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<ul><li>Legal Environment </li></ul><ul><li>• Legal environment refers to the legal system  </li></ul><ul><li>obtaining in...
<ul><li>the manner in which business transactions are to be </li></ul><ul><li>carried out & set down the rights & obligati...
<ul><li>• Laws do not change overnight  </li></ul><ul><li>• They change over a long period of time & may lag </li></ul><ul...
<ul><li>• Totalitarian states, for example, tend to enact laws </li></ul><ul><li>that severely restrict private enterprise...
<ul><li>Systems of Law </li></ul><ul><li>• There are four basic legal systems prevailing around </li></ul><ul><li>the worl...
<ul><li>Islamic Law </li></ul><ul><li>• Islamic law, also called theocratic law, is derived  </li></ul><ul><li>from the in...
<ul><li>• The  shari’a  is not a coded law </li></ul><ul><li>• It provides ethical & moral precepts as well as rules </li>...
<ul><li>disputes  </li></ul><ul><li>• Among the unique aspects of Islamic law is the pro- </li></ul><ul><li>hibition of pa...
<ul><li>• Investments in alcohol, gambling, & casino’s are  </li></ul><ul><li>prohibited </li></ul><ul><li>• Followers of ...
<ul><li>• The international manager should have knowledge </li></ul><ul><li>of the religion’s tenets & understand the way ...
<ul><li>Socialist Law </li></ul><ul><li>• This law evolves from the Marxist socialist system &  </li></ul><ul><li>continue...
<ul><li>• The legal system is not just a set of institutions, but  </li></ul><ul><li>means to achieve a Communist society,...
<ul><li>standards for business practices </li></ul><ul><li>• At the centres of the socialist legal tradition is the  </li>...
<ul><li>sector within a multi-component or mixed economy </li></ul><ul><li>in a socialist legal framework </li></ul><ul><l...
<ul><li>2.  Common law </li></ul><ul><li>• Common comes from English law & it is the found- </li></ul><ul><li>ation of the...
<ul><li>• A key concept in common law is that similar  </li></ul><ul><li>disputes should achieve similar legal results </l...
<ul><li>• Laws affecting business practices vary somewhat in  </li></ul><ul><li>countries which follow common law, creatin...
<ul><li>offer blanket rules </li></ul><ul><li>• Finally, tradition is a major source of law in  </li></ul><ul><li>common l...
<ul><li>Civil or Code Law </li></ul><ul><li>• The civil law system, also called a codified legal </li></ul><ul><li>system,...
<ul><li>• In a common law system, the judge serves as a  </li></ul><ul><li>neutral reference, defining points of law & rul...
<ul><li>intellectual property </li></ul><ul><li>• Under common law, ownership is established by use; </li></ul><ul><li>und...
<ul><li>4.  Comparative Law </li></ul><ul><li>• Comparative law is not a source or system of a law  </li></ul><ul><li>but ...
<ul><li>• Taking own country’s experience & generalising  </li></ul><ul><li>them as applicable to other countries may be a...
<ul><li>• Another interesting case relates to a consultant  </li></ul><ul><li>named Flynn who was assisting a US printing ...
<ul><li>to attract foreign capital, including laws on govern- </li></ul><ul><li>ment approval for foreign investment & tec...
<ul><li>International Dispute Resolution </li></ul><ul><li>• Legal disputes can arise in three situations : between  </li>...
<ul><li>• Often, contracts contain jurisdictional clauses which </li></ul><ul><li>specify that the law of a particular cou...
<ul><li>outside his or her own country) will apply  </li></ul><ul><li>• Jurisdictional issues within the European Union ar...
<ul><li>Conciliation  </li></ul><ul><li>• Also known as mediation, this is a non-bonding  </li></ul><ul><li>agreement betw...
<ul><li>the parties may not be disclosed or used as evidence </li></ul><ul><li>in any subsequent litigation or arbitration...
<ul><li>be tried  </li></ul><ul><li>• In fact, some Chinese cos. may avoid doing business </li></ul><ul><li>with companies...
<ul><li>Arbitration  </li></ul><ul><li>• If conciliation is not used or an agreement cannot be </li></ul><ul><li>achieved,...
<ul><li>• The Inter-American Commercial Arbitration Com- </li></ul><ul><li>mission  </li></ul><ul><li>• The Canadian-Ameri...
<ul><li>• Arbitration under the rules of the International  </li></ul><ul><li>Chambers of Commerce (ICC) affords an excell...
<ul><li>to a hearing,  especially when compared to the  </li></ul><ul><li>expensive & cumbersome discovery process in  </l...
<ul><li>agree to do so, usually in their initial contract </li></ul><ul><li>• Arbitration has become popular in both domes...
<ul><li>Litigation </li></ul><ul><li>• Seeking justice in a court is generally avoided by  </li></ul><ul><li>parties to an...
<ul><li>otherwise have been possible in a mutually agreed </li></ul><ul><li>settlement through arbitration </li></ul><ul><...
<ul><li>(inter-national or domestic), four steps are needed : </li></ul><ul><li>• First, try to placate the affected party...
<ul><li>Areas of Concerns for MNCs </li></ul><ul><li>• The immediate legal issues that bother MNCs most </li></ul><ul><li>...
M N C Protection  of IPRS Contracts Advertising & Sales Promotion Product Liability & Safety Competition Laws Bribery & Co...
<ul><li>Intellectual Property </li></ul><ul><li>• Property that results from people’s intellectual  </li></ul><ul><li>tale...
<ul><li>• Copyrights are the exclusive legal rights of authors, </li></ul><ul><li>composers, play-wrights, artists, & publ...
<ul><li>novel ways of doing things & reward creativity  </li></ul><ul><li>• Country vary widely in their intellectual prop...
<ul><li>Product Liability & Safety </li></ul><ul><li>• Most countries have laid down product safety laws </li></ul><ul><li...
<ul><li>laws in the world, with Europe a close second </li></ul><ul><li>• Less developed & emerging countries have the  </...
<ul><li>made all over the world must meet manufacturing  </li></ul><ul><li>& safety specifications for customers in Brazil...
<ul><li>• Shipments headed for Japan must comply with  </li></ul><ul><li>Japanese toy-safety regulations & those destined ...
<ul><li>makers is Asia, followed closely by eastern Europe </li></ul><ul><li>• Philip Morris, the world’s biggest tobacco ...
<ul><li>Competition among Businesses </li></ul><ul><li>• Competition laws are enforced to break monopolies  </li></ul><ul>...
<ul><li>• From South Korea to Brazil to the Czech Republic, </li></ul><ul><li>all countries have enacted competition laws ...
<ul><li>Bribes & Corrupt Practices </li></ul><ul><li>• Bribery is a deliberate attempt to persuade someone </li></ul><ul><...
<ul><li>of Italian firms in the 1990s, along with much  </li></ul><ul><li>anecdotal information from several years, indica...
<ul><li>Advertising & Sales Promotions </li></ul><ul><li>• Multinational businesses spend huge sums across the </li></ul><...
<ul><li>• Even during the late 19 th  century, when there were  </li></ul><ul><li>no specific laws to protect consumers (t...
<ul><li>• More than 40 countries prohibit or limit such  </li></ul><ul><li>advertising, reasoning that children cannot int...
<ul><li>• Starting in 1993, France banned all tobacco &  </li></ul><ul><li>alcohol advertising – only exception being Fren...
<ul><li>• Some countries prohibit premiums or free gifts </li></ul><ul><li>• In some countries, laws control the amount of...
<ul><li>Contracts </li></ul><ul><li>• A contract is an agreement by the parties concerned </li></ul><ul><li>to establish a...
<ul><li>contracts, although their means of resolving disputes </li></ul><ul><li>differ </li></ul><ul><li>• Under civil law...
<ul><li>Shipping of Goods (Carriage of Goods) </li></ul><ul><li>• Three subjects are relevant in this context ; </li></ul>...
<ul><li>International Carriers’ Liability </li></ul><ul><li>• The liability of an air carrier for death or personal  </li>...
<ul><li>• The Warsaw Convention is an international  convention which regulates  liability  for international  carriage of...
<ul><li>250,000 Francs or 16,600  Special Drawing Rights   (SDR) for personal injury;  </li></ul><ul><ul><ul><li>17 SDR pe...
<ul><li>2.  Ocean Shipping </li></ul><ul><li>• Two types of vessels are involved in ocean shipping - </li></ul><ul><li>cha...
<ul><li>Rules </li></ul><ul><li>• As per these rules, the primary obligation of the </li></ul><ul><li>carrier is to provid...
<ul><li>Insurance </li></ul><ul><li>• Insuring cargo is essential element in inter-national </li></ul><ul><li>business </l...
<ul><li>• Marine risks included, among others, perils of the  </li></ul><ul><li>sea, piracy, fire, thieves & barratry (the...
<ul><li>the loss is general to the entire cargo </li></ul><ul><li>• If a ship jettisons some cargo in order to save the  <...
<ul><li>Labour Legislations </li></ul><ul><li>• Yet another area of concern for an MNC relates to </li></ul><ul><li>labour...
<ul><li>Employee Dismissals </li></ul><ul><li>• Any employer believes that he should have the right </li></ul><ul><li>to t...
