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Table of Contents
Section 1 – The Regulatory Environment .............................................................................................................. 4
Chapter 1 - The Regulatory Environment ................................................................................................................. 4
Chapter 2 - The Netherlands .................................................................................................................................... 7
Chapter 3 - The European Union ............................................................................................................................ 11
Section 2 – Property, contracts and marketing ................................................................................................... 17
Chapter 4 - Property Law ....................................................................................................................................... 17
Chapter 5 - Intellectual property ............................................................................................................................ 21
Chapter 6 - Contracts ............................................................................................................................................. 27
Chapter 7 - Legal forms .......................................................................................................................................... 30
Chapter 8 - International Commercial Contracts ................................................................................................... 33
Chapter 9 - Marketing ............................................................................................................................................ 38
Section 3 – Regulatory Services and Providers.................................................................................................... 43
Chapter 10 - Regulatory Services ........................................................................................................................... 43
Section 1 – The Regulatory Environment
Chapter 1 - The Regulatory Environment
1.1 Introduction
1.1.2. Law
• Constitution = set of fundamental principles or established practices that define a state’s
governance.
• A jurisdiction denotes a territory (country) within which a particular legal system applies.
A country’s legal system can subdivide law into branches of law:
• Private law - relationships between individuals
• Public law - regulates the use of powers by which an administration and other public authorities
affect companies and people.
Business law is an umbrella that covers all that is relevant from private and public law to business.
1.1.5. Legal System
Constitution is a written document or unwritten set of principles that outlines the fundamental values
and organizational structure of the State.
To function properly, a State requires three functions that operate independently. The three powers
represent the Trias Politica.
• Executive Power – Administers the country, and part of that is identifying whether rules must
be changed or created to realize its objectives.
• Legislative Power – Creating and Adapting laws.
o Right of initiative – right to propose new legislation.
• Judiciary Power.
1.1.6. Business System
• A market encompasses all potential buyers of a specific type of offering. The companies that
have comparable offerings constitute an industry.
• Core elements of corporate strategy:
o Products
o Markets
o Competitive advantage.
1.2 External Environment
For managers, the regulatory environment is relevant for entering new markets and identifying changes
in existing markets. A manager needs information about an external regulatory environment in four
strategy-related situations:
1. To develop and evaluate new products or services;
2. To evaluate and select new markets;
3. To decide on the market entry strategy for a new market/country;
4. To formulate plans for the markets in which the company already operates.
1.2.2. / 1.2.3. / 1.2.4.
The regulatory environment consists of:
• Hard law: laws enacted by legislators, regulations based on acts, and the decisions from court.
There rules are binding to all legal subjects in a state’s jurisdiction.
o Treaty = agreement between two States (bilateral) or more (multilateral).
Become binding by ratification = entering into a Treaty of a country by the
signing of the body authorizes there to.
o RTA = Regional Trade Agreements.
Soft law: co-regulation by creating rules by cooperation between private actors. These rules are
not binding but because of their origin considered equally important as hard law.
Self-regulation
o A company and an industry can develop rules to which compliance is voluntarily. Selfregulation encompasses the rules, processes and institutions created by private
organizations, such as companies and industry organizations, to which these submit
voluntarily.
o Internal – company’s self-imposed rules
o External – industry’s rules

•
•
1.2.6. Solutions
Systems offer have two generic options to resolve disputes: litigation in a regular court or out-of-court
method. Latter are called alternative dispute resolutions (ADR) methods. It offers multiple benefits
over litigation in court.
1.2.7. Services
• Advocacy = activity by an individual or group that aims to influence decisions within political,
economic, and social systems and institutions.
• Lobbying = about managing interests by influencing political and regulatory processes and
outcomes.
1.3 Internal Environment
The analysis of the internal legal environment or legal function focusses on the five Cs:
• Contribution
• Costs
• Compliance
• Corporate Governance = involves the procedures and processes that direct and control an
organization.
• Competencies.
1.3.2. Contribution
We now focus on linking regulation and strategic management, which covers integration of:
• Situation analysis: where is the business now
• Developing options & Choice of strategy: identifying and deciding between options
• Strategy implementation & control: planning actions and managing change
1.3.3. Risk Management
• Legal risk / threat = the likelihood that a firm will suffer financial or other damage from a cause
that has its basis in regulation.
• Table 1.6 (book) provides an overview of legal risks
• Supplementary law = refers to the regulations which legal systems have available in case legal
subjects have not used the opportunity to regulate differently.
1.4 Regulatory Analysis
Companies need to understand the environment in which they operate now, and in the future. A
situational analysis is an analysis of a company’s internal and external environment. The findings
constitute ‘strategic input’ for decision making.
> Table 1.7. defines the elements of the SWOT, the abbreviation for Strengths, Weaknesses,
Opportunities, and Threats. See the Book.
1.5 Legal Traditions
A legal family is a group of legal systems that are related; usually by a common historical basis. The
three main families are ‘common law’, ‘civil law’, and ‘religion based law’. Within one country
different legal traditions can co-exist (mixed legal system).
1.5.2. Civil law
Civil Law is the tradition has its origin in Roman law. Their system formed the basis for three
systematically organized law books (codes): French Civil, Commercial and Crime Codes. In the Civil Law
tradition, a legislature creates rules which are documented, codified in books, codes, In a specific
structure. These rules provide general principles that must be interpreted and applied by courts.
The main characteristics of Civil law systems are:
• Legal rules are codified (written down) in a structured manner in specific books;
• Private law rules are generally not too detailed but ‘open, e.g., without delay;
• Open norms allow judges to take circumstances into account;
• Judges are independent; other judge’s (previous) rulings do not bind them.
1.5.3. Common Law
This legal tradition is based on the decisions of courts by applying society’s customs and usage. It is
based on courts creating rules by deciding cases. The rules appear for the most part in reported
judgements. They seem to be more specific and detailed, as they originate from a specific case.
The three main characteristics of the Common law traditions are:
• Courts’ decisions create law; so this ‘case law’ is the main source of law;
• A courts’ ruling applies in similar cases; the precedent or stare decisis principle;
• Legislation complements case law, and judges are reluctant to apply ‘open’ legislation.
1.5.4. Religious law
• Hindu Law: Rules mainly relate to family law and succession.
• Islamic law: a set of rules for life instead of typical legal rules. The rules must be
interpreted to find answers for specific answers for specific situations.
• Jewish law: Israel’s legal system combines the three traditions.
Chapter 2 - The Netherlands
2.1 Introduction
2.1.1 The state
The Kingdom of the Netherlands consists of: The Netherlands, Aruba, Curacao and Saint Maarten.
Translations of the French codes constituted the first Dutch codes of which some parts still form part
of positive law; the total of effective legal rules.
The Netherlands is an unitary state that qualifies as a parliamentary democratic constitutional
monarchy. The Monarch (Willem Alexander) together with the Ministers make up the Government.
They have both executive and legislative power. At each level, the administrative power is controlled
by a directly elected body (exception of the Tweede Kamer).
> See table 2.1 for the total structure.
> See table 2.2 for the Trias Politica of the Netherlands.
2.1.2 Legal system
The Dutch legal system belongs to the civil law family. In practice, not all private law is however in
the Civil Code. The Cicil code consists of ten books.
2.1.3 Business Environment
The Netherlands is an attractive location for international companies, among others because of the
well-developed infrastructure in combination with a professional logistics industry.
Generally companies will be the most interested in the opportunities to obtain and enforce
property and intellectual property rights (trademarks, patents). Taxes are levied at national,
provincial and municipal level. An APA (Advance Pricing Agreement) is an agreement on the price
that the Dutch entity pays to or receives from a foreign group company for receiving or delivering
services or goods. An ATR (Advance Tax Ruling) is an agreement on the amount of future taxes to
be paid. Companies are advised to benchmark competitors’ codes of conduct.
2.2. Specific
2.2.1. Introduction
The sources of law are the places where the substantive and formal legal rules are. In Dutch
law, as in most Civil law systems, the sources are:
• Treaties, legislation and regulations;
• Case law (jurisprudence or courts’ rulings;
• Customary law and general principles of law (unwritten law).
A treaty is a binding arrangement concluded in writing between States or between States and
international organizations (bilateral or multilateral). The Netherlands cannot independently
establish trade barriers as it is bound to apply the EU’s Common Customs Tariff. An extensive
network of bilateral investment treaties protect investors based in the Netherlands against the
financial damages of nationalization and other governmental measures in other countries.
Furthermore, Dutch legal entities are hardly taxed.
2.2.2. Legislative Process
See figure 2.4. for the complete legislative process.
2.2.3. Sources of law
The Dutch Civil Code (DCC) consists of ten Books for specific areas of law:
1. Persons and Family;
2. Legal Persons;
3.
4.
5.
6.
7.
8.
9.
10.
Patrimonial law;
Inheritance;
Real Rights;
Law of obligations;
Specific Contracts (7A – Specific Contracts Continued)
Transport & Traffic
/
International Private Law.
Book 1 – 2  cover law of persons
Book 3 – 8  Cover patrimonial law as they outline the rules of property law and the law of obligations
Book 9  stopped
The Dutch Civil Code reflects the codification ideal of civil law systems (see table 2.4 for the books).
Some rules are merely default rules, supplementary law, in the sense that they apply only if the legal
subjects involved do not provide for a different approach. Other rules are mandatory law, leaving the
legal subjects or parties no other option than to conform to them.
The rulings of courts are collectively referred to as case law or jurisprudence. Judges have to interpret
the law before being able to apply the rule. Open or vague norms are words which have no precise
meaning, but which are given a meaning by interpreting them within the context of the circumstances
and people involved. Contrary to common law, Dutch judges are not bound by decisions in earlier cases,
they always decide independently. An appeal or judicial review refers to higher court’s review of a
lower court’s factual or legal findings. The system of prejudicial questions is the opportunity for lower
courts to ask questions about the interpretation of rules to the Supreme court.
