Chapter7TheInternationalLegalEnvironment:PlayingBytheRules?McGraw-HillEducation.Allrightsreserved.Authorizedonlyforinstructoruseintheclassroom.

NoreproductionorfurtherdistributionpermittedwithoutthepriorwrittenconsentofMcGraw-HillEducation.LearningObjectives1of27-1 Thefourheritagesoftoday’slegalsystems7-2 Theimportantfactorsinthejurisdictionoflegaldisputes7-3 Thevariousmethodsofdisputeresolution7-4 Theuniqueproblemsofprotectingintellectualpropertyrightsinternationally7-5 HowtoprotectagainstpiracyandcounterfeitingLearningObjectives2of2

7-6 Themanyissuesofevolvingcyberlaw7-7 Thelegaldifferencesbetweencountriesandhowthosedifferencescanaffectinternationalmarketingplans7-8 ThedifferentwaysU.S.lawscanbeappliedtoU.S.companiesoperatingoutsidetheUnitedStates7-9 ThestepsnecessarytomovegoodsacrosscountrybordersIntroductionForeignBusinessTransactionLawNouniforminternationalcommerciallawexistsLegalsystemsindifferentcountriesarebothdisparateandcomplexImportanttocomplywiththelawsineachcountryinwhichthemultinationalcorporationoperatesBasesforLegalSystems1of6Fourheritagesoftoday’slegalsystemsCommonlawCivilorcodelawIslamiclawCommerciallegalsystemInterpretationofsystemvariesbycountryImportanceoflawalsovariesNumberofattorneyspercapitaExhibit7.1Lawyersper100,000PeopleinSelectedCountriesJumptolongdescription.Sources:RandyPeerenboom,“EconomicDevelopmentandtheDevelopmentoftheLegalProfessioninChina,”presentationatOxfordUniversity,2006;CouncilofBarsandLawSocietiesofEurope,,2010;.br,2010;,2010;BruceE.Aronson,“TheBraveNewWorldofLawyersinJapan,”PacificRimLaw&PolicyJournal

