WTO & Trade Issues - Legal and Ethical Issues in International Marketing.pptx

Legal and Ethical Issues in International Marketing

Introduction
Making the leap into overseas marketing involves more than just identifying a new market and
going after it. The process requires plenty of foresight and local knowledge if the pitfalls of legal and
cultural issues are to be avoided. Linguistic and cultural differences, shifting political systems, and
governmental protections for home-grown brands will all have to be planned for and dealt with
first.
Some of the issues of International Marketing are as follows:
• Political Climate: Some regions around the world are less stable politically and legally than
others. In these areas, the issues you face as a marketing head can change as fast as the next
election or even the next revolution. Instability makes all business harder to conduct and less
predictable into the future. Marketing campaigns in such locations must take into account the
ebb and flow of the society, and focus more on constants than trends. A changing political
climate can also affect your ability to sell goods in the region, depending on the philosophy of
those in power and the side effects of the process. If the new government decides that no more
outside companies will be welcome in your industry, the campaign you worked so hard to create
may be for naught

Introduction
• Uneven Playing Fields: In many cases there are laws and regulations in place that favor local
industry over outside companies. In these cases, your marketing and distribution network may
have to deal with tariffs and limitations that your competition never has to consider. For
example, if you are launching a marketing campaign in an international destination, the prices
you advertise may be made artificially higher by mandatory tariffs designed to make locally
manufactured goods more attractive to the consumer. Your marketing message and approach
may have to change in response so that attention is shifted from your less attractive price point
to benefits of your product or service that separate you from other, less expensive existing
options.
• Consumer Interest: Foreign market segments come with their own set of needs, wants, tastes
and desires. These must all be analyzed and considered when your marketing is being
developed. What is passe in one market can be popular in another, and what is the hottest thing
at home can be looked upon with curiosity or even negativity in different destinations around
the world. Local research and market trends are an important part of learning your new market
and avoiding issues of consumer rejection. You can have the most beautiful, effective and
thorough marketing in the world, but if the consumer doesn't want the product it won't sell.

Introduction
• Language: Marketing products or services in an unfamiliar language always has its inherent
challenges. Meaning and implication is often lost in translation from one language to the next,
and things become even more cloudy when local dialects come into play. Direct translations of
your marketing tag lines and phrases often end up making confused or forced statements that
locals immediately discern as being of foreign origin. Instead, marketing should be reworked
from the ground up in a way that caters directly to the local population, using local terms and
demonstrating a good knowledge of the culture.

Nature of International Business Disputes and Proposed Action
Introduction
• International disputes are, by definition, major disagreements between two or more countries
on matters such as territory, maritime rights, and human rights, to name just a few. These
disagreements may also be over business, considering how trade and business has joined the
globalization bandwagon.
• International disputes, however, are not limited to two or multiple parties disagreeing actively,
because they may also arise from declarations made unilaterally by one country that are not
acknowledged or accepted by other countries.
• If these international disputes are not addressed and resolved, they could lead to bigger
problems of global proportions, such as animosity and hostility between and among countries,
tense international relations, or, worse, armed conflicts and wars.

Types of International Business Disputes
• Dispute on the sale of goods or commodities:
The dispute could arise from the issues on:
 Product quality and quantity
 Pricing or costing issues;
 Payment issues, such as the conditions and modes of payment, as well as the timing of these
payments
 Transportation or logistics, including the conditions on delivery of commodities or products
 Other contractual provisions or stipulations, including how they were presented in a contract.
Often, disputes arise due to vague stipulations and references on written contracts
Clearly, this type of business dispute can be easily avoided if the contract was prepared
properly and accurately, eliminating any vagueness or ambiguity. Everything should be set out
clearly in order to avoid confusion.

• Dispute on the roles of distributors and agents:
The distinction between a distributorship contract and an agency contract must be made clearly.
Often, these two are confused, which leads to disagreements. A distributor buys the products or
commodities from the manufacturer or original seller, and proceeds to sell them. An agent, on
the other hand, does not buy the products outright. Instead, they act on behalf of the
manufacturer or original seller and promote the products or services and negotiate terms of
sale. Agents do not sell the products; it’s the manufacturer or original seller that sells them.
Dispute can arise when:
 The original seller does not conform to the terms of the distributorship contract, or vice
versa.
 It is possible that the distributor may have overstepped his bounds and started manufacturing
the same products or services, or even sold the products outside of the area or territories
agreed upon

• Dispute on the roles of distributors and agents:
 The manufacturer may also fail to deliver the agreed-upon quantity, or the distributor may
not pay the amount she is due to pay in exchange for the products delivered to him.
 Similarly, the agent may also start taking on the role of a distributor, purchasing the products
from the manufacturer, and selling them. These confusions in roles are potential roots of
international business disputes.
• Disputes on construction, engineering and infrastructure projects:
Companies involved in these industries often find themselves working in foreign territories and
being subjected to various international rules and regulations. International contracts of this
scale are often seen to be riddled with disputes because of any of the following:
 Noncompliance with contractual requirements; Impositions and requirements by various
governments in countries where the construction projects are being conducted
 Disagreements over guarantees made between the parties
Again, these disputes will be avoided if the contract is prepared correctly, and the terms adhered
to by the parties involved.

