International Law Exam 1

Ch 1-6

Three major business transactions

Trade, IP, Foreign Direct Investment

What type of firms are engaged in the most intl trade?

Small and medium firms due to less barriers to entry with the internet

What are the 5 challenges to international business?

1. Language and cultural differences

2. Commercial risk

3. Transport risk

4. Foreign exchange rates and currency control risk

5. Regulatory compliance and foreign laws

T/F Foreign language fluency is not always vital

True

What are the 4 measures of commercial risk?

Risk acceptance, risk reduction, risk transference, risk avoidance

Currency risk vs exchange rate risk

Transacting business in foreign currency vs fluctuations of 2 currencies

How to mitigate exchange rate risks?

Transact in own currency, put it in the K, purchase currency option (predetermined rate)

T/F Companies must comply with laws and regulations of every country that they have a presence/operate in

True

T/F Resolving intl business disputes is complex

True

What country has a market hold over global shipping?

Japan

What is often a firm’s first venture in intl business?

Exporting

Export controls vs sanctions

Restrict exports for natl security vs restrictions targeting specific ppl (political/hr violations)

What are the two types of export managers?

Foreign sales rep and foreign distributor

What are the two exporting intermediaries?

Export management company (export responsibility for manufacturers) and export trade company (joint venture from export companies)

What are the barriers to importing?

Tariffs, quotas, embargos, health/environment/safety reasons

What are some forms of IP rights?

Patents, industrial design, trademark, copyright, geo indications, trade secrets

IP licensing agreement

Owners grant specific rights under certain conditions for a specified time in exchange for fees/royalties

Are IP rights country specific?

Yes, so jurisdiction is in the offending country

Who comes out victorious in a franchise dispute?

Franchisor always win over a franchisee

Foreign direct investments

Ownership, operation, control of assets long term (active investment!!)

What are 3 benefits of FDI?

1. Avoiding quotas, tariffs, currency fluctuations

2. Adapting products to local markets

3. Taking advantage of local resources/labor

3 forms of FDI

Branch: extension of home company

Subsidiary: separate legal entity controlled by parent company

Joint venture: cooperative business arrangement btwn 2 companies

T/F In a branch, the home company is fully responsible for liabilities

True

T/F Host countries often require local ownership/participation in a joint venture

True

T/F There is a universally accepted definition of developing countries

False- their transitional nature

What are characteristics of a developing country?

Lower per capita income, higher foreign debt, rapid population growth, greater state influence over economy, environmental issues, crime/corruption, inadequate education, poor infrastructure

Who found that intl law is from divine rights and common agreement/consensus?

Hugo Grotius

T/F There is a legislative body governing intl law

False- not dictated by a legislative body and no global authority for enforcement

Public vs private intl law

Conduct btwn nations vs rights/responsibilities of corps and individuals

CISG

Contracts for intl sale of goods (USA is a part!)

Pacta sunt servanda

Fundamentally requires parties to perform obligations in good faith

Treaty terms

Protocol: modifying/adding to a treaty

Ratification: countries agree to be bound by treaty

Signatories: nations express willingness to join

Reservation: exception to treaty by signatory

Abrogation: render treaty null and void

Self executing treaty

Immediate effect

Friendship, commerce, navigation treaty

Foreign nationals doing business in a host country (immediate)

What convention codified rules related to treaties?

Vienna convention on the law of treaties 1980

Customary intl law

Commonly accepted rules of conduct and consistent long standing practices

T/F US usually applies customary intl law

True- if no contradictory statute or treaty

Transnational organized crime

Illegal drug/firearm trade, smuggling, human trafficking, cybercrime, money laundering

Transnational business crime

White collar crime, legitimate businesses hiding their crimes

What are 5 types of jusirdiction?

Territoriality, nationality, passive personality, protective, universal

Extraterritoriality

Project laws beyond territory borders (US is more willing to do it internationally)

US statutes that apply to extraterritoriality

Employment discrimination, price fixing/antitrust violations, IP crimes, banking/financial crimes, bribery

Subjective vs objective territoriality

Crime committed in territory vs act committed outside but affected inside (territory = airspace and waters)

Nationality jurisdiction

Individuals and corps must comply with own countries laws

Passive personality jurisdiction

Gives country right to hear a case against a citizen by a noncitizen outside of its territory (nationality of victim)

Protective jurisdiction

Allows jurisdiction over noncitizens for abroad acts that affect national security, vital economic interest, or government functions

Universal jurisdiction

Any country can prosecute heinous and universally condemned crimes regardless of location (war crimes, not terrorism)

International Court of Justice

Primary judicial arm of the UN to arbitrate intl law disputes (nations voluntarily consent and judgements are not appealable)

Who “enforces” ICJ judgements?

World public opinion, diplomatic pressure, good faith (HAS NO TEETH!)

