12 Key 1. The conduct that violates the The anti bribery provisions of the FCPA may also give rise to a private cause of action for treble damages under the Racketeer Influenced and Corrupt Organizations Act (RICO). Answer: True The conduct that violates the antibribery provisions of the FCPA may also give rise to a private cause of action for treble damages under the Racketeer Influenced and Corrupt Organizations Act (RICO). 2. Expropriation is the seizure of foreign-owned property by a government. Answer: True Expropriation, as used in the context of international law, is the seizure of foreign- owned property by a government. 3. Under U.S. law, a firm or individual can compel the U.S. government to press a claim on its behalf before the International Court of Justice. Answer: False No device exists under U.S. law by which a firm or individual can compel the U.S. government to press a claim on its behalf before the ICJ. 4. A country may choose to accept the Court's jurisdiction only when the use of the Court may suit its own interests. Answer: True A country may choose to accept the Court's jurisdiction only when the use of the Court may suit its own interests. 5. The International Court of Justice has been a major force in settling disputes since it began functioning in 1946. Answer: False Article 38 of the Statute of the International Court of Justice (ICJ) is the traditional place for ascertaining what public international law is. The ICJ has not been a major force in settling disputes since it began functioning in 1946. 6. The International Monetary Fund (IMF) encourages international trade by maintaining stable foreign exchange rates and works closely with commercial banks to promote orderly exchange policies with members. Answer: True The International Monetary Fund (IMF) encourages international trade by maintaining stable foreign exchange rates and works closely with commercial banks to promote orderly exchange policies with members. 7. The WTO does not have the power to hear disputes involving member states. Answer: False The WTO has the power to hear disputes involving member states. 8. The World Trade Organization is the only global international trade organization dealing with the rules of trade between nations. Answer: True The WTO is the only global international trade organization dealing with the rules of trade between nations. 9. The European Union, as it is known today, began when six nations signed the Treaty of Rome. Answer: True In 1957, six European countries, Belgium, France, Germany, Luxembourg, and the Netherlands signed the Treaty of Rome, creating the European Community. Six successive enlargements created the European Union (EU), as it is known today. 10. The Convention on the International Sale of Goods (CISG) outlines standard international practices for the sale of goods. Answer: True The Convention on the International Sale of Goods (CISG) outlines standard international practices for the sale of goods. 11. Public international law examines relationships created by commercial transactions. Answer: False Public international law examines relationships between nations and uses rules that are binding on all countries in the international community. 12. Under the CSIG, parties are not allowed to negotiate contract terms and cannot opt out of the CISG. Answer: False Under the CSIG, the parties may negotiate contract terms as they deem fit for their business practices and may, if desired, even opt out of the CISG entirely. 13. The Convention on the International Sale of Goods does not require contracts for the sale of goods to be in writing. Answer: True One of the most interesting provisions in the CISG includes a rule that contracts for the sale of goods need not be in writing. 14. The CISG applies to contracts for the commercial sale of goods (consumer sales for personal, family, or household use are excluded) between parties whose businesses are located in different nations. Answer: True The CISG applies to contracts for the commercial sale of goods (consumer sales for personal, family, or household use are excluded) between parties whose businesses are located in different nations. 15. The Convention on the International Sale of Goods resolves all areas of contract law. Answer: False The CISG does not resolve all areas of contract law; parties are still subject to local laws and customs, which makes international agreements complex and tricky to negotiate. 16. If the United States enters into a trade deal with Costa Rica, with Costa Rica as the seller, and an irrevocable letter of credit is involved, the issuing bank will be located in Costa Rica. Answer: False Transactions using such a letter involve, in addition to a seller and buyer, an issuing bank in the buyer's country. 17. The issuing bank's commitment to pay is given to the seller directly in the case of a letter of credit. Answer: False The issuing bank's commitment to pay is given, not to the seller directly, but to a confirming bank located in the United States from which the seller obtains payment. 18. Irrevocable letters of credit have little effect on reducing uncertainties in international transactions. Answer: False Use of a letter of credit in the transaction thus reduces the uncertainties involved. 19. By using of a letter of credit, the buyer need not pay the seller for goods prior to shipment and the seller can obtain payment for the goods immediately upon shipment. Use of a letter of credit in the transaction reduces the uncertainties involved. Answer: True Use of a letter of credit in the transaction thus reduces the uncertainties involved. The buyer need not pay the seller for goods prior to shipment, and the seller can obtain payment for the goods immediately upon shipment. 20. Irrevocable letters of credit do not recognize the concept of substantial performance. Answer: True There is no room in documentary transactions for substantial performance. 21. A licensing agreement allows an international business to enter a foreign market without any direct foreign investment. Answer: True A licensing arrangement allows the international business to enter a foreign market without any direct foreign investment. 22. The Alien Tort Claims Act was enacted 20 years ago to address tort actions arising from the recent initiatives in global trade. Answer: False The Alien Tort Claims Act (ATCA), enacted in 1789, grants jurisdiction to U.S. federal district courts over "any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States." In the last 20 years it has been revived in a number of human rights contexts, including claims brought against U.S. global companies. 