• Disputes on Procurement:
Even during the bidding stage, some disagreements may arise. In fact, in international trade, you
will hear many disputes over the bidding process itself, since they cover sensitive topics such as
deadlines and mandatory requirements to be complied with. Once the bidding process is done
and they move on to the contract, disputes may still arise regarding the terms stated therein.
• Disputes on Intellectual Property:
Countries are becoming increasingly sensitive (and possessive) when it comes to intellectual
property rights. And rightly so. You may have heard of disputes on royalties, patent and
trademark licensing, as well as the transfer of technology and/or technical know-how, and even
the provision of technical assistance.
 Disputes on Domain Name: International business disputes may also arise from
disagreements over the ownership and registration of internet domain names,
notwithstanding the fact that many rules and legislations have been put in place for their
regulation and control.

• Disputes on Intellectual Property:
 Disputes on Joint Venture: Companies often enter into joint venture agreements when
undertaking international business projects because they simply cannot handle these projects
all on their own. As a result, they will be joining forces with other businesses, often also from
other countries. The dispute is likely to result from disagreements over the terms of the
agreement, particularly on the share or contribution of each participant.
 Disputes on Maritime Contracts: International trade means bringing products overseas and
oceans to and from foreign markets. Maritime disputes, then, are to be expected, especially if
the terms of the maritime contract are not followed.
 Disputes with Customs Authorities: Importers and exporters often find themselves in
disagreement with authorities in customs offices of the countries they operate in. Most of the
time, the disagreement is on valuation of the products being imported/exported, and the
classification of the products, since they also have tax implications

Choosing How to Resolve International Business Disputes
There is no fixed rule on how you can resolve a business dispute that is on an international scale.
You cannot expect to use a method that you used to resolve one dispute on another, since there
may be circumstances that they differ in. However, the basic approach towards solving the dispute
is very much similar in international disputes.
• The first thing that must be considered is the type of international business dispute. You have to
consider the reasons for the dispute, or how they came about. Resolving a joint venture dispute,
for example, will take a different route from resolving a domain name dispute, considering how
international joint ventures are more complex when it comes to their nature and structure.
• Consider the applicable laws in the countries where the businesses and the disputes have
arisen. Remember that laws in countries often differ; one country may allow settlement by
arbitration, while another may not allow arbitration and prefer to go straight to litigation.
Employment contract disputes, on the other hand, may be settled taking into consideration the
applicable labor laws, depending on where the personnel were hired from.
• Anticipate the other types of disputes that may arise in the process of resolving the current
dispute. By taking an anticipative stance, you are looking forward and, therefore, able to be more
prepared in dealing with any repercussion of the actions you are taking at the moment to resolve
a dispute.

Choosing How to Resolve International Business Disputes
There are several ways to resolve an international business dispute, and they can be classified into
two: jurisdictional and non-jurisdictional
RESOLVING INTERNATIONAL BUSINESS DISPUTES THROUGH JURISDICTIONAL PROCESSES:
• Arbitration:
When you hear disputes concerning importing and exporting of international commodities, you
often hear arbitration being the preferred method of resolution since it is faster and less costly.
It is also not as divisive as, say, a court action or litigation taken between two parties in conflict.
In other words, instead of going into trial, parties may opt to undergo arbitration instead.
When two parties in dispute agree to go into arbitration, both agree to be bound by the ruling or
decision of the arbitrator, who is the one who will hand down the decision on how to settle or
resolve the dispute. He hands down his decision, and the dispute is resolved. In short, he acts as
a judge, which means that sometimes his decision may also be contested.
There could be a single arbitrator, or there could be a panel composed of several arbitrators,
acting as a single entity.

• Arbitration:
There are two types of arbitration:
Institutional arbitration: These days, there are now a lot of arbitral institutions in place, all with
the objective of providing arbitral services or administering arbitrations that are related to
international business and commercial disputes. They play an active role in an institutional type
of arbitration.
Ad hoc arbitration: This type of arbitration is carried out without an institution or specialist
administering the proceedings. The parties are the ones to organize the proceedings, including
the selection of the arbitrator or arbitrators.

