Introduction to International Trade Law

Note 1 of 13 Notes
Introduction to
International and Comparative Law

Universiti Kebangsaan Malaysia

Faculty of Law
Pursuing PHD Program in Law
P58462
Musbri Mohamed
DIL; ADIL ( ITM )
MBL ( UKM )
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United Nation Secretary-General; the late U Thant
issued a solemn warning :

I do not wish to seem overdramatic, but I can only

conclude from the information that is available to
me as Secretary-General that the Members of the
United Nations have perhaps ten years left in which
to subordinate their ancient quarrels and launch a
global partnership to curb the arms race, to improve
the human environment, to defuse the population
explosion and to supply the required momentum to
development efforts. If such a global partnership is
not forged within the next decade , then I very much
fear that the problems I have mentioned will have
reached such staggering proportions that they will
be beyond our capacity to control.

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Today, wood pulp producers from Georgia trade in Europe; a
pool of international investors gather to build a dam in China; a
French company builds a tramway in Jerusalem; and when an
Indian investor based in the United Kingdom offers a takeover
bid on a French company, the protest of the French authorities,
as well as the French decree restricting foreign investments,
may be regarded as a breach of European Community ("EC")
and international law.

Now that we have gone from a world of cities to a worldwide

city, or a "global village," the global market needs, just as well,
the rule of law. Is that all very new?

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International trade goes far back in history, and commercial treaties or
contracts can be traced to Ancient Egypt and the merchant law of the eleventh
century. For example, in 1417 a most favored nation clause could be found in a
treaty between Burgundy and England. Our present globalization is not new
either.

The first instance of Globalization began with the great discovery of the
Americas when the Spaniards sailed over and extended European values, rules,
and diseases to the South American countries.

The second instance of globalization occurred under British rule through the
doctrine of "laissez-faire" and with the improvement of communication and
transportation. With cotton mills and businesses, English law spread over India,
and today, for that very reason, a lawyer may refer to an unfair competition case
involving Calvin Klein that was decided by the Calcutta High Court in order to
show that a foreign company has goodwill in the United Kingdom. The same
happened with French law in other parts of the world. Freedom of trade ended
with the First World War, the major crisis of the thirties, and World War II.

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The third instance of globalization, which has its supporters and opponents, favors
the rich powers more than it helps the new entrants. We have not yet reached free
access and total transparency, but the criticisms do not go so much to the Western
model, which people would not want. Conversely, globalization shows other people
throughout the world, through the media and the Internet, a kind of social and
economic model that is attractive and promising, one which they would like to
achieve immediately. However, their political, economic, and social means do not
allow these poor countries to reach such a level of development right now. They need
to be patient, and this may create frustration. When India - a founding member - and
China or other developing countries apply to accede to the World Trade Organization
("WTO"), it is not because they are naive or because they fear major industrial
countries. They can oppose, and they have opposed, the rich countries in that context,
as shown in the Cancun World Trade Conference in 2003. They probably have no
illusion of the possibility of a spontaneous expansion of wealth through capitalism,
but they know now, keeping in mind the nineteenth century experience and the
disasters created by socialism, that protectionism is not the proper way to prosperity.
Therefore, they search for a convenient way to accede to market, trade, investments,
and therefore, development.

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This global market supposes the existence or the adoption of
common legal principles and rules. The role of law in
international trade is quite obvious. It organizes imports and
exports, financial transactions, and movement of traders across
borders.

Moreover, it has been pointed out by the Conference on

Security and Cooperation in Europe in 1990 that "societies
based on the rule of law are prerequisites for ... the lasting of
peace, security, justice and cooperation." So, if we agree with
Montesquieu that "peace is the natural effect of trade," then the
rule of law should extend to international trade.

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How did the rule of law extend to international trade?

It is quite obvious that at some stage international trade is and has been
ruled by law. Law served as an instrument of national-states to organize
imports and exports, financial relations, and movement of traders across the
borders. But the existence of the rule of law in this field supposes that the
three characteristics of an autonomous legal order should exist in order to
achieve three functions.

First, the rule of law regulates the economic behavior of economic agents in
order to create and maintain a stable and fair competitive environment, to
protect property rights, and to enforce contracts. Second, the rule of law
regulates and limits discretionary interventions of the states in economic
and commercial activities. Third, the rule of law regulates the relations
between states in order to allow them to operate in a fair and open
multilateral trading system for the benefit and welfare of their peoples, as
stated in the WTO Marrakesh Declaration of 1994.

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WHAT IS INTERNATIONAL
LAW?

Defined: The body of rules and

norms that regulates activities
carried on outside the legal
boundaries of nations.

Three international relationships

are governed by international law:

1) Those between states and

states.
2) Those between states and
persons.
3) Those between persons and
persons.

