Transnational Commercial Laws

‘Transnational commercial law consists of that set of rules, from whatever source, which governs
international commercial transactions and is common to a number of legal systems. Such commonality
is derived from international instruments of various kinds, such as conventions and model laws, and
from codification of international trade usage adopted by contract, as exemplified by the Uniform
Customs and Practice for Documentary Credits published by the International Chamber of Commerce
and the Model Arbitration Rules issued by the United Nations Commission and International Trade
Law (UNICITRAL). Legislative guides of the kind published by UNICITRAL and UNIDROIT are
also contributing to the process of harmonization at international level. So too are ‘soft law’
restatements, such as the UNIDROIT Principles of International Commercial Contracts, which though
not binding are regularly resorted to by arbitral tribunals and influence the shaping of domestic
legislation in developing as well as ‘developed’ countries. Underpinning these is the lex mercatoria,
consisting of the unwritten customs and usages of merchants, and general principles of commercial
law.’

in the twentieth century, the laws managing global trade have been strengthened, codified and
harmonised. Therefore, commercial law needed to change into a denationalised form to encompass all
types of business regulatory issues of both private and public activities. To do so, several new features
were included to make it appropriate according to the 21st century business trends. For example, the
intellectual property law was added to secure the business interests of particular organization in the
competent international business environment. International arbitration was used to remove the trade
disputes among the involved countries in international trade practices. The commercial law at present
is far different from the form which it had in its inception during the nineteenth century. The
commercial law was mainly established in the nineteenth century. But prior to this it was used in the
eighteenth century for marine insurance and shipping activities. During the initial stages, commercial
law was largely applicable to marine business transactions. In such business, trading by sea was the
most widespread commercial activity. Following the global revival, commercial law has witnessed the
inclusion of new conventions, regulations and agreements related a number of business practices.
Having been denied recognised market relationships with their own economies, several countries were
determined to adopt the practices of the private commerce during the 20th century, while some others
which did not find the most suitable and domestic laws preferred to practise the commercial laws
which were followed in New York and England.

Similarly, many countries such as Europe and the US, the experts of law introduced many-sided
regulations in the strategies and policies of the international commercial law. In these agreements, one
of the most essential steps was harmonising and organising commercial law. For example, In Europe,
there was an awareness of a great need to harmonise law towards the 1950’s. In that period Europe
was experiencing great changes in economical, cultural and geographical aspects. All the member
states of the European Union were experiencing a great competition in business practices. Therefore, a
Design Directive was established by Europe at the end of the century to harmonise all the union’s
commercial laws elements. In Europe an effort to harmonization of the commercial law was carried
out for the protection of the intellectual property of member countries which were involved in
international trade practices. Due to such endeavours made in Europe in commercial law, the
transformation of the commercial law became a subject of international investigation. This much of
endeavours were caused in Europe as intellectual property related issues were became a matter of
serious concern during that time. This made business organizations to conduct their business as per the
transforming commercial law. As a consequence, during 20th century these commercial practices like
intellectual property rights became an important component of resurgence of commercial law.

Another suitability of the resurgence in the 21st century global commercial law was the international
arbitration of the intellectual property. This became an important point of international commerce in
global business. International arbitration became an established procedure in resolving disputes in
international trade practices mainly focusing on disputes among sovereign countries with overseas
investors at a time when globalisation started to expand; thus, opening new markets for foreign
investors. Soon after, international arbitration was undertaken by many bilateral investment treaties in
the globalised business environment to manage disputes in international trade through a process of
integration being forced to enhance these practices.

According to some economists of the twenty first century, providing international arbitration would
ensure a dominant role in running international trade practices. Therefore, arbitration has an
international implication nowadays as business organisations experience different trade clashes
following the opening of new branches worldwide. For instance, dispute resolution with regards to
international trade was conducted by the New York Convention on the Recognition and Enforcement
of Foreign Arbitral Awards. During this convention, the arbitral awards were made easy worldwide.
Thus, international arbitration is a suitable procedure emerging during the resurgence of commercial
law in the twentieth century and continues to be so in the global business environment of the twenty
first century.

Meaning and Scope of Transnational Commercial

Law
International commercial contracts are sale transaction agreements made between parties from
different countries.

The methods of entering the foreign market, with choice made balancing costs, control and risk,
include:

 Export directly.
 Use of foreign agent to sell and distribute.
 Use of foreign distributor to on-sell to local customers.
 Manufacture products in the foreign country by either setting up business or by
acquiring a foreign subsidiary.
  Licence to a local producer.
 Enter into a joint venture with a foreign entity.
 Appoint a franchisee in the foreign country.

Convention on the International Sale of Goods

The United Nations Convention on Contracts for the International Sale of Goods (CISG) is the main
convention for international sale of goods. Established by UNCITRAL, the Convention governs the
conclusion of the sale contract; and buyer and seller obligations, including respective remedies. It is
not concerned with the validity or provisions of the contract nor its effect on the property sold.

Contract of carriage of goods

In the carriage of goods by sea, air or land, goods may be lost, damaged or deteriorated. The bill of
lading (transport document used almost exclusively for carriage of goods by sea) is a contract of
carriage between the consignor, the carrier and consignee that acts as a receipt of transfer of goods and
as a negotiable instrument. The bill of lading also determines rights and liabilities agreed between
parties to an international sale contract. Also reservations as to the quality and quantity of the goods
are marked on the bill when accepting goods so as to stifle any accusations from the consignee of
damage in transit.

Title to sue
Where loss or damage to goods is incurred by a party to the contract of carriage, that person may sue
directly on that contract
.
Whom to sue
The party to be sued on a contract of carriage may vary from the shipowner, the charterer or the freight
forwarder.

Insurance in international trade

Insurance against perils is an important aspect of international commercial transactions. In the event of
loss or damage to cargo due to hazards during voyage, an insured party will be able to recover losses
from the insurer. The type of insurance required depends on the mode of transport agreed between
parties to transport the cargo. Such insurance forms include marine, aviation and land.

