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Courts will use their own doctrine to determine Choice of Law b. EC Reg. 593/2008 i. Parties may choose their own law as the whole or part of a K ii. Sec. 3 - Community law applies if parties choose another law iii. Art. 4 – In absence of choice, then contract is governed by “law of country to which it is most closely connected.” 1. Sec. 2 – most closely collected is presumed to mean “residence/nerve center” of party to effect performance. 2. Sec. 3 – if immovable property then presumption of application in country in which property is located. c. UCC 1-105: “act applies to transactions bearing an appropriate relation to to a state” 1. Appropriate relation – “imperial clause” (expansive but up to judicial decision) 2. Does not apply in Boston (see Roto-Lith) d. 2nd Restatement of Conflicts of Law i. Balancing Test 1. Place of Contracting 2. Place of Negotiation 3. Place of Performance 4. Domicile, Residence, Nationality, Place of Incorporation, or Place of Business. 2. Substantive Law a. UCC: Knock-out rule b. Common law: Last Shot Rule c. EU/German: PECL 2:208/209 (a hybrid rule) i. Boiler Plate drops out ii. Front-face language stays d. CISG i. Apples when K, Sale of Goods, International, and between CISG party states. e. Warranties i. UCC 2-314 – “Implied Warranty of Merchantability” ii. Most EU laws include implied warranty (Germany) iii. As-Is – Accepted under UCC 2-316 (3)(a) f. Additional Terms i. UCC 2-207 – additional terms construed as proposals for addition and accepted if 1. Acceptance limited to terms of offer 2. Terms didn’t materially alter contract
3. No timely notification given to exclude 4. If a “different term” then it would be subject to knockout rule. ii. CISG Art. 19 1. Roto-Lith applies, additions, limitations or modifications is a rejection and constitutes a counteroffer. 2. 4.1b: the Convention on the International Sale of Goods (CISG) 1) Application? a. Contract (K) b. Sale of Goods c. International (business or residence within different States) d. Between CISF contracting party states 2) Material Alteration? CISG Art.. 19 Sec. 1 a. Constitutes a rejection and counter-offer 3) Terms? a. The terms of the counter-offer (“last shot”) unless; (CISG Art. 17) b. Initial K expressly denied additional/different terms c. No Knock-Out rule in CISG, so this is circular i. Some (nearly 2/3) of courts HAVE applied a knock-out rule rather than follow the text (Spagnolle is not sure why) 4) As-is a. Not defined in CISG b. Term of Art in UCC, but not Internationally c. May not be construed to abrogate “all warranties” 4.2: Books to Bath 1) F.O.B (Free on Board) a. In US, doesn’t mean anything without a destination ie. ship name, loading dock, port, etc. b. INCOTERMS FOB is a shipment contract that must be by sea 2) C.I.F (Cargo, Insurance, Freight) a. Requires a negotiable bill of lading b. Must pay against documents c. Cuts off inspection rights 3) UCC a. Lays out F.O.B and C.I.F definitions at UCC 2-319 4) CISG a. CISG Art 30 seller must deliver goods as required by the contract and the CISG b. Art. 6 allows contracts to exclude parts of the CISGs application c. Art. 31 if a contract doesn’t include a destination, then “handing goods over to the first carrier” applies under this article 5) Trade Terms a. Some terms allow in (like INCOTERMS) even if not in the contract
6) Mandatory Law a. Something that cannot be included or excluded by Contract b. Ie. Illegal Conduct c. COGSA (Carriage of Goods by Sea Act) – Hague Rules i. Limitation on liability to $500 per package for common carriers ii. Courts insist that shippers are offered a clear opportunity to declare a higher value. d. Berisford Metals i. Goods Warehoused and thousands of pounds of metal is missing. ii. Loading goods includes a responsibility to know what is in the cargo containers (Conex)
INCOTERM FOB S Delivery Port of Shipment CIF Port of Shipment (A4) Ships rail at port of shipment C&F Same Same
Responsibili Ships Rail ty For Loss Price
Cost of Goods Cost of Goods Inland Transport (ico = All Transport Costs yes American = ?) Packing/Marking Cost of Packing and Export Licensing Marking Insurance for Buyer Export Licensing during transit Bill of Lading, sea waybill, multi-modal transport document Normal is a Straight Bill of Lading (open account) (Prior to payment) In the Contract After Receipt Bill of Lading (transferable while in transit) Same
Same except for Insuranc e
Inspection of Goods Payment Term
Against Documents (not Same necessarily involving a letter of credit)
4.3: Oil to Araby 1. Effects of Treaty and Legislation a. Hague Treaties (US as COGSA)
Hague-Visby . 79 – applies to “parties with places of business in two different contracting states” 1. Includes a negative preemption clause 4 . Force Majeure Clauses a. UNIDROIT Principles i. Rome Convention i. French Administrative Courts (when state is a aprty) have a principle of “impervision” (lack of foresight) allowing parties to modify based on onerousness of performance. Law of seller if an EU business purchaser or to a consumers residence ii. Not adopted by the US c. Hamburg Rules i. Excuse by Failure of Presupposed Conditions. Force Majeure standard for French law is physical impossibility c. $500 liability limit (indexed to gold in some countries. Ie. French Courts i. Specific about physical impossibility ii. CISG Art. Considered Carrier Friendly iii. 4. E-Sign: 1.” 1. “Failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences.” 2.i. 2-615. MD Seller to FR Buyer = CISG + MD UCC as gap filler if a businsess. UCC 1-105: Territorial application of the law “appropriate relationship. Benefits Insurance Companies (because you have to pay for it beyond the $500 liability limit) b. Adopted in 1924 ii. Governing Law a. American i. a. US has never considered joining 2. Applicable Law? i. “non-occurrence was a basic assumption of K” b. FR law if a consumer purchaser.1960s i. Choice of Law a. Ratified by 10-15 countries (Australia the largest) ii. but not in the US) 1.4 Electronic Commerce 1. “Impediment” generally means a physical bar to performance. 2. rather than financial issues ii. Does not deal with authentication or substantive law 2.
80% of goods go this way. 3. iii. i. b/c parties trust past associates b. A Receipt iii. Seller loses control of goods to whomever is consigned iii. ii. Order Bill of Lading: (yellow) i. Types of Bills of Lading: a. A certificate issued by te carrier to the shipper. Buyer loses rt to inspect –carrier enforces cannot touch goods until you show up with the piece of paper. If adopted by states it preempts federal law (by design) and is substantively broader than E-sign UCITA (Uniform Computer Information Transactions Act) 1. Negotiable a. whomever holds has title iv. iv. A contractual arrangement for carriage 1. 38 State Attorney Generals rejected 5. Door-to-Door: 3 day cooling off period Interstate land transaction – 3 days to reject 1. Only adopted in VA and parts of MD 4.seller that serves as: i. Issued to the consignee – non-negotiable – only consignee has rts. 5 . ii. Must be stamped on the B/L itself. Potenitally a Negotiable Instrument 2. Might be considered a license (not governed by CISG or UCC) 4. v. Issued to make deliver to a certain destination set buy consignee to “Holder” of BL. EUTA 1. EU 3. A Document of Title ie. Largely drafter by tech firms lawyers 3. Attempt to regulate every aspect of electronic commercial transactions 2. Can be endorsed – either by blank endorsement or special endorsement. EU Distance Selling Directive: Consumer right to return/withdraw within 7 days unless a perishable item. Unclear laws here: Germany has applied CISG. Straight Bill of Lading: (white) i. any transaction can be voided within 3 days. What is a Bill of Lading? a. “to order”. b. Vt. Special: to a specific Consigness ii. Transfer to holder if endorsement (signature) is blank b. no US application i.ii. Negotiable Bill of Lading. E-Books? a. iii. Purely inted to allow for electronic signatures. 5 states passed legislation that UCITA will not apply to their residents.5: Bills of Lading 1.
Banks less willing to accept because there is a lack of certainty regarding title and negotiable bills of lading can transfer possession dozens of times during a voyage c. The goods are delivered to the order of that person or ii. Forged Endorsement is no endorsement (Adel) 4. How to obtain payment -. The bill has been indorsed to that person. Carrier has an absolute duty to deliver to holder of negotiable bill of lading if it is property indorsed. Does not apply if common carrier is provide with “adequate facilities for weighing the freight” 2.iv. a.” – this works iii. but Holder. Pomerane Act has not been amended for E-Bills of Lading. load. Electronic Bills of Lading a. “Said to contain.” 1. When goods loaded by carrier. For any failure to deliver goods which correspond to the description in the BL – quantity or quality. other docs required in sales contract – endorses the BL and Draft to SBK 2. 6 . Carrier Liability: a. and count. invoice. c. 5. Holder (in due course) is an individual who has possession of. d. Carrier is liable under Straight BL if goes to anyone. Buyer pays w/o inspection – seller risk too (unless letter credit). “contents or condition of contents of packages unknown. Also doesn’t apply carrier does the loading. by the consignee or other indorsee c. or a property right to. Attach a “draft”. or in blank. i. a bill of lading b. Exemptions to carrier’s liability – language to disclaim obligations: i. Carrier is liable under Order BL if goes to anyone. Frequently used for Straight Bills of Lading.” ii. he must count the number of packages and is expected to note the condition of the packages and the kind and quantity – not quality. but it doesn’t use a negotiable bill of lading and banks aren’t involved. but consignee ii. Mis-delivery i. but not for negotiable b. Disclaimers ineffective if carrier knows goods do not conform. b.governs all interstate and international shipments which use BL issued by a common carrier. “Shipper’s weight. i. d. Federal Bill of Lading Act – (Pomerene Act) . BOLERO system in EU is operational. 49 USC 80101(b): must delvier to person in possession of a negotiable bill of lading if: i.Once have negotiable BL: 1. 3.
UCC .§7-508 . iii. a carrier must meet the following three criteria: i. Carrier in shipment transaction has no privity w/the K b/w buyer and seller for the sale of goods. carrier doesn’t know about goods. and therefore has no obligation to deliver goods that conform to the sale K. h. phone calls. goods loaded by shipper ii. In EU – if someone signs your name you might be stuck with it under Vienna Conventions What can carrier do to provide more security or protection i. appropriate wording.e. b. To ensure that their not liable. they may not transfer funds. if there are issues with the BL upon receipt. f. Whether this overcomes 8107 is questionable. Most documents don’t conform exactly but technicalities might allow nonconformity by the receiving bank ie. only holding docs. No international custom – international custom is that collective banks don’t make any warranties as to the genuine nature of the bill. §80107 – unless contrary intention . unless something on BL. iii. 7 . i. the BL. g. If the carrier did not issue the BL and its signature is a forgery or unauthorized. Same disclaimers as misdelivery if bank wants to protect itself.gives opposite presumption. freight forwarder. Banks generally not liable – disclaimers of warranty liability. Applicable Statutes: i. iii. absent actionable negligence.a person negotiating the transferring of a BL for value warrants that it is genuine. iii. ii. which describes the goods is part of the carriage contract. Contract Apporoach i. Forged BL endorsements i. K can say want to meet party’s expectations – that cartons aren’t opened.0: Documentary Letters of Credit a. 5. checks such as pin numbers. j. presumption that if only a collecting bank not giving any warranties – just providing your own good faith and services. Federal Statute vs. that signature is not effective – carrier not liable. Are independent of the underlying transaction and K. Mis-description i. ii. ii. ICC banks have no obligation to examine docs. However. Statute: words must be fairly close and literal ii.
confirming bank. a. AL. Strict Compliance. States custom in the industry but they are not law so must be incorporated into the K ii. Choice of Law issue a. so if you can prove it is a standard banking practice then the court will have to determine whether it is a standard practice is as a matter of law. Art. 5 UCC 5-108 – Issuing bank is not liable unless it broke banking standards. 4. UCP doesn’t deal in fraud. iv. Art. Bank’s obligations are separate from buyer’s and seller’s rights. but more like mandatory law – No solid answer. UCP – Uniform Customs and Practices for Documentary Credits i. Did the UCP adoption mean to get rid of 108(e) or was that an unintended point. h. UCC 5-107 – it is just as if Metro (as confirming bank) issued its own letter of credit that said ICD – so. e. The authors say it is probably not gap filler. Shady has Metro on the hook. g. Non-conforming letter documents – banks obligations: UCP a. UCP 600: Complying Presentation: a presentation that is in accordance with the terms and conditions of the credit 3.1. Art. Bank has to first exam doc and determine conformity 8 . Chances are that bank wins.bank has to present all discrepancies at once or preclusion from claiming non-compliance to non-stated discrepancy. c. Issuing bank. c. a. VI UCP. Art. UCC 5 – governing law in US. however. except in NY. Used as gap filler 2. Telex that is received under ucc – is conforming? d. UCC is a gap filler. 14 . f. and nominated bank. b. 14 – waiver from bank’s client / consultation d. Schmittoff says that mailing a letter is a better business practice. MO – where UCP prevails if incorporated into the letter of credit. UCC and choice of law – UCC Art 5-116 – governed by contract or the laws of jurisdiction where located. Not likely under UCP. d. AZ. Issue: whether 5-108 a mandatory law or mere gap filler. Doesn’t cover fraud and enjoining payment against documents.Time Deadline for UCP of seven days b. iii. then issuing bank can decline to pay b. 13 . most of it is not mandatory and defers to K terms of parties as expressed in the K. UCC –5-108: if not on face the same. so must look to local law – UCC 5 in US e. advising bank. Bank’s deal only in documents not transaction – and insist on strict compliance Art. 5-108(e) practice of financial institutions – Is a bank negligent for not sending a confirming letter and using telex? c.
all that matters are conforming documents. 5. John Little discovers from a 3rd party that Robin Hood is sending him fraudulent goods. Always note privity of K. Banks do have an option to delay i. can he have his bank not pay out to Robin Hoods bank? What else can he do? 2. d. 5. and no liability so long as they conform. or a good faith purchaser (ie. Check responsibility for clerical errors – agency theory. a. May consult applicant. Act upon discrepancies found i. 7 days for inspection – “reasonable time” depends on transaction b. 5-190 a) 2) MAY honor or dishonor in other cases a. f. 5-109 a) 1) [Bank] SHALL honor if demanded in good faith by a holder in due course. anyone they cannot prove is acting in bad faith/knowledge of the alleged fraud. Whose error – negligence in machine maintenance? b.2 The Independence Principal 1. Bank is likely to pay out in most cases (less liability) c. Example: Chinese bank refuses to send $ to Seller’s bank claiming that the BofL is non-conforming because it’s says ICD instead of LCD a. dishonor presentation of docs ii. UPC embodies an “independence principal” ie. See Mid-America Tire (p. Check time deadline in reporting – UCP – seven days e. Typing mistake via fax machine i.i. UCC 5-109 likely applies 1. while Voest Alpine/UCP 600 suggests a new case-by-case approach. Banks duty? a. It can still pay if there is fraud in the transaction so long as they do not know of it for sure. Strict conformity: Rayner (KB 1946): no need for banks to know trade terms c. Aegis on protecting good faith 3rd parties (not buyer or seller) 3. not obligated to consult ii. Notice to dishonor and must state specifically discrepancies – all. 5-116(2) rules of everybody dependent on where located – BNP uses FR law and Metro uses UCC – NY law. b. May ask for applicant to waive iii. Statute is UCC 5-108 (7 days) but UPC is 5 working days. b. UPC is entirely silent on frauds but doesn’t expressly contract out of the UCC i. Who has the obligation here? UCP 500 says four-corners of the K. If not waived. i. Seller (Little John)’s response options? a. 343) 2. 3. Temporary Restraining Order (TRO) 9 .
This may represent the highest applicable standard. UN Convention on Independent Guarantees + Standby Letters of Credit ii. Mid-America Tire (Ohio Court says that must be such a major lie that it vitiates entire contract – about EU tires that were unusable in the US but sold on the gray market) a. Does not guarantee immediate payment because the issuer might litigate. Uniform Rules of Demand Guarantee (URDG) (ICC 1992) iii. NO TRO. A non-revocable letter of credit issued to the buyer from the seller that stands as sureity to sellers ability to conform to the contract terms. and may enter a K with a 3rd party to complete. iii. Bank is using the seller’s money. An insurance like scheme from a bank ii. UN Con. URDG: Must say how the seller has breachedso that someone can go into court to argue the facts of the letter. Bank will simply pay. Has three vague standards that allows a court to order non-payment 3. Buyer obtains funds by submitting a statement indicating breach in conjunction with the letter of credit. has a reputation to uphold. a. American Bell Int'l v. 1. all differently worded (precision) 1. Islamic Republic of Iran (“Evil Intent Standard”) a. May act as an inducement to buyer to enter into the K d. 2. Against his bank to keep his bank from paying the buyer’s bank 1.3: Standby Letters of Credit 1. Alternatives is a Performance Bond? i. 10 . no probably merits. a factual misrepresentation that is known to be untrue and that his relied upon in the transaction and will/has resulted in damages. but that they was an actual lie that induced the K 2. will certainly investigate. UCC . International Standby Practices (ICC 1998) b. 1. Must prove “Fraud”: ie. etc. Injunction. b.i. and only five days to delay while an insurance company has an interest in providing as little $ as possible 2. etc. Provide Standards for TRO. Assurances to Buyer that seller will conform c. International framework because UCC and UCP not adapted for standby letter of credit: i.we've discussed (go back) 3. All Three consider issues of Fraud not addressed in the UCP or ISP i. This doesn’t mean the goods don’t conform fully. 5. (allows his bank to avoid responsibility) ii.
UCC and UCP ii. National Iranian Radio and Television (Evidence of Harm test) a. "evidence of fraud" (much lower standard than evil intent). UCC applies then if the bank is domestic b. Was required to prove that there would be "irreparable harm" to the seeking party ii. and that the assets of all American Banks have already been seized. Probably success on the Merit i. all one animal. Practice . Not used often because seen as completely bank inspired 2. bank (bank's reputation for paying). or even American Courts. c. Probably Success on the Merits? i. Harris Corp v. must show breach (allow someone to argue/litigate) iv. Potentially. Five potential legal regimes i. UCC is backup and it says that law governs associated with the bank branch's location a. M would be liable to Iranian Bank. Review: of Standby Letters of Credit a. That the balance of hardship favored the seeking party i. Would infringe on Manufacturers credibility and likely result in it absorbing the costs in Iran (instead of Bell) iii. If balanced favored Bell. it did not do so decidedly so. 5. seller. that neither appelant has argued it.written by bank lawyers) 1. No suicide credit. URDG (European Style . P has not demonstrated evil intent (this could just be an economically sensible course of action based on its current financial situation) c. “Evil Intent” is a very high standards for gaining a TRO 4. e. Balance of Hardships: buyer. ii. no avenue in American or Iranian Courts. Court holds that no evidence of harm because bank/procuring agency/etc. Balance of Harms? i. Serv. d. Iranian cases indicate type of problems likely i. Irreparable injury? i.set very high in American Bell and Mid-America Tire ii. ISP (Int. US Banks can now issue Insurance Policies (Glass-Steigal has been revoked) 11 . c. Fraud Bar (to TRO) .i. Two leading cases in this area (though every now and again bad goods will work) iii. American Claims Tribunal is the only avenue (new and suspect) b. Must also show irreparable damage iv. b. but would likely face hardship from Iran's potential response. Would likely fail under EU law on ID grounds 3. UN Proposed Convention (US not yet a member) v. not under standby letter of credit. just an international tribunal that the court doesn't trust. But AB never tried to go to Iranian Court.guaranteed payable on first demand) iii. ii. Would require court to assume bad faith on part of Iranian Gov.
