Legal Environment of Business

Dr Monika Jain

The Legal Environment of Business

 It is defined as the attitude of the

government toward business; the historical development of this attitude; current trends of public control in taxation, regulation of commerce and competition; freedom of contract, antitrust legislation and their relationship to marketing, mergers and acquisitions; and labor management relations.

LEGAL ENVIRONMENT OF BUSINESS

 Law is an instrument of social justice

of the state that seeks to provide justice, stability and security in the society.  It assures uniform application of the laws by regulating the behavior and interactions of individuals against each other.

What Is Law?
 Law consists of rules that

regulate the conduct of individuals, businesses, and other organizations within society. It is intended to protect persons and their property from unwanted interference from others.

Purpose of Law
 To maintain status quo in society

ensuring stability and security of social order, enable individuals , maximum of freedom to assert themselves and determine the sphere within which the existence and activity of each individual will be secure and free

Functions of Law
Keeping the peace Shaping moral standards Promoting social justice Maintaining the status quo

Functions of Law
Facilitating orderly change Facilitating planning Providing a basis for compromise Maximizing individual freedom

 The Four-Step Four-

Pyramid of Corporate Social Responsibility

Advantages of Law
 The principle of law provide

uniformity and certainty to the administration of justice The existence of fixed principles of law avoids the dangers of arbitrary, biased and dishonest decisions The fixed principles of law protect administrators of justice from the errors of individual judgment

Sources of Law
 Formal sources- law derives its force and
validity from the time immemorial

 Legal sources- statues , precedents,

legislation


Historical sources- juristic writings,

literary works, commandments of the god

 Legislations- Parliament, state assemblies

The Legal Environment

Basic Principle:
Competition is a good thing Monopoly is a bad thing Therefore: Laws and regulations are aimed at promoting competition and reducing monopoly power.

Contemporary Sources of Law

Constitution Statutes Administrative Law Treaties Common Law

The Constitutional Environment

 WE, THE PEOPLE OF INDIA, having solemnly

THE CONSTITUTION OF INDIA

resolved to constitute India into a SOVEREIGN SOCIALIST SECULAR DEMOCRATIC REPUBLIC and to secure to all its citizens:  JUSTICE, social, economic and political;  LIBERTY of thought, expression, belief, faith and worship;

THE CONSTITUTION OF INDIA

EQUALITY of status and of

opportunity; and to promote among them all assuring

the dignity of the individual and the unity and integrity of the Nation;

Treaties
A treaty is a

compact made between two or more nations.

The Fundamental Rights

The Constitution has eight Fundamental Rights as mentioned below: 1. Right to equality; 2. Right to six freedoms, viz., (a) freedom of speech and expression; (b) freedom to assemble peacefully and without arms; (c) freedom to form associations or unions; (d) freedom to move freely throughout the territory of India; (e) freedom to reside and settle in any part of the territory of India; and (f) freedom to practise any profession or to carry on any occupation, trade or business. 3. Right to life and personal property; 4. Right to freedom of religion; 5. Right to cultural and educational freedom; 6. Right against exploitation; 7. Right to Constitutional remedies.

FUNDAMENTAL DUTIES It shall be the duty of every citizen of India  (a) to abide by the Constitution and respect its ideals and institutions, the National Flag and the National Anthem;  (b) to cherish and follow the noble ideals which inspired our national struggle for freedom;  (c) to uphold and protect the sovereignty, unity and integrity of India;

Fundamental duties
 d) to defend the country and render national

service when called upon to do so;  (e) to promote harmony and the spirit of common brotherhood amongst all the people of India transcending religious, linguistic and regional or sectional diversities; to renounce practices derogatory to the dignity of women

FUNDAMENTAL DUTIES
 (f) to value and preserve the rich heritage of our

composite culture;  (g) to protect and improve the natural environment including forests, lakes, rivers and wild life, and to have compassion for living creatures;  (h) to develop the scientific temper, humanism and the spirit of inquiry and reform;

FUNDAMENTAL DUTIES
 (i) to safeguard public property and to

abjure violence;  (j) to strive towards excellence in all spheres of individual and collective activity so that the nation constantly rises to higher levels of Endeavour and achievement.