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There are several ways to think about law. In the
domestic legal system, we think of law as the rules
that the government issues to control the lives of its
citizens. Those rules are generally created by the
legislature, interpreted by the judiciary, and
enforced by the executive branch, using the police,
if necessary, to force citizens to obey.

What is law for the international community if there

is no one legislature, judiciary, executive branch or
police force?

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Basically defined, international law is simply
the set of rules that countries follow in dealing
with each other.

But this basic definition must be supplemented

with three more complex explanations—Is
international law really law, the way the laws of
the United States, enforced by courts and police,
are? Where do we find the rules of international
law? Are they written down somewhere?

Finally, how is international law enforced, if

there is no world government?

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Is International Law Really Law?

It is because nations and individuals regard international law as

law.

Distinguish: Comity.
1) Comity is courtesy. It is the practice between nations of
treating each other with goodwill and civility.
2) Comity is not law because countries do not regard it as
something they are obligated to respect.

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THE MAKING OF INTERNATIONAL LAW

There is no formal law-making machinery.

The basic mechanism for creating international

law is: the consensus of the international
community.

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SOURCES OF INTERNATIONAL LAW

Sources listed in Article 38(1) of the Statute of the

International Court of Justice (ICJ):

a. International conventions.
b. International custom.
c. General principles of law.
d. Judicial decisions.
e. Teachings of publicists.

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Treaties and Conventions - the most important sources of international law.

a. Treaties are agreements between one or more nations.

b. Conventions are agreements sponsored by international organizations.

c. Reasons for binding effect:

1) Shared sense of commitment.
2) Because one country fears that if it does not respect its promises, other
countries will not respect their promises.

d. Rules governing treaties:

1) Traditionally customary.
2) Now codified in the Vienna Convention on the Law of Treaties (in force
since 1980).

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Treaties are similar to contracts between countries; promises between
States are exchanged, finalized in writing, and signed. States may debate
the interpretation or implementation of a treaty, but the written provisions
of a treaty are binding. Treaties can address any number of fields, such as
trade relations, such as the North American Free Trade Agreement, or
control of nuclear weapons, such as the Nuclear Non-Proliferation
Treaty. They can be either bilateral (between two countries) or
multilateral (between many countries).

They can have their own rules for enforcement, such as arbitration, or
refer enforcement concerns to another agency, such as the International
Court of Justice. The rules concerning how to decide disputes relating to
treaties are even found in a treaty themselves—the Vienna Convention
on the Law of Treaties.

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Custom

a. Defined: Rules that have been around for a long time or which
are generally accepted.

b. To establishing the existence of a custom must show two things:

1) Usus (Latin for: usage): Is the consistent and recurring action
(or lack of action if the custom is one of noninvolvement) by
states.
2) Opinio juris et necessitatis (Latin for: Of the opinion that the
rule is proper and required): Belief by states observing a custom
that it is as one that they must obligatorily follow.

c. Exception to the application of custom:

1) If a state persistently refuses to observe a customary practice
from the practice's beginning, it doesn't have to.

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Customary international law (CIL) is more difficult to ascertain than the
provisions of a written treaty. CIL is created by the actual actions of states (called
“state practice”) when they demonstrate that those states believe that acting otherwise
would be illegal. Even if the rule of CIL is not written down, it still binds states,
requiring them to follow it. For example, for thousands of years, countries have given
protection to ambassadors. As far back as ancient Greece and Rome, ambassadors
from another country were not harmed while on their diplomatic missions, even if they
represented a country at war with the country they were located in. Throughout
history, many countries have publicly stated that they believe that ambassadors should
be given this protection.

Therefore, today, if a country harmed an ambassador it would be violating customary

international law. Similarly, throughout modern history, states have acknowledged
through their actions and their statements that intentionally killing civilians during
wartime is illegal in international law. Determining CIL is difficult, however, because,
unlike a treaty, it is not written down. Some rules are so widely practiced and
acknowledged by many states to be law, that there is little doubt that CIL exists
regarding them; but other rules are not as universally recognized and disputes exists
about whether they are truly CIL or not.

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General Principles - The legal principles common to nation states.

Intepretation of treaties, customs, and general practice:

a. Judicial decisions.
b. Teachings of publicists.

Global market supposes the existence or the

adoption of common legal principles and rules.
The role of law in international trade is quite
obvious. It organizes imports and exports,
financial transactions, and movement of traders
across borders.

Moreover, it has been pointed out by the

Conference on Security and Cooperation in
Europe in 1990 that "societies based on the rule
of law are prerequisites for ... the lasting of
peace, security, justice and cooperation."

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“The general principles of law recognized by civilized nations” are
certain legal beliefs and practices that are common to all developed
legal systems. For instance, most legal systems value “good faith,”
that is, the concept that everyone intends to comply with
agreements they make.