23. A nationalization of assets is most likely to be considered an act in the "public interest" and immune from suit under the FSIA. Answer: True A nationalization of assets, however, probably will be considered an act in the "public interest" and immune from suit under the FSIA. 24. The notion of sovereign immunity has always been, and continues to be, absolute in its application. Answer: False Until approximately 1952, this notion was absolute. From 1952 until 1976, U.S. courts adhered to a restrictive theory under which immunity existed with regard to sovereign or public acts but not with regard to private or commercial acts. 25. Under the doctrine of sovereign immunity, the foreign sovereign claims to be immune from suit entirely based on its status as a state. Answer: True The doctrine of sovereign immunity provides that a foreign sovereign is immune from suit in the United States. Under the doctrine of sovereign immunity, the foreign sovereign claims to be immune from suit entirely based on its status as a state. 26. In suing a foreign firm in the United States, a plaintiff must comply with the terms of the Convention of International Sale of Goods. Answer: False Once the plaintiff decides to sue in the United States, he or she also must comply with the terms of The Hague Service Convention when serving the foreign defendant notice of the lawsuit. 27. The Hague Service Convention is a treaty designed to provide a simpler way to serve process abroad when suing foreign businesses. Answer: True The Hague Service Convention is a treaty that was formulated "to provide a simpler way to serve process abroad, to assure that defendants sued in foreign jurisdictions would receive actual and timely notice of suit, and to facilitate proof of service abroad." 28. Parties can use arbitration to avoid the unwanted publicity that often results in open court proceedings. Answer: True Moreover, the parties can avoid the unwanted publicity that often results in open court proceedings. 29. The World Intellectual Property Organization (WIPO) Arbitration and Mediation Center hears cases involving domain name disputes and cyber-squatting. Answer: True The World Intellectual Property Organization (WIPO) Arbitration and Mediation Center hears cases involving domain name disputes and cybersquatting. 30. The arbitration process likely is more will be more streamlined and easier for the parties to understand than litigating the dispute in a foreign court. Answer: True The arbitration process likely will be more streamlined and easier for the parties to understand than litigating the dispute in a foreign court. 31. Which of the following is true of the Foreign Corrupt Practices Act of 1977? A. It prosecutes any foreign official body that bribes American officials. B. It is designed to watch over the import-export transactions. C. It prohibits American citizens from doing business with countries that have a high level of corruption. D. It is designed to stop bribery of foreign officials by American citizens. E. It governs the corrupt practices in countries doing business with American citizens. Answer: D. It is designed to stop bribery of foreign officials by American citizens. Congress enacted the Foreign Corrupt Practices Act (FCPA) in 1977. The law is designed to stop bribery of foreign officials and to prohibit U.S. citizens and companies from making payments to foreign officials whose duties are not "essentially ministerial or clerical" for the purpose of obtaining business. 32. Intermediaries, under the FCPA, are: A. given restricted rights to make payments to a foreign official. B. allowed to make payments to a foreign official. C. prohibited from making payments that can go to a foreign official. D. prohibited from all types of international trade. E. a recommended mode to make payments to foreign officials. Answer: C. prohibited from making payments that can go to a foreign official. The FCPA also prohibits corrupt payments through intermediaries. It is unlawful to make a payment to a third party, while knowing that all or a portion of the payment will go directly or indirectly to a foreign official. The term knowing includes conscious disregard and deliberate indifference. Additionally, the anti-bribery provisions of the FCPA apply to foreign firms and persons who take action in furtherance of a corrupt payment while in the United States. 33. What does the term ‘knowing' refer to under the FCPA? A. Conscious disregard and deliberate indifference. B. Working with a country that is indexed for high corruption practices. C. Stating in an official document that all parties involved are free from corrupt practices. D. Settlement of payments as per the contract. E. Understanding of the antibribery provisions and the laws that prohibit corruption. Answer: A. Conscious disregard and deliberate indifference. The term knowing includes conscious disregard and deliberate indifference. 34. Which of the following is not a permissible payment for routine government action under the Foreign Corrupt Practices Act? A. Obtaining permits. B. Processing visas. C. Travel expenses to a foreign official for performing a contractual obligation. D. Scheduling inspections associated with the transit of goods across the country. E. Loading and unloading cargo. Answer: C. Travel expenses to a foreign official for performing a contractual obligation. Travel expenses of a foreign official for the purpose of demonstrating a product or for performing a contractual obligation. 35. __________ is used in the context of international law as the seizure of foreign-owned property by a government. A. Nationalization B. Possession C. Power of eminent domain D. Export Controls E. Expropriation Answer: E. Expropriation Expropriation, as used in the context of international law, is the seizure of foreign-owned property by a government. 36. _________ is used in the context of international law as the seizure of foreign-owned property by a government. A. Nationalization B. Possession C. Power of eminent domain D. Export Controls E. Expropriation Answer: E. Expropriation Expropriation, as used in the context of international law, is the seizure of foreign-owned property by a government. 