978-0078023194 Chapter 35 Lecture Notes

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Essentials of Business Law, 9th edition

INSTRUCTOR’S MANUAL

Chapter 35 International Business Law

LESSON OVERVIEW

While the previous chapters dealt with professionals’ liability in the instances of malpractice, Chapter

35 deals with international business laws. This chapter discusses in detail the global business scenario

and cites reasons for the increased need for international law. It further defines international law and

identifies its major sources. This chapter also explains the doctrine of comity, the purposes of several

major international trade institutions, and the international legal environment. It describes how trade

sanctions and embargoes, export and import controls, and boycotts are utilized by governments to

achieve economic and political ends. The chapter also covers the major provisions of the Foreign

Corrupt Practices Act of 1977 and the international laws governing intellectual property. Finally,

students’ understanding of the topics is evaluated through objective-type questions, discussion

questions, and case scenarios. Students are encouraged to conduct their own research through the use of

the Internet and other sources.

CHAPTER OUTLINE

A. GLOBAL BUSINESS (p. 584)

B. WHAT IS INTERNATIONAL LAW? (p. 584)

1. Sources of International Law (p. 584)

C. APPLYING OTHER COUNTRIES’ LAWS—THE DOCTRINE OF COMITY (p. 584)

D. INTERNATIONAL TRADE INSTITUTIONS (pp. 585-587)

1. The World Trade Organization (p. 585)

2. The International Monetary Fund (p. 585)

3. The World Bank (pp. 585-586)

4. Regional Trade Organizations and Agreements (pp. 586-587)

E. THE INTERNATIONAL LEGAL ENVIRONMENT (pp. 587-588)

1. Trade Sanctions and Embargoes (p. 588)

2. Export and Import Controls (p. 588)

3. Governmental Actions (p. 588)

4. Boycotts (p. 588)

F. DOING BUSINESS IN FOREIGN COUNTRIES (pp. 589-590)

1. Foreign Corrupt Practices Act (p. 589)

2. Contracts for the International Sale of Goods (pp. 589)

3. Foreign Sovereign Immunities Act (p. 590)

4. International Treatment of Bankruptcies (p. 590)

G. INTERNATIONAL LAW AND INTELLECTUAL PROPERTY (pp. 590-591)

1. Copyrights (p. 590-591)

2. Patents (pp. 591)

3. Trademarks (p. 591)

H. CHAPTER SUMMARY (pp. 591-592)

I. CHAPTER ASSESSMENT (pp. 591-597)

1. Matching Key Terms (pp. 592-593)

2. True/False Quiz (p. 593)

3. Discussion Questions (pp. 593-594)

4. Thinking Critically About the Law (pp. 594-595)

5. Case Questions (pp. 595-596)

6. Case Analysis (pp. 596-597)

7. Legal Research (p. 597)

KEY TERMS

Key terms are listed at the beginning of the chapter, posted in the student textbook margins, and placed

in bold in the copy. They are listed here for your quick reference.

§ international law (p. 584)

§ comity (p. 584)

§ transnational institutions (p. 584)

§ General Agreement on Tariffs and Trade (GATT) (p. 585)

§ World Trade Organization (WTO) (p. 585)

§ International Monetary Fund (IMF) (p. 585)

§ World Bank (p. 586)

§ North American Free Trade Agreement (NAFTA) (p. 586)

§ European Union (EU) (p. 586)

§ trade sanctions (p. 588)

§ tariff (p. 588)

§ quota systems (p. 588)

§ boycott (p. 588)

§ Foreign Corrupt Practices Act (FCPA) (p. 589)

§ Contracts for the International Sale of Goods (p. 589)

§ Foreign Sovereign Immunities Act (P. 590)

§ World Intellectual Property Organization (WIPO) (p. 590)

LEARNING OUTCOMES

The chapter Learning Outcomes will help you and the students discover the concepts and information

that should be understood upon completion of the chapter. You may want to access the PowerPoint

(PPT) slides for Chapter 35 when you begin the study of the chapter and discuss each Learning

Outcome. Each Learning Outcome will be covered separately in the Instructor Notes, but they are

shown here in total as an overview of the sections being presented in Chapter 35. The corresponding

text page numbers and PPT slides are listed next to each outcome. These slides should be used to

reinforce the main points of the lecture.

