Problems of International Business Transactions - Essay Example

International Business Law (Name) (Institution) (Date) Question One Introduction International business transaction is the exchange of services, goods, and capital internationally. According to Dimatteo (2006) in many countries the transactions represent a major share of gross domestic product. It has also been present throughout the history of business whereby, it was said to be social, political and of economic importance. For example, some of the major impacts on the international business transactions are globalization, outsourcing, multinational corporations, industrialization and transportation. Therefore, increasing international transactions is fundamental for globalization continuity, without this type of trade; countries would be limited to both goods and services within their own borders. However, it does not have a major difference from domestic trade. This is because as Brand (2000) explains, the behavior of trade and the motivation of parties involved in the trade does not change deeply regardless if the trade is across the border or not. It is not as costly as international trade; this is the main difference between the two. This is well explained by the fact that, international borders impose extra costs like tariffs, culture, legal system, language, and time costs because border delays. Another fundamental difference between the tow is in terms of factors of productions, like labour and capital, which are extremely mobile within a state than across countries. International business transactions are also restricted to trade in both goods and services, and to a larger extent trade in labor and capital as well as other factors of production. Trading in goods and services also serves as a substitute for trade when in comes to other factors of production. Domestic business transactions are therefore, exchange of capital, services and goods within the borders, unlike international transaction, where businesses occur across the borders. For example, a nation can decide to import goods that will make intensive use of the issues of production like the case of United States importing goods from China. They import goods produced by Chinese labor instead of importing Chinese labor (Chow Schoenbaum, 2010). Nevertheless, a firm may be pro-actively managing such differences by focusing on comparative advantage in international trade theory. Firms should specialize in involving what their countries produce best instead of producing and buying those goods and services that will lead them astray. In addition, it may also optimally manage the differences by involving in dissimilarity in currencies where such a country involved in such international business may use diverse currencies or may be forced to switch currency from one country to another. The firms should therefore, follow the prevailing currency exchange rate in order to make their business transactions feasible. Therefore, managing and conducting international business transaction is more complex that undertaking a domestic business. The key things that differentiate international and business transactions are different use of currencies, political systems, business policies and regulation, customer heterogeneity across markets. These are the main factors which make an international business transaction more complex and difficult. It is also more complex than the domestic business one, because it does not only include merchandise exports but other services as well, franchising, licensing and trade services. Domestic business only trades in single boundaries only, thus having lesser benefits that the other. For example, through international business transactions, many countries earn foreign exchange, greater aspects of growth, creates employment among others. Domestic business on the other hand, does not involve foreign exchange of currencies and creates employment opportunities also. Since the business is carried locally, it therefore, deals with local resources and perfects in utilization of its resources which obviously reaps benefits. In addition, the firms also reap high profits, and greater utilization of its production capacities. There is an intense competition in domestic business transactions as well as improving the vision of its business (Folsom, 2009). Question 2 In Islamic country or region, banking activity is always based on Islamic law or Sharia, in addition, to its application through the development of Islamic economics. This law prohibits the acceptance of interests also referred to as Riba got from loans. In Saudi Arabia, innovative lending and banking practices and products developed, are compliant with Islamic Law and practices where they meet still meet the dynamic demands of modern commerce, industry and economies. According to Reams (1993), Saudi Arabia being an Islamic country believes that investing in those goods and services that are contrary to their laws is considered Haraam. Despite having used the above principles in a successful economy in recent days, Islamic banks from 20th century formed applied the principles to both semi-private and private institutions in the Muslim community. Therefore, before deciding on international transactions, individuals should first of all be informed about cultures, social differences, legal and political differences among other countries. They must also consider working with those countries in which their goods and services sold will bring inputs as well as assurance hoping that a great business is waiting for them ahead. In Islam, banking is based on some principles where they work according to the Islamic law. Caliphate