oS Contents Introduction to the paper and the course. Part A Essential elements of lagal systems: 1 Economic, political and legal systems. 2 International trade and regulation, 3 Commercial atitration Part Internationa business ransdtons CContracs forthe international sale of goods 5 Oigations and risk in contracts for intemational sales 8 Transportation and payment art C international business forms 7 Agency 8 Sole traders and partnerships Part D Joint stock companies 9. Geers tsa pesca 40 Company formation 11 Constitution ofa company, Part € Capital and financing of compani 12 Share capital 13. Borrowing and ioan capital 44 Capital mantenance and dividend law. Part F Management, administration and regulation of companies 18 Company directors and ofher company oficers 18 Company meatings and resolutions Part G Legal implications relating to companies in dificlty or in crisis 17 Insolvency and administration Part H Governance and ethical issues relating to business 48 Corporate governance 19 Fraudulent behaviour 20. Appendix A: Case summaries 21, Appendix 8: Answers to Lecture Examples. 22 Appendix C: Glossary of Terms, 23 Answer Bank i 101 M41 124 134 1a m4 181 191 201 2nd 224 BaINTRODUCTION Introduction to Paper F4 (Global) Aim ‘To develop knowedge and skits inthe understanding of the general legal framework within which international business takes place, and of specifi legal areas relating to business, recognising the need to seek further specialist legal advice whare necassary, Main capabilities (On successful completion of this paper students should be able to ‘A Identity the essential elements of diferent legal systems incudng the main sources of lav, the ‘elationship between the different branches ofa state's constitution, andthe need fr intemational ‘regulation, and explain the roles of intemaiional organisations in the promotion and regulation of international rade, and the role of intemational arbitration as an allernatve to court adjudication B Recognise and apy the appropriate legal rules applicable under the United Nations Convention on Contracts forthe international Sale of Goods, and explain the various ways in which ‘mtemational business transactions can be funded Recognise diferent types of intemational business forms. Distinguish between the atematve forms and constitutions of business organisations Recognise and compare ypes of capital and the financing of companies Describe ard explsin how companies are managed, stminstred and regulated Recognise fe legal implications relating fo companies in afcly ori crisis DDemonstra an understanding of governance and ethical issue relating to business zonrmone Key skills required to pass the paper To pass the F4 (Gleb) exam you wil ned to bring a numberof diferent prtesional attributes to bea. First, you noadtechnicalknowiedge. Theresa vast amount of tecinical contentin the sylabus modeliaws, Conventions, cos of race ad legisition, You need to lam tis and beable to identify which prs othe fnovedge you have are being cla orn parila question Secondly, you need tobe able to apply knowledge to the scenarios that are presented in the last three {uestions onthe paper. You are aiming to solve practical problems iere. Generally in scenario questions there will be marks avilable fr stating the iaw, identifying the issues inthe scenario in elation tothe law. applying the law and reaching a conclusion, ‘Thirdly, you need written skills in order to be able to explain, and advise on the basis of, your technical knowledge. Explaining means providing simple defiritions and covering why and how these approacies have been developed, You wil gain higher marks if your explanations are clearly focused onthe question and you can supplement your explanations with exarpes, Assessment methods and format of the paper The sylabusis assessed bya thes hour paper based examination ‘The examination consists of seven 10 mark questions assessing knowledge ofthe la, and three 10 mark application questions, (ii)INTRODUCTION Classroom tuition In class we aim to cover the key areas ofthe sylabus. To ensure that we have adequale time todo tis you will be given home study assignments todo at various stages during the course. This wl volve ding homework ‘Questions and 2 limited amount of reading from your BPP Study Text. Helpline '¥you have any queries during your private study simply call +44 (0)20 8740 22421(0)20 8740 2285 (or yourlocal training centre if outside the London area) and ask forthe client services aiministrator who wil be able to put you through to one of our professional stator ak them fo cll you back within 24 hours Alternatively you can email your query fo accaaueries@bpp.co.uk and one of our professional staff wl rely: within 24 hours, Feedback The success of BPP's courses has been built on whal you, the students tellus. At the end of the course for each subject, you willbe given a feedback fom fo complete and return !¥ you have any issues or ideas before you are given the form to complete, please raise them with the course tutor For feedback on courses outside ofthe London area, contact your tutor o the relevant head of cereINTRODUCTION (iv)Economic, political & legal systems Exam Guide Al topes in this chapter should be regarded as highly examinable as a knowle 12 ye question on the paper: introduction Business activity takes place within a particular economic, poltical and legal context, and each of these ‘areas wil affect each other to an extent. The economic and politica context of each nation isnot the same, although many groups of nations are similar in these respects, and theetore nations’ legal systems do vary rom one anther. ‘The differences between the nations in terms of economics, polis and, most importantly fortis Sylabus, law, can present problems for intemational trade. We shall explore the dificuies presented and the solutions created by various intemational bodies. paricuary the United Nations. Economics Economios can be described as "the ways in which society decides what to produce, how to , Produce it and who to produce it for ~ There are various types of economic syste that might exis in country ‘a) A centrally planned or command economy. vere the decisions and choices about resour allocation are made by the government. Money values are allached to resources and to goods. acd and services, butt isthe government that decides what resources shauld be used, how mich shoud be paid ior them. whal goods should be made and what their price should be. Although the invita might be alowed to own some personal possessions, mas kinds of wealth would not be avaiable for oamersip by individuals am (b) market economy, where the decisions and choices about resource allocation are let to market forces of supply and demand, andthe workings ofthe price mechanism inthe market economy, ‘mast wealth is ovmed by individuals, with a minimum being collectively owned. 