Professional Documents
Culture Documents
Firms operating in the international environment must be aware of the difficulties that may result if they fail to include
such things as choice-of-forum, choice-of-language, or choice-of-law provisions in their contracts. Yet these firms must also be
able to utilize foreign exchange markets, correspondent banks, and letters of credit to ensure timely completion of their
contractual obligations. These firms must also realize that international contract disputes arise and that litigation and
arbitration are two means (each having their own advantages and disadvantages) by which such problems can be resolved.
ADDITIONAL RESOURCES—
PowerPoint Slides
To highlight some of this chapter’s key points, you might use the Lecture Review PowerPoint slides compiled for
Chapter 8.
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200 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
The Business Law Digital Video Library at www.cengage.com/blaw/dvl offers a variety of videos for group or
individual review. Clips on topics covered in this chapter include the following.
2. At what point does the seller receive payment in a letter-of-credit transaction? When the seller has
complied with the terms of the letter of credit by shipping the goods and producing the required documents for the
issuing bank, the seller receives payment.
3. What assurances does a letter of credit provide to the buyer and to the seller involved in the transaction?
The buyer is assured that payment will not be made to the seller unless the seller has complied with the terms and
produced the documents proving that the goods were shipped. The buyer also is assured because he or she obtains
legal title to the goods—and can even sell them to another party—before they arrive at the port.
CHAPTER OUTLINE
I. International Law—Sources and Principles
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CHAPTER 8: INTERNATIONAL LAW IN A GLOBAL ECONOMY 201
1. International Customs
Customs evolved over the centuries.
3. International Organizations
International organizations are composed mainly of nations and usually established by treaty—for example,
the 1980 Convention on Contracts for the International Sale of Goods, or CISG.
CASE SYNOPSIS—
Spectrum Stores, Inc., and other U.S. gas retailers filed a suit against Citgo Petroleum Corp. and other oil
production companies in a federal district court. The defendants included companies owned by Venezuela and Saudi
Arabia. The plaintiffs alleged that the defendants conspired with members of the Organization of Petroleum Exporting
Countries to fix the prices of crude oil and refined petroleum products in the United States, primarily by limiting crude-
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202 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
oil production. The plaintiffs sought damages, an injunction, and other relief. The court dismissed the suit. The plaintiffs
appealed.
The U.S. Court of Appeals for the Fifth Circuit affirmed. The act of state doctrine bars consideration of the
plaintiffs’ claims. The exploitation of natural resources is the sovereign function of any nation. Granting relief to the
plaintiffs would effectively order foreign governments to dismantle their chosen means of exploiting the resources
within their own territories. It would also “embarrass” the diplomacy of the executive and legislative branches of the
government.
..................................................................................................................................................
When the act of state doctrine applies, does a party have to forgo a decision on the merits of their claim? Yes.
Sometimes a party may have to forgo a decision on the merits of their claim because the involvement of the courts in
such a decision could, as the court explained in this case, frustrate the conduct of U.S. foreign policy
Suppose that a U.S. court declared that a foreign nation’s act was legal. Would such a declaration interfere with
foreign policy matters falling under the authority of other branches of government? Why or why not? Yes. A judgment
by a U.S. court that a foreign nation’s act was illegal would clearly interfere with foreign policy concerns, which fall
under the authority of the other branches of our government. But a pronouncement either way on the legality of a
foreign nation’s act would impinge on foreign policy matters by reflecting a value judgment that is properly a
diplomatic determination for the other branches to make.
What is the act of state doctrine? In what circumstances is this doctrine applied? The act of state doctrine is a
judicially created doctrine that provides the judicial branch of one country will not examine the validity of public acts
committed by a recognized foreign government within its own territory. This doctrine is often employed in cases
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CHAPTER 8: INTERNATIONAL LAW IN A GLOBAL ECONOMY 203
ADDITIONAL BACKGROUND—
§ 1603. Definitions
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204 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
(a) A “foreign state” except as used in section 1608 of this title, includes a
political subdivision of a foreign state or an agency or instrumentality of a
foreign state as defined in subsection (b)
(2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other
ownership interest is owned by a foreign state or political subdivision thereof, and
(3) which is neither a citizen of a State of the United States as defined in section 1332(c) and (d) of this title, nor created
under the laws of any third country.
