Status of International Commercial Law - Term Paper Example

 : INTERNATIONAL COMMERCIAL LAW   Table of contents    Introduction 2 International organizations 3 European Union 3 Organization for the Harmonization of Business Law in Africa (OHADA) 3 WTO negotiations on trade matters 4 UN Convention on Contracts for the International Sale of Goods 5 Model laws 6 United Nations Commission on International Trade Law (UNCITRAL) 7 International Institute for the Unification of Private Law (UNIDROIT) 7 UNIDROIT Convention on International Interests in Mobile Equipment 8 Hague Conference 8 Need of harmonization of Commercial laws 9 Methods of harmonization 10 Advantages and disadvantages of harmonization 10 Applicability of International laws in national level. 12 Case No: 1 Case C-94/02 P 12 Case No: 2 Case C-377/0 13 Conclusion 14 References 15     Introduction   It was after World War II that international trade grew greatly and along with it increased the significance of international commercial law. As the business increased between countries and companies through out different nations, the necessity of harmonized and organized commercial laws also become apparent. For transactional lawyer the information of international commercial laws become very vital even for those transactional lawyers outside most important metropolitan areas. It is only very recently that Lexis Nexis as well as the International Bar Association made a joint sponsorship on a survey among the attorneys of eight different countries that includes United States of America. The survey results disclose the facts that domestic laws are practiced normally and even then in certain areas the union of laws, mostly on trade as well as investment, is taking place. Most of the attorneys who took part in surveys thought that there will be benefits if international trade and investment law can be standardized.   This paper aims to study about the harmonization of commercial laws as well as guides and the necessity of such coordination. The paper begins with the intergovernmental or international organizations who are supposed to make such a harmonization of international commercial laws. Later on the important international treaties which have harmonized or tried to organize commercial laws, mainly the law of the sale of goods is identified. The role played by WTO in international trade and steps to be evolved by WTO in such an initiative in the aspect of developing countries is then discussed. Documents of World Trade Organization as well as GATT are also included in this paper. It also analyzes the advantages and disadvantages of such harmonization and also tries to present the way in which international institutions are treated by nations through case laws.   INTERNATIONAL ORGANIZATIONS   European Union One of the most important aims of the European Union is the synchronization of various private laws among its member countries due to the development of common internal market in European Union. The acquis communautaire recommends to European Union (“EU”) those laws to be adopted by European Union Member States. An important division of the acquis comprise of consistent commercial laws that acts as a tool in the development of the internal market. Thus occurred the harmonization of law of contract among member states of EU has took place thus by the channel of directions and set of laws, two forms of EU legislation. In 2003 the European Commission had laid down an action plan for the synchronization of law of contract within the EU1. The EU has made great achievement in this area and this Action Plan was a joint venture of all the Internal Markets, Enterprises as well as Health Protection and Consumer Affairs Directorates General of the European Commission.   The European Parliament in 1989 proposed for the first time the implementation of a European Civil Code2. It was through a Commission document that the European Commission responded to the call of Parliament3.   Organization for the Harmonization of Business Law in Africa (OHADA) OHADA is an intergovernmental organization which was shaped in accordance with the Treaty on the Harmonization of Business Law in Africa. This was in between countries like Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Comoros, Congo, Cote d’Ivoire, Gabon, Equatorial Guinea, Mali, Niger, Senegal and Togo4. This treaty produces the organization and configuration for the coordination of contract laws, securities, business organizations, bankruptcy as well as adjudication among member states. With Abidjan, Cote d’Ivoire as base a Common Court of Justice and Arbitrage, was formed for settling disputes. Several uniform acts on general commercial law was adopted in 1997 was drafted by OHADA and member nations. They are also getting assistance of Unidroit for drafting of Uniform Act on Contracts.    WTO negotiations on trade matters Escalating Globalization in world economy especially relating to trade as well as economy has caused marginalization of several developing countries at least in some areas of trade. WTO has come out as key institutional machinery which shapes global economic sector. WTO is supposed to ensure full fledged participation of developed countries in global trading through building vital capacity and thus enable them to actively participate in activities of WTO. From the Uruguay Round negotiations attitude of developing countries' towards WTO and GATT participation changed and a lot of developing countries cooperated very actively in the Uruguay Round negotiations as well as took membership of WTO. Thus developing countries become more successfully included in the global trading system and a number of them have turned out to be key exporters of produces. Trade policies were liberalized in many countries and were made favorable for an external course with lower protection. Importance of watching international rules while trading internationally was given due priority and also the need to preserve trading safety through effectual partaking in the actions of the new association. There have been considerable reductions through out recent year’s in trade policies as well as other barriers that restrain participation of developing countries in global trade. It is the lower barriers that have supplied to a spectacular shift in trading pattern of developing countries. Other