Harmonization of Commercial Law - Essay Example

?“Much of the effort directed at unifying [national laws that affect international commercial transactions] is unnecessary, and some produces rules that hinder rather than promote international business. These deficiencies are due.... to inherent limitations in the process that generates international agreements for national implementation. ...We ought to spend less time drafting rules to govern the substantive rights and duties of persons engaged in a transaction, and more on devising ways to encourage states to facilitate contractual choices made by parties in the course of transactions and in encouraging states to reveal how they propose to deal with private disputes arising out of international commerce.” Discuss. 1. Preamble Law is vital to dealing with any disputes that arise out of human interaction. Over the centuries, laws have been developed to facilitate human activities in myriad spheres including business and commercial transactions. In the earliest days such laws were generally confined to regional borders and other such boundaries where a single government had enough authority to enforce such laws. However, increasing human interaction necessitated the expansion of trade to beyond frontiers where any one government operated thus leading to a certain liquidity in international business and commerce. On the one hand such liquidity has helped businesses to grow and expand into newer markets and on the other hand these interactions have resulted in disputes that are not covered by the regular cover of law. The historical evolution of laws in various nations and cultures has meant that laws are differentiated around the world. Hence, national laws may not be able to provide legal cover in transnational and international commercial interactions. In order to deal with this problem there has been talk and action to develop a harmonised set of laws that govern international commercial transactions. Such law has been developed and practiced for centuries in various forms but has failed to iron out certain differences and technical issues such as the matter of enforcing international commercial law. Unfortunately much like international law in other spheres, commercial international law has failed to live up to expectations especially due to enforceability issues. In order to boost enforceability there has been a teeming move to harmonise such laws so that each nation or other such territorial or other such distinction has uniform laws. This approach to commercial international law has resulted in yet more unique circumstances than ever before. Nations and other such entities have begun framing laws to govern international commercial transactions which are merely similar in nature. It has been argued that these laws are more of a problem in themselves rather than a solution to the predicament at hand. The laws dealing commercial international transactions are seen to be inherently flawed in the manner that they are drafted and enforced in leading to more problems than before. In order to deal with this dilemma it has been suggested that the more appropriate approach would be to devise methods that would encourage states to draft and enforce private dispute laws in the context of international commercial transactions. The current approach relies heavily on delineating various rights, roles and responsibilities of parties involved in international commercial transactions rather than dealing with dispute resolution upfront. It has been suggested that international commercial law can be simplified if the enforcing government concentrates on dispute resolution than delineating rights because it would allow involved parties to make better contractual choices. This text will attempt to analyse this claim in relation to international commercial law by looking at how harmonisation is supposed to function in principle and how it is actually being used. The shortcomings in current law harmonisation techniques will be looked into fully including drafting and enforcing laws. This will be taken further into the context of patching up current shortcomings using a legal framework that deals more with dispute resolution and contractual choices. This will allow a more realistic evaluation of the current claim in order to discern a workable legal system that can produce results. 2. Introduction to Commercial Law In the simplest terms, commercial law refers to any set of laws that are used to manage business or commercial transactions. Commercial law typically spans both public as well as private law. Overall the domain of commercial law is huge and it tends to provide cover to corporate law, competition law, consumer protection, contract law, intellectual property law, international trade law, labour law and the like. The most generalised form of coding for commercial law is present through legislation at the regional or national levels. For example, the United States has slightly differing commercial law at work in various states while India has a uniform set of commercial law throughout its length and breadth1. Using consistently uniform commercial law ensures that contracting parties are fully aware of contractual roles, responsibilities and liabilities in the form of claims. Furthermore, it is simpler to access the areas of dispute resolution when a uniform set of laws is in use because involved parties know what to expect. 3. Attempts at Harmonisation of Commercial Law Over the years there has been an overwhelming move to harmonise commercial law in use in order to reduce the barriers to trade created by the use of differing legal frameworks. The North American example of this is the adoption of the Uniform Commercial Code that has been accepted and adopted for use in all the states of the United States federation as well as the dependent territories2. In a similar manner there is work being carried out in order to create similar uniform laws for the European Union region though there is hardly any implementation yet. The code in use by the United States is near uniform so that commercially interacting parties know what to expect when entering into various contracts with each other and the state or other governments (such as for regulatory stipulations). In contrast, the harmonisation of commercial law on the international front remains much of a dream as yet. There are a number of different laws that have been drafted and implemented over time but the poor enforceability of these rules makes them impracticable to an extent. When such international covenants are drafted, the larger and more dominant states and nations are able to lobby matters in their favour. Consequently, when such laws are drafted and then brought in for ratification, a number of nations choose not to ratify any such laws. This has the subsequent result of leading to international commercial laws that are not equal in different geographical regions. 3.1. United Nations Convention on Contracts for the International Sale of Goods (CISG) For example, it has been held that the United Nations Convention on Contracts for the International Sale of Goods (CISG)3 has been a success on many fronts4 but the fact that it has only been adopted by 77 nations so far reveals the real nature of its success. It has been held that ratification from 77 nations is a large feat in itself given that other agreements on international commercial law have been unable to achieve even these numbers. One of the largest strengths identified within the CISG has been the leverage allowed to exporters so that they can avoid choice of law issues. This means that in case a dispute does arise between contracting parties, the court will not have a hard time to determine exactly what set of laws to implement for delivering a judgement. Instead, the CISG offers these exporters “accepted substantive rules on which contracting parties, courts, and arbitrators may rely”5. Theoretically speaking the framework provided by the CISG seems very charming in that it allows a legal framework where there is little need to look for what laws to use6. Instead the bereaved party will be judged by a common set of commercial laws that are universally applicable throughout the ratifying nations from one end of the globe to the other7. However, practical implementation of such laws may differ purely on a case to case basis. For one thing, the CISG has been acceded to by a total of 77 nations (while the United Nations General Assembly has some 192 members) and out of these only 55 nations have chosen to accede without any reservations on the CISG draft. If these limitations are put into a broader perspective, it becomes clear that under half of the world’s nations have chosen to take to this convention on international commercial law and only some three fourths of those who accepted this convention did so without any reservations8. The more practical connotation of this fact is that when the CISG is taken to court, there are chances that the domestic courts in question may choose to forego this body of laws. In addition to the possibility of rejection by domestic courts, there are chances that the CISG may fail to provide the large legal cover that is expected of it. The failure to provide pervasive legal cover stems from the fact that the Convention is limited in its scope to forming contracts and delineating the rights and obligations of buyers and sellers alone9. It must also be kept in mind that the CISG represents the efforts of international legislators comprising nearly the entirety of the twentieth century. The very basic fact that drafters limited the scope of the CISG to a narrow area within international trade suggests that there are substantial challenges in formulating law which is internationally acceptable. It has often been suggested that the ratification of CISG by a significant number of contracting states and its observance in those states is a large achievement in itself. However, when most of these nations are looked at closely in terms of their legal frameworks and their evolution, it becomes clear that most of these nations share a common English common law heritage10. Yet surprisingly enough Great Britain is not a contracting state which leads to the belief that the ratifying nations come together partially due to common legal heritage and largely due to national interest. The ratification of CISG largely by nations with a common legal background indicates that the CISG may be geared to represent the interests of certain quarters better than those of others. Read More