14bell ache an 1; ECONOMIC, POLITICAL & LEGAL SYSTEMS ib bide e 3 at 32 33 34 (©) Armixed economy where the decisions and choiges are made pally by rae market forces of ‘supply ard demand, and party by govemment decisions, Economic wealth is divided between the Private sector and the public sectar. in practice, all modem national economies are mixed ‘economies although wth difring proportions of ree market end centrally planned decision-making from ane country tothe next Political systems: separation of powers We have already referred tothe role of government in national economics. Governments are also heavily invoived in taw-makinin nations. Pies. ine process of how nations are governed and by whom, is Lanna enn seeacrc post et daly ony oe fran hee opanoc ir ca amas ese tao earn astilbin et behaviourisrequsted bylaw, Net ale crit Yn COX Lonapord \wobt @ candles obe foge oer ra cn el individuals ist a large extent dictated by the tate by means ofiaw. ledck 4 comport em. qehek ce hanya tee wy ma tt ome ri dncotuneatan prataeet ee EOS ee eT Stan tomoaey ee “pia a epaapreooat peoples’ wishes are met, Goad laine ‘weed + Aisle nace, or gaperent ay, i rakes 5 that pt the fas into | eS teat nis ay eray va att ene bese ar betes he ovat nae el erin law or betwee inl (ci iaw). ah (e3USA) the legislature the executive an he judiciary are compote separa, so que tha each accountable fo, and can operate a 2'Sheck and balanos on, te ote In ost stats auch {as the UK, there is @ complex relationship between the three sets of powers, so that a balance i sruck between control and accountability, on the one hand, anc actualy ‘geting things done’ onthe oltes. ‘The other separation of powers thats usually offen seen is where the person who is head of the executive (and whois therefore responsible for making decisions that put laws into-action) isnot the ‘same person asthe head of state, who is regarded as the person who represents the entire body ofthe people. In most Eurcpean nations for instance the two persons ara separate 1.21: ECONOMIC, POLITICAL & LEGAL SYSTEMS 4 Legal systems 4:1. A legaf system in a country embodies both the laws ofthat county and the mechanisms the county has in placs tor regulating and enforcing those laws, legal system incorporates: +The county laws: + The legislature: the law making body + The Judiciary: the body that sits in judgement on disputes about laws * The prosecution system: the system that seeks to ensure that the erminallvris enforoed ant ‘hat people who break the law are prosecuted ‘+ The police: the body wich seeks to enforce the law and protect the public opie we nave baiken the The peisor syster: the system the farmers) #5. weed ke © acum Fr Bry Jeoucke Fol OL oH for et oi ire 7 arn : off deus we das b ELIE trout er Vert jo fod deus ime eyd etfe Ea poutine eff w= ; won disievek Nene one toll hin tk nyo 5 fpet Coy E1: ECONOMIC, POLITICAL & LEGAL SYSTEMS 55 tb) fe @ \ 0 Jk S hictef ab LL OO ted Q Eyrade, Statute @ (o) (¢) Statutory i dn) ‘There are vatious aids a (a) frock dh farlon som defegat ‘Statute law is made by Parliament (orn exercise of law-making powers delegated by Parliament, known then as delegated legislation or, nthe civil iw system (see later) administrative regulators) Until tha UK enterad the European Community (naw the European Union) in 1973 the UK Uv pauloms compleh Parliamert was complataly sovereign its law-making powers were unfettered. Ths isin marked 9... & + ‘contrast with the postion in some other counties, such a8 the US, where there is written tists nn ue (ISH Constituticn and itis possible to challenga inthe courts (as unconstitulionall legislation made by 2 2sa-¢ (» UE BS Sante mmm yaaa the lary aw ating bx. In oan years however, UK membership ofthe European Union has este the povisy f. ev= njettered power of Pariament. Thera is an obgaton, imposed by the Treaty of Rome, to bring UK law int line with the Treaty itself, and with dtectives made by the European Commission or Council The UK tracton isto cra stautesin comprehensive deta io attenpto cover al eventaes tal he stats dese fo over le to assist in interpretation of statutes: Intrinsic aids Found within the 2c itself the folowing may be used by a udge to ald interpretation: + The tile ~iong or sont (consider he Dangerous Cogs Act 1961) +The preamble = Scheduies of the Act Extrinsic sids Found outside the act tse the folowing may be used by @ judge to ad interpretation: ‘The interpretation Act {f78- dees ws nd coment wn ste Hansard 2: Maiuwtes of Ha flours af Corrs dary A dictionary < N ‘Reports of commissions » such as Law Commission reports Presumptions include: |) ‘Act apolies tothe whole of the UK but not olsewhore Act wort be contrary to existing EU ot international aw ‘Act won't bind the Crown ‘Act wan' have retrospective effect ‘Act does not altar the existing law nor repeal other Acts pe AA statute wl not deprive a person of his property without compensation forthe value ‘A stetuteis not intended to deprive @ person of his Iberty . A statute cannot impose criminal ability without proof of qu intention Any point on which the statue is silent is outside the scope of the statute Interpretation rules incude + Literal rule~ This rule requires judges to olve words ther ordinary dictionary meaning, Whitely v Chappell, + Golden rule — This rule acknowledges hat the application of the lteral rule may give rise ‘o an absurdity, hence the ordinary sense ofthe words can be modified to