Chapter 7- The International Legal Environment: Playing by the Rules Flashcards

Terms Definitions
No single, uniform international commercial law governs
foreign business transactions
The foundation of a legal system
Profoundly affects how the law is written, interpreted, and adjudicated
Laws governing business activities within and between countries
An integral part of the legal environment of international business
Four heritages form the basis for the majority of the legal systems of the world
Common law, Civil or code law, Islamic law, and Marxist-socialist tenets
Common law
Derived from English law. England, U.S., Canada and countries who were once under the English influence. Seeks interpretation through the past decisions of higher courts which interpret the same statues. Applies established and customary law principles to a similar set of facts
Civil or Code law
derived from Roman law. Germany, Japan, France and non-Islamic and non-Marxist countries. All-inclusive system of written rules (codes) of law: Legal system is generally divided into three separate codes 1.) Commercial 2.) Civil 3.) Criminal
Ownership is determined by registration. Considered complete as a result of catchall provisions found in most code-law systems
Code Law is complete
Islamic law
Places emphasis on the ethical, moral, social, and religious dimensions to enhance equality and fairness for the good of society. The basis is the interpretation of the Koran. Islamic law defines a complete system that prescribes specific patterns of social and economic behavior for all individuals: 1.) Property rights 2.) Economic decision making 3.) Types of economic freedom
Islamic law
This system prohibits investment in a business dealing with Alcohol, gambling and casinos
In order to comply with Islamic Law following are terms that are frequently use:
Trade with markup or cost-plus sale and leasing. These practices enable borrowers and lenders to share in the rewards as well as the losses in an equitable fashion. The international marketer must know the religion's system of belief and understand how the law is interpreted in each region
Marxist-Socialist Tenets
of Russia and the Republics of the former Soviet Union, Eastern Europe, and China. Legal system centered on the economic, political and social policies of the state. Now more directly involved in trade with non-Marxist countries
Differences among the 4 law systems
Due process may vary. Individual interpretation may vary
Fundamentalist interpretation of Islamic law. Combination of several legal systems. U.S. uses both common and code law
Marxist-Socialist tenets
strictly subordinate to prevailing economics conditions. Private ownership, contracts, due process and other legal mechanisms need to be developed.
Russia and China differ because
Each has taken a different direction in its political economic growth. Russia is moving toward a Democratic System. China is trying to activate a private sector within a mixed economy in a socialist legal framework
Jurisdiction in International Legal Disputes
No judicial body exists to deal with legal commercial problems arising between citizens of different countries. Legal disputes can arise in three situations: 1.) Between governments
2.) Between a company and a government 3.) Between two companies
Jurisdiction is generally determined on the basis of:
Jurisdictional clauses included in contracts, Where a contract was entered into, Where the provisions of the contract were performed
Jurisdictional Clause
"That the parties hereby agree that the agreement is made in Oregon, USA, and that any question regarding this agreement shall be governed by the law of the state of Oregon, USA"
Types of International Disputes
Buyer refuses to pay. Product is inferior quality. Shipment arrives late
Steps when a dispute arises...
