Course Syllabus

230syl.fall21.docx

 

Syllabus dated August 15, 2021

 

 ILO L230 

International Business Transactions

Fall 2021

Prof. Joel P. Trachtman                                                              

 Syllabus

 

This course provides an introduction to the legal context of international business. It includes the private international law issues focusing on which law applies to an international business transaction, which court will hear a case, and where that court’s judgment will be enforceable, and the transactional issues of payment for goods using letters of credit or blockchain and financing of foreign direct investment through project financing, as well as the public law issues of anti-bribery law, international taxation, intellectual property protection, trade law for market access, and international protection of foreign direct investment. This course focuses on issues of international business strategy in response to this legal context. 

This course meets Mondays and Wednesdays 7:35-8:50 am.  Prompt attendance is required, Notify me in advance if you will be late or absent.   

Office Hours

Sign up for office hours at bit.ly/trachtmanofficehours.  If the times are inconvenient, send me an email to schedule another time.  All students are required to meet with me for an introductory session no later than September 30. 

Evaluation:   Evaluation will be as follows:

  • Class participation and “Were you really actively reading?” (WYRAR) questions—20%.  Answers to WYRAR questions must be posted on Canvas prior to the beginning of class on the due date specified in order to receive credit.  These are not group projects:  while you may discuss issues with others, you may not copy their work. 
  • Two short team projects—30% (15% each), set forth at the end of this syllabus. I will establish groups for these projects.
  • Final examination—50%.   This will be a 3‑hour, self-scheduled open-book and open-laptop exam, covering the entire semester’s work. 

Course Outline and Readings:

Part A:  Private International Law and International Business Regulation

  1. September 7 [this class will be provided as a recorded lecture, because I will not be able to attend on September 7 due to religious observance]. Introduction to the Course:  The Legal Context of International Business. 
    1. Goal: Understand the overall contents of the course, and the role of law in business strategy. 
    2. Readings:
      1. Sean Silverthorne, Using the Law to Strategic Advantage (2005).
      2. Paul Breitbarth, Schrems II May Change Everything, October 5, 2020.
    3. Issues:
      1. Navigating legal rules and incorporating them in valuation and business strategy
      2. Public law and private law
      3. Contracts as private law
      4. Law and negotiation
      5. The role and professional responsibility of legal advisors
  2. September 8. Fundamentals of Legal Analysis and Argumentation. 
      1. Goal: Develop a practical taxonomy and reservoir of techniques of legal argument and discourse. 
      2. Readings:
        1. Tools, 1-65
      3. Issues:
        1. Substantive rules and procedural rules
        2. Jurisdiction
        3. Choice of law
        4. Legal analysis
        5. Working with texts
  3. September 13. Choice of Law in Contracts.
        1. WYRAR questions due before class.
        2. Goal: Understand the role and dynamics of choice of law in contracts.    
        3. Readings:
            1. Trachtman, Tools of Argument, 165–186.
            2. Hay, Advanced Introduction to Private International Law and Procedure, 1–14.
            3. Philip Wood, Ten Points for Choosing the Governing Law of an International Business Contract, January 2020.
            4. UCC 1-301.
            5. Restatement of the Laws (Second) Conflicts, section 188.
            6. “Rome I Regulation, Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008.
        4. Issues:
          1. The importance of choice of law as context for interpretation and application of contractual terms.
          2. Use of choice of law clauses.
          3. Determination in absence of choice.

