Lecture notes for Legal Aspects of International Business 312
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Course
Legal Aspects of International Business 312
Institution
Stellenbosch University (SUN)
In depth lecture notes compiling lectures and the resources provided for the module. Examples and illustrations are provided for further understanding. I used these notes only to study and to complete assignments and passed the module cum laude.
LEGAL ASPECTS OF INTERNATIONAL BUSINESS 312:
Lecture 1: Introduction to Law:
WHAT IS THE LAW:
Rules of law and other rules:
• When individuals or groups of people interact, either in the community or in the world of
commerce, there will always be a potential for conflict due to differences in their needs and
desires. Human behaviour is regulated by a variety of rules and norms.
• Four basic types of conduct rules are distinguished; viz:
1. rules of religion
2. rules of individual morality
3. rules of collective morality
4. rules of law
• Because these rules are all aimed at creating order and peace in society, they tend to overlap. For
example, according to the rules of most religions you are not allowed to kill another human being.
At the same time, your conscience will prevent most people from doing so (except in cases of self-
defence). Generally speaking, the collective morality of society is also opposed to murder. Similarly,
the law will prohibit this type of behaviour
• In some instances, rules of the individual morality will not condemn this type of conduct but the
collective morality of society and/or the law might be opposed to it, or the other way around.
• Individual morality, as well as the collective morality of society, tend to change over time. Used
to be condemned and now not eg Adultery
• Moreover, norms tend to differ along geographical and cultural lines eg cannabis legal in some
and not in others as well as same sex marriages.
• Commercial law is heavily influenced by economic and political considerations; however, social
considerations also play an important role, which are addressed through the principle of public
policy.
• In SA, our Constitution ensures that basic human rights are always protected
• The laws of different countries, however, differ as regard the protection of fundamental human
rights eg labour laws and health considerations.
• Transaction costs is an important concept when it comes to doing business, and these costs are
part of the risks of doing business internationally as they could entail additional costs, whether
they are administrative costs to comply with legal rules or legal costs to settle disputes, which all
reduce the profitability of a transaction.
• The rules of law are the only rules that can be enforced by state institutions such as the police, the
courts or the sheriff.
• Other rules are only sanctioned through your own conscience or through social dismissal.
• States which respect the rule of law, law is regarded as the highest authority in such country.
• The 2015 United Nations Sustainable Development Goals refer to the rule of law as one of their
development goals to ensure sustainable development and address poverty.
• Investors and entrepreneurs perceive political stability and an effective legal system that is based
on the rule of law as paramount as it protects ownership and ensures the enforcement of legal
rights which are important for creating business trust. These are considerations that weigh heavily
in decisions to do business in a particular country.
The role of law within the context of business and commerce:
• In context of business and commerce, the rules of law are often more important than the rules of
individual and collective morality (however the latter should not be dismissed)
• Religious conflicts & individual and collective perceptions of the law, equity and justice can
indirectly affect business
, • Increasing pressures internationally to ensure ethical business practices are followed in
production processes
• Rule of Law rules aimed at regulating human conduct (in the form of social or economic
conduct) so as to order society and commerce
• Law prescribes what people are not allowed to do, their certain freedoms & how disputes can be
solved peacefully
• Arbitration & mediation is another way of resolving disputes
- Arbitration
o Specialised
o Various specialists on the board (engineers, building specialists etc.)
o Use wide range of knowledge and information to solve problems (use international law,
mercantile customs & trade practices)
o Judgements aren’t published
- Mediation
o Mediator doesn’t come to a decision on the dispute
o Accompanies the parties to reach their own agreement to solve their dispute
• Law contracts throughout business
- Purchase
- Sale
- Employee contracts
- Insurance contracts
- Customer protection laws
- Debt contracts for borrowings
• Legal Aspects together with economic, financial and political risks are part of the risks which must
be taken into account when a business strategy is formulated
- Legal advisor will be required to deal with finer details
o Plays central role in negotiation and implementation phase of a commercial deal
The rule of law in a constitutional democracy and the role of public policy:
• Bill of Rights
- State that all government and private conduct should adhere to the principles of freedom,
equality and human dignity
- Ensures equitable, reasonable and just rules which respect human rights
• Constitution
- Under rule of law Constitution is the supreme law
- Protect its citizens from state abuse
- Protect the individual’s fundamental rights from abuse by other individuals and institutions
• The sentiment of the constitution and bill of rights are also contained in the notion of public
policy
• Public Policy
- Plays important role in the law of contract
- Hence, principles of freedom, equality and human dignity also impact on the traditional
private sphere of the private law
• All people equal before the law and everyone should have access to the law
SOURCES OF SA LAW:
• There are a number of sources from which SA law originates. They are:
- legislation
- court decisions
- the common law
, - custom
• International law is also a source of law
Legislation:
• The constitution of the republic of SA
- The Constitution is the most important law in the constitutional system of the country and
regulates the legislative, executive and legal functions of the state.
- The Constitution regulates, but at the same time also curbs, governmental power.
- The Constitution is the supreme law of the country. Any law or conduct that is in conflict with
the Constitution may be declared invalid by a court of law.
