564 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION
posed problems for some businesspersons because certain legal terms or phrases in documents governed by, say, U.S.
or English law have no equivalents in the French legal system.
FOR CRITICAL ANALYSIS
How might language differences affect the meaning of certain terms or phrases in an international contract?
ENHANCING YOUR LECTURE—
ARBITRATION V. LITIGATION
One of the reasons many businesspersons find it advantageous to include arbitration clauses in their international
contracts is that arbitration awards are usually easier to enforce than court judgments. As mentioned, the New York
Convention provides for the enforcement of arbitration awards in those countries that have signed the convention. In
contrast, the enforcement of court judgments normally depends on the principle of comity and bilateral agreements
FOR CRITICAL ANALYSIS
What might be some other advantages of arbitrating disputes involving international transactions? Are there any
disadvantages?
a. Telnikoff v. Matusevitch, 159 F.3d 636 (D.C. Cir. 1998).
IV. U.S. Laws in a Global Context
A. U.S. ANTITRUST LAWS
The text explains that persons in foreign nations are subject to U.S. antitrust laws, as well as protected by those
laws from illegal anticompetitive acts committed by U.S. citizens. Any conspiracy that has a substantial effect on
U.S. commerce is within the reach of the Sherman Act, whether the violation occurs outside the United States
and whether a foreign government or person commits it.
CASE SYNOPSIS—
Case 23.3: Khulumani v. Barclay National Bank, Ltd.
CHAPTER 23: INTERNATIONAL LAW IN A GLOBAL ECONOMY 565
Khulumani and many other plaintiffs filed multiple claims in U.S. federal district courts on behalf of victims of
South African apartheid under the Alien Tort Claims Act (ATCA) against hundreds of defendants, including Barclay
National Bank, Ltd. The actions were transferred to a single district court, which granted many of the defendants’
motions to dismiss on the ground that the plaintiffs did not establish subject matter jurisdiction under the ATCA. The
plaintiffs appealed.
The U.S. Court of Appeals for the Second Circuit vacated the dismissal and remanded the case. Grounds for the
plaintiffs’ claims were offered in two concurring opinions. One posited that liability on the facts was “well established
…………………………………………………………..……………………………………………………………………
Notes and Questions
How did the corporate defendants allegedly benefit from “aiding and abetting” South Africa’s apartheid system?
Under apartheid, the white minority government in South Africa maintained a system of cheap labor, among other
things, which increased the profitability of those companies, including the defendants, who took advantage of it. Some
of these firms continued to do business with the repressive regime even after the United Nations imposed sanctions on
the South African government to reduce or eliminate the “advantages” of apartheid.
for the Nuremberg war crimes trials after World War II recognized such liability. Treaties that recognize the cause
include the Rome Statute of the International Criminal Court and those that created the tribunals for trying crimes in
Rwanda and the former Yugoslavia.
A dissenting judge agreed that international law was the proper basis for finding liability but opined that the court
should defer to the government of South Africa—exercising jurisdiction in this particular case would undermine
important U.S. interests.
international law norm; (2) by encouraging, advising, contracting with, or otherwise soliciting a principal tortfeasor to
established customary international law norm in the process of completing that act; or (3) by facilitating the
commission of human rights violations by providing the principal tortfeasor with the tools, instrumentalities, or
566 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION
services to commit those violations with actual or constructive knowledge that those tools, instrumentalities, or
services will be (or only could be) used in connection with that purpose.”
ANSWERS TO QUESTIONS AT THE END OF CASE 23.3
1. What are the ramifications for the defendants of the ruling in this case? Because the U.S. Court of Appeals for the
could face huge claims for aiding and abetting the South African government in maintaining its apartheid system.
2. How might such “prudential concerns” as the principle of comity affect the eventual outcome? The U.S. Court of
Appeals for the Second Circuit acknowledged that “the views of foreign nations are an important consideration under
B. INTERNATIONAL TORT CLAIMS
All nations have laws governing torts, but there are significant variations in the application and effect of the laws.
The Alien Tort Claims Act of 1789 allows foreign citizens to bring suits in U.S. courts for injuries allegedly caused
by violations of international tort law. Some cases have involved violations of human rights. Some have alleged
environmental crimes.