Israel has made misrepresentation in its letter because the system "has" been deliver. Bank? 3.McDonald's Example? 1. Auditors report b. but they perform the same function Problem 5. franchise fee. 6. 3rd party confirmer i. or significant assistance or control (fed. etc. SpaceCom: Fraud --> intentional misrepresentation of inducing fact. Franchisee is the bottler b. a. Three Characteristics of Franchises: an ongoing commercial relationship characterized by: a. Third party (trusted by both parties) to issue certificate e. But no one is doing it instead of letters of credit ii.0000 2. Standby Letters of Credit i. As in the URDG -. Singer Sewing machines ii. Letter of acknowledgement from SpaceCom c. How can we avoid? By a Documentary requirement (see. A marketing plan or community of interests (state statute). Receipt requirement showing dates d. Franchisor (Zor) provides a. Factual Representations in the Statement by Israel a.i. Substantial association or license of a franchise (core) b. $500 over 6 months for FTC ii. i) It was accepted (and diverted) – so should not merit loss of $15. SpaceCom 1. Fast food is prime example ii.000. Drown them in paper ii. This is not a "substantial" breach (unclear). A fee (called a royalty. Guaranteed v. Kimball and Sanders) a. First type. Could be arbiter decision or Court order. Some minor technical differences. b. Clearest example is Coke/Pepsi ie. but it was rerouted by the. Trade Mark 12 . because it was delivered. ii.must say specifically what constituted the breach and document how and when it occurred. How does it work . just four days late. Statute) c. Business Format Franchise i. Several types of Franchises: a. Relatively nominal amounts of money 2. ) i. How do you knock out a letter of credit? i.0: Franchising 1.3: Israel v. Buyers who want protection want to be protected now…not to be held for investigation by an insurance investigator d.. Products Distribution Franchise i.
Liability reduced by distance b. Training c. Franchisor sells right to develop one store. Master administers his Subs for the Franchisor a. Responsible for Quality. $ for Training (fee?) c. Generally 15-20 years initially with a 10 years renewal 2.sub franchising arrangement 1. Provided by Franchisee (Zee) (Total $ % by Gross income average around 5-7%) a.b. Could pay as much as 10% of royalties to Franchisor 6. Knowledge of Market preference i. Master Franchising/Licensing . then additional based on its fixed development schedule 2. Seen allot in the Int'l Arena 2. Generally used domestically 3. $ for Marketing (% of Gross or fee) d. Why be a Franchisor? a. Area development Agreement: From Franchisor to Franchisee 1. Real Estate (Help finding starting location . Training b. Service. Attempt to bring on a Master with prior experience in this area 13 . $ for Rent (% of Gross or fee) iii. Spread the Risk b. Advantages to this arrangement? a. Does Franchisor have day to day control? Over risk? Normally will not apply. Some countries require Master to operate successfully for at least a year prior to sub-franchising 3. Marketing Assistance d. b. Used more than any other approach in the international setting 5. Rights to a specific store in a specific area 2. Provides exclusive right to a territory . Direct Franchising: from Franchisor to Franchisee directly 1.might even own land/shell in order to ensure no 3rd party landlord) 2. Cleanliness (QSC) 4.becomes a multiunit owner iii. $ for TM (initial fee $10-$25k). but will to risk c. Know the area (indirect/Master/Area franchising) i. Can be used internationally in limited circumstances (Canada being one example) ii. Not necessarily a right to a renewal (though could be negotiated in initial/secondary contract) 3. Ongoing Business Relationship 1.
trademarks. dispute resolution. Required to be in Plain English and defined content 2. A bigger issue than we might think (DoubleReverse translation is necessary) iv.tying). Federal: FTC rule i. business length. etc). Fees. or specify why particularized ie. Selling licenses to individuals already operating to take on your name. add'l spending (trips. Cannot cherry pick information (must be representative of the system as a whole. Often used for realtors 3. 15 states have disclosure/registration laws (perhaps something like the FDD) ii. 4. Conversion Franchise 1. because comparable to your projected situation) 6. 2. d. American Law a. i. officers backgrounds. etc. Critical in US context. May governor termination. cure. 3.) prior to money passing hands b. product purchase requirements (by contract . Earnings Claims a. Can lead to "too high" a royalty 4.OPTIONAL part of FDD (#23 of 23). required supplies. International Law 14 . termination procedures. 30 states have relationship laws 1. Tying generally dealt with by setting very specific standards for products your required to used.ii. a. Advantage to have someone sophisticated enough to advance the franchise whilst lacking competing interests. Territorial exclusivity? a. Legislatures went after fraudulent earnings claims and created the Earnings Claims Document which is now a Financial Performance Representation (FPR) --. States may require registration of disclosure iii. Names and Addresses for other Franchisees 5. English Speaking and Translation of Operations Manual i. or renewal requirements 5. Required disclosure prior to sale "franchise disclosure document" (FDD) 1. litigation history. States i. Two weeks notice (no registration req.
Trademark . Corn syrup to Vodka. etc. employees. Enforceability of contracts? i. Translation costs (ongoing) d. The Operations Manual i. Will this cover? h. contracts. It's "Formula for Success" b. What's he selling? a. Tend to focus on placing equity and control in the hands of local individuals and on regulating the franchise agreement to benefit the franchisees. The Federal Patent and Trademark Office i. International Franchise Fee usually $150.000. Why % of Gross? a. a. must be careful so as not to force an agency relationship. Trademark f. to submarines…example Might be better in some cases to direct franchise a. Pricing Scheme. 6. Quality Control – if franchisor doesn’t maintain it. Pro Forma costs (flights. How does he protect his trademark? a.6. Equipment d. Biggest issue has to be the quality of the Master Licensee b. Avoid issues with taxes. Not a legal document per se ii. Manual. Litigation could take as long as 10 years and 100s of thousands of $. Tells you everything about how the business runs (summarizes the system) Additional Costs/Concerns of Internationalization? a. j. e. 8.000 to $500. "other fees" (bribes) k. Cultural preferences c. the trademark could be considered abandoned and lost. 7. 9. etc) g. quality control c.buy it back? f. Advertising program e. etc. marketing. What if someone has registered a duplicate . Taxes and other laws b. Intellectual Property? a. 15 . Ie. However. How do you get your $ (hard currency) out? i.1: Franchising and Trademark Licensing: Colonel Chicken goes abroad 1.avoid abandonment (most important) i. Getting rid of them can be difficult (strongly protected in "their" courts). good accounting could make profit appear to be almost nothing. Know How: Use of recipes. Prob. Instruction Manual 2.
If someone else has registered. Trademark Registration Treaty of Vienna (1973) has not been implemented (so no comparable solution to Berne Treaty). Uruguay Round. Copyright the manual (keep it from being published) – reserve rights 16 . Can prevent unauthorized use or disclosure b. vii. viii. Paris Convention – right of priority of 6 months form home registration. Eliminates need to simultaneously file 3. Famous marks – prevents infringement even if there has been no local registration vi. Some countries give patent to first to file. Registering to set up a company ix. Patent for Equipment -. No longer have to ID good or service classification. iii. valid. Mitigates national requirements that foreigners seeking TR prove a preexisting. EU . What can we do in this situation – get a subsidiary patent to the original – a follow-along-patent. 1.patent office i. US Lanham Act of 1946 – foreigners who seek registration in US might be required to prove a prior and valid “home registration” 1. Will not protect from prior filings (prior to your filing) even if you're first to invite iii. Registering to Block v.ii. 1. and 24 additional months if good cause is shown for delay v. then they will ultimately end up paying someone else who has already registered the Mark abroad. compulsory licensing is banned 2. and continuing home registration. Nice Agreement – registration by single classification system for goods and services. internationally recognized marks receive enhanced protection. the office says it is not new and not invention – that this info is already disclosed in US Patent – so precluded by own prior disclosure. but if you don’t get patent protection in Europe during those months and you come in later. the linking of local marks with foreign TM is prohibited. TRIPs – trade related intellectual property rights. 2. 1. rather than to discover c.You get right of priority of 12 months. iv. US law – allows for registration within 12 months if there is bona fide intent. You can use this in Europe to get patent protection ii. Must register internationally 1. allows well-known trademarks the rt to block or cancel the unauthorized registration of their marks. Not fully implemented yet. Vienna Trademark Registration Treaty – US party to – int’l filing and examination scheme. service marks become registerable.
UCC – copyright holders receive national treatment. Filing everywhere might be prohibitively expensive (this is really a business decision) b. still have to hire local council in each country iii. if attacked in one country and fails. Universal Copyright Convention of 1952 – and Berne Convention of 1886 – US party to both. Foreigners in US have to register if only seeking protection under UCC 2. then it fails in each country under the protocal 17 . Must work a patent to maintain the patet f. etc. has 84 member states ii. 3. How do we protect these things? (Question has to be: What can 'Zee do that will hurt us?) a. Copyright protection is extended to 140 states under Berne Convention i. Indonesia says must manufacture whilst other countries say "selling" 4.i. International Application i. will excuse any national registration requirement provided a notice of a claim of copyright is adequately given. Not an all or nothing proposition c. e. U. Should you file patents on the cooking equipment all at the same time (all 196 countries)? a. e. Manual is protected under Berne Convention b. 3. Register with copyright offices. get patents on improvements to the cooking systems abroad d. Trademark i. Trade secrets. this doesn't happen. Patent protection has to be had early on in the process. Patent follow-on inventions/which will generally protect goods c. translation rights. Under Madrid. but: i. Consider where you might go early…and move on patent protection as you go. normally. Necessary for registration if t d.S. Note that another difficulty is that there is no agreement on how you get a patent and how it is registered. Contract terms for non-disclosure of know how (keep it from being used) i. Permits local copyright protection independent of protection granted in the country of origin and doesn’t require notice. Therefore. As you move forward. Berne – if foreigner is member to Berne as well – then national treatment and release from registration. if publish in US – protected in other ratifying countries. law ends at water's edge f. Also. Madrid protocol around 2000. 4. ii. 1. not necessarily anymore so long as notice provided.
Who pays for training/who conducts training 4. Advertising . Who is paying through.related risk to one franchise (not a big deal in the grand scheme o things) 2. Accounting standards? Generally Accepted Accounting Practices (GAAP) vii. Language . Can potential litigants pierce the corporate veil against the Franchisor? b. where the company has a more in-depth understanding of the marketplace. but instead targeted master/area development.double translation? Or pick one language and then assign as Master. the subs to the master and then up (reverse waterfall) or a distributed pay model or a direct payment and then reversion of fee to Master for management? 6. Trade Secrets i. CANNOT exert day to day control (will create agency . Int'l? vi. Who selects sub franchisees? 3.so need to create separation) 18 . d. Organic growth is more prevalent domestically. etc. Usually create a wholly owned company. 8.1. of avoiding liability through both ends…by proper training and by distance. 6 months protection under the Paris convention. Creation of Master Franchisee or Area Development Agreement? 1. Not generally "organic" growth internationally. a. i. All of this is a balancing act between agency and contractor. 5. Changes to contract itself ii. There are ways to convert "out of the basket" but these are similar to what you'd do if you just registered singly in each country iv. (which one will govern?) v. Risk Mitigation 1. Might not get paid .who controls? Master Franchisee iv. Arbitration requirement? American vs. II(b) of contract --> 2. Potential liability? a. Must consider PRIOR to moving into another country e. Insurance plus Limitation of Franchise c. Depends on Contracts and local laws ii. How do you show that you can make money in target country? 7. Currency iii. then run for a time to determine profitability. System: i.
plain. Food suppliers (correct taste) b. Explanation of site selection 6. very common in Common law countries. and true disclosure of all material facts relating to the franchise proposal to be offered. risk against entire franchise network. ix) Site selection process? Almost never going to be disclosed…"most important secret. etc. Site Selection . 2nd Draft. f.) vi) Potential competition even alt.Most important issue for both Zor and Zee i. b) What do we need to know? i) Historical profitability/cost of individual franchisees? Failure rate? ii) Costs including? iii) Required purchase products + approval process for local substitution iv) Solvency of Franchisor v) Due diligence (1) Suits against trademark." (1) Never been an issue re: disclosure as far as Spagnolli knows. etc. x) This prospectus situation is true in 30 states. Finally approved after a repeated back and forth.2 Regulation: Colonel Chicken Goes to Canada 1) Alberta: Need to file prospectus that provides full. validity. c) Failure to disclose = right to rescission and/or civil penalty" d) A "nut case" can twists these requirements every which way so: i) Must research past case-law/prospectii in the region ii) Request a clarifying opinion? iii) NOT a one way process (1) Drafts. a) Alberta considers franchisee's to be Investors. comments. etc. (2) Similar to the SEC 19 . 4. building design. (2) Compliance with national/province health requirements (including food. Avoid sweat shops. How do you avoid employees steeling/transferring knowhow? viii.India refused to set up franchises without disclosure of Coke's formula…Coke walked away from India for 20 years. Must oversee to avoid ruin to franchises reputation a.. Col Chicken's resp. Prioritize between risk to individual franchise relationship VS.3. etc. but might pass to Master Franchisee (or even sub) ii. franchisees and different franchises (1) Status of any current litigation vii) Forward looking statements (are not misrepresentation) viii) Are "secret spices" a material fact? (1) Coke in India example .
(a) Even here 90% is boilerplate. 5. DeFacto limitation of territory is not an issue. 4. uniforms. Sales price control b. 1. Prospectus (See Example – Alberta) b. A “suggested retail price” is considered “price management” rather than controlling as long as you don’t have an enforcement mechanism ii. Restriction from sale to unauthorized redistributors iv. EU supports intrabrand competition as opposed to interbrand competition (ie. F rather than F v. 2) does not apply to a variety of situations ie. Article 3: says they exemption shall apply where supplies does not exceed 30% marketshare 3. Ownership of the land? a. Prohibits controlling price after resale to 2nd part (retail price maintenance) 1. but there will still be questions/responses regarding the 10% that matters. ii. Restriction on buyers ability to sell components to manufacture same type of goods 20 . placemats. 2. Article 81 is Rome Convention on Anti-Trust law . Seigel. Antitrust Law (In America) – Sherman Antitrust act i. b/c depends on secret recipe and reputation.? 3. e) New prospectus EVERY time you open a new franchise (though thankfully most of it made up already. Can purchase core products from franchisor – chicken.Vertical Restraints Regulation 1. Restrictions on wholesale buyers iii. Restrictions on territory except: i. EU Anti-trust law (sets down comprehensive rules) iii. Types of Regulation a. Article 2: exempts contracts under Article 81 (from anti-trust attack) 2. Not allowed to require franchisee to purchase non-essentials and cooking supplies from franchisor. a. Baskin Robinns – “formula for success” products may be tied. You can’t require that they purchase – generic equipment or supplies. G). so long as rents are being paid correctly. subject to specifications or from a list of approved sources. Active sales into exclusive territories that do not actively limit customers of the buyers 1. Article 4: exemption (art. Napkins. only requires update). Prohibits Tying 1. F v.
do come in and therefore the owners rights are exhausted by the transfer of lawful ownership to Quality King. you could sue K-Market without a contract with K-Market. IP Law theoretically "flows with the items" but there are doctrines of exhaustion that might get in the way. Facts: QK runs a huge gray market empire. warranties. warranties. QK says exclusive right is limited under S. Cheaper price b. May be different. Importation right is limited by the first sale doctrine 21 . Why can't DACCA solve this problem with Contract Law? a. etc. 109. Why might DACCA US be upset? a. but lower with the benefits of domestic product (full compliance with domestic standards. Price discrimination across markets being upset? i. First Sale Doctrine results in Exhaustion of IP Rights. Price equalization? a. 106. Version issue (material differences) .). Language. i. Distributor who pays for advertising is losing its investment to opponents.9. Quality King Distributors (1998) a. Result in slightly higher price than re-importation. IP law will allow you to recover without the Privity of Contract (if a remedy exists in law) b. which is being reimported on the shampoo itself. not meeting US standards or different make-up (different versions ie. US company (DACCA) licenses a FR subsidiary (DACCA FR) to produce a trademark/copyrighted material a.Lever 5. DACCA FR sells them to a discounter in the US (K-Market) 2. sells shampoo from abroad (where it is sold cheap) to stores in the US (where it is a salon only product). 106. 7." But. Here. L'Anza v. c.2a . quality control.Parallel Importation 1. selling goods below suggested resale that it has acquired on the international market. b. 3. Consumers Interest? a.) ii. Broader Choice 4. 106 the exceptions to S. including S. 109 and that an "owner…is entitled to sell without the authority of the copyright owner. Exclusive distribution schemes upset i. Holding: That though this is infringement under S. Here." i. certifications? b. c. Arguments: L'Anza cites statutory text: "importation into the US without the authority of the owner of copyright…is an infringement of the exclusive right to distribute copies under Sec. L'Anza attempts to sue based on it having copyrighted its label. 6. Different materials. etc.
though this is not settled law. If they were made in US initially. (2nd is emphasis). Lower Courts: If copy made outside the US (even by US Company). Citizens/Corps. Application to DACCA? a. in K-mart v. b.S.d. 42 (S. ) 1.S. Costco (9th Cir. 526) includes two exceptions to ban on unauthorized imports: a. 42 does not and appears to otherwise provide protection of equal or greater scope (protects against copy or simulation of a mark) Both prohibit entry of goods into the country (even before goods have been placed on sale). then owner has no first sale rights/defense. 10. Cartier. Concurrence by J.S. Bad precedent for the US. Lanham Act S. S. Cartier(upheld) Infringement Statues Does not require registration Protect all U.how can one determine if it's lawfully made since title 17 has no application abroad? i. Common Control . 526 (19 U. Importation i. But S. because it creates an impetus for companies to manufacture goods abroad…because they get more rights when they're abroad. 109(a) re: "lawfully made" . Ginsburg: hinge here is on language in Title 17. (Omega v. Ordinary infringement statutes Import Statues Both required registration of trademarks 526 limits protection to U. Infringement i. Authorized Use i. Trademark: Three applicable statutes a. 1124)) . Having a licensing relationship that allows the foreign entity to legally use the trademark (could be vise versa) ii. ii. Struck down by Ct.Federal Trademark Act ii. Copies made IN France.) petition for Cert. Tariff Act S. b. copyright owner still has IP rights. Trademark Holders Goods must be offered for sale 22 . so place of maufacture under Omega would result in application of copyright importation . K-mart v. 9.Tariff Act b. Denied. we'd have to consider trademark law. Customs regulation (implementing S. 8. 1526) . ie.Lever. Two potential interpretations: lawful because not "unlawful" or unlawful because outside of the US jurisdiction.C S.
