Business across borders: The importance of international business law
International business is an essential part of a growing global economy. The integration of national economies into a global economic system – otherwise known as globalisation – has been one of the most important developments over the last century, prompting an extraordinary swell in international trade, commerce and production.
This connectedness of markets and peoples has produced global value chains that account for a sizable share of trade growth, global gross domestic product and employment in both developed and developing countries.
As such, international business has become a vital condition for economic and social development – especially for low-income countries. However, the ways in which this business is conducted can have a significant impact on the fortunes and futures of a nation.
Why do we need international business laws?
International business law comprises the various legal aspects of conducting business across borders, including business transactions, entity formation and funding, intellectual property protection, regulatory compliance, dispute resolution and international trade policy. They are put in place to regulate the business operations of a company and their supply chain across different nations.
Upholding international laws is meant to protect against exploitation of a thriving economy or the oppression of a more vulnerable nation. Consequently, the impact of law-making must be carefully considered; the recent political crisis sparked by the Prime Minister’s proposed changes to the negotiated Northern Ireland Protocol is a prime example of this.
Trade or commerce is often at the centrepoint of these considerations, as the economic impact of a certain policy or transaction can be widespread. Multiple jurisdictions must be consulted. Trade agreements provide rules that assimilate and support fair and lawful trade between respective countries, and – ultimately – make business transactions easier.
International commercial law consists of a body of legal rules, conventions, treaties, domestic legislation and commercial customs that governs international business transactions. These laws facilitate mutually beneficial cooperation between respective countries, spanning economics, licensing, tariffs and taxes, and many other elements of business.
Why is international trade so important?
On a business scale, international trade is essential for increasing revenue, broadening a customer base and ensuring a longer product lifespan. Companies can also benefit from currency exchange fluctuations and gain access to a wider pool of potential employees. The majority of Fortune 500 corporations operate locations overseas, while all boast an international client list.
The impact of the Covid-19 crisis has highlighted the importance of globalisation. Following the pandemic, businesses (both big and small) are increasingly relying on international trade to improve commercial viability, with 34% citing a desire to expand internationally and 51% of business leaders influenced to change their view on the value of exports.
Going global: Things to consider
For any company contemplating global expansion, the following are legal questions it will need to consider.
- Labour and employment law: If a business hires or subcontracts overseas, it is subject to the respective country’s labour and employment laws. Consulting legal counsel is essential in helping companies with compliance and risk mitigation.
- International trade compliance: Whenever a business transaction crosses borders, it invokes the national security and economic interests of the respective countries. This area of business law spans the navigation of imports, exports and sanctions. It’s also of great importance to have an understanding of corrupt nations and which countries are off limits (such as the trade sanctions taken against Russia during the Ukrainian crisis).
- Corporate structure: If a business is setting up a branch or subsidiary overseas, where and how it chooses to establish a new business carries costs, capital requirements and tax consequences.
- Taxes: Before going global, a corporation will want to carefully examine whether the foreign country has a tax treaty with their domestic nation, and the particular tax consequences of conducting business there.
- Intellectual property: Spanning patents, copyrights, trademarks or trade secrets, intellectual property is a valuable asset. Securing and enforcing these rights can be costly. However, contractual arrangements including licences and employment agreements can be established before venturing overseas to mitigate risks and lower the expense.
- Finances: The movement of money carries risk and complexity. An organisation must adhere to any applicable foreign currency exchange controls. The employment of a legal advisor can assist in keeping payments secure.
- Termination of a business: Before setting up shop overseas, it’s best to consider an exit strategy if all goes wrong. It can be a complicated and expensive process to close an international venture. Government approval may be needed and there can be significant tax consequences as well as employee rights compliance.
The role of international business lawyers
International business lawyers advise, advocate for, or represent a client’s business interests regarding global transactions. They typically have a specialised education.
These legal advisors can offer cross-border counsel on compliance with international trade rules. For example, they can assist corporations in obtaining the correct exporting licensing and advise on customs classifications. They will also conduct internal investigations and represent organisations through international disputes or when action is taken against any violations.
To be a successful international business lawyer, you must have a strong grasp of economics and well-developed negotiation skills. The demand for international business lawyers and advisors is certain to spike as UK companies navigate the consequences of Brexit and aim to boost commercial viability following the coronavirus pandemic.
Why should I study international business?
Business success requires a global perspective. As companies continue to increase conduct on a global scale, anyone looking to enter an area of business management should have a good understanding of global governance, international agreements, foreign policy, various international business practices and the strategic decision-making of multinational enterprises.
Become an international business leader
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