is a form of government that represents the political leadership and, unity of the Muslim world. It therefore, seeks to integrate some of the prominent Islamic beliefs in their economy. This focuses on distribution of Saudi Arabia resources, which then focuses on its distribution of resources that meets the luxurious and basic needs of the individuals in a society. The Saudi Arabia state has a role of managing its public assets, taxation, ensuring wealth circulation and policing (Fahim and Porzio, 2010) Another principle that underpins the Islamic law and practice is that there is no interest earned on loans and other investing. This explains why its banking is conventional which the first step is in Islamic framework of economics. The Saudi Arabia academic and scholars have also come up with various modes of Shariah that are compliant with financing and designed to work in a capitalist framework in capitalist. They have intermarried Islamic law and modern international commerce by developing their financial institutions that applies in a free economic system. For example, an early market economy was referred to as Islamic Capitalism where the monetary economy was based on dinar currency and tied other regions together in Saudi Arabia together thus becoming independent. Some of the economic techniques and concepts that are applied in Islamic banking are partnership, called mufawada in Islamic, bills of exchange, cheques, trust, assignments, and ledgers among others. Riba in Islamic world means addition, excess or increase, whereby according to the Islamic law it involves excess compensation without value of money. They consider it to be immaterial. Jacobs (2006) argues that applying interest on loans should only be done under special circumstances, like honoring a state with currencies or other materials such as, base metals or papers. For example, it is unacceptable to take 1050 dinars which in this case is an equal amount 1000 dinars of gold. It has the same purpose as conventional banking where money is made for banking institute in terms of lending out its capital. Islam does not agree with interest after lending out money, and therefore, to avoid this problem, they have come up with rules of transactions basically known as Fiqh-al-Muamalat in order to avoid this problem. This is in order to avoid the problem of sharing loss and profits which is considered as Mudharabah, Leasing, which in this case is liars among other problems. For example, in its mortgage transaction, it does not loan their customers any money, instead, the bank buys the item itself and sells it to a buyer at a profit. They also lend out their money to organizations by issuing their floating interest loans rates. This means that its floating rate is pegged to an individual company’s rate of return, meaning that its profit it equal to a percentage in company’s profit. Therefore, Islamic banking is only restricted to their acceptable transactions which in this case excludes pork, gambling or alcohol in the name of investing ethically. It is also an example of full-reserve banking which achieves a 100% ratio (Mohamed and Iqbal, 2011). Question 3 According to International Brotherhood of Teamsters (1942), the International Brotherhood of Teamsters (IBT) is a labor union in Canada and United States that was formed in 1903 by several regional and local teamsters. It is a union which represents professional and blue-collar workers in both private and public sectors. It is said to have an approximately of 1.4 million members. It is a member of Canadian Congress labor and a change to Win Federation. However, there is no international law which governs the IBT’S as well any international court which that has an intention to settle down its disputes. Therefore, the law which governs the IBT’S in reference to Australia and Singapore is, still the international law in regard to the teamsters where they union has expanded maturely and dramatically under the leadership and organization of Tobin. He is said to have pushed for joint councils where local unions are forced to join together in terms of industrial and geographical jurisdiction. Therefore, the joint become a crucial aspect in the governing the IBT in terms of its leadership and negotiating master agreements which covers up all the workers in the industry. Tobin their leader has discouraged strikes so that the union can become disciplined, thus signing other workers to sign the contracts in IBT. Additionally, the union has undertaken long battles in the International Brotherhood of teamsters when there are disputes among the members. It takes advantage of the pro-union act called National Recovery Industrial Act, where it has increased its membership by nearly 65 percent. The teamsters are the people who come up with the law that governs the IBT, they keep changing their leader, and for example, from the leadership of Tobin, they changed to General President Fitzsimmons, where they decentralized back to joint council, local and regional leaders. This helps the union, but still makes it difficult for IBT to act defensively in issues relating their policies. Therefore, their policies moved to the left, which supports the universal health care, bringing to an immediate end of Vietnam War, communal organizing and urban renewal (Lessambo, 2009). The application of the law in this situation has led to the decline of working situation in IBT framework, which has combined with long unhappiness of its members that are employed. This law therefore, develops two nationwide groups with the labor union. The Teamsters for the local union has a number of people assembling to help in their local efforts and