President Rousseff started a program called Brasil Maior in order to promote industry in the nation. Democracy presupposes equality before the law, due process and political pluralism.“Liberty and Justice for Some,” Economist, August 22, 2007, accessed December 21, 2010, http://www.economist.com/node/8908438. besides the laws of individual countries. It governs a complete set of rules, regulations, institutions, and attitudes. The present improved political system now encourages freedom and equality for the people of Indonesia. Two additional religious law systems are the Jewish Halacha and the Christian Canon system, neither of which is practiced at the national level in a country. Plagiarism Prevention 4. Politics changes can affect dramatically the manner that international business deal with import, export, and trade with another countries. A political ideology that asserts that both public and private groups are important in a well-functioning political system. It governs its own territory, has the right to select and implement its own political, economic, and social systems and has the power to enter into bilateral or multilateral agreements with other nations. Baidu self-censors and, as a result, has seen its revenues soar after Google limited its operations in the country.Rolfe Winkler, “Internet Plus China Equals Screaming Baidu,” Wall Street Journal, November 9, 2010, accessed December 21, 2010, http://online.wsj.com/article/SB10001424052748703514904575602781130437538.html. According to Islamic law, banks cannot charge or benefit from interest. Despite the advances in democracy in recent decades, more than one third the world’s population still lives under authoritarian rule. Civil lawA legal system based on a detailed set of laws that constitute a code and on how the law is applied to the facts. Gambling is not liked in Islamic countries, but futures and currency hedging also involves speculation. In totalitarianism, the ideology influences or controls the people, not just a person or party. is the most common form of government around the world today. There is no consensus on how to measure democracy, definitions of democracy are contested and there is an ongoing lively debate on the subject. ‘Harmonization’ and ‘unification’ of the law of international trade refer to the process through which the law facilitating international trade is created and adopted. Learn vocabulary, terms, and more with flashcards, games, and other study tools. The commission is composed of 60 member states elected by the General Assembly. Some banks will charge a large up-front fee. In Arabic, ‘Sharia’ means the clear, well-trodden path to water. After reading this article you will learn about: 1. The complications in a meeting out of non-performance of a business contract also vary widely among the common- and civil-law countries. Political system and Legal systems: Indonesia today is Southeast Asia’s most vibrant democracy. The elaborate legislative codes embody the main rules of the law, spelling out every circumstance. Some industries may be considered essential for national security purposes, such as defense, telecommunications, and infrastructure—for example, a government may be concerned about who owns the ports within its country. Democracy has a number of variations, both in theory and practice, some of which provide better representation and more freedoms for their citizens than others. Is there a well-established legal environment both to enforce policies and rules as well as to challenge them? At the other extreme is totalitarianismA political ideology that contends that every aspect of an individual’s life should be controlled and dictated by a strong central government., which contends that every aspect of an individual’s life should be controlled and dictated by a strong central government. In totalitarian systems, government’s power derives from a select group. The most significant difference in the common law and the civil law countries is in the protection of intellectual property. A political ideology that contends that individuals should control political activities and public government is both unnecessary and unwanted. The major difference between Sharia law and the Western law is the idea of reference to a precedent. Companies that operate globally have an enormous challenge in conducting business in countries with varying political and economic systems. The Internet has started to change this, as sellers and buyers have easier access to each other. Economist Intelligence Unit, “The Economist Intelligence Unit’s Index of Democracy 2008,”. Each political system’s philosophy impacts the policies that govern the local economy and business environment. International managers need to develop basic understanding of the types of legal systems followed in the countries of their operations before entering into legal contracts. Democracy is the most common form of government today. In the broadest sense, capitalismAn economic system in which the means of production are owned and controlled privately. On the other hand, governments may influence trade to reward a country for political support on global matters. Also known as theocratic law; this legal system is based on religious guidelines. Political, Economic, and Legal Systems. Why should businesses care about the different political