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Define expropriation, explain how it affects a county’s investments in foreign counties, and how counties respond to it
Reflection and Discussion
Reflect on the assigned readings for the week. Identify what you thought was the most important concept(s), method(s), the term(s), and/or any other thing that you felt was worthy of your understanding. Also, provide a graduate-level response to each of the following questions:
- Define expropriation, explain how it affects a county’s investments in foreign counties, and how counties respond to it.
- Sprockets Unlimited, a United States corporation, is considering doing business in a foreign country that is known to have an unstable government and corrupt politicians; however, the market could be lucrative and greatly expand Sprockets Unlimited’s profits. What consideration should Sprockets Unlimited consider before doing so? Could the United States not allow Sprockets Unlimited to do business in this country?
Week 6- Short Essay
Question I – Megatron, Inc. is a company with its principal offices in the United States. For years, Megatron has only operated domestically; however, Megatron’s board of directors now feels it is in the company’s best interests to explore how to do business internationally. Give at least three examples of actions Megatron can take with regards to foreign government officials, which would benefits Meagtron’s international growth without running afoul of the Foreign Corrupt Practices Act (FCPA)?Question II – Cowboy, Inc., an American corporation that produces cowboy hats contract with a manufacturing plant in France, Beret, Inc. The contract provides that Beret, Inc. will produce the cowboy hats in France to be distributed back in the United States by Cowboy, Inc. The contract does not provide which country’s law will apply if a dispute arises between Cowboy and Beret. Eventually, Cowboy discovers that Beret is not producing the hats under the specifications agreed upon in the contract. Which will American or French law be used in settling the dispute? Why?
Chapter 7 International Law
Its Legal, Ethical, and Global Environment
Marianne M. Jennings
Business
11th Ed.
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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7-1
Sources of International Law
Common Law
England
United States
Civil or Code Law
Statutes or codes are very detailed; little reliance on precedent
France, Germany, Spain
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Islamic Law
Religious tenets integrated
Combination of Islamic law and colonizers’ laws
Former Communist Countries
In transition
Sources of International Law
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Nonstatutory Sources
Language
Environment and Technology
Authority
Nonverbal behavior
Time Concept
Sources of International Law
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Contracts for the International Sale of Goods (CISG)
Governs the sale of goods internationally
Currently adopted by 53 countries, including the United States
Similar to Article 2 of the Uniform Commercial Code
Sources of International Law
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7-5
Tax Law
Tax laws of different countries provide widely varying rates
Companies go through mergers, acquisitions, and headquarter changes to obtain the most favorable rates
Sources of International Law
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Sources of International Law
Tariffs
Fees paid for imports and exports
Processing controls (raw materials)
7-6
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
Sources of International Law
European Union (EU)
Created by treaty of Rome
Purpose was open trade, unified monetary and fiscal policies, and creation of the Euro
Created European Parliament
Created European Court of Justice
7-7
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
Sources of International Law
Treaties
General Agreement on Tariffs and Trade (GATT)
Multilateral treaty with 150 member nations that created the Work Trade Organization (WTO)
MFN status
Dispute Settlement Body for trade disputes
7-8
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
7-9
North American Free Trade Agreement (NAFTA)
Became effective in 1994
Treaty between Canada, Mexico and the United States
Eliminated most tariffs between member countries
Sources of International Law
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Sources of International Law
Prohibition on Trade: Individual Nation Sanctions (Iran and Cuba lifts of prohibitions)
Primary and secondary boycotts
International Monetary Fund
The Hague Convention (litigation)
Climate Agreements
OPEC
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
7-11
International Monetary Fund (IMF) and the World Bank
IMF is designed to foster international trade through currency stability
IMF creates the International Bank for Reconstruction and Development (The World Bank) which allows members to draw on line of credit to stabilize currency exchange rates
Sources of International Law
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Trust, Corruption, Trade, and Economics
Focus on Reducing Bribery
OECD
FCPA
7-12
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Foreign Corrupt Practices Act
Applies to all 1934 Act companies
Making, authorizing, promising payments or gifts of money or anything of value with intent to corrupt
Applies to gifts to government officials, parties, candidates, NGOs and anyone who transmits money to these persons/entities
7-13
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FCPA
Use of agents
Companies need to screen
Follow “four eyes” rule – two people must sign off on payments
Obtaining or directing business
7-14
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FCPA
Grease or facilitation payments under FCPA
Securing a permit or license
Obtaining paper processing
Securing police protection
Providing phone, water or power services
7-15
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FCPA
Enforcement and Penalties
OECD countries apply FCPA statutes to their citizens acting outside the native country
In U.S., fines of up to $250,000 per violation
7-16
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Principles
Expropriation: Act of State Doctrine
Act of foreign governments are recognized as valid whether or not such actions would be legal in the United States
Sovereign Immunity
Each nation is sovereign
Other nations do not take jurisdiction over a country’s internal operations, laws, and people
Does not apply to contractual relations
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Case 7.1
Case 7.1 In re Yukos Oil Securities Litigation (2006)
Issue of representations about income and tax laws in Russia
Securities fraud claimed
Can you claim sovereign immunity if the actions and decisions of the government affect your business?
7-18
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7-19
Principles of International Law
Hickenlooper Amendment to Foreign Assistance Act of 1962
Allows president to sanction countries that take property of U.S. companies
Treaties Afford Protections
Overseas Private Investment Corporation (OPIC) − federal agency that provides insurance for U.S. businesses against expropriation
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Repatriation
Repatriation
Limits on removal of profits from country where they are earned
Considered acts of state; cannot be litigated
Forum Non Conveniens
Dismisses cases brought in wrong court
Example: India was proper forum to bring suit against Union Carbide for what happened in Bhopal, India
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Checklist for Doing Business In Another Country
What is the economic climate?
What is the government structure?
What are the cultural attitudes about economic development?
What are the feelings of the indigenous peoples toward U.S. businesses?
What is the legal structure of the country?
How are laws passed?
How are disputes resolved?
What is the structure of the court system?
What commercial laws do they have?
What have been the experiences of other companies working there?
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
7-22
Conflicts of Law
No two countries have the exact same commercial laws
Some countries have no commercial codes
Uniform Commercial Code is widely used
Resolving Conflicts of Law
If the parties agree, autonomy controls
If parties have not agreed, law of country where the contract is performed will apply
Conflicts of Law
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Case 7.2
Case 7.2 Tiffany and Company v. Andrew (2012)
What is the impact of counterfeiting?
How can banks help in preventing counterfeiting?
7-23
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7-24
Antitrust Laws
All firms doing business here are subject to antitrust jurisdiction
Export Trading Company Act
Allows joint ventures among competitors
For business in other countries
International Protections
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Protections for Intellectual Property
International protections of intellectual property are constantly being refined
Worldwide registration of patents, trademarks and copyrights may be within reach
International Protections
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Criminal Law Protections
All those present in a country are subject to that country’s criminal law
Subject to all regulations as well
International Protections
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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