04 the international legal environment

8/12/2019 04 the International Legal Environment

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I n t e r n a t i o n a l M a r k e t i n g

The InternationalLegal Environment:

Playing by the Rules

Chapter 7

13 t h E d i t i o n

P h i l i p R. C a t e o r a

M a r y C. G i l l y

J o h n L . G r a h a m


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What Should You Learn?

The four heritages of todays legal systems

The important factors in jurisdiction of legaldisputes

Issues associated with jurisdiction of legaldisputes and the various methods of disputeresolution

The unique problems of protecting intellectual

property rights internationally


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What Should You Learn?

How to protect against piracy and counterfeiting

The legal differences between countries andhow the differences can affect internationalmarketing plans

The different ways U.S. laws can be applied toU.S. companies operating outside the UnitedStates

The many issues of evolving cyberlaw


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Global PerspectiveThe Pajama Caper

No single, uniform international commercial lawgoverns foreign business transactions The international marketer must pay particular attention to the

laws of each country

Laws governing business activities within andbetween countries An integral part of the legal environment of international

business

Securing expert legal advice is a wise decision

The foundation of a legal system Profoundly affects how the law is written, interpreted, and

adjudicated


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Bases for Legal Systems

Four heritages form the basis for the majority ofthe legal systems of the world

Common law

Civil or code law Islamic law

Marxist-socialist tenets

Even though a countrys laws may be based onthe doctrine of one of the four legal systems itsindividual interpretation may vary significantly


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Lawyers per 100,000 Peoplein Selected Countries

Exhibit 7.1


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Common and Code Law

Common law

Seeks interpretation through the past decisions of higher courts whichinterpret the same statues

Applies established and customary law principles to a similar set of facts

Are recognized as not being all-inclusive Ownership is established by use

Code law

Legal system is generally divided into three separate codes Commercial

Civil

Criminal

Ownership is determined by registration

Considered complete as a result of catchall provisions found in mostcode-law systems


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Islamic Law

The basis for Islamic law is interpretation of the Koran

Islamic law defines a complete system that prescribesspecific patterns of social and economic behavior for allindividuals

Property rights Economic decision making

Types of economic freedom

Among the unique aspects of Islamic law is theprohibition against the payment of interest

The Islamic system

Places emphasis on the ethical, moral, social, and religious dimensionsto enhance equality and fairness for the good of society


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Jurisdictionin International Legal Disputes

No judicial body exists to deal with legal commercialproblems arising between citizens of different countries

Legal disputes can arise in three situations Between governments

Between a company and a government

Between two companies

Jurisdiction is generally determined on the basis of:

Jurisdictional clauses included in contracts

Where a contract was entered into

Where the provisions of the contract were performed Most clear-cut decisions can be made:

When contracts or legal documents supporting a business transactioninclude a jurisdictional clause


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International DisputeResolutionConciliation

Conciliation is a nonbinding agreement betweenparties to resolve disputes by asking a thirdparty to mediate differences

Sessions are private

All conferences between parties and the mediator areconfidential

Although conciliation may be the friendly route toresolving disputes

It is not legally binding

An arbitration clause should be included in all conciliationagreements


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International DisputeResolutionArbitration

Conducted under the auspices more formaldomestic and international arbitration groups Organized specifically to facilitate the resolution of commercial disputes

The popularity of arbitration has led to aproliferation of arbitral centers

Established by countries, organizations, and institutions

Inter-American Commercial Arbitration Commission

Canadian-American Commercial Arbitration Commission (for disputes

between Canadian and U.S. businesses) London Court of Arbitration (decisions are enforceable under English law

and English courts)

American Arbitration Association

International Chamber of Commerce (select Arbitration)


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International DisputeResolutionArbitration

Contracts and other legal documents shouldinclude clauses specifying the use of arbitrationto settle disputes

Arbitration clauses require agreement on twocounts

To arbitrate in the case of a dispute according to the rules andprocedures of some arbitration tribunal

To abide by the awards resulting from the arbitration


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International DisputeResolutionLitigation

The best advice is to seek settlement

Deterrents to litigation

Fear of creating a poor image and damaging public relations

Fear of unfair treatment in a foreign court

Difficulty in collecting a judgment that may otherwise have been

collected in a mutually agreed settlement through arbitration

The relatively high cost and time required when bringing legal

action Loss of confidentiality


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Protection of Intellectual PropertyRightsA Special Problem

Companies spend millions of dollars establishingbrand names or trademarks

To symbolize quality and design

To entice customers

Millions are spent on research

To develop products, processes, designs, and formulas

Intellectual or industrial properties are among

the most valuable assets

New technologies developed to prevent piracy


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Counterfeiting and Piracy

Lost sales from the unauthorized use of U.S.patents, trademarks, and copyrights

Amount to more than $100 billion annually

The piracy industry has grown so sophisticated Many counterfeit goods are indistinguishable from original

