Dealing with International Business Law - Assignment Example

International Business Law [Student’s Name] [Tutor’s Name] [Date] 1) In today’s world many businesses have turned international. An international business is a transaction that takes place across the national borders. Businesses have the left the circles of being local to being international and therefore all transactions are carried out under normative structure to provide a procedure that will maintain the local character. Even economists agree that the rule of law is of great importance even when conducting business. Many nations/states guard their legal system against others. However, no matter how complex their legality maybe, it never supports all the structures for cross border business (Kirchner & Stefan 2007). The rule of law is the main concept that streamlines the operations of the domestic and international laws that govern the conduct of international business transactions. It serves as the central ground where lawyers navigate the legal framework the covers their clients who are doing business across borders. It is worth noting that international business transactions re complex and therefore there is a need to be familiar with the relevant law and legal system. However, in most cases people find it hard to have all laws of another country at the finger tips and therefore there is always a need to have a legal advisor to assist them carry on with their business in the country not their own. For example, for one to conduct business in the USA there is a need to understand the laws that such activity. Like when starting a company there you need to understand how USA laws affects areas like; how profits are received by the U.S company, how financing can be arranged, U.S technology export controls, the relations between the U.S and the other countries, limits of payments that maybe made by the U.S company to another country’s official, available insurance covers, payments of customs duty on imports and how international contracts are conducted just to mention but a few (Kirchner & Stefan 2007). International business is handled under different legal contexts: private, national and international. Private tethers partners to their freedom of contract. National/public law regulates the outer of private conduct in the business world, they are non- derogable norms that the state enact in areas where government regulation is deemed essential. This covers trade import tariff and taxes, licensing, export controls and product quality. Government regulations are based on public interest like national security, health and safety, environment conservation, free and fair trade (Kirchner & Stefan 2007).. Finally, the international law is created by governments to regulate relations between nations. For instance World Trade Organization law where many governments have agreed to reduce tariffs by not discriminating among goods and services imported from nay member. Adherence to the law by all is an important consideration and therefore business people and legal practitioners must be aware of the complex legal landscape and recognize the differences in legal cultures throughout the world (Kirchner & Stefan 2007). Business people then should use the advantage given by understanding the legal implication of their business to transact and go about with their businesses. 2) In Saudi Arabia, the dominance religion is Islam. The banking industry in the region has grown in the resent past at a very high rate. This development has resulted to developments in order to make the industry prosper as well. Historically, this development was initiated by the needs of retail banking customers seeking to borrow and invest in accordance to their Islamic beliefs. However, Islamic banking was not competitive as their conventional counterparts in terms of pricing and services offering (Junius & Andreas 2007). This banking service has expanded as the economic and demographic growth in this region has demand for sharia compliant solutions. Having several service providers has raised the level of awareness among customers and also there has been an upsurge of the competitive intensity in the market. The Islamic capital market has been increasing at a very high rate even across the globe. This is attributed to diverse innovations. Today this products and solutions of most conventional markets can be replicated in a sharia compliant manner. For example, the sukuk an Islamic financial concept similar to bonds (Junius & Andreas 2007).. Throughout the Muslim world, Islamic banking has registered double digit growth rates. While UAE shift towards replicating the most innovative conventional financial institutions, Islamic banks in Saudi Arabia develop products such as mudharabah-based investment accounts which in the long run reflect the Islam original ideal of a fair share of risk and rewards. It is worth noting that due to demand and supply factors this sector is out to expanding the more. Increase in retail customers and corporate entities who want financial transactions that are compliant with sharia are the root cause of innovation in this sector. Moreover, there is pressure from the public and shareholders in the Middle East and Southeast Asia on corporations to comply with sharia. This including the use of Sukuk or lending based on Mudharabah or ijara contracts to raise funds (Junius & Andreas 2007).. Even countries which are non Muslim countries like the UK, Japan and China are recognizing and shifting to sharia compliancy so as they can target the liquidity rich middle east. There is stiff competition in this sector at home and therefore a number of Islamic banks in the Middle East are now concentrating in becoming international with target being Asia and Africa. An example of this is Dubai Bank, Qatar Islamic Bank and Al Rajhi Bank. There has been also an increase in supply of services. With many players in the market place, there has been an increase in the public awareness about the sharia compliant products (Junius & Andreas 2007).. The competitive landscape has made Islamic banking to change in a big way. This is due to the fact that they used to derive their competitive advantage from being sharia compliant but also from being the only Islamic bank in town. Some banks used to enjoy monopoly like status but this is long gone. In the resent past, banks have increased and thus competition is high. This has resulted to these banks being innovative so that they can be able to attain a market share that they can count to be in business. Moreover, this leads to innovations after innovations of Islamic compliant products to the advantage of customers (Junius & Andreas 2007). 