Part B:  International Sales Contracts 

  1. September 15. International Sales Contracts Formation
    1. Goal: Know how contracts are formed, how to identify what law applies to the question of formation of contracts, how different applicable law may result in different substantive outcomes.
    2. Readings
        1. Hay, Advanced Introduction to Private International Law and Procedure, 53–80, 95–98.
        2. Folsom, Gordon & Spanogle, International Business Transactions, pp 58-73 (2012) (CANVAS)
        3. U.C.C., article 2, including especially 2-207.
    3. Topics:
      1. Analyze the Universal versus Euro case under “fact pattern A.”
      2. Choice of law in contract
      3. Formation of contract
      4. Battle of the forms
  2. September 20. Role of the UNCISG in International Sale of Goods
      1. WYRAR questions due before class.
      2. Goal: Understand the role and limits of the UNCISG in harmonizing sales law across countries. 
      3. Readings:
        1. Orica Australia Pty Ltd. V. Aston Evaporative Servs., LLC, Civil Action No. 14-cv-0412-WJM-CBS (D. Colo. Jul. 28, 2015).
        2. UN Convention on Contracts for the International Sale of Goods. (permalink)
        3. Pace Law School, CISG Database Guide for Managers and Counsel, prepared by John P. McMahon (May 2010).
      4. Topics
        1. Analyze the Universal versus Euro case under “fact pattern B.”
        2. What is the UNCISG
        3. Is it law
        4. How does it relate to national law
        5. When does it apply
        6. What does it say about the battle of the forms
  3. September 22. International Payment: Letters of Credit and Blockchain
        1. WYRAR questions due before class.
        2. Goal: Know the structure of letters of credit and the allocation of responsibilities to account parties, issuers, beneficiaries, confirming banks, and advising banks. Know the role of the Uniform Customs and Practices for Documentary Credits. Compare the legal context of blockchain devices for payment.
        3. Readings:
          1. United Bank v. Duke Sporting Goods, 41 N.Y.2d 254 (N.Y. 1976), 392 N.Y.S.2d 265 (1976)
          2. Jacqueline D. Lipton, “Documentary Credit Law and Practice in the Global Information Age,” Fordham International Law Journal 22, no. 5 (1998): 1972–1990. (permalink)
          3. Cognizant, Blockchain for Trade Finance: Payment Method Automation (Part 2) (Teaneck, NJ: Cognizant, October 2017).
          4. Resources
            1. C.C., article 5.
            2. Uniform Customs and Practice for Documentary Credits (UCP) 500. (on CANVAS) (Note that a more recent version of the UCP, UCP 600, has been issued. We will focus on UCP 500.)
          5. Topics:
            1. Structure of letter of credit—players and roles; risk allocation
            2. Role of the bill of lading in trade letters of credit
            3. The strict compliance rule and the role of issuers
            4. Dangers of letters of credit to account parties and beneficiaries
            5. Identify the ways in which blockchain can be used to substitute for paper or other electronic means of communication regarding letters of credit.
            6. What advantages would blockchain have?
            7. What legal changes would be necessary to address to move to use of blockchain? What issues do you see if different countries have different legal rules in this area?
            8. What practical changes would be necessary?
            9. Is the move to blockchain likely to be worthwhile?
            10. Strategic aspects of use of letters of credit to pay for goods or services; discuss strategic aspects of revising contracts and law to accommodate or take advantage of technological innovation.
  4. September 27. Force Majeure: Incomplete Contracts
            1. Goal: Consider the role of force majeure in allocating responsibility in contracts.
            2. Readings
              1. Toyomenka Pacific Petroleum, Inc. v. Hess Oil Virgin Islands Corp., 771 F.Supp. 63 (S.D.N.Y. 1991).
              2. Travis S. Hunter and Renée Mosley Delcollo, Is the Force Majeure With You?, July 6, 2020.
            3. Topics
              1. Allocating risks
              2. Negotiating and drafting force majeure clauses
              3. How would you clarify the allocation of responsibility in light of the Toyomenka court’s decision?

