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International Business Law and its Environment

International Business Law and its Environment

Schaffer • Agusti • Dhooge 10e

Schaffer • Agusti • Dhooge

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10e

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Buenos Aires

Rio GrandeValparaiso San Antonio

Santos

Cristobal Colon

Balboa

Cartagena Puerto Cabello

Guayaquil

Callao

Paranagua

Itaqui

Rio de Janeiro

Halifax

Charleston

Jacksonville Savannah

New York/New Jersey

Port of Virginia

Oakland

Seattle Vancouver

Baltimore

Houston South

Louisiana

Los Angeles

Long Beach

Tacoma

Veracruz Manzanillo

Corpus Christi Miami

San Juan

Kingston

Major Ocean Ports of the World (Maps not to scale)

Philadelphia

Boston

Beaumont

WilmingtonBaton Rouge

Mobile

Port Everglades

North, Central, and South America

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Southampton

Antwerp

Liverpool

Bremen

Felixstowe

Marseilles

Le Havre

Algeciras Lisbon Valencia

Barcelona

Rotterdam

Gioia Tauro

Gdansk

Hamburg

Gothenburg

Europe

Salalah

Durban

Jeddah Jebel Ali

Port Khalid

Abidjan

Port Said Alexandria

Africa and the Middle East

Melbourne

Adelaide

Dalian Tianjin

Ningbo- Zhoushan

Qingdao

Shanghai

Xiamen Guangzhou

Shenzhen Hong Kong

Kolkata

Visakhapatnam

Nagoya Osaka

Yokohama Tokyo

Chiba

Ulsan

Busan

Incheon

Kobe

Keelung

Kaohsiung Taichung

ManilaBangkok

SingaporePort Klang

Tanjung Pelepas

Laem Chabang

Tanjung Priok

Botany/ Sydney Harbour

Brisbane

Honolulu

Mumbai

Kochi (Cochin)

Colombo

Chennai (Madras)

Auckland

Karachi

Nhava Sheva

Asia, Australia and the South Pacific region

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International Business Law and its Environment

Cengage Learning LegaL StudieS in BuSineSS aCademiC SerieS

RICHARD SCHAFFER Professor Emeritus (Ret.)

Walker College of Business Appalachian State University

FILIBERTO AGUSTI Senior Partner

Steptoe & Johnson LLP Attorneys at Law Washington, DC

LUCIEN J. DHOOGE Sue and John Staton Professor of Law

College of Management Georgia Institute of Technology

10 E

Australia • Brazil • Mexico • Singapore • United Kingdom • United States

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Printed in the United States of America Print Number: 01 Print Year: 2017

© 2018, © 2015 Cengage Learning, Inc.

Unless otherwise noted, all content is © Cengage

ALL RIGHTS RESERVED. No part of this work covered by the copyright herein may be reproduced or distributed in any form or by any means, except as permitted by U.S. copyright law, without the prior written permission of the copyright owner.

Library of Congress Control Number: 2017947968

ISBN: 978-1-305-97259-9

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International Business Law and its Environment, Tenth Edition Richard Schaffer, Filiberto Agusti, Lucien Dhooge

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R. S. To Avery, for her love, patience, and encouragement.

F. A. To my father, Filiberto, and my mother, Maria Luisa, who sacrificed so much that

I might be free to write as I wish; and to my wife, Suki, and our daughters, Caroline, Olivia, and Jordan, for their abundant patience.

L. J. D. To my wife, Julia, for her encouragement, support, and patience.

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iv

About the Authors

Richard Schaffer is Professor Emeritus of Business Law (retired) in the Department of Finance of the Walker College of Business at Appalachian State University. He has taught business law, international business law and transactions, and the law of international trade and investment since 1977. Professor Schaffer received his J.D. from the University of Mis- sissippi and his LL.M. from New York University. From 1976 through 1982, he assisted United Nations agencies in New York, San Jose, and Vienna, with projects examining the relationship between corrupt practices, multinational corporations, and socioeconomic development, and served as rapporteur of UN working groups on international economic crime. Schaffer was director of international business studies at ASU and founder of its busi- ness study abroad programs. He has served as consultant to business schools on the interna- tionalization of curriculum, and to industry trade groups. Professor Schaffer has extensive experience in business, including manufacturing and global sourcing, and has consulted with companies on matters related to the international home textile industry.

Filiberto Agusti is a partner in the international law firm of Steptoe & Johnson LLP, where he has practiced law since 1978. He represents governments, multinational corpora- tions, manufacturers, and investors in international arbitrations, lawsuits, and negotiations, including bankruptcy reorganizations. Mr. Agusti has authored articles for the Harvard Law Review and other legal publications. He is a frequent speaker at professional seminars around the world and is a regular on camera commentator for Univisión, Telemundo, and CNN en Español. Mr. Agusti was law clerk to Judge William H. Timbers at the U.S. Court of Appeals for the Second Circuit in 1977–78. He is a graduate of the Harvard Law School, where he was a senior editor of the Harvard Law Review. He graduated summa cum laude with a B.A. from the University of Illinois in 1974.

Lucien J. Dhooge is the Sue and John Staton Professor of Law and Ethics at the Scheller College of Business at the Georgia Institute of Technology. He teaches international business law and ethics and serves as area coordinator for the law and ethics group.

After completing an undergraduate degree in history at the University of Colorado in 1980, Professor Dhooge attended the University of Denver College of Law where he received his Juris Doctor in 1983. He received his LL.M. in 1995 from the Georgetown University Law Center where he specialized in international and comparative law. Prior to coming to Georgia Tech, Professor Dhooge spent eleven years in private law practice and twelve years serving on the faculty of the University of the Pacific in California. Professor Dhooge has authored more than fifty-five scholarly articles, co-authored thirteen books, and has presented research papers and courses throughout the United States as well as in Asia, Europe and South America. Professor Dhooge is the recipient of numerous research awards given by the Academy of Legal Studies in Business, including seven Ralph C. Hoeber Awards for excellence in research. He was desig- nated the outstanding junior business law faculty member in the United States by the Academy in 2002 and received the Kay Duffy Award for outstanding service in 2005. Professor Dhooge was the program chair for the Academy’s 2009 international conference in Denver, Colorado and served as Academy President in 2009-10. Professor Dhooge is a past editor-in-chief of the American Business Law Journal and the Journal of Legal Studies Education.

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v

Table of Cases xv Table of Treaties xxi Table of Statutes xxiii Preface xxvii Acknowledgements xxxv

Part One The Legal Environment of International Business 1

1 Introduction to International Business 2 2 International Law and the World’s Legal Systems 29 3 Resolving International Commercial Disputes 57

Part Two International Sales, Credits, and the Commercial Transaction 85

4 The Formation and Performance of Contracts for the Sale of Goods 86 5 The Documentary Sale and Terms of Trade 120 6 Legal Issues in International Transportation 149 7 Bank Collections, Trade Finance, and Letters of Credit 179

Part Three International and U.S. Trade Law 209

8 National Lawmaking Powers and the Regulation of U.S. Trade 210 9 The World Trade Organization: Basic Legal Principles 233 10 Laws Governing Access to Foreign Markets 259 11 Regulating Import Competition and Unfair Trade 284 12 Imports, Customs, and Tariff Law 308 13 Export Controls and Sanctions 341 14 North American Free Trade Law 364 15 The European Union 398

Part Four Regulation of the International Marketplace 425

16 Marketing: Representatives, Advertising, and Anti-Corruption 426 17 Protection and Licensing of Intellectual Property 450 18 The Legal Environment of Foreign Direct Investment 481 19 Labor and Employment Discrimination Law 516 20 Environmental Law 546 21 Regulating the Competitive Environment 574

Index 603

Brief Contents

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v ii

Table of Cases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv Table of Treaties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxi Table of Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxiii Preface. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xxvii Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxxv

Part One The Legal Environment of International Business 1

CHAPTER 1

Introduction to International Business . . . . . . . . . . . .2 Introduction 2 Forms of International Business 2

Trade 3 Licensing and Protection of Intellectual Property

Rights 6 Foreign Direct Investment 10

Conducting Business in Developing and Newly Industrialized Countries 11 Developed Countries 12 Developing Countries 12 The Newly Industrialized Countries 15 The Least-Developed Countries 15

Some Common Risks of International Business 15 Distance and Logistics 15 Language and Cultural Differences 17 Cross-Border Trade Controls 18 Currency Risk 19 Obtaining Professional Assistance 24

Conclusion 24

CHAPTER 2

International Law and the World’s Legal Systems . . . .29 Introduction 29 International Law 29

Definition and Characteristics of International Law 29 The Law of Treaties 30 Customary International Law 33

International Business Law and Crimes 36 Sources of International Business Law 36 Crimes Related to International Business 37 Criminal Jurisdiction and the Extraterritorial Reach

of Domestic Law 38 International Court of Justice 41 Ethics, Social Responsibility, and Codes of Conduct 44

International Business and Human Rights 44 International Labour Organization 45 The OECD Codes of Conduct 45 United Nations Global Compact 45 CERES Principles 46 Corporate Codes of Conduct 46

Comparative Law: Differences in National Laws and Legal Systems 46 Modern Japan: An Example of Legal Change 47 Legal Changes in China 47 Modern Legal Systems of the World 47 Origins of Civil Law Systems 48 Origins of Common Law Systems 48 Differences between Modern Civil Law and Common