21,no.2(March2012),pp.255–75.;MitsuroObe,"JapaneseLawyers'Problem:TooFewCases,TheWallStreetJournal,April3,2016,online.BasesforLegalSystems2of6CommonLawDerivedfromEnglishlawFoundinEngland,U.S.,Canada,andothercountriesonceunderEnglishcontrolBasedontradition,practices,precedentsSetbypastcourts’interpretationsofstatutes,legallegislation,andrulingsBasesforLegalSystems3of6CodeLawDerivedfromRomanlawFoundinGermany,Japan,FranceNon-Islamicandnon-MarxistcountriesBasedonall-inclusivesystemofwrittenrulesoflaw3maincodes:commercial,civil,andcriminalAlllawsarecodified,butbroadinterpretationsarepossibleBasesforLegalSystems4of6CommonLawBasedontraditionNotall-inclusiveOwnershipofintellectualpropertybasedonuseAgreementsbindingaslongasproofofagreementisestablishedActsofGodinterpretedasunforeseeableoccurrencesofnatureCodeLawBasedonsystemofwrittenrulesCatchallprovisionswithbroadinterpretationspossibleOwnershipofintellectualpropertybasedonregistrationAgreementsnotenforceableunlessproperlynotarizedorregisteredActsofGodinterpretedasunforeseeableoccurrencesofnatureandhumanactsBasesforLegalSystems5of6IslamicLaworShari’ahBasedoninterpretationoftheKoranPrescribesspecificpatternsofsocialandeconomicbehaviorforallpeoplePropertyrights,economicdecisionmaking,economicfreedomOverridingobjectiveissocialjusticeandequalityEmphasizesethical,moral,socialandreligiousdimensionsProhibitsinvestmentinactivitiesthatviolateShari’ahIslamicLawandBankingBankinginDubai,UAE,requiresanunderstandingofIslamiclawandcustoms.ProhibitionagainstthepaymentofinterestandprohibitionagainstinvestmentsinbusinessesdealingwithalcoholandgamblingaretwoofthetenetsofIslamiclawthataffectbanking.?AliHaider/EPA/REX/ShutterstockBasesforLegalSystems6of6Marxist-SocialistTenetsPatternfordevelopmentofeconomydiffersbycountryFoundinRussia,EasternEurope,China,andothersocialiststatesLawissubordinatetoprevailingeconomicconditionsDevelopmentofcommerciallegalsystemnecessarySocialistcountriestradingwithnon-MarxistcountriesJurisdictioninInternationalDisputes1of2LegaldisputescanariseinthreesituationsBetweengovernmentsBetweenacompanyandgovernmentBetweentwocompaniesSituation1:ResolvedbyTheWorldCourtattheHagueSituations2and3:HandledbyacourtinoneofthecountriesinvolvedorthrougharbitrationJurisdictioninInternationalDisputes2of2WhichLawGoverns?Jurisdictiongenerallydeterminedby:JurisdictionalclausesincludedincontractsWhereacontractwasenteredintoWheretheprovisionsofthecontractwereperformedInternationalDisputeResolution1of3ConciliationResolvedisputebyaskingthirdpartytomediateDiscussionduringmediationisconfidentialMaynotbeusedinfuturelitigationorarbitrationNotlegallybindingInternationalDisputeResolution2of3ArbitrationDisinterestedandinformedpartychosenasrefereeDeterminethemeritsofthecaseMakejudgmentbothpartiesinconflictcanhonorManyarbitralcenterseachwithstandardizedproceduresArbitrationclausesrequireagreementontwocountsPartiesagreetorulesandproceduresofsomearbitrationtribunalPartiesagreetoabidebytheawardsresultingfromthearbitrationLegallybindinginmostcountriesInternationalDisputeResolution3of3LitigationCommonlyinitiatedbyalawsuit;heldinformalcourtMosttrytoavoidlitigationFearofcreatingpoorimageanddamagingpublicrelationsFearofunfairtreatmentinforeigncourtDifficultyincollectingjudgmentthatmayotherwisehavebeeninamutuallyagreedsettlementthrougharbitrationExpensiveandrequiresalotoftimeLossofconfidentialityProtectionofIntellectualPropertyRights:

ASpecialProblem1of6IntellectualPropertyGlobalbrandnamesandtrademarksUsedtosymbolizequalityofproductorcompanyEnticesconsumerstobuygoodorserviceImportanttoprotectAmongmostvaluableassetstoacompanyCompaniesspendmillionsofdollarsonestablishingpropertyrightsProtectionofIntellectualPropertyRights:

ASpecialProblem2of6CounterfeitingandPiracyOccursinarangeofindustriesCostscompaniesbillionsofdollarsinlostrevenueCounterfeitpharmaceuticalsmostdire;cancausedeathCollusionbetweenmanufacturerandillegitimatesellersMakescounterfeitingmorepossibleSomefeeltheintellectualpropertyregimehasgonetoofarinfavoroffirms;hinderscreativityExhibit7.2PiracyRatesforComputerSoftware,

TopandBottomTenHighestRatesCountryRate%Libya90Zimbabwe90Venezuela88Yemen87Armenia86Bangladesh86Moldova86Iraq85Azerbaijan84Belarus84LowestRatesCountryRate%UnitedStates17Japan18NewZealand18Luxembourg19Australia20Austria21Sweden21Denmark22Germany22UnitedKingdom22Source:From2016BSAandIDCGlobalSoftwarePiracyStudy

(Washington,DC:BusinessSoftwareAlliance);

SeventhAnnualBSA/IDCGlobalSoftwarePiracyStudy(Washington,DC:BusinessSoftwareAlliance),/globalstudyProtectionofIntellectualPropertyRights:

