International trade law has bilateral trade agreements, regional trade agreements and multinational trade agreements. Each of these agreements has its own history, policies and dispute settlement procedures. Furthermore, individual countries have their own policies and laws relating to international trade.
The General Agreement on Trade and Tariffs (GATT) is one such agreement which was enacted in 1947 by 100 countries as an attempt to reduce the number of tariffs and trade barriers and to foster international trade in the years following World War II.
The World Trade Organization is also a result of round of trade negotiation under the GATT. The WTO is a multilateral organization with the mandate to establish enforceable trade rules, to act as a dispute settlement body and to provide a forum for further negotiations into reducing trade barriers.
- International commercial arbitration:
International Commercial Arbitration is the process of resolving business disputes between or among transnational parties through the use of one or more arbitrators rather than through the courts. It requires the agreement of the parties, which is usually given via an arbitration clause that is inserted into the contract or business agreement. The decision is usually binding.
As the number of international commercial disputes mushrooms, so too does the use of arbitration to resolve them. The non-judicial nature of arbitration makes it both attractive and effective for several reasons. There may be distrust of a foreign legal system on the part of one or more of the parties involved in the dispute. In addition, litigation in a foreign court can be time-consuming, complicated, and expensive. Further, a decision rendered in a foreign court is potentially unenforceable. On the other hand, arbitral awards have a great degree of international recognition.
There are essentially two kinds of arbitration, ad hoc and institutional. An institutional arbitration is one that is entrusted to one of the major arbitration institutions to handle, while an ad hoc one is conducted independently without such an organization and according to the rules specified by the parties and their attorneys. On its face, ad hoc arbitration may seem to be less expensive and more flexible. However, institutional arbitration provides an independent, neutral set of rules that already exist, and it requires that an institution provide services that are critical to ensuring that the arbitration proceeds smoothly.
There are different arbitration treaties and conventions to which a party or nation may adhere. An important development in the spread of international arbitration was the adoption of arbitration rules – the United Nations Commission on International Trade Law in 1976. UNCITRAL was established by a resolution of the UN General Assembly in 1966 to promote harmony and unity in international trade.
- Internet Domain Name Disputes:
With the rapid rise of Internet use and the subsequent increase in disputes over domain names, the Internet Corporation for Assigned Names and Numbers (ICANN), the organization responsible for the management of the generic top level domains, was in need of a dispute resolution mechanism. In answer to this need, the World Intellectual Property Organization studied the problem and eventually published a report containing recommendations dealing with domain name issues. Based on the report’s recommendations, ICANN adopted the Uniform Domain Name Dispute Resolution Policy (UDRP). The UDRP went into effect on December 1, 1999, for all ICANN-accredited registrars of Internet domain names.
- Anti-suit Injunctions and Antiarbitration Injunctions
In the international arbitration context, an anti-suit injunction may be used to prevent a party from proceeding with litigation commenced in a foreign venue contrary to the terms of a valid arbitration agreement. An anti-arbitration injunction, on the other hand, may be used to prevent a party from proceeding with arbitration, generally because of the lack of a valid arbitration agreement between the parties.
Anti-suit and anti-arbitration injunctions do not seek to enjoin a foreign court or foreign arbitral tribunal, both of which would give little credence to an injunction from judicial court targeted at their activities. Instead, these injunctions are directed at the parties to the proceedings, enjoining them from pursuing claims in a foreign court or before an arbitrator. Depending on the procedural posture of a matter, a party may request an anti-suit or anti-arbitration injunction from a court by filing either an independent petition or a motion in an ongoing litigation. The process for bringing these requests is similar to the way a party obtains a preliminary injunction, although they are brought under different rules.
ANTI-SUIT INJUNCTIONS: Anti-suit injunctions are national court orders used especially in common law countries, in order to protect the jurisdiction of the arbitral tribunal, or to prevent the tribunal from assuming jurisdiction. Anti-suit injunctions may order a party not to pursue court proceedings initiated in breach of a dispute resolution clause, or an arbitration agreement. Anti-suit injunctions are controversial, since they are an indirect interference with the judicial process of a foreign sovereign state, which is analysed in this article. The need for an anti-suit injunction arises when a party commences a proceeding in a foreign court to gain a strategic or substantive advantage even though it has agreed to arbitrate the underlying dispute in a valid arbitration agreement.