Law Countries 49 Islamic Law 50

Conclusion 52

Contents

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v ii i Contents

Performance of Contracts 103 Performance of Seller 103 Performance of Buyer 105

Remedies for Breach of Contract 107 The Requirement of Fundamental Breach 107 Seller’s Right to Cure 107 Price Reduction 108 Money Damages 108 Specific Performance 110 Anticipatory Breach 110

Excuses for Nonperformance 110 Impossibility of Performance 111 Frustration of Purpose 111 Commercial Impracticability 111 The CISG Exemption for Impediments Beyond

Control 112 Avoiding Performance Disputes: Force Majeure

Clauses 112 Conclusion 112

CHAPTER 5

The Documentary Sale and Terms of Trade . . . . . 120 Transaction Risk 121

Delivery Risk 121 Payment Risk 121

The Documentary Sale 122 The Document of Title 122 The Bill of Lading 122 Rights of Purchasers of Documents of Title 124 Certificates of Inspection or Analysis 129 How Secure Are Documentary Payment Terms? 129 Measuring Damages for Breach of the Documentary

Sale 131 Types of Ocean Bills of Lading 133 Other Types of Transport Documents 134 Electronic Data Interchange 134

Allocating Shipping Responsibilities and the Risk of Loss 135 Freight and Transportation Charges 135 Allocating the Risk of Loss 135 The Risk of Loss in International Sales under the

CISG 136 Trade Terms 136 International Rules for the Interpretation of Trade

Terms 137 E Terms 137 F Terms 137 C Terms 141 D Terms 142 Modification of Trade Terms 142

Conclusion 144

CHAPTER 3

Resolving International Commercial Disputes . . . .57 Avoiding Business Disputes 57

Cultural Attitudes toward Disputes 57 Methods of Resolution 58

Alternative Dispute Resolution 58 Mediation 58 Arbitration 58

Litigation 62 Jurisdiction 62 Venue 69 Forum Non Conveniens 69 Forum Selection Clauses 70

Conflict of Laws 73 The Restatement (Second) of the Conflict of Laws 73 Choice of Law Clauses 75 The Application of Foreign Law in American

Courts 75 Enforcement of Foreign Judgments 77 Commercial Disputes with Nations 78

Sovereign Immunity 78 Abstention Doctrines 79

Conclusion 80

Part Two International Sales, Credits, and the Commercial Transaction 85

CHAPTER 4

The Formation and Performance of Contracts for the Sale of Goods . . . . . . . . . . . . . . . . . . . . . . . .86

Introduction to Contracts for the International Sale of Goods 86

Cultural Influences on Contract Negotiations 86 Negotiating Contracts in Japan 86

The Law of Sales 87 The Origin of Modern Sales Law 87

The Convention on Contracts for the International Sale of Goods (CISG) 89 Applicability of the CISG to International Sales 89

Validity and Formation of International Sales Contracts 92 General Requirements for a Valid Contract 93 The Effect of Illegality 93 The Writing Requirement 93 Problems of Contract Interpretation 93 Mutual Assent: The offer 95 Mutual Assent: The Acceptance 96 Standard Business Forms and Contract

Modifications 100

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Contents ix

Part Three International and U.S. Trade Law 209

CHAPTER 8

National Lawmaking Powers and the Regulation of U .S . Trade . . . . . . . . . . . . . . . . . . . 210

The Separation of Powers 210 Legislative Power of Congress 211 President’s Inherent Powers 211 The Treaty Power 216 Presidential Power and U.S. Trade Relations 216 The Reciprocal Trade Agreements Act of 1934 217 Survey of Changes in U.S. Trade Policy since 1962 218 Trade Agreements and Trade Promotion

Authority 219 Enhanced and Emergency Powers of the

President 220

Federal-State Relations 220 The Supremacy Clause 221 Taxing Imports and Exports in the United States 224 The Commerce Clause 224

Federal Agencies Affecting Trade 227 U. S. Department of Commerce 227 U. S. Department of Homeland Security 227 United States Trade Representative 228 U. S. Department of the Treasury 228 International Trade Commission 228 The U.S. Court of International Trade 228

Conclusion 229

CHAPTER 9

The World Trade Organization: Basic Legal Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233

Introduction to Trade Regulation 233 Reasons for Regulating Imports 234 Tariffs 234 Nontariff Barriers to Trade 234

Bretton Woods and the History of Gatt 235 GATT Multilateral Trade Negotiations 236

The World Trade Organization and WTO Law 237 Functions of the WTO 237 The WTO and U.S. Law 238

Major Principles of WTO Trade Law 238 Transparency 238 Tariff Concessions, Bound Rates, and Tariff

Schedules 239 Nondiscrimination, Most-Favored-Nation Trade,

and National Treatment 240

CHAPTER 6

Legal Issues in International Transportation . . . . 149 The Liability of International Air Carriers 149

The Montreal Convention of 1999 150 Air Carrier’s Liability for Death or Bodily Injury 152 Air Waybills and Air Cargo Losses 155

Maritime Law and the Carriage of Goods by Sea 157 Admiralty Jurisdiction in the United States 158 Cargo Losses and the Carriage of Goods by Sea 159 Liability of the Carrier 161 The Per-Package Limitation 164

The Liability of Ocean Transportation Intermediaries 166 Freight Forwarders 166 Non-Vessel Operating Common Carriers 167

Marine Cargo Insurance 168 Marine Insurance Policies 168 General Average 168 Particular Average Claims 169 Types of Coverage 169

Conclusion 174

CHAPTER 7

Bank Collections, Trade Finance, and Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 179

The Bill of Exchange 179 The Origin of Bills of Exchange 179 Brief Requirements of a Bill of Exchange 180 The Documentary Draft and the Bank Collection

Process 180 Documentary Drafts Used in Trade Finance 181 Credit Risks in Factoring Accounts Receivable:

The Rights of the Assignee 183

The Letter of Credit 184 The Documentary Letter of Credit 184 Law Applicable to Letters of Credit 185 The Independence Principle and Letters

of Credit 187 Following a Letter of Credit Transaction 187 The Rule of Strict Compliance 193 Enjoining Banks from Purchasing Documents in Cases

of Fraud 196 Confirmed Letters of Credit 197 Standby Letters of Credit 201 Other Specialized Uses for Letters of Credit 201 Electronic Data Interchange and the eUCP 202 Letters of Credit in Trade Finance Programs 202

Conclusion 203

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x Contents

U.S. “Special 301” and Intellectual Property Rights 279 U.S. Section 338 279

Conclusion 279

CHAPTER 11

Regulating Import Competition and Unfair Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284

Safeguards Against Injury 284 The GATT Escape Clause 285 The WTO Agreement on Safeguards 285 Safeguards against Injury under U.S. Law 287 Trade Adjustment Assistance 290

Unfair Import Laws: Dumping 290 Reasons for Price Cutting in an Export Market 290 The WTO Antidumping Agreement 291 U.S. Antidumping Investigations 291 The Material Injury Requirement 294 WTO Dispute Settlement in Dumping Cases 294 Dumping and Nonmarket Economy Countries 294

Unfair Import Laws: Subsidies 297 WTO Agreement on Subsidies and Countervailing

Measures 297 Countervailing Duty Actions 299 Subsidies and Nonmarket Economy Countries 299

Beyond Unfair: Extraordinary Trade Remedies 301 Imports that Threaten National Security 301 Import Surcharge in a Balance-of-Payments

Emergency 302 Enforcement and Judicial Review in Unfair Trade

Cases 302 Preventing Companies from Circumventing

the AD/CVD Laws 302 Judicial Review 302

Conclusion 303

CHAPTER 12

Imports, Customs, and Tariff Law . . . . . . . . . . . . . 308 Dutiable Status of Goods 309

The Harmonized Commodity Description and Coding System 309

Tariff Classification of Goods 312 Customs Valuation 318

Rules of Origin 318 Country of Origin 319 Types of Rules of Origin 319 U.S. Non-Preferential Rules of Origin 320 U.S. Preferential Rules of Origin 322 WTO Agreement on Rules of Origin 323 Marking and Labeling of Imports 323

National Treatment 241 Quotas and Quantitative Restrictions on Imports

and Exports 241 Quotas in a Balance-of-Payments Emergency 244 Quantitative Restrictions on Exports and the Case

of Rare Earth Elements 245 Import Licensing and Customs Procedures

as Trade Barriers 247 Exceptions Permitting Trade Restrictions 248

WTO Dispute-Settlement Procedures 248 WTO Reports as Legal Precedent 249

Exceptions to Normal WTO Trade Rules 251 Trade Preferences for Developing Countries 251 Free Trade Areas and Customs Unions 252

Conclusion 253

CHAPTER 10

Laws Governing Access to Foreign Markets . . . . . 259 The General Principle of Least Restrictive Trade 259 Technical Barriers to Trade 262

The Protection of Public Health, Safety, or Welfare 262 European Union Standards and Technical

Regulations 263 Japanese Standards and Technical Regulations 264 Chinese Standards and Technical Regulations 265 The WTO Agreement on Technical Barriers

to Trade 265 International Organization for Standardization 268

Government Procurement 269 The WTO Agreement on Government

Procurement 269 Trade in Services 270

The WTO General Agreement on Trade in Services 270

Trade in Agriculture 271 Some Agricultural Trade Issues in the EU

and Japan 272 The WTO Agreement on Agriculture 273

Sanitary and Phytosanitary Measures: Food, Animal, and Plant Safety 273 Codex Alimentarius 273