<ul><li>work council which must approve the dismissal  </li></ul><ul><li>• If it does not, the employer may appeal in labo...
<ul><li>American & European practices </li></ul><ul><li>• During the recession of the 1990s, for example,  </li></ul><ul><...
<ul><li>• In the post-liberalisation period, India has witnessed  </li></ul><ul><li>a series of layoffs & voluntary retire...
<ul><li>Working Conditions </li></ul><ul><li>• In many countries, conditions under which workers  </li></ul><ul><li>work a...
<ul><li>Bangkok killed more than 240 workers & injured  </li></ul><ul><li>hundreds of others </li></ul><ul><li>• In  a sep...
<ul><li>Child Labour </li></ul><ul><li>• Child labour is a widespread problem in developing </li></ul><ul><li>countries </...
<ul><li>• In addition, a large fraction of labouring children  </li></ul><ul><li>are subject to especially cruel & exploit...
<ul><li>• Inter-national trade treaties threaten such labour </li></ul><ul><li>practices  </li></ul><ul><li>• Most develop...
<ul><li>Discrimination   </li></ul><ul><li>• Discrimination at workplaces still exists even though </li></ul><ul><li>globa...
<ul><li>properties </li></ul><ul><li>• Gender discrimination is widespread  </li></ul><ul><li>• Worldwide working women co...
<ul><li>• In many countries, however, anti-discrimination  </li></ul><ul><li>laws & provisions are in place  </li></ul><ul...
<ul><li>• In Hong Kong, a new law provides for ten weeks  </li></ul><ul><li>maternity leave at two-third of the woman ‘s l...
<ul><li>Environmental Laws </li></ul><ul><li>• Inter-national environmental law has lately become </li></ul><ul><li>a topi...
<ul><li>governing coalitions  </li></ul><ul><li>• Consequently, nations have been enacting  </li></ul><ul><li>legislations...
<ul><li>Environmental Issues </li></ul><ul><li>• In the first place, it is the rich countries that talk  </li></ul><ul><li...
<ul><li>• The EU has been accused of this in order to protect  its meat & dairy products industry, which has been  </li></...
<ul><li>• The EU has no exception, India also has imposed </li></ul><ul><li>similar ban on import of poultry items  </li><...
<ul><li>machinery & equipment to check pollution of the  </li></ul><ul><li>environment  </li></ul><ul><li>• These countrie...
<ul><li>Protective Measures   </li></ul><ul><li>• Historically, countries were seeking arbitration to  </li></ul><ul><li>r...
<ul><li>• The second way of fighting pollution by any nation  </li></ul><ul><li>is to enact legislation outlawing import o...
<ul><li>Regional Approaches </li></ul><ul><li>• These are : </li></ul><ul><li>1. Banning export of hazardous material, as ...
<ul><li>Global Solutions </li></ul><ul><li>• Many environmental pollution problems are global </li></ul><ul><li>in nature ...
<ul><li>• Some of the global measures are : </li></ul><ul><li>  i)  the WTO; </li></ul><ul><li>  ii)  global ban on toxic ...
 
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Business environment 1

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  1. 1. <ul><li>Legal Environment </li></ul><ul><li>• Legal environment refers to the legal system </li></ul><ul><li>obtaining in a country </li></ul><ul><li>• The legal system than refers to the rules & laws that </li></ul><ul><li> regulate behaviour of individuals & organizations </li></ul><ul><li>• Failure to comply with the laws means that penalties </li></ul><ul><li>will be inflicted by the courts depending on the </li></ul><ul><li>seriousness of the offence </li></ul><ul><li>• The legal system of a country is of immense </li></ul><ul><li>importance to inter-national business </li></ul><ul><li>• A country’s laws regulate business practice, define </li></ul>
  2. 2. <ul><li>the manner in which business transactions are to be </li></ul><ul><li>carried out & set down the rights & obligations of </li></ul><ul><li>those involved in business deals </li></ul><ul><li>• The legal system prevailing in India should be </li></ul><ul><li>emulated by all the countries </li></ul><ul><li>• The legal resource is available to all – Indian or </li></ul><ul><li>foreigners </li></ul><ul><li>• Justice is meted to any petitioner, depending on the </li></ul><ul><li>merits of the case </li></ul><ul><li>• GE, for example, got back the entire investments of </li></ul><ul><li>$ 115 million from Dhabol once the latter vent bust </li></ul><ul><li>• Scott Bayman, the CEO, admitted that nowhere else </li></ul><ul><li>this would have been possible </li></ul>
  3. 3. <ul><li>• Laws do not change overnight </li></ul><ul><li>• They change over a long period of time & may lag </li></ul><ul><li>behind important cultural changes which are taking </li></ul><ul><li>place in a country </li></ul><ul><li>• In many cases, it is not cultural changes which invite </li></ul><ul><li>changes in the law but ambiguities in the law them- </li></ul><ul><li>selves which are challenged in the courts </li></ul><ul><li>• The legal system in a country is also influenced by its </li></ul><ul><li>political system </li></ul><ul><li>• The government of a country defines the legal </li></ul><ul><li>framework within which firms conduct business </li></ul><ul><li>& often the laws that regulate business reflect the </li></ul><ul><li>rulers’ political ideology </li></ul>
  4. 4. <ul><li>• Totalitarian states, for example, tend to enact laws </li></ul><ul><li>that severely restrict private enterprise, while </li></ul><ul><li>democratically elected governments pass laws that </li></ul><ul><li>are pro-private enterprise & pro-consumer </li></ul>
  5. 5. <ul><li>Systems of Law </li></ul><ul><li>• There are four basic legal systems prevailing around </li></ul><ul><li>the world : </li></ul><ul><li>1. Islamic Law </li></ul><ul><li>2. Common law </li></ul><ul><li>3. Civil or Code Law </li></ul><ul><li>4. Marxist Legal System </li></ul>
  6. 6. <ul><li>Islamic Law </li></ul><ul><li>• Islamic law, also called theocratic law, is derived </li></ul><ul><li>from the interpretation of the Quran & teachings of </li></ul><ul><li>Prophet Mohammad </li></ul><ul><li>• The word Islam translates into English as </li></ul><ul><li>‘ submission’ or ‘surrender’ </li></ul><ul><li>• Muslims submit to the will of God, who decrees </li></ul><ul><li> what is proper & what is improper </li></ul><ul><li>• God’s commandments, as revealed to Mohammad, </li></ul><ul><li>provide a path, or shari’a, for true believers to </li></ul><ul><li>follow </li></ul><ul><li> </li></ul>
  7. 7. <ul><li>• The shari’a is not a coded law </li></ul><ul><li>• It provides ethical & moral precepts as well as rules </li></ul><ul><li>of public order </li></ul><ul><li>• Countries from Philippines to the former Soviet </li></ul><ul><li>Union have substantial Muslims who follow Islamic </li></ul><ul><li>cultural & legal traditions & Islamic traditions </li></ul><ul><li>dominate the legal & social environment of most Arab nations </li></ul><ul><li>• Islamic law is the product of divine revelation </li></ul><ul><li>• It cannot be changed as the people believe in the will </li></ul><ul><li>of God </li></ul><ul><li>• The immutability of the law requires Islamic nations </li></ul><ul><li>to look to other sources of law to govern & resolve </li></ul>
  8. 8. <ul><li>disputes </li></ul><ul><li>• Among the unique aspects of Islamic law is the pro- </li></ul><ul><li>hibition of paying or receiving interest </li></ul><ul><li>• The Islamic law of contracts states that any given </li></ul><ul><li>transaction should be devoid of riba , which is </li></ul><ul><li>understood as unlawful gain by way of interest or </li></ul><ul><li>usuary </li></ul><ul><li>• Prohibiting receipt & payment of interest is the </li></ul><ul><li>nucleus of the Islamic system </li></ul><ul><li>• Prohibition against interest affects banking & </li></ul><ul><li>business practices severely </li></ul><ul><li>• However, risk sharing, property rights, individual </li></ul><ul><li>rights & duties, & sanctity of contracts are </li></ul><ul><li>advocated </li></ul>
  9. 9. <ul><li>• Investments in alcohol, gambling, & casino’s are </li></ul><ul><li>prohibited </li></ul><ul><li>• Followers of Islam & their financial institutions have </li></ul><ul><li>had to develop alternative financing arrangements </li></ul><ul><li>to source & finance capital </li></ul><ul><li>• Businesses often rely on leasing arrangements, </li></ul><ul><li>rather than borrowing money, in order to obtain </li></ul><ul><li>fixed assets </li></ul><ul><li>• In Iran, banks often charge up-front fees that act as </li></ul><ul><li>a substitute for interest payments, & depositors </li></ul><ul><li>receive shares of the bank instead of interest </li></ul><ul><li>payments </li></ul>
  10. 10. <ul><li>• The international manager should have knowledge </li></ul><ul><li>of the religion’s tenets & understand the way the law </li></ul><ul><li>may be interpreted in each region </li></ul><ul><li>• Regional courts can interpret Islamic law from the </li></ul><ul><li>viewpoint of fundamentalists or they may use a more </li></ul><ul><li>liberal translation </li></ul><ul><li>• The inter-national manager should also know that </li></ul><ul><li>the Islamic legal system places emphasis on the </li></ul><ul><li>ethical, moral, social, & religious dimensions to </li></ul><ul><li>enhance equality & fairness for the good of society </li></ul>
