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Chapter 16 - International Ethics and Law
Internet Exercises and Supplements
Answer to Internet Exercise (p. 727)
Each student’s answer will differ based on the multinational firm they choose.
Student Projects
1. Find a report of an international business legal or ethical issue—that is, a legal or ethical business
2. Find an example of a foreign country regulating business. Explain the regulation. Does the United
Supplemental Web Addresses
http://www.excite.com (By clicking Travel and then selecting an area under Destination Guides, this is
an excellent starting point to find out enormous amounts of country-specific information)
http://www.ita.doc.gov (International Trade Administration)
http://www.chemie.fu-berlin.de/adressen/eu.html (An overview of the European Union)
Answers
Answers to ‘Globalization and Countervailing Forces’ Questions (p. 689)
1. Students could have a discussion based on this question. Students may cite examples of how
2. Students could have a discussion based on this question. When a company chooses to get its
Answers to ‘Islamic Law: Myths and Realities’ Questions (p. 691)
1. Students could have a discussion based on this question. However, students should mention that
2. Students will be required to research to find if any of the U.S. laws rests upon religious principles.
3. Students should have a discussion based on this question. The class could be divided into two
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Chapter 16 - International Ethics and Law
Answer to ‘Laws and Social Norms Regarding Free Speech’ Question (p. 692)
Students’ answers will vary. Students could be asked to work in small groups in order to
Answer to ‘Social Responsibility to Host Country’ Question (p. 693)
1. Students’ answers will vary. However, students should note that labor standards form one of the
Answer to ‘Foreign Corrupt Practices Act’ Question (p. 695)
1. Students’ answers will vary. Some students may opine that although it is ethical for the Congress
Answer to ‘Practicing Ethics: Individual Social Responsibility to Humanity?’
Question (p. 696)
1. Students could have a discussion based on this question. Students may be able to give greater
Answer to ‘Franchising’ Question (p. 699)
You might decide to enter into an agency relationship in order to allow the agent to enter into contracts
on your behalf, but you would only pay that agent a commission. In that way, the more you could
Answer to ‘International Trade in Service’ Question (p. 705)
Students’ opinion will vary. Some students may opine that considering academic excellence is always
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Chapter 16 - International Ethics and Law
Answers to ‘Compulsory Retirement’ Questions (p. 707)
1 If the American firm applies the retirement provision to American citizens in its employ, probably
yes. Note that the employer won’t be able to argue that application of the ADEA violates local law
2 Students’ answers will vary. Students could be divided into two groups depending on the
Answer to ‘Choice of Nationality?’ Question (p.715)
Students’ answers will vary. Some students may feel that it is not a good trend as the U.S. is losing out
Answers to ‘A Closer Look at U.S. Tariffs’ Questions (p. 717)
1 Students’ answers will vary. Consumers are hurt; competing manufacturers and sheep farmers
2 These tariffs probably reflect pre-WTO conditions. Historically France has probably had more
Answer to ‘Rare Earth Elements’ Question (p. 717)
Have students address the criteria for imposing export restrictions under the Act, as described in the
text. One could argue, based on the few facts given, that restrictions might be merited to prevent an
Answers to ‘Fair Trade Regulations: Dumping and Subsidies’ Question (p. 718)
Students’ answers will vary. Developed countries like the USA use all methods at their disposal to
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Chapter 16 - International Ethics and Law
Answers to ‘Trade Restriction—A Tangled Web’ Questions (p. 719)
1. If Chinese citizens already have access to American music, then objecting to U.S. companies
marketing download services and/or blocking such downloads won’t additionally harm its citizens.
2. Students’ answers will vary. Some students may view the United States’ move as a double
Answer to ‘Long Road to Court’ Questions (p. 722)
1. American courts ruled that the principle of forum non conveniens required the lawsuits to be
maintained in the countries where the workers had suffered their injuries. A change in Nicaraguan
2. Students’ answers will vary.
3. Students’ answers will vary. Some students may suggest that Dole and subsequently Dow
Answer to Enforcement of Decisions Question (p. 727)
Students could have a discussion based on this question. Perhaps a UN Convention could be
developed and circulated for adoption that would specify the grounds under which the signatory
Cases and Answers
Transatlantic Financing Corporation v. United States, 363 F. 2d 312 (D.C. Cir.
