BUSINESS LAW SEAN LE - DHQT

2011 - WEEK 11

QUOTES OF THE DAY

What affects men sharply about a foreign
nation is not so much finding or not finding
familiar things; it is rather not finding them in the
familiar place.
G.K Chesterton, British Author

The greatest meliorator of the world is

selfish, huckstering trade.
Ralph Waldo Emerson,
American Philosopher and Poet
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INTERNATIONAL TRADE
In 1992, the United States exported
to other countries, $448 billion
worth of goods and services.
In 1997, just five years later, that figure
had swelled to over $930 billion.

That is a 110% increase in five years!

Multinational Enterprises (MNE)

A multinational enterprise is a corporation that does
business in several countries simultaneously.

Each of the top ten MNEs earns greater

annual revenue than the gross national
product (GNP) of 2/3 of the worlds nations!

Over 200 MNEs have annual sales

exceeding one billion dollars.

Many MNEs have more available cash than

the majority of nations.

MONEY means POWER!

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THE WORLD IS ONE ECONOMY, WITH

EVERY COUNTRY LINKED IN COUNTLESS
FINANCIAL WAYS TO ALMOST EVERY
OTHER.

TO CONDUCT BUSINESS TODAY IS

VERY OFTEN TO ENGAGE IN

INTERNATIONAL COMMERCE, AND THAT

MAKES IT IMPORTANT TO UNDERSTAND

THE BASICS OF INTERNATIONAL LAW.

SOURCES OF INTERNATIONAL LAW

Those things that international tribunals rely on

in deciding international disputes.

Treaties and conventions

Custom

General principles of law

Judicial decisions and teachings

TREATIES AND CONVENTIONS

The

first source of international law.

They are the equivalents of
legislation at the international level.

TREATY

An agreement or contract between two or more

nations.
Formally signed by an authorized representative.
Ratified by the supreme power of each nation.

CONVENTION

Treaty that is sponsored by an international

organization.
Treaties and conventions address:
Foreign aid
Navigation
Commerce
Settlement of disputes

CUSTOM
The second source of international law.
Custom describes a practice followed by two or
more nations when dealing with each other.
It may be found in:
Official government statements.
Diplomatic correspondence.
Policy statements.

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CUSTOM (CONTINUED)

1.

2.

Two elements must be established to show

that a practice has become a custom:
Consistent and recurring action by two or
more nations over a considerable period of
time.
Recognition that the custom is binding
because of legal obligation.

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GENERAL PRINCIPLES OF LAW

The third source of international law.
Consist of principles of law recognized by
civilized nations.
These are principles of law that are common to
the national law of the parties to the dispute.

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GENERAL PRINCIPLES OF LAW (CONTINUED)

The general principles of law may be derived

from:

Constitutions
Statutes
Regulations
Common Law
Other Sources of National Law

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JUDICIAL DECISIONS AND TEACHINGS

The fourth source of international law.
Consist of judicial decisions and teachings of the
most qualified legal scholars of the various
nations involved in the dispute.
International courts are not bound by the
doctrine of stare decisis.

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Trade Regulation -- Export Controls

U.S. Export Administration Act of 1985
This act balances the need for free trade with
important requirements of national security.
Allows the federal government to restrict exports if
they endanger national security, harm foreign
policy goals or drain scarce materials.

U.S. Controlled Commodities List

Made by the Secretary of Commerce; lists

restricted items, which may not be exported
without a license.

U.S. Arms Export Control Act

Permits the president to make a second list of

controlled items, all related to military weaponry.
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Trade Regulation -- Import Controls

Tariffs

A duty (tax) imposed on goods entering a country.

Tariff is calculated based on classification and
valuation of the item being imported.

Duties for Dumping and Subsidizing

Dumping is selling goods in a foreign market for less
than normal price to drive out local competition.
The US Department of Commerce will impose a
dumping duty when they suspect that the low prices
are intended to harm American companies.
Subsidized goods are those for which the home
government has given a benefit (such as low taxes).
Subsidized goods are charged a countervailing duty
to equalize the prices.
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Trade Regulation --

Import Controls/
Nontariff Barriers

Quotas
A quota is a limit on the quantity of a
particular good that may enter a nation.
Quotas may grow a certain percentage per
year, or stay the same.
Import Ban
An import ban means that certain goods are
flatly prohibited.