37. When a government assumes ownership of confiscated property, it also includes the process of __________. A. nationalization B. expropriation C. power of eminent domain D. mortgage E. exclusion Answer: A. nationalization Usually, the expropriating government also assumes ownership of the property, so the process includes nationalization as well. 38. Which of the following is a risk involved with regard to the sale of U.S. strategic products and technology abroad? A. Import controls B. Material controls C. Export controls D. Sales controls E. Transaction controls Answer: C. Export controls Another risk involved in doing business abroad is export controls placed on the sale of U.S. strategic products and technology abroad. 39. Export controls: A. function in the same way as import controls. B. are placed on U.S. products and technology abroad. C. are the confiscation of foreign-owned property by a government. D. are similar to nationalization. E. are the power of eminent domain. Answer: B. are placed on U.S. products and technology abroad. Another risk involved in doing business abroad is export controls placed on the sale of U.S. strategic products and technology abroad. 40. The Wassanaar Arrangement was entered into by 33 countries in order to control: A. monetary value fluctuations encountered by nations when conducting international trade. B. the spread of military and dual use technology to unstable nations. C. the quality control of food and perishables between nations with different individual quality control regulations. D. price gouging by dominant countries when dealing with smaller or weaker countries. E. the impact of corruption on international trade, investments, and business policies. Answer: B. the spread of military and dual use technology to unstable nations. Since that time, a new organization supported by 33 countries, known as the Wassanaar Arrangement, has come into existence to help control the spread of both military and dual-use technology to unstable areas of the world. 41. In the United States, the counterpart of expropriation is called: A. nationalism. B. zoning. C. police powers. D. eminent domain. E. confiscation Answer: D. eminent domain. In the United States, the counterpart of expropriation is called the power of eminent domain. 42. Generally, international law is classified as: A. public international law. B. criminal international law. C. common international law. D. civil international law. E. business international law. Answer: A. public international law. Generally, international law is classified as either public international law or private international law. 43. Which of the following statements is true of sources of international law? A. Public international law examines relationships between businesses. B. Public international law uses rules that are binding on all countries in the international community. C. Private international law examines relationships created by private individuals. D. Private international law utilizes U.S. law to resolve international business disputes. E. Public international law examines the relationships between different populations. Answer: B. Public international law uses rules that are binding on all countries in the international community. Public international law examines relationships between nations and uses rules that are binding on all countries in the international community. 44. The International Court of Justice is also called the: A. World Court. B. Supreme World Court. C. World Chancery Court. D. Court of International Acclaim. E. World Trade Court. Answer: A. World Court. The decisions made by the ICJ, the World Court, do not create binding rules of law or precedent in future cases. 45. Which of the following is true of the International Court of Justice? A. Private parties and corporations have access to the court and can directly present their claims. B. Using legal devices, firms and individuals can compel the U.S. government to press claims on their behalf before the Court. C. Only countries that have submitted to the Court's jurisdiction may be parties. D. The Court has enforcement authority and does not rely on diplomacy or economic sanctions against countries. E. It is compulsory for all countries to accept the Court's jurisdiction, whether or not the use of the Court suits their interests. Answer: C. Only countries that have submitted to the Court's jurisdiction may be parties. Only countries that have submitted to the Court's jurisdiction may be parties, since there is no compulsory process for forcing a country to come before the Court. 46. The International Court of Justice: A. is made up of nine judges. B. allows all nations to initiate a case before it. C. hears cases of countries that have submitted to the Court's jurisdiction. D. can render opinions only when faced with an actual case. E. has been a major force in settling disputes since it began functioning. Answer: C. hears cases of countries that have submitted to the Court's jurisdiction. Only countries that have submitted to the Court's jurisdiction may be parties, since there is no compulsory process for forcing a country to come before the Court. 47. Infractions of international law are most frequently settled by: A. diplomacy. B. formal charges. C. economic sanctions. D. ICJ decision. E. penalties and damages. Answer: A. diplomacy. Infractions of international law often are settled through diplomacy or arbitration, rather than by the presentation of formal charges to the ICJ. 48. The Charter of the United Nations sets forth as its primary goal: A. combating corruption and corrupt practices in other countries. B. providing individual measures for the prevention and removal of threats to peace. C. ensuring that justice is delivered at all levels in all member countries. D. implementing a just and fair international law that guides international commercial transactions. E. eradicating cyber-squatting and criminal practices involving the Internet, in all member countries. Answer: B. providing individual measures for the prevention and removal of threats to peace. The Charter of the United Nations sets forth as its primary goal "to save succeeding generations from the scourge of war" and, to that end, authorizes "collective measures for the prevention and removal of threats to the peace, and for the suppression of acts of aggression or other breaches of the peace." 49. The World Trade Organization was created as a result of the: A. Geneva Convention. B. Uruguay Round. C. Bretton-Woods Conference. D. Asian-Pacific Round. E. Convention of International Sale of Goods Answer: B. Uruguay Round. Since GATT was created in 1948, it has undergone eight major revisions, including the 1994 Uruguay Round, which culminated in the creation of the World Trade Organization (WTO) as an umbrella organization to regulate world trade. 