Legal Aspects of International Trade and Enterprise: Royal Dutch Shell

This report provides an executive summary evaluating the legal aspects Royal Dutch Shell must adhere to in its global operations. It analyzes the company's operations, particularly in Australia, and identifies relevant legislative and regulatory frameworks, including the Competition and Consumer Act 2010, Fair Trading Act 1992, and employment and taxation laws. The report also examines the impact of international treaties, conventions, and agreements, such as the AANZFTA, the Paris Agreement, and the ChAFTA, on the company's products and services, highlighting the need for compliance and adaptation to ensure sustainable operations. The report concludes by emphasizing the significance of adhering to both domestic and international legal frameworks for maintaining business operations and profitability.

Legal Aspects of International Trade
and Enterprise

1
Executive Summary
The purpose of this report is to select a multinational company and evaluate the legal
aspects which the company has to comply with while managing its operations. This
report analysed the case of Royal Dutch Shell along with its industry and the number
of its employees in Australia and worldwide. The legislative regulatory framework
which is applicable to Royal Dutch Shell is identified in this report along with its
impact on the company’s operations. The effect of treaties, conventions and
agreements on Royal Dutch Shell’s products and services is also identified in this
report.

2
Table of Contents
Introduction to the Company........................................................................................3
Impact of the legislative regulatory framework.............................................................3
Effect of treaties, conventions and agreement on products and services...................5
References...................................................................................................................8

3
Introduction to the Company
Royal Dutch Shell is a British-Dutch multinational corporation that operates in the oil
and gas industry (Shell, 2019). It is one of the biggest enterprises in the United
Kingdom, and it is considered as one of the six oil and gas “supermajo rs”. The
headquarters of the company is situated in The Hague, Netherlands and it offers its
services worldwide. In the industry, the company offers various products to its
customers such as petrochemicals, petroleum, LNG, natural gas and lubricants
(Reuters, 2019). The company also offers services such as oil exploration and
production, refining, distributing, marketing and trading. Recently, the company has
also started expanding its operations in the renewable energy sector through wind,
biofuels and energy-kite systems (Reuters, 2019). The company has hired around
86,000 employees who work in more than 70 countries (Shell, 2019). In Australia,
there are around 1600 to 1800 employees who handle its operations (Macdonald,
2016).
Impact of the legislative regulatory framework
The operations of multinational companies are affected by the legislative framework
which is developed by countries to provide guidelines in order to ensure that these
companies conduct their operations in an appropriate manner. These regulatory
policies are implemented on multinational companies and their operations in order to
outline their actions in different aspects that eliminate ambiguity and promote fair
trading practices (Mulley et al., 2012). Similarly, these legislative regulatory policies
also apply to the operations of Royal Dutch Shell and the company has to make sure
that it did not violate these policies or else it could face penalties. In the case of
Australia, the government is strict regarding the regulatory framework of
multinational companies to make sure that they did not misuse the resources in the
country while negatively affecting their stakeholders. The government has imposed
guidelines for the protection of employees, small businesses and customers in
Australia to ensure that multinational companies did not exploit them. A good
example is the imposition of the Competition and Consumer Act 2010 (Cth) in
Australia that is focused on providing policies for competition law and consumer

4
protection. There are two schedules included in this act that focuses on promoting
competition and protection of consumer rights (Arblaster, 2014).
As per this Act, Royal Dutch Shell cannot utilise its resources or position in the
market to eliminate its competition by unfairly acquiring smaller companies or
teaming up with other major oil companies. Through these policies, the rights of
small businesses in Australia are protected, and companies are prohibited from
establishing their monopoly in the market (Arblaster, 2014). Due to these policies,
the economic growth of Australia is proliferated, and it also benefits small
businesses. Moreover, Royal Dutch Shell has to ensure that it takes correct actions
towards the protection of rights of customers while conducting its operations in
Australia. Another similar legislation that applies to the operations of Royal Dutch
Shell is the Fair Trading Act 1992. The objective of this act is to provide guidelines
for companies to make sure that they fairly trade in Australia without engaging in
unethical practices that could lead to negative consequences. Various restrictions
are imposed on Royal Dutch Shell under this act due to which the company is bound
to take corrective actions that did not harm the interest of small businesses in
Australia and customers (Nehme and Adams, 2012). Along with these provisions,
the company is also liable to comply with the taxation laws that govern its operations
in Australia.
The corporate tax rate in Australia is lower than compared to other developed
countries which make it a favourable market for Royal Dutch Shell. The company
has to pay tax at 30 per cent on the profits that it generates through its operations.
Along with the corporate tax, the company is also bound to pay the Goods and
Services Tax (GST) that is imposed on the Australian government on goods and
services of companies that are offered in the country. The current rate of GST is 10
per cent which is applicable to Royal Dutch Shell as well (EY, 2018). Violation of
these taxations obligations could lead to the imposition of financial penalties on
Royal Dutch Shell due to which the company has to take corrective actions to fulfil
them in a timely manner. Since Royal Dutch Shell has to hire a number of
employees in Australia to manage its operations, it is also subject to employment
laws of the country. As per these employment laws, various guidelines are issued by
the government to make sure that the company did not violate the interest of its