Part C.  Dispute Settlement

  1. September 29. Personal Jurisdiction and Product Liability
    1. WYRAR questions due before class.
    2. Goal: Understand the relationship between procedural rules and substantive outcomes. Understand the relationship between personal jurisdiction and choice of forum, including choice of forum clauses and forum non conveniens.
    3. Readings
      1. McIntyre Machinery v. Nicastro, 564 U.S. 873 (2011)—read only the opinion of Justice Kennedy (pp. 1–12).
      2. Jacques Delisle and Elizabeth Trujillo, “Consumer Protection in Transnational Contexts,” American Journal of Comparative Law 58 (2010): 135; read pp. 135-150, 160-164. (permalink)
      3. Laurie Clark, WhatsApp Ties NSO Group’s Hacking to America in New Court Evidence, NS Tech, April 24, 2020.
      4. Hay, Advanced Introduction to Private International Law and Procedure, 23–32.
      5. Tools, 27–46.
    4. Topics:
      1. Procedure and substance
      2. Personal jurisdiction
      3. Forum non conveniens
      4. Relation to choice of law
      5. What is jurisdiction? Jurisdiction to legislate, jurisdiction to adjudicate, and jurisdiction to enforce
      6. What is personal jurisdiction, and how can foreign persons be sued in the U.S.
      7. Are foreign persons that do business in the U.S. on the internet subject to lawsuits in the U.S.
      8. Suppose that you were a resident of Argentina and were harmed by an Argentinean subsidiary of Daimler-Benz AG, a German company. Assume that Daimler-Benz AG does not engage in any activities in the United States, other than owning a variety of subsidiaries. Can you sue Daimler-Benz AG in the United States?
      9. Strategic implications—discuss how you would construct a worldwide strategic plan for dealing with liabilities based on lawsuits if you were establishing a new e-cigarette company based in China
  2. October 4. Planning for Dispute Settlement: Choice of Law and Choice of Forum Clauses in International Contracts
      1. Goal: Understand the relationship between dispute settlement and contract reliability. Know why and how businesses seek to control the law applicable to their contracts or other aspects of their relationships and the court or other forum that will apply the law.
      2. Readings:
        1. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972).
        2. Finance One Public Company Limited v. Lehman Brothers Special Financing Inc., 414 F.3d 325 (2d Cir. 2005).
        3. Hay, Advanced Introduction to Private International Law and Procedure, 17–22.
        4. Trachtman, Tools of Argument, 47–65.
      3. U.C.C., article 1, § 1-301.
      4. Topics:
        1. Muddling through globalization under Bremen v. Zapata—private choice in the absence of governmental action to harmonize or specify applicable law and forum
        2. Components of dispute settlement
        3. Arbitration versus court litigation
        4. Effectiveness and scope of choice of law clauses and choice of forum clauses
        5. What is dispute settlement—informal and formal
        6. Role and scope of choice of law in international contracting
        7. Private law versus public law/ “mandatory law”
        8. How to choose applicable law
        9. The U.S. approach to choice of law in contract
        10. How to negotiate a choice of law clause
        11. BYD Company is negotiating a contract with Ford Motor Company to have Ford Motor Company act as exclusive agent to sell BYD products in the United States. How would you negotiate and draft a choice of forum and choice of law clause?
        12. How do different types of companies, in different types of business, with different liability profiles, construct a global plan to minimize their risk of litigation loss? Compare Web-based companies, banks, and nuclear power plant companies.
  3. October 6. Holding Foreign States Accountable in Business Transactions: Sovereign Immunity, Act-of-State Doctrine, and Investor-State Dispute Settlement
        1. WYRAR questions due before class.
        2. Goal: Understand history and scope of sovereign immunity and the act-of-state doctrine, including which entities and activities are covered and what types of immunity or defenses can be waived. Focus on statutory interpretation and construction. Understand international dispute resolution in domestic courts.
        3. Readings
          1. OBB Personenverkehr AG v. Sachs, 577 U.S. __ (2015). What are the implications of this decision for US companies doing business with foreign states or state-owned enterprises?
          2. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964). Make sure you understand what Banco Nacional de Cuba was claiming. Did the court apply Cuban law or US law? What role did international law play in this decision?
          3. Tools, 127–139.
          4. U.S. Foreign Sovereign Immunities Act.
        4. Topics:
          1. Is it possible to sue a state outside of its territory; under what circumstances?
          2. What is the commercial activity exception to sovereign immunity and when does it apply?
          3. Can a state waive its sovereign immunity in a contract?
          4. Can the acts of a state in its sovereign capacity be evaluated in foreign courts?
          5. Suing foreign governments—causes of action under international law
          6. Personal jurisdiction and sovereign immunity
          7. Immunity from execution
          8. Act-of-state doctrine and choice of law in expropriation
          9. Can foreign sovereigns be reliable partners in contracts? How?
          10. Is it more costly to deal with foreign sovereigns? Under what circumstances?
  4. October 13. Employee Protection in International Manufacturing Transactions: Corporate Social Responsibility
          1. Goal: Understand the legal dimensions of CSR; compare with product liability for consumers.
          2. Readings:
              1. Christopher Burkett & Jennifer Bernardo, The Rana Plaza Class Action – Is Canada the Next Frontier for Global Human Rights Litigation?, Canadian Labor and Employment Law, November 23, 2015.
              2. Valentin Jentsch, Corporate Social Responsibility and the Law: International Standards, Regulatory Theory and the Swiss Responsible Business Initiative, EUI Working Paper MWP 2018/05.
              3. Howard M. Erichson, The Chevron-Ecuador Dispute, Forum Non Conveniens, and the Problem of Ex Ante Inadequacy, 1 Stan. J. Complex Litig. 417 (2013).
            2. Topics:
            3. Should foreign companies have greater responsibilities to workers than local companies?
            4. Should there be special responsibility owed to workers by purchasers of goods, as opposed to employers of those workers? Why? 
            5. Why should the Rana Plaza case be heard in Canadian courts, rather than Bangladeshi ones?
            6. What is the role of forum non conveniens?
  5. October 18. International dispute settlement: arbitration and arbitration agreements
            1. Goal: Understand the utility, role, and mechanism of arbitration, and the enforceability of arbitration agreements, in international dispute settlement. 
            2. Readings:
              1. John Allen Chalk, Arbitration (2018)
              2. Mitsubishi Motors v. Soler Chrysler Plymouth, 473 U.S. 614 (1985).
            3. Topics:
              1. Is it possible to engage in dispute settlement without using courts; to what extent
              2. What is international arbitration
              3. When does it apply
              4. What is the role of arbitration agreements
              5. Where can arbitral awards be enforced

