International Business Law

International Legal Environment

 Overview
National Laws and Regulations
International Law
a/ Public International Law
b/ Private International Law
International Organizations
 International Law?
There is really no such thing as compared to
state law
No country wants to give up any real or
perceived control
It seems that countries can agree on the
rules but not real means of enforcement.

The World Court in The Hague has a dismal

record of success.
 Globalization
The world is getting smaller all the time
What was once the domain of the large
multi-national is now increasingly being
addressed by small and medium sized
companies who must be nimble to find
and exploit opportunities in the fast
growing less mature marketplaces around
the world, but there are risks…
 National Law
• Legal rules governing activities within a
state, including “home” and “host” laws

• Common Law
• Civil Code
• Islamic (Shari’a) Law
• “Marxist Transition”
 Common Law
• Uk, former colonies, USA
• Flexible, complex, dynamic
• Relies on precedence, case law
• Some business law is codified
– UCC in U.S.
– Sale of Goods Act in Canada
• If it is not written that you may not do
something, then it is generally assumed to
be okay to do it
 Civil (Codified) Law
• 70 countries, most European countries
and Quebec
• Tightly defined, consistent, voluminous,
does not deal well with new situations
• Napoleonic Civil Code of 1804 and
German Civil Code of 1896
• If it is not written that you may do
something, it is generally assumed that
you may not do it.
 Islamic (Shari’a) Law
• 30 countries
• A moral code based on the Koran as
interpreted by clerics and the legal
community
• Inflexible and intrusive
• 5 main schools of jurisprudence have
emerged, their differences have become
blurred such that it is difficult to determine
which countries apply which schools
 “Marxist Transition”
• Russia, CIS, Cuba, North Korea
• Blend of communist and western civil law
• Courts are weak and corrupt
• Laws are weak or nonexistent
International Law (such as it is)
• Body of rules and norms that regulates
activities carried on outside the legal
boundaries of states
• Sources: international treaties,
conventions, customs, general legal
principles, judicial decisions
 Public International Laws
• - principles and rules of conduct that states feel
themselves bound to observe in their relations
with each other
• - purpose: creating an orderly (rather than a
just) system of international relations
• - treaties and conventions growing rapidly but
continuing issue of state “ sovereignty”
•
• - regulates 3 economic areas:
• 1. trade in goods and services
• 2. monetary exchange and convertibility
• 3. capital flows and investment
 Basic Principles of Public
International Law
1. Sovereignty and Sovereign Immunity
- governments have right to rule themselves
- one country’s court system cannot interfere
with another country’s court’s judgments
unless that country agrees
2. International Jurisdiction:
i) nationality principle - every country has
jurisdiction over its citizens worldwide
ii) territoriality principle - every nation has
right of jurisdiction within its territory
iii) protective principle - every country has
jurisdiction over behaviour anywhere that
adversely affects national security
3. Doctrine of Comity:
- respect for laws, institutions and
governments of other countries in jurisdiction
over own citizens
 Basic Principles of Public
International Law (cont’d)
4/ Act of State Doctrine:
- all acts of other governments are considered
legal by other nation’s courts even if inappropriate in
other nations
5/ Treatment & Rights of Aliens:
- countries have right to refuse admission,
restrict rights, and deport aliens
6/ Law of State Responsibility:
- allows a state to seek compensation from
other states for injuries done to its nationals
 Private International Law
- rules regulating activities of private persons,
corporations in international transactions
- concerns how a nation’s courts deal with
another nation’s laws
- examples: contracts and sales, torts, transportation,
money and banking, financing, intellectual property,
antitrust, antifraud, taxation.
- concept of “freedom of contract”
- “conflict of laws”
- choice of law
- choice of forum
- recognition and enforcement of
judgments
 International Law
• State to State – Public International
Law
• State to Person – Private / Public
International Law
• Person to Person – Private
International Law
• International Court of Justice (ICJ)
(World Court – The Hague) does not
hear commercial cases
 International Organizations
i) Intergovernmental Organizations (IGO):
- permanent organizations created by two or more states to govern
activities of common interest
- key to making the international legal system work
E.g. - trade in goods and services:
WTO, NAFTA, EU, MERCOSUR, UN
- monetary exchange and convertibility:
IMF, OECD, EU
- capital flows and investment:
World Bank, OECD, WTO, NAFTA,EU
other: WIPO, ILO
ii) Nongovernmental Organizations (NGO):
- for profit or non-profit international
organizations made up of persons other than states
E.g. - International Chamber of Commerce, International Red Cross,
Amnesty International, Transparency International, Greenpeace

