International Commercial LawMAKE SURE THAT YOU MASTER THE SOURCES OF INTERNATIONAL LAW AND THE ACRONYMS

INTRODUCTION

Definition: International commercial law is designed to provide the rules that are applicable to the different relationships and commercial transactions, which are entered into by economic actors; when those relationships and transactions imply movement of goods, services, or values, involving different states.Of all the economic activities that exist, it is hard it imagine one more relevant to the prosperity of a nation than international trade.Why: International trade is important to countries because it allows them to enjoy good, which they would not have been able to produce for lack of raw materials, climate energy and technology. International trade also allows country to earn vital foreign exchange by selling goods, which they are able to produce or manufacture at an advantage over other countries. The mutual demand and supply for good in turn, stimulates the economy resulting in growth and employment. No state is wholly self-sufficient.

I. ECONOMIC INTERDEPENDENCEA. ACKNOWLEDGEMENT

Many economists as well as many business experts realize that no business is purely domestic. Even the smallest local firms are affected by global competition, as well as by world events. In other words, the realities of the modern world make all business (to a certain extent) international. No longer can an economic or political change in one country occur, without causing reverberations throughout world markets.Ex: Crisis in the US 2007/2008

B. FACTORS OF ECONOMIC INTERDEPENDENCE

There are many factors that must be taken into account:Factors of economic interdependence:

1. Precious matters and natural materials are scattered throughout the world. 2. Technological advances (shipping, travel, communication and the internet) have brought people closer together3. Nations have moved away from protectionism and increasingly towards free trade. That means that they have

opened up markets, to goods and services, which were once closed to foreign competition. The world in general has seen a steady movement of economic integration, as well as the development of free trade areas and common markets among nations. E.g North American Free Trade Agreement (NAFTA) 1st Jan 1994, EU, MERCOSUR South America 1991, ASEAN Association of South East Asian Nations 1967.

4. Greater political stability in the developing countries has led to increased foreign investment, but also to industrialization and the integration of those nations into the world economy.

5. Economic interdependence can also be attributed to the sharing of technology and “know how”, with patents, trademarks and copyrights now licensed around the world.

6. The interrelatedness of the financial markets, the worldwide flow of capital, as well as the coordination of economic policies between nations; have had a tremendous impact on the global economy.

7. Political changes in the last two decades have further increased economic interdependence. Throughout the world, countries are moving towards a greater democracy and political freedom. Ex: is the break up of the Soviet Union in 1991. A similar phenomenon took place in Asia and South America. Countries are moving towards greater democracy and political freedom.

II. THE FORMS AND BARRIERS OF INTERNATIONAL TRADE

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A. THE THREE MAIN FORMS OF INTERNATIONAL BUSINESS

Broadly speaking, international trade can be split into three categories: Trade International licensing of international technology property (trademarks, registered designs, patents and

copyrights) FDI (Foreign direct Investment).

These broad categories describe three important methods for entering foreign markets. To the international lawyer, they represent three forms of doing business in a foreign country; as well as the legal relationships between parties to an international business transaction.Each one of these forms represents a different level of commitment to foreign markets. That is to say a different form of involvement in the life of a foreign country, as well a different set of managerial challenges.Each form also exposes the firm to a different set of business legal risks. Trade usually represents the least involvement and therefore the least political, economic and legal risk, especially if the exporting firm is not soliciting business in the set country. The ownership of a foreign firm carries with it the obligation of corporate citizenship and means the complete involvement in all aspects of life in the foreign country (political, economic, social, cultural and legal aspects). There is considerable overlap amongst these different forms of doing business. EX: A business plan for the production and marketing of a product may contain each form.- Buy the use of trademark- import the products to make the product

B. USEFUL DEFINITIONS

Trade consists of the import and export of gods and services. Trade is as old as the oldest civilization. Throughout history, countries have always traded in order to obtain goodsExporting is the shipment of goods out of a country or the rendering of services to a foreign buyer, located in a foreign country. Exporting is usually the first firms step into international business. Compared to the other forms of international business, exporting is quite uncomplicated. This is because it usually only requires a modest capital investment and the risks are usually manageable by the firms.Exporting also permits a firm to explore its foreign market potential before venturing further.For many larger firms, including international corporations, exporting may be an important portion of their international operations. E.g. Aviation industry

There is a distinction between direct and indirect exporting. Direct exporting refers to a type of exporting where the exporter (usually a manufacturer) assumes most of the responsibilities for the export functions including marketing, licensing, shipping and collecting payment. Indirect exporting is used by companies without the experience, employees, or capital to tackle a foreign market by themselves. They may not be able to locate foreign buyers or handle the mechanics of exportation on their own. By indirect exporting, firms can use specialized intermediates whom are able to use these functions.

