Domestic Trade vs International Trade - Assignment Example

International Business Law Name of Student: Student No.: Name of Supervisor: Date: Question 1: Domestic Trade vs. International Trade Introduction Information on commerce, capital flows and immigration are crucial for verification of the level of trans-Tasman incorporation. They also indicate to what extent government efforts at encouraging integration. There has been increased trade between Australia and New Zealand, both in terms of volume and value in recent times. Although the significance of each country’s trade accounts to the other is different in this time when CER has been in effect. This is illustrated in the graph below which shows an increase in merchandise exports from Australia to New Zealand in the wake of CER introduction, although this has since decreased to 3%. Imports from Australia to New Zealand peaked at 4% after introducing CER, but has declined in recent years. Nevertheless, New Zealand remains Australia’s biggest partner in trade in terms of value of imports and exports. On the other hand, Australia is New Zealand’s largest partner in trade. Figure 1: Trade of merchandise between Australia and New Zealand Domestic Trade vs. International Trade Even the most developed countries in the world are vulnerable to market sentiment changes. Furthermore, international bodies like the IMF are able to exert a lot of leverage on policies of smaller nations should the economy take a downturn. In addition, there is an excess of confidence among global policy makers when it comes to the composition of an advantageous economic policy. The emphasis of this neo-liberal model is free trade and free markets. The government’s role being restricted to regulation (Rodrik, 1999; 145-6). According to Rodrik (2008) a successful market is of necessity embedded within a bigger set of man-made regulations and structures of governance. Markets are in need of guidelines, stabilisation and legitimisation because they are incapable of doing so for themselves. Modern capitalism depends on various institutions that govern them such as political democracy. This means that the stability of Australian and New Zealand governments is necessary to sustain international trade. This gives a clue as to why domestic and international trade are different. There is a lot of emergent literature that records the negative influence that national borders have on trade volume. Beginning with McCallum (1995) who documented the first thread of research involving Canadian provinces and United States-level information which indicated that Canada did twenty two times more trade between two provinces than their trade with states in the US, while controlling for explanatory factors. Succeeding research has shown that domestic trade volumes have a tendency to be five to twenty times larger than trade on the international market. Some reasons for this trend includes national trade barriers which add transaction costs, varying standards and customs and differences in regulation. However, very few papers find evidence that this is so (Wei, 1996; Head and Mayer, 2000). Another explanation is that there is a combination of intermediate and final goods manufacturers which makes it unnecessary to trade across borders (Wolf, 1997; Hillberry and Hummels, 2000). These explanations are not mutually exclusive and could co-exist. Conclusion According to research, the border effects equal the product of two factors: the degree of substitutability between goods produced in various nations and the tariff equivalent of the border barrier (Wei, 1996; Hillberry and Hummels, 2000). Therefore, the fact that Australia and New Zealand share many regulatory guidelines, goes a long way toward assisting in the volume of trade they carry out. These guidelines help to eliminate the tariff barriers while the non-substitutability of goods and services from Australia to New Zealand especially in terms of coal, would account for the fact that Australia is New Zealand’s biggest trade partner. Question 2: Islamic Law Introduction As globalisation expands, there is increased interaction between Western and Eastern commerce (Canadian Department of Foreign Affairs and International Trade, Middle East and North Africa Trade Statistics, nd; United States Trade Representatives, nd). These transactions are evolving into ever more complex entities as opportunities expand beyond gas and oil exploration (Chung & Wallis, 2006). The Middle East has great geo-political and economic significance and therefore Western dispute resolution professionals and lawyers need to study the basics of Shari ‘a law (Abdal-Haqq, 2002; Domboli and Kashefi, 2005). This is because it is a source of law in many Middle Eastern countries and is one of the three main legal systems prevalent in today’s world (Ballantyne, 1988). It has been noted that successful international commercial arbitration is a function of religion and culture in the Middle East (McCary, 2000). The religious factor will influence the scope and nature of arbitration, law choice, appointment and liability of arbitrators, limitations period, public policy and evidentiary considerations, interest awards and enforceability of decisions (McCary, 2000). Where clauses on arbitration do not indicate the commercial principles that govern disputes, arbitrators will have to assess the foreign legal provisions and differences in culture in order to come to an equitable settlement. This is true for Middle Eastern cultural variations which will have to be put into consideration when interpreting any contract arrangement and