2.3 Soft Law
The Dutch Government makes recommendations on for example the transition to sustainable energy,
the circular economy, corporate social responsibility, remuneration of executives and innovation.
2.4 Self-regulation
The consensus is an essential component of the political and legislative culture. This ‘polder model’
approach reflects in the preferences for self-regulation over acts of parliament as the method to
influence companies’ behavior.
2.5 Supervision
The Netherlands is typical known for its extensive use of supervisory authorities, which supervise and
enforce compliance in a certain market or industry. They have powers to investigate companies, forcing
them to disclose information and punishing them.
2.6 Solutions
2.6.1. Courts
The legal system of the Netherlands encompasses a juridical system with regular and specialized courts
and alternative dispute resolution opportunities.
The eleven districts are grouped into four Court of Appeals areas (Hague & Amsterdam, ArnhemLeeuwarden, ‘s Hertogenbosch). The Supreme Court is responsible for hearing appeals in cassation;
whether a lower court observed proper application of the law in reaching its decision. The Council
acts as 1) safeguard for the quality of the judiciary system by promoting the uniform application of
law and 2) spokesperson for the judiciary and supporting courts in their operational tasks.
Summary proceedings are available for cases that require prompt action. The sub-district court is
competent in first instance for claims below €25000. The Supreme Court in the Hague is a cassation
court; it reviews the application of the law but does not review the facts of the case.
A bar association is an organization of lawyers which regulates and defends the interest of lawyers.
The Netherlands has four specialized courts that offer specific expertise to businesses:
1. Companies court to conclude on mismanagement at the request of shareholders;
2. District Court the Hague for patent, trademark and design right disputes;
3. District Court Rotterdam for shipping disputes; proceeding in English is optional;
4. The Netherlands Commercial Court (NCC) for commercial disputes in English;
2.6.2 Arbitration
Arbitration = the resolution of a conflict between legal subjects out-of-court by arbitrators.
By arbitration, the parties agree that the arbitrators’ decision (arbitral award) is binding.
2.8 Employment law
2.8.1. Introduction
Dutch Employment law is comprehensive, complicated and in a state of constant change. Dutch law
recognizes individual and collective labor agreements (CAOs)
CAOs are collective agreements between employers and trade unions regarding wages and other
conditions of employment.
2.8.2. Employment contracts
Dealing with complexities of national employment laws is one of the unavoidable management
challenges of most businesses.
Under Dutch law, an employment contract meets three criteria:
1. Subordinates, the worker is subject to instructions;
2. Payment;
3. Contracted person personally performs work for some time.
Employment contracts can have a definite term, which means the contract is valid during the
agreement upon time. Other words: temporary or fixed term contract. A fixed term contract becomes
permanent contracts if subsequent agreements exceed a two-year period or when the parties conclude
more than three fixed-term contracts. A contract for indefinite term has no expiration date.
A non-competition clause is acceptable for a permanent contract. Under this clause one party (usually
an employee) agrees not to enter into or start a similar profession or trade in competition against
another party.
A specific form of an employment contract is the contract between a temp agency and a temp worker.
The law refers to this as a secondment agreement (or temporary employment agency agreement).
A construction agreement is an agreement under which one of the parties (the constructor) engages
himself towards the other party (the principal) to make and deliver a tangible construction on another
basis than an employment agreement, in exchange for a price to be paid in money by the principal art.
2.8.3 Termination
An employee can terminate an employment contract by notification whereby he or she must respect
the contractual or statutory notice term.
For termination by notification:
• An employer requires the consent of the employee, or;
• Approval by the Insitute for Employee insurance (UWV), or;
• Request to cantonal court to dissolve the employment contract.
For the route by the UWV and the Cantonal Court a reasonable ground is required. The requirements
concerning the reasonable ground for termination notification do not apply during the probationary
period. Employer and employee also have the option to terminate by notification in case of an urgent
cause.
Employer and employee can also use the opportunity of termination by agreement. This termination by
mutual consent requires a written form.
Dutch law uses the concept of transition compensation to define the amount awarded as a severance
package for employers’ termination by notification or dissolution in court. See the book for the
concrete calculation.
In case of bankruptcy the appointed administrator can terminate individual employment contracts, by
giving notice, without the need for UWV permission.
2.9 Social Security
Social security refers to the system that provides monetary or non-monetary assistance to inhabitants
with an insufficient or no income. The Dutch System has two types of insurances. Employees have an
insurance against unemployment and incapacity to work.
> See table in the book for the Main Social Security Legislation.
Chapter 3 - The European Union
3.1 Introduction
3.1.1. Supranational Environment
Sovereignty means that a country is independent and free from any outside control or authority over
its decisions and policies. Countries can decide to transfer authority to a supranational organization;
created by two or more countries that transfer part of their sovereignty in order to enable the
organization to make decisions or regulate independently (EU). European States became members by
ratifying, formally approving and accepting, the rules of the Treaties (basis of the EU).
Conferral transfers national legislative and judicial powers to a supranational organization.
3.1.2. Forms of Integration
• Commonwealth is an intergovernmental organization of fifty-three countries.
• Economic integration (trade blocs), is a process whereby countries cooperate to either
reduce or eliminate barriers to the free flow of products, services, people or capital.
• Harmonization is bringing national rules closer or creating common rules.
• In a free trade area (FTA) the Member States agree to remove the trade barriers to the free
flow of goods and services.
• In a custom union, the Member States remove trade barriers to the free flow of goods and
services between each other and create a common external trade policy including common
tariffs.
• The EU creates an internal market. It realizes a free flow of goods, services, persons and
capital.
• In an economic Union, Member States integrate their economic policies. This can be
combined with a monetary union, by a common currency.
• A Political Union is the result of a complete economic and political integration of sovereign
nations.
• The World Trade Organization aims to liberalize trade and to resolve trade disputes between
countries. It is an intergovernmental organization and it has no legislative authority.
3.1.3. Historical background
• First step: creation of European Coal and Steel company (1952): six members
• Signed the Treaty establishing the European Economic Community (1957)
• Maastricht Treaty (1992): creation of EU.
• Lisbon Treaty (2009): creating of two new Treaties
o TEU: principles and structure of the supranational organization
o TFEU: How the EU should operate and which competences to use
3.1.4. European Integration
The EEA agreement enables three European Free Trade Associations to participate in the EU’s
internal market. The EU has FTA’s with different countries. It is a custom union with free flow of
goods within the EU Member States and a Common Custom Tariff (CCT); uniform external tariff
applied to products imported into the EU. When entered the EU, provided all important formalities,
these goods are then free circulation.
The Internal market is an area without internal frontiers in which the free movement of goods,
persons, services and capital is ensured. However, the development of a single internal market has
not yet completed. Fiscal discipline of the Euro is strengthened through the balanced budget rule (%
of GDP). EU acts like a political union, however the EU’s foreign Affairs and Security Policy is still
governed by intergovernmental cooperation. So the EU cannot act independently.
3.1.5. Competences
The three principles which govern the use of the EU’s regulatory authorities are:
•
•
•
Principle of conferral: Union shall act only within the limits of the competences conferred
upon it by the member states in the treaties to attain the objectives set out therein. Any
competence not conferred remains with the Member States.
Principle of subsidiarity: The Union shall act only if the objectives of the proposed action
cannot be sufficiently achieved by the Member States
Proportionality: the content and form of Union action shall not exceed what is necessary to
achieve objectives of the Treaties.
3.1.6. Business Dimensions
• The integration processes created the world’s largest internal market with over five hundred
million consumers and removed most tariff and non-tariff barriers to trade.
• The EU is an incredible complex organization with regulatory processes that involve both the
supranational EU and the national level of the Member States, EU legislation can have a
substantial impact on companies and industries.
3.2. Institutions
The EU is not based on the trias politica. Instead, it implemented a governance model in which
institutions can combine different powers and are controlled by each other; checks and balances.
The Court of Auditors has a mere supervisory function of the EU’s budget and spending. The ECB is
the central bank, with a prime aim to maintain purchasing power and price stability.
From a business perspective, the most relevant institutions are:
• European Council;
• European Commission;
• Council of the European Union (Council);
• The European Parliament (EP);
• The Court of Justice of the European Union (CJEU).
3.2.2. European Council (Europese Raad)
• What: The European Council is considered as highest body from a political
perspective. Members: All Heads of State or Government, the President of the
European Commission, the President of the EU and the EU High Representative.
• Meetings (summits): twice a year under a rotating presidency of one of the Member
States.
• Roles: no formal powers but sets out the strategy for the development of the Union
and functions as a forum for settling disagreements between the Member States.
3.2.3. European Commission (Europese Commissie)
• What: Represents general interest of the Union, operates independently of the Member States.
Divided into several departments.
• Members: 28 members, appointed by the Council of the European Union, after approval by the
European Parliament. President is nominated at a European Council meeting and approved by
the European Parliament.
• Meetings: Once a week
• Roles: Commission has the right of initiative (legislative), is the executive arm and thus
responsible for the implementation of the decisions taken by the Parliament and the Council
(executive) and have supervision over the Member States (supervisory). Further, it has a quasijudicial function, the enforcement of European competition law.
3.2.4. Council of the European Union
• What: Main legislative institution
• Members: Presidency rotates every six months among the Member States. Each Member State
has a Permanent Representation in Brussels. When the Council meets, it represents the
Member States, and therefore one minister from each national government (depending on the
subject).
• Meetings: Staff members meet within the Permanent Representative Committee (COREPER).
Council meets only a few times a year, so COREPER prepares most the Council’s work.
• Roles: Council can request the Commission to look into certain issue to develop a legislative
proposal.
3.2.5. European Parliament
• Meetings: Meetings of the whole Parliament, plenary sessions, take place one week per month
in Strasbourg, and in between in Brussels. These sessions are prepared in one of the twenty
committees.