Courts in many countries will examine whether the parties to a case

acted in good faith and take this issue into consideration when
deciding a matter. The very fact that many different countries take
good faith into consideration in their domestic judicial systems
indicates that “good faith” may be considered a standard of
international law.

General principles are most useful as sources of law when no treaty

or CIL has conclusively addressed an issue.

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THE SCOPE OF INTERNATIONAL LAW

1. The Practice in International Tribunals

a. Municipal law is regarded as being subservient to

international law.

b. States have a general obligation to bring their

municipal law into compliance with international norms.

c. Procedurally municipal law is treated as "mere fact."

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2. The Practice in Municipal
Courts

a. International law is regarded

as correlative.
1) Court determines if a
particular international law has
been received into the
municipal jurisprudence.
2) If it has, the Court applies it
as if it were a local law and not
a mere fact.

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b. Determining if International Law has been Received into the Local
Jurisprudence:

1) Customary international law:

a) Doctrine of Incorporation: a custom is automatically part of a
nation's laws as long as it is not inconsistent with those laws.
(Majority rule)
b) Doctrine of Transformation: a custom is not part of a nation's laws
until espressly adopted by legislative or judicial act, or by local usage.
(Minority rule)

2) Treaty law:
a) Look at the nature of the treaty:
1Self-executing.
2Non-self-executing.
b)Look at the structure of the state adopting the treaty:
1Does the legislature have to ratify?

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INTERNATIONAL PERSONS

1. States

a. Defined: Political entities which have all of the following -

1) A territory.
2) A population.
3) A government capable of entering into international relations.
4) A government capable of controlling its territory and peoples.

b. Kinds of states:
1) Independent states: free from the political control of other states.
2) Dependent states: have formally surrendered some aspect of their
poltical and governmental functions to another state.
3) Inchoate states: lack some attribute required to be a state.

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c. Recognition of States and Governments:

1) A unilateral declaration by another state.

a) Effect: Implies that the recognized state or government is
entitled to the rights and privileges granted by international law.

2) Recognition of a state: Usually granted when an identifiable

government, people, and territory first come into existence.

3) Recognition of a government:
a) Declaratory doctrine: Recognition happens automatically
whenever a government is capable of controlling a territory and
a people.
b) Constitutive doctrine: Recognition must be formally granted
by another state.

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4) Problem: How to avoid the implication that that recognition also means
approval of a particular government?
a) Estrada Doctrine: One government should never explicitly recognize any
other government.

d. Territorial Sovereignty: The right to exercise the functions of a state within

a territory.
1) Not an absolute right -- for example:
a) Positive servitude: the right to do something within another state.
b) Negative servitude: the right to prohibit another state from doing something
within its territory.

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e. Changes in Territorial Sovereignty.

1) Things not effected by a change of sovereigns:

a) Treaties which implement general rules of international law.
b) "Dispositive" treaties: Treaties concerned with rights over territory,
such as boundaries and servitudes.
c) Individuals: keep the nationality of their original state (unless another
arrangement is made in a treaty of cession or by municipal law).
d) Private property rights of individuals.
e) Contractual rights of individuals.

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2) Things effected by a change of
sovereigns:

a) If the property is located in territory

that has been transferred: it is the
property of the state that controls that
territory.

b) If the property is in the territory of a

third state (such as an embassy): it is the
property of whichever state the third
state recognizes.

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2. International Organizations

a. Characteristics:
1) Permanent .
2) Set up by two or more states.
3) Pursue matters of common interest to the creators.
4) Function autonomously as independent international persons.

b. Examples:
1) European Union.
2) United Nations.

c. Creation: essentially in the same fashion as a corporation.

d. Legal capacity: the right to carry on diplomatic relations with states

and to sue and be sued in international tribunals.
1) Acquired by recognition.
a) Automatically from its own state members.
b) When specifically granted by other states.

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3. Non governmental Organizations (NGOs)

a. Non profit NGOs serve as coordinating agencies for private

national groups in international affairs.

b. For-profit NGOs: businesses operating internationally.

1) Other names:
a) Multinational enterprises (MNEs)
b) Transnational corporations (TNCs)

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The scope and authority of international law have thus expanded
dramatically during the era of globalization. Historically, international law
addressed only relations between states in certain limited areas (such as war
and diplomacy) and was dependent on the sovereignty and territorial
boundaries of distinct countries (generally referred to as “states”). But
globalization has changed international law in numerous ways. For example,
as globalization has accelerated, international law become a vehicle for states
to cooperate regarding new areas of international relations (such as the
environment and human rights), many of them requiring states to rethink the
previous notions of the inviolable sovereign state.

The continued growth of international law is even more

remarkable in this sense, since states, having undoubtedly weighed the costs
and benefits of the loss of this valuable sovereignty, have still chosen to
continue the growth of international law.

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How Is International Law Enforced?

