International business chapter 3

When resolving disputes in international business, four questions must be answered are what?

(1) which country's laws apply? (2) in which country should the issue be resolved? (3) what technique should be used to resolve the conflict--litigation, arbitration, mediation, or negotiation? and (4) how will the settlement be enforced?

What is Political risk assessment? .

A systematic analysis of the political risks faced by international businesses in foreign countries.

In extreme cases, a sanction against the country may be imposed - such as India's embargo on trade with Nepal in the early 1990s. What is this action called?

An embargo

This is followed by communist countries and dictatorships, is whatever the country's bureaucrats say it is, regardless of the formal law of the land?

Bureaucratic law

Negative effects of MNCs on the host country?

MNCs can drive domestic firms out of business, creating unemployment. They also often benefit from tax holidays and other policies that reduce the positive effects that otherwise might have been generated. Because of their size, MNCs are often able to counter efforts of host country governments to restrict their activities.

MNCs

Multi National Companys

In the U.S., firms can obtain what type of insurance for protection for their company overseas?

Overseas Private Investment Corporation (OPIC) for protection from nationalization, insurrections or revolutions, and foreign-exchange inconvertibility.

What is the conversion of state-owned property to privately owned property? It is the opposite of nationalization and creates opportunities for international businesses.

Privatization

The Multilateral Investment Guarantee Agency (MIGA), a subsidiary of the World Bank is what?

Source of insurance against political risk. In addition, firms may obtain protection from private insurance firms

What are the positvie economic effects of MNC on host country?

The capital investments MNCs make can help create jobs. The taxes they pay can help host governments finance a variety of programs. Technology transfer can make whole industries in the host country more efficient.

What is Civil law?

This the world's most common form of legal system. It is based on a detailed listing, or codification, of what is and is not permissible with the role of the judge.

What requires protection from piracy?

Trademarks, patents, copyrights, and brand names

What is forum shopping?

When the party may seek to hear the case in the court system most favorable to its own interests.

What is the definition of an embargo?

a comprehensive sanction against all commerce with a given country

What does a macropolitical risk affect?

affects all firms in a country

micropolitical risk

affects only a specific firm or firms within a specific industry

Many companies seeking to avoid the costs and uncertainties of litigation will try to settle their dispute through?

arbitration

Domestically Oriented Laws and Home country law clearly affects a firm's domestic operations, but it may also affect a firm's international operations how?

by regulating international business activities that originate inside the country's borders, affecting the ability of domestic firms to compete internationally, and affecting business activities that occur outside the country's borders.

The United Kingdom and its former colonies all follow a legal system based on?

common law

When the government takes possession without compensating the firms it is called?

confiscation

•Many governments place these on firms in certain industries? For example, the U.S. limits foreigners to 25 percent ownership of U.S. television and radio stations

constraints of foreign ownership

How does the presence of MNCs affects the host country?

economically, politically, and culturally

When the host government compensates the private owners for the assets, the transfer is called?

expropriation

• Attempts by the home country government to regulate a firm's activities outside of the country's borders constitute a practice known as? ).

extraterritoriality

Bureaucratic law is: .

frequently inconsistent, unpredictable, and lacking in appeal procedures

How do Countries constrain foreign MNCs? can also constrain foreign MNCs by?

imposing restrictions on their ability to repatriate profits to their home country

In the common law system who acts as neutral referee? , .

judge

Most political risks fall into one of three categories:

ownership risk ,operating risk, and transfer risk

What is the principle of comity?

provides that a country will honor and enforce within its own territory the judgments and decisions of foreign courts, with certain limitations. For the principle to apply, reciprocity must be extended between the countries, proper notice must be given to the defendant, and the foreign court judgment must not violate domestic statutes or treaty obligations.

What are sanctions?

restraints against commerce with that country.

• A country may attempt to induce a second country to change an undesirable policy by imposing what?

sanctions

What is Religious law?

system based on the officially established rules governing the faith and practice of a particular religion.

An example of extraterritoriality discussed in the text is?

the Helms-Burton Act. Another example of extraterritoriality is the Foreign Corrupt Practices Act

What is Common law is law based on?

the cumulative wisdom of judges' decisions on individual cases through history. Thus, each country's legal system evolves as individual cases set precedents

In a civil law system, what are the judges duties?

the judge takes on many of the tasks that would be completed by lawyers in a common law system

What is arbitration?

the process by which both parties to the conflict agree to submit their cases to a private individual or body whose decision they will honor

A country that follows such a system based on officially established rules governing the faith and practive of a particular religion is called ?

theocracy

What is Statutory laws?

those laws enacted by legislative action, also vary among common law countries, as does the administration of the law.

What do sanctions do?

used to limit the export of high-technology goods that may have military applications (sometimes called dual-products).

When does Nationalization occur?

when a government takes possession of assets belonging to a foreign company.

transfer risk

where the government interferes with the firm's ability to shift funds into and out of the country

operating risk

where the ongoing operations of the firm and/or the safety of its employees are threatened through changes in laws, environmental standards, tax codes, terrorism, and so forth

ownership risk

where the property of the firm is threatened through confiscation or expropriation

What is the Foreign Sovereign Immunities Act of 1976 of the U.S.

•It provides that the actions of foreign governments against U.S. firms are generally beyond the jurisdiction of U.S. courts. However, most countries will try to protect their firms from discriminatory actions by foreign governments by negotiating bilateral treaties.