ANTI-ARBITRATION INJUNCTIONS: An anti-arbitration injunction is a tool to enjoin a party from commencing or continuing an arbitration to which a US court petitioner did not submit or agree.
The global economy is producing a large number of international disputes. Litigating across national borders is often legally complex and difficult to predict. It requires experience and legal training to coordinate and implement an effective litigation strategy.
- International litigation and strategy planning:
International litigation (sometimes called “transnational litigation”) is the practice of litigation in connection with disputes among businesses or individuals residing or based in different countries.
The main difference between international litigation and domestic litigation is that, in the former, certain issues are more likely to be of significance — such as personal jurisdiction, service of process, evidence from abroad, and enforcement of judgments.
Long arm jurisdiction, which is the statutory grant of jurisdiction to local courts over out-of-state defendants. A long-arm statute authorizes a court in a state to exercise jurisdiction over an out-of-state defendant. Without a long arm statute, the courts in a state might not have personal jurisdiction over an out-of-state defendant. A state’s authorization to exercise jurisdiction is limited by the federal Constitution. The use of a long arm statute is usually considered constitutional where the defendant has certain minimum contacts with the forum state and there has been reasonable notice of the action against that defendant.
- Letter of Credit:
Letters of credit (LCs) are one of the most versatile and secure instruments available to international traders. An LC is a commitment by a bank on behalf of the importer (foreign buyer) that payment will be made to the beneficiary (exporter) provided that the terms and conditions stated in the LC have been met, as evidenced by the presentation of specified documents. Since LCs are credit instruments, the importer’s credit with his bank is used to obtain an LC. The importer pays his bank a fee to render this service. An LC is useful when reliable credit information about a foreign buyer is difficult to obtain or if the foreign buyer’s credit is unacceptable, but the exporter is satisfied with the creditworthiness of the importer’s bank. This method also protects the importer since the documents required to trigger payment provide evidence that goods have been shipped as agreed. However, because LCs have opportunities for discrepancies, which may negate payment to the exporter, documents should be prepared by trained professionals or outsourced. Discrepant documents, literally not having an “i dotted and t crossed,” may negate the bank’s payment obligation.
They are often used in international transactions to ensure that payment is received where the buyer and seller may not know each other and are operating in different countries. In this case the seller is exposed to a number of risks such as credit risk, and legal risk caused by the distance, differing laws and difficulty in knowing each party personally. A letter of credit provides the seller with a guarantee that they will get paid as long as certain documentary delivery conditions have been met. For this reason the use of letters of credit has become a very important aspect of international trade.
The bank that writes the letter of credit will act on behalf of the buyer and make sure that all documentary conditions have been met before making the payment to the seller. Most letters of credit are governed by rules promulgated by the International Chamber of Commerce known as Uniform Customs and Practice for Documentary Credits. The current version, UCP600, became effective July 1, 2007. Letters of credit are typically used by importing and exporting companies particularly for large purchases and will often negate the need by the buyer to pay a deposit before delivery is made.
They are also used in land development to ensure that approved public facilities (streets, sidewalks, storm water ponds, etc.) will be built. The parties to a letter of credit are the supplier, usually called the “beneficiary”, “the issuing bank”, of whom the buyer is a client, and sometimes an advising bank, of whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be amended or cancelled without mutual consent of all parties.
Documents that can be presented for payment
- Financial documents —bill of exchange, co-accepted draft
- Commercial documents —invoice, packing list
- Shipping documents —transport document, insurance certificate, commercial, official or legal documents
- Official documents — License, embassy legalization, origin certificate, inspection certificate,phytosanitary certificate
- Transport documents —bill of lading (ocean or multi-modal or charter party), airway bill, lorry/truck receipt, railway receipt, CMC other than mate receipt, forwarder cargo receipt
- Insurance documents — Insurance policy or certificate, but not a cover note.
- If import Machinery/device then required “Test Certificate”
- Foreign Investment and Join Venture:
A foreign direct investment (FDI) is an investment made by a company or entity based in one country, into a company or entity based in another country. Foreign direct investments differ substantially from indirect investments such as portfolio flows, wherein overseas institutions invest in equities listed on a nation’s stock exchange. Entities making direct investments typically have a significant degree of influence and control over the company into which the investment is made. Open economies with skilled workforces and good growth prospects tend to attract larger amounts of foreign direct investment than closed, highly regulated economies.