prevent it, Re Sigsworth, t Je nue te pele yan the AS eteck oop te Fabintinke pre wod Bevin Arno’ tar Hege Fh leg ds Kota cute fe \uleaed Uelablle, adaiomn orate4! ECONOMIC, POLITICAL & * Mischief rule - This rule apoties where the literal rule cannot be applied due to ambiguity. It fooks at the purpose for which the statule was enacted and interprets tin ight ofthat Corkory v Carpenter snd DPP v Bull + Purposive, or contextual approach (especialy used in EC) -Courts ascertain purpose Of statute and give efecto, whatever the wording ofthe statute. Some UK judg take ‘amore purposive approach than others = Ejusciem genoris- Where general words follow specific words the general words must be interpreted by referonce to the specific words used © Expressio unius est exclusio altorius — To express one hing isto exclude anything else + Noscitur e socis- A word craves meaning from the other words arourdit In pari materia tthe staute forms part ofa series which dels with similar subjct matter. the court may look to the interpretation of previous statutes onthe assumotion that PPatlarent intended the same thing Listeocrr: | What does the ‘Golden Rule of statutory inlerpretation mean? ‘A Words should be given their ordinary grammatical meaning meaning of the words can be gathered from their context © Words should be given the meaning which is ley to give elfect to the purpose oF reform which the statute intendea D_) Words should be given ther ordinary grammatical mening unless the resul is manifestly absurd Ee A man is prosecuted for erecting a hidden veo camera in a tent used as a changing room at 3 market stall. An Acthas been brought i o rectify a. common law problem and makes a criminal offence ofthe activity of secret filming of persons in ccurmstances likely to cause dstess on promises. The court must decide if a premise includes the ten. Wich statutory rule of interpretation would they use? A. The Elusdem Generis Rule D The Mischief Rule. ‘The Golden Rule ‘The interpretation Rule ae rena RR ee EEE ENS The role of judges (a) Judges are expected fo be consistent with previous decisions and to provide an opinion which can be used in the future. This forms the basis of judicial precedent 47 Brey,pvedéteb » / coped ren oe XY 4: ECONOMIC, POLITICAL 8 LEGAL SYSTEMS (0) Jodi! peotets son ee elements: ‘+ Report, Thre are comprchansive law reports of ear decisions. rene rine cl Lart> = —nseTemnat eae pov ft nd jeanne hoi satarauctiatecetmraneitindt ll tlnetoatinconiduseus 4 siete cae teihe ait ti ae must prt ofthe rat decondof he case he ple: pines ot £ —_awon wher he cout decided he E2589» au, fy death bere tan nee pol © Thomateial facts of each case must be the same, oe, fe, q © The preceding court must have had a superior (or in some cases, equal) status to the later court, such that its decisions are binding on the later cour. + Chassifeston Pecans ate dlasiiedn thse that ar ining (ao doce) and Ses wich ep cr Dechert vB 58 Judicial review Vier rnetal o hye ty wey (a) Werlestow asta calenge to wich apna be ules The fl of etmnng water eae low conics wh he Conta fa oe, ne cous rote fe US Spree Court. (2) Tate re we martha nthe US a to how judges shoud do tha + Ota sth ter tha the Const shoud be nerd econo teal marge ton ‘© Constructivismis the theory thatthe Constitution shouldbe interpreting looking beyond the ‘original intent ofits authors 6 Civil law (wifoline pvaplo) ti canada Catone pat cai a Sacer ea ; : Principles of eva alod, tye cindy 62 Two key principlesin Ci law are a. ‘and certainty he sors ont that provide the hala of Civil law, and the diferent role allocate to judges inthe Civ law system, ‘Sources of civil law 83 Thiggte various sources of awn France oe” ensttation sgF (Evi aca tal ot consi is more dt in ts Chap «Ns my a + admit replaens Cibqated {eq'stabtan | + Custom (of imited importance, we she rt mia is tthe 6.4 The key source of lewis'satute; mich of which is codified. in France statutes are writen in simple language and cover general principies (unike UK statutes) 6.5 Chil law tradition historically owes much tothe law of the Roman Empire, and is sometimes given a date of ongin as early as 450 BC. 18{1 ECONOMIC, POLITICAL & LEGAL SYSTEMS 56 Codification, This is a process of updating the aw to abolish the mre of common la and custom | temainng fom Roman tines. The French Code Napoleon, publshed in 1204, i the key exampio. | France now has a large numberof such codes of law, The German Cl Code was published in 186, Role of judges 8.7 The role oudgesin a ci law system is significantly diferent in theory to the rol of common aw judge. In France, there distinct division between those who draft the law ar those who apply the law, judges beng wal 6.8 There’ no such thing in Frat as judge made iaw. Hence, while previous decisions of other judges will be peri 16 judges making decisions, they do not create precedent in the same way as in the common aw system, The Court of Cassation 82 toca ameter Calan Cnn coe an he Fn na ‘oust hn te Cour of Casaion was orignal famed wae a goverment deparient eto oy, Lu ‘quash any court decisions where The TEgiSaROrs (elt thatthe law has been incorrectly interpreted, “7 210 Ten arog se Feehan nto) ea teste Ths okt tse mrg tthe etre en ny eee Foe so Se pepe sted + Runetotem totes ems gusts. Ky tne Pec is name ear hastens Payee * "Quand ee est obscure, faut approfondi les dispositions pour en penetrr esprit Bccmaki ete he state i obscure or ambaquous, ane shold conse tin accordance wth he spit of podbeds wen A ae than othe eter nerd to determine ts lege meaning - dace hips + 'Sifen manqué de loi faut consulter usage ou Fequite'- there is 2 gapin the law, juiges He Ms imbeietiay Cae ‘ust resort io castom and equity. eet Nae re as 8.11 Oter maton: eye] ‘+ Teleological method: This is where a judge seeks to dently the social purpose ofthe legislation ‘and apply itn a manner that achieves it. - * Historical method. This is where the judge looks atthe intention of the legslalr and then ines to envisage what ihe intention would be ifthe law was being drafted in modern times. then apples that intention. Judicial review 6.12 Although inthe Civil law raion judges do not have