Rule of Law
Concept particularly important for companies doing business abroad
Property rights & contracts must be enforced to minimize risk in international transactions
International Law
Body of law that governs relations between or among nations, international organizations, & individuals in transactions that cross national borders
U.S. Constitution on international level
gives most of the power to the federal government
Foreign Commerce Clause
vests Congress with the power "to regulate commerce with foreign nations
Treaty Clause
states that the president "shall have power, by and with the advice and consent of the Senate, to make treaties, provided two-thirds of the senators present concur
Primary Source of International Law
body of law in each individual country
General Source of International Law
Treaties, Customs, Judicial Decisions
World Legal Systems
Civil law
Common law
Religious-based law
Mixed law systems
Treaties
any agreement between 2 or more nations to cooperate in a certain manner, formally signed by an authorized representative of each nation & ratified by each nation
Customs
Customary law follows the basic principle of int'l law that individual conduct is permitted unless expressly forbidden; thus, prohibitions as well as affirmative practices must be proven by the state relying on them
Judicial Decisions
general notion that nations will defer to & give effect to the laws & court decisions of other nations, rooted in the idea that reciprocal treatment is a necessary element of int'l relations - does not require courts to accept the judgments of foreign cou
Principle of Comity
Legal reciprocity - nations will generally defer & give effect to the legal acts of other nations as long as such acts are consistent with the law & public policy of the accommodating nation
Sovereign Immunity
Establishes that countries are immune from lawsuits in the courts of other countries
Foreign Sovereign Immunities Act (FSIA)
prohibits U.S. courts from rendering judicial actions against foreign nations or their government officials
FSIA Exceptions
1)if foreign nation has waived its immunity
2) if foreign nation is engaged in some commercial enterprise on U.S. soil, or when its actions have a direct effect on U.S. interests
Principle of Sovereignty
general principle of int'l law that a country has absolute authority over events that transpire within its own territory
Act of State Doctrine
precludes U.S. courts from inquiring into the validity of the public acts a recognized foreign sovereign power committed within its own territory
Expropriation
the taking of private property for national welfare - just compensation depends on nation
Nationalization
the taking of private assets for benefit of the government - merely a confiscation
United Nations (U.N.)
created by multilateral treaty in 1945 at the end of World War II with the stated purpose of promoting social & economic cooperation among nations & protecting human rights
4 main purposes of UN
1)Keep peace throughout the world
2)Develop friendly relations among nations
3)Help nations work together to improve the lives of poor people, to conquer hunger, disease & illiteracy, & to encourage respect for each other's rights & freedoms
4)Be a center
United Nations Organization
6 main organs
1)General Assembly
2)Security Council
3)Economic & Social Council 4)Secretariat
5)Trusteeship Council
6)International Court of Justice
Int'l Monetary Fund ("IMF")
Helps promote sound monetary, fiscal, & macroeconomic policies throughout the world by providing assistance to needy countries, providing short-term loans to its over 180 member nations
World Bank
provides money to developing countries to fund projects for humanitarian purposes & to relieve poverty
World Trade Organization
multilateral treaty that establishes trade agreements & limits tariffs & trade restrictions among its more than 130 member nations
World Trade Organization has jurisdiction to
enforce trade agreements - hears & decides trade disputes between member nations
International Courts
Play a role in the development & interpretation of int'l law, but their power to enforce a ruling on sovereign nations can be tenuous & their jurisdiction may be limited
International Criminal Court
global jurisdiction over criminal aspects of international treaties (US not a member)
Choice of Forum Clause/ Forum Selection Clause
Designates the forum or nation's court that has jurisdiction to hear & decide a case arising out of the contract
Choice of Law Clause
Designates which laws are to be applied in deciding such a case
Doing Business Abroad
Most frequent source of anxiety for Americans operating abroad is the expectation of payoffs & bribes
Foreign Corrupt Practices Act - FCPA
Prohibits reps of U.S. corporations (including intermediaries/agents) from offering or providing significant payments to foreign political parties, candidates, or government officials for the purpose of inducing the recipients to misuse their powerful pos
Foreign official
any officer or employee of a foreign government, regardless of rank; employees of government-owned or government- controlled businesses
Facilitating payments
must not significantly change the final decision or result
Strategies for Avoiding FCPA Liability
Clearly prohibit FCPA violations
Assign senior executives responsibility for oversight
Train employees in FCPA requirements
Establish a safe reporting system for suspected violations
Discipline violators
U.N. Convention on Contracts for the International Sale of Goods (UNICISG)
Int'l counterpart to UCC - treaty that governs sales contracts between businesses located in its signatory countries
Int'l Chamber of Commerce Terms
Standardized contractual terms & designations used in int'l sales contracts to avoid confusion due to language barriers & differing legal systems
Export Controls
No tax or duty shall be laid on articles exported from any state"
Congress uses other tools including: Export quotas, Restrictions on Technology exports, Incentives & subsidies
Methods of Doing Business Abroad
Foreign Sales
Licenses
Franchises
Direct Investment
Foreign Sales
Sell Goods Directly into Foreign Market- to minimize risk use ILOC
Irrevocable Letter of Credit "ILOC
Provides seller with guarantee that it will get paid as long as certain documentary delivery conditions have been met
Licenses
A contract with a foreign entity permitting the use of the Licensor's intellectual property for a fee
Franchises
Franchisors enter into a contractual agreement with franchisees that allows the use of the franchisor's business model, expertise, & intellectual property such as trademarks in operating the business
Direct Foreign Investment
Subsidairy
Joint Venture
Subsidiary
May be wholly owned by parent company
Maintains complete ownership & full control
Joint Venture
When 2 entities form a 3rd entity in which each maintain some percentage of ownership
US companies typically forms relationship with a foreign entity or local owners in the foreign market