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International Business LawLAW 3304 1

INTERNATIONAL BUSINESS LAW

Introduction to International and Comparative BusinessLaws

Responsibilities of States for the Treatment of Aliens andForeign Businesses

Disputes Settlement (Resolution and Litigation) Foreign Investment

Acquisition of Shares and Undertakings

Taxation

Services and Labor

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CHAPTER 1 INTRODUCTION TO INTERNATIONAL & COMPARATIVE BUSINESS LAWS

International Laws

Business Laws

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International Laws International law consists of rules and

principles which govern the relations anddealings of nations with each others.

Most other countries referred to as PublicInternational Law, concerns itself only with

questions of rights between several nationsor nations and the citizens or subjects ofother nations.

Private International Law deals with

controversies between private persons,natural and juridical, arising out of situationshaving significant relationship of more thanone nation.

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International Law includes the basic, classicconcepts of law in national legal systems

status, property, obligation and tort. It also includes substantive law, procedure,

process and remedies.

International Law is rooted in acceptance bythe nation states which constitute the system.

Customary law and convention law areprimary sources of international law.

Conventional international law derives frominternational agreements and may take anyform that the contracting parties agree upon.

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International law is a part of the law of theUnited States only for the application of its

principles on questions of international rightsand duties.

It does not restrict the United States or anyother nation from making laws governing its

own territory. International law impose upon the nations

certain duties with respect to individuals.

It is a violation of international law to treat analien in a manner which does not satisfy theinternational standard of justice.

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However, in the absence of a specificagreement an individual cannot bring the

complaint. Only the state of which he is anational can complain of such a violation beforean international tribunal.

An international organization is one that created

by international agreement or which hasmembership consisting primary of nations. Tovitalize the status of international organization ofwhich United States is a member and facilitatetheir activities Congress has enacted theInternational Organization Immunities Act,which among other provisions defines thecapacity of such organizations.

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The United Nations, the most influential

among international organizations, wascreated on June 26, 1945. The declaredpurposes of United Nations are to maintainpeace and security, to develop friendly

relations among nations, to achieveinternational cooperation in solvinginternational problems and to be a centerfor harmonizing the actions of the nations

and attaining their common ends.

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Business Laws The law of a particular state is the body of

rules designed to regulate human conductwithin the state. Broadly speaking there arethree types of rule: Rules which forbid certain types of behaviour

under threat of penalty Rules which require people to compensate

others whom they injure in certain ways

Rules which specify what must be done to order

certain types of human activity, eg to form acompany, to marry, or to make a will

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The law which is enforced by the courts mustbe distinguished from what is sometimes

referred to as natural or moral law. The basic aim of law is the attainment ofjustice in society. However, in somesituations the degree of justice hoped for is

not achieved. For example: Compensation for injuries usually depends on

providing that someone else is at fault.

The rules regarding mistake in the formation of a

contract often operate to determine which toinnocent parties must bear all of the loss.

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It would therefore be an oversimplificationto say that most people obey the lawbecause it is just, or because it coincideswith their view of which is morally correct.

Law is also closely related to force andauthority and these relationships wouldhave to be examined in order to properlyexplain the intrinsic nature of law, and tofind out why most people obey the law.

An alternative to explaining law byreference to its intrinsic nature is to explainit by reference to what it does.

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The characteristics of English Law

Continuity Absence of codification

The system of precedent

The judiciary Common law and equity

The accusatorial procedure

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Civil and criminal law

Criminal law a crime is regarded as awrong done to the State. Prosecutions areusually commenced by the State, althoughthey may be brought by a private citizen.

Criminal and civil hearings take place indifferent courts with different rules ofprocedures.

There is also a different standard of proof.

In a criminal trial the prosecution mustprove the accuseds guilt beyondreasonable doubt.

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English Legal History Prior to 1066 there existed a primitive legal

system based on local custom. The ascendancy of the Kings courts over

the local courts took about 300 years,during which the King gradually assumed

control through his itinerant justices, andestablished a central system of courts.

Many factors accounted for the growth ofthe Kings courts and the decline of the

local courts including: The evolution of the writ system The STATUE OF GLOUCESTER 1278

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Common law and equity

Similarities between Common Law andEquity

Equity means natural justice, but although inspiredby these ideas, equity no longer represents the

flexible concept of natural justice. Both developed in an English context.