(formulated for different markets) b. Lever Bros. Would be decided under EU law (dispute decided within EU) 13. "the owner" is construed to include anyone within the cloud of the company organization (including a foreign subsidiary or parent company). Summary: a. Counter: why wouldn't you just rebrand in the UK? i. 1993) a. Co. b. chemical make-up.S." 3.loyalty. ends up at EU CofJ. Arguments: that Member states must apply a law of regional exhaustion. cheaper to trademark. 11. Result is to increase costs for gray goods importers AND may limit their relationship with consumers 12. Arguments: Lever bros: that there ARE material differences between the products that should prohibit importation. 42 precludes the common control exception's application with respect to materially/physically different goods. Silhouette v. UK version has different colors. global marketing campaigns. Exception if (1) the goods bear a mark valid in their country of origin and (2) the foreign manufacture is affiliated with the U. Goods are materially different. (brought under S. allows you to stop importation of your own products in competition? (though it likely wouldn't be a strong competitor as a grey market good). etc. S sues H. Also. or 2.S. once a sale is made within EU. packaging. and ii. v. 23 . cross advertising (economies of scale). But. H purchases frames from the trading company. etc. c. Lever: Results in promulgation of new Customs' Regulations that says that Common Control exception only applies when either: 1. What if the facts reversed? A US discounter selling to a FR wholesaler i. then to prohibit import must show: i. No mandated-form disclosure on goods c. scents. Facts: soap being imported from UK subsidiary. Holding: Sec. ii. Goods are not physically or materially different. Facts: S sells off stock of old frames to a trading company in Bulgaria (which was not then a EU country).i. i. Goods bear a "conspicuous and legible label" stating that the product is not a product authorized by the US Tm owner for importation and is physically and materially different from the authorized product. then the goods must be allowed to flow freely through EU. U. Hartlauer (ECJ 1998) a. Global brand development . US trademark holder can generally prohibit non-consented-to importation of goods bearing that mark b. good name choice. Austria argues that it can adopt a rule of International Exhaustion. 42 o f Lanham Act) (DC Cir. mark holder.
but lower cts have said § 43 will be construed same way as Sct has done with abovementioned acts and we are going to say even under common control situations you can keep out imports when difference aren’t cured by labeling. exceptions. Doesn’t matter if licensed outside US. What about Patents? a. you can still prohibit goods from coming back in. US Trademark 16. 17. Section 42 of Lanham Act – Lever Bros. c.S. International Trade Comm. Trademark law provides more opp to provide for segregated markets than copyright. d. . 2001) i. you could create two products that are different enough that ct will find them material different – diff formulas. which is language not in 526 – not clear but that may generate slightly broader protection. we think mark owners if the product is identical then can’t prohibit and only can prohibit-. common control exception is valid under US law. Few cases. Applies to goods actually sold in commerce and infringe US trademark ii. Infringement law under Section 43 of Lanham Act. iii. (Fed. Cir. Talks about products that simulate the US mark. 18.narrows common control exception and says even if common control. because Austria would become import capitol of EU c. and then you can prohibit importation of that product into the US – and case where difference in terms of warranty or language of users manual – not so easily cured by labeling. a.i. Limited to US citizens or domestic corporations. Authorized use and common control of foreign co. b. If you want to do price discrimination – want to sell same product for different prices in different markets. 5-7 represents a complete harmonization so state's cannot create an international harmonization rule. 10. v. 15. diff warranties. Customs issues regulations to unify both above provisions.if material differences and the differences in product can’t be cured by labeling. i. Sct – decides it wants to interpret these provisions together so that differences b/w two turn out to be not that great. however. Holding: to invoke the first sale doctrine.0 The Third Transaction: Foreign Direct Investment 24 . c. Jazz Photo Corp. Victory for mark owners to use trademark law to segregate markets a. b. Foreign corps have to use this section to sue. the sale must have occurred under the U. Section 526 of the Tariff Act – K-mart. a. Holding: That Art. b. Austria doing so would likley force others to do so. 14. Three different provisions in trademark law in which someone seeking to prevent importation of goods into the US might use. Patent. – invalidates authorized use exceptions formulated in customs regulations.
Long time to market ii. Host nation opposition 25 . Anti-trust. Taxes. ie. Negatives? i. i. Lower barriers. labor. Ie. In Civil Law countries: the Contract must be kept. and may be enforced through fines. but not prosecuted under this Administration). Where should we Invest? a. securities. This has been a transition from "fewer restrictions" to "more incentives. infrastructure. etc.different expectations at all levels 1. etc). Contracts. State. Operational Code: laws applied different from written? i. etc. Business Culture . Host preferred iii. Note: notaries in US are a minimal requirement. Expectations of workers. ii. Cultural Differences towards the law ii. In EU. but in EU they're highly accomplished attorney's who've received additional schooling (and had the grades to get into it) 1. Quick entry via existing facilities v. Currency 3. Ex. foreign corrupt practices act 2. Ready made market share iv. 2. How do we find out about this? Local Counsel c. Advantages to Acquisition i. in US is to perform or to pay damages 1. Marijuana shops in Cal. 20 years ago: would have been "place with the fewest restrictions" but Today: What will they give you? Ie. & Local (at all levels) 2. labor laws. Pay a premium iv. Types of Incentives 1. purpose is to defend the status quo (ensuring nothing new is introduced). Cultural Differences . Continuing subjection to US Laws (home country): 1. Potential detainment of intellectual capitol b. iv. Subject to host nation law 3. No market strength or intellectual capitol iii. National. What problems will you face? a. Acquisition or Greenfields? a. Incentive advantages (cheaper) ii. "bribery" 2. (against law. specific performance is a primary remedy. Applicable Law? i.1. etc. A global competition 3.as associated with use of products i." iii. notaries are very conservative. iii. Subject to international law b. Kick-Backs vs. ii. Incentives (land.
Have certificate of incorporation in Delaware translated (consular translation best) 1. Risk of taxation on global profits iv. but potentially runs into corporate veil issues. Subsidiary: a separate company wholly owned by you i. What are you sharing? i. Negatives i. Potentially full transfer of liability to global company assets iii. Easiest to implement. Potential mediocrity of acquisition? 4. When registering. Taxation. etc. cultural expertise c. Branch or Subsidiary a." b. present as a FR/Host nation corporation/citizen ii. but potential difficulties with identification and registration in the host state ii. Minimizing capitol presence (ie. Have translation notarized in FR 2. Greater control and independence of action in support of parent company d. Liability limited by corporate veil iii. strong personalities/relationships. 6. attempt to take pro-rata share of entire company b. Also quick to set-up ( a few days in DE) 1. iii. Involuntary -. Limiting assets in Subsidiary. company footprint) vii. If you can't control a subsidiary. Avoids host state taxation against global corporate profits (only against Subsidiary) 5. Involuntary: "Creeping Expropriation. Two types: Voluntary vs. then you may face direct competition. Benefits i. Ie. How does one identify oneself as a company in FR? v. vi.this dichotomy was common 20 years ago (mandatory) i. ii. potentially of the entire company by both home and host country 1. What level of control is available? ii. How Does a Foreign Direct Investment Differ from a Domestic Investment? 26 . Intellectual partner? ii. vi. Issue of "true independence" of subsidiary? iv. Voluntary: potential tax benefits. Branch: an extension of the parent company on foreign soil i. Market expertise. Law of host nation v. Then present to FR Gov. good for liability of assets. Profits? e.v. control? i. Advisor vs. Joint Venture or Wholly Owned a.
Host State and Mulit-National Organizations (MNO's) & International law 1. What Nation will Govern the Investment? i. Expropriation ii. etc c. threats to investment that may cause a loss of all or part of the invested capitol and technology. Results in quick market access and brand recognition 3. Q1 must be. Operational Code iii. Convertibility of currency v. Applicable Laws of Home State. Restrictions upon Establishment of FDI i. etc. Joint venture requirements 4. without publicly acknowledging a disparity in treatment of FDI. Unwritten Law Governing Foreign Investment in Target State i. availability of incentives. The Operational Code or alt. Equity stake limitations iii. UN Conference on Trade and Development (very little real impact) e. Trade Related Investment Measures (TRIMs) . g. Question of what laws apply and when b. national emergencies. Cultural misunderstandings/failure iv. Where to Establish the Foreign Investment? i. Host Nation: Predominant nexus of control over the foreign branch or subsidiary 1. How to do determine? . domestic oriented with extraterritorial applicability Securities Law / Anti-Trust b. Acquisition restrictions 5.ie.Local Counsel f. War.) i. Barriers to Entry may include: 1. Foreign oriented . why is this being established? 1. FDI by Acquisition or Greenfields? i. MNOs 1. Law vs. A business decision informed by legal guidance ii. Allows host states flexibility to encourage investment in needed areas. h. Acquisitions 1. Permissions/approvals delayed or kick-backs expected. Additional Risks (ie. Foreign Corrupt Practices Act ii. Takes little time to begin market penetration 27 . ii.a. Could result in share/cash arrangements (anti-trust concerns) 2. to avoid trade barriers. Home State: Two types a. Constitutional Provisions vs. Mandatory investment plan review 2.intended to eliminate the restrictive characteristics of foreign investment laws (particularly of the 1970s) d. Tax advantages. Negotiations of exceptions 3.
" 9. Easiest to implement. Liability limited by corporate veil 8. In US: Corporation vs. This is an issue best left to discussion with foreign counsel 10. Civil: only applies to property or professional business ii. Employee Equity sharing? ii. Generally host preferred 3. Commercial i. SA and SAS allow free trade in shares 2. law b. Creation of separate company ii. Greenfields (new business from scratch) 1.4. ii. Potentially full transfer of liability to global company assets iii. What form of Business Organization for the Subsidiary? a. Financing Foreign Investment a. Establishing Security Interests e. LLC b. Currency Exchange Rates i. Fluctuation level (ie. Termination 28 . etc. Potential Tax incentives 2. Voluntary: potential tax benefits. Shifting costs to reduce profit payout to foreign investors (also likely illegal) 12. Currency Restrictions (on export?) ii. Branch: an extension of the parent company on foreign soil i. Must be @ market rates to comply with Tax and Corp. Content. "Arms Length" transactions between parents and subs are essential i. Shifting costs to avoid tax liability = tax evasion c. Joint Venture or Wholly Owned? a. Two types: Voluntary vs. Involuntary i. or SARL 1. Affect of Different Currency on Investment? c. Risk of taxation on global profits b. Valuation b. Extent of Gov. Involuntary: "Creeping Expropriation. Commercial: 3 types: SA. Development Assistance funding/rates available? i. SARL requires formal measures to trade in shares 3. Branch or Subsidiary? a. Subsidiary i. stability of currency) 11. strong personalities/relationships. Bank Relationships and Rates b. Cultural expectation of kick-backs? g. Operating Restrictions f. or Technology minimums of inclusion? d. Labor. Transfer Pricing a. Oversight i. Takes more time 7. but ii. Could entail privatizaiton process and result in questions of a. SAS. In FL: Civil vs.
Shop Level (workers counsels) 2. Sharing of financial date (with union negotiators) 2. No blame against management ii. This solution results in significant administrative costs and might cause significant upset to employees. telecommuting. A limited partnership (K. Work Counsel (if more than 5 employees): i. there has to be compromise (or poisoned well) iv. Union Reps. etc. Social Matters: When you can take your coffee break. Board of Directors (managing Board): b. Enterprise level (Board of Director is elected by shareholders and a 2nd board called the Supervisory Counsel is elected via CoDetermination) 1. Potential sharing of intellectual property? f. e. iii. shut downs. c. Adversarial process iii. Can you repatriate left-over capitol? b. Their objection is not binding (but there has to be notice) d.a.G) is where management exercises authority ie. regulators. Personnel Matter/Business: being advised of layoffs. Most of the time. flex time. Declaring dividends. 1. Organized Labor is actually quite limited in the US b. Investment decisions iii. dress code. formally enter electoral process) ii. Work Division for Corporate Governance in Germany: a. ii. German i. vacation policy. US i. German Labor Law/Unions a. Set up multiple corporations that each employ about 400 people with one coordinating company. How will the physical assets be disposed of? 1. How do we avoid a supervisory board (without an SE)? 29 . etc. other perks etc. What's the downside of Supervisory Boards? i. Industrial level (collective bargaining) iii. Does the parent have liability for Subs debts? c. Supervisory Board (if 2.000 employees: 50/50 but if 500 employees: 2/3-1/3 not required for fewer): i. SC is 50/50 split and then elected Chairman (two votes on 2nd ballot) 2. Government participation (a political movement ie. Naming managing directors ii. How do we avoid? i. coordinating company. US Labor Law/Unions v. Less centrally controlled ii. Failure to maintain confidentiality 1.
Auctions do not allow you to negotiate b. 5. All topics open ii. ii. Counsel's job here MAY be to tell management what they don't want to hear and then persuade them regarding potential benefits (the "bright side") Privatization: a. May not be able to downsize workers. DGInt acquires a German Incorporated company and moves the state of incorporation to the UK a. Formerly would have been German b. Where is our Headquarters? a. Acquiring a company: i. Look to negotiations. subject to EU protection and bargaining laws associated with former contract 2. Merger Law: EU reg. 6.3. i. b. 4. GGInt acquires a UK company. this problem can be solved. Modern: where is most effected by your operations? Can we implement an SE? Does it need a supervisory board? a. SE"s initially conceptualized in the 1970's. Formerly: Where your managements day to day offices are vs. Might be best to just allow for the supervisory committee and works counsels. i. Technically. subject to EU protection and bargaining laws associated with former contract 3. closes its UK facilities and moves them to Germany 1. Debt. Negotiate: i. May not be able to downsize workers. Compromise between German and British concerns regarding labor systems c. etc. which law applies? i. but the more convoluted it gets the more likely you will damage your relationship with labor and potential customers. Will not require a supervisory board if less than 25% of the company had previously had a right to codetermination (supervisory boards) e. 4064/89 grant commission exclusive power to oppose mergers of companies with turnover of over 5 30 . Avoid promises of retaining jobs. DGInt incorporates in UK and establishes facilities in Germany. d. indemnification. Merger governed by German law will only include potential competitive impact in Germany. Unclear if this is possible in Germany if we grow bigger than 500 employees. Unclear under Uberseering and Inspire Art 1. Took 30 years to gain approval b. NOT to auctions i. Must include the merger between two companies within Member states (or subsidiaries). (1100) b. but focus must be on future competitiveness Questions to consider: a.
rule. Advantages? i. Likely WILL NOT apply to DGI or DGInt. Assuming a subsidiary in the UK or Germany. without needing to set up subsidiaries government by national laws ii. or 2.billion ECUs. does that ensure that German codetermination and work council laws do not apply? 5. Stirke.5 billion and 100 million in at least 3 member states. Created in 1989 out of competition between UK (workers collective bargaining) and most of the rest of EU (workers participation in corporate governance). UK accepted after 1991. P1094 c. redundancy of workers representation and collective defense all require unanimity amongst members a party to the directive. EU company (SE) can be set up by: i. etc. it was not required (p. Can or should. iv. Easy move of headquarters\ iv. Result in reduction of legal and administrative costs. a. iii. EU company cannot be created without accepting directive related to workers Social Policy. DGInt form a Societas Europa (an EUwide corporate form that became effective in 2004) (p. 4. If UK law is applicable to the internal affairs of DGInt. had to keep codetermination. and turnover of 250 million in the region. Registration in once country then published in EC's official journal 31 . Different EU companies will be able to merge under one corporate gov. forming a holding company from to companies from member states. iii. still National while Social Security. 1093) (directive in force starting in 2004) b. -. Dual system in place: Formed where workers had codetermination. Pay. 1092) i. ii. formed elsewhere. or transforming a public company which for at least 2 years has had a subsidiary in another Member State. Merging two companies from different Member states. what form of corporation should DGInt take? a.includes worker information and consultation reqs.. formation of subsidiary from two companies different member states.
(here. iv. Government level b. etc). codetermination and work councils are NOT applicable if incorporated in another member state.2003) 7. Under current conflict rules in Germany. Both cases leave unclear how much a member state might impose its corporate laws on a company within its borders that is incorporated elsewhere before it violates the EU freedom of establishment rule. Registered in the Member state where is has its administrative head office (nerve center test) vi. Inspire Art: a. 1096) iii.000 Euro. negatives? a. buy a UK and Erie company and form an ES to operate in Germany. investment decisions. 1090) 9. Prohibits EU Member States from imposing numerous legal requirements on a company incorporated in another member state. 8. (p.000 employees 32 . b. Minimum capitol requirement of 120.v. Worker participation in Germany: a. EU articles 43 and 48 preclude member states from denying companies legal capacity to bring legal action when they are incorporated in a different member state. Uberseering: a. German friendship. Could DGInt simply operate a branch in the EU? Benefits. Union representative parity with shareholder representatives 1. With business that employee MORE THAN 2. Codetermination Act of 1976 = 1976 50/50 role on supervisory board a. the SE will retain that requirement. Legal status is also recognized (WM decision of German Supreme Court . Contracts and pension subject to National Law of headquarters country d. Must report to employees on company's current and future business plans ii. Naming managing directors. Enterprise level (supervisory or governing boards) i. vii. 6. Apply "standard principals" of worker participation if SE was pregviously covered by participation rules (p. i. Where at least 25% of workers previously had the right to participate in management decisions. but there is public pressure to amend the view. Negatives i. Industry level (collective bargaining) c. commerce and navigation treaty with the US gives US Corps legal status in Germany b. ii. and declaring dividends.
elected by shareholders (chairman has two votes on 2nd vote tie . Privatization – Eastvia a. Supervisory board of every stock and closed corporation of more than 500 employees is 2/3 shareholders and 2/3 workers (no Union representatives) iii. department closures. Plant/Shop level (work counsels or union representatives) 1.b. breaks ties) 2. Government Approval Process: Potential for demand of bribes 4. Unclear commitment to privatization (though here 10 years of movement) iii. Citizen claims for property expropriated during collectivization 2. Work Counsels . Worker Approval: likely stalls any negotiations because they fear the near automatic layoffs incumbent in privatization (primary issue of public control is over employment) 33 . iv. Customs issues associated with lack of experience with market capitalism ii. Personnel matters: must be notified prior (or void) 4. but if no majority.EU Directive 94/45 1. POLSK has too many employees. Workers must be given information on economic financial situation employment. Business modifications: reduction of operations. Required in companies with more than 1000 employees with 150 Employees in at least two Member States 2. Applies to parent companies located outside the United States 10. Almost all business with more than 50 employees has a work counsel 3. Workers constitution Act of 1952 (1103) a. 2. low productivity. Workers counsels in all ALL establishments or plants of business organizations with more than 5 permanent employees who are qualified to vote. mergers. Indemnification against environment claims formerly had at bay by sovereign immunity 3. May withhold information that might be seriously harmful or prejudicial to the company 4. Social matters: Wages. Work Counsels have codetermination rights a. (any ambiguity in collective bargaining agreement) b. Chairman of board elected by majority. etc. work methods.ie. and layoffs 3. hours. Additional Problems facing DGInt? 1. and unreliable accounting (hard to fix value) i. etc.
prices fluctuate for nations vs. Method of Valuation: potential faulty accounting. foreign investors. negotiation preferred over auction format. Limitations on Foreign Participation: often attempt to limit foreign control or diversity control while gaining technology and know-how (limits investment opportunity) 7.acquiring company must consider the cost of this dilution. Preference for Nationals/Domestic Companies: Workers/ Nationals often given right to buy "shares" but pay almost nothing .5. 6. 34 .
for example – different than US standards • Dispute or Contract settlement – what court for resolution. And reputation and confusion can occur long after the particular good that bears the mark has left the hands of the producer. Merchant’s determine whether it is a hard of soft Controlled currency – based on country’s central bank setting standard and usually only allowed in country • Political Risks – war.K – interpretation • You have to put yourself in the other fellow’s shoes – you also have to consider how to make it possible for him to make a concession – but. Used only in specified country. • Insurance • Customs – taxes. then can one state enforce it on the other – full faith and credit clause o What does Brussels Convention say relating to issue? o NY Convention -. plane and Terms. • Shipping . the idea that you can whip your negotiating opposite in to agreeing with you is nonsense.where currency will be exchanged – credit -.protects investment in works of authorship. transparency. • Law of Country relating to patents / trademarks / copyrights. or a convention? o Hard – government support of currency – buying its own back when other nation wished to sell –fixed on gold or other scarce commodity. land. o Trademark – protects reputation of mark holder and investment by owner in reputation and from consumer side – in preventing confusion. options • Payment . inspection and standards of country importing to • EU standards.sea. but when you sell the additional copy you have realized the economic benefit that Act intended to protect and don’t need to protect it further.Why is trademark so much more user friendly than copyright o Copyright -. hedging. Forms and Players for International Trade Decisions and Risks in trade • What Currency to use (Euros or $). corruption • Choice of Law -. international.Conventions requiring states to enforce arbitration awards in a way that there isn’t such a relation to court awards. rail. Preferred method of payment o Soft – not supported by fixed term and government.what bank and what rules bank is operating under – ie US. • Export Controls in US – can you sell the product abroad? 35 . o Who has jurisdiction – where is PJ.
