International bussiness the challenge of global competition 11e chapter 10

Learning Objectives Discuss the complexity of the legal forces that confront international business  Recognize the importance of foreign law  Explain contract devices and institution

Legal Forces

chapter ten

Learning Objectives

 Discuss the complexity of the legal forces that

confront international business

 Recognize the importance of foreign law

 Explain contract devices and institutions that assist

in interpreting international contracts

Learning Objectives

 Discuss enforcement of antitrust laws

 Explain the risk of product liability legal actions,

which can result in imprisonment for employees or fines for them and the company

 Discuss U.S laws that affect international

business operations

International Legal Forces

• Rule of law allows foreign

businesses to know interests will

be protected

• Public International Law

– Legal relations between governments

• Private International Law

– Laws governing transactions of

individuals and companies that cross

Sources of International Law

• The most important source is found in

bilateral and multilateral treaties between

nations

– Treaties are agreements between countries,

which may be bilateral (between two countries)

or multilateral (involving more than two

countries); also called conventions, covenants,

compacts, or protocols

– United Nation’s International Court of Justice

creates law when it decides disputes

• A country’s attempt to apply its laws to foreigners

or nonresidents and to acts and activities that take place outside its borders

– Not done through force, but by

traditional legal means

International Dispute Settlement

 Litigation in the United States

 well-developed court systems that facilitate

litigation

 One reason many people outside the U.S dislike litigation in the U.S is the process of discovery

 Unlike most other countries, the U.S

has two major court systems

 The federal court system and the state court systems

Performance of Contracts

• United Nations Solution

– Many countries, including the U.S., have

ratified the UN Convention on Contracts

for International Sales of Goods (CISG)

– CISG established uniform legal rules to

govern international sales contracts and

the rights and obligations of the buyer and seller

– CISG is automatically applied to all

contracts

Performance of Contracts

• Private Solution: Arbitration

– Instead of going to court in any country,

companies may opt for arbitration

• A process, agreed to by parties to a dispute

in lieu of going to court, by which a neutral person or body makes a binding decision

• Generally faster

• More informal

• Confidential

• Less expensive

Enforcement of Foreign Arbitration Awards

• The UN Convention on the Recognition and

Enforcement of Foreign Arbitral Awards

– The U.S and most UN member-countries of

have ratified this convention

– Binds ratifying countries to compel arbitration

when the parties have so agreed in their contract and to enforce the resulting awards

Intellectual Property: Patents, Trademarks, Trade Names, Copyrights, and Trade Secrets

 Intellectual property includes

Intellectual Property

 Patents (Protection)

 International Convention for the Protection

of Industrial Property

 European Patent Organization (EPO)

 The World Intellectual Property

Organization (WIPO)

Intellectual Property

 Trade Names

 Protected in countries that adhere to the

Convention for the Protection of Industrial

Property

 Copyrights

– Protection provided under the Berne

Convention of 1886 adhered to by 77 countries

Common Law or Civil Law?

 Much more predictable

Legal System Differences between

Europe and United States

• Europe

• Legislation is rarely amended and

regulations are rarely revised

• Courts are not as often asked to give their

interpretations

• If they are, the decisions are rarely appealed

• United States

• Laws and regulations are constantly being

amended or revised by legislatures and the

Legal System Differences between England

and the U.S

• England has a split legal profession with barristers and solicitors

• England has no jury for civil court

actions

• Contingency fees less common in

England

• Award of costs to the winner in civil

litigation standard in England

Standardizing Laws

• Many attempts have been made to standardize laws

among various countries

• International business flows much better with a

uniform set of rules

– UN Convention on International Sale of Goods

– International Organization for Standardization (ISO)

• Nonrevenue tax purposes

– To redistribute income, discourage

consumption of products such as tobacco and alcohol, and encourage purchase of

domestic rather than imported products

National Tax Approach Differences

• Tax Levels

– Range from relatively high in some

Western European countries to zero in tax havens

– Some countries have capital gains taxes,

and some do not

• Capital gain is realized when an asset

is sold for an amount greater than its cost

National Differences of Approach

Taxation

Tax Laws and Regulations

• Complexity of national tax systems differs

– Many consider tax laws and regulations of the

U.S the most complex

• Compliance with tax laws and their enforcement

vary widely

– Germany and U.S strict, Italy and Spain

relatively lax

• Other differences include

– Tax incentives, exemptions, costs,

depreciation allowances, foreign tax credits,

 Tax Treaties or Conventions

– Treaties between countries that bind the

governments to share information about

taxpayers and cooperate in tax law

enforcement, often called tax conventions

– The U.S has tax treaties with over 50

countries

• National Tax Jurisdiction

– A tax system for expatriate citizens of a

country whereby the country taxes them on the basis of nationality even though they

live and work abroad

• Territorial Tax Jurisdiction

¯ Expatriates are exempt from their country’s

Antitrust Laws

• Antitrust laws

– Laws to prevent price fixing, market sharing,

and business monopolies

• Competition policy

– The European Union equivalent of antitrust laws

• The U.S and the EU have attempted to

enforce their antitrust laws extraterritorially

• Japan’s Fair Trade Commission

– the “toothless tiger”

Tariffs, Quotas, and Other

 Health requirements

 Packaging requirements

 Language requirements

 Weak patent or trademark protection

 Quarantine periods

 Product Liability

– Standard that holds a company and its officers

and directors liable and possibly subject to

fines or imprisonment when their product

causes death, injury, or damage

 Strict Liability

– Standard that holds the designer or

manufacturer liable for damages caused by a

product without the need for a plaintiff to prove

negligence in the product’s design or

U.S Laws That Affect U.S Firms’ International

Business

• Federal Employment Laws

• Foreign Corrupt Practices Act (FCPA)

– U.S law prohibits making payments to

foreign government officials for special treatment

– Congress passed FCPA outlawing bribery,

but not “grease” payments

2002 Bribe Payers Index

Accounting Law

• Sarbanes-Oxley Act (SOX)

– Brings major changes to the regulation of

corporate governance and financial practice

• New reporting requirements

• Officer and director responsibilities

• Auditor independence– Applies to any company, domestic or foreign,

that has securities registered or is required to

file reports under the Securities Exchange Act