Lectures of International Business Law (2014-2015)

Chapter A: First insight

International law = The body of legal rules and norms that regulates activities carried on beyond the legal boundaries of a single state.

International law deals with 3 kinds of relationships:

1. Between states and states
2. Between states and persons
3. Between persons and persons (private international law)

Public international law = The division of international law that deals primarily with the rights and duties of states and intergovernmental organizations as between themselves.

Private international law = The part of international law that deals primarily with the rights and duties of individuals and nongovernmental organizations in their international affairs.

(at least) 3 ways to look at international law:

• Cosmopolitans: international law based on universal human rights, should restrain states from violating norms based on universal human rights, consent of state is irrelevant.
• Positivists: focus on sovereignty of states. International law based on: (1)sovereign equality of all states in the international system (2) state consent to individual international law, either through treaties or customs. Only binding through contracts.
• Hobbesians: states will make agreements and abide by international law only when it suits their self-interests.

Comity = The practice or courtesy existing between states of treating each other with goodwill and civility.

Comity is an informal principle that nations will extend certain courtesies to other nations, particularly by recognizing the validity and effect of their executive. Under the doctrine known as comity, a court should decline to exercise jurisdiction under certain circumstances in deference to the laws and interest of another country.

State’s territorial basis for taking jurisdiction: if a business incorporated in one state operates a manufacturing facility in another state and violates the law of the other state, the other state will have the well-recognized power under customary international law to hear and decide a case against the foreign defendant.

Nationality jurisdiction: e.g. U.S. companies do certain acts in other states, they may still be held accountable in U.S. courts.

Different states in the international community function in the roles of both lobbyists and legislators. Under Positivist principles, international law comes into effect only when states consent to it. The general consent of the international community can be found in state practice.

State practice = the conduct and practices of states in their dealings with each other.

Statements or evidence of general consent can be found in the decision of the International Court of Justice (ICJ) in resolutions passed by the General Assembly of the UN, in lawmaking multilateral treaties and in the conclusions of international conferences.

The sources of international law are what courts and other international tribunals rely on to determine the content of international law. Article 38 of the Statute of the ICJ lists the sources: The Court, whose function is to decide in accordance with international law such disputes as are submitted to it, shall apply:

1. International conventions, whether general or particular, establishing rules expressly recognized by the contesting states
2. International custom, as evidence of a general practice accepted as law
3. The general principles of law recognized by civilized nations
4. Subject to the provision of Article 59, judicial decisions and the teachings of the most highly qualified publicists of the various nations, as a subsidiary means for the determination of rules of law.

This listing implies a hierarchy, an order in which these sources are to be relied on.

Treaty = legally binding agreement between two or more states

Conventions = legally binding agreement between states sponsored by an international organization.

Most of the customary rules that once governed treaties are contained in the Vienna Convention on the Law of Treaties(1980). Article 2(1)(a) of the Vienna Convention states that ‘Treaty’ means an international agreement concluded between states in written form and governed by international law, whether embodied in a single instrument or two or more related instruments and whatever its particular designation. This definition excludes certain agreements, such as oral promises, unilateral promises, agreements relating to international organizations, agreements governed by municipal law, and agreements that were clearly not intended to create a legal relationship.

Custom = a long-established tradition or usage that becomes customary law if it is (1) consistently and regularly observed and (2) recognized by those states observing it as a practice that they must obligatorily follow.

To show that a customary practice has become customary law, two elements must be established – one behavioural and one psychological.

1. Usus: a consistent and recurring practice. Evidence of such action can be found in the official statements of governments.
2. States observing the custom must regard it as binding. Opinio juris sive necessitatis: Maxim requiring a state to observe a customary practice only if it is one that international law requires the state to observe.

Even if the international community follows a practice and recognizes it as binding customary law, under some circumstances the rule will not apply to a particular state. This happens when a state persistently objects to a practice during its formative stages and thus never becomes a party to it.

Persistent objection: Active rejection of a customary practice from its first observance by other states.

This can also happen after a customary rule has become generally accepted, if a state is allowed by the international community to deviate from the general practice.

When courts are required to decide international disputes, they frequently rely on the general principles.

General principles = Principles of law common to the world’s legal systems.

There are only 2 highly influential legal systems for international law: Anglo-American common law system and the Romano-Germanic civil law system. The similarities of these systems provides courts with the general principles they can use.

ARTICLE 53 (Vienna Convention, 1986)

Treaties conflicting with a Peremptory norm of general international law (Jus Cogens)

A treaty is void if, at the time of its conclusion, it conflicts with a peremptory norm of general international law. For the purposes of the present Convention, a peremptory norm of general international law is a norm accepted and recognized by the international community of States as a whole as a norm from which no derogation is permitted and which can be modified only by a subsequent norm of general international law having the same character.

Jus cogens = A peremptory norm of general international law, recognized by the international community of states as a norm from which no derogation is permitted.

Jus cogens was developed under strong influence of natural law concepts. Natural law is the school of legal thought that emphasizes the need for statutes and constitutional laws to be based on universal principles.

At the same time, however, the contractual, consensual emphasis for international law is early seen in Article 38(1) of the Statute of ICJ. Article 38(1) lists conventions, customary general practice, and general principles of law. In the case of conventions, Article 38(1) requires their express recognition by the contesting states, it holds that customary general practice should be “accepted as law”. Moreover, the general principles of law should be “recognized”by civilized nations.

International Law in actual practice

International tribunals generally regard municipal law as subservient to international law.

Subservient = subordinate in capacity or function.

It is a generally accepted principle of international law that in the relation between states who are contracting parties to a treaty, the provisions of their municipal law cannot prevail over those of the treaty. Not only do international tribunals treat international law as the superior law, but they also regard states as having a general obligation to bring their municipal law into compliance with international norms.

If a municipal court determines that a certain rule of international law could apply in a particular case, the major question for the court is whether the international law has been “received” into the local jurisprudence. How the court will answer this question depends on whether the law is based on customary practice or is contained in a treaty.

In most countries, customary law is received in accordance with the doctrine of incorporation.

Doctrine of incorporation = Customary international law is part of domestic law to the extent that it is not inconsistent.

A minority of courts apply the doctrine of transformation.

Doctrine of transformation = Customary international law is applicable domestically only after it is adopted by legislation, court decision, or local usage.

The reception rules found in treaties depend on two factors:

1. The nature of the treaty: Treaties may be either self-executing or non-self-executing. Self-executing treaty = A treaty containing a term that says that it is directly effective within the signatory states upon ratification.
   Non-self-executing treaty = A treaty that requires state parties to enact enabling legislation before it becomes effective domestically. T
2. The constitutional structure of the ratifying state: Two kind of treaties:
   1. Constitutional treaties: treaties adopted according to the constitutional provision of the ratifying state.
   2. Executive agreements: treaties or international agreements entered into by a state’s executive without following the state’s constitutionally required ratification procedure.

Executive agreements and constitutional treaties that are non-self-executing are not effective domestically. To obtain effect, implementing legislation must be adopted.

International Persons

The personalities of international law are states (and their subdivisions), international organizations, businesses, and individuals.

State = A political entity comprising a territory, a population, a government capable of entering into international relations, and a government capable of controlling its territory and peoples. There are three kinds of states:

1. Independent state: A state that is sovereign; one that operates independently internationally.
2. Dependent state: A state that has surrendered its rights to conduct international affairs to another state. Dependencies of the US include Puerto Rico, Virgin Islands and various other islands located in the Pacific Ocean.
3. Inchoate state: Begun, but not completed; imperfectly formed or developed. E.g. American Samoa is an unincorporated and unorganized territory of the U.S., administered by the Office of Insular Affairs. Persons born in American Samoa are U.S. nationals, but not U.S. citizens.

Recognition =  Formal acknowledgement or acceptance by a government of the independence and sovereignty of a newly created state or a newly established government in another state, especially one established by revolution.

Once recognition is given, it implies that the recognized state or government is entitled to the rights and privileges granted by international law. Recognition of a government is different from a state. Two theories as guidelines for when a government should be recognized:

1. Declaratory doctrine: the legal existence of a state or government happens automatically by operation of law.
2. Constitutive doctrine: the legal existence of a state or government is dependent on recognition by other states.

It is important for a government to be recognized, because recognition implies that the recognizing government wishes to have normal relations. And recognized governments are entitled, among other thing, to diplomatic protection and sovereign immunity.

Estrada doctrine = Doctrine that foreign governments will not be explicitly recognized. Objective is to remain neutral in foreign controversies by rejecting the usual practice of states, namely “recognizing” foreign governments.

For a state to exist, it must have territorial sovereignty. This right may not be absolute, other states may obtain servitudes, either by treaty or practice.

Territorial sovereignty = The right of a government to exclusively exercise its power within a particular territory.

Servitude = A right to use of another’s property. May also be negative, they may prevent one state from doing something within its territory that causes injury to a second state.

Article X of the Helsinki rules adopted by the International Law Association:

1. A state must prevent any new form of water pollution or any increase in the degree of existing water pollution in an international drainage basin which would cause substantial injury in the territory of a co-basin State.
2. A state should take all reasonable measures to abate existing water pollution in an international drainage basin to such an extent that no substantial damage is caused in the territory of a co-basin State.

Water pollution = any detrimental change resulting from human conduct in the natural composition, content, or quality of waters.

To have territorial sovereignty, a state must first acquire territory. Is done is several ways:

1. By the occupation of land not claimed by another sovereign
2. By the voluntary transfer of territory from one sovereign to another
3. By the conquest and continued occupation of the territory of another sovereign

Once territory is acquired, a state’s title is affirmed either by the formal recognition of other states or by a process of estoppel.

Estoppel = Legal rule that one cannot make an allegation or denial of fact that is contrary to one’s previous actions or words. It arises when a state fails to speak up and object to another’s exercise of sovereignty when it would be reasonable to do so.

Successor states must observe treaties that implement general rules of international law, and they are bound by dispositive treaties.

Dispositive treaties = A treaty concerned with rights over territory, such as boundaries and servitudes.

The obligation of a successor state to observe other treaty commitments depends on how it acquires a territory:

• Merger rule: Legal rule that the treaties in effect in a former state remain in effect in its territory when it becomes part of a new state.This rule presumes that when two states merge to form a new state, the pre-existing treaties remain in force in the territories where they previously applied.
  two exceptions:
  • The new successor state and other states that are parties to a treaty with one of the predecessor states can agree to either terminate the treaty or extend it to the whole territory of the new state.
  • A treaty will terminate if its object and purpose can no longer be accomplished or if the conditions necessary to accomplish its object and purpose have radically changed.
• Moving boundaries rule: Legal rule that the treaties of a state absorbing new territory become effective within the absorbed territory. ( If territory from one state shifts to another).
• Clean State doctrine: Doctrine that a new state coming into existence through decolonization is under no obligation to succeed to the treaties of its former colonial power.
  When two states come into existence following the disintegration of a predecessor, the Clean State doctrine does not apply. According to Article34 of the Vienna Convention on the Succession of States in Respect of Treaties, both are bound by the predecessor’s treaties to the extent that they are applicable within each of the territories. (e.g. when Soviet Union broke up into 12 republics)

Succession of States: occurs when (1) two states agree to join and form a single state or (2) a state dissolves and its constituent states assume the role of independent states. Disputes between two sovereign states over state succession are not matter for municipal courts to decide.