than reliance on exports of commodities much greater dependence were given on services as well as manufactures. More than that export relations with other developing nations become more important. These transformations have reflective inference on the role performed by developing countries in the economic system and trade system of the world5. With the institution of the WTO additional demands were imposed on developing countries for increasing their participation in world trade. This is because WTO covers a diversity of areas like services, intellectual property rights etc that demands extra institutional capacity for member countries. WTO has been doing a number of discussions regarding liberalization in various sectors that demands active participation of member countries. One of the most important questions now is whether the representation of developing countries' is enough to pursuit effective participation by developing countries' in WTO’s activities and is it possible to promote the interests of such countries when new problems arise everyday? The membership data cover up the reality that developing countries in large number have been formally "inactive" at any point in time for not paying their dues to WTO for a period of not less than three years. This implies that such countries are not capable of receiving technical support from the organization and do not have any representatives of theirs chair WTO bodies and a number of privileges like the distribution of documents are also withholding of such countries(GATT/PC/7, L\7578).Some other developing countries who made arrears for one or more years were barred from chairing bodies of WTO. Thus, about one third among the total members barred from chairmanships. Among them twenty were least developed nations. Many countries in Geneva had only representation for name sake while fifteen countries had no Missions. UN Convention on Contracts for the International Sale of Goods   UN Convention on Contracts for the International Sale of Goods can be considered as the most victorious of all the treaties on contracts internationally as it is approved and adopted by more than 60 nations except United Kingdom and Japan. This treaty is often referred as CISG or UN CISG.    Model laws We can find several uniform laws among various subjects like law of Contracts, Restitution, Torts, Agency, Suretyship, and Conflict of Laws. The uniform Acts always aim to include legal harmonization as well as law reform. The new laws need to be capable of improving pre-existing law. Model laws aims only to inform and to present a model for consideration and never produces a statute that can be adopted as it is. For example Model Penal Code. In some cases, uniform laws have not been able to influence further enactments and in some other they have been helpful. The Uniform Commercial Code is one of the best examples for the pros and cons of uniform laws. This code was forced on commercial practice and has influenced the commercial law making of various countries. The Hague and Hamburg Rules on Sea Transport are samples of model laws of unification. This is in same field of international commerce. This is about sea transport or we can say that this is on goods carriage in ships. Shipping Act of 1916 led to establishment of United States Shipping Board now known as Federal Maritime Commission that regulates the interstate as well as international carriage of cargos in ships. Traders want a safe delivery of goods and carriers do not want to be held liable of any injuries to goods. Some countries have domestic rules favoring carriers while others have laws favoring traders. Domestic commerce law was the one law which was applied earlier but later this field demanded legal intervention and new legislation. Taxation issues like discrimination, charges of ports, price controls etc made the issue worse. Damage rules were likely to make carriers more liable6 and hence in 1893 Harter Act was enacted by the United States. This Act aimed to impose obligations mandatory for sea carriers. But other states were not ready to follow the rule and thus the law remained in effective. We can see several similar enactments like The Warsaw Convention on air transport with same effect. United Nations Commission on International Trade Law (UNCITRAL) One among such is the UN Commission on International Trade Law (UNCITRAL7). It is constituted by thirty-six official delegations that represent various national governments that are chosen on a rotating basis8 by the General Assembly of UN. It has a permanent secretariat for administration and for providing publicity. Most of its operation is through working groups with experts. Working group is selected on the basis of special assignments. They are to develop a draft for the projects that needs to get approval of member states delegates. Usually these projects undergo several revision before it gets final approval from member states and this at times takes several years itself. Annual conferences are held for reviewing and approving the performance of working groups. These delegates as well as working group are experts in international law and are not civil servants or politicians and are academicians or legal experts by profession. United Nations Commission on International Trade Law has drafted several conventions regarding commercial law dealings and has been known to be more productive ever after the end of the Cold War. From 1981 to 1991 UNICITRAL had approved only one convention and one model law while it has approved two conventions and four model laws from 1991 onwards and all together it has agreed seven conventions as well as five model laws9. International Institute for the Unification of Private Law (UNIDROIT) UNIDROIT is an international organization that began only as part of the League of Nations but later on in 1940 became an official international governmental organization. UNIDROIT now has got 59 members and ten formal conventions have been produced by it. Both Hague Conference on Private International Law (Hague Conference) and UNIDROIT operate almost like UNCITRAL. Representatives from the governments of these member sates holds conferences periodically for reviewing and approving works of task force. It has since now formed eight international conventions but with the acceptance of Contracts for the