After completing this chapter, the students will be able to:

1. Discuss global business and cite reasons for the increased need for international law. (p. 584, PPT

slide 2)

2. Define international law and identify its major sources. (p. 584, PPT slides 3-5)

3. Discuss the doctrine of comity. (p. 584, PPT slide 6)

4. Explain the purposes of several major international trade institutions. (pp. 585-587, PPT slides

7-12)

5. Discuss the international legal environment and state how trade sanctions and embargoes, export

and import controls, and boycotts are utilized by governments to achieve economic and political ends.

(pp. 587-588, PPT slides 13-19)

6. Discuss the major provisions of the Foreign Corrupt Practices Act, the treaty known as the

Contracts for the International Sale of Goods, and the Foreign Sovereign Immunities Act. (pp. 588-590,

PPT slides 20-23)

7. Discuss the international laws governing intellectual property. (pp. 590-591, PPT slides 24-26)

LECTURE OUTLINE

A. GLOBAL BUSINESS

The increasing volume of international trade and tourism, the globalization of the marketplace, the

growing incidence of multinational business organizations, and cultural exchanges have given rise to

the need for international law.

B. WHAT IS INTERNATIONAL LAW?

International law is the broad study of the legal systems of major countries, treaties, practices, tariffs

and nontariff trade barriers, and import and export quotas.

1. Sources of International Law

In order to fully appreciate the complex legal relationships that exist among nations, it is

important to recognize that international law often develops to address the many issues

that emerge from international trade.

C. APPLYING OTHER COUNTRIES’ LAWS—THE DOCTRINE OF COMITY

A major legal principle involved in international law is the doctrine of comity, which holds that the

courts of one country should refrain from deciding cases involving the acts of persons from another

country. The doctrine is discretionary, and courts of individual countries decide whether or not to apply

it based on the facts of each case.

D. INTERNATIONAL TRADE INSTITUTIONS

Trade among nations remains a vital ingredient to the economic health of the world’s population. While

countries are sovereign and create and interpret their own sets of laws, the goal is that trade be

governed by transnational institutions, whose purpose is to maintain legal and economic order in

trade.

1. The World Trade Organization

In 1947, an international agreement called the General Agreement on Tariffs and

Trade (GATT) was entered into by a multitude of nations. By 1995, tariffs had become

far less commonplace and most nations came to recognize that GATT was no longer

sufficient. Accordingly, the new World Trade Organization (WTO) was formed. The

WTO is responsible for overseeing the implementation of all multinational trade

agreements negotiated now or in the future.

2. The International Monetary Fund

In 1944, several nations formed the International Monetary Fund (IMF). The purpose

of this organization is to maintain a stable environment for the economies and the

currencies of its members by providing protection against large fluctuations in the value

of one currency versus another.

3. The World Bank

In 1944, in order to provide relief to the countries suffering from the ravages of World

War II, the International Bank for Reconstruction and Development was created. Now

popularly referred to simply as the World Bank, this organization works closely with

the IMF to ensure that developing countries have access to funds in order to stimulate

their economies.

4. Regional Trade Organizations and Agreements

In addition to the above worldwide organizations, there exist numerous regional

agreements and entities whose purpose it is to provide legal, political, and economic

processes to maintain an orderly relationship among the members.

E. THE INTERNATIONAL LEGAL ENVIRONMENT

Companies that conduct business in several countries face the challenge of having to comply with a

variety of legal systems that sometimes conflict with one another.

1. Trade Sanctions and Embargoes

Many governments place legal restrictions on trade in order to achieve desired political

results. Countries that enact laws prohibiting trade with specific countries are said to be

using trade sanctions, sometimes referred to as embargoes.

2. Export and Import Controls

In addition to trade sanctions and embargoes, at times a country will impose a tariff, a

form of tax, or other restrictions, on imports or exports to attain economic results, such

as protecting domestic industries or facilitating the production of certain crops.