Importing is the entering of goods into the customs territory of a country, or the receipt of services from a foreign provider. IP (Intellectual Property) rights are a grant from a government to an individual or a firm, of the exclusive legal right to use a copyright, patent, trademark or a design, for a specified time.

International licensing agreements are contracts by which the order of IP rights will grant certain rights in that property to a foreign firm under specific conditions and for a specified time.

A FDI (foreign direct investment) refers to the ownership and active control of the productive of on going business concerns by an investor in a foreign country. This may include investments in manufacturing, mining, farming, assembly operations, or other facilities of production, as well as service industries. According to the world investment report of 2012, which is issues by the UN conference of trade on development, global foreign direct investment exceeded the pre-crisis average in 2011, reaching $1.5trillion despite turmoil in the global economy.

Trade barriers in general, tariff and quotas:

International commercial transactions are heavily influenced by domestic policies/politics. Left to its own devices, any nation would want to protect its industries from foreign competitors by erecting a maze of import trade barriers.

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A trade barrier can be defined as any impediment to trade in goods and services. An import trade barrier can be any impediment to the direct entrance or sale of imported goods or services in the importing country.

Nations impose import trade barriers for many reasons, whether political or economical:1. Collection of revenues, that are obtained through the taxation.2. Regulation of import competition3. Retaliation against foreign government trade barriers4. Implementation of foreign policy. 5. Implementation of national economic policies (e.g preservation of foreign exchange).6. The preservation of national defence7. Protection of public health, safety and morals.8. Protection of natural resources or the environment. 9. Protection of local culture, religious or ethnic values (e.g ban on the broadcast of certain TV

programmes)Import barriers can take on many forms. They are usually classified as tariff or non-tariff barriers. Tariffs are also called import duty and are the most common device used on imports. A tariff is a tax levied by the country of importation.

Non-tariff barriers are broadly defined as any impediment to trade other than tariffs. These may be either direct or indirect:

Direct non-tariff trade barriers include those barriers that specifically limit the import of goods or services such as embargos and quotas.

An embargo can be either a complete ban with trade with a certain foreign nation (e.g. USA, North Korea, Iraq and CUBA) or it can be the ban of the sale of transfer of specific products. They can be on both imports from and exports to a nation. This extraordinary remedy is usually used for political reasons.

Quotas are probably the direct non-tariff trade barriers that most people think of when they think about non-tariff barriers. Quotas are quantitative restrictions, which can be placed on the value of goods or quantity. They may also be expressed as a percentage of the market value. Quotas may be placed on all goods of a particular kind coming from one country; a group of countries; or all countries. They are usually used as a tool for implementing a nation’s economic policy of reducing imports.

Governments sometimes prefer quotas to tariffs as they can work quickly to protect a domestic industry, which is threatened with increased imported goods. They are also more flexible as they may only be used for a short period of time. Quotas may be used to regulate the commodity of a particular market.

Quotas also have disadvantages: The first being that most quotas do not provide revenue to the importing nations. They are politically unpopular as they deprive companies and consumers of choice of products. They may lead to retaliation by foreign governments whose products have been restricted Quotas also interfere with the price mechanism in the market place because they affect prices by reducing

supply.

Indirect non-tariff trade barriers by definition, seem perfectly neutral and non discriminatory against foreign made products; but in their use and application they make it difficult or costly to import foreign made goods. For example: legal regulations, industrial and commercial practices, social and cultural forces, or administrative requirements. Monetary and exchange controls on currency, product safety etc.

III. THE NEED FOR INTERNATIONAL LEGAL RULES

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The fact that states have become aware of international trade, has led to the development of international norms and conventions, which provide a stable environment for firms doing business abroad. This has been put in place by governments and international organizations, in order to control and manage international transactions. There are many legal rules on international transactions. There is however, one aspect of international commerce that deserves no less recognition than the sources. These are the private aspects of international trade. Although international trade is often expressed in terms of relationships between two or more countries, in reality, the majority of traders are private persons, which take the form of businesses or companies. There are a number or institutions, which take part in international trade.

IV: THE INSTITUTIONS PLAYING A ROLE IN INTERNATIONAL TRADE

These institutions are usually established by multi-lateral treaties and serve different purposes, although their common aim is to develop international trade. Those international institutions may contribute to the liberalization of international trade. They may also deal with the financial aspects of international trade. They may devise the rules and regulations applicable to international trade (they may have a normative function).

