Provide a substantive response to at least one posting from a colleague in the discussion, critiquing the initial post by appealing to legal and business considerations.
(1) Shannon Scheffel
2. A Colossal subsidiary in Bartan, an Asian country, wants the company to enter into a sales contract with a subsidiary there, using the UN Convention on Contracts for the International Sale of Goods (CISG) as the controlling law. The VP needs to know the ramifications of this option and decide whether it is a good idea.
Based on my research and interpretation of CISG, I find that it would be a good idea to use CISG as the controlling law to enter into contract with the subsidiary in Bartan. The purpose of the CISG is to provide a modern, uniform and fair regime for contracts for the international sale of goods. Therefore, the CISG donates significantly to introducing certainty and confidence in commercial exchanges and decreasing transaction costs. CISG may apply to a contract for international sale of goods when the rules of private international law point at the law of a Contracting State as the applicable one, or by feature of the choice of the contractual parties, regardless of whether their places of business are located in a Contracting State. In this situation, the CISG provides an impartial form of rules that can be easily accepted in light of its transnational nature and of the extensive availability of explanatory materials. It is however good to keep in mind that CISG applies only to international transactions and avoids the recourse to rules of private international law for those contracts falling under its scope of application.
A few more benefits to point out for using CISG in this case are; CISG is clear and transparent, the distinct rules are easily accessible not only for attorneys but also for businessmen and women, manufacturers, entrepreneurs etc. Also, the CISG has consistent and unfailing terminology used across the jurisdictions which facilitates a reliable interpretation of the Convention by courts of different countries. Since its origination it has not only grown an impressive body of intellectual work but also an extensive set of case law, accessible via digital databases and mostly translated into the English language. Not to mention it is used in more than 95% of world trade carried out between nations that have accepted or agreed to use the CISG.
3. Colossal management also needs to know whether arbitration is a good idea for a dispute resolution provision for both domestic and international contracts and why.
Arbitration is one of various methods that together are referred to as alternative dispute resolution or ADR. The idea behind methods of ADR is to provide an alternative to filing a lawsuit and going to court, which is the traditional method for resolving legal disputes. Arbitration and similar alternatives were primarily designed to deliver more toward a streamlined and cost-conscious option to deal with a legal issue. Arbitration is a nonjudicial proceeding designed to settle disputes and is dictated by whatever is in the contract between the parties. According to the UMUC study lesson, arbitration has a number of benefits, including efficiency and confidentiality, the most significant benefit being enforceability. Under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), most of the world’s trading nations have approved their courts enforcing arbitrary awards issued in foreign nations. Using arbitration avoids hostility because the parties are encouraged to participate fully and sometimes help structure and facilitate the resolution. It involves their cooperation and adherence so it encourages working together peacefully to reach a determination. It has also been found to be a cheaper and faster way to handle a dispute rather than litigation therefore being more efficient. The limited right to appeal arbitration awards typically eliminates an appeal process that can delay finality of the settlement. In reference to cost the compressed schedule for the completion of discovery and trial shortens the length time needed for discovery. Not to mention that arbitration proceedings are usually held in private and parties can agree to keep the conflict resolution private and not publicize or publish it. Overall Colossal needs to still consider the reliability of any arbitration is largely dependent on the judge or arbitrator.
4. The parent company, Colossal Corporation, has been sued in the country of Notso in South America. The lawsuit claims millions of dollars in damages due to supposed pollution at a mine that Colossal owned there. Since Colossal has already decided to exit that country and sold the mine there, the company's regional VP believes there is no risk if the company is taken to court in Notso. He says that even if Colossal loses there and a court judgment is rendered against it, there is no danger because the company will have left the country. The VP needs to know if he is right.
In this situation, the VP is incorrect and a court judgement could render Colossal guilty and responsible for the damage done if it is proved that the damage was in fact caused by them despite the fact they have since relocated and closed in Notso. Corporations that do business in foreign territories or places not considered their own are expected to follow and obey the laws set forth by the host country, in this case South America. As Robert Godwin stated in our study lesson of International Dispute Resolution, “It is important for those of us interested in international business to understand the nature of legal responsibilities when conducting business in foreign countries and the power of countries to impose rules that will influence business activities in another country”. We learn that each country has a sovereign right to define the legal rules for activities within its territory, and the principles of international law are supposed to respect that sovereignty.