  11. 11. <ul><li>Socialist Law </li></ul><ul><li>• This law evolves from the Marxist socialist system & </li></ul><ul><li>continues to influence regulations in former </li></ul><ul><li>communist countries, particularly those from the </li></ul><ul><li>former Soviet Union, as well as present day China, </li></ul><ul><li>Vietnam, North Korea, & Cuba </li></ul><ul><li>• Ideology plays a crucial role in socialist law </li></ul><ul><li>• Unlike a civil law code, which can be used by </li></ul><ul><li>governments of widely differing political viewpoints, </li></ul><ul><li>socialist legal codes are designed to achieve personal </li></ul><ul><li>& societal transformation </li></ul>
  12. 12. <ul><li>• The legal system is not just a set of institutions, but </li></ul><ul><li>means to achieve a Communist society, where each </li></ul><ul><li>gives according to his or her abilities & takes </li></ul><ul><li>according to his or her needs </li></ul><ul><li>• Communist ideology permeates socialist law </li></ul><ul><li>• The legal environment provides for state ownership </li></ul><ul><li>of the means of production & distribution, including </li></ul><ul><li>most businesses </li></ul><ul><li>• It also calls for state ownership of land &, in most </li></ul><ul><li>cases, collective use of land </li></ul><ul><li>• There is little tolerance of private property rights </li></ul><ul><li>• The code support centralised planning, allowing the </li></ul><ul><li>cultural government to set national & uniform </li></ul>
  13. 13. <ul><li>standards for business practices </li></ul><ul><li>• At the centres of the socialist legal tradition is the </li></ul><ul><li>Communist party </li></ul><ul><li>• The party is the keeper of the ideology of the state </li></ul><ul><li>& through its power to nominate officers, staff the </li></ul><ul><li>bureaucracy, & monitor workplaces, it determine </li></ul><ul><li>the norms that become law </li></ul><ul><li>• Russia & China are the two countries which comes </li></ul><ul><li>to one’s mind while discussing socialist law </li></ul><ul><li>• Each country has taken a difference direction in its </li></ul><ul><li>political & economic growth </li></ul><ul><li>• Russia is moving towards a democratic system, </li></ul><ul><li>whereas China is attempting to activate private </li></ul>
  14. 14. <ul><li>sector within a multi-component or mixed economy </li></ul><ul><li>in a socialist legal framework </li></ul><ul><li>• Both the countries are busy with passing laws to suit </li></ul><ul><li>changed political environments </li></ul><ul><li>• China has implemented over 150 laws but most laws </li></ul><ul><li>are vague </li></ul><ul><li>• Russia’s experience has been identical </li></ul><ul><li>• Vaguely worded laws have been passed without </li></ul><ul><li>mechanisms for implementation </li></ul><ul><li>• These countries are struggling with universal issues </li></ul><ul><li>such as states’ rights, freedom, rights of property </li></ul><ul><li>owners, ‘taxation’ & price control </li></ul>
  15. 15. <ul><li>2. Common law </li></ul><ul><li>• Common comes from English law & it is the found- </li></ul><ul><li>ation of the legal system in the US, Canada, </li></ul><ul><li>England, Australia, New Zealand, India, & many </li></ul><ul><li>other countries </li></ul><ul><li>• Common law is based on the cumulative wisdom of </li></ul><ul><li>judges’ decisions in individual cases </li></ul><ul><li>• In common law countries, vast areas of law, such as </li></ul><ul><li>contracts, torts, & agency are controlled by </li></ul><ul><li>collections of principles deduced from specific </li></ul><ul><li>disputes resolved in an adversary process </li></ul>
  16. 16. <ul><li>• A key concept in common law is that similar </li></ul><ul><li>disputes should achieve similar legal results </li></ul><ul><li>• Thus, parties to a dispute will look for similar, </li></ul><ul><li>earlier cases with favourable decisions </li></ul><ul><li>• These earlier cases have precedential value to a </li></ul><ul><li>current dispute </li></ul><ul><li>• If an earlier case is from a higher court in the same </li></ul><ul><li>jurisdiction, a subsequent judge is expected to follow </li></ul><ul><li>the earlier decision </li></ul><ul><li>• This practice of relying on past precedences provides </li></ul><ul><li>the stability required for business people to plan </li></ul><ul><li>their future action </li></ul><ul><li>• But there is also the flip side </li></ul>
  17. 17. <ul><li>• Laws affecting business practices vary somewhat in </li></ul><ul><li>countries which follow common law, creating </li></ul><ul><li>potential problems for the not so well-informed </li></ul><ul><li>inter-national business manager </li></ul><ul><li>• For example, manufacturers of defective products </li></ul><ul><li>are more vulnerable to lawsuits in the US than in </li></ul><ul><li>New Zealand as a result of evolutionary differences </li></ul><ul><li>in the law of negligence in the two countries </li></ul><ul><li>• Legislation & its accompanying regulations are </li></ul><ul><li>another major source of law in common law </li></ul><ul><li>countries </li></ul><ul><li>• Cases provide rules for individual, specific </li></ul><ul><li>circumstances, whereas legislation & regulators </li></ul>
  18. 18. <ul><li>offer blanket rules </li></ul><ul><li>• Finally, tradition is a major source of law in </li></ul><ul><li>common law countries </li></ul><ul><li>• The customary practices of an industry or of govern- </li></ul><ul><li>ment institutions influence the way a judge will </li></ul><ul><li>look at a particular case </li></ul>
  19. 19. <ul><li>Civil or Code Law </li></ul><ul><li>• The civil law system, also called a codified legal </li></ul><ul><li>system, is based on a detailed set of laws that make </li></ul><ul><li>up a code </li></ul><ul><li>• Rules for conducting business are a part of the code </li></ul><ul><li>• Over 70 countries, including Germany, France, & </li></ul><ul><li>Japan follow civil law </li></ul><ul><li>• The civil law system originated with the Romans in </li></ul><ul><li>the ancient times, who spread it throughout the </li></ul><ul><li>Western world </li></ul><ul><li>• The roles of judges & lawyers make civil law </li></ul><ul><li>different from common law </li></ul>
  20. 20. <ul><li>• In a common law system, the judge serves as a </li></ul><ul><li>neutral reference, defining points of law & ruling </li></ul><ul><li>on various motions put forth by the opposing party’s </li></ul><ul><li>lawyers </li></ul><ul><li>• These lawyers are responsible for developing their </li></ul><ul><li>client’s cases & choosing which evidence to submit </li></ul><ul><li>on their client’s behalf </li></ul><ul><li>• In a civil law system, the judge takes on many of the </li></ul><ul><li>tasks of the lawyers, for example, determining the </li></ul><ul><li>scope of evidence to be collected & presented to the </li></ul><ul><li>court </li></ul><ul><li>• The distinction between common law & code law </li></ul><ul><li>systems becomes more pronounced in protecting </li></ul>
  21. 21. <ul><li>intellectual property </li></ul><ul><li>• Under common law, ownership is established by use; </li></ul><ul><li>under code law, ownership is determined by </li></ul><ul><li>registration </li></ul><ul><li>• In some countries where civil law prevails, certain </li></ul><ul><li>agreements may not be enforceable unless properly </li></ul><ul><li>notarised or registered ;in a common law country, </li></ul><ul><li>the same agreement may be binding so long as proof </li></ul><ul><li>of the agreement can be established. </li></ul>
  22. 22. <ul><li>4. Comparative Law </li></ul><ul><li>• Comparative law is not a source or system of a law </li></ul><ul><li>but an emerging discipline that examines differences </li></ul><ul><li>between legal systems prevailing in different </li></ul><ul><li>countries </li></ul><ul><li>• Before a manager is posted on a foreign assignment, </li></ul><ul><li>he or she is briefed about the host country’s legal </li></ul><ul><li>system </li></ul><ul><li>• Understanding the legal system of a host country is </li></ul><ul><li>not enough </li></ul><ul><li>• The inter-national manager needs to know how the </li></ul><ul><li>laws of one country compare with those obtaining </li></ul><ul><li>in another nation </li></ul>
  23. 23. <ul><li>• Taking own country’s experience & generalising </li></ul><ul><li>them as applicable to other countries may be a </li></ul><ul><li>costly mistake </li></ul><ul><li>• The comparison of foreign criminal laws is </li></ul><ul><li>important to business people who find themselves </li></ul><ul><li>under the control of a foreign government & accused </li></ul><ul><li>of crimes </li></ul><ul><li>• For example, a businesswoman was arrested in </li></ul><ul><li>Nigeria for selling oil without a licence </li></ul><ul><li>• The penalty (changed after she was arrested) was </li></ul><ul><li>death </li></ul><ul><li>• She was tried & finally acquitted - the acquittal </li></ul><ul><li>occurred because of active intervention by the </li></ul><ul><li>counsel & US congressional representatives </li></ul>
