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Moog was the beneficiary of an irrevocable letter of credit issues by Bancomer, a
Mexican bank, on behalf of its local customer CRG. A dispute arose between Moog and
2. 3COM Corporation v. Banco do Brasil, 171 F. 3d 739 (1999)
A dispute arose over whether Banco do Brasil had provided effective notice of non-
renewal of a letter of credit in favor of 3COM. Banco contended that it had cancelled the
letter of credit and 3COM maintained that the credit was not cancelled. The court ruled
that Banco do Brasil had not cancelled the letter of credit. It found that Banco’s notice
of non-renewal was neither clear nor unequivocal. Simplicity and certainty are the
hallmarks of the letter of credit transaction according to the court.
B. Licenses or Franchises
Emphasize:
That a licensing arrangement allows the international business to enter a foreign market
without any direct foreign investment.
That licensing often is used as a transitional technique for firms expanding international
operations since the risks are greater than with foreign sales but considerably less than
with direct foreign investment.
Sidebar 12.9—“Successful International Franchising Ventures”
Additional Matters for Discussion:
The inherent difficulty of protecting intangible property rights such as patents,
royalties in the foreign country.
The problems of cultural differences affecting the successful operation of an overseas
franchise such as McDonald’s in France. See Raymond Dayan v. McDonald’s Corp.,
125 Ill.App.3d 972, 466 N.E.2d 958 (1984).
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parent firm by subjecting it to foreign laws and the jurisdiction of foreign courts. Union
foreign country is to engage in a joint venture with an entity from that host country.
Additional Matters for Discussion:
Many countries that are rich in natural resources and plentiful in labor may be lacking in
roads, bridges, public utilities, drinking water, and education.
Dating back to their experiences with Western colonization, many countries may be very
A. Alien Tort Statute
Emphasize:
That the Alien Tort Statute (ATS), enacted in 1789, grants jurisdiction to U.S. federal
district courts over “any civil action by an alien for a tort only, committed in violation of
the law of nations or a treaty of the United States.”
B. Suing Foreign Governments in the United States
Emphasize:
The Foreign Sovereign Immunities Act (FSIA).
The commercial acts exception.
Cases for Discussion:
1. Transamerican Steamship Corp. v. Somali Democratic Republic, 767 F.2d 998 (D.C.
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Cir. 1985)
An American shipper, Transamerican Steamship, brought suit against the Somali
Democratic Republic for losses when the government detained its ship over a dispute
involving the emergency shipment of 40,000 tons of corn. The shipment was part of a
$20 million famine relief program to ameliorate widespread starvation and malnutrition
in Somalia.
Issue: Does the district court have jurisdiction over Transamerican’s claims against
Somalia?
which the foreign state has implicitly or explicitly waived its immunity or where the
claim arises from commercial activities by the foreign state.
2. Princz v. Federal Republic of Germany, 26 F.3d 1166 (D.C. Cir. 1994)
The plaintiff, a Jewish American, brought suit in the United States for injuries he
suffered and the slave labor he performed while a prisoner in Nazi concentration camps.
The plaintiff was arrested shortly after the United States declared war on Germany while
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defendant notice of the lawsuit.
Sidebar 12.11—“The Reach of U.S. Law: Spector v. Norwegian Cruise Line, Ltd.)”
Case for Discussion:
1. Volkswagenwerk Aktiengesellschaft v. Schlunk, 108 S.Ct. 2104 (1988)
A German corporation moved to quash service of a complaint served on its American
subsidiary related to a wrongful death products liability action for failure to follow the
Hague Service Convention.
Issue: Was the plaintiff required to serve the German parent under the Hague Service
Convention?
D. International Arbitration
Emphasize:
That the advantages of arbitration in domestic transactions are more pronounced in
international transactions where differences in languages and legal systems make
litigation costs still more costly.
That the United Nations Convention on the Recognition and Enforcement of Foreign
Arbitral Awards of 1958 (New York Convention), adopted in more than fifty countries,
encourages the use of arbitration in commercial agreements made by companies in the
signatory countries.
That once the parties to an international transaction agree to arbitrate disputes between
them, the U.S. courts are reluctant to disturb that agreement.
Sidebar 12.12—“Chevron and Texaco in Ecuador: $18 Billion Judgment”
Additional Matters for Discussion:
An arbitrator’s decision is more easily enforceable than a court ruling since both parties
have agreed in advance to the arbitration.
When arbitration clauses are used in international agreements, the parties must decide
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Emphasize:
That the China International Economic and Trade Arbitration Commission
(CIETAC) is a permanent arbitration institution established to resolve economic and
trade disputes arising in China.
The World Intellectual Property Organization: Arbitration and Mediation Center
Emphasize:
The role of the World Intellectual Property Organization (WIPO) Arbitration and
Mediation Center.
Answers to Review Questions and Problems
Risks Involved in International Trade
1. Pressures for Bribes
2. Expropriation and Nationalization
3. Export Controls
International Law and Organizations
4. Sources of International Law
a. The ICJ applies international law to resolve disputes between nations. The ICJ resolves
5. International Organizations
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a. The three major principles of the World Trade Organization are nondiscriminatory,
d. The EU recognizes the importance of an integrated approach to economic development
much like the United States.
6. Major Agreements Affecting Trade
a. The CISG is a uniform set of rules intended to eliminate uncertainty in transactions.
b. Tariffs have been reduced and trade has increased as a result of NAFTA & CAFTA-
DR.
Methods of Transacting International Business
7. Foreign Sales
The seller must strictly comply with the terms of the letter of credit to obtain payment.
8. Licenses or Franchises
9. Direct Foreign Investment
A joint venture allows local individuals and firms to participate in the benefits of economic
10. Alien Tort Claims Act
11. Suing Foreign Governments in the United States
12–15
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No. The doctrine of sovereign immunity will prevent the suit in the United States.
12. Suing Foreign Firms in the United States
13. International Arbitration
Arbitration clauses simplify the resolution of international disputes and encourage trade by
making it easier to resolve disputes between parties in different countries.
Business Discussion #1
1. Does XYZ have any moral or legal responsibility in this case?
2. How should XYZ protect itself under these circumstances?
3. Should American business practices be impacted by conflicts between governments?
In today’s world, economic sanctions are often the quickest and most effective method to
Business Discussion #2
1. Should Sophia call the home office to ask for advice?
In all likelihood, Sophia feels the pressure to pay the money to further Hello-Hello’s
interests in China. But, hopefully, bells are going off in her head that these payments may be
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2. If her boss says to pay the money, should she do it?
3. What potential legal problems are presented by the payments?
There are two potential legal problems presented by the facts. The payments made to
customs officials may be permissible as facilitating or grease payments, because they are for