Both have been partly embodied in statute, forexample Sale of Good Act 1979.

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Difference between Common Law and

Equity Common law was constructed as a complete

and independent system, whereas equitydeveloped to remedy the defects of the

common law.

Their content remains separate.

Each system had different procedural rule.

By its nature the Court of Chancery wascertain to come into conflict with the CommonLaw courts.

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CHAPTER 2 RESPONSIBILITIES OF STATES FOR THE TREATMENT OF ALIENS AND

FOREIGN BUSINESSES

Aliens Businesses

Foreign Businesses

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Responsibilities of States Companies have been subject to government

regulation for the protection of the environmentand labor rights, but the new debate that isdeveloping at the theoretical and practical level iswhether private agents, including business sector

are legally obligated to respect human rightsinternationally.

Companies and their employment practicesindeed can violate human rights through how

their production processes impact workers andtheir communities, the environment or virtue oftheir association with repressive politicalauthorities or governments.

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Companies indirect obligations are derived

from this obligation of the state. International law could impose direct legal

obligations on companies, obligations thatcould be enforced at the international level

when the states are not disposed to or notable to do it themselves.

The Universal Declaration of Human Rightsexhorts individuals as well as institutions topromote respect for human rights andensure their recognition and applications.

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States must also take measures to prevent or

punish abuses committed by private agentsand moreover, they have an obligation toprovide victims with effective legal recourse todemand their human rights be respected.

The distribution of legal responsibilitiesbetween governments and companies is anevolving process, similar to the division ofresponsibilities between companies and the

individuals who run them.

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The Sub-Commission on the Promotion andProtection of Human Rights of the UN EconomicSocial Council in August 2003 at is 55th session,approved norms on transnational companiesand other businesses responsibilities on human

rights and decided to transmit these norms tothe Commission on Human Rights forconsideration and adoption in March 2004.

The proposed text begins with basic rights such

as freedom of opinion, speech and association,gender and racial equality, and safety at work.

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National legislation can be weak, and whenthis is not the case, the rules of procedure, thecosts, delays and relative weakness of thevictims in comparison with corporations makeit difficult to achieve total compensations forharms and injuries as a result of the process.

There is no regional strategy or funding in thewomens movement for identifying modelcases

There is no analysis from a genderperspective of the diverse responsibilities androles that each actor should have

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The U.S. Constitution has provided strong protectionsfor private property and economic liberties. The U.S.

has continued a leadership role in free trade witheight ratified free trade agreements, another signedagreement, and ongoing negotiations with othercountries.

Trade Policy The government imposes non-tariff barriers,

including quotas, tariff rate import quotas, anti-dumping provisions, countervailing duties, and

licensing requirements, on a number of goods.

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Fiscal Burden

Monetary Policy Foreign Investment

Foreign and domestic enterprises are treatedequally under the law, and foreign investors are

not required to register with or seek approval fromthe federal government. Foreign investments facerestrictions in banking, mining, defencecontracting, certain energy-related industries,

fishing, shipping, communication and aviation.

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Banking and Finance

The most dynamic and developed financialmarkets in the worlda large network of

national and regional banks providescompanies with capital and a broad array offinancial services.

Large multi-purpose money-centred banks withinternational reach manage corporate needsboth at home and broad.

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Wages and Prices Price controls apply to some regulated

monopolies in the United States and certainstates and localities control residential rents.

Property Rights Measures of property rights protection,

including an honest and independent judiciary,a sound commercial code and other laws forthe resolution of contract and property disputesbetween private parties, and the recognition offoreign arbitration and court rulings.

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Regulations

It is easy to establish a business. Firms maychoose a location on the basis of which stateslaw offer greater flexibility.

Informal Market

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CHAPTER 3 DISPUTE SETTLEMENT

Resolution and Litigation

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Resolution and Litigations

Disputes are generally considered to bedisagreements that involve negotiableinterests. Such issues can be settledthrough negotiation, mediation, or

adjudication.

They are generally short-term and, giventhe right process, lend themselves to the

development of mutually satisfactorysolutions.

