1 Introduction to Intnl business law

International Law for Business : 

International Law: A. Ashta 1 International Law for Business 1. Going Global Arvind Ashta Course presented at American Business School, Paris Based on: Carolyn Hotchkiss’s book

Outline : 

International Law: A. Ashta 2 Outline Introduction Growth of internatinal business Growth of international Commercial Law Structure of International Business Multinational Enterprise Law, Business and Economic Development The Global Manager

Introduction : 

International Law: A. Ashta 3 Introduction Countries regulate imports of Goods Technology Capital People/Labour Countries regulate exports Stimulate / Disincentives Capital Treaties simplify trade or investments

Growth of internatinal business : 

International Law: A. Ashta 4 Growth of internatinal business Ancient Trading Systems Barter or gold Travellers Midieval Trade (7th century) Seasonal and permanent markets/ trade fairs Tax at markets Tax on routes/ roads or rivers Treaties to end taxes bilaterally

Growth of internatinal business…. : 

International Law: A. Ashta 5 Growth of internatinal business…. 3. Trade and Colonial Power (1600…) Colonies were source of raw material Colonies were markets for finished goods Merchants given exclusive geographic rights - E. India Trading Company; Hudson Bay Company 4. Multinational enterprises (1875…) Companies operating in many nations MNCs bigger than some countries Potential for conflict between States and corporations

Growth of internatinal business…. : 

International Law: A. Ashta 6 Growth of internatinal business…. 5. Globalization (1975…) Markets no longer treated as separate but one Standardized low-cost large-scale high quanlity products wipe out differential segmentation advantages Mobiity of capital forces down labour power and controls costs See Theodore Levitt: The golablaization of Markets, HBR May-June 1983

Growth of international Commercial Law : 

International Law: A. Ashta 7 Growth of international Commercial Law Code of Hamurabi Merchants’ rights Penalty for breach of contract 5 times Commercial practices The Law Merchant The New Law Merchant 19th century treaties 20th century: reinternationalization

The Law Merchant (7th century) : 

International Law: A. Ashta 8 The Law Merchant (7th century) Trade fairs led to customs Trade fairs travelled: customs travelled Commercial law developed uniformly Merchants judged by their own law Otherwise quality of justice varied with the city Even today in France Speed (before ship left) Informality (good faith) based on knowlege of customs Held to promise: unless some fundamental unfairness or surprise Magna Carta: gives right to safe conduct for business

Law Merchant : 

International Law: A. Ashta 9 Law Merchant Covered contracts Validity, Enforcement, Remedies for breach Credit and commercial documents Checks, Promissory notes, bills of lading Agency and fiduciary relationships Bankruptcy Partnership and Joint Ventures Trademarks and Patents

Growth of International Law… : 

International Law: A. Ashta 10 Growth of International Law… 3. The New Law Merchant (1600) Kingdoms consolidated Commercial law codified into local national law Diluted the uniformity of international law from country to country 4. 19th century treaties Ocean Transport Uniform rules for carrying goods Air Transport Above rules were adapted

20th century: Reinternationalization : 

International Law: A. Ashta 11 20th century: Reinternationalization International Institutions Sale of Goods Trademarks, Patent and copyrights (TRIPS) Regulate investment and business practices of MNCs on intenrational basis Globalization changes name of game: States compete for MNCs and gloabl firms

Competition among nations : 

International Law: A. Ashta 12 Competition among nations Competitive advantage of nations: Encouraging perpetual innovation Stimulate early demand for advanced products Promote higher standards Specialized training to increase productivity Efficiency, 2. quality Favourable business climate low State Aids, low tax, but control / avoid mergers, increase local competition Export cutltural and political values State support in opening foreign markets and not defending national ones. All this implies new laws to attract enterprise (Porter, HBR March-April 1990)

Structure of International Business : 

International Law: A. Ashta 13 Structure of International Business Sales Relationships Licencing Relationships Investment Relationships

Sales Relationships : 

International Law: A. Ashta 14 Sales Relationships Direct selling Trade fairs Intermediaries Agents : doesn’t contract in his own name Distributors

Licencing Relationships : 

International Law: A. Ashta 15 Licencing Relationships Patent: Sell the right to produce abroad Trademarks: right to sell using brand name Copyright: right to copy and sell Franchise: usually trademark, sometimes patent

Investment Relationships : 

International Law: A. Ashta 16 Investment Relationships Branch Not a separate legal entity Factory, warehouse or office Subsidiary Separate legal entity 100% or 50% or <50% Joint Venture Two or more businesses create a new entity One company buys into existing company Usually, to get local partners Legal requirement Knowledge of markets, customs

Multinational Enterprise : 

International Law: A. Ashta 17 Multinational Enterprise Many countires Using different structures in different countries Subsidiaries Joint-ventures Branches Franchises Exports Direct Agents

Bulova V. Hatorri : 

International Law: A. Ashta 18 Bulova V. Hatorri For parent, Hattori, to be in NYC juridiction, need additional factors Direct and indirect control of distributors Treating subsidiary as « incorporated division » Treating subsidiary as « agent »

Bulova V. Hattori : 

International Law: A. Ashta 19 Bulova V. Hattori Hattori: No presence in US: No offices, No bank accounts, No personnel, No licence Arm’s length trading with subsidiaries

Bulova V. Hattori : 

International Law: A. Ashta 20 Bulova V. Hattori Court: However 100% ownership Interchange and overlap of directors Intercompany loans made to subsidiaries Financial accoutns are consilidated Marketing brochures printed in Tokyo distributed in US Subsidiaries sole activity is promoting Hattori products Subsidiaries do not manufacture Uniform control ovr markting is intended Integrated operation: At present, no independence Can look at Hattori (US has juridiction)

Law, Business and Economic Development : 

International Law: A. Ashta 21 Law, Business and Economic Development Old division First world (US, USSR) Second World (W. Europe, Japan) Third world: LDCs No longer relevant Korea, Singapore, Taiwan, Chile, Brazil

Common concerns : 

International Law: A. Ashta 22 Common concerns International law reflects interests of developed nations Ignores experience of LDCs Which law: nations want their own law to apply Which judge: nations want own judges to decide MNCs: development or exploitatin? Bring technology, training, capital, employment But monopoly power, distorsions, corruption removes more money than it invests (dividends) MNCs keep countires dependant (eco colonialism) NIEO (1974): equality, decrease gap, sovereign right to nationalize

The Global Manager : 

International Law: A. Ashta 23 The Global Manager Speed of change Technology Political transformation Transfers (Work abroad) Skills required Anticipate, lead and implement « change » Adapt to new environment Accomodate differences in backgrounds No « right » or « wrong »: only « different »