In the era of globalization and the new digital-driven era of globalization, businesses face legal issues in international business transactions. Globalization and the digital age have created new business opportunities worldwide but at the same time they have given rise to new legal issues, particularly with respect to the form of contracts and enforceability of contracts made and carried out across borders and electronically.
Today, whether you are in the United States or in China you can accomplish common business transactions with the click of a button, and contracts can be made and carried out entirely online. Aside from e-commerce companies, other companies involved in international business transactions face similar legal challenges. But before we address some of the legal issues prevalent in the international business arena, it is important to discuss international business transactions.
An international business transaction is any type of deal between parties from at least two different countries and such transactions can include sales, licenses, and investments. An e-commerce transaction can be an international business transaction. In general, the parties to international business deals include individuals, small and large multinational companies, and even countries. The contracts for goods and services entered into by the parties, create at times legal issues. Goods are sold against letters of credit, guarantees and post arrival payments, and all these segments of the international sale and purchase create legal binding contracts. When something goes wrong with the transaction, legal issues such as jurisdiction, applicability of law, interpretation and enforcement of judgment arise from the contract.
The most important legal issues in international business transactions include:
• Choice of law. In the case of private parties to an international business transaction, the emerging issues are generally governed by conflict of laws principle where the law of the place of domicile determines the jurisdiction. If the contract specifies which country and court has jurisdictions in case of disputes, then a court would respect a contract’s choice of law clause. For example, in a contract for sale of goods, a U.S. manufacturer of shoes and a Spanish retail can decide that either American or Spanish law governs the transaction. Alternatively, they can also choose the law of a third country to regulate the deal. However, most legal systems do not enforce the latter choice unless the transaction has some connection with the third country. Therefore, it is important for parties to an international business contract to be careful when agreeing to the terms and conditions of the contract specifying the applicable law and jurisdiction to settle the disputes. However, general principles of international law such as the United Nations Convention on Contracts for the International Sale of Goods, Uniform Commercial Code and UNIDROIT do become applicable.
• Enforceability. Unless the parties to an international business transaction agree in writing how to resolve disputes, quite often the law (or lack of law) of the defendant’s locale will determine what relief, if any, is available, and certain huge markets, such as China, Russia, much of the Middle East, Indonesia, Eastern Europe and most of Africa, neither have effective legal remedies or enforcement of judgments obtained elsewhere. Therefore, terms providing for private arbitration of all disputes concerning the transaction in a neutral third country, usually under the auspices of the International Chamber of Commerce, can mitigate enforceability issues.
With digitalization of goods and services and with international trade expanding, it is important to understand the legal issues in international business transactions.
Contact us, your international business attorney in Florida, to assist you with your international business needs.
Malescu Law P.A. – Business Lawyers