 

  1. October 20. Midterm Review

 

Part D. Public Law in International Business:  Regulation

 

  1. October 25. Bribery in International Business
    1. WYRAR questions due before class.
    2. Goal: Understand the rationale for foreign antibribery law and the elements of a violation of the US Foreign Corrupt Practices Act, as well as the latter’s relationship to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Understand legal analysis of violation of law through analysis of parameters of violation and evaluation of facts against parameters.
    3. Preparation:
      1. Readings
        1. US Foreign Corrupt Practices Act. What are the elements of a violation of the FCPA? What are the defenses?
        2. US Department of Justice and US Securities and Exchange Commission, FCPA: A Resource Guide to the Foreign Corrupt Practices Act (Washington, DC: GPO, 2012), 1–35. (permalink) Make sure you understand the hypotheticals at pages 12, 17–18, and 26.
        3. Trachtman, Tools of Argument, 67–105.
        4. OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
      2. Topics:
        1. Legal analysis and synthesis
        2. Working with statutes, treaties, and contracts
        3. What is a “bribe”? What are the policy implications of bribery? Distinguish domestic from international bribery.
        4. US Foreign Corrupt Practices Act
        5. OECD Anti-Bribery Convention
        6. Designing and implementing compliance programs
        7. Is a foreign subsidiary of a US company covered by the FCPA?
        8. Are bribes to doctors to prescribe the medicines you are trying to sell covered?
        9. When is it illegal to hire the child of a government official?
        10. If you were CEO of a US-based company seeking to make an investment in a foreign country and wished to engage a consultant to assist with negotiations with the host government, what would you do to protect your company and yourself from liability under the FCPA?
        11. Discuss strategic implications of compliance with anti-bribery law.
  2. October 27. Trade, Tariffs, Nontariff Barriers, and Business Strategy
        1. Goal: Understand national tariff and nontariff barriers and the role of free trade agreements and the World Trade Organization in specifying limits on tariffs and nontariff barriers. Understand reliability of commitments and international marketing strategy.
        2. Readings:
          1. Understanding the WTO. Read “Basics,” skimming “The GATT Years.” Read “The Agreements” and “Settling Disputes.”
        3. Topics:
          1. Tariff negotiations inside the WTO and free trade agreements
          2. Discrimination—national treatment and most favored nation treatment
          3. Trade and environmental protection
          4. Dumping and international pricing strategies
          5. Subsidies and countervailing duties
          6. How does international trade law relate to private international law?
          7. How should international sales agreements or international service supply agreements or international investment agreements take account of trade law issues?
          8. How does a business engage in planning for foreign market access?
          9. How do import-competing businesses use national trade law to foreclose their markets to foreign competitors?
          10. How do you engage in due diligence about market access in a foreign country?
          11. How can you assess the reliability of market access?
  3. November 1. International Taxation
          1. WYRAR questions due before class.
          2. Goal: Understand the business context of international taxation—application of home-country and host-country tax law to business and capital income and application of bilateral tax treaties, avoiding double taxation.
          3. Readings:
            1. Congressional Research Service, Issues in International Corporate Taxation: the 2017 Revision, April 23, 2020. 
            2. OECD Model Tax Convention 2017. Click “read online”. Read pp. 12–14; articles 4, 5, 7, and 10. (permalink).
          4. Topics:
            1. Tax jurisdiction and neutrality
            2. Credits and exclusions
            3. Withholding taxes
            4. The role of tax treaties
            5. Transfer pricing and tax havens
  4. November 3. International Taxation, continued: Transfer Pricing, Tax Havens, and Digital Service Taxes
            1. Analyze governmental responses to tax avoidance structuring and the growing digital economy.
            2. Readings:
              1. Review readings from last session.
              2. Congressional Research Service, Digital Services Taxes: Policy and Economic Analysis, 1-15 (2019).
