By Friedrich Helml and Julia Helml
In recent years, the increasing influence of geopolitical tensions on global business operations has become undeniable. From sanctions to supply chain disruptions, international corporate law is evolving to meet the challenges posed by shifting political landscapes. Companies are no longer just concerned with navigating the complexities of business regulations—they must also account for the economic and legal consequences of global conflicts. The escalating tensions between the U.S. and China, as well as the ongoing Russia-Ukraine conflict, highlight how geopolitical risks can swiftly impact international commerce, trade, and investment.
One of the key mechanisms through which geopolitical forces influence corporate law is the use of economic sanctions and trade restrictions. These legal tools, designed to exert political pressure on specific nations or entities, have far-reaching effects on multinational companies. Sanctions targeting Russia, for instance, have created ripple effects across Europe and beyond, forcing businesses to reconsider their dealings in the region. Companies that fail to comply with sanctions or navigate these changes effectively risk significant reputational and financial damage. Legal teams are now tasked with not only ensuring compliance with sanctions but also managing the reputational risks of operating in politically unstable areas.
Beyond sanctions, geopolitical tensions also create logistical and legal complications for businesses operating in conflict zones or politically unstable regions. Traditional legal systems, such as courts, may become unreliable in war-torn areas, prompting businesses to seek alternative dispute resolution mechanisms like arbitration. However, even arbitration can be politically charged, and, in any event, any judgement or arbitral award must also be enforced in countries or regions affected by geopolitical tensions. The need for agility in such environments has never been more apparent, as companies must remain flexible to adjust to rapidly changing legal and political circumstances.
Another prominent example of geopolitical tension shaping corporate strategy is the ongoing U.S.-China rivalry. With both economic and political friction between these two global powers, businesses are increasingly caught in the middle. U.S. export controls, which limit the sale of American technology to Chinese firms, add layers of complexity to cross-border transactions. Similarly, China’s data localization laws, which require foreign companies to store data domestically, challenge businesses to reconcile competing legal frameworks. Companies must constantly balance these conflicting regulations, ensuring they remain compliant while protecting their global operations.
Geopolitical tensions not only influence operational and legal strategies but also corporate governance. Corporate boards must now incorporate geopolitical risk management into their broader risk assessment frameworks. This goes beyond traditional financial or operational risk analysis and requires legal teams to be fully engaged in identifying potential geopolitical vulnerabilities. Some companies have begun appointing specialized geopolitical risk committees or hiring chief geopolitical strategists to navigate these complexities. These experts provide valuable insights into how political decisions can influence business environments and legal frameworks, helping businesses anticipate potential risks.
In response to the challenges posed by geopolitical risks, many companies are reevaluating their supply chains and market diversification strategies. By expanding operations across multiple regions, businesses can reduce their exposure to geopolitical turmoil in any one area. Diversifying supply chains has become a critical strategy for maintaining operational flexibility and avoiding the disruptions that result from sanctions, trade barriers, or political unrest.
Another legal strategy that has proven effective in managing geopolitical risk is the inclusion of flexible contract provisions, such as force majeure and exit clauses. These provisions allow businesses to suspend or terminate contracts in the event of unforeseen political events, such as sanctions or military conflicts. Force majeure clauses, in particular, have been critical in enabling companies to adjust their obligations when geopolitical events render the fulfillment of contracts impossible or impractical.
Corporate law is also adapting to the new realities of “weaponized interdependence,” a concept where countries use their control over global economic networks as a form of political leverage. For example, the U.S. leverages its control over the SWIFT financial messaging system to enforce sanctions, while China wields its dominance in global supply chains to exert influence over foreign businesses. Companies operating in these economic networks must be acutely aware of how geopolitical actors may manipulate the system to achieve their political goals.
As the landscape of international business becomes increasingly shaped by geopolitical forces, corporate law must continue to evolve to address these emerging challenges. Legal frameworks that once relied on global institutions such as the World Trade Organization (WTO) are being supplanted by bilateral agreements, sanctions regimes, and new forms of economic competition between states. Businesses must now adapt their operations to reflect this reality, ensuring that their legal strategies are flexible, forward-looking, and aligned with the evolving geopolitical environment.
In this context, legal advisors play an essential role in guiding companies through the intricacies of geopolitics. Legal teams must stay informed of developments, help businesses navigate complex regulatory landscapes, and advise on risk mitigation strategies. In an era where political instability can severely disrupt global operations, having a legal framework that is both adaptable and comprehensive is key to ensuring long-term business continuity.
Geopolitical tensions are not going away anytime soon. For companies operating on a global scale, incorporating geopolitical risk management into corporate governance and legal strategies is no longer optional—it is essential. As businesses continue to confront an increasingly fragmented and politicized global market, legal advisors must provide the expertise and tools necessary to safeguard business operations and ensure resilience in the face of evolving geopolitical threats.
In conclusion, the future of international corporate law will be shaped by the continued influence of geopolitical tensions. As countries increasingly use economic tools to further their political objectives, businesses must adapt their legal and operational strategies to navigate the complexities of this new environment. Only by staying ahead of these challenges can companies ensure they are well-positioned to succeed in the global marketplace.
About the Authors
Friedrich Helml PhD, holds an LL.M. in international law from Duke University. After seven years managing international litigation, arbitration, real estate, and M&A transactions in Vienna, he founded Aliant Helml Rechtsanwälte GmbH in 2014. As Senior Partner, he oversees its offices in Vienna and Linz.
Julia Helml, LL.M., studied in Vienna and California, earning her second LL.M. in U.S. law from Santa Clara University in 2011. An expert in transactional and corporate law, she’s recognized by Chambers for her ability to translate business ideas into legal solutions, advising on high-value transactions and international arbitrations.