A. THE EUROPEAN INSTIUTIONS

One of the main goals is to achieve the European Integration.The treaty of Rome set out the goal of achieving economic integration amongst EU member states. According to Art. 5 of the Treaty of Europe (TE), the EU must act within the limits of the powers conferred upon it by the treaties and with the objectives assigned to it, within these treaties. That means that in areas, which do not fall within its exclusive competence, the EU must take action in accordance with the “principle of subsidarity”. The EU may act only if the objectives of the proposed action cannot be sufficiently achieved by the member states and can therefore, because of the scale or effects of the proposed action, be better achieved by the EU. Besides, any action by the union must no exceed what is necessary to achieve the objective of the treaties.This particular rule determines the scope of commercial EU law. EU commercial law contains different provisions, which touch upon different provisions (company law, bankruptcy law, IP law, transfer or technologies, credit, carriage of goods etc). As a principle, these provisions are applicable to transactions made within the EU and are known as intra-union transactions. These provisions do not interfere with the member state sovereignty, which still regulates business relations and transactions made upon their soil, by companies from that country, with those from foreign countries. The EU provisions do not aim to impact on international commercial law.

However, there are some areas of EU commercial law where the EU law is not only applicable to intra-EU transactions, but also to transactions entered into with third party/non-EU countries. This exception is applicable whenever the general policy of the EU requires it. E.g where the customs union policy or economic and monetary union policy require it.

Beyond the TEU and TFEU, it is also necessary to look at European secondary law, along with the treaties and agreements made by the EU with third countries.According to Art. 47 TEU the EU itself, has legal personality and can thus, sign treaties with third countries.

I. THE CUSTOMS UNION

a. EU’S JURISDICTION IN CUSTOMS MATTERS

From the moment France (along with the other member states) became a member of the European Community, it lost sovereignty to most of its customs matters. This is of because the first signatories to the GATT (General Agreement on Tariffs and Trade) 30th October 1947 which was signed in Geneva. This agreement made it legal to allow certain states to create zones, suppressing obstacles regarding their trading relationships. This includes third party countries. GATT 1947 offered two methods of action:

1. The creation of a free trade zone2. The creation of a customs union

The Treaty of Rome 25th March 1957 chose one option, the creation of a customs union. According to article 24 GATT 1947, a customs union is composed of the three following elements:

1. The constitution of a single customs territory2. The elimination of most of the customs duties and other restrictive regulations

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3. The creation of a common customs tariff.

The Treaty of Rome details a specific procedure, which abides by the conditions of Art 24 of GATT 1947. Within the EU there is one rule, which is the prohibition of the following:

- Custom rights- Charges having an equivalent effect to that of customs duties. - Tariff barriers - Quantitative restrictions on imports or exports and measures having an equivalent effect.

When it comes to the relationship between member states and third countries the rules, which are applicable are known as common “customs tariffs”, which were created by the regulation of 25th June 1968 (came into force 1st July 1968). The common customs tariff is the external tariff applied to imports within the EU. Since that date, the customs corporation council aka the WCO, has adopted in Brussels, on 14th June 1983, an “international convention on the harmonized commodity description and coding system”; as well as a protocol of amendment (24th June 1986); both having been approved on behalf of the European economic community by the council decision of 7th April 1987.

The European community also exercises its sovereignty in customs matters within the WTO framework. Art. 31 and 32 of the TFEU: Art. 31 “common customs tariffs duties shall be fixed by the council on the proposal of the commission”. Art. 32 TFEU, sets out the goals of the EU.

In this particular field, the fundamental provisions can be found in the council regulations adopted on 23rd July 1987 on the tariff and statistical nomenclature and the common customs tariff which has been amended several times since their adoption. The purpose of this regulation is to establish what is known as the CM (combined nomenclature), which meets customs tariffs and statistical requirements. This is in order to create an integrated tariff of the European community known as TARIC.The CM is the EU’s official method for designation goods and merchandise. The CM provides the best means of collecting, exchanging and publishing data on EU trade statistics. The CM is also used for the collection and publication of external trade statistics in intra-trade EU. The CM is based on the HS (Harmonized System nomenclature), which has further subdivisions, (created at the EU level) which are known as “CM subheadings.”

The HS is run by WCO. This systematic list of commodities forms the basis for international trade negotiations and is applied by most trading nations.

The TARIC comprises all customs duties and certain EU rules, applicable to EU external trade. The EU Commission established the TARIC taking into account the CM. TARIC supports good clearance by the EU countries. The TARIC also provides means of collecting, trading and publishing data on EU external trade statistics. However, this data is not available to the general public. TARIC comprises addition EU subdivision known as “TARIC subheadings”. Such subheadings are used as additional provisions to describe goods and their code number, customs duty rates (dependant on the origin of the goods).