Other WTO “Trade-Related” Agreements 275 Trade-Related Investment Measures 275 Trade-Related Aspects of Intellectual Property

Rights 276 Trade Enforcement and Retaliation 276

U.S. Section 301 277 Unilateralism, U.S. Trade Enforcement,

and the WTO 277

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Contents xi

The North American Free Trade Area 367 Canada−U .S . Trade 368

Mexico−U.S. Trade 368 The North American Free Trade Agreement 368 National Treatment 369

Rules of Origin 370 Goods Wholly Produced or Obtained in North

America 370 Annex 401 Tariff Shift Rule of Origin 370 The NAFTA Certificate of Origin 372 Standards and Technical Barriers to Trade 373 Marking and Labeling Rules 375

Trade in Goods: Sectoral Issues 375 Trade in Motor Vehicles and Parts 376 Trade in Textiles and Apparel 376 Trade in Agriculture 376 Government Procurement 377 Emergency Action to Protect Domestic Industry

(NAFTA Safeguards) 377 Trade in Services 377

Financial Services 378 Transportation 378 Telecommunications 381

Cross-Border Investment 381 NAFTA’s Investment Provisions 381

Other Nafta Provisions 383 Intellectual Property Rights 385 Environmental Cooperation and Enforcement 385 Labor Cooperation and Worker Rights 386 Rights to Temporary Entry 386

Administration and Dispute Settlement 388 NAFTA Fair Trade Commission 388

Production Sharing: Assembly Plants and the Mexican Maquiladoras 389 Assembly Plant Tariff Rules 390 Issues Related to the Mexican Maquila Industry 392

Conclusion 392

CHAPTER 15

The European Union . . . . . . . . . . . . . . . . . . . . . . . . 398 History of the European Union 398

Founding Treaties 398 Membership in the European Union 400

The Accession Process 400 Withdrawal from the EU 402

Structure of the European Union 404 The European Council 404 The Council of Ministers of the European Union 404 The European Commission 404

Other Customs Laws Affecting U .S . Imports 324 Drawbacks 324 Foreign Trade Zones 325

The Administration of U .S . Customs and Tariff Laws 327 The Formal Entry 327 Liquidation and Protest 330 Enforcement and Penalties 330 Binding Rulings 336

Conclusion 336

CHAPTER 13

Export Controls and Sanctions . . . . . . . . . . . . . . . . 341 Multilateral Cooperation in Controlling

Technology 342 The Wassenaar Arrangement 342

History of U .S . Export Control Laws 342 Changes in the Export Environment since

2001 343 Balancing National Policy Objectives with Economic

Competitiveness 343 National Security and Foreign Policy Issues 344

Policy Reasons for Control 344 Export Controls and Licensing of Commercial

and Dual-Use Goods and Technology 346 Export Administration Act of 1979 and EAR

Regulations 346 Export Shipments and Electronic Export Information

Filing 350 Extraterritorial Jurisdiction of Export Control

Laws 350 Antiboycott Provisions 351 Export Compliance and Enforcement 353

Economic and Financial Sanctions 355 Effectiveness of Economic and Financial

Sanctions 355 Authority for U.S. Sanctions 357 U.S. Sanctions on Trade with Cuba 359

Conclusion 359

CHAPTER 14

North American Free Trade Law . . . . . . . . . . . . . . 364 The Philosophy of Economic Integration 364

Federal Model 364 Free Trade Area 365 Customs Union 365 Common Market 366 Compatibility of Trade Areas with the WTO

and GATT 367

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xii Contents

CHAPTER 17 450

Protection and Licensing of Intellectual Property 450

Introduction 450 Litigation 451 Reasons for Intellectual Property Transfer

Arrangements 452 Intellectual Property Rights: Transfer

Arrangements 453 Right to Use and Conditions of Use 453 Competitive Circumstances 453 Confidentiality and Improvements 454

International Protection for Patents, Trademarks, and Other Intellectual Property 454 Paris Convention 455 Patent Application Standardization 455 Trademarks 458 Domain Names 459 Copyrights 460 TRIPS 463

The Doha Declaration on Trips and Public Health 465 The War of Geographical Indications 465 Geographical Indications under the Doha

Development Agenda 468 Nonenforcement of IPR Laws 468 The Mechanics of IPR Transfer Regulations 469

Prior-Approval Schemes 469 Notification-Registration Schemes 470

The Gray Market 471 The Nature of the Problem 471 Resolution of the Dispute 471

Franchising: Licensing Outside the Technological Context 473

Antitrust/Competition Law Considerations 474 Conclusion 475

CHAPTER 18

The Legal Environment of Foreign Direct Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 481

Choosing Foreign Direct Investment 481 Reasons for Foreign Direct Investment 481 Methods of Foreign Direct Investment 482 The Legal Consequences of Foreign Direct

Investment 484 Country and Regional Risks in Foreign Direct

Investment 485 Currency Risk 485 Political Risk and Government Stability 487

The European Parliament 404 The Court of Justice of the European Union 405 Distinctions among Institutions 406 Harmonization: Directives and Regulations 407

The European Union and the Regulation of Business: The Four Freedoms 409 The Free Movement of Goods 409 The Free Movement of Services 412 The Free Movement of Capital 414 The Free Movement of People 415

Other Areas of Integration: Some Examples 417 The Common Agricultural Policy 417 Consumer Protection 418 Energy and the Environment 418 The Business Implications of the European

Union 419 The European Economic Integration Model and the

Financial Crisis 419 Causes of the Financial Crisis 419 The EU’s Response to the Financial Crisis 420 The Future of the Euro 421

Conclusion 421

Part Four Regulation of the International Marketplace 425

CHAPTER 16

Marketing: Representatives, Advertising, and Anti-Corruption . . . . . . . . . . . . . . . . . . . . . . 426

Regulation of Relationships with Representatives 426 Supersession of Agreement with Representative 427 Tax and Labor Regulation and Principal Liability:

The Dependent–Independent Distinction 429 Regulation of Advertising Abroad 430

Truth in Advertising 430 Content-Specific Regulations 432 Marketing Considerations: The Nestlé Infant

Formula Case 434 The Foreign Corrupt Practices Act 435

Origins of the FCPA and Other Antibribery Laws 436 Structure of the FCPA 437 The Department of Justice Review Process 441 FCPA Enforcement Actions 442 Territorial Jurisdiction over Non-U.S. Persons 442 Foreign Enforcement Actions 442 International Refusal to Enforce Contracts

Induced by Bribery 444 Best Practices for the U.S. Businessperson 446

Conclusion 446

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Contents xii i

CHAPTER 20

Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . 546 Consideration of Varying Environmental

Requirements 546 Differences in Regulatory Schemes 546 Environmental Law as an Anticompetitive Tool 547

Traditional International Remedies 548 The Polluter Pays: Responsibility for Pollution 548 Other ICJ Matters 549 Regulation of Products That Violate Environmental

Objectives 553 Regulation of Products with Environmentally

Objectionable Production Processes 555 Inadequacies of the Traditional International

Pollution-Control System 559 Emerging Problems and Solutions 559

Regional Approaches 559 Global Solutions 564

Conclusion 569

CHAPTER 21

Regulating the Competitive Environment 574 Historical Development of International

Competition Law 574

Basic Regulatory Framework 575 Prohibitions against Agreements to Restrict

Competition 575 Abuse of Dominant Market Position 577 Mergers and Acquisitions 581

Other Attributes of U .S . and Non-U .S . Competition Law 587 Private Causes of Action for Damages 587 Potential Criminal Liability 588 Article 101(3) and the Rule of Reason 588 Preapproval Procedures versus Litigation 589

Extraterritorial Effect of Competition Laws 590 The U.S. Effects Test 590 The European “Implementation” Test 594 Blocking Legislation 598

Conclusion 600

Index 603

Attitudes Toward FDI in Emerging Economies and the Taking of Investors’ Property 489 Sovereign Rights versus Investor Rights in Emerging

Economies 490 Threats to an Investor’s Private Property 492 Privatization 494

Resolving Investment Disputes 494 The Use of Arbitration in Settling Investment

Disputes 494 Resolving Investment Disputes before Courts 497

Taxation of Multinational Firms 502 The Government Dilemma in Taxing Multinational

Firms: Economic and Enforcement Problems 502 Territorial and Extraterritorial Income 502 Systems for Taxing Multinational Firms 503 Other Issues in International Taxation 506

Conclusion 510

CHAPTER 19

Labor and Employment Discrimination Law . . . . 516 Different Approaches to Labor Law 516

Employee Participation in Strategic Decisions 516 Impediments to Dismissal 518 Assumption of Employment Arrangements 520

Employment Discrimination Outside the United States 520 The Extraterritorial Application of U.S. Employment

Discrimination Law 521 Applicability of U.S. Employment Law

to Noncitizens 522 U.S. Employment Laws Inapplicable Abroad 523 Defenses to U.S. Employment Law When Applied

Extraterritorially 523 Antidiscrimination Laws Outside the United

States 527

Foreign Laws Permitting Difficult Work Conditions 535 Unsafe Labor Conditions 536 Prison Labor 536 Child Labor 537 Consequences of Participation in Illegal or Harsh

Work Conditions 537

Conclusion 541

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xv

Principal cases are in bold type.

