Practical Compliance
Assessing Exposure to a Counterparty Investigation
What actions should a company undertake upon discovery of an investigation into a counterparty to a major agreement?

When a company finds out that its counterparty is subject to a government investigation, it has to evaluate what impact it may have on a current business relationship. The company should first understand what is the subject matter of an investigation. It should then analyze the nature of the relationship with the affected entity and whether in light of that relationship, the investigation in question may pose a risk to the company itself. The threshold issue would be whether the investigation into a counterparty and any reputational damage that it may cause may materially impact its ability to continue doing business with the company. One should also consider in parallel whether the fact of investigation, the issue underlying the investigation or any reputational damage stemming from the investigation would give rise to a basis for contractual termination of the agreement. In addition, the company should evaluate whether it should implement additional compliance measures or add extra levels of diligence and oversight with respect to transactions, both past and ongoing, with the affected entity. 

*The contents of this message, current at the date of publication, are for reference and general informational purposes only and do not constitute legal advice.  You should contact your attorney to obtain advice with respect to any particular legal matter.  You should not act or refrain from acting on the basis of information in this publication without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.    
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