  24. 24. <ul><li>• Another interesting case relates to a consultant </li></ul><ul><li>named Flynn who was assisting a US printing co. </li></ul><ul><li>that was unable to comply with the contract terms </li></ul><ul><li>with a Mexican co. </li></ul><ul><li>• Flynn flew to Mexico to resolve the issue & was </li></ul><ul><li>arrested & sentenced to six years in prison </li></ul><ul><li>• After three years of imprisonment, the conviction </li></ul><ul><li>was overturned on the ground that he had not been </li></ul><ul><li>a party to the contract </li></ul><ul><li>• It is not only criminal law which needs comparison </li></ul><ul><li>• Foreign investments law also invites comparison </li></ul><ul><li>• Many countries, including East European, Latin & </li></ul><ul><li>South American ones, have been changing their laws </li></ul>
  25. 25. <ul><li>to attract foreign capital, including laws on govern- </li></ul><ul><li>ment approval for foreign investment & technology </li></ul><ul><li>transfer agreements </li></ul><ul><li>• Some countries have removed restrictions on profit </li></ul><ul><li>repatriations, movement of capital, & form of </li></ul><ul><li>ownership & lowered tax rates as incentives </li></ul><ul><li>• Each country, depending upon its stage of develop- </li></ul><ul><li>ment as well as past experience with foreign invest- </li></ul><ul><li>men, will develop unique investment codes </li></ul><ul><li>• Assumptions about what is permissible for business </li></ul><ul><li>in a particular country are dangerous because while </li></ul><ul><li>one country allows wholly owned foreign companies, </li></ul><ul><li>other nations may require some level of local </li></ul><ul><li>participation </li></ul>
  26. 26. <ul><li>International Dispute Resolution </li></ul><ul><li>• Legal disputes can arise in three situations : between </li></ul><ul><li>governments, between a firm & a government, & </li></ul><ul><li>between two firms </li></ul><ul><li>• Disputes between governments are resolved through </li></ul><ul><li>the intervention of the World Court at the Hague & </li></ul><ul><li>the Inter-national Court of Justice, the principal </li></ul><ul><li>judicial organ of the United Nations </li></ul><ul><li>• Disputes of the other two situations must be handled </li></ul><ul><li>in the courts of the country of one of the parties </li></ul><ul><li>involved or through arbitration </li></ul><ul><li>• Which country’s court should handle a dispute is a </li></ul><ul><li>relevant question </li></ul>
  27. 27. <ul><li>• Often, contracts contain jurisdictional clauses which </li></ul><ul><li>specify that the law of a particular country will </li></ul><ul><li>apply, as agreed by the parties to the contract </li></ul><ul><li>• Often, the law of England is specified even though </li></ul><ul><li>neither party resides in the UK </li></ul><ul><li>• This is because English law has dealt with questions </li></ul><ul><li>of inter-national trade for many countries, is well </li></ul><ul><li>documented, & has ready answers for questions </li></ul><ul><li>arising from cross-border transactions </li></ul><ul><li>• If a contract does not contain a jurisdictional clause, </li></ul><ul><li>then the law of the country in which the case is </li></ul><ul><li>heard (normally the defendant’s nations, because the </li></ul><ul><li>defendant cannot be compelled to attend a court </li></ul>
  28. 28. <ul><li>outside his or her own country) will apply </li></ul><ul><li>• Jurisdictional issues within the European Union are </li></ul><ul><li>covered by the Brussels Convention of 1982 & the </li></ul><ul><li>Rome Convention of 1990 which establish the </li></ul><ul><li>circumstances in which cases will be heard </li></ul><ul><li>• Either the contract of sale will name a country, or </li></ul><ul><li>the country with ‘the closet connection’ with the </li></ul><ul><li>country must be chosen </li></ul><ul><li>• The principal means of resolving inter-national </li></ul><ul><li>disputes are conciliation, arbitration, & litigation </li></ul><ul><li>• Most inter-national businesses prefer a settlement </li></ul><ul><li>through arbitration rather than by suing a foreign </li></ul><ul><li>country </li></ul>
  29. 29. <ul><li>Conciliation </li></ul><ul><li>• Also known as mediation, this is a non-bonding </li></ul><ul><li>agreement between parties to resolve disputes by </li></ul><ul><li>asking third party to mediate </li></ul><ul><li>• The function of the mediator is to carefully listen to </li></ul><ul><li>each party & to explore, clarify, & discuss the </li></ul><ul><li>various practical options & possibilities for a </li></ul><ul><li>solution with the intent that the parties will agree to </li></ul><ul><li>it </li></ul><ul><li>• Unlike arbitration & litigation, conciliation session </li></ul><ul><li>are private & all conferences between parties & the </li></ul><ul><li>mediator are confidential ; the statements made by </li></ul>
  30. 30. <ul><li>the parties may not be disclosed or used as evidence </li></ul><ul><li>in any subsequent litigation or arbitration </li></ul><ul><li>• The track record for the conciliation process is </li></ul><ul><li>excellent, with a majority of disputes reaching settle- </li></ul><ul><li>ment & leading to the resumption of business </li></ul><ul><li>between the disputants </li></ul><ul><li>• Conciliation is considered to be especially effective </li></ul><ul><li>when resolving dispute with Chinese business </li></ul><ul><li>partners because they feel less threatened by </li></ul><ul><li>conciliation than arbitration </li></ul><ul><li>• The Chinese believe that when a dispute occurs, </li></ul><ul><li>informal, friendly negotiation should be used first to </li></ul><ul><li>solve the problem; if that fails, conciliation should </li></ul>
  31. 31. <ul><li>be tried </li></ul><ul><li>• In fact, some Chinese cos. may avoid doing business </li></ul><ul><li>with companies that resort first to arbitration </li></ul><ul><li>• Conciliation can be either formal or informal </li></ul><ul><li>• Both sides agreeing on a third party to mediate can </li></ul><ul><li>establish informal conciliation </li></ul>
  32. 32. <ul><li>Arbitration </li></ul><ul><li>• If conciliation is not used or an agreement cannot be </li></ul><ul><li>achieved, the next step often used is arbitration </li></ul><ul><li>• The usual arbitration procedure is for the parties </li></ul><ul><li>involved to select a disinterested & informed party </li></ul><ul><li>or parties as referee to determine the merits of the </li></ul><ul><li>case & make a judgment that both parties agree to </li></ul><ul><li>honour </li></ul><ul><li>• In most countries, decisions reached in formal </li></ul><ul><li>arbitration are enforceable under the law </li></ul><ul><li>Some of the more active are the following : </li></ul>
  33. 33. <ul><li>• The Inter-American Commercial Arbitration Com- </li></ul><ul><li>mission </li></ul><ul><li>• The Canadian-American Commercial Arbitration </li></ul><ul><li>Commission (for disputes between Canadian & US </li></ul><ul><li>businesses) </li></ul><ul><li>• The London Court of Arbitration (decisions are </li></ul><ul><li>enforceable under English law & English courts) </li></ul><ul><li>• The American Arbitration Association </li></ul><ul><li>• The Inter-national Chamber of Commerce </li></ul><ul><li>• The Commercial Dispute Resolution Center of the </li></ul><ul><li>Americas </li></ul><ul><li>• The procedures used by formal arbitration </li></ul><ul><li>organisations are similar </li></ul>
  34. 34. <ul><li>• Arbitration under the rules of the International </li></ul><ul><li>Chambers of Commerce (ICC) affords an excellent </li></ul><ul><li>example of how most organisations operate </li></ul><ul><li>• When an initial request for arbitration is received, </li></ul><ul><li>the Chamber first attempts conciliation between the </li></ul><ul><li>disputants </li></ul><ul><li>• If this fails, the process of arbitration is started </li></ul><ul><li>• The plaintiff & the defendant select one person each </li></ul><ul><li>from among acceptable arbitrators to defend their </li></ul><ul><li>case & the ICC Courts of Arbitration appoints a </li></ul><ul><li>third member, generally chosen from a list of </li></ul><ul><li>distinguished lawyers, jurists, & professors </li></ul><ul><li>• It may have a more streamlined process of getting </li></ul>
  35. 35. <ul><li>to a hearing, especially when compared to the </li></ul><ul><li>expensive & cumbersome discovery process in </li></ul><ul><li>countries </li></ul><ul><li>• A major factor in favour of arbitration is its lack of </li></ul><ul><li>publicity </li></ul><ul><li>• Unlike court proceedings, which are open to the </li></ul><ul><li>public & often result in published decisions, </li></ul><ul><li>arbitration is a private process </li></ul><ul><li>• Other advantages of arbitration include flexibility in </li></ul><ul><li>rules on the admissibility of evidence, compellability </li></ul><ul><li>to implement decisions, & limited rights of a party </li></ul><ul><li>to appeal </li></ul><ul><li>• In order to arbitrate a dispute, the parties must </li></ul><ul><li> </li></ul>