Table of Cases

A . Ahlstrom Osakeyhtio v . Comm’n, 596, 597–598, 599–600

A . Bourjois & Co . v . Katzel, 472 ADC Affiliate et al . v . The Republic of Hungary,

496–497 Aero Indus., Inc. v. DeMonte Fabricating, Ltd., 67 Air France v. Saks, 152, 153 Airtours v . Commission, 583 Aldana v. Del Monte Fresh Produce N.A., Inc., 540 Alfred Dunhill of London, Inc. v. Cuba, 500 Allstar Marketing Group, LLC v. U.S., 339 Amerada Hess Corp. v. S/T Mobil Apex, 169 American Banana Co. v. United Fruit Co., 590 American Mint LLC v. GOSoftware, Inc., 91, 109, 117 Ample Bright Development, Ltd . v . Comis

International, 125, 126–127 Anheuser-Busch Brewing Association v. United States, 320 Animal Science Products, Inc . v . China Minmetals

Corp ., et al ., 595–596 Apple, Inc . v . Samsung Electronics Co ., Ltd ., 451 Argentina—Safeguard Measures on Imports of

Footwear, Report of the WTO Appellate Body 286–287 Argentina v. Uruguay. see Pulp Mills on the River

Uruguay (Argentina v . Uruguay) Arizona v . United States, 221–223 Asahi Metal Ind . v . Superior Ct . of California, Solano

County, 63, 64–65, 66 Asante Techs., Inc. v. PMC–Sierra, Inc., 140 Asoma Corp. v. M/V Land, 161 Australia v . Japan: New Zealand intervening (Whaling

in the Antarctic), 552–553

Banco General Runinahui, S.A. v. Citibank, 205 Bank of America Nat’l Trust & Savings Assn . v . United

States, 503–505 Banque de Depots v . Ferroligas, 124, 125–126 Barclay’s Bank, Ltd. v. Commissioners of Customs and

Excise, 146 Barclays Bank PLC v. Franchise Tax Board of California, 225 Basse and Selve v . Bank of Australasia, 129, 132 BAT Reynolds v. Commission, 594 Bende and Sons, Inc. v. Crown Recreation and Kiffe

Products, 116 Bernina Distributors v . Bernina Sewing Machine Co .,

19–20 Bestfoods v. United States, 375 Better Home Plastics Corp . v . United States, 316–317 Beyene v. Irving Trust Co., 205 Biddell Brothers v . E . Clemens Horst Co ., 130–131 BII Finance Co. v. U–States Forwarding Services Corp., 126 Binladen BSB Landscaping v. The Nedlloyd Rotterdam, 166 Blanco and Fabretti v . Agenzia Delle Entrate, 412 Board of Trustees v. United States, 226 BP Oil International, Ltd., v. Empresa Estatal Petroleos de

Ecuador, 140, 147 Brauer & Co. (GB) Ltd. v. James Clark (Brush Materials)

Ltd., 113 Briggs & Stratton Corp . v . Baldridge, 352–353 Bryan v. United States, 358 Bulk Aspirin from the People’s Republic of China,

295–297 Bulmer v. Bollinger, 406 Burger King Corp. v. Rudzewicz, 66

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xv i Table of Cases

Eagle Terminal Tankers, Inc. v. Insurance Co. of USSR, 169 Eastern Airlines, Inc. v. Floyd, 151, 155 Ehrlich v. American Airlines, Inc., 155 El Al Israel Airlines, Ltd . v . Tseng, 151–152 Elayyan v . Sol Melia, SA, 66–68 Electra-Amambay S .R .L . v . Compañía Antártica

Paulista Ind ., 427–428 Energizer Battery v. United States, 320–321 Equal Employment Opportunity Commission

v . Arabian American Oil Co ., 521–522 Equitable Trust Co. of New York v. Dawson Partners Ltd., 193 European Commission Proceedings against Czech

Republic on the Race Equality Directive and the Employment Equality Directive, 527–529

European Communities—Measures Concerning Meat and Meat Products (Hormones), Report of the WTO Panel, 274–275

European Communities—Regime for the Importation, Sale & Distribution of Bananas, Report of the WTO Appellate Body, 250–251

European Economic Community—Import Regime for Bananas, Report of the GATT Panel, 239–240

Executive Jet Aviation, Inc. v. Cleveland, 159

Fallhowe v . Hilton Worldwide, Inc ., 70, 71–72 Fallini Stefano & Co. s.n.c. v. Foodic BV, 106 Farmers Ins. Exchange v. Zerin, 126 Ferrostaal Metals Corp . v . United States, 321–322 F. Hoffman-La Roche Ltd. v. Empagran S.A., 594, 601 Finnish Fur Sales Co ., Ltd . v . Juliette Shulof Furs, Inc .,

75, 76–77 First Flight Associates v. Professional Golf Co., Inc., 26 Fishman & Tobin, Inc. v. Tropical Shipping & Const. Co.,

Ltd., 176 Frigaliment Importing Co., Ltd. v. B.N.S. International

Sales Corp., 26

Gaskin v . Stumm Handel GMBH, 17–18 General Electric Co. v. Commission of the European

Communities, 586 General Instrument Corp. v. United States, 391 Geneva Pharmaceuticals Technology Corp. v. Barr

Laboratories Inc., 93 Ghannoum v. Qatar Airways, 83 Gibbons v. Ogden, 222 Gomez v. Honeywell Int’l, Inc., 522 Gonzalez v. Chrysler Corp., 71 Goodyear Dunlop Tires Operations, S.A. v. Brown, 82 GPX International Tire Corp v. U.S., 299 Graham v. Richardson, 387

California v. American Stores Co., 581 CamelBak Products, LLC v. U.S., 339 Carlill v . Carbolic Smoke Ball Co ., 431–432 Carl Zeiss, Inc . v . United States, 314–315 C-ART, Ltd. v. Hong Kong Islands Line America, S.A., 147 Cedar Petrochemicals, Inc . v . Dongbu Hannong

Chemical Co ., 137, 140–141 Chateau Des Charmes Wines, Ltd. v. Sabate U.S.A., Ltd., 99 Chevron U.S.A., Inc. v. Natural Resources Defense

Council, Inc., 293 Chicago Prime Packers, Inc . v . Northam Food Trading

Co ., 105–107 China—Measures Related to the Exportation of Rare

Earth Tungsten and Molybdenum, Report of the WTO Appellate Body, 247

China—Certain Measures Affecting Electronic Payment Services, Report of the WTO Panel, 281

China North Chemical Industries Corp. v. Beston Chemical Corp., 146

Cicippio-Pueblo v. Islamic Republic of Iran, 502 Commission of the European Communities v. Italian

Republic, 422, 423 Commission of the European Communities v . Italian

Republic (national monuments), 408–409 Commission of the European Communities v . Italian

Republic (chocolate decision), 421 Commission of the European Communities

v . Portuguese Republic, 410–411 Compaq Computer Corp . Subsidiaries v . Commissioner

of Internal Revenue, 506–508 Consumers Union of U.S., Inc. v. Kissinger, 231 Costa Rica v . Nicaragua, 550–551 Costa v. ENEL, 407 Council, Pillbox 38(UK) v. Secretary of State for Health, 418 Courtaulds North America, Inc . v . North Carolina

National Bank, 194–195 Crosby v. National Foreign Trade Council, 222, 223

Dayan v . McDonald’s, 9–10 De Canas v. Bica, 387 Delovio v. Boit, 159 Department of Revenue of the State of Washington v.

Association of Washington Stevedoring Cos., 224 Department of Transportation v. Public Citizen, 380 Deutsche Parkinson Vereinigung v. Zentrale zur

Bekämpfung unlauteren Wettbewerbs, 422 Diamond v . Chakrabarty, 456–458 DIP SpA v . Comune di Bassano del Grappa, 23–24 Dole v . Carter, 215 Duncan v . American Intern . Group, Inc ., 523–524

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Table of Cases xv ii

Kiobel v . Royal Dutch Petroleum Co ., 35, 54, 537–539, 558

Kirk v . New York State Department of Education, 387–388

Kisen Kaisha Ltd. v. Regal-Beloit Corp., 161 K Mart Corp. v. Cartier, Inc., 472–473 Korea—Measures Affecting Imports of Fresh, Chilled and

Frozen Beef, Report of the WTO Appellate Body Kochi Hoso (Broadcasting Co .), 519–520 Kruger v. United Airlines, Inc., 176 Kumar Corp . v . Nopal Lines, Ltd ., 142, 143

Leegin Creative Leather Products, Inc. v. PSKS, Inc., 588 Lite-On Peripherals, Inc. v. Burlington Air Express, Inc., 146 Litmer v. PDQUSA.com, 67 Luke v. Lyde, 158

MacNamara v. Korean Air Lines, 32, 33 Mago International v. LHB AG, 206 Mahoney v . RFE/RL, Inc ., 525–526 Malgorzata Jany & Others v . Staatssecretaris van

Justitie, 530–531 Marbury v. Madison, 80 Marlwood Commercial Inc. v. Kozeny, 444 M . Aslam Khaki v . Syed Muhammad Hashim, 50–52 Maurice O’Meara Co . v . National Park Bank of New

York, 187, 189–190 MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova

D’Agostino, S.P.A., 94 MCF Liquidation, LLC v. International Suntrade, Inc., 117 Medellin v. Texas, 31 Merrit v. Welsh, 317 Metalclad Corporation v . United Mexican States,

