Chapter 06 International and Comparative Law Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

International Law (Definition): Laws governing the conduct of states and international organizations and their relations with one another and natural and juridical persons Laws governing the conduct of states and international organizations and their relations with one another and natural and juridical persons “International organizations” include the United Nations, the International Monetary Fund, the World Bank, and the World Trade Organization “International organizations” include the United Nations, the International Monetary Fund, the World Bank, and the World Trade Organization “Natural and juridical persons” include individuals and businesses “Natural and juridical persons” include individuals and businesses 6-2

Methods of International Business Involvement Export (including use of foreign sales representative and/or distributors) Export (including use of foreign sales representative and/or distributors) Franchise Agreement Franchise Agreement Joint Venture Joint Venture Foreign Subsidiary/Affiliate Foreign Subsidiary/Affiliate 6-3

Ethical Considerations in International Business Whether to do business with “repressive” governments Whether to do business with “repressive” governments Whether to provide products for the poor at reasonable prices Whether to provide products for the poor at reasonable prices Whether to treat workers according to local customs, or consistent with international standards of humane treatment Whether to treat workers according to local customs, or consistent with international standards of humane treatment 6-4

The General Agreement on Tariffs and Trade (GATT)—Definition: A comprehensive, multilateral trading system designed to achieve “distortion-free” international trade through minimization of tariffs and removal of artificial trade barriers A comprehensive, multilateral trading system designed to achieve “distortion-free” international trade through minimization of tariffs and removal of artificial trade barriers 6-5

GATT Principles of Trade Law Article I: Addresses the principle of “most favored nation” status (a.k.a. “normal trade relations”); requires that WTO members treat similar goods coming from other WTO members on an equal basis (prohibits discrimination against like products on the basis of their country of origin) Article I: Addresses the principle of “most favored nation” status (a.k.a. “normal trade relations”); requires that WTO members treat similar goods coming from other WTO members on an equal basis (prohibits discrimination against like products on the basis of their country of origin) Article III: Establishes principles of “national treatment” (prohibits WTO members from regulating, taxing or otherwise treating imported products any differently than domestically-produced products) Article III: Establishes principles of “national treatment” (prohibits WTO members from regulating, taxing or otherwise treating imported products any differently than domestically-produced products) Article VI: Prohibits certain types of dumping and subsidies Article VI: Prohibits certain types of dumping and subsidies Article XI: Prohibits quantitative restrictions on imports Article XI: Prohibits quantitative restrictions on imports 6-6

Regional Trade Agreements Free Trade Agreement: Two or more states agree to reduce (and gradually eliminate) tariffs and other trade barriers) Free Trade Agreement: Two or more states agree to reduce (and gradually eliminate) tariffs and other trade barriers) Example: The North American Free Trade Agreement (NAFTA) Example: The North American Free Trade Agreement (NAFTA) Bilateral Trade Agreement: Two states agree on issues related to trade between them Bilateral Trade Agreement: Two states agree on issues related to trade between them Example: United States bilateral agreements with Australia, Israel, Jordan, and Singapore Example: United States bilateral agreements with Australia, Israel, Jordan, and Singapore 6-7

Comparative Law (Def.): Study of the legal systems of other states Provides a better understanding of the general purpose of law Provides a better understanding of the general purpose of law Assists in development of a critical viewpoint of one’s own legal system Assists in development of a critical viewpoint of one’s own legal system Demonstrates that one’s own legal system is only one of many alternatives Demonstrates that one’s own legal system is only one of many alternatives Could lead to adoption of another state’s law or method of resolving a dispute Could lead to adoption of another state’s law or method of resolving a dispute 6-8

Legal Systems and Procedures “Civil law” systems: Consist of detailed national legal codes, which serve as the sole official source of law (these represent the majority of the world’s legal systems) “Civil law” systems: Consist of detailed national legal codes, which serve as the sole official source of law (these represent the majority of the world’s legal systems) “Common law” systems: Based on constitutions, legislation, regulations, and their interpretations by court of laws “Common law” systems: Based on constitutions, legislation, regulations, and their interpretations by court of laws “Socialist law” systems: Rights of society outweigh individual rights, and that the state owns means of production and property “Socialist law” systems: Rights of society outweigh individual rights, and that the state owns means of production and property “Islamic law” systems: Law derived from and interpreted consistent with Shari’a (God’s Law) and the Koran “Islamic law” systems: Law derived from and interpreted consistent with Shari’a (God’s Law) and the Koran 6-9

International Dispute Settlement Methods Litigation (Court must have personal jurisdiction over parties involved in the dispute, and subject matter jurisdiction over the issues involved in the dispute) Litigation (Court must have personal jurisdiction over parties involved in the dispute, and subject matter jurisdiction over the issues involved in the dispute) Arbitration (Dispute submitted for resolution to an arbitrator, who renders decision based on determination of facts involved in the dispute, and application of the appropriate law) Arbitration (Dispute submitted for resolution to an arbitrator, who renders decision based on determination of facts involved in the dispute, and application of the appropriate law) 6-10