Every year, the commission adopts a regulation, reproducing a complete version of the CM, TARIC taking into account, council and commission amendments. That regulation is published yearly, on 31st October (at the latest), coming into force every year on 1st January.

When declared to customs in the community, goods must generally be classified according to an official method for designating goods and merchandise. - That is the goal of the CM. Both imported and exported goods must be declared, stating under which subheading of the nomenclature they fall. This determines which rate of customs duty applies and how the goods are to be treated for statistical purposes. The collection of customs duties is ensured by the member states customs services on behalf of the EU.

b. EU law as applied to external tradeSeveral provisions have been adopted at EU level in order to deal with the export and import of member states. With regards to exports, regulation no˚ 260/69 of the council of 20th December 1969 “Establishing Common Law Exports” is

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important. Regarding imports the council decision no˚3285/94 on the common rules for imports and repealing regulations no˚ 518/84 is important.Main Principle: These regulations have been modified on numerous occasions. Exports from the EU to third countries, as well as imports from third countries to the EU, are free. However, there are exceptions, which return sovereignty to the member states. They can be found in certain agreements entered into by the EU. Exceptions may also be found in the aforementioned regulations, by which member states may be given the right to adopt regulations and limit imports and exports. Theses limitations and prohibitions may be limited for the reasons of: public security, public relations, public policy, the protection of life and health; the preservation of national treasures; and the enforcement of IP rights. Exceptions may also arise from EU law whereby member states and EU institutions, can lawfully resort to procedures in cases of emergency. Such measures can consist of either civilian measures or safeguard measures. Whatever the case, the procedures, which are to be followed are very strict. A certain number of special schemes can be found in the EU law such schemes regulate or restrict the sovereignty of the member states in regards to external trade. Such regimes may be found in council regulations of directives.E.g : The directive adopted on 7th May 1998 on the harmonization of the main provisions concerning export credit insurance for transactions with medium and long term cover. E.g: council directive 9th December 1992 on the export of cultural goodsThe European procedure for administering quantitative quotas rely on the council regulation of 7th March 1994 “The council regulation establishing a community procedure for administering quantitative quotas”. This procedure concerns both export and import quota and applies wherever no specific schemes apply (such as with agricultural goods or textiles).

c. The EU and the WTOThe EU is a signatory to GATT 1947 and GATT 1994. It is therefore through the EU law that the member states are required to make sure that their own international commercial law abides by the GATT provisions. The primary text in this regard is the council decision of 22nd December 1984, concerning the conclusion on behalf of the EC, with regards to matters within its competence of the agreements reached in the Uruguay Round multilateral negotiations, which took place between 1986 and 1994. Through that specific decision, the council adopted on behalf of the EC, the provisions contained within the Marrakesh Agreement signed on 15th April 1994 aka Marrakesh final act. It is pursuant to that decision that the EU member states have become official members of the WTO. It is within that framework that the competent European authorities have established the means, which may be used by member states in order to fight against trade barriers; and that anti-dumping measures, as well as anti-subsidy measures have been put into place. The primary source of law, when it comes to the measures against trade barriers, is the regulation adopted on the 22nd

December 1984, laying down community procedure in the field of the common commercial policy, in order to ensure the exercise of the community’s rights under international trade laws; in particular those established under the auspices of the WTO, which has been amended several times since its adoption. Mainly, it is about commercial practices, which are contrary to the WTO’s rules or the bilateral agreements, which cause damages to the European industry.EU law has adopted a specific anti-dumping procedure, which is composed of several procedures, which may mainly be found in the council regulation adopted on 22nd December 1985 “on the protection against dumped imports from countries, not members of the EC”.Dumping concerns the situations where one manufacturer produces goods in a country and sells the goods in a foreign country at a much lower price than the country of production. An identical procedure can be found in council regulation 6th October 1987 “on the protection against subsidized imports from countries not member of the EC”.Since 1995, pursuant to the terms of a communication made by the EU commission to the EU parliament and Council, of 1st

June 1994, the authorities have put into place a specific system know as the GSP (generalized system of preferences) in order to better integrate developing countries in the world trade commerce. This means that the EU’s scheme of GSP offers developing countries, a reduction in custom’s duties for certain products, entering the EU market. This policy aims to help beneficiary countries, to better participate in global trade and thus, to contribute to the development of their economy. This may be also in order to respect human rights and the principals of sustainable development.

