Enhanced Due Diligence as a Prerequisite to Avoid High-Cost Litigation

Enhanced Due Diligence as a Prerequisite to Avoid High-Cost Litigation

In nearly all arbitration cases, clients always ask a typical question: “What should we have done to avoid litigation and arbitration?” Evidently, there is no simple single answer or a preset formula that would allow companies to avoid lengthy and costly litigation and arbitration proceedings. Nevertheless, there are certain guidelines, compliance with which can mitigate the risk of a potential breach of contract and the accompanied dispute resolution proceedings.

An absolute necessity, as well as a guiding light for companies, is to run an Enhanced Due Diligence (EDD) procedure to identify and assess the risk involved in any business relationship. Through collecting and evaluating all pertinent legal, commercial, and technical data, comprehensive due diligence will facilitate the identification and assessment of the risk associated with some business transactions, whether with legal entities or individuals engaged. Moreover, as part of an EDD procedure, an entity or person shall recognize and comply with the anti-money laundering regulations (AML) or sanctions laws applicable due to the nature of their business or the country of their residence. Furthermore, for any company that maintains a business relationship in the international arena, it is necessary to urge caution in the face of potentially fraudulent activities by certain actors. Once a company finds itself with dubious instructions or activities as instructed by respective clients, it would be for the best if it sought legal advice on whether or not to maintain such business activity.

The measures mentioned above are merely an example of a broad set of procedures that a reasonable person or entity should follow to secure its business by reducing risks accompanying their business relationships and avoiding the possibility of legal actions and liability claims.

In this respect, before performing a seemingly profitable transaction at a national or international level, it is safer for any company to perfume an EDD procedure on their business Customer/Partner. Engaging experienced legal institutions, such as the Hague Centre for Law and Arbitration (HCLA), which has a proven track record in managing arbitration cases and exercising EDD vis-à-vis economic sanctions and potential anti-money laundering risks, can facilitate running such an EDD assessment and secure your business.  

For any question regarding the Enhanced Due Diligence process and economic sanction risks assessment, please contact HCLA via [email protected]