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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
