How a Lawsuit Can Affect the Reputation of Your Business Abroad

Earlier this year, Nestlé faced a lawsuit in Warsaw, Poland. It was a fresh entry to the company’s history of objections in overseas operations. 

The lawsuit claims that Nestlé’s Nałęczowianka bottled water is misleading consumers through its packaging. While the bottles claim to be made from “recycled PET plastic” or be “recyclable”, what does it imply for the environmental repercussions of single-use plastic?

This alleged greenwashing lawsuit is preceded by previous complaints related to Nestlé’s unfair labor practices in Brazil and customs duty disputes in India. 

Examples like these are rampant in today’s competitive world, where many businesses expand overseas but become embroiled in controversy. It leaves their brand image compromised and also affects future growth.

The Impact of Lawsuits on Your Business Reputation Abroad

Let’s assess the impact of legal action offshore as a clarion call for businesses considering expansion without adequate planning. 

Shaping Consumer Sentiment on Social Media

The most damaging impact of lawsuits against your business often stems from social media activity. Posts from enraged customers, watchdogs, and local community members can spread like wildfire. They reach your native audiences in no time, serving to antagonize even brand loyalists in extreme cases.

Consider the TikTok controversy that led to its eventual ban in India and a potential ban in the US. The BBC reports that concerns about national security were severe enough to make the ban effective immediately in India, which was once a huge market for the popular app.

TikTok has also faced legal action due to its alleged potential for addiction through manipulative algorithms and filter bubbles. The TruLaw legal consultation team states that many plaintiffs blame the platform for behavioral and mood problems in teenagers.

These sentiments have spread rapidly on competing social media platforms and also in non-virtual circles. The bans continue. 

This case exemplifies how legal developments can shape consumer sentiment and deplete a brand’s hard-earned affinity.

Dampening Employee Engagement

Legal action against your business also impacts your workforce, both locally and globally. Since news travels fast, your staff will hear about these developments sooner rather than later. It can stir feelings of confusion, doubt, and disengagement from the organization.

Demotivated employees may also propagate negative word of mouth. A 2023 HR survey found that almost 70% of employees leave online reviews of former employers. More than half of these are negative. 

Imagine the scenario where employees realize their organization is trapped in a legal controversy. Besides your company’s reputation, it also affects recruitment and new client acquisition. 

Resistance to Future Investment Support

A business with an active lawsuit is sure to struggle with attracting investment from overseas stakeholders. Many entities will run thorough background checks before signing on the dotted line. Anything short of a squeaky-clean reputation will generate apprehension in the current economy.

Lawsuits can be a deterrent to ongoing investments, and some people may want to reconsider or end their association. You may be looking at derailed projects and upset future plans for years.

Best Business Practices to Stay Legally Compliant Offshore

Mending a compromised reputation is much harder for a business than building one afresh. When planning to internationalize your company, it is best to adopt best practices for legal compliance proactively. 

Unfortunately, the effort in this area still seems to be lacking for many companies, as observed by McKinsey’s Global GRC Benchmarking Survey 2025. Many leaders opine that the core GRC pillars of governance, risk, and compliance need substantial strengthening. The report identified the main challenges as limitations in tech enablement and resourcing, as well as a shifting regulatory landscape.

These best practices can prove helpful in furthering compliance offshore:

• Have your team examine and implement global compliance laws, primarily related to taxation. These may be different from your primary country of operation.
• Have a safe plan to safeguard your assets that considers the vagaries of the contemporary business landscape and the possibility of failure.
• Develop sincere partnerships with local players to build a deeper understanding of the new destination. These connections may also keep your operations steady should trouble befall your business.
• Ensure that your business compliance frameworks also account for socio-cultural nuances. Legal actions may stem from offended sentiments and misconstrued promotional campaigns.

Modern civilization is hyper-aware of the legal route to resolving conflicts and holding entities accountable. Businesses that expand offshore are often the center of attention for several parties, such as industry watchers, competitors, and the local government. This scenario makes it vital for businesses to remain vigilant and ensure compliance from all fronts.

A lawsuit often translates into a vicious cycle that obstructs growth. You will find fewer people willing to engage in business with you, which impacts your revenue. It makes it more likely that you will falter on commitments. 

Taking preventive action to avoid lawsuits and staying prepared to handle ones that still emerge is the best foot forward for a business in today’s landscape.