General Principles of Business Law – issues relating to

International Business Law

Prof. L.C. Singhi,IAS (Retd) M.A;LL.M;MAIPS(USA);Ph.D(Law)

Law: Basic Principles

‘Law’ may be defined as an enforceable body of rules that govern the conduct of individuals in a society, not only in terms of their relationship with each other but also with the society as a whole.

The law and the legal system of the nation are inseparable from its history, its culture and its customs.

• The law provides certain rights, protection and freedoms to each individual and specifies the boundaries that may not be crossed in such relationships.

• It also prescribes the penalty for the violation of the boundaries.

Basic Features of Law

• It is a means to preserve the social order, and to specify the penalties for violation of such order.

• It is a means to provide a basic, broad model of conduct. It would declare certain types of conducts that are considered illegal.

• It establishes the nature of property and other rights in a society and it would thereby reduce uncertainty in expectations.

• this reduction in uncertainty in expectation creates conditions that would go for the design and implementation of economic, political and social exchange in any society.

• It acts as a Compromiser, by mediating the views of different segments of society into one common set of enforceable rules.

Types of Law in Different Parts of the World

(1) Common Law: a system of law built on traditions and on the notion of ‘Stare decisis’ (‘let the decision stand’) the notion of precedence.

(2) Civil law: a system of codified law, where courts tend to follow statutes in letter and spirit.

(3) Religious law

Characteristics of Civil law system

• The right to a civil jury does not exist

• Courtroom arguments are less adversarial

• Contingency fees for lawyers are unethical

• Court imposed limits on award for damages

• Punitive or noneconomic damages not allowed

• Parties go to court without knowing as to what would be presented by the other side

• Class-action suits are not allowed.

Broad classifications of law

• Criminal and civil law: criminal law is a wrong done to the society

• Violation of criminal law entails penalty.

• Substantive and procedural law

• Public and private law

International Law: Is It law ?

• Lack of institutions : not possible to locate supreme parliamentary body

• Command theory of Austin

• Effectiveness- it appears that there is no authority to implement it.

“almost all nations observe almost all principles of international law and almost all of their obligations and almost all of the time” (Louise Henkin in 1979)

continued

• ‘pure theory of law’ defines ‘law’as ‘ought ‘ propositions and that the validity of a law should be judged by reference to a prior law. Accordingly, international law is not a law.

• Hart defined international law as ‘primitive form of legal order’ as there is no gradual development in the absence of supreme Parliament and Court of Justice. There should be a rule of recognition.

Contd.

• states generally act only when their self interest so warrants and not otherwise. When it comes to their self interest, they care very little about the law. For example, US conduct.

• international law places excessive reliance on states to the detriment of individuals.

• International law is both a social fact and a social necessity.

• No purpose will be served on first defining ‘law’ and then to ask whether international law is law or not.

• International law tends to place the emphasis on mutual respect and cooperation. It acts as a vehicle and would promote international cooperation between the states.

Types of International Law

• Public International Law (known as Law of Nations, or Common-Law of Mankind orTransnational law)

• Private International Law (also known as ‘the conflict of laws’ in the US)

• In US ‘Public International Law’ also referred as ‘International Law’

• (‘Public International Law was first used by the English philosopher Jeremy Bentham and The Private International Law used by Joseph Story.

enforceability of international law

• International law lacks sanctions and does not have proper means of enforcement. However, the international law has considerable number of methods of dispute resolution.

• International law is respected because it’s compliance is based on acceptance.

• Some rules of international law become enforceable by becoming a part of the national legal system.

• A serious breach of international law will cause the state to suffer in its dealings with other states.

• The UN Security Council may take enforcement actions in certain circumstances.

• In case of breach some individual states may also take action against the defaulting state.

• Since 1920 there is a International Court of Justice.

• Even under International Law a State can use minimum force in self-defence.

Sources of international law for business

• International conventions, with the general or particular establishing rules.

