At one end of the extremes of political philosophies, or ideologies, is anarchismA political ideology that contends that individuals should control political activities and public government is both unnecessary and unwanted., which contends that individuals should control political activities and public government is both unnecessary and unwanted. Brazil: Currently Dilma Rousseff is the President of Brazil. (d) Business involving forbidden products or activity, such as alcohol, pork, or gambling is prohibited. Socialist law traditionally advocates ownership of most property by the state or state-owned public enterprises, prohibiting free entry to foreign firms. The political and legal ystem in Australia: The Government of the Commonwealth of Australia is a federal one. Religious lawAlso known as theocratic law; this legal system is based on religious guidelines. There is no consensus on how to measure democracy, definitions of democracy are contested and there is an ongoing lively debate on the subject. Search. (f) Compassion is required when a business is in trouble. Before we can evaluate the impact on business, let’s first look at the different political and legal systems. Historically, democratic governments have supported capitalism and authoritarian regimes have tended to utilize a state-controlled approach to managing the economy. What businesses must focus on is how a country’s political system impacts the economy as well as the particular firm and industry. Create . Theocratic law is the legal system based on religious doctrine, precepts, and beliefs. Plagiarism Prevention 4. Classic Sharia manuals are divided in four parts: laws related to personal acts of worship, laws related to commercial dealings, laws related to marriage and divorce, and penal laws. This combination is called pluralismA political ideology that asserts that both public and private groups are important in a well-functioning political system., which asserts that both public and private groups are important in a well-functioning political system. The interest-bearing accounts and loans, which fall under the strict ribamles, most futures and options, which are considered speculative and gharar, and insurance, because the outcome of the contract can no way be determined beforehand , are all haram. Log in Sign up. is one in which the government or state directs and controls the economy, including the means and decision making for production. Multinationals now find themselves competing as never before with state-owned companies armed with substantial financial and political support from their governments.”Ian Bremmer, “The Long Shadow of the Visible Hand,” Wall Street Journal, May 22, 2010, accessed December 21, 2010, http://online.wsj.com/article/SB10001424052748704852004575258541875590852.html. Thankfully, for many agricultural products and agribusinesses like timber, fish, livestock and so on, the rules are fairly well defined. As a result, the government has placed a priority on energy related technologies, including solar energy. As political systems in different areas vary, the political impact differs. Democracy presupposes equality before the law, due process and political pluralism.“Liberty and Justice for Some,” Economist, August 22, 2007, accessed December 21, 2010, http://www.economist.com/node/8908438. Major similarities between the Sharia and secular law are that in both: 2. The extent of separation of judicial powers between the judiciary and the public authorities varies considerably across nations. Privacy Policy 8. Economist Intelligence Unit, “The Economist Intelligence Unit’s Index of Democracy 2008,” Economist, October 29, 2008, accessed December 21, 2010, http://graphics.eiu.com/PDF/Democracy%20Index%202008.pdf. The independence of a country’s judicial system from political influences of the members of governments, citizens, or firms is crucial for the fair treatment a firm receives in its overseas operations. Its leaders see the economy as a tool to preserving the state’s power, which in turn is essential to maintaining stability and growth and ensuring the long-term viability of the Communist Party.Jason Dean, Andrew Browne, and Shai Oster, “China’s ‘State Capitalism’ Sparks Global Backlash,” Wall Street Journal, November 16, 2010, accessed December 22, 2010, http://online.wsj.com/article/SB10001424052748703514904575602731006315198.html. Many common law countries, including the US and India have adapted commercial codes to govern business. For example, the Chinese government owns almost all the major banks, the three largest oil companies, the three telecommunications carriers, and almost all of the media. State-owned companies control more than 75 percent of all crude oil production, in contrast with only 10 percent for private multinational oil firms.Ian Bremmer, “The Long Shadow of the Visible Hand,” Wall Street Journal, May 22, 2010, accessed December 21, 2010, http://online.wsj.com/article/SB10001424052748704852004575258541875590852.html; “Really Big Oil,” Economist, August 10, 2006, accessed December 21, 2010, http://www.economist.com/node/7276986. Although most countries are pluralistic