Fundamentals of Business

10.1. Legal and Political Environment

What has it to do with an enterprise
There are political and legal issues that affect every enterprise.
Global Scale international law

Body of legal rules governing interaction between sovereign states (Public International Law) and the rights and duties of the citizens of sovereign states towards the citizens of other sovereign states (Private International Law). Since there has never been a law-making body for international law, it has been builtup piecemeal through accords, agreements, charters, compromises, conventions, memorandums, protocols, treaties, tribunals, understandings, etc.

The statute of the International Court Of Justice (judicial arm of the UN which has no enforcement power, and can adjudicate only where both sides agree to abide by its decisions) states the basis on which it adjudicates cases before it as "(a) international conventions, whether general or particular, establishing rules expressly recognized by the contesting states; (b) international custom, as evidence of a general practice accepted as law; (c) the general principles of law recognized by civilized nations". It is not 'World Law' but law between consenting sovereign states (each government can decide which law it will adhere to or not) and has not been able to solve the problems of inter state aggression, conflict, terrorism, and war. Despite its limited applicability, however, it has played a vital role over the centuries in developing a system of procedures and rules in areas (such as air, land, sea, outerspace, human rights) where one state's existence impinges that of the others. The General assembly of the UN is entrusted with developing international law.

European Union European Union Law is the unique legal system which operates alongside the laws of Member States of the European Union (EU). EU law has direct effect within the legal systems of its Member States, and overrides national law in many areas, especially in terms of economic and social policy.

Direct effect EU law covers a broad range which is comparable to that of the legal systems of the Member States themselves. Both the provisions of the Treaties and EU regulations are said to have "direct effect" horizontally. This means private citizens can rely on the rights granted to them (and the duties created for them) against one another. For instance, an air hostess could sue her airline employer for sexual discrimination. The other main legal instruments of the EU, "directives", have direct effect, but only "vertically".

Private Citizens may not sue one another on the basis of an EU directive, since these are addressed to the Member States. Directives allow some choice for Member States in the way they translate (or 'transpose') a directive into national law - usually this is done by passing one or more legislative acts, such as an Act of Parliament or statutory instrument in the UK. Once this has happened citizens may rely on the law that has been implemented.

They may only sue the government "vertically" for failing to implement a directive correctly. An example of a directive is the Product liability Directive, which makes companies liable for dangerous and defective products that harm consumers. A regulation is a legislative act of the European Union which becomes immediately enforceable as law in all member states simultaneously.