Summary:  As with others in the same position, I am seduced by my quasi-outside status as a frequent visitor to Europe to write down some observations.  In this case, it is about Europe in this economic crisis and the news is this:  Not all that bad.  True, it is the worst economic situation in almost two generations but the special European “system” has demonstrated admirable resilience.  People are losing their jobs and shops are closing but the safety net has held and governments have responded with alacrity (such as it is) without the ideological war cries about socialism that are rampant in the US.  Besides, the espresso remains delicious, as does the panna cotta.

The Details.

Over the last two years I have spent about half that time (off and on) in Europe.  While I did not play the fiddle while all around me was burning, Rome itself was not on fire nor was it being sacked (but then I was not in Rome, so enough of that allusion).  Upon each return to Europe from the economic wreckage and political name-calling and Chicken Little screaming, I was mildly amazed at how well the European economy has managed this terrible crisis.

Weak Dollar, Resilient Companies. True, the weak dollar has severely crimped revenues (and jobs) of many export-based industries—the engine of the EU economy—but companies have responded by seeking other markets or simply riding out the storm.  Most of these companies are small enough and experienced enough that resilience seems to be inherent.

Fast Government Intervention. In addition, the crisis started as a credit crunch.  Without much dithering, the governments responded, usually with nationalization.  That worked.  Few cries of “socialism” were heard because people knew, and accepted, what had to be done.  Moreover, not all of the national economies included banks in serious trouble;  financial regulators in several countries had spotted the looming crisis several years before, forcing banks to suffer lesser pain then so as to avoid fatal illness later.

The Safety Net Held. EU governments invest a lot of money in their forms of social security, unemployment and—get ready—health care.  And they work.  True, public debt is high and getting higher—but, contrary to the claims of monetarists that such debt crowds out (presumably more efficient) private debt, it has not happened.

Don’t get us wrong:  We are neither for nor against public sector spending.  We’re just following the money.  Viewed that way, the safety net expenditures operate as a kind of ongoing stimulus package.  After all, people receiving this money have to spend it somewhere and they do:  on rent, food, even entertainment (today in the phone store I listened to a welfare recipient rant about problems with his government-subsidized mobile phone).  The larger public sector employment also operates as a kind of ongoing stimulus program, in much the same way.  Public employees—notoriously difficult to fire—nonetheless earn (at least some of) their money by making the trains run on time and, like welfare recipients, they spend what they earn from the taxpayers.

The same can be said of the long vacations enjoyed by most Europeans.  Five to six weeks of time off means higher, not lower, expenditures.  True, the money “bleeds” out of, say, Italy to, for example, Switzerland but it is still money spent.  GDP measurements do not differentiate among types of expenditures—just that things are made and spent.  Thus, vacation expenditures contribute to GDP.

Macro Level Productivity. Whatever the ideological knee-jerking that occurs in reference to nationalized companies, a little bit of analysis shows that they fare pretty well by all measurements—ROI, return to shareholders.  The Economist pointed out that most of the largest corporations in the world are in fact government controlled.  Moreover, European employees perform pretty well by most measurements of productivity.  Long vacations, high wages and lots of rich food do not seem to damage their output.

So What?

One can draw many conclusions from these observations (and we haven’t even gotten to the panna cotta).  We think there are many opportunities for US companies in the EU and vice versa (hey, we’re not here just for the espresso and good food).

Part Deux to come . . .

James C. Roberts III ( is the Managing Partner of Global Capital Law Group and CEO of the strategic consulting firm, Global Capital Strategic Group.  He heads the international, mergers & acquisitions and transactional practices and the industry practices concentrating on digital, media, mobile and cleantech technologies.  He is currently involved in opening the Milan office for Global Capital.  Mr. Roberts speaks English and French.  He received his JD from the University of Chicago Law School, his MA from Stanford University and his BS from the University of California—Berkeley.

Global Capital ( counsels domestic and international clients on legal issues inherent in the deployment of intellectual & financial capital—a merger or acquisition, foreign market expansion, a strategic alliance, a digital content license, a mobile deal, foreign and domestic labor and employment policies, starting a new entity or raising capital. Clients range from global Fortune 100 corporations such as Deutsche Bank and News Corporation and its subsidiaries, and Fox Interactive Media, to start-ups.  Industries represented include digital media, Internet, software, medical and biotechnology, nanotechnology, consulting firms, environmental technology, advertising, museums and other cultural institutions and manufacturing.


