International Business Law - Report Example

FACT NUMBER ONE ABC Japanese Corporation is offering to purchase 200,000 cell phones manufactured by I Own A Winner, Inc., to be sold in their home country and to their other stores such as India, Indonesia, Nigeria, Pakistan, and Peru. Both companies are neither large and ABC Japanese Corporation was known to have previously suffered some financial difficulties a few years ago. ABC then had a problem paying its debts. Furthermore, the company’s cell phones are currently produced by union workers, where the company might not meet their current job benefit demands and the fact that the labor contract of the company and the union is up for renewal. Also, there is a plan to set up an alternative manufacturing operation in Mexico. ISSUES 1. What are the concerns associated with international sale, particularly entering into an agreement with ABC Japanese Corporation, would the company face? 2. What are the ways which can minimize the company’s risks? 3. What are the possible contract proposals which ABC might give which may tend to be legal deal breakers? ANALYSIS Since this sale transaction crosses international boundaries, it is important to determine which legal system or what law applies (Nanda and Pansius, 30). There may be an instance when the foreign trading partner might not agree to apply the United States law, hence, the United Nations Convention on Contracts for the International Sale of Goods (CISG) may necessarily provide the “uniform rules to govern the questions that arise in the formation of international sales contracts, and the rights and obligations of the buyer and seller in performance of the contracts” (Nanda and Pansius, 30). The United Nations Convention on Contracts for the International Sale of Goods (CISG), 19 I.L.M. 668, would apply if the parties are located in signatory countries and the contracts do not explicitly opt out of CISG coverage. As held in the case of Delchi Carrier SpA v. Rotorex Corp., 71 F.3d 1024 (2d Cir. 1995), the UN CISG, 19 I.L.M. 668, applies to contract claims for the sales of goods between parties in signatory nations, unless the parties expressly contract to be bound by another source of law, such as the Uniform Commercial Code (1024). If however, the sales agreement is silent as to the choice of law, the CISG then applies (Delchi Carrier SpA v. Rotorex Corp., 71 F.3d 1024 (2d Cir. 1995). The United States has ratified the CISG on 11 December 1986 while Japan, which is the home country of ABC Japanese Corporation, acceded to such convention on 01 July 2008 (UNCITRAL, 1). According to the United Nations, accession “is the act whereby a state accepts the offer or the opportunity to become a party to a treaty already negotiated and signed by other states and has the same legal effect as ratification” (United Nations, 1). The parties being signatories to the CISG, such convention should then govern unless there is a specific provision in the contract which states that the United Nations Convention on Contracts for the International Sale of Goods (CISG) shall not apply. This should be taken into account when entering into an agreement with ABC Japanese Corporation. Furthermore, since business activities are to be conducted in several countries, the place of business should be identified or that place which “has the closest relationship to the contract and its performance” (CISG, Article 10). Identification of what particular system to apply would clarify what rules to govern in case of conflict. If then parties have identified for instance CISG to govern the agreement, rules as to the formation of the contract where parties must first sufficiently agree to the goods, the quantity and the price in order that there may be a binding contract between the parties (Filanto, S.p.A. v. Chilewich Intern. Corp., 789 F. Supp. 1229 (S.D. N.Y. 1992), is governed by CISG. It would also govern the rights and obligations of parties to the contract of sale, the breach of action, the risk of loss and the available remedies for either party in case of breach (CISG). Before entering into a contract, the company must consider the specific quantity of cell phone that the ABC Japanese Corporation needs to be supplied and a determination if such quantity and its quality can be delivered considering that the company would be supplying thousands of cell phones to the stores of the other party located in different countries and the fact that these cell phones are produced by union workers. Breach of contract may be claimed if I Own A Winner, Inc. is not able to comply with this obligation and would even entitle the other party to damages for lost profits and foreseeable consequential damages under the CISG. As held in the case of Delchi Carrier SpA v. Rotorex Corp., 71 F.3d 1024 (2d Cir. 1995), the court ruled in favor of the foreign buyer of compressors who brought an action under the CISG against the United States seller for damages related to a breach of contract and failure to deliver conforming goods (1995). The buyer in this case was unable to obtain in a timely fashion substitute compressors from other sources and thus suffered a loss in its sales volume during the selling season (Delchi Carrier SpA v. Rotorex Corp., 71 F.3d 1024 (2d Cir. 1995). The court held that the buyer was entitled to an award of lost profits and foreseeable consequential damages under the CISG (Delchi Carrier SpA v. Rotorex Corp., 71 F.3d 1024 (2d Cir. 1995). The company must also take into consideration whether each of the countries that the cell phones have to be distributed are subject to some kind of regulation or national legislation (DIP SpA v. Commune di Bassano del Grappa, 1995), and a determination of which company has the responsibility for such compliance. Issues such as patents or trademarks to be properly registered (First Flight Associates, Inc. v. Professional Golf Co., Inc., 527 F.2d 931, C.A.Tenn. 1975), must also be taken into consideration especially since this will be sold in other countries, where infringement of intellectual property is possible. FACT