ADDITIONAL BACKGROUND—
Cultural Differences
To conduct business successfully in a foreign nation can require knowledge of that nation’s laws and some
familiarity with its cultural system, economy, and business climate. Cultural differences can cause problems—language
and communication (gestures can be misinterpreted, for example), colors and numbers (which can have different
meanings in different countries), perceptions of time, and management styles (confrontational v. nonconfrontational,
CHAPTER 23: INTERNATIONAL LAW IN A GLOBAL ECONOMY 567
for instance).
that a relationship between contracting parties will be long term. Contracting parties in these cultures often expect
TEACHING SUGGESTIONS
1. International business transactions require students to visualize situations in which several different contractual
2. Many foreign governments have claimed that arguably commercial activities carried out by foreign governmental
agencies are functions of the state and should therefore be protected from suit in U.S. courts. Ask students to discuss
how a useful test for distinguishing among governmental and commercial activities might be developed. What sorts of
information would someone have to have to decide whether a particular activity was commercial or governmental in
nature? Should the designation focus on the type of ownership (private v. government) of the enterprise or the nature
of the activity itself?
3. The expropriation of property by foreign states is permitted under international law but the act of state doctrine
might be made.
4. Explain that historically, Americans have not been as active in international trade as have citizens and businesses
of other nations. Over the last decade, however, the federal and state governments in the United States have been
encouraging domestic firms to compete in international markets. Ask students to discuss why Americans did not
widely participate in international trade. What effect has this had on American attitudes towards other nationals?
What effect has this had on other nationals’ attitudes towards Americans? Why is the situation changing?
5. Discuss some of the effects that the increasingly smaller size of the global community is having on the cultural,
legal, and other differences among nations. Points may be well illustrated by anecdotes—some students may have
traveled to other countries and heard rock music playing from a cassette deck in a remote location or seen video tapes
of American movies available in unlikely places—as well as by the sweep of larger events. What effects are likely to
result from the increasing use of English as the international language of business? Already, English is being taught by
within the borders of those countries. Will English become the truly international language? What effects might this
6. Bring to class various examples of international contracts and discuss the differences among the provisions. To
govern such a contract, why would one country’s law be chosen over another’s? Why might the parties choose the law
568 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION
of a country of which neither is a citizen?
Cyberlaw Link
What effect might the Internet have on the uniformity of law among nations? Might the effect be different on
international laws?
DISCUSSION QUESTIONS
1. Discuss the principle of comity. Under what is known as the principle of comity, one nation will defer and give respect
2. Discuss the act of state doctrine. The act of state doctrine is a judicially created principle that provides that the judicial
branch of one country will not examine the validity of public acts committed by a recognized foreign government within its own
3. What is an international business transaction? An international business transaction is any binding agreement
4. What is the difference between expropriation and confiscation? Expropriation occurs when property is taken and the
5. Are common law and civil law systems wholly distinct? No. For example, although the United States has a common
6. What are some of the differences among common law and civil law systems? The judges of different common law
7. How does the Sherman Act affect international business? Section 1 of the Sherman Act declares that its provisions are
8. Do U.S. discrimination laws apply in foreign countries? Title VII of the 1964 Civil Rights Act regulates employment
9. What are some of the differences among nations’ judicial systems? Judges play a similar role in virtually all countries:
10. What are some of the significant variations in the practical application and effect of contract laws among nations? The
requirements of offer and acceptance are common, although what is considered an offer varies by jurisdiction. Many nations
(such as Germany) require that an offer, once made, must remain open for acceptance for some minimum period of time.
Germany also does not require the exchange of consideration for a contract to be legally binding (agreements to make gifts may
thus be enforceable by the donee). In the United States, consideration is a required element for a valid contract, and promises
to make gifts are normally not enforceable. In Saudi Arabia, written contracts should be formally witnessed by two males or a
male and a female, and contracts for goods forbidden in the Koran are illegal and unenforceable. In China, some types of
570 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION
ACTIVITY AND RESEARCH ASSIGNMENTS
1. Obtain and fill out copies of detailed form international licensing and franchise agreements and distribute these copies
to the students. Divide the class into two groups and ask the students to advise the licensor (franchisor) or the licensee
2. How does a custom or practice become part of international law? Much of what we know as international law is based
3. Have students research other nations to determine which currently represent good investments for U.S. businesses.
Ask them to note what makes such research difficult (the unreliability of statistics, particularly in developing countries). Have
them outline the major changes in the last forty years that make some places more amenable than others (the end of World
War II, the fall of communism, etc.). Why have some areas remained unchanged? What are the factors that cause or allow a
4. Ask students to research the investments of domestic firms in other countries to discover the common pattern (in
neighboring countries, in former colonies, and in places with valuable resources, large domestic markets, and educated
workforce). The United States is the leading host nation for foreign investment. Besides fulfilling all of the criteria of the
common foreign investment pattern, what other factors influence other nationals to invest here (fewer trade barriers, the
world’s most stable and sound economy)?