Public property located within a territory becomes the property of the successor state.

International Organizations

According to the UN Charter, there are two kinds of international organizations:

1. Public or intergovernmental organizations (IGOs)
2. Private or nongovernmental organizations (NGOs)

Intergovernmental organization = A permanent organization set up by two or more states to carry on activities of common interest. It aims and objectives, internal structure, resources, and express powers are set out in a “constituent instrument” or charter.

Charter = A document outlining the principles, functions, and organization of a juridical entity.

For an IGO to have the legal capacity to deal with other international persons, it must be recognized. Generally, by becoming a member of an IGO, a state automatically recognizes the IGO’s international personality (not in UK).

Legal capacity = Qualification or authority, such as the qualification or authority to carry on international relations.

The most important IGO is the United Nations (25 Oct. 1945). The organs of the UN are:  

• The General Assembly is the main deliberative organ of the UN, it is a quasi-legislative body made up of representatives of all member states (193). It function is to discuss and vote on any question/matter within the scope of the charter.
• Security Council is made up of representatives of 15 member states, 5 are permanent (US, China, Russia, France, UK). It is responsible for maintaining international peace and security. Only UN organ with the authority to use armed force. Rule of “great Power unanimity or veto power: decisions on substantive matters require nine votes, including the concurring votes of all five permanent members.
• Secretariat is the administrative arm of the UN, responsible for making reports and recommendation to the General Assembly and Security Council.
• International Court of Justice is UN principal judicial body.
• Trusteeship Council has no longer a function.
• Economic and Social Council (ECOSOC) is responsible for promoting economic, social, health, cultural, and educational progress as well as respect for human rights.

The United Nations System is a group of autonomous organizations affiliated with the UN. These specialized agencies are autonomous organizations working with the UN and each other through the coordination machinery of the ECOSOC at the intergovernmental level, and through the Chief Executives board for coordination at the intersecretariat level. (see table 1.2)The WTO and Atomic Energy Agency have similar relationships with the UN.

European Union (EU) (1951) = An IGO that has as its goals the elimination of internal frontiers and the establishment of a political, economic, and monetary union.

Unlike the most IGO’s, the EU is endowed with supranational powers.

Supranational powers = powers surrendered by member states to an IGO. Such powers are superior to and pre-empt the laws and regulations of its member states. In exercising these powers, the organization may grant rights and privileges to the national of its member states, which those individuals may directly invoke.

This “supremacy principle” has two consequences:

1. The member states are required to bring their internal laws into compliance with EU law
2. EU law is directly effective within member states.

Main institutions of EU:

1. Council of the EU and the European Council
2. European Parliament
3. European Commission

Other important bodies: European Court of Justice, European Central Bank, European Economic and Social Committee, Court of Auditors, and European Investment Bank.

Council of the European Union = Representative of the member state governments and the co-legislative body (with Parliament) of the EU. It is the main decision-making body of EU

It is s made up of ministers, 1 from each member. Its role is to:

1. Adopt legislation in conjunction with the Parliament
2. Adopt an annual budget, also in conjunction with the Parliament
3. Adopt international agreements
4. Coordinate the economic policies of the member states.

European Council acts as the principal initiator of overall policy for the EU. It focuses on establishing general policies and goals for the EU, deals with urgent foreign policy issues through the common foreign and security policy.

European Commission = The administrative and executive arm of the EU. It represents the EU internationally. The tasks of the commission are to:

1. Ensure that EU rules are respected (can impose fines and take states to European Court of Justice)
2. Propose the European Council measures likely to advance the development of EU policies
3. Implement EU policies
4. Manage the funds that make up most of the EU budget

European Parliament = The co-legislative body (with the Council of the EU) and the main supervisory institution of the EU.  Three main roles:

1. Oversight authority over all EU institutions
2. Shares legislative power with the Council of the EU
3. Determines the EU’s annual budget in conjunction with the Council of the EU.

European Court of Justice = Supreme tribunal of the EU. Full court is in a Grand Chamber of 13 judges. Otherwise in Chambers of three or five judges. The full court will sit in “plenary sessions” for “contentious cases”. It hears 4 kinds of contentious cases:

1. Appeals from the Court of First Instance
2. Complaints brought by the commission or by one member state against another member state for failure of the latter to meet its obligations under EU law.
3. Complaint brought by a member state against an EU institution or its servants for failing to act or for injuries they may have caused
4. Actions brought by a member state, the council, the commission, or Parliament seeking the annulment of an EU legal measure.

Economic and Social Committee =  An EU consultative body made up of special-interests groups.

Court of First Instance = The EU’s trial court with jurisdiction over (1) disputes brought by private persons against EU institution and (2) employment disputes between EU institutions and their employees.

European Central Bank is responsible for carrying out the EU’s monetary policy.

European Court of Auditors = The institution responsible for supervising the EU’s budget.

IGOs can be categorized into two basic groups:

1. General IGOs that have competence in a wide variety of fields, including politics, security, culture and economics (like UN)
2. Specialized IGOs that limit their activities to a particular field.

Custom unions = A group of states that have reduced or eliminated trade barriers among themselves and have established a common external tariff. The success of custom unions (table 1.4) has been limited for several reasons:

1. The economies of member states tend to compete with, rather than complement each other.
2. Many of the member states only recently gained independence, they are reluctant to surrender that independence to a central authority.
3. Economic gains made within these unions have often been unequal, prompting those states that have not shared fully t become discouraged and withdraw.

Free trade area (FTA) = A group of states that have reduced or eliminated trade barriers among themselves but maintain their individual tariffs in dealing with other states.

Economic consultative association = A group of states that exchanges information, coordinates economic policy, and promotes trade cooperation. (e.g. OPEC)

Nongovernmental organization (NGO) = An international organization made up of organizations other than states. Includes non-profit and for-profit NGOs.

Nonprofit NGOs = An international organization that draws its members from among individuals and domestic organizations (sometimes including local governments, such as municipalities) who reside in two or more states. (e.g. Amnesty International).

For-profit NGOs are multinational enterprises (MNEs).

MNEs have acquired the authority to enter into international agreements with states and to sue states in at least one international tribunal. The right to sue a state is granted in the Convention on the Settlement of International Disputes between States and Nationals of Other States. It requires both the MNEs and the countries to resolve any disputes about their agreements using a mandatory mechanism of conciliation and arbitration.

Arbitration = The process by which parties to a dispute submit their differences to the judgment of an impartial third person or group selected by mutual consent.

The Rights of Individuals under International Law

International law looks upon individuals in two different ways: (1) ignores them, or (2) treats them as its subjects.

State responsibility = Liability of a state for the injuries that it causes to foreign persons. (traditional view).

Second way: Human rights = Basic rights intended to protect all people from cruel and inhumane treatment, threats to their lives, and persecution. (See table 1.5 for a comparison of the law of state responsibility and international human rights law)

Comparison of Municipal Legal Systems

Whereas international law governs relations between states, institutions, and individuals across national boundaries, municipal law governs these same person within the boundaries of a particular state.

Comparative law = Study, analysis and comparison of the world’s municipal law systems.

Comparative lawyers classify countries into legal families:

1. Romano-Germanic civil law
2. Anglo-American common law
3. Islamic law

Romano-Germanic civil law is the oldest and most influential legal family, commonly called civil law. Civil law = (1) The legal system derived from Roman and Germanic practice and set out in national law codes. (2) As distinguished from public law, the body of law dealing with the rights of private citizens.

Corpus Juris Civilis = Codification of Roman law completed about 534 A.D. at the order of Emperor Justinian that selected, arranged, and condensed the ancient laws.

Jus commune = Law based on Roman law, canon law, and the interpretations of glossators and commentators, and common to Europe at the beginning of the Renaissance.

Two national codes have been such widespread and lasting influences that they are no regarded as the basis of the modern civil law:

1. French Civil Law: Law code promulgated in 1804 by Napoleon that collected, arranged, and simplified French law.
2. German Civil Law: Law code promulgated in 1896 that is based on the Corpus Juris Civilis and is characterized by its detailed structure and its technical precision. Pandectists: scholars who attempted to prepare a pandect, or complete and comprehensive treatise or digest of the law, concentrate on the test of the Corpus Juris Civilis, with the aim of discovering its underlying principles and organization.

Although the French and German codes are different in style and tone, they are more similar than dissimilar. Both are based on the jus commune, in particular in their approach to the law of obligations and in their structure. They also rely on many of the same political and philosophical ideals, notable laissez-faire economics and the autonomous rights of individuals.

Separate from the codification of civil or private law was the development of public law.

Public law = constitutional and administrative law. It is not involved in the civil law codes.

The Anglo-American Common law system, generally called common law.

Common law = The legal system of England and countries that were once English colonies. It is based primarily on court-made rules or precedent. A fundamental doctrine of the common law: Supremacy of the law = doctrine that all persons, including the sovereign, are subordinate to the rule of law. Common law must also be distinguished from the law that evolved out of equity (principles of justice developed by the king’s chaplain, or chancellor to provide parties with a remedy when none was available in the kind’s courts) and out of admiralty (the law and court with jurisdiction over marine affairs in general). The common law’s basis in court decisions, distinguishes it from the Romano-Germanic civil law, where the grounds for deciding cases are found in codes, statutes and prescribed texts.

See table 1.6 for the general characteristics of the world’s two major legal systems.

The Islamic legal system is known as Shari’a.

Shari’a = The Islamic legal system. It is based on principles found in the Koran and related writings. It is derived from the following sources, in the order of their importance:

1. Koran
2. Sunna or traditional teachings and practices of the Prophet Muhammad
3. Writings of Islamic scholars who derived rules by analogy from the principles established in the Koran and the Sunna
4. Consensus of the legal community

The Shari’a is primarily a moral code, more concerned with ethics than with the promotion of commerce or international relations.

Chapter B: Dispute

Diplomacy = A form of international dispute settlement that attempts to reconcile parties to a disagreement by use of negotiation, mediation, or inquiry.

Formally only applied to disputes between states, but can be applied to disputes involving institutions and individuals, it is then called alternative dispute resolution.

Negotiation = The process of reaching an agreement by conferring or discussing.

Most important tool in in process of dispute settlement. Used to resolve and prevent.

Negotiations between states most commonly conducted on ad hoc basis, but sometimes more formal. In such cases, states negotiate through normal diplomatic channels, through the use of competent authorities, through the establishment of mixed or joint commissions, or through summit meetings.

Summit meeting can be an effective way to bypass the official bureaucracy of participating states.