National law
 National law is the law of the land. The

constitution of India is the supreme law of the nation. It provides the rights, duties, and the liberties of the citizens. The laws made by the state exercising their legislative powers under the constitution have to be in consonance with those of the supreme law

International law
 While the national law is the law of a nation

,also known as municipal law, International law is the law of nations. Where as International law is the body of rules which are legally binding on states in their intercourse with each other. International law is considered to be a weak law because it is not founded on the sovereign authority

Basic Principles of International Law

Sovereignty and Sovereign Immunity

Sovereignty and Sovereign Immunity

An international principle of law which holds that governments have the right to rule themselves as they see fit

Basic Principles of International Law

Sovereignty and Sovereign Immunity

International Jurisdiction
A jurisdictional principle of international law which holds that every country has jurisdiction over its citizens no matter where they are located

International Jurisdiction

Basic Principles of International Law

Sovereignty and Sovereign Immunity

International Jurisdiction

Doctrine of Comity

Doctrine of Comity A jurisdictional principle of international law which holds that there must be mutual respect for the laws, institutions, and government of other countries in the matter of jurisdiction over their own citizens

Basic Principles of International Law

Sovereignty and Sovereign Immunity

International Jurisdiction

Act of State Doctrine

Doctrine of Comity

Act of State Doctrine A jurisdictional principle of international law which holds that all acts of other governments are considered to be valid by U.S. courts, even if such acts are illegal or inappropriate under U.S. law

Basic Principles of International Law

Sovereignty and Sovereign Immunity

Treatment and Rights of Aliens

International Jurisdiction

Act of State Doctrine

Doctrine of Comity

Treatment and Rights of Aliens Countries have the legal right to refuse admission of foreign citizens and to impose special restrictions on their conduct, right of travel, where they can stay, and what business they may conduct Nations also can deport aliens

Basic Principles of International Law

Forum for Sovereignty Hearing and and Sovereign Settling Immunity Disputes Treatment and Rights of Aliens

International Jurisdiction

Act of State Doctrine

Doctrine of Comity

Forum for Hearing and Settling Disputes U.S. courts can dismiss cases brought before them by foreigners; however they are bound to examine issues such as where the plaintiffs are located, where the evidence must be gathered where property to be used in restitution is located

Justice delivery system in India

 Supreme court

High court Subordinate courts---- Civil courts-Metropolitan, City civil courts, Court of small causes
 Criminal courts-District, Sessions,

Magistrate courts

Justice delivery system in India

 Tribunals

(The bench on which a judge or other presiding officer sits in court ) Central administrative Tribunals Industrial Tribunals Labor Tribunals. Consumer dispute redressal Tribunals

Civil Law
 It

governs the litigation arising between individuals over properties, monetary affairs, partnership, accident cases etc, The Nature of penalty is civil in nature. Liability to compensate the affected party will be in the monetary form

Criminal law
 In criminal cases, the government

for violation or injury to public rights files suits. The State takes initiative to file the case. Criminal law governs cases arising out of theft ,murder, cheating etc., The nature of punishment is monetary and imprisonment, and capital punishment in rare cases.

The Legal Environment of Business

3 measures in the resolution of legal problems:
Planning

Prevention

the resolution of legal problems

Managerial participation

Legal and Regulatory Environment

 Confusion and challenge of international

business environment is heightened by

Differing laws and regulations in MNCs global business operations Impact of these laws and regulations on ability to capitalize on economies of scale and scope

 MNCs must carefully evaluate legal

framework in each market in which they want to do business, before doing so

Four Global Foundations of Law

Islamic Law

 Derived from interpretation of

the Quran and teachings of Prophet Muhammad  Found in Islamic countries

Middle East Central Asia

Four Global Foundations of Law

Islamic Law Socialist Law

 Comes from Marxist socialist

system  Continues to influence regulations in former communist countries

Members of former Soviet Union Peoples Republic of China Vietnam North Korea

Four Global Foundations of Law

Islamic Law Socialist Law Common Law

 Comes from English law  Foundation of legal system United States Canada England Australia New Zealand

Four Global Foundations of Law

Islamic Law Socialist Law Common Law Civil or Code Law

 Derived from Roman law  Found in non-Islamic and

nonsocialist countries
France Some Latin American countries Louisiana in the U.S.

BUSINESS ENVIRONMENT

POLITICAL AND GOVERNMENT ENVIRONMENT

 The political environment includes factors such as the

characteristics and policies of the political parties, the nature of the Constitution and government system and the government environment encompassing the economic and business policies and regulations. These factors may vary very considerably between different nations, between different provinces of the same nation and also over time.

Functions of State
 In most modern economies the states regulatory role

is now broader and more complex than ever before, covering such areas as the environment and the financial sector, as well as more traditional areas such as monopolies. The design of regulation needs to fit the capability of state regulatory agencies and the sophistication of markets, and give greater emphasis to personal responsibility.

Functions of the State (Adopted from World Bank, World Development Report, 1997)

Impact of State