professional driver’s council that is concerned with the safety of the employees. The law requires a direct election of members internationally, where it demand for years that adds up to a certain decree. Nevertheless, this helps in replacing the indirect election of delegates at the union convention that is capitalized by pressure from the government. The Teamsters union being the largest union of labor in the world in accordance to their law is the largest contributor in the United States that is also supported by President Bush and Ronald Reagan both from the republican’s party. Through this law, the republicans have donated to the union, as well as refused the George Bush agenda in opening the US highway to the truckers in Mexican (Jacobs, 2006). Question 4 Assuming am an international business lawyer in Singapore, specializing in advising the Singaporean and Indian trading firms on key legal contracts for the purchase and sale of manufactured goods between the two countries, in this case Janapada and Bedok Indian and Singaporean firms respectively. The joint approach I would decide to advise them on is based on choice of law issues. To start, I will look at Singapore being the 15the largest exporter in the world. Based on international trade, it has therefore, influenced the economy strongly. It is also said to have the highest trade to the G.D.P ratio in the world and stands in at 407.9 percent. Therefore, its exports involves entrepot trade where it exports a large volume of Singapore its merchandise exports, Because of its geostrategic location and high facilities of ports. They should also consider that Singapore is a relatively small domestic market where it is aligns itself with external agencies. Therefore, in the international arena, it is mainly concerned with Doha Development and WTO agendas. Being a member of numerous trade agreements like Australian-New Zealand and ASEAN-Korea among others, it maintains a bilateral free trade area with other countries such as Australia (Reams, 1993). Having looked at what Singapore exports, it should also consider the goods and services that India trade with also. After all this is done, they should look at what the Prime minister of Singapore and India agreed on in the establishment of the India-Comprehensive Economic Cooperation Agreement. The two prime ministers met several times in Singapore and India where they submitted reports of major benefits the two countries would get, in terms of increased investment and trade, through their cooperation in economics. Therefore, I would advise the two trading firms on these issues by first of all looking at the direct economic benefits that the said agreed would bring. For example, the agreement has strengthens the ties between Singapore and India and therefore forms a bridge between the Association of Southeast Asian and India. Moreover, the agreement they agreed on also serves as a pathfinder for the India-Asean Free agreement which aims to connect Singapore which is one of the most dynamic economies. Therefore, it aims at catalyzing the trading system multilateral, in addition to serving as a framework for their negotiations. Nevertheless, the merits of arbitration in India versus Singapore are; amazing growth in Indian economy over the past decades where there is a number of increased investors that are doing business in India. Becker and Olivier (2008), explain that international arbitration in a country that is neutral has a favored dispute resolution method. This choice therefore, has a greater impact in the Indian court system which has affected the arbitrations that take place in India. For example, the Delhi court has accumulation of cases which will take like 466 years to clear them. The parties are seen to drive the parties elsewhere. Therefore, choosing a neutral venue will help an arbitral award will be enforced in India. India being a signatory to the convention of New York, awards will be made in their territories which will only be notified by the Official Gazette. However, by deciding to choose, Singapore among the countries which are notified, factors like Geography will be looked at, in terms of accidents. This is because; the Singapore Government has a focus of delivering its efficient public services. Efficiency and Internationalism has been the most important watchwords in the creation of a business environment in the country, which attracts the international arbitration to its territories. Moreover, the merits of a compulsory arbitration are; where the countries combine history with geography. For example, India and Singapore were a result of British India and other origins of modern- day legal systems in the two countries intertwined. Since them both derive from the English law, a number of Indian laws and acts are applied in Singapore, most notable is the penal code that requires all the divergence subsequent between their legal system to be united by a common law heritage in India and Singapore. They also prefer to use the English laws which are the main language which divides America and Britain, but since the international arbitration is concerned it makes it easy for Indians to operate well in Singapore. Additionally, costs are the expense of the European arbitration unlike in Singapore where a greater portion of parties is derived from the Indian counsel and lawyers, and can be employed in London like in the case of Singapore. Reduced costs therefore, work in Singapore’s favor. Compulsory arbitration is that method of resolving disputes that arises from either international or domestic disputes, based on commercial agreements and other relationships international. Arbitration is therefore