ANSWERS TO ESSAY QUESTIONS IN
STUDY GUIDE TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION
BY HOLLOWELL & MILLER
1. In what ways may a company conduct international business? Exports. Most companies initially become involved in
CHAPTER 23: INTERNATIONAL LAW IN A GLOBAL ECONOMY 571
nology to foreign manufacturers if they wish to avoid the expense of building overseas factories. Licenses need not be
restricted to patented devices but may also include products that are made using trade secrets. Franchising. A U.S. firm may
2. How does the Foreign Sovereign Immunities Act affect commercial activities by foreign governments? In 1976, the U.S.
Congress codified the rules under which foreign states are immune from suit in the Foreign Sovereign Immunities Act (FSIA).
The FSIA governs the circumstances in which an action may be brought in the United States against a foreign nation, including
attempts to attach the foreign state’s property. The passage of the FSIA was prompted in part by the desire of Congress that
REVIEWING—
INTERNATIONAL LAW IN A GLOBAL ECONOMY
Robco, Inc., was a Florida arms dealer. The armed forces of Honduras contracted to purchase weapons from
Robco over a six-year period. After the government was replaced and a democracy installed, the Honduran
government sought to reduce the size of its military, and its relationship with Robco deteriorated. Honduras refused to
honor the contract by purchasing the inventory of arms, which Robco could sell only at a much lower price. Robco filed
a suit in a federal district court in the United States to recover damages for this breach of contract by the government
of Honduras. Ask your students to answer the following questions, using the information presented in the chapter.
1. Should the Foreign Sovereign Immunities Act (FSIA) preclude this lawsuit? Why or why not? Because the armed
2. Does the act of state doctrine bar Robco from seeking to enforce the contract? Explain. The act of state doctrine
3. Suppose that prior to this lawsuit, the new government of Honduras had enacted a law making it illegal to
purchase weapons from foreign arms dealers. What doctrine might lead a U.S. court to dismiss Robco’s case in that
situation? The principle of comity might apply here. This principle is a doctrine of deference. Under this principle, one
4. Now suppose that the U.S. court hears the case and awards damages to Robco, but the government of Honduras
has no assets in the United States that can be used to satisfy the judgment. Under which doctrine might Robco be able
to collect the damages by asking another nation’s court to enforce the U.S. judgment? Under the principle of comity,
one nation will defer and give effect to the laws and judicial decrees of another country, as long as those laws are
consistent with the law and public policy of the accommodating nation. This would be very useful to Robco in its
attempt to collect damages under the award. Robco could take the judgment issued by a U.S. court to any nation in
which the government of Honduras does have assets and ask that nation’s court to enforce the judgment under the
principle of comity.
DEBATE THIS:
The U.S. federal courts are accepting too many lawsuits initiated by foreigners that concern matters not relevant
to this country. Our federal courts are already overwhelmed by normal lawsuits that concern purported wrongs
committed on U.S. soil that involve residents of this country. Why should we become the preferred jurisdiction for
lawsuits that involve human rights issues in other countries? Why should we become the preferred jurisdiction for
purported employment discrimination that might have taken place outside of the U.S.? We are not the world’s
conscience.
CHAPTER 23: INTERNATIONAL LAW IN A GLOBAL ECONOMY 573
ANSWERS TO QUESTIONS—
SPECIAL CASE ANALYSIS
Case No. 23.3
Khulumani v. Barclay National Bank, Ltd.
United States Court of Appeals, Second Circuit, 2007.
504 F.3d 254.
(a) Issue: What was the plaintiffs’ claim in this case? The plaintiffs claimed that the defendants had “aided and
abetted” the government of South Africa in its maintenance of a repressive system of apartheid. These actions
allegedly economically benefited the corporate defendants.
(c) Applying the Rule of Law: How did the trial court respond to the parties’ contentions, what was the appellate
court’s position, and why? The trial court (a federal district court in the “Southern District of New York”) dismissed the
plaintiffs’ complaint, holding that allegedly aiding and abetting violations of international law does not provide a basis
for jurisdiction under the ATCA. The U.S. Court of Appeals for the Second Circuit vacated this dismissal, ruling to the
contrary that “a plaintiff may plead a theory of aiding and abetting liability under the ATCA.” With respect to the
concerns of the defendants, the appellate court reasoned that “a policy of case-specific deference to the political
branches” could be appropriate in determining the status of the plaintiffs’ claim and should be part of the lower court’s
analysis.
(d) Conclusion: Did the court issue an ultimate ruling with respect to the plaintiffs’ claim in this case? Explain. No, the
court did not ultimately rule on the defendants’ liability with respect to the plaintiffs’ claim here. In this case, the