International Trade Law - Essay Example

Swarna Word count:2530 P.Swarnalatha ID # 5448 Order # 158109 23rd March 2007 International Trade Law Based on Trans-Oriented Marine Corp v. Star Trading and Marine , Inc 731 F. Supp.619(SDNY;1990) find, read and brief the Trans-Orient case and answer: : In 1983 Trans-Orient was granted a five-year exclusive agency agreement to represent the Sudan in the United States. Two years later, a military coup deposed the then head of state in the Sudan, declaring a state of emergency and suspending the constitution. A twelve-month transitional military regime followed, which was then replaced by a civilian coalition government. At that time, the name of the country was changed from the Sudan to the Republic of Sudan. In 1989, there was another military coup in which the present military regime overthrew the former civilian administration and suspended the constitution. During 1985, the Sudanese government sent letters advising Trans-Orient that a new agent had been appointed to represent the country in the United States. This termination of Trans-Orient did not provide the one-year termination notice required under the original contract. When Trans-Orient filed a breach of contract suit, the present Sudanese government asserted that it was not liable for the contractual obligations of the prior sovereign. Trans-Orient responded that neither the 1985 regime nor the present regime was a successor state, but that they represented mere changes in government which did not relieve them from the prior governments contractual obligations. a. What was the principal international law issue addressed by the court? The court mainly addressed about succession of state theory in deciding the present case while explaining the conditions under which the validity of any international contract stands (Trans-orient marine corp. v. Star trading & marine, inc., 1990). Whether a new administration may terminate the executory portions of its predecessors contracts is dependent on the succession of state theory. International law clearly distinguishes the succession of state, which may create a discontinuity of statehood, from a succession of government, which leaves statehood unaffected. It is also accepted that a change in government, regime, or ideology has no effect on that states international rights and obligations because the state continues to exist despite the change. However, in case, one sovereign succeeds another, and a new state is created, the rights and obligations of the successor are affected. While the successor state is permitted to terminate existing contracts originally executed by the former sovereign and a private party, the successor state is liable to that party for any amount due him as of the date of the change of sovereignty. b. what is the difference between a "succession of state" and a "succession of government"? The main difference is that succession of government means replacement of old government with new government by different means i.e. by democratic means or military force. It is in general formed through democratic elections. Where as the succession of state means the status of statehood remains unaffected even though it is ruled by different governments as long as it satisfies the principles of succession of state i.e. : (1) wholly absorbs another state; (2) takes over part of the territory of another state, (3) becomes independent of another state of which it had formed a part; or (4) arises because of the dismemberment of the state of which it had been a part. International law clearly defines the succession of state and declares that the international agreements can be given validity even though the succession of state occurs in any country. It also clarifies that succession of state has a clear cut distinction with succession of governments as the former shall not have any effect on international treaties. However, where one sovereign succeeds another, in the form of succession of governments, the rights and obligations of the successor are affected. If the contract is totally executory, the successor state is released from the contract entirely. ) Under the succession of state theory, a new state is released from liability on contracts that are totally executory when one sovereign succeeds another and a new state is created. The human rights treaties were also not affected by the succession of state at international level (Volkovitsch.,1992; Shaw,1994) where as the succession of governments would affect the international treaties remarkably. Similarly When the Democratic Kampuchea regime of Pol Pot was militarily displaced by the Vietnamese-backed Peoples Republic of Cambodia, the United Nations seat continued to be held by Democratic Kampuchea for many years. It also reflects that succession of states would not affect the international agreements as in case of succession of governements. c. What effect is there on contracts to which the state is a party? A careful study of the events that occurred in the Republic of Sudan makes clear that there has not been a succession of state. Arguments by the Sudanese government that the governmental transitions occurred by way of military coup as opposed to routine, constitutional