978-0078023859 Chapter 12 Solution Manual Part 1

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Chapter 12 – International Law

12-1

Chapter 12

International Law

Learning Objectives

This chapter is intended to provide the student with an introduction to some aspects of the legal

environment of international business transactions. In addition, it is designed to provide an

understanding of how economically interdependent nations have become in recent years. The

chapter also seeks to provide students with a basic understanding of the rules of international law

and the major institutions. Some consideration also is given to the emergence of the free trade

agreements on the global economy. Finally, the students are exposed to some of the risks

involved in international transactions, including the requirements of the Foreign Corrupt

Practices Act.

References

 August, Ray, International Business Law. 4th Ed. Prentice Hall (2004).

 Aust, Anthony, Handbook of International Law. Cambridge UP (2005).

Jurisprudence. Cambridge UP (2005).

 Folsom, Gordon and Spanogle, International Business Transactions in a Nutshell. West

Publishing Co. (2000).

 Hirschhorn, Eric, The Export Control Embargo Handbook. Oceana Publications (2005).

 Joyner, Christopher C., International law in the 21st Century: Rules for Global Governance.

Press (2006).

 Schaffer, Earle and Agusti, International Business Law and Its Environment. 6th Ed. South-

Western Publishing Co. (2005).

 Steiner, Vagts and Koh, Transnational Business Problems, 4th ed. The Foundation Press

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(1998).

 Weatherill, Stephen, Cases and Materials on EU Law 7th Ed. Oxford UP (2006).

Teaching Outline

I. Risks Involved in International Trade (LO 12-1)

Emphasize:

 The nine point bullet list of concerns.

 Sidebar 12.1—“Problems with Outsourcing in China: Mattel’s Massive Toy Recall”

A. Pressures for Bribes

Emphasize:

 The Foreign Corrupt Practices Act (FCPA) and its two principal requirements.

 That as a result of intensive lobbying by the U.S. business community, Congress

 Sidebar 12.2—“Turning Back the Tide of Corruption.”

Additional Matters for Discussion:

 Consider that bribery has been a way of life for centuries in many foreign countries.

Should the United States impose ethical standards on other cultures?

 The developing practice of using offsets to bypass domestic bribery laws.

activity—expropriation.

 That the U.S. Constitution prohibits the government from seizing private property

except for “public purposes” and upon the payment of “just compensation.” Compare

the extent of such protection elsewhere.

Additional Matters for Discussion:

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 Discuss the importance of providing adequate compensation to ensure economic

development.

 Risk generally: see Sidebar 12.1 and discuss Mattel’s massive toy recall.

C. Export Controls

Emphasize:

 That a risk involved in doing business abroad is export controls placed on the sale of

U.S. strategic products and technology abroad.

 That significant criminal and administrative sanctions may be imposed upon

corporations and individuals convicted of violating the law.

 The elimination of COCOM in 1994 and the development of the Wassanaar

Arrangement.

 Consider Cuba as a case example and discuss whether the U.S. should lift its trade

embargo with Cuba.

 Sidebar 12.4—“Export Control Reform”

Cases for Discussion:

1. United States v. Randy Reyes, 270 F.3d 1158 (7th Cir. 2001)

The defendant, Randy Reyes, was employed by Siraj International. He made contact

with a customer named Texam Holding located in Geneva. Texam was acting as a front

for Iran’s procurement of military aircraft parts from the United States. Reyes was

2. United States v. Covarrubias, 94 F.3d 172 (5th Cir. 1996)

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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

Covarrubias was pulled over by a Texas police officer within several miles of the U.S.-

Mexico border for a malfunctioning taillight and failure to display a front license plate.

The officer requested and was granted permission to search the vehicle after smelling

fresh paint and noticing a gas filler hose protruding from near the left rear tire of the

truck. The search disclosed that one of the truck’s gas tanks contained weapons.

Covarrubias was convicted of attempting to export items on the United States Munitions

List without obtaining the required export license. The court found that Covarrubias

knew that authorization was required before transporting weapons to another country.

