Which law applies to services performed on board a cruise ship operating on international itineraries?
And how should the relationship between a U.S. contracting party and an Italian company involved in performing those services be structured?
These questions become particularly relevant when an Italian business expands into the United States by exporting not only products, but also services, formats and experiences.
EXP Legal recently assisted Nonna Enterprises Inc. and Nonna Enterprises LLC, through a team coordinated by partner Stefano Rossi, with the support of senior associate Alessandro Rossi, in the legal and contractual structuring of the group’s activities in the international cruise industry. U.S. law matters, as well as intercompany tax and accounting issues, were addressed with the support of partner Beatrice Bianchi Fasani and A as Accounting.
The project represents an interesting example of the international expansion of an Italian format: the group’s cooking experiences are also offered on board cruise ships, through a structure involving U.S. and Italian companies.
The assistance involved Nonna Enterprises Inc., acting as contracting party with the cruise operator; Nonna Enterprises LLC, a Florida company expected to play an increasingly significant role in the group’s U.S. operations; and NN S.r.l., the Italian company involved in the operational performance of certain services.
Governing law and international operations
Agreements with U.S. operators frequently identify the law of a particular U.S. state as the governing law and provide for a specific jurisdiction or venue.
However, the law governing the contract should be distinguished from the rules potentially applicable to the actual performance of the services. Where activities are carried out on board vessels operating internationally, additional regulations may become relevant depending on the vessel, ports, place of performance and parties involved.
A contractual choice of U.S. law therefore does not necessarily make that law exclusively applicable to every aspect of the underlying operation.
Contracting party and intercompany subcontracting
The involvement of several companies belonging to the same business organization requires a clearly defined contractual chain.
A U.S. entity may act as general contractor towards the client while subcontracting certain activities to an Italian company. The two entities nevertheless remain separate legal persons.
The main agreement and the intercompany relationship should therefore consistently address subcontracting, invoicing, use of personnel and allocation of liabilities. Particular attention should also be paid to any contractual provisions requiring the client’s prior approval for subcontracting.
Indemnification, liability and insurance
In U.S. commercial agreements, indemnification provisions may require a service provider to defend, indemnify or reimburse the other party in connection with third-party claims.
These clauses should always be analyzed together with the limitation of liability provisions: the existence of a liability cap does not necessarily mean that indemnification obligations or other specific liabilities fall within that limit.
The same analysis must extend to insurance coverage. Requirements concerning Commercial General Liability, Professional Liability/E&O and other policies should be compared with the actual contractual allocation of risk.
In particular, a contractual obligation is not necessarily insured simply because the contracting party maintains liability coverage. This becomes even more relevant when services are partly performed by another group company.
The U.S. company within the international structure
The project also illustrates a broader principle of U.S. internationalization.
Incorporating a U.S. corporation or LLC can facilitate relationships with American clients and the organization of local operations, but incorporation is only the first step. The actual function of the U.S. entity within the group’s value chain must be clearly defined.
When a business operates across multiple entities and jurisdictions, corporate structure, contractual architecture, insurance coverage and operating model should be designed consistently.
Through its U.S. Desk, EXP Legal assists Italian companies and international groups with the corporate and contractual structuring of their U.S. operations and the legal aspects of international expansion projects.