Chapter 46

International Law in
a Global Economy
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 Learning Objectives
• What is the principle of comity and why do courts
deciding disputes involving a foreign law or judicial
decree apply this principle?
• What is the act of state doctrine? In what
circumstances is this doctrine applied?
• Under the Foreign Sovereign Immunities Act of 1976,
on what bases might a foreign state be considered
subject to the jurisdiction of U.S. courts?
• In what circumstances will U.S. antitrust laws be
applied extraterritorially?
• Do U.S. laws prohibiting employment discrimination
apply in all circumstances to U.S. employees working
for U.S. employers abroad?

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International Law
• Law that governs affairs between
nations.
• Law that regulates transactions
between individuals and businesses of
different countries.
• No single source of international law.
• No world court responsible for
interpreting all international law.

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The United States and Foreign Affairs

• The Constitution gives most

of the power over foreign
affairs to the federal
government.
– Foreign Commerce Clause
– Treaty Clause

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Foreign Commerce Clause

• Article I, Section 8, Clause 3 vests Congress

with the power “to regulate commerce with
foreign nations.”
• Any state or local law that unduly burdens
foreign commerce is unconstitutional under
the Commerce Clause.

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 Treaty Clause
• Article II, Section 2, clause 2 states that the president
“shall have power, by and with the advice and consent of
the Senate, to make treaties, provided two-thirds of the
senators present concur.”
• The president is the agent of the United States in dealing
with foreign countries.

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Treaty Clause (continued)

• Under the Treaty Clause, only the federal

government may enter into treaties with
foreign nations.
• Under the Supremacy Clause of the
Constitution:
– Treaties become part of the “law of the land”
– Conflicting state or local law is void

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Sources of International Law
• Those things that international
tribunals rely on in deciding
international disputes.
– Treaties and conventions
– Custom
– General principles of law
– Judicial decisions and
teachings

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Treaties and Conventions
• The first source of
international law.
• They are the equivalents of
legislation at the
international level.

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Treaty

• An agreement or
contract between two
or more nations.
– Formally signed by an
authorized
representative.
– Ratified by the
supreme power of
each nation.

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Convention

• Treaty that is sponsored by an international

organization.
• Treaties and conventions address:
– Human rights
– Foreign aid
– Navigation
– Commerce
– Settlement of disputes

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Custom

• The second source of international law.

• Custom describes a practice followed by
two or more nations when dealing with each
other.
• It may be found in:
– Official government statements.
– Diplomatic correspondence.
– Policy statements.

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Custom (continued)

• Two elements must be established to

show that a practice has become a
custom:
1. Consistent and recurring action by two or
more nations over a considerable period
of time.
2. Recognition that the custom is binding
because of legal obligation.

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General Principles of Law

• The third source of international law.

• Consist of principles of law recognized by
civilized nations.
• These are principles of law that are
common to the national law of the parties
to the dispute.

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General Principles of Law (continued)

• The general principles of law may be

derived from:
– Constitutions
– Statutes
– Regulations
– Common Law
– Other Sources of National Law

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Judicial Decisions and
Teachings
• The fourth source of international
law.
• Consist of judicial decisions and
teachings of the most qualified
legal scholars of the various
nations involved in the dispute.
• International courts are not
bound by the doctrine of stare
decisis.

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International Principles
and Doctrines
• The most important principles and doctrines
applied in the interest of maintaining
harmonious relations among nations:
– The Principle of Comity.
– The Act of State Doctrine.
– The Doctrine of Sovereign Immunity.

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The Principle of Comity

• One nation will defer and give effect to the

laws and judicial decrees of another
country, as long as those laws and judicial
decrees are consistent with the law and
public policy of the accommodating nation.

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The Act of State Doctrine

• Judicial branch of one country will not

examine the validity of public acts
committed by recognized foreign
government within its own territory.
• This doctrine is often invoked to protect:
– Expropriation, and
– Confiscation.

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The Doctrine of Sovereign
Immunity
• This doctrine exempts foreign nations from
jurisdiction in U.S. courts.
• The Foreign Sovereign Immunities Act
expanded the jurisdiction of U.S. courts for
creditors of foreign governments.

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 Doing Business Internationally
• Types of International Business
Operations
– Exporting, through:
• An Agent.
• A Foreign Distributor.
– Manufacturing Abroad, through:
• Licensing.
• Franchising.
• Investing in a subsidiary or joint
venture.

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Commercial Contracts in an
International Setting

• Choice of Language Clause.

• Choice of Forum.
• Choice of Law .
• Force Majeure (impossibility or “act of
God”).
• Civil Dispute Resolution.

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 Judicial Procedure
• Choice of forum clause –
designates the judicial or
arbitral forum that hear
and decide the case.
• Choice of law clause –
designates the law to be
applied by the court or
arbitrator in deciding the
case.

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International Arbitration

• A non-judicial method of dispute resolution.

• A neutral third party decides the case.
• The parties agree to be bound by the
arbitrator’s decision.
• Faster, less expensive, less formal, and
more private than litigation.

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International Arbitration (continued)

• Arbitration Clause
– A clause contained in many international
contracts.
– Stipulates that any dispute between the parties
concerning the performance of the contract will
be submitted to an arbitrator or arbitration
panel for resolution.

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Making Payment on
International Transactions
• Monetary Systems.
– Foreign Exchange Rates/Markets.
– Correspondent Banks (affiliated banks in
different countries).
– Letters of Credit.
• Conditional promise by Issuer (Bank) to pay
Beneficiary (Seller) on behalf of Account (Buyer).

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Regulation of Specific
Business Activities
• Nations impose laws and controls to
restrict or facilitate international business.
– Investing.
– Export and Import Controls: Quotas, Tariffs
and Anti-Dumping Rules.
– International Organizations and Agreements:
World Trade Organization, European Union
and NAFTA.

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U.S. Laws in a Global Context

• U.S. antitrust law applies to the activities of U.S.

firms even when they are acting abroad.
• Foreign persons and governments can sue
under U.S. antitrust laws in U.S. courts.
• Generally, U.S. firms must abide by U.S. anti-
discrimination law, even in their foreign
activities, unless doing so would require them
to violate the laws of the foreign country.

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United Nations

• International organization created by

multinational treaty in 1945.
• Goals of the United Nations (U.N.):
– Maintain peace and security in the world.
– Promote economic and social cooperation.
– Protect human rights.

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 Governance of the United
Nations
The United Nations is governed by:
• The General Assembly
– Composed of all member nations.
– The legislative body of the U.N.
– Adopts resolutions which have limited force.
– Resolutions are usually enforced through
persuasion and sanctions.

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 Governance of the United
Nations (continued)

• The Security Council

– Composed of 15 member nations.
• Five are permanent members
• Ten are chosen for two-year
terms
– Primarily responsible for
maintaining international
peace and security.
– Has authority to use armed
forces.

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 Governance of the United
Nations (continued)

• The Secretariat
– Administers the day-to-day operations of the
United Nations.
– Headed by the Secretary-General, who is
elected by the General Assembly.

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FINITO

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