International Criminal Court

Separate from the UN- for genocide, war crimes, humanitarian (NOT terrorism or drugs)

T/F In the US, companies can get reduced fines if they have a code of conduct/compliance program in place

True

5 steps for a code of conduct to be effective

1. Communicated to employees

2. Integrated into corporate culture

3. Disciplinary measures

4. System to measure effectiveness

5. Means of accountability

What are the CERES (Coalition for Environmentally Responsible Economies) principles?

Private American environmental groups for environment/product safety, audits, environmental impact reports

Civil law

Modern legal systems from Ancient Rome (predominant worldwide)

Common law

English law originated from Normandy, France (Anglo Saxon law to William the conqueror to Emerging legal precedent)

Stare decisis

“Let the decision stand” common law

Differences btwn civil and common law

Both rely on legislative codes but civil law is more comprehensive (judges focus on code principles and are more inquisitorial)

Islamic law

Sharia derived from Koran and Sunna (SA has business regulations supplement religious laws and Pakistan has 1 secular/1 religious court)

For citizens of different states, what is the monetary amount for federal jurisdiction?

Greater than $75,000

What are reasons companies want to avoid intl business disputes?

Damages reputation, costly litigation, unfamiliar laws

Alternative dispute resolutions

Mediation and Arbitration (requires parties to voluntarily submit… most are clauses in K)

T/F After mediation, parties can still litigate or arbitrate

True

Advantages of arbitration

• Held in a neutral third country

• Chosen by parties

• Straightforward rules

• Faster and limited pretrial discovery

• Private proceedings

• Flexible evidence rules

• Limited right to appeal

T/F Federal policy strongly favors arbitration

True- and inconvenience for distance is NOT grounds for invalidating

More jurisdiction types under federal

Territorial: committed in court’s territory

In rem: power over property in geographical boundaries

Subject matter: authority of specific types of cases

Diversity: >75k and different citizenship

In personam: power of individual or corporations (minimum contact)

Do US courts determine in personam jurisdiction on a case-by-case basis?

Yes, based on defendant’s presence, business activities, and fairness to all parties

T/F Proper service of process is crucial for personal jurisdiction

True

How is jurisdiction determined in EU?

By defendant’s domicile

T/F In China, nonresidents must have a meaningful connection to hear cases

True- like a K

T/F Federal rules allow venue to be where all plaintiffs/defendants reside or where the action took place

True

Forum Non Conveniens

Allows court to refuse to hear a case even with jurisdiction if another court is more convenient (location of action, witnesses/evidence, party residence, applicable country laws)

Forum shopping

Attempts by counsel to find favorable laws/juries by FNC transfers

T/F Forum selection clauses are valid even if they are not reasonably connected to the transaction

False- must have reasonable connection

Restatement of conflict of laws

General rule = closest relationship to the “action”

5 factors for center of gravity in K

1. Place of contracting

2. Place of negotiation

3. Place of performance

4. Location of subject matter

5. Domicile, residency, nationality, place of incorporation, place of business

T/F Choice of law clauses are generally upheld if reasonable relationship between transaction and chosen jurisdiction

True

T/F Foreign laws can be applied in American contractual disputes

True

Full faith and credit clause

Judgements in one state are recognized in all others

When do US courts recognize foreign judgements?

If fair, impartial tribunal, proper jurisdiction, and adequate notice

Sovereign immunity

Governments can’t be sued (but for profit/commercial activity can be sued!)

Why would US refuse jurisdiction?

Abstention doctrines- comity, acts of state, political question

Uniform Commercial Code

Standardize US commerce

What does modern sales law exclude? (UCC/CISG doesn’t apply)

Real estate, intangibles, employment, insurance, services

T/F Modern sales law came from law merchants

True

What is the only state that did not adopt the UCC?

Louisianna

What countries do not follow CISG?

The UK and India

When is the CISG applicable?

• For contracts of commercial sales

• Parties are from different countries (held in country with closest relationship to the K)

• Both countries have ratified CISG

• or Conflict of laws applies to contracting state (seller tendency)

T/F The US participates in the CISG

False- UCC applies to Ks with nonCISG countries

What is excluded from CISG?

Consumer goods, auctions, securities, ships, electricity, labor/services

Common K elements

Mutual assent, consideration, legal capacity, lawful purpose

T/F Civil law does not require consideration

True

How does US deal with consideration?

Falls under state law so still required, CISG doesn’t mention

T/F CISG does not require Ks to be written

True- only UCC and nonCISG countries require for $500+

Parole evidence

Evidence outside of K cannot be considered if it contradicts, adds or alters the K

T/F CISG incorporates parole evidence rule

False- therefore outside evidence can be used!

T/F CISG recognizes trade usage

True- aka widely known industry practice or established by parties

Mutual assent in CISG

Requires sufficiently definite (goods, quantity, and price) but no price is still a valid K

T/F Offers are irrevocable if reasonable reliance by offeree

True

Pro forma invoice

For a specific buyer under certain conditions

When is a contract effective under CISG?

Once it reaches the offeror’s inbox, not when sent