• Court litigation:
Most businesses try to avoid litigation as much as possible. After all, as mentioned earlier, they
can be far costlier, and definitely more stressful. Compared to arbitration, litigation usually takes
more time. Litigation, then, is seen as the last resort when arbitration, mediation and
conciliation are unsuccessful.
In this method, the disputes are submitted to the court which has the jurisdiction over it – it may
be the country of the one who is making the claim, or that of the respondent.
There are also other considerations to be factored in, such as the applicable laws and the
language and culture of the territories.

RESOLVING INTERNATIONAL BUSINESS DISPUTES THROUGH NON-JURISDICTIONAL PROCESSES
• Conciliation:
Another alternate dispute resolution scheme that stays away from jurisdictional process is
conciliation, which is currently governed by the Conciliation Rules adopted by the United Nations
Commission on International Trade Law (UNCITRAL).
In conciliation, the parties involved are:
 The parties in dispute; and
 The conciliator, or a third party to settle the dispute. The conciliator must have been chosen
by the two parties in dispute. He or she is the one who decides how to go about resolving the
dispute, depending on his or her judgment. She may want to hear out the parties separately,
or together.

• Conciliation:
Just like arbitration, there are two types of conciliation proceedings that may be conducted by
the conciliator:
• Institutional conciliation: The proceedings are organized and managed by an institution that
specializes in administering arbitrations.
• Ad hoc conciliation: The conciliation is organized, managed and carried out by the parties,
without the participation or assistance of an arbitral specialist or arbitration institution.
As the word implies, conciliation requires the full agreement or consent of all the disagreeing
parties. After the proceedings, the conciliator will present his proposals or recommendations. If
the parties agree, the conciliation is a success. If not, they can try other methods, such as
mediation or arbitration.
[How Arbitration is different from Conciliation: Conciliation is a method of resolving the
dispute, where a conciliator helps the parties to arrive at solution or settlement of their
disputes.; The Arbitrator decision is enforceable and binding on the parties to dispute. On the
other hand, the conciliator decision is not enforceable and binding on the parties]

• Mediation:
Mediation and conciliation are also similar in many ways. However, the third party is known as
the “mediator”. He will examine the claims of the disagreeing parties and, after evaluation,
presents possible solutions to resolve the problem.
His role is to present all sides of the story to the parties, without trying to influence them to
decide on one thing. He does not propose a way to resolve a problem, he just presents possible
solutions. The final decision on whether to choose any of these possible solutions remains in the
hands of the parties. In other words, the mediator also acts as a guide and a moderator.
Again, mediation also has two types: ad hoc and institutionalized.

• Mini Trials:
The name may deceive you into thinking that it is a judicial process. In a way, it looks like one,
but it is not. It is, for all intents and purposes, a shorter and non-juridical version of a court trial.
Currently, this method is used in the United States, and its main objective is to get disagreeing
parties to reach an agreement and an amicable settlement without going to a full trial.
Both parties will choose their own legal counsels or representation (you can even use online
legal services), and the mini-trial conducted in front of senior executives of the parties, in the
presence of advisers or observers who will take a neutral stance throughout the proceedings. In
the proceedings, they will be giving advice when asked, and the senior executives are there to
come up with an amicable settlement or solution, and not to decide on who will win the dispute.

Role of ICC in Arbitration and Conciliation
Settlement is a desirable solution for business disputes of international character. The International
Chamber of Commerce, Paris, is a highly successful and most popular global organization /
institution. It has clear framework of rules and procedures, which provides the required facilities
and the administrative and supervisory services for settlement of disputes through arbitration and
conciliation. The ICC system combines the security and the safeguards of institutional arbitration
with the flexibility of ad-hoc arbitration. The ICC system consists of a Court of Arbitration and a
permanent Secretariat which supervises each arbitration and conciliation, together with a
comprehensive set of rules for guiding the procedure.
The arbitration and conciliation proceedings are initiated at the request of the party wishing to have
recourse to arbitration or conciliation and completed within a specified time limit. The court also
fixes the place of arbitration unless the parties have agreed otherwise
The parties having referred a dispute for arbitration or conciliation enjoy complete freedom on
some important matters like choice of arbitrators, or conciliators, applicable law, venue of
arbitration or conciliation etc, It is worthwhile to mention that the parties are free to determine the
applicable law but in the absence of any such indication by the parties the arbitrator shall apply the
law designated as the proper law by the conflict of rule which he deems appropriate.
ICC arbitration or conciliation can take place any where in the world and there are no restrictions on
the type of business dispute that can be submitted to ICC arbitration or conciliation