insured. damage in transit.• Buyer Risks: whether seller can be trusted to ship goods if prepays. exchange controls. other delays Seller Risks: whether buyer is credit worthy or trustworthy. documentation to claim from customs. is buyer reliable. Quantity and Quality. appropriate shipping carrier. export and customs control documentation. • 36 . delays in receiving funds.
o Invoice o Packing List o Insurance against damage in transportation o Proof from carrier or shipping company Proof that goods have been shipped and in possession of 3rd party that will deliver them to where buyer wants (4) Bill of Lading – contract b/w the carrier and the seller to deliver the goods to another destination o On board stamp by the ship’s master – until that is there the bank probably doesn’t care about Bill of Lading. • Seller wants a bank it can trust to guarantee it’s payment. For seller not to get paid once has confirmed letter of credit and proper documents – seller’s bank would have to go under. Buyer’s Bank promises to pay o Buyer’s bank then takes paper and gets payment from buyer – in either money collected or in some type of security o In this situation the bank still has the B/L and goods can only be delivered to the person who has the Bill of Lading. If buyer can’t pay then bank can sell the goods off. o Suppose seller’s bank goes under buy buyer’s bank is ok – can seller collect? He has a direct promise from buyer’s bank guaranteeing the payment upon receipt of documents. B/L is the bank’s protection against buyer’s bankruptcy • When seller takes Bill of Lading to Seller’s bank – the Seller endorses the Bill of Lading (deliver to Seller’s Bank) to the Seller’s Bank to get paid. that buyer’s bank will pay for delivery of certification of shipment of goods to seller (pay money v. Seller’s bank and buyer’s bank (2) Buyer’s bank issues a letter of credit to Seller • Letter of credit is just another K. Then if buyer pays $ and gets Bill of Lading the Bill will say deliver to Buyer and be endorsed by buyer’s bank. but not connection b/w two parties. US Dollars. • What kind of documents should the bank demand? Buyer wants to know at a minimum that goods are in possession of a third party. • Risks in this situation are covered by the banks mutual relationship • Suppose both buyer and buyer’s bank are broke – can seller collect.Seller’s bank to guarantee it will pay (confirm) letter of credit of buyer’s bank in order for seller to get paid. 37 . And. -.transaction (1) Contract b/w Seller and Buyer – neither knows the other nor trusts the other.0 . Yes. full faith and credit. by his bank. Some US bank – b/c it is subject to local suit.Problem 4. • Use an intermediary. (3) Confirming letter of Credit by Seller’s Bank . documents that show shipment of goods) o Documents will show that goods have been shipped. 3rd party. o Seller has the Bill of Lading. Situation in which want to do a deal.Take Bill of Lading to seller’s bank o Seller’s bank then takes the paper it has gotten and forwards it to Buyer’s Bank to get paid. then SBK endorses Bill of Lading (deliver to BBK) to Buyer’s Bank to get paid.
insurance. GET INSPECTION FORM CERTIFIED. Keeps track of paper and goods as each circulates – cheap service fee to be sure of validity of paper and endorsement • Other term important is the payment term – COD if not specified.o US banks are usually guaranteed by FDIC. he has greater risk. whether his own place of business or some intermediate point. but if put in sales contract (before form 3 – must be in sales contract from beginning) that letter of credit confirmed by US bank in US Dollars. customs issues. • • Seller low risk –has bill of lading and Bank guarantee to pay o Losses control of goods. If not put in must ship goods and pray.FOT – Free on Train. • FOB – Imports are valued at a designated point. Seller is obligated to pay the costs and assume all risks for transporting the goods from his place of business to the FAS point. “Free on Board” Seller is obligated to have the goods packaged and ready for shipment from the agreed point. labeling. as well as all subsequent transportation costs – including loading on vessel. and freight” for the goods sold (charge in full). Buyer’s risk? o Note that unless buyer has pre-inspection of shipment. Seller arranges and pays for all relevant expenses involved in shipping goods from their point of exportation to a given point of importation • FAS – “Free Alongside Ship” refers to the point of embarkation from which the vessel or plane selected by the buyer will transport the goods. Buyer normally assumes the burden of all inland transportation costs and risks in the exporting country. then ok. PRICE TERMS OF TRANSACTION: • CIF – the selling price includes all “costs. o FOB Vessel – Seller bears all transportation costs to the vessel named by B – and loading costs o FOR – Free on Rail -. Risk of stored or improperly handled. Forms of Transaction (1) Letter from Buyer Requesting Invoice (2) Invoice (3) Purchase order (4) Letter of Credit (buyer) – Confirmed Irrevocable (Seller) (5) Shipper’s Letter of Instructions (6) Commercial Invoice (7) Shipper’s Export Declaration (8) Certificate of Origin (9) Dock Receipt (10) Bill of Lading (11) Insurance Certificate 38 . • C & F – Adding ocean freight and freight forwarder fees – Freight forwarder will check documents to make sure they are good docs. fraud or forged B/L.
• Art. penalty clauses. Sales to consumers. Property rights to goods. Seller-friendly rules. • Gap filler – first turn to customary international law and then private choice of law decisions – UCC or other local law. securities. maquiladora sales. o Governs only the formation. price. capacity. service K. • CISG – offers may be irrevocable. Arbitration…etc. limitations on buyer’s remedies. 4 – buyer seller relationship – unclear if “warranty in a box” gives c/a o If ct sees manufacturer as participating in sale via warranty.(12) Sight Draft 4.Requires (1) sale of goods (2) contract be both (3) international and (4) bear a stated relation to a contracting State o Vague as to what is a good or sale or contract o International defined as “place of business” in two different states Place of business not defined – suggested that permanent establishment is required and neither a warehouse nor the office of the seller’s agent qualifies Autonomous legal entity – satellite office doesn’t count o If multinational CISG 10(a): “closest relation to the K and its place of business. – CISG doesn’t apply. rights and obligations of the parties to the contract. domestic law of NY applicable. 39 . no consideration needed. no statute of frauds. o Doesn’t govern: validity of K / title of goods / liability for death or personal injury. unfair competition laws still apply. no parole evidence. money. investments. Mirror image / last shot. quantity o Questionable: does validity include disclaimers on warranty. What substantive law: UN Convention on International Trade Law (UNCITRAL) – Convention on International Sale of Goods – CISG. • US Federal Law – self executing / supercedes UCC 2 where applicable.1 – Formation of International Transaction – Euro and Universal(US) o Choice of Law o UCC Law or International Law? o Ex. • Always specify law you want to be applicable very clear. electricity. • Art.” o If one office is associated with K and other with performance – place of business is limited to circumstances known to parties before K is formed o If majority of production put in by buyer – CISG n/a. information transfers. Ships (indiv). 1 -. acceptance. distribution agreements. Domestic fraud and duress.– Contract Formation. but if literal interpretation – no c/a.
Therefore. if not both Contracting parties US n/a CISG. price). then CISG governs sale of goods. and both are Contracting States to CISG. sufficiently definite (description of goods. o State can declare that it is not bound by Formation rules – Scandinavian countries. where understanding or intent of parties diverge. Put in minimum quantity • • • 40 . US reservation under Art 95 – 1(1)(b) – not bound by it. a party can use art 12 to declare writings required if local law states that and party has ppb in that State. then German law should apply CISG 1(b) – if it determines that law of Japan should apply then it will not apply CISG Note. and one party knew or could not have been unaware of other party’s intent. you would have to use the UCC instead. “shall be governed by NY Law” – is ambiguous. 1(1)(b) . 1(b) – if German ct determines its law applies – if transaction b/w Germany and Japan (non-contracting state). b/c NY Court could find CISG applicable via preemption doctrines. 96 – IF Contracting state has so declared. where private choice of law rules lead to applying the CISG – US says nope. o US only bound by CISG when the places of business of both parties to the sale contract are each in different States. Art. CISG only preempts US law if both contracting parties are members of convention. latter party’s intent prevails. Ex.if only one State is a Contacting State and private international law choice-of-law rules lead to the application of the law of a Contracting State. b/c UCC superior in US eyes. we will apply US domestic law instead. o In order to exclude must clearly state that CISG is not applicable and stating the other applicable law that has been chosen. o 8(1) – subjective intent while interpreting both the statements and the conduct of the parties o 8(3) – no parole evidence o possible avoidance of last shot doctrine by ct looking at actual intent. So. 6 – parties may exclude application of this convention (don’t do it just b/c don’t know about it – malpractice). (England and Japan not members) Contract formation: o Art. o Art. Offer (3 requirements) o Proposal for contract. reasonable person standard. quantity. o Partial Derogation is permitted – states can opt out of provisions.• o Art. 8 – looks at parties common understanding or intent. So. parties unaware of divergence. German court won’t find US party under 1(1)(b). indicate an intention to be bound.
deliver the goods – property rights domestic law. Conduct as communication – if starts to ship then acceptance. upon delivery o Under UCC: o UCC 2-207(1) acceptance even though states terms additional or different o UCC 2-207(2) Additional terms acceptable unless materially alter o UCC2-314 – implied warranty of merchantability if silent on issue (hurts client) UCC – failing to explicitly state choice of law. later selection of assorted goods. If offeree hears via 3rd party – acceptance o If seller ships and conflicting K. Contract Acceptance under CISG o Art. unless materially alter terms. Offeree can withdraw acceptance until offeror receives it o Offeror’s ability to revoke stops upon dispatch of acceptance by offeree. Contract Acceptance Under German law • 41 . o Art. then law of territory of State applies provided appropriate transaction -UCC • EEC Convention –Rome Convention – (page 1030) Germany has enacted this as internal law. condition of goods depends on particular K – when shipped v. 4 – law of country that most closely connected. CISG resembles some mirror image – best to avoid it by stating parties intent clearly and looking there. 8 – to interpret K (1) intent (2) knew or could not have been unaware of the other party’s intent – latter’s prevails (3) reasonable person test. Need to determine what is characteristic performance Where party that does that performance has their principle office. 4. o 19(2) although offer and counter offer ok. o If Shipment is in UN – then that law applies. not where performance is done.Art. German ct would avoid this.• • • amounts or price set on index. Seller’s Obligations . the valid K is the last non-terminated offer – usually seller’s order acknowledgement form. Presumption Art. 18(1) – assent to offer is acceptance – silence is not by itself acceptance o 17 rejection of the original offer terminates original offer. Foreign law must be pleaded and proven as a matter of fact. The paragraph says “among other things” so. not as a matter of law. 3rd part. o No agreement . even though not explicitly stated could still be applicable. o Offeree’s Acceptance upon receipt to offeror. o Art 19 (3) – material alteration – “as is” quality of the goods issued has now been changed. Number 2 – payment not characteristic for performance.
§ 188 (2) – consider factors: • place of contracting o Germany – when goods were accepted. more favorable to silence – response to original offer is considered a counter offer. KS Client comes to you. That a lapse in time w/o an answer followed by performance constituted a written agreement. shipped from there. Alstine article – (95) – CISG fails adequately to accommodate a variety of more flexible and informal relationships in modern commerce that the law would nonetheless recognize as contractual in nature. so liable. upon receipt o KS law – upon dispatch adams v. which terminates original offer o Goods are shipped and accepted by buyer – do we have K? Under this system Euro could reject the goods. uses instead the prior conduct of the parties to decide case. o Not so helpful here – depends on which law apply. • Place of negotiation of K – law of cyberspace – satellite? • Place of performance – what’s performance o KS – once goods are shipped (UCC) o German law – once goods received on buyer’s end Filanto. but not case here § 188 (1) – tells us to use local law of state – KS and Germany. o What you need to do is – negotiate – communicate: Tell clients don’t know how goods will operate in German market? • • • • 42 . 18 and 19 – mirror image and last shot doctrine – courts have generally said nice. sent off delegation to International Trade Fair and he knows orders are going to come in – he is afraid that something might happen to product once delivered overseas – how does he deal with problem and prevent it before arising. irrevocable unless stated otherwise.US dist judge said not going to apply battle of forms. o Art. Restatement of Foreign Law o RS – which is the fall back if UCC doesn’t apply me. o Euro – made in KS. Keep him out of court o White and Summers – Part A – no way to win the battle of the forms.K formation. o Terms of K are the last one’s standing. lindsell. but we will do what we want to. NY UCC doesn’t say what to apply in absence of NY UCC and in that case choice of law rules come out of RS 2nd – (page 80) § 6 (1) if you have a statute follow it. thanks. price set.• Last Shot Doctrine -. which has most significant relationship to transaction and parties: • transactional relationship o Germany – that’s were goods are used and fall. but if they accept and pay for goods you have a K.
– UCC. CIF and whether UCC. jurisdiction. FOB with additional services must be complied with in US. 4. whatever (3) FOB isn’t enough too many types – must say who is going to provide or arrange transportation. fraud. Doesn’t imply payment term at all. 2 of UCC are gap fillers and they apply unless the parties agree otherwise then apply. must notify buyer goods delivered on board. (2) Document – non-negotiable document – b/c have to deliver goods. INCOTERMS. Best advice might be – before accepting offers . Bills of Lading.O. Duty of investigation. • note: they do not address choice of law. and Insurance – books to Bath. • If can’t show INCO applicable – UCC gap filler o Note most in Art. • Must be expressly incorporated in K. when get time. Standard Cash against goods. unless get other agreement (4) UK practice FOB has a lot of ambiguities 43 . Other law Need to specify payment type – against goods or documents – types of BL. Buyer: (1) Payment against goods – as provided in contract sale. UK law (3 types – Schmitthoff) FOB: INCOTERMS – International Chamber of Commerce. (4) bear all risk of loss until items pass ships rail Note: INCOTERMS has an ambiguity as to whether seller makes any kind of contract for buyer’s account as to carrier. Seller : (1) Has to deliver good on board the vessel designated – in possession of carrier. INCOTERMS • One K is an F. (3) buyer must take delivery of goods – A. o Note: nothing in INCOTERMS to help out. what about preinspection UK Law – Schmitthoff (1) Buyer must arrange transportation (Schmitthoff Number 3) (2) You must put in own payment terms – against doc. UK. INCO. export license and customs docs (3) No K of carriage obligation.2 – Commercial Terms.B.complete due diligence.4 – post inspection. Need to specify K type – FOB. • New client – Sam and book K’s – can he put two shipments together and ship them off. (2) Obtain commercial invoice. or when k formed • International customary law.
• Payment – Seller gets paid b/c of K terms.FOB (A)(4) – on board vessel named by buyer at the port of shipment • Risk of Loss shift -. This could apply to FOB contract as well. • UCC – 2-504 look here not necessarily defined in 2-319 o Referring to shipment contracts as contrasted with destination contracts. • Seller’s risk under FOB: o Cost of freight and insurance b/w time he makes K with set price and time he actually buys insurance and freight. or payment against documents. Seller gets paid once delivered to carrier. Buyer still has to pay for goods – goods have been delivered – seller gets contract.cost • Insurance • Ocean freight • Delivery term – when delivery of documents o INCOTERMS -. • Inspection – not necessary. but recovers insurance money – limited. but also very explicit about CIF – no right of inspection before payment as long as agree to CIF. Usually against docs – not always clear. but not to get them to a particular destination • UCC 2-506 – if nothing in contract. o INCOTERMS – in accordance with contract. o Refers to SHIPMENT Contracts – required or authorized to ship.buyer doesn’t pay until the goods arrive.5 – bear all risks until port of shipment o SHIPMENT CONTRACT o Buyer bears risk of loss of or damage to goods from the time they passed the ship’s rail at port of shipment. • UCC (supp 986-87) 2-513 – right to inspect. SHIPMENT v. Buyer is upset. o seller should build paper handling fees into price. 44 . • If buyer doesn’t pay. b/c payment is against documents o UCC – unless otherwise agreed to (2-513). o UK . o What if Buyer doesn’t want to pay? Carrier has goods and bank or seller can get goods More risk here for the seller if no letter of credit.Customary law – pay against docs • What kind of document has to be used: negotiable document. CIF Contract: • Price of goods .UCC • payment against deliver of goods unless otherwise specified. then have shipped it off and payment is against receipt of the goods . the goods are in shipper’s hands and can come back. COD. so that buyer can resell the goods without the goods.seller to buyer – A. DELIVERY Contracts.
Hague/Visby Rules and Hamburg Rules came into Play. o What does prevented mean – by explicit terms in K or is it just buying the oil (spot market) or by a specific manufacturing process (Refinery) acceptable? CISG only applies to commercial transactions. then could say COGSA doesn’t apply and can disclaim liability to any amount – only way to be effective is to say these are the rules and can’t bury them by K. Carriers drafted it and won’t move without it.o Not much risk for seller unless war breaks out – costs go up. won’t be able to do it any other way. Do we need separate insurance for each shipment? o Minimum liability o INCO – 10% coverage?? o Why not sue carrier – $500 per package COSGA. o CIF includes only cost of goods buyer is purchasing – not other items. FOB doesn’t tell you anything about payment. o For BL – see below. • CISG governs (K2)– Article 79 – performance has to be prevented. railway car. In US can be FOB destination port. Case law – we don’t care what contract says – mandatory law to make sure carriers pay at least $500 per package. • NEED to include a separate payment term in contract. • Ex. UCC 2-316 – how to disclaim warranties – if don’t do it this way. etc. Mandatory law to have certain amount of liability. 79(2) – can you say you are excused b/c supplier is excused? First have to show you meet all criteria in paragraph 1 and then your supplier 45 . o Art. • IINCOTERMS has to be FOB port of shipment. Hague Rules were first put out to make uniformity – and that has disappeared a lot. If not mandatory.3 – Wars and Other Frustrations: oil from araby What law governs Contract: divide K’s up. • 4. • Major differences b/w FOB and CIF o Both shipment contacts o Buyer takes more Risk under FOB: NO right to inspection for buyer – pays carriage and insurance In US have to state where FOB • UCC 2-319 have to know where. Note: don’t know what type of FOB you have if you don’t specify either FOB INCOTERMS or FOB UCC or one of Schmittoff’s.
o Identical K’s . which gives Ship Master right to divert if in danger. one with refinery and one with Javert – he comes in to your office and says he wants a K to protect him if the refinery burns down. but available to arbitrators. If don’t meet 1 on own. and oil in K2 is from a non-specified source. German Case law seems to let folks off – renegotiate Ks. o Contingency K’s . 46 . Au Provision is used by admin cts and gov’t will always be party in case when applied – only available to seller.• meets all criteria in paragraph 1 as well.Can’t give away your source. (possibility that he can get out if French law applies). CISG the frustration applies to both seller and buyer. although price has risen enormously • Hardship argument? Principles for a Commercial Contract – not treaty. so Art. o 1st line in force majeure clause – only talks about seller’s performance not buyer’s performance (1) Can argue this was put in as THE force majeure clause to substitute for 79. (K2) Jean →Javert • Jean comes to you before refinery burns down – he has two handshake deals.Treaty of Rome says seller’s law applies – Jean Valjean – so. but what is being sold in K1 is oil from particular source.” • Interpretive arguments. • If performance is by a specific date.K2 contingent on K1-.Under most of the schemes not impossible for Jean to perform. French Doctrine of au provision – note that ordinary cts don’t use that doctrine they use force majeure. which a diligent party could not have avoided and consequences…. • Price Increase . Example: Jean Val Jean • Two Contracts • (K1) Refinery burns→ Jean.Could you make force majeure contract in K1 and K2 identical – won’t work either – b/c carrier won’t modify contract of carriage. 79 of CISG is available. EEC . or o Excuse of seller’s performance and not buyer’s performance and for that you have to turn to the convention UCC the frustration only applies to Seller and for non-delivery of delay in delivery. • • • • Force Mageure Clauses • Clause in K providing reasons to get out –force majeure clause bottom 135 – “any circumstance beyond the control of the parties. Usually used when people selling to gov’t – may help Jean Valjean if Javert is representing municipality of Marseilles. American Law applies – that would be unless both are members of CISG – both members. can’t talk about K2.
