Chapter 23
International Law in a
Global Economy
N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.
N A question new to this edition of the Test Bank.
+ A question modified from the previous edition of the Test Bank.
= A question included in the previous edition of the Test Bank.
TRUE/FALSE QUESTIONS
B1. International law attempts to reconcile the authority of each nation over its own
affairs with its desire to benefit from trade and harmonious relations.
B2. In a civil law system, the courts independently develop the rules governing certain
areas of the law.
B3. In Islamic countries, the law is often influenced by the religious law of Islam.
B4. In a common law system, judicial precedents are not binding.
B5. In a civil law system, the only official source of law is a statutory code.
B6. The principle of comity is based primarily on an international treaty.
B7. The act of state doctrine provides that only a head of state can make treaties with an-
other nation.
B8. Expropriation occurs when a government seizes a private property for a proper public
purpose and awards just compensation.
B9. Under the act of state doctrine, a firm whose assets a foreign government has expro-
priated may not recover compensatory damages in a U.S. court.
B10. The Foreign Sovereign Immunities Act broadly defines commercial activity.
B11. A foreign state is immune from the jurisdiction of U.S. courts unless the state is
involved in commercial activity within the United States.
B12. Franchising is a form of licensing.
B13. Many remedies are available for confiscation of property by a foreign government.
B14. Quotas are limits on the amounts of goods that can be imported.
B15. Tariffs are taxes on exports.
B16. Dumping is the exporting of environmentally polluting goods to a foreign market.
B17. The chief aim of the World Trade Organization and other trade agreements is to
maximize trade barriers among their members.
B18. Antidumping duties are the responsibilities of international environmental polluters.
B19. A U.S. citizen can bring a civil suit in a U.S. court against a U.S. entity for a tort
allegedly committed overseas.
B20. Generally, U.S. employers abroad must abide by U.S. discrimination laws.
MULTIPLE CHOICE QUESTIONS
B1. The government of Iran violates an international law. Persuasive tactics to remedy the
situation fail. The only recourse of other nations is to
a. approve the European Union’s enforcement of the law.
b. ask the International Court of Justice to enforce sanctions.
c. seek enforcement of the law through the United Nations.
d. take coercive action—sever relations, impose boycotts, go to war.
B2. Global Properties, Inc. (GPI), a U.S. firm, owns property in Hong Kong. The government
in Hong Kong takes GPI’s property without paying for it. A U.S. court will probably not
examine the validity of this act committed by China within its own territory, under
a. the act of state doctrine.
b. the doctrine of sovereign immunity.
c. the principle of comity.
d. the World Trade Organization .
B3. Canada giving effect to the laws and court decisions of the United States is an
application of
a. the act of state doctrine.
b. the doctrine of sovereign immunity.
c. the principle of comity.
d. the World Trade Organization.
Fact Pattern 23-1B (Questions B4–B5 apply)
Sociedad Guarantia (SG), a Mexican firm, borrows $1 million from Tri-national Bank, a U.S.
firm. Later, SG files for bankruptcy under Mexican law and asks the Mexican court to order
the reimbursement of payments on the loan. Tri-national files a suit against SG in a U.S. court,
arguing that the funds do not belong to SG.
B4. Refer to Fact Pattern 23-1B. The U.S. court in Tri-national’s suit is most likely to apply
the principle of comity because
a. the actions of foreign nations “taken in connection with commercial activities”
are exempt from the jurisdiction of U.S. courts.
b. the bankruptcy proceedings in the Mexican court appear to be fundamentally
fair and not in violation of U.S. public policy.
c. the courts of one country will not review the validity of acts by the courts of
another country within their own jurisdiction.
d. the nations of the world are constitutionally bound to honor the actions of
each others’ courts.
B5. Refer to Fact Pattern 23-1B. Under the principle of comity, the U.S. court in Tri-
national’s suit is most likely to
a. ask the Mexican court to drop SG’s petition.
b. ask Tri-national to drop its suit.
c. dismiss Tri-national’s suit.
d. order the Mexican court to deny SG’s request.
B6. Call Center Corporation, a U.S. firm, owns property in India. The government of India
seizes the property for a proper public purpose and pays Call Center just
compensation. This is
a. confiscation.
b. defalcation.
c. dumping.
d. expropriation.
B7. Hemisphere Financial Corporation, a U.S. firm, files a suit against Italy in a U.S. court.