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General Agreement on Trade

and Tariffs (GATT)
History of GATT
GATT is an international treaty which dates back
to the 1940s, with its most recent version signed
by 126 nations in 1994.
During this time period, tariffs on industrial goods
dropped from about 40% to about 5%.
The latest round of cuts should drop tariffs to
about 3.7% and create more categories of dutyfree goods.
Even with the perceived benefits, opponents
claim that the US will not be able to compete with
countries that have under-paid workers.
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GATT -- (contd)
World Trade Organization
The WTO is an international court created by GATT
and empowered to hear complaints about violations.
April 2000, Jordan became the 136th WTO member.
A panel of judges will review WTO decisions, and
recommend withdrawal from the WTO if excess
unfounded decisions are made against the US.

Issues raised by and addressed by GATT

GATT opponents fear environmental problems due to
uncontrolled growth in developing nations.
Child labor is not adequately limited by GATT.
GATT increases protection for intellectual property.

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WORLD TRADE ORGANIZATION (WTO)

The Uruguay Round of multilateral trade negotiations

under the auspices of GATT (General Agreement on Tariffs
and Trade, based on a 1947 agreement) established the
World Trade Organization. Upon ratification of the Round's
Final Act by members, the WTO replaced GATT as the
global multilateral trade organization, and a series of
agreements associated with but legally distinct from GATT
were also placed under the WTO umbrella (such as the
GATS, the Agreement on Agriculture, on Textiles and
Clothing, on Rules of Origin, etc.).
International organization of more than 130 member
nations.
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2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

WORLD TRADE ORGANIZATION (WTO) CONTD

Created to promote and enforce trade

agreements among member nations.
Vietnam became a member of the World Trade
Organization (WTO) in 2006.
The WTO has as its main function the
administration of a number of multilateral trade
agreements, the objectives of which are to
reduce existing trade barriers and to expand
international economic

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WTO DISPUTE RESOLUTION

WTO hears and decides trade disputes between

member nations.
Three-judge panel issues panel report.
Report referred to dispute settlement body of WTO.
WTO creates an appellate body composed of seven
professional justices.
If violation found, offending nation ordered to stop
and to pay damages.

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UNITED NATIONS
International organization created by
multinational treaty in 1945.
Goals of the United Nations (U.N.):

Maintain peace and security in the world.

Promote economic and social cooperation.
Protect human rights.

Viet Nam joined the UN on 20 September 1977

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GOVERNANCE OF THE UNITED NATIONS

The United Nations is governed by:
The General Assembly
Composed of all member nations.
The legislative body of the U.N.
Adopts resolutions which have limited force.
Resolutions are usually enforced through persuasion
and sanctions.

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GOVERNANCE OF THE UNITED NATIONS

(CONTINUED)

The Security Council

Composed of 15 member nations.

Five are permanent members
Ten are chosen for two-year terms

Primarily responsible for maintaining international

peace and security.
Has authority to use armed forces.

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GOVERNANCE OF THE UNITED NATIONS

(CONTINUED)

The Secretariat

Administers the day-to-day operations of the United

Nations.
Headed by the Secretary-General, who is elected by
the General Assembly.

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INTERNATIONAL MONETARY FUND

IMF was established to promote the world

economy.

Sound monetary, fiscal, and macroeconomic policies

worldwide

Provides assistance to needy countries

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WORLD BANK
Financed by contribution from developed
countries.
Provides money to developing countries to fund
projects for humanitarian purposes and relieve
poverty.
Bank routinely grants debt relief for these loans.

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THE EUROPEAN UNION

Comprised of many countries of Western
Europe.
Created to promote:

Peace and security.

Economic, social, and cultural development.
Open borders for trade.
Provide free flow of capital, labor, goods, and
services.

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REGIONAL AGREEMENTS

The European Union (EU) -- most of Europe

Sets standards for tariffs, dumping, subsidies,
antitrust, and transportation.
Is currently trying to establish a common currency, to
be called the euro.

North American Free Trade Agreement

(NAFTA) -- Mexico, Canada, USA

Eliminates almost all trade barriers between

the three member nations.

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FREE TRADE AREA OF THE AMERICAS (FTAA)

Possible extension to NAFTA

Would include all of the countries of North,
Central and South America, extending from
Alaska in the North to Argentina in the South.
Reservations and critics still exist.

