Deck 45: International Business Law

Question 1

A privately owned business in a developing country determines that current computer technology could solve many of the problems faced by its country's private and public sectors. This business, however, lacks the capitalresources necessary for research and development to acquire such computer technology, even if trained personel were available. Furthermore, despite a sense of patriotism, the business concludes that its national government could not efficiently or effectively handle such a development project. What business forms are available to this business for acquiring sophisticated computer technology? What are the advantages and problems inherent in the various options?

Answer 1

Multinational companies:
Multinational companies generally refer to the businesses that are taken place away from the national borders of Country U. It involves the activities of selling or purchasing goods from different countries.
The following are the forms of multinational companies in which it conducts its businesses:
• Direct sales
• Joint ventures
• Subsidiaries that are owned wholly
• Licensing
• Foreign agents
• Distributorship
The following are the business forms available for acquiring the required technology:
"Foreign agents" is an important form of business that will help in acquiring the required computerized technology. This type of relationship is used by the multinational enterprises. The company appoints an agent in the other country who is authorized only to take orders.
Distributorship is another important form of business. The producer of the goods arranges a distributor. He helps in the sales of the product. Under this form of MNE, the distributor takes the ownership of the title of the goods. He bears the risks and hence is paid for it. It is to be carefully analyzed that both the countries do not violate antitrust laws of each countries.
The biggest disadvantage of these forms of businesses is that the company will not know if the agent/distributor takes the right decision in getting the orders. The agent/distributor can act illegally for the sake of money.
Joint venturing is another form of business in which there will be a collaboration of 2 or more companies of different countries in terms of business. They agree towards reaching a common goal and work towards it. The sharing of profits and losses will be based on the agreed norms or as per the investment of capital mentioned in the contract between the countries.
The biggest disadvantage of this form of business is that it might create problems of trust. There might be issues in sharing the knowledge. The knowledge shared can create issues between the countries saying that the employee of one country's knowledge is shared.Generally, a new trademark or patent is licensed by the company, which helps in producing it. When that company does not want to continue the business further with it or if it wishes to exploit, then it announces for the sale of license. By this sale, the patent or trademark or information technology formed is sold to another party who then continues the business with the same trademark. A royalty is being paid in exchange of the above mentioned.Licensing creates problems after being sold. The company that sells the business can use the information in it claiming that they had used it already. The knowledge being shared in one company by an employee can cause problems when he shares the same knowledge in a different company.
Conclusion:
Hence, the problems faced in acquiring the sophisticated computerized technology are explained as above.

Question 2

King Faisal II of Iraq was killed on July 14, 1958, in the midst of a revolution in that country that led to the establishment of a republic subsequently recognized by the U.S. government. On July 19, 1958, the new republic issued a decree that all property of the former ruling dynasty, regardless of location, should be confiscated. Subsequently, the Republic of Iraq brought suit in the United States to obtain possession of money and stock sdeposited in the deceased king's U.S. bank account in New York City. Explain whether Iraq will be able to collect the funds.

Answer 2

Sovereign immunity:
Under the concept of international law, sovereign immunity is one of the oldest concepts. This concept says that there is an absolute authority for the nations over the things/events that happen in its territory.
A host country must not impose strict laws for the nations that are present within its borders. Hence, this immunity of a host country from its courts is called as sovereign immunity.
Determine if Country I will be able to collect the funds:
The case deals with sovereign immunity. Country I can collect the funds only if the money was used for commercial purposes. Hence, the reason for the funds invested in that country is to be determined. Only after the determination of the funds being invested, the ability of collecting the funds could be determined.Conclusion:
Hence, the given scenario is explained.

Question 3

A business entity incorporated under the laws of o e of the European Union (EU) member nations contracts with the government of a developing nation to form a joint venture for the mining and refining of a scarce raw material used by several industrial nations in the manufacture of highly sensitive weapons systems. The contract calls for the EU-based corporation to invest money and technology that will be used to build permanent refinery plants that eventually will revert to the developing nation. The developing nation also reserves the right to set quotas on sales of this scarce resource and to choose the destination of exports. Due to political conflicts, the developing nation refuses to allow any exports of the scarce material to the United States. This causes a sharp price increase in exports to the United States by other uppliers. The United States asserts antitrust violations against the EU-based corporation for the effects produced within the United States. Should the United States succeed? Explain.

Answer 3

Joint ventures:
It refers to collaboration of 2 or more companies of different countries in terms of business. They agree towards reaching a common goal and work towards it. The sharing of profits and losses will be based on the agreed norms or as per the investment of capital mentioned in the contract between the countries.
Each company will try its best to prove its sales in the country. Hence, a lot is spent on promotion and advertisement of the product.
Explain if Country U must succeed:
It is determined that Country U must succeed. However, for succeeding, it must take care of political conflicts that take place in the country.
According to the antitrust law, any activity that is found to restrain trade is deemed to be illegal. Therefore, agreements regarding the increased import costs are illegal. In addition, the agreements that are found to exclude imports or agreements, which does not allow one country to compete in other countries, are illegal.
The anti-trust laws are designed to protect the country's exports. The unfair methods are hence forbidden from the country with the help of these laws.
In this scenario, the developing nation restrains trade from Country U. Therefore, it is deemed illegal. The other suppliers play a major role in the increase in price for the products. Either, they must reduce their commission or they must not sell the scarce material in Country U.
Conclusion:
Hence, Country U can succeed in the given case.

Question 4

A Panamanian corporation lends money to a Turkish enterprise, which issues a promissory note. The loan contract specifies that payment on the interest and principal shall be made to the Chemical Bank of New York City, where both parties maintain accounts. The loan contract contains no choice of law designation, but the Panamanian and Turkish companies have referred to the Chemical Bank in New York as their "legal address." As a result of a contractual performance dispute, the Turkish company suspends payments on the loan. The Panamanian corporation then brings suit in the United States to recover the balance of the payments due. What possible options for choice of law apply?

Question 5

New England Petroleum Corporation (NEPCO), a New York corporation, was in the business of selling fuel oil in the United States. PETCO, a refinery incorporated in the Bahamas, was a wholly owned subsidiary of NEPCO. In 1968, PETCO entered into a long-term contract to purchase crude oil from Chevron Oil Trading (COT), which held 50 percent of an oil concession in Libya. In 1973, Libya nationalized COT and several other foreign-owned oil concessions, thereby forcing COT to terminate its contract with PETCO. To secure needed oil supplies, PETCO entered into a new contract with National Oil Corporation (NOC), which was wholly owned by the Libyan government. This contract was at a substantially higher price than the original contract with COT. The following month, Libya declared an oil embargo on exports to the United States, the Netherlands, and the Bahamas. Accordingly, NOC canceled its contracts with PETCO. After oil prices rose dramatically, NOC accepted bids for new contracts to replace the ones inactivated by the embargo. NEPCO brought suit in a U.S. district court against the Libyan government and NOC, alleging breach of contract. Does the district court have jurisdiction? Explain.

Question 6

Nigeria, experiencing an economic boom due to exports of high-grade oil, embarked on an infrastructur e developmentplan. Accordingly, Nigeria entered into at least 109 contracts with 68 suppliers for the purchase of cement at a price of almost $1 billion. Among the contracting suppliers were four U.S. corporations, including Texas Trading Milling Corporation. Nigeria misjudged the cement market (having anticipated only a 20 percent fulfillment rate) and was forced to repudiate most of the contracts. Texas Trading Milling Corporation and three other American companies brought suit, alleging anticipatory breach of contract. Nigeria claimed immunity under the Foreign Sovereign Immunities Act. Is Nigeria's claim correct? Explain.

Question 7

Prior to 1918, a Russian corporation had deposited sums of money with August Belmont, a private banker doing business in New York City. In 1918, the Soviet government nationalized the corporation and appropriated all of the corporation's property and assets, including the deposit account with Belmont. The deposit became the property of the Soviet government until 1933, when it was released and assigned to the U.S. government as part of an international compact between the United States and the former Soviet Union. The purpose of this arrangement was to bring about a final settlement of the claims and counterclaims between the two countries.
The United States brought an action to recover the deposit from Belmont. Belmont resists, arguing that the act of nationalization by the Soviets was a confiscation prohibited by the Fifth Amendment to the U.S. Constitution and was also a violation of New York public policy. Explain who will prevail.

Question 8

A Federal grand jury handed down an indictment naming as a defendant Nippon Paper Industries Co., Ltd. (NPI), a Japanese manufacturer of facsimile paper. The indictment alleged that five years earlier NPI and certain unnamed coconspirators held a number of meetings in Japan, which culminated in an agreement to fix the price of thermal fax paper throughout North America. NPI and other manufacturers who were involved in the scheme purportedly accomplished their objective by selling the paper in Japan to unaffiliated trading houses on the condition that the latter charge specified (inflated) prices for the paper when they resold it in North America. The trading houses then shipped and sold the paper to their subsidiaries in the United States, who in turn sold it to U.S. consumers at inflated prices. The indictment further states that, to ensure the success of the venture, NPI monitored the paper trail and confirmed that the prices charged to end users were those that it had arranged. The indictment maintains that these activities had a substantial adverse effect on commerce in the United States and unreasonably restrained trade in violation of the Sherman Act. Does the Sherman Act apply to this conduct? Explain.

Question 9

Three banks that are wholly owned by the Republic of Costa Rica had issued promissory notes, payable in U.S. dollars in New York City. The notes are now in default due solely to actions of the Costa Rican government, which had suspended all payments of external debt because of escalating economic problems. Efforts by Costa Rica to curb foreign debt payment difficulti es conflicted with U.S. policy for debt resolution procedure as conducted under the auspices of the International Monetary Fund. A syndicate of U.S. banks brought suit to recover on the promissory notes. The three Costa Rican banks assert the act of state doctrine as a defense. Should the doctrine apply? Explain.

Question 10

The Commercial Office of Spain hired Enrique Segni to develop a market for Spanish wines in the U.S. Midwest. The Commercial Office is an arm of the Spanish government. Seven months later, Segni was fired, whereupon he filed a lawsuit in a U.S. district court charging that the Commercial Office had breached the contract and seeking payment for the remainder of the contract term as damages. The Commercial Office moved for dismissal, claiming immunity from suit under the terms of the Foreign Sovereign Immunities Act (FSIA).
a. What are the arguments that Spain is immune from suit under the FSIA?
b. What are the arguments that Spain is not immune from suit under the FSIA?
c. Explain which party should prevail.?

Question 11

Six U.S. manufacturers of broad-spectrum antibiotics derived a large percentage of their sales from overseas markets, including India, Iran, the Philippines, Spain, the Republic of Korea, Germany, Colombia, and Kuwait. The manufacturers agreed to a common plan of marketing, whereby territories were divided and prices for products were set. The members of the plan also agreed not to grant foreign producers licenses to the manufacturing technology of any of their "big money" drugs. May the above foreign countries recover treble damages for violation of the U.S. antitrust laws? Why?

Question 12

After reading attractive brochures advertising a package tour of the Dominican Republic, a U.S. family decided to purchase tickets for the family vacation plan. The tour was a product of four different business entities, twodomestic (U.S.) and two foreign. Sheraton Hotels Inns, World Corporation, was to provide food and lodging; Dominicana Airlines, wholly owned by the government of the Dominican Republic, which routinely flew into Miami International Airport and sold tickets within the United States, was to provide round-trip air transportation and "tourist cards" necessary for entry into the Dominican Republic; and two U.S. firms organized and sold the tour. Problems for the family began when their Dominicana flight landed in the Dominican Republic, and immigration officials denied them entry. Forced to leave, the family was shuttled first to Puerto Rico and then to Haiti, where they had to secure their own passage back to the United States at additional expense. The family brings suit for battery, false imprisonment, breach of warranty, and breach of contract against all four different business entities. The Dominicana Airlines asserts the act of state doctrine as a defense. Explain whether this defense applies in this situation.