50. The __________ encourages international trade by maintaining stable foreign exchange rates and works closely with commercial banks to promote orderly exchange policies with members. A. World Bank B. World Trade Organization C. General Agreement in Tariffs and Trade D. International Monetary Fund E. Convention on International Sale of Goods Answer: D. International Monetary Fund The International Monetary Fund (IMF) encourages international trade by maintaining stable foreign exchange rates and works closely with commercial banks to promote orderly exchange policies with members. 51. In 1994, the Uruguay Round incorporated all of the following principles from the General Agreement on Tariffs and Trades except: A. equalization of import quotas. B. national treatment. C. non-discrimination. D. elimination of trade barriers. E. reducing tariffs. Answer: A. equalization of import quotas. At the heart of the 1994 Uruguay Round are several enduring GATT principles -nondiscrimination (treating all member countries equally with respect to trade); national treatment (countries not favoring their domestic products over imported products; elimination of trade barriers (reducing tariffs and other restrictions in foreign products). 52. Which of the following is true of the Commission of the European Union? A. It coordinates the policies of the member states in a variety of areas from economics to foreign affairs. B. It is composed of elected representatives from each member state. C. It plays an active role in drafting legislation that has an impact on the daily lives of its citizens. D. It has joint power with the Council over the annual budget of the European Union. E. It consists of individuals who represent the will and interests of the entire EU, rather than specific national concerns. Answer: E. It consists of individuals who represent the will and interests of the entire EU, rather than specific national concerns. The Commission consists of individuals who represent the will and interests of the entire EU, rather than specific national concerns. 53. _________ decides the nature and parameters of EU law. A. The Parliament B. The Commission C. The Court of Justice D. The Council E. The Council of Ministers Answer: C. The Court of Justice The Court of Justice decides the nature and parameters of EU law. Justices are appointed by the Council, and each member state has a justice seated on the Court. 54. Which of the following is true of the Convention on the International Sale of Goods? A. It outlines standard international practices for the sale of goods. B. It encourages international trade by maintaining stable foreign exchange rates. C. It promotes economic development in poor countries by making loans to finance necessary development projects and programs. D. It ascertains what public international law is. E. It grants jurisdiction to U.S. federal district courts over "any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States." Answer: A. It outlines standard international practices for the sale of goods. The Convention on the International Sale of Goods (CISG) outlines standard international practices for the sale of goods. 55. With respect to the sale of goods, which of the following is true as per the CISG? A. All contracts for the sale of goods must be written. B. All contracts for the sale of goods must be in the oral form. C. Contracts for the sale of goods need not be in writing. D. The parties should sign the contract in the presence of attorneys. E. Contracts concerning sale of goods above $500 must be in writing. Answer: C. Contracts for the sale of goods need not be in writing. One of the most interesting provisions in the CISG includes a rule that contracts for the sale of goods need not be in writing. 56. Which of the following is a major institution of the European Union? A. The Secretary Council B. The International Court of Justice C. The Council of Members D. The House of Representatives E. The Council of Ministers Answer: E. The Council of Ministers The major institutions of the EU are the Council of Ministers, the Commission, the Parliament, and the Court of Justice. 57. ___________ opened up many opportunities for business between Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, the Dominican Republic, and the United States. A. North America Free Trade Agreement B. Central America- Dominican Republic Free Trade Agreement C. U.S.-Colombia Free Trade Agreement D. Uruguay Round Agreements E. Convention on the International Sale of Goods Answer: B. Central America- Dominican Republic Free Trade Agreement The passage of the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) in 2005 opened up many opportunities for business in Central America. CAFTA-DR is a comprehensive trade agreement between Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, the Dominican Republic, and the United States. 58. The _________ provides for a dispute settlement mechanism that makes it easier to resolve trade disputes between the United States, Mexico, and Canada. A. Convention on the International Sale of Goods B. North American Free Trade Agreement C. Central America-Dominican Republic Free Trade Agreement D. Foreign Corrupt Practices Act E. General Agreement on Tariffs and Trade Answer: B. North American Free Trade Agreement The passage of the North American Free Trade Agreement (NAFTA) in 1993 set in motion increased trade and foreign investment and opportunities for economic growth in the United States, Mexico, and Canada. NAFTA also provides for a dispute settlement mechanism that makes it easier to resolve trade disputes between the three countries. 59. Transactions using ________ involve, in addition to a seller and buyer, an issuing bank in the buyer's country. A. a bill of lading B. a bill of exchange C. an irrevocable promissory note D. a negotiable instrument E. an irrevocable letter of credit Answer: E. an irrevocable letter of credit Commonly, an irrevocable letter of credit is used to ensure payment. Transactions using such a letter involve, in addition to a seller and buyer, an issuing bank in the buyer's country. 