3) In the case of the absence of the international law as such which directly governs international business transactions (“IBTs”) and no international commercial court(s) to settle resulting disputes, then the commercial law which is under the common law will be the best suited to govern the International business transactions between one or more countries. In this case, the Singapore and Australian commercial law share many similarities than differences since they both are commonwealth countries. It is vital to realize that the commercial law in both Singapore and Australia is purposed to govern the litigation, mergers, contracts and acquisitions as well as protecting the consumers against unfair business practices. The law mainly majors in the definitions of responsibilities and rights and not the enforcement of the laws. in both countries, the law incorporates other newly developed areas that have developed which include the secured sales transactions, transactions in real estate, instruments of negotiations, bankruptcy, banking, contracts, consumer credit, creditor and debtor, tenant and landlord and Mortgages (Julian, 1978). The commercial law which is under the common law for countries that are of a commonwealth is embodied in the case law. The precedents in this law are developed largely from the judgments of cases that are often handed down mainly by the supreme courts. Under the jurisdiction, the involved parties are to agree on the country court that is seen to have the best capacity to handle the adjudicated disputes. The court that is best suited to handle the dispute mater will have to be based on the territorial limits within which it should operate and the subject matter at hand. This can also be based on the presence or the business activities of the companies that are involved. The commercial law could have the jurisdiction over the defendant since his/her physical presence and her/his property is within the jurisdiction of the courts. The supreme court of Singapore for instance stipulates that the jurisdiction should be where the defendant resides or where he/she runs the business. It is vital in this case to also consider the consent of the supreme courts by following the judicature (Michael, 1989). The consent of the defendant on agreeing the venue of the proceedings has to be in writing. The consent has to be given prior to the arising of the dispute in the sales contract. The courts are however in their own right allowed to restrict the activities within their borders or national territory. the court system in the two countries in relation to the case law have extra territorial jurisdiction as they have the authority to regulate the activities that are occurring outside their jurisdiction (Gary, 2001). However, there are certain legislations contained in the contract law that are different in the countries in question and may cause a conflict in the decisions that are being made. This implies that conflict of law rules will apply. It is in the view of the common law that all the parties have the freedom as per their contract to practice the law that is applicable to their own choice. This implies that the courts will give precedence to the laws of the choice of the disputed parties. The courts will only step in and decide on the applicable law for the parties if they have failed or are ignorant of the laws that are to be chosen. This will be determined based on the reality of connection of the contract that is in dispute. The currency and the mode of payment will be a reliable way through which the courts will be able to determine the closest and the most real connection with respect to the contract (Laurence, 1995). 4) a) Contractual issues In developing the contract, the parties have to identify and agree on the terms and the law that will govern the whole transaction process. this will form a foundation on which the parties are able to identify the laws that govern the export and import of commodities in the respective countries thus be able to help them arrive at the best possible ways through which the disputes will be resolved if they arise. Secondly, the parties will have to agree on how the buyer in one of the countries will be able to get the payments to the seller in the other country. The use of letters is advised in this process as it will be able to minimize any risk that will result in nonpayment. Thirdly, parties are to discuss on the export controls that exist or that are imposed on the seller by his/her state. This will be included in the regulatory issues as they are terms and conditions that are to be fulfilled (Chan, 1996). The parties have to come to an agreement on the language to be used and the use of commercial terms. They also have to agree on the person to pay for the goods shipping fee and the one who will bear the liability if the goods are lost or damaged in the process. In addressing these issues, the parties are to agree on where they are to address the issues that may arise during the process. All these will form part of the memorandum of understanding between the 2 parties. The parties are finally to agree on the signatories that will be officially and legally binding during the process (Chan, 1996). b) The arbitration clause in the case of the business transactions between the 2 countries will be able to offer a private mode through which the disputes that arise between the two parties will be able to be solved if they arise. These are alternative to the court process since the business transactions involve two countries that are of different territories. This is vital as the case or dispute will be based on a decision agreed by the two parties and thus not subject to unfair judgment. The two have to decide on the mode of arbitration process they are to assume and thus will be affordable and conducive for all the parties to participate. This will thus provide a neutral ground onto which the case is to be handled and offer a great chance for the arbitration not to be disrupted by unnecessary tactics (Pravin, 2005). Lastly, the arbitration process will be able to deal with issues of sovereign immunity that may arise in the