II. THE ECONOMIC AND MONETARY UNIONa. EU’s jurisdiction in exchange rate matters

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The Treaty of Maastricht 3rd February 1992, created the euro, which is an unique money for the euro zone and managed by the ECB (European Central Bank). At the time when the treaty was signed, twelve member states met the economic criteria for the European money. The criteria are presented in article 140(1) of the Treaty on the functioning of the European Union (TFEU). There are 4 criteria:

1. Price stability2. Sound public finances (there is a deficit at the level of debt which is limited in terms of GDP (gross domestic

product))3. Stable exchange rates4. Low and stable long term interest rates

In addition to those 4 criteria, each EU member states, must ensure the compatibility of its national legislation, including the statutes of the national bank with both the TFUE provisions and the of European system of central banks and the EU central bank (ECB) itself. The Euro came into force in 1st January 1999 and the physical currency came into force of 1st January 2002. Today, eighteen member states belong to the Euro Zone. (CHECK ONLINE FOR DATES AND NAMES OF COUNTRIES)

As far as the new member countries are concerned, they will only be allowed to adopt the Euro when it is ascertained that they meet the aforementioned criteria. Before being allowed to participate in the Euro Zone, they must abide by the ERM (exchange rate mechanism), which replaces the EMS (European Monetary System).

When it comes to the exchange rate, EU commercial law leaves no leeway to the member states. It may be said that they have lost their sovereignty in this area.

b. EU’s jurisdiction in movements of capital

When it comes to movement of capital, there is no room left to the member states, regarding both EU commercial law and international commercial law. The Treaty of Maastricht established the principle of “freedom in the movement of capital”. Article 63 TFEU prohibits the member states from imposing any restrictions on the movement of capital between member states and between member states and third countries. It also prohibits all restrictions on payments between member states and between member states and third countries. The movements of capital that fall with article 63 TFEU are not listed in the TFEU, but within the council directive adopted on 24th June 1988, annexe 1.

The 5 categories of capital movements are as follows: Category 1: In this nomenclature, capital movements are classified according to the economic nature of the assets and liabilities they concern, denominated either in national currency or foreign exchange. The capital movements in this nomenclature are taken to cover: all the operations necessary for the purposes of capital movement (the conclusion and performance of the transaction and related transfers). The transactions generally take place between residences of different member states, although some capital movements are carried out by a single person, for his own accord. Category 2: Operations carried out by any natural or legal person, including operations in respect or liabilities by member states, or of other public administrations or agencies, are subject to the provisions contained in Art. 68(3) of the TFEU. Category 3: Access for the economic operator to all the financial techniques available on the market approach for the purpose of carrying out the operating questions.The concept of acquisition of securities and other financial instruments covers not only spot transactions but also all the dealing techniques available:

- Forward transactions- Transactions carrying out an action or warrant- Swaps against other assets

Similarly the concept or operations in current and deposit accounts of these financial/credit institutions, include not only the opening and placing of funds in those accounts, but also forward foreign exchange and transactions, irrespective of whether these are intended to cover an exchange risk, or to take an open foreign exchange position.Explanation: People may by currency in order to protect against any risks that might occur. e.g : one might seek to guaranty against the risk of the value of a country’s currency decreasing by purchasing the (stronger) currency of another nation. It’s a type of bidding. Here, one is investing in the state itself.4 th category : The operations to liquidate or assign assets filter, repatriation of the proceeds of liquidation thereof, or immediate use of such proceeds within the limits of community obligations. 5 th Category : The operations to repay credits or loans.

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All restrictions to capital movements are prohibited even if they are non discriminatory (restrictions which apply to everyone/natural persons within or outside of the EU). The probation of those restrictions applies whether the restrictions are direct or indirect. However, there are exceptions contained within the TFEU. Regarding these exceptions, it is important to note the distinction between EU commercial transactions and international commercial transactions.

There are some common limitations, irrespective of whether the commercial transactions are made within the EU or internationally, which are contained in art. 65 TFEU. These limitations concern:

- Tax law- Prudential supervision- Statistical statements/declarations - All the measures made for the reasons of public policy or safety.

Occasionally, the EU institutions themselves require the member states to put into place, restrictions on money transfers, especially in cases concerning money laundering.

The limitations, which only concern international transactions, may be found in article 64 TFEU. This includes the limitations, which were already in place before 31st December 1993. This article also contains the rules regarding the abolition or initiation of such limitations.

Article 66 TFEU concerns exceptional circumstances concerning movements of capital to or from third countries; where they cause or threaten to cause serious difficulties for the economic or monetary union; the European council, (after consulting the ECB) may take safeguard measures with regards to third countries, for a period not exceeding six months; if such measures are strictly necessary.However, a member state may also be authorized for grave political reasons, or in cases of emergency, to anticipate a decision that the European council may take (especially in the case of an embargo) and so may be authorized to adopt unilateral measures concerning the movement of capital and payments.