Mediation = Bringing about a peaceful settlement or compromise between parties to a dispute through the benevolent intervention of an impartial third party.

Good offices = when mediators provide a channel of communications only.

Conciliation = The process by which an impartial third party makes an independent investigation and suggests a solution to a dispute.

Mediation can occur only if all the parties to a dispute consent to it. The mediator must be acceptable to both parties.

Inquiry = The process by which an impartial third party makes an investigation to determine the facts underlying a dispute without resolving the dispute itself.

It is an process used to determine a disputed fact or set of facts. It focuses only on a particular incident.

The Hague Convention for the Pacific Settlement of International Disputes of 1899 called for the use of commission of inquiry. The convention limited the use of inquiries to disputes “involving neither honor nor essential interests” of the parties, because the feared that it might threaten the national sovereignty. In 1907: second Hague Convention devised more extensive and less limiting rules for commission of inquiry.

Settlement of disputes in international tribunals
Settled in much the same way that a domestic dispute is settled.

Dispute between states or intergovernmental organizations (IGOs) may be able to take case to international tribunal, such as International Court of Justice (ICJ), a dispute resolution panel of the WTO or to arbitration. A dispute between a private person and a state or IGO, the case will normally end up in arbitration or in municipal court.

Arbitration between private persons and states or persons is commonly arranged through a permanent arbitration tribunal (or facility).

International court of justice

It is the principal judicial organ of the United Nations (UN), seated at the Peace Palace in The Hague since 1946.

Function: dual role: to settle in accordance with international law the legal disputes submitted to it by states and to give advisory opinions on legal question referred to it by duly authorized international organs and agencies.

Composition: 15 judges elected to nine-year terms of office by UN General Assembly and Security Council. Members are independent magistrates.

The UN Charter declares that all member states of UN are automatically parties to the

Statute of the International Court of Justice. Non-members may adhere to the statute when they agree to respect the Court’s decisions and to help cover the court’s expenses.

ICJ has the jurisdiction to hear two kinds of cases:

1. Those between states (based on the court’s contentious jurisdiction)
2. Those requested by organs or specialized agencies of the UN

The ICJ has no authority to hear cases involving individuals or entities other than those just mentioned.

Jurisdiction = The authority/power of a court or tribunal to hear a particular case or dispute.

Contentious jurisdiction = the power of a court to hear a matter that involves a dispute between two or more countries.

Before the ICJ can hear a contentious case, all of the states parties to the proceeding must have recognized the court’s contentious jurisdiction. Most commonly on ad hoc basis: parties to an existing dispute negotiate a special agreement to let the ICJ decide the case. Sometimes agreements made permanently by including it in a bilateral treaty.

Article 36(2) of the Statute of the Court: Optional Clause, allows states to make unilateral declaration recognizing “as compulsory ipso facto (by that very fact) and without special agreement, in relation to any other state accepting the same obligation, the jurisdiction of the Court in all legal disputes.

Unrestricted Optional Clause declaration are rare, most states have added a variety of restrictions on the kinds of suits they are willing to let the Court hear. (example American Optional Clause declaration p. 131)

Rule of reciprocity = A state has to respond to a suit brought against it before the ICJ, only to the extent to which the state bringing the suit has also accepted the jurisdiction of this court.

The ICJ has then the power to decide a case to the extent that both states have agreed to the same sort of matters.

Self-judging reservation = A reservation that allows a state to exclude from the jurisdiction of the ICJ any dispute that it determines is a domestic matter (Conally Reservation).

The ICJ’s  advisory jurisdiction exists so that the Court may give opinions about issues of international law at the request of UN or one of its specialized agencies. The Court will reject a request for an opinion, if it has the effect of making a state a party to a dispute without that state’s consent.

A case can be concluded in one of three ways:

1. If the parties tell the Court that they have reached a settlement, the Court will issue an order removing the case from its list.
2. If the applicant state withdraws it suit, the Court will order the case to be removed from its list.
3. The Court will deliver a judgment.

The decision of the Court has no binding force except between the parties and in respect of that particular case (Article 59). The court’s decisions have no precedential value. The parties to a suit, however, are bound by the Court’s decisions. “The judgment is final and without appeal' (Article 60).

There is no way to force a state to comply with a judgment. If a party refuses to comply, “the other party may have recourse to the Security Council, which may, if it deems necessary, make recommendations or decide upon measures to give effect to the judgment”.

The International Criminal Court (ICC) is an independent, permanent court of last resort that tries persons accused of the most serious crimes affecting the international community (e.g. genocide, war crimes, crimes against humanity and those assisting in commission of these crimes). The jurisdiction and functioning of the ICC are governed by the Rome Statute. The Rome Statute is binding only on those states that formally express their consent to be bound by its provisions. The court’s jurisdiction is not universal: (1) the accused must be a national of a state party or a state otherwise accepting the jurisdiction of the court. (2) the crime took place on the territory of a state party or a state otherwise accepting the jurisdiction of the court. (3) the UN Security Council has referred the situation to the prosecutor, irrespective of the nationality of the accused or the location of the crime.

A case will be inadmissible if it has been or is being investigated or prosecuted by a state with jurisdiction. If the investigating or prosecuting state is unwilling or unable to carry out the investigation or prosecution a case may be admissible.

World Trade Organization (WTO) = International intergovernmental organization responsible for implementing and enforcing international rules regulating trade between nations. The rules themselves are found in a wide-ranging collection of WTO agreements, including the General Agreement on Tariffs and Trade (GATT), the General Agreement on Trade in Services (GATS), and the Agreement on Trade-Related Aspects of Intellectual Property Rights. Each of these agreements has three main objectives:

1. To help trade flow as freely as possible
2. To achieve further liberalization gradually through negotiation
3. To set up an impartial means of settling disputes.

The WTO’s dispute settlement process is governed by the Dispute Settlement Understanding (DSU), which is an unified process that applies to all disputes arising under the WTO agreements. The DSU encourages member states to resolve dispute through consultation with each other. If a member fails to respond within 10 days of a request or fails to consult within 30 days, or within a period agreed upon, the requesting member can seek the establishment of a WTO Dispute Settlement Panel. Also, no solution reached within 60 days after request for consultation: complaining party can ask for establishment of a panel. Parties to a dispute may, if each of them agrees, seek the assistance of third parties in resolving their differences.

The organs charged with administering and carrying out the DSU are:

1. Dispute Settlement Body (DSB)
2. Dispute Settlement Panels (DSP)
3. Appellate Body

The DSB is actually the WTO General Council convened under its own chairman and following own rules of procedures. Responsible for establishing panels, adopting their reports and those of the Appellate Body, monitoring implementation of rulings and recommendations, and authorizing the suspension of concessions and other obligations in appropriate cases. Function of DSP is to assist the DSB by making an objective assessment of the matter referred to it, including the facts of the case, the applicability of and conformity with the pertinent WTO agreements, and by making findings that will help the DSB to make recommendations and rulings to resolve the dispute. 

The Appellate Body is an appeals board made up of seven persons, who should have expertise in law, international trade, and the subject matter of the WTO Agreement and it annexes. A panel decision may be appealed to the Appellate Body only by parties directly involved in a dispute.

Panel and Appellate Body reports adopted by the DSB are enforced by the DSB. The DSB is responsible for monitoring compliance.

The International Center for the Settlement of Investment Disputes (ICSID), created in 1965. Purpose is to encourage private investment in underdeveloped countries. ICSID is created to provide a reliable mechanism for impartially resolving disputes between investor and country of investment. The ICSID had an Administrative Council, a Secretariat, and two panels of experts. Council is made up of representatives of the states parties to the Washington Convention and chaired by president of World Bank. Council chooses Panel of Arbitrators and Panel of Conciliators from nominees submitted by states parties.

Arbitration = The process by which parties to a dispute submit their differences to the binding judgment of an impartial third person or group selected by mutual consent.

In order to establish the jurisdiction of ICSID to resolve a dispute, two conditions must be compiled with, the state wherein the investment is being made (the host state) and the state of which the investor is a national (home state) must both be:

• Parties to the Washington Convention, and;
• The investor and the host state must both consent to ICSID jurisdiction.

Furthermore, Art. 25 says that if proper consent has been given to establish an ICSID tribunal, then the tribunal can be set up even when the host state or the investor refuses to participate. Also, once consent has been given, it cannot be unilaterally withdrawn.

The litigants (i.e. the investor and the host state) may select any amount of arbitrators (amount must be odd) and may be any persons agreeable to the litigants; however the majority must be nationals of states other than the state party of the dispute.

 Arbitration Is usually held at ICSID’s headquarters in Washington D.C., but could be held anywhere as long as the institution has made arrangements with ICSID.  Giving consent to ICSID arbitration is deemed to exclude all other remedies.

An ICSID tribunal must have jurisdiction both over the parties involved and over the subject matter of the dispute. In order for a tribunal to have personal jurisdiction, the parties appearing before it must be a state party (incl. the state itself, its agencies and its subdivisions) and a national of another contracting state (can be either a natural person – a human being, or a juridical person – a legal entity created by national or international law, e.g. a firm).

Personal jurisdiction = The requirement that a tribunal must have power over the parties before it may hear a dispute.

In order for a juridical person to be a party to an ICSID arbitration, it must have had the nationality of a home state on the date the parties consented to arbitration.

Companies under the control of foreign nationals will also be treated as nationals of another contracting state if the contracting parties agree that they should be treated as such.

ICSID arbitration tribunals can only decide matters that are disputes that arise out of an investment. The requirement that there be a dispute means that ICSID tribunals will not decide collusive actions.

collusive actions = A suit in which the parties are not at odds but instead cooperate to obtain a judgment.

There are two terms not covered in the convention:

1. Legal dispute = A disagreement as to the existence of a legal right or obligation, or as  the nature and extent of the compensation due for the breach of such a right or obligation;
2. Investment= A commitment of money or capital in order to earn a financial return.

An ICSID tribunal has the power to recommend provisional measures to preserve the respective rights of the parties and to issue binding awards. Rewards issued by an ICSID tribunal are binding but not final; therefore, they can be review or revised. Appeal is also allowed to an ad hoc committee that has the power to cancel the award. ICSID awards are binding on the parties to an arbitration, and the states parties to the Washington Convention agree to comply with them. The courts of the states parties are forbidden to review the award, and the states themselves are obliged to enforce the pecuniary provisions of the award as if it were a final judgment of their own courts. To review an award, an investor can seek diplomatic remedies from its home state, and other states parties to the convention can protest as well.

Arbitration between private parties is not normally done on a purely ad hoc basis. More often, the parties agree in advance to resolve their disputes using existing guidelines set up by one of several international arbitration organizations.

Municipal courts (the domestic courts of various nation-states) are often called upon to settle international disputes. These can include crimes and torts where the wrongful act did not occur within the forum state or, if it did, where the defendant is not a national of the forum state.

