14. International Law
One of the most important considerations for international business is understanding that companies operating in foreign nations are subject to the laws of those nations (Cross & Miller, 2018, p. 212). When international laws are violated, disputes are often resolved through the legal systems within individual nations.
Most countries have either common law or civil law systems. Common law systems operate independently by developing their own rules that govern areas of business law, such as torts and contracts. Canada has a common law system (except for Quebec which is a civil-law system). One-third of all people in the world live in nations in which common law is practiced. Civil law systems base their legislation on Roman civil law, which utilizes statutory codes as the primary source of law.
Impact on International Trade
There are three international law enforcement methods that can radically impact trade: collective action, reciprocity, and shaming.
- Collective action occurs when businesses work collectively to strengthen their resources and achieve a shared goal. In February 2018, the UN Conference on Trade and Development Secretary-General argued that collective action can be one of the most effective methods for protecting international trade in the current global climate. Due to recent trade restructuring from the United States and the United Kingdom (withdrawal from the EU on January 31, 2020), collective action was promoted as a way to “harness energy that will not fragment the [international trade] system” (UNCTAD, 2018). By leveraging nations to defend “rules-based multilateral trading systems as a force for creating inclusive prosperity,” the Secretary-General promoted collective action as the primary way to assure continued international peace and economic viability for generations to come.
- Reciprocity is a fundamental axiom of international trade. It happens most commonly in international business exchanges as countries lower import duties, or other trade barriers, in exchange for mutual arrangements extended by the other country (provisions within the General Agreement on Tariffs and Trade provide good examples). Various international treaties, including the Vienna Convention of 1969 incorporate reciprocity provisions with the articles of agreement (for example, Article 21(1)(b) of the Vienna Convention). Reciprocity can be beneficial to the nations involved, or it can be punitive.
- Shaming is a deliberate attempt to negatively impact a state, regime, or governmental leader’s reputation by publicizing and targeting violations of international laws, including customary norms, treaty breaches, and violations of organizational expectations (Gopalan & Fuller, 2014, p. 75). However, shaming is not viewed as particularly effective without more concrete measures to accompany it (Klymak, 2017). A recent research study conducted by the Department of Economics in Dublin, Ireland, found that there is no evidence to suggest that there has been a decrease in the imports of goods to the United States from countries where foreign goods are likely produced by child and forced labor. Despite media coverage and the International Labour Organization’s coverage that routinely shames certain nations for producing goods by child or forced labor, those goods are nonetheless regularly imported for international sale.
Public and Private International Law
International law consists of rules and principles that apply to the conduct of nations, international organizations, and individuals across borders. There are two types of international law: public and private.
Public international law governs the relations among governments and international organizations. It includes the law of war, the acquisition of territory, and the settlement of disputes among nations. Public international law also includes agreements governing property rights, trade, outer space, and natural resources, such as the seas and mineral rights. For businesses, public international law is important because it defines human rights, such as the prohibition against child labor, slavery, and trafficking in people and stolen goods.
Private international law applies to private parties engaged in international commercial and legal transactions. Essentially, private international law identifies what law applies to an agreement and how the parties will settle any disputes with parties in other nations.