Resolve the issue informally, Conciliation aka Mediation,
a nonbinding agreement between parties to resolve disputes by asking a third party to mediate differences. Sessions are private and all conferences between parties and the mediator are confidential
in all conciliation agreements
An arbitration clause should be included
The popularity of arbitration has led to a proliferation of arbitral centers
Established by countries, organizations, and institutions. Inter-American Commercial Arbitration Commission. Canadian-American Commercial Arbitration Commission (for disputes between Canadian and U.S. businesses). London Court of Arbitration (decisions are enforceable under English law and English courts). American Arbitration Association. International Chamber of Commerce (select Arbitration)
Arbitration clauses require agreement on two counts
To arbitrate in the case of a dispute according to the rules and procedures of some arbitration tribunal. To abide by the awards resulting from the arbitration
Contracts and other legal documents should include
clauses specifying the use of arbitration to settle disputes
Problems with Arbitration
Companies may refuse to: 1.) Name arbitrators 2.) Arbitrate
3.) After arbitration awards are made companies may refuse to honor the award 4.) In most countries, arbitration clauses are recognized by the courts and are enforceable by law within those countries
Deterrents to litigation
Fear of creating a poor image and damaging public relations. Fear of unfair treatment in a foreign court. Difficulty in collecting a judgment that may otherwise have been collected in a mutually agreed settlement through arbitration. The relatively high cost and time required when bringing legal action. Loss of confidentiality
4 recommended steps for settling disputes
Try to placate the injured party. Conciliate. Arbitrate. Litigate
Companies spend millions of dollars establishing brand names or trademarks
To symbolize quality and design. To entice customers
Millions are spent on research
To develop products, processes, designs, and formulas
Lost sales from the unauthorized use of U.S. patents, trademarks, and copyrights
Amount to more than $100 billion annually
range from copies that have the same efficacy as the original to those with few or no active ingredients, to those made of harmful substances
Inadequate Protection
Failing to adequately protect intellectual property rights can lead to the legal loss of rights in potentially profitable markets
A company that believes it can always establish ownership in another country by proving it
used the trademark or brand name first is wrong and risks the loss of these assets
It is best to protect intellectual property rights through
In the U.S. , a Common-law country, ownership of intellectual property rights is established by
prior use versus registration
International Conventions
Three major aspects: Paris Convention for the Protection of Industrial Property, Inter-American Convention, Madrid Arrangement
All countries have laws regulating marketing activities
Promotion, Product development, Labeling, Pricing, Channels of distribution
Discrepancies across markets cause problems for trade negotiators - particularly for managers and their firms
U.S. does not allow the buying or selling of human organs. Some countries only have a few marketing laws with lax enforcement. Others have detailed, complicated rules that are stringently enforced
comparisons in advertisements are always subject to the competitor's right to go to the courts and ask for proof of any implied or stated superiority
Green marketing laws
Focus on environmentally friendly products and Focus on product packaging and its effect on solid waste management
alot of the 20th century it was Nonexistent and Not enforced in most of the world's countries (U.S. was exception)
U.S. Laws Apply in Host Countries
Foreign Corrupt Practices Act, National security laws, Antiboycott law, Extraterritoriality of U.S. laws and Antitrust laws
Foreign Corrupt Practices Act
Makes it illegal for companies to pay bribes to foreign officials, candidates, or political parties
National security laws
Prohibit a U.S. company, its subsidiaries, joint ventures, or licensees to sell controlled products without special permission from the U.S.
Antiboycott law
U.S. companies are forbidden to participate in any unauthorized foreign boycott. Required to report any request to cooperate with a boycott
Extraterritoriality of U.S. laws
Especially important to U.S. multinational firms. Foreign governments fear the influence of American government policy on their economies through U.S. multinationals
What is illegal for an American business at home can also be illegal by U.S. law in
foreign jurisdictions for the firm, subsidiaries and licensees of U.S. technology
Cyberlaw - Unresolved Issues
Cybersquatters (CSQs), Taxes, and Jurisdiction of disputes and validity of contracts
In the past, a company was deemed to have a taxable presence in a country if it had a permanent establishment there
The EU Commission
Proposes value-added tax (VAT)
Jurisdiction of disputes and validity of contracts
The EU Commission has adopted an e-commerce directive that will permit online retailers to trade by the rules of their home country unless the seller had enticed or approached the consumer by way of advertising
buy and register descriptive nouns, geographic names, and names of ethnic groups and pharmaceutical substances, and other similar descriptors and hold them until they can be sold at an inflated price
Businesses face a multitude of problems in their efforts to develop successful marketing programs
Varying legal systems of the world and their effect on business transactions
Legal questions must also be considered
Jurisdictional and legal recourse in disputes. Protection of intellectual property rights. Extended U.S. law enforcement
Enforcement of antitrust legislation by U.S. and foreign governments
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