International Sale of Goods (CISG) two of them became obsolete. Most recent among the conventions adopted by it is the UNIDROIT Convention on International Interests in Mobile Equipment. For different unification projects and for CISG it has done background work also. UNIDROIT Convention on International Interests in Mobile Equipment UNIDROIT Convention on International Interests in Mobile Equipment of November 2001 is other wise known as the Cape Town Convention that came in to effect on April 1, 2004. This harmonizes secured transactions laws where the security includes mobile equipment. Those nations who have signed the treaty include the United States, France, Germany as well as the United Kingdom and all the nations’ together forms twenty five in number. Hague Conference This began in 1893 but it was only in 1955 that it took the character of a permanent institution. There are 45 members and its work is through task forces also known as special commissions. Their work report is given to member state delegates at their quadrennial diplomatic conferences. After World War II, 33 Conventions were promulgated and some of them were widely approved. Organization of American States as well as the European Union employ specialists at the regional level working groups for drafting multilateral conventions or to encourage harmonization of international commercial law. Several laws are drafted which affect goods carriage, intercontinental private litigation as well as intermodal transport. A project for harmonizing civil laws of its fifteen members was launched by European Union10. Convention on the Law Applicable to Contracts for the International Sale of Goods11. The1955 treaty of this convention was revised and a draft was made for complementing UN Convention of 1980 and this was on the International Sale of Goods (“UN CISG”). It is not in force as since now only four countries have accepted and signed this treaty. Some contracts were excluded by the UN CISG from its provisions. They are consumer contracts and contracts for aircraft. When the parties to a contract have not made specific selection of any governing law, this convention will be applicable to such contracts that are excluded from the UN CISG. Convention on the Law Applicable to Contracts for the International Sale of Goods, 510 U.N.T.S. 147 (1955). This convention was signed by twelve nations and it was in 1964 that it came into force. Need of harmonization of Commercial laws International traders are always demanding the harmonization of international trade laws and commercial laws as they believe this move to be helpful when there arises a dispute. For the same purpose several conventions and international agreements are also taking place. But most of these conventions and meetings end up with out making any great progress in the field. We can find that unification of international commercial laws will be beneficial for countries and traders who come into world trade and at the same time we can also see that such a move has disadvantages also. Most of the trades taking place between the countries is according to the domestic laws of those countries taking part in this. As domestic laws of each country are different it is very difficult for traders to start a contract for business as there are chances of dispute in any trade. But when there is a uniform law for regulating international trade and commerce there will be a law enforcing agency as well for solving the disputes. Unlike WTO or ECtHR the rulings of such an institution will be binding for the parties to contract irrespective of their domestic commercial laws. Methods of harmonization Harmonization of international laws will be done with the assistance of technical expertise. They will blend existing domestic commercial laws with those international rules to find a perfect law for trade and commerce. These laws will be caring enough about the accountability of those entering in to trade as they will need to have some voice in case of issues. There will be methods to punish those who violate the law and for those who comply with the law there will be provisions as well. There will be specialists help for making and implementing the law and this will have both positive and negative effect. Specialists in this field will be helpful to anticipate the issues that are likely to arise from this law and will help to identify the apt one for successful implementation. At the same time they will also help us to find out the complexity of each law by interpreting it and thus will help to specify the criteria for negative and positive effects of law. This will be helpful in making necessary adjustments while drafting legislation. But as there is no international parliament e can not hope to have electoral accountability for these laws. Only thing that can be done is to find the drafters from various countries that get maximum acceptance in the international regime12. But if there is a widespread rejection of legislation from various governments this unifies laws will not be successful. Yet another issue is that none of the international organizations will directly enact such an unified law and hence there won’t be any political accountability. But most of these bodies are engaged in drafting of laws in the form of treaties or domestic legislation for various national governments. Advantages and disadvantages of harmonization One of the most important and primary benefit of unification of international commercial law is effectiveness in management of legal risks. When there is a unified code for trade among international traders there will be a uniformity of rules applicable in each issue. Laws will be drafted keeping in mind the probable disputes that arise out of world trade. There will be a common court which is acceptable for both the countries or traders and there won’t be any dispute as to which law is applicable and to what extend one will be getting protection of law. There will be single jurisdiction and lawyers too will find it easier to solve the issues. When there is reduction of legal risk there will be more trade and even countries that does not possess much advanced domestic commercial laws will be able to trade with developed or developing countries. There will be uniformity of law applicable to traders irrespective of the nation which they represent. Yet