1966) (p. 702)
Syllabus
Transatlantic contracted to ship goods for the U.S. from Texas to Iran. When the Suez Canal
was closed (by a war between Israel and Egypt), Transatlantic was forced to travel by a
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Chapter 16 - International Ethics and Law
different route, incurring additional expense. Transatlantic sued the U.S. for this additional
expense on the grounds that the inability to use the Suez Canal made the contract
commercially impracticable. The District Court held for the U.S. and the D.C. Circuit affirmed.
The D.C. Circuit felt that the war was a contingency that should have been anticipated.
Therefore, it did not render the contract commercially impracticable or legally impossible.
Answers to ‘Transatlantic Financing Corporation v. United States’ Questions (p. 703)
1.
a. The private law of the parties are the terms they expressly included in their contract. With
b. The court said, “Nor is there anything in custom or trade usage … which would support our
2. Possibly, if tomatoes had been involved, then the goods would have been subject to harm from
3. If the goods had to arrive in Iran by a specified date, and it were not possible for the goods to
4. The court states that cost and difficulty of performance may constitute impracticability (actually, it
Golan v. Holder 132 S.Ct. 873 (2012) (p. 709)
Syllabus
The United States was a latecomer into the Berne Convention, in 1989. In the year 1994, the
Congress enacted Section 514 of the Uruguay Round Agreements Act (URAA), ensuring copyrights
protection to non-US works. Following a slew of complaints and from countries, such as Mexico,
Turkey, Egypt, and Austria, whose works were not protected in the US, the Congress passed a
resolution extending protection to all member countries of the Berne Convention. In 1994, the Uruguay
round of round of multilateral trade negotiations produced the World Trade Organization as well as the
Agreement on Trade–Related Aspects of Intellectual Property Rights (TRIPS). Despite these
measures, Section 514 did not offer a recourse to any use of foreign works occurring before
restoration. Therefore petitioners appealed against the section.
Answers to ‘Golan v. Holder’ (p. 712)
1. When the court says that a work is in the “public domain,” it means the work is available for
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Chapter 16 - International Ethics and Law
2.
a. Going by the interpretation of the law, if one was a Canadian artiste in the 1950’s he or she
b. The issue plaguing artistes in the 1950s is obsolete now. This is attributed to the fact that all
3. Students’ answers will vary. Before the passing of Section 514, the United States did not
4. Students’ answers will vary. The courts observed that extending copyright protection to products
Butters v. Vance International, Inc., 225 F. 3d 462 (4th Cir. 2000) (p. 724)
Syllabus
Butters had been assigned on several occasions to a detail guarding a Saudi princess who
was undergoing medical treatment in California. After a time, Butters’ supervisors
recommended that she serve a full rotation at the command post. A Saudi military officer
rejected the recommendation as unacceptable under Islamic law, because Saudis would
consider it inappropriate for their officers to spend long periods of time in a command post with
a woman present. Butters, a security agent, filed suit against her employer, Vance
International, charging gender discrimination, discriminatory constructive termination,
retaliatory constructive termination and wrongful constructive termination under a California
employment statute.
Vance moved for a summary judgment based on the Foreign Sovereign Immunities Act
(FSIA), under the argument that it was “acting under the direct military orders of” the ranking
Saudi military officer who had hired Vance. The court rejected Butters argument that this
circumstance came within the “commercial activity” exception of the FSIA, saying that deciding
how best to secure the safety of its leaders “is quintessentially an act ‘peculiar to sovereigns.’”
The court found Vance entitled to derivative immunity under the FSIA for not promoting
Butters.
Answers to ‘Butters v. Vance International, Inc’ Questions (p. 725)
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Chapter 16 - International Ethics and Law
1 Butters argued that the action of the Saudis in rejecting her promotion came under the
2 Students could have a discussion based on this question. Of course Butters suffered
Answers to Chapter Questions (p. 727)
1 Students could have a discussion based on this question. It is a combination of both. On one
2 Students’ answers will vary. Some students may feel that once China began to open its economy,
3
a. Students could have a discussion based on this question. In order to substantiate their
b. Laws banning African American citizens from testifying against White citizens, and
4
a. Students’ answers will vary.
