Application of International Law
Dawn M. Engel
Business Law and Corporate Ethics
May 28, 2014
In the United States, Calvin Coolidge signed the Federal Arbitration Act (FAA) into law in 1925, to be effective on January 1, 1926. (Wikipedia, 2014). “International commercial arbitration in Russia is governed by another statute: Law No. 5338-1 . . . It follows the UNCITRAL Model Law almost verbatim.” (Nikiforov, 2013). Both were “enacted to establish validity and enforcement of arbitration agreements”. (James, 2011). An arbitration agreement is then written to solve disputes later on. An arbitration agreement should include what law will govern the ...view middle of the document...
Find out if the courts will actually enforce the arbitration agreement. Make sure there are no multi-tier clauses (clauses that require negotiation before an arbitration can commence). Sometimes first-tier clause settlements require more time than the maximum period allowed for mediation. Make sure the arbitration agreement is not unilateral, as they can sometimes be found void. “In 2011, an LCIA award based on a unilateral arbitration clause was refused recognition and enforcement in Russia.” (Nikiforov, 2013) In the future, take advantage of Russian Law #5338-1, Part III, Article 11 and appoint at least one of the arbitrators. (The Russian Arbitration Association, 1993).
When dealing with foreign countries in the future, make sure you are familiar with the four dimensions of international business. First, the political dimension, you should know the type of government they have, whether it is free, partly free or totalitarian. If dealing with a totalitarian government, you might reap huge profits, but you also lose most of the control running the business. If the business does help the country retain stability, you could also lose everything from the business itself to consumer trust. Second, the economic dimension, you should examine a nation’s economics, such as its rate of economic growth, inflation, budget, and trade balance. When McDonald’s decided to do business internationally, they found that it could perform well in cities that had potentially high growth rates, not just places that already had high growth rates, they also found they had to increase expenses in distribution to fix transportation problems. Third is the cultural dimension, a failure to understand a different culture can lead to big mistakes. (Kubasek, Brennan, & Browne, 2009) An example of this is when Walmart tried to open stores in Germany. As Walmart’s success is built on “streamlined distribution channels, high-volumes sales and low prices”, it did not fit well with German consumers, who tend to believe in “small and medium-sized retailers that know the ins and outs of the country's restricted business hours, intricate labor laws and multi-layered distribution systems.” As Germans are less price sensitive than North Americans are, they might also question the quality of items with discounted prices. (Gallant, 2012). Last is the legal dimension, when doing business with a foreign country, one should learn what legal system they are using. “The major families of law are common law, which relies primarily on case law and precedent; civil law, which relies primarily on codes and statutory law; Islamic law, which relies on the Shari’a, a religious code of rules;...