Forum state = The nation-state in which the court, or forum, conducts its business.

Similarly, in contract cases, the contract may not have been made in the forum state or may not have been carried out there, or both. The jurisdiction of municipal courts is limited. Immunity = Freedom or exemption from a burden or duty, such as from the obligation to appear before a court. Natural and juridical persons have few immunities from the powers of a municipal court.

Jurisdiction in criminal cases are conducted in accordance with the international law principles where there is come connection, or nexus, between the regulating nations (the forum) and the crime or criminal. Four nexus have been raised by courts to justify their exercise of jurisdiction:

1. Territorial nexus: criteria that allows a court  to assume criminal jurisdiction over an offense that was committed within the forum state.
2. Nationality nexus: criteria that allows a court to assume criminal jurisdiction when the defendant is a national of the forum state.
3. Protective nexus: criteria that allows a court to assume criminal jurisdiction in cases in which a national interest of the forum state was injured.
4. Universality nexus: criteria that allows a court to assume criminal jurisdiction if the offense is one recognized by the international community as being of universal concern.

It is not enough that these nexuses exist; the connection between the forum and the person or activity also must be reasonable. Furthermore, the four nexuses are not mutually exclusive.

Jurisdiction in civil cases is based on either in personam or in rem principles.

In personam jurisdiction =  The power of a court or tribunal to determine the rights of a party who appears before it.

For natural persons, consent to jurisdiction can come about in any of the following ways: by the individual appearing in court after a suit has commenced, by a party agreeing to the personal jurisdiction of a particular court in a forum selection clause contained in a contract, or by a party appointing an agent within a state to receive service of process on his behalf. For juridical persons, legal entities created within a state are nationals of that sate – they are called domestic entities – and they may sue or be sued there.

Foreign entities, however, are amenable to the jurisdiction of another state’s municipal courts only if they are recognized in law as juridical persons and they give their consent.

A juridical person’s consent to the jurisdiction of a foreign court may be given expressly or it may be implied.

Forum selection clause is a provision in a contract designating a particular court or tribunal to resolve any dispute that may arise concerning the contract; this is an example of express consent. Consent will be implied if there are enough contacts between the juridical person and the foreign state. In determining if there are enough contacts, courts have to consider: whether the company has performed acts that relate to the forum state, whether the suit is based  on those acts, and whether the company has indicated by s conduct that it intended to rely on the benefits (such as doing business) of the forum state.

In rem jurisdiction = The power of a court to determine the ownership rights of persons as to property located within the forum state.

Sovereign states are immune from jurisdiction of foreign courts why they engage in activities anywhere in the world that are unique to sovereigns and when they act officially within their own territory. The first condition comes under the rubric of sovereign or state immunity, the second under the title of act of state.

Sovereign or state immunity = Doctrine that municipal courts must decline to hear suits against foreign sovereigns.

Absolute sovereign immunity = Rule that a foreign state is immune from all types of suits.

This rule meant that individuals and businesses that contracted to buy from or sell goods or services to foreign country would be unable to sue the country if the country breached its contract = unfair.

Restrictive sovereign immunity = Theory that a foreign state is not immune when the cause of action for a suit is based on conduct unrelated to the state’s governmental activities.

This theory says that a state is immune from suit in cases involving injuries that are the result of its governmental actions (jure imperii) but is not immune when the injuries result from a purely commercial or nongovernmental activity (jure gestionis).

When faced with civil suits involving parties acts or transactions from different countries, municipal courts are confronted with the problem of deciding which law to apply. Before the courts applied foreign laws, based on the idea of comity.

Although the obligation to apply foreign law exists today as a rule of law unto itself, its existence presents states with a difficult problem: how to decide which law to apply. Courts use choice of law.

Choice of law = Rules used by municipal courts to determine which state’s law they should apply in hearing a civil dispute.

The choice of law is a two-step procedure. First, if the parties to a dispute have agreed to the application of the law of a particular country, the court should apply that law. Second, if the parties have not agreed as to which law should apply (either expressively or impliedly), then the courts should determine for itself which law it should apply by:

1. Following statutory dictates
2. Determining which state has the most significant relationship with the dispute,
3. Determining which state has the greatest interest in the outcome of the case.

The agreement of the parties as to which law should apply most commonly is a factor in contract cases. By the use of a choice of law clause, the parties agree in advance as to what law should apply.

Choice of law clause = A provision in a contract designating the state whose law will govern disputes relating to the contract.

In civil law countries the law that courts will apply in a dispute when the parties themselves have not made a choice is found in statutory codes, or sometimes, in international treaties. These provisions are based on a concept known as the vesting of rights, and this approach to choosing the applicable law is called the vested rights doctrine.

Vested rights doctrine = Doctrine that courts should apply the law of the state where the rights of the parties legally become effective.

To determine whether particular rights vest, the codes provide fairly simple and straightforward guidelines. Beyond this, the courts look to the subject matter of the suit – such as delicts (legal offences, in civil law countries any private wrong or injury, or a minor public wrong or injury), contracts, or real property – and then choose the appropriate choice of law rule for the subject matter.

However, this is not the only way used by courts to determine the choice of law. Other ways are the most significant relationship doctrine and the governmental interest doctrine.

Most significant relationship doctrine = Doctrine that courts should apply the law of the state that has the most real connection with the dispute.

Governmental interest doctrine = Doctrine that holds that courts should apply the law of the state that has the most interest in determining the outcome of the dispute.

Courts that apply this doctrine will, first, make no choice of law unless asked to do so by the parties. If they are not asked, they will apply the law of their own state. If asked, they will then look to see which state has a legitimate interest in determining the outcome of the dispute.

Municipal courts are rarely required to exercise jurisdiction over cases involving international disputes. The doctrine used by common law courts to refuse jurisdiction is called forum non conveniens.

Forum non conveniens = Doctrine that a municipal court will decline to hear a dispute when it can be better or more conveniently heard in a foreign court.

The basic four-part test for the application of forum non conveniens is that the defendant will prevail if there is an alternative forum that is:

1. Available
2. Adequate
   And if:
3. Private interest factors and
4. Public interest factors point toward alternative forum

When a litigant bring suit in a foreign court, it sometimes happens that the litigant’s home country is opposed to his doing so.

Anti-suit injunction = Court order directing a person not to proceed with litigation in a foreign court.

Two different standards are used by courts to determine whether to issue an anti-suit injunction. The first requires a court to consider comity and to grant the injunction to protect its own jurisdiction or to prevent evasion of its public policies. The second allows a court to grant the injunction if the foreign proceedings are oppressive or if they will otherwise cause inequitable hardship.

Courts are held to know their own state’s law and international law, but not the law of foreign states.

Chapter C: MNE

A business with an agent or representative office in a foreign nation is generally not considered to be doing business in the foreign country. As such, the business would not be subject to the foreign nation’s regulations and would only be subject to taxes for monies earned there.

A license is a contractual grant of a legally recognized right. Franchising from one nation to another involves substantial elements of intellectual property: trade secrets and trademarks. Reasons to consider licencing intellectual property: (1) Transportation of goods across great distances is cost-prohibitive. (2) nature of goods themselves makes shipping by sea inadvisable. (3) Culture of host country is so different, local expertise is needed.(4) Host country has national laws that restrict import of finished goods.

Corporations and certain other companies are juridical entities that have legal identities separate from those of their owners. Separate legal identity has several important consequences. First, means that the liability of owners is limited to their investment in the company. Second, rights and benefits accruing the company belong to the company, not to its owners.

The simplest international operating structure is the nonmultinational enterprise: a domestic firm that operates internationally through independent foreign agents. Somewhat more complex is the national multinational enterprise, and the most complex is the international multinational enterprise.

Nonmultinational Enterprise
Foreign agent act on behalf of the domestic firm (principal) to either sell the  principal’s goods or services abroad (agent: sales representative) or to buy goods or procure services for the principal (agent: factor). Relationship is governed by an agency contract.

National Multinational Enterprise

An enterprise organized around a parent firm established in one state that operates through branches and subsidiaries in other states. A branch is an unit or part of the party, a subsidiary is a company organized as a separate legal entity that is owned by the parent.

International Multinational Enterprise

An enterprise made up of two or more parents from different states that co-own subordinate operating businesses in two or more states.

Representative offices, agencies, and branches do not create separate entities in the host country.

Representative office does not actually conduct business, it functions as a foreign contact point where interested parties can obtain information about a particular firm.

Establishing representative offices, agencies, and branches is advantageous, because they allow the parent to maintain direct control. The practice can be disadvantageous because: (1) the parent has to assume all of the risk of investing abroad (2) a foreign firm (or agent/branch) is often taxed at higher rates than local firms, (3) many developing states require local participation. Because of these advantages, MNEs set up subsidiaries, joint ventures and holding companies.

Subsidiary: independently organized and incorporated company.

Joint venture: association of persons or companies collaborating in a business venture for more than a transitory time period. Can be used to share risk and facilitate entry into foreign markets.

Holding company: company owned by parent(s) to supervise and coordinate the operations of subsidiary companies. Created primarily to establish a consolidated management team for a group of subsidiaries or group of subsidiaries of different parents and for tax advantages.

The Organization for Economic Cooperation and Development (OECD)-sponsored Convention on Combating Bribery of Foreign Public Officials in International Business Transactions is the main exception to the rule that international guidelines for ethical behaviour should be voluntary. The Convention requires states parties to outlaw the “active bribery” of foreign officials.

To the extent that a MNE operates within the domestic marketplace of its home country, the home country regulates it in the same way that national enterprises are regulated. The most important forms of national regulation include (1) regulation of competition, (2) regulation of injuries caused by defective products, (3) prohibition of sharp sales practices, (4) regulation of securities, (5) regulation of labor and employment, (6) establishment of accounting standards, (7) taxation. First three have been applied to activities that take place outside territorial boundaries of a state.

In US, principal law regulating anticompetitive activity is the Sherman Antitrust Act. Section 1: forbids combinations and conspiracies in restraint of interstate and international trade. Rule of reason used: rule applied by courts on a case-by-case basis requiring them to consider all of the circumstances in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition in violation of Sherman Act Section 1. Automatically illegal (per se violations) have become horizontal and vertical price fixing, horizontal market division and joint refusals to deal. No case-by-case rule by a per se violation.

Section 2: forbids monopolies and attempts to monopolize interstate and international trade. Applies to conduct of a single enterprise if enterprise is a dominant firm (power to control price and exclude competitors from market).

Clayton Act: expands the enforcement provisions of the Sherman Antitrust Act. Defines exclusive dealing and tying clauses, mergers that result in monopolies, and interlocking directorates as being unfair business practices.

Robinson-Patman Act: forbids price discrimination.

Treble damages: permits a court to triple the amount of the actual/compensatory damages to be awarded to a prevailing plaintiff.