(c) The “United States” includes all territory and waters, continental or insular, subject to the jurisdiction of the United
States.
(d) A “commercial activity” means either a regular course of commercial conduct or a particular commercial
transaction or act. The commercial character of an activity shall be determined by reference to the nature of the
course of conduct or particular transaction or act, rather than by reference to its purpose.
(e) A “commercial activity carried on in the United States by a foreign state” means commercial activity carried on by
such state and having substantial contact with the United States.
(a) A foreign state shall not be immune from the jurisdiction of courts of the United States or the States in any case—
* * * *
(2) in which the action is based upon a commercial activity carried on in the United States by the foreign state; or upon
an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or upon
an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere
and that act causes a direct effect in the United States;
(3) in which rights in property taken in violation of international law are in issue and that property or any property
exchanged for such property is present in the United States in connection with a commercial activity carried on in the
United States by the foreign state; or that property or any property exchanged for such property is owned or operated
by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial
activity in the United States;
* * * *
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CHAPTER 8: INTERNATIONAL LAW IN A GLOBAL ECONOMY 205
Manufacturing goods in foreign countries may have the advantages of lower costs, taxes, and trade barriers, as well as
less government regulation.
A. EXPORTING
There are two ways to export: direct and indirect. Direct exporting does not involve third parties. Indirect
exporting involves the use of a third party to sell a product in a foreign market for a domestic manufacturer.
When that party is in a foreign market, it is an agent.
1. Distributorships
A third party, located in a foreign market, who takes title to domestically-manufactured goods, is a
distributor.
a. Export Promotion
The Export Promotion Cabinet—officials from sixteen government agencies and departments—will
promote exports to high-growth markets in Brazil, China, and India and identify opportunities in fast-
growth sectors such as renewable energy.
B. MANUFACTURING ABROAD
There are several ways to manufacture goods abroad.
1. Licensing
Licensing involves payment of royalties.
2. Franchising
Franchising is covered in detail in Chapter 26. The text lists some examples of famous international
franchises
3. Subsidiaries
When a U.S. firm establishes a wholly-owned foreign subsidiary, the parent company often retains complete
ownership of the facilities and complete control over all phases of the operation. In a joint venture, a U.S.
firm shares ownership, control, profits, and liabilities.
A. INVESTMENT PROTECTIONS
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206 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
The text discusses government regulation of expropriation and confiscation of investment property. Essentially,
expropriation involves compensation for what is taken; confiscation does not. International law principles are
violated when property is confiscated. Some countries provide constitutional or statutory guaranties against it, or
insurance for their citizens’ investments abroad. Few remedies are available, however.
B. EXPORT CONTROLS
Under the Constitution, Congress cannot impose export taxes, but Congress controls exports by setting quotas or
other restrictions on the flow of commodities, products, and data. Congress stimulates exports through tax
incentives (exempting income) and encouraging investment in and loans to U.S. export companies.
C. IMPORT CONTROLS
The production and sale of domestic products may also be stimulated by import restrictions, which include
prohibitions, quotas, and tariffs. Prohibitions are imposed on illegal drugs, books that urge insurrection against
the U.S. government, agricultural products that pose dangers to domestic crops or animals, goods coming from
enemies of the United States.
1. Quotas and Tariffs
Tariffs are imposed on such products as oil.
2. Political Factors
Tariffs are sometimes imposed for political acts.
3. Antidumping Duties
Specific laws deal with what the United States regards as unfair international trade practices (the text uses
dumping as an example).
ADDITIONAL BACKGROUND—
Antidumping Duties
The procedure for imposing antidumping duties involves two U.S. government agencies: the International Trade
Commission (ITC) and the International Trade Administration (ITA). The ITC is an independent agency that makes
recommendations to the president concerning temporary import restrictions. The ITC assesses the effects of dumping
on domestic businesses. The ITA is part of the Department of Commerce and decides whether import sales were at
less than fair market value. The ITA determination establishes the amount of antidumping duties, which are set to
equal the difference between the price charged in the United States and the price charged in the exporting country. A
duty may be retroactive to cover past dumping incidents.
