Legal environment of business: an introduction

Why study the legal environment of business?

1. To become aware of the rules of doing business.

2. To familiarize yourself with the legal limits on business freedom.

3. To form an alertness to potential misconduct of competitors.

4. To be able to communicate with your lawyer.

5. To become aware of the complexity and risks of business decisions.

6. To acquire a heightened awareness of business ethics.

The “Big Picture”
 Some areas of the law
(in civil law countries)
•Constitutional law • Business law

• Business contracts
•Structure of the State
• Corporations, M&A
•Fundamental rights
• Banking, capital markets
•Civil law
• Intellectual property: patents, trademarks, etc
•Contracts
• Consumer law

•Torts
• Bankruptcy / Insolvency

•Land law, mortgages, etc • Anti-trust

•Family law • Employment law: contracts, dismissals, unions, etc

•Wills & Successions • Tax law

•Criminal law: offenses & punishments • Dispute resolution law: litigation, arbitration...

•Administrative law: regulation • International law: relationships between states

• Specific risks in International Trade

• Transport-related risk

• Credit or Non-payment risk

• Quality of goods risk

• Exchange rate risk

• Legal or Political risks: changes in law, wars, strikes, disputes,

expropriations, etc
Political / Legal Risk
 Forms of Host Country Controls
• Expropriation
• Taking of private property with compensation

• Confiscation
• Taking of private property without compensation

• Domestication
• To gain control over foreign investment through demanding
partial transfer of ownership and imposed regulations
• Raise tax rates
• Price controls
Most numerous
types of litigation
in the US and UK
(2004)

Source: Financial Times,

10 October 2005
 Schools of Jurisprudence
SCHOOL SOME CHARACTERISTICS

Natural Law Source of law is absolute (Nature, God, or Reason).

Positivist Source of law is the sovereign.

Sociological Source of law is contemporary community opinion and customs.

Source of law is actors in the legal system and scientific analysis

American Realist
of their actions.
Source of law is a cluster of legal and nonlegal beliefs that must
Critical Legal Theory
be critiqued to bring about social and political change.
Jurisprudence reflects a male-dominated executive, legislative,
Feminist and judicial system in which women’s perspectives are ignored
and women are victimized.
Applies classical economic theory and empirical methods to all
Law and Economics areas of law in order to arrive at decisions.
© 2006 Prentice Hall Ch 2-11
 Sources of law
(where norms come from)

• International law

• Agreements between States: international treaties

• Customary international law

• Norms issued by International organisations (e.g. EU directives & regulations)

• Constitution

• Legislature: statutes

• Government / Administrative agencies: regulations

• Judiciary: case law (common law countries)

• Customary law / Legal principles

 Branches of the Government / State
Executive – carries out government functions, including finances,
national security and social welfare.

Legislative – law-making structures and processes; in

democracies, based on a national elected assembly.

Judicial – through the court system, officials administer justice

and adjudicate in disputes for both individuals and organizations.

* Two constitutional principles underpin relations between the

three branches:
• Separation of powers – each is independent, but…
• Checks and balances prevent domination by one branch.
 SOME LEGAL TRADITIONS OF THE WORLD

• “Civil law” countries: Continental Europe, Latin America, French-speaking

Africa, Japan, Russia, China (¿?)

• “Common law” countries:

England, the Commonwealth, USA, English
speaking Africa

• “Mixed” Jurisdictions: Scotland, South Africa…

• Sharia countries: Northern Africa, Middle East, South East Asia…

 Classifications of Law
Statutory Law - made by the legislative branch of government

Case Law - results from judicial interpretations of constitutions and statutes

Criminal Law - composed of statutes prohibiting wrongful conduct ranging

from murder to fraud

Civil Law - governs litigation between two private parties

Public Law - deals with the relationship of government to individual citizens

Private Law - deals with the enforcement of private duties

Substantive law – defines rights and obligations of individuals

Procedural law – establishes processes for settling disputes

• Hierarchy of sources of law in the Republic of Kazakhstan
(art. 4 LNLA)

• The Constitution

• Laws introducing amendments and additions to the Constitution

• Constitutional laws and decrees of the President having the force of a constitutional law

• Codes

• Laws and decrees of the President having the force of a law

• Resolutions of the Parliament and its chambers

• Decrees of the President

• Resolutions of the Government

• Orders of Ministers and other heads of central state organs

• Acts of local representative and executive bodies

• Codes of the Republic of Kazakhstan

• Budget code
• Civil code
• Civil Procedure code
• Ecological code
• Water code
• Land code
• Forest code
• Tax code
• Customs code
• Labour code
• Criminal-executive code
• Criminal code
• Code on Administrative offenses
• Criminal Procedure code
• Code on the People´s Health and the Health Care System
 Finding the law

• All normative acts of the Republic of Kazakhstan must be published

• Parliament´s Bulletin

• Corpus of Acts of the President and the Government

• Corpus of Acts of the Central Executive and other Central State Bodies

• Regulatory Acts of the National Bank of the Republic of KZ

• Bulletin of International Treaties of the Republic of KZ

• Information System Paragraph (Yurist)

• Internet portal Zakon

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