Legal Risks and Considerations in International Business - Explained
Risks of Doing Business in a Foriegn Country
Written by Jason Gordon
Updated at April 8th, 2023
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What are the legal risks associated with carrying on international business?
The competitive risks associated with carrying on business in a foreign market are numerous. For example, understanding the foreign market, communicating in a foreign language, and understanding the competitive environment can be extremely difficult. Important for this chapter, the legal risks associated with carrying on international business can be extensive. The following are examples of legal risks businesses commonly encounter:
Governing Laws
What laws control business agreements? Contracts often employ some amalgam of contract laws from each country. Does the foreign country recognize and protect intellectual property rights? What are the legal hurdles in the importation process? What tariffs, duties, customs processes, etc., apply to the importation of goods? What labor laws apply to operations?
Enforcing Legal Rights
How does one enforce legal agreements or ones property rights? Foreign court systems have varying methods of enforcing ones rights. The legal system may be difficult to navigate or unavailable to foreigners. Is there a risk of expropriation or nationalization of business assets?
Political Stability
Is there a risk of political overturn, war, etc., that could disrupt business operations. This includes the potential for expropriation or nationalization of the companys resources.
This list is by no means exhaustive. Operating in a foreign market may give rise to any sort of specific legal barrier or hurdle for foreign entities.
Next Article: Types of International Agreement Affecting US TradeBack to: INTERNATIONAL BUSINESS, LAW, & RELATIONS
Discussion Question
Can you think of other legal risks that may present themselves when doing business in a foreign country? How do these risks compare to other risks, such as the foreign competitive environment?
Practice Question
ABC Corp is considering expanding its US-based operations into China. Can you identify some of the legal risks that ABC Corp will face in its expansion?
Related Topics
- International Law (Intro)
- What is International Law?
- What are the types of international law?
- United Nations
- United Nations Commission on International Trade law
- United Nations Conference on Trade Development
- North Atlantic Treaty Organization
- International Monetary Fund
- Other Economic Development Organizations
- World Bank
- World Trade Organization
- European Union
- What international courts exist and what are their functions?
- What are the methods of carrying on international business?
- What are the legal risks associated with carrying on international business?
- What major international agreements affect international trade?
- When is carrying on business in a foreign country prohibited by US law?
- What is the significance of boycotts between foreign countries?
- What US laws apply to limit business transactions in foreign countries?
- What regulations apply to exports from the United States?
- What are the legal limitations on importing goods into the United States?
- How are private international business agreements generally enforced?
- How do parties determine the rules, location, and method of resolving disputes?
