Foundation Essay International Trade Law

Foundation Essay International Trade Law

It has come to a point where sale transactions are no longer limited by lack of carriage,
product or communication. The advancement of technology and the constant availability for
supply and demand has led to an explosion in international sales. This being said such a contract
involves an international dimension where the parties involved are either from different countries
or the performance of the contract will be concluded in a different state.
The issue that this essay question highlights is the problem that these contracts with no
geographical boundaries may generate during a dispute, due to the differences of systems of law
found in different states, difference of contract wording and several other issues.
In order to tackle the statement above and reach a conclusion it is vital to showcase as
many examples of conflicts of law possible from different areas of International Trade Law and
why those appeared. Furthermore a presentation of what anticipation measures were created to
try to clear the danger of such conflicts will be offered alongside the conflicts of law mentioned
above. Finally a conclusion that emphasizes the direction that International Trade Law is steering
towards based on the pros and cons of the current position will be offered highlighting. In
English law it seems that one of the most often conflict of laws revolves around the question of
forum (jurisdiction) and choice of substantive law in an international sale.
The choice of law could simply viewed as a straightforward contractual stipulation thus
avoiding complication but more frequently the rules tend to contain additional requirements
necessary for a choice of law clause to be valid. In consequence somebody who would be able to
succeed under contract law rules can at the same time be in conflict with the choice of law
clause. The English courts have in general set to give effect to express intention of both parties
even if there is no connection between the choice of law and the subject matter of the dispute but
they are not ready to recognize a floating1 choice of law.2

1 The Morviken [1983] 1 Lloyds Rep 1

The Rome Convention3 contains a combination of conflict between contract law and rules
for a choice of law. Art 3(1) provides that a choice of law must be expressed and demonstrated
with reasonable certainty by the terms of contract or by circumstances. 4
O.T.M Hydraulics5 was a very complex case which proved the conflict that can arise under the
choice of law clauses. Here both parties had standard forms which sought to choose their own
substantive both invoking two different choices of law. One of the choices invoked was
Californian law for which the Californian UCC version was used as tool of interpretation.
Section 2-207 UCC states that there are only in only one approach which is the first shot
choice of law s (1) s(2) or knockout of both choices of law s(3) whilst UK rule of law clearly
upholds the last shot approach.
Such an example of astonishing circumstances proves how conflict of law arises. In this
case Parker, J managed to name the conflicting issue and examined the case both under English
and Californian law6.7
2 Wilson, F, John, Carriage of Goods by Sea, 7th edn (Harlow: Pearson Education Limited, 2010) pag 325

3 Rome convention 1980

4 Wilson, F, John, Carriage of Goods by Sea, 7th edn (Harlow: Pearson Education Limited, 2010) pag 326

5 O.T.M. Ltd. v. Hydranautics [1981] 2 Lloyd's Rep. 211 (

6 LEX MERCATORIA: Essays on International Commercial Law in Honour of Francis Reynolds Edited
by FRANCIS D. ROSE

7 LEX MERCATORIA: Essays on International Commercial Law in Honour of Francis Reynolds Edited
by FRANCIS D. ROSE

This is an appropriate example of the danger that two laws from different systems
conflicting.
8

The approach of English Law also enables the parties of such a contract to choose their

forum. However the nominated courts has the option to accept the jurisdiction and not to force a
forum to stay proceedings in deference to a choice of forum clause. English courts recognize the
principle of freedom of contract and of the validity of a jurisdiction agreement in a contract. 9
Therefore the English courts are usually ready to accept jurisdiction even though the contract has
no connection with the chosen forum10.11
However a conflict of laws can appear when a defendant might assert that the chosen
forum is not suitable due to ground such as inter alia, or lower costs or better expediency would
result from proceedings in another forum or when both parties have mentioned different choices
of forum. In considering a question of the appropriate forum, the court must take into
consideration all relevant circumstances including the convenience of all parties, the availability
of evidence, the law to be applies, the costs and whether the justice done in a different forum has
the resources to offer the same level of judgment12.13