France has managed to retain a bit of leeway in the provisions, which are found in the “ French monetary code” and in articles 151-1, 151-2 and 151-3.

“ Financial dealing between France and foreign countries are unrestricted” – article 151-1“In order to defend the national interest, the government may, through a decree enacted on the basis of a report from the minister for the economy, may take a number of measures, but only for the purpose of the protection of national interests.” – article151- 2

The provisions of article 151-3 which details a list of activities known as foreign investments, for which the French government is able to take restrictive measures, has come under close scrutiny from the EU, as it does not conform with the EU objectives/principals. This list has been amended “DANONE amendments” in 2005. Dominic De Villepin, the then French Premier minister adopted the strategy of “economic patriotism”. This was once again deemed to be illegal by the EU.

B. THE INTERNATIONAL INSTITUTIONSWe are going to study the seven main international institutions, which play a role in international trade.

I. GATT AND WTOGATT is an agreement and not an institution.The WTO is the figurehead of world trade. It intervenes actively in international commercial regulation, so much that the WTO may be described as the biggest influence on world trade within the past decade.

a. The initial steps The origins of the WTO can be linked to the “UN (United Nations) charter” which, was created by an agreement on the 25th June 1954.The first international trade agreement was signed by 23 of the original 50 UN member countries, among those 23 countries were: USA, UK, Australia, Belgium, China etc. That first international trade agreement formed the constitution of the ITO (International Trade Organization) which operated under the auspices of the UN. The primary objective was the reduction of trade barriers and protective tariffs following which were put into place following the great depression (1928 in the USA).

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The GATT (general agreement on tariffs and trade) was signed on 30 th October 1947 and came into force 1st January 1948. The GATT is an agreement and has never been granted the status of an international organization.

Around the same time, a set of rules for the operation of the ITO, known as the ITO Charter were put into place and signed 24th March 1948.However, the ITO did not work, as the conditions for the set of rules referred to as the “ Havana agreement”, were not fulfilled within the prescribed time limit, detailed within said agreement. This was because certain states, signatories to the agreement, failed to ratify the Havana agreement.As a consequence, the agreement was nullified leaving only the basic GATT in place.

b. The benefits and disadvantages of GATT 1947GATT has been the most important multilateral trade agreement for liberalizing trade worldwide. Since most of the world’s major trading nations have been members of the GATT 1947, GATT has controlled more that 80% of trade in goods, worldwide.

The first thing that did GATT was to, reduce tariffs, open markets, and set rules promoting freer and fairer trade. GATT 1947 originally contained 48 articles and resulted in 45 000 tariffs concessions, covering over 1/5 of the world’s trade.

From 1947 to 1994, GATT 1947 also provided an efficient framework for fruitful multilateral negotiations, aimed at establishing freer trade. These multilateral negotiations are also referred to as ‘rounds’. In total, 8 rounds have been completed since 1947. The method contained in GATT exists to initiate negotiations amongst member countries and aims at ensuring the countries accept the agreements reached in a variety of economic secateurs.

The first round is known as the Geneva round 1947, (23 participating countries). A famous round is the TOKYO round 1953-1979 (201 participating countries). The eighth round it the Uruguay round 1986-1994 (125 countries). A ninth round has been initiated but not completed and it’s current status is ‘suspended’ it began in 2001 in GOA.

The first 6 rounds were focused on the reduction of tariffs on a commodity-by-commodity basis. This changed with the Kennedy round (1964-1967), because negotiations took a far broader and more liberal approach. This is because the broader reduction of tariffs was accomplished through a percentage basis.

The Uruguay is the most widely published of rounds as it led to the creation of the WTO.NB: GATT 1947 has never been repealed; it therefore coexists with GATT 1994, on different matters.

A. NATIONAL TREATMENT CLAUSEAmong the standard causes, which can be found in the GATT’47, whatever the economic activity concerned, you will find ‘the national treatment clause’ and ‘the most favoured national treatment clause’.

The national treatment clause is about treating foreigners and locals equally; once the foreign goods have entered the market. The same applies to domestic and foreign services, foreign and domestic trademarks, copyrights and patents. A country should treat foreigners the same as its nationals. This is also contained in certain agreements attached to the WTO.

National treatment only applies once a product; service or item of intellectual property has entered the market. Therefore, charging custom’s duties on imports are not a violation of national treatment; even if locally produced goods are not charges.

