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International Law: A. Ashta 1

International Law for

Business

1. Going Global

Arvind Ashta

Course presented at

American Business School, Paris

Based on: Carolyn Hotchkisss book

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Outline

1. Introduction

2. Growth of internatinal business3. Growth of international Commercial

Law

4. Structure of International Business

5. Multinational Enterprise6. Law, Business and Economic

Development

7. The Global Manager

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Introduction

1. Countries regulate imports of1. Goods

2. Technology

3. Capital

4. People/Labour

2. Countries regulate exports1. Stimulate / Disincentives

2. Capital

3. Treaties simplify trade or investments

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Growth of internatinalbusiness

1. Ancient Trading Systems1. Barter or gold

2. Travellers

2. Midieval Trade (7th century)1. Seasonal and permanent markets/ trade

fairs

2. Tax at markets

3. Tax on routes/ roads or rivers

4. Treaties to end taxes bilaterally

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Growth of internatinalbusiness.

3. Trade and Colonial Power (1600)1. Colonies were source of raw material

2. Colonies were markets for finished goods

3. Merchants given exclusive geographicrights1. - E. India Trading Company; Hudson Bay

Company4. Multinational enterprises (1875)

1. Companies operating in many nations

2. MNCs bigger than some countries

3. Potential for conflict between States andcorporations

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Growth of internatinalbusiness.

5. Globalization (1975)1. Markets no longer treated as separate but

one

2. Standardized low-cost large-scale highquanlity products wipe out differentialsegmentation advantages

3. Mobiity of capital forces down labourpower and controls costs

See Theodore Levitt: The golablaization ofMarkets, HBR May-June 1983

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Growth of internationalCommercial Law

1. Code of Hamurabi

1. Merchants rights1. Penalty for breach of contract 5 times

2. Commercial practices

2. The Law Merchant

3. The New Law Merchant4. 19th century treaties

5. 20th century: reinternationalization

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The Law Merchant (7thcentury)

1. Trade fairs led to customs

2. Trade fairs travelled: customs travelled

3. Commercial law developed uniformly1.Merchants judged by their own law

1.Otherwise quality of justice varied with the city

2.Even today in France

2.Speed (before ship left)

3.Informality (good faith) based on knowlege ofcustoms

4.Held to promise: unless some fundamentalunfairness or surprise

4. Magna Carta: gives right to safe conduct

for business

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Law Merchant

Covered contracts Validity, Enforcement, Remedies for

breach

Credit and commercial documents Checks, Promissory notes, bills of lading

Agency and fiduciary relationships

Bankruptcy

Partnership and Joint Ventures

Trademarks and Patents

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Growth of InternationalLaw

3. The New Law Merchant (1600) Kingdoms consolidated

Commercial law codified into local nationallaw

Diluted the uniformity of international lawfrom country to country

4. 19th century treaties1. Ocean Transport

1.Uniform rules for carrying goods

2. Air Transport1.Above rules were adapted

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20th century:

Reinternationalization

1. International Institutions

2. Sale of Goods

3. Trademarks, Patent and copyrights(TRIPS)

4. Regulate investment and businesspractices of MNCs on intenrational basis

5. Globalization changes name of game:States compete for MNCs and gloablfirms

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Competition amongnations

1. Competitive advantage of nations:

1. Encouraging perpetual innovation

1.Stimulate early demand for advanced products

2.Promote higher standards

2. Specialized training to increase productivity

1. Efficiency, 2. quality

3. Favourable business climate

1. low State Aids, low tax,

2. but control / avoid mergers, increase local

competition4. Export cutltural and political values

5. State support in opening foreign markets and notdefending national ones.

2. All this implies new laws to attract enterprise

(Porter, HBR March-April 1990)

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Structure of InternationalBusiness

1. Sales Relationships

2. Licencing Relationships3. Investment Relationships

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Sales Relationships

1. Direct selling

1.Trade fairs1.Intermediaries

1.Agents : doesnt contract in his ownname

2.Distributors

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Licencing Relationships

1.Patent: Sell the right to produce

abroad2.Trademarks: right to sell using

brand name

3.Copyright: right to copy and sell4.Franchise: usually trademark,

sometimes patent

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Investment Relationships

1. Branch1. Not a separate legal entity

2. Factory, warehouse or office

2. Subsidiary1. Separate legal entity

2. 100% or 50% or

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Multinational Enterprise

1. Many countires

2. Using different structures in differentcountries1. Subsidiaries

2. Joint-ventures

3. Branches

4. Franchises

5. Exports1.Direct

2.Agents

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Bulova V. Hatorri

For parent, Hattori, to be in NYCjuridiction, need additional factors Direct and indirect control of distributors

Treating subsidiary as incorporated

division Treatin subsidiar as a ent

Carribean South America Europe

Seiko Time N.Y. Pulsor Time N.Y. SPD Precision N.Y.

Haze Brazil

Seiko Time Brazil

SCA (N.Y.)

Hattori (Tokyo)

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Bulova V. Hattori

Hattori:

No presence in US:

No offices, No bank accounts,

No personnel,

No licence Arms length trading with subsidiaries

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Bulova V. Hattori

Court: However 100% ownership

Interchange and overlap of directors Intercompany loans made to subsidiaries

Financial accoutns are consilidated

Marketing brochures printed in Tokyodistributed in US

Subsidiaries sole activity is promoting Hattoriproducts

Subsidiaries do not manufacture

Uniform control ovr markting is intended

Integrated operation: At present, no

independence

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EconomicDevelopment

1.Old division

1.First world (US, USSR)2.Second World (W. Europe, Japan)

3.Third world: LDCs

2.No longer relevant1.Korea, Singapore, Taiwan, Chile,

Brazil

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Common concerns

International law reflects interests ofdeveloped nations

Ignores experience of LDCs

Which law: nations want their own law to apply Which judge: nations want own judges to decide

MNCs: development or exploitatin? Bring technology, training, capital, employment

But monopoly power, distorsions, corruption

removes more money than it invests (dividends) MNCs keep countires dependant (eco colonialism)

NIEO (1974): equality, decrease gap,

sovereign right to nationalize

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The Global Manager

Speed of change Technology

Political transformation

Transfers (Work abroad)

Skills required Anticipate, lead and implement change

Adapt to new environment

Accomodate differences in backgrounds No right or wrong : only different

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