When entering foreign markets, companies face a number of differences that quickly become apparent and others that are not so obvious. Generally, cultural and linguistic differences are easily recognized, but legal differences aren’t so obvious. Law in the United States derives from English law, which is partially derived from custom and judicial precedent rather than statutes. Germany and France have different systems of law that are based on civil law, or Roman law. Civil law’s most obvious feature is its reliance on legal parameters that are defined by codes. Generally, civil law contracts are much shorter and simpler than common law contracts. In Arabic countries another type of legal system is practiced, theocratic or Sharia Law. Under theocratic law, a religious leader serves as a civil ruler and is regarded as being directed by a divine power. Under theocratic law, all laws must be based on religious teachings of the ruling religion. Among all of these various types of legal systems, treatment of contracts, copyrights and other legal matters can differ significantly.
Bribery in International Business
In international business, bribery is among the most controversial and misunderstood of practices. Although payments and gifts to government and business leaders is encouraged in some countries, the act is heavily punishable if a conviction results in other countries. Usually bribes or gifts are used to encourage awarding of public development contracts, preferential treatment, and positive inspection reports. However, these payments are frequently a form of bribery that encourage unethical practices, distrust in government, inefficiencies, and waste.
Foreign Corrupt Practices Act
In the United States, businesses must adhere to the Foreign Corrupt Practices Act (FCPA). This act makes it illegal for businesses to make payments in exchange for preferred governmental treatment such as moving products through customs. However, certain types of payment are still legal, such as foreign aid payments from one country to another that are used to gain certain political favors.
The FCPA also provides the U.S. government power to probe and fine foreign businesses involved in bribery when they use their U.S.-based subsidiaries and banking institutions. Since its founding, the FCPA has had an increasing case load. Some companies, fearing a probe and fines, have even reported their own illicit activities to the FCPA.
An International organization that closely monitors corruption in international trade is the Organization for Economic Co-Operation and Development (OECD). Similar to the FCPA, this organization seeks to fight bribery of foreign officials among its member nations.