International Business Law

Question 1

What is the difference between an international business and a multinational business?

Answer 1

An international business is located in one place but deals with foreign countries in the course of its business
A multinational business sets up offices in other countries and carries on business in those countries as well as their own

Question 2

What are export houses?

Answer 2

Specialist firms that make arrangements for shipping, insurance, and financing in export sales

Question 3

What groups are involved in an export sale?

Answer 3

Carriers, insurers, banks, finance houses, as well as the buyer and seller

Question 4

Who pays for insurance for an export contract?

Answer 4

Depends on the contract and is usually reflected in the price of goods

Question 5

What are incoterms?

Answer 5

A set of rules represented in symbols that define responsibilities of buyers and sellers in international transactions

Question 6

What is the EXW incoterm?

Answer 6

Ex Works. Means the buyer picks up the goods directly from the seller’s gate. They assume liability as soon as they take the goods

Question 7

What is the FOB incoterm?

Answer 7

Means free on board. The seller delivers goods onto the buyer’s carrier. Liability is transferred to the buyer as soon as this is done

Question 8

What is the CIF incoterm?

Answer 8

Means Cost, insurance, and freight. The seller must arrange the carrier shipment and the buyer picks up the goods at the point of destination where liability is transferred.

Question 9

What is the DDP incoterm?

Answer 9

Means Delivery duty paid. The seller delivers goods to the buyer’s location and pays all duty along the way. Liability belongs to the seller for the whole transportation

Question 10

What is a bill of lading?

Answer 10

Acknowledgement by the carrier that goods have been delivered for shipment. Acts as a document of title to goods and facilitates financing of the transaction

Question 11

What is a collection arrangement?

Answer 11

The seller employs the services of their bank to collect payment by depositing documents to the bank and receiving credit

Question 12

What is a letter of credit?

Answer 12

A letter obtained by the buyer from their bank to pay the seller. Basically the opposite side of a collection arrangement

Question 13

How should payment for an export contract be specified?

Answer 13

Amount should be specified in a stable currency. The timing of payment normally must be negotiated by a banker

Question 14

What is a countertrade?

Answer 14

When a seller agrees to accept payment in goods from the buyer instead of money

Question 15

What is the issue with intellectual property when selling internationally?

Answer 15

Developing nations do not have the resources to enforce intellectual property rules and their rules are not integrated with the developed world. The other country may be unwilling or unable to enforce trademarks

Question 16

What is conflict of laws analysis?

Answer 16

A complex set of rules to resolve questions concerning private relationships affected by the laws of two or more countries. They will look at surrounding circumstances, intentions of the parties, and the system of law most closely connected to the contract

Question 17

How does a court decide what laws are enforced in an international contract dispute?

Answer 17

1. The place is named in the contract
2. A court will consider in light of the circumstances to determine the intention of the parties. Intention is inferred through the form of the document and use of particular legal terminology
3. If they cannot infer, the court will apply the system of law it considers most closely connected to the contract

Question 18

What is the GATT?

Answer 18

The principal document forming rules for international trade with 164 member countries

Question 19

What are the shortcomings of the GATT?

Answer 19

Applies only to goods but not all goods. Things like agricultural products and textiles are not included

Question 20

What is the WTO?

Answer 20

The World Trade Organization. Supersedes the GATT as an organization but the document remains as the foundation of trade rules

Question 21

What does the WTO do?

Answer 21

Facilitates negotiation of new agreements and resolves disputes under existing agreements. Harmonizes customs rules and reduction of customs duties. They generally prohibit quotas and other forms of non-tariff barriers, export subsidies, anti-dumping duties, and countervailing duties.

Question 22

What is the fundamental principle of the WTO

Answer 22

Non discrimination. Goods from one country should not be treated more or less favorably than goods from another country. Goods from other member states, once tariffs have been paid, should be treated no less favorably than domestic goods

Question 23

What is a regional free trade area?

Answer 23

An area permitted by the WTO in which customs duties can be eliminated entirely

Question 24

What is NAFTA/USMCA?

Answer 24

The free trade agreement among the US, Canada, and Mexico, the world’s largest free trade area.

Question 25

How can NAFTA members avoid NAFTA requirements?

Answer 25

If the activity fits into cultural industries, national security, taxation, or health and safety

Question 26

What is passive investment?

Answer 26

Portfolio investment, normally in government or corporate bonds, stocks, shares, and other securities

Question 27

What is active investment?

Answer 27

Foreign Direct Investment. Made to acquire a lasting interest in an enterprise operating in an economic environment other than that of the investor with the investor’s goal being an effective voice in the management of the enterprise

Question 28

What happens when a foreign investor establishes a branch in another country?

Answer 28

The investor carries on business in the host country in its own name. The foreign branch is part of the global business with assets being owned by the investor

Question 29

What happens when a foreign investor creates a subsidiary in a different country?

Answer 29

They have effectively established a separate corporation in the host country. The parent investor owns the shares of the company but not the assets

Question 30

How does a Canadian court decide whether or not it will assume jurisdiction over a case?

Answer 30

1. The court decides whether the location where the lawsuit was started has jurisdiction
2. If jurisdiction exists, the court can be asked by the defendant to not hear the matter and defer it to a foreign court

Question 31

How is real and substantial connection of a jurisdiction established?

Answer 31

1. The defendant is resident in the jurisdiction
2. The defendant carries on business in the jurisdiction
3. The jurisdiction is where the tort occurred
4. A contract connected with the dispute was made in the jurisdiction

Question 32

How can a party convince a court to defer a matter to a foreign court?

Answer 32

Must prove there is some forum clearly more appropriate. Decided by location of parties and witnesses, cost of transferring to another jurisdiction, avoidance of multiple proceedings, avoidance of conflicting decisions, ability to enforce resulting judgement, fair and efficient functioning of the legal system, relative strength of connections of the two parties to each location

Question 33

How is location of jurisdiction decided for contract dispute?

Answer 33

Decided by connecting factors for tort actions as well as

1. A contract was to be performed there
2. Damage from breach of contract was sustained there
3. Dispute concerned property or goods situated there
4. Contract stipulated it should be governed by laws of a certain country

Question 34

What foreign plaintiffs cannot bring actions in Canadian courts?

Answer 34

Foreign corporations not licensed or registered in Canada. Other foreign plaintiffs can as long as they deposit money into the court in case they must pay the costs of the defendant

Question 35

How can we be sure foreign rulings will be followed?

Answer 35

Canada has treaties with trading parties to agree to enforce their judgements and vice-versa. The foreign court must have been exercising proper jurisdiction and the judgement must not be obtained by fraud

Question 36

What is arbitration?

Answer 36

Allows disputing parties to select an independent neutral adjudicator to privately decide the dispute

Question 37

What is the advantage of arbitration?

Answer 37

Gives more flexibility to the parties as they can choose the arbitrator, procedural rules, and the law to be applied. Also reduces delays, costs, publicity, and uncertainties around international litigation

Question 38

How are disputes between governments settled?

Answer 38

Apply through WTO or NAFTA for redress for breaches of treaty agreements or other binding international laws. This often results in retaliatory tariffs and it is difficult to enforce compliance