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Dispute settlement therefore refers to theworking out of a mutually satisfactoryagreement between the parties involved.

Dispute settlement is primarily concernedwith upholding established social norms (of

right and wrong) and is aimed at bringingthe dispute to an end, without necessarilydealing with its fundamental causes.

Although the particular dispute might be

settled permanently, another similar orrelated dispute may arise again later if theunderlying causes are still there.

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A dispute arises when a member

government believes another membergovernment is violating an agreement

or a commitment that it has made in

the WTO.

The WTOs procedure for resolving

trade quarrels under the Dispute

Settlement Understanding is vital for

enforcing the rules and therefore forensuring that trade flows smoothly.

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Methods

Methods of dispute resolution include: Lawsuits (litigation)

Arbitration

Mediation

Conciliation

Many types of negotiation

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Dispute resolution processes fall into

two major types: Adjudicative processes, such as litigation

or arbitration, in which a judge, jury orarbitrator determines the outcome

Consensual processes, such as mediation,conciliation or negotiation, in which theparties attempt to reach agreement

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Judicial dispute resolution A competent and effective judge, arbitrator

and mediator can greatly aid the properfunctioning of the dispute resolution process.

Judges often experienced trial lawyers whohave litigated many cases over many years

before their appointment or election to thejudiciary.

Retired judges or experienced privatelawyers often become arbitrators ormediators, but trained and qualified non-legal dispute resolution specialists form agrowing body.

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Extrajudicial dispute resolution

Refer only to alternative dispute resolution,extrajudicial processes such as arbitrationand mediation used to resolve conflict andpotential conflict between and among

individuals, business entities, governmentagencies and states.

May not offer the fairest way for parties notin an equal bargaining relationship, forexample in a dispute between a consumerand a large corporation.

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Dispute resolution can also take place on-line by using technology in certain cases.

Online Dispute Resolution, a growing fieldof dispute resolution, uses newtechnologies to solve disputes.

It also involves the application of traditionaldispute resolution methods to disputeswhich arise online.

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The choice between litigation and

settlement of disputes. Consider alawsuit in which the plaintiff seeksmonetary damages from the defendant.Normally, the parties to the dispute have

the choice of either having the caseresolved in a court trial or instead settlingthe matter between themselves.

A private settlement has the advantageof saving them the costs of litigating thecase, which may be quite substantial.

Litigation may entail extensive out-of-

pocket attorneys fees, and in addition

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Any agreement to settle the case will

generate a surplus for the parties in theform of saved litigation costs that theparties can divide between themselves.

To the extent the outcomes of a trial isuncertain, litigation is risky, makingsettlement still more attractive if theparties are risk averse.

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CHAPTER 4 FOREIGN INVESTMENT

Foreign Investment

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Hi hi l St t f F i I t t

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Hierarchical Status of Foreign Investment

General Directorate of Investment and ExportPromotion (Governmental)

Management and coordination

Advisory services to investors and exporters

Bilateral negotiations between governments

Supervision of the operation of the Export Center Evaluation, formalization, registration and follow-up

of Investment and Export Contracts

Specific technical assistance to the export and

financial sectors

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Foreign Investment Committee

Shall be the entity in charge of qualifying andauthorizing, on behalf of the State, the entry offoreign capital within the legal framework of thislaw, stipulating the terms and conditions of thecorresponding Investment Contracts, and

monitoring compliance with the pertinent legal andcontractual provisions.

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Executive Secretary of The Foreign InvestmentCommittee

Receives, studies and informs the Committee onapplications for foreign investment and other petitionsor matters presented to it with respect to the same.

Prepares any necessary documentation and studies.

Keep the Registry of Investment and a Directory inwhich all the investments registered and in operationmust be kept.

Supervises foreign investment

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Obtains and processes information and resultsof the supervision which public institutions must

execute in respect of the obligations of foreigninvestors.

Negotiates before the different publicinstitutions the reports and authorizationrequired prior to the approval of theapplications.

Investigate the qualifications and suitability ofpotential foreign investors.

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Export and Investment Center Provides specialized technical assistance

to exporters and investors to develop theirproposals.

