International Business Law [email protected] fr Dossier : group of 4 or 5. Topics in the intranet. Max 10 pages in English. 1. Explain the subject 2. Explain the legal rules (ex: European competition law) 3. Personal opinion/analysis I. International contracts Why create a company in a foreign country? * Costs (labour is cheaper) * New market (different demand) * Reciprocal agreements (bilateral for foreign investment) * Proximity * Taxation * Corporate law issues The first step is to study the market to make sure that you’ve got some demand… Then you need to do financial analysis (costs, installation, materials…).
Next you have to pay attention to the legal environment. What are the goals of your launch? When you know that you can make a choice on the legal form. 3 main forms: 1. Import/Export * Usually the first step for activities abroad * Advantage: requests a low level of investment * Disadvantage: the time factor for the return on investment. Usually you have to wait between 3 and 5 years before aspects the results. The broker put in touch the seller and the purchaser but as no role except that between both people.
The sales commission agent is going to take care of finding
The local merchant and the exporting company have more or less the same kind of customers. Exclusivity clause can be for: the products, geographical zone (country, zone…), and specific period of time. The License Agreement it’s a contract sign between licensor and licensee by which the licensor allows the licensee to use its trademark (marque deposee). Licensor is the owner of Industrial Property right (brands, patents, industrial design…). For these IP right you need a registration. If you’ve got the license agreement you are the real title of ownership. The Licensee has the right to trade under the licensor’s trade-mark.
The taxation is for the licensor because he pays the royalties The Franchise: There are a franchisor and a franchisee. Transfer of know-how. Limited liability of franchisor. For the franchisee the interest is to be integrated in a kind of network. There is warranty about the product. The franchise pays the royalties and the lump sum for the training. Without the training (transfer of know-how) it become a license. In a franchise agreement, the franchisor is renting his business model to the franchisee. 2. Corporate Structures / Setting-up a structure * May be useful for the sale, the distribution or manufacturing Advantage: local presence * Disadvantage: the cost/ tax consequences The branch office (sucursalle): has no juridical personality (it can’t sign contract on his own, liability, purchase assets, enter into loan, tax). The Subsidiary: you pay tax in the holding company and in the subsidiary (filial). * Notion of juridical personality * Tax consequences * Notion of permanent establishment Double-taxation treaties: the goal is to avoid (eviter) double taxation. A permanent establishment > if you have a permanent place of business you may become a tax liable. 3. Foreign Investments Various forms * Advantage: allows to gain market shares quickly * Disadvantage: the financial investment * Various legal forms / joint-ventures / take-over / merger * Problem of competition law * Others forms / transfer of technology / outsourcing The joint Venture: is a partnership between two companies and those two companies want to invest in a common project to make profit. Common law system is a system which is use in Anglo-Saxons countries, where we find legal system in jurisprudence. In the common law system, the contractual is based on two different approaches.
Input (=apport): you can give some finance (money), assets, know how. They share the powers between the partners and they have to decide how to share the profits. In the civil law system we will have the two partners who will create a new company, a subsidiary (filial) thanks to input which create share from the new subsidiary. Then they can vote and create dividends. Exemple Sony Corporate and Ericsson which created Sony Ericsson. The take over / Merger: * Interest * Legal issues / competition law (abuse of dominant position) The takeover is a financial participation in nother company, in general to take control in order to have a majority of votes. Transfer of share (company A buy share from shareholders of company B), or increase the capital thanks the creation of share (Company A create share to be majoritary). Merger: All the assets and liabilities of one company come to the second company during the merger. The sub-contracting: is a contract by which a company A will outsource (sous-traiter) the production of assets or devises. License contract + royalty > confidentiality Counter feiting = contre facon * Interest * Legal issues Pre-contractual contract > cover the negotiation period.