processes are not persuasive. Treatises, as well as applicable case law, demonstrate that such features do not effect a succession of state (Czaplinski.,1990). Under this case, it is clear that succession of state was unaffected because there existed only succession of government. Hence the statehood is unaffected and hence the contract will have its applicability with out any change and the new government has to obey it. 2.Regarding Miller v. Rice, England, Court of Kings bench(1758) , English Report, vol. 97, p398(stolen bearer paper, I.E., bill of exchange or promissory note). Answer the following questions: Finney purchased a note, payable to bearer and drawn on the bank of England. He attempted to mail it to Odenharty, but it was stolen. The next day, Miller not implicated in the theft, came in possession on the note. Finney then applied to the Bank of England to stop payment on the note (due to robbery) and the bank agreed. Consequently, when Miller presented the note for payment, Race(a bank Clerk) refused payment. Miller brought this action to compel payment by the bank and was successful. a. What is bearer paper? A bearer Document or a bearer paper may be defined as a negotiable instrument, commercial paper, document of title, or security that is issued and payable or transferable on demand to the individual who holds the instrument (Whittington and Delaney, 2003). A bearer document authorizes the payment of funds or the transfer of property to the bearer when the bearer simply presents the document to the person, such as a bank or a shipper (Delaney and Whittington, 2002). It means that the bearer paper is a simple commercial paper for facilitating higher money transactions among different people operating through different financial agencies like commercial banks. The bearer paper has its origin in the most fundamental type of commercial paper i.e. a promissory note, a written pledge to pay money. A promissory note is a two-party paper. The maker is the individual who promises to pay while the payee or holder is the person to whom payment is promised. The payee can be either a specifically named individual or merely the bearer of the instrument who has it in his or her physical possession when he or she seeks to be paid according to its terms. A note payable to "bearer" can be paid to whoever presents it for remuneration. Such an instrument is said to be bearer paper. b. When would a bill of exchange be bearer paper? A bill of exchange may be a written instrument or document such as a check, draft, promissory note, or a certificate of deposit, that manifests the pledge or duty of one individual to pay money to another. A draft, important type of a bill of exchange, is a three-party paper ordering the payment of money. The drawer is the individual issuing the order to pay, while the drawee is the party to whom the order to pay is given. As in the case of a promissory note, the payee is either a specified individual or the bearer of the draft who is to receive payment according to its terms. The draft is made payable on demand or on a certain date. A common example of a draft is a cashiers check. Bill of exchange like commercial paper is ordinarily used in business transactions, since it is a reliable and expedient means of dealing with large sums of money and minimizes the risks inherent in using cash, such as the increased possibility of theft (Roszkowski, 2006). It may be an order paper in which the payee is specifically named or otherwise designated with reasonable certainty or it can be a bearer paper which is payable to whoever possesses the instrument and is therefore much like cash. The main intention of creation of bearer paper is facilitating easier transactions among different people. It may be concluded that a bill of exchange would be named as a bearer paper if the bill contains the word ‘bearer’ to whom the mentioned money has to be paid by the bank at any cost. It doesn’t matter who carries it as it is almost equivalent to cash. c. Why and when, was the bank obligated to pay? Had it been the order paper, the bank would not b payable have been obliged to pay to Miller as the order paper contains the specific name of the person to whom it should be paid. After confirming the identity of the specific person whose name appears on the order paper, the bank would pay the money. However the transaction instrument or bill of exchange under this case was bearer paper which had no specific name due to its nature and it contained only ‘bearer’ to whom the payment is intended. Hence even though Finney complained to the Bank of England, when Miller submitted the bearer paper, the bank was obliged to pay after initial resistance as the bearer or Miller took the advantage of the basic nature of bearer paper (Miller V Race, 1957). Hence even though the bank initially denied Miller for payment, as Miller forced the bank to pay him the money using the loopholes of bearer paper in his favor and went for the legal representation and he won the case in his favor. Hence the Bank of England was obliged to pay Miller. Similar type of situation had arrived in some other cases where people took advantage of the basic nature of bearer papers (Gilmore, 1954). 