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International Commerce and Investment
University of Kansas School of Law
Head, John W.

 International Commerce and Investment
I.                   Introduction to Global Business Law
A.    The Forms and Challenges of international business transactions
1.      Three categories prevail: exports, licensing of products abroad, and foreign direct investment (“FDI”) See table on p. 28.
a.       Exporting
                                                                                                                                      i.      Unaided exports-do not involve the use of an international sales agency arrangement or distributor arrangement.
                                                                                                                                    ii.      With sales agency (shared domestic and overseas control of sales)
                                                                                                                                  iii.      With distributorship (control of sales is overseas)
b.      Licensing of Production Abroad
                                                                                                                                      i.      Many times exporters want to reduce costs and raise profit by moving the means of production overseas market (or at least nearer to the overseas market)
                                                                                                                                    ii.      But company does not want to build or purchase factory, so enters into licensing agreement permitting the overseas company to use patented manufacturing processes and trademark. The overseas company then pays a royalty to the domestic company that owns the patents/trademark.
c.       Foreign Direct Investment (“FDI”)
                                                                                                                                      i.      Instead of getting licensing agreement, the U.S. company wants to establish its own manufacturing and marketing operations in the overseas market.
                                                                                                                                    ii.      May create its own subsidiary company under overseas law.
1.      overseas law may limit foreign investors’ control (may require a joint venture with overseas company)
2.      Special Challenges of Conducting Transborder Business
a.       Exporting
                                                                                                                                      i.      Transporting
1.      who takes on risk?
a.       Why want risk?—maybe client would be able to find cheapest/most efficient method.
                                                                                                                                    ii.      Insurance
                                                                                                                                  iii.      3rd parties
1.      freight forwarder
2.      banks (letter of credit to guarantee payment)
3.      local legal counsel
                                                                                                                                  iv.      payment (currency problems)
                                                                                                                                    v.      Dispute settlement
                                                                                                                                  vi.      Tax considerations
                                                                                                                                vii.      Intellectual Property Protection
                                                                                                                              viii.      Tariffs on importation of goods
                                                                                                                                  ix.      Export controls on goods leaving seller’s country.
                                                                                                                                    x.      Political matters
b.      Licensing of Products Abroad (including many of the above)
                                                                                                                                      i.      Gov’t. regs on licensing agreements
                                                                                                                                    ii.      More intellectual property issues.
                                                                                                                                  iii.      Inspection and quality control.
                                                                                                                                  iv.      Other terms that licensing agreement should include:
1.      grounds for termination
2.      royalties
3.      payment terms (currency)
4.      obligation of licensee to grant back to licensor new design elements
5.      territorial limitations on the licensee’s right to sell its products.
c.       FDI (including many of the above)
                                                                                                                                      i.      Structure
                                                                                                                                    ii.      Joint venture (contractual or corporate)
                                                                                                                                  iii.      Control vs. ownership
                                                                                                                                  iv.      Registration and regulation
                                                                                                                                    v.      Expropriation- protect against gov’t action to nationalize the investment property.
                                                                                                                                  vi.      Currency matters
                                                                                                                                vii.      Codes of Conduct
d.      General Principles
                                                                                                                                      i.      All transnational business transactions must be viewed as substantially different from domestic transactions. (more risk internationally)
                                                                                                                                    ii.      FDI poses more challenges and risks than exporting.
3.      Where Global Business Law Fits into the International Legal System? See p. 37.
a.       The Character of International Economic Law
                                                                                                                                      i.      International Public Law (human rights, law of the sea, etc.)
                                                                                                                                    ii.      International “Private Law” (transactions, business, etc. as well as adoption and family law)
b.      Global Business Law and the Sources of International Law
                                                                                                                                      i.      Much of the law comes from local or national law
                                                                                                                                    ii.      Other influence comes from multinational regulations—two main sources: treaties and customary international law. (see handbook p. 14)
1.      Article 38(1) of the Statute of the International Court of Justice
a.       Public international law
b.      Made up of

   ii.      1st and 2nd Cents. CE—jurisconsults-gentlemen scholars (like lawyers) wrote down views on various legal concepts and practice
                                                                                                                                  iii.      Early 4th century CE—Constantine laid foundations to make Rome Christian Empire. Christianity became main religion and infiltrated the institutions and law of Imperial Rome.
1.      start of canon (religious) law to go with civil law
                                                                                                                                  iv.      479 CE—Roman law began deteriorating as the Empire fell to the Germanic tribes.
                                                                                                                                    v.      533 CE-Roman Emperor Justinian presided over publication of legal compilation made of four parts:
1.      the Digest=most important/largest offered summary of best works by the jurisconsults
2.      the Codex
3.      the Institutes
4.      the Novellae
b.      Second life of Roman law
                                                                                                                                      i.      Late 11th century—Justinian’s digest rediscovered
                                                                                                                                    ii.      About 1140—Gration completes comprehensive codification called “second subtradition” of the civil law tradition.
1.      leads to hierarchy of law where legal scholars/ professors are at top and judges at the bottom.
2.      Code is first word on the law
a.       Then go to regulations
                                                                                                                                  iii.      12th-17th century—much of Europe develops “jus commune”, or the “common law” of Europe
                                                                                                                                  iv.      1648—Peace of Westphalia-acceptance of nation-state as fundamental political unit in Europe.
c.       5 subtraditions of the civil law
                                                                                                                                      i.      Roman civil law- see above
                                                                                                                                    ii.      Canon law- see above
                                                                                                                                  iii.      Commercial law- see Chap. 3
                                                                                                                                  iv.      Intellectual and political revolution of 18th Century Europe—sets stage for modern democratic principles in the law of European civil law nations (more influence on “public law”)
                                                                                                                                    v.      German Legal Science- reflects deep desire w/in civil law systems to create certainty in the legal rules that govern relations.
d.      See song to remember dates.