Legal Policies
Domestic and international laws play a big role in determining how a company can operate abroad. Domestic law includes both home-and host-country regulations on such matters as taxation, employment, and foreign-exchange transactions. British law, for example, determines how the U.S.-investor-owned Liverpool Football Club is taxed and which nationalities of people it employs in the U.K. Meanwhile, U.S. law determines how and when the earnings from the operation are taxed in the United States.
International law-in the from of legal agreements between countries-determines how earning are taxed by all jurisdictions. International law may also determine how (and whether) companies can operate in certain places. As we point out in our closing case, strong bilateral agreements and good legalese is an important part of the trade flow that allows unhindered movement of Dubai Ports World's ships across the seas. When transactions between countries involve disputes, such as whether a French football team must pay Nike for imported uniforms when it questions the quality, the contract usually specifies the country's law that will make the determination.
Finally, the ways in which laws are enforced also affect a firm's foreign operations. In the realm of trademarks, patented knowledge, and copyrights, most countries have joined in international treaties and enacted domestic laws dealing with violations. Many, however, do very little to enforce either the agreements or their own laws. This is why companies not only must understand agreements and laws but also must determine how fastidiously they're enforced in different countries.