negotiation (Ruis, 1985). Integration of Islamic Law Commercial arbitration is a fundamental private dispute resolution system which facilitates swift resolution compared to legal means (Redfern, 1991). It is the preferred option due to the flexibility it affords participants and helps obliterate uncertainties in selection of decision-maker, environment and the law that is applied (Jones, 1985). International commercial arbitration simply involves the arbitration between international players either between states or private parties (Permanent Court of Arbitration, nd). Arbitration is now the first resort in resolving international commercial disputes. The Islamic acceptance of arbitration can be illustrated by the Bahrain international commercial arbitration in Paris and London (Radhi, 1992). Until the 1950s, arbitration was the main method of resolving oil concession agreement disputes in Saudi Arabia (Saleh, 1984). In spite of this, the history of arbitration in the Islamic world is problematic (Brower & Sharpe, 2003). In the case of case Shamil Bank of Bahrain EC vs. Beximco Pharmaceuticals Ltd & Ors [2004] EWCA Civ 19 where the judge refused to consider Shari’a law applicable because it was not a national law. This illustrates the difficulty in applying this law to commercial agreements and emphasises the importance of arbitration as an alternative. While Shari’a influences the mindsets of a majority of Middle Easterners the actual law differs from country to country. The Eastern legal systems are loosely divided into three; those where Western laws are applicable such as Lebanon, Syria, Egypt, Bahrain, Libya, Morocco, Kuwait, Tunisia and Algeria. There are those with common law tradition which are Jordan, Sudan, the UAE and Iraq. There are those which are more completely drawn from Shari’a such as Saudi Arabia, Oman, Yemen and Qatar and the last group that have Western commercial laws but are impacted strongly by Shari’a ideology. This includes Libya, Jordan and Iraq (Comair-Abeid, 1996). Conclusion There is not so much clamour over the last decade on allegations of foul play during arbitration. When these occur in contemporary situations, the clamour involves demands for incorporation of Islamic legal tradition in arbitration (Mahsani, 1992). Professor Chibli Mallat (2000) contends that the commercial law of the Middle East as covered in legislation or in court cases which are interpreted as transposed European Law. However, Shari’a law cannot be completely sidelined especially as there is a growing clamour to return to Islamic principles by many facets of the Muslim world (Sayen, 2003). Question 3: ADR in Islamic Law Introduction There is a long history of tahkim or arbitration in the Middle East which pre-dates Islam (Donner, 1999). Contemporary Muslim society is also accepting of arbitration and Bahrain was known as a centre of international commercial arbitration prior to Paris and London (Radhi, 1992). In 1950s Saudi Arabia, arbitration was known as the main method to resolve oil concession agreement issues (Saleh, 1984). However recent attempts at arbitration in the Islamic world can be described as problematic (Brower and Sharpe, 2003). Three phases of international commercial arbitration in the mid twentieth century have been identified by Brower and Sharpe (2003). The first phase spanned from the Second World War up until the 1970s. In this period there was an undercutting of domestic Islamic laws in favour of allegedly superior Western laws in arbitration of long standing oil concession issues. An illustration of this is the case of Petroleum Development (Trucial Coasts) Ltd. v. Sheikh of Abu Dhabi, where the arbitrator, Lord Asquith recognised that Abu Dhabi was the source of execution of the contract and therefore applicable law is the law of Abu Dhabi. However, he went ahead to deride these laws because in his opinion, the retrogressive nature of the region negates the possibility of any legal principles applicable in the construction of contemporary commercial tools. He therefore used English law because they were apparently the common practise for civilised nations. The gist of the rejection of this law was the absence of general law contract in Shari’a. This same attitude is depicted in the case of Ruler of Qatar v. International Marine Oil co. Ltd., where the arbitrator conceded that Islamic law was the most appropriate to apply but dismissed it due to the same reason. Both these arbitrators ignored the widespread legal scholarship of Islam which gives clearly set out guidelines for contract law based on both primary and secondary sources (Ballantyne, 1987). This disaffection with and distrust of international arbitration was strengthened by the arbitration in 1963 in Saudi Arabia v. Arab American Oil Co. (ARAMCO) where the panel found against Saudi Arabia. The panel decided that the laws of Saudi needed to be read and augmented by the general principles of law, by the tradition and operations of the oil business and by ideas of unadulterated jurisprudence due to the fact that the rights of ARAMCO were not secured in an conclusive manner by the laws of Saudi Arabia.  