Name: Tutor: Course: Date: Global Business Law Question 1 The force majeure clause is among the most general clauses in contracts. With respect to this, the force majeure clause is a clause that liberates both parties within the contractual agreement from requirement or liability in the event that an unexpected occurrence or circumstance outside the power of the parties restricts both from gratifying their obligations within the contractual agreement.
Usually, the events out of the control of both parties assume the description of Acts of God such as earthquakes, hurricane, floods and volcanic eruption as well as man made acts such as crimes, strikes, war and riots. These happenings in the context of the force majeure connote the uncontrollable law of nature in determining the execution of justice in the milieu of law. Usually, a significant part of clauses that focus on force majeure do not warrant the excuse of the non-performance of a party completely, but only suspends the party from a duration documented by the aforesaid clause. Usually, the force majeure clause possesses the objective of including risks that surpass the rational authority of a party that do not arise from the maleficent or negligent actions of a party and thus pose a considerable impact on the capability of the respective party to carry out its obligations as per the stipulations provided within the respective contract. Nevertheless, in order to mitigate the effects of the force majeure clause, it is important to include the Hardship Clause. The Hardship clause is a provision within a contract that possesses the objective of covering cases in which unexpected events take place. The unforeseen events modify the balance of the contract and thus lead to the creation of an excessive burden on one of the concerned parties.
Usually, hardship clauses identify that parties have to carry out their contractual duties even if the events have delivered performance more burdensome than the burden anticipated at the culmination of the contract. Nevertheless, in the event that continuous performance becomes heavily tedious based on a situation that is beyond the control of the parties as well as the anticipation of the parties in the creation of the contract, the clause can compel the involved parties to negotiate alternative contractual terms which rationally permit for the consequences of the situation. With respect to the force majeure clause, the hardship clause integrates together with the clause based on the assumption that both clauses share common characteristics and they both cater to conditions of deviating situations.
The dissimilarity between the two notions is that hardship comprises the implication of the burden on the performance of the deprived party but does not include the notion of impossibility. On the other hand, the force majeure proviso illustrates the impossibility of the obligations of the required party based on uncontrollable circumstances. As such, the hardship clause constitutes a reason for a change within the contractual agenda of the parties. As such, the hardship and force majeure clause create the notion of the Impossibility Doctrine and the Commercial Impracticability Doctrine. The Impossibility Doctrine is the sole justification for non-performance as per the contractual specifications. The Commercial Impracticability Doctrine, on the other hand, provides for the provision of an excuse solely in circumstances where change makes performance of contractual obligations impossible.
In legal context, Article 6 of the CISG allows for the exclusion of the Convention by parties and thus allows parties to utilize the clause of force majeure in order to supersede common law. Question 2 a) The examiner in the credit department is indeed correct. Usually, a Letter of Credit stipulates the terms and conditions that the seller should comply with based on the buyer’s requests and assertion. In the context of this case, the seller or supplier, Sine-Tech, possessed the mandate of supplying computer chips to a U.S buyer. Furthermore, the terms of the credit bordered on the require specifications for the chips that were necessary in meeting the conditions the buyer set. The documents that required for the transaction such as the Certificate of Insurance, commercial invoices and inspection certificates all referred to Altima III Central Processing Units at 750 MHz and 512 Random Access Memory Chips. In addition, the documents all corresponded to the terms and conditions of the credit, which included the recognition of terms such as CPU, MHZ and RAM, which completely match the terms of the credit.
b) All Letters of Credit must adhere to the Doctrine of Strict Compliance. In summary, the Doctrine of Strict Compliance requires that all the documents required ascertaining transaction by the Letter of Credit should sternly comply with the terms and conditions within the Letter of Credit. As such, documents that do not conform to the terms provided for the positive transaction of the Letter of Credit justify the refusal to pay by the bank. In this case, there is the absence of further compliance issues relating with the exchange between the U.S buyer and Sine-Tech. This is because all documents that are present within the Letter of Credit conform to the terms and conditions provided by the U.