The American antitrust law authorize a court to assume personal jurisdiction if a defendant has the contacts specified either by (1) Section 12 of the Clayton Act or (2) and applicable state long arm statute. Section 12 of Clayton allows a court to assume personal jurisdiction over an antitrust defendant who “transacts business” in the forum jurisdiction.

Long arm statue: A law defining the conduct of a foreign person within a state that will subject that person to the jurisdiction of the state.

The principal limitation of the assumption of personal jurisdiction by US courts is the federal constitutional requirement of due process. This forbids the court assuming personal jurisdiction unless a defendant has minimum contacts with the forum.

In essence, a court has jurisdiction only if (1) the defendant purposefully did business in the forum, and (2) the defendant reasonably could have anticipated that it would have defend itself there.

Minimum contacts test: a jurisdictional test required by due process that looks to see if a person had such contacts with a state, did business within the state, and could reasonably have anticipated that it would have to defend itself.

Two tests to determine whether a court has subject-matter jurisdiction in an American antitrust case. Effects test and jurisdiction rule of reason test.

Effects test: a jurisdictional test that subjects foreign businesses to U.S. anti-trust laws if their activities were intended to affect U.S. commerce and the effect was other than minimal.

Jurisdictional rule of reason test: A jurisdictional test that allows the U.S. courts to assume jurisdiction over a foreign business for violation of U.S. anti-trust laws if (1) the alleged conduct was intended to affect the foreign commerce of the U.S. (2) it was of such a type and magnitude as to violate the Sherman Act, and (3) as a matter of international comity and fairness, a U.S. court ought to assume extraterritorial jurisdiction over the matter.

Regulation Anticompetitive Behavior EU

The European Community Treaty contains two articles (81 and 82) that regulate business competition. Article 81: forbids competitors to enter into agreements to prevent, restrain, or distort trade. The following activities are expressly prohibited:

1. Fixing any trading condition, including price fixing
2. Limiting/controlling production, markets, technical development or investment
3. Allocation markets/sources of supply
4. Applying unequal terms to parties furnishing equivalent consideration
5. Using unrelated tying clauses.

Exception is made for agreements/practices that both contribute to improved production/distribution or technical processes and do not prevent competition in a substantial part of the market.

Article 82: forbids dominant businesses from taking advantage of their position to the detriment of consumers. Specific prohibitions:

1. Directly/indirectly imposing unfair prices or trading conditions
2. Limiting production, market or technical developments to the prejudice of consumers
3. Applying unequal conditions to equivalent transactions with different trading partners
4. Imposing unrelated tying clauses.

No exceptions.

Determining compliance with Article 81 and 82 is left solely to the European Commission, which can impose substantial fines in its own right. The rules apply to foreign firms to the extent that the firms’ activities have an effect on trade or commerce within the EU.

Blocking statutes are possibly the most forceful responses that states have made to

The extraterritorial application of American anti-trust laws.

Blocking statute = Law enacted in some states to obstruct the extraterritorial application of U.S. anti-trust laws y limiting a plaintiff’s right to obtain evidence or to enforce a judgment, and that allows a defendant to bring suit locally to recover punitive damages paid in the U.S.

These statutes have typically three features:

1. They limit the extent to which an U.S. plaintiff can obtain evidence or seek production of commercial documents outside of the U.S. for use in investigation or proceedings in the U.S.
2. They make it difficult for a successful plaintiff to enforce an U.S. judgment outside the U.S.
3. By virtue of a clawback provision, they allow defendants to bring suit in their home country to recover the punitive damages they paid in the U.S.

Torts and Products Liability Laws

Certain torts are deemed intentional. It means that a court may find that the defendant did not harm someone out of neglect or carelessness, but probably acted with an intent to do harm. Cases of assault, defamation, intentional infliction of emotional distress, nuisance are torts of intent.

Products liability = Liability of a manufacturer for the injuries caused by its defective products. Three theories are commonly relied upon to do this:

1. Breach of contract
2. Negligence
3. Strict liability

Breach by contract:

A seller’s obligation with respect to every sales contract is to deliver a product that is fit for the purpose for which it was sold. Failure to perform by delivering a defective product is a breach of both the seller’s obligation and the contract.  Two rules: privity and burden of proof.

Privity = A legal relationship sufficiently close and direct to support a legal claim on behalf of or against another with whom the relationship exist.

Burden of proof = The responsibility of proving a disputed charge or allegation (the plaintiff has to show that the seller was fault).

The seller can avoid liability by showing that the defect was due to some factor beyond the seller’s control or that the seller took reasonable steps to prevent the defect.

Liability for breach of the implied warranty not to deliver a latent defect is also a very limited remedy:

1. Privity restricts recovery to the immediate purchaser
2. The buyer cannot be aware of the defect at the time the product was purchased
3. The seller’s liability is limited to repairing or replacing the product.

Negligence = The neglect or omission of reasonable precaution or care. It is a more likely basis for imposing liability. A claimant must prove:

1. The existence of a defect
2. That the defect was the result of the defendant’s conduct
3. That the plaintiff suffered an injury
4. That the injury was caused by the defect
5. That the defendant breached a duty of care to the plaintiff

In common law countries there are two doctrines to make it somewhat easier for a claimant to meet the proof requirements.

1. Res ipsa loquitur: This excuses an injured claimant who can show that a product was defective when it left the hands of the defendant from having to prove that the defendant caused the defect.
2. Negligence per se: This excuses a claimant from showing that the defendant breached a duty of care in those cases where the defendant violated a statutory manufacturing or disclosure requirement.

Strict liability: Imposing liability on an actor regardless of fault. Significant limitation: the defective product must be “unreasonably dangerous”. This means that the claimant has to show either

1. That the product was dangerous beyond the expectations of the ordinary consumer
2. That a less dangerous alternative was economically feasible for the manufacturer to produce and the manufacturer failed to produce it.

In EU a common minimum products liabilities standard for all EU member states. It is similar to the strict liability theory used in the common law theories, but it doesn’t require the claimant to show that a defect is unreasonably dangerous. The directive provides:

1. A product is defective when it doesn’t provide the safety which a person is entitled to expect, taking all circumstances into account, including:
   1. The presentation of the product
   2. The use to which it could reasonably be expected that the product would be put.
   3. The time when it was put into circulation.
2. A product does not have a defect for the sole reason that a better product is subsequently put into circulation.

In U.S. two issues when deciding if jurisdiction can be exercised in a product liability case, personal jurisdiction and forum non conveniens:

Personal jurisdiction: Products liability is a creature of the laws of the individual states of U.S. rather than federal law. So personal jurisdiction must be found in the individual states’ long arm statutes. But a claimant must also satisfy the federal constitutional requirement of due process by showing that the defendant had minimum contacts with the forum.

Minimum contacts test allows a court to assume jurisdiction only if:

1. The defendant purposefully availed itself of doing business in the forum
2. The defendant reasonably could have anticipated that it would have to defend itself there

Forum non conveniens = Doctrine that a municipal court will decline to hear a dispute when it can be better or more conveniently settled in a foreign forum.  The factors considered are:

1. The private interests of the parties
2. The public interest factors

Sharp practices = Business dealing meant to obtain a benefit for a person/firm regardless of the means used (misrepresentation, bribery).

Foreign Corrupt Practices Act (FCPA) attacks sharp practices in two ways. First, it imposes accounting obligation on companies as a means of indirectly deterring bribery. Second, the FCPA makes it illegal for American companies, foreign companies registered with U.S. Securities, or their officers/agents/employees to knowingly bribe a foreign governmental official, a foreign political party official or candidate.

Host state regulation of MNE’s

The focus of host state regulation is not on making the local parent company responsible for the conduct of a foreign subsidiary, but on making the foreign parent responsible for the conduct of the local subsidiary. Leads to three types of investigations:

1. Whether a foreign company has consented to the jurisdiction of the host state
2. Whether a local firm is part of a common enterprise with a foreign firm, making both liable for activities of the local firm
3. Whether the independent corporate status of a subsidiary can be ignored so that liability can be imposed on its parent.

A company that incorporates or has its main office in a state is said to have expressly consented to the jurisdiction of that state.

A foreign company that applies to obtain a certificate to do business in a host state must expressly consent to the state’s jurisdiction as a condition of obtaining the certificate.

Distinction should be made between applying for certificate and setting up a subsidiary. Whereas the subsidiary is a local firm and therefore subject to the jurisdiction of the local state, the parent is merely a foreign shareholder that has not consented to the state’s jurisdiction.

Commonly, jurisdiction will be found if a company is, either directly or through an agent – carrying on a business, soliciting business, or engaging in any other persistent conduct related to making of a profit.

Common enterprise liability = Each member of a common enterprise will have liability for the conduct of the entire enterprise.

When individuals or companies function as part of a common enterprise, courts will treat them as if they were members of a joint venture/partnership, with each of them having joint or joint and several liability for the obligations of the enterprise.

For determining if persons/firms are members of common enterprise, look at intent of parties.

If the parties have not entered into a formal agreement creating a partnership/joint venture, the courts will consider several factors in determining intent:

1. Sharing of profits or losses
2. Sharing in the management
3. Joint ownership of the business

Pierce the company veil = An expression indicating that the legal fiction that a company is a separate legal entity will be set aside and the shareholders of the company will be held liable for tis conduct as if they were partners is a partnership.

Four circumstances under which courts will pierce the corporate veil:

1. Controlled company: the corporate states of a controlled company will be ignored if:
   1. Its financing and management are so closely connected to its parent that it does not have any independent decision-making authority
   2. It’s induced to enter into a transaction beneficial to the parent but detrimental to it and to third parties.
2. Alter ego company: if the company is not treated by its shareholders as a separate juridical entity. (If it is treated as the alter ego of the shareholders)
3. Undercapitalization: If the company has insufficient capital at the time it’s formed to meet its prospective debts or potential liabilities.
4. Personal assumption of liability: shareholder personally assume liability for the obligations of company. Especially common when company is new, small or marginally successful.

Lecture 1

Lecture 1 is incorporated in part 1.

Lecture 2

Overview of the lecture:

Methods of dispute resolution:

• Court –Jurisdiction. 2 types: civil and criminal

• Arbitration

• ADR

• Jurisdiction and immunity

• Applicable law

• International tribunals

• Recognition and enforcement of foreign judgements

Before going to Court, a company has to look at the impact it has on the business. Going to court means ‘going to the public’, this may affect your market share because everyone can see your ‘dirty actions’. Also, going to court is costly. A company has to consider what dispute resolution they want to use.

What will we do if things do not go according to plan?

E.g. a company is dealing with Thailand.

Do you want to go to a court in Bangkok? Likewise, your Thai partner does not want to go to court in Groningen. So you have to discuss this issue before problems arise.

You have to decide and put in the contract: Where do you want to court? And what will be the applicable law clause?

Standard clauses: used in the shipping industry usually in English law. So in case an issue, they go to the Court in England. It provides certainty.

Example: English company selling machines to a French trader. The machine is delivered and A wants to be paid. B says ‘the machine is not working, we are not going to pay’. A does not agree and decides to go to court.