Legal Issues To Be Aware Of When Running An International Business
• COMPANY LAWS: The first thing you will have to do when expanding your business to another
country is to register the appropriate business structure. This can be a branch or a subsidiary of
your own company, or a new entity, the choice is all yours. Whatever you decide you must
consider the relevant company laws. Adequate knowledge of the appropriate procedures,
bureaucracy and amount of time you will need before being able to start operations is required
• EMPLOYMENT LAWS: Employment laws differ substantially from jurisdiction to jurisdiction and
are usually applied strictly by the local authorities. Making sure you comply with all relevant
wage, health and safety and other legal requirements is a must for the proper operation of your
business
• CORRUPTION ISSUES WHEN RUNNING AN INTERNATIONAL BUSINESS: Corruption is still a
major issue in most of the countries in the world. When doing business internationally, you will
notice that every different State has various customs regarding the way business is done. In that
regard, it often appears that certain payments or presents are asked in order to foster the
development of your business on local soil. Please be extremely cautious with such payments, as
they can be considered a corrupt practice in other parts of the world

• INVESTMENT TREATIES: When deciding whether to expand your business to a different country
by investing there, it is worth having a look if there are any investment agreements in place
between your home country and country in which you intend to invest. There are numerous
bilateral (between two states) and multilateral (between more than two states) agreements
whose goal is to promote foreign investment and afford substantial protection to investors.
Making use of such treaties is really beneficial, as they impose a number of obligations to the
receiving state as to the level of legal protection they should afford to foreign investors.
• LEGAL SYSTEMS: Another important issue for businesses that operate on an international level is
the respect for the fundamental difference between legal systems. There are generally two legal
regimes – the Civil law and the Common law systems.
Common law system is based on the concept of judicial precedent. Judges take an active role in
shaping the law here, since the decisions a court makes are then used as a precedent for future
cases
In a civil law system, a judge merely establishes the facts of a case and applies remedies found in
the codified law. As a result, lawmakers, scholars, and legal experts hold much more influence
over how the legal system is administered than judges.

• TAX LAWS RUNNING AN INTERNATIONAL BUSINESS: Compliance with tax regulations is a major
part of the legal obligations a business has. When doing business internationally, you will have to
pay taxes in all different locations. There are international agreements between states which
support and ease such activities, and help businesses plan their tax obligations. However, as tax
laws differ substantively from country to country, it is worth seeking advice from a competent tax
adviser in all locations your business operates. Tax is always one of many big issues for all
businesses so don’t take this lightly.
• IP RIGHTS WHEN RUNNING AN INTERNATIONAL BUSINESS: Intellectual property rights usually
are assigned in each country you have applied. This means that if you have your company name
trademark registered in one state, protection will be afforded only in this jurisdiction. The same
premise is valid for patents. In practice, the consequences of this regime are that in order to
have your IP rights protected, you should apply for such protection in any country you are
seeking it. If your business is operating in multiple jurisdictions, you have to apply to all of them
one by one.

• EXCLUSIVE DISTRIBUTION AGREEMENTS: Often times when entering a new market, you will be
offered the opportunity of signing an exclusive distribution agreement with a single distributor,
who will be the only permitted entity to sell your products.
There are certain benefits to entering into such an agreement – usually, it allows faster and
easier entry into the market.
On the other hand, however, it limits significantly growth perspectives, as you will not be
permitted to allow a different distributor to sell or deliver your goods or services. Moreover,
such agreements have stringent conditions and are hard to terminate.
Another disadvantage is the distributor who holds exclusive rights generally controls your
business in this country, therefore can have substantive power over it. When offered such a
possibility, evaluate the pros and cons and consider carefully your decision based on your
specific situation.

Ethical Issues in Marketing Communication
• Children: Marketing to children is considered an ethical issue because children can be highly
impressionable. Advertising of apparel, food, toys, films and music target youth with cartoon
characters, trendy catch phrases, and the use of child actors. According to the American
Psychological Association, children view more than 40,000 commercials each year. Although
commercials can be used to raise awareness over issues such as bullying or drugs, commercials
can also be used to make potentially harmful or unhealthy items more enticing.
• Stereotyping: Although marketing to a select niche can be helpful for companies, sometimes
marketing communication can come across as stereotypical and even offensive. Examples of this
range from sexism to racism and can often trigger a backlash from a company's target market.
• Health Concerns: Commercials often portray food as fresher, larger and more appealing than the
actual product. Although food items may appear fresh, many ingredients are present in such
small quantities that they are not listed. This can be potentially harmful for people who are
highly sensitive or allergic to certain chemicals or food items.
• Misleading Communication: Commercials sometimes make items look more stylish or more
effective, show farms or green fields on the packaging of highly processed foods, or use terms
such as "pure" or "natural" when the product actually contains preservatives.

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