• UNIDROIT Principals – suppose this goes to arbitration – and arbitrator wants to use the principles – is that a good idea for jean Valjean? o Force majeure – impediment which the non-peforming party could not control and could not reasonably have been expected to have taken into account.o Buying oil futures – K with other refineries that would allow him to buy oil at a price set already. not that you have to do it – just offer it as risk aversion or risk taking. Insurance sometimes isn’t called insurance – what about buying the right to buy oil at a particular price when you want to – might cost you a little bit. 47 .consideration doesn’t come into commercial laws o Need intent to be bound o Intent to adopt o Symbol as signature Can’t get this under UCC – maybe other doctrine. (955 supp) – Federal Law o § 101 (a)(1) – can’t be denied effect solely. Doesn’t solve signature problem nor intent problem Seems to be clear that don’t have contract. Can be attached by glue. State law. if the disadvantaged party requests Economic hardship in price change can be a factor 4. but it might be worth factoring into costs.Uniform Electronic Transactions Act – state enactment. • Private law agreements – machine communications will bind. Estoppel to say won’t be any contest under statute of frauds. • E-Sign Act – Electronic Signatures in Global and National Commerce Act. This worked well in common law courts and not civil law courts that looked at what it felt. “meeting of the minds” . and signature not out b/c electronic. b/c in e-form rather than written. stamp. Your job for sure is to make sure you client is aware of this possible action – client must decide whether to take risk or not o Straight forward insurance isn’t possible. • UETA . o Hardship – “events fundamentally alter” the cost or value of the promised performance Hardship compels renegotiation of the K. Required is that it has to be adopted with a particular intent. o Signed § 1-201 – any symbol executed or adopted by party to authenticate. Attorney can suggest it as a way to protect yourself. b/c in electronic form. 3rd party insurance. Have to be able to prove that intent • Common law – what would be acceptance – intent of parties. Ct can’t refuse to enforce electronic K. electronic means. Doesn’t have to be put down there by hand.4 E-Commerce • UCC – signature – pretty flexible. o States can go further and electronic assent = acceptance.
o Data messages aren’t to be denied legal effect b//w they are electronic o Signature is valid if can: Identify both the identity of the person sending the message and that person’s approval of the message (can be read). o Can’t transfer personal data to non-member states that don’t have same type of regulations. o Provides equality of treatment b/w paper and e messages. • UETA – played it up and created a new classification of agents Dissented from seeing agents as independent from machines. • EU Directive o Art. but adequate protection. o Attributed to person if sent by an authorized person or by a machine that is programmed by the originator to operate automatically. o Under 5 – where message is yours. then met if certain method followed to ID person and authenticate signature – adopted with proper intent. 25 of EU Directive sets procedure for determining if adequate protection. Art. or you acted on it – estoppel rule set up. • German Law – will signature stand up? 48 . Security procedure – suppose somebody finds the algorithm and uses it – in that case under 3. 7 – signature – if law requires it.(b) you are liable. Art. (2) ship it from US and then have to have the information (3) consent • UNCITRAL model law – use method as is appropriate. which goes further and makes a binding contract for East. Case by case analysis. 26 – exceptions that allow for determination if protection is adequate. • set up to be used on a country by country basis • not being used on country by country basis – instead being used for US purposes on a company by company basis. Facilitator not regulator. o To show intent of machine transactions can say: You programmed the machine and it is just doing what you want Can call it an electronic agent and whatever it does whether programmed by you or not is your responsibility • UNCITRAL did not call these electronic agents – just said you’re bound without going into what happened. deemed to be yours.o Compare 101 of E-sign to 7 and 14 of UETA. o Three ways out of EU doctrine: (1) joining Trustee or BB on line – (adequate procedures). Not necessarily same.
com is going to make order and have 3rd party ship it. • If necessary to send information under contract – if Riehn is merely an order taker and the book is going to be shipped out of Rivers. Italians failed in enacting law. o UCC could apply if so designated. Pedro buying book from Rhein and East is replenishing Rhein • First. b/c Germany and US are contracting states – sale of goods b/w both parties who have places of business in different contracting states. • Which law applies to Rhein regarding East transaction o CISG.com inventory or if Rivers. o Problem with PKI is that if you get a law saying the only way you can authenticate a signature in court of order or acceptance is if it follows a particular technology. but not in great use. If you do a credit report through a bank. o The government can’t use personal info – Privacy Act of 1974 • o US Congress hasn’t passed many laws on this b/c info inquiring business is profitable. used a bit more.o Very strict law and doesn’t accept electronic signatures unless authenticated Authentication – have I adopted this as my own? Attribution – are you the person you say you are? • Public key encryption systems (PKI) – public key and certifying key – usually 64 digit algorithm. 49 . Just one of many ways of confirmation. Example: Prof. In Europe. Protects econ info o HIPPA – regulates what you can do with health information. and since with Germany (handwritten signature). That is what both German and Utah law said. • Still have questions of is there acceptance. Great idea. If East has required this K shall be governed by UCC. look at wholesale contractor – East to Rhein – is it an enforceable K. No statute of frauds under CISG.com US – no regulation on private companies? o Fair Credit Reporting Act (FRCA). o Winn – the number of people using PKI is very small in US. Note that Riehn probably has to report sale and income to Rivers – but may not need to join the two and report Pedro’s name to the book. o In US – it is regulation sector by sector. is there a signature. it has limited rights to sell information gained. unless book is coming from Rivers. but EU directive similar to UNCITRAL on Ecommerce.
4.5 – The Bill of Lading: computers to caracas Differences in Bills of Lading: • Straight Bill of Lading: (white) o Issued to the consignee – non-negotiable – only consignee has rts. Must be stamped on the B/L itself. o Seller loses control of goods – Buyer might fail to pay in which case Buyer has the goods o The way the Bill of lading is made, the seller will now have to convince the carrier that he is even entitled to goods. 80% of goods go this way, b/c parties have dealt with each other before. (we want parties who don’t know each other). • Order Bill of Lading: (yellow) o Issued to make deliver to a certain destination set buy consignee to “Holder” of BL. o Negotiable Bill of Lading. “to order”. Can be endorsed – either by blank endorsement or special endorsement. o Buyer loses rt to inspect –carrier enforces cannot touch goods until you show up with the piece of paper. o How to obtain payment -- Once have negotiable BL: Attach a “draft”; invoice; other docs required in sales contract – endorses the BL and Draft to SBK Buyer pays w/o inspection – seller risk too (unless letter credit). The Hague Rules – Adopted in 1968 and amended the Hague Rules o shipowner liability to shippers for cargo loss and dmg o Limit liability to min $500 o US Enacted - COGSA The Hague-Visby Rules – define term package to include containerized cargo, increase the per package liability to $663, and restrict carrier’s limitations of liability for dmg caused either intentionally or recklessly. o UK Enacted. The Hamburg Rules – departure from above rules – 1978 – decreases carrier defenses and increases liability. Liability of $1,169. Not widely adopted yet. Federal Bill of Lading Act – (Pomerene Act) - governs all interstate and international shipments which use BL issued by a common carrier. o Holder of the BL does not have absolute title in all cases, but nearly so. o New concepts for the Federal BL Act (page 204) – when in carrier is in possession right to get goods – of consignee (non-negotiable BL) and Holder (negotiable BL). Look at (a) and (b). (a) offer in good faith to satisfy the carrier’s lawful lien upon goods (b) person in possession of negotiable BL, if properly indorsed 50
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“Holder” - means possession and rt to posses, ie -properly indorsed o Any forgery of a necessary indorsement is not effective to create or transfer rts. Carrier is obligated to deliver goods to the rightful holder “each person who takes BL should know indorser for protection.” o Carrier is liable for any failure to deliver goods which correspond to the description in the BL – quantity or quality. o Exemptions to carrier’s liability – language to disclaim obligations: “contents or condition of contents of packages unknown.” “Said to contain.” “Shipper’s weight, load, and count.” o Disclaimer is not effective if carrier knows goods don’t conform. o When goods loaded by carrier, he must count the number of packages and is expected to note the condition of the packages and the kind and quantity – not quality. Mis-delivery o Carrier is liable under Straight BL if goes to anyone, but consignee o Carrier is liable under Order BL if goes to anyone, but Holder. o Banks generally not liable – disclaimers of warranty liability, only holding docs, ICC banks have no obligation to examine docs. Mis-description o Carrier in shipment transaction has no privity w/the K b/w buyer and seller for the sale of goods, and therefore has no obligation to deliver goods that conform to the sale K. However, the BL, which describes the goods is part of the carriage contract. Forged BL endorsements o If the carrier did not issue the BL and its signature is a forgery or unauthorized, that signature is not effective – carrier not liable, absent actionable negligence. o Same disclaimers as misdelivery if bank wants to protect itself. o In EU – if someone signs your name you might be stuck with it under Vienna Conventions Don’t make BL too specific – boxes and see invoice or packing list for what is inside boxes What can carrier do to provide more security or protection o freight forwarder, phone calls, checks such as pin numbers. Prohibits e-B/L – b/c must be handed over to carrier upon delivery of goods. COGSA – applies to ever B/L or doc of title to or from US port, not automatic for domestic B/L. Harter Act preempts – doesn’t allow carrier to disclaim all liability. o Excludes live animals, cargo carried on deck, charter parties o Seaworthiness of vessel, care and loading of cargo. o No due diligence requirement o Carrier liable for unreasonable deviations of K that dmg cargo
o $500 per package limitation on liability for loss or damage o claims must be filed within 1 yr of delivery\ of goods • • • Adel –carrier delivered farm equipment to Hickman. Ct held clearly forged and carrier should not have delivered –liable. Schmitthoff – purpose of negotiable BL is to allow buyer to sell to 3rd party while goods are in motion – by transferring the piece of paper – so, other people not in invoice will come into transaction. Winship - Can we electronify this stuff – not so successful, b/c bankers don’t believe in electronic messages – can satisfy everyone, but if you want the bank to finance transaction via letter of credit – then bank will protect itself. o CMI routine hasn’t been as successful o Cdocs – Chase Manhattan wanted to act as a 3rd party register, that technologically it was a great success, but no body used it – buyers didn’t want it. It was mainly being used by oil tankers in Gulf – change hands a lot during voyage. o Don’t want to register, b/c of records being left around after transaction.
Mitsui – multiple modes of transportation – one carrier loading on to another. Ocean vessel on to Barge – might not be by bargee, but loaded by ocean vessel. IF not loaded by shipper Mitsui might be protected o Quantity and weight is something that cts general put on the carrier. o To find liability on carrier need to get through three hurdles goods loaded by shipper, appropriate wording, carrier doesn’t know about goods. o If take fed stat approach – words must be fairly close and literal o If take K approach – can say want to meet party’s expectations – that cartons aren’t opened. Industria Nacional – put down particulars furnished by shipper –Strict construction. o Must say, “shipper’s load, weight and count” o Protect buyer by using invoice made by seller . Fort Worth Elevator v. State Guaranty Bank - Buyer v. banks -- § 80107. • Forged draft deposited in bank, is bank liable. §80107 – unless contrary intention - a person negotiating the transferring of a BL for value warrants that it is genuine. • UCC - §7-508 - gives opposite presumption, unless something on BL, presumption that if only a collecting bank not giving any warranties – just providing your own good faith and services. No international custom – international custom is that collective banks don’t make any warranties as to the genuiness of the bill. Whether this overcomes 8107 is questionable. •
Did carrier do anything wrong? o Carrier gave goods to holder of properly endorsed paper o Here the Carrier gave it to S & A – who endorsed it to Citi and then endorsed to deliver goods or order to Bank of Valencia (all special endorsements to particular person).tends to create more legal problems. put it in writing. o Buyer? – chose the seller. Does not normally have power to bind supplier • • Risks 53 . K Employee agent – employed by US company – commissions alone or salary plus commissions – employer subjected to local labor laws – jurisdictional issues – more control for US company. Buyer is unhappy. • Should he be able to sue carrier? • Carrier’s liability for BL – didn’t authorize it – not liable. • Independent foreign agent – sales rep or commission agent – paid in form of salary and commissions – bears no risk that the buyer might not pay / risk stays with US company – usually can bind US entity – agent sends orders abroad – no need to store goods abroad . but carrier says didn’t get cartons. Can bind – express or implicitly. nationality of agent/distributor. o Carrier? 4. – misrep. • Choose wisely – hire a foreign individual or company. Check meaning of agent in local law. Independent foreign distributor – buys company’s products and resells through its own network – takes title to goods – assumes risks – must store and pay for goods. b/c never shipped goods – but can’t find them.Example: S & A →Citibank →Bank of Valencia →Carrier. could obviate the risk by using letters of credit. (buyer→ carrier) rd (1) Ten good computers – 3 party gets hold of BL and goes to carrier and says give me and carrier does.6 Selling Through Distributorships/Agents and the Use of Counter-trade: Growfast in Mexico and Russia • First. unless some negligence – not properly secured. • Know US and Foreign laws – most problems arise upon termination. o Bank? – took for collection only. torts. Choice of law provision. b/c gets different amount than what purchased. o Carriers usually leave BL out so can be filled out and brought back – is this negligent? • Who ought to bear the loss – seller. (2) Same steps as last one.
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Credit of all potential buyers for agent look at local laws first! Labor laws – compensation, termination Anti-trust – will agent/ distributor set up a monopoly. Price – anti-dumping / resale prices / intra-brand competition through distributors. Termination of employees and partner – local law. Can Principal Corporation be bound – and how much control does it have – how product is perceived.. How can parent company be bound? o Which services will agent perform Taxation – agent working for you in Mexico – indep distributor doing business in Mexico and not you so they pay taxes in Mexico, not FC. Gray Market? Undercutting principal? Rights retained upon termination Duration of agreement How to limit risks through an agent: o specify which law applies, get sales manager to approve every transaction at corporate office. Even if put in K, must do it in practice. o Broker – in practice is different than agent – has tons of products – but what’s difference b/w agent – agency is not a fixed concept and waters are muddied greatly. E. Siqueiroso broker / intermediary (receives fee for putting seller and buy in touch). Not legal rep nor employee nor ability to bind US co. corredor/ mediador o Agent – comisionistas – subject to rules of attorneys o Agency K does not have to be registered – use CISG No antitrust problems – never ruled on – but specificity or territory likely to be necessary Ignacio Gomez-Palacio o Mediation K – (US commission K) no tax impact in Mexico – no rep for principal – machinery – Mediators go around with catalogs and tell them who to call, but collect fees. o Commission Agreement – (agency agreement) – regulated by the commercial code – non-permanent relationship – performs act in discharge of the commission of his principal and must continue it until ends. Commission of selling goods Commission on which is the payment of a given fee – open or secret.
Ends by being revoked. o Distribution Agreement -- In Mexico can revoke agency or distributor agreement at any time – doesn’t recognize distribution agreements. • Example: Grow Fast – Pesticide manufacturing company that is incorp in DE and principal offices in KS. o Sell product in Mexico through either distributor or agent “distribuidoras agricolas, SA. What type of distribution it can use? How can it terminate distributor agreement – at will?
Counter Trade: • If you can find a broker to resell goods, do deal • Set K – terms valuation in $. • Make separate Ks (1) US seller to foreign buyer – LC to bank (2) Foreign buyer countertrade item to US seller – LC to bank no one gets $ out of fund, but it has to balance out at end of K. (3) Protocol – to get paid. Must sign both to be valid – and nonperformance by one excuses performance by the other. Can put in seller’s right to inspect goods and verify that quality is at industry acceptable level before K fulfilled. • Practical problems are in seeing what other goods are available. o Defining the local goods – narrow v. broadly o How do you value the stuff – is there a non-fluctuating market? o How are you going to sell the goods? Brokers or switch traders. o Tell Client – talk to trader before you set your price. o Fit and Quality problems. o Penalties for non-purchase, price setting, release letters, dispute res. • Switch Trading – get credits in a clearing account and sell to a third party who uses your credits. • Beckerman – the cost of counter trade – increasing your exports will inevitably be passed back to the country – Companies will not internalize the costs, but pass them on to the Indonesians by increasing price of their goods. – Neighboring countries will lower their prices to compete with the increase in exportation, which will make fewer countries willing to trade with Indonesia. OR all of the competing countries will set similar prices and then it will be just as if no counter trade occurred. However, the corps will pay a broker or trader to sell the counter traded items, who will in turn collect a commission that will ultimately be covered by increased sales prices of goods to Indonesians. Soltysinsky – Half a loaf is better than none. Not threat to foreign competitors or domestic.
o GATT system – protectionism, bad. But everyone has protectionism in one form or another. This method is the least objectionable. • Your job is to make sure client understands the comparative risks of different courses of action.
5.0 Financing The International Sale of Goods: Introduction – Letters of Credit 5.1 Letter of Credit and Electronic Communication: Gold Watch Pens for France. • Most documents don’t conform exactly – technicalities might let nonconformance off if it is ancient usage, clauses in BL that limit carrier’s liability.
Choice of Law issue • UCP – Uniform Customs and Practices for Documentary Credits o States custom in the industry, not the law. Must be incorporated in terms of contract o UCC is a gap filler, except in NY, AL, AZ, MO – where UCP prevails if incorporated into the letter of credit. o Doesn’t cover fraud and enjoining payment against documents. o Issuing bank, advising bank, confirming bank, and nominated bank. • Bank’s obligations are separate from buyer’s and seller’s rights. • Bank’s deal only in documents not transaction – and insist on strict compliance Art. VI UCP. • UCC and choice of law – Art 5-116 – governed by laws of jurisdiction where located. Use it as gap filler o Traditional argument would be that when BNP issues letter of credit it is doing so under FR law and it is paying under FR law, and US ct will have to look at whether US Law requires reimbursement of US bank.
The commercial invoice must be specific, since this is all the bank ever sees – common law strict interpretation. • Midland – letter of credit and if not that, don’t have to pay. • India – strict compliance. • Art. 13 - Time Deadline for UCP of seven days • Art. 14 - bank has to present all discrepancies at once or preclusion from claiming non-compliance to non-stated discrepancy. • Art. 14 – waiver from bank’s client / consultation • UCP doesn’t deal in fraud, so must look to local law – UCC 5 in US.