Summary:  Every corporate lawyer has drafted “best efforts” and similar contract provisions but often without much thought to the meaning and most certainly without a lot of guidance from US case law.  Now the UK High Court has provided some guidance, with some particularity.  Equally interesting, the opinion clearly indicates that at least that court will go beyond the four corners of the document and look at the conduct of the distributor relative to overall conditions of and business efforts in the relevant industry.  This makes sense, insofar as “reasonable” requires some examination of the real world.  In the end, this opinion helps in the US.  Somewhat.  And why?  Because important phrases with little meaning to the drafting lawyers now have to obtain more substance within the agreement itself.  This also gets to our drafting philosophy—that a contract is also a roadmap for the non-lawyers to use in guiding the relationship.  It is also critical reading for anyone with agreements governing UK (and EU) distributors.

The Details.

What corporate lawyer hasn’t drafted a “best efforts,” “reasonable efforts” or “commercially reasonable efforts” contract provision?  And what such lawyer hasn’t scratched his or her head about the legal meaning of these phrases?  Oddly enough, there is not much guidance from US case law.  So now, we have the UK High Court offering a pretty detailed analysis of the UK law equivalent—“reasonable endeavours.”

The case is CEP Holdings Ltd & CEP Claddings Ltd v Steni AS.  Basically, Steni manufactured cladding (building siding) distributed in the UK by CEP and they terminated the distribution agreement on the grounds that CEP had breached the “reasonable endeavours” provisions of that agreement.  The distributors sued them for the termination.  (UK and EU distribution agreements are notoriously difficult to terminate but we will not discuss that part of the larger context here.)

Clean Up Your Act. Well, the court disagreed that the supplier had been in the wrong after the court looked at the business conduct of CEP.  Interestingly, the court took note of the sales performance during an up market:  The relevant market went up roughly 18% while CEP sales declined roughly 62%.  The court noted that much of the decline was attributable to a “lack of an adequately structured, and directed, sales and marketing organization[.]”  To the facts of the case, the court pointed out that everything rested on one man and internal processes were pretty informal.  In our view, it looks like the court did not like the sloppiness of the distributor as well as the lack of communications (rolling sales reports are mentioned).

The opinion included some guidance in the abstract.  In a nutshell:  Plan; promote, monitor, communicate (with your supplier); and improve your sales team if things go bad.  Probably paramount among these matters is regular and meaningful communications with the supplier (e.g., rolling sales reports).

So What?

Let’s look at the consequences—i.e., what should be drafted.  Perhaps the agreement should specify just what those “commercially reasonable efforts” are and are not.  In other words, one could include language that says something to the effect that “such efforts do not include the preparation of reports beyond those specified in this Agreement or promotional efforts beyond those normally conducted by Distributor.”  Put in the positive, one could include an attachment that enumerates the specific marketing efforts to be undertaken.

Communications is often handled in US agreements by a reporting provision that spells out in some detail the sorts of reports needed by the supplier on a regular basis.  This begs the question, then, whether that provision needs to be expressly tied to the “commercially reasonable” standard, as suggested in the language above.

A “contrarian” approach for domestic agreements might be to leave everything out and rely upon a comparison by the courts to the outside world, thereby leaving the definition of “reasonableness” to the court.  This may make some sense.  The absence of case law may support this proposition.  Moreover, the courts are notoriously reluctant to look at specific business practices and an industry as a whole (excluding for the moment egregious corporate behavior in other areas).

We, however, would be disinclined to take the contrarian approach.  Better to specify (in an attachment) the marketing efforts to be undertaken.  However, in California, there may be a risk of an “accidental franchise” if the supplier imposes too many conditions, including, for example, both a marketing plan and employee training.  (We’re just as surprised as you are about that one, by the way.)  That is one of the reasons that we like such efforts to be tied to the normal marketing efforts of the Distributor.

It’s a Small World. And besides, many distribution agreements now cross borders and jurisdictions.  Many companies have distributors in the UK or elsewhere in the EU.  They will be affected by this decision.  And they should be.  True, this opinion does not carry much (if any, by some views) weight in this country for domestic agreements.  That fact does not mean that its utility as a guide for drafting should be ignored.  And there are many agreements already in existence guiding UK and EU relationships with the vague language now subject to scrutiny under this case.

Contract as Roadmap. You have heard us before say that a contract should be a roadmap for non-lawyers responsible for maintaining the relationship.  An attachment that elaborates—or gives the right and responsibility to the parties to elaborate—marketing (including co-marketing) efforts goes a fair amount of the way towards achieving just that goal.

Summary:  European newspapers are figuring out how to survive–even using an old concept.

We have posted quite a few blogs on newspapers (see others at where a different version of this entry is posted).  No, Chicken Little, the sky is not falling in the newspaper world, though it does look a bit cloudy.  Look around you.  Try Europe, for starters.