process1. c) The arbitration proceeds having its jurisdiction in India will be of great advantage as the state underwent substantial change in the year 1996. This substantial change saw the country experience the enactment of the Conciliation and Arbitration Act. The act purposes to cover for both the domestic and international functions of international arbitration. The process is cheap compared to that of Singapore as it substantially minimizes the courts role in the arbitration. The arbitration process in the state dates back in 1772 when the modern law of arbitration was developed utilizing the Bengal regulations. These regulations purposed to provide the arbitration processes with the required regulations2. The law is enriched as it contains 3 statutes namely the 1937 Arbitration Act, 1940 India Arbitration Act and the 1961 Foreign Awards Act. This gives the country unmatched experience in the process compared to Singapore. In addition, the arbitration process in India is much more expeditious and effective based on the foundation of the repealed Arbitration and Conciliation Act 1996. This process was meant to give the Indian arbitration process the confidence it deserves (Sumeet, 2008). d) It is comparatively hard to enforce an Indian foreign law in Singapore based on the fact that the Indian domestic laws only apply within the jurisdictions of the state and its courts and are not subject to the Singapore courts and jurisdiction. Each of the countries has its own conflict of law rules which are specific and unique to their experiences. Some of the legislations and rules have been crafted based on the ruling of cases from the Supreme Court which may have different experiences in both the countries. The interpretation of laws in the two countries despite them being of a similar commonwealth law origin may be different based on their experiences and development (Basu, 2007). 5) a) In this case, it was alleged by Global that ITC in relation to the trade advances and acting one or several of the second to eleventh defendants had caused Global to grant several advances totalling US$9.1m to the Chitalia Group with no commercial benefit to Global. These trade advances were alleged to have been made to ITC’s benefit. ITC had sold certain commodities at inflated prices to the Chitalia Group which then on-sold them to other parties at substantially lower prices. ITC thus was able to generate massive profits at the expense of Chatalia which made severe losses3. In Colombo, it was alleged by Global that ITC, in the year 1994, had directed it to purchase 34,000 metric tons of rice that were held in Colombo, Sirilanka. This rise had earlier been sold to Chatalia by ITC in March of 1993. It is further realized that Global never made any benefits commercially from the purchase of this rice. It had been agreed that ITC was to underwrite Global for the losses incurred that was related to the purchase. Global suffered a massive loss of US$ 9m from the transaction4. b) The arbitration judgment ruled for the forum conveniens based on the witnesses, parties involved, connections and personal connections to the pertinent events and the transactions. For personal collection, Global, the party that is placed under liquidation is in Singapore. Most of the defendants of the ITC Company who are Indian nationals are residents of Singapore. In addition, most if not all the relevant witnesses to the case is from Singapore which is a major point to be considered. These witnesses who are non party are much needed to testify in favor of the defense. Lastly, the key dispute of the wrongful acts in respect to the Colombo rice transaction was performed in Singapore. These were the key wrongful acts that bring out the dispute. To this regard the possibility for the governing law in the cases will be the Singapore law. This foundations form the basis of the Arbitration process to be carried out in Singapore5. c) The writ had to be served in accordance with the Singapore law as the O 11 r 3 (2) 0f the ROC states “the court may not make any order or direction which shall authorize or require the doing of anything in which service is effected which is contrary to the law of that country.” the writ was requested by Global to be outside the jurisdiction with the supreme court of Singapore. The matter was thus left to the Indian foreign affairs ministry and the Indian law by the 13th of May 2009 since ITC had played no hand in the determination of the Writ. The copy of the process server was given on the 15th of December 2009 stating that the writ will be in accordance to the law of the country that the services were affected6. d) The processes followed in the determination of the Writ were flowed in four ways. These included the no proof is given to validate that the documents were delivered to the Indian judicial authorities. Secondly, the purported Writ was invalid as it had already expired. This implied that it had no legal basis or holding at the time. Thirdly, the Writ provisionary services had not been effected through the Kolkata court of small causes. This was a requirement by the Indian law. Lastly, the Writ was not served as a legal requirement to the secretary, principle officer or director neither was it served to Vaidyanath and Deveshwar7. References Basu, D, 2007, Commentary on the Constitution of India (8th ed.). Nagpur: Wadhwa & Co. ISBN 9788180384790. Chan L, 1996, “Sale of Goods (United Nations Convention) Act 1995”, 8 Singapore Academy of Law Journal 104 at p 106. Gary, B, 2001, International Commercial Arbitration Commentary and Materials (2d ed. Transnational Publishers/Kluwer Law International. Julian, D, 1978, Applicable Law in International Commercial Arbitration, Oceana. Junius, A, 2007, “Islamic Finance: Issues Surrounding Islamic Law as a Choice of Law under German Conflict of ALws Principles”. Kirchner, S, 2007, “Transnational Law and the Choice-of-Law Competence ofArbitral Tribunals in International Commercial Arbitration” Lawrence, G, 1995, 7 Asia Business Law Review 69 or “Alternative Dispute Resolution in Singapore.” Michael, J, Stewart, C, 1989 Commercial Arbitration, 2d ed, Butterworths. Pravin H, 2005, ‘Public Policy as a ground for setting aside the award’, ICA’s Arbitration Quarterly,ICA, vol. XL/No.2, p 19. Sumeet, K, 2008, ‘Enforcement of Arbitration Awards in India’, Asian International Arbitration Journal, vol. 4, number 1, p 68. Read More