Payment in international trade

Two broad methods of financing international transactions are direct payment between seller and
buyer; or finance through banks. Practically, payment is effected by the following methods:
Cash in Advance: buyer transfers funds to the seller’s account in advance pursuant to the sale contract.

Open Account: arrangement for the buyer to advance funds to an ‘open account’ of the seller on a
fixed date or upon the occurrence of a specified event, such as delivery of the goods.
Bills of Exchange: negotiable instrument representing an order to the bank in writing to pay a certain
sum of money to the bearer (or specified person) on demand, or at a fixed or determinable future time.

Documentary Bill: seller (drawer) draws a bill of exchange on the buyer (drawee) and attaches it to the
bill of lading. The idea is to secure acceptance of the bill of exchange by the buyer; and the buyer is
bound to return the bill of lading if he does not honour the bill of exchange.

Documentary Credits: the bank, on behalf of buyer, issues a letter of credit undertaking to pay the
price of the sale contract on condition that the seller complies with credit terms. Upon presentation of
necessary commercial documents verifying shipment of goods, the bank collects payment for goods on
behalf of the seller. In the collection process, the buyer pays for goods in exchange for title documents.
Under this method the bank guarantees the buyer’s title to the goods and guarantees payment to the
seller.

This predominantly occurs through legal instruments governing commercial contracts is limited in its
scope since it depends upon incorporation into contracts. For any pragmatic effect there must be a
degree of uniformity in commercial practice between the contracting parties.

Model Laws promote the unification of international commercial law. Some examples are the
UNCITRAL Model Laws on:

 International Commercial Arbitration.

 International Credit Transfers 1992 (largely adopted by the EU).
 Procurement of Goods, Construction and Services 1994.
 Electronic Signatures.
 Electronic Commerce 1996.


Evolution of Law Merchant

History

The lex mercatoria was originally a body of rules and principles laid down by merchants to regulate
their dealings. It consisted of rules and customs common to merchants and traders in Europe, with
some local variation. It originated from the need for quick and effective jurisdiction, administered by
specialised courts. The guiding spirit of the merchant law was that it ought to derive from commercial
practice, respond to the needs of the merchants, and be comprehensible and acceptable to the
merchants who submitted to it. International commercial law today owes some of its fundamental
principles to the lex mercatoria. This includes choice of arbitration institutions, procedures, applicable
law and arbitrators, and the goal to reflect customs, usage and good practice among the parties.

Goods and services flowed freely during the medieval merchant law, thus generating more wealth for
all involved. It is debated whether the law was uniform in nature, was spontaneous as a method of
dispute resolution, or applied equally to everyone who subordinated to it. The lex mercatoria was also
a means for local communities to protect their own markets. Local kings or lords extracted taxes and
set trade restrictions. In 1303 Edward I issued the Carta Mercatoria, a charter to foreign merchants in
England, which guaranteed them freedom to trade, with certain protections and exemption under the
law. Although the charter was revoked by Edward II, due to complaints by English merchants, foreign
merchants retained most of their rights in practice, but these would vary widely with the march of
time, events and changes to state policy.

Administration

The lex mercatoria was the product of customs and practices among traders, and could be enforced
through the local courts. However, the merchants needed to solve their disputes rapidly, sometimes on
the hour, with the least costs and by the most efficient means. Public courts did not provide this. A
trial before the courts would delay their business, and that meant losing money. The lex mercatoria
provided quick and effective justice. This was possible through informal proceedings, with liberal
procedural rules. The lex mercatoria rendered proportionate judgements over the merchants’ disputes,
in light of “fair price”, good commerce, and equity.

Judges were chosen according to their commercial background and practical knowledge. Their
reputation rested upon their perceived expertise in merchant trade and their fair-mindedness.
Gradually, a professional judiciary developed through the merchant judges. Their skills and reputation
would however still rely upon practical knowledge of merchant practice.

Legal concepts

The lex mercatoria was composed of such usages and customs as were common to merchants and
traders in all parts of Europe, varied slightly in different localities by special peculiarities. Less
procedural formality meant speedier dispensation of justice, particularly when it came to
documentation and proof. Out of practical need, the medieval lex mercatoria originated the “writing
obligatory”. By this, creditors could freely transfer the debts owed to them. The “writing obligatory”
displaced the need for more complex forms of proof, as it was valid as a proof of debt, without further
proof of; transfer of the debt; powers of attorney; or a formal bargain for sale. The lex mercatoria also
strengthened the concept of party autonomy: whatever the rules of the lex mercatoria were, the parties
were always free to choose whether to take a case to court, what evidence to submit and which law to
apply.

Reception

Merchant law declined as a cosmopolitan and international system of merchant justice towards the end
of medieval times. This was to a large extent due to the adoption of national commercial law codes. It
was also connected with an increasing modification of local customs to protect the interests of local
merchants. The result of the replacement of lex mercatoria codes with national governed codes was the
loss of autonomy of merchant tribunals to state courts. The main reason for this development was the
protection of state interests.
Sources of Transnational Commercial Laws
The Mercantile Law in India developed with the enactment of the Indian Contract Act, 1872. Before
this, all the commercials transactions were governed by the personal laws of the party to contract. For
example Hindu Law, Mohammedan Law, etc. The first attempt to codify Mercantile Law in India was
made by the Britishers in 1872 by the enactment of Indian Contract Act. Since then, numerous laws
have been enacted in India to regulate commercial transactions, such as Partnership Act, Negotiable
Instruments Act, etc.

Sources of Indian Mercantile Law

The Indian Mercantile Law has developed from many sources. The following are the main sources of
Indian Mercantile Law:

 English Mercantile Law:

The Indian Mercantile Law owes its origin to the English Mercantile Law. For a very long time, India
was under the control of Britishers. Therefore, it has a direct influence on Indian law, and Indian
Mercantile Law is no exception to it. The dependence of Indian Law on English Law is so high that, in
the absence of any provision related to the issue in question, the direct recourse is to refer to the
English Mercantile Law. The sources of English Mercantile Law are Common Law, Equity, Law
Merchant, and Statute Law. The Common law of England or the judge made law is the preliminary
source of Indian Law. It is the unwritten law of England that consists of judicial decisions and
customs. With the passage of time, this law became rigid. This rigidity led to the development of
Equity in England.