8 Wilson, F, John, Carriage of Goods by Sea, 7th edn (Harlow: Pearson Education Limited, 2010) pag 315

9 Deutsche Bank AG v Asia Broadband Wireless Communications Inc [2008]

10 The Chapparal [1968]

11 Wilson, F, John, Carriage of Goods by Sea, 7th edn (Harlow: Pearson Education Limited, 2010) pag 315

In the case of choosing a forum (jurisdiction) the issue of conflict appears when these
forms have several clauses coming from two different set of rules, which compete on the issue of
determining which of the sets of rules can offer a more effective jurisdiction.14
It seems that the requirements for an effective choice of jurisdiction are stricter that the ones
imposed for the right to chose the applicable law. Brussels Convention 15 (Art. 12,15,16) proves
the strictness, the risk and responsibility that choosing a jurisdiction entails given the various
restrictions. Moreover Art.17 of Brussels Convention provides express requirements providing
that choice of forum need to be in writing, or to be confirmed in writing, or to correspond to a
form established by custom between the parties or International Trade Rules. 16However Art 17
can create conflicts of law due to the strict form requested under the convention given that such
requirements might not be met fully in every standard term clause under contract law rules.17

12 Amin Rasheed Shipping Corp v Kuwait Insurance Co, The al Wahab [1984]

13 Wilson, F, John, Carriage of Goods by Sea, 7th edn (Harlow: Pearson Education Limited, 2010) pag 319

14 Wilson, F, John, Carriage of Goods by Sea, 7th edn (Harlow: Pearson Education Limited, 2010) pag 320

15 The European Regulation 44/2001 (Brussel 1)

16 McKendrick, Ewan, Goode on Commercial Law, 4th edn (London: LexisNexis UK and Penguin
Books, 2010) pag 1197

17 Wilson, F, John, Carriage of Goods by Sea, 7th edn (Harlow: Pearson Education Limited, 2010) pag 315

Therefore many choices of Jurisdiction might not fall under the Brussels Convention this
also leading to a discrepancy in the substantive law of the courts forcing them to rely on and
apply a foreign substantive law. This is the danger that arises from jurisdictions competing for
the same case or even both jurisdictions refusing competency and the two legal systems involved
following different approaches to solve these cases can be to blame.
It seems that a way to avoid such a conflicts would amount to a harmonization of the
approaches of the court. If there would be a common ground on where all jurisdiction would
apply the best approach it would eliminate the danger of conflicting laws. Moreover a
harmonization of the approaches would eventually lead to a harmonization of the clause of
choice, which in the end would save the courts and the parties money and time. Basing contract
on standard terms and clauses of which both parties are aware of and from which they benefit of
equal advantages could be the solution of avoiding conflict or clauses, misunderstanding of the
parties and conflict of jurisdictions and substantive laws. Incoterms 18 are a series of pre-defined
rules published by the ICC19 which offers the parties the option to base their contract on
internationally contractual standards. These standard terms offer the parties clarity of what their
roles are and moreover it reduces the dangers of misunderstandings, contract ambiguity and any
disagreements which could have appeared with a contract based on two separate legal systems.
There is a greater possibility that such a harmonization of approaches could achieve an end result
such as the success of Incoterms.
In order to offer a conclusion on how to avoid conflict of law it is necessary to show
some of the preventive actions that were made so far. A objective of the European Union to
achieve uniformity in laws of member states is to facilitate free trade and protect citizens 20. This
18 International Commercial Terms 2010 (1 January 2011)

19 International Chamber of Commerce

20 Peter E Nygh, Peter Butt ,Butterworth Australian LEGAL Dictionary 1997 pag 543

aim of uniformity intends to reduce as far as possible the discrepancies between the national
legal systems by inducing them to adopt common principles of law. UNCITRAL is a successful
model of law which was negotiated to such an extent where by selecting detailed policies and
through compromise it resulted in an international forum.
Another intent to harmonize the law it was through the international treaty Vienna
Convention21. Whether successful or not can be debated by the fact that it cannot fully reach its
purpose if its own wording can possibly create a conflict for the courts. For example in contract
covered by Vienna convention Art 67(1) states that risk passes when goods passed to Carrier.
This for example would be an example of conflict because the passing of the property is very
ambiguous and it is not certain the when, where of how the property and the risk pass. However
in UK law risk is certain leaving no room of doubt because the law clearly states that risk passes
at the rail of the ship.22 Such inconsistencies could be one of the reasons why UK is not part of
the Vienna Convention and although major trading nations disagree there seems to be no lack of
business. Moreover model contracts such as Fosfa/Gafta specifically exclude the application of
Vienna.23
However harmonization seems to become a pending issue on a worldwide scale, starting
with the New York Convention24 and continuing with the proposal of a free trade agreement
between European Union and the United States through The Transatlantic Trade and Investment
21 UN Convention on Contracts for the International Sale of Goods 1980

