International Business Transactions

Front 1

TRANSNATIONAL LAWYERING

Laws Applicable to International Business:

Back 1

Laws Applicable to International Business:
-Domestic Laws
-Foreign Laws of Host Country
-International Law
•Executive Agreements
•Treaties
•Customary International (Common) Law
-“Private Law”: the law of the K

Front 2

TRANSNATIONAL LAWYERING

Rules of Transnational Practice:
-Competency

Back 2

Rules of Transnational Practice:
-Competency:
•MR 1.1: must provide competent representation
•Lawyer is only subject to discipline in the states in which he is admitted, but may be disciplined in those states for violating other state’s rules
•Civil Liability: may be liable for malpractice

Front 3

TRANSNATIONAL LAWYERING

Rules of Transnational Practice:
-Unauthorized Practice of Law

Back 3

Unauthorized Practice of Law:
- MR 5.5: may not engaging in unauthorized practice of law under another Jx’s rules
•Foreign counsel should render foreign law opinion
- Foreign lawyers may not practice foreign law in NY without a license. In re Roel (1957)
• NY and many foreign countries now grant limited permission to practice foreign law.
- EU countries allow other EU lawyers to practice in the country under their home title.

Front 4

TRANSNATIONAL LAWYERING

Rules of Transnational Practice:
-Confidentiality/Atty-Client Privilege

Back 4

Confidentiality/Atty-Client Privilege:
- EC Rules (AM&S Europe):
• Written communication
• Confidential
• B/w client and independent (non-employee) atty
• For purpose of legal defense (but may be in anticipation of litigation)
• Privilege only extends to EC-licensed lawyers

Front 5

TRANSNATIONAL LAWYERING

In re Roel (1957)

Back 5

•Giving Advice → In re Roel (In the Matter of NY County Lawyers Ass’n): Mex. Lawyer who gives advice about Mex. Divorce law. Ct held he can’t.
-Policy arguments against foreign lawyers practicing law in the US → NY bar protects the public and foreign lawyers are not subject to NY Bar. But, does the rule deny people the ability to seek advice from people most competent to give it?
-NY has subsequently changed its rules for foreign lawyers to practice giving advice about foreign law so long as they are willing to subject themselves to punishments under NY bar.

Front 6

INTERNATIONAL TAX

U.S. Tax Status & Source of Income:

Back 6

U.S. Tax Status & Source of Income:
- U.S. Citizs, Resident Aliens, U.S. Corps: worldwide inc
- Non-Resident Aliens, Foreign Corps: U.S. source income
- Royalties: sourced where property is used
- Interest: sourced to residency of debtor
- Dividends: sourced to location of payor
- Sale of inventory: sourced where title passes A.P. Green

Front 7

INTERNATIONAL TAX

Branch v. Subsidiary:

Back 7

Branch v. Subsidiary:
- Foreign Corp/Branch in U.S.:
• ECI (regular + sustained bus activities) = normal rates
• Non-ECI/Passive income taxed at 30% w/h
• Branch-profits tax (cash shifting home = tax like div)
- Foreign Subsidiary of U.S. Corp:
• Sub pays foreign tax immediately
• U.S. tax deferred until income repatriated (then dividend is subject to foreign w/h tax, too)
- Foreign Branch of U.S. Corp:
• U.S. corp pays foreign tax immediately (branch profits tax too, maybe)
• Immediate U.S. tax on income or recognition of losses

Front 8

INTERNATIONAL TAX

Transfer Pricing (IRC §482):

Back 8

Transfer Pricing (IRC §482): Prices which entities under common control charge each other for goods and services.
- IRS has authority to adjust inter-company prices to reflect an “arms-length” basis. May result in big penalties.

Front 9

INTERNATIONAL TAX

Controlled Foreign Corporations (CFC):

Back 9

Controlled Foreign Corporations (CFC):
- “U.S. Shareholder” of a “CFC” must include in its income its pro-rata share of certain income of the CFC:
• Passive income
• Foreign Base Company Income:
• Sales to countries o/s country of incorporation
• CFC purchases from or sells to a related party
• Goods produced o/s country of incorporation
- CFC: foreign corp owned >50% (by vote or value) by U.S. Shareholders
- U.S. Shareholder: U.S. person owning ≥10% of CFC’s voting power