 Acts enacted by Indian Legislature:

The greater part of Indian Mercantile law is Legislature enacted. The Acts enacted by the Indian
Parliament are that source of law which makes it possible to bring uniformity in Indian Law. Changes
can be brought in Indian Law effectively by legislative enactments.

Judicial Decisions:

Judges interpret the law and put life into the black and white letters of law for its effective
implementation. The decision of judges is binding on all subsequent decisions unless overruled by a
higher court or a larger bench. For example, the decision of a High Court is binding on all the lower
courts under its jurisdiction, and the decision of a Supreme Court is binding on all the courts of India
except for the Supreme Court itself. The decision of the Supreme Court has persuasive value for the
same bench, but it has binding value in the case, a larger bench gave the earlier ruling.
  Customs and Trade Usages:

Customs and Usages had played a very vital role in regulating the commercial transactions in India
when there was no codified law. In fact, the codified law of India has given superseding powers to the
customs and usages. For example, Section 1 of Indian Contract Act states, “Nothing herein contained
shall affect any usage or custom of trade not inconsistent with the Act.” A custom becomes binding
when certain pre-requisites are fulfilled. For example, antique, reasonable, consistent with law, not
against public policy. Then, the custom is recognized by courts, and it becomes a legal obligation.
Hundi is the best example of this, and it has been recognized by the Negotiable Instruments Act as
well.

The need for mercantile law is felt when a dispute arises between the two parties to the contract.
Awareness about the law of the land is essential as ignorance of law is no excuse. Therefore, each and
every individual should have knowledge of the mercantile law of their country. In the absence of
knowledge, no rights can be enjoyed, and no obligations can be met.

UNIDROIT
UNIDROIT (formally, the International Institute for the Unification of Private Law; French: Institut
international pour l’unification du droit privé) is an intergovernmental organization whose objective is
to harmonize international private law across countries through uniform rules, international
conventions, and the production of model laws, sets of principles, guides and guidelines. Established
in 1926 as part of the League of Nations, it was reestablished in 1940 following the League’s
dissolution through a multilateral agreement, the UNIDROIT Statute. As at 2019 UNIDROIT has 63
member states.

Conventions

Unidroit has over the years prepared the following international Conventions, drawn up by Unidroit
and adopted by diplomatic Conferences convened by member States of Unidroit:

 Convention relating to a Uniform Law on the International Sale of Goods (The

Hague, 1964)
 Convention relating to a Uniform Law on the Formation of Contracts for the
International Sale of Goods (The Hague, 1964)
 International Convention on Travel Contracts (Brussels, 1970)
 Convention providing a Uniform Law on the Form of an International Will
(Washington, D.C., 1973)
 Convention on Agency in the International Sale of Goods (Geneva, 1983)
 Unidroit Convention on International Financial Leasing (Ottawa, 1988)
 Unidroit Convention on International Factoring (Ottawa, 1988)
  UNIDROIT Convention on Stolen or Illegally Exported Cultural Objects (Rome,
1995)
 Convention on International Interests in Mobile Equipment (Cape Town, 2001)
(including Protocols on Aircraft (2001) and Railway rolling stock (2007) and Space
assets (2012))
 Geneva Securities Convention (Geneva, 2009)

UNCITRAL
The United Nations Commission on International Trade Law (UNCITRAL) (French: Commission des
Nations Unies pour le droit commercial international (CNUDCI)) is a subsidiary body of the U.N.
General Assembly (UNGA) responsible for helping to facilitate international trade and investment.

Established by the UNGA in 1966, UNCITRAL’s official mandate is “to promote the progressive
harmonization and unification of international trade law” through conventions, model laws, and other
instruments that address key areas of commerce, from dispute resolution to the procurement and sale
of goods.

UNCITRAL carries out its work at annual sessions held alternately in New York City and Vienna,
where it is headquartered.

History

When world trade began to expand dramatically in the 1960s, national governments began to realize
the need for a global set of standards and rules to harmonize national and regional regulations, which
until then governed international trade.

Membership

UNCITRAL’s original membership comprised 29 states, and was expanded to 36 in 1973, and again to
60 in 2004. Member states of UNCITRAL are representing different legal traditions and levels of
economic development, as well as different geographic regions. States includes 12 African states, 15
Asian states, 18 European states, 6 Latin American and Caribbean states, and 1 oceanian state. The
Commission member States are elected by the General Assembly. Membership is structured so as to
be representative of the world’s various geographic regions and its principal economic and legal
systems. Members of the commission are elected for terms of six years, the terms of half the members
expiring every three years.
Activities

 Coordinating the work of active organizations and encouraging cooperation among

them.
 Promoting wider participation in existing international conventions and wider
acceptance of existing model and uniform laws.
 Preparing or promoting the adoption of new international conventions, model laws
and uniform laws and promoting the codification and wider acceptance of
international trade terms, provisions, customs and practice, in collaboration, where
appropriate, with the organizations operating in this field.
 Promoting ways and means of ensuring a uniform interpretation and application of
international conventions and uniform laws in the field of the law of international
trade.
 Collecting and disseminating information on national legislation and modern legal
developments, including case law, in the field of the law of international trade.
 Establishing and maintaining a close collaboration with the UN Conference on
Trade and development.
 Maintaining liaison with other UN organs and specialized agencies concerned with
international trade.

Conventions

A convention is an agreement among participating states establishing obligations binding upon those
States that ratify or accede to it. A convention is designed to unify law by establishing binding legal
obligations. To become a party to a convention, States are required formally to deposit a binding
instrument of ratification or accession with the depository. The entry into force of a convention is
usually dependent upon the deposit of a minimum number of instruments of ratification.

