The International Legal
Environment
Playing By The Rules
Bases for Legal Systems
• Three heritages form the bases for the majority of the legal
systems of the world.
- Common law
- Civil or code law
- Islamic law
• Even though a country’s laws may be based on the doctrine of one
of the four legal systems its individual interpretation may vary
significantly.
• One measure of the importance of the legal system in each country
is the number of attorneys per capita.
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Lawyers per 100,000 People in Selected
Countries
• Insert Exhibit 7.1
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Common and Code Law
• Common law seeks “interpretation through the past decisions of
higher courts which interpret the same statues or apply established
and customary principles of law to a similar set of facts.”
• Under code law the legal system is generally divided into three
separate codes:
- Commercial
- Civil
- Criminal
• Common law is recognized as not being all-inclusive, whereas
code law is considered complete as a result of catchall provisions
found in most code-law systems.
• Under common law, ownership is established by use; under code
law, ownership is determined by registration.
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Islamic Law
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Marxist-Socialist Tenets
• As socialist countries become more directly involved in trade with
non-Marxist countries it has been necessary to develop a
commercial legal system that permits them to engage in active
international commerce.
• The pattern for development varies among the countries because
each has a different background and each is at a different stage in
its development of a market-driven economy.
• Under the premise that law is strictly subordinate to prevailing
economic conditions, such fundamental propositions as private
ownership, contracts, due process, and other legal mechanisms
have had to be developed.
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International Dispute Resolution: Conciliation
• Conciliation is a nonbinding agreement between parties
to resolve disputes by asking a third party to mediate
differences.
• Conciliation sessions are private and all conferences
between parties and the mediator are confidential.
• Although conciliation may be the friendly route to
resolving disputes it is not legally binding; thus an
arbitration clause should be included in all conciliation
agreements.
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International Dispute Resolution: Arbitration
• Most arbitration is conducted under the auspices of one of the
more formal domestic and international arbitration groups
organized specifically to facilitate the resolution of commercial
disputes.
• The popularity of arbitration has led to a proliferation of arbitral
centers established by countries, organizations, and institutions.
• Contracts and other legal documents should include clauses
specifying the use of arbitration to settle disputes.
• Arbitration clauses require agreement on two counts:
- The parties agree to arbitrate in the case of a dispute according to the
rules and procedures of some arbitration tribunal.
- They agree to abide by the awards resulting from the arbitration.
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International Dispute Resolution: Litigation
• The best advice is to seek settlement.
• Deterrents to litigation:
- Fear of creating a poor image and damaging public
relations.
- Fear of unfair treatment in a foreign court.
- Difficulty in collecting a judgment that may otherwise
have been collected in a mutually agreed settlement
through arbitration.
- The relatively high cost and time required when bringing
legal action.
- Loss of confidentiality.
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Counterfeiting and Piracy
• Lost sales from the unauthorized use of U.S. patents,
trademarks, and copyrights amount to more than $100 billion
annually.
• The piracy industry has grown so sophisticated that many
counterfeit goods are almost impossible to distinguish from
the original.
• Recent research implies that for companies like Microsoft,
some level of piracy actually can serve the company.
• A pharmaceutical manufacturers association that 2% of the
$327 billion worth of drugs sold each year are counterfeit.
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Piracy Rates for Computer Software, Top and
Bottom 20
• Insert Exhibit 7.2
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Prior Use versus Registration
• Prior Use – whoever can establish first use is typically
considered the rightful owner.
• Registration – the first to register a trademark or other
property right is considered the rightful owner.
• A company that believes it can always establish
ownership in another country by proving it used the
trademark or brand name first is wrong and risks the loss
of these assets.
• It is best to protect intellectual property rights through
registration.
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International Conventions
• Three major international conventions:
- The Paris Convention for the Protection of Industrial Property
- The Inter-American Convention
- The Madrid Arrangement
• World Intellectual Property Organization (WIPO)
- Responsible for the promotion of the protection of intellectual
property and for the administration of the various multilateral
treaties through cooperation among its member states.
•
•
•
•
Patent Cooperation Treaty (PCT)
European Patent Convention (EPC)
The Trade-Related Aspects of Intellectual Property Rights (TRIPs)
Mr. McDonalds in Venezuela
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Marketing Laws
How Drugs are Marketed in
Mexico versus the United States
– No Prescription Needed in
Mexico
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Green Marketing Legislation
Greenpeace
Protester in Hong
Kong
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Green Marketing Legislation
• Green marketing laws focus on environmentally friendly products
and on product packaging and its effect on solid waste
management.
• Germany – stringent laws regarding management and recycling of
packaging waste
- Phase one – all transport packaging waste be received back by
manufacturer for re-cycling
- Phase two – all manufacturers, distributors and retailers to accept
returned packaging including corrugated boxes, blister packs, antitheft packaging, vending packaging and promotional packaging
- Phase three- all packaging, cans, plastic bottles, Styrofoam and
cardboard cereal boxes
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Antitrust Legislation
Antitrust
- With the exception of the U.S., antitrust laws were either nonexistent or
not enforced in most of the world’s countries for the better part of the
20th century.
• The U.S. intervenes when non-U.S. companies attempt to
acquire American companies.
• At times, companies are subject to antitrust charges in more
than one country.
- Nestle’s proposed acquisition of Dreyer’s Grand Ice Cream
• Competitive methods illegal in the U.S. can be legal in another
country
- Tony Romas in Mexico only sell Modelo beer.
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U.S. Laws Apply in Host Countries
• Foreign Corrupt Practices Act
- Makes it illegal for companies to pay bribes to foreign officials,
candidates, or political parties.
• National security laws
- Prohibit a U.S. company, its subsidiaries, joint ventures, or licenses
to sell controlled products without special permission from the U.S.
government.
• Antitrust laws
- Antitrust enforcement has two purposes in international commerce.
• Protect American consumers
• Protect American export and investment opportunities against any
privately imposed restrictions.
- The question of jurisdiction and how U.S. antitrust laws apply
• Sections I and II of the Sherman Act
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U.S. Laws Apply in Host Countries (continued)
• Antiboycott law
- U.S. companies are forbidden to participate in any unauthorized
foreign boycott.
- Required to report any request to cooperate with a boycott.
• Extraterritoriality of U.S. laws
- Especially important to U.S. multinational firms
- Foreign governments fear the influence of American government
policy on their economies through U.S. multinationals.
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Cyberlaw: Unresolved Issues
• Domain names and cybersquatters
- Cybersquatters (CSQs) buy and register descriptive nouns,
geographic names, and names of ethnic groups and pharmaceutical
substances, and other similar descriptors and hold them until they
can be sold at an inflated price.
• Anti-Cyber Squatting Consumer Protection Act (ACPA)
• Nominet Dispute Resolution Service (DRS)
• World Intellectual Property Organization (WIPO) established a
structure through the Internet Corporation for Assigned Names and
Numbers (ICANN)
- Uniform Dispute Resolution Policy (UDRP)
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Cyberlaw: Unresolved Issues
Microsoft and Censorship in China
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Cyberlaw: Unresolved Issues (continued)
• Taxes
- In the past, a company was deemed to have a taxable presence in a
country if it had a permanent establishment there.
- The EU Commission
• Proposes value-added tax (VAT)
• Jurisdiction of disputes and validity of contracts
- The EU Commission has adopted an e-commerce directive that will
permit online retailers to trade by the rules of their home country
unless the seller had enticed or approached the consumer by way of
advertising.
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