Goodwin, R. C. (2019) International dispute resolution. Retrieved from https://leocontent.umuc.edu/content/umuc/tgs/mba/mba630/2191/learning-topic-list/international-disputeresolution.html?ou=345131
L&P, 2015. Advantages of applying the United Nations convention on contracts for the international sale of goods (CISG) in general terms and conditions. Retrieved from https://www.lorenz-partners.com/download/Germany/NL102E-Advantages-of-General-Terms-and-Conditions-on CISG-Basis-Jan15.pdf
Nolo, 2019. Arbitration pros and cons. Retrieved from https://www.nolo.com/legal-encyclopedia/arbitration-pros-cons-29807.html
Thomson Reuters, 2019. What is arbitration? Retrieved from https://adr.findlaw.com/arbitration/what-is-arbitration-.html
UMUC, 2019. International dispute resolution. Retrieved from https://leocontent.umuc.edu/content/umuc/tgs/mba/mba630/2191/learning-topic-list/international-disputeresolution.html?ou=345131
UNCITRAL, 2019. United Nations convention on contracts for the international sale of goods. Retrieved from http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG.html
(2) Sandra Rodas
#3. Colossal management also needs to know whether arbitration is a good idea for a dispute resolution provision for both domestic and international contracts and why.
While litigation and lawsuits can provide closure to disagreements and other legal issues, it should not be the first option for an organization to choose. According to Alternative Dispute Resolution (“ADR”) (n.d.), mediation and arbitration are alternative options to litigation because these methods can provide the following to the company with savings in terms of costs and time, avoids jury decisions, keep the company’s negotiations private, and allows for business relationships to improve or remain amicable. Mediation also provides an important alternative that allows both parties to negotiate their differences. More importantly, this method allows the for business relationship to improve because both parties work out and settle their disagreements without third parties being involved. Lastly, this method can be powerful in the international arena because of the differences in culture and customs. If done correctly, this can allow global organizations to learn each other’s practices and business approach. It can be a learning experience for both companies and an improvement to the business relationship that may expand into the future and globally. There is always the risk that negotiations may fall through due to differences in opinion or the miscommunication. However, open communication and respect can bring a satisfactory outcome to both parties.
In conclusion, arbitration and mediation should be sought out first when disagreement arise. The outcome may be more amicable because the final agreement will be composed of the two parties’ wishes and compromises. Additionally, ADR will save both parties costs and time.
#4. The parent company, Colossal Corporation, has been sued in the country of Notso in South America. The lawsuit claims millions of dollars in damages due to supposed pollution at a mine that Colossal owned there. Since Colossal has already decided to exit that country and sold the mine there, the company's regional VP believes there is no risk if the company is taken to court in Notso. He says that even if Colossal loses there and a court judgment is rendered against it, there is no danger because the company will have left the country. The VP needs to know if he is right.
Unfortunately, the company’s regional VP is incorrect. According to Goodwin (n.d.), it is important for international businesses to be well informed of the foreign countries in which they do business in. Colossal Company will have to present its best defense in the country of Notso because the country is within its right to hold Colossal responsible for its activities within the country. “Foreign companies are bound to obey the laws of the country where they are doing business” (Goodwin, n.d.).
Upon the results of the trial, Colossal runs the risk of having a judgement be rendered in that country be brought to the United States so it can be enforced (Goodwin, n.d.). This can occur as long as the United States is willing to accept the judgement and the certain standards have been met:
· Jurisdiction
· Adequate notice
· Due process or similar procedures
· If fraud was present in judgement
· Judgement conflict between final judgement and initial agreement.
In conclusion, the VP needs to present a strong defense and the necessary documentation to prove innocence. The country of Notso should not be slighted because Colossal no longer has a business relationship with the country, on the other hand, the laws of the country should be respected and adhered to. It is important to remember that depending on the outcome of the case and the if the judgement meets United States’ law standards, it will be enforced. It is also important to consider that Colossal’s behavior will be reported and will impact the business’ future ability to expand its business to other countries and other countries’ willingness to negotiate with a rogue organization.