S buyer. Furthermore, based on the examiner within the credit department of the buyer’s bank, the documents indeed conform to the terms and conditions specified by the buyer and as such, the bank does not possess any justification as to why it should not pay the seller. c) The bank is indeed safe in paying the credit to the seller. Additionally, based on the endorsement of the Inspection Certificate by the buyer’s Vice President to pay, the bank complies with the terms of the credit, which include the incorporation of an Inspection Certificate. Based on Article 14(c) of the UCP 600, the endorsement of the certificate does not constitute any discrepancy.
In delineation, a discrepancy within the Letter of Credit involves opposing the terms and conditions of a Letter of Credit or the documents available under the Letter of Credit. Thus, regarding this case, the Inspection Certificate is a document required under the Letter of Credit. Furthermore, the Inspection Certificate conforms to the terms of the Letter of Credit and thus do not present any discrepancy for refusal of payment. However, Article 14 (c) of the UCP 600 acknowledges that the beneficiary, the buyer, must provide a presentation together with a transport document before 21 days from the shipment date. Since the expiry date of the Letter of Credit is absent, the confirming bank is indeed liable if it proceeds with confirming the transaction. Furthermore, the UCP demands that every Letter of Credit should provide an expiry date, in order to prevent the possibility of discrepancies arising from the absence of the credit’s deadline.
Essentially, based on the non-inclusion of an expiry date for the Letter of Credit, the transaction of the credit by the bank based on the inspection certificate’s endorsement comprises a waiver of discrepancies by the buyer within Article 14(c) of the UCP 600 and as such, justifies the bank’s notion if it were to refuse to pay the beneficiary. Question 3 a) Various transaction methods are applicable in ensuring that the beneficiary or the buyer fulfills its financial obligation to the applicant without termination of its services. In this case, one financial instrument that is accessible and conforming to this notion is a Documentary Letter of Credit. A Documentary Letter of Credit refers to a type of Letter of Credit that supports the transportation of merchandise, which is in turn facilitated by commercial or shipping documents that are usually offered to the Issuing Bank or the Confirming Bank by the beneficiary for imbursement or approval.
In terms of the case between KS Enterprises and ABC, the Documentary Letter of Credit would be an effectual means of ascertaining payment to the seller based on the terms and conditions stipulated by the credit. One of the main reasons that support the Documentary Letter of Credit as an efficient transaction method is based on prompt payment. This will be highly advantageous for the seller, ABC Sports. This is due to the concerns by the seller that the buyer, KS Enterprises, will refuse to make payment of the commodities in advance, as the seller requires. As such, the Documentary Letter of Credit facilitates this notion by ensuring that payment is prompt.
Secondly, the Documentary Letter of Credit is able to substitute credit. This is based on the assertion that this type of transaction method bears the ability to self-liquidate. As such, the Documentary Letter of Credit as a self-liquidating credit is able to repay itself with finance produced from the assets purchased by the finance from the credit itself. This would apply advantageously to the seller, ABC Sports, since the Documentary Letter of Credit will facilitate its need for quick revenue from its commodity sales to KS Enterprises by ensuring repayment takes place at an advanced rate. Another advantage of the Documentary Letter of Credit is that it ensures non-cancellation of an order by the buyer.
In specification, the buyer requires a Conformed Documentary Letter of Credit in order to ensure that the buyer does not revoke his transaction promise. Typically, a Confirmed Letter of Credit comprises a letter of credit usually offered by a single bank in which another bank subjected its permanent confirmation to reimburse the seller in the same way as the opening bank. b) Nevertheless, in ensuring that the transaction between the buyer and the seller continues based on the utilization of a Documentary Letter of Credit, various stipulations require implementation in order to facilitate this transaction. The Documentary Letter of Credit requires a set of documents that provide equal ground for the buyer and the seller to transact and even repudiate the transaction if there is evidence of malfeasance. One document is a Commercial Invoice. The Commercial Invoice is a shipping document, provided by the exporter or the seller, which includes mainly the identification of the seller and the buyer, the terms and conditions of the sale and the quantified value of the shipment.
Another document required for facilitation of the Documentary Letter of Credit is the Insurance Certificate, which verifies the existence of an insurance cover under particular terms offered to listed persons. The other important document is the Certificate of Inspection, which verifies the inspection of the commodity and thus determines if the shipment corresponds to the terms and conditions of the credit. The final document is the Bill of Lading, which is a legal text between the shipper and the carrier of the commodity and as such, acts as a receipt of shipment in the event that the commodity reaches its destination.