60. When a buyer receives a receipt from a carrier stating that the goods ordered have been shipped to the designated place for delivery, the receipt is called ________. A. an irrevocable letter of credit B. a bill of exchange C. a bill of lading D. an identity note E. a promissory note Answer: C. a bill of lading The buyer obtains a commitment from the bank to advance (pay) a specified amount (i.e. the price of the goods) upon receipt, from the carrier, of a bill of lading, stating that the goods have been shipped. 61. Which type of a contract can be adopted in case of a domestic firm granting a foreign firm the means to produce and sell its product? A. Transfer contract B. Franchise contract C. Promotion contract D. Foreign investment contract E. Foreign subsidiary contract Answer: B. Franchise contract In appropriate circumstances, a domestic firm may choose to grant a foreign firm the means to produce and sell its product. The typical method for controlling these transfers of information is the license or franchise contract. 62. Which of the following is true of licensing arrangements? A. Licensing requires international businesses to make direct foreign investment to enter foreign markets. B. Licensing often is used by firms as an expansion technique in the domestic market. C. Licensing agreements must follow the local laws where they operate. D. Licensing agreements are governed by international trade and business laws. E. Licensing technology requires substantial capital to expand a company's market. Answer: C. Licensing agreements must follow the local laws where they operate. Licensing and franchise agreements also must follow the local laws where they operate. 63. Grimmy Fast Food Ltd., located in New York, grants Truffle Eateries, a chain of restaurants in Paris, permission to produce and sell Grimmy's famous pizzas. Truffle will launch Grimmy's in Paris and sell the products. This is an example of which of the following? A. Foreign subsidiary B. Direct foreign investment C. Sovereign immunity D. Franchise E. International trade Answer: D. Franchise In appropriate circumstances, a domestic firm may choose to grant a foreign firm the means to produce and sell its product. The typical method for controlling these transfers of information is the license or franchise contract. 64. Which of the following is a reason a firm may enter a licensing agreement? A. Licensing allow firms to enter a foreign market without direct foreign investments. B. A firm enters a licensing agreement to expand once it has substantial capital. C. Licensing is the next step a firm must take, after it has established sufficient research and development. D. Licensing is a technique that firms use when applying management skills and marketing strategies. E. Licensing agreement is a risk free method to expand in foreign markets. Answer: A. Licensing allow firms to enter a foreign market without direct foreign investments. A licensing arrangement allows the international business to enter a foreign market without any direct foreign investment. 65. Which of the following is true of a foreign subsidiary? A. A foreign subsidiary has fewer formalities in its creation and operation. B. A foreign subsidiary allows the parent company to have greater control. C. A foreign subsidiary is one of the cost-effective ways to expand business in foreign markets. D. A foreign subsidiary must be a national of the host country. E. A foreign subsidiary is a risk-free alternative that most corporations adopt for global expansion. Answer: B. A foreign subsidiary allows the parent company to have greater control. Since this designation may create difficulties in control and result in unnecessary expense, the usual practice for multinational corporations is to create a foreign subsidiary in the host country. 66. In many cases, the only legal or political means a firm has to invest directly in a foreign country is to engage in ________, with an entity from the host country. A. a foreign subsidiary arrangement B. a franchise agreement C. a license contract D. a merger E. a joint venture Answer: E. a joint venture In many instances, however, the only legal or political means a firm has to invest directly in a foreign country is to engage in a joint venture with an entity from that host country. 67. Which of the following is true of a joint venture? A. It takes place when a domestic firm may choose to grant a foreign firm the means to produce and sell its product. B. It takes place when a company launches another company which it partially or completely owns in a foreign country. C. It takes place when a company designates a national firm or individual of the host country as its legal representative. D. It takes place when a company invests in a country by engaging in business with an entity from that country. E. It takes place when a company merges with a company from the host country. Answer: D. It takes place when a company invests in a country by engaging in business with an entity from that country. In many instances, however, the only legal or political means a firm has to invest directly in a foreign country is to engage in a joint venture with an entity from that host country. A host country's participant may be a private enterprise or, especially in developing countries, a government agency or government-owned corporation. 68. The _______ grants jurisdiction to U.S. federal district courts over "any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States." A. Federal Torts Act B. Alien Tort Claims Act C. Foreign Tort Claims Act D. International Tort Act E. Tort Claims in International Trade Act Answer: B. Alien Tort Claims Act The Alien Tort Claims Act (ATCA), enacted in 1789, grants jurisdiction to U.S. federal district courts over "any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States." 69. Under the doctrine of sovereign immunity, the foreign sovereign claims to be immune from suit entirely based on ________. A. its status as a commercial center. B. its membership with the World Trade Organization. C. its status as a state. D. its political and economic conditions. E. its commercial acts. Answer: C. its status as a state. Under the doctrine of sovereign immunity, the foreign sovereign claims to be immune from suit entirely based on its status as a state. 70. _________ is defined as the supreme, absolute, and uncontrollable power by which any state is governed. A. Sovereignty B. Government C. Integrity D. Fraternity E. Federation Answer: A. Sovereignty Sovereignty is defined as the supreme, absolute, and uncontrollable power by which any state is governed. 