382–383, 383–385 Michelin Tire Corp. v. Wages, 224 Microsoft Corp . v . Commission of the European

Communities, 578–580 Mid-America Tire, Inc. v. PTZ Trading Ltd., 208 Milliken v. Meyer, 64 Mineral Park Land Co. v. Howard, 111 Mobile Communication Service Inc. v. WebReg,

RN 459–460 Morgan Guaranty Trust Co. v. Republic of Palau, 76 Morrison v. Nat’l Australia Bank Ltd., 40 M/S Bremen v . Zapata Off-Shore Co ., 73–74

National Farmers’ Union v. Secrétariat Général du Gouvernement, 423

National Group for Communications and Computers, Ltd. v. Lucent Technologies International, Inc., 116

National Juice Products Association v. United States, 320

GRK Canada, Ltd. v. U.S., 339 Gschwind v. Cessna Aircraft Co., 71 Gulf Oil Corp. v. F. P. C., 20 Gulf Oil v. Gilbert, 69

Hadley v. Baxendale, 206 Hanil Bank v. Pt. Bank Negara Indonesia (Persero), 205 Hanson v. Denckla, 66 Hanwha Corp. v. Cedar Petrochemical, Inc., 117 Hartford Fire Ins. Co. v. California, 41 Hartford Fire Insurance Co . v . California, 592–594 Havana Club Holding v. Galleon, 359 Heartland By-Products, Inc. v. United States, 317 Heavyweight Motorcycles & Engines & Power-Train

Subassemblies, 288–289 Hines v. Davidowitz, 222 Hoffman Plastic Compounds, Inc. v. NLRB, 222 Honeywell International Inc. v. Commission of the

European Communities, 586 Hyundai Electronics Co., Ltd. v. United States, 249

INA Corp . v . Islamic Republic of Iran, 492–493 “Inceysa Vallisolenta, S.L v. Republic of El Salvador”, 444 India—Quantitative Restrictions on Imports of

Agricultural, Textile, & Industrial Products, Report of the WTO Panel, 245–247

Inner Secrets v. United States, 339 Innolux v. European Commission, 598 In re Independent Service Organizations Antitrust

Litigation CSU et al . v . Xerox Corporation, 474–475 In re Union Carbide Corporation Gas Plant Disaster at

Bhopal, 13–14, 70 INS v. Lopez–Mendoza, 222 Intercontinental Hotels Corp. v. Golden, 77 International Shoe Co. v. Washington, 63, 64, 66 In the Matter of Cross Border Trucking, 379–380 It’s Intoxicating, Inc . v . Maritim Hotelgesellschaft,

mbH, 91–92

Japan Line, Ltd . v . County of Los Angeles, 225–226 Japan—Taxes on Alcoholic Beverages, Report of the

WTO Appellate Body, 242–243 Jennings v. AC Hydraulic A/S, 67 J . Gerber & Co . v . S .S . Sabine Howaldt, 163–164 J. McIntyre Machinery, Ltd. v. Nicastro, 82 Joseph Muller Corp., Zurich v. Societe Anonyme De

Gerance Et D’Armament, 591 Judgment of February 23, 1988, 557–558

Kathleen Hill & Ann Stapleton Revenue Comm’rs & Dpt . of Finance, 533–534

Kelo v. City of New London, 514

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xv ii i Table of Cases

Schooner Exchange v. McFaddon, 79 Seaver v. Lindsay Light Co., 132 Sebago Inc. v. GB Unie, SA, 473 Securities and Exchange Commission v . Siemens

Aktiengesellschaft, 443–444 SEC v. Uriel Sharef et al., 442 Semetex Corp . v . UBAF Arab American Bank, 199–200 Seung v. Regent Seven Seas Cruises, Inc., 82 Shantou Real Lingerie Manufacturing Co. v. Native Group

International, Ltd., 116 Sharpe & Co., Ltd. v. Nosawa & Co., 131 Shaver Transportation Co . v . The Travelers Indemnity

Co ., 172–173 Shekoyan v. Sibley International Corp., 522 Silhouette International Schmied GmbH & Co. KG v.

Hartlauer Handelsge-sellschaft mbH, 473 Singh v. North American Airlines, 154 Skeena River Fishery: Canada, 562–563 Sky Cast, Inc. v. Global Direct Distribution, LLC, 117 Smith Kline French Laboratories v. Bloch, 58 Smith v. Selma Community Hosp., 126 Solae, LLC v . Hershey Canada, Inc ., 98, 99–100 Sony Magnetic Products Inc. of America v. Merivienti

O/Y, 177 Sosa v . Alvarez-Machain, 34–36, 537 South-Central Timber Development, Inc. v. Wunnicke,

226–227 Sport D’Hiver di Genevieve Culet v. Ets Louys et Fils, 106 Squillante & Zimmerman Sales, Inc. v. Puerto Rico

Marine Management, Inc., 177 Star-Kist Foods, Inc . v . United States, 217–218 St. Eve International v. United States, 339 St. Paul Guardian Ins. Co. v. Neuromed Medical Systems

& Support, Gmbh, 147 Sumitomo Electric Industries Ltd ., 535 Sumitomo Shoji Am., Inc. v. Avagliano, 32 Sztejn v . J . Henry Schroder Banking Corp ., 197,

198–199

Tandrin Aviation Holdings Ltd . v . Aero Toy Store, LLC, 112, 113–114

Tarbert Trading v . Cometals, 4–5 Tel-Oren v. Libyan Arab Republic, 41 Tetra Laval BV v . Commission, 586 Thailand—Restrictions on Importation of Cigarettes,

Report of the GATT Panel, 260–261 Thames Valley Power Ltd. v. Total Gas & Power Ltd., 113 Tokio Marine & Fire Ins. Co., Ltd. v. Nippon Express

U.S.A., 166 Toll v. Moreno, 221

National Thermal Power Corp . v . The Singer Co ., 495 New Zealand—Comite Interprofessionel du Vin de

Champagne v . Wineworths Group, Ltd ., 465–467 Nissan Motor Mfg . Corp ., U .S .A . v . United States, 326 Norfolk Southern Railway Co. v. James N. Kirby, Ltd.,

160–161 North American Foreign Trading Corp. v. Chiao Tung

Bank, 206 Nottebohm Case [Liechtenstein v . Guatemala], 42–43

Oakdale Village Group v. Fong, 126 OBB Personenverkehr AG v . Sachs, 498–500 Ocean Tramp Tankers Corp. v. V/O Sovfracht, 16 Ofori-Tenkorang v. American International Group, Inc., 523 Ohno v. Yasuma, 82 Olympic Airways v . Husain, 153–154 O’Mahony v. Accenture Ltd., 523 Otter Products, LLC v . United States, 313–314

The Paquette Habana, 33–34 Papierfabrik SE v. U.S., 305 Pebble Beach Co. v. Caddy, 83 Pesquera Mares Australes Ltda . v . United States, 292 Pestana v. Karinol Corp., 147 Philip Morris Brands SARL v. Secretary of State for

Health, 418 Phillips Puerto Rico Core, Inc. v. Tradax Petroleum Ltd., 147 Poland v. Germany (Factory at Chorzów), 42 Poland v. Parliament, 418 Prima U .S . Inc . v . Panalpina, Inc ., 167–168 Pulp Mills on the River Uruguay (Argentina

v . Uruguay), 548–549 Purdue Research Found. v. Sanofi-Synthelabo, S.A., 66

Quality King Distributors v. L’anza Research Intl. Inc., 478 Québec (Procureur général) c . Entreprises W .F .H . ltée, 433

Rajoppe v. GMAC Corp. Holding Corp., 525 Raw Materials, Inc. v. Manfred Forberich GMBH & Co., 118 Rewe-Zentral [Cassis de Dijon], 421 Regent Corp., U.S.A. v. Azmat Bangladesh, Ltd., 197 Rhodia v. U.S., 296 Robalen, Inc. v. Generale de Banque S.A., 206 Robertson v. American Airlines, Inc., 176 Russian Entertainment Wholesale, Inc . v . Close-Up

International, Inc ., 7–8

Samsonite Corp . v . United States, 390–391 Sanders Brothers v. Maclean & Co., 127 Schaefer-Condulmari v. U.S. Airways Group, LLC, 176 Scherk v . Alberto-Culver, 60, 61–62 Schneider Elec . SA v . Commission, 584–585

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Table of Cases xix

United States v. Romero-Galue, 41 United States v . Zhi Yong Guo, 354–355 United States Schools of Golf, Inc. v. Biltmore Golf, Inc., 67 United States v. Campbell, 54 United States v. Delgado-Garcia, 54 United States v. Ramzi Yousef, 40

Van Gend en Loos v. Nederlandse Administratie der Belastingen, 407

Ventress v . Japan Airlines, 32–33 Voest-Alpine Trading Co. v. Bank of China, 195

Ware v. Hylton, 35 Waterproofing Systems, Inc. v. Hydro-Stop, Inc., 427 Watson v. CSA, Ltd., 525 Wide Volkswagen Corp. v. Woodson, 66 Wilko v. Swan, 61 Wilson v. Humphreys (Cayman) Ltd., 67 Wisconsin Dept. of Industry v. Gould Inc., 222 Woodling v. Garrett Corp., 76 World Duty Free Company Limited v . The Republic of