5
employees and also take corrective actions to maintain their health and safety (Bray
and Stewart, 2013).
The Fair Work Act 2009 is relevant legislation regarding this matter in which the
government has included basic guidelines which are necessary to be fulfilled by
domestic and foreign companies operating in Australia to make sure that they did not
exploit the interest of their employees. This act includes provisions regarding
minimum wage which is necessary to be considered by Royal Dutch Shell to make
sure that it did not hire its labour for below minimum wage or else it could face legal
consequences. While working for the company, employees must have access to
basic facilities which are crucial to maintain their health, and the company should
also take corrective actions to maintain safety in the working environment in order to
ensure that employees are protected from hazardous (Bray and Stewart, 2013).
Furthermore, the company cannot enforce its employees to work for more than 38
hours in a week as provided in the Fair Work Act. Thus, if the company wanted to
hire workers for more hours, they have to enter into a specific contract with them in
which they clearly specific the longer working shifts and they also have to pay
additional salary to them for the additional hours. Thus, these are the key provisions
of the legislative regulatory framework that applies to the operations of Royal Dutch
Shell, and the company is bound by these guidelines when it manages its operations
in Australia.
Effect of treaties, conventions and agreement on products and
services
The operations of multinational companies are not only affected by local laws but
international policies as well. The governments of different nations form treaties or
agreements with one another in which they specific new provisions that apply to the
operations of multinational companies. Many of these actions are taken by the
government to make sure that companies have an option to easily expand their
operations and conduct them in foreign markets. The objective of these provisions is
to establish common principles that made it easier for companies to reach to a new
customer base situation in foreign markets without having to deal with legal
provisions (Niforou, 2012). Thus, these treaties, conventions and agreements have a
significant impact on the products and services of companies since they have to

6
make changes in their products or delay them while launching in newer markets if a
positive trading relationship is not formed between two countries. The treaties that
are formed between the Australian government and other countries in which Royal
Dutch Shell has established its operations resulted in benefiting the company since it
makes it easier for the company to offer its services and products in these markets
without having to deal with stricter laws and provisions (Taguchi, 2015).
The objective of these policies is to support companies, and Royal Dutch Shell is no
exception; however, the company has to make sure that it effectively comply with
these guidelines or else its international operations could suffer (Niforou, 2012). For
example, Royal Dutch Shell operates in New Zealand which is the neighbouring
country of Australia, and it has a positive trade relationship with the country as well.
Due to this positive relationship, Royal Dutch Shell is able to offer its products and
services in New Zealand while exporting them from Australia without facing
significant challenges. For example, these countries have formed the ASEAN-
Australia-New Zealand Free Trade Agreement (AANZFTA). This is a major FTA that
has opened new trade opportunities for companies operating in both nations
(Taguchi, 2015). A free trade area is established through this agreement under
which the government has lowered the trading compliances and standards which are
otherwise mandatory for companies. At the same time, provisions have also been
implemented to reduce tariff and duties which are applied over companies when their
export or import their products (Freudenberg et al., 2012). These provisions benefit
the products and services of Royal Dutch Shell since it becomes easier for the
company to conduct its operations in these markets without facing charges.
The prices of its products did not hike in New Zealand since the company is not
subject to high tariff or duties which enable it to offer effective products and services
to customers without dealing with stricter regulatory compliances. Along with these
policies, the double tax treaty that is formed between Australia and New Zealand
also affects the prices of products and services of Royal Dutch Shell since it did not
have to increase their prices while offering them in New Zealand (Freudenberg et al.,
2012). This cost-effective strategy expands the operations of Royal Dutch Shell in
both markets while ensuring that the pricing and quality of its products and services
remain the same which is crucial to build a loyal customer base. Australia is also part
of the Paris agreement which took place in the United Nations Framework