Promotes the creation of autonomousprivate sector agencies aimed at export

promotion. Provides training on exports and

investments to the private sector and thenational banking system.

Stimulates national and foreign investment,coordinating with the government actionsnecessary for its attainment.

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Taxes and tariffs foreign investment isgenerally subject to the fiscal regime ineffect on the date on which the contract issigned and may only be modified where itbenefits the foreign investors.

Access to loan foreign investors haveaccess to external financing sources withinthe debt limits authorized by the CentralBank. Access to domestic financing is forshort-term credit to be used as workingcapital and does not receive preferentialtreatment.

Industrial parks: no special incentives.

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CHAPTER 5 ACQUISITION OF SHARES AND UNDERTAKINGS

India

China

United Kingdom

USA

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India

The Supreme court makes a delicate

distinction among different governmentcompanies. There is one type, registeredunder the Companies Act, in which thecentral or state government holds major

shares. In the Balco judgment, the court has allowed

freedom to the government to divest theshares of such companies.

The banking and mines nationalisation lawsspecifically stated that the shareholding shallalways be held by government.

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China

Entity Purchases A foreign investor may directly acquire equity. By a foreign investor may be carried out

through an indirect offshore acquisition.

Indirect Equity Acquisitions An indirect offshore acquisition is possiblewhen the target is a foreign partys equity.

The foreign investor acquires equity in the FIEoffshore investor.

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Direct Equity Acquisitions

The foreign investor acquires equity in an FIE ordomestic entering the existing foreign or Chineseequity holders pursuant to an equity acquisitionagreement target through a subscription for newequity.

If the equity of a purely domestic enterprise isacquired by a foreign investor, conversion of FIEwill be required.

Operating FIEs are now permitted to invest in other

enterprises.

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A different regulatory regime isapplicable to foreign invested holdingcompanies.

Asset acquisition

Mergers

Domestic targets

Acquisition of Domestic companies

Acquisition of State-Owned companies

Acquisition of Listed companies

Acquisition of Legal Person and State-owned shares

Acquisition of share

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United Kingdom

The United Kingdom Government argued that itscase does not entail a restriction on the freemovement of capital, since access to the marketis not affected and BAAs Articles of Association

are governed by private company law and not by

public law. The Court rejects the United Kingdom

Governments arguments and does not examine

the issue of justification.

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The Court declares that the United Kingdomrules are contrary to the free movement of

capital. Refer to Commission v. Portugal (C36798),

Commission v. France (C-483/99) andCommission v. Belgium (C503/99) which

relate to Golden Shares. The Articles of Association of BAA plc (BAA),

a privatised undertaking which owns certaininternational airports in the United Kingdom,

create a special share held by the UnitedKingdom Government which empowers it togive consent to certain of the companysoperations.

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The Court of Justice points out, first, thatthe EC Treaty prohibits all restrictions on

the movement of capital between MemberStates and between Member States andthird countries.

Investments in the form of participationconstitute movements of capital under theCommunity legislation.

The Court thus draws attention to the fact

that both the United Kingdom rules entailrestrictions on the movement of capitalbetween Member States.

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USA The organisation, operation and liquidation of

corporation are regulated by the CorporationLaw.

In comparison with the provisions governing,the extensive provisions governing corporationprovide a detailed regulatory framework forcorporate activities, management andshareholder relations, greater financingflexibility and enhanced transparency, albeit at

the expense of the increased administrativeand publication costs associated with thesefeatures.

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Corporate Procedures

A corporation may be formed with a publicor private subscription of its sharesIncorporation with a public subscription,i.e., the offering of a corporations

securities to the public at large by meansof a prospectus and with the intermediationof brokers or brokerage firms, must beregistered with and approved by the

Comissao de Valores Mobiliarios (CVM),within five days of receipt of such funds.

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Corporate Capital The capital of a corporation must be

established in the by-laws and expressedin local currency Capital increases may beauthorized up to a previously set limit,without amendments to the by-laws.

The authorized capital may have as a limita certain amount in local currency or acertain quantity of shares.

Financial institutions other than leasingcompanies, may adopt the authorizedcapital system.

