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International Business Transactions
University of North Carolina School of Law
Coyle, John F.

INTERNATIONAL BUSINESS TRANSACTIONS – COYLE – FALL 2016
 
Introduction
 
The Legal Framework for IBTs
Historically, we have had three different types of law: Public Int’l Law, Int’l Trade Law, Int’l Business Transactions
Public International Law
Public International Law is the system of laws governing the relations of nation-states, intergovernmental organizations, and, to a limited extend, the private conduct of individuals.
Diplomatic relations
Conduct of war, trade, and human rights
Law of the sea (Sharing of oceanic resources)
Public Constitutional Law/Customary International Law (CIL)
U.S. v. India
International Trade Law
In international trade, the focus is on compliance with mandatory public laws, and the party that one normally deals with is a governmental authority with regulatory and enforcement powers.
Basically, international trade law is nation states dealing with private industries.
Administrative Law
Ford Motor Company v. United States
International Business Transactions
In International Business Transactions (IBTs), the focus is on negotiating, structuring, and implementing transactions against a background of private laws that allows for bargains altering rights and obligations by contracts.
In International Business Transactions, private individuals are dealing with other private individuals.
There is no sovereign nation state involved in IBTs.
The closest analogy is contracts and maybe tort law
Hickory Furniture v. Peruvian Buyer
International Conflicts of Law and Choice of Law in IBTs
Choice of Law – Involves a procedural stage in the litigation of a case involving the conflict of laws when it is necessary to reconcile the differences between the laws of different legal jurisdictions (where treaties and statutes are not specified in the K, you may use the domestic law of the court where the dispute takes place).
For example, say you have a Canadian seller and a New York buyer, and the New York buyer is suing the Canadian seller for some reason.
You then ask, “which countries’ substantive law applies to this transaction?”
 
 
New York, United States
Ontario, Canada
Choice of Law Rules: Private International Law Rules
Apply the law of the place where the tort was committed
Apply the law of the place where the injury occurred
Substantive Law Rules
Comparative Negligence
Contributory Negligence
If π is 1% negligent, then she cannot recover just that part
The π cannot recover anything if she is even 1% negligent
$1,000,000 à ($1,000,000 x 99%) = $990,000
$1,000,000 à $0
 
 
 
 
 
 
 
 
 
 
 
 
 
< >  
 
< >Harmonize International Commercial Law – Geared towards reducing legal uncertainty in cross-border countries, which in turn reduces risks and lowers overall costs 
 
 
Examples of harmonized world:
 
New York, United States
Ontario, Canada
Choice of Law Rules: Private International Law Rules
Apply the law of the place where the tort was committed
Apply the law of the place where the injury occurred
Substantive Law Rules
Comparative Negligence
Comparative Negligence
In this case, it does not matter because both New York and Ontario have the same substantive rule. Therefore, it does not matter whose choice of law rules apply.
 
 
New York, United States
Ontario, Canada
Choice of Law Rules: Private International Law Rules
Apply the law of the place where the injury occurred
Apply the law of the place where the injury occurred
Substantive Law Rules
Comparative Negligence
Contributory Negligence
In this case, it also does not matter because both New York and Ontario have the same choice of law rule. Therefore, it does not matter what the substantive rules are.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
< >Legislative tools that may be used to harmonize the world:Creating a treatyIncorporating a model law (this is especially great if multiple countries join)You have these trade associations—and you give them money for projects—and what they do is create model contracts to be used by the countries in the trade association. They think of all the risks involved and whatnot.If these contracts become used enough within the industry, they sort of become universally used by all the countries.Harmonize in the contract itselfChoice of Law clausesTrade TermsIncoterms – A series of pre-defined commercial terms published by the International Chamber of Commerce (ICC).You write these magic terms into your contract and then it is incorporated into the agreement by use of the magic word.FOB, CIF, COFRestatement-like deviceThis is basically a book written by a law professor trying to restate the content of law in a particular area.Torts, contracts, etc.These are not binding; they are persuasive authority.The New Lex Mercatoria (“Law Merchant”) In medieval times, international conflicts of law did not arise in the modern sense because merchants in different European kingdoms employed common legal rules to resolve disputes. This body of law was known as the lex mercatoria.
 
Problem 1-3 – Joe has a burger joint he wants to start up in China. This burger joint stresses thrift in daily life and a return to the simple non-materialistic values of Rural America. What problems arise?
 
Fast food menu must be tailored to Chinese tastes
Supplies/Sources difficult to get
Declining demand in China of burgers
Blue Collar/No frills/Appearance and perception of the United States à positive or negative?
Competition (McDonalds, Wendy’s, etc.)
 
“Modest but steady” à Is this enough to warrant & fund expansion
 
 
 
< >International Economic LawThe European Union (EU) – A political, economic, and (partial) monetary union of 28 member states that have signed a succession of important international treaties delegating significant sovereign powers to pan-European institutions (standardized system of laws that apply in all member states).The historical beginnings of the EU go back to the end of the Second World War when Europe was considering how to recover from devastation and to prevent future European wars.The European Economic Community (1951) – This regional organization was created to bring about economic integration by its member states.The founding member states of the EC were Belgium, France, Germany, Italy, Luxembourg, and the Netherlands.They were soon joined by the United Kingdom, Denmark, and Ireland

eges or benefits to one nation. For example, if the U.S. is negotiating with Brazil and decides that Brazil is their friend and drops their tariff to 2% (when it was previously 5%), what is the principle that the most favored nation treatment says? It will give that same discount to Thailand and India as well. Everyone who is “in the WTO club,” will have the same “best deal.”Supremacy Clause – The U.S. Constitution establishes that when it comes to federal law and state law, the federal law always wins when there is a conflict.What happens when there are different sources of federal law and they are in conflict with one another?Constitution trumps statutes and treatiesStatutes and treaties trump state lawBut what happens when there are two statutes or two treaties in conflict?Although there is no textual answer because the Supremacy Clause does not provide an answer, Congress enacted the “last in time rule,” which states that both are equal, but the most recent statute or treaty wins.However, there is a wrinkle in this—not all treaties are equal.Self executing treaty – becomes judicially enforceable upon ratificationCan be used by people like you and me immediately when its ratifiedThe CISG is a self-executing treaty (everyone agrees on this!)Non-self executing treaty – becomes judicially enforceable through the implementation of legislationUseless until Congress says you can use itThe self executing and non-self executing treaties were irrelevant until 1945, when the Second World war ended when human rights treaties were frequently being promulgated. The problem was that, at the time, African Americans in the South were being treated horribly by the Southern government. The concern was, for the Southern senators, that if the U.S. were to ratify these human rights treaties and were self-executed treaties, then all the black people could use these treaties to challenge the laws that were made against them because the new treaties now trumps the old ones. Other than treaties, we have customary international law, which results from a general and consistent practice of states that they follow from a sense of legal obligation.Customary international law is much less important than 80 years ago because the number of treaties being written the past few decades have exponentially increased.We have genocide treaties, torture treaties, peace treaties, etc.In the field of IBT, people talk about the law of merchants (the lex mercatoria) as a form of customary law, however for our purposes it doesn’t really carry a lot of weight. A lot of these principles are already baked into our American legal system.