• Roles: Legislative, supervisory and budget functions. It has two roles in the legislative process: 1)
request the Commission to develop a legislative proposal and 2) adopting, with the Council,
legislative proposals. The committees prepare, amend and adopt legislative proposals prior to
the plenary sessions. Furthermore, it supervises the other institutions in many ways. Together
with the Council it decides on the annual budget.
3.2.6. Court of Justice of the European Union (CJ)
The CJ rules on questions of law relating to the interpretation and application of the Treaties. It
consists of a court of first instance, the General Court, the CJ and some specialised tribunals. The
judges and Advocates-General are appointed by common consent of the Member States (6-year
term). Most relevant to business are the preliminary rulings. CJ may be referred cases from a
national court of a Member States, which thus requests an authoritative ruling on the interpretation
of any EU legislation. A National court must seek a preliminary ruling from the CJ where a point of EU
law is ambiguous or otherwise at issue. Preliminary ruling ensures the uniform application of EU law
in all Member States’ courts. Application of European Law is decentralised to national courts.
3.3 Regulatory Environment
3.3.1 Instruments
The (community) acquis (europees recht) is the body of common rights and obligations which bind all
the Member States together. Applicant countries have to accept the Community acquis before they
can join the Union. Applicant will have to transpose the acquis into their national legislation.
The two Treaties are considered as the primary legislation. Secondary legislation consists of the
legislative products with a basis in the Treaties (e.g. Regulations, Directives and decisions).
Recommendations and opinions are not binding and therefore qualified as soft law.
A regulation is a legal act of the EU of which the content becomes immediately enforceable as law in
all members states simultaneously.
3.3.3. Secondary Legislation
Secondary legislation of the EU is found in three types of rules:
• Regulations: directly applicable in all Member States without the approval of the Parliaments of
those States. The date the rules become effective is stated in the Regulation.
• Directives: not immediately binding but require Member States to pass legislation to bring
them into effect by the time of their implementation date. Most imply minimum
harmonisation (states are allowed to keep, or introduce, stricter rules than the Directives do).
Others imply maximum harmonisation (do not allow the Member states to deviate from the
content). The implementation deficit refers to the percentage of Directives which have not
been transposed into national law after the deadline has passed. Confusion can arise when
Countries do not transpose Directives at the same moment.
• Decisions: may be issued by institutions of the EU on a specific case. It is binding to the member
State, individual, or company to which it is addressed.
3.3.4. Soft Law
A recommendation is a non-binding communication of the EU that explains a current policy and
recommends further actions to the member States. An opinion explains the current and future EU
policies and legislation.
3.3.5. Tertiary Sources
The tertiary sources encompass case law, the general principles of EU law, and the rules in international
treaties.
3.3.6. Effects
To understand the application of EU legislation, the following concepts need to be understood:
• Supremacy: principle by which laws of the EU member states that conflict with laws of the EU
must be ignored by national courts.
• Direct effect: no EU legislation can have direct effect unless it is sufficiently clear, precise and
unconditional (right does not depend on the judgment or discretion of an independent body).
There is direct horizontal effect, one individual against another, and direct vertical effect, an
individual against the State.
• Directly Applicable: When Member States’ actions need to transpose the rules into their
national legal systems, they are not directly applicable.
3.3.7. Influence
EU law affects regulatory environment of its Member Stats but also companies and legislators outside
the EU. Companies outside the EU can decide to make their products and processes EU legislation
compliant in order to facilitate an entry and subsequent marketing on the internal market.
3.3.8. Self-Regulation
The EU considers self-regulation and co-regulation as alternatives to legislation with the advantage of
fewer administrative burdens. Self-regulation consists of voluntary agreements of codes of conduct
between private bodies. Co-regulation a desired outcome is set down in law, by the decision on how to
achieve it is left to businesses, social partners, non-governmental organizations.
3.4 Lobbying
In official EU-texts the more neutral words advocacy and interest representation are used to refer to
lobbying. People involved in the legislative process in the EU are increasingly turning to industry
representatives, associations and others in order to obtain comprehensive information on issues before
making a decision. This gives stakeholders the opportunity to provide input in the decision-making
process.
Lobbying = a strategy to influence legislative or other governmental processes.
3.4.2. Lobby Management
Reactive lobbying is the attempt to stop or change a specific legislative development.
Proactive lobbying about for example constructive input, or stimulating and convincing those
involved to initiate a proposal.
3.4.3. Lobbying the EU
The EU has two types of legislative procedures.
• Ordinary: the joint adoption of instruments by the Council of the EU and EP on a proposal
from the Commission (institutional triangle), and;
• Special procedures.
The Commission has the right of initiative. The commission differs from ordinary national
legislators because 1) the multicultural composition and 2) under resources nature.
The development of new legislation can be preceded by two papers: 1) green papers, stimulate
discussion on a topic and regulation option, followed by a 2) white paper, in which the planned
regulatory approach is outlined. The Directorate General (DG) than drafts legislative proposals after
consultations.
The Commission sets out legislative, and some non-legislative, initiatives in roadmaps. An impact
assessment identifies the economic, social and environmental consequences of the initiative. Public
consultations are announced in the roadmaps and offer stakeholders the opportunity to influence
the outcome in the early stage of new legislation.
Corporate capture refers to the influence of big business on legislation. It expresses the concern that
the interest of companies dominates in legislative processes. Organisational charts including names and
positions of staff are on the DG’s website. The drafts of new legislation are very detailed, covering
policy issue based on stakeholders’ opinion, and therefore offer limited opportunities for successful
lobbying in the Commission.
After approved, the final proposal can put on the agenda of a Commission meeting for presentation
and evaluation in order to finalise and adopt the proposal. The draft is then sent to the EP and
Council and forwarded to the Member States’ Parliaments. The role of the parliament was first
limited. It can now use a yellow card, which means the commission should (but not obliged)
reconsider its proposal.
They can be lobbied at by targeting the national ministers who attend the Council meetings in
Brussels. The Council sets out committees to carry out certain preparatory work or studies. These
members however have an official national government status, and are thus not easy to access for
lobbying.
In some cases, the Council or Parliament can enact alone, but is so each Member State has a veto
right: lobbyists can block such a legislative proposal by convincing one of the Member States’
government to oppose the law. If, within 3 months of receiving amendments, the Council approves
all EP amendments, a proposal is adopted. If not, the proposal goes to a conciliation committee, to
reach an agreement between EP and Council on a joint text. Trilogues are behind-closed-doors talks
to find a way out of a deadlock in an ordinary procedure.
The essential lobby targets are the committee’s rapporteur and shadow rapporteur.
• Rapporteur has responsibility for a particular topic on behalf of a committee in the EP.
• Shadow rapporteur negotiate the topic with the rapporteur.
The Ep and Council may entrust the Commission with a legislative act with the power to adopt nonlegislative acts. One example is the delegated act, authorises the Commission to supplement or
amend certain non-essential elements of legislation. The second is implementing acts: certain
European measures require uniform implementation across the EU, a competence of the
Commission.
3.4.4. Monitoring Regulation
Companies and lobbyists will monitor, gather information on, the EU’s regulatory plans and
initiatives, by using websites, database and documents.
Section 2 – Property, contracts and marketing
Chapter 4 - Property Law
4.1 Introduction
Property is anything that as a value and can be sold or exchanged such as land, buildings, smartphones,
machines, copyrights and cryptocurrencies.
Property law defines the moment ownership transfers and risk transfer from a seller to a buyer.
4.2 Functions
• Strategic Input: Property law is primarily national law. Property laws tend to be rather static,
closed systems, so the chance that external regulatory opportunities or threats result from
changes in legislation in limited.
• Create Value: property rights are strong rights because in law the rights are absolute and
exclusive.
o Absolute = owner can uphold his property right agains anybody.
o Exclusive = signals an owner can prohibit anybody from interfering in his property
rights.
• Protect value
o Right to revendicate property;
o A reservation of ownership;
o Establishing security rights.
• Reputation management: Infringements on others’ property rights should be avoided to avoid
negative publicity and the effect of this on the company’s reputation.
• Risk management: The main source of risk for companies within the setting of property law are
the internal risk of liability for loss or damage of goods sold and, the external risk of changes in
property laws. There are different combinations which result in four systems for the transfer of
ownership:
o Consensual: ownership in principle passes at the moment the agreement originates
o Traditio: Delivery of goods is requirement for ownership to pass
o Abstract system: Transfer of ownership remains unaffected in case the contracts is or
becomes invalid.
o Causal system: a valid agreement is a prerequisite for the transfer.
In Islamic law, the property of goods ordinarily passes to the buyer as soon as the contract
originates from an offer and it acceptance.
Reservation of ownership: making the transfer of ownership of the product a company is
selling subject to payment, with the possibility to demand return of the products.
4.3 Dutch Property Law
Property law and the law of obligations together constitute patrimonial law. The distinctions
between the types of property rights are specifically relevant within the context of transfer as the
type of right defines the legal requirements to transfer the property.
The law defines two types of property: things, corporeal objects which can be subjected to human
control, and Patrimonial rights, all rights which represent a value for business.
Dutch law defines ownership as the most comprehensive right on things. Ownership can only be
used for things and is not applicable to intangibles, such as the intellectual property rights. A legal
subject does not own an intangible right but is the ‘holder’/’is entitled to’ the right.
Property rights are absolute rights; they work against anybody (exclusivity). The exclusivity of a right
means that the law enables an owner or holder to ‘exclude’ anybody from the right.
Closed systems means that the only rights that are available are those ones explicitly made available
by the Civil Code. Other rights are personal rights, which are the rights on a specific performance by a
specific legal subject (claim).
4.3.2. Ownership
Ownership is the core of property law and other property rights are derived from it. It is the most
comprehensive rights; freedom to use it, within the limits of the law, as one likes and it includes
ownership of anything generated by the thing or object.