71. The World Intellectual Property Organizations Arbitration and Mediation Center hears cases involving: A. international patent and copyright. B. sovereign immunity. C. international trademark and trade secret. D. domain name and cybersquatting. E. copyright and patent violation. Answer: D. domain name and cybersquatting. The World Intellectual Property Organization (WIPO) Arbitration and Mediation Center hears cases involving domain name disputes and cybersquatting. 72. The Foreign Sovereign Immunities Act codified which of the following? A. Foreign governments cannot be sued under any cause of action within the United States. B. Foreign governments can be sued for most causes of action except when participating in commercial acts. C. Foreign governments cannot be sued for most causes of action but can be sued when participating in commercial acts. D. Sovereign immunity was abolished making foreign governments liable for all acts committed within the United States, whether commercial or not. E. Sovereign immunity held that governments could be held liable for nationalization of assets. Answer: C. Foreign governments cannot be sued for most causes of action but can be sued when participating in commercial acts. Congress enacted the Foreign Sovereign Immunities Act (FSIA), which codifies this restrictive theory and rejects immunity for commercial acts carried on in the United States or having direct effects in this country. 73. The Foreign Sovereign Immunities Act ________: A. codifies the modern-traditional theory of trade and tariffs. B. provides immunity for private acts. C. rejects immunity for commercial acts carried on in the countries trading with the U.S. D. provides immunity for commercial acts having direct effects in the U.S. E. rejects immunity for commercial acts carried on in the U.S. Answer: E. rejects immunity for commercial acts carried on in the U.S. Foreign Sovereign Immunities Act (FSIA), which codifies this restrictive theory and rejects immunity for commercial acts carried on in the United States or having direct effects in this country. 74. To sue a foreign firm in the United States, the plaintiff must: A. establish maximum contacts between the foreign defendant and the forum court. B. demonstrate that exercise of personal jurisdiction over the defendant will be ineffective. C. comply with the terms of the Hague Service Convention when serving notice of the lawsuit. D. comply with the terms of the Convention of International Sale of Goods when filing a lawsuit. E. establish legal representation in the area of personal jurisdiction. Answer: C. comply with the terms of the Hague Service Convention when serving notice of the lawsuit. Once the plaintiff decides to sue in the United States, he or she also must comply with the terms of the Hague Service Convention when serving the foreign defendant notice of the lawsuit. 75. Which of the following is true concerning the arbitration of international disputes? A. Arbitration is not widely practiced and, hence, is not an easily available option. B. Arbitration creates more publicity than litigation. C. Arbitration is complex alternative for the parties involved. D. Arbitration can be compelled, where previously agreed upon by the parties. E. Arbitration has been proven to have limited effectiveness concerning international disputes. Answer: D. Arbitration can be compelled, where previously agreed upon by the parties. Under the New York Convention it is easier to compel arbitration, where previously agreed upon by the parties, and to enforce the arbitrator's award once a decision is reached. 76. What are the criticisms the FCPA faces for its strict prohibition of American businesses bribing officials of other countries? Answer: Many legal observers criticized the FCPA for creating a significantly chilling effect on U.S. companies seeking business in many developing countries where under-the-table payments to government officials are an accepted practice. Indeed, many civil servants in other nations are expected to supplement their salaries in this manner. The U.S. prohibition of such payments is perceived as an attempt to impose U.S. standards of morality in other parts of the world, and it has caused resentment and discrimination against U.S. businesses. Moreover, the FCPA arguably puts U.S. firms at a competitive disadvantage with businesses in other countries that are not operating under similar constraints. 77. Discuss the role of intermediaries under the FCPA. Answer: The FCPA also prohibits corrupt payments through intermediaries. It is unlawful to make a payment to a third party, while knowing that all or a portion of the payment will go directly or indirectly to a foreign official. The term knowing includes conscious disregard and deliberate indifference. Additionally, the antibribery provisions of the FCPA apply to foreign firms and persons who take action in furtherance of a corrupt payment while in the United States. 78. What are the current penalties for violation of the Foreign Corrupt Practices Act? Answer: Under the 1988 FCPA amendments, the criminal penalties for corporations were increased to $2 million per bribe. Individuals can be sentenced, per bribe, to up to $100,000 and/or five years in prison. 79. How have U.S. businesses enhanced their business position with foreign countries without paying bribes and violating the Foreign Corrupt Practices Act? Answer: Since bribes were outlawed under the FCPA, various permissible payments have become permitted and have become commonplace in international business. These permissible payments include payments for routine government action and include payments associated with obtaining permits, licenses, official documents such as visas, and work orders, providing police protection, loading and unloading cargo, and scheduling inspections associated with contract performance or transit of goods across country. 80. Explain what is expropriation and nationalization. Answer: Expropriation, as used in the context of international law, is the seizure of foreign- owned property by a government. When the owners are not fairly compensated, the expropriation is also considered to be a confiscation of property. Usually, the expropriating government also assumes ownership of the property, so the process includes nationalization as well. In the United States, the counterpart of expropriation is called the power of eminent domain. 