b. Students’ answers will vary. Some students may say that business decisions may be
c. Students’ answers will vary. While some students may be willing to accept laws of
5
a. Students’ answers will vary. Some students may feel the influx of American fast-food chains
b. Students’ answers will vary. Universal Healthcare does not mean people can binge
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Chapter 16 - International Ethics and Law
c. Students’ answers will vary. If a country is concerned about its citizens’ dietary
6
a. Students’ answers will vary. However, students should consider that the shopkeepers were
b. Students’ answers will vary. Valentine’s Day, although is a celebration of love, is not
c. Students’ answers will vary. Some students may state that festivals are held to
7
a. Students’ answers will vary. Students may choose to either go with what the judge has ruled,
b. Students’ answers will vary. Some students may feel that it may be required since the
8
a. Students could have a discussion based on this question. Students could be divided into
b. Within the previous discussion, each group could be asked to explain why a firm would
9 Students’ answers will vary. Some students may suggest that there is a certain degree of
10 In Appalachian Artworks v. Granada Electronics, 816 F. 2d 68 (2d Cir. 1987), the court held that
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Chapter 16 - International Ethics and Law
11 The issue to be decided by the court was whether “camping out, i.e., taking up temporary
residence in the outdoors” is a sport; if so, then tents are sporting equipment. Certain light tents
12 Students could have a discussion based on this question. The Fifth Circuit dismissed the suit on
13 The court held that the act of state doctrine did not apply here because the principle behind that
doctrine applies to acts of a sovereign in its own territory. In this situation, there was an act of a
14 The court found that Zedan’s recruitment did not satisfy the “commercial activity within the U.S.”
requirement as the project and all dealings with the Ministry were conducted in Saudi Arabia. The
15 The court held that under the Convention on the Recognition and Enforcement of Foreign Arbitral
Supplementary Materials
I. Substandard Working Conditions
Nike’s Image Problem
By Julie Schmit
When 200 workers making Nike shoes here [Vietnam] were told recently that they would have
to work a Sunday, they balked.
They demanded the customary double-time pay. The Korean-owned factory, which Nike pays
to make its shoes, wanted the workers to simply take a different day off during the week.
In the past, the scene could have been explosive. This was, after all, the same factory in
which 40 Vietnamese workers were forced in 1996 to kneel with their hands in the air as
punishment for poor performance. In 1997, 56 Vietnamese workers making Nike shoes at a
Taiwanese-owned plant were forced to run around a factory in the stifling heat because they
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Chapter 16 - International Ethics and Law
didn’t were regulation shoes. Twelve fainted. In other Vietnam factories, workers had been
slapped with shoes or ordered to lick factory floors.
This time, trouble was muted. Nike’s own managers, located in Vietnam near the plant,
demanded that the Tae Kwang Vina factory pay double time and give the workers another day
off. They then banned Sunday work at the five Vietnam factories that make Nike shoes but are
Korean- or Taiwanese-owned.
What a difference a global outcry over working conditions can make.
It has been more than two years since reports of atrocious working conditions in Nike’s
subcontractor plants in Vietnam set off huge waves of consumer, investor and labor-rights
protests. Today, while the plants are hardly inspiring places to work, they are better than they
were. What’s more, Nike’s experience has sent a warning to other companies who hire
overseas contractors: Ignoring poor working conditions is not acceptable.
USA Today, October 4, 1999, p. 1B. Reprinted by permission.
The article goes on to describe some of the areas in which improvements have been made: Cleaner
air, more oversight, better communication and some independent monitoring. But, the author, asserts,
“Nike has yet to tackle its biggest shortcoming: wages.” “Despite the wage complaints, every worker
interviewed was grateful to have a job in a country where unemployment is pushing 20%.”
Supplementary Cases
I. Papaila v. Uniden America Corp., 51 F. 3d 54 (5th Cir. 1995) Syllabus
A Japanese corporation set up a wholly-owned subsidiary in the United States, incorporating it
under the laws of Indiana. In overseeing its subsidiary, the Japanese parent corporation sent
various employees from the parent in Japan to the subsidiary on temporary work assignments.
Plaintiff, a former American employee of the subsidiary, sued the subsidiary for discrimination
based on race and national origin, alleging that the Japanese temporary workers received
more favorable employment treatment. The Court held that the alleged discriminatory acts
were the acts of the Japanese parent, not the American subsidiary, and therefore were not
subject to American law based on a Treaty between the U.S. and Japan which allows a foreign
corporation to discriminate in favor of citizens from its own country in filling certain specified
high-level positions. (The treaty would permit a U.S. corporation operating in Japan to do
likewise.)
