International Business Law

Jiangxi University of Finance and Economics Term Paper for International Students of IMIB

Subject : International Business Law

Student’s Name : Mohammad Tawhidur Rahman Student’s ID number : 31540051 Date : May 22, 2016

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I. Please give the definition of the following terms. (40 points/4 point each) 1. Jus Cogens – Jus Cogens is an international law principle which is accepted by the international

community of states as a whole as a norm from which no derogation is permitted. 2. Comity – Comity is the general principle that encourages the recognition in one country of

the judicial acts of another. Its basis is not simply respect for other nations, but convenience and necessity, recognizing the need to facilitate inter-jurisdictional transactions.

3. Secret partnership – An association of two or more persons engaged in a business enterprise in which th

e profits and losses are shared proportionally and which is hidden from the public. 4. Sharp practices – Sharp practice is questionable or unethical actions, especially by a lawyer. It may

include making misleading statements or treats, ignoring agreements, improperly using process or employing other tricky and/or dishonorable means barely within the law. A consistent pattern of sharp practice may lead to discipline by a court or state bar association.

5. EPZs – EPZ or Export Processing Zone is a Customs area where one is allowed to import

plant, machinery, equipment and material for the manufacture of export goods under security, without payment of duty.

6. Bona fide purchaser – A bona fide purchaser (BFP) is a term used predominantly in common law

jurisdictions in the law of real property and personal property to refer to an innocent party who purchases property without notice of any other party's claim to the title of that property.

7. Acceptance – Acceptance is an agreeing either expressly or by conduct to the act or offer of

another so that a contract is concluded and the parties become legally bound. 8. The passage of risk – During a transaction at which the risk of loss and damage passes on from

the seller to the buyer. Different trading terms have different points where passage of risk occurs.

9. Clean bills of lading – Clean Bill Of Lading is a bill of lading issued by a carrier declaring that the goods

have been received in an appropriate condition, without the presence of any defects.

10. Appraisal rights – An appraisal right is the statutory right of a corporation's minority shareholders

to have a fair stock price be determined by a judicial proceeding or independent valuator, and the obligation for the acquiring corporation to repurchase shares at that price.


II. Questions and Answer. (30 points/5 point each) 1. Comparing the two forms of the NGOs. – NGOs are may be nonprofit non-governmental organizations (NGO) or for-profit

multinational enterprise (MNE). NGOs are non-governmental organizations are not-for-profit, voluntary

associations of people and communities, may work at local, regional, national or international level. They get funding from the charities, donors and Government agencies to perform social services and humanitarian functions. They are the catalysts of society and work as an agent of social change to bridge the gap between people and Governments ensuring people's participation in development for implementation of programs and projects. The main activities of NGOs are:

(a) Promote the interest of the poor (b) Protect the environment (c) Provide the basic social services (d) To relieve suffering (e) Undertake community development

A multinational enterprise (MNE) is a type of non-governmental organization (NGO) that works for a profit and originates from one country, identifying itself with one national income. MNE is usually a large corporation which produces or sells goods or services in various countries. The main activities of MNEs are:

(a) Importing and exporting goods and services (b) Making significant investments in a foreign country (c) Buying and selling licenses in foreign markets (d) Engaging in contract manufacturing—permitting a local

manufacturer in a foreign country to produce their products (e) Opening manufacturing facilities or assembly operations in foreign

countries 2. What is the main difference between branch and subsidiary? – Main differences between branch and subsidiary are as follows-

Branch Subsidiary Legal Type

Not a separate legal entity but an extension of the parent company

Separate legal entity distinct from its parent company

Liabilities

Liabilities extend to parent company

Liabilities limited to subsidiary

Entity Name

Must be the same as the parent company

Can be the same or different from parent company

Allowed Activities

Must be the same as the parent company

Can be the same or different from parent company

Taxation

Taxed as parent (foreign) corporation, local tax benefits not available

Taxed as individual (domestic) corporation, local tax benefits available


3. List and explain methods to oppose extraterritorial application of unfair competition law (in particular, US antitrust law) – The Sherman Anti-Trust Act of 1890 was the first and most significant of the U.S.

antitrust laws. The Sherman Act made agreements "in restraint of trade" illegal. It also made it a crime to "monopolize, or attempt to monopolize … any part of the trade or commerce." The purpose of the act was to maintain competition in business. To oppose extraterritorial application of unfair competition we can apply following methods: (a) Restraint of Trade: Section one of the Sherman Act provides that "[e]very

contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations is hereby declared to be illegal."

(b) Concerted Action: Section one of the Sherman Act prohibits concerted action, which requires more than a unilateral act by a person or business alone.

(c) Price Fixing: The agreement to inhibit price competition by raising, depressing, fixing, or stabilizing prices is the most serious example of a per se violation under the Sherman Act.

(d) Market Allocations: Market allocations are situations where competitors agree to not compete with each other in specific markets, by dividing up geographic areas, types of products, or types of customers. Market allocations are another form of price fixing.

