exchange controls, local content laws, import restrictions, tax controls, price controls, and labor problems.
19. You are an executive in a large domestic company with only minor interests in international
markets; however, corporate plans call for major global expansion. Visit the homepage of Control Risks Group www.crg.com. After thoroughly familiarizing yourself with the services offered by CRG, write a brief report to management describing how its services could possibly help with your global expansion.
19. Although CRG is a ―for profit company‖ and will charge for complete reports, they do provide summaries of the reports which contain a synopsis of the report. Visiting this site will illustrate the types of information available to MNCs seeking information on political conditions in countries and regions. At the time this was written (2001) the following report was available;
20. RiskMap 2001 provides a critical assessment of global and regional political, security and business practice issues that will challenge and energize business leaders in 2001 and beyond.
21. RiskMap 2001 global essays cover issues as diverse as: ? the growing threat to business from AIDS;
? the powerful politics of hydro-electric construction projects; and
? the short- and medium-term effects arising from price changes and technological
developments in the oil sector.
22. The regional sections include articles on key countries as well as political and security risk ratings for all countries. A new feature is a map illustrating these risks, suitable for wall display.
23. Key predictions for 2001
24. Sub-Saharan Africa
25. Despite containing most of the world’s Extreme-rated areas, the prospects for subSaharan Africa as a whole provide some reason for optimism. Gradual political and economic reform is likely, albeit accompanied by phases of political instability and renewed conflict. Countries such as Tanzania, Mozambique and Zambia will achieve new successes, while old favorites such as Ghana and Ethiopia could again hit the spotlight. Areas of concern include Liberia, the Central African Republic, Chad, Kenya, Zimbabwe, Guinea-Conakry and Equatorial Guinea. 26. Americas
27. The situation in the Americas is increasingly stable, with star-performing countries like Argentina, Brazil and Mexico maintaining their commitment to fiscal austerity and attracting the bulk of inward investment into Latin America. On the negative side, however, Brazil and Mexico will experience serious crime problems and some of the smaller economies, especially in the Andean region, could experience continued political volatility and this could undermine investor confidence in the region. 28. Asia and the Pacific
29. Both perennial hazards and new areas of uncertainty confront foreign investors in Asia and the Pacific in 2001. The main areas of concern will remain Pakistan, Indonesia and the Philippines, with potential for more unrest in the South Pacific countries of Fiji and the Solomon Islands. Basic political stability in the continent’s giants, India and China, will not
be in question.
30. Europe and the FSU
31. In Europe and the Former Soviet Union, new risks, from cybercrime to physical direct action campaigns, will come to the fore. Although overt gangsterism is declining in most of Eastern Europe, criminal groups are becoming more sophisticated, engaging in complex economic fraud, cybertheft and money-laundering. Western Europe, in particular, will witness further episodes of direct action, while terrorism will remain a specter in countries such as Spain and Greece.
32. Middle East and North Africa
33. The Middle East and North Africa will see continued political stability combined with moderate growth. Israel’s fragmented parliament will result in weak governing coalitions and further clashes are likely in the West Bank and Gaza. The power struggle between reformists and conservatives in Iran will continue to open to foreign investment. An increasingly nationalist political atmosphere in Turkey may heighten political risk to foreign business.
34. The successor to Control Risks’ Outlook series. RiskMap 2001 is an important annual milestone in the political and security risk assessment process that is now a required part of good corporate governance.
35. 20. Visit the homepage of Agora www.politicalresources.net . Select the Political Site of the
Week and write a brief political analysis highlighting potential problem areas for a company interested in investing in that country.
36. Individual research. Instructor may want to visit the Web site and assign countries for students to study.
37. 21. Search the Web for information on activities of PSAs outside the United States and write
a briefing paper for international management on potential problems.
38. Individual research. Most of the large periodical search sources will result in numerous articles about PSA activities.
22. Discuss ways the companies discussed in the Global Perspective could have minimized their
losses in the Banana Wars.
39. Opinion. Questions 22 and 23 can be used for a debate or discussion in class
23. Discuss any ethical and socially responsible issues that may be implied in the Global
Perspective.
40. Opinion. Questions 22 and 23 can be used for a debate or discussion in class.
Chapter 7The International Legal Environment
Discussion Questions
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 different countries, the foreign marketer must look to the legal systems of all the countries involved; that is, the laws of his own country and the laws of the country in which he is conducting business. In general, a U.S. citizen is subject to the laws of the United
States as well as to those of any foreign country in which he lives or works. In the case of a conflict, and unless the government of the citizen takes up the citizen’s case in an international court, jurisdiction is generally determined (1) on the basis of jurisdictional clauses included in the contract, (2) on the basis of where a contract was entered into, or (3) on the basis of where the provisions of the contract were performed. The jurisdictional clause is the most clear-cut and is usually honored. If there is no such clause or if it is ineffective, either of the other two methods is used.
3. Discuss the state of international commercial law.
Commercial law, as seen in Question 1, varies in meaning between common law (where commercial disputes are subject either to civil or commercial law) and code law (where a codified inclusive commercial law exists). Consequently, there is no such thing as an
―international‖ commercial law, and the question of jurisdiction is handled as described in Question 2. In general, the marketer must deal with national commercial laws and must vary his operations from country to country with regard to its individual laws. Progress toward unification is being taken with greatest success in the EEC countries, which eventually aim toward a unified commercial legal system as well as unification in all other areas, especially political. 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, it is not unusual for a court to use the law of another country for its
decisions. However, if the contractual events are not in effect, entered into or executed within the state indicated, courts have been known to disregard the jurisdictional clause and apply different rules in determining what law governs. Since there is no obligation for the courts to uphold jurisdictional clauses, the parties must be reasonable when adding such clauses, or they are liable to have very limited actual value. 5. What is the ―objective theory of jurisdiction?‖ How does it apply to a firm doing business
within a foreign country?