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CHAPTER 8: INTERNATIONAL LAW IN A GLOBAL ECONOMY 207
This regional trade association minimizes trade barriers among its member nations.
A. CONTRACT CLAUSES
1. Choice-of-Language Clause
Besides designating the official language by which the contract will be interpreted, this clause may allow for
a translation that can be authoritative if it is ratified by all parties.
2. Forum-Selection Clause
This clause should identify the specific court that will have jurisdiction over a dispute. The choice cannot
deny a party an effective remedy, be the product of fraud or unconscionable conduct, cause substantial
inconvenience to a party to the contract, or violate public policy.
3. Choice-of-Law Clause
As with language and forum, the parties to an international contract can choose whatever law they wish to
govern their contract (at least under international agreements—the UCC restricts the choice to whatever is
“reasonable”). Under the 1986 Hague Convention on the Law Applicable to Contracts for the International
Sale of Goods, if a choice-of-law is not specified, the governing law is that of the country in which the
seller’s business is located.
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208 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
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CHAPTER 8: INTERNATIONAL LAW IN A GLOBAL ECONOMY 209
CASE SYNOPSIS—
Case 8.2: S&T Oil Equipment & Machinery, Ltd. v. Juridica Investments, Ltd.
Juridica Investments, Ltd. (JIL), entered into a contract with S&T Oil Equipment & Machinery, Ltd., in Guernsey,
which is one of a group of British islands in the English Channel. The contract stated that it was executed in Guernsey, it
would be fully performed there, and any dispute between the parties was subject to arbitration there. As part of the
deal, JIL wired funds to S&T from Guernsey. Later, when a dispute arose, S&T filed a suit in a U.S. court. JIL asked the
court to enforce the arbitration provision. The court compelled arbitration under the Convention on the Recognition
and Enforcement of Foreign Arbitral Awards (the New York Convention). S & T appealed.
The U.S. Court of Appeals for the Fifth Circuit affirmed. The court explained that a provision for arbitration in a
foreign jurisdiction is enforceable under the New York Convention if the parties expect their contract to be performed
or enforced abroad. In this case, JIL and S&T executed their contract in Guernsey and agreed to its performance there.
In fact, JIL had already performed part of the contract in Guernsey.
..................................................................................................................................................
Foreign arbitration awards are usually easier to enforce than foreign court judgments. The enforcement of court
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210 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
judgments normally depends on the principle of comity and bilateral agreements providing for such enforcement. The
international Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York
Convention) provides for the enforcement of foreign arbitration provisions and awards.
Could S&T have convincingly claimed that it did not understand the arbitration provision at the time of the
contract with JIL or that JIL had “forced” the provision on S&T? No, to both claims. S&T and JIL were both business
firms with relatively equal bargaining power. There is nothing to indicate that JIL forced any part of their agreement on
S&T.
A. MONETARY SYSTEMS
Firms engaged in international transactions rely on the convertibility of currencies. What convertibility is and
where currencies are converted (foreign exchange markets) are explained in the text. Exchange rates are set by
the forces of supply and demand. Correspondent banking makes it possible to transfer funds internationally.
Most interbank transfers are handled electronically.
B. LETTERS OF CREDIT
Letters of credit facilitate international transactions.
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CHAPTER 8: INTERNATIONAL LAW IN A GLOBAL ECONOMY 211
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—
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
in international law,” citing such examples as the Rome Statute of the International Criminal Court. Another stated that
grounds existed in such resources of U.S. law as Section 876(b) of the Restatement (Second) of Torts, under which
liability could be assessed in part for “facilitating the commission of human rights violations by providing the principal
tortfeasor with the tools, instrumentalities, or services to commit those violations.” On remand, the lower court was
instructed to review the “prudential concerns”—the “practical consequences” of this litigation in U.S. federal courts,
any limits on relief in U.S. federal courts for violations of international law, “judicial deference to the Executive Branch
on questions of foreign policy,” and the principle of comity.
..................................................................................................................................................
How did the corporate defendants allegedly benefit from “aiding and abetting” South Africa’s apartheid system?
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212 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
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.