Front 10

INTERNATIONAL TAX

Back 10

Tax Treaties:
- Increases coordination of tax authorities, fight tax evasion
- Try to eliminate overlapping taxation (integrate systems)
• Provide for reciprocal FTCs
• Once country may forgo taxing a type of income or transaction and allow the other country to tax it.
• Consistent definitions of “residency”/“source”
• Reduced withholding tax rates
• Business profits only taxed if associated with a “Permanent Establishment” (no w/h tax, though)
- C/L Jxs generally refuse to enforce foreign tax judgments

Front 11

INTERNATIONAL LITIGATION

Personal Jursidiction:

Back 11

Personal Jx:
- Most courts recognize Jx if:
• D’s domicile
• Place of the wrong or performance of K
• Consent to Jx
• Choice-of-forum clause is enforceable, unless unreasonable + unjust (would deprive D of day in court). Zapata; Carnival Cruise Lines
• Clause is unenforceable if selected forum will not accept Jx (because no connection to the case)
- Generally only U.S. courts recognize Jx if:
• Served while present in the forum Burnham
• Regular and systematic contacts (General Jx)

Front 12

INTERNATIONAL LITIGATION

All International Contracts
should have:

Back 12

- Choice-of-Forum Clause
- Choice-of-Law Clause

Front 13

INTERNATIONAL LITIGATION

Evidence/Procedure:

Back 13

Evidence/Procedure:
- Rare outside U.S.: civil juries, class actions
- Discovery:
• Foreign law may require party to show knowledge of evidence and its relevance before discovery
• Hague Conference on Private Intl Law
• Letters of Request (“Letters Rogatory”):
- For civil and commercial cases only
- Seeks the aid of a foreign court
- May refuse if incompatible with local law
• US Ct not limited to Hague Conv Societe Nationale
• Depositions abroad may be “official functions”
• FRCP 32(a)(3)(B) allows foreign depos at trial
• Subpoenas:
• Usually only enforceable against U.S. residents with assets in U.S. and parties to the litigation
- May draw negative inferences from absent documents Rogers
- Appeals (in foreign ct): generally de novo review
- Costs: “British Rule” = loser pays atty fees, contingency fees may be barred in foreign Jx

Front 14

INTERNATIONAL LITIGATION

Judgments:
-Foreign Judgments in U.S.:

Back 14

Judgments:
- Foreign Judgments in U.S.:
• FF&C does not apply foreign judgments
• Depends on state law: Uniform Foreign Monetary Judgments Act, requires enforcement except if:
• No due process or impartial tribunal
• No PJx, SMJx, or Notice
• Fraud or Violation of Public Policy
• Violation of parties’ agreement
• Forum was seriously inconvenient

Front 15

INTERNATIONAL LITIGATION

Judgments:
-U.S Judgments in Foreign Courts:

Back 15

- U.S Judgments in Foreign Courts:
• Depends on foreign law.
• U.S. is not a party to a treaty providing for enforcement of judgments
• Brussels Convention = EEC Only
• Foreign Jx may use public policy veto:
• E.g., Strict Liability or Punitive Damages
• Germ & Japan (like many countries) require reciprocity

Front 16

ARBITRATION

Advantages Disadvantages

Back 16

ARBITRATION

Advantages Disadvantages

Time No Appeal

Cost Cost

Privacy No Precendent

Enforce No
Judgments Injunctions

Arbitrators’ Limited
Expertise Discovery

Neutrality No
of Forum Subpoenas

Front 17

NEW YORK CONVENTION

Back 17

- 132 signatories, including U.S.
- Federal Arbitration Act implements the Convention
- Only applies to commercial relationships

Front 18

For NY Convention to Apply, Arbitral Award Must:

Back 18

- Be made outside enforcing state’s territory
- Be rendered in another signatory country
- Not be considered “domestic” by enforcing state’s law

Front 19

Signatories Must Enforce Arbitration CLAUSE, unless:

Back 19

- Arbitration agreement void due to fraud, duress, etc.
- Non-arbitral subject matter

Front 20

Signatories Must Enforce Arbitration AWARD, unless:

Back 20

- Incapacity or invalidity of the K (fraud, duress, etc.)
- Ct. in Jx where award was made set it aside
- Failure to give notice and opportunity to be heard
- Award outside scope of the agreement
- Nonconformity of proceedings to the agreement
- Non-arbitral subject matter
- Public policy violation (basic notions of morality/justice)
• “Manifest disregard of law” must rise to the level of contravening public policy (error of fact or law alone ≠ exception) Brandeis Intsel