Reference no: EM131454790
Assignment
What are the legal issues involved in determining the best way to resolve legal disputes in international transactions? Explain your answer.
When legal disputes arise internationally, the legal requirements between two countries may not always be compatible. In the simulation, CadMex is faced with the challenge of sublicensing its products in international markets. To overcome this risks is important for the company to perform ample research and due diligence before entering into an international contract. If possible, it is best to resolve disputes in following order: negotiation, mediation, arbitration, and litigation. Litigating through a foreign court system is likely to be very expensive and have a low success rate, thus it should only be used as a last resort.
What are some practical (not legal) considerations of taking legal action against a foreign business partner based in another country?
Taking legal action against a foreign business partner has several practical considerations. First, the cost of taking legal action will likely be much more expensive due to the increased need to research laws applicable to the country. In CadMex's case, it would be necessary to hire a legal team with expertise in the foreign country. Second, the probability of a foreign entity successfully winning a civil suit against a domestic entity will most likely be very low. Third, suing a business partner could adversely affect the brand reputation and make other international partners cautious of doing business with the company. It is often much more favorable for both parties to resolve disputes behind closed doors with mediation or arbitration, as opposed to a formal court system.
What factors could work against CadMex's decision to grant sublicensing agreements? Explain your answer.
In the simulation, there were already generic brands of CadMex's product on the Canadian market. The Canadian government has a vested interest in seeing domestic industry thrive, therefore, it may not want to cede market share to a foreign corporation. If the foreign legislators believe sublicensing will hurt domestic firms, they could take steps to prevent the deal from going through. If this event were to take place, CadMex would have very few remedies to profit from its sublicensing agreements. This highlights the importance of conducting ample due diligence before investing in operations in a foreign country.
When the local customs and laws conflict with the customs and laws of a U.S. organization operating abroad, which should prevail? Explain why.
The customs policies of the country receiving the goods should prevail. For example, if a U.S. company exports a banned substance into a foreign country, that party will be in violation of the law. When a person or business breaks the law in a foreign country, they will be forced to abide by the legal process and punishments given in the foreign country. U.S. officials will have very little power at assisting entities that have broken foreign laws. In extreme cases, foreign governments have seized assets of foreign businesses for violating local laws.
How would you compare the issues in this simulation to the domestic legal issues discussed in your Week One readings.
In principle, the international legal issues are very similar to domestic issues. Laws are designed to protect the people of the domestic country and firms must work within these constraints. Companies face a much large risk when operating internationally because they must comply with a completely different set of laws. If the company is in violation of the law, they will be subjected to the legal system in the foreign country. Ultimately, building a strong understanding of the legal and political systems that exist in foreign countries can mitigate this risk.