Does international law support the recognition of criminal liability under a theory of aiding and abetting under the
ATCA? Yes, according to a concurring opinion in the Khulumani case. That concurrence averred that liability for criminal
aiding and abetting is “well established in international law.” For example, the London Charter that formed the basis
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.
Does U.S. law provide a source for assessing civil liability on a theory of aiding and abetting under the ATCA? Yes,
according to a concurring opinion in the Khulumani case. This opinion cited Section 876(b) of the Restatement (Second)
of Torts as applicable to the plaintiffs’ ATCA claims “in one of three ways: (1) by knowingly and substantially assisting a
principal tortfeasor, such as a foreign government or its proxy, to commit an act that violates a clearly established
international law norm; (2) by encouraging, advising, contracting with, or otherwise soliciting a principal tortfeasor to
commit an act while having actual or constructive knowledge that the principal tortfeasor will violate a clearly
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
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.”
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
the doctrine of international comity, [but] we have not held them to be dispositive. At this stage in the litigation, we
express no view as to what level of deference to their views is appropriate in this particular case. Instead, we remand
to the district court so that it may carefully consider whether any of these doctrines require dismissal” of the plaintiffs’
claims.
What are the ramifications for the defendants of the ruling in this case? Because the U.S. Court of Appeals for the
Second Circuit vacated the lower court’s dismissal of the plaintiffs’ claims, the case will return to the lower court “for
further proceedings consistent with this opinion.” Many or most, if not all, of the corporate defendants—and others—
could face huge claims for aiding and abetting the South African government in maintaining its apartheid system.
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CHAPTER 8: INTERNATIONAL LAW IN A GLOBAL ECONOMY 213
population? Why or why not? For ethical reasons, many corporations, both large and small, did in fact refuse to do
business with South Africa during the period of apartheid. To the extent that you might have believed at the time that
apartheid was immoral and unacceptable, then you would have had a strong argument for condemning U.S.
corporations for engaging in business dealings with South Africa.
C. ANTIDISCRIMINATION LAWS
Under the Civil Rights Act of 1991, Title VII of the Civil Rights Act of 1964 covers U.S. citizens working abroad for
U.S. employers, unless compliance with Title VII would violate the laws of the country in which they work.
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,
for instance).
Among other differences are cultural attitudes about relationships, which influences contract negotiations. For
example, in Japan, China, and Latin America, and in some Western European nations, there is a cultural expectation
that a relationship between contracting parties will be long term. Contracting parties in these cultures often expect
that disputes can be worked as they arise, because the parties are committed to maintaining the relationship. For this
reason, the negotiation process can be long, while contracts are often short, in contrast to negotiations and contracts in
the United States, where the opposite may be true.
TEACHING SUGGESTIONS
1. International business transactions require students to visualize situations in which several different contractual
parties are involved. It may be helpful to have students engage in “role playing” exercises in which they play the parts
of parties involved in negotiations over the purchase of a certain product.
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
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214 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
may prevent a U.S. company from obtaining an enforceable judgment in a U.S. court. Ask students to discuss how a
U.S. firm might attempt to collect compensation for a taking by a foreign government and the form in which payment
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 fifteen years, 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?
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CHAPTER 8: INTERNATIONAL LAW IN A GLOBAL ECONOMY 215
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
non-English speakers to other non-English speakers in non-English speaking countries solely for the use of English
within the borders of those countries. Will English become the truly international language? What effects might this
have on law and its interpretation and application?
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
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
to the laws and judicial decrees of another country as long as those laws and judicial decrees are consistent with the laws and
public policy of the accommodating nation. This recognition has no clear legal origin but is based primarily on notions of
courtesy and 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
territory. This doctrine is premised on the theory that the U.S. judicial branch should not question the validity of acts by foreign
governments within their own borders when to do so would adversely affect relations with those foreign governments. The act
of state doctrine has important consequences for those parties doing business or investing in foreign countries because
individuals or businesses whose assets are expropriated may be forced to litigate their claims in the expropriating state’s courts
due to the reluctance of the U.S. courts to entertain such claims.
3. What is an international business transaction? An international business transaction is any binding agreement
between two or more parties not having the same nationality involving the purchase or sale of a good or service.