politically, they may lean more to one extreme than the other. To further illustrate the complexity of the definition of a democracy, the Economist Intelligence Unit’s annual “Index of Democracy” uses a detailed questionnaire and analysis process to provide “a snapshot of the current state of democracy worldwide for 165 independent states and two territories (this covers almost the entire population of the world and the vast majority of the world’s independent states (27 micro states are excluded) [as of 2008)].”Economist Intelligence Unit, “The Economist Intelligence Unit’s Index of Democracy 2008,” Economist, October 29, 2008, accessed December 21, 2010, http://graphics.eiu.com/PDF/Democracy%20Index%202008.pdf. National security issues can impact both the import and exports of a country, as some governments may not want advanced technological information to be sold to unfriendly foreign interests. Only two Asian countries are represented: Japan and South Korea. 36 terms. The Indonesians enjoy a level of political freedom. Firms need to assess the balance to determine how local policies, rules, and regulations will affect their business. Bureaucracy 5. First, let’s briefly discuss some of the reasons behind these interventions. Domestic Chinese manufacturers received quick loans with favorable terms as well as speedy approvals. Most countries actually have a combination of these systems, creating hybrid legal systems. Facing a shortage in 2007, growing domestic demand, and high prices from foreign companies that dominated production, China declared the development of domestic polysilicon supplies a priority. The burden of proof is on the plaintiff. Although the terms “freedom” and “democracy” are often used interchangeably, the two are not synonymous. Businesses in industries, such as commodities and oil, have found more authoritarian governments to be predictable partners for long-term access and investment for these commodities. ‘Harmonization’ and ‘unification’ of the law of international trade refer to the process through which the law facilitating international trade is created and adopted. In the Persian Gulf region alone, there are twenty-two Sharia-compliant, Islamic banks, which in 2008 had approximately $300 billion in assets.Tala Malik, “Gulf Islamic Bank Assets to Hit $300bn,” Arabian Business, February 20, 2008, accessed December 21, 2010, http://www.arabianbusiness.com/511804-gulf-islamic-banks-assets-to-hit-300bn. The Christian Canon system is observed in the Vatican City. Every country has the right of jurisdiction within its own legal territory. Governments have several key policy areas that can be used to create rules and regulations to control and manage trade. In Islam, Sharia is used to refer to the matters of religion that God has legislated for His Servants. In essence, there are three main kinds of legal systems—common law, civil law, and religious or theocratic law. Totalitarianism, a more extreme form of authoritarianism, occurs when an authoritarian leadership is motivated by a distinct ideology, such as communism. They may want to protect young industries or to preserve access to local consumer markets for domestic firms. Effects of politics on international business 1. At the other extreme is totalitarianismA political ideology that contends that every aspect of an individual’s life should be controlled and dictated by a strong central government., which contends that every aspect of an individual’s life should be controlled and dictated by a strong central government. Instead, most countries have a combination of both. Authoritarian governments centralize all control in the hands of one strong leader or a small group of leaders, who have full authority. Business contracts tend to be detailed and specific with all contingencies elaborated in civil-law countries whereas contracts tend to be shorter and less specific in common-law countries. This remaining competence of the States was originated in the American Constitution and followed by all Brazilian Constitutions. Firms operating internationally face major challenges in conforming to different laws, regulations, and legal systems in different countries. A political ideology that contends that individuals should control political activities and public government is both unnecessary and unwanted. To begin with, despite the globalization of business, firms must abide by the local rules and regulations of the countries in which they operate. A main differentiator of political systems is each system’s philosophy on the rights of the individual and the group as well as the role of government. The most commonly known example of religious law is Islamic law, also known as ShariaIslamic religious law that addresses all aspect of daily life; in terms of business and finance, the law prohibits charging interest on money and other common investment activities, including hedging and short selling.. Islamic law governs a number of Islamic nations and communities around the world and is the most widely accepted religious law system. Baidu self-censors and, as a result, has seen its revenues soar after Google limited its operations in the