‘’Do we go to France or to England?’’

Before going to court, you also need to look at the assets of the other country.

Suppose you win, does the other company have assets to pay you?

When it is not in the contract: Conflict of law (private international law = national/local law with an international aspect). Applicable law of example above.

Suppose English law applies. Sale of Good Act 1994 kicks in. It has some conditions that are ‘implied’. Implied means that you do not have to really write them into the contract.

Conditions of the Act are: product has to be of a satisfactory quality, and it has to be fit for purpose.

When is a good of a satisfactory quality?

That is a question that has to be answered by a court. Court says a good is satisfactory if it meets the standards a reasonable person/man would regard as satisfactory (will look at the description/ price of the goods)

Fit for purpose: Purpose was described by company B. The court will look at ‘is that machine really doing that?’ ♦All these conditions are implied by the Sale of Goods Act (between traders).

‘Caveat emptor’’: Buyer beware ‘. If you buy second hand car, you may expect that it is not working (between traders and buyers).

Jurisdiction: the power of a court to hear a particular case. The ground on which a court will take jurisdiction. 2 types: Criminal (based on types of nexus)and Civil jurisdiction.

Nexus: the connection the person has with the state where the court is

4 types of nexus:

1. Territorial nexus: place where the crime is committed determines jurisdiction. If the crime is committed in the territory without going out of the borders, this is where you go to court.

2. Nationality nexus: looks at nationality of person committing the crime to determine jurisdiction. A crime may be committed by a Dutch person in England, the Dutch court may still assume jurisdiction. Problems arise when you have 2 nationalities, then the Dutch go after me or the English ♦ the courts have to find this out together (double jeopardy)

3. Protective nexus: jurisdiction lies when national or international interest of the forum is injured. (When the national security is affected by a particular crime committed by a person from another country, for instance, political, currency, and immigration offenses)

4. Universality nexus: Courts have jurisdiction over crimes of universal concern, such as slavery an hijacking (very serious crimes)

Once a nexus has been found by a court, they must look at the criteria of reasonableness. Is the connection between the court and the activity of the person reasonable? They will look at the circumstances: the effect on the territory, the character of the activity.

They are not mutually exclusive, it may be that they use more nexuses (they overlap), So give a ground for your argumentation in the exam.

Civil jurisdiction

Rem jurisdiction: a thing is about deciding who owns a particular property (‘res’).

Advantages of in rem jurisdiction: the owner of the ship/ or the person who hired the boat does not have to be in the country. They will put a chain around it so the ship cannot sail -> time is money, so the owner will pay to get the ship move as fast as possible. The value of the ship is far greater than the value of that bit of cargo. (Jurisdiction over things, court decides who owns that particular property).

Personam jurisdiction: The power of the court to judge on matters concerning natural or juridical (such as companies) person ♦ they want to find the person who is responsible.

Person subject to in personam jurisdiction:

• Nationals of the forum

• Individuals present within the state

• individuals domiciled in the state

• individuals who consent to jurisdiction

Bumper case: deals with jurisdiction of a company and the issue of a court having to look at not just companies but also at other organisations.

So what happened in the Bumper case: a worker discovered a religious object in the fields while he was working. The object was very valuable and therefore, he sold it. The object was eventually bought by the Bumper company and had a document of origin (which was false). In order to get it cleaned up, they took it to the British museum in London. While the object was in the British museum, the police came in because in English law a stolen object has to be returned to the owner. The company took the police to court because the company had paid a lot of money for it. The persons of the Indian temple also went to court (were the claimant). The court had to decided if the temple was a legal person or not. So could the temple claim ownership in English law? In Indian law, a temple is recognised as a legal entity, but this was English law. The court of appeal relied on a distinguished writer who had stretch the limited application of the concept of legal entities.

This writer had also included church. So the court of appeal said: if you can include churches, we should also include temples.

(Read slide 7 for the case of Shell v. R. W. Struge, Ltd. (1995)):
Agreements contained both choice of law and forum selection clauses naming England.
A selection forum clause in an international agreement should be enforced unless:

1. Enforcement would be unreasonable and unjust

2. The clause was invalid for reasons of fraud

There was nothing to suggest that English law would be unfair or unreasonable ♦ the claim was dismissed.

Jurisdiction of the court extends to persons of flesh and blood and legal entities.

States are immune of jurisdiction of court ♦ absolute sovereign immunity (Jure imperii)

Restrictive immunity (Juri gestionis: activities carried out by a state as a commercial trader): states enter in commercial activities. Began to happen in the 19th century, they were acting as traders. It was not good for the state to say ‘we are running a company but we are a state, so immune for jurisdiction’. They started as a trader and they must end as a trader, so the state can be sued and has no sovereign immunity when it breaks contracts or wrongs (civil torts).

Torts: the obligation that the law puts on us. E.g.you are not allowed to talk badly about people to such an extent that it will affect their reputation (tort of deformation).

Case (slide9): The state had no immunity here because it carried out activities as a commercial trader according to Abbott. South Africans said it was absolute immunity ♦ the issue remained very unclear.

Applicable or governing law (slide 7)

Parties have to insert applicable law clause in the contract or express applicable choice to the court (it is clear from their activities that they want a particular to apply, then that law applies).

In the absence of no governing law clause, the court will have to look at the doctrine of the most significant relationship, intention and most interests.
For instance, in tort cases, they will consider the place of the injury (damage). Each case will be decided on its own. In real property cases, the location dictates. In contracting cases, the court will look at where the parties did negotiate.

The cases mentioned in the slides are relevant cases (have to read/learn them for the exam).

Forum non conveniens: a court will not assume jurisdiction when it is more appropriate to hear a case abroad.

Anti-suit injunction: it orders a person not to precede with a case. They do that to protect their own jurisdiction and to protect issues of public policy.

They may ask a expert witness when forum non conveniens. Because e.g. Dutch no Dutch and international law but do not know English law. In English law, foreign law (law from another country) has to be proven as a fact.

International tribunals (slide 12)

International Court of Justice: they do not represent their own countries (are independent)

2 types of jurisdiction:

1. Contentious cases (2 countries having an argument)

2. Advisory jurisdiction (If the U.N. can ask for an advisory opinion)

Acceptance of jurisdiction by a state:

• Special agreement

• Jurisdictional clause

• Declarations

• Security Council (it is there but it has not done much)

• Sources of law

Article 59 says the decision of the court has no binding effect on other cases but is the outcome between parties (concept of binding precedent). Common law: if a higher court says something, the lower court must follow that and cannot depart from the outcome of the higher court.

Article 60 says ‘this judgment is final and without appeal’. You take this outcome home and you live with it, you cannot go to another court with the issue. Most countries apply with the outcome of the international court of justice tribunals but a couple of countries have not done it (e.g. America).

International criminal court
It is an independent court, it has nothing to do with the United Nations etc. It was adopted in 1989. Its objective was to end impunity (= not being punished) of perpetrators of most serious crimes (=crimes against humanity, crimes of war).

Dispute resolution in public international law (also called diplomacy)
Diplomacy: a form of international dispute settlement that uses negotiation, mediation or inquiry.

Steps:

Negotiation: ad hoc or formal (talking about the issue)
Mediation: 3rd party, good offices (passing the information)
Conciliation: giving ideas, investigation and formal proposal
Inquiry: what happened exactly? This can be done by the International Civil Aviation Organisation (for example).

Arbitration: is a bit more formal than the steps above.

The advantages is that it is behind closed doors, so it will not be published and your competitors will not know about it.
Another advantage, you can say what you want (e.g. we want to do this as quick as possible), so it can be done quicker.

A disadvantage: it is difficult to establish precedent

2 features of arbitration:

• The contractual element: it is in your contract that you go to arbitration. Even if the whole contract falls apart, you will still have to go to arbitration (the clause for arbitration will stand)

• The judicial element: arbitrators must act professionally and must apply the law properly.

Lecture 3

Overview of the lecture
International Trade Law

• History general trade law

• General Agreement on Trade in Goods

• Objectives GATT

• Principles GATT

• Direct effect under GATT

• Exemptions under GATT

• Dumping and subsidies

Trade in Goods
1945- United Nations Charter; United Nations were established in Bretton Woods. Article 13 of that Charter is about international trade law. “The general assembly shall initiate studies and make recommendations on the purpose of promoting international cooperation (…)” The United Nations must be looked at from the Great Depression, which caused huge protectionist measures by countries. This resulted in a tariff law >> Need for deregulation, abandoning tariffs in order to positively influence world trade. That’s when the United Nations were established. Three pillars:

• International Monetary Fund > Maintain monetary stability and the facility of currency exchange

• International Bank for Reconstruction and Development (World Bank) > To assist countries that were damaged after the World War

• International Trade Organization > Objective is to reduce barriers and tariffs on trade

1947- General Agreement on Tariffs and Trade, replacement of the ITO

GATT 1947
Objective is to negotiate reducing import duties and to take away other obstacles/impediments to trade. Principles:

• Non-discrimination in respect of trade
  Article 1 of GATT : Most favored nation rule (once goods are outside the countries; each state applies the same rules to the contracting state) and national treatment rule (once goods are inside the countries) >> “Any advantage, favor, privilege or immunity granted by any member to any product originating in or destined for any other countries shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other members”

• Customs tariffs are the only barrier that can be used to limit importation

• Transparency on what countries do in terms of regulation

• Customs Unions and Free Trade Areas are allowed as long as they do not discriminate to non-members

• Certain charges on imports are allowed (Not very important, focus on the first four principles mainly)

Exemptions to Most Favored Nation rule : Counteract dumping (selling goods far below the market price) and Subsidies ; Customs Unions and Free Trade Areas (Know the difference between CU and FTA for exam, see below) ; Protection of public health or national security (a country stopping the importation of certain fruits for example that endanger the health of the population)

Free Trade Area = Tariffs among member countries are abandoned
Customs Union = Tariffs among member countries are abandoned and one same tariff to the outside word by members of the CU

Developing states under GATT need help, so the rules are less strict for them. South-south preferences means that developing countries (who are mainly from the south) can set their own tariffs.

The national treatment rule = Case 7.2- Japan and Taxes on Alcoholic Beverages.
Japan abandoned imports of vodka in favor of their own drink. Article 3(2) of GATT and the issue of like products.

Is this a like product? Court looked at the end consumers, who for both products were similar. Dispute panel told Japan to stop abandoning vodka. “The products of the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly to like domestic products”

GATT exemptions, protection of domestic industry is allowed in cases of;

• Critical shortage of food

• Quantitative restrictions on agricultural products

• Balance of payments safeguard

GATT rounds are negotiations on the terms of GATT (Know what was discussed and revised in rounds):
Kennedy Round 1954-1967
Tokyo Round 1973-1979
Uruguay Round 1986-1994 >> Most important one! WTO was set up here

WTO
WTO is an umbrella organization, an ongoing forum overseeing multilateral trade organizations. Remember functions of WTO.