In addition, the main laws that will guide the use of Documentary Letter of Credit are the Uniform Customs and Practices for Documentary Credits, which govern the utilization of Letters of Credit described as documentary credits. In addition, the UCP Laws gain recognition internationally and therefore facilitate international business and trade transactions between international countries. Question 4 a) The Kiobel vs. Royal Dutch Petroleum Co. case focused on the implications of the Alien Tort Claims Act in its application in extraterritorial jurisdiction.
The petitioners within the case comprised civilians originating from Nigeria. These Nigerian citizens alleged that British, Nigerian and Dutch corporations specializing in oil exploration assisted and encouraged the Nigerian government in carrying out contravention of conventional international legislation in the 1990s. The petitioners, who were also the plaintiffs, asserted that the Royal Dutch Shell coerced its subsidiary, which was a Nigerian firm, together with the Nigerian government, to rout peaceful resistance in the Ogoni Niger River Delta based on belligerent oil development brutally.
In addition, the petitioners enquired for the payment of damages under the Alien Tort Statute (ATS). The defendants sought to dismiss the indictments pressed against them based on two arguments. The first argument brought forward by the defendant focuses on conventional international legislation.
According to the defendant, international legislation offers the regulations through which decision borders on whether conduct infringes the legislation of nations whereby non-state agents commit the violation based on the allegation. The subsequent argument provided by the defendants alleged that the absence of norms has always been evident among nations and as such, such norms lack the capacity to impress legal responsibility on corporate agents. Alternately, the petitioners, who relocated to the United States based on seeking political asylum, alleged jurisdiction beneath the ATS and asked for relief under conventional international law. Their rationale for using the ATS focuses on the provision of the ATS which provides that the district court possess native jurisdiction over actions of tort solely that violate the a United States decree or the Law of Nations. As such, the petitioners alleged that the defendants impinged the Law of Nations by assisting the Nigerian government in performing a) extrajudicial killings, b) humanity crimes, c) vindictive treatment and torture, d) uninformed arrest and detention, e) infringements on the Right to Life, f) association, security and liberty, g) coerced exile and h) destruction of property. The District Court dismissed a, e, f and g indictments in accordance with the fact the indictments did not correspond to infringements on the Law of Nations. As such, the District Court recognized that the case requires interlocutory appeal towards the Second Circuit based on the stern nature of the questions raised regarding the applications of the ATS, of which the Court of Appeals decided that the ATS does not identify corporate liability and as such, the ATS is not a ground for liability regarding corporations. Irrespective of the plaintiffs arguing that the ATS possessed applicability within foreign nations, the judges of the case decided that the conjecture against extraterritoriality pertains to indictments in the ATS, and nothing in the statute refutes that supposition.
Furthermore, the ATS is deemed jurisdictional and as such, the standard of statutory elucidation cannot apply to the ATS due to the danger of judicial interference within foreign policy. Accordingly, the court held that the supposition against extraterritoriality comprises a standard of statutory elucidation that offers that in the event that a statute provides unclear illustration of an extraterritorial application, it possess null extraterritorial applications. Furthermore, the Court alleged that nothing in the history, text or aims of the ATS rebuts the supposition. This is due to the reason that the provision in Tort Law, which states that causes occurring internationally that can be identified as taking place locally, does not assist in rebutting the supposition because that does not constitute the sole necessary connotation of the decree’s text. Lastly, the Court alleged that it would be far-fetched to suppose that the First Congress desired to make the United States an exceptional place for enforcing foreign norms. Question 5 a) In terms of economic performance, the Republic of India is among the formidable economies of the world by the end of 2011.
By the culmination of this year, India became the third largest economy toppling Japan. The basis for this economic ascent delved on the purchasing power of the Indian people. Additionally, the economy of India constitutes conventional village farming, handicrafts, a general spread of contemporary industries, modern agriculture and numerous services. Between 2000 and 2011, the average quarterly Gross Domestic Product (GDP) growth of the country was 7.45 percent but rose to 11.