Dutch law defines that ownership of land encompasses for example the building permanently
attached to the soil and the plants and trees connected to the soil. To change this there are two
opportunities: 1) superficies, become owner of buildings/works of vegetation on ground owned by
another legal subject and 2) leasehold, results in the right to use the immovable thing.
4.3.3. Components
Components are relevant for assessing which things are included in the ownership right. The owner
of a thing is the owner of all the components of that thing (principle of unity).
4.3.4. Movable or Immovable
Immovable: land, unextracted minerals, plants growing on land buildings and works sturdily united with
land, either directly of by incorporation with other buildings or works.
Movable: everything that is not immovable.
4.3.5. Registered Property
Registered Property is all property which is subjected to a mandatory entry in the land registry for
the creation and transfer. This can apply to both things and rights. For the transfer, Dutch law
requires delivery by a notarial deed, a document with a legal purpose, followed by its entry in the
registers.
4.3.6. Dismembered rights
Property law enables legal subjects to split parts of their ownership right to create a partial right,
dismembered right. All dismembered rights are absolute and exclusive rights, and remain on a
property even when the ownership is transferred.
• Security rights: can be used in business for risk management purposes.
o Mortgage: On registered property, immovable, ships and airplanes.
o Pledge: For all other property such as stocks, shares, trademarks.
They are both based on the principle that the property on which the right is established
can be sold by the unpaid creditor to whom the right was given.
• Enjoyment rights: Used to create and give other a patrimonial right: for free or in
exchange for a payment.
o Superficies and leasehold (mentioned before)
o Usufruct: give somebody the right to reap the ‘fruits’ of a stock-portfolio or orchard.
o Apartment: right on a specific apartment in a building with several apartments.
4.3.7. Transfer
From a business perspective, the moment at which ownership is transferred is the moment in time at
which value is realized by a seller and the moment at which the buyer has obligation to pay. From a
legislative perspective, the moment at which ownership transfers is defined by rules or by agreement
between parties. From an insurance perspective, a buyer must take out an insurance cover from the
moment he becomes the legal owner of the purchased good. From an accounting perspective, for a
claim to be recorded, it must exist.
Transfer based on a sales contract is a particular title. Examples of under general title are a merger or
inheritance whereby all property is transferred. The law sets specific requirements for different types
of property.
• The owner must be qualified to dispose of the property (right of disposal).
• There must be a valid title, legal relationship that justifies the transfer, such as a contract.
Valid means the title is not void or nullified because it was voidable. Void means the title
never existed.
• Delivery must take place; giving possession.
In Dutch Law, there are several ways for delivery:
• The movable physically moves from seller to buyer
• Symbolic delivery by bringing the buyer in a position in which he or she has control over the
property (e.g. handing over the keys).
• Constitutum Possessorium: a detentor, who is in possession of a thing owned by another
legal subject, holds it on the basis of a legal relationship other than the transfer of
ownership.
• Brevi Manu: When the buyer already holds the property of the seller (e.g. lease). The
property remains where it is but the buyer becomes owner.
• Longa Manu: in situations in which the thin is not in the possession of the seller or buyer, but
by a third party (e.g. warehouse). The third party becomes holder for the new owner.
Goods can be sold during their transportation using a bill of lading, document issued by a carrier to a
shipper, listing and acknowledging receipt of goods for transport and specifying terms of delivery.
4.2.8. Claims
A claim is the right on the obligation of performance that a legal subject has towards another legal
subject. They usually have a value and therefore are patrimonial rights. The delivery requirement can be
met in three ways:
• Claim by name: claim on a known, identifiable creditor which can be embodied in paper. The
delivery requirement is met by a written deed of assignment, transfer of the right by one
legal person to another. Silent assignment is also an option available by law.
• Claim to bearer: the name of the creditor is not fixed. The debtor must simply pay to the
person who shows the paper and demands the payment. The delivery requirement is met by
handing over the paper which embodies the claim.
• Claim to order: must be written and must have the name of the creditor stated on paper,
followed by ‘or to order; it can be transferred for which the delivery requirement is met by
handing over the paper and writing the name of the new creditor.
4.3.9. Financing
• Factoring: selling account receivables to a third party at a discount to improve liquidity.
o Advance factoring: the business owner sells his receivables in the form of invoice to the
factor. The factor collects the full amount from the customer and pays the balance
amount due to the business owner after deducted the charges.
• Securization: is a structured finance technique. The basis is a transfer of assets or claims,
incorporation of a legal entity financed by issuing and selling shares.
4.5. Mergers and Acquisitions
• Acquisition: is the purchase of the controlling interest or ownership of another company.
• Merger: two companies combining and becoming one entity
• Takeover: purchase of a smaller company.
• Restructuring or divestment refers to the process of selling off a company or parts of it. Control
of companies which have the legal form of a limited can be obtained by purchasing all or at
least the majority of their shares by a share purchase agreement.
• A statutory merger is a merger process between two or more companies specifically defined in
the law in which one company continues to legally exist, while all other cease to exist as they
are integrated into the ‘acquiring’ company.
A controlled auction process is a type of sales process where various potential buyers submit
purchase offers for an acquisition target. (see table 4.3. for all the steps).
4.6. International Dimensions
4.6.2. Civil Law
Civil Law Systems distinguish between movable and immovable property. Civil Law systems
differentiate between ownership the right, and possession, being in control of the good, and detentor,
who holds the good under control with permission of the owner.
4.6.3. Common law
Common law-style contracts are the most used types of contracts in international financing practice.
There are differences between Dutch civil law concept and mortgage in common law. The common
law mortgage can also be established on movables. Furthermore, in common law, the owner loses
ownership when establishing a mortgage and becomes owner again after completing all payments of
the loan. In the USA’s, failure to make mortgage payment can result in foreclosure, allowing the
mortgage to declare that the entire mortgage debt is due and must be paid immediately.
Legal title = actual ownership of the property.
The equitable title = enjoyment of the property.
Lien = right to retain the property until payment of debt. Pledge transfers as a security an asset to
the creditor and gives the right to sell the assets if the debtor does perform according to the
agreement. A charge is comparable to pledge with the difference that the asset involved remains
with the debtor. A mortgage consists of the transfer of the ownership of an asset to secure a debt.
4.6.4. Islamic Law
It is forbidden under Sharia Law to pay for receive interest. There are two types of mortgage, both
involving the lender purchasing a property and either selling it to the buyer at a higher price or
renting it. The payments for the lease are used to pay the sukuk holders, which is a sharia compliant
bond. It is not simply a claim to cash flow but an ownership claim
Chapter 5 - Intellectual property
5.1. Introduction
5.1.1. Overview
The right which protect the results of intellectual accomplishments are collectively called intellectual
property rights. IP rights are absolute and exclusive (they exclude others) patrimonial rights on
intangibles. The main IP rights are:
• Patent rights: protect inventions that are new, non-obvious solutions and industrially
applicable.
• Trademark right: can be obtained for signs which function for distinctive identification of
products and services.
• Geographical indications: rights to state that certain agricultural products and foodstuffs
come from a specific region.
• Copyrights: protect creative expressions and usually originate automatically at the moment of
creation of the protected work by the maker.
• Design rights: on a new external appearance of a product.
• Database rights: original databases are protected by copyright and some by database right.
All rights require substantive investment and some call for formal requirements (exception
for copyright and database).
• Trade secret: valuable piece of confidential information that gives an enterprise a competitive
advantage.
IP Rights:
• Create value
o Licensing agreement = contract between an owner of intellectual property rights and
another who obtains to use that right in a specified manner during a specified
period.
o Cross-licensing = agreement between two IP owners to licence-in and pay by
licensing out.
• Protect value
• Strategic input: Information which can serve as strategic input is collected externally and
internally by an IP audit. IP regulation, due to their economic importance, are extensively
regulated international, so an analysis for strategic input at multiple levels needs to be done.
• Reputation management: A settlement refers to a compromise agreement by opposing
parties in a dispute which avoids the need of a public court case. Large settlements for
patent holders have stimulated competitors to protect their revenues from IP rights and
have also stimulated IP owners to litigate IP infringement.
• Risk management: A company’s IPRs are resources which company directors manage on
behalf of stakeholders. This requires directors to create a governance and risk management
system which maximizes value creation with IPs and reduces the risk of value destruction by
improper IP management.
5.2 Interventions - Patents
5.2.1. Principles
Patent rights protect inventions (products or production processes). A patent is an exclusive right,
allowing the holder of the right to forbid someone else from using the invention for commercial
purposes in a particular jurisdiction. It loses it absolute and exclusive character after is expires
(generally 20 years). An intervention is a technical solution to a problem in the form of a product or
process.
Legal systems require three substantive requirements to be met for an invention to be protected:
• Novelty or prior act: before the application, nowhere in the world anything was made public
about the product or process
• Inventive step or non-obviousness: the invention may not be obvious to a professional in the
field of the application
• Industrial application: the product or process can be made or used in business.
5.2.2. Levels of Regulation
Patent rights are national, but it is by treaties and conventions that countries have created additional
patent management opportunities (table 5.1):
• Dutch patent law: The law states substantive requirements for a Dutch patent, however it
does not define what inventions are (but what are not). The patent right can be crosslicensed; parties exchange licenses on each other’s patents.
• European Union: the current EU system of national filing and enforcing patents is
complicated and costly. In 2012, the representatives of the EU member states agreed to
create a unitary patent and a European patent court.
• Europe: The European Patent Convention enables to acquire a national patent in 38
countries via the EPO (offers a centralised procedure for examining patent applications).
• International: The World Intellectual Property Organisation (WIPO) in Geneva is specialised
agency of the UN.
5.2.3. Strategies
Figure 5.1 of the book presents the main strategic issues that international managers face for patents.