UNCITRAL conventions:

 The Convention on the Recognition and Enforcement of Foreign Arbitral Awards

(the New York Convention) (1958)
 The Convention on the Limitation Period in the International Sale of Goods (1974)
 The United Nations Convention on the Carriage of Goods by Sea (1978)
 the United Nations Convention on Contracts for the International Sale of Goods
(1980)
 The United Nations Convention on International Bills of Exchange and International
Promissory Notes (1988)
 The United Nations Convention on the Liability of Operators of Transport
Terminals in International Trade (1991)
 The United Nations Convention on Independent Guarantees and Stand-by Letters of
Credit (1995)
  The United Nations Convention on the Assignment of Receivables in International
Trade (2001)
 The United Nations Convention on the Use of Electronic Communications in
International Contracts (2005)
 The United Nations Convention on Contracts for the International Carriage of
Goods Wholly or Partly by Sea (2008)
 The United Nations Convention on Transparency in Treaty-based Investor-State
Arbitration (2015)
 The United Nations Convention on International Settlement Agreements Resulting
from Mediation (the Singapore Convention on Mediation) (2018)

Model laws

A model law is a legislative text that is recommended to States for enactment as part of their national
law. Model laws are generally finalized and adapted by UNCITRAL, at its annual session, while

Carriages of goods by Sea, Air, Multimodal

Transportation
Multimodal transport (also known as combined transport) is the transportation of goods under a single
contract, but performed with at least two different modes of transport; the carrier is liable (in a legal
sense) for the entire carriage, even though it is performed by several different modes of transport (by
rail, sea and road, for example). The carrier does not have to possess all the means of transport, and in
practice usually does not; the carriage is often performed by sub-carriers (referred to in legal language
as “actual carriers”). The carrier responsible for the entire carriage is referred to as a multimodal
transport operator, or MTO.

Multi modal Transportation of Goods Act: In view of the provisions of Section (3) of the
Multimodal Transportation of Goods Act (MMTG), 1993, no person shall carry on or commence
business on multimodal transportation unless he is registered under the Multimodal Transportation of
Goods Act,1993. “Multimodal Transport Contract” to mean” a contract under which Multimodal
Transport Operator undertakes to perform or procure the performance of Multimodal Transportation
against payment of freight”.

Multimodal transport document: Multimodal transport document is issued when the transportation

of goods involve more than one mode of transport. It is a document evidencing contract for
performance of combined transport.

Hence, in Multi modal transport document, the carriers are called as multimodal transport operator
who takes the liability for safe carriage of goods by different modes of conveyances from the place of
receipt of the goods to place of delivery. It is to be noted that this document will only confirm the
receipt of the goods and not shipment on board.
Types of Multimodal Transport Organizations:

Various types of organizations are operating as MTOs but they may be grouped under two
categories:

Vessel Operating MTOs

 Individual shipping companies or groups of consortia of shipping companies.

 The large exporters who utilize their own multimodal transport operations by
engaging their owned chartered ships.

Non-vessel Operating MTOs (NVO-MTOs)

 Freight forwarders.
 Road transport operators.

Does multimodal transport service is accepted to all shippers:

Many shippers do not like to select a single carrier or by conference carriers for availing of different
quality of service and prices depending on their requirements.

According to some shippers that a conference carrier does outstanding job in terms of service,
documentation, communication, safety and security but it was expensive.  But when they utilize the
services of non conference carrier and NVO-MTOs , they do not get the service for inland
transportation for which they have to have make a separate arrangement.

Responsibilities and Liabilities of MTO:

The MTO remains responsible for the goods throughout the period from the time they receive the
consignment until the same is delivered. The MTO shall be liable for loss resulting from:

 Any loss of or damage to the consignment;

 Delay in delivery of the consignment and any consequential loss or damage arising
from such delay, where such loss/ damage or delay in delivery took place while the
consignment was in his charge.

Limits of liability:

 Where the MTO becomes liable for any loss of, or damage to, any consignment, the
nature and value whereof have not been declared by the consignor before such
consignment was taken in charge by the MTO, and if the stage of transit at which
such loss or damage occurred is not known, then the liability of the MTO shall not
 exceed 2 SDR per kg of gross weight of the consignment lost or damaged, or 666.67
SDR per package or unit lost or damaged, whichever is higher.
 If no sea or inland water way leg is involved in the transit, then the limitation is
based solely on weight, i.e., 8.33 SDR per kg. of gross weight of the goods lost or
damaged.
 If the stage of transport at which such loss of, or damage occurred is known, the
limit of liability of the MTO shall be determined in accordance with the provisions
of the relevant law (or convention governing limitation of liability) applicable in
relation to the mode and stage of transit during the course of which such loss of, or
damaged occurred.

Notice of loss /damage to the goods:

Notice shall be given by the consignees in writing to the MTO immediately if the losses are apparent.
However, if the loss/ damage is not apparent; such notice shall be given within six days from the date
of delivery.

Limitation on Legal Action:

The MTO shall not be liable under any of the provisions of the act unless legal action against him is
brought within 9 months of:

 The date of delivery of the goods; or

 The date when the goods should have been delivered; or
 The date on and from which the consignee has the right to treat the goods as lost.

Vienna convention on Contract for International

sale of Goods
The United Nations Convention on Contracts for the International Sale of Goods (CISG), sometimes
known as the Vienna Convention is a multilateral treaty that establishes a uniform framework for
international commerce. Ratified by 93 countries, known as “Contracting States”, the Convention
governs a significant proportion of world trade, making it one of the most successful instruments of
international trade law. Guatemala and Laos are the most recent parties to the Convention, acceding to
it on 12 December 2019 and 24 September 2019, respectively.

The CISG was developed by the United Nations Commission on International Trade Law
(UNCITRAL) beginning in 1968, drawing from previous efforts in the 1930s undertaken by the
International Institute for the Unification of Private Law (UNIDROIT). In 1980, a draft text was
introduced in a conference in Vienna, and following weeks of discussion and modification, it was
unanimously approved and opened for ratification; the CISG subsequently came into force on 1
January 1988, after being ratified by 11 countries.
Major absentees

India, South Africa, Nigeria, and the United Kingdom are the major trading countries that have not yet
ratified the CISG.

