Editor’s note: “International Business Corner” is a weekly column written by Joan Keston that provides information for people involved in or considering international operations. Keston is an international business consultant. Over the next several months she will be writing about important issues that international businesses face as they compete in the 21st century global business environment.
This article discusses the legal concept of due process, a right that we take for granted when doing business.
RALEIGH – Without realizing it, we make assumptions in doing business based on our legal tradition and certain legal concepts embedded in our culture that we incorporate into our definition of or list of “rights.” Due process of law and fairness are examples of those rights.
According to Cochran’s Law Lexicon, due process of law means “the compliance with the fundamental rules for fair and orderly legal proceedings, e.g., notice, opportunity to appear and be heard, right to effective counsel and a fair and impartial jury.” Neither the federal nor state governments may deprive any person of life, liberty or property without due process of law. This concept extends into our business culture. Due process of law is not a concept that should be taken for granted in developing countries.
We also expect our government to act fairly. We constantly see cases where someone “takes on the government.”
John Doe vs. the US
I once heard a business person from a developing country comment on a US film in which an American was able to win against the federal government. This was a symbol to that person of how wonderful the US was; that an individual could seek and obtain justice against its own government. It was completely foreign to that person that a citizen could sue the government. We do it all the time.
Unfair Government in Brazil?
During the time that I lived in Brazil inflation was at 1000%. The first democratically elected president after the military regimes of the 60s-80s froze all bank accounts, liberating the equivalent of $1000 per person and entity. Imagine running a business with $1000! The finance minister would appear nightly on the news telling us how we could liberate more funds from our accounts and other financial mechanisms as the government steered the course through the extreme economic policies adopted. I remember one particular time when she advised of a particular transaction that would be permitted. The following day most businesses implemented changes relying on that information. The next evening she retracted the activity she permitted the prior evening but provided for no such retraction for those who had acted according to her advice, and thus found themselves in a more disadvantageous position because the followed her original advice.
Unfair Government in China?
One of the fears that business people have in China, whether they be Chinese or American, is that the government can act in ways that could destroy a successful business in an instant. Imagine the scenario where you have created a successful business and discover that the government has financed a similar business across the street from your establishment that is selling the same product for less than your costs, and is only able to do so because of the government’s involvement.
Risks of Doing Business in Developing Countries
Although developing countries are evolving along a spectrum of development and adopting many changes, the governments and the basic principles of those governments do not protect the people and their interests in the same manner or degree as we take for granted in the US. These are risks factors that must be analyzed and addressed when formulating your corporate strategy for global business.
About the Author: Joan Keston is the Managing Principal of Keston & Associates, Ltd., an international business consulting firm located in Raleigh, NC, and a Partner at Paladin and Associates, Inc. She has 25 twenty-five years of experience with mature as well as entrepreneurial companies, domestically and internationally, coupled with an executive managerial and legal background. Her firm facilitates international business transactions, and assists companies establish, grow and integrate their international operations. She can be reached at (919) 881-7764 and email@example.com.