If there is no contracted sign, in case of failure you can’t be protect, no assurance, no warranties. A good contract protect you against risks. A good contact is based on: * The goal to reach by operation * The identification of the risks Before reaching the signature, there is a long process: * International environment creates additional difficulties * These operation to anticipate the risks that are more important * 2 main steps: Negotiation and drafting the contract The legal risks in pre-contractual period are: * Lost of information * Lost money * Lost of investments / Assets I.
Negotiating the international contract A. Main Difficulties 1. The time factor Negotiation may last for a long period of time. It is therefore important to protect both parties from the risks linked to that situation. 2. The financial factor Time is money / negotiating needs an investment in time and in preparation work. 3. The cultural factor The cultural of business is different (relations with time / money is not the same). The legal culture is not the same either (Common law environment vs. civil law) which will impact your strategy. Possible misunderstandings may arise = legal risks. 4. The geographical factor
The fact that the parties are far one from the other may impact the leading of the negotiation (time / terms). 5. The confidence and trust Necessity to write a pre-contractual agreement to create a climate of confidence for both parties. B. Pre-contractual agreements 1. The letter of intent / compfort letter a) Letter of intent Its goal is to confirm the intent to conclude a contract. Risk of re-qualification in a contract if the obligations contained are to conclude a contract (obligation of result and means). b) Compfort letter (dettes) It is a document that we used to confirm a financial guaranty.
If it contains the obligations to pay on behalf of another, then it can be re-qualified as a “financial guaranty” (cautionnement). 2. Confidentiality agreements The confidentiality agreement protects the exchange of information: * During the negotiation * After the negotiation 3. Gentlemen’s Agreement Has only a moral value / not legally binding (obligation juridique). c) Linguistic Risk Present in the negotiation process and in the writing of the agreement Ex: terms partnerships/contract Two types of limit: * Translation clause is a clause by which you will give priority to one version of the contract over another version. Definition: you can include in your contract a list with definitions. If you obliged yourself to write definition, its mean that you are sure that the other understands the meaning of the word. II. Notion of International Contract An international contract is a contract sign by two parties, based in two different countries. A. In French law Principle: The contract is the result of the parties’ internet (1134 of the civil code) * 1134 C. civ = “les conventions legalement formees tiennent lieu de loi a ceux qui les ont faites” * Goal = create legally binding obligations for the parties. The exchange of consent is sufficient to create a contract. The contract is a security for both parts, rules to follow, you are obliged to do it, and you have to respect the clauses… If you don’t respect the contract the other part can sue you. Will (of the parties) => Consent (valid=free mutual based on true information) => agreement => obligation (legally binding obligations = if default, may raise a legal recourse). 1. Freedom to contract a) Freedom to enter into the contract b) Freedom to determine the content of the contract 2. Validity of the consent a) Mistake on the object (erreur) 1110 c. iv (mistake on a painting = fake one) b) Violence / consent must be based on freedom 1111 / 1112 c. civ (violence with an employee) c) Misleading information (dol) 1116 C. civ (the fact of hiding information) 3. Classification of contracts a) Bilateral contract (contract synallagmatique) / both parties have obligations. Ex: sale b) Onerous contract (contract onereux) / based on a financial counterpart c) Formalist contract (contrat formaliste) / the validity of the contract depend of the accomplishment of the formality. B. International law 1. Definition An international contract will show one of the following characteristics: i) It enters into the sphere of application of an international treaty; ex: Vienna convention (ii) It relates to many national laws. For example, when the parties of a contract are based in different countries. (iii) The contractual transaction will imply a trans-border operation (ex: sale of merchandise between parties based in 2 different states). (iv) It deals with the “interest of international trade”. This principal arises from jurisprudence. Merchandise (canada) Merchandise (chile) Port of NY Purchaser in France Seller in France = french contrat sale/purchase contract application law = UK compromissory clause illegal clause 2. Different classifications (i) Contracts requiring a formality / ex. French law (real estate sale) / Italian law (commercial lease (bail)) (ii) Onerous contract / ex: Common Law system all the contracts have a counterpart. 