4. What are choice-of-language, choice-of-forum and choice-of-law clauses? Choice-of-Language Clause. A choice-of-
language clause is often included by parties to an international contact because many phrases in one language are not readily
translatable into another language. The choice-of-language clause designates the official language by which the contract will be
interpreted to resolve any disputes. Choice-of-Forum Clause. A choice-of-forum clause is used in international contracts to
designate the forum in which a dispute will be litigated by the parties. The choice-of-forum clause should indicate that the
court will have jurisdiction as well as the state in which that court has exclusive jurisdiction so as to preclude other courts from
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216 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
entering the case. A choice-of-forum clause may be invalidated if the clause, for example, denies one party an effective rem-
edy, causes substantial inconvenience to one of the parties, violates public policy or is the product of fraudulent or
unconscionable conduct. Choice-of-Law Clause. A choice-of-law clause permits the parties to an international contract to
designate the law that will govern their contractual relationship so long as the law chosen is the law of a jurisdiction that has a
substantial relationship to the parties and to the transaction itself. Although the UCC requires that the choice-of-law be
reasonable, the CISG allows unlimited autonomy in the choice-of-law. In the absence of a specification of what law is to apply,
however, the CISG indicates that the governing law will be that country in which the seller’s place of business is located.
5. Describe some of the events that are typically covered by a force majeure clause. A force majeure clause will excuse
the nonperformance of a party to an agreement if any one of several events occurs including war, flood, fire, embargo,
governmental orders, regulations, restrictions, governmental expropriation, accident, interruptions of transportation facilities,
labor strikes and disputes, shortages of material, or any other causes beyond the control of the parties.
6. How does a simple letter of credit work? A letter of credit is designed to ensure the performance of international
contracts by enabling the seller to avoid delivering goods for which it might not be paid and by giving the buyer the assurance
that the seller will not be paid until the goods have been shipped. In a simple letter of credit transaction, the issuing bank
agrees to issue a letter of credit and to ascertain the occurrence of certain acts by the seller. In return, the buyer promises to
reimburse the issuer for the amount paid to the seller. Under a letter of credit, the issuing bank is bound to pay the seller when
the seller has complied with the terms and conditions of the letter of credit. Consequently, the seller will look to the issuing
bank--not the buyer—when it presents the documents (such as a bill of lading) required by the letter of credit. A letter-of-credit
assures the seller of payment while at the same time assuring the buyer that payment will not be made until the seller has
complied with the terms and conditions of the credit.
7. What are the primary methods for resolving international contractual disputes? Litigation. If the contract does not
have an arbitration clause, then the parties may choose to litigate their dispute in court. Any litigation will be simplified
somewhat if the contract contains forum-selection and choice-of-law clauses. The absence of such provisions, however, will
probably result in excessive litigation since the contract does not restrict the parties to a particular forum or require that a
certain country’s laws be used to resolve any disputes arising under the agreement. Even if one party prevails against another
in a legal action, however, it may still be difficult for the winning party to satisfy the judgment against the losing party.
Arbitration. Many international contracts include an arbitration clause which is designed to avoid costly litigation by specifying
that the parties agree in advance to be bound by the decision of a designated third party in the event that any disputes arise.
The enforcement of arbitration decisions can be assisted by existing multilateral and bilateral treaties.
8. What is the difference between expropriation and confiscation? Expropriation occurs when property is taken and the
owner is paid just compensation for what is taken. Expropriation does not violate generally observed principles of international
law. Confiscation occurs, by contrast, when property is taken and no (or inadequate) compensation is paid. International law
principles are violated when property is confiscated.
9. How does the Sherman Act affect international business? Section 1 of the Sherman Act declares that its provisions are
applicable both in the U.S and abroad; it purports to reach any conspiracy (foreign or domestic) that has a substantial effect on
U.S. commerce. Foreign governments as well as natural persons can be sued for violating the Sherman Act regardless of
whether the alleged violations occurred inside or outside the U.S. Before a U.S. court will exercise its jurisdiction over an
alleged antitrust violation, however, the party bringing the claim must demonstrate that the alleged violations have the
requisite effect on U.S. commerce. The jurisdiction of the court will be automatically invoked, however, if a per se violation has
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CHAPTER 8: INTERNATIONAL LAW IN A GLOBAL ECONOMY 217
been committed as would be the case if a U.S. firm had joined a foreign cartel and conspired successfully to control the produc-
tion, price, or distribution of a good that substantially affected U.S. commerce.
