1. CHAPTER 3 INTERNATIONAL LAW DAVIDSON, KNOWLES & FORSYTHE Business Law: Cases and Principles in the Legal Environment (8 th Ed.)

2. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 2 BUSINESS IN A GLOBAL VILLAGE World events create opportunities and risks for U.S. businesses. “Internalization” is permeating society at every level. Every businessperson must be familiar with the basic rules of international business. World events create opportunities and risks for U.S. businesses. “Internalization” is permeating society at every level. Every businessperson must be familiar with the basic rules of international business.

3. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 3 GOING ‘GLOBAL’ Communication and transportation improvements helps buyers and sellers in different markets to find one another more easily and makes it easier in doing business. Technology has opened the global marketplace to businesses of all sizes. Communication and transportation improvements helps buyers and sellers in different markets to find one another more easily and makes it easier in doing business. Technology has opened the global marketplace to businesses of all sizes.

4. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 4 DOING BUSINESS IN A GLOBAL MARKET – Franchising: special privileges granted by a corporation that allow the franchisee to conduct business under the corporate name of the franchisor. – License: permission granted by a franchisor to the franchisee to do some act that, without such authorization, would be illegal, a trespass or a tort. – Franchising: special privileges granted by a corporation that allow the franchisee to conduct business under the corporate name of the franchisor. – License: permission granted by a franchisor to the franchisee to do some act that, without such authorization, would be illegal, a trespass or a tort.

5. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 5 CROSS-CULTURAL NEGOTIATIONS International businesspersons need to learn about their trading partners and their cultures. Language can have an impact on cross- cultural negotiations and business dealings. International businesspersons need to learn about their trading partners and their cultures. Language can have an impact on cross- cultural negotiations and business dealings.

6. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 6 EXTRATERRITORIAL APPLICATION OF U.S. LAW Extraterritorial Applications of Sovereign Law. – Do the laws of a nation end at its border? – Is domestic law applied internationally? In some cases US. laws apply to business conduct in other countries. – Antitrust Law; – The Foreign Corrupt Practices Act (FCPA); – Employment. Extraterritorial Applications of Sovereign Law. – Do the laws of a nation end at its border? – Is domestic law applied internationally? In some cases US. laws apply to business conduct in other countries. – Antitrust Law; – The Foreign Corrupt Practices Act (FCPA); – Employment.

7. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 7 EXTRATERRITORIAL APPLICATION OF U.S. LAW Antitrust Law: – Under the “direct and substantive effect” standard, courts have applied antitrust statutes to business conducted outside the United States The Foreign Corrupt Practices Act (FCPA): – Forbids US. firms from engaging in corrupt practices to advance business interests Employment: – Nondiscrimination laws apply to Americans working for US. firms abroad Antitrust Law: – Under the “direct and substantive effect” standard, courts have applied antitrust statutes to business conducted outside the United States The Foreign Corrupt Practices Act (FCPA): – Forbids US. firms from engaging in corrupt practices to advance business interests Employment: – Nondiscrimination laws apply to Americans working for US. firms abroad

8. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 8 FREE TRADE ZONES Created to Facilitate and Expedite Commerce by Forming Economic Unions. Two Most Recognized Are: – European Union (EU). – North American Free Trade Area. Other Free Trade Zones: – In Latin America. – In Africa. Created to Facilitate and Expedite Commerce by Forming Economic Unions. Two Most Recognized Are: – European Union (EU). – North American Free Trade Area. Other Free Trade Zones: – In Latin America. – In Africa.

9. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 9 THE EUROPEAN UNION (EU) Organization of Western European Countries: created by the Treaty of Rome. Purpose of EU is to: – Establish a common customs tariff for outside nations importing goods into EU. – Eliminates tariffs among EU members. – Allow free movement of workers, goods, and capital within EU. Organization of Western European Countries: created by the Treaty of Rome. Purpose of EU is to: – Establish a common customs tariff for outside nations importing goods into EU. – Eliminates tariffs among EU members. – Allow free movement of workers, goods, and capital within EU.

10. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 10 THE EUROPEAN UNION (EU) Governed by four main bodies: – The Council of Ministers: legislative branch of EU, issues directives and regulations. – The European Commission: enforcement branch of EU, imposes fines and sanctions. – The European Parliament: primarily an advisory board. – The Court of Justice of the European Communities: arbitrates disputes within EU. Governed by four main bodies: – The Council of Ministers: legislative branch of EU, issues directives and regulations. – The European Commission: enforcement branch of EU, imposes fines and sanctions. – The European Parliament: primarily an advisory board. – The Court of Justice of the European Communities: arbitrates disputes within EU.

11. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 11 THE EUROPEAN UNION (EU) Objectives within the EU: – Goods; – People; – Services; – Capital. Competition (Antitrust) Law in the EU: – Articles 85 and 86; – Negative Clearance; – Extraterritoriality. Objectives within the EU: – Goods; – People; – Services; – Capital. Competition (Antitrust) Law in the EU: – Articles 85 and 86; – Negative Clearance; – Extraterritoriality.

12. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 12 NAFTANAFTA Agreement between Mexico, Canada, and the United States. Seeks to eliminate tariffs of goods traded among member nations. Promotes greater movement of workers and investment capital among member nations. Agreement between Mexico, Canada, and the United States. Seeks to eliminate tariffs of goods traded among member nations. Promotes greater movement of workers and investment capital among member nations.

13. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 13 OTHER FREE TRADE ZONES In Latin America: – Central American Common Market; – MERCOSUS Common Market; – Andean Common Market; – Caribbean Community. In Africa: – Economic Community of West African States; – Economic and Customs Union of Central Africa; – East African Community. In Latin America: – Central American Common Market; – MERCOSUS Common Market; – Andean Common Market; – Caribbean Community. In Africa: – Economic Community of West African States; – Economic and Customs Union of Central Africa; – East African Community.

14. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 14 GATTGATT Promotes free trade by defining unfair trading practices. Provides panels to resolve trade disputes. Designed to reduce tariffs and quotas between member nations. Created the World Trade Organization, an international economic organization to provide leadership and coordinate international trade. Promotes free trade by defining unfair trading practices. Provides panels to resolve trade disputes. Designed to reduce tariffs and quotas between member nations. Created the World Trade Organization, an international economic organization to provide leadership and coordinate international trade.

15. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 15 WTOWTO Intended to improve on the gains made by GATT. Comprised of 134 member nations. Adopted rules relating to international trade involving not only goods but also services and intellectual properties. Disputes resolved by a panel of trade experts. Intended to improve on the gains made by GATT. Comprised of 134 member nations. Adopted rules relating to international trade involving not only goods but also services and intellectual properties. Disputes resolved by a panel of trade experts.

16. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 16 UNCITRAL United Nations Commission on International Trade Law. Provides harmonization of private international law to enhance trade. Creating model laws on arbitration. United Nations Commission on International Trade Law. Provides harmonization of private international law to enhance trade. Creating model laws on arbitration.

17. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 17 EXPORTS AND IMPORTS Export: all exports leaving the U.S. must be licensed/regulated to: protect national interest in time of short supply protect national security further U.S. foreign interest Imports: all imports must pass through customs which usually involves the payment of tariff or duty. Export: all exports leaving the U.S. must be licensed/regulated to: protect national interest in time of short supply protect national security further U.S. foreign interest Imports: all imports must pass through customs which usually involves the payment of tariff or duty.

18. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 18 LETTERS OF CREDIT, INFORMATION & TECHNOLOGY Letters of Credit: – Minimize financial risk of international trade. Information and Technology: – World Intellectual Property Organization is the “UN” of intellectual property law, but no universal international law protecting intellectual property at this time. – There are international protection of copyrights, patents, and trademarks. Letters of Credit: – Minimize financial risk of international trade. Information and Technology: – World Intellectual Property Organization is the “UN” of intellectual property law, but no universal international law protecting intellectual property at this time. – There are international protection of copyrights, patents, and trademarks.

19. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 19 NATIONALIZATION AND ACT OF STATE DOCTRINE Nationalization: – Occurs when a foreign country converts private business into a government owned enterprise. – International law requires state to have proper public purpose and provide just compensation. “Act of State” Doctrine: – The Act of State Doctrine prohibits courts from judging the acts of a foreign government performed within its borders. Nationalization: – Occurs when a foreign country converts private business into a government owned enterprise. – International law requires state to have proper public purpose and provide just compensation. “Act of State” Doctrine: – The Act of State Doctrine prohibits courts from judging the acts of a foreign government performed within its borders.

20. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 20 SOVEREIGN IMMUNITY Sovereign Immunity: – Prohibits individuals or countries from suing a foreign government based on political activities. However, it is permissible to sue foreign governments based on its commercial activities. Sovereign Immunity: – Prohibits individuals or countries from suing a foreign government based on political activities. However, it is permissible to sue foreign governments based on its commercial activities.

21. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 21 DISPUTE RESOLUTION Options to resolve international business disputes: – International Court of Justice. – National Courts. – Arbitration. Online Dispute Resolution uses the internet to resolve international business disputes.