country.Rolfe Winkler, “Internet Plus China Equals Screaming Baidu,” Wall Street Journal, November 9, 2010, accessed December 21, 2010, http://online.wsj.com/article/SB10001424052748703514904575602781130437538.html. Politically, a country’s government may seek to protect jobs or specific industries. Political factors constitute an important environment factor in International Business.Actually politics and economics are inter-related as one influences the other. In other words, the damages to property will be actual sums relating to repair and replacement of the property. A form of government that derives its power from the people. Image Guidelines 5. International managers need to develop basic understanding of the types of legal systems followed in the countries of their operations before entering into legal contracts. The Internet has started to change this, as sellers and buyers have easier access to each other. However, “in defense, power generation, telecoms, metals, minerals, aviation, and other sectors, a growing number of emerging-market governments, not content with simply regulating markets, are moving to dominate them.”Ian Bremmer, “The Long Shadow of the Visible Hand,” Wall Street Journal, May 22, 2010, accessed December 21, 2010, http://online.wsj.com/article/SB10001424052748704852004575258541875590852.html. International Business Chapter 3: Governmental and Legal Systems. Two additional religious law systems are the Jewish Halacha and the Christian Canon system, neither of which is practiced at the national level in a country. Chapter 4 "World Economies" provides more details about developed and developing countries and emerging markets. In contrast a planned economy is one in which the government or state directs and controls the economy. Central to China’s approach are policies that champion state-owned firms and other so-called national champions, seek aggressively to obtain advanced technology, and manage its exchange rate to benefit exporters. is an economic system in which the means of production are owned and controlled privately. This was reported to be considerably lower in China (3.4), Brazil (3.1), Russian Federation (2.7) and the lowest in Venezuela (1.2). Governments and politics play a large role in international business. International law recognizes the sovereign right of anation to allow or deny foreign firms to conduct. A country may also refuse entry to foreign citizens or restrict their travel. Cultural and social factors might also impact a government’s intervention in trade. Chapter 7 Political and Legal Systems in National Environments1 It is based on traditions, past practices, and legal precedents set by the courts through interpretation of statutes, legal legislations, and past rulings. Log in Sign up. Political Stability - Is there a risk of political overturn, war, etc., that could disrupt business operations. China’s ability to focus on dominating key industries inspires both fear and awe throughout the world. Common lawA legal system based on traditions and precedence. While the past century has seen a major shift toward free trade, many governments continue to intervene in trade. Laws of most countries have elements of both common and civil law. Sharia is the canonical law derived from a combination of sources, such as the Koran, the holy book of Islam, the Sunna, teachings and practices of the prophet Mohammed, and the fat was, the rulings of the Islamic scholars. Nevertheless, countries still have the ability to regulate or strong-arm companies into abiding by their rules and regulations. Governments intervene in trade for a combination of political, economic, social, and cultural reasons. The complications in a meeting out of non-performance of a business contract also vary widely among the common- and civil-law countries. Several things stand out in the 2008 index. Particularly for businesses that operate internationally, a lack of political stability in any country has an effect on operations. For the purpose of this discussion, the main relevant difference is in ideology. How involved is the government in the private sector? Is there a well-established legal environment both to enforce policies and rules as well as to challenge them? In the past thirty years, governments have increasingly privatized a number of industries. Sharia has clear guidelines for aspects of life. Common law originated from England and it is followed in most of the former British colonies, such as India, UK, the US, Canada, Australia, and New Zealand. In ‘civil law’ countries, judges have to strictly follow the ‘letter of the law’, giving them low flexibility in judicial decisions whereas in common-law countries, greater reliance is placed on the previous rulings and interpretations by other judges in similar cases. As you might expect, established democracies, such as those found in the United States, Canada, Western Europe, Japan, and Australia, offer a high level of political stability. 