Chapter 8 The international legal environment of business: moving towards harmonization

Case study 8.1 Legal battle between Tesco and Levi Strauss
What is the essential issue of the TescoLevi case? Essential issue is whether retailers should have freedom to buy goods in any country for sale in another practice known as parallel imports. Facts of the case to date should be outlined, making clear the legal position in the different jurisdictions: note that in this case there are English and Scottish precedents, and ultimately the European Court of Justice has authority. An ECJ decision in 1998 would favour Levi Strauss, as the court held that retailers could not import goods from outside Europe without the manufacturers consent. A 2001 decision was unclear, making a nod in the direction of parallel importers, but the ECJ decision later that year (after this case study was written) came down on the side of Levi Strauss. What are the wider implications for retailers of branded goods? Implications for retailers of branded goods:
G Within the EU retailers can buy from any supplier, even though outside manufacturers official

distribution channels
G Importing from outside Europe is still a grey area, and retailers who are not licensed outlets

could face legal action from manufacturers.

Case study 8.2 South Africans sue in English courts: targeting the multinationals
What are the legal risks of liability for transnational companies and what are the possible solutions? Begin with an outline of the case facts in the first paragraph. Legal risks for TNCs:
G A parent company may be liable for harm caused by subsidiaries abroad G Moreover, the parent company is liable to be sued by foreign plaintiffs in its home-country courts G Liability is also possible in joint ventures.

Possible solutions and implications: The parent company may step back from any control of the foreign operation, thus avoiding liability, or, alternatively, take an active hands-on role in running it directly, thereby preventing accidents and injuries. In practice, companies tend to adopt a middle position: the main decision-making takes place at the corporate HQ, and powers are delegated to local managers of overseas operations. This is the area in which risk lies, and companies are advised to examine lines of authority and responsibility. For example, working practices can be formulated at the HQ, and local managers be made responsible for adhering to them.

Web support material for The International Business Environment, Janet Morrison 2002, published by Palgrave

The International Business Environment

Case study 8.3 Firestone recalls 6.5 million tyres

What are the lessons which should be learnt from this case? Once the faults had emerged, should the companies involved have handled the situation differently? Begin with summary of the facts in the first paragraph. Establish what a product recall is. (Students should be familiar with other examples.) By the time of writing this guideline, the number of recalled tyres has risen to 13 million, and the number of deaths to over 300. Lessons to be learnt:
G The need to test tyres (and other components) in all terrains and climates in which they are to be

sold
G The need for co-ordination in testing between the manufacturer of the vehicle and that of the

tyre. Note the discrepancy between Ford and Firestone on the safety testing record. This is a point which might be lost in the trend to global sourcing of components. The extent of the problem emerged only gradually, and it appeared the companies were attempting to cover it up in order to limit the damage. This seldom works, and the companies finish up with even more damaged reputations than they would have suffered had they admitted the problem immediately and taken decisive action. Perhaps naturally, each company blamed the other, and the overall impression damages consumer confidence in both.

Assignment 1
The essentials of the national legal environment should be set out:
G Structures, including law-making, court system for administration of justice G Substantive national law, highlighting the areas most relevant to business, such as contract law,

the law of torts, company law, employment law

G In both structures and substantive law, there is now a growing international element.

International harmonization:
G Convention on Contracts for the International Sale of Goods (CISG) G UNIDROIT Principles G Private international law the Rome Convention (on the law of a contract) and Brussels

Convention (on jurisdiction in contractual disputes) were designed to smooth the processes of contractual relations and disputes between businesses in different states within the EU
G EU harmonization initiatives through directives and regulations these include consumer law,

employment law and company law.

Web support material for The International Business Environment, Janet Morrison 2002, published by Palgrave

The international legal environment of business: moving towards harmonization

Assignment 2
An introduction should briefly define the many aspects of human rights. The treaty status of the main conventions, and their incorporation into national law should be emphasized. The incorporation of the European Convention of Human Rights into English law with the Human Rights Act 1998 should be stressed. Human rights law is very broad and affects businesses in all countries. Different aspects of the law come to the fore in different countries. Some examples: FDI operations in developing countries child labour, poor working conditions, degrading treatment of employees. National authorities in many countries take little notice of these human rights abuses, and companies are increasingly held accountable. Human Rights Act 1998 the right to a fair trial pertains to businesses as well has humans. Right to respect for private and family life, home and correspondence: businesses must assess whether their practices intrude in private lives of employees.

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Web support material for The International Business Environment, Janet Morrison 2002, published by Palgrave