UCC 5 – governing law in US. In which case BNP could reject the letter as not valid. • Issue: whether 5-108 a mandatory law or mere gap filler. Shady has Metro on the hook. • Non-conforming letter documents – banks obligations: UCP o Bank has to first exam doc and determine conformity May consult applicant. then issuing bank can decline to pay • Art. • Typing mistake via machine o Whose error – negligence in machine maintenance. o Chances are that bank wins. The authors say it is probably not gap filler. but more like mandatory law –No solid answer. 5 says if BNP has busted banking standards then loss on BNP and banks take loss. This rule applies to Metro. waiver. Example: Letter of credit from FR bank (buyer’s) to US Bank (seller’s) and bank finds non-compliance with letter of credit by one error in letter. Not likely under UCP. Lindsell – effective upon dispatch – if doesn’t get there – you elected to have the telex or postman be your agent. Notice. Did the UCP adoption mean to get rid of 108(e) or was that an unintended point. so if you can prove it is a standard banking practice then the court will have to determine whether it is a standard practice is as a matter of law. not obligated to consult May ask for applicant to waive 7 days for inspection – “reasonable time” depends on transaction o Act upon discrepancies found If not waived. dishonor presentation of docs Notice to dishonor and must state specifically discrepancies – all. • UCC –5-108: if not on face the same. • 5-107 – it is just as if Metro issued its own letter of credit that said ICD – so. o Germany – effective once reached your mailbox. most of it is not mandatory and defers to K terms of parties as expressed in the K. • More usage in fraud cases. despite article 16 • Check time deadline in reporting – UCP – seven days 57 . o Look at bank rule o 5-116(2) rules of everybody dependent on where located – BNP uses FR law and Metro uses UCC – NY law. however. • Schmittoff says that mailing a letter is a better business practice. • Do docs have to conform to letter issued or letter received? o Adams v. 5-108(e) practice of financial institutions – Is BNP negligent for not sending a confirming letter and using telex? o Telex that is received under ucc – is conforming? • 5 UCC 5-108 – issuing bank is not liable unless it violated customary banking standards. • UCC.
• Fraud exception – is allowed in UCP. o Evidence of fraud – not mere allegations • 58 . – if bank pays in good faith it gets reimbursed. such as carrier. • Problem: “independence principle” that banks follow conflicting with the public interest in preventing fraud equals that of issuing letters of credit. even though it has been notified that docs are forged or fraudulent as long as acts in good faith • Must follow procedures for Injunctive relief • Relief can be denied if 3rd party is not adequately protected – none if confirming bank already paid • Fraud in the transaction – only actionable if committed by the beneficiary and not some 3rd party. o Ct can enjoin the bank from honoring the presentation. o you have to get to the confirmer before the confirmer pays. start with (a) – (a)(2).2 – Enjoining Payment of Letters of Credit for Fraud: vcrs from japan. • • Right to get an injunction comes from UCC 5-109(b). UCC used as a gap filler for silence on issue under the UCP. Not a material breach of K – b/c there is not supposed to be a connection b/w K of goods and banks that deal only in documents. Limitations: • UCC 5-109 issuer shall honor presentation. Limitations o In all cases the bank can honor. 5. • If documents are presented by anyone else the issuing bank may still pay. To get a TRO under UCC. even though you give it a case of fraud the bank can get into trouble if bank has too much knowledge. o Ct will judge case on b of K and fraud – more likely fraud. Never ever go directly to 5-109(b). must show: o Irreparable injury – damage that significantly hurts co? o Material misrepresentation of fact . Court can issue injunction. even thought not stated anywhere. 1st ask what letter of Credit says and what other obligations to 3rd parties are – if advising bank is out there and paid or not.• • Check responsibility for clerical errors – agency theory. but doesn’t have too issue an injunction. o If on its face docs comply bank must pay the confirming bank even if forged or fraud So. b/c 5-109(2) gives ct this authority – then applicant must prove fraud. Banks usually can meet the good faith test in 5-109(a)(2).fact that is false. Note that knowledge is hard to pin down with only ex parte declarations. if honor is demanded by a nominated person who has given value in good faith without notice of material injury or fraud. Always note privity of K.
2 – VCRs good working order.a showing: (1) Egregious fraud arising from declarations that have no basis in fact and are attempts to run off with the • • • • • • 59 . Much more likely thing to get you into the trial court and let you have persuasive evidence. US courts generally want a showing of fraud that is elevated in some respect before breaching the autonomy principle -. o This is British Law Strict compliance – includes goods. must prove fraud not breach of K – just b/c break K. o Note. letter of credit paid after goods arrived. Safe thing is to say don’t even bring it to me – isn’t that a great way to lose customers? o Citibank can ask applicant to take evidence to the court and get an injunction. o Seller won. Good to go. b/c you can get the harbor master’s documentation as to when the ship arrived. Citibank really doesn’t want to read the evidence. o Note most important word is that “or” – if have fraud in both the underlying transaction and in docs – you have met that hurdle. still a fraudulent document. Suppose erasure is done by carrier – Ct held that have to pay. Material misstatement. Could say on their face there is some fraud – especially if ship didn’t arrive until 16th in port to load.• Example: As Citibank. but must first say statements are on a required document and these statements are false. not necessarily fraud. warranty included – this could also be a breach of K. Suppose obvious erasure and then they put in 15th. American Accord. b/c that would open them up to liability. o Why does carrier’s lie not count. Whether or not you actually know if there is fraud or not. What is a false statement in the documents in 5. dates. b/c Seller not responsible for third party breach –Carrier lied. o “good faith” – subjective knowledge of the truth. but not by seller. doesn’t matter who did the misrep – carrier or seller – if fraud in documents doesn’t matter that fraud in underlying transaction. you don’t want to play judge – the safe course of action is to pay the claim as long as operating in good faith. L/C says 15th and B/L says 16th and doc checker says should we accept docs – if waiver fine.falsity when goods where put on ship. o Where do we look for the fraud – in the required documents. Cambridge – when goods arrived. everything. if not then not conforming. then still protected from liability. United Bank v.
(2) “unscrupulous” sellers. o Magnitude for fraud are greater here. The Israeli’s prevented delivery. • Issued by the seller’s bank and runs in favor of the buyer – backwards – payable against a writing which certifies that the seller has not performed its promises. not out of contract duties – most of the time even a disclaimer will be struck down as being not permissible. • Why the difference b/w bank operations and insurance company? o The insurance company is paying out its own money and the bank is paying out seller’s money. What else could you show? On the part of the beneficiary – Israelis. 5 – doesn’t define fraud. Tort actions are created out of general societal duties. Fraud – material misrepresentation of fact with evil intent and all the rest? Don’t know. o Art. This is cost free. o Does the UCC apply in this case? Yes.customer’s money. b/c K says state of NY Law applies – UCC Art. You may be able to show that because is the fraud.buyer just needs to type something up stating necessary terms. though Do we have that here in the Israeli Document? Wasn’t the Israeli government right in saying the goods aren’t in the Negev. Example: SpaceCom – when buyer (Israel) brings the document to the issuing bank can seller get an injunction on fraud theory? o Not likely – b/c ISP and UCP don’t refer to fraud – UCC gap filler? o Note: not in readings – K can almost never take away an action from fraud. so we get our money. Usually looks at intent. o Performance bond for the seller’s performance. • Primary users of standby letters of credit today are governments! o Seller usually responds to standby letter of credit by adding 20% to cost. How 60 • • . • Governed by the UCP – same as letters of credit • If conform then bank must honor the draft.3 -. 5. b/c of documents.Standby Letters of Credit: electronics to Israel. it is a suicide paper-. 5. o Bank does it with minimum use of labor. o Beneficiary is not subject to defenses arising out of the underlying sales transaction o Based solely on documents – bank should pay w/o question o Essentially. or (3) fraud that vitiates the underlying transaction before. Note even if NY Law doesn’t apply UCC 5-102? Says governing law of where company is located – NY law would apply. o What is material breach – four days late? o Misrepresentation is in the use of the word because – the acts aren’t causally related.
soda bottler • done to avoid personally opening up new locations • usually have separate laws governing them – more specific 61 . o Balance of hardships? Wouldn’t this hurt the issuing banks reputation? • Franchising – 40-50% of retail in US. why? Iran wants to take Bell for a walk. o Probable success on the merits? No. o Note: case on point – harris corp. but Ct says Bell might be able to take action in US courts – FSIA. The ct very often finds this part not present. Ct says here Claims Tribunal is not adequate substitute. o If you want to avoid being a franchise. o Here – couldn’t show irreparable harm? Ct says that Bell can’t get into Iran – that is irreparable. b/c can’t go to US courts. 800 billion dollars • Franchising defined – an ongoing. o Evil intent – ct says no evil intent. and money. 10 million in employment. significant assistance or control. Ct didn’t trust Tribunal to make speedy decision. Has in fact changed. but b/c they really wanted to get to SpaceCom evilly. Harris – comes out opposite o Irreparable injury – courts in Iran Hostile and US-Iran Claims Tribunal must go there – can’t go to US Courts. Caulfield Test. the only sure way to do it is to get rid of TM License o Two types of franchises (1) product distribution arrangement – car dealership. commercial relationship characterized by a trademark license. but on bank Manufacturers could lose 30million plus other assets in Iran. o Note: SpaceCom would also have to show irreparable injury damage – can’t meet payroll. Usually minimum of $500 over first six months of activity. transaction o Balance of hardship in Bell? No real hardship on Bell.are you going to show evil intent on part of the Israeli Government? You have to show they did this not by mistake. o Intent to defraud is a very difficult action to undertake. not to mention reputation. • American Bell – what do they have to show to get injunction? o Irreparable injury and either probable success on the merits or sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief. right? Could just be a regime change that doesn’t want to work with Bell. why? Doc v. o At its heart a franchise is a trademark.
(3) Product Ex. (2) royalties (this is where franchisor makes money) – these can be structured various ways -. o Franchisee gives back: (1) money in the form of initial fee (trademark license fee. Less training needed. o Pro’s of going into franchising for franchisor: Other people’s money – don’t have to raise capital – the Franchisee has to put the store up.zor has reduced control over employees and premises Trademark damage o Franchisor to the Franchisee -. and gives trademark rights and advertising. and methods of doing business and running daily activities. not profits).000 stores o Choose to be franchise or company owned chain – at this point zor has to decide what to do. franchisee fee usually not that large) given for right to use trademark and business format. Ex. How does it work – get going: o The parent company is the franchisor and below that are franchisees o The Zor – (franchisor) – has a business idea that is a prototype operation – usually for at least a year.• • (2) business franchise format –McDonald’s • giving trademark. Long before franchisee has been making profits he sends % of gross to franchisor. White Castle Chain – corporation owns outlets 3-400 stores. one business cycle. Goal is to let you duplicate a good business idea with ease and speed. McDonald’s – franchise distribution 23. Doesn’t have to be flat percentage. 62 .% of gross is most common (send every two weeks percentage of gross receipts. Provides very specific instructions on every aspect of the business contained in an operations manual. but most common way – usually 4-5%. Must be in hard copy. suppose you are running car rental dealership? o Flat fee for each transaction – a transaction approach. • General franchise laws Huge expansion in franchising has been in business franchise format.trains the franchisee in how to run the business. Ex. Faster expansion o Con’s of going into franchising for franchisor: Control . so franchizor gets same amount regardless of what car is rented o Sliding scale method – royalty rate going down as gross receipt goes up.
which tend to focus on placing equity and control in the hands of local individuals and on regulating the franchise agreement to benefit the franchisees. Expanding or selling franchises • Individual franchise agreements -. Now franchisee is a multi-unit owner. This way franchisor can use local subfranchisor (local citizen) to control franchisee. and gives franchisor and franchisee both adv – as long as franchisor exercises control and meets expectations and law. International Franchising: • Focus on foreign laws. sub takes on some of the training and supervision responsibilities. Regarding store one. • Conversion franchising – franchisor goes to someone already operating his type of business and gets him to change over. o Antitrust laws and trademark laws come into play. But. x looks for one and will tell him he won’t see right to anyone else. etc…. three … five. then store two. Also be sensitive to cultural impact. but you must open a store every six months. o Average term is about 10 years for relationship b/w franchisor and franchisee. o Or franchisor can lease to an entity (sub-franchisor) to sell so many units.S. soda. there will be a second separate K for new store. Most franchisees are becoming multi-unit owners – usually 4-5 units. Suppose going to UK (1) First requirement is whether your domestic operation is in control and profitable. The sub can sell single units or area development agreements. (2) Why do you want to go abroad? o Suppose you want to expand b/c out of room domestically (3) International Licensing and support obligations – can your company handle them? o Management personal and troubles Going global 63 .o There are some systems where franchisor sells product – and where product comes from franchisor – cars. Usually analyzed by time. etc…. Most are renewable for different terms. o If y does good job and x decides to open another store in same city. Instead of finding five franchisees. • Assuming franchisor’s headquarters are in U.1:1 o Franchisor (x) gives rights to (y) and in return gets money. Trademark laws allow you to register it. you will have a normal franchise agreement with store one. Used extensively in international markets. • Area development agreement – franchisor (x) says I want to develop a certain area such as Richmond – that can ultimately handle five successful stores. but area can hold five stores and I’ll give you the right to the area. profitability.
area development. 9. Double reverse translate everything. • Develop business plan • Calculate value of master license – for both sides and look at it in terms of what your own profit is and costs are – franchisor should put himself in position of franchisee to see rate of return.1 – Franchising and Trademark Licensing: Colonel Chicken goes abroad • Paris Convention – right of priority of 6 months form home registration. and 24 additional months if good cause is shown for delay 64 . o Mitigates national requirements that foreigners seeking TR prove a preexisting. allows well-known trademarks the rt to block or cancel the unauthorized registration of their marks. valid. o Eliminates need to simultaneously file o Famous marks – prevents infringement even if there has been no local registration • Nice Agreement – registration by single classification system for goods and services. Not fully implemented yet. and continuing home registration. • Vienna Trademark Registration Treaty – US party to – int’l filing and examination scheme. • US Lanham Act of 1946 – foreigners who seek registration in US might be required to prove a prior and valid “home registration” o US law – allows for registration within 12 months if there is bona fide intent. o Note distance and difference in time o Can you get your royalties out of the host country. o Note political stability of country • Handle trademark franchising problems • Define general characteristics of international franchisee o Education o Financial capabilities o Duties – what will they be o Team player – do you want franchisees to be entrep or follow your system Know reputation of person in target country Investigate details yourself – common sense. No longer have to ID good or service classification.(1) Establish an international department – at least one person – to help organize and centralize concerns and responsibilities involved (2) Define general strategy and pick target country – 1:1. • What royalties and how split? • Offer training in development in form of master franchisee • Set up program to identify and address cultural differences or market differences – language issue. subfranchising. • Operate a pilot unit in the new territory for at least one year before allowing a new franchisee to open.
knives. must be careful so as not to force an agency relationship. You can use this in Europe to get patent protection Pengilley – man who drafts contract is the one who gets the best rts and benefits.You get right of priority of 12 months.• EU . Client is selling his o Trademark o Trade secret – know-how -. o Translations TRIPs – trade related intellectual property rights. o Uruguay Round.secret recipes. Consider whether such trademark falls on country’s forbidden list or must meet other regulations Quality Control – if franchisor doesn’t maintain it. internationally recognized marks receive enhanced protection.business model. Advertising o Patented goods . compulsory licensing is banned o Can prevent unauthorized use or disclosure WTO – doesn’t deal with patent registration Madrid Agreement if both parties are part of it (US part of) Recommendable that gets trademark office before open business – nat’l or abroad. • • • • • • • • • Copy right material – designs and logos of franchisor – instruction manual 65 . o Combination of services and trade secrets – Training. Note: continuing relationship – don’t be overzealous in limiting rts. However.) o Copyright protection – Business Manual. the trademark could be considered abandoned and lost. etc…. the linking of local marks with foreign TM is prohibited. special patented cooking equipment and purchases of chicken from a list of designated sources o Non-patented goods with trademark on them (napkins. o Avoids having to buy it later. Will have to register it with trade mark office domestically and then probably in foreign country as well. the office says it is not new and not invention – that this info is already disclosed in US Patent – so precluded by own prior disclosure. but if you don’t get patent protection in Europe during those months and you come in later. service marks become registerable. Marketing. What can we do in this situation – get a subsidiary patent to the original – a follow-along-patent.
if publish in US – protected in other ratifying countries. Act is not specific on what have to disclose? • What are material facts for disclosure? Financial statements of the franchisor and sample franchises. Franchise Agreement – standard contracts used in home markets and revised for international use. • Royalties – gross sale or % . • Coverage of: right to sub franchise. area of agreement. default and dispute settlement.• Universal Copyright Convention of 1952 – and Berne Convention of 1886 – US party to both. Main thing is trademark licensing clause giving rts to franchisee in return for royalties. Copy of standard form contract that you plan to use can be part of prospectus (subject to change while entering into franchise agreements) 66 . formulas. Canada: o Section 6 –Registration: Don’t do anything unless file prospectus. doesn’t necessarily mean you have it in other countries. translation rights. services. Foreigners in US have to register if only seeking protection under UCC o Berne – if foreigner is member to Berne as well – then national treatment and release from registration. will excuse any national registration requirement provided a notice of a claim of copyright is adequately given. control. franchise fees and grant. pricing. Difficult to protect under US law. Trade secrets – recipes and cooking techniques to customer lists. Example: Colonel Chicken going to CANADA • ALBERTA approach o First. training. advertising. • Note that if you have trademark in US. accounting procedures. market data or bookkeeping procedures. Permits local copyright protection independent of protection granted in the country of origin and doesn’t require notice. o UCC – copyright holders receive national treatment. • Problem – hard to define exactly what is a trade secret. taxes. Need to Register to do business and must be received by Registrar. o Consider the Franchises Act of Alberta. o Note that another difficulty is that there is no agreement on how you get a patent and how it is registered. Main treaty is the Paris treaty. business standards. Franchisor has to give a prospectus – b/c: Government wanting information Consumer protection – prevents them from buying bad chicken.in $ or Local currency – inflation guard • Permits for building – cultural differences • Translation problems. insurance. royalties. Therefore.
Example: Cl Chicken going to Europe – Germany -. o Master franchise for three areas. (discretionary). that is what they have just gotten rid of Other regulations in Germany • 67 . o Exclusive license – only the franchisee has rights to license. subject to specifications or from a list of approved sources.Pronuptia. placemats. b/c depends on secret recipe and reputation. o Does the Exclusive license violate EU regs? Europe cross border trade doesn’t want an entire geographic limitation.• Copy of Patents involved – whether registered in Canada or US or internationally and if Canada is a party to Convention Copy of Registered Trademark – show that is part of deal Section 8 paragraph 3 – director may require any additional information which he considers necessary to be included in the prospectus. • You can’t require that they purchase – generic equipment or supplies. Really Scary in its breadth. • Can you require franchisee to operate out of the site that you own? Yes. Antitrust issues – Sherman Antitrust act • Problems: tying issues o Not allowed to require franchisee to purchase non-essentials and cooking supplies from franchisor. (1) You could argue that the lease isn’t a product – no tying (2) McDonald’s – 4th Cir – can require a lease before getting franchise B/c control of profits – marketing and already existing franchises and how will effect business – max franchise outlets w/o minimizing profit (3) Judge’s shouldn’t decide – not expertise • • • • US Franchise Regulations: Disclosure laws – criminal penalties for material misrepresentation or omissions in franchise agreements Copy of Prospectus / capitalization FTC Monitored – can ask to be exempt if sophisticated business person.? o Baskin Robinns – “formula for success” products may be tied. Is there anything gov’t might think would be useful for franchisee to know and they might demand in prospectus that you don’t want to give o Business plan – but you can say that will be revealed later o Labor Standards? o Location – McDonalds won’t tell you the site or how they select it. Napkins. uniforms. o Can purchase core products from franchisor – chicken. Seigel. Not a Sole license – franchisor reserves rts to enter and compete.
