FOREIGN NATIONAL ENVIRONMENTS:Types of legal systems,

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International Marketing MKT630

Lesson # 11

FOREIGN NATIONAL ENVIRONMENTS

Legal Environments

Differences in legal systems:

Businesses are affected by legal environments of countries in many ways. Legal environments are not

just based on different laws and regulations concerning businesses, these are also defined by the factors

like rule of law, access to legal systems by foreigners, litigations systems etc.

National legal systems vary on the following aspects;

The rule of law

Some country have strong rule of law in that laws are applied strictly, quickly and fairly,

while in others laws are not applied for various reasons, such as corruption, strong

nationalism, weak legal institutions etc.

The role of lawyers

A firm depends on lawyers to access courts to seek justice or to defend in case of any

litigation against. International business firms are affected by the role of lawyers in foreign

countries. In some countries there are few lawyers and it is difficult of very costly to engage a

good lawyer. In some countries lawyers may be corrupt or biased in favor of locals.

Access to legal system

Access to legal system also varies from country to country, especially for foreign entities. In

some countries foreigners can easily access courts to seek remedies while in other countries

there may be restrictions.

The burden of proof

In some countries the burden of proof, in case of any litigation, is on the defendant, while in

other countries the applicant / plaintiff has to first prove that there is a case for the court to

proceed against someone. It may become difficult for foreigners to get proofs in certain

situations.

The right to judicial review

Various countries have different legal provisions for appeals and review of lower court or

earlier judgments. These provisions may also vary for foreign entities.

And the laws

Laws relevant to businesses (including foreign firms) also vary from country to country.

Types of legal systems:

Business environments in foreign countries also vary with the types of legal systems. Various types of

legal systems are described in the following;

· Common law

Law based on cumulative wisdom of judges' decisions on individual cases over time. Relevant

judgments of upper courts have bearings on lower court decisions.

· Statutory law

Laws enacted by legislative actions, i.e., through parliamentary proceedings

International Marketing MKT630

· Civil law

Law based on codification and detailed listings. Laws, their applications and penalties are all

detailed and judges have little flexibility compared with common based law systems.

· Tort law

Cover wrongful acts, damages, and injuries caused by an action other than breach of contract. In

some countries, like USA, judges make big awards for tortuous liabilities, while in many other

countries courts are reluctant to entertain big claims under tort.

· Religious law - (Theocracy)

- When the cases are adjudicated based on religious knowledge and beliefs.

· Bureaucratic law

When officials adjudicate cases, such as in communist countries. This results into lack of

consistency, predictability & appeal procedures

Legal issues faced by marketers in international markets:

Variations in legal environments, rule of law, laws, and legal systems affect foreign business firms in a

number or areas. Key areas of business that are affected by legal environments are listed below;

· Laws concerning employment and labor affect managing of workforce in international markets.

· Different laws in foreign countries regulate financing of operations by foreigners. In some countries

foreign firms are restricted access to local deposits / funds.

· Various countries around the world have different laws concerning marketing of products, especially

food products, pharmaceuticals, hazardous materials and strategic products to a nation.

· Countries also control and regulate developing and utilizing of technologies through various laws

and regulations.

· Many countries also have different laws and regulations that affect ownership of businesses by

foreigners.

· Countries also regulate / restrict remittances to foreign countries and repatriation of profits.

· Some countries regulate closing of operations and in some countries businesses are not allowed to

close shop especially when they have sold products that have guarantees and warranties from the

foreign firms.

· Various countries around the world have implemented different trade and investment regulations.

· Countries also have their own taxation requirements, systems and laws.

· Countries also differ on the accounting reporting requirements from various categories of firms.

· Legal environments of countries vary that also affect dispute resolution situations and

· contractual relationships.

· Countries around the world have also actively implemented environmental regulations that affect

businesses.

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