  36. 36. <ul><li>agree to do so, usually in their initial contract </li></ul><ul><li>• Arbitration has become popular in both domestic </li></ul><ul><li>& inter-national business agreements </li></ul><ul><li>• An arbitration clause may be inserted in an employ- </li></ul><ul><li>ment contract, credit card agreement, cruise ship </li></ul><ul><li>ticket, or bank account application, as well as in big </li></ul><ul><li>contracts </li></ul>
  37. 37. <ul><li>Litigation </li></ul><ul><li>• Seeking justice in a court is generally avoided by </li></ul><ul><li>parties to an agreement </li></ul><ul><li>• The costs incurred, the frustrating delays involved, </li></ul><ul><li>& extended aggravation make victories in law suits </li></ul><ul><li>spurious </li></ul><ul><li>• There are other grey areas also in litigation : </li></ul><ul><li>1. Fear of creating a poor image & damaging </li></ul><ul><li>public relations </li></ul><ul><li>2. Fear of unfair treatment in a foreign court </li></ul><ul><li>3. Difficulty in obtaining judgment that may </li></ul>
  38. 38. <ul><li>otherwise have been possible in a mutually agreed </li></ul><ul><li>settlement through arbitration </li></ul><ul><li>4. The relatively high cost & time required to settle the </li></ul><ul><li>dispute. The issues of paying compensation to the </li></ul><ul><li>victims of the Bhopal gas tragedy has been only </li></ul><ul><li>recently decided though decades have gone by since </li></ul><ul><li>the disaster occurred </li></ul><ul><li>5. Loss of confidentiality. Unlike arbitration & </li></ul><ul><li>conciliation that are confidential, litigation is public </li></ul><ul><li>• The three approaches to dispute settlement – </li></ul><ul><li>conciliation, arbitration & litigation have their </li></ul><ul><li>advantages as well as limitations </li></ul><ul><li>• To sum up, we may state that to settle any dispute </li></ul>
  39. 39. <ul><li>(inter-national or domestic), four steps are needed : </li></ul><ul><li>• First, try to placate the affected party ; </li></ul><ul><li>• Second, if this does not work conciliate ; </li></ul><ul><li>• Third, if this also fails, seek arbitration, & </li></ul><ul><li>• Fourth, if arbitration fails ; resolve through </li></ul><ul><li>litigation . Though litigation is recommended as one of the options, a wise course of action would be to seek a settlement other than by </li></ul><ul><li>sueing </li></ul>
  40. 40. <ul><li>Areas of Concerns for MNCs </li></ul><ul><li>• The immediate legal issues that bother MNCs most </li></ul><ul><li>are the following : </li></ul><ul><li>a) Protection of intellectual property </li></ul><ul><li>b) Product liability & safety </li></ul><ul><li>c) Competition among businesses, </li></ul><ul><li>d) Payment of bribes & other corrupt practices </li></ul><ul><li>e) Advertising & sales promotions, </li></ul><ul><li>f) Formation & termination of contracts, </li></ul><ul><li>g) Shipping of goods, </li></ul><ul><li>h) Labour legislations & </li></ul><ul><li> i) Environmental laws </li></ul>
  41. 41. M N C Protection of IPRS Contracts Advertising & Sales Promotion Product Liability & Safety Competition Laws Bribery & Corruption Environmental Laws Labour Laws Shipping of Goods
  42. 42. <ul><li>Intellectual Property </li></ul><ul><li>• Property that results from people’s intellectual </li></ul><ul><li>talent & abilities is called intellectual property & </li></ul><ul><li>includes designs, novels, patents, trade marks, copy- </li></ul><ul><li>rights, computer software, & secret formulae as the </li></ul><ul><li>one used for making Coca Cola </li></ul><ul><li>• It is possible to establish ownership rights over </li></ul><ul><li>intellectual property through patents, copyrights, & </li></ul><ul><li>trade marks </li></ul><ul><li>• A patent grants the inventor of a new product or </li></ul><ul><li>process exclusive rights of manufacture, use, or sale </li></ul><ul><li>of that invention </li></ul>
  43. 43. <ul><li>• Copyrights are the exclusive legal rights of authors, </li></ul><ul><li>composers, play-wrights, artists, & publishers to </li></ul><ul><li>publish & disperse their work as they wish </li></ul><ul><li>• Trade marks are designs & names, often officially </li></ul><ul><li>registered, by which business people designate & </li></ul><ul><li>differentiate their products </li></ul><ul><li>• The philosophy behind intellectual property laws is </li></ul><ul><li>to reward the originator of an invention, book, </li></ul><ul><li>musical record, clothes design, software & the like, </li></ul><ul><li>for his or her idea & effort </li></ul><ul><li>• Such laws are a very important stimulous to </li></ul><ul><li>innovation & creative work </li></ul><ul><li>• They provide an incentive for people to search for </li></ul>
  44. 44. <ul><li>novel ways of doing things & reward creativity </li></ul><ul><li>• Country vary widely in their intellectual property </li></ul><ul><li>laws </li></ul><ul><li>• While many countries have stringent intellectual </li></ul><ul><li>property laws in their books, their enforcement has </li></ul><ul><li>been lax </li></ul><ul><li>• This has been the case even among the countries that </li></ul><ul><li>have signed important inter-national agreements to </li></ul><ul><li>protect intellectual property, such as the Paris </li></ul><ul><li>Convention for the protection of industrial </li></ul><ul><li>properties which has 96 countries as signatories to it </li></ul><ul><li>• Weak enforcement encourages the piracy of </li></ul><ul><li>intellectual property </li></ul><ul><li>• China & Thailand are the worst offenders in Asia. </li></ul>
  45. 45. <ul><li>Product Liability & Safety </li></ul><ul><li>• Most countries have laid down product safety laws </li></ul><ul><li>which bind manufacturers to produce safe products </li></ul><ul><li>• Products liability holds manufacturers & sellers </li></ul><ul><li>responsible for damage, injury, or death caused by </li></ul><ul><li>defective products </li></ul><ul><li>• Affected parties can sue both for monetary compen- </li></ul><ul><li>sation through civil law suits, or imprisonment </li></ul><ul><li>through criminal lawsuits </li></ul><ul><li>• Civil lawsuits are frequently settled before cases are </li></ul><ul><li>filed in courts </li></ul><ul><li>• The United States has the toughest product liability </li></ul>
  46. 46. <ul><li>laws in the world, with Europe a close second </li></ul><ul><li>• Less developed & emerging countries have the </li></ul><ul><li>weakest laws </li></ul><ul><li>• By the same token, insurance premiums & legal </li></ul><ul><li>expenses are greater in those nations with strong </li></ul><ul><li>product liability laws </li></ul><ul><li>• Awarded damages tend to be several times larger in </li></ul><ul><li>the United States than in other developed countries </li></ul><ul><li>• Conforming to different inter-national laws can be a </li></ul><ul><li>complex process </li></ul><ul><li>• Consider a product as seemingly straightforward as </li></ul><ul><li>Chinese-made teddy bears </li></ul><ul><li>• Bears that were assembled in China with parts </li></ul>
  47. 47. <ul><li>made all over the world must meet manufacturing </li></ul><ul><li>& safety specifications for customers in Brazil, </li></ul><ul><li>Canada, the European Union, Japan, Mexico, & the </li></ul><ul><li>United States </li></ul><ul><li>• Before a teddy bear can be shipped to the United </li></ul><ul><li>States, four different certificates from four different </li></ul><ul><li>labs must be obtained </li></ul><ul><li>• Each one certifies that the toy complies with various </li></ul><ul><li>US federal regulations, including ASTM F-963, the </li></ul><ul><li>US voluntary toy-safety standard </li></ul><ul><li>• Teddy bears headed for Brazil need certification for </li></ul><ul><li>a recognised US or Brazilian laboratory </li></ul>
  48. 48. <ul><li>• Shipments headed for Japan must comply with </li></ul><ul><li>Japanese toy-safety regulations & those destined for </li></ul><ul><li>sale in the European Union must comply with ENZI, </li></ul><ul><li>the European safety standard </li></ul><ul><li>• Enforcement of product liability laws differ from </li></ul><ul><li>nation to nation </li></ul><ul><li>• In the United States, for instance, tobacco companies </li></ul><ul><li>are under attack for failing to warn consumers </li></ul><ul><li>about the health effects of tobacco & nicotine </li></ul><ul><li>• In countries like India & Sri Lanka, however, they </li></ul><ul><li>are free from scrutiny by public-welfare </li></ul><ul><li>organisations Because of far less stringent </li></ul><ul><li>regulation, the biggest market for US cigarette </li></ul><ul><li> </li></ul>
  49. 49. <ul><li>makers is Asia, followed closely by eastern Europe </li></ul><ul><li>• Philip Morris, the world’s biggest tobacco co., </li></ul><ul><li>increased inter-national sales by 80 per cent (to 660 </li></ul><ul><li>billion cigarettes) between 1990 & 1997 </li></ul><ul><li>• In Poland, market potential is still quite large despite the curbing of cigarette advertising, raising of taxes, & banning of smoking on the job </li></ul><ul><li>• About 50 per cent of all Polish adults smoke, </li></ul><ul><li>compared to 25 per cent in the United States </li></ul>