3. Specific legal regime a) The choice of the applicable law to the contract (for the contractual obligations only) The choice of the applicable law to the contract by both parties is the main characteristic of the international contract. The choice is based on the following elements: * The legality of the object of the contract The applicable regime of contractual liability * The delays of prescription Contractual liability Covers any in execution or bad execution of the obligations contained in the contract Extra-contractual liability These obligations are always subject to the laws of public order, which are independent of the contract. b) The compromissory clause (arbitration) The compromissory clause allows to settle the litigation through the arbitration process instead of going to court. It’s: * Faster * Cheaper than going in court * Confidentiality III. Structure of the International contract Guidelines: * Who are the parties? Why is this contract being signed? * What merchandise / service? * Which counterpart? * Which date, which delays? * Which conditions? * What happens in case of litigation? I. Identification of Parties * Name of the company, address, legal form, name of the representative * Tip 1: verify to the RCS the legal status of the other party / juridical personality * Tip 2: the representative must be authorized II. Preliminary Clauses * Whereas it’s very important to define the intention of the parties when they signed the contract * Include the object of the contract (a sale? An employment contract? ) * Include definitions Are there some schedules? They should be included in the contract * Define the rules of precedence over the schedules and the contract in case of contradiction * Any amendment should be written * Effective date of the contract: make sure that the effective date is clearly stated in a clause * Be careful to the date of execution in the international contract. The place and date of signature may not be the same for both parties. III. Obligations of the parties * Obligation of the seller / terms related to the delivery of the product / delays and date of the signature may not be the same for both parties. Obligation of the purchaser / terms of payment / ways / transportation / transfer of risks and ownership IV. Guaranties * Guaranty of the product / which parts are guaranteed? / spare parts / repair? * Financial warranties / Guaranties of payment / insurances from both parties V. Ending of the contract * Duration of the contract * Re-negotiation if change in the circumstances (ex: raise of the price of the raw) * Force majeure (act of God) * Avoidance of the contract / if obligations are not executed accordingly) * Recondition of the contract (limited period) * Notices * Applicable law / settlement of litigations Schedules * Translation International Sales Agreements * United nations’ convention for the International sales of goods (“CISG”) * Treaty offering harmonized rules for international sales of merchandise. As in July 2008, ratified by 71 countries * Developed by the UN’ Commission on international trade law * Signed in 1980 * Effective in France in 1988, January the first * One of the most successful international uniform laws * Ratified by a diversity of countries (geographical, economical, and legal situations very different). * As a multi-lateral treaty, deemed to be incorporated in the national laws / supplants.
Structure of the treaty => an outlook to the rules Part 1: Sphere of application * Contracts of sales of goods between parties whose place of business are in contracting states State A, Party to CISG State B, Party to CISG Cie CDE Cie ABC Parties are based in non-contracting states but the choice of law rule refers to the laws of a contracting state. French legal system: French laws applying to the sale National sales | International sales | Civil codes, commercial codes, etc… Protects the purchaser | Vienna Convention on the international sales good Protects the seller | = 2 sets of different rules Merchandise does not apply to domestic goods, ships, aircrafts, services * The application of CISG may be excluded. Part 2: Formation of the contract * Offer: the contract is based on an offer. * The offer, has to be complete (description of the goods, the price, the quality, quantity and jurisdiction) * Upon acceptance = contract * Acceptance has to be a positive act. * Change of conditions = counter-offer if it deals with major * Duties of the seller deliver the merchandise with the related documents. * Duties of the purchaser take delivery of the merchandise and pay the price The merchandise 1) Should be of good quality (expected) 2) Suitably packaged 3) In conformity with IP rights 4) Buyer should examine upon delivery / lack of conformity = delay of 2 years