Piracy actually can serve come companies

Microsoft

Counterfeit pharmaceuticals

2% of the $327 billion worth of drugs sold each year


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Piracy Rates for Computer SoftwareTop and Bottom 20

Exhibit 7.2


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Inadequate Protection

Failing to adequately protect intellectual propertyrights can lead to the legal loss of rights inpotentially profitable markets

There have been many cases where companieshave legally lost the rights to trademarks andhave had to buy back these rights or payroyalties for their use

McDonalds in Japan Many businesses fail to take proper steps to

legally protect their intellectual property


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International Conventions

Three major international conventions

Paris Convention for the Protection of Industrial Property

Inter-American Convention

Madrid Arrangement

World Intellectual Property Organization (WIPO) Responsible for the promotion of the protection of intellectual property

and for the administration of the various multilateral treaties throughcooperation among its member states

Patent Cooperation Treaty (PCT)

European Patent Convention (EPC)

The Trade-Related Aspects of Intellectual PropertyRights (TRIPs)


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Marketing Laws

All countries have laws regulating marketingactivities

Promotion Product development

Labeling Pricing Channels of distribution

Discrepancies across markets cause problems fortrade negotiatorsparticularly for managers and

their firms U.S. does not allow the buying or selling of human organs Some countries only have a few marketing laws with lax enforcement Others have detailed, complicated rules that are stringently enforced


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Marketing Laws

There often are vast differences in enforcementand interpretation among countries having lawscovering the same activities

Laws governing sales promotions in the European community Censorship of advertising is a constant concern

For many U.S. products with markets in Europe,meeting EU standards is less expensive thandesigning products especially for Europe


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Green Marketing Legislation

The U.S. intervenes when non-U.S. companies attemptto acquire American companies

At times, companies are subject to antitrust charges inmore than one country

Nestles proposed acquisition of Dreyers Grand Ice Cream

Microsoft

Enforcement of antitrust in Europe almost nonexistentuntil the early stages of EU established legislation


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U.S. Laws Apply in Host Countries

Foreign Corrupt Practices Act Makes it illegal for companies to pay bribes to foreign officials,

candidates, or political parties

National security laws

Prohibit a U.S. company, its subsidiaries, joint ventures, orlicensees to sell controlled products without special permissionfrom the U.S.

Antitrust laws

Enforcement has two purposes in international commerce Protect American consumers Protect American exports and investments against any private restrictions

The question of jurisdiction and how U.S. antitrust laws apply Sections I and II of the Sherman Act


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U.S. Laws Apply in Host Countries

Antiboycott law

U.S. companies are forbidden to participate in any unauthorizedforeign boycott

Required to report any request to cooperate with a boycott

Extraterritoriality of U.S. laws

Especially important to U.S. multinational firms

Foreign governments fear the influence of American governmentpolicy on their economies through U.S. multinationals

When U.S. laws conflict with those of host country

When U.S. Justice Department restricts of forbids ventures because ofanticompetitive effects


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CyberlawUnresolved Issues

Domain names and cybersquatters

Cybersquatters (CSQs) buy and register descriptive nouns, geographicnames, and names of ethnic groups and pharmaceutical substances,and other similar descriptors and hold them until they can be sold at aninflated price

Other cybersquatting abuses that can pose a seriousthreat to business include parody sites, protest sites, andhate sites

www.walmartsucks.org

The Internet is not a libel-free zone

Lawsuits involving libel, defamation, and product liability causecompanies to voluntarily restrict their Web sites to selected countries
http://www.walmartsucks.org/http://www.walmartsucks.org/


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CyberlawUnresolved Issues

Taxes

In the past, a company was deemed to have a taxable presencein a country if it had a permanent establishment there

The EU Commission Proposes value-added tax (VAT)

Jurisdiction of disputes and validity of contracts

The EU Commission has adopted an e-commerce directive thatwill permit online retailers to trade by the rules of their home

country unless the seller had enticed or approached theconsumer by way of advertising


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Summary

Businesses face a multitude of problems in theirefforts to develop successful marketing programs

Varying legal systems of the world and their effect on businesstransactions

Political climate, cultural differences, localgeography, different business customs, and thestage of economic development must be taken intoaccount

Legal questions must also be considered

Jurisdictional and legal recourse in disputes

Protection of intellectual property rights

Extended U.S. law enforcement

Enforcement of antitrust legislation by U.S. and foreigngovernments


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Summary

The Internet creates a new set of legalentanglements

The freedom that now exists on the World

Wide Web will only be a faint memory beforelong

Prudent path to follow at all stages of foreignmarketing operations is one leading tocompetent counsel, well versed in the intricaciesof the international legal environment

04 the international legal environment

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