LAW 896 International Business Transactions Assessment 2: Problem Question 30 Marks
Assume SMART Electronic (SE), a UK based company, manufactures an electronic device with a distinctive brand ST, entered into two separate business contracts with High Tech (HT), an Australian company, and Agar Pty Ltd, an Indian company.
The terms and conditions of the contract with HT required it (HT) to ‘comply with the quality control conditions and a specific system of marketing plan as approved by SE and to open two outlets per year across Australia subject to SE’s financial and operational support.’ Given ST’s increased popularity in Australia and its commensurate trading prospect across the globe, in March 2015 (before the expiry of the contract-term) SE wanted to be directly engaged in the Australian market and abruptly stopped providing financial support to HT which made it incapable of opening outlets as required under the terms of the contract. SE, however, terminated the contract on a range of grounds, including, the non-fulfilment of contractual obligations to start up outlets by HT; SE’s inability to provide financial support to HT due to its huge financial loss incurred from several businesses with Elite, a US based company, of which HT was not informed. Consequently, HT wishes to go for a legal battle. SE argues, inter alia, it did not intend to mislead HT and was not aware of the foreign law, that is, Australian law and its recent changes.
The contract with Agar required SE to contribute 60 percent of the total capital to the company. Accordingly, SE invested US$ 50 million in a few projects of the company. Initially, the Indian government approved these projects but the current changes in the govt’s FDI policies imposed certain conditions on their operation. These conditions include, ‘employing 65 percent local workers, exporting at least 75 percent of the projects’ products and using 50 percent Indian-made content in the construction of the projects.’ The company’s (Agar) failure to do so led to the expropriation of all its projects. The government of India, however, cited ‘public interest’ as the reason for the expropriation.
Frustrated and in despair, SE would like to proceed now with other international commercial transactions such as distributorship in Thailand, and investing further in Australia, especially given its liberal approach to FDI with a relatively stable legal regime but is worried about the start-up and operating cost and risk factors involved in those modes.
Answer the following: (Marks 5+20+5)
1. What are possible legal issues and methods of business involved in the above scenario from the perspective of International Business Transactions? (Marks 5)
2. Advise SE (in both instances SE v HT and SE v Agar) and HT about their prospects of success by referring to relevant laws in Australia and international standards. (Marks 20)
3. What policy and legal considerations should be taken into account in dealing with distributorship in Thailand? Identify and explain particular provisions that could best ensure the protection and return of SE’s investment. (Marks 5)
This task aims to assess your skill and analytical ability to examine issues involved in the problem scenario with adequate support and acknowledgement. Marks will be awarded based on the following assessment criteria:
Originality of the work devoid of plagiarism
Accurate identification of and analyse issues by using primary and secondary sources
Critical evaluation and efficient use of information
Concise and logical approach to address relevant aspects
Clear demonstration of knowledge and correct written expression
The degree of persuasion/depth of research evidenced from respective arguments
Coherent organisation of the paper/ structured presentation of ideas
Proper referencing and acknowledgement of sources
Relevant Information and Instructions
• Due Date:
• Length: 2000 words (excluding footnotes, but footnotes must not include any substantive content. The actual word length of a paper must be stated on the cover sheet).
• Assignment must be typed, double spaced and referenced and should conform to the Australian Guide to Legal Citation (can be downloaded at http://www.law.unimelb.edu.au/go/aglc).
Written paper Submission
The following requirements as to presentation of written papers must be complied with: must be double-spaced and referenced. You may print on both sides of the paper if your inclinations towards conservation are threatened by the double-spacing requirement.’