following the delivery vs French laws = discovery. Part 3: Sale Transfer of risks 1) Contained in the convention 2) In practice = INCOTERMS The Trade mark An outlook to national, European and international protection. Intellectual property rights: => legal protection (file a request at the official office) => certificate = title of ownership = exclusivity => copying, imitation: counter (contre facon) . Patents, technical innovation 2. Trade marks (marque de commerce): image for a lie for goods/services 3. Copy rights (droit d’auteur): the expression of an idea 4. Industrial design: visual design (unique) “know-how” = industrial secret. Not legally protected Ex: Coca Cola recipe Industrial Rights INPI I. Under French Laws * Section L711-1 of CPI rules the registration of Trade-Marks. * A brand (…) is a graphical sign used to identify goods or services of an individual or a company. A. What can be registred as a Trade-Mark? * A mix of letters and numbers * Example Trade-Mark Lancel or Volvo Logos or graphical representations / The designs is the distinctive element of the brand. Ex: Citroen and Lacoste * Musical sounds (has to be represented with notes). Ex: jingles * Combination of words, letters, numbers and a logo. Ex: apple brand (world + apple logo) * Tri-dimensional elements. ex: a bottle of Perrier * A color, if clearly identified. Ex: rose candia; couleur orange (Pantone 151) B. Conditions of validity a) The distinctiveness * Should not describe the product with words used in the day-to-day language Ex: Ticket Restaurant is not a valid Trade-mark * Being distinctive does not mean being riginal in the choice of the words, both in their use. Ex: “le Chat” are common words, but their use in association with a soap is distinct. Ex: Persil b) Not misleadingly deceptive * On the origin of the product (ex: Geneva for French watches) * On the composition of the product (ex: Evian fruite for a product not including Evian water). * On the nature of the product (ex: Beurrax for margarine) * On the quality of the product (ex: Servifrais for frozen food) c) It has to be available. It should not be confusingly similar to IP assets already registered such as: * Trade marks * Trade names, commercial names Appellations d’origine protegees * Registered names of individuals * Copyrights, and industrial designs Shall be declared as not-registrable: * Sign already registered (except if different products) * Any similar sign causing a confusion, based on: * Phonetical similitude (ex: Galerie Lafayette and Galerie Lafayetette) * By the meaning (ex: Subito and pronto) * By the contrast (ex: la Vache qui rit / la vache serieuse) * By the translation if understood by the public (ex: apres l’amour and after love). * Notorious trade-marks are very highly protected. Vaguely similar trade-marks are prohibited ) Not contrary to the public order * Flags or anything contrary to the public order. Ex: slogan “non a la Turquie dans l’Europe”. C. Obtaining Rights on a Trade-Mark * By filing a request at the INPI or at the Commercial Court of our residence * It includes a description of the trade-mark, the products and services attached the name of the owner, and the fees. * The description of the products is based on a list of classes (34 for products and 11 for services) * Registration for 10 years / renewable. The only IP asset for an unlimited time. * Loss of the rights if the mark is not used within the first 5 years. A real title of ownership * Legal recourse based on CPI= Counterfeited products Imitation (or reproduction) * Civil penalties (concurrence deloyale) * Penal fines II. Under European Laws A. What can be registered as a Trade-Mark? * Official office in Alicante (Spain) * Opened in 1994 * OHIM (Office of harmonization for registration / protection * Valid on the EU territory * Registration for 10 years, renewable * A mix of letters and numbers * Logos or graphical representations * Musical sounds * Combination of letters, numbers and a logo * Tri-dimensional elements A color, if clearly identified C. Advantages of the European Trade-Mark * Keep the previous brands (national and international) * The use in only one country is enough to block and recourse for default of use * Registration for 10 years / renewable * One legal text applicable. * The Brand has to be available, non-descriptive, not deceptive, and not contrary to the public order in the 27member states. * The descriptive characteristics are evaluated with the reference to each of the national language within EU. It’s much more risky having a brand similar in Europe III. International Aspects of Trade-Marks The simplification of the registration at the international level * Control in each country * Different legal systems of registration (usage/registration) Harmonization for the member states of WTO | | Domain | Duration | Formality | Artistic rights | Copyright | Expression of an idea | 50 years 70 years | None | Industrial Property Rights | Trade Mark | Any distinctive sign | 7 years not renewable 10 years renewable | Registration and use | | Designs | New and original designs | 10 years | Specific laws or copyrights | | Patent | New inventions with an industrial application | 20 years | Registration |