For small and medium sized companies, FDI represents an opportunity to become more actively involved in international business activities. In the past 15 years, the classic definition of FDI as noted above has changed considerably. This notion of a change in the classic definition, however, must be kept in the proper context. Very clearly, over 2/3 of direct foreign investment is still made in the form of fixtures, machinery, equipment and buildings. Moreover, larger multinational corporations and conglomerates still make the overwhelming percentage of FDI. But, with the advent of the Internet, the increasing role of technology, loosening of direct investment restrictions in many markets and decreasing communication costs means that newer, non-traditional forms of investment will play an important role in the future.
Joint venture and other hybrid strategic alliances:
An international joint venture (IJV) occurs when two businesses based in two or more countries form a partnership. A company that wants to explore international trade without taking on the full responsibilities of cross-border business transactions has the option of forming a joint venture with a foreign partner. International investors entering into a joint venture minimize the risk that comes with an outright acquisition of a business. In international business development, performing due diligence on the foreign country and the partner limits the risks involved in such a business transaction.
IJVs aid companies to form strategic alliances, which allow them to gain competitive advantage through access to a partner’s resources, including markets, technologies, capital and people. International joint ventures are viewed as a practical vehicle for knowledge transfer, such as technology transfer, from multinational expertise to local companies, and such knowledge transfer can contribute to the performance improvement of local companies. Within IJVs one or more of the parties is located where the operations of the IJV take place and also involve a local and foreign company
The more traditional joint venture is bi-lateral, that is it involves two parties who are within the same industry who are partnering for some strategic advantage. Typical reasons might include a need for access to proprietary technology that might tip the competitive edge in another competitor’s favor, desire to gain access to intellectual capital in the form of ultra-expensive human resources, access to heretofore closed channels of distribution in key regions of the world. One very good reason why many joint ventures only involve two parties is the difficulty in integrating different corporate cultures. With two domestic companies from the same country, it would still be very difficult. However, with two companies from different cultures, it is almost impossible at times. This is probably why pure joint ventures have a fairly high failure rate only five years after inception. Joint ventures involving three or more parties are usually called syndicates and are most often formed for specific projects such as large construction or public works projects that might involve a wide variety of expertise and resources for successful completion. In some cases, syndicates are actually easier to manage because the project itself sets certain limits on each party and close cooperation is not always a prerequisite for ultimate success of the endeavour.
- Anti-dumping and WTO:
Anti-dumping is said to occur when the goods are exported by a country to another country at a price lower than its normal value. This is an unfair trade practice which can have a distortive effect on international trade. Anti-dumping is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect. Thus, the purpose of anti-dumping duty is to rectify the trade distortive effect of dumping and re-establish fair trade. The use of anti-dumping measure as an instrument of fair competition is permitted by the WTO. In fact, anti-dumping is an instrument for ensuring fair trade and is not a measure of protection per se for the domestic industry. It provides relief to the domestic industry against the injury caused by dumping.
Often, dumping is mistaken and simplified to mean cheap or low priced imports. However, it is a misunderstanding of the term. On the other hand, dumping, in its legal sense, means export of goods by a country to another country at a price lower than its normal value. Thus, dumping implies low priced imports only in the relative sense (relative to the normal value), and not in absolute sense.
Import of cheap products through illegal trade channels like smuggling do not fall within the purview of anti-dumping measures. It is a measure of protection for domestic industry. However, anti-dumping measures do not provide protection per se to the domestic industry. It only serves the purpose of providing remedy to the domestic industry against the injury caused by the unfair trade practice of dumping. In fact, anti-dumping is a trade remedial measure to counteract the trade distortion caused by dumping and the consequential injury to the domestic industry. Only in this sense, it can be seen as a protective measure. It can never be regarded as a protectionist measure.
The General Agreement on Tariffs and Trade lays down the principles to be followed by the member countries for imposition of anti-dumping duties, countervailing duties and safeguard measures. Pursuant to the GATT, 1994, detailed guidelines have been prescribed under the specific agreements which have also been incorporated in the national legislation of the member countries of the WTO. Indian laws were amended with effect from 1.1.95 to bring them in line with the provisions of the respective GATT agreements.
The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business.
