1
Chapter 27
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
1. International law is a body of law that governs relations between and among
citizens, not countries.
2. Under the principle of comity, one nation may defer and give effect to the laws
and judicial decrees of another country.
3. Under the principle of comity, all foreign governments are subject to all U.S.
laws.
4. The act of state doctrine provides that the executive branch of one country will
not examine the validity of public acts committed by a recognized foreign
government within its own territory.
2 UNIT THREE: COMMERCIAL TRANSACTIONS
5. Confiscation occurs when a government seizes private property for an illegal
purpose or without just compensation.
6. The act of state doctrine does not have important consequences for firms doing
business in other countries.
7. Expropriation occurs when a government seizes private property for a proper
purpose and awards just compensation.
8. The Foreign Sovereign Immunities Act spells out what a “foreign state”
includes.
9. Under the Foreign Sovereign Immunities Act, a foreign state can be a political
subdivision of a foreign state.
10. The doctrine of sovereign immunity cannot immunize a foreign nation from the
jurisdiction of U.S. courts.
11. According to the Foreign Sovereign Immunities Act, a foreign state that has
committed a tort in the United States is protected from the jurisdiction of the
U.S. courts.
12. According to the Foreign Sovereign Immunities Act, a foreign state that waived
its immunity by implication is subject to the jurisdiction of the U.S. courts.
13. The simplest way for a U.S. firm to do business in a foreign market is to export
its products directly to that market.
14. In direct exporting, a U.S. company signs a sales contract with a foreign
purchaser that provides for the conditions of shipment and payment of goods.
15. When a U.S. firm wishes to increase its involvement in an international market,
it normally establishes an agency relationship with a foreign firm.
16. A party to a licensing agreement generally agrees to pay royalties on some
basis.
17. International franchisees usually do not pay fees for the license to use a
trademark or trade name.
18. In a joint venture, the parent company in the United States retains complete
ownership and authority over all phases of the operation.
19. Restrictions on imports may include prohibitions.
20. A tariff is always a flat rate per unit.
21. Restrictions on imports may include quotas.
22. Tariffs are imposed only on exports.
23. Quotas are limits on the amounts of goods that can be exported.
24. Dumping is the exporting of environmentally polluting goods to a foreign
market.
25. Dumping is the sale of imported goods at “less than fair value.”
26. The chief aim of the World Trade Organization and other trade agreements is
to maximize trade barriers among their members.
27. The chief aim of the European Union and other trade organizations is to
minimize trade barriers among their members.
28. The primary goal of the North American Free Trade Agreement is to eliminate
tariffs among the United States, Canada, and Mexico.
29. All international sales contracts should have a choice–of-language clause to
designate the official language by which the contract will be interpreted.
30. Force majeure clauses in international business contracts commonly set forth
the major clauses of the contracts.
31. Foreign exchange markets comprise a worldwide system for buying and selling
currency.
32. Generally, a foreign government cannot sue under U.S. antitrust laws in U.S.
courts.
33. Any conspiracy that has a substantial effect on U.S. commerce is within the
reach of the U.S. antitrust laws.
34. 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.
35. U.S. laws that prohibit discrimination in employment apply to U.S. employees
working for U.S. firms located abroad.
CHAPTER 27: INTERNATIONAL LAW IN A GLOBAL ECONOMY 7
MULTIPLE CHOICE QUESTIONS
1. Yokio, Ltd., and Zeno, S.A., transact an international sale of goods. At the
request of these parties, a court in Portugal resolves a dispute between them.
A U.S. court will most likely honor the judgment
a. if it is consistent with U.S. laws and public policy.
b. if it is consistent with Portuguese laws and public policy.
c. if it does not benefit the U.S. to deny it.
d. under no circumstances.
2. Michael, a citizen of Ireland, and Nina, a citizen of the United States, enter into
a contract. When Nina breaches the contract, Michael obtains an award of
damages in an Irish court. He asks a U.S. court to enforce the award. The U.S.
court defers to and enforces the Irish court’s decree. This is
a. a travesty of justice.
b. the act of state doctrine.
c. the doctrine of sovereign immunity.
d. the principle of comity.
3. The basis for India to give effect to the laws and court decisions of the United
States is primarily
a. courtesy and respect.
b. fear and intimidation.
c. admiration and envy.
d. payments of cash and exchanges of property.