Italy claims foreign sovereign immunity. Under the Foreign Sovereign Immunities Act,
this claim is determined by
a. a neutral third-party court.
b. an international law court.
c. an Italian court.
d. the U.S. court in which the suit is filed.
B8. WiFi Corporation, a U.S. firm, signs a contract with Bueno Computadores, Ltd., an
Argentinean firm, for a shipment and payment for WiFi’s goods. This is
a. a distribution agreement.
b. a joint venture.
c. direct exporting.
d. licensing.
B9. UniOil, a U.S. firm, owns property in Venezuela. When the government of Venezuela
seizes the property, UniOil asks a U.S. court to order the property’s return. The court
rules that Venezuela is exempt from the court’s jurisdiction. This is
a. a travesty of justice.
b. the act of state doctrine.
c. the doctrine of sovereign immunity.
d. the principle of comity.
B10. Precision Motors Corporation (PMC), a U.S. firm, expands into international markets
through a joint venture. In this venture, PMC owns
a. all of the operation.
b. as much of the operation as PMC wants.
c. none of the operation.
d. part of the operation.
B11. Expando Global Corporation, a U.S. firm, establishes a wholly owned subsidiary firm in
Germany. In this situation, Expando retains complete ownership of
a. all of the facilities.
b. only those facilities in the United States.
c. none of the facilities.
d. less than half of the facilities.
B12. Innovative Manufacturing Company, a U.S. firm, signs a contract with Librador
Corporacion, a Columbian firm, to give Librador the right to use Innovative’s
production processes. This is
a. a distribution agreement.
b. a joint venture.
c. direct exporting.
d. licensing.
B13. Eagle, Inc., a U.S. firm, contracts with Fong, Ltd., a Hong Kong firm, allowing Fong to
use and profit from Eagle’s patented products. This is
a. a distribution agreement.
b. a joint venture.
c. direct exporting.
d. licensing.
B14. Congresswoman Jones and other politicians want to prohibit the import of certain
agricultural products that pose a danger to domestic crops. With respect to these
products’ import, Congress can
a. do nothing.
b. impose quotas, but not tariffs.
c. impose tariffs, but not quotas.
d. prohibit the imports.
B15. The government of Japan sets a limit on the amount of rice that can be imported from
the United States. This is
a. a dumping duty.
b. an antidumping duty.
c. a quota.
d. a tariff.
B16. Vieux Carré S.A., a French firm, imports its goods into the United States and offers
those goods for sale at “less than fair value.” “Fair value” is the price of Vieux Carré’s
goods in
a. the Northern Hemisphere.
b. France.
c. the United States.
d. the world market.
B17. Delphi, Ltd., imports appliances made in Southeast Asia into the United States. To
obtain a larger share of the U.S. market, Delphi sells the appliances at lower prices
here than in its exporting countries. With respect to these imports, the United States
may
a. do nothing.
b. assess antidumping duties.
c. order the return of the appliances to the exporting countries.
d. confiscate the appliances without just compensation.
B18. The United States and other members of a certain organization agree to grant normal
trade relations (NTR) status on each other with regard to imports and exports. This
organization is
a. the Convention on Contracts for the International Sale of Goods.
b. the International Export-Import Bank.
c. the United Nations.
d. the World Trade Organization.
B19. Two Japanese firms—Mikato, Ltd., and Shuzushi, Ltd.—enter into a joint venture in an
attempt to increase their market share of the U.S. auto market. A U.S. court could exercise
jurisdiction over the firms
a. if the joint venture has a substantial effect on U.S. commerce.
b. if the joint venture has any effect on U.S. commerce.
c. if the joint venture was entered into in the United States.
d. under no circumstances.
B20. Fabiola, Gabriella, or any foreign citizen, can bring a civil suit in a U.S. court
a. for a violation of a treaty of the United States only.
b. for a violation of a treaty of the United States or the law of nations.
c. for a violation of the law of nations only.
d. under no circumstances.
ESSAY QUESTIONS
B1. Savory Cooking Sauces, Inc., a U.S. business firm, makes and sells distinctively flavored
cooking sauces. Although the recipes are secret, the ingredients could be revealed and
the sauces could be reconstructed with diligent efforts. What can Savory do to
prevent its products from being “decoded” and pirated abroad?
B2. The management of Sportz Shoes Corporation, a U.S. firm, wants to expand into
foreign investment and employment markets. They are considering either opening
their own production facility in a foreign country or entering into a licensing
agreement with a foreign firm. What are the advantages and disadvantages of each of
these courses of action?