Legal Environment

International Business
 Prepared By
Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com

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 Legal Environment
Managers must be aware of the
legal systems in the countries in
which their firms operate, the
basic nature of the legal
profession (both domestic and
international) and the legal
relationships that exist between
and among countries. Legal
systems differ both in terms of
the nature of the system and the
degree of independence of the
judiciary from the political
process.
 Kinds of Legal Systems
Common law originated in
the United Kingdom and is
based upon tradition,
precedent, custom and
usage; therefore, courts
play an important role in
interpreting the law.
 Kinds of Legal Systems
Civil law, also known as
codified law, originated
with the Romans and is
based upon a detailed set
of laws that make up a
detailed code that includes
rules for conducting
business; courts play an
important role in applying
the law.
 Kinds of Legal Systems
Theocratic law is based
upon religious precepts.
The best example is Islamic
law, or Shair’a. The key for
businesses is to adhere to
the constraints of ancient
Islamic laws while
maintaining sufficient
flexibility to operate in a
modern global economy.
 Consumer Safeguards
Different legal systems
provide varying safeguards
with respect to product
liability and other legal
issues. For example, access
to and assistance from the
legal community, legal fees
and the ability to use
foreign lawyers all differ
across countries.
 The Legal Profession
Although lawyers and law firms
vary in terms of how they practice
law and service clients, MNEs must
use lawyers for a variety of
services, such as negotiating
contracts, formalizing agent-
distributor relationships and
protecting intellectual property.
The key for managers doing
business overseas is to choose a
law firm with the needed expertise
and overseas connections, whether
through the company’s own
offices, a merger, or correspondent
relationships.
Legal Issues in International Business
National laws may affect the
business climate both within and
beyond a country’s borders and
pertain to both domestic and
foreign firms. Areas addressed
include health and safety
standards, employment practices,
antitrust prohibitions, contractual
relationships, environmental
practices, intellectual property,
cross-border investment flows,
tariffs and non-tariff barriers, to
name but a few. In addition,
international treaties among
nations may also affect the nature
and extent of business operations.