8 percent in 2003. As such, this indicates the steady increase in the Indian economy attributed to the Services sector, which constitutes 55.3 percent of the GDP. In addition, the Services sector is the main source of growth in the Indian economy, accounting for greater than a half of the output of India with less than a third of its workforce. As such, investing in India possesses advantages based on the country’s rich economy.
In 1991, economic liberalization facilitated the onset of Foreign Direct Investment (FDI) in the country. Between 2012 and 2014, India ranks as the third most appealing vicinity for FDI based on the 2012 UNCTAD World Investment Report. In addition, the 2012 survey of the Japan Bank for International Cooperation asserted that India is the second most promising nation for international business operations. In addition, the Indian government has initiated incentives for enhancing the FDI environment. These incentives by the Central Government include 100 percent profit subtraction for creating, sustaining and operating facilities of infrastructure. Another incentive involves exempting 100 percent tax on export profit for a maximum of ten years. In addition, the Indian government supports subtraction with respect to definite clearing of dividends. Other incentives include a variety of capital subsidy frameworks and fiscal incentives for development in undeveloped regions and schemes focusing on the enhancement of export infrastructure.
In addition, the Indian state government also provides various incentives that facilitate FDI in the country. One such incentive comprises the Single Window system. The Single Window system approves the implementation of industrial units. Another incentive introduced by the state government focuses on the exempting the investor from registration fees, stamp duty and electricity duty. The state government also ensures that it reserves plots for NRIs, EOUs and Foreign Investment Projects. The state government also initiates rebates on the cost of land, concessions on tax and octroi refunds. Other incentives involve subsidies on rates of interest and fixed capital, industrial and regional development incentives for underdeveloped areas in terms of subsidized capital, sales tax exemptions and power rate subsidies. In addition, Foreign Direct Investment is accessible in all economic sectors in India.
However, various disadvantages exist for FDI investors in India. One disadvantage involves strong opposition from the structured and unstructured retail players. Another disadvantage of investing in India incorporates the substitution of reputable countrywide brands by retail profits’ brands. For instance, Wal-Mart dedicates itself to purchasing the best products at the lowest prices in order to provide its clients the finest value.
This comprises the main reason for its heavy outsourcing in China. Even though Wal-Mart may cease operations in China and continue outsourcing, the low prices surrounding Chinese products can easily encourage price consciousness among Indians and as such, promote Chinese brands. Furthermore, initiating FDIs in other sectors of the Indian economy such as the Manufacturing Sector can lead to considerable losses attributed to the low number of skilled workers within the manufacturing plants of India. As such, the low level of skilled labor in the country possesses a significant disadvantage with respect to investing in the country’s manufacturing sector. Question 6 In this case, the consideration of Foreign Direct Investment in hostile territory outlines various legal and non-legal risks that accompany the action of investment in the country. These risks affect the conduction of business within the host country and as such, prevent the investor from receiving profitable gains due to the legal restrictions imposed on them by the legislature of the host country. One legal risk arising from investing in the foreign country is the quantitative restriction on the import.
This restriction, usually referred to as Customs Duty is one of the most common restrictions that limit the exportation or importation of commodities and products in countries. In this case, ABC Company seeks to export an enzyme that will facilitate the conversion of plants such as Sugarcane into bio fuel. Nevertheless, the exportation of such a product is likely to gain hindrance due to implication of the customs duty. In delineation, customs duty involves tax usually implied on commodities of international trade.
Usually, the duties implied by the government with respect to imported commodities comprise Import Duty. Similarly, the duties implied by the government with respect to exported consignments constitute export duty. In this sense, ABC requires the validation of export duty in order to facilitate the export of the enzyme within the country of Trinidad. Consequently, ABC Company requires the raw materials required for conversion to bio-fuel from other international countries such as Cuba and other nations located within the Central America region. As such, the costs that the firm will incur in terms of export duty pose a great challenge to facilitating foreign investment. Another legal risk that will hinder the continuation of foreign investment in Trinidad by ABC Company is the cost of the implementation of a factory plant within the country. Typically, countries that seek to establish factory plants in other foreign countries usually experience high tax deductions and investment charges from the local government. As such, in this context, ABC Company is likely to incur huge costs arising from its incorporation of a processing facility in Trinidad.