GATT- direct effects
Provisions contrary to GATT or positive actions have direct effects
Case 7.1- Finance Ministry v Manufaturra Lane Marzotto
Is article 3 directly affected? GATT was implemented in Italy in the 50s, later on they decided to change a few things

GATT and exceptions
General exceptions on GATT hold when it matters the protection of public morals and the protection of human, animal and plant life.
Case 7.3- The Shrimp Case
The Americans went shrimp fishing, but instead of shrimp they caught turtles, which was a protected animal species. Law forced fishers who wanted to catch shrimp to use special nets that protect turtles, but this law wasn’t communicated properly with other countries. The panel argued that this law is not well implemented and communicated (ex-party).

Security exceptions are in case the security of a country is endangered in times of war for example.

WTO- Annexes
Annex = Regulations such as customs valuation (how is the price of goods determined?), pre-shipment (price and content of goods can be checked before they are shipped), or sanitary and phyto-sanitary measures.
Case 7.4- Australia, Importation of Salmon
Australia imposed higher importation tariffs on one fish than the other. In order to show Australia was inconsistent, it should be proven that Australia indeed did discriminate.

Anti-dumping code >> Article 6 of GATT treatment. Important!
Dumping = Brining in goods to another country below cost price

Dumping is not prohibited but action to counteract dumping can be taken. Proving dumping can be done with material injury; you have to show that dumping is taking place, you have to calculate the extent of dumping and how dumping is injuring your industry.

Subsidies and countervailing measures
Subsidies are given to make production and export cheaper. This is done by governments to boost exports, but it is prohibited under GATT >> The Agreement on Subsidies and Countervailing Measures (SCM Agreement). Specific subsidies may be allowed, actionable subsidies are prohibited.

Lecture 4

General Agreement on Trade in Services (GATS): main objective: regulation and liberalisation of trade in services.

The structure of GATS:

• Framework Agreement

• Sectoral annexes

• National schedules of specific commitments

The GATS Framework Agreement:

The scope of the Framework is all the trade in any sector. Governments are an exception to the scope of the Framework.

The Framework defines service and service sector ♦ GATS does not cover: labourers, permanent (domestic) employment laws and IPR

Modes of supply:

• Cross-border supply

• Consumption abroad

• Commercial presence

• Temporary presence

General obligations under GATS:

• Most-favoured-nation and transparency

• Difference with GATT ♦ MFN is les binding under GATS

• MFN exemptions

GATS and NAFTA:

• NAFTA deals in sectors

• NAFTA has 3 main service chapters: cross-border trade in services, telecommunications, and financial services

• NAFTA has 3 annexes

• NAFTA does not have 4 modes supply as in GATS

• NAFTA has a negative list (This includes sectors that are not covered and limitations that apply to them)

International Labour Organisation (ILO) ♦ is a UN specialised agency set up in 1919

• It is responsible for promoting international efforts to improve working conditions, living standards, and the equitable treatment of workers worldwide.

• It carries out its objective by issuing recommended labour standards, organizing conferences to draft international labour conventions, monitoring compliance with its recommendations and conventions, and providing technical assistance to member states.

So, objectives of ILO through:

• Conventions – consensus

• Recommendation - lack of consensus/detailing conventions

The settlement of disputes between intergovernmental organizations and their employees is covered by the ILO Administrative Tribunal.

ILO Administrative Tribunal: Special court that hears complaints from employees in the secretariats of the ILO and other IGOs. It does not have the power to order an IGO to undertake an action it has not begun on its own.

The basic principles underlying contemporary international labour law are found in the Universal Declaration of Human Rights and in the International Convent on economic, Social and Cultural Rights.

Intellectual property: : Useful artistic and industrial information and knowledge.

Intellectual property is split into two:

1. artistic property: artistic, literary, and musical works

2. industrial property: inventions and trademarks.

Intellectual property rights:

• - exclusive

• - no right to payment

The World Intellectual Property Organisation (WIPO): Intergovernmental organization responsible for administering the principal international intellectual property conventions.

The WIPO’s governing body, the General Assembly, is made up of representatives of state parties to the Stockholm Convention that are also parties to either the Paris or Berne Convention.

Rights of creators and rights of public need to be determined by IPR.

The objective of IPR:

• To safeguard creators by prohibition

• To stimulate innovation

Enforcement of rights:

Civil law: civil action (begun by a party)

Criminal law: begun by public prosecutor, tax office and customs officials

Criminal prosecution in Holland: fine or unpaid work

In the U.S.A.: jail sentence

Copyright: An incorporated statutory right that gives the author of an artistic work, for a limited period, the exclusive privilege of making copies of the work and publishing and selling the copies.

It regards to things that are tangible. Furthermore, it should be noted that a copyright does not stop someone else from taking their author’s idea(s).

The copyright law was originated from the past when printing was around. The Copyright Act was enacted in 1709, which protected authors without requiring them to obtain an individual grant from their sovereign. Later in 1886, there was the Berne Convention which required the signatory states to impose minimal formalities and to protect both pecuniary and moral rights.

Pecuniary rights: The right of an author to exploit a copyrighted work for economic gain. There are three kinds of pecuniary rights:

• Right of reproduction

• Right of distribution (but doctrine of exhaustion)

• Right of public performance

Moral rights: The right of an author to prohibit others from tampering with a copyrighted work.

Originality: Creative effort invested by an author in raw materials that gives them a new quality or character. It involves effort, skill, labour and judgment.

What is protected is not the idea or knowledge contained in the work, but the expression of the work.

Independent rights from pecuniary rights

• Right to prohibit others from tampering

• Right to be recognised as author

• Control public access

A trademark can be defined as a distinctive symbol that identifies its products or services. There are five types of trademarks:

• True trademark: a mark or symbol used to identify goods of a particular manufacturer or merchant.

• Trade name: a mark of symbol used to identify a manufacturer or merchant.

• Service mark: a mark of symbol used to identify a person who provides services.

• Collective mark: a mark of symbol used to identify itself to its members.

• Certification mark: a mark of symbol used by a licensee or franchisee to indicate that a particular product meets certain standards.

Trademark Law Treaty: Requires member states to establish common minimum rules to protect trademarks.

Acquisition of trademark: by use or registration.

Registration of trademark: only when there was no prior use, and the trademark is distinctive.

Lecture 5

Intellectual property rights and CISG

Overview of the lecture:

• Trademark and patent law (chapter 9)

• CISG (chapter 10)

Important case: Case 9 – 5: L’Oreal v eBay (2011) ♦ See slide 2 and 3 for outcome

Patent: An incorporeal statutory right that gives an inventor, for a limited period, the exclusive right to use or sell a patented product or to use a patented method or process.

Reasons for granting a patent:

• Patents are a confirmation of the private property rights of the inventor

• A patent is a grant of special monopoly to encourage invention and industrial development

Criteria for obtaining a patent:

• Newness or novelty

• Inventive step

• Being capable of industrial application

♦ See case 9 – 3 Monsato Co. v Coramandal

Refusal of patent:

• Failure to satisfy the criteria

• Offending public order or morality

• Under the Agreement of Trade-Related Aspect of International Property –possibility to withhold a patent

There are three kinds of patents:

1. Design patent: to protect new and original designs of an article or manufacture

2. Plant patent: for the creation or discovery of a new and distinct variety of a plant.

3. Utility patent: patent granted for the invention of a new and useful process, machine, article of manufacture, or composition of matter.

In addition, there is also a pretty patent: A statutory right given to the authors of minor inventions.

Actual patent contains:

• Filing date/priority date

• Date of granting

• Content of patent (abstract/drawings/description and claims)

International IPR organisations

Role of national law: Intellectual Property Rights creation of national law

Role of international law: setting guidelines

• Changes in international business – increase in copying techniques

• 1967 – WIPO

• Objectives of WIPO

The World Intellectual Property Organisation (WIPO) (1976): Intergovernmental organization responsible for administering the principal international intellectual property conventions.

The WIPO’s governing body, the General Assembly, is made up of representatives of state parties to the Stockholm Convention that are also parties to either the Paris or Berne Convention.

Council for Trade-Related Aspects of Intellectual Property Rights (Council for TRIPs): Organ of the WTO responsible for administering the Agreement on Trade-Related Aspects of Intellectual Property Rights. It consults with the WIPO.

Methods to transfer IPR:

• Go abroad and sell it himself

• Transfer rights

• Licensing agreement

• Franchise agreement

Patent pool: An agreement to share patents and other technology.

Multiple licensing agreement: A contract for the licensing of industrial property rights to two or more licenses.

Ingredients of a contract:

• Agreement: offer and acceptance

• Consideration

• Intention

• Form

• Capacity

• Genuine consent

• Legality

History of CISG:

The CISG came about in January 1988. The CISG supersedes two earlier convention, those are the Convention Relating to a Uniform Law on the international Sale of Goods (ULIS) and the Convention Relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF), which were never widely adopted.

CISG = a federal treaty and preempts all state laws

Objective of CISG:

• Promotion of harmonisation

• Unification of international trade law

The CISG is organised in four parts:

• the scope of the convention

• contract formation

• rights and obligations of buyer and seller

• ratification and entry into force

The scope of CISG is either that both of the states are contracting parties to the convention or the rules of private international law must lead to the application of the law of a contracting state. The CISG may be applicable to a certain case; however, either the contracting states or the choice-of-law rules are able to exclude (i.e. they may opt out) or modify its application by a choice-of-law clause.

See slide 16: Case 10 – 1: Asanta Technologies Inc v PMC Sierra Inc

• Requirements for opting out/what must parties do to opt out of CISG

• Terms & Conditions reflected an intention to opt out?

The CISG applies to contracts for the international sale of goods: a sale involving a buyer and seller with parties of business in different states.

When interpreting the words of CISG, the following must be considered: the international character of the convention, the needs to promote uniformity in the convention’s application, and the observance of good faith.

• The court may only use the plain meaning (rule). Plain meaning rule: A statute or treaty is to be interpreted only form the words contained within the statute or treaty.

• And a court may look into a statute’s legislative history to determine its intent, this is referred to as travaux préparatoires. Travaux préparatoires: The legislative history of a statute or treaty that is the negotiations leading up to its final drafting and adoption.

• Also the general principles should be looked at when making an interpretation of the convention – two suggested principles are that a party to a contract has the duty to communicate information needed by the other party, and parties have the obligation to mitigate damages resulting from a breach. General principles: Those principles underlying and common to a statutory scheme or treaty.

Article 8 of the CSIG establishes rules for interpreting the statements and conduct of the parties. There are two approaches for interpretation of the contract:

1. The subjective approach: Rule that contracts should be interpreted according to the actual intent and understanding of the parties at the time they made their agreement;

2. The objective intent approach: Rule that contracts should be interpreted according to the understanding that a reasonable person would have had at the time the agreement was made.

