Are you based in Latin America and would like to learn the advantages tolling agreements may bring in the context of an ongoing or potential conflict?

A statute of limitations is a mechanism which most legal systems contemplate that sets the maximum amount of time after an alleged offense during which legal proceedings may be initiated in connection with such event. When the applicable statute of limitations expires, the relevant legal claim can no longer be pursued in court. The duration of the specified period of time varies depending on the nature of the alleged offense and the place where it took place. Statutes of limitation do not generally apply to crimes against humanity, war crimes and genocide.

In the context of a conflict or legal dispute, tolling agreements can serve as a tool that allows parties to suspend or place on hold the applicable statute of limitations while allowing the parties to gain additional time to resolve their differences outside of court. To learn about how you can access U.S. courts, you can read Brown Rudnick’s article on that topic by clicking here.

Benefits of Tolling Agreements

Tolling agreements are typically mutually beneficial. They provide claimants with the necessary time to strengthen their cases and gather comprehensive evidence, avoiding the rush to sue as a statute of limitations approaches its end. For defendants, these agreements offer a chance to negotiate settlements out of court, potentially reducing legal expenses and to manage the reputational challenges that court proceedings may bring. Tolling Agreements can be flexible, allowing parties to enter into one before a lawsuit is filed or during ongoing litigation. 

Link to the Underlying Transaction

It is key for tolling agreements to articulate the scope of paused legal actions and specify the claims they cover. The agreement should also describe how the parties are to act during the tolling period, include restrictions on filing related lawsuits or pursuing alternative dispute resolutions in connection with the same subject matter, and indicate what occurs when the agreement expires.

After the Tolling Agreement Expires

Upon the expiration of a tolling agreement, the applicable statute of limitations typically resumes. If no resolution has been reached, the claimant may proceed with filing a lawsuit, depending on the remaining time under the statute of limitations. This critical juncture often prompts a decision on whether to settle or litigate, influenced by the progress made by the parties during the tolling period. To learn  how you could benefit from obtaining documents or testimony from a person located in the U.S. for a non-U.S. proceeding, you can read Brown Rudnick’s article on that topic by clicking here.

Cross-Border Considerations

When negotiating tolling agreements that involve parties from different countries, the following factors should be considered:

1. Legal systems involved: Different countries have different laws regarding statutes of limitations, contract enforcement and dispute resolution. It is therefore critical to ensure that the agreement complies with all applicable laws.
2. Choice of law and venue: The agreement should clearly specify which law governs the agreement (choice of law) and in which jurisdiction any disputes will be resolved (choice of venue). These choices can significantly impact how the agreement is interpreted and enforced.
3. Enforceability: Parties should consider how an agreement will be enforced in the jurisdiction where enforcement may be needed as well as international treaty obligations, such as those under the Hague Convention for the Pacific Settlement of International Disputes.
4. Language and cultural differences: To address possible misunderstandings as a result of differences in language and business practices, it is advisable to draft the agreement in the language(s) all parties can understand and to consider cultural differences in business practices as legal negotiations take place. When an agreement is executed in more than one language, it is also important to select upfront which version will prevail and be considered the governing document in the event of any discrepancy, contradiction or difference in interpretation.
5. Tax implications: Cross-border agreements may have tax implications, especially if they involve payments between parties in different countries. Understanding and planning for any potential tax liabilities in all jurisdictions involved is essential.
6. Data protection and privacy laws: When tolling agreements involve the transfer of personal or sensitive information across borders, compliance with data protection laws becomes crucial, as they regulate how data can be transferred and processed across borders.
7. Communication and time zones: Practical issues such as differences in time zones and communication barriers can affect negotiations and the management of the agreement. Setting clear expectations regarding communications and timelines can be beneficial.
8. Political and economic environments: The political and economic environment in the jurisdictions involved may affect the execution and enforceability of tolling agreements. As a result, policy issues in the relevant countries should be taken into account.

Tolling agreements can serve as useful tools to provide flexibility and foster a thoughtful approach to dispute resolution. If you are interested in entering into a tolling agreement or are dealing with one now, let us know. Our team of international lawyers, many of whom are also admitted to practice law in Latin American countries, can help create a tailor-made strategy to protect your ability to effectively negotiate a settlement and avoid litigation.