The Glossary on Page 375 lists the most common Acronyms and Abbreviations
used in this text. Bookmark the page.
 Global Business Environment
1980’s – Berlin Wall, end of cold war, breakup of the USSR,
New markets in Europe and Asia
Communications (e-mail), fast, cheap transportation
Reductions in trade and financial barriers
1990’s – end of apartheid in S.A.
Salvaging of GATT from Bretton Woods
Morphing of GATT into the WTO
But – Bosnia, Somalia, Rwanda, Chechnya
2000’s – Too soon to tell
Israel and Palestine
Terrorism, Afghanistan, Iraq
The US’s loss of world favour
 Overiding Condition -
SOVEREIGNTY
• For the WTO, EU, NAFTA etc to work nations
must relinquishat least some of their national
power and sovereignty.
• Compromise is the order of the day.
• In 1994 the US Congress voted down the
US’s membership in the WTO for fear that
they would become subject to an external
supra-national body, but then relented and
the US joined January 1, 1995 along with all
the other founding nations
 The United Nations
Founded after WW II - 51 countries now 191 countries
Mandate 1) maintain int’l peace and security
2) develop friendly relations between nations
3) solve int’l problems – economic, social, cultural,
and humanitarian
4) promote and encourage human rights and
fundamental freedoms
No direct role in the legal aspects of business but it’s action or
inaction should not be underestimated.
Now has 191 members – Taiwan is an exception, Switzerland
joined only in 2002
The General Assembly – one state one vote
The Security Council – 5 permanent members (who ?)
- 10 non-permanent members (2 yrs)
* The Secretary General (runs the Secretariat)
 The Bretton Woods Institutions
Held prior to the end of WW II - Allies - post-war era needs freer trade and a
trans-national bank. The result was:
International Monetary Fund (IMF)
Assists with countries with “balance of payment problems”
Lends to developing countries to offset high interest rates and high oil prices
Voting weighted in proportion to countries Special Drawing rights (SDR’s)
HQ Washington
Funds obtained through quota subscriptions from each country based on a
mixture of indicators, GDP, reserves, trade balance etc.
World Bank
International Bank for Reconstruction and Development IBRD – market lender
IDA – lends only to governments
Now an agency of the UN with 191 member countries
HQ Washington
General Agreement on Tariffs and Trade (GATT)
The fall out agreement from an attempt to establish an International Trade
Association
In 1947 the ITA was quashed at a gathering in Havana, Cuba ….. what survived
was GATT which eventually was superseded by the WTO in 1995 …..a long
time coming…..
 International Chamber of
Commerce
Link between the UN, it’s agencies & the Int’l private sector

4 part Mandate
1) provides a permanent rep to liaise with intergovernmental
Institutions and participate in international conferences
2) harmonize, codify & standardize international business
practices
3) service provider for it’s members
4) link between countries

Has developed “Uniform Customs and Practice for Documentary

Credits” UCP very important !! (Chapter 8)
Established the international Court of Arbitration (Chapter 11)
Established “Incoterms” rules for interpreting trade terms
(Chapter 7)
Organization For Economic Cooperation And
Development (OECD)

• Begun in 1948 as “Organization for

European Economic Cooperation” (OEEC)
Included Western European nations and the
US and Canada as associate members
• Established to implement the Marshall Plan
to aid in the recovery of Europe after WWII
• 1961 changed to the (OECD) added Japan &
US and Canada became full members
• 1996 - 25 members - now 30 full
members with 70 other associates
 The Group of Seven Countries (G-7)
now (G-8)
• Began in 1975 as a result of the “oil crisis” of 1973
• Originally it was the G-6 consisting of US, UK,
France, Germany, Italy & Japan…..
• Canada joined in 1976 making it the G-7 where it
remained until 1998 when Russia joined making it
the G-8
• Economic “Club” representing 50% of the world’s
economic output.
• Japan’s membership was seen as compensation for
not being a permanent member of the UN’s Security
Council