Premium Services, Not Premium News Access.

One approach is to provide premium services.  In Norway, you can pay a hefty price ($90) to join a weight-loss club that is part of a newspaper website.  Your profile on the site can be updated but only for another fee.

Now, paying to upgrade your profile may be a bit much (unless the weigh-loss membership has not been successful) because of the nearly ubiquitous networking sites, but the point is to offer other services for a fee.

US papers tried this approach but in a different manner:  They charged a premium for access to certain news.  (One site, about which we have written,, charges a premium for additional news AND access to the editorial meeting, of a sort, and access to the journalists themselves).  Think about other services.

The Old Horse of Repurposing Content

Axel Springer, a large player in the publishing space, revived an old concept, which makes perfect sense:  Write once, distribute many times.  Write the article and post it on multiple sites.  This is the old concept of “repurposing” content for different platforms and different audiences.

Data as a New Source of Revenue

Newspapers make money not be delivering news but by delivering audiences to advertisers.  Few things are better than granular data about audience interests.  The more platforms on which your news is available, the more granular those data.  Advertisers like that.  They will pay for that.

Perhaps losing weight through a club run by a newspapers does not sit well with your idea of reading weighty editorial pronouncements.  But something else might.  Newspapers thinking this way create what their advertisers want:  connections with their potential audiences.

And some of them may lose weight, too.

Oh, and if you want to think about the ramifications for licenses then go to

Just returned to Milan from the usual European winter holiday–this time up in the Alps, surrounded by the wealthy and the ultra-wealthy in their SUVs and furs (we are not among those people).

So what?

1.  Some people have so much income that their lives are not–and will not be–affected by the on-going economic meltdown.  They will still pay $12 for a bratwurst while on the ski slopes and millions for the right apartment, no matter what the conditions.  In the Swiss resorts, this is not a small fraction of the people.

2.  Many others are being affected:  Cracks in the “perfect” mountain life are showing.  Please keep in mind that most people planned–and paid for–their holidays long before the meltdown started, so NOT going was generally not an option.  (Besides, the majority of people in these places go to family-owned–and modest–apartments.)  Evidence:  Dinner reservations off and, from the stories from the locals, few sales in the chic stores (Prada, etc.) and even in the sports stores (e.g., new equipment).

3.  The economy was the second topic in all lunch and dinner conversations (Obama was first).  Everyone assured me that he or she was not being affected.  When people go out of their way in conversation to make such assurances then I read the tea-leaves the other way:  They are on the phone screaming at their private banker.

4.  Noted for their absence:  Investment banking and hedge fund partners normally there.  Hmmmmm…

5.  Private-side M&A deals were actually discussed and–yes!!–several had closed!

So this is not strictly about transactions and strategy–unless some clever VC is out there realizing that we international road warriors who do not have unlimited expense accounts are a huge business opportunity.

In spite of spending most of my professional career the last zillion years on digital convergence, I keep coming up against its limits–reminding me that no matter what we say, it is not ready for prime time.

I am changing jurisdictions in Europe for the next three weeks, much of it for vacation but, hey, work will call.  This move means that:

1.  I have to re-forward all of my US phones to another line in that new jurisdiction–and get our IT department to doublecheck it all back in the US.

2.  I have to get a DIFFERENT SIM card for this jurisdiction.

3.  I have to pay for Internet access either by the minute or by taking out a loan for “all you can eat” (and we know how tough it is to get a loan these days).

4.  No matter what I do, my firm will pay a gazillion dollars for the calls to/from Europe and the text messages.

OK, OK.  It’s still Europe and therefore still pretty.

And while I am grousing:  Just when will we get vacation parity?

It is possible that some of the structural problems of the European economy (economies) may actually give them something of a buffer for the current difficulties.  Here’s why:

1.  Money under the mattress:  A great deal of money is hidden from tax authorities (legally or illegally), which the Europeans have for centuries saved for a rainy day.  Financial hurricanes count as rainy days.  The mattress is metaphorical in that much of it resides with private banks.  Although they have taken their portfolio licks, they are also sources for capital for doing some interesting deals in acquiring companies, e.g., here in Italy.

2.  No small business lending:  Small business lending, as it is known in the US, essentially does not exist.  This is a bad thing for innovation and economic growth but in downturns a good thing:  less indebtedness.

The third reason is not so much a structural flaw as a difference:  People have (near) universal health insurance.  Whether or not you (or I) like it is not the point.  The point is that people are not going bankrupt because of uninsured medical conditions–and they are going to the doctors.

Food for thought.