• International customs-accepted as law• The general principles of law recognised

by nations• Judicial decisions and the writings of the

eminent scholars of various nations as subsidiary means for determining rules of law.

Broad principles of international law for business

• The concept of sovereignty and sovereign immunity

• international jurisdiction

• The doctrine of comity

• The Act of State Doctrine

• The treatment and rights of aliens

• Appropriate forum for hearing and settling disputes.

Sovereignty and sovereign immunity

• Sovereign countries cannot be subjected to the decisions of the Indian courts for their acts.

• Even though such acts are illegal under the domestic law or under international law

• Transactions of commercial nature entered by sovereign nations may be subjected to local and domestic law.

International jurisdiction

• Nationality Principle: every country has jurisdiction over its citizens no matter where they are located.

• Territoriality principle: every nation has the right of jurisdiction within its legal territory- the act must be committed within the state but effect may be outside the state, but not vice versa.

• Protective principle: every nation has jurisdiction over behaviour that affects its national security or its government’s operations- even if the conduct took place outside the country or conducted by an alien.

The doctrine of Comity

• The doctrine of comity is also known as the custom of International etiquette or mutual respect for the laws, institutions and governments of the other country.

Doctrine of Act of state

• All acts of governments of other states in their own territory are considered as valid by courts in India, even if such acts are illegal or inappropriate.

• Example- nationalisation of assets of other countries– limiting transfer of assets by MNCs

Treatment and rights of aliens

• There is no equal treatment between citizens and aliens.

• Can refuse to admit foreign nationals,

• Regulate the conduct of business by them

• Restrict the rights of Travel or choice regarding place of stay

• Special laws can be enacted for aliens and right of appeal may be denied.

Dispute Settlement Forums

• Principle of forum non convenience was applied by US courts in the case of Union Carbide and the matter was referred to the Indian courts. The matter related to Bhopal gas tragedy.

• This principle can be applied when suits are brought by foreigners before Indian courts also.

Theories of International Law

• Natural theory of law

• Theory of positive law

• Pure theory of law

• Sociological theory of law

• Theory of critical analysis

International Law & National Law

Article 51 of the Constitution of India states that the state shall endeavour to:

(a) promote international peace and security (b) maintain just and hon’ble relations

between nations© Foster respect for international law and

treaty obligations(d) encourage settlement of international

disputes by arbitration

International Law & National Law

• international treaties do not automatically become part of national law,

• they have to be incorporated into the legal system by appropriate law.

• The national legislation to be respected, even if contrary to international law; and

• Power to implement the treaties is with the union government.

Issues relating to International Business Law

• International Antitrust Considerations

• Multinational bankruptcy

• Cross-border liability

• Trade disputes and the international trade laws

• Protection of intellectual property

• National security/foreign policy considerations

Emerging non-trade issues

• Environmental issues

• Biodiversity issues

• Human rights issues

• Issues relating to women rights

• Issues relating to livelihood

• Issues relating to non-proliferation

• Issues relating to terrorism and insurgency

Course-content of Legal Aspects of International Business (LA)

• General Principles of International Business Law- issues relating to International Business Laws.

• Impact of General Agreement on Trade & Tariffs (GATT), WTO and Bilateral and Regional Trade Agreements on Legal Regime.

• Laws Relating to Anti-Dumping and Countervailing Duties.

Course content- LA

• Intellectual Property Rights and TRIPS Agreement-role of WIPO

• .Laws relating to Trade in Services-General Agreement on Trade in Services (GATS)

• International law relating to Investments (TRIMS)-Foreign Direct Investment (FDI).

• International Law Relating to Standards -Agreement on Technical Barriers to Trade and other non-trade issues.

Course content- LA

• Global Monetary System, the IMF and World Bank: Laws Relating to Foreign Exchange Market.

• Dispute Settlement Mechanism in International Business-Practice & Procedure.

• International Commercial Contracts and Arbitration.

Thanks