International Business Transactions (IBT)

Atty. Josh Ventura

06:00-08:00 PM

Group 5
Alburo, Rachel
Archival, Lorenil
Argallon, Kristine Joy
Butalid, Vince
Inocian, Aaron
Gabutan, Roshalane
Question # 5.
You have a client from India, a small-sized firm who is eyeing UK as a market for its
advanced customized software. You are asked for the appropriate advice as to
what type of International Business Transaction it would adapt considering that it
just wants the local firms here to avail of the software tailored fit to their needs on
a per agreement basis, the consideration of which is detailed in the agreement.
a. What IBT is best for this transaction?
b. What are the ramifications in doing business in the UK?
c. What would be the effect if the UK remained in the EU?
Answers:
a. The most feasible IBT for this transaction would be Licensing.
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Under a licensing agreement, a firm (the licensor) grants rights to intangible property to
another company (the licensee) to use in a specified geographic area for a specified
period of time; in exchange, the licensee ordinarily pays a royalty to the licensor. Such
rights may be exclusive or nonexclusive. Usually the licensor is obliged to furnish
technical information and assistance, while the licensee is obliged to exploit the rights
effectively and pay compensation to the licensor.

Intangible property may be classified as:

patents, inventions, formulas, processes, designs, patterns
copyrights for literary, musical, or artistic compositions
trademarks, trade names, brand names
franchises, licenses, contracts
methods, programs, procedures, systems.

Purposes of Licensing
Licensing often has an economic motive, such as the desire for faster start-up, lower
costs, or access to additional property rights (e.g., technology). For the licensor, the risks
and costs of a given venture are lessened; for the licensee, costs are less than if it had to
develop a product or process on its own.
Cross-licensing represents the situation in which companies in various countries
exchange technology rather than compete with each other with every product in every
market.
The amount and type of payment for licensing arrangements may vary. Each contract
tends to be negotiated on its own merits; the bargaining range is based on dual
expectations. Both agreement-specific and environment-specific factors may affect the
value of a license.
b. #brexit
The European Union and the United Kingdom
It is a process through which geographical regions become significant political and/or
economic units serving as the basic for cooperation and identity. It involves the growth of norms,
rules, and formal structures through which coordination is brought about. It implies a level of
realignment of political identities and loyalties from the state to the region.
The European Union was formed in 1993 through the ratification of the Treaty of the
European Union. The EU is a unique international organization that combines intergovernmental
and supranational features. Member states remain independent, but they hold their sovereignty in
one to gain strength.
It is composed of 28 member-states. It is a single market which allows the free movement
of goods, services, money and people within the European Union, as if it was a single country. It
involves political and monetary union as well as economic union. It has developed into a
political organization w/c has features of a state and a conventional international organization.
The idea was to boost trade, create jobs and lower prices. But it requires common law-making to
ensure products are made to the same technical standards and imposes other rules to ensure a
"level playing field".
However, on June 23, 2016, England voted strongly for Brexit, by 53.4% to 46.6%, as
did Wales, with Leave getting 52.5% of the vote and Remain 47.5%. Scotland and Northern
Ireland both backed staying in the EU. Scotland backed Remain by 62% to 38%, while 55.8% in
Northern Ireland voted Remain and 44.2% Leave.

Here are the possible ramifications of doing business in the UK in light of #brexit
Transition Period

UK on its own

Considering the unstable political situation

of UK as an aftermath of Brexit, it will most
likely loosen its economic policies to
accommodate investments to keep its
economy afloat while the British pound is
going down.

restrictions on trade
currency risks
legal considerations
economic impact

EU Treaties still apply, so for the meantime,

client can still enter EU market within the
two years negotiation period. It can take
advantage of the single market system,
allowing entry of the services and goods to
the rest of the EU member states.
However, it will gradually set its own
policies in the years to come.

c. What if there was no #brexit?

The UK will enjoy the benefits of a single market economy that the EU has to offer. The
primary aim of the EU is to promote European harmony through creating a single market,
enabling the free movement of goods, services and people. EU is one of strongest economic
areas in the world. With 500 million people, it has 7.3% of the world's population, but accounts
for 23% of nominal global GDP, it can have positive impacts to an economy of a country
belonging to the bloc.
Had there been no #brexit, the UK would still enjoy the following:
1. Free trade and removal of non-tariff barriers have helped reduce costs and prices for
consumers. Increased trade to the EU creates jobs and higher income.
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Over 52% of UK exports are to the EU. Trade within the EU has increased 30% since
1992.

2. Removal of customs barriers mean 60 million customs clearance documents per year no
longer need to be completed, cutting bureaucracy and reducing costs and delivery times
3. Social cohesion fund for poorer parts of the UK such as Ireland, Scotland.

This has invested in poorer areas of the EU to help reduce regional disparities. For
example, Ireland benefited from the EU social cohesion fund (over 6 billion of
investment in education and infrastructure spending)

4. EU structural funds to help Eastern European economies develop will benefit the UK in
the long term because as they become more affluent, they will be able to buy more UK
exports.
5. The European Union has attracted greater inward investment from outside the EU.
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The EU is a springboard for trade with the rest of the world through its global clout: it
accounted for 23% of the global economy in 2012 in dollar terms. Through 30 trade deals
negotiated by the EU, including the Single Market itself, British firms have full access to
a $24 trillion market.

Investment flows across borders inside the EU have roughly doubled following the
introduction of the Single Market.

Free movement of labour helps UK business plug skills gaps.