Anders Hedetoft & Anna Martine Stubben Skovsgaard of Holst, Advokater takes part in Negotiating Effective Contracts & Dealing with Disputes

Published 29 April 2019 by Holst, Advokater

QUESTION ONE - Which techniques are typically used by international counterparties in your experience to overcome challenges in the negotiation process?

Cross-cultural creation of relationships has become a widely spread and effective technique for negotiating

Hardball approaches are not very common anymore. Negotiators often focus on identifying and recognising sensitivity and awareness during the negotiations. You often hear open-ended questions intended for you to open up and feel secure during the process of negotiations. However, do not let yourself be fooled by this empathetic approach. Whereas some negotiators focus on creating an atmosphere of trust and a spirit of mutual success with a pure heart, others may use that trust to suddenly catch you off guard.

One of our best techniques to overcome challenges in the negotiating process is to allow the negotiating parties a break. Allow them to go for a walk, take a deep breath, clear their heads and then let them think about the remaining unresolved issues. If, for example, five items remain unresolved and the negotiations on the issues are not leading anywhere, we have found it useful for the parties to take that break and let each of them return with a prioritised list of the remaining items. Indicating which of the items are of most and least important for them, will show that perhaps your top priority is the lowest priority to the counterparty and therefore compromises on the remaining items may be easier to find.

QUESTION TWO - Is there anything special or peculiar about commercial contract law in your country that General Counsel should be aware of?

In Denmark, the system of justice is very pragmatic and not at all formalistic when it comes to commercial contract law (and in other areas too). General Counsels should be aware of that when entering into contracts governed by Danish law.

If, for example, you enter into a contract in which it is stated that changes and amendments to the contract shall be enforceable only if they are in writing and are signed by both parties. you cannot rely on it.

In Denmark, a party becomes bound by not only what the party writes, but also what the party says, and how the party acts. Therefore, if, by your acts or omissions, you make your counterparty reasonably believe that you deviate from a certain term in your contract, a Danish court may well find that you have accepted to do so, regardless of the term in the contract, specifying that changes must be agreed in writing.

Denmark is a civil law country and therefore General Counsels from common law countries must be aware and conscious of the differences. Agreements may be established informally. Hence, a party shall be attentive to what he commits himself to and the grounds by which a party wishes to be bound shall be agreed with great precision.

QUESTION THREE - What recent legislative developments in your jurisdiction affect commonly drawn up contracts such as articles of incorporation, shareholder agreements or executive remuneration? Can you provide any relevant case law to illustrate this?

In Denmark, the provisions of a shareholders’ agreement are only binding for the parties, not the company. The validity of a resolution of a general meeting, therefore, does not in any way determine whether the parties to a shareholders’ agreement have exercised their voting rights in accordance with the provisions of the shareholders’ agreement. Thus, shareholders may enter into agreements on voting rights, however, such agreement is of no relevance for the company.

Resolutions on a general meeting only need to comply with the law and the company’s articles of association. Hence, where relevant, provisions of the shareholders’ agreement must be applied in the articles of association in order to establish any obligations on the part of the company too. It is, however, important to be aware of the fact that the articles of association, contrary to the shareholders’ agreement, are accessible to the public. If the shareholders of the company do not find it attractive that rights contained in the shareholders’ agreement are made public, the only actual alternative is to intensify the remedies for the breach between the shareholders in the event they do not comply with their internal agreement (the shareholder’s agreement).

Another thing to be aware of is that for many years it was against the law in Denmark to grant loans to shareholders in a company. This prohibition was repealed within recent years, and now Danish companies may legally grant loans to its shareholders. Loans may, however, only be granted subject to special conditions; it is, for example, a condition, among others, that the decision to grant financial assistance may only be made after presenting the first annual report of the company.

TOP TIPS FOR: Successful negotiations

DO analyse and understand your own and your counterparty’s starting point in terms of culture, negotiation and tactics.

DO listen. The more you listen, the more information you get on your counterparty and therefore get a better understanding of their side, what you have in common and where their hard lines are.

DO be aware that negotiation is all about compromise and reaching a point where both parties are satisfied. Identify the areas where you are willing to be accommodating towards your counterparty and the areas where you are not willing to give in.

DO be precise in language style – both written as well as spoken in order to avoid misunderstandings.

DO engender confidence; comply with the time schedule and agreements already concluded.

DON’T think you have to win every battle - only the war!

DON’T underestimate anyone - appearances can be deceptive.

DON’T get caught up in emotions. Keep your emotions to yourself, act calm and don’t let your counterparty know if you want this deal more than he does. If your counterparty smells blood, you are finished.

DON’T ignore or overlook your counterparty’s criterion for success. If you do, you’ll never reach a win-win.

DON’T gloat after a win. Act professionally.

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