International Business (Intl Biz) 101: The Political and Legal Environment International Law Public vs Private International Law Treaties Conventions ICJ UNCITRAL CISG

What This Is

International law is a set of rules and regulations that govern international relations, trade, and business. It is essential for international business as it provides a framework for companies to operate globally, protects their interests, and ensures compliance with local laws. For instance, IKEA, a Swedish furniture company, must comply with local labor laws and regulations in countries where it operates, such as China and the United States.

Key Theories & Frameworks

• Public International Law: Deals with the relationships between states, including treaties, conventions, and international courts. It governs issues like war, diplomacy, and human rights.
• Private International Law: Concerns the relationships between individuals, companies, and states, including contracts, property, and family law.
• Treaties: Agreements between states that are binding and enforceable under international law. Examples include the General Agreement on Tariffs and Trade (GATT) and the North American Free Trade Agreement (NAFTA).
• Conventions: International agreements that are not binding but serve as guidelines for states. Examples include the United Nations Convention on Contracts for the International Sale of Goods (CISG) and the International Chamber of Commerce (ICC) Rules.
• International Court of Justice (ICJ): The primary judicial organ of the United Nations, responsible for settling disputes between states.
• UNCITRAL (United Nations Commission on International Trade Law): A body that promotes the development of international trade law and provides model laws and rules for countries to adopt.
• CISG (United Nations Convention on Contracts for the International Sale of Goods): A treaty that governs international sales contracts and provides a uniform set of rules for countries to follow.
• Lex Mercatoria: A set of rules and principles that govern international trade and commerce, including the use of arbitration and mediation.
• Piercing the Corporate Veil: A doctrine that allows courts to look beyond the corporate structure and hold individuals liable for company actions.
• Forum Shopping: The practice of choosing a jurisdiction with favorable laws or courts to resolve a dispute.

Step-by-Step Application

1. Conduct a Country Risk Analysis: When entering a new market, assess the country's political, economic, and legal risks using frameworks like the World Bank's Country Risk Index.
2. Choose an Entry Mode: Select the most suitable entry mode (e.g., export, joint venture, FDI) based on factors like market size, competition, and local regulations.
3. Evaluate a Potential FDI Location: Assess the host country's business environment, including laws, regulations, and infrastructure, using tools like the World Bank's Ease of Doing Business Index.
4. Comply with Local Laws: Ensure compliance with local labor laws, tax regulations, and environmental standards when operating in a foreign market.
5. Negotiate Contracts: Use international contract law principles and conventions like CISG to negotiate and draft contracts that protect both parties' interests.

Common Mistakes

• Mistake: Assuming that international law is the same as domestic law.
• Correction: International law is distinct and governed by its own principles and rules, such as the Vienna Convention on the Law of Treaties.
• Mistake: Confusing public and private international law.
• Correction: Public international law deals with state-to-state relations, while private international law concerns individual and company relationships.
• Mistake: Misapplying cultural dimensions as stereotypes.
• Correction: Cultural dimensions like Hofstede's Power Distance Index should be used to inform management style and decision-making, not as a basis for stereotyping.

Exam / Case Interview Tips

• Be familiar with key international law concepts and frameworks: Treaties, conventions, ICJ, UNCITRAL, CISG, and lex mercatoria.
• Understand the differences between public and private international law: Public law deals with state-to-state relations, while private law concerns individual and company relationships.
• Be prepared to analyze case studies: Use frameworks like the SWOT analysis to evaluate the strengths, weaknesses, opportunities, and threats of a company operating in a foreign market.

Quick Practice Scenario

A Brazilian firm wants to enter the German market. What entry mode is lowest risk?

Answer: Exporting through a local distributor, as it allows the Brazilian firm to maintain control while minimizing risk.

Last-Minute Cram Sheet

• Public International Law: Deals with state-to-state relations, including treaties, conventions, and ICJ.
• Private International Law: Concerns individual and company relationships, including contracts, property, and family law.
• Treaties: Binding agreements between states, such as GATT and NAFTA.
• Conventions: Non-binding agreements that serve as guidelines, like CISG and ICC Rules.
• ICJ: The primary judicial organ of the United Nations, responsible for settling disputes between states.
• UNCITRAL: Promotes international trade law and provides model laws and rules for countries to adopt.
• CISG: A treaty that governs international sales contracts and provides a uniform set of rules.
• Lex Mercatoria: A set of rules and principles that govern international trade and commerce.
• Piercing the Corporate Veil: A doctrine that allows courts to look beyond the corporate structure and hold individuals liable.
• Forum Shopping: The practice of choosing a jurisdiction with favorable laws or courts to resolve a dispute.
• ⚠️ Absolute advantage is different from comparative advantage: Absolute means lower cost of production, while comparative means lower opportunity cost.