and legal systems around the world? To further illustrate the complexity of the definition of a democracy, the Economist Intelligence Unit’s annual “Index of Democracy” uses a detailed questionnaire and analysis process to provide “a snapshot of the current state of democracy worldwide for 165 independent states and two territories (this covers almost the entire population of the world and the vast majority of the world’s independent states (27 micro states are excluded) [as of 2008)].”Economist Intelligence Unit, “The Economist Intelligence Unit’s Index of Democracy 2008,” Economist, October 29, 2008, accessed December 21, 2010, http://graphics.eiu.com/PDF/Democracy%20Index%202008.pdf. Economist Intelligence Unit, “The Economist Intelligence Unit’s Index of Democracy 2008,” Economist, October 29, 2008, accessed December 21, 2010, http://graphics.eiu.com/PDF/Democracy%20Index%202008.pdf. Firms need to assess the balance to determine how local policies, rules, and regulations will affect their business. Is power concentrated in the hands of a few, or is it clearly outlined in a constitution or similar national legal document? In common law systems, judges interpret the law and judicial rulings can set precedent. Governments intervene in trade to protect their nation’s economy and industry, as well as promote and preserve their social, cultural, political, and economic structures and philosophies. The study of political systems is extensive and complex. Many common law countries, including the US and India have adapted commercial codes to govern business. Theocratic law is the legal system based on religious doctrine, precepts, and beliefs. Brazilian Legal System Doing Business in Brazil. United Nations Commission on International Trade Law (UNCITRAL). Although there is significant overlapping in practice under the two systems, laws are much more rigid in the countries with civil-law system compared to common-law systems. In essence, there are three main kinds of legal systems—common law, civil law, and religious or theocratic law. Chapters 6-7Chapters 6-7 INTERNATIONALINTERNATIONAL POLITICAL AND LEGALPOLITICAL AND LEGAL ENVIROMENTENVIROMENT 2. To begin with, despite the globalization of business, firms must abide by the local rules and regulations of the countries in which they operate. Common law originated from England and it is followed in most of the former British colonies, such as India, UK, the US, Canada, Australia, and New Zealand. This is the national government and it has six State Governments under it. While the government still remains the dominant force by controlling more than a third of the economy, more private businesses have emerged. However, in the past two decades, China has pursued a new balance of how much the state plans and manages the national economy. While doing business in Islamic countries, international managers need to appreciate the intertwining of religion and Islamic law and take care never to mention the Palestine-Israeli situation. State Capitalism: Governments Seeking to Control Key Industries. Chapter 7 Political and Legal Systems in National Environments1 For example, in Islamic law, business is directly impacted by the concept of interest. Political and legal risks are two very important aspects of running a business of which an entrepreneur should be aware. 2. The legal system of a country is significantly important to international businesses. Log in Sign up. The program promotes domestic production as well as exports and is funded by the state. A country’s law regulate business practices, defines business policies, rights and obligations involved in business transactions. Laws of most countries have elements of both common and civil law. In general, Japanese corporate law supports inward facing investment. Jason Dean, Andrew Browne, and Shai Oster, “China’s ‘State Capitalism’ Sparks Global Backlash,”, http://graphics.eiu.com/PDF/Democracy%20Index%202008.pdf, http://online.wsj.com/article/SB10001424052748703514904575602781130437538.html, http://www.arabianbusiness.com/511804-gulf-islamic-banks-assets-to-hit-300bn, http://online.wsj.com/article/SB10001424052748704852004575258541875590852.html, http://www.energyintel.com/documentdetail.asp?document_id=245527, http://online.wsj.com/article/SB10001424052748703514904575602731006315198.html. is based on traditions and precedence. Sharia is the canonical law derived from a combination of sources, such as the Koran, the holy book of Islam, the Sunna, teachings and practices of the prophet Mohammed, and the fat was, the rulings of the Islamic scholars. Log in Sign up. (b) Gharar, the transaction involving fundamental uncertainty or speculation is prohibited. Every nation has jurisdiction over conduct that adversely affects its national security even if such behaviour occurs outside the country. Many business analysts mention these issues in discussions of global business ethics and the role and responsibility of companies in different political environments. Taxes or tariffs that are levied as a fixed charge, regardless of the value of the product or service. The United Nations Commission on International Trade Law (UNCITRAL) was established in 1966 by the UN General Assembly (Fig. Legal Systems 4. For instance, an Italian firm that sells India’s defense secrets can be booked under the Indian law.