Chapter 16 - International Law in a Global Economy

Correspondent Banks

a bank that acts on behalf of another bank for the purpose of facilitating fund transfers

Choice of Law Clause

a clause in a contract designating the law (such as the law of a particular state or nation) that will govern the contract

Choice of Language Clause

a clause in a contract designating the official language by which the contract will be interpreted in the event of a disagreement over the contract's terms

Normal Trade Relations (NTR) status

a legal trade status granted to member countries of the WTO

Licensing

a licensing agreement with a foreign based firm is much the same as any other licensing agreement; e.g. Coca Cola; franchising

European Union (EU)

a single integrated trading unit made up of 28 (27?) European nations

Int'l Principles and Doctrines

employed by the courts of various nations to resolve or reduce conflicts that involve a foreign element

International Customs

evidence of a general practice accepted as law

Quotas

limits on the amounts of goods that can be imported

US Antitrust Laws

-may subject firms in foreign nations to their provisions -protect foreign consumers and competitors from violations committed by US citizens

International Tort Claims

Alien Tort Claims Act (ATCA) allows foreign citizens to bring civil suits in US courts for injuries caused by violations of int'l law or a treaty of the US

Export Controls

Congress cannot import export taxes, but they can: 1. set export quotas 2. the flow of tech advanced products and technical data can be restricted 3. incentives and subsidies are used to stimulate some exports and thereby aid domestic businesses

Anti discrimination Laws

US employees working abroad for US employers are protected under the Age Discrimination in Employment Act and the Americans with Disabilities Act and the Civil Rights Act

Forum Selection Clause

a provision in a contract designating the court, jurisdiction, or tribunal that will decide any disputes arising under the contract

Force Majeure Clause

a provision in a contract stipulating that certain unforeseen events-such as war, political upheavals, or acts of God- will excuse a party from liability for nonperformance of contractual obligations

Foreign Exchange Market

a worldwide system for buying and selling of foreign currencies

Letters of Credit

a written document in which the issuer (usually a bank) promises to honor drafts or other demands for payment by 3rd persons in accordance with the terms of the instrument; the issuer is bound to pay the beneficiary when the beneficiary has complied with the terms and conditions of the letter of credit How it works: Issuer (bank) agrees to issue a letter of credit and to ascertain whether the beneficiary (seller) performs certain acts. In return, the account party (buyer) promises to reimburse the issuer for the amount paid to the beneficiary; the transaction may also involve and advising bank that transmits info and a paying bank that expedites payment under the letter of credit.

Int'l Trade Commission (ITC)

asses the acts of dumping on domestic businesses and then makes recommendations to the president concerning temporary import restrictions

North American Free Trade Agreement (NAFTA)

created a regional trading unit between Canada, Mexico, and the US; the goal of NAFTA is to eliminate tariffs among these 3 countries on substantially all goods by reducing the tariffs incrementally over time; provides for the elimination of barriers that have prevented cross border movement of services

Int'l Trade Administration (ITA)

decided whether imports were sold at less than fair value; the ITA's determination established the amount of antidumping duties, which = the difference between the price charged in the US and the price charged in the exporting country

International Law

defined as a body of law - formed as a result of international customs, treaties, and orgs - that governs relations among or between nations; may be created when individual nations agree to comply with certain standards

Investment Protections

firms that invest in foreign nations face the risk that the foreign gov't may take possession of the investment property; confiscation violates int'l law; claims are often resolved by lump sum settlements after negotiations between the US and the taking nation

Foreign State vs Commercial Activity

foreign state: includes both a political subdivision of a foreign state and an instrumentality of a foreign state commercial activity: a regular course of commercial conduct, transaction, or act that is carried out by a foreign state within the US

Int'l Orgs

generally refers to an org that is composed mainly of member nations and usually established by treaty; adopt resolutions, declarations, etc.; create uniform rules