The absence of the United Kingdom, a leading jurisdiction for the choice of law in international
commercial contracts, has been attributed variously to: the government not viewing its ratification as a
legislative priority, a lack of interest from business in supporting ratification, opposition from a
number of large and influential organisations, a lack of public service resources, and a danger that
London would lose its edge in international arbitration and litigation.

There is significant academic disagreement as to whether Hong Kong, Taiwan, and Macau are deemed
parties to the CISG due to China’s status as a party.

Potential Contracting States

Rwanda has concluded the domestic procedure of consideration of the CISG and adopted laws
authorising its adoption; it will subsequently enter into force once the instrument of accession is
deposited with the Secretary-General of the United Nations. Kazakhstan has also made progress in the
adoption process.

Future directions

Greater acceptance of the CISG will come from three directions. First, it is likely that within the global
legal profession, as the numbers of new lawyers educated in the CISG increases, the existing
Contracting States will embrace the CISG, appropriately interpret the articles, and demonstrate a
greater willingness to accept precedents from other Contracting States.

Second, businesses will increasingly pressure both lawyers and governments to make international
commercial disputes over the sale of goods less expensive, and reduce the risk of being forced to use a
legal system that may be completely alien to their own. Both of these objectives can be achieved
through use of the CISG.

Differences with country legislation relating to the sale of goods

Depending on the country, the CISG can represent a small or significant departure from local
legislation relating to the sale of goods, and in this can provide important benefits to companies from
one contracting state that import goods into other states that have ratified the CISG.

Differences with US legislation (the UCC)

In the U.S., all 50 states have, to varying degrees, adopted common legislation referred to as the
Uniform Commercial Code (“UCC”). UCC Articles 1 (General Provisions) and 2 (Sales) are generally
similar to the CISG. However, the UCC differs from the CISG in some respects, such as the following
areas that tend to reflect more general aspects of the U.S. legal system:

 Terms of Acceptance: Under the CISG, acceptance occurs when it is received by

the offeror, a rule similar to many civil law jurisdictions which contemplate for
service to be effective upon receipt. By contrast, the U.S. legal system often applies
the so-called “mailbox rule” by which, acceptance, like service, can occur at the
time the offeree transmits it to the offeror.
 “Battle of the Forms”: Under the CISG, a reply to an offer that purports to be an
acceptance, but has additions, limitations, or other modifications, is generally
considered a rejection and counteroffer. The UCC, on the other hand, tries to avoid
the “battle of the forms” that can result from such a rule, and allows an expression of
acceptance to be operative, unless the acceptance states that it is conditioned on the
offeror consenting to the additional or different terms contained in the acceptance.
 Writing Requirement: Unless otherwise specified by a ratifying State, the CISG
does not require that a sales contract be reduced to a writing. Under the UCC’s
statute of frauds (inherited from the common law), contracts selling goods for a
price of $500 or more are generally not enforceable unless in writing.


Drafting of International Commercial contracts

One of the most important subjects in international trade is drafting international commercial
contracts. International commercial contracts include 3 expressions: contract, commercial, and
international. Contract means an agreement which provides the relations between 2 or more parties.
These relations can be in different fields such as sales and purchase of goods, lease, mortgage,
guarantee, or granting financial facilities. A commercial contract is a charter entered into for business
purposes and commercial needs.

Governing Law of Contract

Conflict of Laws

International contracts contrary to local contracts are related to more than one national legal systems
and whereas a single contract cannot be governed by different national legal systems, conflict of laws
occurs.

Determination of Applicable Law

In principle since the national legal systems have no uniform rules, a single contract may lead into
different rights, obligations and consequences in different legal systems.
Preparation of Primary Draft

The first step in drafting international contracts is determination of the purposes and how to achieve
them. At first, to achieve a contract’s ends must be planned and then based on which, contractual
conditions must be drafted. When the contract general framework was determined, usually one of the
parties undertakes to prepare the primary draft of the contract for the future negotiations. In
preparation of primary draft, the previous contracts entered into concerning the same or similar
contract subject are very important.

Preliminary Agreements

In daily and usual transactions, negotiations and drafting the contract are basically performed
simultaneously. However, there are several cases in economic and social relations where the parties
can’t for some reasons finalize and draft their considered contract promptly and it’s necessary to
provide preliminaries before entering into the contract and/or conduct negotiations to reach the mutual
agreement concerning their accepted conditions.

Contract Forms

International contracts may be entered into in different forms. An international contract may be formed
orally and/or by letters, fax, or e-mail. In important contracts, at first, the text of contract is negotiated
and then signed by the parties. But the merchants who trade with each other for the years may make
their orders only on the phone. However, almost all international contracts are in writing.

A Contract Text: Brief or Detailed

A contract may be formed in detail or briefly. A detailed contract provides the subjects including
rights and obligations of the parties, contract termination, rewards and penalties, dispute settlement,
governing law and other details. The less brief a contract, the more interference of governing law to
interpret and supplement the contract provisions. The more contract price or the longer contract term,
or the more complicated the contract subject, the more details must be predicted in the contract.

A contract text: Simple or Complicated

A principle in drafting a contract is that the contract provisions must be transparent and precise as
much as possible to express the parties’ intention clearly. Transparency in a contract avoids the future
disputes and in case of disputes, the dispute settlement authorities can interpret the contract simpler
and more definite. If the usual meaning of the words and expressions are not clear, it is suggested to
make clear the meaning of those words in definition section of the contract. When a phrase is defined
in a contract, it must be identified in what part of the contract those words and phrases are used in their
defined meaning and in what part in their usual meaning. In English contracts, the defined words and
phrases are usually written in capital letters.
International Payments
If you have shopped online on international portals or have received payments from abroad, you
would have wondered about how the payments flow across the world and which banks and financial
institutions underpin global commerce and trade.