2 – Protection of Intellectual Property: Pirated and Grey Market Rockers Tapes and Cds. can take reasonable steps to keep info secret from competitors. resulting in export or destruction. public good will of assignee. can put in location clauses forbidding francisee during K or for reasonable time from opening a store with a similar or identical object where it might compete with other franchise in network. • 9.o Can you suggest prices – can provide guidance. • K-mart – Customs can continue to permit entry of genuine goods when common ownership of TM exists – but must seize such good only when TM authorized. injunction. o 85(1) -. “black list”. • Note: first sale doctrine in copyright – after that no right to reap benefits. EU passed 4087/88 and 2790/1999 – detailed a “white list”.says you can’t o 85(3) –case by case exemption that you would have to seek – versus a block exemption (everyone can use it) o After case. 81 formerly 85 o Ct drew a triparte distinction b/w distribution fracnhises and service and production franchises. and “gray list” Attempt is to make a balance b/w the two parties. 68 . Gray Goods: goods produced abroad with authorization and payment but which are imported into unauthorized markets. o Can I select sites for my franchisees? Build here and rent from me and sell from there – can we do that? • Consider Treaty of ROME Regulations: Art. Katzel – Sct blocked French cosmetics from entering the US. Zor can communicate know-how or assistance. and can prohibit sale of store without permission o Passive sales are acceptable outside of your territory. but can’t set prices among franchizors or franchises to hinder competition – that would be price fixing and illegal. Sct emphasized TM ownership and indep. but not common ownership. US firm assigned US trademark for FR cosmetics. and dmgs • Duracell – Reagan denied relief. Assignee obtained infringement relief against FR manufacturer. rather than just protecting the franchisee. Section 526 of the 1930 Tariff Act – bars unauthorized importation of goods bearing TM of US citizens • Results in seizure of imports.
Article 46.2 of Customs Service Rules -. Note three approaches o Stop at border • • • 69 . which spells out what kind of remedies a government has to provide in order to be within the permissible actions under TRIPS. o Statements filed on behalf of validity of goods are kicked upstairs to the commissioner or director. Decision is made based on the ordinary observer test. copies of certificate of registration. but airplane motors as well. o What would you really like to have as a remedy? Criminal Liability – note on 816 – Law of 1996.File application with Sec’t Treasury (homeland defense).S. Long run – no incentive to create music – both good and bad music. And. Aggressive intervention – find out who is counterfeiting and when it is coming out.• First question is who cares. Little chance of enjoining the producer or distributor outside U. Injunction against producer or importer? o Foreign country – do they even have injunctions or counterfeit laws? o What’s likelihood that foreign country will have same trade law – are they in WTO – GATT 1994 or Multi-Lateral agreements such as TRIPS? Trade Related Intellectual Property Agreement – found in parts 5159 on border measures. Cost is a factor. The trademark importer has the burden of proof. Customs has the authority to seize counterfeit goods. Think of it in context of not only music. Disposed of outside of channels of commerce in manner to avoid harm to right holder or destroyed. trademarks o To protect the market place for goods – if no economic incentive to bring goods to markets then hurts everyone o How does it protect the consumers – short run cheaper goods. piercing the corporate shell if the indictment is proper. proof of certificate of registration of trademark/copyright. copyrights. Dist Ct to get TRO o Get customs officer to seize the goods? 133. then tell Customs. The copyright owner has the burden of proof. why should we protect these guys from counterfeit goods? o To protect patents. customs – including fee. o Customs will contact the parties who have an interest in the goods – will ask owner of trademark for consent to allow in country. We don’t want counterfeit goods in certain areas How do we shut down these bad imports for Rockers? o Go to Fed.
silhouette case – Austria v. • Unrelated Producers might be using the same mark on the same or similar products. Limitations of Contract Law • Privity Requirement – to enforce you need to be in contractual privity. service provided with product sold. franchising. liabilities. Why would we want to have geographic distribution • Legal situations – required by host nation • Lack of capital and we can’t raise money to distribute product world wide. In many cases the goods have left the hands of original party and it is a 3rd party exporting to US. o New trend setting image. Why would producers want to segregate goods on regional national basis • Price Discrimination Different Manufacturing costs Same manufacturing costs. Note: AT Cross – p 817 – Foreign Trade Zone Act abuse. US Copyright – simpler • L’anza – 602(a) importation right under copyright law and first sales doctrine 109(a). but local partners would do it via franchising with us. the owner of 70 .o Sue for injunction or damages or both o Criminal liability • • Note: Romless Computers – that copyright protection and not merely trademark protection – the cts interpret the regulations and violations narrowly. fashionable v. o Also worried about trademark violation – less so than made in USA o Note: hierarchy of values in cts enforcement. Distribution channels are different. Putting made in USA stamp on foreign products – cts got super upset about that – more so than bad trademark and bad copyright. Bulgaria • Geographically exclusive licensing agreements. Generally. Can the original owner say you can’t resell without my permission. different markets – Sunlight Dishwashing case. but different prices Copyright case – different marketing • Product differentiation – different products. No. i. o Different regulations – warranties. under cr law – 109(a) – page 829 – states: not withstanding 103 exclusion rights is entitled to sell or dispose of product and then the buyer can resell it. Hurting US Gov’t not a private individual and that is more important to court. once a copy is sold initially. dumping old products.
leaves open crack for goods manufactured outside US 3. but not manufactured outside US. Ct says regarding products manufactured domestically. IF originally made in US can’t use copyright to segregate goods. 71 . 1. then exported. b/c copies – pirate material. a. then re-imported the first sale doctrine trumps the importation right. music. Since importation right refers to exclusive right to distribute – which is self limited by first sale – and you can’t control re-importation. there is some thought that 109(a) refers to prohibit remanufacturing of good in the US.the copyright has realized the economic value of the author’s rights in that copy and you can resell it on secondary market. Doesn’t say about manufactured outside US. and software – limitations. L’anza is trying to use the label to control distribution of product 602(a) states: “importation w/o authority of owner of copyright is infringement.” ii. In hair care products the copy is incidental to what is being sold. 2. exceptions to first sale doctrine are with cd’s. Sct says what is relationship – should we say after first sale no residual right or extra right or there is on importation 1.
o Limited to US citizens or domestic corporations. Doesn’t matter if licensed outside US. and then you can prohibit importation of that product into the US – and case where difference in terms of warranty or language of users manual – not so easily cured by labeling. o Applies to goods actually sold in commerce and infringe US trademark o Few cases. o Victory for mark owners to use trademark law to segregate markets o Foreign corps have to use this section to sue. exceptions. you can still prohibit goods from coming back in. . Infringement law under Section 43 of Lanham Act.if material differences and the differences in product can’t be cured by labeling. however. common control exception is valid under US law. Trademark law provides more opp to provide for segregated markets than copyright. diff warranties. Section 526 of the Tariff Act – K-mart.US Trademark • Three different provisions in trademark law in which someone seeking to prevent importation of goods into the US might use. Customs issues regulations to unify both above provisions. which is language not in 526 – not clear but that may generate slightly broader protection. we think mark owners if the product is identical then can’t prohibit and only can prohibit-. o Talks about products that simulate the US mark. Section 42 of Lanham Act – Lever Bros. but lower cts have said § 43 will be construed same way as Sct has done with abovementioned acts and we are going to say even under common control situations you can keep out imports when difference aren’t cured by labeling.narrows common control exception and says even if common control. If you want to do price discrimination – want to sell same product for different prices in different markets. Sct – decides it wants to interpret these provisions together so that differences b/w two turn out to be not that great. you could create two products that are different enough that ct will find them material different – diff formulas. – invalidates authorized use exceptions formulated in customs regulations. o Authorized use and common control of foreign co. 72 .
• 73 . seizure of gods or entry only under bond o Temporary relief decisions are made by admin judge – reviewable by FTC o WTO conflicts with 337 treating imported goods inferior – MFN? • Example: Patents – Section 337 – FIZZER wants to use this. not personam. TRIPS and Pharmaceuticals from Thailand SECTION 337 of the Tariff Act of 1930 • Applies to Copyright and Trademark items – patent go to WTO. Special 301 Procedures. and market disruption. fed ct. Just that industry exists – factory. • Can result in general exclusion orders. capital. unreasonable. o US may undertake unilateral retaliatory trade measures – subsidy. TRIPS. b/c Unlicensed manufacturers products coming back into the US and what can they do? (1) Go to the International Trade Commission: (2) Claim Patent infringement under 337. and encouraging productivity. escape clause. employment of labor. Doesn’t require proof of injury to domestic industry. dumping. • Determination and recommends to the President are exclusive by USTR. and show industry exists (3) Importers will argue it is in the Public Interest – lower prices o What about with drugs and AIDS – is anti-AIDS virus drug excludible --what about innovative thinking. 9. o Can exclude importation from US unless in contrary to public health (4) President then has to approve exclusion order – 60 days to disapprove or ITC ruling holds. o Independent US Agency. And reputation and confusion can occur long after the particular good that bears the mark has left the hands of the producer. • In rem. o Trademark – protects reputation of mark holder and investment by owner in reputation and from consumer side – in preventing confusion. or discriminatory conduct. equipment. Section 301 Proceedings – when US rights or benefits under international trade agreements are at risk or when foreign nations engage in unjustifiable. o Subjected to authority of the USTR – mandatory retaliation if breach of international agreement to which US is a party. Discretionary authority when unreasonable or discriminatory practice.3 – Protection of Intellectual Property: Section 337 Proceedings. but when you sell the additional copy you have realized the economic benefit that Act intended to protect and don’t need to protect it further. Why is trademark so much more user friendly than copyright o Copyright -.protects investment in works of authorship.
o Protecting it is mainly function of contract. • DURACELL BATTERY – the President says he doesn’t like not allowing them into the country – wants to encourage competition. • Know-how – commercially valuable knowledge – cannot register it an obtain exlcusive legal rights.4 Patent and Know-how Licensing: Oil Drilling Bits in Germany and Mexico • First. lack of bargaining power • Licensor’s Risks – currency exchange controls. damages. o TM protection o Licensor would only go through Licensee – no parallel importers Treaty of Rome: o 85(1) – can’t grant absolute territorial license open license not under here – deriving rts through licensor to not produce or sell in area 74 • . excessive royalties.o If dispute is covered by WTO dispute settlement understanding. labor reduction. lack effective enfocement o In US can result in injunctive relief. taxes. Can’t use 1337 of gray goods – ITC doesn’t use it anymore • Personal Computers– have we seen this fact situation before – in the Romless computer case – customs in Romless computer case – they were able to come in b/c romless and can only prevent copyright product from coming in – separate shipments of memory and plastic computers. acquire patents in all countries where hope to go. then USTR proceeds under WTO. GRAY GOODS – see US TRADE above. Top of page 847. o In developing world often not granted for pharmaceuticals. and trade secret laws • Licensee’s Risks – old or obsolete. expiration • Example: Licensing seed product in Germany – Maize Seed.–licensee agreed to: o Exclusive rights to organize sales and not to deal in other seed o Not to place restriction on supply of seed to technically suitable distributors – prices fixed in consultation with licensor. 9. Keeps product out. gray market goods. • Patents – territorial grants of exclusive rights. o Required 2/3 of sales to be imported by licensee and limited its domestic production to 1/3 sales. Even if separated. o ITC – says nope – can’t bring it in. tort. exclusive orders ITC Section 337 of the 1930 Tariff Act o Two types of systems – examination and registration (US and GER examination and FR registration and UK worked within time frame).
o If NordMetall makes a follow along product – the grant back doesn’t let them get anything back. royalty-free license. Permanent. royalty-free license the same . Black List – Article 3. 1. You can’t just drop the royalty free part from the clause. permanent. o What about letting them get royalties for follow-along invention. Creates lists mentioned above. o What about dropping as well exclusive and changing it to non-exclusive.closed license is applicable – deriving rts through licensor to prevent 3rd parties from exporting product to area – can’t exclude imports or exports to other member states o Regulation 240/96 – on application of 81(3) –make a single regulation covering tech transfer and harmonize patent and knowhow licensing Rome Treaty shall not apply to pure patent and knowhow licensing agreements and missed patent and knowhow licensing agreements. What does the EU say: o it must be non-exclusive and there has to be reciprocities.6 – o Obligating the Licensee to assign in whole or in part to the licensor rights to improvements to or new applications of the licensed technology. non-exclusive. o What about profit sharing from improvement – hard to calculate. TIME? o A permanent license with royalties – non-exclusive license. o Any good lawyer can argue this two or three ways – not sure if applies or not. Even for the black list this is ambiguous – doesn’t use assign. but is exclusive. Drill bit is worried about competition or develop a superior product. o What about revocable license – at will? Not so fair What license would we put in the grant back clause o Royalty free. Is this a requirement of an assignment – or is it a license and not an assignment – so black list doesn’t apply. o (2) are there any that are contrary to EU regulations for licensor geographic basis in art. exclusive. but as NordMetall’s attorney you want to make sure something is in Art. you need to set amount. two questions: o (1) Unfair provisions to licensee Grant-back clause – art. 2 the permissible list • • • • • 75 . 7 – by German company.not exactly. What about royalties. What should NordMetall get out of this and what should DB get – one says no license wanted and the other says no rights period. What is the licensee worried about: o Wants to be able to develop product better – not likely to want to work with NordMetall. • Example: Drill Bits license agreement.
o Closed license – b/w two parties. use or distribution of competing products without prejudice…. production. Paragraph 1 – are there any more concerns: o If we make the solicit sales outside territory instead of business – is there anything else.2 – can’t restrict one party from competing within the common market with the other party. Art. Is this a prohibition on carrying out sales activities Note distinction b/w passive sales and active sales activity on white list and black list. 3. Here in paragraph 1 – there is the possibility of third-parties being allowed in. with undertakings connected with the other party or with other undertakings in respect of research and development. 3 EU – says without any objectively justified reason – what would be an objectively justified reason – and 3(b) is directed to resellers – which is about gray goods.1 – paragraph one – defines open and closed contracts – don’t know whether we fit under which one. To bring in legality of EU law – instead of saying no sales are permitted. say no solicitation of sales are permitted. Is there reciprocity – are France and UK not allowed to sell in Germany? o This one says solicit sales – actively selling. o Paragraph 1 – the Grant – might have problems with Art. Article 3(3)(a) – above don’t apply where one or both of the parties are required without objectively justified reason (a) to refuse to meet orders from users or resellers o Is that what paragraph one says in K – nope. o Does para 1 mean that under no circumstances can NordMetall sell to UK or France. • • • • • • 76 . Both on grounds of authority and fairness. What would we rely on to make it closed as read by license agreement? • Market sharing agreements with pre-established rights • Licensees in UK and France o Open license 1. that black list really gets things that are only truly bad. Note. may be authorized except France and UK – so those are out. o Note difference b/w sales outside area and no one can solicit sales outside of Germany.
better to fall under block exemption or try to get an individual exemption ----------------------------------------------------------------------------Example: Mexico Subsidiary • Risks of Mexico licensing: o Reform of past over-inclusive franchising laws o Mexican Corporations law o Royalty payments o Taxes payments o Risks upon entry. Mexico had pretty much abolished regulation and only required registration – NAFTA makes sure that they can’t go back. Put in clause that NordMetall will inform DB of prices and meet if prices go too low. 77 • . If you are a three party contract the regulation doesn’t apply and article 85 may apply. o Limitation on ownership rights / equity / location / currency / management / performance / capital transfer / earnings. risks of operation.• Price setting by DB – Resale Price Cross Maintenance Clause– is this bad? o Market should determine process o You can recommend sale prices o And. and ask for individual exemption to 85. • Registration of IP rights in MX – to protect property rts and public policy: • What’s effect of NAFTA? o Made sure there was no counter-revolution. not to collude. o Take a look at Chapter 17 of NAFTA – and whether the word license is ever mentioned in Chapter 17 of NAFTA – does this just set up IP rights or how they will be used. Take individual contract to EU and ask whether it meets regulation. o So. Is this applicable to open or closed or both – Art. o Note if don’t get individual exemption there are other possibilities – negative clearances to comfort letters. (85) – is the German version of the Sherman Act. o Basically if you have two party license and no bad clauses we won’t prosecute you for anti-trust – block exemption. • Note the operational code and drawer rules. o If you don’t make the block exemption – it doesn’t necessarily mean you are going to be charged – but if there is so much reference to 3rd parties that we don’t qualify – you can get an individual exemption. get too big etc… and it says if you are within parameters of two party license agreement and don’t have stuff on the black list and not too much on gray list – you don’t have to worry about anti-trust. That NAFTA Doesn’t prohibit it – argued by Brasil – when goods are being made and sold in local country. risks of termination. • Check TRIPPS 31 – compulsory licensing.
exchange control. foreign resources.more: -.Add my notes from a transaction gone well. and choice of law. currency inconvertibility. bankruptcy laws. taxes.wholly owned: o Usually cheaper and quicker. labor. • Always consider control. o more control – training of locals. control. o OPIC and MIGA – coverage on risk – political. competition. 10. o Corporations: Board – who appoints– SH? Do they give orders to the president? Who appoints supervisory bd – depends on how many employees Branch o Control . government regulations. social.Losses are deductible • 78 . Losses not necessarily import on impact of parent.1 – Foreign Direct Investment risks: • Operational risks o Political. operational costs. choice of law.Is it on a % of global income of the whole corporation o Reports and Reserves -. local culture • Foreign law o Corporate law. marketing.it is the same legal person – bears all liability as home office o Taxes -. registration.depends on how much is owned – separate legal entity. • Organizational Risks o Formation costs. jurisdiction. (1) Branch or subsidiary • Subsidiary . termination costs. competition. veil piercing. expropriation. less capital investment possibly o Control . • What can attorney do to get rid of risk or to ameliorate it in some way. corporate administration. operational code.Employer and Employee o Liability -.When and what -. economic stability. antitrust issues. o Liability – liable for all cost – worry about veil piercing o Taxes – on all world wide or local proceeds o Reports and Reserves When do you have to report – not in favor of sub. reports and reserves.
No local connections.who is the principal is by showing the money – financial material on parent corporation. Cheaper and quicker to get a sub. Charter will be in German – so. where two persons decide to undertake some venture for profit for what is usually a short duration. and 8 – saying national treatment and MFN don’t apply. or gain more secure sources of components or markets • WTO – TRIMs – National treatment is mandated • Offered by nations who lack the financial resources. technologies. and markets • Considerations to take account of: o Foreign culture. local capital. obtain needed management skills. would need certified translation.o Very difficult to set up a branch Think of a German Company coming to US – easy to set up subsidiary – just file with sec’t of state. obtain needed technology. (3) create local legal person – LLC or LLP chartered in local jurisdiction • notice most countries have difference in public company v small closely held company – refers to SH number not size of corp. • GmbH – seems more suited to our needs – not public trading and don’t need protection of minority SH put into AG (4) Joint Venture – partnership. environment. Need to see if ok under German law to expand – • Notary – who is a notary? Lawyers with additional training. raw material. obtain favorable tax treatment. currency reserves. o 1102 – need to national treatment. 6. technology transferred – new or old. Authorities want to know who are you –need to show more than just charter and by-laws -. rather than a branch which is licensed to do business in Germany. Limited numbers – demand greater than supply. 1103 – MFN treatment. • Share risk. gain a host nation identity.prohibits mandatory joint ventures. • NAFTA Chapter 11 . (2) De novo or acquisition – very expensive de novo. 79 . local industry harm. To set up a branch – you have to come over – register to do business – license to do business. o They are supposed to advise the parties of the risks involved – fully informing both parties. 7. o Decides what can be put in corporate charters and by-laws. need to make everything to fit and culture. 1106 – no performance requirements • In all of these investment measures like TRIMS – there is some limitation on application – ie Mexico has taken off the table all items in article 5.