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Shareholders Rights and Duties Shareholders have the following rights that

cannot be taken away by means of amodification to the by-laws or by a decision ofthe Shareholders General Meeting Participation in the profits

Participation in the net assets of the corporation onliquidation

Supervision of the corporation management

A preemptive right to subscribe for shares and other

securities convertible into shares issued by thecorporation

Withdrawal from the corporation

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CHAPTER 6 - TAXATION

Tax Treaty

Direct and Indirect Taxes

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Tax Treaty Tax treaties exist between many countries

on a bilateral basis to prevent doubletaxation (taxes levied twice on the sameincome, profit, capital gain, inheritance orother item).

Tax treaties tend not to exist when eitherparty regards the other as a tax haven, forobvious reasons. There are a number ofmodel tax treaties published by variousnational and international bodies, such asthe United Nations and the Organisationfor Economic Co-operation andDevelopment (OECD).

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The concept of International DoubleTaxation

International double taxation, narrowly defined,occurs when two different states impose acomparable tax on the same potential taxpayer

on the same taxable item. For example,someone who is resident for tax purposes andwho makes an interest-bearing deposit with abank in the UK is potentially exposed to income

tax on the interest in the UK.

The concept of international double taxationthat bilateral tax treaties seek to remove is

broader than the narrow definition.

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It includes some types of economic doubletaxation that is, taxation of something alreadytaxed under another countrys laws whether or

not it is formally subject to multiple levels oftaxation.

Tax treaties attempt to eliminate most forms ofinternational double taxation, narrowly defined,and various other forms of international doubletaxation when a failure to do so would have a

demonstrably harmful impact on internationaltrade and investment.

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A major goal of bilateral tax treaties is to

remove impediments to international tradeand investment by abating the risk of doubletaxation that can occur when bothcont0racting states impose tax on the sameincome. The goal is advanced in four distinctways.

First, a bilateral tax treaty increases the extent to

which exporters residing in one contracting statecan engage in trading activity in the othercontracting state without attracting tax liability inthat latter.

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Second, when a resident of a contractingstate does engage in a sufficient activity in

the other contracting state for that state tohave the right to tax, the treaty establishescertain guidelines on how that income is tobe taxed, which profits are attributable to

the permanent establishment in the secondstate.

Third, a bilateral tax treaty provides adispute resolution mechanism that the

contracting state may invoke to relievedouble taxation in particular circumstancesnot dealt with explicitly under the treaty.

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Fourth, where income or gain remain in

principle taxable in both contracting states,the state of residence of the taxpayer willrelieve the double taxation that resultseither by allowing a credit for the tax paid

in the other state or by exempting theincome or gain from its own tax in practice.

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Long term vs. short term

Generally, appreciated capital assets thatare sold after being held more than oneyear (long-term capital gain) will be taxedat a maximum rate of 15%. For the sale of

collectibles and small business stock, thecapital gain rate is 28%. Appreciatedcapital assets that are sold after being heldless than one year (short-term capital gain)

will be taxed as ordinary income, whichrises as high as 35% in the progressive taxsystem.

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Realized vs. unrealized

Capital gains can be either realized orunrealized. Realized capital gains occurwhen the actual sale of the asset returnedmore money than the purchase price.

Unrealized capital gains occur when it isknown that the asset has appreciated invalue, but the asset has not been sold yet;the gain is only potential.

Currently in the US, unrealized capitalgains are not subject to income tax.

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Direct and Indirect Taxes

Any government has three ways of raisingmoney for its expenditure:

Tax income by means of income tax orcorporate profit tax, i.e. direct taxes

Tax consumption by means of value added tax,excise tax, receipts tax, i.e. indirect tax

Print money

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A simple model suggest that indirect taxes

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A simple model suggest that indirect taxesencourage economic growth in the long-runbetter than direct ones do. The modelassumes the following: The government can use either direct or indirect

taxes

Consumption at any given period of time equalconsumption financed from income received atthis period plus consumption financed fromincome earned and saved during the previous

period Savings are converted into domestic investments

Increased investments mean increasedproduction capacities and economic growth

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Direct Taxes

A direct tax is one that the taxpayer paysdirectly to the government . These taxescannot be shifted to others.

A homeowner pays personal property

taxes directly to the government. A family pays its own federal income tax.