Components and Constituents of the International Payment System

So, who and what are the constituents and components of the international payment system? To start
with, banks and financial institutions form the first layer of the international payment wherein
they hold accounts of other global banks who in turn hold accounts of the former. This enables the
banks to send and receive payments from each other as they can simply debit their accounts and credit
the other bank’s account with them and this in turn leads to payments flowing to the recipient bank
that debit the sending bank and credit their account.

The SWIFT Protocol

However, it is not enough for banks and other financial institutions to simply transfer money to each
other without having a common protocol and standard by which they can communicate with each
other. In other words, they need to “talk to each other” in a “language” that is understood by them.

Hence, there is indeed a common protocol that forms the basis for such communication, this is
the SWIFT standard wherein the acronym stands for Society for Worldwide International
Funds Transfer wherein this payment standard prescribes the rules and regulations that all
participants in the international payment network must abide with to ensure that there is a common
standard of messaging and communication between the banks and other financial institutions.

An Example of How International Payments Work

To take an example, if you are located in the United States and want to send a funds transfer to India,
you must first setup the beneficiary and then transfer funds from your account to the beneficiary.
While this completes your end of the value chain, the next step is when your bank in the United States
debits your account and credits its account with the funds. After this, it transfers the money to its
partner bank in India or if it does not have any dealings with Indian banks, it contacts a bank in the
United States that has such dealings and in both these cases; the funds are then transferred from the
banks in the United States to the bank in India.

Once the banks in India receive the funds, they must then send it to the ultimate beneficiary wherein
the funds are debited from its account and credited to the recipient. Again, this step might be a single
or two step processes depending on the recipient holding an account with the concerned bank that
receives the funds.

Automation and Digitalization of the International Payment System

As you can see from the above example, international payments involve a complex chain of
transactions and payment routes that entail cooperation and coordination between multiple banks and
financial institutions. All these flows are made possible by automated payment systems that use the
SWIFT standard which as explained earlier enables and ensures that the payments flow smoothly
throughout the value chain.

Further, in recent years, there has been so much automation and digitalization of the payment systems
that funds from one country to the other are flowing in an almost real time manner with just minor
delays because of the clearing houses in between.

The Role of International Chamber of Commerce

in the development of Transnational Commercial
Laws
Based in Paris, France, the International Chamber of Commerce (ICC) is an organization comprised of
more than six million members from countries around the world, tasked primarily with representing
and helping to establish rules that affect and govern the interests of individuals and organizations in
every part of private enterprise.

The Basic Functions and Activities of the ICC

In its capacity as the world’s foremost business organization, the International Chamber of Commerce
functions in three primary capacities:

 As an advocate for policies that benefit members in every area of business

 The establishing of rules that help members achieve such policies and adhere to
them
 Solving disputes between members

Who the ICC Supports

Ultimately, the International Chamber of Commerce supports its members and associates. However, in
setting the groundwork for fair and profitable trade and business between nations, the ICC ends up
supporting any firm that seeks out deals or trade with another country.
The ICC also works closely with a number of governmental agencies by lending expertise and
establishing a presence through representatives at places like the World Trade Organization (WTO),
the United Nations (UN), and even at the G20 summits.

The International Chamber of Commerce was created shortly after World War I when real regulation
or security concerning international trade and business interests were not existent. Over the years, the
ICC became a foundation on which rules of ethical and profitable trade between nations could be
established. The rules the ICC laid down in its earliest years are the principles it stands on today,
principles that influence almost every area of business and trade around the world.

Dispute resolution services

ICC’s administered dispute resolution services help solve difficulties in international business. ICC
Arbitration is a private procedure that leads to a binding and enforceable decision.

ICC Commercial Crime Services

ICC Commercial Crime Services (CCS) provides the world business community with a centralized
commercial crime-fighting body. It draws on the worldwide resources of its members in the fight
against commercial crime on many fronts.

From its base in London, and comprising three distinct bureaux, CCS operates according to two basic
principles: to prevent commercial crime and to investigate and help prosecute criminals involved in
commercial crime.

The specialized divisions of CCS are:

 International Maritime Bureau

 Financial Investigation Bureau
 Counterfeiting Intelligence Bureau
 FraudNet

ICC Business World Trade Agenda

The International Chamber of Commerce (ICC), in partnership with the Qatar Chamber, launched the
ICC Business World Trade Agenda initiative in March 2012 to provide private sector leadership in
shaping a new multilateral trade policy agenda. The aim of this initiative is ultimately to drive World
Trade Organization (WTO) multilateral trade talks out of an 11-year deadlock and “beyond Doha”.

The World Trade Agenda is a strong business-led initiative to bolster rules-based trade. The WTO
lends its support to this initiative by engaging business to provide recommendations to advance global
trade negotiations.
The World Trade Agenda aims to:

 Define multilateral trade negotiation priorities for business

 Help governments set a trade policy agenda for the 21st century that contributes to
economic growth and job creation
 Find answers to the current economic crisis and drive more effective trade talks
 Set concrete recommendations to advance global trade negotiations
 Sound the alarm on protectionism
 Gather input and validation from the global business community on trade agenda
priorities and recommendations for achieving a Doha victory

Uniform Customs and Practices on Documentary

credits
The Uniform Customs and Practice for Documentary Credits (UCP) is a set of rules on the issuance
and use of letters of credit. The UCP is utilized by bankers and commercial parties in more than 175
countries in trade finance. Some 11-15% of international trade utilizes letters of credit, totaling over a
trillion dollars (US) each year.

Historically, the commercial parties, particularly banks, have developed the techniques and methods
for handling letters of credit in international trade finance. This practice has been standardized by the
ICC (International Chamber of Commerce) by publishing the UCP in 1933 and subsequently updating
it throughout the years. The ICC has developed and moulded the UCP by regular revisions, the current
version being the UCP600. The result is the most successful international attempt at unifying rules
ever, as the UCP has substantially universal effect. The latest revision was approved by the Banking
Commission of the ICC at its meeting in Paris on 25 October 2006. This latest version, called the
UCP600, formally commenced on 1 July 2007.

