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March 2, 2017

Putting the Principles of Multinational CLM into Practice

Putting the Principles of Multinational CLM into Practice

In my last post, I wrote about the differences between global and multinational contract lifecycle management. These two seemingly synonymous terms provide guidelines for a large group of varied users and organizations, but they achieve their objectives in different ways. Global implies control, pushing a set of standards universally, while multinational implies flexibility, modifying a localized ability to accommodate regional norms.

With today’s preference for collaboration over mandate, multinational is often the “right” way to proceed.  While that sounds like an easy choice to make, the devil is in the details when it comes to carrying out a multinational approach to contract management. Is it actually possible to maintain control while adapting to the unique circumstances that are bound to arise?

It is, as long as leadership recognizes the importance of being center-led rather than centralized. In addition, the technology in place must be agile enough to empower good decision making, avoiding the rigidity seen with traditional global CLM systems. Realizing this goal requires the ability to refine and implement globally consistent and efficient contract management processes across a myriad of stakeholders.

The professionals tasked with making contracts actionable on a multinational basis have an important task on two core levels: language and regional standards as well as legal systems.

Language & Regional Standards

If there is an obvious example of functionality that is a must-have to maximize localized usability, it is language and formatting. This includes the user interface, the contract language and the metadata tags that are used to make the contract more searchable and usable. Although each contract is usually crafted in one originating language, multinational contracts often need to be accessible in one or more geographic areas. Regional differences—idioms, dialects, cultural references, and expressions—should be carefully considered.

The nuances of word choice can have serious legal implications if not chosen with great care and an understanding of regional or local law. For example, consider phrases in French in France v. Quebec, or Spanish in Spain v. Argentina or Mexico, or Portuguese in Portugal v. Brazil. This is an area where the right CLM solution can be an effective tool. Beyond a complete contract translation, it is possible to leverage metadata tags to ensure that the intended regional meaning of an agreement is preserved from language to language. By isolating salient details through metadata, these terms become abundantly clear across languages and dialects.

Bi-directional visibility and information flows are required to facilitate an effective multinational CLM effort. That’ means all “translated” contracts need active involvement of internal users and suppliers in the locations affected by the alternate language(s) of the contract. The meaning of terms and conditions, as well as the accuracy of different character sets or metadata tags, must be QA’d on a local level. Ideally, this will open up a line of communication internally in the organization for improved CLM adoption and interaction that continues through the life of the contract.  The result: all involved counterparties are facilitated, not constrained, by the CLM solution.

Once everyone is in agreement about the intent and desired outcome of the contract on multiple local levels, it is also important to ensure that the contract is just as transferrable from a formatting perspective within the CLM system. It would simplify the authoring process if US English spelling, US dollars and US-based formatting (e.g., metric v. english, currency, dates and times) were always the defaults, but you can’t compel global users to an approach from one region.

Understanding the Intent of Law

But even when words are translated accurately from one language to another, the intent—and therefore the results—may vary.  Variations in law from one legal jurisdiction to the other (i.e., Common Law v. Civil Law) may also require something to be explicitly stated in one location, while it is enough to be implied or understood in another.

For instance, in common law in countries like the US, UK, India and Canada, everything the parties want to agree upon needs to be set out in the contract. That way it will be recognized by a court. Conversely, civil law systems in Latin America, most of Europe, all of Asia, and most of Africa, typically have extensive standard rules or codes that will be applicable on certain types of contracts. This means the contracts can be quite short. The drawback is that not all the rules are mandatory. This can create issues later if the parties end up disagreeing about certain provisions. It may not void the entire contract, but still can cause problems.

The end goal of each contract is to lead to a set of actions, behaviors, and results. To do that, they must take into account the nuances of law, culture, and language so that the outcomes are as accurate in translation as they are in the original authoring language(s). If contracts are to serve their intended purpose everywhere in the world they apply, their details must follow the same principles as a high-level multinational approach to CLM. That requires taking into consideration all of the information that is required to make the contract applicable on a local level—including language, currency, time and date formats, and local business practices. This draws those geographically dispersed business units closer to the center than the strongest global mandate ever could.

A contract lifecycle management system that supports multinational requirements empowers companies to function accurately in a dynamic business environment. Allowing contracts to fall out of alignment with actual business requirements just because the solution in place can’t do better is no excuse.

Addressing these areas properly as part of planning and deployment ensure organizations the ability to:

  • Drive consistent client experience through global guidelines and policies on documentation negotiations
  • Align roles and responsibilities across global, regional and local partners (legal and compliance teams, product and implementation teams)
  • Directly manage clients, suppliers and other third parties in documentation issues that drive resolution
  • Advance the digitization effort of contracts by accommodating business requirements and ultimately driving success
  • Enable contract owners to work closely with all global/regional managers on the appropriate usage of CLM in global frameworks

To get a closer look at what it takes to deploy contract lifecycle management multinationally, check out the on-demand webinar with IACCM.

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