The Process of Arbitration One of the benefits of international commercial arbitration is the latitude involved between parties to negotiate their own selection of provisions of law. According to article 28 of the UNCITRAL Model Law, a tribunal will come to a decision according to the choice of law chosen by the parties. Should the parties not make provision for this then the tribunal will apply the law in a way determined by the contradiction between the applicable laws. The tribunal is also empowered to take into account the ‘usages of the trade applicable to the transaction’. According to article 17 of the ICC Arbitration rules there are provisions which state that: 1. The parties shall be free to agree upon the rules of law to be applied by the Arbitral Tribunal to the merits of the dispute. In the absence of any such agreement, the Arbitral Tribunal shall apply the rules of law which it determines to be appropriate. 2. In all cases the Arbitral Tribunal shall take account of the provisions of the contract and the relevant trade usages. Conclusion There are some developments which denote that arbitration has become more mainstream in the Middle East: the last twenty to thirty years have seen the transformation of arbitration laws in various countries and several arbitration centres are established in the region (Brower and Sharpe, 2003). Efforts to modernise the arbitration models span from embracing Western models in Lebanon and Qatar as well as adoption of the UNCITRAL Model law in Bahrain, Oman, Jordan, Iran, and Tunisia. Question 4 Facts of the Case The defendant-appellant Philippines International Air Terminals Company, Inc. otherwise known as (‘appellant’/’PIATCO’) was awarded the Ninoy Aquino International Airport International Passenger Terminal 3 (NAIA-IPT3) project by the Government of the Republic of the Philippines (GRP) through the Manila International Airport Authority (MIAA). On July 12, 1997 the Department of Transportation and Communications (DOTC) and MIAA came up with a Concession Agreement with PIATCO for the construction, development and operation of NAIA-IPT3 under the auspices of the Build, Operate and Transfer (BOT) scheme. The Concession Agreement stated that PIATCO would construct, operate for half a century with an option to extend for another 25 years and hand over NAIA-IPT3’s facilities to GRP for one Philippine Peso. The Concession Agreement was subsequently altered to an Amended and Restated Concession Agreement (ARCA). PIATCO got into an agreement with plaintiff-appellee, Takenaka Corporation which is an On-Shore Construction company, as well as an Off-Shore Procurement firm Asahikosan Corporation to construct NAIA-IPT3 and the planning, purchase, test and delivery of the Plant respectively. Construction commenced on June 15th 2000. On November 29th 2002, President Gloria Arroyo decreed that her administration will no longer honour the PIATCO-GRP agreement. Grounds for Rejection of Ruling PIATCO claimed that it would not appeal the judgment rendered in London in which the court ruled for apelles in the sum of 6,602971 USD plus interest amounting to 116,825,365 Philippine pesos up to and including 18th February 2005. The second claimant was awarded 8,224,236 USD plus interest of 2,947,564.87 USD up to and including 18th Feb. 2005. In spite of due notice, PIATCO did not appeal the judgement because of the exorbitant cost of instituting such an appeal in London. However, it claimed that it was not bound by foreign judgments which in contradiction to the Philippino constitution given by a court lacking jurisdiction. They did not comply with the judgement amounts granted on grounds that they were unjustified. This prompted appellees, Takenaka and Asahikosan, acting as plaintiffs, to file with the court a quo a case for Enforcement of Foreign Judgements/Final orders against the defendant-appellant PIATCO. Rebuttal by Associate Justice Rebecca De Guia-Salvador The judge ruled in favour of the appellees in a judgement which stated that: ‘The Court is confronted with the lone but all-embracing issue of whether or not the subject Orders from the London court could be validly enforced within this jurisdiction. At the heart of the controversy is the applicability of Section 48, Rule 39 of the Revised Rules of Court. After a careful evaluation and study of the evidence of the parties, this Court resolves to grant the reliefs prayed for in the Complaint.’ The judge also ruled that attempts to claim that the foreign court had no jurisdiction but that the matter should have been taken up by the Dispute Adjudication Board which does have jurisdiction to hear and rule on such disputes. They also argued that due to the fact that the dispute involved construction of NAIA-IPT3 then the issues should have been heard by the Construction Industry Arbitration Commission (CIAC) in line with the arbitration contracts contained in the clauses and the Construction Industry Arbitration Law (EO 1008). This was found to be without any merit. This is due to the fact that the contract provides that; ‘If a dispute arises between the Employer and the Contractor in connection with, or arising out of, the Contract or the execution of the Works, including any dispute as to any opinion, instruction, determination, certification or valuation of the Employer's Representative, the dispute shall initially be referred in writing to the Dispute Adjudication Board for its decision, with a copy to the other party. Such reference shall state that it is made under this Sub-Clause.’ Should the Dispute Adjudication Board be unable to resolve the issues, the contract provides th ‘Equally clear from the above-quoted agreement is the following provision: “20.6 English Courts any dispute in respect of which: (a)the decision, if any, of the Dispute Adjudication Board has not become final and binding pursuant to Sub-Clause 20.4; and (b) Amicable settlement has not been reached. Shall finally be decided by the English Courts. The parties hereto irrevocably agree that the English Courts shall have exclusive jurisdiction to hear and determine such dispute, save that any decision, judgment or award of the English Courts may be enforced in the Courts of any relevant jurisdiction. The Court shall have full power to open up, review and revise any decision of the Dispute Adjudication Board.’ Question 5: Cutty Sark Choice of Law The Model law can be used to administrate international arbitrations such as would take place between an Australian firm like Cutty Sark, in the Philippines. Under this law, the aid and supervision of the courts can be requested to deal with matters arising and the rules it institutes will apply on setting aside an award (UNCITRAL). This law is applicable because even those who are of the opinion that non-national arbitration would be useful would have their needs satisfied. Private International Law is a set of rules of procedure that establish which jurisdiction applies to a certain dispute. This rule applies when there is an overseas factor to a contract such as between parties from differing nations such as is the case with Cutty Sark. Therefore the contract can be drafted under Private International Law so as to cater to the needs of both parties. Inclusion of a compulsory arbitration clause Arbitration essentially involves a concurrence to establish private justice according to E. I. Du Pont De Nemours and Co. v. Rhodia Fiber and Resin Intermediates. This is the reason that it is widely acknowledged that arbitration agreements are hybrid in nature with contractual as well as procedural elements (Lew et al, 2003). Today every set of arbitration laws has substantive rules of private international law. These administer the crux of arbitrability of claims that have issues which serve in that jurisdiction. These include Art. 177 Swiss Statute on Private International Law, Sect. 1030(1) German Arbitration Act, Sect. 1020(3) Dutch Arbitration Act or Sect. 1(1) Swedish Arbitration Act contains such “règles materielles”. There are several bottlenecks to inclusion of a compulsory arbitration agreement in a contract. These bottlenecks are as a result of the parties’ capacity to wrap up the arbitration agreement, the lex loci arbitri has an applicable law that governs the procedure, the receptum arbitri also has a law applicable to it (Berger, 1993), the contract between the parties has a law applicable to it as well as that between parties and administering institutions as well as laws dealing with the substance of the dispute (Redfern and Hunter, 2004). There would be about fourteen issues of conflict of laws that would come up with international arbitration. Comparative Merits of Arbitration in Different Countries The state Commercial Arbitration Acts or CAAs lack provisions to do with interpretation. This results in courts resorting to the interpretation of the statute rather than resorting to ordinary statutory and common law rules of interpretation as they exist in Australia. The CAAs do not contain specific provisions that specify the aim of the Act but an examination of the long and short titles of the Act and its structure will assist in the comprehension of its purpose. The capability of a court to arbitrate is classified in two; intervention before commencement and that after it has begun. The former mainly involves appointment powers for an arbitrator as contained in CAA Part II. Arbitration in Asia as a whole is on the rise and Singapore and Hong Kong in particular have seen proliferation of arbitration cases with support from domestic courts. This has given rise to alternate systems of dispute resolution throughout Asia. Further harmonisation is required in the Asian arbitration systems in order to facilitate its accessibility to international entities (Leong et al, 2012). Comparative Ease of Enforcement The New York Convention of 1958 is a treaty concerned with the use and enforcement of international arbitration. This still remains the most significant legal document in international arbitration because it calls on countries to acknowledge and enforce international awards, regardless of whether the process occurred in the country or elsewhere. The UNCITRAL is currently preparing a guide to the same. However, should the contract be drafted under UNCITRAL then it will be subject to this enforceability. Should the Philippine government insist that the subject to loan approval, Cutty Sark would have to subject itself to Philippine law and arbitration this would mean that there would be some differences between what the UNCITRAL Model Law and the Philippine Arbitration Law have to say on court intervention. While the latter, under Republic Act No. 876 gives leeway for courts to intervene in cases where grave abuse is alleged to have been committed by the Arbitral Tribunal as well as other grounds, the UNCITRAL law does not allow for subsequent intervention by the courts and holds the tribunal award as only subject to be set aside under provisions of Article 34.This may create a conflict of interest between the contract under which the business terms were agreed upon and the terms of the Philippino government, therefore it will be up to Cutty Sark to decide on whether this will be a deal breaker or not. References Abdal-Haqq, I. (2002). Islamic Law: An Overview of Its Origins and Elements, 7 J. Islamic L. & Culture 27, 31-33 Ballantyne, W. M. (1988). Commercial Arbitration in the Arab Middle East (A Study in Shari‘a and Statute Law), 4 Arb. Int'l 269, 269 Brower, C.N. & Sharpe, J.K. (2003). International Arbitration and the Islamic World: The Third Phase, 97 Am. J. 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