International Commercial Risks
April 1, 2013
International Commercial Risks -
Business is continually growing on a global level leading to international business partnerships, agreements, and trades. During these types of business relationships disputes are common (University of Phoenix, n.d.). If a dispute occurs one party may chooses to take legal action against the other party. Making the decision to take legal action businesses must make considerations prior to proceeding. Making the right decisions can build a strong relationship between parties. Considerations to take include contracts, local law, and local customs and culture. Steps may be taken to minimize risks in international business agreements as well. The first consideration that needs to be made when considering legal action against a business based in another country is contractual agreements. Review of what agreements the two parties have made through an agreed contract should take place. In reviewing the contract notice if a choice of law clause or a forum selection clause is present. These factors effect what steps a business must take and what efforts the business is willing to give in taking on legal action. A company should protect its “interests in the foreign country against all eventualities” (University of Phoenix, n.d.). If a choice of law clause is present in a contract it explains what set laws the parties have agreed to follow, such as the United States Law, foreign law, or international law. This is also covered by a forum selection clause. The forum selection clause is set to specifically determine if a dispute is to be taken to the United States court, foreign court, or arbitration. Arbitration is favored by the World Trade Organization (WTO). Members of the WTO are preferred to attempt arbitration before any other legal action (Repa, 2013). Arbitration allows a judgment and agreement to be reached without involving courts keeping a low-profile on the dispute (Melvin,...
References: Melvin, S. P. (2011). The legal environment of business: A managerial approach: Theory to practice. New York, NY: McGraw-Hill/Irwin.
Repa, B. (2013). Arbitration Basics. Retrieved from http://www.nolo.com/legal-encyclopedia/arbitration-basics-29947.html
University of Phoenix. (n.d.). Contemporary Business Law I [Multimedia]. Retrieved from University of Phoenix, LAW 421 website.
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