3. Governmental Actions

Many governments attempt to maintain control over the actions of foreign businesses

operating within the host country by controlling the ownership of the foreign company’s

assets.

4. Boycotts

At times, citizens of a particular country refuse to purchase goods made by businesses

located in other countries. This action, whether supported by the government or not, is

referred to as a boycott.

F. DOING BUSINESS IN FOREIGN COUNTRIES

1. Foreign Corrupt Practices Act

In some countries, it is perfectly acceptable and indeed expected that there will be

payments made to individuals in order to secure their business. In the United States,

however, this type of activity amounts to bribery, which is both illegal and ethically

unacceptable. In 1977, the United States passed the Foreign Corrupt Practices Act

(FCPA), a federal statute designed to provide executives of American companies with

rules and restrictions relating to paying persons in foreign countries to expedite business

in these foreign nations.

2. Contracts for the International Sale of Goods

Sometimes parties to an international transaction disagree over the legal provisions of

the contract based on the laws of their native countries. These disagreements can delay

and stifle international business. To resolve such problems, a treaty known as the United

Nations Convention on Contracts for the International Sale of Goods (CISG) was

drafted to establish a universal set of legal procedures to be applied to contracts covering

international transactions.

Countries that have signed the treaty are bound to the terms of the CISG. Because the

United States has ratified this treaty, the CISG supersedes the provisions of the Uniform

Commercial Code (UCC) in certain cases. Note that the CISG differs from the UCC in

only a few areas.

3. Foreign Sovereign Immunities Act

In the United States, it had been tradition that foreign sovereign nations were granted

immunity from all lawsuits brought by private individuals. However, the Foreign

Sovereign Immunities Act (FSIA), a federal law passed in 1976, established certain

exceptions to foreign sovereign immunity. Under this statute, a U.S. court may allow a

lawsuit against a foreign sovereign nation to proceed provided the plaintiff can prove

that the foreign nation engaged in one or more of the following:

· Commercial activity that occurred in the United States in connection

with foreign activity.

· Commercial activity outside the United States that caused a direct

effect on U.S. commerce.

· Commercial antitrust actions (see Chapter 12).

· Expropriation, terrorism, or torture.

· Other torts committed in the United States.

4. International Treatment of Bankruptcies

In order to promote cooperation between U.S. courts and those of foreign

countries in bankruptcy cases, the Bankruptcy Abuse Prevention and

Consumer Protection Act added Chapter 15 to the federal bankruptcy law. This law allows

foreign courts to interact with U.S. courts in resolving bankruptcy cases.

G. INTERNATIONAL LAW AND INTELLECTUAL PROPERTY

Individuals, as well as companies, have rights and duties in foreign countries. These rights and duties

are increasingly important in the context of the international laws governing intellectual property.

Intellectual Property includes both artistic as well as industrial property rights. Copyrights, patents,

and trademarks are the principal areas involved. Related to these rights is industrial “know-how” or

technology—particularly in developing countries where technology is transferred between firms in

different countries that have joint venture agreements.

1. Copyrights

Copyrights protect the authors or creators of literary, artistic, or musical works and (in

some countries) computer programs. These laws prohibit the reproduction or alteration

of an author’s work without his or her permission. Copyrighted materials are given at

least minimal protection in most countries.

2. Patents

Patents are a statutory privilege granted by a nation to inventors for a fixed period of

years to exclude all others from manufacturing, using, or selling a patented product

without permission from the inventor. A U.S. firm can take advantage of world markets

by licensing foreign firms to either manufacture a patented product or use an innovative

manufacturing process in the manufacture of a product. A firm might seek parallel

patents in each of the countries that maintains a patent system.

3. Trademarks

Trademarks, trade names, service marks, and certification marks are valuable tools used

by businesses to identify their products and services. In most cases, the treatment of

these valuable properties in international commerce does not greatly differ from

domestic treatment.

Trademarks are viewed as property and thus can be transferred or licensed to others.

Although not true in the United States, in most countries registration is a prerequisite for

ownership and protection of the mark. Often a foreign licensee must meet certain

product quality requirements so that the use of the mark does not deceive the consumer

or lessen the value of the mark to the owner.