3. Trade Embargos and Sanctions 4. Until recently, governments were able to directly enforce the rules and regulations based on their political and legal philosophies. is basically the system of politics and government in a country. Many are permitted to engage in sale-buyback or leaseback of an asset. Political system and Legal systems: Indonesia today is Southeast Asia’s most vibrant democracy. In practice, countries use a combination of one or more of these systems and often adapt them to suit the local values and culture. The most significant difference in the common law and the civil law countries is in the protection of intellectual property. Unlike the countries dominated by Christianity, Hinduism, and Buddhism where either common or civil law is followed, a large number of Islamic countries integrate their legal system based on the Sharia. Democracy is the most common form of government today. STUDY. In reality, neither extreme exists in its purest form. There are more than thirteen major types of government and each type consists of multiple variations. This contrasts with more authoritarian governments, where democracy is either not in effect or simply a token process. A person is innocent unless proved guilty. Nations have the right to impose restriction upon foreign citizens on their rights to travel and stay, their conduct, or area of business operations. Civil lawA legal system based on a detailed set of laws that constitute a code and on how the law is applied to the facts. Government-business trade relations are the relationships between national governments and global businesses. Presently, UNCITRAL has six working groups for areas, such as procurement, international arbitration and conciliation, transport law, electronic commerce, insolvency law, and security interests. A fair judicial system also reduces political risks in overseas markets. It governs a complete set of rules, regulations, institutions, and attitudes. Capitalism is an economic system in which the means of production are owned and controlled privately. A ‘sovereign’ state is independent and free from all external control or enjoys complete legal equality with other states. An economic system in which the government or state directs and controls the economy, including the means and decision making for production. China’s different set of political and legal guidelines made Google choose to discontinue its mainland Chinese version of its site and direct mainland Chinese users to a Hong Kong version. Prohibited Content 3. If a new party comes into power, will the rules of business change dramatically? State companies, like their private sector counterparts, get to keep the profits from oil production, creating a significant incentive for governments to either maintain or regain control of this very lucrative industry. • Government: Political and business orientation, legislation, regulation, ... Legal Aspects in International Markets. In Arabic, ‘Sharia’ means the clear, well-trodden path to water. China, for instance, has generally followed ‘rule by man and not by law’, the tradition of which still remains despite the country developing a model legal system. The study of political systems is extensive and complex. In most countries, it is applied in conjunction with the common and the civil law. How do political and legal realities impact international trade, and what do businesses need to think about as they develop their global strategy? Rolfe Winkler, “Internet Plus China Equals Screaming Baidu,”. Why should businesses care about the different political and legal systems around the world? Governments are also motivated by economic factors to intervene in trade. Also known as theocratic law; this legal system is based on religious guidelines. At the same time, an agreement would be signed for the bank to sell back the assets to the company at a later date and at a higher price. (b) Gharar, the transaction involving fundamental uncertainty or speculation is prohibited. Legal Systems. This could lead to rioting and looting and general disorder, which disrupts the operations of a business. ...Many aspects affect the way international business is conducted. madison_mainman. (c) Interest on money is prohibited but allows management fees and services. For example, in Islamic law, business is directly impacted by the concept of interest. Although Japan is the world’s third larges economy, historically they have steered clear of international business. 4. Introduction to International Legal Environment 2. is based on traditions and precedence. Written contracts have a sanctity and legitimacy of their own. Under international law, there are three basic types of jurisdictional principles. (i) Common Law: It is based on traditions, past practices, and legal precedents set by the courts through interpretation of statutes, legal legislations, and past rulings. Whether the motive is economic (i.e., profit) or political (i.e., state control), “foreign firms and investors find that national and local rules and regulations are increasingly designed to favor domestic firms at their expense. For example China worked a serious restructuration on their politics and regulations with the international companies, which include better conditions of work for the local employees.
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