Ken Rosen
International Business Transactions
Fall 2017
Sources of International Law
International Commercial Law is a body of legal rules, conventions, treaties, domestic legislation and commercial customs or usages, that governs international commercial or business transactions. A transaction will qualify to be international if elements of more than one country are involved.
Lex mercatoria (from the Latin for “merchant law”), refers to that part of international commercial law which is unwritten, including customary commercial law; customary rules of evidence and procedure; and general principles of commercial law. Dates back to medieval Europe period. It evolved similar to English common law as a system of custom and best practice, which was enforced through a system of merchant courts along the main trade routes. It functioned as the international law of commerce. Characteristics are: (Speedy and Informal; Merchant Customs; Transnational; Equity driven.)
Custom-Columbia v Peru-Asylum case—A “constant and Uniform usage, accepted as law.”
International Orgainizations-
World Trade Organization
International Court of Justice-the primary judicial branch of the United Nations (UN). Seated in the Peace Palace in The Hague, Netherlands, the court settles legal disputes submitted to it by states and provides advisory opinions on legal questions submitted to it by duly authorized international branches, agencies, and the UN General Assembly. (The Hague, World Court)
UNIDROIT (formally, the International Institute for the Unification of Private Law; is an intergovernmental organization on harmonization of private international law; its projects include drafting of international conventions and production of model laws. As of 2017 UNIDROIT has 63 member states.
UNCITRAL (The United Nations Commission on International Trade Law) was established by the United Nations General Assembly “to promote the progressive harmonization and unification of international trade law”. (Gave us CISG)
ICC-International Chamber of Commerce.
Regional trade blocs are arrangements between States to enable parties to benefit from greater access to each other’s markets. European Union, North American Free Trade Agreement (Nafta) and Mercosur
Tips for being a great IBT Lawyer
Hazards of doing business with foreign entities-State contracts, expropriation, contract solutions, dispute Settlement)
Limitation of Risk- Negotiate, Buy Protection, Rely on Institutional limits.
Sale Transactions
Contracts
Issues with Contracts
Special contract clauses
Risk allocation is critical
Contract enforcement issues
Types of Contracts
Sales contract;
pro-forma invoice is a preliminary bill of sale sent to buyers in advance of a shipment or delivery of goods
Purcase order acknowledgement
Goods, price, estimated freight, insurance, customs clearance charges
Insurance contract
Freight contract
Bill of lading-
Letter of credit-(Third party bank/financial institution; Credit line; Documents seller must present to access credit line; Seller’s draft and letter presenting the draft)
Risk Allocation–(Price-delivery term (e.g., c.i.f.); Responsibility for each charge (fluctuation risk); Responsibility for loss/damage in transit; Timing of obligations; Force majeure; Choice of forum; Choice of law)
Can look to Incoterms-Which party pays specific costs (loading, freight, insurance, etc.) and bears the risk of fluctuation in the costs; Which party bears risk of loss/damage of goods in transit; When a party’s obligations arise (e.g., to pay)
Incoterms- Incoterms inform sales contract by defining respective obligations, costs, and risks involved in the delivery of goods from seller to buyer.
Insurance in international trade
Insurance against perils is an important aspect of international commercial transactions. In the event of loss or damage to cargo due to hazards during voyage, an insured party will be able to recover losses from the insurer. The type of insurance required depends on the mode of transport agreed between parties to transport the cargo.
The type of insurance contract depends on the Incoterm adopted by the parties in a sale contract. A CIF sale contract requires the seller to obtain insurance cover for the voyage. An FOB contract however places no obligation on the buyer or seller to obtain insurance, although it is prudent for the buyer to protect against potential losses. It is not uncommon for the buyer in a FOB contract to request the seller to arrange insurance on an understanding that they will reimburse the insurance costs incurred.
Bill of lading-Contract of carriage of goods
In the carriage of goods by sea, air or land, goods may be lost, damaged or deteriorated. The bill of lading is a contract of carriage between the seller, the carrier, and the buyer that acts as a receipt of transfer of goods and as a negotiable instrument. The bill of lading also determines rights and liabilities agreed between parties to an international sale contract. Also, reservations as to the quality and quantity of the goods are marked on the bill when accepting goods so as to stifle any accusations from the buyer of damage in transit. The seller retains ownership of the goods until the bill of lading is transferred to the buyer.
A bill of lading must be negotiable, and serves three main functions:
it is a conclusive cargo receipt, i.e. an acknowledgement that the goods have been loaded;[4] and
evidences the terms of the contract of carriage; and
it serves as a document of title to the goods,
How to use a Bill of Lading in the context of an International Sale by Carrier
Seller delivers goods t carrier in excha
tional sales lawyers must be cognizant of this.
Convention on the Intl. Sale of Goods (CISG)
Creation of UNCITRAL (http://www.uncitral.org)
–Areas of interest include arbitration, cross-border insolvency, international transport of goods, international payments, electronic commerce
-CISG-The United Nations Convention on Contracts for the International Sale of Goods (CISG) is the main convention for international sale of goods. Established by UNCITRAL, the Convention governs the conclusion of the sale contract; and buyer and seller obligations, including respective remedies.
–1980 CISG (The United Nations Convention on Contracts for the International Sale of Goods)
Effective 1988; Over 50 nations including U.S.
CISG Rules for private parties
Self-executing treaty
Part 1- Sphere of application and general provisions (1-13)
CISG-The CISG applies to contracts of the sale of goods between parties whose places of business are in different States, when the States are Contracting States (Article 1(1)(a)). Given the significant number of Contracting States, this is the usual path to the CISG’s applicability.
Application to Non-Contracting States-The CISG also applies if the parties are situated in different countries (which need not be Contracting States) and the conflict of law rules lead to the application of the law of a Contracting State. For example, a contract between a Japanese trader and a Brazilian trader may contain a clause that arbitration will be in Sydney under Australian law with the consequence that the CISG would apply. A number of States have declared they will not be bound by this condition. (USA decided not to adhere to this article.)
Applies to Commercial Goods/Does not apply to Sales-. The CISG is intended to apply to commercial goods and products only. With some limited exceptions, the CISG does not apply to personal, family, or household goods, nor does it apply to auctions, ships, aircraft, or intangibles and services. The position of computer software is ‘controversial’ and will depend upon various conditions.
Vary or Exclude CISG-“The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.”