  50. 50. <ul><li>Competition among Businesses </li></ul><ul><li>• Competition laws are enforced to break monopolies </li></ul><ul><li>& protect consumer interests </li></ul><ul><li>• It is truism that consumer interests are better </li></ul><ul><li>protected by encouraging competition among </li></ul><ul><li>manufacturers & sellers of products </li></ul><ul><li>• In India there is the Competition Law </li></ul><ul><li>• Other countries too have antitrust laws </li></ul><ul><li>• The US has antitrust legislation, as also in Germany </li></ul><ul><li>• In Japan, the fair Trade Commission enforces anti- </li></ul><ul><li>trust laws </li></ul>
  51. 51. <ul><li>• From South Korea to Brazil to the Czech Republic, </li></ul><ul><li>all countries have enacted competition laws </li></ul><ul><li>• All antitrust laws are identical in their focus on two </li></ul><ul><li>types of activities </li></ul><ul><li>• First, competition laws tend to prohibit agreement </li></ul><ul><li>between competitors that restrict competition </li></ul><ul><li>• Secondly, such laws prohibit the abuse of a </li></ul><ul><li>dominant market position </li></ul>
  52. 52. <ul><li>Bribes & Corrupt Practices </li></ul><ul><li>• Bribery is a deliberate attempt to persuade someone </li></ul><ul><li>(usually in position of power & authority) to act </li></ul><ul><li>improperly in favour of the party offering bribes in </li></ul><ul><li>the form of money or gifts </li></ul><ul><li>• Bribery is the root cause for corruption </li></ul><ul><li>• Corruption then may be understood as the abuse of </li></ul><ul><li>public office for private gain </li></ul><ul><li>• Inter-national businesses are known to bribe officials </li></ul><ul><li>to get favours </li></ul><ul><li>• Investigations of the US based MNCs in the 1970s & </li></ul>
  53. 53. <ul><li>of Italian firms in the 1990s, along with much </li></ul><ul><li>anecdotal information from several years, indicate </li></ul><ul><li>that the practice has been widespread. </li></ul>
  54. 54. <ul><li>Advertising & Sales Promotions </li></ul><ul><li>• Multinational businesses spend huge sums across the </li></ul><ul><li>globe for advertising their products </li></ul><ul><li>• Like advertising in domestic markets, there are </li></ul><ul><li>temptations to make exaggerated claims & tell un- </li></ul><ul><li>truths while conveying messages about the product </li></ul><ul><li>to be sold in inter-national markets </li></ul><ul><li>• Almost all nations have laws to prevent such false </li></ul><ul><li>claims </li></ul><ul><li>• The EU specifically excludes fraudulent advertising </li></ul><ul><li>from its general protection of commercial speech </li></ul>
  55. 55. <ul><li>• Even during the late 19 th century, when there were </li></ul><ul><li>no specific laws to protect consumers (those were the </li></ul><ul><li>days of unbridled capitalism), courts found ways to </li></ul><ul><li>save the users </li></ul><ul><li>• In a country with no consumer protection laws, </li></ul><ul><li>English courts protected consumer by invoking </li></ul><ul><li>ancient contract law principles to news paper adver- </li></ul><ul><li>tising </li></ul><ul><li>• Advertising can also be outlawed even if its content </li></ul><ul><li>is perfectly true </li></ul><ul><li>• Advertising aimed at children, for example, is closely </li></ul><ul><li>regulated </li></ul>
  56. 56. <ul><li>• More than 40 countries prohibit or limit such </li></ul><ul><li>advertising, reasoning that children cannot intelle- </li></ul><ul><li>gently assess the contents of commercial ads </li></ul><ul><li>• Some countries insist of the use of local language </li></ul><ul><li>which complicates cross-border advertising </li></ul><ul><li>• Indonesia, for example, insists on use of Bahasa in </li></ul><ul><li>bill boards </li></ul><ul><li>• But Bahasa happens to be a second language in the </li></ul><ul><li>country of 180 million people </li></ul><ul><li>• Similarly in France, every word used in advertising </li></ul><ul><li>must be in French, even if the French people them- </li></ul><ul><li>selves use English </li></ul><ul><li>• Almost all countries limit the advertising of tobacco </li></ul><ul><li>& alcohol </li></ul>
  57. 57. <ul><li>• Starting in 1993, France banned all tobacco & </li></ul><ul><li>alcohol advertising – only exception being French </li></ul><ul><li>wine </li></ul><ul><li>• Bulgaria, has banned all tobacco advertising outside </li></ul><ul><li>of tobacco shops & threatened violators with a </li></ul><ul><li>$ 50,000 fine per violation </li></ul><ul><li>• In Britain, tobacco commercials are not banned but </li></ul><ul><li>the citizens believe the self-imposed & subjective </li></ul><ul><li>industry guidelines </li></ul><ul><li>• Sales promotions are marketing activities that </li></ul><ul><li>stimulate consumer purchases </li></ul><ul><li>• As is true in advertising, there are laws restricting </li></ul><ul><li>sales promotional activities </li></ul>
  58. 58. <ul><li>• Some countries prohibit premiums or free gifts </li></ul><ul><li>• In some countries, laws control the amount of </li></ul><ul><li>discount given to retailer, others require permits </li></ul><ul><li>for all sales promotions, & at least in one country, no </li></ul><ul><li>competitor can spend more on a sales promotion </li></ul><ul><li>than any other company selling the product. </li></ul>
  59. 59. <ul><li>Contracts </li></ul><ul><li>• A contract is an agreement by the parties concerned </li></ul><ul><li>to establish a set of rules to govern a business </li></ul><ul><li>transaction </li></ul><ul><li>• Contract law plays a major role in inter-national </li></ul><ul><li>business transactions because of the complexities </li></ul><ul><li>arising from the differences in the legal systems of </li></ul><ul><li>participating countries & because the host govern- </li></ul><ul><li>ment in many developing & communist countries is </li></ul><ul><li>often a third party in the contract </li></ul><ul><li>• Both common law & civil law countries enforce </li></ul>
  60. 60. <ul><li>contracts, although their means of resolving disputes </li></ul><ul><li>differ </li></ul><ul><li>• Under civil law, it is assumed that a contract reflects </li></ul><ul><li>promise that will be enforced without specifying the </li></ul><ul><li>details in the contract ; under common law, the </li></ul><ul><li>details of promises must be written into the contract </li></ul><ul><li>to be enforced. </li></ul>
  61. 61. <ul><li>Shipping of Goods (Carriage of Goods) </li></ul><ul><li>• Three subjects are relevant in this context ; </li></ul><ul><li>1. International Carriers’ Liability </li></ul><ul><li>2. Ocean Shipping </li></ul><ul><li>3. Insurance </li></ul>
  62. 62. <ul><li>International Carriers’ Liability </li></ul><ul><li>• The liability of an air carrier for death or personal </li></ul><ul><li>injury of a passenger or damage to property is </li></ul><ul><li>determined by the Warsaw Convention of 1929, as </li></ul><ul><li>amended in 1999 </li></ul>
  63. 63. <ul><li>• The Warsaw Convention is an international convention which regulates liability for international carriage of persons, luggage or goods performed by aircraft for reward. </li></ul><ul><li>• It was signed in 1929 in Warsaw . It was amended in 1955 at The Hague and in 1975 in Montreal . </li></ul><ul><li>• In particular, the Warsaw Convention has the following rules: </li></ul><ul><li>• carriers issue passenger tickets; </li></ul><ul><li>• carriers issue baggage checks for checked luggage; </li></ul><ul><li>• there is a limitation period of 2 years within which a claim must be brought (Article 29); and a carrier's liability is at least: </li></ul>
  64. 64. <ul><li>250,000 Francs or 16,600 Special Drawing Rights (SDR) for personal injury; </li></ul><ul><ul><ul><li>17 SDR per kilogram for checked luggage and cargo, </li></ul></ul></ul><ul><ul><ul><li>5,000 Francs or 332 SDR for the hand luggage of a traveller. </li></ul></ul></ul><ul><li>On April 1 , 2007 , the exchange rate was 1.00 SDR = 1.135 EUR O or 1.00 SDR = 1.51 USD . </li></ul><ul><li>The Montreal Convention , signed in 1999 , will replace the Warsaw Convention system, once Montreal has been ratified by all states. </li></ul>
  65. 65. <ul><li>2. Ocean Shipping </li></ul><ul><li>• Two types of vessels are involved in ocean shipping - </li></ul><ul><li>chartered ships & common carriers </li></ul><ul><li>• With a charter, the ship’s owner agrees to carry a </li></ul><ul><li>particular co’s. goods </li></ul><ul><li>• A shipper with a large cargo of goods & </li></ul><ul><li>commodities may decide to charter an entire ship to </li></ul><ul><li>take goods to overseas markets </li></ul><ul><li>• A common carrier, on the other hand, will carry </li></ul><ul><li>anyone’s goods by scheduled vessels </li></ul><ul><li>• The liability of the carrier (chartered or common </li></ul><ul><li>carrier) for damage or loss to ocean-going goods, in </li></ul><ul><li>most nations of the world, is governed by the Hague </li></ul>