Kenya, 444–446 Worldwide Volkswagen Corp. v. Woodson, 63 W .S . Kirkpatrick v . Environmental Tectronics

Corp ., 501 WTO Report of the Appellate Body on European

Communities—Regime for the Importation, Sale and Distribution of Bananas, 249–251

Xerox Corporation v. County of Harris, Texas, 231

Yavuz v. 61 MM, Ltd., 71 Youngstown Sheet & Tube v . Sawyer, 212–214

Zhejiang Shaoxing Yongli Printing & Dyeing Co., Ltd. v. Microflock Textile Group Corp., 140

Zippo Mfg. Co. v. Zippo Dot Com, Inc., 67 Z .K . Marine, Inc . v . Archigetis, 165

Torreblanca de Aguilar v. Boeing Co., 71 Torresi v . Consiglio dell’Ordine degli Avvocati di

Macerata, 415–417 Transatlantic Financing v . United States, 16–17 Tupman Thurlow Co. v. Moss, 227, 231 Turicentro, S.A. v. Am. Airlines Inc., 595 TVBO Production Limited v . Australia Sky Net Pty

Limited, 462–463

Underhill v. Hernandez, 79 United States—Import Prohibition of Certain Shrimp

and Shrimp Products, Report of the WTO Appellate Body 248, 555–557

United States—Measures Affecting the Production and Sale of Clove Cigarettes, Report of the WTO Appellate Body, 266–268

United States—Countervailing Measures Concerning Certain Products from the European Communities (“European Steel”), 300

United States of America v . Joel Esquenazi, Carlos Rodriguez, 438–441

United States—Sections 301-310 of the Trade Act of 1974, Report of the WTO Panel, 278

United States v . Aluminum Co . of America, 590–591 United States v. Bellaizac-Hurtado, 54 United States v. Bowman, 41 United States v . Campbell, 40–41 United States v. Curtiss-Wright Export Co., 214 United States v . Golden Ship Trading Co ., 331–333 United States v. Grinnell Corp., 577 United States v. Guy W. Capps, Inc., 231 United States v. Haggar Apparel Co., 391 United States v . Mandel, 345 United States v. Microsoft, 587 United States v . Mousavi, 357–358 United States v. Pink, 32 United States v. Roberts, 39

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xxi

Agreement on the Conservation of Nature and Natural Resources (ASEAN), 564

Anti-Counterfeiting Coalition, 469 Arab Convention on Commercial Arbitration, 59 ASEAN Agreement on the Conservation of Nature and

Natural Resources, 564 Barcelona Convention for the Protection of the

Mediterranean Sea from Pollution, 564 Basel Convention on Transboundary Movements of

Hazardous Wastes and Their Disposal, 565 Berne Convention for the Protection of Literary and

Artistic Works, 460 Brussels Convention on Jurisdiction and the Enforcement

of Judgments in Civil and Commercial Matters, 65 Central American Free Trade Agreement, 219 Chile OECD Convention, 436 Draft Treaty on Certain Questions Concerning the

Protection of Literary and Artistic Works, 461 European Convention on International Arbitration, 62 European Convention Providing a Uniform Law on

Arbitration (Strasbourg Convention), 59 European Union - European Patent Convention, 455 European Union - Agreement Relating to Community

Patents, 455 European Union - Maastricht Agreement, 398, 400 European Union - Single European Act, 399, 563 European Union - Treaty Establishing a Constitution for

Europe, 400 European Union - Treaty of Maastricht, 400 Friendship, Commerce, and Navigation treaties, 529 General Agreement on Tariffs and Trade 1947 (GATT),

235–240, 246, 251, 255, 260–261, 270, 276, 278, 284, 290, 297, 364, 463, 467, 476, 553, 559, 564

General Agreement on Trade in Services (GATS), 237, 240, 255, 270–271

Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs, 456

Geneva Convention on the Execution of Foreign Arbitral Awards, 59

Geneva Protocol on Arbitration Clauses, 59 Hague Convention on the Service Abroad of Judicial and

Extra-Judicial Documents in Civil and Commercial Matters, 68

Hague Rules. See International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading

Hague System for the International Registration of Industrial Designs, 456

Helsinki Convention on the Protection of the Marine Environment of the Baltic Sea Area, 564

Inter-American Convention on International Commercial Arbitration, 59

International Convention for the Unification of Certain Rules of Law relating to Bills of Lading (Hague Rules), 160

Kyoto Protocol to the United Nations Framework Convention on Climate Change, 563, 567

League of Nations - Warsaw Convention of 1929, 149 London Convention for the Prevention of Marine

Pollution by Dumping from Ships and Aircraft, 563 Madrid Agreement Concerning the International

Registration of Marks of 1891 (Madrid Protocol), 458 Montreal Convention for the Unification of Certain Rules

for International Carriage by Air, 31, 150–151, 155 Montreal Protocol on Substances That Deplete the Ozone

Layer, 566, 569

Table of Treaties and International Agreements

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xxii Table of Treaties and International Agreements

United Nations - Convention on Contracts for the International Sale of Goods, 36, 89–92, 112, 115, 112, 136, 137, 140, 147

United Nations - Convention on International Trade in Endangered Species of Wild Fauna and Flora, 566

United Nations - Convention on the Protection and Promotion of the Diversity of Cultural Expressions, 258

United Nations - Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 59, 60

U.S.–Central America–Dominican Republic Free Trade Agreement (CAFTA-DR), 252, 366

U.S. - Trans-Pacific Partnership Agreement, 220 WTO - Agreement on Agriculture, 273 WTO - Agreement on Basic Telecommunications, 271 WTO - Agreement Establishing the World Trade

Organization, 219, 237 WTO - Agreement on Government Procurement (AGP),

237, 269–270 WTO - Agreement on Implementation of Article VI, 237 WTO - Agreement on Implementation of Article VII, 237 WTO - Agreement on Import Licensing Procedures, 237 WTO - Agreement on Preshipment Inspection, 237 WTO - Agreement on Rules of Origin, 323 WTO - Agreement on Safeguards, 237, 285–287 WTO - Agreement on the Application of Sanitary and

Phytosanitary Measures (the SPS Agreement), 274–275 WTO - Agreement on Subsidies and Countervailing

Measures, 297–299 WTO - Agreement on Technical Barriers to Trade, 237,

265–268 WTO - Agreement on Textiles and Clothing, 376 WTO - Agreement on Trade Facilitation, 237 WTO - Agreement on Trade in Financial Services, 271 WTO - Agreement on Trade-Related Aspects of Intellectual

Property Rights (TRIPS), 237, 275, 276, 463–468 WTO - Agreement on Trade-Related Investment

Measures (TRIMS), 237, 275–276 WTO - Antidumping Agreement, 291, 294 WTO - Understanding on Dispute Settlement, 237 WTO - Understanding on Rules and Procedures

Governing the Settlement of Disputes, also known as the WTO Dispute-Settlement Understanding, 237, 248–251

New York Convention. See United Nations – Convention on the Recognition and Enforcement of Foreign Arbitral Awards

North American Agreement on Environmental Cooperation, 385–386

North American Agreement on Labor Cooperation, 386 North American Free Trade Agreement (NAFTA), 219,

220, 252, 270, 279, 302, 3654, 367, 368–375, 379–380, 560

OECD Convention on Combating Bribery of Foreign Public Officials in International Business, Transactions, 45, 436, 442–443

Paris Convention for the Protection of Industrial Property, 455

Performance and Phonograms Treaty, 461 Patent Cooperation Treaty (PCT), 455–456 Stockholm Declaration on the Human Environment, 564 Tax Information Exchange Agreement (TIEA), 510 Treaty on the Functioning of the European Union

(TFEU), 400, 574 Treaty of Paris Establishing the European Coal and Steel

Community, 398 Treaty of Rome Establishing the European Economic

Community, 398, 399, 400, 407, 409, 412, 414, 417, 419 United Nations - Charter, 31, 42, 448 United Nations - Convention against Corruption, 38,

436, 444 United Nations - Convention for the Prevention of

Marine Pollution by Dumping from Ships and Aircraft (London), 563

United Nations - Convention for the Protection of Industrial Property (Paris Convention), 455

United Nations - Convention for the Protection of Literary and Artistic Works (Berne), 460

United Nations - Convention for the Protection of the Mediterranean Sea from Pollution (Barcelona), 564

United Nations - Convention for the Unification of Certain Rules for International Carriage by Air (Mon- treal), 31, 150–152

United Nations - Convention for the Unification of Certain Rules of Law Relating to Bills of Lading (Hague Rules), 160

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xxii i

Table of Statutes

African Growth and Opportunity Act, 219, 251 Andean Pact Decision, 494 Andean Trade Program and Drug Eradication Act

(Andean Trade Preference Act), 219 Australia - Copyright Act of 1968, 462 Canada - Fisheries Act, 560, 562 Canada - Investment Canada Act, 382 Canada - Pulp Paper Effluent Regulations (PPER), 560 China - Arbitration Law of the People’s Republic of