a key role interpreting statute, a system of judicial review has grown in certain civil law countries, to comment on whether statute law is accordance with the countrys constitution 6.13 This is the case in Germany. where constitutional courts have been sel up forthe purpose. However. the judges in constitutional courts are not the same as in the normal court system. In other words. special judges are created fo coment on whether lecislation in constitutional 7 Sharia jaw 7.1 Sharais ‘away i. watering place, in oer words, 2 pat o be folowed, Sharia law is ordained by ‘Alah as guidance for mankind ‘The major dterence between Sharia law and the other legal systems we have inlroduced in this chapter is that Sharia law is explicitly based on, and connected mith the religion of islam ‘countries that have adopted Sharia iw are Pakistan and Ian 18 Bry4: ECONOMIC, POLITICAL & LEGAL SYSTEMS 7.2 This major cfference has two effects. The fist is thatthe law extends info areas of belie and religious practice. The second i that ulimatey, the law is god-given, and it has wider significance than social order Principles of aw 3s can be seen above, the main principle of Sharia laws that tis the divine way ordained for man to follow by Allah. The law, therefore, is sourced directly from Allah and this has @ significant impact on how i is interpreted by judges. In Sharia tradiion, judges are dries, known a8 imam. Sources of law (ly /74 The key sou aw in Sharia is he Quran, which contains various iunctons of lagal nature. The 2t/GirantsAlts ne olen fis Pope Marana pe?” 7.5 note primary sure oft in Sharia the Sunnah The Sunnahis the bean rac’ ioe words \ what has come tobe the acceptable course of conduct is derived fom the sayings ofthe Prope, known as Ahadith (own in singular as Had). 7.6 There are lso 5 major secondary sources of aw inthe Muslm world, known as Madhab, These ae schools of hough based on writings and thoughts of major jurists formed inthe yeas immeialy Jr%) lowing he ea ofthe Pret nd ar nares ater hose: coe peo The Sia shoo © The Hanaf schoo! (Imam Abu Hanifa) + The Matix school imam Mali) ‘+ The Hants school (mam Ahmad fon Hanba) + The Stal schoo (Imam As-Shafi Constitution 7.7 Many Muslim countries have a write Lae tokens “> val fo ow put to apply He bw 7.8 As we have obsened above, the religious nature of Sharia means tha in rue Sharia traction, judges are clerics, known as Imam. This i the sition in Iran, for exemple, However, n other Musim sttes, there are a mixture of clerical judges and secular judges. 7.9 Judges are required to apply the law to cases brought before them, however, ven the nature and source of the law, there are particular considerations wit regard te interpretation ofthe law. ‘+ The Quran cannot be altered, being the Word of Ash + When clarguidance canna! be obtained irom ne Quran, the judge may turn to the Sunnah to soe how the Quran was interpreted by the Prophet. The Sunnah is used by Muslim jurist to * Confirm the law in the Quran © Explain matters mentioned in the Quran in general tems ® Clarify verses inthe Quran that may seam ambiguous © Introduce a rule where the Quran is stent ‘Schools of law 7.10 There is controversy inthe Musin world as to whether matters of legal and religious significance \ should be interpreted further, or whvther everything is clear and new cases should not bring the need for further development ofthe law. Those that believed more rent was needed developed 2 science of understanding and interpreting legal ules known a, figh,through the techniques of ithad, Itihad are the processes for ascertaining the iw. tis the use UtNfellectual exertion by a jurist to derive answer eg uesion | uy ! likepet a lucas ~ swale71 Teter fafa nor neat neato aown gag he proceso tt adherence i eRe ee hcdox Muss woubedhero Tae, athoug some wad clan there was 2 ned deal rarely wih he resus of new West nfunoes cone Tai wa te eit of ral own 2'cosng he ptsat a ch bor place aumgthecosse | ofthe 16 to 19M centuries AD, \ Judicial review 7.42 In some Muslim sites, the State wil issue statutes, although these should be based on Sharia aw principles, — 7.13 Pakistan has a Federal Shariat Court which has @ key roe in judicial review. The rule against usury 7-14 rule in Sharia law that has a signfcant impact on commerce and trade and therefore wil be relevent in Our sylabus isthe rule against usury, known in Sharia as riba, Riba is the Islamic concept of una Gain, usualy translated as intrest, whic i stity forbidden by the Quran 1 Codification and Constitutions {a} Compare and contest the practice of codification inthe common and cv law systems (b) Explain the concept of juticial review’ and give an example ofits application in anational system, 2 Sources of Law Describe the main sources of aw found in TWO af he following (2) Common taw system (b)—Civltaw system. (6) Sharia taw system 3 Riba (2) Explain the meaning of Rébain a Sharia aw system, giving an example of how this im business law. (b) Explain the folowing concepts: (i) Qiyas. (i) ma | Sete tanetnees cet en oS SES Gerace STARE ESERER A’be f ee Woe. «) Hae assur ve lee Wally ': ECONOMC, POLTICAL & LESH. SYSTEMS . it ct, “hed (iw) ots coset, . i Ear a bodh ~~ anit bh dbs) ule flor b). Mololosal Doce iar iff Croke th es - ws “ whee. jet ae Pe ee | END OF CHAPTER ____ENDOF CHAPTER [| 142 KInternational trade and regulation Vguxe bb Exam Guide the diferent bodies national commerce re most likely tobe knowiedge questions, focusing on the role ala, and onthe features of i ‘Questions on these opi involved inthe operation and development of inter that make such development necessary 1 Public and private international law ‘AS Seen in chapter 4, intemational law's the sysiom regulating the intereletionship of sovereign states ‘and their rights and duties as regards one another. This can be broken down ints ‘+ Public international law which consists of rules and principles which apply in ganeral othe "uct of soveraign states and interational organisations and the relationships between them ‘+ Privat international law (also known as conflict of laws) which regulates cases which involve ‘he national laws of two or more states where a