- Chapter Two of the Constitution provides for a Bill of Rights in which these fundamental rights
are entrenched. Some of the rights that are entrenched in the Bill of Rights are the right to
equality (s 9), the right to assemble and to strike peacefully (s 17); the right to freely choose a
trade, occupation and profession (s 22), the right to fair labour practices (s 23) and the right not
to be deprived of property except in terms of law of general application (s 25) and the right to
fair administrative conduct (s 33).
- Any act in conflict with the constitutional principles of freedom, equality and human dignity of
all people can therefore be declared invalid by the Constitutional Court. An example is the
decision in S v Makwanyane 1995 3 SA 391 (CC) where the Court held that the statutorily
accepted death sentence is unconstitutional because it is conflict with the right to life (s 11).
Another example is a finding of the Constitutional Court in December 1995 that declared the
requirement in the Marriage Act 25 of 1961 namely that a legal marriage could only take place
between a man and a woman unconstitutional for being discriminatory on the grounds of
gender equality and, therefore, being an infringement of fundamental human rights (s 9).
Parliament was given the opportunity to amend the law to provide for marriages between
people of the same sex. It was decided to enact new legislation providing for these types of
marriages. Parliament subsequently promulgated the Civil Union Act, Act 17 of 2006, which
came into operation on 30 November 2006.
- Although the Constitution is primarily aimed at regulating the relationship between the State
and the individual, it is clear that the purpose of the Bill of Rights is not only to regulate this so-
called “vertical relationship” but that it also applies horizontally between individuals, or
between companies or businesses, and can be enforced in those contexts as well.
- Sometimes, different human rights that are both protected by the Constitution will come “in
conflict”, such as the right to free speech and the right to dignity. The rights will then have to be
weighed against each other. Typical examples are where rude or racist remarks are made on
social media.
• Parliamentary legislation (national level):
- The Constitution empowers Parliament to legislate.
- Legislation (also known as statutes or Acts) comprises legal rules made by Parliament.
- Under a democratic order, Parliament is constituted by representatives of political parties
elected by the community. (In South Africa it is done on the basis of proportional
representation.)
- Legislation should reflect the will of the people and the collective morality of society.
However, at times, laws are made which generate much debate (e.g. the abortion law)
- It should however be remembered that collective morality is not static and that it tends to
change over time.
- Parliament is the most supreme legislator on national level, but it is subject to scrutiny of the
Constitution as the highest law of the land. Parliamentary acts are the most powerful source
of law on the national level and enjoy preference over the common law, as well as court
decisions and customary law.
, - Legislation is published in Government Gazettes that are available electronically. Statutes
have titles and numbers, e.g. the Insolvency Act 24 of 1936 and also have a preamble which
summarises the content and the purpose of the law. All statutes are divided into sections, e.g.
s 2 of the Insolvency Act. Each section, in turn, is subdivided into subsections.
• Provincial constitution and legislation (regional level)
- Every province has a provincial legislature which may enact a constitution for its specific
province and it may legislate on so-called “own affairs” (e.g. local government, provincial roads
and road traffic, health services, non-tertiary education, agriculture etc).
- Together with the national legislature it can also make laws dealing with specific issues, such
as housing, trade, education, health services, agriculture, etc.
• Subordinate legislation (local level and other)
- Legal rules can also be formulated by other bodies.
- Delegated legislation is made by local councils, municipal councils, university boards, health
boards and even by ministers. A municipality may, for example, make building regulations
which are operative within its boundaries
- Such regulations are known as subordinate legislation.
- This particular type of legislation is subordinate in that the person or legislative body derives its
authority to legislate from an act of Parliament (the authorising act).
- Subordinate legislation is limited in the sense that the person or legislative body can only act
within the boundaries of the authority provided by the authorising act. Ultra vires legal rules
(which are outside the boundaries set by the authorising act) may be declared invalid by a court
of law.
Court decisions:
• Apart from the common law and statutory law, court decisions are an important source of law.
• The judiciary consists of different courts.
• Hierarchy:
- Constitutional court (Johannesburg) highest court in the country (constitutional matter or
public interest)
- Supreme court of Appeal (Bloemfontein) other cases than constitutional or public interest,
supreme court is last resort
- High courts civil and criminal matters and constitutional matters
- Lower courts (magistrates court) limited jurisdiction over civil and criminal matters
- Regional courts more serious lower court matters
- District courts smaller lower court misdemeanours
- Special courts matters of a specialized nature eg family court
- Small claims court civil matters where the cause of the action is less similar and the amount
in the dispute is relatively small. Plaintiffs act in personal capacity
• Judges normally do not create law but only apply the law or interpret it. However, in interpreting
legislation or the common law, judges may create law when they give a new interpretation to a
statute or by extending or adapting a principle of the common law.
• Statutory interpretation takes place with reference to principles and rules provided by the
legislator or by the courts. The Constitution also provides guidelines on the interpretation of
statute. When a judge interprets a statute he/she will firstly be led by the statute, its context and
more specifically the definitions provided therein.
• The extent to which court decisions are binding, are determined by the precedent system (stare
decisis doctrine). The precedent system ensures greater legal consistency, certainty and
predictability. The precedent system influences the extent to which a court decision is binding. In
essence the system entails that a court is bound to the ratio decidendi of a prior decision by the
same court or a higher court within its jurisdiction until it is upturned by a court which is higher in
the legal hierarchy or where the decision was evidently wrong or where the facts of the matters
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