IP. o Technology transfer – bring companies up to a minimum standard to function more efficiently. Have to decide where you are going to put the seat of your corporation – DE equivalent in Europe is the best tax jurisdiction – Luxemburg. Get out of company running business. they like workers’ rights too). o Don’t automatically assume going to the UK is the best place to go – it may be the best. • Can we avoid this by creating a European Corporation SE. (but. law for disputes. o Germans have always been afraid of what has happened in US with corporate law – race to the bottom as far as regulating corporate officer behavior – DE allows them to do what ever they want. GR want to set minimum standard and have them apply – the new directive will set some minimum standard – Spanogle thinks will see race to the bottom Privatization: Example: • Why Privatize o Economy – bring in hard currency. o Compromise was the if you had workers rights previously you would still have to have it and in countries that don’t you don’t have to leave it to local law of country in which you are originally incorporated in. equity and control. duration. title to property. Balance of Payments. (starts 2004) o Allows you to go throughout Europe without getting new branch license in each jurisdiction. • What does gov’t have to do to attract investors: (1) Make a corporations law for the Country 80 . Took awhile b/c of corporate law as social doctrine. management. intended markets. Government ad-ins o Jobs and training o Technical contributions o Compliance of environmental requirements o Increasing Mexican competitiveness in production plant. efficiency. language.• Agreement considerations: purpose. taxes. Unlike US where you can have corp headquarters in one place and principle place of business in other can’t do that in Europe. but what about tax rates? o Europe is starting to catch up to our corporations going nation wide or EU wide. Government approval. • Factors to consider: • Worker participation o American Corps usually don’t like worker participation and don’t want to deal with it – think about whether you want to go out of way to avoid it – sends bad signal to foreign employees. try to bring in market economy. Be prepared to talk to employer about what the effects are – probably want German counsel to do this.
finished and raw materials o Environmental liability – are there claims o Expropriation – former owners o Accounting standards. who gets what positions Control of company? o To have effective control of the company – 10% is not a significant amount as with a huge company. auction – might be costly What would you want to change in privatization law: o Value of company – state owned enterprise – equipment. inventory. standards. “shall” indemnify any claims arising from government ownership. From public invitation. o Indemnification from any former claims would settle this issue. o public announced offer – brings competition. • Who could you sue o Standard Oil – suing parent for breach of fiduciary duty 81 . reputation. o You want to tell President you can bring more employment or severance packages. but need to prove o Price being charged is higher than market value o Law gives claim and process to initiate suit.• • • • • • • (2) Since it is a state agency – first need to convert it into state owned corporation (3) Sell the shares Article 23 – several ways to sell off state corporation – which one does DGI want: o negotiations with government. o Investor’s name – want quality. training for fired employees. • Most countries tell SH to either sell or try to take over the corporation. o How to terminate. o New technology –100% control – gets you best technology. • If parent charges more to the subsidiary. unemployment compensation fund. – SH derivative c/a for breach of fiduciary duty. Hard currency will bring it in for Capital – to pay for goods Art. 24 – Sales of Stock having to be to citizens Currency Exchange Control • Inflation • Price Transferring to avoid taxes and dividend payouts. Machines – bringing in equipment as well. and second best with less control. Negotiations about employees o How much of shares do they get if any – investor will want to reduce price to buy by % employees get. insurance. who would complain? Subs shareholders – can sue. bank claims … etc.
Gov’t leaks to competitors. unless DGI files in every jurisdiction in which it has assets then there is the temptation of creditors to go and dismember anything outside US. • Corps can’t share among themselves – anti-trust violation. but not all. This is the minority SH of US corp bring c/a against parent US corporation o Can you sue parent in local courts – jurisdictional problems o Can you sue parent in US courts – if sub is host country sub o Host country gov would be out of luck on taxes and customs duties. o What about pulling out of everywhere but Germany – can the Russian debt be dumped just on that country’s assets or will claims against the parent have rights against the sub? o Should European court talk to subsidiary and talk to American Court handling the parent? Coordinated Claims Procedures (no multilateral treaties) UNCITRAL Model – the US has picked up parts of it. 82 . Bankruptcy • What is creditor’s first instinct? o US – courts issue a mandatory stay o Foreign Assets – not covered by US court order. World wide income tax system – unitary system Tighter regulations – more information.• • • Creole is a subsidiary of Standard Oil. Different country – different laws • Protocol – agreement b/w two courts to do same procedure and how to go forward. o Parent would claim reputation is why price is higher. How to solve price transferring – who can remedy this situation? o Wheeler article – p 991. o Who gets the assets – what creditors? o Many bankruptcy statutes have no provision for reorganization of any kind. you might only be able to liquidate and not reorganize. Can set up on bilateral or multilateral basis. which incorporates UNCITRAL Model is not enacted yet. So. • Suppose you manage to file in all the different states where you have assets – problems? o Each country will apply its own bankruptcy laws. Decides who gets to participate in what part of distribution and where assets go – world wide or local. • The 1999 Bankruptcy Act. So. but to other similar corp in same country what would the price be – and that is arms length dealings. But what would corporations report and governments don’t want to share it – they want to protect corps pricing policies. Problem of proof –how to find out what price should be charged. Everyone is losing on this – problem for all governments. Arms – Length Dealings – if Parent was selling not to sub. and it is a US Corporation.
o Usually treating subsidiary as branch by transfer pricing scams – ct pierces Project Financing (think of oil and gas production in Iraq) • Mogul going in to Iraq / Kamchatka Peninsula. o Creditor of subsidiary can’t get parent’s assets o Parent might have debt invested. Don’t want to put this on balance sheet. Pays regardless.mortgage Guarantor o Gas buyers • What does project have to do: o Insurance o Mortgage Appraiser – what’s the gas worth – more than investment o Purchase K b/w project and buyers Project wants “hell or high water clauses” – pay certain amount regardless of whether take gas. scare investors off.• • • Problems of insolvency for the borrow – can you coordinate bankruptcies that span various jurisdiction o Do you make universal o Race to the bottom – grab what can o Allow states to say only our citizens can participate Be aware that if subsidiary is separately chartered that bankruptcy will be an isolated event – won’t necessarily help or hurt parent notwithstanding the loss of investment. Risk and limits on borrowing capacity. 83 . Construction Company – build refinery o Money Bank (partial Owner) – equity. Excuses seller from not delivering Buyer wants – price term • Something regarding governmental regulation changes – cts do this on case by case basis – if gov’t shuts down one plant can get it from other plant. o Parent might have equity in subsid – in which it comes after debt claims Piercing the corporate veil – some cases allow debtors of subsidiary to go after parent’s assets – 20-30 years old and haven’t been replicated – usually unique situation harping back to transfer pricing that is truly egregious. In a sense it is a strict liability clause put in K. . • Force maguere clause – if incorporated allows parties out (not recommended). • Who are the parties to this thing? • Project – separate entity (off books) – debt is project’s not mogul’s o Mogul – sponsor – (parent of the project) – has to get various sponsors b/c can’t afford collateral.
b/c nonrecourse financing and sponsor doesn’t provide collateral only get assets and any equity. • Comfort Letter – states sponsor will stay in business – if it mergers or is bought out need this clause. o Plant + Land – What if plant is not furnished? Mortgage is on the land – who owns land / how do you record it. Creates problem with hell or high water clause – o Especially if you have to pay if no gas comes. If price falls a lot. o Note: price gets better for foreign buyers as you offload risk on to the buyer. but if it is bad then excused – would encourage seller not to deliver. Improvements to the land – is it allowed. Quality or supply problems. Impurities in gas. • Assets of project as collateral o Problem with claiming right to natural resources – not allowed in Russia. • Want sponsor to be part owner – put up enough capital that it will hurt if it fails. goes down. Two groups of financers w/ various banks associated • Start-up loans • Operational loans If can’t raise money from banks – can do private placement of securities – can sell it off to pension funds (ask high interest or equity). Guarantor – what kind • Mogul to pay if project falls – won’t get it.• • • • Impracticability – very hard to sell to court. Bank wants higher pay • Interest rate • Profits • Larger equity Is one bank enough – need lots of banks – b/c of lending limitations. Currency exchange rate – set a floating rate or fixed rate. Put in control. specifications of warranty. Unlikely going to get a warranty. fixed price might be above market. buyer takes risk of demand. • Contract assignments to bank if project fails. 84 . (escalator clause) Relate it to an index tied into market price – which one (in country you are selling it to).
only one merger in 15 years have been knocked down officially. Sct cases hold – can interpret statute. or first to notify debtor. First to file wins. might not veto it. Dispute Resolution • 11. materials or things processed. • Exon – Florio Amendment – (759 supp) President can stop sale for reasons of national security. arbitration.. Appraisal of gas – if not there. b/c of due process What in WI statute gives jurisdiction? • Para 3: def neither lancelot nor Camelot has acted in WI • Para 4(a) – were carried on within this state by or on behalf of the D – did Sony carry out any services for D in state? Need actual repair in WI on any tele. • Mini-trials – (p. o A lot depends on whether US company wants to be taken over or not – this amendment is a barrier to investment entry regarding hostile acts. or etc .S. • Anti-trust laws – which have real teeth and keep price talks b/w competitors off the table.is there a long-arm statute in WI that allows them to get there. Need to find out if there are other customers that have moved to WI and asked for repairs. o There is no limit – barrier to investment – Prof Alvarez o there is a restricted list on Amendment for technology If you are on the restricted list you have to notify CFIUS – committee on Foreign Investment in the US – if low tech company. conciliation. and randomly went to WI – some kind of 85 . Highly discretionary legislation. litigation …. Financial disclosure.0 – intro – different types of DR mechanisms available – negotiation.1158) plethora of different avenues available.. o Business Plan Going into the U. don’t have to pay. • Arthur and his estate – zapped in WI and wants to sue manufacturer – can he do it? o Can WI exercise jurisdiction over Camelot? Look at grant of authority . • SEC – could be a barrier to entry to the US. manufactured by D used in state in ordinary course of trade o Question: is it in ordinary course of trade? Sold in NY. mediation. Limited use. o CFIUS will also look at country of origin and other clients of the acquiring company. but there are certain interpretations not allowed.o Security interest – need to perfect it – by filing it. • Para 4: (b) – products.
but hours shorter less discovery (pretrial shorter) Arbitration limits discovery – hard to see other party’s hand before arbitration No Appeal (post trial shorter) o What about non-binding arbitration – can have it closed or open to later use as evidence. o Which one should the judge use in taking this as case of first impression. 5(a) would get you specific jurisdiction and possibly general jurisdiction. commercial activity going on. what do you advise the judge to do next? Make sure state court ruling won’t conflict with Sct ruling and Constitution – Sct won’t interpret state statute. everyone else says lets use arbitration b/c: Better for reputation of bank. less expensive b/c: rent a judge. • Para 5(a): promise – warranty of service. • B/L – Banco Lago won’t pay -letter of credit o Informal negotiation and then arbitration or litigation depending on State. o Germany quick courts. o What could we do to persuade Banco it wants arbitration – threaten to sue in Spain – nope. but does c/a arise out of that promise? Can stretch it if friendly judge. o Why are we worried about getting jurisdiction over Lancelot? WI and Lancelot and Camelot • US company doesn’t have any assets – pierce the veil? All foreign to WI – DE. Easy to get jurisdiction if drop last words – once talking about if used in state in ord course of trade – used by consumer or used in some commercial sale. Canadian – so. Note cases on 1187 – read that again – 86 . o Can Lancelot call Banco Lago and say lets go to arbitration? Need consent – voluntary arrangement. Could stretch any of the three to get jurisdiction – but more restrictive reason would not allow it. • DP limitation is mainly interpretation by local judges. Promise to repair. like retail or distribution. not to appear litigious b/c not public. question is are you doing business in WI – General jurisdiction. What about threat to sue in US? Would US court take jurisdiction – Mass ct? Has Banco purposefully availed itself and is it fair? • Banco issuing letter of credit to Mass citizen.
how are bd directors rotated. To prevent fraud and injustice o Ct looking at whether financial dependence. o Won’t issuing bank claim didn’t avail – benef came to me. • Second case just an advising bank – doesn’t pay or confirm or issue – just says we have message from out of state bank that says you have the following rights – not an agent. • 87 . then piercing the corporate veil becomes easy – treating it like a branch. employee decisions. accounting practices – dominant ownership. What’s the difference? • First case – issuing bank. just a messenger. Argument not a slam dunk and might be a DP problem. In letter of credit cases you have two banks – one that has jurisdiction and one that doesn’t fall into it. marketing decisions – if Lancelot just a warehouse that takes orders from Camelot. Bd of directors – mid-level directors from Camelot – might not be enough to make it separate – marketing decisions. Discovery is sometimes helpful French Gov’t . o Don’t know why don’t want to pay – you want to know why quickly.fabrique wants to sue lancelot and Camelot to get to funds. o Can we pierce the veil? Alter ego – separate bd. Can say think Mass ct will have jurisdiction – look at highland bank case? • Why might not want arbitration in case? o Lancelot might want to join the buyer as a 3rd party. Is it separately organized. operational issues.
You would lose control of case and State would be able to settle it as they want. • Don’t always want arbitration – banks prefer it.1 – choice of law.2 ties it up – saying unless idiot always have a choice of law clause and a choice of forum clause. Same as 4. German court would say lets use German law. ownership (common). Can get State Dept to support your claim. it will likely go to court. • 11. 17 – if one or more is EU state and chose forum then that forum has exclusive jurisdiction. financial support sub gets from parent. Depends on court. meet practices parties have established. More than one state can be reasonable related Choice of Forum o German Ct would use the Brussels Convention Art. b/c repeat clients – but if 3rd party involved issues. • Fabrique Breton issues: o Can you pierce the corp veil – sue Camelot in Mass. Also make sure forum and law are the same. common form for transaction 88 • .1 – litigation about jurisdiction is very messy and unpredictable. o If ct will pierce. 14 and 15. 3 – K governed by law chosen by the parties. o Use of arbitration is preferred by most business on idea that it is a way to get dispute settled quickly.04-22-03 Dispute Resolution – various techniques • WI – statute can be interpreted in myriad manners – DP considerations • Jurisdiction basis – letter of credit issuing or confirming – never been challenged on DP grounds. breadth of jurisdiction – is it exclusive or not.1 -. Depends on facts of how corp is managed. o Take from 11. • This rationale changes if the continuation of the business is on the line – if business is at risk of being bankrupt.Choice of law clause o Rome Convention (EEC) Art. Control over marketing – is it independent. operational factors including bd of directors employee use. then Camelot will want to raise jurisdictional issues o International tribunals and foreign tribunals Not taking this to the ICJ – only for states. Foreign ct will ignore US ct judgment – p 1198 – French Civil code Art. Choice of law and choice of forum issues are super messy and long litigation. o 11. but not likely to get much done there. • Reasonable relation – amorphous. o What if go to an American ct – Look at UCC – 1-105 – if reasonable relation to state parties can choose that law. out of the way and go back to business. Writing. up to the court.
Neutral forum. • Doesn’t say relationship has to be b/w jurisdiction and parties. but whether transaction bears a reasonable relationship to state. Uphold choice of forum clause – if US ct you look to see who the parties are they can choose the forum – if equal bargaining power? What do you look at if you are an American judge who wanted to retain jurisdiction – mandatory or permissive clause. No reservations on this – German court is bound by treaty law – law of Germany to deny jurisdiction. Note Parties to CISG – not mandatory law – would it govern? Rome Convention doesn’t require relationship to State o US Ct – can we have FR law US/German Sale Contract – UCC 1-1-05 – significant relationship. although court said shall is not necessarily determinative. • “shall” favors mandatory. so ok. Holding company was in control and wants to have same law to define uniform practices in contracting. US company to Germany and chosen FR Law. • Foreign law must be pleaded and proven as a matter of fact – experts saying it goes both ways. 1 is being rewritten – it will likely drop the reasonable relationship requirement and say instead if domestic transaction can choose law of any state and international can choose the law of any nation. • Choice of Forum o Germany – Brussels Convention – Art. Acceptable. it is unlikely will be shot down by Sct. Note: art. Upheld as long as not considered mandatory law? 89 . Doesn’t seem to have limitations – if consumer case may get into trouble – not contract of adhesion. 17 – can you choose a forum not related to the transaction. – if ct decides to take jurisdiction. US ct will try to avoid foreign law – best argument is to say the UCC comment – or the fact that money goes to France or France – real party in interest. • Better to say exclusive. Wouldn’t work in Germany o US Court – Sct decision – court can decide its own jurisdiction. German subsidiary of French Holding company. o Questions: what is a significant relationship – and exclusivity Sale K 2: • Choice of Law o German Ct – Rome Convention – K governed by law chosen by parties. Caldas.
Criminal laws. and under skyreefer (1221) and 1222-23 Sct has ruled COGSA issues have to go to arbitration – ousts US cts from jurisdiction – Can they get ousted in cases involving clauses that select foreign court tribunal – we don’t know yet. Applies if transaction doesn’t have relation to foreign state. the law would be useless. Just a gap filler not mandatory law. Cannot contract out of letters of credit and fraud. Arbitration clauses are to be upheld and since then you have the NY Convention p. SEC. Cannot contract out of Antitrust issues. If substantive rights are abrogated then US court won’t allow foreign court to have jurisdiction of forum. Mandatory rules in convention – Art. because it can be contracted around in Art. • Almost everyone says no. Mandatory.Is CISG mandatory law – no.…considering whether to give effect to these mandatory rules. o Is there mandatory law involved – warranties. 6 in whole or part. regard to nature and purpose. o Number 2 – cts of England – Rome Convention – choice of law. 47 and throughout the world Convention Language that says arbitration clause must be upheld. o Nothing in Bremen – read cases on 1220 that summarize that if US mandatory law. US mandatory forum. Applying American Law would hurt UK Carrier? What if US shipper sues in US court and choice of forum says go to cts of London: • Depends on substantive rights. 7 – effect may be given to rules of law of another country. • Problem 3 – choice of arbitration clauses –Fed Arbitration Act – appendix to the document 2. Cannot contract out of securities regulations. 7(1) . • Carrier contract – B/L is governed by COGSA. Page 49 in supp. b/c carrier can’t disclaim all liability – minimum liability – if allow contractors to K out of it. Ct must deny jurisdiction. Art. o Must it deny jurisdiction both for gap filling law and also mandatory laws? Clear that anti-trust. Choice of law – if before a FR ct and have claim that relates to COGSA – Rome Convention – court would have to apply COGSA if US mandatory law. o Choice of law clause will not let you contract of US anti-trust or COGSA law. – Export control laws. o Do you send this to arbitration is by treaty law fairly well stated. 90 • . COGSA o COGSA mandatory.
o Bonny v. which is not a US requirement to succeed on cause. • 91 . o Even though case sent to England – ct knew they were costing US party many of its issues. but if first prove bad faith. Bramen – foreign clauses are to be adhered to for gap fillers. Society of Loydds – still have issues abroad that can raise o British statute in 1226 – says yes can raise them.• Skyreefer – dictum to say no difference b/w arbitration clause and choice of law clause. o NY convention arbitration clauses adhered to for gap fillers and mandatory law o Foreign forum selection clauses – mandatory law? Not sure. O’Connor.