A. Convention d’Union de Paris (1883) * Priority of registration within the members states’ territory B. Arrangement de Nice (1957) * Classification of goods and services in classes: * 33 classes of goods * 11 classes of services C. Arrangement de Madrid (1981) * International filing system * Ruled by WIPO (world IP Organization) in Geneva * 2 goals: ease the registration and ease the renewal * Registration for 10 years 1. Who can use the system? * Individuals * Companies * Based in member states or having the nationality 2. The request * Filed in the country of origin * Forwarded to WIPO Contains a description of the trade-mark, the service, and the countries in which it should be filed. * The office of the country of origin certifies the conformity * WIPO verifies the conformity with the law and forward * The national authorities examine the request * Any opposition is dealth with directly with the petitioner 3. Consequence / effects * Protection in each member state * If legal action, much complicated than for EU Trade-mark. * During five years, the mark will depend of the mark of origin * No modification possible to the Trade-mark 4. International Registry * Should be updated for names of owners Includes the limitation to the use of specific trade-marks in some designated countries * Any radiation or renunciation * License agreements 5. Advantages * Simplification of the procedure of registration/renewal * Registration is effective after 2 months if no answer from the country of registration Brand: ownership: 1. Owner = licensee * Asus=use * Abusus=sak * Vuctus=receive money from the asset 2. Licensee = user Pay = royalty I. Definition * Title of ownership * Based on exclusivity rights * Granting the use of an asset * Against a counterpart: the royalty * Title of II. Main Clauses * Exclusivity of use Territory * Validity of the title * Royalty (payment/calculations) * Defense against counterfeiting * Non competition clause III. Competition law * Notion of cartel: refers to any type of cooperation between competitors that result in a distorted competition. * Notion of Abuse of dominant position: refers to any economical power that allows a company to act independently of its competitors and of the consumers. A. License is the principal contract 1. Transfer of technologies 2. 1. Definition Share of skills 1. Transfer of technologies 2. 2 type of clauses ownership of the IP asset. Why the licensee wants to obtain the rights xclusivity to the licensee territory infringements to IP when discovred confidentiality clauses the improvements subsequent to the contract the secrecy: what is covered technical assistance royalties 2. 3 legal frame Exemption based on Regulation No772/2004 related to transfer of technologies agreements. The regulation contains only the hardcore restrictions (forbidden clauses). 2. Trade-marks license and Cartels 3. 1. Legal Frame No specific legal rules. Case by case analysis. Ex: License agreement with a clause stating that the license will not be allowed to manufacture or sell another brand, (non competition clause).
This clause could be illegal if the licensee has significant market shares. It blocks the access to other potential owners of trade-marks who could enter into other agreements with licensee. B. License accessory to a vertical Supplier > (franchise agreement) purchaser > (sale agreement) customer 1. Legal frame Regulation no 2790/1999 applicable to vertical to vertical agreements: creates an exception stating that those agreements are not infringing competition law. Condition: * The license has to be within a contract of purchase or distribution (not manufacturing nor pure license) The rights are granted to be purchaser * The license is ancillary to the distribution C. Refusal of License The refusal of license may be considered as anticompetitive, and contrary to the provisions of Abuse of Dominant position if: * The product protected by IP rights is needed to develop a new product * The refusal of license is an obstacle to the creation of a new product * The refusal is not justified * The refusal excludes the competition on an ANCILLARY market. Partiel: Definition, contrat de confidentialite… QCM: 1 reponse sans point negatifs 1st Part: International fiscal law, fiscal taxes residence nd: Short cases 3rd: Review Management of the workforce mobility: Expatriates: Fr => Abroad Impetrates: foreigners => Fr * We will be focus on taxation of income (notion of tax residence) * Social security * Labour law (employment contract) Taxation of income: Mr. B is French and is going to work in USA. His wage is paid by France. Revenues are taxed based on worldwide income. Territoriality => any money earned in USA is tax in USA Double taxation = is the taxation of the same income or the same tax payer twice Double taxation treaties: sources = international treaties and Lex Mercatoria