Article 8(3) of the CISG directs that “due consideration” be given “to all relevant circumstances” including:

1. the negotiations: The preliminary discussions leading up to the adoption of an agreement

2. the practices that the parties have established between themselves,

3. the parties’ conduct after they agree to the contract.

While Article 8(3) gives a court the flexibility to consider all relevant evidence, Article 6 allows the parties to “derogate from or vary the effect of any of the provisions of the court. Therefore, if the parties choose to adopt the parol evidence rule, they can do so. If this is not specifically done, then the court will look at all the relevant circumstances in the case.

Parol evidence rule: When a contract describes itself as being complete and final, preliminary or informal agreements made prior to or at the same time the contract was made will be ignored when interpreting it.

Article 9 of the CISG state that parties are bound by any practices which they have established between themselves.

Practices: the method of performance established between parties by their actions or conduct

Article 9(1) allows a court to consider any usages that the parties agree to, and Article 9(2) lets it consider a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by parties to contracts of the types involved in the particular trade concerned.

Usage: The customary method of performing or acting that is followed by a particular group of people, such as people within a particular trade.

A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirements as to form. It may be proved by any means, including witnesses.

The formation of the contract is when an offer to buy or sell a good is accepted – the parties are bound by its provisions.

Offer: A proposal by one person to another indicating an intention to enter into a contract under specified terms.

The offer is definite when there is clarity about the goods that are being offered with the quantity and price. Furthermore, an offer must be addressed to one or more specified persons. An offer becomes effective when it reaches the offeree, so before they are received offers can be withdrawn, which refers to revocation.

Revocation: Cancellation by the offeror of an offer.

The doctrine of consideration does not apply to CISG, however, the firm offers (an offer that the offeror promises to keep open for a fixed period of time) are enforceable.

A contract comes into existence once it is acceptance if given by the offeree to the offeror in whichever form he/she wishes (writing, speech, etc.); therefore, agreement to enter into a contract proposed by an offeror. Silence does not represent acceptance. Acceptance must be received by the offeror within the time period specified in the offer. If no time period is given, it must be done within a reasonable time.

(See slide 24, Case 10- 4: Filanto, SPA v Chilewich Int Corp.)

Breach of contract:

• Avoidance

• Specific performance

• Difference: common law and civil law

• CISG compromise

Sellers obligations

A seller is required to:

1. deliver the goods

2. hand over any documents relating to them

3. ensure that the goods conform with the contract

The seller will not be responsible for a defect that arises more than two years after delivery unless:

1. the seller knew or ought to have known or a nonconformity and did not disclose it to the buyer

2. the contract establishes a longer period of guarantee

Buyers obligations:

A buyer is required to:

1. Pay the price

2. Take delivery of the goods

Passage of risk: The point in time when the buyer becomes responsible for losses to the goods.

(See case 10-5 The Natural Gas Case)

Lecture 6

The CISG came about in January 1988. The CISG supersedes two earlier convention, those are the Convention Relating to a Uniform Law on the international Sale of Goods (ULIS) and the Convention Relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF), which were never widely adopted.

The objective of the CISG is the promotion of harmonization and the unification of international trade law.

The CISG applies to contracts for the international sale of goods: a sale involving a buyer and seller with parties of business in different states.

CISG = a federal treaty and preempts all state laws

The CISG does not define sales, it speaks of the seller’s and buyer’s obligations.

Sales: The exchange of goods for an amount of money or its equivalent.

Nor, does it define goods: a movable, tangible object.

-> For the purposes of CISG, goods do not include things bought for personal use or at an auction or foreclosure sale, nor may they be oceangoing vessels or aircrafts.

The CISG only deals with the formation of the contract and the remedies available to the buyer and seller. It excludes the legality of the contract, the competency of the parties, the rights of third parties, and liability for death or personal injury.

So, goods and contract law covered by CISG:

• Excluded: Illegality, competency of parties, rights of 3^rd parties etc.

• Included: formation of contracts, rights, and obligations of both buyer and seller.

When deciding an issue under the CISG a court must bear in mind:

• International character

• Promotion of uniformity

• Observance of good faith

Article 8 of the CSIG establishes rules for interpreting the statements and conduct of the parties. There are two approaches for interpretation of the contract:

1. The subjective approach: Rule that contracts should be interpreted according to the actual intent and understanding of the parties at the time they made their agreement;

2. The objective intent approach: Rule that contracts should be interpreted according to the understanding that a reasonable person would have had at the time the agreement was made

Article 8(3) of the CISG directs that “due consideration” be given “to all relevant circumstances” including:

1. the negotiations: The preliminary discussions leading up to the adoption of an agreement

2. the practices that the parties have established between themselves,

3. the parties’ conduct after they agree to the contract.

While Article 8(3) gives a court the flexibility to consider all relevant evidence, Article 6 allows the parties to “derogate from or vary the effect of any of the provisions of the court. Therefore, if the parties choose to adopt the parol evidence rule, they can do so. If this is not specifically done, then the court will look at all the relevant circumstances in the case.

Parol evidence rule: When a contract describes itself as being complete and final, preliminary or informal agreements made prior to or at the same time the contract was made will be ignored when interpreting it.

Usage: The customary method of performing or acting that is followed by a particular group of people, such as people within a particular trade.

A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirements as to form. It may be proved by any means, including witnesses.

Offer: A proposal by one person to another indicating an intention to enter into a contract under specified terms.

The offer is definite when there is clarity about the goods that are being offered with the quantity and price.

Avoidance: Notification by a party that he is cancelling a contract and returning everything already received.

A seller is required to:

1. deliver the goods

2. hand over any documents relating to them

3. ensure that the goods conform with the contract

A buyer is required to:

1. Pay the price

2. Take delivery of the goods

Force majeure

• Failure due to an impediment beyond his control

• Not reasonably taken into account at time of contract

• Unable to overcome impediment 

Trade terms: Standardized terms used in sales contracts that describe the time, place, and manner for the transfer of goods from the seller to the buyer.

The most used private trade terms are published by the International Chamber of Commerce, and are referred to as Incoterms. When making use of incoterms, it should be explicitly stated, otherwise the courts will apply the definitions used in their own jurisdiction.

4 categories of International Commercial Terms:

• E group

• F group

• C group

• D group

Duties of seller under FOB/CIF – passage of risk

Bill of lading:

3 functions:

• Receipt

• Evidence of the contract of carriage of goods

• Document of title

A bill of lading which is clean, indicates that the goods have been properly loaded on board the carrier’s ship; and a bill of lading which is claused, indicates that something is wrong between the goods loaded and the goods listed on the bill. This must be done at the time of loading.

Lecture 7

Incoterms (2010): Buyer and seller know:

• Who is responsible for the cost of transporting the goods, insurance, taxes and duties

• Where the goods must be collected and transported from

• Who is responsible for the goods during transportation

Force majeure clause: “In the event of any strike, fire or other event …preventing or delaying shipment of delivery of the goods by seller…..the unaffected party may cancel the unfulfilled balance of the contract…”

-> Purpose of force majeure clauses = to relieve a party from the contract when performance is prevented by a force beyond its control or when the purpose of the contract is frustrated….

Duties of the carrier:

A carrier transporting goods under a bill of lading is required by the Hague and Hague-Visby Rules to exercise due diligence, it has to:

• make the ship seaworthy

• properly man, equip and supply the ship

• make the holds, refrigerating and cool chambers, .... fit and safe.. for carriage

Carrier’s immunities from liability: e.g. .act of war, quarantine restrictions, etc.

A claim or loss or damages must be instituted within one year after the goods were or should have been delivered.

Third-party Rights (Himalaya Clause)

The Himalaya Clause is a term in a bill of lading that purports to extend to third parties the carrier’s liability limits established by the Hague and Hague-Visby Rules.

For the exam:

All important cases will be on nestor!

Important concepts for the exam:

1. Thought of neglicance

2. Neighbor principle

3. Thought of trespass

4. Burden of proof – in single cases (balance of probabilities, in criminal cases prove beyond reasonable doubt that X has done it!)

5. Thought of defimation (reputation of a company)

6. Pacta sunt servanda

7. Categories of international law

8. Comity

9. Starer defices

10. Jus cogens

11. Concept of usus ( common law)

12. Unilateral promises (case of Denmark – Norway chapter 1)

13. Doctrine of incorporation and transformation

14. Self executing treaty

15. Relationship of domestic law and international law

16. Supremacy of law (law is supreme – what does that mean?)

17. (Second lecuure buying second hand car – should have known this – buyer beware) Cavia mentor

18. Types of nexes

19. Civil jurisdiction

20. Alternative dispute resolution ADI

21. International court of justice – what jurisdiction do they got, what kind of president mechanism

22. Optional clauses and treaties

23. International criminal court

24. World trade organization : what does it doe, objectives, dispute resolution techniques

25. Chapter 1 : common law system : equity

26. GATT – what is it what does it do, is there a direct effect under gat?

27. Concept of dumping

28. What GATT does for developing states

29. Before the WTO we had the ITO (International Trade Organisation)

30. Principles of GATT and exceptions

31. Custom unions and free trade areas

32. General and security exceptions under GATT

33. Anti-dumping

34. Subsidies and countervailing measures

35. The structure of GATS – how does it work, commitments

36. Right of establishment and freedom to provide services in the EU

37. Similarities/ differences between NAFTA and GATS

38. International labour organization : objective/ structure / organization

39. Universal declaration of human rights – legal effect?

40. Intellectual property : copy right (categories and criteria)

41. Agreement of trade related aspects of property right – TRIPS agreement 498: 527

42. Exception to copyright protection

43. Types of patents : various types

44. Criteria for getting a patent

45. Inventions that are excluded from patent protection

46. 5 marks to identify producer and its goods

47. Acquisition of a trademark

48. And criteria of getting a trademark

49. Concept of know how

50. Methods for transferring IBR 81-82 articles : what do they do and the SHERMAN ACT in the USA and how are they applied are they the same is there a difference?

51. Non completion clauses

52. Tying clauses

53. Principles of contract law (Domestic level )

54. CISG– when does it apply when does it no apply – opting in and opting out )

55. Are sales and goods defined under the CISG? Some things are excluded

56. Competence of parties and illegality of a contract does the convention deal with this?

57. Preemption – concept – relation to this invention

58. Interpretation of the convention and the interpretation of the contract

59. Parol evidence rule

60. Practices and usages under the convention

61. Offers and acceptance of convention

62. Urgent situations: 580: buyer needs some goods 2 ways

63. Battle of the forms

64. Fundamental breach of contract – under the convention

65. Sellers and buyers obligations under the convention

66. Remedies for breach of contract

67. What are the excuses for non performance

68. The US legal concept of ‘’dirty hands’’

69. FOB/CIF, INCOTERMS (2010)

70. Common carriers

71. Bill of lading

72. Hague rules – what do they do

73. Himalaya clause

74. Privity of contract - what is it, how applied in different jurisdictions

75. Maritime leans