The question of U.S. sovereignty over its citizens abroad has been dealt with by the ―objective theory of jurisdiction‖ which states that ―even if an act is committed abroad, that is outside the territorial jurisdiction of the courts, those courts can nevertheless have jurisdiction over it if this act produces consequences or effects within the United States.‖ Broadly interpreted, this means that an American is always a citizen of the United States and is subject to its laws as interpreted by the U.S. courts. Commonly interpreted,
however, only those violations of U.S. laws which ―affect our foreign or domestic trade‖ are considered subject to the U.S. legal system when operations are outside the legal jurisdiction of U.S. courts. Since an American working, traveling, or living in a foreign country is subject to the laws of that country and must obey them, he will not be punished by an American court if he is at the same time violating a domestic U.S. law. It is obvious, however, that a firm (U.S.) in a foreign country must consider at least two sets of laws, and perhaps more. This is especially important in antitrust cases, or with laws governing loyalty and U.S. citizenship (i.e., trading with enemy, political office in foreign countries, offices in political parties, etc.).
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.
The most important reasons for avoiding court settlements of international legal disputes is that they are time consuming, frustrating, and costly. In addition, court cases are often publicized and may create a poor image of the company; the courts may not be well versed in the problem and thus hand down an unfair decision; and a more fair, less time consuming and less expensive decision can often be reached through arbitration. As a result of the high costs of litigation, the philosophy of most companies is to first ―placate,‖ second to ―arbitrate,‖ and to ―litigate‖ as a last resort. 7. Illustrate the procedure generally followed in international commercial disputes when settled
under the auspices of a formal arbitration tribunal.
Arbitration obviously depends upon the willingness of both parties to accept the arbitrator’s rulings; it has been most successful when provision for this method of
settlement is included in the contract. However, there is some question of the legality of enforcing arbitration agreements which have been made prior to a dispute. While the theory of arbitration is that each of the parties involved in the dispute selects or agrees upon a referee or judge of the case, in actual practice most arbitration is submitted to one of the established arbitration boards and to established rules and procedures. The general procedure followed by an established arbitration tribunal is that of immediately attempting a conciliation between the parties. If not successful, each party selects an
arbitrator to defend its case, the court appoints a third member (from a list of arbitrators it maintains), hearings of both sides take place, a decision and an award is made. Such decisions have had a great deal of success, i.e., they are upheld by the parties. 8. What are intellectual property rights? Why should a company in international marketing take
special steps to protect them?
9. Industrial property rights are rights to the exclusive or limited use of products, processes,
designs, formulas, brand names, and trademarks which provide a company with advantages over competitors; i.e., patents, trademarks, and copyrights. Such industrial properties are among the most important assets of a company because they symbolize quality, entice consumers, and have a psychological or intangible quality which is invaluable. Because of this fact and the fact that millions of dollars are spent developing such qualities, the international marketer should take special steps to govern these properties since the rules governing them vary from country to country. (See next question.)
10. 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 established by registration, and the first to register a product is its legal owner. In the United States, the common law principle is observed: prior use established ownership. That is, whoever can establish first use is considered the owner and has legal rights. Obviously, an oversight in understanding these differences may result in much pirating and the loss of property rights, or at least in the loss of a great deal of time, effort, and/or money. Obviously, uniform laws would help since the international marketer must
necessarily consider the world as his or her market and should have a means of obtaining worldwide intellectual property rights. 11. 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 international conventions on trademarks, patents, and copyrights is that their product, their sales, their profits are more easily protected, i.e., the marketer may register the product at the same time in many countries, thus avoiding piracy, eliminating
time-consuming patent procedures and bureaucracy. in addition, such conventions make an attempt at establishing uniform requirements. Obviously, the situation is difficult when different countries have different attitudes toward the rights of individuals. In most countries, the individual may not obtain exclusive monopoly of a product without manufacturing and selling that product (as an individual may in the United States) but must share the product with the citizens of the country. The patent will revert to public domain if the product isn’t manufactured within a specified time. Thus, conventions aid the businessperson by enabling him or her to more easily patent the product, to jog his or her memory that laws are not uniform and that he or she needs a worldwide basis of protection, and to eliminate much time. In addition, conventions serve as the machinery for obtaining these rights and as a possible means of establishing uniform worldwide industrial property rights laws. 12. ―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.
As discussed in Question 10, the lack of uniform commercial laws results in the
expenditure of much time, energy, and money on the part of the marketer. In addition, a lack of understanding of foreign laws or customs may have serious consequences for the unwary businessperson. Furthermore, information concerning these customs and laws might be hard to obtain. Since any mistakes are liable to have legal consequences, they thus represent some sort of loss to the company. Since customs, politics, geography and innumerable other factors vary greatly, affect, and are affected by the legal environment, it is imperative that the businessperson be acquainted with all aspects. Since legal
questions also establish insurmountable roadblocks, the wisest course for the international marketer is to have reference to a council well versed in the intricacies of the international legal environment. 13. Why is conciliation a better way to resolve a commercial dispute than arbitration?
Although arbitration is generally regarded as the best means of settling international
disputes, a preliminary effort at conciliation is the best method for resolving disputes with a Chinese business partner. In fact, some Chinese companies may avoid doing business with companies that go first to arbitration when differences arise. Conciliation is considered by the Chinese to be far friendlier than arbitration or litigation in settling disputes. The Chinese believe that when a dispute occurs, friendly negotiation should be used first to solve the problem; if that fails, then conciliation should be tried. The Chinese