No two countries have the same political and legal system. Each country has its own laws and regulations on business and products. When doing business in another country it is important to know the laws and abide by them. Culture plays a huge part in a business’s success when venturing into a foreign market. Being sensitive to the cultural and religious beliefs in that country is important to a business’s long term success. A business needs to be educated in the laws, customs and cultures of that country so that business will be able to comply and coincide with that country. A business needs to know how and where to resolve any legal issues that may arise while doing business in that country. Disputes need to be handled in a way that is respectful to that country and adheres to the contract in which the parties agreed.
Issues in Legal Disputes in International Transactions
“International transactions and dispute resolution requires both an understanding of the law and a sensitivity to foreign culture, politics, formal and informal power structures and decision-making approaches” (White and Williams LLP, 2013). When entering into a contract with a foreign country, one needs to be very specific in the contract about how to resolve any issues that could come up between the two companies. Deciding and agreeing on where issues will be resolved is a key element in the contract. Going to court can be costly for both companies and the decision made by the court could take an extended amount of time. If the companies were to go to court, deciding in where the court hearing would take place is another issue. If the hearing was to be held in the foreign country, the laws might not be the same and that country might not have much experience in international disputes. If the hearing was to be held in the United States,
the other company and the country’s government it resides in could become hostile and not uphold the ruling. Arbitration would be the best way to resolve any disputes between the two countries. Arbitration can save a lot of time and money for both companies while also protecting the images of both companies by not having a lengthy trial in the press. “Arbitration is often less costly, less litigious, and less time-consuming, and offers more privacy to the parties than litigation” (Companies Export, 2008).The ruling from the arbitration could be binding or non-binding depending on what is agreed upon in the contract.
When trying to resolve a dispute with a company in a foreign country, one would need to look over the written contract that was drawn up at the beginning of the relationship. “The governing law clause will set out which country’s law will apply to any dispute under the contract, and the jurisdiction clause will state in which country the legal action must be taken” (Smith, 2007). The U.S. based company needs to be aware of the laws that affect the company and the business dealings in the other country. The company needs to consider the cultural aspects, the ethical behavior, and the legal structure within that country. “U.S. laws governing the international business activities of the U.S. companies fall into two categories. The first consists of laws, such as antitrust, employment, and economic-espionage laws, that are also applied frequently in the domestic context. With respect to these laws, the international business activities of the U.S. companies are arguably at special risk because management educated and trained outside the United States might be less familiar with these laws than management educated and trained in the United States” (Winer, 2013). Bribery is also a consideration when taking legal action against a foreign business partner because this is illegal under the U.S. Foreign Corrupt Practices Act (FCPA). In some countries, bribery and gift giving is not seen as an illegal or unethical act but a form of showing respect and gratitude. A company needs to be careful on how this is perceived because it could be seen as an illegal act on the company’s part.
Factors against CadMex
Time and money would work against CadMex in the sublicensing agreements. In the simunlation, Candore is under an epidemic and needs the medicine ViroBlax at a subsidized price. There would not be enough time, due to the epidemic, to work out a contract that both parties will agree upon. Each separate pharmaceutical company in Candore would have to be sought out and a new contract would have to be drawn up for each different company. This is not only costing CadMex time but countless dollars on man hours. CadMex would have to invest a lot of money into properly training the employees and building the proper facilities. CadMex would also have to insure that the generic products were to the proper standards and up to regulation. Even if CadMex was to invest the time and the money into sublicensing the drug, CadMex would lose money because the drug is being sold at a subsidized price. The royalties that would be paid out with sublicensing still would not gap the margin of loss that CadMex has. When Customs and Laws Conflict
When the local customs and the local laws conflict with the customs and laws of an organization operating abroad; the organization should look at the customs and laws in which it is operating under and those should prevail, as long as the company is following the laws in which it is to operate by. When operating abroad, it is important to be aware and sensitive to the customs of that country. Allowing employees to observe religious and cultural holidays will not only keep moral high but also will keep the company within the laws that country has. Knowing the cultural normalities and integrating those into the business model will allow for the employees and members of the community to feel that the business has their interests mind. Being able to comply with the laws of the country in which the business is in while also complying with the laws set by the country, in which the mother company resides, can be a hard line to walk. Complying with the laws of the country in which was agreed upon in the contract at the onset of the partnership would prevail. Making sure to follow the rules of the country that the business is in is important because that is where the business will produce its goods. “Employees who engage in international business are responsible for knowing and complying with both the laws and regulations of the countries in which the businesses
operate and the U.S. law and regulations that apply outside U.S. borders. If U.S. law conflicts with the local customs, or if the local law is more restrictive than U.S. laws or company policies, one must follow the more restrictive law, custom or policy” (Olin, 2012). Resolving Domestic and International Issues
Resolving domestic issues can be done through arbitration or through the court system. It can be as simple as suing a party and showing up to court. When trying to resolve an issue domestically, the laws are well known for both parties and the venue in which the issue will be settled is easily accessible to both parties. Resolving an issue internationally is more work involved. The issue has to be resolved through which venue both parties agreed upon when signing the contract. Both companies need to know the laws of that country and travel might be needed. If arbitration was selected, both parties would need to submit all paperwork to a panel of arbitrators and adhere to the judgment in which the panel decides. If one party does not comply with the ruling, then legal action must be taken.
When doing business internationally, a company needs to be aware of many factors. Conforming to the culture and abiding by the laws that are set in that country are essential to that business and its success. A company needs to know how to resolve issues that will come up in the daily running of the business. Being sensitive to religious and cultural norms will not only help with the moral of employees but the community as well. Adhering to the contract in which the company agreed upon will help avoid any legal action being taken against them. By following the laws and cultures of the country the business resides in will ensure success of the company and future dealings in that country.
Companies Export. (6/4/2008). Retrieved from http://export.gov/regulation/eg_main_018226.asp Olin. (2012). International Business. Retrieved from http://www.b2i.us/profiles/investor/fullpage.asp?BzID=1548&to=cp&Nav=0&LangID