The WTO provides a forum for negotiating agreements aimed at reducing obstacles to international trade and ensuring a level playing field for all, thus contributing to economic growth and development. The WTO also provides a legal and institutional framework for the implementation and monitoring of these agreements, as well as for settling disputes arising from their interpretation and application. The current body of trade agreements comprising the WTO consists of 16 different multilateral agreements (to which all WTO members are parties) and two different plurilateral agreements (to which only some WTO members are parties).
Over the past 60 years, the WTO, which was established in 1995, and its predecessor organization the GATT have helped to create a strong and prosperous international trading system, thereby contributing to unprecedented global economic growth. The WTO currently has 162 members, of which 117 are developing countries or separate customs territories. WTO activities are supported by a Secretariat of some 700 staff, led by the WTO Director-General. The Secretariat is located in Geneva, Switzerland, and has an annual budget of approximately CHF 200 million ($180 million, €130 million).
Anti-dumping & WTO:
The WTO Agreement does not regulate the actions of companies engaged in “dumping”. Its focus is on how governments can or cannot react to dumping — it disciplines anti-dumping actions, and it is often called the “Anti-dumping Agreement”.
the WTO agreement allows governments to act against dumping where there is genuine (“material”) injury to the competing domestic industry. In order to do that the government has to be able to show that dumping is taking place, calculate the extent of dumping (how much lower the export price is compared to the exporter’s home market price), and show that the dumping is causing injury or threatening to do so.
GATT (Article 6) allows countries to take action against dumping. The Anti-Dumping Agreement clarifies and expands Article 6, and the two operate together. They allow countries to act in a way that would normally break the GATT principles of binding a tariff and not discriminating between trading partners — typically anti-dumping action means charging extra import duty on the particular product from the particular exporting country in order to bring its price closer to the “normal value” or to remove the injury to domestic industry in the importing country.
The agreement says member countries must inform the Committee on Anti-Dumping Practices about all preliminary and final anti-dumping actions, promptly and in detail. They must also report on all investigations twice a year. When differences arise, members are encouraged to consult each other. They can also use the WTO’s dispute settlement procedure.
- Franchising and Distribution Agreement:
Franchise agreement: A franchise is a contractual relationship where the franchisor allows a franchisee to use its trade name, marks and brands; exercises continuing control over a franchisee and is obliged to provide training and assistance to a franchisee. It requires a franchisee to make an initial and continuing payments to the franchisor.
Distribution agreement: In this agreement a manufacturer or a supplier of goods appoints an independent third party – the distributor – to market its goods. The independent third party purchases the goods on his own account and trades under his own name as an authorised distributor. His business name will usually have no connection with the name of the supplier of the goods nor will the supplier regulate the way in which the distributor operates his business other than, perhaps, to oblige the distributor to reach minimum turnover levels, to maintain advertising and PR material, to maintain minimum stocks both of goods and spare parts and to employ experienced servicing representatives. The obligations on a distributor should be compared to the much more extensive restrictions which a franchisor seeks to impose on its franchisees. Furthermore, no royalties are payable to the supplier by the distributor. The supplier’s profit arises from the difference between the price at which he manufactures or which he pays for the goods and the price at which he is able to sell the goods to the distributor.
Whilst a clear distinction can be drawn between franchising and distribution it should not be forgotten that franchising has evolved through the development of distributorship agreements.
Although used interchangeably in general conversation, these two agreements have the following differences:
- A franchise has different responsibilities and functions than a distributor.
Franchisees enter into a legal contract with the parent company to serve as a licensed operator under the parent company’s name and the company must provide adequate training to allow the franchisee to do so.
A distribution agreement between the parent company and a distributor or seller permits the distributor to market and sell the parent company’s products but under the distributor’s name.
- The franchisor, or parent company, lets the franchise use any trademarks or brand names needed to run the franchise. These trademarks bring the recognition of the parent company to the franchisee. McDonald’s is an example of a franchise with brand name recognition.
A distribution agreement does not allow the distributor to claim any trademarks or brands. Instead, the distributor uses its own business name to sell the parent company’s products.
- A franchise must follow the guidelines and standards of the parent company. Franchises also must pay fees to the parent company for use of the company’s name and products. The parent company has an obligation to ensure that the franchise has all the resources including training and technical advice needed for success.
A distribution agreement obligates the distributor to effectively sell the company’s products by keeping enough products in stock, minimizing employee turnover and advertising the products.
- A much greater degree of control is exercised by the franchisor over the franchisee in comparison with a supplier over his distributor.