International treaties: A. Multilateral Create new rules of law = (many parties, CISG) B. Bilateral = create a link between the legal systems of 2 states: 2 parties, do not create new rules of law. The purpose is to avoid contradictions between both countries according to the double taxations. OECD model => Fr/UK I. Sign of application a) Definition of territory (excludes Jernesay, Guernezay = tax heavens) b) Residence II. Rules to share the right to tax State A state B Double taxation treaties = DTT How do we apply those treaties? Principle 1: priority over national laws => 55 of constitution
Principle 2: subsidiaries of I. T. DTT will apply only if there is a contradiction between two national laws Ex: without formalities French German Laws: formalities usual place of living German tax domicile French tax domicile => Opposition between the 2 laws = DTT => conflicts of laws I. Under French Laws Article 4B CGI Home, principal place of staying or the center of familial interests * One home: the place where the person is usually living with its family (spouse and children). (=where the family is based) Also includes the main place of staying: * independent of the conditions 183 days is the minimum number of days that you have to stay * Principal place of staying: when a person is living in a house most of the time, independently of the conditions of staying, (apartment, hotel or else). Someone living more than 183 days in France is a tax resident. However a person living less than 183 days in France may be qualified as a French tax resident, if France is the main place of staying. * Place where someone carries out its main professional activity (time is the main factor) * Center of economical interests (investments; asset management; professional activities; main evenues) II. Under DTT The states determine in their national laws if someone is qualified as a tax resident. If there is a conflict of residence, ie someone being considered as tax resident of more than one state, the DTT shall settle the question. The criteria are successively analyzed. 1. One permanent The notion of home covers any form of living (house, apartment, room…), the tax payer being owner or renting. The home has to be permanent. It should be durably be at the disposal of the taxpayer. The DTT have a broader definition of home (one home and not the home).
The taxpayer, should in principle, have only one home. He may have at his disposal two permanent homes/the expatriates are very often faced to his problem because they often keep one home in the country of origin. 2. Personal links or center of economic interests Take into account the family or social relations, the various occupations (political activities, cultural, or others). These circumstances are analyzed globally / be careful to the proofs (school records, pay slips, bank accounts, mailing address, invoices). 3. Principal place of staying Refers to the physical attendance on a territory.
The criteria are usual place of staying, and not the most usual place of staying. Consequently, 2 usual place of staying may be considered. (ex: Fr for holidays and abroad for work). 4. Nationality This is the last criteria. If there is not any arising solution, the tax authorities will have to negotiate. International contracts: A. Negotiation of the contract Pre contractual => Types of contract (confidentiality, letter of intent, and comfort letter) => savoir les definitions => The use of these contracts (protect the confidentiality during the negotiation, after in case of failure in the negotiation).
B. Notion of international contract => Characteristics of international contract => Contractual liability = clause of choice of law => Extra contractual liability = laws of public order Intellectual property: A. Trade mark 1) Definition of TM 2) Condition to register a TM 3) Rights to protect the TM B. European trade mark (27 members states): def a,b,c C. International TM: def a,b,c Fr => ompi=> spain, Europe… D. International treaties (arrangement de Nice, convention de Paris, system de Madrid) E. Licence agreement => what is a licence agreement => the link with competition law
Licenser (owner of the IP right > exclusivity) => licensee (right to use the IP right > have to pay the royalties) Competition law: A. Cartels (definition, criteria use to control them characteristics) B. Abuse of dominant positions (what is it and legal region (prohibited behaviors applying to all companies, specific penalties for abuse of dominant positions)) Taxation law: A. Double taxations treaties (what is it, how to fight against it) B. Tax domicile under French law and under DTT Introduction: Various legal form A. Import export (def, characteristics and differences) B. Structure (def) C. Investments In