  66. 66. <ul><li>Rules </li></ul><ul><li>• As per these rules, the primary obligation of the </li></ul><ul><li>carrier is to provide a seaworthy ship </li></ul><ul><li>• Its liability for damage to cargo resulting from </li></ul><ul><li>errors in navigation, perils of the sea, & fire is </li></ul><ul><li>limited </li></ul><ul><li>• The losses usually fall on the insurer of the cargo & </li></ul><ul><li>vessel. </li></ul>
  67. 67. <ul><li>Insurance </li></ul><ul><li>• Insuring cargo is essential element in inter-national </li></ul><ul><li>business </li></ul><ul><li>• The potential for damage & loss to goods, </li></ul><ul><li>particularly during ocean shipments that are more </li></ul><ul><li>lengthy & more hazardous than air shipments, is </li></ul><ul><li>tremendous </li></ul><ul><li>• Such loss is sought to be minimised through </li></ul><ul><li>insurance </li></ul><ul><li>• Historically, marine cargo insurance covered two </li></ul><ul><li>separate categories of underwriting risks : </li></ul><ul><li>a) marine risks, & b) war risks </li></ul>
  68. 68. <ul><li>• Marine risks included, among others, perils of the </li></ul><ul><li>sea, piracy, fire, thieves & barratry (the serious </li></ul><ul><li>misconduct of the captain or crew) </li></ul><ul><li>• War risk included the risk of aerial bombardment, </li></ul><ul><li>mines, torpedoes, taking or seizures by governments </li></ul><ul><li>factions, or belligerents in wars, civil wars, & </li></ul><ul><li>rebellions </li></ul><ul><li>• Today, it is common to obtain insurance to cover all </li></ul><ul><li>risks, rather than to rely on a listing of specific risk </li></ul><ul><li>covered </li></ul><ul><li>• Some insurance policies contain the clause “free of </li></ul><ul><li>particular average” (FPA) which means that the </li></ul><ul><li>underwriter will not pay for any partial loss unless </li></ul>
  69. 69. <ul><li>the loss is general to the entire cargo </li></ul><ul><li>• If a ship jettisons some cargo in order to save the </li></ul><ul><li>ship,all shippers & the ship owner suffer </li></ul><ul><li>proportionately </li></ul><ul><li>• If a shipper is shipping wool that is partially </li></ul><ul><li>destroyed but the other shippers do not suffer any </li></ul><ul><li>loss, her loss would be “particular” & thus not pay- </li></ul><ul><li>able under an FPA clause </li></ul><ul><li>• Some policies state “FPA unless 10 per cent” </li></ul><ul><li>• In this situation, the insurer will pay for partial </li></ul><ul><li>losses exceeding 10 per cent of the valuation of the </li></ul><ul><li>cargo. </li></ul>
  70. 70. <ul><li>Labour Legislations </li></ul><ul><li>• Yet another area of concern for an MNC relates to </li></ul><ul><li>labour legislations prevailing in different countries </li></ul><ul><li>• Three main issues relating to labour are : </li></ul><ul><li>1. Employee dismissals </li></ul><ul><li>2. Working conditions </li></ul><ul><li>3. Discrimination </li></ul>
  71. 71. <ul><li>Employee Dismissals </li></ul><ul><li>• Any employer believes that he should have the right </li></ul><ul><li>to terminate the services of an employee the moment </li></ul><ul><li>the individual ceases to be productive </li></ul><ul><li>• This is the right an employer in the US enjoys </li></ul><ul><li>• Law in the UK mandates that an employer consult </li></ul><ul><li>with the appropriate trade union before making a </li></ul><ul><li>dismissal </li></ul><ul><li>• If the workforce is to be reduced by ten or more </li></ul><ul><li>employees, a consultation must take place sixty days </li></ul><ul><li>prior to termination </li></ul><ul><li>• Under German law, the employer should consult a </li></ul>
  72. 72. <ul><li>work council which must approve the dismissal </li></ul><ul><li>• If it does not, the employer may appeal in labour </li></ul><ul><li>court, but is likely to lose the appeal </li></ul><ul><li>• In Japan, an individual is expected to hold a job in </li></ul><ul><li>the same co. for a lifetime </li></ul><ul><li>• But conditions are changing on the labour front </li></ul><ul><li>• US businesses, for example, are being influenced </li></ul><ul><li>more & more by European & Japanese practices </li></ul><ul><li>• The employees are now given unpaid leave to care for family members & are guaranteed jobs back </li></ul><ul><li>after such leave & are warned in advance of any </li></ul><ul><li>plant closure </li></ul><ul><li>• Japanese, on the other hand, are being influenced by </li></ul>
  73. 73. <ul><li>American & European practices </li></ul><ul><li>• During the recession of the 1990s, for example, </li></ul><ul><li>giants such as Nippon Telephone & Telegraph, NKK </li></ul><ul><li>Corporation, & Nissan Corporation successfully </li></ul><ul><li>implemented reduction in their staff strengths </li></ul><ul><li>• These firms did not actually lay off employees, but </li></ul><ul><li>effected the reductions through normal attrition, </li></ul><ul><li>intra-company transfers, & transfers to subsidiaries </li></ul><ul><li>• But because many employees rejected unattractive </li></ul><ul><li>transfers & many subsidiaries went out of business, </li></ul><ul><li>the purpose was well served </li></ul><ul><li>• The days of lifetime employment are actually </li></ul><ul><li>numbered </li></ul>
  74. 74. <ul><li>• In the post-liberalisation period, India has witnessed </li></ul><ul><li>a series of layoffs & voluntary retirement schemes </li></ul><ul><li>being implemented both in public sector & private </li></ul><ul><li> sector units </li></ul><ul><li>• Change on the labour front notwithstanding, when </li></ul><ul><li>acquiring a co., an MNC is required to adhere to </li></ul><ul><li>its existing employment arrangements </li></ul><ul><li>• In other words, when acquiring a manufacturing </li></ul><ul><li>unit, one may be acquiring the collective bargaining </li></ul><ul><li>agreement that the seller had negotiated with the </li></ul><ul><li>trade union prior to the purchase of the company </li></ul>
  75. 75. <ul><li>Working Conditions </li></ul><ul><li>• In many countries, conditions under which workers </li></ul><ul><li>work are unsafe & unhealthy </li></ul><ul><li>• Child labour is also grossly abused </li></ul><ul><li>• One of the most common & dangerous of unsafe </li></ul><ul><li>practices is the blocking & locking of all exits in </li></ul><ul><li>manufacturing facilities as a low-cost measure to </li></ul><ul><li>prevent pilfering </li></ul><ul><li>• This practice has caused thousands of workers to be </li></ul><ul><li>trapped burnt alive when fires broke out in such </li></ul><ul><li>buildings </li></ul><ul><li>• For example, a fire in a locked toy factory near </li></ul>
  76. 76. <ul><li>Bangkok killed more than 240 workers & injured </li></ul><ul><li>hundreds of others </li></ul><ul><li>• In a separate incident, a fire in a locked facility </li></ul><ul><li>killed 80 young women in Dongguan, China </li></ul><ul><li>• The lack of ventilation in many factories increased </li></ul><ul><li>the incidence of tuberculosis & sinusitis among </li></ul><ul><li>workers </li></ul><ul><li>• A second, common safety issue is the use of </li></ul><ul><li>antiquated & poorly-maintained equipment </li></ul><ul><li>• Such equipment causes the rate of workplace </li></ul><ul><li>injuries to balloons </li></ul><ul><li>• In fact, in many developing nations, work-related </li></ul><ul><li>injuries have doubled in the last five years. </li></ul>
  77. 77. <ul><li>Child Labour </li></ul><ul><li>• Child labour is a widespread problem in developing </li></ul><ul><li>countries </li></ul><ul><li>• When children under age 14 work, their labour time </li></ul><ul><li>at minimum disrupts their schooling & in a majority </li></ul><ul><li>of cases, prevent them from attending school </li></ul><ul><li>altogether </li></ul><ul><li>• Compounding this, the health of child worker is </li></ul><ul><li>significantly worse, even accounting for their </li></ul><ul><li>poverty status, than that of children who do not </li></ul><ul><li>work ; physically stunting among child labourers is </li></ul><ul><li>very common </li></ul>
  78. 78. <ul><li>• In addition, a large fraction of labouring children </li></ul><ul><li>are subject to especially cruel & exploitative working </li></ul><ul><li>conditions </li></ul><ul><li>• The Inter-national Labour Office (ILO), a U.N body </li></ul><ul><li>that has played a lead role on the child labour issues, </li></ul><ul><li>recently estimated that some 120 million children in </li></ul><ul><li>developing countries between the age of 5 & 14 are </li></ul><ul><li>working full time, with another 130 million working </li></ul><ul><li>half-time </li></ul><ul><li>• Some 61% of the 250 million working children, or </li></ul><ul><li>nearly 153 million live in Asia, while 32%, or 80 </li></ul><ul><li>million, live in Africa, & 7%, or over 17 million, </li></ul><ul><li>live in Latin America </li></ul>
  79. 79. <ul><li>• Inter-national trade treaties threaten such labour </li></ul><ul><li>practices </li></ul><ul><li>• Most developed nations have attempted to make </li></ul><ul><li>non-enforcement of employment laws a violation of </li></ul><ul><li>inter-national trade agreements </li></ul>