5.3 Branding - Trademarks
5.3.1. Principles
Trademarks allow companies to distinguish their goods and services from those of their competitors.
Trademarks and geographical indications (IGs) protect the legal concept distinctive sing; signs
enabling manufacturers of products and services to differentiate their offerings from others in the
market. In general, the substantive requirements are:
• Object of the trademark right must be a sign;
• The sign is capable of representation;
• The sign serves to distinguish a product or service.
Formal requirements are an application, for one or more classes, and subsequent registration in a
trademark register.
Trademark has three types:
1. Individual trademark – distinguishes the goods and services of one particular company from
those of another.
2. Collective trademark – identify the products and services of a group of companies or
members of an association.
3. Certification marks – indicate that goods or services comply with the certification
requirements of a certifying institution or organization, they are a sign of supervised quality.
Trademarks can lose distinctiveness by dilution. Dilution occurs when a brand becomes a generic
word in a language’s vocabulary for a particular class of products.
5.3.2. Levels of Regulation
Trademarks are in principle acquired and enforced on a national basis, but, by treaties, legal
opportunities were created at other levels:
• National: trademarks are to be filed for at a national Trademark or IP office.
• Benelux: The Benelux has a Benelux convention on intellectual property (BCIP). A national
trademark for one of the three countries is not possible. Lack of distinctiveness is the most
common ground for a refusal to register a sign as trademark. Furthermore, the applicants
must indicate one or more classes of goods which the trademark will be used.
• EU: opportunity to obtain a Community Trademark (CTM) by a single direct or indirect
application at the Office for Harmonisation in the International Market (OHIM). The EUs
systems is a dual system; EU and national law co-exist, but are not identical. A CTM confers
on its proprietor exclusive rights. A CTM is dealt with for the whole area of the EU as a
national trade mark registered in the Member State in which the proprietor has his seat or
domicile.
• Geographical indications: a name or sign used on certain products to link them to a specific
geographical location or origin. The protected Designation of Origin is available for a product
that is produced, processes and prepared in a defined area using recognised know-how. A
Protected Geographical Indication can be granted to products whose reputation or
characteristics are linked to production in the area. Traditional Speciality Guaranteed
promote and protect names of quality agricultural products and foods.
• International: The WIPO administers the Madrid Agreement and Protocol, which enables cost
effective filing and renewal of trademarks in the Member States.
• Global: The WTO’s TRIPS agreement and the Paris Convention for the Protection of Industrial
Property offer owners of well-known trademarks the opportunity to request cancellation of
an existing infringing trademark, when they are not yet registered in a country.
5.4. Creativity - Copyrights
5.4.1. Principles
A Copyright is a non-registered right: there is no administrative, formal, procedure required to go
through in order to become the ‘owner’ of this right. It generally comes into existence automatically
at the materialization, by the making, of a work that meets the substantive requirements for
protection: it should be an original creative product of the mind embodied in a concrete appearance.
Copyrights protect works that exist in some form and are original.
See the book for a list of examples.
The minimum duration of protection set by the Berne Convention is the authors’ lifetime plus 50
years from his/her death. However, within the EU the protection is seventy years after the author has
passed away.
In copyright law, related rights are the rights of creative work not connected with the work’s actual
maker.
5.4.2. Levels of Regulation
The legal basis for copyright regulation at various levels and the organisations are as follows:
• Netherlands (Auteurswet): A copyright originates automatically by embodying a creative,
original ‘product of the mind’, in some physical means of expression. The substantive
requirement of originality of the work is however not stated explicitly. A copyright cannot be
seized by creditors of the maker and remains outside of bankruptcy. Licensing is not
regulated in the ‘Auteurswet’: the general rules of patrimonial law apply.
• EU: The EU succeeded in realizing significant harmonization of the substantive copyright
laws. However, there are still differences between Member State systems.
• International: The enjoyment of protection in countries other than the country of origin is
automatic and not subjected to registration formalities (Berne Convention).
5.5. Exterior – Design Rights
A design is from a legal perspective, the ornamental or aesthetic aspect of a product, which can be
two- or three-dimensional. In general, a sign must be ‘new’ or ‘original’ to be protected. It can be
obtained by registration or by bringing a product on the market. Excluded are forms which are
primarily the result of technical requirements.
The Substantive requirements for design registration are:
• Novelty;
• Individual character;
• Non-functionality.
Protection if registered is 5 years from the date of the filing of the application with four renewals of
five years.
5.5.2. Levels of Regulation
Levels of regulation are:
• Benelux: The Benelux Convention on Intellectual Property (BCIP) distinguishes between
drawings and models. Requirements are: a design must be novel, no identical designs are
available. It must have an individual character, if the overall impression on the user differs from
any design that has been disclosed before. Designs shall only be regarded as identical when
their characteristics differ only in terms of insignificant details.
• EU: A Community Design Registration is comparatively inexpensive to acquire. If formal
requirements are met, the design is registered. The EU facilitates two types of protection:
o Registered Community Design: by filing with the OHIM
o Unregistered Community Design: requires no formalities but comes into existence by
disclosing a design product to the public.
o International: The Hague Agreement system gives the owner of an industrial design
the possibility to have a design protected by filing a single application with the WIPO.
5.6. Other IP and Related Rights
5.6.1. Database Right
A database is a structured collection of data which can be used to create information products. Under
the Database Directive, two types of rights were created: harmonized copyright and a specific
standalone right. People who made substantial investment in the database, can be protected.
5.6.2. Geographical Indication
A Geographical Indication identifies a good as originating from a particular territory or region. Only
producers of products of a particular geographical region have the right to apply and use a GI for a
product from that region.
5.6.3. Trade Name Right
Trade name: name under which one or more business are run. Two relevant Dutch Acts are the Trade
Names Act and the Trade Register Act. Substantive requirements are that the name can be
pronounced, is sufficiently distinctive and is used for business purpose. Formal requirement is
registration in the trade register.
5.6.4. Chip Rights
The TRIPS agreement requires protection of semiconductors, chips, for at least ten years.
5.6.5. Plant Breeder’s Right
A plant breeder’s right is an exclusive and absolute right granted to a plant breeder to cultivate and
trade in a new plant variety.
5.6.6. Trade secret
A trade secret (undisclosed information) refers to technical or commercial business information which
has an economic value and for which reasonable steps are taken to keep it secret. Secret in the sense
that it is not generally known or easily accessible. The holder of a trade secret is not the owner of an
exclusive right over its creation. Competitors may discover, develop and freely use the same formula.
5.6.7. Domain Name
An internet domain name is a unique Internet address in a simplified form, designed to enable users
to localize and visit a website or use an e-mail. All trademarks can, in principle, be registered as a
domain name.
ICANN = Internet Corporation for Assigned Names and Numbers.
5.6.8. Portrait rights
The portrait right allows a depicted person to prohibit the publication or copying of the photo or
footage on which he/she is shown. The depicted is not entitled to an exclusive right on his
appearance. Unlawful use of a portrait can lead to commercial damage, resulting in remedies being
awarded to the person whose portrait right was unlawfully used.
5.7 IP in Business Planning
Ineffective IP management can result in missed opportunities, unintentional or intentional
infringements of others IP rights, contractual disputes, etc. We now evaluate the role of IP in
business planning:
• Mission and vision: in which the importance of IP to a company can be emphasised.
• Objective setting: IP objectives can be
•
•
•
•
o Exclusivity: defending an IP based competitive advantage
o Design access: agreements to use others’ IP rights
o Revenues: additional revenues by licensing or transferring IP rights
o Design freedom: invalidating other companies’ IP rights
Strategic analysis: IP situational analysis forms the input for developing objectives and
strategies.
Strategic choice: a distinction will be made between SME’s and MNC’s:
o MNC: the essential strategic choices involve the combination of countries and IP
rights to be obtained, renewed and protected.
o SME: don’t have well developed management competences and networks to create
such portfolio’s. A strategy based on collaboration can be instrumental to acquire the
knowledge, skills and investments.
Strategic Implementation: requires a multidisciplinary approach, involving cooperation
between different functions. Often support of a IP law firm will be needed.
Control: Objectives and markets must be monitored to identify deviations and infringements
and if needed corrective action is to be considered.
Chapter 6 - Contracts
6.1 Introduction
6.1.1. Principles
In all legal traditions, contracting is based on a party making an offer and another party accepting it.
An offer which is accepted results in an agreement. Legal systems consider contract-based obligations
as binding and, when not performed, make them enforceable by offering remedies and enforcement
institutions.
Contract laws in all legal traditions have four identical principles:
1. Party autonomy - principle that legal subjects have the freedom to decide on how and about
what they conclude contracts;
2. Consensualism – means that concensus suffices for the formation of a contract;
3. Binding obligations;
4. Relativity – means a contract only binds the parties.
6.1.2. Contractual pluralism
Within the EU, the Member States’ contract systems are by no means identical (contractual
pluralism), which can hinder cross-border trade by increasing transaction costs. The contract law
systems of the Member States can be clustered in:
6.1.3. Contracting Process
• Pre-contractual liability – a party, under certain circumstances, is liable to compensate the
costs and losses of the other party that result from breaking off the negations.
• Capacity – ability to perform legal acts.
• Will-reliance – refers to the question of whether somebody is bound to a statement that is not
according to that person’s will.
• Legal traditions have force majeure concepts – Unlikely events that make the performance
impossible such as flood or earthquake, may serve the ward off a remedy like compensation for
non-performance.
• Three types of remedies for breach of contract:
o Demand performance of the contractual obligations;
o Compensation for costs and damage;
o Court removes the binding character from a contract by setting it aside.
6.1.4. Types of contracts
• Sales contracts that transfer ownership or right;
• Services contract that involve the performance of an intangible performance.
6.1.5. Business contracts
> See table 6.2. for types of business contracts.