B. THE MOST FAVOURED NATIONAL TREATMENT CLAUSE (MFTC)This is probably the most progressive clause adopted so far. This clause aims to treat all people equally. Under the WTO agreements, countries cannot discriminate between trading partners. Should a particular country grant someone a special favour, such as a lower custom duty on a particular product, it will have to do the same for all the other WTO countries. This principal is so important, that it is included within the first article of the GATT, which governs trade in goods. The most favoured treatment clause is also present in the ‘General Agreement on Trade and Services’ GATS article 2. The MFTC is also used in TRIPS (Trade related aspects of Intellectual Property Rights) at article 4. However, even though it is treated in each of the aforementioned agreements, each one treats it differently. The agreements do however cover all main areas of international trade.

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There are exceptions to the rule: - Countries can set up a free trade agreement that applies only to good traded within the group. This discriminates

against goods from outside the group.- Countries can give developing countries special access to their markets- A country can raise barriers against products that are considered to be traded unfairly, between specific

countries. - In services, countries are allowed (in limited circumstances) to discriminate

The aforementioned agreements only permit these exceptions under strict conditions. Other clauses dealing with protective measures:

- Immediate reduction or sometimes progressive production of customs duties on certain products- Prohibition on quantitative restrictions: these may be quotas on imports or exports and may concern measure

having an equivalent effect- Measures having a qualitative effect- Dumping clauses- State aid (granted to exporters)

The drawbacks of GATT:GATT 1947 has not been granted the status of an international organisation. It was founded on a simplified agreement, which was only supposed to be temporary, rendering its structure rather small. There were originally only 23 member countries. The sanctions attached to the rules provided for in the agreement, were not enforced with sufficiency. The rules only apply to trades in goods, which means that trade in services were specifically excluded from GATT 1947. It also fails to address agricultural trade (which is an important area) and trade in textiles (due to its sensitive nature). As GATT 1947 only dealt with trade in goods, it did little to protect IP rights (such as copyrights, trademarks etc.) It also failed to regulate the restrictions on foreign investments, which interfered with the free movement of goods. GATT 1947 was filled with loopholes and thus, often ineffective. As a conclusion, the initial GATT 1947 agreement needed to be improved.

c. The Creation of the WTOThe WTO was created by the “final act of Marrakesh agreement” which was entered into on 15th April 1994. The WTO came into force on 1st January 1995 and as of this date the WTO replaced the original GATT organisation. From an institutional point of view, the 1994 act put an end to the GATT system and created the WTO. By signing the 1994 act, the member countries committed to abide by all the multilateral agreements, which had been previously signed. Through this act, the role of the WTO has been confirmed. Its aim was to facilitate open markets and to provide a forum for future trade negotiations between members; along with a forum for the settlement of trade disputes.The WTO is an intergovernmental organisation that assists nations in regulating trade in:

- Manufactured goods- Services (including banking, finance, insurance and telecommunications)- IP rights- Textile and clothing- Agricultural goods

The WTO has a standing equal to that of the IMF or the World Bank, and cooperates with them on economic matters. The WTO’s membership includes the countries which previously belonged to GATT 1947 and is now, open to other countries as long as their membership is accepted by a 2/3 majority voted of members. It now has 160 member countries.

One of the biggest improvements made by the Marrakesh final act is that the WTO is a recognised international organisation, founded on by an international agreement. The WTO has legal personality. It may therefore take action against a state.

d. The recent initiatives lead by the WTOAs the WTO is now n international organisation, the multilateral negotiation process is more permanent. There are ministerial conferences, which are the highest decision-making bodies of the WTO, which usually meets every two years. This means that every 2 years, all members of the WTO (countries or customs unions) are brought together. This conference may make decisions on all matters under any of the multilateral trade agreements.

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The last ministerial conference took place in Bali, Indonesia in December 2013. The next is due in December 2015. It is up to the ministerial to decide upon any point, which they see fit, however, agreements may be made/signed between conferences.

The main characteristic today, is that there are important divergences between countries, on what are considered to be very important topics. For instance, the purpose of the Seattle conference 1991 was to open negotiations on investments, negotiations etc. This conference failed as the divergences between countries were too difficult to overcome.

The main disagreement between parties (which lead to the suspension of the GOA round):This is mainly due to the agricultural sector, specifically on market support and domestic success. There are also disagreements on non-agricultural products, with the position of countries being too diverse to achieve any foreseeable agreement.