              3. Hogan Lovells, Is the DST Compatible with the UK’s International Obligations?, November 11, 2019.
            3. Topics:
              1. You are tasked with developing a worldwide system of coordination of taxation so that businesses are taxed only once, but no less than once, and the tax base is divided fairly among countries. How would you respond?
              2. If you were establishing an internet-based commerce business, selling goods, or services, to customers in various countries through an online platform, what would be your tax strategy? How would you develop it?
              3. How does tax interact with managerial concerns? With avoidance of exposure to liability for, for example, defective products?
  5. November 15. Protecting Intellectual Property
              1. Goal: Focusing on patents, understand national nature of intellectual property protection, variations of scope of intellectual property protection, the role of international treaties in coordinating intellectual property protection, and how to negotiate and structure licensing agreements. Understand competition law constraints on contents of licensing agreements—role of public law in constraining business.
              2. Readings
                  1. L.T.C. Harms, A Casebook on the Enforcement of Intellectual Property Rights (2018), chapters 1, 10.
                  2. Milan Kapadia, How to File an International Patent Application (2007).
                  3. WTO TRIPS Agreement.
              3. Topics:
                1. Patent, trademark, and copyright—protection for inventions, brands, and creative works
                2. International coordination
                3. International minimum standards under the WTO TRIPS Agreement
                4. Structure of intellectual property license agreements
                5. Competition law issues in intellectual property license agreements
                6. For a pharmaceutical, software, or other intellectual property–based business, what is the best method for establishing a strategy for exploiting your intellectual property worldwide?
  6. November 17. Licensing Intellectual Property: Intellectual Property and Competition Law Issues
                1. Goal: Understand the business choices in connection with an intellectual property license, and the public law constraints in intellectual property law and competition law. 
                2. Readings:
                    1. OECD Secretariat, Licensing of IP Rights and Competition Law, June 6, 2019.
                    2. Donna Bobrowitz, A Checklist for Negotiating License Agreements (2007).
                    3. EU Commission Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements
                3. Topics:
                  1. What are the critical issues in intellectual property licensing from a contractual, and from a regulatory, standpoint?
                  2. How does competition law constrain intellectual property licensing?
  7. November 22. Global Issues in Competition Law
                  1. WYRAR questions due before class.
                  2. Goal: Examine the scope of prescriptive jurisdiction in competition law, and how it affects global enterprise. 
                  3. Readings:
                    1. Eleanor Fox, Extraterritorial Jurisdiction, Antitrust, and the EU Intel Case, 42 Fordham International Law Journal 981 (2019).
                    2. Foo Yun Chee, EU Throws New Rule Book at Google, Reuters, July 1, 2020.
                    3. William Dodge, Jurisdictional Reasonableness Under Customary International Law: the Restatement (Fourth) of U.S. Foreign Relations Law, October 31, 2019.
                  4. Topics:
                    1. Reasons and formal basis for applying national competition law to foreign operations.
                    2. Different competition law requirements and different business models.
  8. November 24. International Privacy Regulation
                    1. Goal: Examine the scope of application of national or regional privacy regulation, and the effects of regulation on global business. 
                    2. Readings:
                      1. EU, What Is the European General Data Privacy Regulation?
                      2. Anupam Chander, Margot Kaminski, and William McGeveran, Catalyzing Privacy Law (2019).
                      3. Bradley Brooker and Sujit Raman, The Need for Clarity After Schrems II, Lawfare Blog, September 29, 2020.
                    3. Topics:
                      1. Increasing role of privacy regulation, and data nationalism.
                      2. Reasons and formal basis for applying national privacy law to foreign operations.