6.2 Dutch Contract Law
6.2.1. Introduction
The Law of Obligations is considered an ‘open system’, while property law is the opposite. An
obligation is a performance to be made, which in the case of non-performance, is enforceable. The
four main statutory obligations are:
• Management of another’s affairs: e.g. when a passer-by takes measures to stop a fire in
your office, you have to pay the costs he had to make.
•
•
•
Undue Payment: a person who has transferred property or made a payment to another
without a reason is entitled to reclaim it from the recipient.
Unjustified enrichment: enrichment which is not legally justified.
Unlawful act: allows competitors to take legal action and demand compensation for any
behavior which unlawfully damages their interests.
The Dutch law distinguishes two sources of obligations: contracts and the law. The Dutch Law of
obligations recognizes party autonomy and consensualism and as a result, allows for substantial
freedom of contract. It reflects the fact that the majority of the rules on obligations are defaults.
A party can invoke reasonableness and fairness in court to add content to a contract or, in
exceptional circumstances, prevent a party from relying on a contractual clause.
6.2.2 Pre-contractual Risks
Dutch law recognizes the requirement of reasonableness and fairness. Parties involved must behave in
a way which takes the justified interest of the other party into account. Breaking off negotiations can
conflict with reasonableness and fairness and thus constitute improper social conduct, which can
function as the basis for a compensation claim. Another risk is a letter of intent: a written statement
expressing the intention to enter into a formal agreement  managers might think this is not binding.
6.2.3 Formation risks
From a business perspective, the moment the contract is defined as binding, is important. Two
potential risks are:
• Voidness: the legal act or contract has no legal effects; it does not exist and no
obligations can originate from it.
• Voidable: a valid legal act or contract has a defect, which could result in the act or
contract being annulled and thus to become void.
> See table 6.6. for more information
6.2.4 Non-Performance
• Non-performance refers to a lack of, a non-timely, or an incomplete performance.
• Force Majeure refers to a cause of non-performance that was outside the control of a party.
• Clause is a provision in an agreement or general conditions on a specific subject.
6.2.5. Dispute Resolution Risks
In case the words of a contract do not perfectly reflect the parties’ intentions, they become a potential
source of risk. Interpretation in Dutch law is based on the will-reliance theory. The obligations are
what the parties have consensus about, which refers to the will and the intention of the parties to be
decisive. The text of the contract is not decisive; a judge has the task to see through the words of the
contract to detect the real intentions of the parties. In case a topic is not covered in a contract, the
court can use reasonableness and fairness to assess what actually should have been in the contract.
6.3 Common Law
English law is the legal language of international businesses. English law considers the contract as an
exchange of promises. The general theory of contract is based on case law. English contract law is
occasionally supplemented by the rules of equity. The core concepts of English Law are: promise &
consideration: parties make a promise to each other which must have a value to meet the
‘consideration’ requirement.
• Pre-contractual Risk: English law does not recognize reasonableness and fairness.
• Formation Risk: requirement of a promise supported by a consideration to realize an
enforceable contract. It means both parties must give up something of monetary value. Under
•
English law, an offer is freely revocable (herroepbaar) before acceptance  no difference if
there is a deadline or not.
Non-Performance: Common law respects autonomy and responsibility. The parol evidence
rule prevents a party to a written contract to present anything to support a deviation from or
specific interpretation of the contract. Contracts do not run the risk of being changed.
o Force Majeur is broader than Act of God.
6.4 Islamic Law
Contracts must fully respect the moral principles and values expected of all Muslims.
• Pre-contractual: Quran refers to good faith, justice and honesty as imperative prerequisites in
all Muslim transactions.
• Formation: Contracts can only be concluded by adults of sound judgement. Written and verbal
contracts can be valid, if the offer and the acceptance are performed at the same meeting
session, without any interruption or venue change. Party autonomy is limited by specific
principles. Contracts with uncertain elements or speculation are prohibited (e.g. derivative,
type of security). Trade in claims is prohibited as it involves trade in money, and money cannot
function as a source of profit.
• Non-Performance: the Riba prohibition does not allow charging or paying interest because it
results in societal injustice.
• Dispute Resolution: Parties’ behavior or agreements that go against religious regulations are
invalid and cannot rely on enforcement. The Islam prohibits any exploitation of another party’s
genuine misfortune.
Chapter 7 - Legal forms
7.1 Introduction
Law considers an enterprise as an organizational structure with the objective of sustainable
participation in economic activities. Legal systems distinguish legal forms with and without legal
personality. A business without legal personality is a business run by a natural person.
Natural persons:
1. Sole ownership;
2. General Partnership;
3. Limited Partnership.
Legal persons:
1. Private Limited Liability;
2. Public Limited Liability;
3. Association;
4. Cooperative;
5. Foundation;
6. Limited Liability partnership.
See the book for explanation on all the persons mentioned above.
Holding company: business organization in which a legal person holds interests in a number of other
legal persons.
Corporate Governance: deals with the rights and responsibilities of a company’s management, its
board, shareholders and various stakeholders.
7.2 Dutch Law
7.2.2 Sole Ownership
Dutch law differentiates between three types of contract based forms of cooperation: 1) non-public
partnership, 2) partnership under a common firm, and 3) limited partnership. A sole trader is the
simplest way to set up and run a business. A sole trader must be registered with the Chamber of
Commerce. Sole owners are bound by and liable for all consequences of their acts and all their
property is available for resource by creditors.
7.2.3. Partnership
A partnership is a relative simple way for two or more natural persons to set up and run a business.
They are based on agreements. A partnership lacks legal personality. The liability of the partners in a
non-public partnership is less extensive than in the forms which are now introduced:
• Partnership under common firm: presents itself to the outside world under a common
identity. A written contract is not compulsory, but essential in practice. Partners are joint
liable; each liable up to the full amount of an obligation of the partnership.
• Limited/silent partnership: consists of active partners, run the business and liability is
identical to the latter, and sleeping partners, only finance the business and therefore the
financial risk is limited to the loss of the contribution.
7.2.4. Legal Persons
All legal forms require a set of internal regulations at the moment of incorporation, which are
documented in the articles of association.
•
•
•
•
Association: a legal person with members aiming to realise a common goal other than
meeting the tangible needs of its members. It is not allowed to distribute profits among the
members.
Cooperative: special form of association. It is a taxable entity and therefore also benefits
from the participation exemption and the Dutch treaty network. It is able to distribute profits
to its members without being subject to withholding tax on dividends.
Foundation: legal person without members, established with a certain amount of capital to
achieve a goal stated in its articles of association. Making profits is allowed but the allocation
is restricted.
Private and public limited company’s: legal persons based on capital acquired by issuing
shares. The articles of association are the primary rules governing the management of a
limited and the document is generally filed with a state or other regulatory agency. One of
the legal questions with business relevance is the representation question, which refers to
the authority to act and realise legal effects on behalf of another person.
7.2.5. Limited Liability
The Dutch Act on simpler and more flexible laws of private limited liability companies resulted in
more freedom in structuring the Dutch limited liability company.
• Minimum capital of €18000 is abolished.
• Before the Flex BV, the voting right could be denied to shareholders by means of issuance of
depositary receipts for shares. They we’re limited to dividends. The Flex BV provides an
alternative, because the BV’s articles of associations can limit or exclude certain shares from
dividends and voting rights.
• General meeting will be allowed to give specific instructions to the managing board.
• Greater flexibility in how to appoint and dismiss managing and supervisory directors.
7.2.9. Executive liability
Executive is the Anglo-Saxon term for the person who has the administrative authority in the
organisation. Legal systems differentiate between an internal liability to the company and an
external liability towards legal subjects outside the company. Executives’ behaviour is regulated by
articles of association, employment, or other types of contracts. The relationship between an
executive director and a listed company is based on an agreement.
7.2.10. Corporate Governance
Public limited companies tend to have three bodies: board, the shareholders and the supervisory
board. As their interest differ, this can give rise to the so called agency problems. To avoid this,
corporate governance law, self-regulation and practices attempt to regulate the relationships
between the three bodies. Dutch stock listed companies are by law subjected to the Corporate
Governance Code.
See table 7.5 in the book for an overview of the legal forms
7.3 Common Law
All legal traditions offer the three generic form and to differentiate between contractual and
incorporation based legal forms.
• Civil law: rules are in the law of obligations, Commercial Codes, specific acts. The term
company tends to be employed for both partnerships and limited companies.
• Common Law: corporate law, the law of business associations or companies’ law. Confusion
between civil law and common law concepts can result from the fact that under English law,
all human beings are endowed with a legal personality. In civil law, legal personality is
reserved for legal forms which are created by incorporation.
• Islamic law: Sharia did not regulate legal persons. Nowadays all regular legal forms are
available in Islamic jurisdiction.
7.3.2. Sole Ownership
• Sole Ownership enterprises do not qualify as companies.
• The partnership has three types: ordinary, limited, and limited liability partnership.
7.3.3. Corporate Governance
The UK Corporate Governance Code stipulates a set of principles of good corporate governance aimed
at companies listed on the London Stock Exchange. The principles primarily serve the interests of
shareholders.
The Role of the governance mechanism is to put the right managers in place, give them room to
implement their chosen strategy and monitor their progress.
7.4 Islamic Law
7.4.1. Corporate Law
• Under Islamic Law, religious obligations apply identically to enterprises and natural persons.
Companies must combine profitability with compliance to ethical and religious principles such
as respect for employees, people, and society.
7.4.2. Legal Forms
• Companies divide into two types:
o Property company
o Contract company
 Capital
 Work
 Personal
• Juristic person = a legal entity that exists separately from the individual that incorporate it.
7.4.3. Corporate Governance
• Islamic systems generally impose a two-tier governance system on limited liability companies.
7.4.4. Director’s liability
• The Sharia law principles of accountability, trust, fairness and transparency are considered to
impose additional fiduciary duties on directors of all types of company, for example to avoid
conflicts of interest and to act in the best interests of the company.