diferent result will ensue depending upon which states lewis applied 2 Conflict of laws and the need for international regulation Public international law isto do withthe recagniion of tates, or was, or the atemath of wa vents which re considered of international signifcance. Pato international law is therefore vith matters such 28 war crimes and other human nights abuses ‘Such meters are beyond the scope of our syllabus which fs concerned with situations where indivicuals F corporations interact or act on the bass of inlemational commerce, thats private international aw 24 Bry2; INTERNATIONAL TRADE AND REGULATION As seen in Chapler 1, economics, paiics and law all effect international trade, Given the ifferences between economic and poitical systems between nation, there are therefore significant bariars to fe Intemational trade 22. Barriers to freeinternational trade In practice many barriers to fee trade exist because governments ty to protect home indusiies against foreign competion. Protectionism is economic in form and can be practised by a goverment in several ways. ‘+ Tatts orcustoms duties ~ Tariffs or customs duties are taxes on imported goods ‘+ import quotas ~ import quotas are restrictions onthe quantity of a product that is allowed to be imported ito the country ‘+ Embargoes — An embargo on imports trom one particular country is atta ban, Le effectively a zero quota + Hidden subsities for exporters and domestic producors ~ These include items such as export credit guarantees (insurance against bed debts for overseas sales), financial help (such as government grants to the aircraft orshipbulking ndusty) and state assistance ‘+ Import restrictions ~ These include items such as complex import regulations and documentation, or special safety standards demanded ftom imported goods 23. Amajor problem with international trade i thatthe aw varies from country to country, it may be one thing in one country and a diferent thing in another It may also have diferent legal consequences in ferent parts ofthe wort. 24 In tarms of intemational trade we can consider a contract fr sale of goods from one country to another. Say A (rom county Z) wants to rade with B (rom couniryY), If fhe reationship breaks down, the following issues could arise: = Acould cam that under Z's law, no contract was ever formed ‘+B could clam that under Y's law, no contract was ever formed ‘+ Both parties could claim that the contrac is not legally enforceable in thir country + The remedes availabe fr broken contracts inthe diferent counties may differ ‘+The partes might dissgree on which country to seek legal resoltion in They might sesk legal resolutions in ther countries and be unable to enforce them 2.5 Conflict of laws is where partis from different nations have a legal dispute, and itis necessary to ‘determine which fam governs the val a the legal situation, Countries have sought solutions o these problems by coming to agreements with each other and by enacting various conventions and treaties between nations to regulate international practice on thase issues, For example the Rome Convention 1980 set out palcy on what iw should gover the validly of intemational contracts andthe New York Convention 1958 set out the aareement of counties rating to refering cases to arbitration, ‘The United Nations has also developed model laws nat countries may adopt into thet ovm national laws 50 a8 to make pracices uniform on an intemationa basis and icon out any remaining problems 3 Role of international organisations in trade 3.1 The moves towards intemationalisng legal practices in elation to commerce have taten the cooperation of nations, Important bodies associated wih international law include the folowing The European Union (EU) ‘The United Nations (UN) ‘The international Chamber of Commerce (ICC) The World Trade Organisation (WTO) 22 wee32 33 2 INTERNATIONAL TRADE AND REGULATION ©The Council of Europe (CoE) ‘+ The Organisation for Economic Cooperation and Development (OECD) © The International institute for the Unification of Private Law (UNIDROIT) The European Union (EU) One of severa international economic associations, the EU was formed in 1957 by the Treaty of Rome: 4nd now has 27 member states. The EU has a common market combining diferent specs, inciting @ free trade area and a customs union, (a) A free trade area exists when there is no restriction onthe movement of goods and services between countries. This may be extended into a customs union where the union promotes free trade among its members but acts a a protectionist bloc against the rest of the word (0) A common market encompasses the idea of a customs union but hes 2 number of aciional_ features such as: ‘© tree markets in each ofthe tactrs of production eg movement of labour ‘© harmonisation of goverment economic polices establishing 2 closer political federation, ‘The single European market The EU seta target of the end of 1992 as the dst for the removal of al exising physical, technical and ‘ical bariets among member sates, thus creating a large mulinational single European market. Ths objective was embodied in the Single European Act of 1985. In practic. these changes have not occurred overnight and many of them are sil in progress, Elimination of rade restictions covers the folowing areas: (a) Physical barriers (en customs inspection) on goods and servc=s have been removed fer most products gues fe (0) Teetwical standard (oor ult and slay) shoud be harmonised oT es (6 Governmenis shoud nat scinineebetween compare in avarng publi works ee Se joulbice contracts, (4) Telecommunications should be subject to greater competion “4 (2) It should be possible to provide financial services in any country. = poses Leg () Threshold bere movement of ap wn he conmuny al: o> (@) Professional qualifications awarded in one member stats should be recognised inthe oes (6) The EUs taking a co-ordinated stand on matiers related to consumer protection. Itwould be wrong to assume, however, that there is now 2 completely ‘evel playing felt’, There are sti ‘Mey areas where harmonisation isa ong way from being achieved, including te following = Company taxation © Indirect taxation + Differences in prosperity ‘© Differences in workforce skills © Infrastructure The United Nations (UN) ‘Almost every independent stale inthe word is @ member ofthe United Nations (UN). The UN starte in 1845 when the then members ratified the UN charter. The purposes ofthe UN ate to © Maintain peace and securty '* Develop friendly retains among natons © Co-operate in slving economic, social, culural and humanitarian problems ‘© Promote respect for human nghts and intemational freedoms 2.32: INTERNATIONAL TRADE AND Tesch ULATION. tos ‘The UN has varus organs, one of which isthe International Court of Justice, which we shal lok atin more detail ister, ‘The UN Charter states that member nations should develop and codify international law. Currently, ther@-are over S(O UN conventions, treaties and standards which legally bind the States that ratty them There are two bodies in the UN involved in drafting international law, These ae: ‘+ inlemational Law Commission © UN Commission on international Trade Law (UNCITRAL) UN Commission on International Trade Law (UNCITRAL) LUNICITRAL isthe core legal body within the UN inthe field of intemationa trade law. It was established ln 1986 and given the task of harmonising and unifying the aw of mtemational trade by: ‘© Co-ordinating the work of organisations active inthe fled and encouraging co-operation among them: ‘= Promoting wider partcigation 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 trace terms, provisions, customs and practices, in collaboration, where appropriate, wit te organisations operating in this fel. ‘+ Promoting ways and means of ensuring a uniform interpretation and application of Intemational conventions and uniform laws in the fd of intemational trade. ‘© Collecting and disseminating information on national legisstion and modern legal ‘evelopment, including case law, i the field of intemational trade law. © Establishing and maintaining a close collaboration with the UN Conference on Trade and Development + Maintaining iaison wit otter UN organs and specialised agencies concsmed with interational trade, © Taking any other action it may deem useful to ull functions ‘The UN General Assembly elects a total of 60 member states fo frm UNCITRAL, whichis structured so as tobe representa of Ihe word's geographic regions, economic and legal systems, The Commission carries out its work lt annual sessions, held in altemate years al UN headquarters n New York and Vienna. Members of the Commission are elected for 6 years, wit hal the members ferms expiring every 3 years, ‘The Commission operates through 6 working groups. composed of all member States of the ‘Commission. The 6 groups and their curent tops are Group | ~ Privately inanced infrastructure projects Group II ~ Internationa arbitration and conctation Group ill = Transport iaw Group IV — Electronic Group V Insolvency Group VI ~ Securtyinterests Non-members ofthe Commission and other interested intervational organisations are invited to atten sessions ofthe Commission and ofits working groups as observers. They can partepate in any liscussions tothe same extent as members, 2434 35 2: INTERNATIONAL TRADE AND REGULATION (Current achievements of UNCITRAL indude: ‘+ UN Convention on Ganiracts forthe Intemational Sale of Goods. This convention established a Comprehensive code of egal rules governing the formation of contracts forthe international sale ‘of goods, the obligations ofthe buyer and seller, remedies for breach of contract and other aspects of the contract ‘© UN Convention on the Carnage of Goods by Sea (The Hamburg Rules), This convention established @ uniform legal egime governing the rights and obligations of shippers. cariars and consignees under a contract of cariage by sea, '* UN Convention on Intemational Bits of Exchange and Promissory Notes. This convention Provides @ comprehensive code of legal rules governing new international instruments for optional Use by parties 0 interational commercial transactions ‘© UNCITRAL Moda! Law on Commercial Arbitration. These provisions are designed to assist States in felorming and modernising thei iaws on arbitral procedure so 2s to take account ofthe Particular features and needs of intemational commercial arbitration. '¢_UNGITRAL Mode! aw on Electronic Commerce. This Mode! Law, adopted in 1996, is intended to facia the use of modern means of communications and storage of information, ‘© UNCITRAL Mode! Law on Cross-Border Insolvency. This Model Law seeks to promote fair legislation for cases where an insolvent debtor has asses in more than one State. The International Chamber of Commerce (ICC) The ICC was formed in 1918 Yo serve word business by promoting trade and investment, open martets for goods and services, and the free fow of capital CCrighialy create by business leaders trom Belgium, UK. France, aly and the USA, itis now a worl ‘wade business organisation with thousands of member companies and associations tom 130 countres. The ICC makes representations to governments on issues relating to international rade, k develops Codtes of practice for businesses to encourage them to aperate with 2 minimum of goverment intervention, it co-operates wih and advises the UN, i provides practical services to businesses and Seeks to combat commercial crime, (One important aspect of ICC was ts ‘The World Trade Organisation (WTO) ‘The World Trade Organisation (WTO) is an organisation that devotes itself enily to international trade in goods, serves, laded inventions, creations and intelectual property. Estabished in 1995, tis the successor to the General Agreement on Tarifs and Trade (GATT) which was setup after World War I The WTO has nearly 150 members, with 30 more applicant members, and these represent 97% of Intemational ade. The WTO seeks to promote the fee flow of trade by removing cbstaces to trade, and to make sure that individuals, companies and governments know what the rules are. The WTO: tablishment in 1923 of the International Court of Arbitration, + aministrs trade agreements ‘© is forum for rade agreements sells rade disputes revlews national race poeies assists devloging countries in rade poly issues co-operates wit ther