INSTRUCTOR NOTES

A resulting answer or explanation is provided below for each Learning Outcome in Chapter 35. Every

outcome is also mapped to corresponding text page numbers, PPT slides, and relevant chapter

assessment exercises and activities for ease of reference and use.

LO1. Discuss global business and cite reasons for the increased need for international law.

Giving rise to the need for international law are the increasing volume of international trade and

tourism, the globalization of the marketplace, the growing incidence of multinational business

organizations, and cultural exchanges.

Text Pages: 584

PowerPoint: Slide 2

Discussion Questions: 23

LO2. Define international law and identify its major sources.

International law may be defined as the broad study of the legal systems of major countries,

treaties, practices, tariffs and nontariff trade barriers, and import and export quotas. Also included in the

study of international law are organizations—national and international—that regulate personal and

commercial activity and facilitate international trade. The sources of international law in modern times

are customary practices and treaties, which are recognized in the Statute of the International Court of

Justice. Over 200 sovereign nations have the capacity to negotiate treaties and create legal obligations.

Text Pages: 584

PowerPoint: Slides 3-5

Case Questions: 34

LO3. Discuss the doctrine of comity.

The doctrine of comity holds that the courts of one country should refrain from deciding cases

involving the acts of persons from other countries. The doctrine is discretionary, and courts of

individual countries decide whether or not to apply it based on the facts of each case.

Text Pages: 584

PowerPoint: Slide 6

LO4. Explain the purposes of several major international trade institutions.

The World Trade Organization is responsible for overseeing the implementation of all multinational

trade agreements negotiated now or in the future. The International Monetary Fund maintains a stable

environment for the economies and the currencies of its members by providing protection against large

fluctuations in the value of one currency versus another. The World Bank ensures that developing

countries have access to funds in order to stimulate their economies. The North American Free Trade

Agreement governs economic trade among the United States, Canada, and Mexico. The European

Union represents a legal and political relationship among its members that promotes economic growth,

as well as social and cultural affiliations.

Text Pages: 585-587

PowerPoint: Slides 7-12

Discussion Questions: 24, 27

Thinking Critically About the Law: 30, 32

LO5. Discuss the international legal environment and state how trade sanctions and embargoes,

export and import controls, and boycotts are utilized by governments to achieve economic and

political ends.

Trade sanctions and embargoes, export and import controls, and boycotts are all measures used by

governments and citizens of one country to restrict the economic activities of businesses from other

countries, by not allowing these foreign firms free access to markets.

Text Pages: 587-588

PowerPoint: Slides 13-19

Discussion Questions: 25, 26

Thinking Critically About the Law: 29, 31

Case Questions: 35

Case Analysis: 37, 39

LO6. Discuss the major provisions of the Foreign Corrupt Practices Act, the treaty known as the

Contracts for the International Sale of Goods, and the Foreign Sovereign Immunities Act.

The Foreign Corrupt Practices Act is a federal statute designed to provide executives of American

companies with rules and restrictions relating to paying persons in foreign countries in order to

expedite business in these foreign nations.

Contracts for the International Sale of Goods (CISG) was drafted to establish a universal set of legal

procedures to be applied to contracts covering international transactions.

Foreign Sovereign Immunities Act (FSIA), a federal law passed in 1976, established certain exceptions

to foreign sovereign immunity

Text Pages: 589-590

PowerPoint: Slides 20-23

Discussion Question: 28

Thinking Critically About the Law: 33

Case Questions: 36

LO7. Discuss the international laws governing intellectual property.

Copyrights, patents, and trademarks are the principal areas involved in international laws governing

intellectual property. Copyrighted materials are given at least minimal protection in most countries.

Through the use of patents, a U.S. firm can take advantage of world markets by licensing foreign firms

to either manufacture a patented product or use an innovative manufacturing process in the

manufacture of a product. The treatment of trademarks in international commerce does not greatly

differ from domestic treatment in most cases.

Text Pages: 590-591

PowerPoint: Slides 20-23

Case Analysis: 38