,"While a\nquestionnaire is a valuable approach, many clients may not agree to complete it\n- or may complete it but with selective or untrue answers. To verify accurate responses, information\nfrom the questionnaire can be supplied to a risk intelligence screening\ncompany, such as Refinitiv\u2122 World-Check\u00ae, to further research the potential client. "]]],[1,"p",[[0,[],0,"Other\noptions for conducting due diligence are to perform a lien search; public\nrecords and litigation search; insurance and liability review; supplier and\ncustomer review; and operations, organization, environmental, and real estate\nreviews. In various Middle Eastern\ncountries, a client can be researched by its commercial registration\nnumber. This is a unique number assigned\nto a company when it is formed. \nInformation, such as disputes and complaints to governmental authorities\nabout the client, are tied to their commercial registration number. "]]],[1,"p",[[0,[],0,"Additionally,\nthe contractor\u2019s due diligence should include a review of the Foreign Corrupt\nPractices Act (FCPA) violations by the client along with individuals listed on\nPEP list or the Office of Foreign Assets Control (OFAC) sanctions list, which\ncan be accessed at "],[0,[0],1,"https:\/\/home.treasury.gov\/policy-issues\/financial-sanctions\/specially-designated-nationals-and-blocked-persons-list-sdn-human-readable-lists"],[0,[],0,". \nThe contractor\u2019s due diligence should be thorough enough to weigh the\nrisks of undertaking business with the client, its related entities, and its\nbank from which payments will be made to the contractor, as well as the\nrespective officers, directors, employees, and beneficial owners of any of\nthem. The Department of State and the\nU.S. Embassy\u2019s commercial service for a particular country are also sources of assistance\nand referrals; so, too, are professional societies in the U.S. and overseas."]]],[1,"p",[[0,[],0,"It is\nvaluable to understand a prospective client\u2019s corporate organizational\nstructure and their financial resources. \nRegarding the former, a client\u2019s entity that is a shell will be\nimpossible to collect from for nonpayment. \nThe contractor should determine whether the potential client has assets\nor operations in the U.S. or Canada, which can be helpful if assets need to be\nfrozen as the result of a lawsuit. Additionally, Dun and Bradstreet can provide\ndata, analytics, and other information about a business. "]]],[1,"p",[[0,[],0,"A contractor\ncan gauge the potential client\u2019s ability to issue payments by conducting credit\nchecks and speaking with firms who previously worked with the client. The Export-Import Bank, a U.S. agency, can\nprovide foreign credit risk protection, including information about a client\u2019s\nassets and credit rating. In particular,\nthe Export-Import Bank can assure payment from a client in a developing nation\nto the contractor, which enables the contractor to provide generous payment\nterms (e.g., several months). To better\nunderstand the client\u2019s financial means, the contractor should inquire whether\nprivate investors are funding the client\u2019s project, as it is possible that the\ninvestors may stop their funding during construction."]]],[1,"p",[[0,[1,2],2,"AIA Contract Documents has provided this article for\ngeneral informational purposes only. The information provided is not legal\nopinion or legal advice and does not create an attorney-client relationship of\nany kind. This article is also not intended to provide guidance as to how\nproject parties should interpret their specific contracts or resolve contract\ndisputes, as those decisions will need to be made in consultation with legal\ncounsel, insurance counsel, and other professionals, and based upon a multitude\nof factors. "]]]]}
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