ifemationalorganisabons ‘The Council of Europe ‘The Council of Europe (CoE) isan organisation which aims to: ‘= Protect human rights. pluralist demoeracy and the ue ol aw + Promote awareness and encourage the development of Europe's cual entity and diversi 252: INTERNATIONAL TRADE AND REGULATION, ‘© Seek solutions to problems facing European socity (discrimination against minorities, xenophobia intolerance, environmental protection, human cloning AIDS, drugs, organised crime, etc) ‘+ Help consolidate democratic stabity in Europe by backing political legislative, and constttional reform ‘Any European sate may become a memiber of the CoE. ‘The CoE works towards legal co-operation in Europe, by seeking to harmonise national legisaion, improving judicial procedures and seeking common solutions to made legal problems. ‘The CoE produces Conventions which, when adopted by States, ae logally binding, and issues ‘recommendations, which act as guidelines for States to fllow. CoE conventions cover, amongst many ‘other topics, the flowing: extraion ‘confiscation ofthe proceeds of crime protection of wife and natural habitats ‘oping in port bioethics and cloning nationality ‘coruption 3.7 The Organisation for Economic Cooperation and Development (OECD) ‘The Organisation ior Economic Cooperation and Development (OECD) is an organisation set up tobe'a ‘forum to discuss, develop and refine economic and social policies’. thas created both legally binding agreements (for instance in relation to bribery) and also non-binding agreements (such as {guidelines for mulinational entomprises), It developed in 1961 out ofan organisation setup to administer North American aid to Europe after WII ‘and now has members from most continents, including countries such as Japan, Australia and Mexico. ‘The OECD invites non-member countries io subscribe to its agreements and is therefore involved in ‘many other countries such as China, Russia, Brazil and a number of African counties. 3.8 International institute for the Unification of Private Law (UNIDROIT) Intemational inttute forthe Unification of Private Law (UNIDROIT) is an independent intergovernmental organisation which studies the need for and haw to mademise, harmonise and co- ornate private intemational law, paticulaty trade law, between states and groups of states. tis based ‘in Rome and has operated since 1926. LUNIDROFT membership is restricted to 61 States which have signed up to the UNIDROIT Statute. tt represents al five continents and a variety of ilerent legal, political and economic systems. Because UNIDROIT is an intergovernmenial structure, its rules have traditionally tended to take the form ‘of intemational contentions wrich apply automaticaly in preference {o 2 State's naional aw once hey have been implemented Since States are often slow to adopt conventions, UNIDROIT has more recently favoured alternatives such as: ‘* Mode! awsto be taken info consideration when drafting domestic legislation onthe subject covered © General principles adaressad directly a judges, arbitrators and contracting parties wi are then left ree to decide whether to use them or nat ‘+ Legal guides typically on new business techniques, an new types of transaction or onthe ‘framework fr the organisation of markets at both the domestic and international eval, 284 41 42 43 44 2 INTERNATIONAL TRADE AND REGULATION Court-based adjudication gal sputes, of whatever nature, have analy been setled in courts. ‘Most countries have a systern of courts, with ower level courts for minor matters and higher level courts ‘or more serious mattars and also to hear appesis when court decisions ate disputed In this section we shall use as an example the English court system, | The Engish cour system is decentralised through a system of acal cours, so that smell matte can be dealt with where they have occurred, athough larger cases ate tried inthe major courts in he capt! city, London, In England thee is a citferent court structure for civ and cminal aw, athough some ofthe higher courts have jurisdiction over both types of law. ‘There is a system of review to higher courts. The English legal system contains a series of appeal oars Cases in either type of law may be appenied upto four mes, vith fe highest court of appeal being the European Court of Justice, due to the UK's membership ofthe EU, Terminology © A-court of first instance Is a court where a case is heard forthe frst time + Anvappeliate court, or court of appeal, is one were the previous deviion of lower cout can bere-heard, due to a disoute over a point of law or fac in a decided case + Indictable offences are mere serous offences that can only be heard in @ Crown Court + Summary offences are minor crimes, only table summarily in magistrates’ courts: Some offences are ‘triable either way ‘+ Ajuryis group of people sworn to dative a true verdict according tothe evidence upon a case [resented in @ court of English civil court structure Saad ‘The key cours inthe cv system are the County Cour, which only has civil ursciction and which deals with almost every type of civil case at alacl evel, the High Cour, which deals with the most mijor ‘cases at fst instance and sometimes isa court of appeal rom the County Court and the Court of ‘Appeal. which 's the major appeal cout in civil matters. ‘The diagram below shows the structure ofthe English cv cou! system. 