The prudent global manager consults with legal services, both locally and at her or his headquarters, to comply with host-country regulations and to maintain cooper-
ative long-term relationships in the local area. If the manager waits until a problem arises, little legal recourse may be available outside of local interpretation and enforcement. Indeed, this has been the experience of many foreign managers in China, where financial and legal systems remain rudimentary in spite of attempts to show the world a capitalist face. Managers there often simply ignore their debts to foreign companies as they did under the old socialist system.59 The painful lesson to many foreign companies in China is that they are losing millions because Beijing often does not stand behind the commitments of its state-owned enterprises. Although stifi no guarantee, ways to minimize the risk of massive losses include making sure you get approval from related government offices (national, provincial, and local), making sure you are not going to run amok of long-term government goals, and getting loan guarantees from the headquarters of one of Beijings main banks.60 In addition, dont assume there will be legal recourse in China. Mr. Cheng, an American businessman who grew up in Hunan, was thrown in jail in China because a Chinese businessman changed his mind about investing in Mr. Chengs safety- helmet factory in Zhuhai. Only after two months and his sons visit to the U.S. Embassy in Beijing was Mr. Cheng freed. Mr. Cheng asks, [without even a triall how could the court render a decision just one hour after Mr. Liu and my general manager had signed a new contract?61 Some of the contributing factors, he has realized since then, were the personal connections-guanxi---involved and the fact that some courts offer their services to the business community for profit; in addition many judges get their jobs through nepotism rather than by virtue of a law degree.
While the regulatory environment for the international manager consists of the many local laws and the court systems in those countries in which he or she operates, certain other legal issues are covered by international law. International law is the law that governs relationships between sovereign countries, the basic units in the world political system.62 One such agreement, which regulates international business by spelling out the rights and obligations of the seller and the buyer, is the United Nations Convention on Contracts for the International Sale of Goods (CISG). This convention became law on January 1, 1988, and applies to contracts for the sale of goods between countries that have adopted the convention.
Generally speaking, the manager of the foreign subsidiary or foreign operating division will comply with the host countrys legal system. Such systems, derived from common law, civil law, or Muslim law, are a reflection of the countrys culture, religion, and traditions. Under common law, used in the United States and 26 other countries of English origin or influence, past court decisions act as precedents to the interpretation of the law and to common custom. Civil law is based on a coniprehensive set of laws organized into a code. Interpretation of these laws is based on reference to codes and statutes. About 70 countries, predominantly in Europe (e.g., France and Germany), are ruled by civil law, as is Japan. In Islamic countries, such as Saudi Arabia, the dominant legal system is Islamic law; based on religious beliefs, it dominates all aspects of life. Islamic law is followed in approximately 27 countries and combines, in varying degrees, civil, common, and indigenous law.
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