22 Passing of Risk in International Contracts of Sale of Goods;

A Comparative Study Between the United Nations Convention on
Contracts for Sale of Goods 1980 and the English Sale of Goods Act 1979 Essa Alazemi

23
McKendrick, Ewan, Goode on Commercial Law, 4th edn (London: LexisNexis UK and Penguin Books,
2010) pag 1015
24
The New York Convention of 1958

Partnership (TTIP). In conclusion the word International from International Trade Law seems to
weigh the most when assessing how Trade Law is approached. The International aspect is
mirrored in the outcome of so many issues that somehow emerged from using this term as a
boarder rather than common ground.
It is noticeable how the dangers that the international discrepancy between systems of
laws enabled many states, scholars and professionals to acknowledge the issue and attempt to
solve it.
As Schmitthoff25 highlights the need for harmonization is shown by international
legislations such as 1958 New York Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, the 1980 United Nations (Vienna) Convention on Contracts for the International
Sale of Goods, the 1985 UNCITRAL Model Law on International Commercial Arbitration. As a
harmonising instrument international instruments such as UNCITRAL, UNIDROIT26, the Hague
Conference27,the European Union and other intergovernmental international organizations are
used. Moreover international commercial customs are also highlighter through Incoterms,
Gafta28, etc.29
Finally the best way to avoid conflict of law seems to resume to a full embracement of
the International nature that Trade Law has developed in the last century. It is a given that
through state autonomy each state benefits of their own system of law which is tailored to their
25
Clive M. Schmitthoff's Select Essays on International Trade Law edited by Chia-Jui Chenghoff , (London: Martinus
Nijhoff Publishers, 1988)

26
International Institute for the unification of Private Law
27
The Hague Conventions 1907
28
The Grain and Feed Trade Association

nation, economy and cultural necessities. Having an autonomous International Trade Law
harmonized through tailored Treaties, Conventions and legislation the danger of the conflict of
law can be removed or significantly reduced.
A harmonized law unifies the legal systems from which a effective legal framework can
be derived and tailored for trade. Moreover such a law would rectify any bias or impartiality of
the legal regime and reduce costs.

Furthermore having in place a common and unified

International Trade Law would enable the opportunity for reforms at a worldwide level and also
it would offer newly developed states the opportunity to have a say .

29
Murray, Carole, Schmitthoff EXPORT TRADE: THE LAW AND PRACTICE OF INTERNATIONAL
TRADE, 11th edn (London: Sweet & Maxwell Limited, 2007)

Bibliography
1. Bridge, M., Benjamins Sale of Goods, 8th edn (London: Thomson Reuters (Legal)
Limited, 2010)
2. Clive M. Schmitthoff's Select Essays on International Trade Law edited by Chia-Jui
Chenghoff , (London: Martinus Nijhoff Publishers, 1988)
3. McKendrick, Ewan, Goode on Commercial Law, 4th edn (London: LexisNexis UK and
Penguin Books, 2010) 1015
4. Murray, Carole, Schmitthoff EXPORT TRADE: THE LAW AND PRACTICE OF
INTERNATIONAL TRADE, 11th edn (London: Sweet & Maxwell Limited, 2007)
5. Wilson, F, John, Carriage of Goods by Sea, 7 th edn (Harlow: Pearson Education Limited,
2010)
6. Peter E Nygh, Peter Butt ,Butterworth Australian LEGAL Dictionary 1997 pag 543
7. Sealy, LS and Hooley, RJA, Commercial Law. Text , Cases, and Materials, 4th edn
(Oxford:Oxford University Press, 2009)
Articles
1. Essa Alazemi , Passing of Risk in International Contracts of Sale of Goods; A

Comparative Study Between the United Nations Convention on Contracts for Sale of
Goods 1980 and the English Sale of Goods Act 1979 Essa Alazemi