272 INTERNATIONAL TRADE AND REGULATION VIL SYSTEM European European Court of Court of Justice Haman Rights ft House of Lords | (Supreme Cout forthe United Kingdom) Court of Dena oe [5 HIGH COURT Family aap County ‘SMALL CLAIMS Manistraies ‘Arbitration Employment Tribunal = appeal patway 282 INTERNATIONAL TRADE AND REGULATION 45. English criminal court structure The key courts in the eriminal system are the Magistrates’ Court and the Crown Court. which ae local Courts hearing the bulk of criminal cases, andthe Court of Appeal. The C:own Court hears cases fist instance and isan appeal cour from the Magistrates’ Court Cases are appealed from the Crowm Court to the Court of Appeal ‘The ciagram below shows the structure ofthe English criminal cout system CRIMINAL SYSTEM European Cout of sustice European Cout of HOUSE OF Human Rigs LORDS — (Supreme Cour or the United Kingdom) DIVISIONAL COURT aBD Cre Stated CROWN COURT Case —_ 1st Re-hearng Stated Instance Commitial 1st | Instance Magistrates’ Court —s ‘ummary indictable 4-=< 2.9 Bry,2: INTERNATIONAL TRADE AND REGULATION 4.6 Courts descrptcn: ©The European Courts (a) Court ofthe European Union (European Court of Justice) (not tobe confused wth European Court of Human Rights); {Hears references and appeais from courts of member states on matters of European Law, (i) Qn European Law matters can overrule decisions of any UK court; (0) European Court of Human Rights: (i) The final source of appeal on European Convention on Human Rights matters (Note thatthe Convention was incorporsted into UX law ty Human Rights Act 1998); (i) Theres no appeal irom the European Coutt of Human Rights to European Cout of Justice ‘©The House of Lords (Supreme Court for the United Kingdom) (2) Highest UK court. Role due to be taken over by a Supreme Court fr the United Kingdom in late 2009; (b] Personnel Lords of Appeal in Ordinary (Law Lords) 5 wal usually st on an appeat Jutsdiction ~ purely appellate. Hears appeals from @ Both divisions ofthe Court of Appeal (@)__The divisional court of he Queens Bench Division of the High Court (ii) The High Cout by eap-frog procedure (4) On appeals from some Commonweath Courts and Channel itands the cour sits as The Judicial Committee ofthe Privy Councit. © The Court of Appeal: (a) Divided into 2 divisions: )civand (i) criminat (b} Personnel -Lord Justices of Appeal. 3 val usualy sit on an appect (civ division - Master ofthe Rls is chiet judge (i) criminal division ~Lord Chief Justice ofthe criminal division (0) Jurisdiction — purely appetite. Hears appeals from (i) a3 divisions ofthe High Court the divisional cout the EAT, Lords Tbunal and Transport Trisunal (i) the Crown Court (ii) the County Court © TheHigh Cour: (2) Divided into 3 divisions: (0, Queens Bench Division (@)— Family Division (ii) Chancary Division (b) Personne! High Court Judges (Putsne judges) (i) QBD~Lord Chiet Justice = chiet judge (il) Famiy Division - President = chief judge (ii) Chancery Division ~ Nominally Lord Chancellor — in practice Viee-Chancellor 2.402 INTERNATIONAL TRADE AND REGULATION (0) Queens Bench Division juristiction (0) Contract, Tort and other general civ matters wihout limit as to value inches specialist courts such asthe Commercial and Admiralty Courts, (i) The making of prerogative wits and orders (ii) The Divisional Court ofthe O80 hears appeals on points of law rom the Magistrates and Crown Courts, (4) Family Division jurisdiction: (]) Defended divorces and matters under the Domestic Violence and Matrimonial Proceedings Act 1976 (i) Motters rating to Childrens Act 1989 and Human Fertilisation and Embryology Act 1900 (ii) Appeats in regard to family matters from the County Cour (e) Chancery Division jurisdiction (Trusts (i) Tax i) Company Law (wy) Probate (¥) Insolvency (\) Companies Court and Petents Cou are part ofthe Chancery division The Crown Court: (a) Personne: (High Court Judges (where offence i serious) (il) Circuit Judges (il) Recorders (0) Jurisdiction (Tals on incictment (2. not gut pleas) (@) Sentencing of offenders who have pleaded quily to indictable offences (i) Appeals fom Magistrates Cours {w) Sentencing offenders commited for sentencing’ by the Macistratee NB: Role o jury is to establish facts and deride on the quit ar otherwise ofthe oflender Role fudge isto explain the relevant law tothe juy and to decide on sentence, The County Court (exclusively civil jurisdiction} (a) Personnel: (i) Circuit Judges assisted by (i) District Judges (known as Masters inthe High Court (0) Junsdition i) Tort and Contact cases (i) Undefended divorces (ii) Probate matters (iv) The Small Claims Procedure wl deal with claims up to £5,000. This procedure is signed to be quicker and less formal and less expensive than a County Court hearing Its basically an arbization conducted by a dsrc judge. ait Br2; INTERNATIONAL TRADE AND REGULATION ar 48 52 The Magistrates Court (mainly criminal but also civil jurisdiction): (a) Personnet (Magistrates —lay persons selected from 2 panel by the Lord Chancelor (i) Circut Judges ~ paid ‘professional magistrates’ (i) Magistrates Court Clerks (©) Jurisdiction: (i) Deais with summary offences and also has some civil jurisdiction (i) Commital proceedings (in e: indictable offences) (il) Some fami jurisdiction (iv) Debt collection for pubic utes, council tax (v}Controlticences for seling liquor in their area The role ofthe jury in the US system ‘A feature ofthe US civ court system is that US ciizens have aright to ajury til in civil eases, by Virtue ofthe seventh amendment to the consitubon. Trial by jury i cv cases is rare in England, The German sysiem a) © Going to court in Germany is cheaper than itis in England, vivre a client wil not have to consult two diferent sets of legal representatives, bu he same legal proiessional consults and represents the client in court ‘The majorty of civil cases are heard in the Regional Court (Landgeriht), where they are hear before 3 professional judges. There is no such thing as pre-‘rial disclosure in Germany and most iui law countries. Alternative dispute resolution Alternative Dispute Resolution is any type of procedure or combination af procedures voluntary used to resolve issues in controversy, other than court basad adjudication Arbitration (a) This is aprvate hearing betweon parties who have agreed to forward any disputes to this forum (0) Advantages: + privacy + specials arbitrator + lessformal procodures + decision i inal and binding (o) Disadvantages: + lackof pubity + no egal rules on evidence, which can lead to lengthy and expensive proceedings + limites remedies and enforcement + lack atexpertse in setting disputes + imited right to appeat (2) Itcan produce diferent solutions to court-based adjudication, Far example, it cculd produce: ‘+A change inthe way a person or crganisaton behaves + A praise thet 3 person or company won't do something + Anapolegy ‘+ Aneppienation for what happened + Armisiake corrected + Compensation 7 5 Bored au fe gaty oh cmd, Tol oh, oP pcr Vo me ey 242