Chapter 8
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. The major difference between international law and national law is that
government authorities can enforce national law.
2. An international custom can be defined as “evidence of a general practice
accepted as law.”
3. The International Court of Justice normally has authority to settle legal disputes
only when nations voluntarily submit to its jurisdiction.
4. International law requires nations to honor the actions of other nations.
5. The principle of comity basically refers to legal reciprocity.
6. The act of state doctrine provides that the judicial branch of one country will
examine the validity of public acts committed by a recognized foreign
government within the latter’s own territory.
7. The doctrine of sovereign immunity provides that only a head of state can
make treaties with another nation.
8. Expropriation occurs when a government seizes a privately owned business or
privately owned goods for a proper public purpose and awards just
compensation.
9. The Foreign Sovereign Immunities Act broadly defines commercial activity.
10. A foreign state is immune from the jurisdiction of U.S. courts unless the state is
involved in commercial activity within the United States.
11. Franchising is a form of licensing.
12. Some countries provide insurance for their citizens’ investments abroad.
CHAPTER 8: INTERNATIONAL LAW IN A GLOBAL ECONOMY 3
13. Few countries guarantee compensation to foreign investors if their property is
taken.
14. To restrict or encourage exports, Congress can set quotas on various items,
such as grain being sold abroad.
15. The importation of goods that infringe U.S. patents is not prohibited.
16. Dumping is the exporting of environmentally polluting goods to a foreign
market.
17. Each member of the World Trade Organization is obligated to treat other
members at least as well as it treats the country that receives its most
favorable treatment with regard to imports or exports.
18. International contracts rarely include arbitration clauses.
19. Foreign citizens can bring civil suits in U.S. courts for injuries caused by
violations of the law of nations or a treaty of the United States.
20. Generally, U.S. employers abroad must abide by U.S. discrimination laws
unless to do so would violate the laws of the country where their workplaces
are located.
MULTIPLE CHOICE QUESTIONS
1. 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.
2. The government of North Korea violates an international law. Persuasive
tactics to remedy the situation fail. The only recourse of other nations is to
a. approve the World Trade Organization’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.
3. 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.
4. Global Marketing, Inc., a U.S. firm, owns property in Honduras. The
government in Honduras takes Global Marketing’s property without paying for
it. A U.S. court will probably not examine the validity of this act committed by
Honduras 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 .
5. 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.
6. 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.
7. Reality Financial Corporation, a U.S. firm, files a suit against Switzerland in a
U.S. court. Switzerland claims foreign sovereign immunity. Under the Foreign
Sovereign Immunities Act
a. Reality Financial must show that Switzerland is not entitled to sovereign
immunity.
b. Switzerland must show that it is entitled to sovereign immunity.
c. the court must dismiss the suit without any showing.
d. the court may hear the suit but its decision will have no effect.
8. Dynamic Oil Corporation, a U.S. firm, owns property in Ecuador. When the
government of Ecuador seizes the property, Dynamic Oil asks a U.S. court to
order the property’s return. The court rules that Ecuador 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. 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.
10. UniVision Corporation, a U.S. company, sets up a firm in Vietnam. UniVision
remains in the United States and retains ownership of the Vietnamese branch,
as well as 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.
11. Secure Investments, Inc., a U.S. firm, expands into international markets
through a joint venture. In this situation, Secure Investments owns
a. all of the operation.
b. as much of the operation as Secure Investments wants.
c. none of the operation.
d. part of the operation.
12. Big Deal! Marketing Company, a U.S. firm, signs a contract with Comercio
Exterior, Ltd., a Chilean firm, to give Comercio the right to use Big Deal!’s
animation techniques and characters in product promotions. This is
a. a distribution agreement.
b. a joint venture.
c. direct exporting.
d. licensing.
13. Fresh Meds, Inc., a U.S. firm, contracts with Gong, Ltd., a Hong Kong firm, al–
lowing Gong to use and profit from Fresh Meds’ patented products. This is
a. a distribution agreement.
b. a joint venture.
c. direct exporting.
d. licensing.
14. Congresswoman Smith and other politicians want to prohibit the import of
certain genetically modified agricultural products that they believe may 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.
15. Mont Blanc 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
Mont Blanc’s goods in
a. the European market.
b. France.
c. the United States.
d. the world market.
16. Omega, Ltd., imports athletic shoes made in Southeast Asia into the United
States. To obtain a larger share of the U.S. market, Omega sells the athletic
shoes 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 athletic shoes to the exporting countries.
d. confiscate the athletic shoes without just compensation.
17. The government of Korea 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.
18. The United States and other members of a certain organization agree to grant
normal trade relations (NTR) 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.
19. 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.
20. 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. Stardust Coffee Company a U.S. business firm, makes and sells distinctively
flavored coffee beverages. Although the recipes are secret, the ingredients
could be revealed and the sauces could be reconstructed with diligent efforts.
What can Stardust do to prevent its products from being “decoded” and pirated
abroad?
2. The management of Sweet Soft Drinks 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?