4. Premier Clothing, Inc., a U.S. firm, obtains a judgment in a U.S. court against
Quang Tri, Ltd., a Vietnamese business. Whether the court’s judgment will be
enforced by a court in Vietnam depends on the Vietnamese court’s application
of
a. the act of state doctrine.
b. the doctrine of sovereign immunity.
c. the principle of comity.
d. the World Trade Organization.
5. Mountain Mining Company, a U.S. firm, owns property in Bolivia. The
government of Bolivia seizes the property for an illegal purpose without paying
just compensation. This is
a. confiscation.
b. defalcation.
c. dumping.
d. expropriation.
6. Sudan seizes the assets of Triage Medical, Inc., a U.S. firm. Triage’s recovery
from Sudan in a U.S. court may be prevented by
a. the act of state doctrine.
b. the doctrine of sovereign immunity.
c. the Foreign Corrupt Practices Act.
d. the principle of comity.
7. 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.
8. 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.
9. U.S. Cars, a U.S. firm, owns property in Argentina. The government of
Argentina seizes the property. U.S. Cars claims that this is confiscation. The
government of Argentina claims that it is expropriation. The burden of proof lies
with
a. the U.S. government.
b. the government of Argentina.
c. U.S. Cars.
d. the U.S. Supreme Court.
10. Soleful Shoes, Inc. owns property in Somalia. The Somalian government
seizes the property. In order for the seizure to be considered an expropriation
and not a confiscation, the Somalian government must
a. pay just compensation to Soleful Shoes.
b. give Soleful Shoes at least thirty days notice of the seizure.
10 UNIT THREE: COMMERCIAL TRANSACTIONS
c. give Soleful Shoes at least ninety days notice of the seizure.
d. notify the U.S. government before the seizure.
11. Metallic Metals, Inc., a U.S. firm, files a suit against a Venezuela government
agency. The agency has committed a tort in the United States. Under the
Foreign Sovereign Immunities Act
a. the Venezuelan government agency is not immune from the jurisdiction
of the U.S. courts.
b. the Venezuelan government agency is immune from the jurisdiction of
the U.S. courts.
c. Metallic Metals cannot bring a suit against the Venezuelan agency.
d. Metallic Metals must file suit in Venezuela.
12. In some cases, foreign states are not immune from the jurisdiction of U.S.
courts. These circumstances are governed by the
a. Uniform Commercial Code.
b. Foreign Sovereign Immunities Act.
c. European Union.
d. North American Free Trade Agreement.
13. Wrugged Woolens, Inc., a U.S. corporation, sets up a specialized marketing
organization in Scotland by appointing a foreign agent. This is called
a. direct exporting.
b. indirect exporting.
c. a joint venture.
d. piracy.
14. 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.
15. Optima Medico Corporation, a U.S. firm, signs a contract with Pharma
Beneficial, Ltd., a Canadian firm, to give Pharma the right to sell Optima’s
products in Canada. This is
a. a distribution agreement.
b. a joint venture.
c. direct exporting.
d. licensing.
16. KO Marketing Company, a U.S. firm, signs a contract with Librador
Corporacion, a Chilean firm, to give Librador the right to use Innovative’s
animation techniques and characters in product promotions. This is
a. a distribution agreement.
b. a joint venture.
c. direct exporting.
d. licensing.
17. The U.S. corporation Fun Toys, Inc. sets up a firm in China. The parent
company remains in the United States and retains complete ownership of the
China branch as well as complete authority and control over all phases of the
operation. This is
a. a franchise.
b. a wholly owned subsidiary.
c. a joint venture.
d. direct exporting.
18. Secure Investments, Inc., a U.S. firm, expands into international markets
through a joint venture. In this situation, Secure owns
a. all of the operation, and its profits and liabilities.
b. all of the operation, and none of its profits and liabilities.
c. none of the operation, and none of its profits and liabilities.
d. part of the operation, and shares its profits and liabilities.
19. Senator Brown and other politicians want to restrict the flow of technologically
advanced products and data from the United States to other countries. To
restrict or encourage exports, Congress can
a. do nothing.
b. assess antidumping duties.
c. impose export taxes.
d. set export quotas.
20. 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
a. comparable goods in a select “basket” of other countries.
b. Vieux Carré’s goods in France.
c. Vieux Carré’s goods in the United States.
d. Vieux Carré’s goods on the world market.
21. The United States and other members of a certain organization agree to grant
normal trade relations status to 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.
22. The United States taxes each barrel of imported oil at a flat rate. This is
a. an antidumping duty.
b. a dumping duty.
c. a quota.
d. a tariff.
23. 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.
24. To obtain a contract with the Chinese government, Bammo Engineering
Corporation, a U.S. firm, gives a Chinese official a sport utility vehicle. This
may violate
a. the act of state doctrine.
b. the doctrine of sovereign immunity.
c. the Foreign Corrupt Practices Act.
d. the principle of comity.
25. Wytex, Inc., a U.S. firm, and Findora Commercial, a Nigerian firm, are parties
to a contract that specifies that the official language of the contract is English.
This is
a. a choice-of-forum clause.
b. a choice-of-language clause.
c. a choice-of-law clause.
d. an arbitration clause.
26. Telfonix Corporation, a U.S. firm, and Adex, Inc., a British firm, are parties to a
contract with a forum-selection clause. The forum specified in the clause
a. must be within the geographic boundaries of the United States.
b. must be within the geographic boundaries of Britain.
c. need not be within the geographic boundaries of either party.
d. must be within the geographic boundaries of either the United States or
Britain.
27. Quality Energy Company, a U.S. firm, and Royal Petro, a Dutch firm, enter into
a contract that includes an arbitration clause. This clause must provide that the
arbitrator will be
a. any specified third party.
b. the American Arbitration Association.
c. the Dutch Arbitration Organization.
d. the International Chamber of Commerce.
28. Suisse Internationale, a Swiss maker of athletic equipment, enters into a price
fixing agreement with Total World Sports, a U.S. wholesaler of Suisse’s
products. U.S. courts will apply U.S. antitrust laws if
a. the agreement was made in Switzerland.
b. the agreement was made in the United States.
c. the price fixing has a substantial effect on U.S. commerce.
d. the Swiss government agrees to be sued in the United States.
29. Bulbous Cordials, Inc., a U.S. firm, enters into an agreement with Columbiana
Cacao, S.A., a South American firm, to fix the price of dark chocolate in the
U.S. market. If the agreement is a per se violation of U.S. antitrust laws, a U.S.
court could exercise jurisdiction over
a. Bulbous Cordials and Columbiana Cacao.
b. Bulbous Cordials only.
c. Columbiana Cacao only.
d. neither Bulbous Cordials nor Columbiana Cacao.
30. 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. If
the joint venture is not a per se violation of U.S. antitrust laws, 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.
31. Bango! Business, Inc., a U.S. firm, may have committed, in Chile, acts that
would constitute, in the United States, violations of U.S. antitrust laws. These
laws apply
a. extraterritorially.
b. only to signatories of the North American Free Trade Agreement.
CHAPTER 27: INTERNATIONAL LAW IN A GLOBAL ECONOMY 17
c. only to members of the World Trade Organization.
d. only within U.S. borders.
32. Qang and other foreign citizens allege human rights violations committed
overseas by the government of Burma on behalf of Railway Construction
Company, a U.S. firm. To seek redress for their injuries in a U.S. court, these
citizens can
a. allege antitrust injuries under the Sherman Act.
b. bring civil suits under the Alien Tort Claims Act.
c. file criminal complaints under Title VII of the Civil Rights Act.
d. do nothing.
33. Sam, or any U.S. citizen, can bring a civil suit in a U.S. court against a foreign
entity for
a. a tort allegedly committed in the United States only.
b. a tort allegedly committed in the United States or overseas.
c. a tort allegedly committed overseas only.
d. no purpose.
34. Real World Sports Corporation (RWSC) is a U.S. firm with a workplace in
Switzerland. Generally, RWSC must abide by U.S. anti-discrimination laws in
Switzerland
a. under any circumstances.
b. under no circumstances.
c. unless to do so would contravene the cultural norms of Switzerland.
d. unless to do so would violate the law of Switzerland.
35. Miranda is a U.S. citizen working in Europe for Tourist Vacations, Inc., a U.S.
travel agency. Tourist fires Miranda for reasons that she believes violate U.S.
antidiscrimination laws. Those laws apply
a. extraterritorially.
b. only to signatories of the North American Free Trade Agreement.
c. only to members of the World Trade Organization.
d. only within U.S. borders.
ESSAY QUESTIONS
1. The management of Sport 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?
2. Savory Cooking Sauces, Inc., a U.S. business firm, makes and sells distinc–
tively 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?