China, 59 China - Contract Law for the People’s Republic of

China, 93 China - Foreign Trade Law of the People’s Republic of

China, 296 Czech Republic - Anti-Discrimination Act, 528 England - Bills of Exchange Act, 180 England - Sale of Goods Act of 1894, 88 EU - Council Regulation 2081/92, 467 EU - Council Regulation No. 1215/2012, 65 EU - Directive 73/241/EEC, 422 EU - Directive 86/653, 427, 428 EU - Directive 2000/43/EC, 528–529 EU - Directive 2000/78/EC, 527, 528 EU - Directive Concerning the Safety of Toys, 264, 418 EU - Directives 75/117, 533 EU - European Fiscal Compact (EFC), 420, 421 EU - Harmonization Directives, 407–408 EU - Measures Concerning Meat and Meat Products

(hormones), 274–275 EU - Single European Act (SEA), 399, 563 EU - Trademark Directive, 473 EU - Treaty and Community Directive 2006/54/EC, 532 EU - Treaty and Council Directive 73/241/ EEC, 422 France - French Civil Code, 90 France - Marine Ordinance of 1681, 158

Germany - Bürgerliches Gesetzbuch, 48 Germany - Renewable Energy Sources Act, 569 Germany - Works Constitution Act, 517 India - Arbitration Act, 495 India - Foreign Awards Act, 495 Japan - Antimonopoly Act, 577, 587 Japan - Large-Scale Retail Stores Law, 235 Japan - Liquor Tax Law, 241, 242–243 Kenya - Anti-Corruption and Economic Crimes Act of

2003, 445 Korea - Monopoly Regulation and Fair Trade Act, 575 Puerto Rico Dealer’s Act, 427 Rome Statute of the International Criminal Court, 44. See

also United Nations - Statute of the International Court of Justice

Russian arbitration law, 60 Thailand - Tobacco Act of 1966, 260 United Kingdom - Arbitration Act, 59 United Kingdom - Sale of Goods Act of 1979, 88 United Nations - Geneva Act of the Hague Agreement

Concerning the International Registration of Industrial Designs (Geneva Act), 456

United Nations - Model Law on International Commercial Arbitration, 60

United Nations - Statute of the International Court of Justice, 30, 41

United States - African Growth and Opportunity Act of 2000, 219, 251, 252

United States - Age Discrimination in Employment Act (ADEA), 522, 525–526, 541

United States - Agricultural Act of 2014, 272 United States - Alien Tort Claims Act, 558 United States - Alien Tort Statute (ATS), 34–35, 54, 537,

542, 569 United States - Alternative Fines Act, 437, 444

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xxiv Table of Statutes

United States - Americans with Disabilities Act, 522, 541 United States - Andean Trade Program and Drug

Eradication Act of 2002, 219 United States - Anticybersquatting Consumer Protection

Act, 459 United States - Arbitration Act, 61–62 United States - Arms Export Control Act, 342, 347 United States - Buy American Act, 269, 270, 321 United States - Caribbean Basin Economic Recovery Act

(CBERA), 219, 252 United States - Caribbean Basin Initiative (CBI), 251, 252 United States - Carriage of Goods by Sea Act (COGSA),

160–161, 163, 165, 175 United States - Civil Rights Act, 521, 541 United States - Clayton Act, 581, 595 United States - Constitution, 50, 63, 77, 159, 210–216,

220–221, 224–225, 346, 352, 364–365, 398, 514–515, 527, 535

United States - Copyright Act, 7 United States - Copyright Term Extension Act (CTEA), 461 United States - Customs Modernization and Informed

Compliance Act of 1993 (Mod Act), 333–334 United States - Electronic Signatures in Global and

National Commerce Act, 93 United States - Embargo Act of 1807, 342 United States - Employee Retirement Income Security Act

of 1974 (ERISA), 523 United States - Energy Policy Act of 2005, 568 United States - Equal Pay Act, 523, 541 United States - Export Administration Act, 346–350 United States - Export-Import Bank Reform and

Reauthorization Act, 203 United States - Export Trading Company Act, 4 United States - Extension of Admiralty Jurisdiction Act, 159 United States - Fair Labor Standards Act (FSLA), 523 United States - Family and Medical Leave Act, 523 United States - Family Smoking Prevention and Tobacco

Control Act, 266 United States - Farm Bill, 272 United States - Federal Arbitration Act (U.S.), 60 United States - Federal Bills of Lading Act, 124 United States - Federal Insecticide, Fungicide, and

Rodenticide Act (FIFRA), 559 United States - Flammable Fabrics Act, 262 United States - Foreign Corrupt Practices Act (FCPA),

425, 435–446, 501 United States - Foreign Sovereign Immunities Act (FSIA),

79, 498, 510 United States - Foreign Trade Antitrust Improvements

Act, 592

United States - Freedom of Information Act, 441 United States - Generalized System of Preferences, 251,

312, 322, 369 United States - Harmonized Tariff Schedule, 239, 252, 309,

310, 335, 371, 389 United States - Harter Act, 160 United States - Hart–Scott–Rodino Act, 581 United States - Immigration Reform and Control Act of

1986 (IRCA), 222 United States - Internal Revenue Code, 502, 503, 509 United States - International Emergency Economic Powers

Act, 220, 347, 354, 357 United States - International Traffic in Arms Regulations,

342, 347 United States - Judiciary Act of 1789, 537 United States - LeahySmith America Invents Act, 456 United States - McCarran–Ferguson Act, 594 United States - Mickey Mouse Protection Act, 461 United States - National Labor Relations Act, 523 United States - North American Free Trade Act, 322 United States - Occupational Safety and Health Act,

523, 541 United States - Ocean Shipping Reform Act of 1998, 167 United States - Omnibus Trade and Competitiveness Act

of 1988 United States - Patent Act of 1793, 457 United States - Patent Law Treaties Implementation Act

(PLTIA), 456 United States - Patriot Act, 358–359 United States - Plant Variety Protection Act, 457–458 United States - Reciprocal Trade Agreements Act of 1934,

216, 217 United States - Resource Conservation and Recovery Act

(RCRA), 559 United States - Sarbanes–Oxley Act of 2002 (SOX), 523 United States - Sarbanes–Oxley Act of 2004, 441 United States - Securities and Exchange Act, 61 United States - Sherman Antitrust Act, 574, 590, 591 United States - Shipping Act of 1984, 167 United States - Sonny Bono Copyright Term Extension

Act, 461 United States - Taft–Hartley Act, 212 United States - Tariff Act of 1930 (Smoot–Hawley), 210,

216, 217, 279, 291, 294, 299, 302, 536 United States - Torture Victim Protection Act, 540 United States - Toxic Substances Control Act (TSCA), 559 United States - Trade Act of 1974, 277, 278, 287, 290, 302,

469, 540 United States - Trade Act of 2002, 232 United States - Trade Expansion Act of 1962/1974, 218, 301

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Table of Statutes xxv

United States - Uniform Foreign Money Claims Act, 78 United States - Uniform Foreign Money Judgments

Recognition Act of 1962, 77 United States - Uniform Negotiable Instruments Law of

1866, 180 United States - Uniform Sales Act of 1906, 88 United States - Uruguay Round Agreement Act, 238, 471 United States - Webb–Pomerene Act of 1918, 597–598 United States - Worker Adjustment, Retraining, and

Notification Act, 516

United States - Trade Facilitation and Enforcement Act of 2015, 279, 537

United States - Trade Preferences Extension Act of 2015, 220

United States - Trade Reform Act of 1974, 219 United States - Trading with the Enemy Act, 342, 357 United States - Uniform Commercial Code, 36, 88, 109,

111, 124, 180, 185, 186 United States - Uniform Foreign-Country Money

Judgments Recognition Act of 2005, 77, 81, 82

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xxv ii

Preface

It has been said that America’s interest in international education has peaked and ebbed with the changing tide of the American political climate, rising in times of economic expansion and ebbing during periods of political isolation or economic protectionism. Per- haps, however, the cycle has finally been broken, and industry leaders, government policymakers, and edu- cators alike have come to understand the importance of making a permanent commitment to international business education.

In the last half century, America faced an increas- ingly competitive global marketplace and a mount- ing trade deficit. Rather than seek protection behind often-politicized trade laws, America’s leaders commit- ted the nation to policies of free trade and open invest- ment. American managers realized that they had no choice but to compete aggressively with international competitors, in markets both at home and abroad. Witness not only the success of America’s great multi- national corporations but also that of the many small and medium-sized companies that today do business internationally.

Among nations, the post-World War II spirit of free trade became contagious. Examples could be seen everywhere: The rush of nations to join the World Trade Organization, the growth of regional economic integration, privatization of national economies, the opening of once tightly controlled markets in devel- oping countries and in formerly communist countries, and China’s rise to prominence. The outcome has been the globalization of firms and of world markets for goods, services, and ideas, and the interdependence of national economies. It is in this climate that we have

seen perhaps the greatest renewal of interest in interna- tional business education in America’s history.

TRADE, INTELLECTUAL PROPERTY, AND FOREIGN DIRECT INVESTMENT:A THEMATIC APPROACH

International Business Law and Its Environment is intended for use in such courses as International Busi- ness Law, International Business Transactions, or The Law of International Trade and Investment. Our the- matic approach tracks the basic market-entry strategies of many firms as they expand into international mar- kets: trade in goods and services, the protection and licensing of intellectual property rights, and foreign direct investment. Through the study of law, we exam- ine each of these market-entry methods—and their variations and combinations—as they might fit into the overall strategy of a firm. We begin our discussion with trade, which involves the least penetration into the international market, and progress to the protection and licensing of intellectual property, and end with foreign direct investment, which immerses the firm completely in the social, cultural, and legal systems of its host coun- try. Each step in the progression presents new and more complex risks, and following the old adage, we hope the sequence of this book teaches us to walk before we run. This progression patterns the life cycle of many firms, as well as the careers of many of our graduates, as they

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Moreover, the text is appropriate for use anywhere because of its international and comparative perspec- tive, its treatment of developing countries, and its focus on the legal issues facing all firms exporting to the United States.

