Being a global entity involves having employees, assets, manufacturing facilities and marketing offices in multiple countries overseas. If a significant chunk of revenue does not come out of businesses outside India, a company would only be called transnational. A company is dependent on the overseas economy when it becomes a global company.
The product quality and pricing of a company must be competitive with those of global players. A company can call itself globalised only when it meets competition both inside and outside the country.
Within the Tata group, Tata Consultancy Services (TCS) has built a reputation in the global market with its presence outside the country and its international workforce. TCS attracts talent from companies such as Microsoft. Tata Tea is regarded as a global company because of the Tetley acquisition. On the other hand, Tata Steel and Tata Motors have huge exports and Voltas executes huge turnkey projects abroad, but they are not called global companies.
Mergers and acquisitions (M&A) today is a growing route for businesses to expand globally. Therefore, lawyers need to be aware of the laws in various jurisdictions. In international M&A, companies play in a jurisdiction where they are not too familiar with local regulations and socio-political issues. The due diligence process is very different. Cultural issues are also significant when one acquires a company in India as compared to acquiring one overseas. The employees of the acquired company need to be integrated into the acquiring company.
Another major factor is the environmental risk. If Tata Chemicals were to acquire a chemical company in India, they would know the environmental pollution laws to comply with. In the US, they would need to learn more about environmental laws. The viability of the project can be affected by environmental issues. Issues of tax and transfer pricing need to be looked at critically before engaging in business overseas.
The arrival of the World Trade Organization (WTO) has ensured that certain key laws are uniform across geographies. The customs valuation rules for the valuation of imported goods have to be the same for all WTO member-countries. Now, for instance, sitting in India, I can confidently advise my client in Singapore about the anti-dumping regulation. The WTO is now making a uniform intellectual property rights law across the globe and India will become a part of it on January 1, 2005.
Simultaneously, local laws are acquiring a global nature. They are aligned to international laws partly due to WTO and partly due to compulsion of industry. Secondly, as many multinationals are coming into India, the legal practice is adapting itself to the changing scenario. Old laws are no longer completely relevant. The approach of the Indian corporates has changed.
Technology has changed the way in which the legal function works internationally. Getting knowledge has become easy. If I need to know any law, I can go to any government website and download the relevant law.
Overseas, multinationals invariably have a lawyer leading the M&A process. In India, a lawyer enters the picture only after the commercial terms have been agreed upon and the deal almost finalised. A lawyer cannot make any significant suggestions on structuring of a deal at such a late stage. This is now changing. Today lawyers play a key role in commercial negotiations also. That is why they need to be well informed about international and local laws and have strong commercial orientation. Local situations are different in each country and lawyers need to understand them all.Other articles on globalisation: