CHAPTER 13CHAPTER 13

International Transactions

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INTRODUCTIONINTRODUCTIONThis chapter introduces the student to the increasingly complex legal environment of international business transactions, beginning with a discussion of buying and selling goods abroad, focusing primarily on the international sales contract but also reviewing leasing, compensation trade, and processing operations. The chapter proceeds to letters of credit, then international transfers of technology and overseas investments.

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BUYING AND SELLING ABROAD

BUYING AND SELLING ABROAD

Selling of Tangible Goods – most common form of international business.

U.S. Regulations and Export of Information – may apply even to transactions entirely outside the U.S. among non-U.S. parties.

Foreign Regulations, Bilateral and multilateral Treaties

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THE INTERNATIONAL SALES CONTRACT

THE INTERNATIONAL SALES CONTRACT

Expectations and Cultural Differences Applicable Law

– Substantive laws– Local (US) laws interpret contract?– Explicit choice-of-law and venue provisions.– Public policy considerations.– CISG

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Dispute Resolution– Arbitration preferable to litigation.– International arbitration organizations.– International arbitration rules – UNCITRAL.– Arbitration awards are enforceable – New York

Convention of 1958.

Payments and Letters of credit. Overseas Office and Subsidiaries.

THE INTERNATIONAL SALES CONTRACT

THE INTERNATIONAL SALES CONTRACT

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DOCUMENTARY AND STANDBY LETTERS OF

CREDIT AND GUARANTIES.

DOCUMENTARY AND STANDBY LETTERS OF

CREDIT AND GUARANTIES. Application of UCC Article 5 and UC – parties elect.

Use of letters of credit in sales transactions.– Bill of landing– Confirming bank– Parallel contracts– Irrevocable letters of credit

Guaranties and standby letters of credit in financing transactions.

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INTERNATIONAL LEASING

INTERNATIONAL LEASING

Financing Lease – parties expect the lessee to purchase the leased equipment at the end of the lease term at an agreed-on residual value.

Compensation Trade – a variation on the simple sale or lease transaction.

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INTERNATIONAL TRANSFERS OF TECHNOLOGY

INTERNATIONAL TRANSFERS OF TECHNOLOGY

Licensing – developing countries encourage the licensing of technology to upgrade local manufacturing capabilities and expertise.

International Intellectual Property Protection – more rigorously enforced in the U.S..

International Franchising – an increasingly common form of international licensing.

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INVESTMENT ABROAD

INVESTMENT ABROAD

Investment Goals– Local market penetration– Regional base– Cheaper production costs– Economic conditions– Political conditions – OPIC– Geographic conditions– Legal conditions– Labor conditions

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INVESTMENT ABROAD

INVESTMENT ABROAD

Financial Issues– Currency Considerations

• Open Economy• Hard Currency Economy• Cash-Flow Hedging

– Projection Capitalization– Taxation

• Bi-Lateral Tax Treaties• Foreign Tax Credits

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OPERATIONAL CONCERNS

OPERATIONAL CONCERNS

Language and Cultural Customs – Knowledge of the language and customs of the host country, or the use of proficient interpreters, is essential to the success of a business venture abroad.

Communications – when not available, expatriate managers need to be more creative and self-reliant.

Transportation – without reliable transportation, products and the people responsible for production cannot effectively reach their destinations.

Expatriate Amenities – essential to provide needed skills.

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FACTORS TO CONSIDER WHEN GOING

INTERNATIONAL

FACTORS TO CONSIDER WHEN GOING

INTERNATIONAL Local Office or Retain a Local

Representative – If the transaction is not correctly structured, the company may find that it has a dependent agent in the foreign country.

Subsidiary in Foreign Country Tax and Legal Advisors

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EXTRATERRITORIAL APPLICATION OF DOMESTIC

LAW AND FORUM NON CONVENIENS

EXTRATERRITORIAL APPLICATION OF DOMESTIC

LAW AND FORUM NON CONVENIENS

Application of Foreign Law to Domestic Disputes – Most courts will not exercise jurisdiction unless the country in which the court sits has some interest in the transaction.

Forum Non Conveniens – To prevail on a motion to dismiss a case under the doctrine of forum non conveniens, the defendant must first show that an adequate forum exists.

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APPLICATION OF FOREIGN LAW TO DOMESTIC

DISPUTES

APPLICATION OF FOREIGN LAW TO DOMESTIC

DISPUTES Case 13.1 Synopsis. Robinson v. TCI/US West (5th Cir. 1998).

Alan Robinson, an English citizen and resident, was a founder of one of the first English cable companies. Robinson’s interest in CCTV became an interest in an English company called United Artists Communications (London South), PLC (United Artists) controlled by Defendants TCI/US West. Defendants negotiated a buyout of Robinson where he agreed to sell all his stock Defendant for two payments, one of £790,000 to occur at the time the shares were transferred and another at the time of a later public offering. Robinson received the first payment but received nothing for the second. Robinson sued Defendants and their affiliated companies, claiming they defrauded him in violation of Section 10(b) of the Securities Exchange Act of 1934 (the 1934 Act) and Rule 10b-5. The district court dismissed the case. Robinson appealed. CONTINUED

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Case 13.1 Synopsis. (Cont’d).

ISSUE: Does the 1934 Act give U.S. federal courts jurisdiction over a case in which an English citizen alleged securities fraud on the part of an English company when a central act in the alleged fraud was conducted in the United States by an American affiliate of that English company? HELD: REVERSED and remanded to the district court for trial. Robinson could sue in a U.S. court for violation of the 1934 Act. Instead, the court noted that the heart of Robinson’s allegation (which the district court ignored) was that the entire scheme was directed and controlled from the United States by TCI and U.S.

APPLICATION OF FOREIGN LAW TO DOMESTIC

DISPUTES

APPLICATION OF FOREIGN LAW TO DOMESTIC

DISPUTES

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SUING FOREIGN GOVERNMENTS SUING FOREIGN GOVERNMENTS

Sovereign Immunity – Foreign Sovereign Immunities Act of 1976 – the U.S.

codification of the restrictive theory of immunity.– “Commercial Activity” exception – a foreign sovereign or

its agencies and instrumentalities shall not be immune form the jurisdiction of the courts of the U.S. or of the states in any case in which the action is based on certain conditions.

Act-of-State Doctrine – applies to non-commercial acts.

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U.S. DOMESTIC CONSIDERATIONS

U.S. DOMESTIC CONSIDERATIONS

Trade Laws Product Safety Standards View From Cyberspace: French

Courts order Yahoo! to block access to Nazi memorabilia.

Export Licensing

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BRIBERY AND THE FOREIGN CORRUPT

PRACTICES ACT

BRIBERY AND THE FOREIGN CORRUPT

PRACTICES ACT Foreign Corrupt Practices Act Prohibited Payments - prohibits any payment

by a company, its employees, or its agents directly or indirectly to a foreign government official or a foreign political party for the purpose of improperly influencing government decisions in order to obtain business abroad.

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Record-Keeping Requirements – apply to all public companies that file periodic reports with the Securities and Exchange Commission under the 1934 Act.

OECD Convention

BRIBERY AND THE FOREIGN CORRUPT

PRACTICES ACT

BRIBERY AND THE FOREIGN CORRUPT

PRACTICES ACT

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THE RESPONSIBLE MANAGER

THE RESPONSIBLE MANAGER

Managing International Business Transactions

Analysis of Foreign-Investment Laws Early Use of Advisors Choice of language, Law, and Venue

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REVIEWREVIEW1. How are letters of credit helpful to business?

2. How could intellectual property protections be improved internationally?

3. Is sovereign immunity a dinosaur?