81. What is the modern traditional theory of expropriation, and what are the problems associated with it? Answer: The modern traditional theory states that when a country expropriates property it is supposed to give 'prompt, adequate, and effective compensation' for the property taken. Effective compensation is typically fair market value. One problem is it is difficult to enforce this theory without invading the expropriating country. Also, fair market value may be paid, but it may be paid in commodities instead of cash that may be of little use to the former owner of the property. Moreover, the compensation may be paid in the country's currency that is worthless outside of that country. 82. The U.S. Export Control and Related Border Security Assistance Program, in order to control the export of technology flowing into dangerous hands, has issued three "red flags" that exporters should be aware of. Identify and discuss these "red flags". Answer: First, the exporter should be aware if a customer is reluctant to provide end/user information, wants to pay cash for high cost shipments, has little experience in the field, refuses normal warranties, services or installations or is ordering items incompatible with business. Second, the exporter should be wary should the shipment involves intermediaries in a weapons sale, the shipment is going to an entity unrelated to the buyer, the packaging requested is not consistent with normal shipping practices or should the route of shipment be circuitous or illogical. Third, the exporter should be suspicious of end-users that request shipments inconsistent with their inventory or spare parts in excess of needs, a middleman is being used from third country locations or should the end user refuse to specify whether the goods are for domestic use, export or re-export. 83. International law is generally classified as either public or private international law. Compare and contrast these two types. Answer: Public international law examines the relationships between nations and uses rules that are binding on all countries in the international community. Private international law examines the relationships created by commercial transactions and utilizes international agreements and the individual laws of nations to resolve business disputes. Article 38 of the Statute of the International Court of Justice (ICJ) is the traditional place for ascertaining what public international law is. However, the decisions made by the ICJ, the World Court, do not create binding rules of law or precedent in future cases. Private international law is represented by the laws of individual nations and the multilateral agreements developed between nations to provide mutual understanding and some degree of continuity to international business transactions. 84. What are the major institutions of the European Union? Answer: The major institutions of the EU are the Council of Ministers, the Commission, the Parliament, and the Court of Justice. 85. What effect has the International Court of Justice had on settling international disputes? Answer: The ICJ has not been a major force in settling disputes since its inception. The ICJ averages only one contested decision per year and one advisory opinion every other year. 86. Discuss the International Court of Justice in brief. Answer: The Statute of the International Court of Justice (ICJ) is the traditional place for ascertaining what public international law is. The ICJ is the judicial branch of the United Nations and sits at The Hague in the Netherlands. It consists of 15 judges representing all of the world's major legal systems. The judges are elected by the U.N. General Assembly and the Security Council after having been nominated by national groups, not governments. No more than one judge may be a national of any country. Only countries have access to the Court. Private parties or corporations may not directly present claims before the Court. No device exists under U.S. law by which a firm or individual can compel the U.S. government to press a claim on its behalf before the ICJ. Only countries that have submitted to the Court's jurisdiction may be parties, since there is no compulsory process for forcing a country to come before the Court. A country may choose to accept the Court's jurisdiction only when the use of the Court may suit its own interests. The ICJ has no enforcement authority and must rely on diplomacy or economic sanctions against countries that breach international law. 87. Discuss the primary goals of the United Nations. Answer: The Charter of the United Nations sets forth as its primary goal "to save succeeding generations from the scourge of war" and, to that end, authorizes "collective measures for the prevention and removal of threats to the peace, and for the suppression of acts of aggression or other breaches of the peace." 88. What are some of the criticisms of the World Trade Organization? Answer: The WTO is an international organization which, as its primary purpose, seeks to resolve trade disputes between member nations. The WTO faces opposition from antiglobalization protesters. Concerns are raised by opponents who are concerned about human rights, environmental, and labor issues. There are also tensions between developed and developing nations that hinder negotiations to cut tariffs. 89. Discuss the Agreement on Trade-Related Aspects of Intellectual Property Rights. Answer: Another important aspect of the WTO is the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), including trade in counterfeit goods. Recognizing that there are widely different standards for the protection of intellectual property, as well as a lack of a multilateral framework of rules for dealing with counterfeit goods, the WTO directly addressed this issue with TRIPS. This agreement discusses the applicability of GATT principles and those of relevant international property agreements in an effort to strengthen the protection of intellectual property in the international sphere. 90. Discuss the advantages of the Convention on the International Sale of Goods. Answer: The CISG is a positive alternative to using one country's laws as the governing law of a contract in case of dispute or breach. Many businesses believe that they will not get treated fairly in a court in a foreign country. Using the CISG allows them to use a neutral, self-selected set of rules. Companies may also negotiate contract without the burden of Uniform Commercial Code Compliance, particularly with regard to written contracts. The CISG further allows a company to disclaim warranties on goods easier than under U.S. law. 91. What is NAFTA? Answer: The passage of the North American Free Trade Agreement (NAFTA) in 1993 set in motion increased trade and foreign investment and opportunities for economic growth in the United States, Mexico, and Canada. Free trade is at the core of NAFTA through the reduction and eventual elimination of tariffs and other barriers to business between these three countries. NAFTA also provides for a dispute settlement mechanism that makes it easier to resolve trade disputes between the three countries. 