a creature of contract where parties discuss decisions to submit their disputes, in order to come up with one resolution by more or one arbitrators who are normally selected on behalf of the parties. For example, in labor disputes, there are those laws which force the communities to take up the tow sides of management and labor, in order to undergo arbitration. This is what is called compulsory arbitration, where the laws apply mostly to strikes that affect the public interest. This compulsory arbitration has therefore, been developed in order to allow parties from different cultural and legal backgrounds to determine their disputes without any formalities that are based on legal systems. Some contracts also make a specific provision which in turn makes a compulsory provision based on labor if the two sides disagree. For example, in Australia, there is a compulsory arbitration that However; some of the advantages of International Arbitration are where parties are given many choices to choose from, in terms of resolving their disputes that arises from the contract. If they decide to stay silent the courts will take advantage of them if a disaffected party decides to commence official proceedings. Therefore, their contractual rights will be enforced (Brand, 2000). Question 5 According to the commentary from based on Global holdings V ITC Ltd, there are two adverse transactions based on Trade Advances and Colombo Rice Transactions which occurred between the global and ITC that led to Global liquidation, together with the issues that occurred before the court present proceedings are cross appeals from the assistant register pronouncement to respect the first and third amendments that were summoned for the 2010 orders. To start with the first order was granted the plaintiff to leave in order to service the jurisdiction out to India. Secondly, the Global service writ to the summons according to the three defendants that was set aside. Lastly, the proceedings then stayed on the ground of the forum non conveniens. Additionally, the Assistant registrar dismissed the application in order top set aside the court order that has been granted to server the writ out of the Global’s Jurisdiction that had raised issues to be tried since there were no material facts that were disclosed, and therefore, the most appropriate forum to listen to the dispute was Singapore. The AR had also dismissed the application that was set aside of the Writ of the first defendant and since the writ was said to be based on the Indian law. However, the material facts and relevant legal rules concerning the issue of Singapore was the global commodities company in Singapore. Therefore, the ITC in India was incorporated as the sole shareholder of the Global. The Global was further placed under the management of judicial and further put into the liquidation that based on the material times in India. I think Singapore was convenient for the forum because there was no other country that was ready to listen to the case. Apart from the three defendants, there were other twelve defendants that have been named in the suit, where they fourteenth and fifteen were the citizens of the United States and the Chitalia group, which was one of the Global partners. The Global is said to have given loans to Chitalia. The Global accused the ITC of acting through the second to eleventh defendants and had therefore, because the Global to fund the Chitalia group US$9 with no benefits. The trade advances, therefore, concluded that the Global benefited from the ITC, since it has sold some commodities to the group at higher prices. Nonetheless, according to the commentary, the Global is said to have been instructed to make the trade advances in order to put the group in toes so that it can make payments to ITC. This was essential because, the foreign exchange regulations of India wanted the ITC to personally collect payment for the sales that were invoiced from the Group in 180 days, but the Chitalia Group did not do this. The case for Colombo Rice Transactions was alleged in 1994 where the ITC directed the Colombo to purchase from Chitalia group. About 34,000 tone of rice in Sri Lanka and Colombo, which was later sold by ITC to Chitalia. The issue was governed by both the Singapore and Indian law because according to the international law, every defendant should be respected. Therefore, both validities of the Writ were advised on several lawyers from their own countries. The Supreme court of India concerns was not clear because it interpreted the case literally, which means that some of the case were not brought out fairly in according to the companies of the defendants. Therefore, the issue here is ensuring that the defendant is fairly and sufficiently clear with the proper proceedings against his case. References Becker, U and Olivier, M. P. (2008). Access to social security for non-citizens and informal Sector workers: an international, South African and German perspective. Stellenbosch, Sun Press. Brand, R. A. (2000). Fundamentals of international business transactions. The Hague: Kluwer. Chow, D. C. K and Schoenbaum, T. J. (2010). International business transactions: problems, Cases and materials. New York, NY, Aspen Publishers. Dimatteo, L. A and Dhooge, L. J. (2006). International business law: a transactional approach. Mason, OH, Thomson / West. Fahim Khan, M and Porzio, M. (2010). Islamic banking and finance in the European Union: a Challenge. Cheltenham, U.K., Edward Elgar. Folsom, R. H. (2009). International business transactions: a problem-oriented course book. St. Paul, MN, Thomson/West. Jacobs, J. B. (2006). 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