Part E:  Foreign Investment

22. November 29. International Investment and Joint Venture Contracts

    1. Goal: Analyze the components of an international investment or joint venture agreement. 
    2. Readings:
      1. Michael Hooton, Structuring and Negotiating International Joint Ventures, 27 Creighton Law Review 1013 (1994).
      2. UNCTAD International Trade Centre, ITC Contractual Joint Venture Model Agreement (Two Parties Only), pp. 63-78.
    3. Topics:
      1. Foreign investment contracts
      2. Joint-venture agreements and public-private partnerships
      3. Control aspects of joint ventures
      4. Financial aspects of joint ventures
      5. Taxonomy of contractual provisions in joint venture agreements

23.  December 1. International Investment Risk and Protection

      1. WYRAR questions due before class.
      2. Goal: Review risks of foreign investment and structure of foreign investment contracts, as well as the role of customary international law and international investment treaties in protecting foreign investment.
      3. Readings:
        1. Prabhash Ranjan, Harsha Vardhana Singh, Kevin James, and Ramandeep Singh, “India’s Model Bilateral Investment Treaty: Is India Too Risk Averse?” (Brookings India IMPACT Series No. 082018, New Delhi, August 2018).
        2. Model Text for Indian Bilateral Investment Treaty.
      4. Topics:
        1. Bilateral investment treaty protections
        2. Right to regulate and expropriation, fair and equitable treatment
        3. What are the concerns about the right to regulate and constraints on national autonomy in connection with bilateral investment treaties and investor-state dispute settlement?
        4. How did the Indian model bilateral investment treaty attempt to address these concerns?
        5. What are the countervailing concerns of foreign investors?
        6. How does a business engage in planning for foreign investment? What are the risks, and how can they be addressed through due diligence and through host-country law and international law?

24. December 6. Project Finance

          1. WYRAR questions due before class.
          2. Goal: Understand the structure and function, and contractual articulation, of project finance.
          3. Readings:
              1. Tero Erme, “International Project Financing as Contractual Risk Minimization Arrangements” (paper, University of Helsinki, 2010), 283–293, 296–331, 351–363.
          4. Topics:
            1. Risk and responsibility allocation in project finance.
            2. Role of contractual provisions.
            3. Role of collateral provisions.

Part F:  Wrap-Up

25.  December 8. Application to Web-Based Businesses: Digital Commerce, Personal Jurisdiction, Taxation, Applicable Law, and Enforcement of Judgments.

    1. Goal: Examine the application of concepts learned in previous sessions to Web-based businesses—how they are taxed, what their liability profile is, which country’s regulation applies to the business, etc.
    2. Readings
      1. Hay, Advanced Introduction to Private International Law and Procedure, 103–138.
      2. Cedric Ryngaert, “The Concept of Jurisdiction in International Law” (paper, Utrecht, The Netherlands, 2015).
      3. OECD, Addressing the Tax Challenges of the Digital Economy (OECD/G20 Base Erosion and Profit Shifting Project, 2014). Read “Executive Summary” only. (permalink)
    3. Topics:
      1. How does digital commerce affect settled concepts of personal jurisdiction, taxation, applicable law and enforcement of judgments?
  2. December 13. Review

* * *

Team Project 1—Due October 20.

