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Amity School of Business

Amity School of Business


BBA, V Semester International Marketing Prof. Ruchi Khandelwal

International Legal Environment


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Amity School of Business

Effect of legal environment on companies


Multiplicity of legal environments: domestic, foreign and international. Laws can prohibit the marketing of a product, like illicit drugs or espionage equipment cannot legally enter certain countries. Laws can cause inconvenience for business Many products have to be modified to conform to local laws before they are allowed entry. Legal environment can affect a companys production strategy also. There is no international law per se, only national laws prevail which may be in conflict with one another.
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Amity School of Business

Legal Systems
Common law, derived from English law and found in England, the United States, and other countries once under English influence; Civil or code law, derived from Roman law and found in Germany, Japan, France, and other non-Islamic and non-Marxist countries; Islamic law, derived from the interpretation of Koran and found in Pakistan, Iraq, Saudi Arabia, and other Islamic states. A commercial legal system in the Marxist-socialist economies of Russia and the republics of the former Soviet Union, Eastern Europe, China and other states. The basis of Common law is traditions, past practices, and legal precedents set by the courts through interpretations of statutes, legal legislations and past rulings; code law is based on an all-inclusive system of written rules (codes) of law. There are fundamental differences causing difficulty in obedience of laws of either country, parent or host.
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Amity School of Business

Difference in legal systems


Under Common law, the impossibility of performance does not necessarily excuse compliance with the provisions of a contract unless compliance is impossible for reason of an act of God, like natural calamity. Under code law, acts of God are not limited solely to acts of nature but are extended considerably. CASE: a contract was entered into to deliver a specific quantity of cloth.
Situation 1: In one case, before the seller could make delivery an earthquake caused the destruction of the cloth, making compliance impossible. Situation 2: in the second case, the pipes in the sprinkler system where the material was stored froze and broke, spilling water on the cloth and destroying it.

Were the parties in these cases absolved of their obligations under the contract?
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Amity School of Business

Legal Systems
Islamic law, defines a complete system that prescribes specific patterns of social and economic behavior for all individuals.
Banking in Dubai, UAE, requires an understanding of Islamic law and customs. Prohibitions against the payment of interest and prohibition against investments in businesses dealing with alcohol and gambling are two tenets of Islamic law affecting the banking industry.

Marxist-socialist tenets have developed variably among the different countries because of their different backgrounds and different stages of economic development.
Central European countries have revised and reconstituted their legal codes post world war II. Russia and China, though both have built their legal systems from the scratch but the difference lies in that Russia is moving towards a democratic system, whereas, Chinas attempts are to activate a private sector within a mixed economy.
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Amity School of Business

Jurisdiction in International Legal Disputes


There is no international commercial law per se that deals with business activities of companies in the international arena, there are only national laws that vary from one country to another. The World Court at The Hague and the International Court of Justice, are operative only in international disputes between sovereign nations of the world, rather than between private citizens or countries. Jurisdiction is determined in one of three ways:
On the basis of jurisdictional clauses included in the contracts On the basis of where a contract was entered into On the basis of where the provisions of the contract were performed

Amity School of Business

Jurisdiction and extraterritoriality


Extra territorial application of law (a nation wishing to protect its own interests often applies its laws to activities outside its own territory) does not have universal acceptance. Activities of foreign subsidiaries and affiliates are very controversial and unclear. Belgiums law of universal jurisdiction allowed its legal system to exert criminal authority over war crimes, genocide and crimes against humanity that took place anywhere in the world. In 2003, the law was repealed. International Criminal Court at Hague, empowered to try individuals accused of genocide, war crimes and crimes against humanity. Territorial jurisdiction is not enough to regulate the activities of cyberspace and e-commerce which are inherently international.

Amity School of Business

International Dispute Resolution


Most disputes in international commercial transactions are settled informally, however when resolution is not forthcoming, following methods can be used:
Conciliation is a non-binding agreement between parties to resolve disputes by asking a mediator to mediate differences. Unlike arbitration and litigation, conciliation sessions are private and all conferences between parties and the mediator are confidential. The next step is arbitration, in which the parties can resolve dispute using any of the formally established domestic or international arbitration group, like London court of arbitration, the American arbitration association , International chambers of commerce, etc. Litigation should be taken as the last resort, because of many reasons like, costs, fear of creating a poor image or defamation, time involved, loss of confidentiality etc.

Amity School of Business

Important issues to consider


Legal form of Organization Different legal forms of organizations in different countries Nomenclatures indicating incorporation is different in different countries.
Decision between Branch Vs. Subsidiary As a rule MNCs prefer subsidiaries over branches because:
Recruitment of management Gaining quick access Flexibility Tax benefits Limited liability advantage

Amity School of Business

Important issues to consider


MNCs generally believe that they are protected against their subsidiary actions and liabilities due to the separate incorporation of parent firms and subsidiaries - Case of lawsuit filed by India against Union Carbide.
In addition to the law suit against Union Carbide, victims lawyers alleging plant design defects as a contributing factor, sued Humphreys and Glasgow Consultants Pvt. Ltd., Union Carbides prime contractor, based in Mumbai. The Indian counsel urged that the subsidiary and the parent company should not be treated as legally separate. Further, M. Anderson, companys chairman was charged with criminal offense of culpable homicide.
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Amity School of Business

Important issues to consider


Protection of Intellectual Property Rights Counterfeiting and Piracy
Design Rip-offs Product Rip-offs Brand name rip-offs Book Rip-offs

In an attempt to control counterfeits, China passed a law that allows customers to demand a double refund for fake merchandise sold in department stores. Counterfeiting CDs, toys, and similar products cost companies billions of dollars in lost revenue and may damage the products brand image, but counterfeits in pharmaceutical industry can do serious physical harm. Another problem is collusion between the contract manufacturers and the illegitimate sellers.
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Amity School of Business

Important issues to consider


Patent Law: United States Vs. Japan
United States
Operates under first to invent rule Protects individual inventors Patent applications secret Patents granted in up to 24 months Patents valid for 17 years from date issued Inadequate Protection Prior use Vs Registration

Japan
Operates under first to register rule Promotes technology sharing Patent applications public Patents granted in four to six years Patents valid 20 years from application

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Amity School of Business

Important issues to consider


International Conventions designed for mutual recognition and protection of IPRs:
Paris Convention, including US and 100 other countries Inter-American Convention, including Latin American nations and the US The Madrid Agreement, including 26 European countries. Patent Cooperation Treaty European Patent Convention

Once an IPR is registered, most countries require that these rights be worked and properly policed. Commercial laws within countries
Marketing laws- vast differences exist in enforcement and interpretation among various countries. Green Marketing Legislation Antitrust Laws Foreign Corrupt Practices Act (FCPA) and bribery

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