92. Describe a common method to obtain payment from a buyer in the international sale of goods. Answer: Commonly, an irrevocable letter of credit is used to ensure payment. Transactions using such a letter involve, in addition to a seller and buyer, an issuing bank in the buyer's country. The buyer obtains a commitment from the bank to advance (pay) a specified amount (i.e., the price of the goods) upon receipt, from the carrier, of a bill of lading, stating that the goods have been shipped. The issuing bank's commitment to pay is given, not to the seller directly, but to a confirming bank located in the United States, from which the seller obtains payment. The confirming bank forwards the bill of lading to the issuing bank in order to obtain reimbursement of the funds that have been paid to the seller. The issuing bank releases the bill of lading to the buyer after it has been paid, and with the bill of lading the buyer is able to obtain the goods from the carrier. Use of a letter of credit in the transaction thus reduces the uncertainties involved. 93. What are the advantages of a licensing arrangement for an international business? Answer: A licensing arrangement allows the international business to enter a foreign market without any direct foreign investment. Licensing often is used as a transitional technique for firms expanding international operations since the risks are greater than with foreign sales but considerably less than with direct foreign investment. Licensing technology or the sale of a product to a foreign firm is a way to expand the company's market without the need for substantial capital. The foreign firm may agree to this arrangement because it lacks sufficient research and development capability or the management skills or marketing strategies to promote the product alone. 94. What is a franchise? Answer: In appropriate circumstances, a domestic firm may choose to grant a foreign firm the means to produce and sell its product. The typical method for controlling these transfers of information is the license or franchise contract. In this manner, intangible property rights, such as patents, copyrights, trademarks, or manufacturing processes, are transferred in exchange for royalties in the foreign country. 95. What are the reasons for a company to create a foreign subsidiary in a host country? Answer: As a business increases its level of international trade, it may find that creation of a foreign subsidiary is necessary. Most countries will permit a foreign firm to conduct business only if a national (individual or firm) of the host country is designated as its legal representative. Since this designation may create difficulties in control and result in unnecessary expense, the usual practice for multinational corporations is to create a foreign subsidiary in the host country. The other forms of subsidiaries may also exist that have characteristics of limited liability of the owners and fewer formalities in their creation and operation. 96. Discuss the concept of a joint venture. Answer: In many instances the only legal or political means a firm has to invest directly in a foreign country is to engage in a joint venture with an entity from that host country. A host country's participant may be a private enterprise or, especially in developing countries, a government agency or government-owned corporation. Many foreign countries favor joint ventures because they allow local individuals and firms to participate in the benefits of economic growth and decrease the risk of foreign domination of local industry. Many of the developing countries require that the local partner have majority equity control of the venture and also insist on joint ventures with government participation. 97. What is the purpose and application of the Alien Torts Claims Act and how is it applied? Answer: Originally enacted in 1789, the ATCA gives the federal district courts jurisdiction over civil actions by an alien for tort actions committed in violation of the laws of nations or U.S. treaties. It has been used to hold U.S. companies liable for the commission of torts if the acts of the corporation violated the laws established in any international agreements, treaties or conventions. 98. What must a plaintiff do, according to the Supreme Court, in order to sue a foreign firm in the United States? Answer: To sue a foreign firm in the United States, the Supreme Court held that the plaintiff must establish "minimum contacts" between the foreign defendant and the forum court. The plaintiff must demonstrate that exercise of personal jurisdiction over the defendant "does not offend traditional notions of fair play and substantial justice." Once the plaintiff decides to sue in the United States, he or she also must comply with the terms of the Hague Service Convention when serving the foreign defendant notice of the lawsuit. 99. What are some of the advantages of the arbitration of international disputes? Answer: Some of the advantages of international arbitration over litigation are that arbitration is 1) more streamlined, 2) easier for the parties to understand, 3) unwanted publicity is avoided and 4) the parties can agree on who will act as their arbitrator. 100. Briefly explain what is the doctrine of sovereign immunity? Answer: The doctrine of sovereign immunity provides that a foreign sovereign is immune from suit in the United States. Under the doctrine of sovereign immunity, the foreign sovereign claims to be immune from suit entirely based on its status as a state. The Supreme Court held that the doctrine should not be extended to foreign governments acting in a commercial capacity and "should not be extended to include the repudiation of a purely commercial obligation owed by a foreign sovereign or by one of its commercial instrumentalities." Test Bank for The Legal and Regulatory Environment of Business O. Lee Reed, Marisa Pagnattaro, Daniel Cahoy, Peter Shedd, Jere Morehead 9780073524993, 9780077437336, 9781260161793
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