Chapter 8 - International Commercial Contracts
8.1 Introduction
Litigation involves the submission of a dispute to a court of law. There are three typical legal
challenges, which are a source of risk from a business perspective:
• Where proceeding should be brought: risk is that a dispute must be decided upon in a
foreign court. The question is, which law to apply? If the contract is a purely domestic one,
the judge will apply the local law. However, if the contract is international, a problem needs
to be solved
• Which law is governing the contract: Unless the question is raised, the judge will apply the
local law. When the issue of the governing law is raised, the judged cannot ignore it but must
decide the question before going on to deal.
• Risk related to recognition and enforcement of judgements, and arbitral awards, handed
down by foreign courts, or arbitrators, outside their jurisdiction.
8.2 Applicable Law
With respect to the law applicable to a contract, two potential case positions for sales and services
contracts and one position specifically for sales contracts can be identified:
• The parties made a choice
The choice by the parties is expressed in a choice of law clause; a provision in which the
parties specify which law will be applied to resolve any disputes arising under the contract.
The EU Member States have harmonised their national IPL rules by Regulations on the law
applicable to contractual obligations (Rome I). Rome I:
o International contracts between consumer and companies: governed by the law of
the country where the consumer has habitual residence.
o Not possible to be deprived of the strong protection of Dutch law by a choice of
law for another legal system, even when agreed upon by the parties in the sales
contract.
• The parties made a choice and excluded CISG
The ‘Vienna Convention on the International Sales of Goods’ is part of Dutch Law and
applies to international sales of goods contracts, not to services, unless its application
contractually excluded by the parties. CISG regulates parties’ legal rights, duties and
available remedies.
o CISG applies when companies involved are in contracting states
o Or when as a result of a referral rule the law of a country which is a signatory
applies.
One of the reasons to eclusion is the fact that the avoidance of a contract requires more than
a simply non-performance; it requires avoidance a fundamental breach.
• Parties made no choice
The principle is that the law of the country of the seller or service provider governs a contract
in which no choice for an applicable legal system was made.
8.3 Competent Court
Competence refers to the ‘ability’ of a court to exert jurisdiction on a dispute on which a decision is
requested. The forum selection clause in a contract determines the process by which parties to the
contract will have their disputes resolved and the venue for such dispute resolution. The specific
forum selection clause that best meets the interests of the parties, should be decided on several
conditions. Forum non conveniens is a common law doctrine whereby courts may refuse to take
jurisdiction over international matters where there is a more appropriate forum available.
Within the EU, the IPL competence rules are harmonized by the EEX regulation. It offers the
opportunity (article 23) to choose the court that should have jurisdiction in case of a dispute. In case
parties have not chosen, or the choice was not according to formal requirements, the defendant will
be sued in the courts of the Member State in which he/she is domiciled (art. 2 EEX). A person
domiciled in a Member State may be sued in another Member State in matters relating to contracts
in general, in the courts for the place of performance of the obligation in question (where the goods
are delivered). With consumer contracts, the consumer may only be brought in the courts of the
Member State in which the consumer is domiciled.
8.3.2 Arbitration
Arbitration is an agreement to refer a dispute to the decision of privately appointed judges called
arbitrators. Arbitration requires an agreement in the form of an arbitration clause in the contract or a
later so called compromise. Advantages or arbitration: speed, economy, informality, specific industry
expertise. Arbitration can be ‘ad-hoc’, meaning the parties appoint arbitrators as a dispute arises.
8.4 Carriage Contracts
8.4.1. Regulation
Companies can make use of four types of carriage for transportation of goods:
1. Truck
2. Rail
3. Plane
4. Ship
Three principles of relationship between carrier and sender:
1. Carrier must deliver the goods without damage and in time
2. The liability of carriers is maximized
3. Claims for damage and litigation are subject to time limits.
8.4.2. CMR (vervoersovereenkomst)
It only applies to road transport contract in which the place of taking over the goods is in a different
country than the designated place of delivery.
8.5 Risk Transfer
8.5.2 Incoterms
The ICC in Paris and the UNIDROIT in Rome are both organizations supporting international business
with miscellaneous, contract related and other services. The incoterms are standard commercial
terms for the use in international contracts for the sale of goods. They rule: tasks, costs and risks
involved in the delivery of goods from sellers to buyers. It can be binding by 1) including the term in
the body of a sales contract or by 2) the applicable general conditions.
Incoterms define which party has the obligation to make carriage or insurance arrangements, when
the seller delivers the goods to the buyer, and which costs each party is responsible for. The moment
of delivery is the moment where the risk transfers from seller to buyer.
There are four categories of Incoterms, see table 8.3 in the book.
8.4.2. Any mode of transport.
• Ex Works: minimum responsibility to the seller, who has to make the goods available,
suitably packaged, at the specified place. Risk transfers to buyer at the moment he is
informed by the buyer.
• Free Carrier: where the buyer arranges the main carriage. Risk transfers at the seller’s
premises, when the goods have been loaded on the means of transport.
•
•
•
•
•
Carriage Paid to: seller is responsible for arranging carriage to the named place, but not for
arranging insurance cover for the buyer for the transport of the named place. Risk transfers
at point where the goods are taken in charge by the first carrier.
Carriage and insurance paid to: as with the one before, delivery takes place and risk
transfers from seller to buyer, before the main carriage, at the point where the goods are
taken in charge by the first carrier. The seller is responsible for arranging carriage and
insurance.
Delivered at Terminal: seller is responsible for arranging carriage and for delivering the
goods, unloaded from the arriving conveyance, at the named place. Risk passes when the
goods, once unloaded, are placed at the disposal of the buyer at the named terminal. Seller is
responsible for export clearance procedure.
Delivered at Place: seller is responsible for arranging carriage and for delivering the goods,
ready for unloading form the arriving conveyance, at the named place. Risk passes, when the
good are placed at the disposal of the buyer, while still on the arriving means of transport at
the named place of destination.
Delivered Duty Paid: maximum of obligations of the seller; all transport, formalities and
costs involve in bringing the goods to the premises of a buyer. Risk transfers from seller to
buyer when the goods are made available to the buyer.
8.5.4. Waterway
• Free alongside Ship: seller delivers goods, cleared for export, alongside the vessel at a
named port, at which point risk transfers to the buyer.
• Free on Board: seller delivers the goods, cleared for export, on board the vessel nominated
by the buyer at the named port of shipment. Once loaded, the risk passes to the buyer.
• Cost and Freight: seller must pay the costs and freight to bring the goods to the port of
destination. Risk is transferred to the buyer once the goods are loaded on the vessel.
• Cost insurance and Freight: seller also contracts for insurance cover against the buyer’s risk
of loss or damage to the goods during the carriage.
8.7 International contracting
8.7.1. Structure
Contracts tend to consist of five parts:
• Heading: indicates what the type of agreement is.
• Description of the parties
• Whereas: describes why the parties have decided to enter into an agreement.
• Body (‘now therefore’…): describes the content of the agreement. Usually in the last part,
the parties will include a choice of law and forum clause.
• Names of the companies and their representatives, dates of signing.
8.7.2. Clauses
Legal problems are likely to arise in the course of any business, especially in the performance of all
but the most straightforward contracts. All kinds of clauses are included in the body or general
conditions.
• Exemption clause: limiting a liability risk
• Indemnity clause: provision under which one party commit to compensate the other for
any harm, legal liability or loss arising out of the contract.
• Warranty: promise about a product made by either a manufacturer or a seller.
•
•
•
•
•
•
•
•
•
Time-is-of-the-essence-clause: make sure that a deadline is met and if not, breach
of contract is constituted.
No-waiver clause: to avoid the inability to use the right in the future by not exercising when it
could have been used.
Reservation of ownership: to subject the transfer of ownership to the performance of
a specific suspensive condition which usually is the payment.
Advanced payment clause: manages risk of non-payment.
When performance cannot be attributed if it is not due to fault, we call this force majeur.
Common law differentiates between ‘Acts of God’ and acts of humans such as strikes and
terrorists attacks. An act of God is an act caused exclusively by the violence of nature.
Liquidation damages clause: amounts of compensation for a failure to perform is
assessed beforehand and defined (in common law).
Attorney fees clause: in the event of litigation, the losing party is to reimburse the
prevailing party’s costs for legal support.
Nullity clause: ensures that problems with a clause in a contract will not affect the rest.
Entire agreement clause: defines that the written contract reflects everything the
parties agreed upon and invalidates all other sources of obligations.
Change of control clause: opportunity to terminate a contract for example when the other
party is taken over, or economic conditions change dramatically.
8.9 Dutch Contract Law
The layered structure of the DCC (no distinction in private and trade law) means that the substantive
rules for sales and services contracts are distributed over different books.
8.9.2. Types of Contracts
Sales (7.1 BW): contract whereby one should give a thing and the other pay a price. Dutch law
differentiates (article 7.5) between sales contracts between companies and consumer sale. The extra
protection of consumers is based on article 7.6. Article 7.400 BW defines a contract for services.
8.9.4. Obligations
• Sales and services contracts are bilateral contracts; the obligation of one party is what the
other has a claim on. The seller’s obligation is to transfer the ownership of a thing and to
ensure the thing is actually delivered.
• Deliver means the actual transportation of the property to the buyer in order to give the
buyer possession.
• When the thing does not possess the qualities, the buyer was expecting on the basis of the
contracts, the seller’s performance constitutes to non-conformity.
• For B-to-B sales contracts the conformity article is supplementary law, and companies thus
have the freedom to deviate from it. Party autonomy also leaves room to include in a sales
of goods contracts additional requirements for invoking non-conformity.