ASpecialProblem3of6InadequateProtectionLeadstolossoflegalrightsinprofitablemarketsPatents,processes,trademarks,andcopyrightsValuableinallcountriesLackofadequateprotectionagainstforeignexploitationManycasesofcompanieslosingrightstoowntrademarkandhavingtobuythembackPatentinfringementiscommonlyusedbycompetitorswithnointenttocompensateforuseProtectionofIntellectualPropertyRights:

ASpecialProblem4of6PriorUseversusRegistrationCommonlaw:ownershipestablishedbyprioruseFirsttouseistypicallyconsideredtherightfulownerCodelaw:ownershipestablishedbyregistrationFirsttoregisteristypicallyconsideredrightfulownerUseofthepropertydoesnotmatterProtectionofIntellectualPropertyRights:

ASpecialProblem5of6InternationalConventionsDesignedformutualrecognitionandprotectionofIPrightsThreemainconventionsTheParisConventionfortheProtectionofIndustrialPropertyTheInter-AmericanConventionTheMadridArrangementProtectionofIntellectualPropertyRights:

ASpecialProblem6of6OtherManagerialApproachesTraditional,butfeeble,remediesPrevention,engagelocalrepresentationanddiligentlyregisterintellectualpropertywithappropriateagenciesPursuenegationandalternativedisputeresolutionComplaintoauthoritiesofhostnationComplaintodomesticgovernmentandWorldTradeOrganization(WTO)Cyberlaw:UnresolvedIssues1of4InternetlawistoovagueDoesnotaddressuniquenessofInternetGlobalinreach,nopoliticalorgeographicboundariesEuropeanUnion,U.S.,andothercountriesdraftinglegislationWillcoverthemyriadlegalquestionsnotaddressedbycurrentlawUntilcomplete,businessesatriskMighthavetorelyonhostnation’slawsCyberlaw:UnresolvedIssues2of4DomainNamesandCybersquattersBuyandregisterwebsitenamesUsingdescriptivenouns,celebritynames,variationsoncompanytrademarksKeepdomainnametoselllateratinflatedpriceHopeowneroftrademarkornamewillpayhugedollaramountstoacquiretheURLMicrosoftandCensorshipinChinaPotentialcustomersvisitaMicrosoftboothinBeijing.WhenChinesebloggersuseMicrosoft’sservicetopostmessagesandtypeinsuchtermsas“democracy,”“capitalism,”“l(fā)iberty,”or“humanrights,”theygetayellowlightandacomputerwarning:“Thismessageincludesforbiddenlanguage.Pleasedeletetheprohibitedexpression.”Microsofthasagreedtothissortofcensorship,explainingthatitisjustfollowinglocallawsandthatthecompanystillprovidesamostusefulservicetoitsChineseclients.?NgHanGuan/APImagesCyberlaw:UnresolvedIssues3of4TaxesTraditionalsystemtaxeseconomicactivitywhereitoccursPeoplecanworkfromanywhereusingtheInternetWhenandwhereshouldthesetaxesbecollected?Whoshouldcollectthetaxes?Cyberlaw:UnresolvedIssues4of4JurisdictionofDisputesandValidityofContractsBodyofcyberlawgraduallybeingcreatedFornow,therearetwomaintroublingareasDeterminingwhoselawswillprevailinlegaldisputesbetweenpartieslocatedindifferentcountriesEstablishingcontractualvalidityofelectroniccommunicationsManycountriesworkingtoaddressissuesCommercialLawwithinCountries1of3MarketingLawsCountrieshaveuniquelawsinmarketingPromotion,development,labeling,pricing,sales,distributionLawsvaryinstrictnessbycountryandindustryDiscrepanciescreatechallengesformarketersandtradersHopeofcommoncommercialcodeacrosscountriesEuropeanUnionattemptingtostandardizelawSaleofHumanOrgansInthePhilippinesandotherdevelopingcountries,youcanbuyyourselfakidneyontheblackmarket—theglobalpriceisaround$2,000.However,U.S.lawsprohibitthebuyingandsellingofhumanorgans.?PatRoque/APImagesCommercialLawwithinCountries2of3GreenMarketingLegislationEnvironmentalprotectionofglobalconcernExtendsbeyondjustpollutionandhazardouswasteFocusesdirectlyonenvironmental-friendlinessofproductsGermanyhasmoststringentlawsRegulatemanagementandrecyclingofpackagingwaste“Ecolabel”inEuropeforproductsthatcomplywithcriteriaCommercialLawwithinCountries3of3ForeignCountries’AntitrustLawsU.S.mainenforcerinmostof20thcenturyNowusedasmodelforothercountriesEuropeancommunity,Japan,andothersFocusesonissuestoensurefaircommerceAntimonopoly,pricediscrimination,supplyrestrictions,full-lineforcingarehighlypenalizedU.S.LawsApplyinHostCountries1of5Home-CountryLawsProtectcountry’spoliticalandeconomicinterestsU.S.lawholdstrueinforeignjurisdictionsForthefirm,itssubsidiaries,andlicenseesofU.S.technologyPayingbribes,tradingwiththeenemy,commercialventuresthatharmU.S.,andunauthorizedboycottsarepunishableU.S.LawsApplyinHostCountries2of5ForeignCorruptPracticesAct(FCPA)Illegalforcompaniestopaybribestoforeignofficials,candidates,orpoliticalpartiesStiffpenaltiesforparticipatinginbriberyBriberycommonbusinesspracticeinmanycountriesStill,U.S.strictlyadherestoFCPASomearguethisdisadvantagesU.S.companiesin“corrupt”marketsU.S.LawsApplyinHostCountries3of5U.S.AntitrustLawsthatApplyinForeignMarketsTwomainpurposesininternationalcommerceProtectAmericanconsumersbyensuringtheybenefitfromproductsandideasproducedbyforeignanddomesticcompetitorsProtectAmericanexportandinvestmentopportunitiesagainstanyprivatelyimposedrestrictionsDefenseofU.S.commerceagainstthreateningforeignbehaviorofchiefconcernU.S.LawsApplyinHostCountries4of5AntiboycottLawU.S.companiescan’tparticipateinunauthorizedboycottNeedtoreportanyrequesttocooperatewithaboycottResponsetoArabLeagueboycottofIsraelibusinessesCreateschallengingsituationforU.S.companiesBlacklistedbyArabLeagueiftheytradewithIsraelPunishedbyU.S.iftheyparticipateinboycottU.S.LawsApplyinHostCountries5of5ExtraterritorialityofU.S.LawsCausesanxietyforforeignheadsofstatesU.S.lawscaninterferewitheconomicorpoliticalgoalsMultinationalcorporations(MNCs)areheldliableforactivitiesthatviolatehumanrightsLikedoingbusinesswithoppressiveregimesLawsuitsbroughttoU.S.courtsbyforeigncountriesU.S.wantsmorefirmstobecomemultinationalNeedstomakemoreprovisionsforresolutionofconflictExportRestrictions1of4U.S.PolicyonExportsBusinessescanexportwithoutaformallicenseExportsmayneedalicenseincertainsituationsCommoditiesandU.S.technicaldata,re-exportstootherforeigndestinations,U.S-originpartsusedtobuildforeignproductsControlledbyU.S.BureauofIndustryandSecurity(BIS)ExportsfromU.S.increaseddrasticallyoverlastdecadeExportAdministrationRegulations(EAR)publishedExportRestrictions2of4NationalSecurityLawsSaleofproductscannotaffectU.S.nationalsecurityAppliestoAmericanfirms,theirforeignsubsidiaries,andforeignlicenseesofU.S.technologyResponsibilityextendstothefinaldestinationoftheproductRestrictionsonweaponsofmassdestruction(WMD)post-9/11U.S.controlsexportsforahostofreasonsProtectandpromotehumanrights,enforceforeignpolic