Admiralty and Maritime Law:
Admiralty law was introduced into England by the French Queen Eleanor of Aquitaine while she was acting as regent for her son, King Richard the Lionheart.
Admiralty law became part of the law of the United States as it was gradually introduced through admiralty cases arising after the adoption of the U.S. Constitution in 1789. Many American lawyers who were prominent in the American Revolution were admiralty and maritime lawyers in their private lives. Those included are Alexander Hamilton in New York and John Adams in Massachusetts.
Admiralty law or maritime law is a distinct body of law that governs maritime questions and offenses. It is a body of both domestic law governing maritime activities, and private international law governing the relationships between private entities that operate vessels on the oceans. It deals with matters including marine commerce, marine navigation, marine salvaging, shipping, sailors, and the transportation of passengers and goods by sea. Admiralty law also covers many commercial activities, although land based or occurring wholly on land, that are maritime in character.
Admiralty law is distinguished from the Law of the Sea, which is a body of public international law dealing with navigational rights, mineral rights, jurisdiction over coastal waters and international law governing relationships between nations.
Although each legal jurisdiction usually has its own enacted legislation governing maritime matters, admiralty law is characterized by a significant amount of international law developed in recent decades, including numerous multilateral treaties.
- Competition and Anti-trust Law:
Competition law is a law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement.
Competition law is known as antitrust law in the United States and European Union, and as anti-monopoly law in China and Russia. In previous years it has been known as trade practices law in the United Kingdom and Australia.
The history of competition law reaches back to the Roman Empire. The business practices of market traders, guilds and governments have always been subject to scrutiny, and sometimes severe sanctions. Since the 20th century, competition law has become global. The two largest and most influential systems of competition regulation are United States antitrust law and European Union competition law. National and regional competition authorities across the world have formed international support and enforcement networks.
Competition law, or antitrust law, has three main elements:
- prohibiting agreements or practices that restrict free trading and competition between business. This includes in particular the repression of free trade caused by cartels.
- banning abusive behaviour by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position. Practices controlled in this way may include predatory pricing, tying, price gouging, refusal to deal, and many others.
- supervising the mergers and acquisitions of large corporations, including some joint ventures. Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to “remedies” such as an obligation to divest part of the merged business or to offer licenses or access to facilities to enable other businesses to continue competing.
At a national level competition law is enforced through competition authorities, as well as private enforcement.
- Intellectual Property Rights:
Intellectual property rights are the rights given to persons over the creations of their minds. They usually give the creator an exclusive right over the use of his/her creation for a certain period of time.
International intellectual property law is a patchwork area of intersecting multilateral and bilateral agreements and their resulting harmonization of national laws. It has become an increasingly important and frequently litigated area, particularly in the patent, copyright, and trademark arenas. In addition, in the past few decades, there have been louder calls for the protection of domain names, databases, software, and traditional knowledge. Many of these cutting edge intellectual property issues are addressed on an international level through the World Intellectual Property Organization (WIPO). Along with new forms of protection, the trend towards globalization in the trade arena has had a direct effect on the harmonization of national intellectual property laws through the World Trade Organization (WTO) and regional trade organizations. With increased interest in international intellectual property law, there are now numerous high quality electronic resources that cover various facets of this ever-changing area.
Intellectual property rights are customarily divided into two main areas:
- Copyright and rights related to copyright.
The rights of authors of literary and artistic works (such as books and other writings, musical compositions, paintings, sculpture, computer programs and films) are protected by copyright, for a minimum period of 50 years after the death of the author.
Also protected through copyright and related (sometimes referred to as “neighbouring”) rights are the rights of performers (e.g. actors, singers and musicians), producers of phonograms (sound recordings) and broadcasting organizations. The main social purpose of protection of copyright and related rights is to encourage and reward creative work.
Industrial property can usefully be divided into two main areas:
- One area can be characterized as the protection of distinctive signs, in particular trademarks (which distinguish the goods or services of one undertaking from those of other undertakings) and geographical indications (which identify a good as originating in a place where a given characteristic of the good is essentially attributable to its geographical origin).
- Other types of industrial property are protected primarily to stimulate innovation, design and the creation of technology. In this category fall inventions (protected by patents), industrial designs and trade secrets. The social purpose is to provide protection for the results of investment in the development of new technology, thus giving the incentive and means to finance research and development activities.