Business Law CH24 S2025 LEW

Chapter 24: International Law

International Law

• International law: Governs relations among nations, lacks enforcement authority, limited to persuasion or coercive actions

• National Law: Specific to nations; enforced by governments.

• Reconciliation: Balances national sovereignty with economic cooperation.

Sources of International Law

1. International Customs: Evolved from widely accepted practices.

2. Treaties and International Agreements: Contracts between nations.

3. International Organizations: Composed of nations, often established by treaties (e.g., UN General Assembly promotes global peace; resolutions contested in the International Court of Justice).

   1. adopt resolutions, declarations, and other types of standards that often require nations to behave in a particular manner. Disputes with respect to these resolutions and declarations may be brought before the International Court of Justice.

Legal Systems

• Common Law: Courts develop rules independently (e.g., torts, contracts).

• Civil Law: Codified laws provide structure; courts apply laws without creating precedents.

International Principles and Doctrines

• Principle of Comity: Nations respect laws aligning with their own.

• Act of State Doctrine: Protects recognized foreign governments from scrutiny in their territory.

  • Expropriation: Legal seizure with compensation.

  • Confiscation: Illegal seizure without compensation.

• Doctrine of Sovereign Immunity: Shields foreign nations from U.S. court jurisdiction based on defined conditions (FSIA); exceptions include waivers, commercial activities, torts, and terrorism-related actions.

  • A foreign state can be sued in U.S. courts if it:

    1. Waives its immunity, either explicitly or implicitly.

    2. Engages in commercial activities in the U.S. or activities outside the U.S. that affect the U.S. directly.

    3. Commits a tort in the U.S. or breaks certain international laws.

    4. Is labeled a state sponsor of terrorism and is sued under the FSIA for injuries or deaths caused by torture or terrorism against a U.S. citizen.

  • When applying the FSIA, courts must determine if an entity qualifies as a "foreign state"—including its political subdivisions or government agencies—and if its actions constitute "commercial activity," meaning regular commercial conduct or transactions by the foreign state within the U.S.

• When applicable, both the act of state doctrine and the doctrine of sovereign immunity tend to shield foreign nations from the jurisdiction of the U.S. courts.

Doing Business Internationally

• Modes: Exporting, manufacturing abroad, licensing technology, selling franchises, establishing subsidiaries/joint ventures.

• Exporting:

  • Direct: U.S. companies sell directly to foreign buyers.

  • Indirect: Foreign agents/distributors manage sales.

    • Foreign agent – acts as the U.S. firm’s agent and can sign contracts in the foreign location on behalf of the principal (the U.S. company).

    • Foreign distributor – the U.S. company and the foreign distributor enter into a distribution agreement setting out the terms and conditions for selling the company’s products.

• Manufacturing Abroad: Establishing plants for efficiency; licensing grants IP usage rights; franchising allows control with fees; joint ventures/subsidiaries involve ownership sharing.

Regulation of Business Activities

• Investment Protections: Expropriation acceptable under international law; confiscation usually violates it.

• Export Controls: Congress cannot impose export taxes, but regulates through quotas and incentives.

• Import Controls: Quotas limit imports; tariffs tax imports; anti-dumping duties protect domestic industry.

Minimizing trade barriers

• The world trade organization (WTO): each member country is required to grant normal trade relations (N T R) status to other member countries.

  • Normal trade relations (N T R) status – is granted through an international treaty by which each member nation must treat other members at least as well as it treats the country that receives its most favorable treatment.

International Dispute Resolution

• Contracts often require arbitration for disputes; litigation occurs in specified forums.

  • When the contract contains forum-selection and choice-of-law clauses, the lawsuit will be heard by a court in the specified forum and decided according to that forum’s law.

• New York Convention: Facilitates international arbitration enforcement; U.S. courts compel arbitration under specific conditions (existence of agreements, commercial relationships, non-U.S. citizens).

  • Under the New York Convention, a U.S. court will compel the parties to arbitrate their dispute if all of the following are true:

  1. There is a written (or recorded) agreement to arbitrate the matter.

  2. The agreement provides for arbitration in a convention signatory nation.

  3. The agreement arises out of a commercial legal relationship.

  4. At least one party to the agreement is not a U.S. citizen.