The issues that travel with the money
In cross-border financing, governing law and forum come first, and New York law is common for international loans partly because its courts and rules are familiar to lenders. Withholding tax on interest can apply when payments go to a foreign lender, and loan documents usually say who bears that cost. Currency risk, hedging, and payment in a specified currency need clear terms. Sanctions and anti-money laundering representations are standard, and lenders run their own know-your-customer checks on borrowers and guarantors. Approvals or reports may be required in the other country as well; Korea, for example, has foreign exchange reporting rules that reach many cross-border loans and guarantees.
Security, guarantees, and enforcement
Collateral located abroad usually has to be taken under the law where it sits, which means separate local documents and local counsel. A guarantee from a foreign parent raises its own questions about corporate authority, and some countries limit such guarantees. Lenders also look at where a borrower's assets actually are and whether a New York judgment, or an arbitration award, could be enforced there. Borrowers abroad commonly appoint an agent for service of process in New York so that a lawsuit can begin without treaty service delays. The insolvency rules of the borrower's home country can affect how security holds up if things go wrong.
Structuring and reviewing the deal
Whether you are borrowing or lending, we start with the parties, the jurisdictions, the collateral, and the cash flows. We identify the approvals, filings, and tax points in each country and coordinate with local counsel where needed. We review the term sheet before it hardens, because issues like withholding gross-ups and currency of payment are easier to settle early. For intercompany loans, we also look at whether the terms will hold up under tax and transfer pricing scrutiny. The aim is a financing that works as intended in every country it touches.
