Legal Environment of International Business: Definition & Essentials Video

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  • 0:00 The International…
  • 0:25 Conceptual Framework
  • 5:30 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
Conducting business oversees can be a complicated legal affair. In this lesson, you'll learn some of the essential legal characteristics of international business. A short quiz is provided after the lesson.

The International Legal Environment

Public international law is the system of rules and principles governing the conduct of and relationships between states and international organizations as well some of their persons.

Private international law governs relationships between persons and organizations engaged in international transactions and addresses which laws will apply when the parties are in a legal dispute.

Foreign law is a law enacted by a foreign country.

Conceptual Framework

If your company engages in any transactions overseas, it will have to familiarize itself with the general concepts of public and private international law as well as foreign law, because all can affect the manner in which you can engage in business abroad. We'll look at the most essential aspects of the international legal system that are relevant to businesses.

Public International Law: Sources and Relevance to Business

Public international law comes from three primary sources.

Treaties, conventions, protocols, charters of international organizations, and executive agreements govern relationships between countries and international organizations. A treaty is an agreement between one or more countries that addresses specific aspects of international relations between the parties to the treaty. A convention is also an agreement between countries and is often negotiated through international organizations such as the UN, the International Monetary Fund (or IMF), or World Bank on a regional or global basis, such as the entire continent of Europe. Protocols are agreements that address matters that are less important than treaty matters but may relate to matters related to treaties. Finally, executive agreements are simply agreements between the executives of two or more governments.

Customary international law is basically the customs that have developed between states in addressing international relationships that have become general practice and accepted as law.

Certain principles common to major legal systems, such as due process, rules of evidence, and trial by legal tribunal (such as a court of law), also comprise a source of international law.

Businesses engaging in international transactions can be affected by public international laws in several different ways that are described below.

Trade agreements address some aspect of the trade relationship between two or more countries, including barriers to trade that will usually affect importers and exporters of goods and services. A traditional barrier to trade is a tariff, which is a special tax on imported goods. If your product or service is subject to a tariff, it will probably be more expensive than domestic goods or services. The tariff can be assessed ad valorem - as a percentage of the value of the imported product - or as a flat assessment based on the number of units being imported. Non-tariff barriers include quotas, which restrict the number of imports permitted into a country, and embargoes that ban imports and exports with a foreign country or certain products. An example of an embargoed country is Cuba, and an embargoed product is cocaine. Finally, indirect trade barriers exist, such as local laws, regulations, and customs that may make it difficult to conduct business in a foreign country.

Anti-bribery conventions are international agreements that prohibit bribery in business. You should note that countries do impose domestic laws prohibiting bribery and other acts of corruption related to international trade, such as the United States Foreign Corrupt Practices Act of 1977.

Environmental treaties can also affect imports and exports of products if foreign products do not meet established environmental requirements of treaties entered into by the relevant country.

Protection of intellectual property rights is also important in international business. You may not want to conduct business in a foreign country if the national government will not protect your intellectual property rights, such as copyrights, trademarks, and patents.

Private International Law

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