10. Do U.S. discrimination laws apply in foreign countries? Title VII of the 1964 Civil Rights Act regulates employment
practices of businesses and covers employees who are employed in any industry affecting commerce. Under the Civil Rights Act
of 1991, this law has extraterritorial effect—it applies to U.S. citizens employed in foreign countries.
2. How does a custom or practice become part of international law? Much of what we know as international law is based
on customs that evolved from commercial practices. The principle that the high seas should be open to the commerce of all
nations developed because certain seafaring powers that maintained overseas trading empires did not wish to have important
sea lanes claimed by hostile powers and because it was physically impossible for any single state to prevent other nations from
sailing the seas. Ask the students to research the origins of this principle and to examine what factors have led to its acceptance
as a fundamental principle of international law.
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
nation to grow and prosper economically (growth in agricultural production, in exports, and in investment relative to
production; the sense of being a nation; governmental administrative competence; and the political leadership: its continuity,
its policies, and its orientation—economic progress v. political power)?
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)?
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.
218 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
Garware Polyester, Ltd. v. Intermax Trading Corp., the court dismissed the case for improper venue. “[T]he ‘gist’ of Garware’s
claim is a breach of the Agency Agreements. The . . . sales in question were made by Intermax for the purpose of selling
Garware products in the contractually defined territory. The Agency Agreements specifically relate to Intermax’s role as
Garware’s ‘selling agent. . . . Further, the parties’ course of dealing supports the conclusion that the parties themselves
believed the Agency Agreements included [these] sales: as required by the Agreements, Garware paid commissions to Intermax
on these sales.”
Could the parties in this case have expressly waived the application of the forum-selection clause? The short answer is
yes. A contract may be modified by conduct or a subsequent writing on the mutual assent of the parties.
Why didn’t the court rule that the parties in this case impliedly waived the application of the forum-selection clause
when they filed a complaint and responded in a different jurisdiction? A defense to the application of a forum-selection clause
may be waived by implication when a party takes actions that are inconsistent with it. Thus, here, it could be argued that
Garware waived the clause by filing its suit in the United States rather than in India. Generally, however, it is not held that a
party waives such a clause merely by participating in pre-trial motions, or when the opposing party is not prejudiced by a
dismissal. This means that Intermax could not be said to have waived the clause simply be responding to Garware’s complaint,
and because Garware is based in India, it could not be said that it would be prejudiced by a dismissal of its suit in the United
States.
REVIEWING—
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.
CHAPTER 8: INTERNATIONAL LAW IN A GLOBAL ECONOMY 219
The U.S. has one of the best-run and most fair federal judiciaries in the world. We still support freedom and
democracy. Therefore, it is appropriate that when, for example, human rights are violated by companies that operate
in other countries, the aggrieved can avail themselves of our federal courts. Also, if a U.S. company that operates
abroad violates our employment discrimination or antitrust laws, then that company should be sued in the
U.S. Obviously, other countries do not have the same high standards that we have in these matters.
EXAMPREP—
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.
220 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
Roast accepts the beans but refuses to pay. Café Rojo sues Dark Roast in an Ecuadoran court and is awarded dam ages,
but Dark Roast’s as sets are in the United States. Under what circumstances would a U.S. court enforce the judgment of
the Ecuadoran court? Under the principle of comity, a U.S court would defer and give effect to foreign laws and judicial
decrees that are consistent with U.S. law and public policy.
2. Gems International, Ltd., is a foreign firm that has a 12 percent share of the U.S. market for diamonds. To capture
a larger share, Gems offers its products at a below-cost discount to U.S. buyers (and inflates the prices in its own
country to make up the difference). How can this attempt to undersell U.S. businesses be defeated? The practice
described in this problem is known as dumping, which is regarded as an unfair international trade practice. Dumping is
the sale of imported goods at “less than fair value.” Based on the price of those goods in the exporting country, an
extra tariff—known as an antidumping duty—can be imposed on the imports.
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.
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LA SOURICIÈRE
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FIN
TABLE DES MATIÈRES
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