Recently the international legal and ethic issues have become a standing point and subject of the numerous discussions both by those who actually have hand in business and those who study and write about the ways people make money.

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Generally, it has been considered that common laws and rules set by the local governments succeed in managing all trade and commercial relationships. However, when international business ins concerned, these rules are found to be limited and insufficient. Therefore, separate states with various legal systems have introduced international law which major task is to decide which country’s domestic laws should be applied in the individual cases with foreign actors.

Nevertheless, in practice these rules are much weaker than they should be and national legal systems remain the most influential when dealing with international transactions. Neither public nor private international law can provide a sufficient “possessive and transactional security for international business framework” (1, 2005).

Yet, without any doubt, this does not prevent those above-mentioned foreign actors from crossing borders. Quite to the contrary, we are witnessing two amazing phenomena today. First, a set of the so-called ‘lex mercatoria or law merchant’ rules have been elaborated for guiding economic transactions either at national or international level (2, 2006). Moreover, there are special private institutions that facilitate international trade and “help provide transactional security and, as such, represent an important factor for resolving specific social dilemmas in international business” (2, 2006).

Such interest in foreign cooperation and establishment of international business relationships lies on the surface and can be expressed as ‘outsourcing’. In other words, it is much cheaper to manufacture product and produce services abroad where taxes are lower and laws are milder.

 Among different ways of legalizing such international business relationships is sublicensing.   “Subject to individual country laws, a licensee does not have sublicensing rights unless the agreement authorizes them” (4, 2006). The main agreement should contain all conditions, party’s rights and obligations (either of the ‘licensor’ or of ‘licensee’).

Sublicensing is a common practice and is beneficial for all participants of the agreement

Page 2 Addressing international legal and ethical issues Essay

as the licensor has the licensee responsible for meeting all requirements of the main license as well as receives royalties. Whereas the sublicensee has legal right to make claims on the basis of the agreement and can use various services and goods. Notably, that this kind of relationships is general for using patents (i.e. intellectual property).

To mi mind, factors that may prevent the company from granting the sublicensing agreement are connected with lack of trust among partners or infeasibility of the sublicensee’ plans. He should guarantee against any damages and provide a technical plan (if it is needed).

Furthermore, request for a sublicense may be rejected if the third party is a competitor of the licensor.  Moreover, in those cases when the products or technology under a license are sensitive or might be utilized in countries defined by the national trade authorities and government as with restricted exports, “the licensor will require a clause to assure that such restrictions are not violated”, or prohibit the licensee from exporting at all.

Generally, sublicense agreements like principal agreements are resolved in the arbitration courts. There is a popular trend toward selecting an impartial arbitrator, but in most agreements it is much commoner to have three arbitrators, one from each party’s country and the third from a different country (4, 2006). Note, when cases are judged, the preference is given to the local customs and laws of the licensee as he undertakes most of responsibility.


Dispute resolution in international transactions. Freshfields Bruckhaus Deringer, August 2005
Private Governance of International Commercial Disputes. Retrieved on February 1, 2006 from
International Commercial Disputes. Retrieved on February 1, 2006 from
Structure of a Technology Transfer Agreement. Retrieved on February 1, 2006 from

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