II. Sumitomo Shoji America, Inc. V. Avagliano, 102 S. Ct. 2374 (1982) (See
Employment-Related Regulations, p. 705)
Syllabus
Petitioner, Sumitomo Shoji America, Inc., is a New York corporation and a wholly-owned
subsidiary of a Japanese general trading company. Past and present female secretarial
employees of Sumitomo, who (with one exception) are United States citizens, brought a class
action in federal court against Sumitomo, claiming that Sumitomo’s alleged practice of hiring
only male Japanese citizens to fill executive, managerial and sales positions violated Title VII
of the Civil Rights Act of 1964. Sumitomo moved to dismiss the complaint on the ground that
its practices were protected under Article VIII(1) of the Friendship, Commerce and Navigation
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Chapter 16 - International Ethics and Law
Treaty between the United States and Japan. That article provides that the “companies of
either Party shall be permitted to engage, within the territories of the other Party, accountants
and other technical experts, executive personnel, attorneys, agents and other specialists of
their choice.” The Treaty defines “companies” as “[c]ompanies constituted under the
applicable laws and regulations within the territories of either Part.”
The district court refused to dismiss, holding that because Sumitomo was incorporated in the
United States; it was not covered by Article VIII(1). The Court of Appeals reversed in part,
holding that Article VIII(1) was intended to cover locally incorporated subsidiaries of foreign
companies, but that the Treaty language did not insulate Sumitomo’s employment practices
from Title VII scrutiny.
The Supreme Court held that Sumitomo is not a company of Japan and thus is not covered by
Article VIII(1) of the Treaty. Under the Treaty’s literal language, Sumitomo is a company of the
United States, since it was “constituted under the applicable laws and regulations” of New
York. As a company of the United States, it cannot invoke the rights provided in Article VIII(1),
which are available only to companies of Japan operating in the United States and to
companies of the United States operating in Japan. Where both parties to the Treaty agree
with this meaning and such interpretation follows from the clear Treaty language, deference
will be given to it, absent extraordinarily strong contrary evidence. Further, adherence to the
Treaty language does not overlook the Treaty’s purpose, since the primary purpose of the
corporation provisions was to give corporations of each signatory legal status in the territory of
the other party and to allow them to conduct business in the other country on a comparable
basis with domestic firms.
III. Comite Interprofessionel de Vin de Champagne v. Wineworths Group, Ltd., 2
N.Z.L.R. 432 (High Court of Wellington, New Zealand 1991) (See Intellectual
Property Regulation, p. 707)
Syllabus
French wine producers sought to enjoin an Australian company from selling wine in New
Zealand containing the word “champagne” on bottle labels on the grounds that consumers
would be misled into thinking the wine came from the champagne region of France.
Held: Injunction granted preventing defendants from marketing their wine with the word
champagne. According to the court, the word champagne has a “special impact or impression
on ordinary, average New Zealanders.” The court specifically noted that, while the decision
might have been different “in Australia or Canada and the United States,” the court (sitting in
New Zealand) had to decide the case according to the law applicable in New Zealand. The
court felt that defendant’s use of the word champagne in its advertising amounted to deceptive
advertising.
IV. Nissho Iwai American Corporation and Nike, Inc. v. U.S., 143 F.3d 1470 (Fed.
Cir. 1998) (See Imports, p. 716)
Syllabus
Nissho Iwai American Corporation and Nike, Inc. (collectively “Nike”) appeal from the
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Chapter 16 - International Ethics and Law
judgment of the U.S. Court of International Trade. That court held that Nike shoes would be
taxed at a rate of 20% rather than the 6% rate that Nike alleged applied. In rejecting the
importers’ arguments, the court determined that the footwear at issue could not be classified
under certain subheadings, dutiable at 6%, which expressly excluded footwear containing “a
foxing or foxing-like band.” The Court of International Trade interpreted the tariff term
“foxing-like band” as applying to athletic shoes having an externally visible band applied or
molded at the sole and overlapping the upper.
Nike asserts that the term “foxing-like band” is applicable only to shoes resembling the
traditional sneaker or tennis shoe and thus argues that the exception cannot apply to the
modern day athletic shoe containing a mid-sole. Additionally, Nike asserts that Customs has
permitted numerous athletic shoes to enter the U.S. without classifying them as possessing a
“foxing-like band.” The “foxing or foxing-like band” exception was inserted to capture footwear
that competed with the domestic footwear industry. The Tariff Classification Study states that if
the athletic footwear has a visible band formed by the sole overlapping the upper (such that it
resembles the traditional sneaker or tennis shoe), it falls within the exclusion.