3. United States v. Lee, 183 F.3rd 1029 (9th Cir. 1999)

Following the deaths in Tiananmen Square, the U.S. State Department suspended all

licenses and approvals to export defense articles from the United States to China. The

defendant was prosecuted for exporting a military item (cutter blade) without disclosing

advisory opinion every two years. There has been widespread reluctance to resort to

the ICJ as a forum for resolving international disputes for several reasons.

 That private parties or corporations may not directly present claims before the Court.

 That Article 38 sets forth the order of importance for determining what is the

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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

international law in a given case.

Private International Law

Emphasize:

 That private international law is represented by the laws of individual nations and the

multilateral agreements developed between nations to provide mutual understanding

and some degree of continuity to international business transactions.

Additional Matters for Discussion:

 Discuss corporate codes of conduct. See Sidebar 12.6. Ask students to consider what

they would include in a corporate code of conduct.

 Sidebar 12.7—“Medellin v. Texas (2008): The U.S. Supreme Court and the International

Court of Justice (ICJ)”

Case for Discussion:

1. Armed terrorists seized a civilian bus in Israel and killed, wounded, and tortured the

passengers. The victims were citizens of Israel, the United States, and the Netherlands.

An action was brought in the United States against Libya, the Palestine Liberation

Organization, and other alleged perpetrators under the American Alien Tort Claims Act.

The act permits aliens to bring tort actions committed in violation of the law of nations.

Issue: Is terrorism a violation of the law of nations?

B. International Organizations

Emphasize:

 The eight UN Millennium Development Goals referenced in the marginalia.

United Nations

Emphasize:

 The primary goal that the Charter of the United Nations sets forth.

 The importance of the Security Council and the veto power of the five permanent

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members. Discuss whether the composition of the Security Council should be

 The successes and failures of the U.N. to bring about a peaceful world. Consider the

cases of Iraq and Bosnia.

World Trade Organization

Emphasize:

 The role of the General Agreement on Tariffs and Trade (GATT) and the World

tariffs imposed by President Bush. The WTO has ruled that such tariffs are illegal

and will combat the tariffs with more than $2 billion of sanctions on other U.S.

exports. Many U.S. companies are also decrying their own country’s tariffs and their

profit-cutting effects.

The European Union

 The EU’s mission in the twenty-first century.

 The major institutions of the EU. Go to the EU website—Europa.eu/—for current

news.

Additional Matters for Discussion:

 Consider the potential conflict between foreign business practices and the European

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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

mustaches, beards, and excessive jewelry violates the law since it was not approved

by both workers and managers meeting as a work council.

 Discuss the difficulties of bringing Eastern European countries into the EU given the

vast differences in wealth between Western and Eastern Europe.

 Note how the elaborate European welfare system is being strained by the

demographic changes throughout Europe where people are living longer and having

fewer children.

 Discuss the growing tensions between the United States and the EU over a variety of

trade disputes including tariffs, agriculture subsidies, and genetically modified foods.

Case for Discussion:

1. Verband Sozialer Wettbewerb eV v. Clinique Laboratories and Estee Lauder

Cosmetics GmbH, Case C-315/92 European Court of Justice (1994)

Germany banned the sale of the product “Clinique.” Germany claimed that the

similarity in sound between the words “Clinique” and “Klinik” would confuse

 The likely expansion of NAFTA to include additional countries.

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Additional Matter for Discussion:

Recent Free Trade Agreements

Emphasize:

 That the United States ratified trade agreements with South Korea, Panama, and

Colombia in 2011.

 That negotiations are under way for the Transatlantic Trade and Investment

Partnership.

 That the United States is also in the process of negotiating the Trans-Pacific

Partnership Agreement with 11 nations.

III. Methods of Transacting International Business (LO 12-4)

A. Foreign Sales

Emphasize:

 That the most common approach for a manufacturer to use when trying to enter foreign

markets is to sell goods directly to buyers located in other countries. Ask the students to

identify factors which will affect the choice in addition to the considerations involved in

domestic choice-of-entity decisions.

 Sidebar 12.8—“Philip Morris: Restrictions Affecting Their Global Business”

Cases for Discussion:

1. Moog World Trade Corporation v. Bancomer, S.A., 90 F. 3d 1382 (8th Cir. 1996)