A legal system is the mechanism for creating, interpreting, and enforcing the laws in a specified jurisdiction.

It is the means and methods a country uses Regulate business practices Define how companies conduct business transactions Specify the rights and obligations of those engaged in business transactions

Generally, legal systems fall into one of the following categories: Common law. Common law Common law, also known ascase lawor precedent, islawdeveloped byjudgesthroughdecisionsofcourtsand similar tribunals rather than throughlegislative statutesorexecutive branch action Common-law nations include Australia, Britain, Canada, New Zealand, and the United States. Civil law. Civil law, or Roman law, originated with the Romans and is based upon a detailed set of laws that comprise It holds legislation as the primary source of law. a code that includes rules for conducting business; therefore, courts play an important role in applying the law. Civil law nations include France, Germany, and Japan.

Theocratic law. Theocratic law is based upon religious precepts; ultimate legal authority is conferred upon religious leaders who govern society. The best example is Islamic law, or Sharia, which is based on the Quran, the Sunnah, the writings of Islamic scholars, and the consensus of Muslim countries legal communities. (The key for business success is to adhere to the constraints of ancient Islamic laws while maintaining sufficient flexibility to operate in a modern global economy.)

Mixed Legal System. A mixed legal system emerges when two or more legal systems are used within a single country. Although the majority of such countries are found in Africa and Asia, the United States legal system combines both common and civil law.

LEGAL ISSUES IN INTERNATIONAL BUSINESS National laws may affect day-to-day operations and a firms long-term competitive-ness both within and beyond a countrys borders and pertain to both domestic and foreign firms.

Areas addressed include health and safety standards, employment practices, antitrust prohibitions, contractual relationships, environmental practices, intellectual property, cross-border investment flows, tariffs, and non-tariff barriers, to name but a few.

Operational Concerns Efforts to start a business, to enter and enforce contracts, to hire and fire employees, and to close a business are all affected by national laws and regulations.

The legal systems of the more highly developed countries tend to regulate the major operational features of business activity more consistently than do the less developed nations. Further, those countries that make it easy to start a business also tend to impose fewer and simpler regulations to hire and fire workers and impose less regulation in their courts and bankruptcy systems

1) Starting a new Business: Generally it takes 2 business days to start business in Australia as compared to 77 days in Chad (Africa). All due to number of procedural requirements

2) Hiring & Firing: Its easy to hire & fire in countries like China, New Zealand, USA etc in contrast to countries like Angola, Paraguay etc. Companys have to provide proper documentations for the reason of firing, generous prior notifications & payments

B. Strategic Concerns Many legal issues affect the process of value creation. The following legal contingencies often shape an international competitors strategic plans. 1.Product Safety and Liability. Often products must be customized in order to comply with local standards, which may be higher than those found in a firms home market. While product liability laws are very stringent in markets such as the United States, they are spotty & absent in many less developed countries. Organizations have to pay heavy damages regarding these issues

2. Marketplace Behavior. National laws determine permissible practices in pricing, distribution, advertising, and the promotion of products, and they vary widely from one country to another. E.g) Germany prohibits comparative advertising, China prohibits comparisons if it reflects negatively on competitors 3. Legal Jurisdiction. Every country specifies which law should apply and where litigation should occur when agents are involved, whether they are legal residents of the same or different countries.

4. Arbitration. Arbitration allows parties to choose their own mediators and resolve disputes on neutral grounds or through third party

C. Intellectual Property Rights Intellectual property rights (IPRs) consist of ownership rights to intangible assets i.e., the right to control and derive the benefits from writing and other creative art forms (copyright), inventions (patents), and identifiers (trademarks).

Problems arise because intellectual property, whether in the form of literature, music, design, software, scientific patents, or brand names, is difficult to create but easy to duplicate. Cross-national and cross-cultural legal differences complicate specifying, regulating, and enforcing intellectual property rights. The costs of piracy, whether in terms of lost sales and royalties or future creativity, are very high for registered owners.