 We call it ‘coyote ugly,’ a clichÎ, perhaps, but apropos.
A relatively naÕve, but very large foreign company figuratively gets into bed with an aggressive local partner. As the story goes, the used and abused company would rather gnaw off its own arm rather than awaken the slumbering siren that has become a menace.
What is the foreign company to do? In the relatively short period since the independence of the Eastern European states, this is a question that has faced companies as large as Norway's Telenor and as small as the entrepreneurial startup saloon.
We rank hopping into bed with an unsuitable partner as the No. 1 danger for companies doing business in Ukraine and Russia. We say to foreign investors: “Come on in, the water is fine - but beware of the jellyfish!”
The advice our company dispenses is not always taken, nor always appreciated. When threatened with a local corporate bully, we believe that war has been declared and that the only appropriate action is active and vigorous engagement.
The alternative – corporate passivity – guarantees that the minority partner will always win what if nothing else becomes an excruciating war of attrition. Also, employing London or New York lawyers as the field generals in this war plays into the enemy's hands. This is no slur against lawyers, only an observation as to their relevance at this stage of the game.
This type of corporate warfare cannot be won in a courtroom, where the rule of law has the substance of cotton candy. You cannot win this war by proxy. Companies simply cannot do in Donetsk what they would do in Detroit.
The opposition will challenge you in multiple courts. From a practical standpoint, you will be left trying to put out a wildfire with a water pistol. By that time, though you probably don't realize it yet, you are in full retreat.
You win this war by recognizing the opposition’s vital self-interests and by aggressively challenging those self interests. Quite often, those self-interests are related to the genetic makeup of the local company or its oligarch owner. You need to determine those points of vulnerability. And, as with any bully, you have to figuratively draw blood: The greedy minority partner must realize that you have the strength and willpower to do battle. This is important.
The most effective way to chase your company out of the country is by implementing a campaign of constant harassment. That harassment can take many forms, from inventing bogus environmental problems backed by faux protestors, to flanking action in the courts, to ‘black’ PR in the form of paid stories in newspapers and on television.
(An aside here, any ownership dispute in Eastern Europe will most often be won by the local company, as it has no hesitancy in purchasing ‘black’ PR. In local business terms, these underhanded tactics are not even considered bad form.)
To your opponent, this is a local game. You need to create a larger battlefield. Lawyers recently advised a client to wage a toe-to-toe legal shootout on the client's home turf, combined with issuing news releases. We felt this would be bluster without effect – a hurricane that came ashore without turning a leaf.
We advised: 1) to aggressively hit the opponent where it hurts most, by pointing out the corporate governance issues and demonstrating that the adversary’s firm was not a place smart people would put their money; and 2) taking our arguments to the PR capitals of London, New York, and Washington, where they would have weight. In other words, we recommended that the besieged client focus on the vital self interest of the minority partner who wished to bully them and eventually take their business. This is sometimes difficult to do.
Get over it - It works.
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