8- Pursuant to the instructions of the buyer, a Chicago bank issued its credit in favor of a bicycle exporter in Hong Kong covering “HPO 360 bicycles.” The operative credit was by cable, with no mail confirmation to follow. The Hong Kong bank confirmed. On receipt of the documents, the confirming bank paid the seller and forwarded the documents to the Chicago bank. On receipt, the Chicago bank rejected the documents, claiming that the invoices showed the merchandise as “NOOHPO 360 bicycles.” The confirming bank claims that the documents complied with the credit because the cable containing the credit called for “NOOHPO 360 bicycles”. Later, the banks realized that although the Chicago bank had sent the cable correctly (describing HPO360 bicycles), the Hong Kong bank had received the credit with the description “NOOHPO 360 bicycles.” Investigation revealed that the error was caused by sunspots affecting satellite transmission. Under the transmission agreement, the satellite company is liable only for $250. The confirming bank in Hong Kong seeks reimbursement. 1- What is the confirming bank’s argument? The confirming bank says that it has received the cable message reflecting the credit as NOOHPO 360 bicycles which has been complied with the invoice or documents submitted by the seller. Hence it has paid the credit to the seller and hence it has committed no mistake. It also argues that the agreement should be considered under international trade law which states that neither the nationality of the parties nor the civil or commercial character of the parties or of the contract is to be taken into consideration in determining the application of the international convention (United Nations Convention for the international sale of goods, 1980). 2- What claim does the confirming bank have against the beneficiary? The confirming bank claims for the reimbursement from the beneficiary because it argues that the beneficiary was held responsible for wrong display of company name as NOOHPO instead of HPO due to creation of sunspots which obstructed the satellite transmission. Moreover the transmission agreement states that the satellite company is liable for payment up to $250 only and hence the confirming bank seeks the complete reimbursement from the beneficiary. 3- What is the argument of the issuing bank in Chicago? The issuing bank or Chicago bank argues that it has sent the credit order with name of company displayed as HPO bicycles and the invoice submitted by the seller or beneficiary as forwarded by the Hongkong bank contained the name of company as NOOHPO bicycles and hence it rejects the payment to confirming bank. 4- What legal or ethical responsibilities do the buyer and seller have to each other and to the two banks? The buyer will have to pay the correct displayed amount to the seller provided the seller gives accurate information. In case the seller deviates from these principles, the buyer has the right to cancel the agreement or has the right to seek compensation. The banks act as only facilitators for the transactions between buyer and seller and they follow strictly the instructions given by the buyer and pay the accurate amount to the seller once the information provided coincides with the information given by the buyer. In case any deviation or manipulation occurs, the banks have the right to seek compensation from the persons responsible for manipulation. The article 30 of United Nations Convention on contracts for international sale of goods (1980) clearly states that the seller must deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract and this Convention. In this particular case the seller violated this article and other such protected clauses relating to the international trade law and hence can be punished under court of law. Hence the confirming bank has a solid chance to get back the compensation from the beneficiary. References: Czaplinski.,W. (1990). `State Succession and State Responsibility, 28, Can. Y.B. Intl L., 339-359. Delaney,P.R. & Whittington,O.R. (2002). Business law and professional responsibilities (Wiley CPA Examination Review). John Wiley & Sons publication, P: 512, ISBN-10: 0471438235. Gilmore. (1954). The commercial doctrine of good faith purchase. Yale.L.J.Publication, P:1057. Miller V Race. (1757). English report, 97, 398, 400-02. Roszkowski,M.E. (2006). Business Law: Principles, Cases And Policy. Stipes Publication. P: 1358, ISBN-10: 1588743500 Shaw, M.N. (1994). `State Succession Revisited, 5 Finnish Yearbook of International Law, 34, 84. Trans-orient marine corp. v. Star trading & marine, inc. (1990). 731, F.Supp., 619 (S.D. N.Y. 1990). http://www.kelley.iu.edu/icweb/events/Richards_handout.doc. Whittington,O.R. & Delaney,P.R. (2003). Business Law and Professional Responsibilities (Wiley CPA Examination Review 2003), John Wiley & sons publication, P :488, ISBN-10: 0471265039. United Nations Convention On Contracts For The International Sale Of Goods, 1980 (CISG). (1980). Part 1, Chapter 1, Article 1(3). http://www.jus.uio.no/lm/un.contracts.international.sale.of.goods.convention.1980/ Volkovitsch.,M.J. (1992). `Righting Wrongs: Towards a New Theory of State Succession to Responsibility for International Delicts, 92, Colum. L. Rev., 2162-2214. Read More