Chapter 07 – The International Legal Environment: Playing by the Rules
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Chapter 7 – The International Legal Environment: Playing by
the Rules
Teaching Objectives
This chapter deals with two broad issues involving the legal environment. The first issue is concerned
with the problems that arise with international commercial contracts and settling disputes when they arise.
Since there is no international commercial law or international commercial courts, disputes must be
settled under the laws of one of the countries where the parties of the contract reside or, if an arbitration
clause is included in the contract, by arbitration. Although there is no international commercial law per se,
the agreement to enforce arbitration decisions that exists among a large number of countries does create a
system that approaches international commercial court. The second issue concerns the common law bases
for the U.S. legal system which creates problems for U.S. companies when interpreting the laws in
countries whose legal systems are based either on code, socialist, or Islamic law. A review of the different
legal systems is important for students to appreciate the problems that arise in protecting such things as
intellectual property rights, etc. I continue to discuss socialist law even though most formerly socialist
countries are moving toward a different system. My reasoning is that the legacy of a socialist legal system
continues to influence how businesspeople think about legal matters. The teaching objectives of this
chapter are to:
1) Help students understand the four legal systems of the world’s countries.
2) Appreciate the critical nature of jurisdiction when legal disputes arise and thus, the need for
solutions other than litigation.
3) Understand the difficulty of protecting intellectual property rights and how those rights can easily
be lost if the company depends on its rights as defined in a common law country to protect it in a
code law country.
4) Know that in addition to the commercial laws within in a country, a U.S. company must abide by
certain U.S. laws as well.
Comments and Suggestions
1. We use Case 2-6, When International Buyers and Sellers Disagree, to open the discussion on this
In the discussion of intellectual property rights there are two points to make: 1) gaining legal
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We differentiate between piracy and counterfeiting. Although most discussions do not differentiate
between the two, they are two separate problems. When piracy occurs, the pirated product is of the
same quality as an original, for example, a company duplicates a piece of software or copies a video
cooperation of host countries and efforts by the U.S. government.
Lecture Outline
I. The International Legal Environment: Playing by the Rules
II. Global Perspective—The Pajama Caper
III. Bases for Legal Systems
A. Common and Code Law
B. Islamic Law
C. Marxist-Socialist Tenets
IV. Jurisdiction in International Legal Disputes
V. International Dispute Resolution
A. Conciliation
B. Arbitration
C. Litigation
VI. Protection of Intellectual Property Rights—A Special Problem
A. Counterfeiting and Piracy
B. Inadequate Protection
C. Prior Use versus Registration
D. International Conventions
E. Other approaches for protecting IP
VII. Cyber Law—Unresolved Issues
A. Cybersquatters
B. Taxes
C. Jurisdiction of Disputes and Contracts
VIII. Commercial Law within Countries
A. Marketing Laws
B. Green Marketing Legislation
C. Foreign Countries’ Antitrust Laws
IX. U.S. Laws Apply in Host Countries
A. Foreign Corrupt Practices Act
B. National Security Laws
C. Antitrust Laws
Chapter 07 – The International Legal Environment: Playing by the Rules
D. Antiboycott Laws
E. Extraterritorially of U.S. Laws
X. Export Restrictions
A. National Security Laws
B. Determining Export Requirements
C. ELAIN, STELA, ERIC, and SNAP
XI. Summary
Discussion Questions
1.
Define:
Common Law
Code Law
Islamic Law
Marxist-Socialist tenets
Prior use vs. registration
Conciliation
Arbitration
Litigation
Cybersquatters
Prior use
Registration
2. How does the international marketer determine what legal system will have jurisdiction when legal
disputes arise? Since there is no judicial body to deal with legal problems arising between citizens of
3. Discuss the state of international commercial law.
Commercial law, as seen in Question 1, varies in meaning between common law (where commercial
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4. Discuss the limitations of jurisdictional clauses in contracts.
In general, jurisdictional clauses, when present in a contract, are honored by the courts. For example,
5. What is the “objective theory of jurisdiction?” How does it apply to a firm doing business within a
foreign country?
6. Discuss some of the reasons why it is probably best to seek an out–of-court settlement in international
commercial legal disputes rather than sue.
7. Illustrate the procedure generally followed in international commercial disputes when settled under
the auspices of a formal arbitration tribunal.
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8. What are intellectual property rights? Why should a company in international marketing take special
steps to protect them?
9. In many code law countries, ownership of intellectual property rights is established by registration
rather than prior use. Comment.
Most countries of the world follow a code law principle concerning property rights. That is, rights are
10. Discuss the advantages to the international marketer arising from the existence of the various
international conventions on trademarks, patents, and copyrights.
The obvious advantage to international marketers arising from the existence of the various
11. “The legal environment of the foreign marketer takes on an added dimension of importance since
there is no single uniform international commercial law which governs foreign business transactions.”
Comment.
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12. Why is conciliation a better way to resolve a commercial dispute than arbitration?
13. Differentiate between conciliation and arbitration.
The main difference between conciliation and arbitration is that neither side is bound to a conciliation
settlement as would be the case under arbitration. Conciliation can be either formal or informal.
14. Assume you are a vice-president in charge of a new business–to-business e-commerce division of a
well-known major international auto parts manufacturer. A) A cyber squatter has registered the
company name as a domain Web name. What are your options to secure the domain name for your
company? B) Discuss the steps you should take to ensure worldwide protection of your domain name.
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The U.S. has taken a giant step to develop laws for dealing with domain name pirates by passing the
Anticybersquatting Consumer Protection Act, a formal policy for protection of trademark owners. It
15. Discuss the issues of a website being sued for libel for information posted on the site.
The United States has taken a giant step in dealing with domain name pirates by passing the Anti-
cybersquatting Consumer Protection Act (ACPA) and the World Intellectual Property Organization
(WIPO) established a structure through the Internet Corporation for Assigned Names and Numbers
(ICANN) in which anyone registering a domain name with complying registries has to agree to
16. Discuss the motives of a cybersquatter. What resources does a company have to defend itself against
a cybersquatters?
Chapter 07 – The International Legal Environment: Playing by the Rules
Another ploy of CSQ is to register familiar names and known trademarks that divert traffic from
intended destinations or to sell competing products. eBay, the world’s largest online auction house,
was embroiled in a dispute with an entrepreneur in Nova Scotia who registered http://www.ebay.ca/,
The Web address now takes you directly to a Hasbro site.
In addition to CsQs hijacking trademarks, personal names and other intellectual property, lawsuits
involving libel, defamation, and product liability, are creating legal quagmires for Internet users.
Consider a case involving Dow Jones and an Australian industrialist over an allegedly defamatory