The specific issue is whether the “foxing-like band” exclusion in the tariff provisions applies to
athletic shoes in which part of the “band “ overlapping the upper is formed by a mid-sole rather
than exclusively by the outer sole. The court held that it did.
V. Doe v. Unocal Corp., 963 F. Supp. 880 (C.D. Cal. 1997) (See Sovereign
Immunity, p. 723)
Syllabus
According to plaintiffs’ complaint, SLORC is a military junta that seized control in Burma in
1988 and MOGE is a state-owned company controlled by SLORC that produces and sells
energy products. Plaintiffs seek relief for alleged international human rights violations
perpetrated by defendants in furtherance of defendants Unocal, Total and MOGE’s joint
venture, the Yadana gas pipeline project. Plaintiffs contend that the FSIA’s commercial activity
exception exposes SLORC and MOGE to suit in U.S. courts. Plaintiffs contend that SLORC
and MOGE are not entitled to immunity because this case falls within clauses two and three of
the commercial activity exception.
The legally significant acts giving rise to plaintiffs’ claims occurred in Burma, not in the U.S.
Accordingly, plaintiffs cannot satisfy the direct effects requirement of the commercial activity
exception, and SLORC and MOGE are entitled to sovereign immunity from plaintiffs’ suit.
VI. Mitsubishi Motors v. Soler Chrysler–Plymouth, 473 U.S. 614 (1985)
Syllabus
Mitsubishi requested arbitration pursuant to an arbitration agreement. Soler objected to
arbitration on the grounds that the issues involved (e.g., antitrust) were not appropriate for
arbitration. The district court ordered arbitration but the court of appeals reversed as to the
antitrust claims. The Supreme Court ordered arbitration of all claims, noting the increasing
importance arbitration had assumed in international transactions.
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Chapter 16 - International Ethics and Law
Selected Bibliography
Fred Barbash, “Europe’s Quest of Common Currency, by 1999, Proving Divisive But Fervent,”
Washington Post, Sept. 23, 1996, p. A15.
Harm J. De Blij, Why Geography Matters: Three Challenges Facing America: Climate Change, The
Rise of China, and Global Terrorism (Oxford University Press 2005).
Victoria De Grazia, Irresistible Empire: America's Advance Through Twentieth-Century Europe
(Belknap Press 2005).
Martin du Bois, “Euro Disney’s Dress Code Faces Challenge By French Prosecutor,“ Wall Street
Journal, Dec. 28, 1994, p. B7.
Maggie Farley and James Gerstenzang, “China Piracy of U.S. Products Surges Despite Accord,” Los
Angeles Times, Oct. 10, 1995, p. A1.
Thomas L. Friedman, “Small and Smaller,” New York Times, March 4, 2004, p. A29.
Jeffrey C. Isaac, “Thinking About the Antisweatshop Movement,” Dissent, Fall 2001, p. 100.
Nicholas D. Kristof and Sheryl WuDunn, “Two Cheers for Sweatshops,” New York Times Magazine,
September 24, 2000, p. 70.
Barry C. Lynn, End of the Line: The Rise and Coming Fall of the Global Corporation (Doubleday
2005).
Hiroshi Matsumoto, “Legal Harassment of Foreign Firms: The Case of the U.S. Steel Industry,” Pacific
Basin Quarterly, Fall 1993, p. 3.
John McCarron, “U.S. Suffering From Embarrassing Morality Gap,” Chicago Tribune, March 5, 1995,
section 7, p.2.
Janet Moore, “Factory Abused Workers,” Star Tribune, February 17, 2001, p. 1D.
David B. Rivkin, Jr. and Lee Casey, “The Rocky Shoals of International Law,” The National Interest,
Winter 2000/01.
David E. Sanger, “Analysis: U.S. Exports Its Values in Global Trade Accords,” New York Times, Feb.
17, 1997.
Teri Sforza, “TV Carries America’s Image to the World,” Des Moines Sunday Register, October 14,
2001, p. 4E.
Joe Skelly, “The Caux Round Table Principles for Business,” Business Ethics (Minneapolis, MN
55408).
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Chapter 16 - International Ethics and Law
Lenore Skenazy, “Labor Costs 11 Cents, Sweatshirt $22.99,” Courier, May 1, 2001, p. A6.
“U.S. Ranks 12th on Globalization Index Out Today,” USA Today, January 8, 2001, p. 6A.
Stephen M. Walt, Taming American Power: The Global Response to U.S. Primacy (W.W. Norton 2005)
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