BY:
Elliot H. Brown, Dan M. WasserThe most basic considerations in negotiating foreign stage deals are, of course, the same as for any other deals: strict attention must be paid to the basic issues of credit, control and compensation. Generally speaking, all deal points can be grouped within those broad categories.
Issues of billing credit, with a few possible exceptions, really do not differ from deal to deal, from country to country or from language to language.
Issues of control and compensation, however, are likely to vary from country to country. With respect to control issues, for example, it may not be realistic or even possible to exercise the same degree of control over a production in, say, Japan as in New York or Las Vegas. Compensation issues will, of course, be entirely different in many respects from country to country.
Each of these three aspects of deal making in the international stage business deserve closer consideration:
Credit
The enforcement of credit obligations even in the United States can be extraordinarily difficult no matter how carefully contracts may be drawn. Whether or not a high school in Iowa actually gives the credit it has agreed to accord in connection with its Senior play may be exceedingly difficult to discover, enforce or?punish.– Those problems, of course, are multiplied internationally, not just in terms of discovery of errors, but also in terms of enforcement and penalties. International contracts should, of course, contain all normal strict and specific credit requirements, including obligations to cure, and indemnifications for credit breaches if the rights of others are involved. Beyond that, there is often little an American producer or author can do other than to require submission of a copy of all playbills, programs and advertising material and hope that the material is used only as approved.
Control
In every international deal, normal approvals will have to be negotiated and covered contractually. A producer granting foreign production rights in a Broadway play will want to be sure contractually that, for example, any approvals retained by the authors over the foreign production will be accorded to the authors by the foreign producer. The problems, of course, are obvious: time (in terms of the speed with which approvals are necessary) and even time zones (the time of day or night when a particular issue arises) will certainly be a factor. Distance also will create problems since it may not be either convenient or viable for a producer, author, etc. to be present for a lengthy period of time for casting, rehearsals and previews through opening night. Finally, of course, language is also an issue.
Besides those obvious points, there are some points somewhat more subtle which also could arise: There may be cultural differences (for better or worse) which the foreign creative team believes outweigh the American creative team’s right of approval. Censorship issues and governmental interference are also possibilities. In addition, when it comes to choice of various creative personnel, union issues may also cause a problem, making it impossible under certain circumstances for the American team to compel the foreign producer to retain all personnel who would otherwise be desirable insofar as the Americans are concerned. This is a particular problem for American producers who have committed to the participation of certain American creative elements whose services may either be unwelcome, barred by union requirements or illegal (by reason, for example, of visa requirements) in certain foreign countries.
The expense of attendance is also an issue in foreign productions deals. While it may be easy to negotiate a lengthy right to be present in order that approvals can be exercised and changes may be observed, it may not be so easy for any individual to stay overseas for the amount of time required to properly exercise all approvals. The expense of a lengthy stay or stays will normally be the subject of spirited negotiation. Again, even if actual presence is possible and permissible, translation and language issues may interfere with appropriate approvals and controls.
Foreign productions also raise the ultimate nightmare for owners of rights: total loss of the property. It may be exceedingly difficult to enforce a ban on illicit taping or recording of foreign productions (not that it is easy to enforce such a ban in the United States), and, in addition, scripts, musical parts and other elements of a play, particularly in translation, may be hard to protect. The same is true with respect to cast albums and merchandise. Copyright issues themselves may be different as there may be different owners of, for example, the copyright in certain songs in foreign countries than in the United States.
Compensation
The key issue with respect to compensation in international deals, of course, is to make sure the seller, licensor or performer is fully and timely paid. This often involves consideration of letters of credit and the payment of extremely large advances, as well as up front assurances that all travel and per diem will be covered. It may be necessary to consider, with respect to certain countries, cash deals only where there is a question about the calculation of royalties and the possibility of collecting any further compensation after the contract is signed and production commences.
Issues also arise with respect to the nature of the payment themselves. It may be most desirable for all payments to be made in dollars, since the element of uncertainty is then removed from the mix. If that is not possible, efforts will be made to provide for the local currency to be converted into United States dollars. Issues then include what and whose conversion rate will be used and what date will be used for the conversion. Clearly, it is undesirable to permit a foreign producer to gamble–on making a late payment in the hope that the value of the dollar will fall. Similarly, to the extent possible, there should be protection with respect to the transfer of funds including not just the cost of transfer but also the feasibility of the transfer itself. Attention must be paid to local law and the possibility that it may be necessary to retain funds in a particular country.
Local taxes and tax treaties will also be an issue which an American attorney working on an overseas deal will want to discuss with his or her client’s financial advisors.
Finally, as always, remedies are an issue with respect to collection of compensation or enforcement of any other provision of an agreement. It is normally undesirable to be subject to either the law of the foreign country or the courts of the foreign country. Efforts should be made to provide contractually for United States law to apply, for the United States to be the selected forum for any mediation, arbitration or litigation and for the foreign parties to consent to service of process here. Even if that can be achieved, however, enforcement of judgements may become a difficult issue later.
Conclusion
The most secure way to approach international deals is to attempt to deal with parties who are known, have proven track records, have established credit, have a lengthy and good business history and can provide references–who will back them up. Under the circumstances of certain deals, it may be possible to rely on a local representative to protect a client’s interests to the extent possible. For example, stock and amateur licensing companies with substantial international business are likely to have established subagents in certain territories with whom they have worked for years and who can be relied upon to deal immediately and competently with local problems in the local language on the spot as they arise. Such a representative would, of course, make it substantially easier, for example, to monitor compliance with billing requirements and to enforce payment obligations. However, the retention of a dependable local representative may not be possible or practical in the context of many deals. In the absence of the foregoing safeguards, letters of credit, large advances, penalty payments, termination rights and, finally, return tickets home in hand may be the only means to protect your client if a more reliable deal is not available.