THE MECHANICS AND THEORY OF INTERNATIONAL BUSINESS TRANSACTIONS

International Business Law and Its Environment not only teaches the “hands on” mechanics of international busi- ness transactions but also provides the theory needed for businesspeople to understand the consequences of their actions.

Common commercial transactions are examined and explained to the nonlawyer. This includes negoti- ating contracts for the sale of goods and services, nego- tiating contractual terms of trade, handling shipping contracts and cargo insurance, understanding agency contracts, dealing with letters of credit and other bank- ing arrangements, considering alternatives for dispute settlement, and more. The importance of understand- ing intellectual property licensing agreements, employ- ing persons abroad, and other issues are addressed. Similarly, we take readers through many thorny prob- lems of dealing with government, such as learning how to use the harmonized tariff code when entering goods and “clearing customs,” or when licensing exports.

A MANAGERIAL PERSPECTIVE ON RISK

We begin with the premise that the world of interna- tional business is a dangerous place and that the man- agement of international business is the management of risk. Whether one is developing and implementing an international business strategy or managing an inter- national business transaction, an understanding of the special risks involved will help ensure a project’s suc- cess. in keeping with our thematic approach, we exam- ine the risks of trade (for example, managing credit and marine risk); protecting and licensing intellectual prop- erty (for example, dealing with gray-market goods and registering foreign patents); handling foreign mergers

mature and then move more aggressively into new international markets.

PRIVATE AND PUBLIC INTERNATIONAL LAW

International Business Law and Its Environment empha- sizes both private and public law. The private law appli- cable to international business transactions includes the law of international sales, trade finance and letters of credit, licensing and distribution agreements, agree- ments with foreign sales representatives, and other gov- erning law.

Public international law includes conventions, trea- ties, and agreements among nations that provide a legal basis for their relationships with each other, and with individuals, and which make up the legal framework within which international business takes place. Cus- toms and tariff laws are good examples, as are laws that open markets to international investors. The treaties of the European Union, the agreements of the World Trade Organization, and NAFTA are prime sources of public international law. We also treat general princi- ples of the law of nations, the jurisdiction and work of international courts and tribunals, as well as the work of various intergovernmental organizations (such as UN agencies, the WTO, and the OECD), because these are fundamentals needed for study.

INTERNATIONAL AND COMPARATIVE APPROACH

No text can attempt to teach the law of every nation in which a firm might do business, and we have resisted the temptation to merely catalog foreign laws. Instead, we present foreign laws and foreign court decisions throughout the book for comparison purposes, to illus- trate differences in legal or economic systems, and to show how business is done in other countries. Where applicable, we introduce and compare civil law, com- mon law, socialist law, Islamic law, and concepts from different legal systems. Examples are contract law, labor and employment law, advertising law, agency law, and competition law. The text focuses on interna- tional agreements, uniform codes, and the decisions of international tribunals relevant to international firms.

xxv ii i Preface

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and acquisitions (for example, coping with unexpected differences in foreign corporate or labor law); and evaluating political risk in less stable regions of the world. We then show how to avoid, reduce, or shift the risk to other parties or intermediaries. The case study approach is excellent for this purpose, as it shows read- ers the mistakes others have made, and how disputes have been resolved.

We also stress strategic business decision-making. For example, our chapter on imports, customs, and tar- iff law does not view importing as an isolated transac- tion. Rather, it addresses the importance of customs and tariff law from the strategic business perspective as well as its impact on the modern global supply chain.

THE CULTURAL, POLITICAL, SOCIAL, AND ECONOMIC ENVIRONMENT AND HUMAN RIGHTS CONCERNS

As with each previous edition, we have made a special effort to discuss the cultural, economic, political, and social aspects of international business as they bear on differences in attitudes toward the law, their impact on trade relations, and how they affect the way we do busi- ness in another country.

Any discussion of trade policy is almost inseparable from economic policy, foreign policy, or even domes- tic politics. Although we have tried to remain focused on the legal issues at hand, policy issues are addressed. We hope this is evident in our coverage of unfair trade laws, trade enforcement remedies, and other areas. Of course, we also address the foreign policy and national security issues affecting export controls and trade sanc- tions imposed for reasons of foreign policy or national security. We have also devoted considerable attention to current events in many countries and their impact on international business there.

Many topics require a historical perspective, such as the Smoot-Hawley era of the 1930s, the development of GATT in the 1940s, export controls and the Cold War, the Iranian Revolution of 1979 or fifty years of U.S.- Cuba relations. We often try to draw on the lessons of history, such as the implications of President Carter’s grain embargo of the Soviet Union in response to that nation’s invasion of Afghanistan, or President Reagan’s embargo of U.S. participation in the construction of the Siberian natural gas pipeline to Western Europe.

Throughout the book, readers are asked to consider the impact of world current events on their strategic business decisions, particularly in unstable regions or under hostile political and economic conditions.

We believe that it is impossible to cover the real world of international business without exploring the larger problems of human rights. Thus, we treat the areas of human rights law and international criminal law as global issues of concern to international business.

DEVELOPING COUNTRIES

The developing countries of Africa, Asia, Latin Amer- ica, and the Caribbean present special problems for their richer trading partners. We have tried to paint a realistic picture of trade and investment opportunities, colored by the realities of disease, poverty, and environ- mental degradation that threaten much of our planet.

Trade, IP, and investment issues in developing and emerging market countries are incorporated in all parts of the book. Examples include the Generalized System of Preferences, the CARICOM Single Market and Economy Treaty, the Doha Development Agenda, labor and work- er’s rights issues, environmental issues in developing and island countries, and U.S. trade initiatives for Latin America, the Caribbean, and Africa. Doing business with China is stressed.

ETHICS AND SOCIAL RESPONSIBILITY

Because ethical questions can arise in varying contexts, we have chosen to integrate the subject throughout the book. However, we give a more focused treatment to ethics, social responsibility, and corporate codes of con- duct in Chapter 2, the chapter on international law. All chapters conclude with a hypothetical case problem on ethics, called Ethical Considerations. Examples include, among others:

• Codes of conduct • Bribery and corruption • Child labor • Workers’ rights, health and safety • Protection of the environment and of fish and wildlife • Prison, forced and indentured labor • Labor and Environmental Standards in Trade

Agreements

Preface xxix

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9. How to better communicate with attorneys on IB matters;

10. The role of agents, contractors, and intermediaries in IB, particularly those involved in international sales, transportation, banking, insurance, and cus- toms brokerage.

TO OUR INTERNATIONAL READERS

We are pleased to know that our work has contributed to student learning at universities on virtually every continent and in every region of the world. Naturally, our audience is primarily an American one. We neces- sarily devote a major portion of the text to American law, U.S. trade relations, and the needs of the American firm. However, we have made every effort to maintain our international perspective and to draw important international comparisons. Non-U.S. cases are pre- sented, as are decisions of international courts and tri- bunals, and discussions of foreign codes and practices. Moreover, the increased reliance on uniform rules, har- monized codes, and international standards makes the book suitable for any student interested in international business law.

KEY REVISIONS TO THE TENTH EDITION

The tenth edition of International Business Law and its Environment was prepared during the early period of the Trump Administration. Certainly, our great- est challenge was to discount the rhetoric of the 2016 presidential campaign, to cautiously eye the early trade policy statements of the new administration, and to note the shifting “trade winds” where appropriate. We strongly believe that our job, as always, has been to teach the principles of IBL in a way that helps readers better understand and scrutinize trade policy issues on their own.

As with the previous edition, we have tried to make the tenth edition even more readable and manageable. We continued to condense an ever- expanding body of legal material, clarify and simplify key terms and con- cepts, and refocus on the essentials of international business law. The writing style is tighter, boxed cases

• Fair trade initiatives • Human rights issues • AIDS and other world health issues • Discrimination issues in foreign countries • Special issues related to U.S. investments • Mexican maquiladora plants • Maritime fraud

WHY STUDY INTERNATIONAL BUSINESS LAW?

As you begin your study of international business law using this text, realize that no book can tell you what the law “is.” We can only introduce you the legal environ- ment of international business, explain some basic prin- ciples of international law and international business law, and challenge you to consider the legal implications of any international business strategy or transaction. Thus, we study international business law because we want to understand: 1. How the legal and regulatory environment affects

firms operating internationally; 2. The legal issues bearing on international busi-

ness(IB) decision-making or strategies; 3. That the management of IB is the management of

risk; 4. The sources of public and private international law,

particularly international business law, as reflected in treaties and other international agreements, har- monized codes, national laws, and the decisions of national and international courts and tribunals;

5. The mechanics and legal implications of common IB transactions, particularly regarding trade in goods, the licensing of intellectual property, and foreign direct investment;

6. The influence of ethics and social responsibility in IB and when doing business in foreign countries, to encourage the development of an individual ethical value system for IB managers, and in particular to develop an appreciation for the rights of workers, consumers, and other stakeholders in civil society when doing business in foreign countries;