Harmonisation of International Commercial Law - Term Paper Example

Harmonisation of commercial law Since World War II, global trade has grown exponentially and this has caused increasing importance and emphasis on international law principles, with the need for harmonization in the laws becoming more apparent. The modern perception of the law of international trade has been defined by Schmitthoff, who stated: “It is a remarkable fact - as remarkable as the world-wide acceptance of the rule of law and the universal acceptance of corporateness - that the law of international trade shows a striking similarity in all national legal systems.”1 The notable aspect about international law is that it seeks to move away from the limitations of purely domestic law to a transnational perspective of international trade law. The increasing trend towards the arbitration of disputes or the use of other non judicial methods, has favored the application of international principles of law as opposed to nationalist legal principles2. This requires harmonization of national laws, or the convergence of national law systems, through elements such as judicial parallelism or commonality in domestic laws and rules, such as for example in the principles of contract law.3 The object of harmonization is to produce a unification of the law of different countries. Different kinds of legal instruments have been used to effect harmonisation, including European Community Directives, multilateral conventions embodying a uniform law and those not embodying a uniform law.4 Other examples of harmonization measures that have been traditionally applied are the 1980 United Nations Convention on Contracts for the International Sale of Goods, the UNIDROIT Factoring Convention and the English Sale of Goods Act. These are all examples of harmonization measures that may be classified as hard law. Harmonisation seeks to reduce the conflict in laws produced by different types of national laws and through the replacement of the many legal systems of different countries with a single, international legal instrument.5. But hard laws have not been effective in achieving unification in the law for a variety of reasons, including the limited scope of their application, coupled with a lack of political will to incorporate the international harmonizing measures within the scope of domestic law. Ineffective harmonization may actually increase the problems arising out of the conflicts of laws6. Hard laws have thus far proved themselves inadequate to deal with the complexities of harmonisation. In discussing the CISG and the UNIDROIT, Kronke for example, points out that there are various problem areas and gaps that may be identified in the terms for sale of goods set out as per Convention standards7. Some of these problem areas include standard terms, conclusion of contracts using an authorized agent, and effects arising from State intervention at various stages of a contract. Hence these laws also demonstrate some level of lack of clarity, similar to those generated in complex intergovernmental transactions. As opposed to this soft law measures such as the ICC Model Commercial Agency Contract, appear to be more effective in harmonization, addressing the potential conflict of laws for example, by clearly spelling out the manner in which disputes arising out of uncertainty of jurisdiction are to be settled. This study will undertake an examination into hard and soft law measures available for harmonization in order to determine which one is likely to be more effective in achieving the goals of harmonization. The future of harmonisation may not lie in creating new international Conventions which are no more than muddled multi-cultural compromises which have so far proved ineffective in effectively addressing international disputes. Soft law instruments such as the Principles of International Commercial Contracts and the Union Customs and Practices on Documentary Credits may be more effective. The thesis statement proposed in this study is: The future of harmonisation lies in soft law instruments rather than in existing hard law provisions such as Conventions. Outline of the Proposed study: I. Introduction: This section will consist of the background of international law and how the need for harmonisation measures have developed. It will assess developments after the two World Wars and the emergence of developing nations, as well as the steep rise in global trading. With the collapse in totalitarian systems and the rise in democracy, the provisions of international commercial law have also been introduced in the former Soviet Republics.8 Developments in international transactions favored the development of an international trade usage with its benefits being the use of “normative force through the conjunction of usus and opinion juris9 and was the subject of policy differences between countries10. II. Hard Law provisions: This section will undertake an evaluation of hard law provisions by examining measures such as the CISG or the Vienna Convention11. This was intended to bring about harmonisation in the area of international sale of goods; it is a system of international trading law that is compatible with both civil and common law.12 This section will also discuss CIF contracts CIF contracts, which are the most commonly and widely used kinds of contracts for sea borne commerce.13 It also includes freight14 and insurance.15 The drawbacks of hard law provisions will also de discussed in this section. For example, the CISG16 does not extend to sales contracts covered through an agent, assignment rights and limitation periods.17 Opt out provisions had to be provided to encourage business people18 to adopt the new regime.19 The widespread adoption of these laws is not conditioned by their inherent virtues, and there is no consensus on the issue of whether or not these laws constitute best practice, since most States have adopted them just to run with the crowd.20 England in particular has expressed its opposition to ratification of the CISG21. Some of the problems that have been identified with the Vienna Convention is that most legal practitioners understand Convention provisions in accordance with their own domestic laws.22 Kronke points out that there are various problem areas and gaps that may be identified in the terms for sale of goods set out as per Convention standards, such as usage of standard terms and lack of clarity.23 Other problems with hard laws include recognition and enforcement of judgments.24 III. Soft law provisions: Soft law consists of quasi legal instruments that do not have binding force, or whose binding force is weak25. This section will provide a description of the various soft law measures that have been put forward to deal with the limitations identified in hard law measures. Some of the measures discussed in detail will be UNIDROIT principles of International Commercial Contracts26 and Uniform Customs and Practices on Documentary Credits. Soft law measures have allowed for the emergence of a transnational commercial law, which is initially non binding, and only assumes legal force when the parties have accepted to be governed by it, thereby ensuring their full conformity with the law.27 Thus it enables social norms to be obtained and allows for the passage of time before they become binding. The UCPDC prescribes international standards for letters of credit.28 Universal rules applying to all letters of credit are the Uniform Customs and Practices, which are not the law in any country , yet they bind all parties to a letter of credit because they are incorporated in every letter of credit.29 Soft Law has some significant advantages over hard law30. As opposed to hard law, soft law measures are effective in that they allow for added flexibility from the parties – for example termination is dependent upon the initiative of the parties.31 Soft laws can lay the groundwork for treaty laws.32 Soft laws are also flexible and therefore easier to correct when errors in policy occur and they are able to fill up the gaps in hard law without the long drawn out process involved in treaty amendments33. Soft law also reduces contracting costs and threats to sovereignty and allows for greater flexibility in adjusting to global uncertainties.34 Conclusion: After the comparative study of hard and soft law, presenting the advantages and drawbacks associated with each type of legal arrangement, this study will then arrive at a conclusion preferring soft law principles over hard law. In a global environment of uncertainty where there are constant changes, there is a need for flexibility in the law. Soft law, being non binding, can be easily modified, hard law must go through a long drawn out process to achieve the same goal. Secondly, soft law takes into account the social content in different countries and allows for the development of a consensus or acceptance in each country before the laws gradually become binding in their force. In the event some provisions of the law are found to be unacceptable, they can be easily corrected and adjusted as needs indicate. Since harmonization of international law requires that a common framework of law be developed that will be acceptable to all countries adopting it and will be followed, soft law appears to suit the requirements better than hard laws can. Parties in various countries would have greater confidence and adherence to the law if commonly accepted principles are developed over time, rather than set out as binding instruments of hard law at the very outset. Read More