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Exam 18: The Legal Environment of Foreign Direct Investment

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Question 41

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Considering the different types of currency risk associated with foreign transactions, which is most salient for a U.S. business?

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The most salient type of currency risk f...

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Question 42

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In which of the following cases do the developin g countrie s encourage foreig n investmen t?

A) Companies producing quality consumer goods because these firms bring a variety of needed products at reasonable prices for consumers
B) Companies producing goods for export
C) Companies investing in telecommunications and transportation industries
D) Companies investing in the oil and gas industry and other natural resources

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Question 43

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Identify countries that have views regarding the taxation of e-commerce that are most (or least) favorable to U.S. e-merchants.

OPIC insurance is primarily intended to protect U.S. investments in Japan, Canada and Western Europe.

A U.S. enterprise that wishes to establish an entity abroad under its control may create a subsidiary or branch: I. Once either of these is established, the company may waive Rights of Protection under the U.S. bilateral investment protection agreements. II. If the company chooses a subsidiary, it will not be directly answerable for liability.

Insurance is available from the U.S. AID to U.S. firms against the expropriation of their property by a foreign government.

OPIC insurance does not provide coverage against the loss of assets by U.S. firms in the case of the nationalization of farms or factories held in a foreign country.

A foreign investor may enter into a joint venture by combining with a national of a host country to create a new entity or by acquiring a portion of an existing local entity.

An American firm that builds a factory abroad for the building of component parts to be shipped back to the United States does not qualify for OPIC insurance.

North American and Western European countries generally accept the modern traditional theory of the taking of private property as provided under the "due process" clause of the U.S. Constitution.

An example of an active investment is the licensing of technology to a foreign firm.

Artificially manipulated pricing between joint venture corporations is known as transfer pricing.

The difficulties associated with private political risk insurance include all of the following except :

In the case of nationalization, "adequate" compensation is defined as fair market value minus accumulation of depreciation.

International investment disputes are arbitrated by:

In the case of nationalization, the party whose property has been subject to a taking may elect to receive either the fair market value as estimated by a government agency or the saleable value as identified by independent valuation specialists.

An investment in which the investor limits its involvement to providing equity capital in an enterprise managed by another in hope of a profitable return is called a(n) :

One tax issue that presents no problem for a U.S. investor is the question of crediting taxes it has paid to a foreign country against taxes it would have to pay the U.S. on its federal return.

Which of the following cases cannot be heard by the U.S federal courts unde r th e Foreig n Sovereig n Immunitie s Act ?

Virtually every foreign country prohibits entities controlled by foreigners in a number of particularly sensitive sectors.