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Indirect Taxes

An indirect tax can be passed on toanother person or group. A business mayrecover the cost of taxes it pays bycharging higher prices to customers.

A tax shift occurs when the businessesshifts its taxes to others.

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Direct Tax

Of the direct and indirect taxes, IncomeTax is a major source for mobilisinginternal resources. As an outcome ofglobalisation, collection of import duties is

gradually declining. Hence, increasingimportance is being put on Income Tax. Onthe one hand, Income Tax raises internalresource and ensures social justice, and

on the other, ensures equitable distributionof wealth in society.

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It is therefore very important to develop amodern, efficient and accountable tax

administration and an environmentcongenial and simple for the taxpayers tocomply. To achieve this goal, reformsmeasures have been undertaken to widen

the scope of self-assessment, reducediscretionary powers of tax officials andimprove the tax paying culture.

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I di t T

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Indirect Tax In this era of globalization, although the

dependence of the government on customsduties as a source of revenue has graduallybeen decreasing, the major portion of suchrevenues still comes from duties and taxeslevied at the import stage

Value Added Tax (VAT), SupplementaryDuty (SD), Advance Income Tax (AIT) andInfrastructure Development Surcharge(IDSC) are at present collected along withImport Duties at the import stage, perhapsbecause it is collected in advance and isrelatively easy to do so.

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CHAPTER 7- SERVICE & LABOR

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C S C & O

Service

Labor

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Service and Labor

Since 1998 with the International LaborOrganization's Declaration on FundamentalPrinciples and Rights at Work, countriesand labor rights advocates across the

globe have paid increasing attention toproblems such as workplacediscrimination, forced labor, child labor,and denial of the right to organize unions.

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Rules that vary from state to state, fromnation to nation, from trading region totrading region. Restrictions that can slowinnovation, stifle business success andplace the survival of any unsuspecting

company at risk. In this climate, companies of all sizes

require labor and employment counsel

that can meet the challenges of the newglobal economy both in the UnitedStates, and in every commercial center

around the world.

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Legal services that are: Comprehensive

Innovative

Effective

Seamless

Global

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Labor and Employment Law

The labor and employment laws in the U.S.were designed for long-term employees, sothat criteria for eligibility and schedules ofbenefits assume an on-going employment

relationship with a single employer. As the numbers of atypical employees

grows, more and more individuals findthemselves lacking basic protection for

minimum wage, health and safety,retirement security, industrial injury, andcollective bargaining rights.

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International Labor Law Organisation

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International Labor Law Organisation

The International Labour Organization ("ILO") is

an international organisation which has a longhistory of improving working conditions andpromoting social justice and human rights.Indeed, in 1969, on its 50th anniversary, the ILO

was awarded the Nobel Peace Prize. The ILO'swebsite, located at http://www.ilo.org , providesboth general information about the organisationand original documentation for scholars. Cornell

Law Library also hosts a mirror site for theInternational Labour Organization.

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Refer to:

http://www.lawschool.cornell.edu/library/International_Resources/ilo.htm

International Labour Organisation
http://www.lawschool.cornell.edu/library/International_Resources/ilo.htmhttp://www.lawschool.cornell.edu/library/International_Resources/ilo.htmhttp://www.lawschool.cornell.edu/library/International_Resources/ilo.htmhttp://www.lawschool.cornell.edu/library/International_Resources/ilo.htm

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Labour Court

The type of claims heard by the LabourDepartment officers relating to the provisionsof the Employment Act include claims for:

Termination benefits

Maternity benefits Overtime payments

Sick pay

Annual leave pay

Public holiday pay

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The immediate objectives and activitiesof trade unions vary, but may include: Provision of benefits to members: Early

trade unions, like Friendly Societies, oftenprovided a range of benefits to insure

members against unemployment, ill health,old age and funeral expenses.

Collective bargaining: Where tradeunions are able to operate openly and are

recognised by employers, they maynegotiate with employers over wages andworking conditions

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Industrial action: Trade unions may

organise strikes or resistance to lockouts infurtherance of particular goals.

Political activity: Trade unions maypromote legislation favourable to the

interests of their members or workers as awhole.

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