8.9.6 Consumer protection
The objective of consumer law is to repair the power and information asymmetry between
manufacturers and consumers. Most statutory private law provisions on consumers are mandatory
law. The legal risks for companies with respect to consumer sales contracts result from:
• mandatory statutory provisions: high costs of court proceedings, risk of negative publicity.
• courts which tend to protect consumers against companies
•
•
rules of self-regulation
rules enforced by supervisory boards:
o Authority for Consumers and Markets: authorised to take action against national and
cross-border infringements of consumer law provisions.
o Netherlands Authority or the Financial Markets
Chapter 9 - Marketing
9.1 Introduction
The marketing philosophy holds that achieving organizational objectives depends on knowing and
providing what target markets want. As an organizational function, marketing is usually concentrated
in a marketing department. A marketing process generally starts with analyzing the (marketing)
environment.
•
•
•
Target group = potential customers at wich marketing directs its offerings and activities.
Competitive advantage = what a business chooses to distinguish a product or service from
competitive offerings.
Marketing mix = product, place, price, promotion.
9.1.2 Levels or regulation
Law and other regulations intervene to control and regulate certain types of activity deemed to be
harmful to the general public interest or fair competition. The EU is committed to the protection of
consumers. The EU’s CSR policy aims at improving trust in business (e.g. OECD, ICC’s code). In some
countries, marketing is subject to detailed legislation. In others, it is more self-regulation; marketers
organize themselves in associations or institutes.
9.1.3. The Netherlands
The Netherlands has no Act that exclusively regulates marketing. Most of marketing activities are
regulated in general statutory provisions, statutory provisions that result from EU directives that
protect consumers, in the Advertising Code of Practice.
9.2 Non-contractual liability
Liability means legal responsibility of acts or omissions which the law considers unacceptable. Legal
systems tend to work with two types of bases for liability:
• Contractual liability: result of the consequences the law attaches to non-performance or
the contractual conditions as agreed upon by parties.
• Non-contractual liability: it results from acting, or not acting.
o Fault-based: legal subject who damaged is to blame for what was done
o Strict: based on risk, irrespective of intent or fault on the side of the legal
subject which acted (e.g. parents for children).
Common law works with over seventy types of ‘torts’.
9.2.2. Dutch Law
The Dutch legal system relies on the general principle that everybody who, through hi fault, causes
damage to another, must compensate the damage. Non-contractual liability is based on a general rule
as the basis for demanding a court to stop or prevent certain behaviour, or compensation for the
damage. There are a few requirements for an unlawful act:
• Unlawfulness of the act, which can be constituted in three ways:
o Violation of a right
o Breaching a duty imposed by law
o Breaching a rule of proper social conduct (open norm)
• Attributable to the actor.
• Material or immaterial damage. The injured person has a right of compensation for damage
that does not consist of material loss.
•
•
Only damage in consequence of can be compensated.
Relativity; a judge will assess whether the rule that was breached was intended to protect
the damaged interest.
9.3 Marketing communications
Promotion is one of the instruments (4P’s) which marketers have at their disposal to realize marketing
objectives. Consumers want to be informed; but as weaker party they welcome regulatory protection.
9.3.2. Advertising
Advertising is characterized by the fact that the communication has its objective to get attention to
create awareness to promote sales. Companies need to manage miscellaneous risks (e.g. misleading
advertising, violating IP rights, contractual conditions with suppliers).
Advertisement regulation and enforcement in the Netherlands is expressed in a wide range of
statutory and self-regulatory rules and regulations, all relating to commercial communication.
• Dutch Civil Code
• Dutch Advertising Code Foundation
• Advertising Code Committee (for complaints about advertising).
• Authority for Consumers and Markets and the Authority for the Financial Markets:
supervisory authorities.
• Dutch Media Authority
Misleading advertising is any advertising which in any way deceives or is likely to deceive the
persons to whom it is addressed or whom it reaches. Comparative advertising is any advertising
which identifies a competitor or goods or services offered by a competitor.
9.3.3. Direct Marketing
The communication of any advertising or marketing material which is directed to particular
individuals is an instrument in the promotions mix which is called direct marketing.
9.3.4. Social Media
The EU is firmly opposed to restrictions of access to use of social media; freedom of expression.
Some countries provide guidance on how existing advertising rules should be applied to the use of
children in peer-to-peer marketing.
The Dutch Advertising Code contains a specific Advertising Code Social Media. This provides
guidance for compliance when marketing via social media.
9.3.5. Unfair Trade Practices
The Directive on Unfair Commercial Practices was transposed into the Dutch Law. As a full
harmonisation directive, it blocked the opportunity for the Member States to impose stricter rules.
The AFM and ACM are Dutch supervising authorities which can force a violator to perform a certain
action/penalty.
Commercial practices are unfair if a trader acts contrary to the requirements of professional
diligence and the ability of the average consumer to take a decision on the basis of sufficient
information is noticeably limited or may be noticeably limited.
9.3.7. Personal Selling
Personal selling is person-to-person, interactive communications used to ultimately persuade
another legal subject to act in a certain way (acceptance of an offer). Employers are liable for the
damages which employees suffer during work and for the damages employees inflict upon third
parties; unlawful behavior (vicarious liability). In order for employees to effectively enforce
instructions on social media, it is advisable to have a social media policy.
To avoid the risk of liability or reputation damage as a result of representatives’ actions, they should
be extensively trained in the regulatory risk of their work including internal reporting policies.
9.4 Product
Regulation is in the interest of both seller and buyer: rules which protect consumers create trust
which consumers need as a basis for buying. However, rules have a national basis, and therefore
differ. The EU and industries co-operate to harmonize standards.
Product liability rules define the conditions under which producers are liable for injuries or death
caused by their defective product. EU Member States’ liability rules enable a consumer to hold a
producer liable if the latter’s defective product causes damages.
In the EU, the ‘product recall’ rules are the result of the General Product Safety Directive. In the
Netherlands, the Directive was implemented by the ‘Commodities Decree General Product Safety’.
9.5 Place
9.5.1. Distribution
Theory differentiates between direct distribution (sales contracts) and indirect distribution by using
intermediaries or middlemen. Companies are accountable not only for their own actions, but also for
their third-party suppliers and partners.
9.5.2. Selective distribution
Exclusive distribution agreement is an agreement under which the distributor will enjoy an exclusive
sales territory within which it is protected from competing sales by the supplier and/or distributors
appointed in other territories. The distributors, in return, agree to supply only other distributors who
are within the approved selective distribution system or end users.
9.5.3. RSCM
Responsible Supply Chain Management stimulates that companies manage the social, including
human rights, and environmental dimensions of the processes and parties in their supply chains.
9.5.4. Carriage contracts
Transportation or carriage contracts cover the physical transport of goods to a destination, involving
a carrier.
9.6 Pricing
9.6.2. Value Added Tax
VAT is chargeable on most of the EU-based companies’ sales and purchase except exports to
countries outside the EU. It affects the ultimate market price; the pricing tactic.
9.6.3. Transfer pricing
• Inter-company or transfer pricing denotes the pricing policies among associated enterprises
resident in different countries. Pricing can be used to reduce profits in countries with high
taxes and favour of countries with lower corporate taxes.
• National tax authorities apply arm’s-length principle; they only approve a pricing policy if
prices would be the same for independent parties under comparable circumstances.
9.7 Entry Strategies
Two interrelated decisions are important; market entry and the distribution strategy. Market entry
strategy defines the method chosen to enter and thus operate on the new market.
9.7.2. Agents and Distributors
A company can export by selling directly to customers or by involving a local or regional agent or
distributor. An agent has express or implied authority to act to another (the principle), so as to bring
the principal into contractual relationships with other parties. He is under control of the principle,
and binds the principle with his acts.
A commercial agent is a person/company who mediates against payment on the formation of
contracts in the name and for the account of the principle. They are remunerated by a commission
fee based on the amount of sales. In case of a termination of the contract, he is entitled to goodwill
compensation.
Distributor buys products or product lines, warehouses them, and resells them to retailers or
direct to end users. They usually provide strong manpower and cash support and usually a range of
services and a reasonable notification term. In practice, a distributor seems to receive more
compensation than an agent, as a result of the long notification time.
9.7.3. Franchising
Franchising is an arrangement where one party grants another party the right to use trademark or
trade-name as well as certain business systems and processes, to produce and market a good or
service according to certain specifications. It gains rapid (inter)national expansion of business and
earnings at minimum capital outlay. The franchise, different to agents, will enter into contracts in his
name and for his own account.
9.7.4. Wholly owned subsidiary
This can be realized by two strategies:
• Greenfield investment: establishment of a subsidiary in a new market which is completely
owned by a foreign parent company
• Acquisition: buying a local company in the new market.
9.8 Competition Law
Competition law promotes or maintains market competition by defining and regulating anticompetitive behavior. According to the OECD guidelines for MNC’s, these companies should refrain
from entering or carrying out anti-competitive agreements among competitors.
9.9 Cartels
Cartel = agreement between undertakings or concerted practices, which has as the objective or
effect the prevention, restriction or distortion of competition.
Section 3 – Regulatory Services and Providers
Chapter 10 - Regulatory Services
10.1 Legal Function
10.1.2. Legal management
Companies and academics demonstrate an increasing interest in managing Legal. Legal
management is the discipline that studies the application fo managerial concepts on Legal.
> See table 10.2 for Drivers of Change
10.1.3. Legal Services
Managers continuously face so-called “make-or-buy” decisions. See table 10.3 for five categories
of reasons for buying legal services.
10.2 Contribution
10.2.1. Framework
See table 10.6 in the book.
10.2.2. Creating value
The TMF index identified five major trends that affect global compliance.
1. Global Financing Transparency
2. Rapid Growth of Regulatory Compliance Obligations
3. Data Privacy
4. Cybersecurity
5. Ethics and Compliance including anti-bribery and anti-money laundering.
References:
Law & Self-Regulation, Nico A. Jansen, 2020 Student Edition.