Nevertheless, various strategies are accessible that can circumvent the implication of these legal risks on the company. Regarding the impact of the Customs Duty, one strategy that can be advantageous in averting this is lowering the rate of the duty. Regarding the incorporation of the processing facility, a joint venture would be advantageous since the costs arising from the investment charges will split between the two subsidiaries of the firm. Non-legal risks that may arise from the foreign investment include political instability and expropriation. Political instability may arise due to the guerilla militants who are against the Western Foreign Direct Investment (FDI).
Expropriation may arise from the host country’s action in taking advantage of ABC’s resources for public or private benefit without compensation. Nevertheless, various methods are accessible in mitigating these risks. Regarding political instability, one strategy is the Alternative Dispute Resolution. This type of litigation allows conflicting parties to join, work and agree on a specific solution that will benefit both parties instead of pursuing litigation procedures. Regarding the notion of expropriation, various laws focus on addressing the problem of expropriation. In most cases, arbitral tribunals bordering on the issue of expropriation comprise the best solutions towards solving this problem.
Alternately, two provisions based on the notion of joint venture require consideration by the co-venturer. One consideration comprises the tax exemption covering ten years from the government of Trinidad. This tax exemption will allow the venture to incur better treatment from the host country, may lessen capital investment, and gain local familiarity and connections. The other consideration focuses on incorporation of the wholly owned corporation, which may possess disadvantages that may incur loss to partners, corporate disputes and potential competition.
Question 7 A Multinational Corporation (MNC) is a company that possesses numerous business and trade operations in several countries and possesses registration in several countries as well. Usually, most multinational corporations make Foreign Direct Investments and as such, possess budgets that surpass the budgets of numerous countries. Indeed, multinational companies can own an authoritative influence in local economies and international associations and ass such, are able to exert enormous impact on the notion of globalization in both developed and developing countries.
The classifications for these companies segment into three categories. The first category involves the MNCs that possess horizontal integration. In this case, these companies handle production establishments situated within various countries in order to produce undifferentiated products. The next category of MNCs involves MNCs aligned to vertical integration. This category of MNCs administers production establishments in definite countries in order to produce products or commodities that function as input to production establishments within other different countries. The last category of MNCs is the diversified type. Differentiated MNCs administer production establishments situated within dissimilar countries that are neither straight nor vertically and horizontally integrated. As such, the categories of these companies allow focus on the legal concerns of these institutions on their function in developing and developed countries.
With respect to the developing countries, the benefits acclaimed to these nations in terms of the presence of MNCs are numerous. These benefits include the movement of capital, the transition of technology, the instruction of workers and enhanced access to other markets. As such, it is no surprise that MNCs facilitate globalization. Nevertheless, MNCs also possess legal concerns that arise from their exploitation of developed countries in order to facilitate their growth.
Similarly, the problems arising from the business transactions of these large companies correlate with those incurred by domestic enterprises. For instance, most MNCs take advantage of Limited Liability. In this instance, firms usually use up resources and apportion the profits gained without replenishing the resources used and mitigating the effects arising from the production function of these firms. Another way that is of legal concern involves the use of power by MNCs to gain complimentary legislations. Usually, MNCs engage their significant resources by contributing significantly to political campaigns.
In addition, the firms, after investing in the developed country’s economy, carry out significant advertising campaigns regarding their products and services that possess distorted and appealing information with respect to example products such as cigarettes and lubricants. Another legal concern involving MNCs in their operations in developed countries is the use of methods that considerably conceal and inflate the financial information. This was evident in corporations such as Enron and WorldCom that provided financial statements with inflated earnings to shareholders and investors. Furthermore, these MNCs possess extra-ordinary sophisticated detection facilities that traverse beyond the detecting competence of most developing countries.
In addition, the MNCs possess the capability of acquiring particular legislation that benefit them and as such, gain considerable economic power than most developing countries. At times, MNCs seek and obtain special tax exemptions and even possess the capability of persuading companies from enforcing new regulations that may hinder the growth prospects. Furthermore, MNCs, in the event of gaining special favors from the governments of the developing countries encourage the use of bribes and therefore, the spread of corruption in these countries therefore leading to the underdevelopment of such countries in order for the MNCs to continue reaping off the revenues and resources of the countries.