(e) Boycotts: A boycott, or a concerted refusal to deal, occurs when two or more companies agree not to deal with a third party. These agreements may be clearly anticompetitive and may violate the Sherman Act.

(f) Tying Arrangements: When a seller conditions the sale of one product on the purchase of another product, the seller has set up a tying arrangement, which calls for close legal scrutiny. This situation generally occurs with related products, such as a printer and paper.

(g) Monopolies: Section two of the Sherman Act prohibits monopolies, attempts to monopolize, or conspiracies to monopolize.

4. Suppose there is a contract of sale of goods between a German company (place of business in Germany) and a Chinese company (place of business in China). Does CISG govern the contract with or without opt-out clause? – If any party either Germany or China does not mention any particular law in

contract then the CISG applies automatically without opt-out clause because both Germany and the China are CISG contracting states.

5. In 1974, a company in Poland sold a passel of sugar to another company in England. The contract provided that the seller should deliver the goods within November or December. In August, because of heavy rain, the sugar beets were mostly destroyed. By the end of December, the seller could not deliver the sugar, and required exemption of the contract liability for force majeure. Can the seller exempt the contract liability for force majeure and explain? – Force majeure clauses can give an out for parties unable to meet their contractual

obligations because of events beyond their control. Heavy rain was beyond the control of the seller, but here the subject matter is sugar not sugar beets. Seller should collect sugar through other way; rain did not lead to the impossibility of delivery. So the seller can not exempt the contract liability for force majeure.


6. Which perils commonly covered by special and open cargo policies? – The majority of risks covered under special and open cargo policies, such as- Loss

or damage from the sea, Fire, Jettison, Forcible taking of the ship, Barratry, Explosion, Fumigation damage, Damage from loading, discharging or transshipping cargo.

III. Case Analysis. (30 points/10 point each) 1. A seller in US agrees to deliver grade No.1 corn to a buyer in China for a price of $120,000. While the corn is in transit in a third country, a war breaks out and the ship is detained for 2 months. When the corn arrives in Shanghai, it is moldy and graded only as No.3 (No.3 corn values $90,000 and No.1 values $150,000 at that time.) The Chinese buyer is happy to have the corn, even though it is moldy, because the war has interrupted all of its orders. However, the Chinese buyer wanted to seek suitable remedy for his lost. What remedy the Court is likely to grant under CISG? How much the Chinese buyer will likely to pay the seller? – Under the damage provision of CISG, the buyer is not entitled to damages.

However, buyer is entitled to price reduction. The amount of reduction considers the relative price of conforming and nonconforming goods at the time of delivery.

– The amount of the reduction is determined by the price reduction formula that considers the relative price of conforming and nonconforming goods at the time of delivery. In our case, at the time of delivery in Shanghai grade no. 3 corn price is $90,000 and the price of same amount grade no. 1 corn is $150,000. The original price ($120,000) will be reduced by the ratio of the price of grade no. 3 to the price of grade no. 1 corn. Accordingly, the reduction will be $48,000 and the Chinese buyer will pay only $72,000.

2. A Chinese importer and a Holland exporter concluded a contract of 100 machine tools to be delivered before Dec. 7th, 1995. Total value is $50,000. However, on July, 7th, the seller informed the buyer that it would not deliver goods unless the buyer agreed to pay $60,000 because of the increased market price. The buyer didn’t agree to pay $60,000. The seller avoided the contract. And at that date, the buyer found another company selling substitute goods. But the new supplier asked for $56,000. The buyer didn’t purchase at that time. On Dec. 7th, the buyer had to purchase 100 machines from another company and paid $61,000. Then the buyer sued for the compensation damages of $11,000. Is it reasonable for the buyer to get damages and why? If the Court grants the buyer damage relief, how much would it likely be? Why? – In our case, the time of contract avoidance is 7th July. The buyer didn’t purchase

the substitutes goods at that time. So according to the CISG Article 76, it is reasonable for the buyer to get damages.

– The difference between the contract price and the current price at the time of contract avoidance (7th July) is $6000. So, if the Court grants the buyer damage relief the buyer would likely to get $6000 as compensation, not $11,000 because, it is unreasonable.


3. Wanhai Company in China agreed to sell 10 tons of Heilongjiang rices to Simon Co. Ltd in United States. Because the parties had not dealt with each other before, they chose letter of credit. Simon arranged for a letter of credit with the local bank in United States. The credit required payment on presentation of a bill of lading and commercial invoices. Wanhai produced the bill of lading, commercial invoice and certification of origin. The certification of origin stated that the rice originated in Guangdong Province. The bank refused to pay because the origin of rice is inconsistent with the sales contract. Was the bank correct in refusing payment? Discuss. – Before making any payment every bank should match the information properly. In

our case, we found that when Wanhai Company, China and Simon Co. Ltd, US made an agreement of business they mention their product as Heilongjiang rice. The Simon Co. made all the papers accordingly and submitted to the local bank. But Wanhai Co. sent Guangdong rice and stated it in certification of origin. Finally bank found the inconsistent information between two parties. So the bank has the right to refusing payment against L/C and in this case they are correct.

-THANK YOU-