International Commerce and Investment
Professor Head
Fall 2008
CHAPTER 1 –
Carrie Coulson Example –
General Principals that should be applied:
Pay attention to local legal circumstances
Anticipate problems
Transfer risk to 3Ps –
OPIC Insurance
Rely on trustworthy parties
Draft written agreements more comprehensively
Be alert to the larger legal, political, and cultural context
Three Types of International Business Transactions –
Exports – sale of goods across borders
How to Find and Attract Buyers –
Direct Unaided Exports
Sales Representative/Agency Agreement – rep merely acts as representative of exporting company
Distributor Agreement – exporter makes sales to distributor. Distributor then makes sales in the overseas market.
Licensing of Production
Generally –
Produce goods in the overseas market through an agreement with a the overseas manufacturer
Production Takes place in overseas country
Either Entity controls the means of production
Dangers –
Theft of intellectual property
Direct Foreign Investment –
Generally –
Often last stage of “going international”
Create a subsidiary under the law of the overseas corporation.
Production occurs overseas
Distinct from portfolio investment which involves financial securities or instruments but no physical presence
Special Challenges of Conducting Transborder Business –
Exporting
Licensing of Production
Foreign Direct Investment
The Larger Landscape: Where Global Business Law Fits into the International Legal System –
Course focuses on private international law – transactional law
Private International Law –
In US, refers to private sector economic/business law
Outside US, term refers to conflicts of law
Sources of International Law –
General Sources (Under ICJ Statute)
International conventions/treaties
Most treaties only relate to exports
Few treaties on FDI
On international front – treaty supercedes a countries international law
Only binding on countries that sign the treaties
Force w/in country depends on national law – US = later in time
International custom
Emerges from consistent state practice – a consistent behavior in a particular area over time; uniformity of the practice among states that engage in it.
Once a custom is proven, the custom is binding on all states regardless of whether the state engaged in the custom.
Elements –
Practice of states showing consistency, generality, and duration
Reflecting a sense of legal obligation on the part of those states engaging in the practice.
General Principals of Law Recognized by Civilized Nations
Decisions and teachings of highly qualified publicists
Other Issues in International Law – pp 26
Future of the Nation-State –
Most rules affecting ITC emerge from national legal systems
Many recent treaties, however, cut the other way.
NGOs, Multinational Corporations
Regional trade organizations – ASEAN, MERCOSOR, NAFTA, etc
Trade Groups – G7, G8
A Withering of Multilateralism –
WWI & WWII evoked the rise of multilateral institutions – UN, IMF, WB
North-South Divide –
Originated from the Brandt Commission: Developed Northern countries v. Developing Southern Countries
Terrorism –
What effect will terrorism and related precautionary measures have on ITC?
CHAPTER 2 –
Definitions
Legal tradition – a set of deeply held, historically conditioned attitudes to how law is formulated, taught, and interpreted
Legal Family – a group of nation-states that share a legal tradition
Legal System – the body of rules, both primary and secondary in character, that define and govern legal relations within a particular political entity.
LEGAL TRADITIONS –
Civil –
Civil code is preeminent; constitution less so. Judges accorded lower social status—viewed as mere bureaucrats.
Originated from Roman Law – second oldest legal tradition – 450 BC
Recorded by Justinian 533 CE; rediscovered in 11th century
Westphalia – 1648 – end of 30-years war and rise of modern nation-state
Before nation state, civil law allowed a body of universal law—jus gentium—to develop.
1804 – Code Napoleon
1896 – German Civil Code
The most widely distributed legal tradition
Sources of law: Statutes and Codes; Regulations; Constitution; Case Law; Custom
Common –
Islamic –
Chinese –
Cross-Cultural Negotiations –
Principals –
Will encounter linguistic difficulties: miscommunications, interpreters
Rules for using interpreters:
Hire your own
Explain the deal to the terp b/f hand
Avoid terps that try to control the negotiation
Keep it short
Plan each statement carefully
Give the terp breaks
Treat w/ respect and
Ways Culture Affects Negotiations –
Negotiating Goal: Contract or Relationship
How fluid are the K terms, are they to be renegotiated
Negotiating Attitude: Win/Lose or Win/Win
Personal Style: Informal or Formal
Pay attention to culture’s emphasis on formalism
Communication: Direct or Indirect
To whom do you communicate. Who calls the show
Sensitivity to Time: High or Low
Emotionalism: High or Low
Form of Agreement: General or Specific?
Building an Agreement: Bottom Up or Top Down
Team Organization: One leader or Group Consensus
Risk Taking: High or Low
Ideology and Deal Making –
Ideology has an adversarial quality
Ideological differences can complicate communication
Ideology may lead to hard and fast positions
Dealing with Ideology –
Know your own ideology
\Don’t be preachy
Take the other side’s ideology seriously
Look for ideological divisions on the other side
Avoid discussion of ideological positions and focus on interests
Look for gaps between ideology and reality
Maintain confidentiality
GETTING LOCAL
Procuring Local Legal Counsel – pp 91
Freight Forwarders and Other Facilitators – pp93
International Agents and Distributors – pp95
Agent – Serves a matchmaking function that finds buyers for the seller’s goods.
Distributor – buys directl
reaty – agreement among states that is binding under the principals of international law on the states
Substantive Commercial Code – governs private sector commercial transactions
Unique Aspect: Treaty is directed at the conduct of individual contractors, not States.
CISG as Odd-ball –
CISG as treaty and focused on the actions of private individuals
Binding on states as treaty & focused on private sector
Compare:
GATT – it is a binding treaty but focused on nations
INCOTERMS – focused on private sector but not a treaty and therefore not binding
UCP – Also focused on private sector but not a treaty and not binding.
Does the CISG apply?
Applies:
To goods, but “goods” is left undefined.
Seems intended to govern only sale of moveable tangibles
May be NA to documents/intellectual property
NA to:
Goods for family/personal use unless seller neither knew nor should have. See Art. 2.
Auctions; stocks/securities; ships; electricity
Buyer supplies a substantial part of the materials necessary for the manufacture of the goods. See Art. 3(1).
· Similar to specially-manufactured goods exception.
K for (largely, predominant part) services. See Art. 3(2).
IE – BOT contract – build operate and transfer – predominant part is service
Determine property interest in goods
Determine the validity of the contract à mistake, fraud, or duress. See Art. 4(a).
Liability of seller for death or personal injury. See Art. 5.
Art. 6: Opt-Out provision
Parties may opt-out of the entire CISG or specific provisions
Should make intent clear
To opt out in the US, not enough to say that the law of the US applies à this will lead to application of the CISG as a treaty under the Supremacy Clause.
Parties should state that “the provisions of the UCC as adopted in the State of [] and no the convention for the International Sale of Goods.
**There is no reference to an OPT-IN provision, although freedom of K suggests that such a provision would be effective.
Conflict of Law Rules –
General CoL Rules –
Convention applies to parties w/ PoB in different contracting states (1)(1)(a), or
When conflict of law rules lead to application of the law of a contracting state.(1)(1)(b)
*Nationality of parties is irrelevant. 1(2)
§ *Fact that PoB is in a different state is irrelevant if not disclosed by dealings. 1(3)