Sovereign Immunity

immunizes foreign nations from the jurisdiction of US courts of US courts; Foreign Sovereign Immunities Act (FSIA) exclusively governs the circumstances in which an action may be brought into the US against a foreign nation; a foreign state is not immune from the jurisdiction of US courts in the following situations: 1. when the foreign state has waived its immunity either explicitly or by implication 2. when the foreign state has engaged in commercial activity within the uS or in commercial activity outside the US that has a direct effect in the US 3. when the foreign state has committed a tort in the US or has violated certain int'l laws

Import Controls

include strict prohibitions, quotas, and tariffs; Trading with the Enemy Act prohibits goods being imported from nations that have been designated enemies of the US; the International Trade Commission investigates allegations that imported goods infringe US patents

Civil Dispute Resolution

int'l contracts frequently include arbitration clauses; under the New York Convention, a court will compel the parties to arbitrate their dispute if all of the following are true: 1. there is a written agreement to arbitrate the matter 2. the agreement provides for arbitration in a convention signatory nation 3. the agreement arises out of a commercial legal relationship 4. one party to the agreement is not a US citizen (both parties cannot be US citizens)

Sources of Int'l Law

international customs, treaties, and int'l agreement, and int'l orgs

Republic of Korea-United States Free Trade Agreement (KORUS FTA)

largest free trade agreeemnt the US has entered into since NAFTA and may boost US exports by more than $10 billion a year

Manufacturing Abroad

lower costs, fewer gov't regulations, and lower taxes and trade barriers; Japanese manufacturers (Canon, Hitachi, Toyota) have established US plants to avoid import duties

Expropriation

occurs when a gov't seizes a privately owned business or goods for proper public purpose and awards just compensation

Principle of Comity

one nation will defer to and give effect to the laws and judicial decrees of another country, as long as they are consistent with law and public policy of the accommodating nations

Subsidiaries

parent co remains in the US and retains complete ownership of all the facilities in the foreign country

Act of State Doctrine

provides that the judicial branch of one country will not examine the validity of public acts committed by a recognized foreign gov't within its own territory

Central America-Dominican Republic-United States Trade Agreement (CAFTA-DR)

reduce tariffs and improve market access among all of the signatory nations

Trade Barriers

restrictions of imports; the elimination of trade barriers is sometimes seen as essential to the world's economic well-being; the World Trade Org (WTO) works to reduce trade barriers among nations

Tariffs

taxes on imported goods; usually a % of the value of the import, but can be a flat rate per unit; the effect is to cause some consumers to purchase more domestically manufactured goods and fewer imported goods; sometimes countries impose tariffs on goods from a particular nation in retaliation for political acts

Joint Ventures

the US co owns only part of the operations, the rest is owned by local owners in the foreign country or by another foreign entity; share responsibility, profits, and liabilities

Foreign Exchange Rate

the price of a unity of one country's currency in terms of another country's currency; set by the forces of supply and demand

Export

the sale of goods and services by domestic firms to buyers located in other countries direct: a US co signs a sales contract with a foreign purchaser that provides for the conditions of shipment and payment for the goods indirect: if sufficient business develops in a foreign country, a US co may set up a specialized marketing org in that country (agency or distributor)

Dumping

the sale of imported goods at less than fair value; fair value is usually based on the price of those goods in the exporting country; foreign firms that engage in dumping in the US hope to undersell US business to obtain a larger share of the US market; to prevent this, an extra tariff known as antidumping duty may be assessed on the imports

Treaties and Int'l Agreements

treaty: an agreement/contract between two or more nations that must be authorized and ratified by the supreme power of each nation; US constitution gives the president the power to do this; ASEAN and EU are multilateral (several nations) trade agreements

Agency Relationship

when a US firm prefers to limit its involvement in an int'l market, it will typically establish an agency relationship with a foreign firm

Distribution Agreement

when a foreign country represents a substantial market, a US firm may wish to appoint a distributor located in that country; this is a contract setting out the terms and conditions of the distributorship, such as price, currency, guarantee of supply availability, and method of payment

Confiscation

when a gov't seizes private party for an illegal purpose or without just confiscation