International Business Law and the Legal Environment
Comprehensive summary of the lectures for the course International Business Law. Suitable for students International Business. Given by Stephanie Gardner at the Vrije Universiteit Brussel in the academic year .
Summary:
Theory lectures International Business Law
PROFESSOR: STEPHANIE GARDNER
Gino Aytas | 1MA IB | Academic year 2021 – 2022
Version 1
,Practical information:
The final exam will be good for 100% of the marks. On the exam there are multiple choice
(NO guess correction), short answer and open questions.
1. Law and Society: Origin and Nature of Law
Lets start by defining what the law is exactly. It is legally defined as enforceable rules
governing relationships among individuals and between individuals & their society. The
law sets out rights, duties and obligations of citizens.
As a result of the law there is stability and predictability. As the Law regulates conduct
in society on a personal level, allowing citizens to determine right from wrong and on
a business level, allowing for a degree of legal certainty in business dealings. One of
the key features of the law will be the enforceability.
Fortunes are made an lost on legal questions such as: What happens if my counterparty
breaches the terms of the contract? From an international business pov, what is legally
right and wrong differs from case to case. It depends on the case, which country it
happened in and so on. This is usually the case for law questions!
An important factor is the stability of the legal environment where we intend to do
business. The more stable a legal environment is, the less risk we are taking. If the court
system is overthrown and laws are not enforced we are taking a big risk. The law is never
100% certain, thus it is important to prepare and avoid legal pitfalls. Look at the
particular country where you are sitting at a particular moment in history.
An example of the fact that law is verry different depending on time and place is regarding
traffic law. Since the 1st of January 2017 the speed outside of what is known as “city limits”
changed from 90 km/h to 70 km/h but only in Flanders! It stayed at 90 km/h in Brussels
and Wallonia up till this point.
Another example is regarding voting, which is mandatory in Belgium but is not in the US.
In the US mostly the extremes come out and vote, moderate people tend not to vote in
society where voting is not mandatory. People who are unhappy with live will be
motivated to vote.
An another interesting illustration is that of Apple. Ireland gave them a great deal where
they had to pay next to none tax for coming to their country. Which is quite common,
countries offering tax advantages for setting up business there.
Next there is the example of Women’s voting rights, which was only introduced in
Belgium in 1948. Whereas it was already introduced in the US and Germany in 1919.
Lichtenstein only followed in 1984, which is odd as it is a microstate fully enclosed by
Germany. It is not that the Women in Lichtenstein differ from those in Germany. This
difference is due to a difference in societal values.
In general the law reflects society or ruling group its values and norms. So over time
the Law is constantly evolving, we have had many examples of this:
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, • Nomadic tribes
• Greek concepts of Democracy
• Roman Code
There is a close relationship between morality and any rule that society will enforce. This
is interesting from a business point of view.
• What is the current Legal Environment?
• Society’s current attitudes
• Can the Law be “behind the times”?
• Noteworthy trends
For example in the US it is much easier to start a company and to go bankrupt compared
to Belgium.
Therefore it is important to ask these key questions for International Business Persons.
How will the local, legal environment affect my business decision making? Many different
laws can affect a single business decision.
Lets illustrate this. Imagine you have been named the new President & CEO of Amazon.
As mandated by the Board of Directors, the company will continue its worldwide
expansion and intends to build a new operations site for 1,000 workers. How will the local
laws of various countries influence your decision on where to build the new site? Area’s
we need to look at can include:
• Labour laws
• Building/construction permit regulations
• Fiscal laws
• Environmental laws
• Social security system
The laws in any of these areas can heavily influence our undertakings and should thus be
evaluated closely when deciding upon a country where we want to expand towards.
During this course we will be focussing more on International Private Law. Which is a
set of rules or procedural law that regulates relationships between persons or entities of
different nationalities.
It also determines which legal systems and law of which jurisdiction will apply to a legal
dispute among individuals involving a foreign element, also known as Conflict of Laws.
The Transnational rules that national courts use to regulate have three primary
relationships:
• Relationship between two nations
• Relationship between a nation and an individual
• Relationship between persons/entities from different countries
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, The sources of these Transnational rules are: International conventions & treaties,
customs practices, widely accepted general principles of law and all other sources used in
national law.
An example of International conventions/treaties relevant to business law are the
agreements laid out by the World Trade Organisation (WTO) in its founding 1995
Treaties.
The role of law and courts in society can be heavily influenced by broader historical and
societal practices, known as customary law. Customary law can be described as based
upon the customs in a community. Usually accompanied by oral tradition, organised set
of rules regulating social relations that have received approval from the members of the
community. The legal system of Mongolia still relies on customary law as of today.
Today Civil law and Common law are more common. Thus a difference has to be made
between Civil and Common law.
• Civil Law = Continental European Approach
o Most influential legal system
o Codified law based on Roman Code
o Legal rules set out in one comprehensive & systemized code
o Ex.
Family law
Fiscal law
Labour law
The 4 most important features of the civil law system that distinguished it from the
common law include:
Dominant source of law are codes, ex. commercial law codes
Judge-controlled investigative form of procedure
Judicial cases or court decisions NOT a form of law-making
Importance of legal academics in law-making
Then there is the Common Law system.
• Common Law = Anglo-Saxon Tradition
o Law based on
a case-by-case basis
court decisions and precedent
o Accumulation of Judicial Decisions
o Encourages litigation as law is less clear
o Judge decisions via
Reason of authority
Reason of substance
Stare Decisis also comes into play with Common Law, requiring courts to follow their
own precedents. This automatically binds all lower courts of a jurisdiction to the same
determinations. Decisions must be clearly explained, called ratio decidendi.
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