Legal Systems in Global Business: Comparison & Laws

Instructor: Scott Tuning

Scott has been a faculty member in higher education for over 10 years. He holds an MBA in Management, an MA in counseling, and an M.Div. in Academic Biblical Studies.

Business law can be tricky under the best of circumstances. This lesson explores business law as it relates to international organizations, and it provides a list of some important considerations for the global business environment.

Law and International Business

Organizations all around the world must adhere to a number of laws related to their actions as they conduct their business. In some countries like the United States, the legal system is complex but relatively fair. In other countries, especially developing nations, laws governing business are weak or nonexistent, and the application of laws to business is inconsistent.

Types of Law

Civil Lawsuits and Contracts

A civil suit is the most common legal action against an organization. Civil suits are typically brought when an entity believes that it has been illegally deprived of something of value. Civil suits are often filed to enforce the terms of a contract. In a civil suit, the plaintiff alleges that a defendant's conduct caused him or her harm or loss. When the plaintiff asks for damages, he or she is asking to be repaid for financial losses. Plaintiffs can also ask for injunctive relief, which is a request that the court order another entity to act in a certain manner.

One of the most recognizable civil lawsuits filed against a global company was the 2010 explosion on the Deepwater Horizon oil rig. After being found negligent, the global firm British Petroleum was held responsible for damages associated with a 4.9 million barrel crude oil leak that covered thousands of square miles. In this civil case, although BP was not a U.S.-based company, it was sued in the United States because the incident affected Americans.

When an offshore platform like this one exploded and spilled crude oil, a non-U.S. company was sued in civil court by U.S. citizens.
Oil Rig of Fire

Criminal Law

Criminal lawsuits against corporations are rare in the United States, but companies can be held criminally responsible as an entity in the most egregious cases of negligence or misconduct. In many countries, an occurrence that would be a civil violation in the United States is actually a criminal violation in another country. In January of 2012, cruise ship Costa Concordia was run aground by a captain who was convicted of manslaughter for causing 33 deaths because of his gross negligence. Criminal suits are characterized by the potential for a term of incarceration as a penalty.

Theocratic Law

A similar situation exists when a company's business operations are subject to theocratic law. For many U.S.-based companies, theocratic law is an aberration. U.S. businesses are not, under any circumstances, required to submit to laws made by religious leaders. This, however, is not the case in a number of countries.

During the periods in which the U.S. military was engaged in operations based in countries like Saudi Arabia, female U.S. service personnel were often required to wear the head covering associated with Islamic law if they left their base and entered the host country. Where theocratic law is strong, companies doing business overseas should be prepared for conditions not commonly seen in the United States such as:

  • Mandatory closure days related to the religious calendar.
  • Unexpected changes in the types of merchandise and products that are permissible or prohibited for consumption by the public.
  • Requirements stating that employers must allow their employees certain latitude regarding religious practice.

Application of the Law

Common Law

The law applies to businesses in the United States and abroad in a number of ways. The principle of common law applies in the United States, many European countries, and Australia. Common law refers to the requirement that the nation's courts follow each other's rulings. For a business, this means an unfavorable outcome in court must be appealed to a higher court but cannot be taken to a different court at the same level in an attempt to get a different decision.

Common law is part of a legal system that uses already-decided cases to determine the outcomes of future cases alleging the same facts.

Product Safety and Liability

Product safety laws are quite strong in the United States and many other industrialized nations. These types of laws require companies to refrain from practices or the production of goods of which the quality is substandard to the point that it may harm the consumer. These laws can be enforced by governmental organizations that are granted specific oversight over an industry by the law. International businesses may be required to comply with government regulators in many separate instances.

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