  80. 80. <ul><li>Discrimination </li></ul><ul><li>• Discrimination at workplaces still exists even though </li></ul><ul><li>global firms are increasingly becoming cosmopolitan </li></ul><ul><li>• Discrimination is made on origin, religion, & gender </li></ul><ul><li>• In a few countries, the law actually requires discri- </li></ul><ul><li>mination based on religion or nationality </li></ul><ul><li>• When a country is synonymous with an ethnic group </li></ul><ul><li>that ethnic group sometimes justifies preservation </li></ul><ul><li>of its ethnic identity by methodical exclusion of those </li></ul><ul><li>outside it </li></ul><ul><li>• For example, ethnic Kuwaitis & Jordanians have </li></ul><ul><li>excluded Palestinian co-religionists from key jobs & </li></ul>
  81. 81. <ul><li>properties </li></ul><ul><li>• Gender discrimination is widespread </li></ul><ul><li>• Worldwide working women consistently earn less </li></ul><ul><li>than men </li></ul><ul><li>• In Japan, women earn only 63 per cent of what men </li></ul><ul><li>do </li></ul><ul><li>• In the United States, the figure is 74 per cent </li></ul><ul><li>• Northern European nations are some what better – </li></ul><ul><li>such as Sweden & Denmark, at 87 & 88 per cent, </li></ul><ul><li>respectively </li></ul><ul><li>• But others are measurably worse ; </li></ul><ul><li>• In some Islamic nations, restrictions are imposed on </li></ul><ul><li>women’s in workplaces </li></ul>
  82. 82. <ul><li>• In many countries, however, anti-discrimination </li></ul><ul><li>laws & provisions are in place </li></ul><ul><li>• For example, Article 7, 48, 52, & 59 of the EU treaty </li></ul><ul><li>forbid different type of discrimination within the </li></ul><ul><li>Union on the basis of nationality </li></ul><ul><li>• Law-makers particularly focused on the issue of </li></ul><ul><li>maternity leave </li></ul><ul><li>• An EU directive now provides for a minimum of </li></ul><ul><li>fourteen weeks maternity leave & an allowance of at </li></ul><ul><li>least 75 or 80 per cent of net salary </li></ul><ul><li>• It further stipulates that pregnant workers cannot </li></ul><ul><li>be fired </li></ul><ul><li> </li></ul>
  83. 83. <ul><li>• In Hong Kong, a new law provides for ten weeks </li></ul><ul><li>maternity leave at two-third of the woman ‘s latest </li></ul><ul><li>salary </li></ul><ul><li>• India requires six weeks leave at full pay </li></ul><ul><li>• The Equal Remuneration Act in India underlines </li></ul><ul><li>equal pay for equal work & prohibits any </li></ul><ul><li>discrimination in payment of wages </li></ul>
  84. 84. <ul><li>Environmental Laws </li></ul><ul><li>• Inter-national environmental law has lately become </li></ul><ul><li>a topic of considerable interest </li></ul><ul><li>• There have been large-scale inter-national </li></ul><ul><li>environmental disasters, such as the Chernobyl </li></ul><ul><li>nuclear plant disaster, the Samdoz Chemical spill </li></ul><ul><li>into the Rhine river, & various oil tanker spills </li></ul><ul><li>• At the same time, concern over the possible thinning </li></ul><ul><li>of the o-zone layer & global warming has intensified </li></ul><ul><li>• Political parties, with environmental protection as </li></ul><ul><li>main plank, have been formed around the world & </li></ul><ul><li>in countries like Germany they have become part of </li></ul>
  85. 85. <ul><li>governing coalitions </li></ul><ul><li>• Consequently, nations have been enacting </li></ul><ul><li>legislations & entering into treaties concerning the </li></ul><ul><li>environment. </li></ul><ul><li> </li></ul>
  86. 86. <ul><li>Environmental Issues </li></ul><ul><li>• In the first place, it is the rich countries that talk </li></ul><ul><li>about environment & enact laws to protect the </li></ul><ul><li>ecology </li></ul><ul><li>• Poor nations tend to oppose extensive environmental </li></ul><ul><li>regulation because it impairs their ability to profit </li></ul><ul><li>from less-sophisticated production procedures </li></ul><ul><li>• Poor countries are more concerned about growth </li></ul><ul><li>than about environmental protection </li></ul><ul><li>• Secondly, wealthy countries enact environmental </li></ul><ul><li>laws to protect themselves from foreign competition </li></ul>
  87. 87. <ul><li>• The EU has been accused of this in order to protect its meat & dairy products industry, which has been </li></ul><ul><li>battered by foreign competition </li></ul><ul><li>• In 1993, the EU traced an outbreak of disease in Italian livestock exported to Croatia </li></ul><ul><li>• Rather than banning Italian hoof & mouth Croatian </li></ul><ul><li>meat, the union banned meat from the entire former </li></ul><ul><li>East Bloc </li></ul><ul><li>• Needless to say, the arbitrariness of banning meat </li></ul><ul><li>from half a continent on the basis of an outbreak in </li></ul><ul><li>a region of a small nation, especially while not </li></ul><ul><li>banning meat from only the country where the </li></ul><ul><li>disease had occurred, struck many producers as </li></ul><ul><li>unfair </li></ul>
  88. 88. <ul><li>• The EU has no exception, India also has imposed </li></ul><ul><li>similar ban on import of poultry items </li></ul><ul><li>• In order to check the spread of bird influenza from </li></ul><ul><li>across the borders, India first imposed ban on </li></ul><ul><li>imports of wild birds, hatching eggs, bird semen, fresh meat, & processed poultry from Pakistan, Thailand, South Korea, Cambodia, Vietnam & Japan </li></ul><ul><li>• Later on January 28, 2004, the country extended the </li></ul><ul><li>ban on imports from all countries </li></ul><ul><li>• Third, rich countries seem to have a vested interest </li></ul><ul><li>in enacting environmental laws & imposing them on </li></ul><ul><li>other nations </li></ul><ul><li>• It is the wealthy nations which manufacture </li></ul>
  89. 89. <ul><li>machinery & equipment to check pollution of the </li></ul><ul><li>environment </li></ul><ul><li>• These countries are well aware of the fact that </li></ul><ul><li>environmental industry is big business. </li></ul>
  90. 90. <ul><li>Protective Measures </li></ul><ul><li>• Historically, countries were seeking arbitration to </li></ul><ul><li>resolve any dispute relating to pollution of the </li></ul><ul><li>environment </li></ul><ul><li>• In other words, the polluting country & the country </li></ul><ul><li>which suffers the consequence of pollution would </li></ul><ul><li>agree to arbitrate </li></ul><ul><li>• Arbitration can proceed only when both the </li></ul><ul><li>countries agree </li></ul><ul><li>• This rarely happens because a nation usually does </li></ul><ul><li>not voluntarily subject itself to a proceeding on </li></ul><ul><li>pollution generated from its own territory </li></ul>
  91. 91. <ul><li>• The second way of fighting pollution by any nation </li></ul><ul><li>is to enact legislation outlawing import of the </li></ul><ul><li>offending products </li></ul><ul><li>• Often, the offence lies not in the product but in its </li></ul><ul><li>manufacturing process </li></ul><ul><li>• Regulating such offences becomes difficult. </li></ul>
  92. 92. <ul><li>Regional Approaches </li></ul><ul><li>• These are : </li></ul><ul><li>1. Banning export of hazardous material, as is </li></ul><ul><li>done in the US through its Federal Insecticide, </li></ul><ul><li>Fungicide, & Rodenticide Act; </li></ul><ul><li>2. The single European Act 1985 for the EU; </li></ul><ul><li>3. North American Environmental Treaties & </li></ul><ul><li>NAFTA; </li></ul><ul><li>4. Regional marine treaties among nations </li></ul><ul><li>sharing bodies of water; & </li></ul><ul><li>5. The ASEAN Agreement on the Conservation </li></ul><ul><li>of Nature & Natural Resources for Asian </li></ul><ul><li>countries. </li></ul>
  93. 93. <ul><li>Global Solutions </li></ul><ul><li>• Many environmental pollution problems are global </li></ul><ul><li>in nature </li></ul><ul><li>• The United Nations began its work in this arena in </li></ul><ul><li>December 1972 when it adopted the Stockholm </li></ul><ul><li>Declaration on the Human Environment & founded </li></ul><ul><li>the United Nations Environmental Programme </li></ul><ul><li>(UNEP) </li></ul><ul><li>• UNEP has become the catalyst for the formulation </li></ul><ul><li>or adoption of almost 30 binding multilateral </li></ul><ul><li>instruments & ten sets of non-binding </li></ul><ul><li>environmental guidelines & principles </li></ul>
  94. 94. <ul><li>• Some of the global measures are : </li></ul><ul><li> i) the WTO; </li></ul><ul><li> ii) global ban on toxic substances such as PCBs, </li></ul><ul><li> DDT, dioxins, & furans; </li></ul><ul><li> iii) the Basel Convention on Transboundary </li></ul><ul><li> Movements of Hazardous Wastes & their </li></ul><ul><li> Disposal; </li></ul><ul><li> iv) the Conventional on Inter-national Trade </li></ul><ul><li> Endangered Species; </li></ul><ul><li> v) the Montreal Protocol ;& </li></ul><ul><li> vi) the Climate Control Convention. </li></ul>
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