  1. Answer both questions set out below.
  2. On August 1, 2022, representatives of ABC Equipment Inc. (ABC), a small Texas-incorporated firm with its headquarters in Houston, went to a trade fair in New York, where they met representatives of China National Pipe Corporation (CNPC), a large Chinese company. (These are fictional companies.) ABC, which has never engaged in any international business transactions before, is interested in CNPC’s pipe insulation for use in oil refineries. CNPC gave ABC a price list showing CNPC’s Standard Pipe Insulation Product 100A priced at $100 per foot. CNPC is new to the US market and has not done business in the United States before, but it has a good track record in China. On August 15, 2022, ABC emailed CNPC as an attachment a signed purchase order form, stating, “We order today 5,000 feet of Standard Pipe Insulation Product 100A for $500,000, CIF Houston, to be delivered no later than January 15, 2023.” CNPC immediately responded by email with an attached order acknowledgment form, stating acceptance of the order, specifying Chinese governing law, stating that the goods are sold without warranty, and requiring that ABC open and notify CNPC no later than September 1 of a satisfactory letter of credit covering the full amount of the order, plus charges of $20,000 for freight and $10,000 for insurance.
    1. After this exchange, do the parties have a binding contract? If so, what are its terms? What suggestions would you make to ABC about the legal aspects of this exchange or of these arrangements more generally?
    2. If there is a problem with the pipe insulation sold by CNPC, and assuming without investigation that ABC may have a basis for a legal claim under both Chinese and US law against CNPC, will ABC be able to sue CNPC in US courts? What additional facts will you require?

Team Project 2—Due December 7.

This is a fictional hypothetical.  In 2019, the hypothetical U.S. oil company, Permapetrol, Inc., acting through its Nevezuelan subsidiary, Neveland S.A., entered into a build-own-transfer agreement (the “BOT Agreement”) to explore and drill for oil in the Cretacio Basin of the hypothetical country of Nevezuela.  The BOT Agreement provided that Neveland would have the contractual right to extract any oil discovered in the designated area for a period of five years.  At the time the BOT Agreement was entered into, Permapetrol estimated that it could extract 95% of all available reserves within that period.  Neveland would have the right to sell this oil.  At the time the BOT Agreement was entered into, the standard tax rate in Nevezuela, applicable to all enterprises including Neveland, was 10% of net income.  Nevezuela also imposed a standard withholding tax of 30% on dividends, reduced by the Nevezuelan tax treaty with the U.S. to 5%.  In early 2020, after a change in government in Nevezuela, the Nevezuelan government took the following actions: 

 

  1. It imposed a special hydrocarbons tax on all petroleum activities, equal to 25% of net income. This is in addition to the standard tax rate of 10%. 
  2. It passed the Cretacio Environmental Protection Law, which provides that mineral extraction in the Cretacio Basin cannot exceed a pace that would result in removal of more than 5% of known reserves in any single year. Under this new law, all oil extracted must be sold to the Nevezuelan government. 
  3. It terminated its tax treaty with the U.S., and its withholding tax on dividends paid to U.S. companies reverted to 30%.

 

Nevezuela and the U.S. are party to a Bilateral Investment Treaty, the terms of which are substantially the same as the 2012 US model bilateral investment treaty. 

 

Accessibility
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Diversity
Tufts University values the diversity of our students, staff, and faculty; recognizing the important contribution each student makes to our unique community.  It is my intent that students from all diverse backgrounds and perspectives be well served by this course, that students’ learning needs be addressed both in and out of class, and that the diversity that students bring to this class be viewed as a resource, strength and benefit. It is my intent to present materials and activities that are respectful of diversity: gender, sexuality, disability, age, socioeconomic status, ethnicity, race, and culture. Please let me know ways to improve the effectiveness of the course for you personally or for other students or student groups. In addition, if any of our class meetings conflict with your religious events, please let me know so that we can make arrangements for you.