Reference:
Alternative Dispute Resolution. (n.d). Retrieved from
https://leocontent.umuc.edu/content/umuc/tgs/mba/mba630/2191/learning-resourcelist1/alternative-disputeresolution.html?ou=345131
Goodwin, R. C. (2019) International Dispute Resolution. Retrieved from https://leocontent.umuc.edu/content/umuc/tgs/mba/mba630/2191/learning-topic-list/international-disputeresolution.html?ou=345131
(3) Troy Newman
If Colossal Corporation is sued by the country of Notso, they could be at risk of having any judgment that might be rendered in their country brought to the United States and enforced against them. If Notso decided to pursue this legal action, the US court would pose the following to determine whether the judgement should be accepted and enforced: (Goodwin, 2019)
- Using US standards of jurisdiction, did the foreign court have jurisdiction?
- Was the defendant given adequate notice?
- Was the judgment rendered under a system that provides impartial tribunals or procedures compatible with the requirements of due process of law?
- Was the judgment obtained without fraud?
- Is enforcement of the foreign judgment consistent with US public policy?
- Does the judgment conflict with another final judgment or is it contrary to an agreement between the parties providing for arbitration or some other alternate dispute settlement mechanism?
The United States, unlike many countries, is willing to accept judgments issued by the courts of other nations provided this criterion has been vetted and satisfied. However, the enforcement of foreign court judgements are governed by the laws of the states in the US, and not by formal requests to foreign courts for judicial assistance called “letters rogatory”. (Wikipedia, 2019) “Under U.S. law, an individual seeking to enforce a foreign judgment, decree or order in this country must file suit before a competent court. The court will determine whether to recognize and enforce the foreign judgment.” (Travelstategov, 2019)
In this case, the VP is incorrect. Based on the extent of neglect and lack of responsibility, Colossal Corporation would be potentially liable for millions if a judgment was rendered in Notso, and brought to the United States where it could be accepted and enforced.
Case 5:
Edfin’s new mandate to require a letter of credit, that alters the terms of their long-standing agreement to supply raw materials for Colossal’s factories in the United States, exposes each faction to numerous ramifications that could hamper their relationship. Letters of credit are used for sales contracts to ensure payments are received. The transaction process depends on a bank to reimbursement the seller for the invoice instead of the buyer. (Goodwin, 2019) The benefit of an import letter of credit is that it enhances the credit worthiness of the importer Colossal (US), while the benefit of an export letter of credit is that it mitigates the credit risk for the exporter Edfin and helps improve cash flow. (Bulaki, 2016)
The detriments for Edfin as the exporter include the exporter guarantee to meet the mutually agreed terms and conditions declared in letter of credit, the expenses for opening, negotiating and other procedures of letter of credit are high and incurred by the exporter, if political strife between the two countries arise, the trade bilateral agreement may become void, and currency fluctuation and/or price variation to produce raw materials could threaten the exporters bottom line. (Howtoexportimport, 2019)
The detriments for Colossal (US) as the importer consist of the forfeiture of rights to physically verify the contents of goods, due to various reasons including selling price variation, a confirmed and irrevocable letter of credit cannot be modified, the cost of operating letter of credit procedures and formalities are often higher than other methods of payment transactions, and currency fluctuation and/or price variation to produce raw materials could threaten the importers bottom line. (Howtoexportimport, 2019)
While it cannot be deduced why Edfin has decided to amend the way they conduct business with Colossal in the United States, enacting a letter of credit exposes each entity to numerous ramifications that may not be as advantageous as presumed.
Bulaki, S. (2016). Import and Export Letter of Credit. Retrieved 29 January, 2019, from
https://efinancemanagement.com/sources-of-finance/import-export-letter-credit
Howtoexportimport. (2019). Disadvantages of Letter of Credit (LC) for Exporter. Retrieved 29 January, 2019, from
https://howtoexportimport.com/Disadvantages-of-Letter-of-credit-LC-for-Exporter-428.aspx
Howtoexportimport. (2019). Disadvantages of LC (letter of Credit) to Importer. Retrieved 29 January, 2019, from
https://howtoexportimport.com/Disadvantages-of-LC-letter-of-Credit-to-Importer--429.aspx
Goodwin. R. C. (2019). International dispute resolution. University of Maryland University College. Retrieved 29 January, 2019, from
Travelstategov, (2019). Enforcement of Judgments. Retrieved 30 January, 2019, from
Wikipedia. (2019). Letters Rogatory. Retrieved 30 January, 2019, from
https://en.wikipedia.org/wiki/Letters_rogatory