This document discusses various legal issues related to international business. It covers regional, national, and international laws; the basic characteristics and requirements of an effective legal system; the functions of law; sources of international law including treaties, customs, and judicial decisions; commercial treaties and intellectual property rights; the impact of laws on international business operations and strategy; and specific legal issues international businesses may face regarding workers, contracts, antitrust, and intellectual property.

1. LEGAL ISSUES IN INTERNATIONAL
BUSINESS
- Jitin Kollamkudy

2. Regional Laws
National Laws
International Law
The Legal Environment of
International Business

3. Basic Characteristics of Law
• Law is a norm that prescribes what is assumed to
be a proper mode of behavior
• Law not only prescribes a certain pattern of
behavior, but also requires that the prescribed mode
be followed
• Law includes a process approved by society for
applying coercive sanctions against those who do
not obey and therefore perform illegal acts

4. The Requirements of an Effective
Legal System
• The people in the society must clearly
understand and have knowledge of what the
society prescribes as legal behavior
• The members of society, the subjects of the legal
system, must have agreed that the laws deserve
to be obeyed, that is, they must regard the laws
as being fair and unjust
• An effective system for punishing illegal behavior
must be in place

5. Functions of Law
• Law communicates to individuals in a society
their rights and duties in their daily interactions
with other people in the society
• Law helps in controlling and preventing behavior
that the society considers undesirable
• Governments use law to promote the social and
economic welfare of society
• Laws of a society reflect the norms, values, aims,
and general beliefs of a society

6. The International Court of Justice
(The World Court)
• There are three scenarios under which disputes
could arise:
– Between two countries
– Between a country and a company
– Between two companies
• The International Court of Justice can adjudicate
disputes between two countries only when both
governments involved agree to submit to the
authority of the International Court of Justice

7. Sources of International Law
International
Law
International
Treaties
International
Customs
Judicial Decisions
and Teachings
General Principles
Of Law

8. Essential Elements of International
Custom
• Concordant Practice by a number of States
regarding the type of situation falling within the
domain of international relations
• Continuation and Repetition of the practice over
a considerable period of time
• Conception that the practice is consistent with
prevailing international law
• General acquiescence in the practice by other
States

9. International Treaty
An international treaty is an international agreement
concluded between states in written form and governed
by international law
Bilateral treaty: only two states are the contracting
parties
Multilateral treaty: more than two states are
contracting parties

10. Commercial Treaties
National Treatment
 Treatment that is no less favorable than that
which is given to business firms that are its own
citizens
Most-Favored-Nation (MFN) Treatment
 Obligates the country to give to the imports of
goods from the other country with which it has
signed a treaty, treatment in terms of tariffs that
is no less favorable than that given to imports
from third countries

11. Losses from Piracy of Intellectual
Property
• The international company
– loses sales in the copycat country itself as it is
forced to compete against pirated products
– loses sales in third countries where it has to
compete against exported pirated products
– suffers in its reputation as a producer of
quality products and services because pirated
products of inferior quality are often sold
under the company’s brand name
– may be prevented entry in a foreign market
because a company in the foreign market may
have established a dominant market share
using the international company’s pirated
technology or trademark

12. Origin of Commercial or Corporate
Legal Codes
1. English common law
2. Civil law of French, German, or
Scandinavian origin
3. Socialist law, based on Communist
principles

13. Impact of Laws on International
Business
• National laws affect all local business activities.
• National laws affect cross-border activities.
• International treaties and conventions may govern
some cross-border transactions.

14. Legal Issues in International Business
• Managers look at legal issues from two
perspectives:
• Operational (Procedural) Concerns: How do
legal regulations impact day-to-day operations?
• Starting a business,
• Hiring and firing,
• Entering and enforcing contracts,
• Closing down the business

15. Legal Issues in International Business
• Strategic Concerns: How do legal regulations
affect companies’ long-term competitiveness?
• Product safety and liability
• Marketplace behavior
• Product origin
• Legal jurisdiction
• Arbitration

16. Intellectual Property Rights (IPRs)
• Now, countries are competing on the strength of
their brainpower to create might, prestige, and
wealth.
• The output of this brainpower is called intellectual
property – books, designs, brand names, software.
• Problems occur because IP is hard to conceive but
easy to copy. (Piracy)
• IPRs refer to the right to control and derive the
benefits from writing (copyrights), inventions
(patents), processes (trade secrets),and identifiers
(trademarks).

17. Intellectual Property Rights (IPRs)
• Legal problems arise because countries because not
all countries formally support the various
conventions that protect IPRs.
• The Paris Convention for the Protection of
Industrial Property
• The Berne Convention for the Protection of Literary
and Artistic Works.
• The Trade Related Aspects of Intellectual Property
Rights (TRIPS) code of the WTO.

18. Why Some Countries are Less Inclined
to Protect IPRs
• 1. Level of Economic Development: Poorer
countries provide weaker legal protection than do
richer countries.
• Rich countries: protecting ideas is the only way to
energize the incentive to innovate.
• Poor countries: Strict protection of IPRs restricts
the diffusion of new technologies, inflates the
prices, inhibits economic development by
controlling the use of existing knowledge.
• 2. National Cultural Attributes:
• Individualist v. Collectivist Orientations

19. Legal Issues for International
Businesses
• Worker relations
– Health and safety standards
– Workweek
• Employment practices
• Antitrust prohibitions
• Contractual relationships
• Environmental practices
• Patents, trademarks, and intellectual property
protection
• Taxes and reporting requirements
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20. THANK YOU