ICC and the UCP

A significant function of the ICC is the preparation and promotion of its uniform rules of practice. The
ICC’s aim is to provide a codification of international practice occasionally selecting the best practice
after ample debate and consideration. The ICC rules of practice are designed by bankers and
merchants and not by legislatures with political and local considerations. The rules accordingly
demonstrate the needs, customs and practices of business. Because the rules are incorporated
voluntarily into contracts, the rules are flexible while providing a stable base for international review,
including judicial scrutiny. International revision is thus facilitated permitting the incorporation of the
changing practices of the commercial parties. ICC, which was established in 1919, had as its primary
objective facilitating the flow of international trade at a time when nationalism and protectionism
threatened the easing of world trade. It was in that spirit that the UCP were first introduced – to
alleviate the confusion caused by individual countries’ promoting their own national rules on letter of
credit practice. The aim was to create a set of contractual rules that would establish uniformity in
practice, so that there would be less need to cope with often conflicting national regulations. The
universal acceptance of the UCP by practitioners in countries with widely divergent economic and
judicial systems is a testament to the rules’ success.

UCP600

The latest (July 2007) revision of UCP is the sixth revision of the rules since they were first
promulgated in 1933. It is the outcome of more than three years of work by the ICC’s Commission on
Banking Technique and Practice.

eUCP

The eUCP was developed as a supplement to UCP due to the sense at the time that banks and
corporates together with the transport and insurance industries were ready to use electronic commerce.
The hope and expectation that surrounded the development of eUCP has failed the UCP600 and it will
remain as a supplement albeit slightly amended to identify its relationship with UCP600.

An updated version of the eUCP came into effect on 1 July 2019.

CDCS

The Certificate for Documentary Credit Specialists (CDCS) is the leading qualification for
documentary credit specialists. Recognised worldwide as a benchmark of competence for international
practitioners, it enables documentary credit specialists to demonstrate practical knowledge and
understanding of the complex issues associated with documentary credit practice such as:

 Documentary credits: types, characteristics and uses, including standby credits

 Rules and trade terms, including ISBP 745, ISP 98, UCP 600, URR 725 and
Incoterms 2010
 Types and methods of payment / credit used in documentary credit transactions

International Commercial Arbitration

International commercial arbitration is an alternative method of resolving disputes between private
parties arising out of commercial transactions conducted across national boundaries that allows the
parties to avoid litigation in national courts.

Agreement details

A number of essential elements should be included in almost all international arbitration agreements,
with model language available. These include the agreement to arbitrate, a definition of the scope of
disputes subject to arbitration, the means for selecting the arbitrator(s), a choice of the arbitral seat,
and the adoption of institutional or ad hoc arbitration rules. A number of other provisions can also be
included in international arbitration clauses, including the language for the conduct of the arbitration,
choice of applicable law, arbitrator qualifications, interim relief, costs, and procedural matters.

In order to bridge the gap when parties to an international agreement have difficulty in agreeing upon
an arbitral institution, some international arbitration specialists recommend using an arbitration clause
that authorizes two arbitral institutions in the same city. Those clauses generally empower the party
commencing the arbitration to select the arbitral institution.

Key Resources for International Commercial Arbitration

 Global Arbitration Review (GAR)

Specialized news source for monitoring the latest developments in international commercial
arbitration.  Also publishes practitioner guides and annual surveys.

 ICC Dispute Resolution Library

Features extracts from arbitral awards issued in disputes administered by the International Court of
Arbitration of the International Chamber of Commerce.

 Kluwer Arbitration

This searchable database includes both primary legal materials (treaties, national laws, arbitral awards,
and court decisions) and secondary sources (e-books and journal articles).

 Transnational Dispute Management (TDM)

Content includes peer-reviewed articles from TDM’s online-only journal and a searchable database of
primary legal materials.

 Westlaw (International Arbitration Materials)

This Westlaw database includes primary legal materials from select jurisdictions, secondary sources,
and drafting aids.

UNCITRAL Model law on International

Commercial arbitration
The UNCITRAL Model Law on International Commercial Arbitration was prepared by UNCITRAL,
and adopted by the United Nations Commission on International Trade Law on 21 June 1985. In 2006
the model law was amended, it now includes more detailed provisions on interim measures.

The model law is not binding, but individual states may adopt the model law by incorporating it into
their domestic law (as, for example, Australia did, in the International Arbitration Act 1974, as
amended).

The preamble to the Model Law provides:

The purpose of this Law is to provide effective mechanisms for dealing with cases of cross-border
insolvency so as to promote the objectives of:

(a) Cooperation between the courts and other competent authorities of this State and foreign States
involved in cases of cross-border insolvency;

(b) Greater legal certainty for trade and investment;

(c) Fair and efficient administration of cross-border insolvencies that protects the interests of all
creditors and other interested persons, including the debtor;

(d) Protection and maximization of the value of the debtor’s assets; and

(e) Facilitation of the rescue of financially troubled businesses, thereby protecting investment and
preserving employment.

Indian Arbitration and Conciliation Act 1996

The ‘Arbitration and Conciliation Act 1996’ is an Act that regulates domestic arbitration in India. It
was amended in 2015 and further ammendment passed in Lok Sabha on 1 August 2019.