A treaty may have incorporated into its own text

enforcement provisions, such as arbitration of disputes or
referral to the ICJ. However, some treaties may not
expressly include such enforcement mechanisms.
Especially in situations where the international law in
question is not explicitly written out in a treaty, one can
question how this unwritten law can be enforced. In an
international system where there is no overarching
authoritative enforcer, punishment for noncompliance
functions differently.

States are more likely to fear tactics used by other States,

such as reciprocity, collective action, and shaming.

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Reciprocity is a type of enforcement by which states are
assured that if they offend another state, that other state will
respond by returning the same behavior.

Guarantees of reciprocal reactions encourage states to think

twice about which of their actions they would like imposed
upon them. For example, during a war, one state will refrain
from killing the prisoners of another state because it does not
want the other state to kill its own prisoners.

In a trade dispute, one state will be reluctant to impose high

tariffs on another state’s goods because the other state could
do the same in return.

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Through collective action, several states act together
against one State to produce what is usually a punitive
result. For example, Iraq’s 1990 invasion of
Kuwait was opposed by most states, and they organized
through the United Nations to condemn it and to initiate
joint military action to remove Iraq.

Similarly, the United Nations imposed join economic

sanctions, such as restrictions on trade, on South Africa
in the 1980s to force that country to end the practice of
racial segregation known as apartheid.

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Most states dislike negative publicity and will
actively try to avoid it, so the threat of shaming
a state with public statements regarding their
offending behavior is often an effective
enforcement mechanism.

This method is particularly effective in the field

of human rights where states, not wanting to
intervene directly into the domestic affairs of
another state, may use media attention to
highlight violations of international law. In turn,
negative public attention may serve as a catalyst
to having an international organization address
the issue, it may align international grassroots
movements on an issue, or it may give a state
the political will needed from its populace to
authorize further action.

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International law has developed certain areas of practice, guided
by their own principles, documents and institutions. Even
though these areas of expertise can stand alone, to a certain
extent, boundaries drawn in international law are arbitrary
because the underlying principles of each field both inform and
compete with one another. For example, both the laws of armed
conflict and human rights support each other in the belief
that state official torture is condemnable. The condemnation is
doubly reinforced by its affirmation in both fields.

On the other hand, principles of international economic law

may counteract principles in international environmental law, as
evidenced by the possible conflicts between industrial
development and environmental preservation. International
issues also do not often fit neatly into a single category; the
treaty on Trade - Related Aspects of Intellectual Property
Rights (TRIPs), for example, combine concerns in both
economic and human rights fields, with the principles of
each field dictating different results.

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What is the Effect of International Trade Rules? The main
difficulty is determining the effect of international trade
rules. As shown by Dicey, an effective rule of law that is
based on international rules supposes its supremacy. In the
context of international relations and even more so of
international trade, this supremacy may appear problematic.

There is no difficulty in implementing contract terms subject

to their conformity with public policy. Furthermore, there is
no difficulty in enforcing municipal law, subject to conflicts
of laws and jurisdictions, which may be resolved either on the
basis of national law or on the basis of a specific convention.

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Conversely, where the rule of law derives from an
international rule or principle, the trader, the
lawyer, or the court may face two sorts of
difficulties.

The first difficulty is traditional and well known by

international lawyers: it concerns the relations
between international law and national law, and the
opposition of monism and dualism is at the heart of
the question. National courts have developed
different views in this matter.

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English courts have traditionally refused to apply an
international rule if it has not been incorporated into English law
by an act of Parliament. Sometimes this has led to absurd
consequences such as in Arab Monetary Fund v. Hashim in
1991 where the House of Lords held that in the absence of a
statutory instrument creating the Arab Monetary Fund as an
entity with legal status in English law, the Fund did not exist as
an international organization, in spite of the fact that it had been
established by treaty, had one thousand employees, and had
engaged in many transactions in London. This has changed, and
in recent cases the courts - and particularly the House of Lords -
tend to give effect in some matters to international rules or
principles in Common Law through jus cogens or by asserting
jurisdiction over foreign acts that are contrary to international
law. For instance, the decision by a foreign government to
confiscate foreign assets is justiciable when it violates
international law.

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On the contrary, generally, French
courts give effect to international law
that prevails over domestic law, but
according to recent decisions, this is
subject to the provisions of the French
Constitution: both administrative and
judicial supreme courts have ruled that
the French Constitution supersedes
treaties or international agreements.
However, there is no possibility under
French law to challenge the
constitutionality of a treaty after it has
been ratified or approved by French
authorities.

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RIGHTS OF INDIVIDUALS UNDER INTERNATIONAL LAW

1. Traditional view: no rights--only duties.

Case 1-10. DeSanchez v. Banco Central de Nicaragua
2. Evolving view:
a. Individuals have basic human rights.
b. Individuals may sue states in some international tribunals.

Dec. 2010 ………Continue to Part 2 …………

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