NUMBER TWO A lawsuit was brought by Saudi Arabia nationals against Haillyburden, a multi-national company incorporated in Delaware and with its corporate headquarters in Dallas, Texas, before the U.S. District Court in Texas. The company was alleged to have negligently and intentionally disposed of the waste in a manner that caused physical harm to the plaintiffs, to their property, and to the stability of the ecosystem in the area. Actual damages and punitive damages along with an injunction preventing the defendants from continuing or renewing its polluting activities, were sought. It is a fact that Saudi Arabia do not allow punitive damage awards, that due process guarantees in a Saudi court differ substantially from those in the United States, and that the statute of limitations has already passed in Saudi Arabia. ISSUE Whether or not a motion to dismiss such action may prevail. ANALYSIS Filing of a motion to dismiss action would prevail on the ground of forum non conveniens. As held in the case of In Re Union Carbide Corporation Gas Plant Disaster at Bhopal, 809 F.2d 195, C.A.2 (N.Y.), 1987, the court dismissed an action based on forum non conveniens (but subject to certain conditions) were upheld on appeal as the proof necessary for the resolution of the issues to be tried were mostly located in India (195). Relevant proof such as “the principal witnesses and documents bearing on the development and construction of the plant, the detailed designs, the implementation of plans, the operation and regulation of the plant, its safety precautions, the facts with respect to the accident itself, and the deaths and injuries attributable to the accident” were all located in India (In Re Union Carbide Corporation Gas Plant Disaster at Bhopal, 1987). Furthermore, foreign judgments may be recognized on the principles of comity (Hilton v. Guyot, 159 U.S. 113, 16 S.Ct. 139, 40 L.Ed. 95 (1895). The dismissal of an action based on forum non conveniens determination is at the sound discretion of the trial court and may be reversed only when there has been a clear abuse of discretion, after consideration of all relevant public and private interest factors (In Re Union Carbide Corporation Gas Plant Disaster at Bhopal, 1987). In this case, the company needs to prove only that there is no abuse of discretion. Finally, as held in the case of Gaskin v. Stumm Handel GmbH, 390 F.Supp. 361, D.C.N.Y. 1975, parties may even have a forum selection clause which is enforceable as a matter of contract law, unless it was invalid or application would be unreasonable, which in this case is absent. FACT NUMBER THREE One case I found significant is that of Banque de Depots v. Ferroligas, 728 So.2d 533, 1998-0742 (La.App. 4 Cir. 1/27/99), where a Swiss bank advanced funds in millions of U.S. dollars to a Brazilian company named Bozel Mineracao E Ferroligas (“Bozel”). Another Brazilian company, Companhia Paulista De Ferroligas, S.A. (“CPDF”), eventually became the successor to Bozel. Bozel, and then CPDF, alleged that BDD had actually advanced the funds, not to Bozel, but to Hofflinghouse Finance Ltd. (“Hofflinghouse”) (Banque de Depots v. Ferroligas, 728 So.2d 533, 1998-0742 (La.App. 4 Cir. 1/27/99). Because Hofflinghouse became insolvent, BDD sought to recover from Bozel, and then CPDF (Banque de Depots v. Ferroligas, 728 So.2d 533, 1998-0742 (La.App. 4 Cir. 1/27/99). Hence there were five lawsuits in this case (Banque de Depots v. Ferroligas, 728 So.2d 533, 1998-0742 (La.App. 4 Cir. 1/27/99). There was however a settlement agreement in writing between the parties which included the reciprocal defense and indemnity arrangement and specified Louisiana law and a choice of forum clause. Despite this settlement agreement, the Brazilian Declaratory Action was still not dismissed and which rendered a judgment, in favor CPDFs Brazilian attorneys, Peixoto & Cury Advogages S.C. (“Peixoto”) and against BDD, for attorneys fees in an amount equivalent to more than one million U.S. dollars (Banque de Depots v. Ferroligas, 728 So.2d 533, 1998-0742 (La.App. 4 Cir. 1/27/99). On the issue of whether the defense and indemnity provision applied to all of the attorney fee claims at issue, the court upheld such a defense and indemnity provision and that the bank was entitled to bring motion to enforce settlement, instead of commencing separate civil action (Banque de Depots v. Ferroligas, 728 So.2d 533, 1998-0742 (La.App. 4 Cir. 1/27/99). In this case, although a contract provision is found to be clear and unambiguous, its interpretation and meaning is also an issue of law and may still be reviewed. Hence, it is still in the Court’s discretion. However, it was right for the Bank to file a motion to enforce defense and indemnity provision of settlement agreement attorneys had already attempted to collect attorney fee award from bank (Banque de Depots v. Ferroligas, 728 So.2d 533, 1998-0742 (La.App. 4 Cir. 1/27/99). Hence, in business transactions, it is not enough to claim that a provision is clear and unambiguous as such a provision may still be subject of review by Courts. Works Cited Banque de Depots v. Ferroligas, 728 So.2d 533, 1998-0742 (La.App. 4 Cir. 1/27/99). Delchi Carrier SpA v. Rotorex Corp., 71 F.3d 1024 (2d Cir. 1995) DIP SpA v. Commune di Bassano del Grappa, 1995. Filanto, S.p.A. v. Chilewich Intern. Corp., 789 F. Supp. 1229 (S.D. N.Y. 1992). First Flight Associates, Inc. v. Professional Golf Co., Inc., 527 F.2d 931, C.A.Tenn. 1975). Gaskin v. Stumm Handel GmbH, 390 F.Supp. 361, D.C.N.Y. 1975. Hilton v. Guyot, 159 U.S. 113, 16 S.Ct. 139, 40 L.Ed. 95 (1895). In Re Union Carbide Corporation Gas Plant Disaster at Bhopal, 809 F.2d 195, C.A.2 (N.Y.), 1987. Nanda, Ved and Pansius, David. Litigation of International Disputes in U.S. Courts (International Business & Law Series, V). United States: West Publishing Co., 1986. § 7:30, 1986. United Nations Convention on Contracts for the International Sale of Goods (CISG), 19 I.L.M. 668. United Nations Treaty Collection. 2008. United Nations. 24 May 2009 http://untreaty.un.org/English/guide.asp. Read More