another benefit is that unification and harmonization of commercial law is likely to substitute existing laws by better rules. These rules might enhance the economic welfare. There might develop a stream of laws that will increase trade between countries with out much effort. There will be more legal experts in this field who are capable of solving issues easily. Thus the traders will find it more easier in cases of dispute and this will in turn bring more clarity to laws of international trade. There won’t be domination from the side of developed countries or developing countries over less developed or least developed in trade matters as the laws will be equally applicable to all irrespective of domestic law. Along with the benefits come the disadvantages of harmonization. It is not possible to make a law which is acceptable to all the countries of the world. Even if such a law is drafted it might not be possible to apply it to the full extent. One might not be capable of for seeing all the possible issues that can arise out of a thing like international trade. More over if these laws are to be properly enacted there need to have a enforcement agency and that agencies decision must be acceptable to all. The lawyers who are interested in this field will have to study this new legislation as a whole and it will have to be made a part of curriculum in all member countries legal studies also. More over this law must be very precise and must include each and every aspect of the trade. Such a law which is very precise will be difficult to interpret. There is no prior interpretation of these laws even if it comes to effect and hence the legal authority who is bound to solve the issues will be bound to interpret each and every aspect of such anew law. The legal officers must be persons acceptable to all member countries which again is a difficult task to manage. Thus there are several constraints in harmonizing commercial laws though it is good if such a harmonization is possible with effective implementation. We can find below some examples of international law application by various nationals and how they treat an international court when a dispute arise. Applicability of International laws in national level. We can see that most of the national constitutional courts are not completely accepting international laws. It can be find that international courts like European Court of Human Rights and International court of Justice are not accepted as such by these constitutional courts. Case No: 1 Case C-94/02 P In Biret International13 the ECJ was to pronounce decision in an issue between a French company and European Community. The question of law was if the French company is having the right to claim compensation for the damages caused from violation of SPS Agreement from the Community14. The European Council has adopted directives prohibiting import of meat of those animals that have been treated with some specific hormones in 1988 (88/146/EEC)15 and 1996 (96/22/EC)16. Appellate body of the World Trade Organization (WTO) in January 1998 found these directives of European Council as breach of the SPS Agreement17. The plaintiff company claimed liability of damages from European Community according to EC Treaty as there was violation of WTO law. ECJ found that the claim for damages can not arise till the lapse of time period community has to implement Appellate body decision18. Case No: 2 Case C-377/0 In the case of Van Parys the ECJ held that there is no direct effect on legal order of EU by the decisions made by WTO dispute settlement system19. The case was about system established for import of banana by the EC. The system differentiates bananas imported from ACP States and non-ACP third states. WTO Appellate Body in 1997 found that according to some provisions of GATT the system established by EU was incompatible20. The plaintiff applied from Ecuador for banana import licenses in both 1998 and 1999, but only a certain quota was granted by Belgian authorities of the applied quantities due to some EC regulations. It was against this decision that Van Parys approached the court. They claimed that decisions were not compatible with laws of WTO and hence they should not be based on regulations of the EC. ECJ referred that there is no direct effect for World Trade law in EU legal order, and hence the decision of DSB too can not have similar effect21. The reason given by court for this was that the dispute settlement system of WTO is not a judicial system fully developed and if the decisions of DSB are given direct effect, the political organs of the EU will be deprived of their power of negotiation which is afforded by DSB’s procedural provisions22. Secondly , even some member states of WTO is against direct effect of World Trade law in their internal legal order as it is likely to deprive the EU of its political organs which is the considerable space for maneuver.23 Conclusion   Thus from the above case laws and various treaties and conventions we can find that the though there are several laws on international commercial matters there is no uniformity among them. It can also be noted that in various issues under European Court of Human Rights is not considered as an absolute or supreme authority by various Constitutional Courts and thus can not claim the status of an International Constitutional court. We can also find that though the Constitutional courts does not encourage jurisprudence of European Court of Human Rights to dominate their position or domestic law it is clear that the international court through its various decisions have gained much popularity and status even among individuals. Through its decision to entertain individual complaints the court has established a major role in interpreting and implementing commercial laws when ever there arise a dispute regarding the same. We can also find that WTO is regarded as supreme by its member states in issues of trade and thus occupies a major position in international commercial matters. This is the same in all matters including human rights interpretation also. It will be better to create a harmonization of all the international commercial laws for further development of international trade and this is more important for developing countries participation in world trade. 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