The Government of India decided to amend the Arbitration and Conciliation Act, 1996 by introducing
the Arbitration and Conciliation (Amendment) Bill, 2015 in the Parliament. In an attempt to make
arbitration a preferred mode of settlement of commercial disputes and making India a hub of
international commercial arbitration, the President of India on 23 October 2015 promulgated an
Ordinance (Arbitration and Conciliation (Amendment) Ordinance, 2015) amending the Arbitration and
Conciliation Act, 1996. The Union Cabinet chaired by the Prime Minister, had given its approval for
amendments to the Arbitration and Conciliation Bill, 2015

Qualifications and Experience of Arbitrators

A person will not be qualified to be an arbitrator unless he is/ has been:

(i) an advocate within the meaning of the Advocates Act, 1961 having ten years of practice experience
as an advocate

(ii) A chartered accountant within the meaning of the Chartered Accountants Act, 1949 having ten
years of experience

(iii) A cost accountant within the meaning of the Cost and Works Accountants Act, 1959 having ten
years of experience

(iv) A company secretary within the meaning of the Company Secretaries Act, 1980 having ten years
of experience

(v) An officer of the Indian Legal Service

(vi) an officer with law degree having ten years of experience in the legal matters in the Government,
autonomous body, public sector undertaking or at a senior level managerial position in private sector

(vii) an officer with engineering degree having ten years of experience as an engineer in the
Government, autonomous body, public sector undertaking or at a senior level managerial position in
the private sector or self-employed

(viii) an officer having senior level experience of administration in the Central Government or State
Government or having experience of senior level management of a public sector undertaking or a
Government company or a private company of repute

(ix) a person having educational qualification at degree level with ten years of experience in a
scientific or technical stream in the fields of telecom, information technology, intellectual property
rights or other specialized areas in the Government, autonomous body, public sector undertaking or a
senior level managerial position in a private sector, as the case may be.

2015 Amendment

The following are the salient features of the new ordinance, introduced in 2015:

The first and foremost amendment introduced by the ordinance, is with respect to definition of
expression ‘ Court ‘. The amended law makes a clear distinction between an international commercial
arbitration and domestic arbitration with regard to the definition of ‘Court’. In so far as domestic
arbitration is concerned, the definition of “Court” is the same as was in the 1996 Act, however, for the
purpose of international commercial arbitration, ‘Court’ has been defined to mean only High Court of
competent jurisdiction. Accordingly, in an international commercial arbitration, as per the new law,
district court will have no jurisdiction and the parties can expect speedier and efficacious
determination of any issue directly by the High court which is better equipped in terms of handling
commercial disputes.

Enforcement of foreign arbitral award

An arbitral award refers to the decision of an arbitral tribunal, whether in a domestic or international
arbitration, including any interim awards thereunder. In India, enforcement and execution of arbitral
awards are governed both by the Arbitration and Conciliation Act, 1996 and the Code of Civil
Procedure, 1908. This article aims to look at the manner and procedure by which these arbitral awards,
which are passed or laid down outside our territorial limits, are enforced in India. The process for the
same is one that is mired in complexities and takes a lot of time to be enforced and as shall be seen
below, been muddled by judicial decisions on the matter.

Frameworks for enforcement of arbitral awards

The primary framework as regards the enforcement of arbitral awards is the 1958 United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New
York Convention. The Convention facilitates the enforcement of arbitral awards in all the contracting
states, that is, those nations which are a party to and are signatories to the Convention, one among
which is India. Prior to the New York Convention, enforcement of arbitral awards of another country
in the jurisdiction of another State was provided for in the Geneva Protocol on Arbitration Clauses,
1924 as well as the Geneva Convention on the Enforcement of Awards of 1927.

Enforcement of awards under the Arbitration and Conciliation Act, 1996

As the Arbitration and Conciliation Act of 1996 (hereinafter referred to as the ‘Act’), is the prime
legislation behind the enforcement of foreign awards, it is essential to understand how the awards are
enforced under the Act. One of the declared objectives of the Arbitration and Conciliation Act, 1996 is
that every final award is to be enforced in the same manner as the decree of the Indian court would be.

The Act has two parts- Part I and Part II, each of which deal with the enforcement of different type of
foreign arbitral awards. Part I, modelled on the UNCITRAL Model Law, provides for the enforcement
of arbitral awards that are not covered under the ambit of either the New York or the Geneva
Conventions. As laid down by the apex Court, Part I of the Act applies to foreign awards that are
governed neither by the New York nor the Geneva Convention. Such enforcement of awards can be
challenged in cases wherein the award is contrary to either the fundamental policy or interest of India
or is patently illegal. 

Procedure for enforcement of awards

At the outset, it is upon the losing party to object to the arbitral award and file an application for
setting it aside. However, if the objections to the award are not sustained or if no objections are filed
within the time limit, the award itself becomes enforceable as a decree of the court.

An award can be challenged and set aside only by way of an application under Section 36 of the Act
and only the basis of the circumstances listed under it. An application for setting aside an award must
be made within three months of receipt of the award by the applicant subject to a further extension of
30 days on sufficient cause being shown. An application beyond this period is time-barred and further
delay cannot be condoned. The party, after the expiry of the time for setting aside the arbitral award, as
mentioned above, can file an application for execution before the court of the competent jurisdiction
for the enforcement of the arbitral award

The different types of awards which are enforceable include Money Award, Award Containing
Injunction and a Declaratory Award.  

Jurisdiction 

For the purposes of the Arbitration and Conciliation Act, 1996, ‘court’ means the principal Civil Court
having original jurisdiction to decide the question forming the subject matter of the arbitration if the
same were a subject matter of a suit. The aggrieved party can, thus, bring its application to set aside
the award before the court where the successful party has its office or where the cause of action in
whole or in part arose or where the arbitration took place.

Time Limit

Any application filed under Section 34 of the Act for setting aside the award must be made within 3
months from receipt of the same. This period can be extended by the court by a further period of 30
days on a sufficient cause being shown, but not thereafter. The court normally allows a wide scope to
the meaning of what constitutes ‘sufficient cause’ and if it is convinced of the genuineness of the delay
in filing an, the delay is condoned.

Format of application filed before the court

An application is filed before the court of the competent jurisdiction seeking enforceability and
execution of the award. The application should state all the important facts and issues framed by the
arbitral tribunal and findings of the arbitral tribunal. The claim as awarded should be mentioned and
specifically the extent to which the award for enforcement id sought. The documents required for the
same, include the original award or authenticated copy of the award as well as an original or duly
certified copy of the original arbitration agreement.