Legal Environment: Legal Systems (Common Law, Civil Law, Theocratic Law), Legal Differences, Anti-Dumping Law and Import License

22/11/2021 1 By indiafreenotes

Businesses are affected by legal environments of countries in many ways. Legal environments are not just based on different laws and regulations concerning businesses, these are also defined by the factors like rule of law, access to legal systems by foreigners, litigations systems etc. Variations in legal environments, rule of law, laws, and legal systems affect foreign business firms in a number or areas.

Key areas of business that are affected by legal environments are listed below:

(a) Laws concerning employment and labour affect managing of workforce in international markets.

(b) Different laws in foreign countries regulate financing of operations by foreigners. In some countries foreign firms are restricted access to local deposits/funds.

(c) Various countries around the world have different laws concerning marketing of products, especially food products, pharmaceuticals, hazardous materials and strategic products to a nation.

(d) Countries also control and regulate developing and utilising of technologies through various laws and regulations.

(e) Many countries also have different laws and regulations that affect ownership of businesses by foreigners.

(f) Countries also regulate /restrict remittances to foreign countries and repatriation of profits.

(g) Some countries regulate closing of operations and in some countries, businesses are not allowed to close shop especially when they have sold products that have guarantees and warranties from the foreign firms.

(h) Various countries around the world have implemented different trade and investment regulations.

(i) Countries also have their own taxation requirements, systems and laws.

(j) Countries also differ on the accounting reporting requirements from various categories of firms.

(k) Countries around the world have also actively implemented environmental regulations that affect businesses.

Legal Systems (Common Law, Civil Law, Theocratic Law)

Common Law

The basis for common law is tradition, past practices, and legal precedents set by the courts through interpretations of statutes, legal legislation, and past rulings. Common law seeks “interpretation through the past decisions of higher courts which interpret the same statutes or apply established and customary principles of law to a similar set of facts”.

Common law refers to law developed by judges through decisions of courts and similar tribunals (called case law), rather than through legislative statutes or executive action, and to corresponding legal systems that rely on precedential case law.

The body of precedent is called “common law” and it binds future decisions. In future cases, when parties disagree on what the law is, an idealized common law court looks to past precedential decisions of relevant courts. If a similar dispute has been resolved in the past, the court is bound to follow the reasoning used in the prior decision (this principle is known as stare decisis). If however, the court finds that the current dispute is fundamentally distinct from all previous cases (called a “matter of first impression”), judges have the authority and duty to make law by creating precedent. Thereafter, the new decision becomes precedent, and will bind future courts.

Civil Law

Civil law is based on an explicit written codification of what is permissible, and what is not. Laws are documented in criminal, civil and commercial codes which can be used to settle disputes. The precise wording of legal codes means the system is less adversarial than common law.

Theocratic Law

This system is based on religious teachings, as they are enshrined in the religious scriptures. Islamic law, Shari at, is the most widely practiced religious legal system in today’s world. It is based on morality rather than commercial requirement of human behaviour in all aspects of a person’s self and social life. Islamic law is based on the Holy book of Islam, the Quran and on interpretation of the practices and sayings of Prophet Mohammad.

It also follows the writings of scholars and teachers of Islamic scholarship, who derived rules by analogy from the principles established in the holy Quran. The basic foundations of Islamic law remain unaltered even after many centuries because they have been derived from the holy book and are acceptable to all devout Muslims.

Even though Islamic jurists and scholars constantly debate the application of Islamic law to the modern world, their debates are only scholastic deliberations. However, to keep pace with the advancement of life, many Muslim countries have a blend of Common law and Civil law system along with the Sharia law.

Legal Differences

  • Local domestic laws. These are all different. The only way to find a route through the legal maze in overseas markets is to use experts on the separate legal systems and laws pertaining in each market targeted
  • International law. There are a number of international laws that can affect the organisation’s activity. Some are international laws covering piracy and hijacking, others are more international conventions and agreements and cover items such as the International Monetary Fund (IMF) and World Trade Organisation (WTO) treaties, patents and trademarks legislation and harmonisation of legal systems within regional economic groupings, e.g. the European Union.
  • Domestic laws in the home country. The organisation’s domestic (home market) legal system is important for two reasons. First, there are often export controls which limit the free export of certain goods and services to particular marketplaces, and second, there is the duty of the organisation to act and abide by its national laws in all its activities, whether domestic or international.

Anti-Dumping Law and Import License

Anti-dumping duty is a measure by the government to rectify the situation arising out of dumping. It is an instrument to restore fair competition. Despite being perceived as a protectionist measure, anti-dumping is essentially meant to provide relief to the domestic industries from the harm caused by dumping. These measures are meant to prevent foreign exporters from using predatory pricing to undermine domestic businesses. In furtherance of the same, the governments levy anti-dumping duties on the businesses not exceeding the margin of dumping in reference to any commodity.

It has been debated whether this practice is right or wrong over the years. The World Trade Centre does not take the high ground in declaring the validity of this practice but instead sets out the dos and don’ts of anti-dumping. Article VI of General Agreement on Tariffs and Trade, 1994 (hereinafter “GATT”) lays down the rules governing the practice of anti-dumping.

Anti-dumping duty is a measure by the government to rectify the situation arising out of dumping. It is an instrument to restore fair competition. Despite being perceived as a protectionist measure, anti-dumping is essentially meant to provide relief to the domestic industries from the harm caused by dumping. These measures are meant to prevent foreign exporters from using predatory pricing to undermine domestic businesses. In furtherance of the same, the governments levy anti-dumping duties on the businesses not exceeding the margin of dumping in reference to any commodity.

It has been debated whether this practice is right or wrong over the years. The World Trade Centre does not take the high ground in declaring the validity of this practice but instead sets out the dos and don’ts of anti-dumping. Article VI of General Agreement on Tariffs and Trade, 1994 (hereinafter “GATT”) lays down the rules governing the practice of anti-dumping.

Different Laws:

Customs Tariff Act, 1975- Sec 9A, 9B, 9C (as amended in 1995)

Customs Tariff (Identification, Assessment, and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995

Significance of Anti-Dumping Laws

The anti-dumping laws and regulations are meant to further the idea of fair trade between buyers and sellers in the international market. While the freedom of trade is essential, it is also important that the countries protect domestic industries from harm caused by discriminatory trade practices. Discriminatory means under the garb of free trade can lead to exploitation and can cause harm to develop economies.

The practice of dumping is not wrong per se depending upon the market conditions and the freedom of traders to fix the desired price. This is why WTO does not condemn dumping or anti-dumping. The practice of dumping might not harm the domestic industries in all cases and hence the domestic legislations allow the country to impose anti-dumping duties only when a causal link is established between the dumping practices and the injury caused.