Exam 18: Takings and National Controls on Foreign Direct Investment

Weigh the relative benefits of political risk insurance from government agencies and private insurers.

The creation of a foreign subsidiary has few tax consequences to the foreign firm.

Where the government expropriates property,the former owner will receive:

Draft a model law (plan or treaty)for government privatization.This may be done with an eye toward privatizing through national or foreign investment.

All of the following are alternative methods for a U.S.investor entering into a joint venture in a foreign country except:

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.

When choosing to establish a foreign branch or subsidiary,a prime factor in the U.S.company's decision is:

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

Under the modern traditional theory of the taking of property,a sovereign may take private property only where:

OPIC insurance is provided to U.S.firms operating abroad by private American insurance companies.

World Motors assembles automobiles in the United States from engines produced by its subsidiary corporation in Country X.In order to shift its tax liability,World Motors instructs the subsidiary in Country X to overvalue its invoice price of the engines.This is known as:

Explain and assess the different methods that a business may employ to reduce the political risk associated with a foreign investment.

Developing countries usually welcome foreign investment in which of the following cases:

All foreign nations permit foreign majority ownership of some type.

U.S.multinational corporations are generally safer in building a factory in a foreign country that has entered into an investment treaty with the United States than in a country that has no such treaty.

Under the Foreign Sovereign Immunities Act,federal courts in the U.S.cannot hear which of the following cases:

Weigh the strengths and weaknesses of the various methods that a business may use to ensure access to hard currency.

California Agricultural Aircraft Services,Inc.(CAAS)is a California corporation headquartered in Sacramento.CAAS leases aircraft to crop dusting businesses through California.CAAS entered into a contract with Shànghai Aircraft Company (SAC),a state-owned enterprise organized pursuant to the laws of the People's Republic of China.The contract provided for the manufacture by SAC and purchase by CAAS of ten crop dusting aircraft at a price of U.S.$2.1 million,a savings of approximately $200,000 compared to crop dusting aircraft available from other manufacturers.One of the aircraft delivered to CAAS was subsequently leased to Central Valley Crop Dusting,Inc.(CVCD),a California corporation.One month later,this aircraft crashed during a CVCD spraying operation resulting in a complete loss of the aircraft and serious injuries to the pilot.The pilot stated that the engine lost power and then caught on fire while he was attempting an emergency landing.Subsequent investigations by federal and state authorities determined the sole cause of the crash to be catastrophic engine failure.CVCD and its pilot subsequently initiated litigation in the San Joaquin County Superior Court against CAAS,claiming breach of numerous provisions within the lease agreement,strict product liability and negligence.CAAS immediately notified SAC regarding the litigation and requested indemnification,but SAC did not respond to this request.CAAS is now contemplating joining SAC as a co-defendant to CVCD's lawsuit. What defense could SAC assert to the exercise of personal jurisdiction by the San Joaquin County Superior Court? What does this defense provide? Would this defense be successful in this case? Why or why not?

The United States does not tax foreign subsidiaries on the income they earn abroad.

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