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LATIN, CENTRAL, AND SOUTH AMERICAN

ECONOMIC COMMUNITIES
Central American Common Market
MERCOSUR Common Market
Caribbean Community
Andean Common Market

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REGIONAL AGREEMENTS

Association of South-East Asian Nations

(ASEAN) -- 9 Asian countries

Is still in negotiations, with the goal of reducing tariffs

and eliminating duties between members.

Mercosur -- 4 South American countries

Formed to improve commerce among
members.
Members are considering creating a
common currency.
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MIDDLE EASTERN ECONOMIC COMMUNITIES

Organization of Petroleum Exporting Countries

(OPEC)

11 Oil-producing and exporting countries from Africa,

Asia, the Middle East and South America.
Sets quotas on the output of oil production by
member nations.

Gulf Corporation Council

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MFN

MFN == The Most Favored Nation principle is contained in

Article One of GATT and its successor, the World Trade
Organization (WTO). The name is confusing. It prohibits
discriminatory treatment in international trade by providing
that trade concessions or agreements with any one GATT
partner must unconditionally be extended to all others. In
this way any bilateral concession immediately becomes
multilateralized. Customs Unions are permitted as
exceptions to MFN under certain conditions, and the
principle may also be violated as part of anti-dumping
retaliation.

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NATIONAL COURTS DECIDE

INTERNATIONAL DISPUTES

The majority of commercial litigation involving

international business transactions are heard by
national courts.

Most disputes are between private parties.

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International Sales Agreement

Direct Sales -- domestic manufacturer

to foreign store
Must decide which of three potentially
conflicting laws will govern the transaction.
Must also decide where disputes will be
settled and in what language and currency
the transactions will take place.
Parties may require a letter of credit, which
is a banks guarantee of payment.
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International Sales Agreement

Indirect Sales -- through a distributor in

the foreign country

Choice of law, legal forum, language and
currency are same as with direct sales.
Must also determine if your distributor will
be an exclusive dealer, meaning they will
not carry any competing lines of goods.
You may have to agree to let them be the
exclusive distributorship, and not let any
competing distributors sell your goods.
Be careful not to violate antitrust laws!
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International Sales Agreement

In the event of a conflict, international

comity requires one court to respect the

other legal system and decline to hear a
suit if it would more logically be
resolved in the other country.
Licensing -- giving a foreign company

rights to produce your product

Be certain that the country you are dealing
with will honor your patents or trademarks.
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Investing Abroad
Repatriation of Profits -- some countries
allow profits made by foreign investors to
be taken back home; others do not.

Expropriation -- in some cases, private

businesses can be bought (for a fair price)
by the government without consent.
In general, American courts cannot hear
cases against a foreign country, even in
expropriation cases.
Investment insurance is often a wise
business expenditure when investing abroad.
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Investing Abroad (contd)

U.S. Foreign Corrupt Practices Act -makes it illegal for an American business
person to give anything of value to a
foreign official in order to influence an
official decision.
In many countries, bribery is commonplace (but
foreign bribery is still against the FCPA).
Small payments to speed up, but not change the
result of, processes may be acceptable.
If a countrys written laws allow bribery (but few
do), it is not a violation of the FCPA.
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JUDICIAL PROCEDURE
Choice of forum clause designates the
judicial or arbitral forum that hear and decide the
case.
Choice of law clause designates the law to be
applied by the court or arbitrator in deciding the
case.

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DOCTRINE OF SOVEREIGN IMMUNITY

Act of a government in a foreign country is not
subject to suit in the foreign country.
Some countries provide absolute immunity.
Some countries provide limited immunity.

The U.S. provides limited immunity

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INTERNATIONAL ARBITRATION
A non-judicial method of dispute resolution.
A neutral third party decides the case.
The parties agree to be bound by the arbitrators
decision.
Faster, less expensive, less formal, and more
private than litigation.

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INTERNATIONAL ARBITRATION (CONTINUED)

Arbitration Clause
A clause contained in many international contracts.
Stipulates that any dispute between the parties
concerning the performance of the contract will be
submitted to an arbitrator or arbitration panel for
resolution.

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LAW AROUND THE WORLD

Jewish Law and the Torah

Islamic Law and the Koran

More in search of truth than it is an adversarial

process.
Used primarily in the areas of marriage, divorce
and inheritance. Limited use in criminal law.
Ignored in commercial Law.

Hindu Law and Dharmasastra

Does not rest on civil codes nor court decisions,

but on the works of private scholars that were
passed along for centuries by oral tradition and
eventually smitris (or law books). Concerned
with family matters and the law of succession.
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