7
Convention on Climate Change (UNFCCC). As per this agreement, the Australian
government agreed to take measures in order to reduce the negative impact of
climate change and global warming to make sure the environment resources are
protected. Since Australia is a part of this convention, the products and services
offered by Royal Dutch Shell in the country are affected by the terms of this
convention (Morgan, 2017). Since Royal Dutch Shell is in the business of fossil fuel
which is a key contributor of global warming due to high emission of greenhouse
gasses, the company has to make sure that it takes corrective measures to reduce
its carbon footprint while offering its products in the country.
There are many restrictions imposed on the company in relation to the offering of its
products and services in Australia that makes it difficult for the company to make
sure that it sustains its profitability in the market while offering its products and
services. The company has to make necessary changes in its products by making
them more environment friendly and reducing its overall carbon footprint while
offering them in Australia (Morgan, 2017). Furthermore, Royal Dutch Shell has a
strong presence in the Chinese market, and its products and services which are
offered in China are affected by the FTA formed between Australia and China.
ChAFTA (China-Australia FTA) is an agreement that is formed between the two
countries which reduce regulatory compliances for foreign companies along with
tariff and duties which are imposed otherwise. Thus, it affects the products and
services of Royal Dutch Shell by making it easier for the company to offer them in
both markets without dealing with stricter laws (Wang, 2017). The company also
saves its costs in exporting and importing due to a reduction in tariff and duties which
reduces the prices of its products and increasing profitability of the company.

8
References
Bray, M. and Stewart, A. (2013) From the arbitration system to the Fair Work Act: the
changing approach in Australia to voice and representation at work. Adel. L.
Rev., 34, p.21.
EY. (2018) 2018 Worldwide VAT, GST and Sales Tax Guide: VAT, GST and sales
tax rates. [Online] Available at: https://www.ey.com/gl/en/services/tax/worldwide-vat--
gst-and-sales-tax-guide---rates [Accessed 26/04/19].
Freudenberg, B., Tran-Nam, B., Karlinsky, S. and Gupta, R. (2012) A comparative
analysis of tax advisers' perception of small business tax law complexity: United
States, Australia and New Zealand. Austl. Tax F., 27, p.677.
Macdonald, A. (2016) Shell Australia prepares to cut Queensland jobs after BG
takeover. [Online] Available at: https://www.smh.com.au/business/shell-australia-
prepares-to-cut-queensland-jobs-after-bg-takeover-20160215-gmuqyb.html
[Accessed 26/04/19].
Morgan, W. (2017) Coal comfort: Pacific islands on collision course with Australia
over emissions. Pacific Journalism Review, 23(1), p.25.
Mulley, C., Nelson, J., Teal, R., Wright, S. and Daniels, R. (2012) Barriers to
implementing flexible transport services: An international comparison of the
experiences in Australia, Europe and USA. Research in Transportation Business &
Management, 3, pp.3-11.
Nehme, M. and Adams, M. (2012) Section 18 of the Australian Consumer Law and
environmental issues. Bond L. Rev., 24, p.30.
Niforou, C. (2012) International framework agreements and industrial relations
governance: Global rhetoric versus local realities. British Journal of Industrial
Relations, 50(2), pp.352-373.
Reuters. (2019) Royal Dutch Shell PLC (RDSa). [Online] Available at:
https://www.reuters.com/finance/stocks/companyProfile/RDSa [Accessed 26/04/19].

9
Shell. (2019) About Us. [Online] Available at: https://www.shell.com/about-us.html
[Accessed 26/04/19].
Taguchi, H. (2015) 'Trade creation and diversion effects of ASEAN-plus-one free
trade agreements. Economics Bulletin, 35(3), pp.1856-1866.
Wang, H. (2017) The RCEP and Its Investment Rules: Learning from Past Chinese
FTAs. The Chinese Journal of Global Governance, 3(2), pp.160-181.