II. THE INTERNATIONAL MONETARY FUND (IMF)A. CREATION OF THE IMF

The IMF is a specialised institution of the UN organisation.Why was it created?During the great depression the 1930s, countries attempted to protect their failing economies by sharply raising barriers to foreign trades; devaluing their currencies to compete against each other for export markets and curtailing their citizen’s freedom to conduct foreign exchange. This failed as world trade declined sharply and employment and living standards plummeted. This breakdown in communication led the IMF’s founders to plan an institution charged with overseeing economic exchange.IMF: the system of exchange rates and international payments that enables countries and their citizens to buy goods and services from each other. This new global entity would ensure exchange stability ad encourage its member countries to eliminate exchange restrictions which hindered trade. The IMF was created during the “Breton woods Agreement” in July 1944, when representatives of 45 countries met in the town of Breton woods, New Hampshire. These representatives agreed upon a framework of economic integration, to be established after WWII. They strongly believed that such a framework was necessary to avoid repetition of disastrous economic possibilities such as those, which contributed to the great depression. The IMF came into existence in 1945 when the first 29 member countries signed its articles of agreement. It began operations on 1st March 1947. Later that year, France became the first country to borrow money from the IMF. 45 members signed it. As far as the current IMF membership is concerned, membership increased as many African countries became independent. The cold war limited the IMF’s membership when most countries within the Soviet’s sphere of influence refuse to join. Today, there is a membership of 188 countries.

B. GOVERNANCE BODIES OF THE IMFThe IMF’s mandate and governance have evolved along with changes in the economy, allowing the organisation to retain a central role within the international financial architecture. The board of governors is the highest decision making body of the IMF. It consists of 1 governor and 1 alternate governor for each member country. The Governor is appointed by each country and is usually the minister for finance or the head of the county’s national bank. While the board of governors has delegated most of its powers to the IMF’s executive board, it retains the right to approve quota increases special drawing rights allocations, the admittance of new members, compulsory withdrawal of members, and amendments to the articles of agreements and bylaws. The board of governors also elects or appoints executive directors and is the ultimate arbiter on issues related to the interpretation of the IMF’s articles of agreement.

Ministerial committees:The IMF board of governors is advised by two ministerial committees: the first being the International Monetary and Finance committee (IMFC) and the second being the Development Committee (DC)

IMFC:

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The IMFC has 24 members drawn from the pool of governors. It meets twice a year to discuss matters of common concern affecting the global economy. It also advises the IMF on the direction of its work.

DC: The DC is a joint committee tasked with advising the governors and the World Bank on issues related to the economic development relating to emerging and developing countries. It has 24 members (usually the minister of finance or of development).

The executive boards: It has 24 members and is concerned with the daily operations of the IMF. The 24 board members represent all the countries. Large economic countries such as USA or China have their own seat, however, countries are grouped into constituencies (of between 4 and 24 countries), which are represented by one director. The board usually makes decisions based on consensus but at times, formal votes are taken. At the end of most formal discussions, the board issues a ‘summing up’ which is a summary of their meeting. The IMF has approximately 2600 staff and is based in Washington DC.

III. THE UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW (UNCITRAL)A. CREATION, PURPOSE AND INSTITUTIONAL STRUCTURE OF THE UNCITRAL

The UNCITRAL is a core legal body of the UN system, in the field of international trade law. It is a legal body with universal membership, specialising in commercial law reform worldwide (for the past 40 years). The UNCITRAL was created by the general assembly of the UN in 1966, through a resolution adopted on 17th Dec 1966.The aim was to improve international commercial law in order to achieve greater harmonisation.There were two main reasons for this:

- It was considered that too great a diversity in international was a hindrance to the development of international trade.

- It was considered that harmonisation should be undertaken by an organisation likely to have sufficient authority towards both industrialised and developing countries.

B. MAIN ACHIEVEMENTS OF THE UNCITRALMethods of work used by the UNCITRAL: The commission carries out its work in annual sessions, which are held in alternate years at the UN headquarters in NY (New York) and the Vienna centre. The commission has also established 6 working groups to perform the substantive preparatory work on topics within the commission’s program of work. Each one of the 6 groups is composed of members or the member states. Each working group holds 1 or 2 sessions a year, dependant on the subject matter to be covered. These sessions take place either in NY or Vienna. In addition to member states, all members that are not members of the commission are invited to attend meetings of the commission as observers. Observers are permitted to participate in discussions at sessions of the commission, to the same extent as members.Each working group deals with a different topicEg. Group 1 – procurement

At the end of each session the UNCITAL comes up with a normative document, which once added to the other normative documents, forms an integral part of the rules and regulations applicable to international trade within the UNCITAL. Such documents deal with key areas of international trade.E.g recommendation adopted in 2012 to assist arbitral institutions as well as any other interest bodies, with regards to arbitration under the UNCITRAL arbitration rules, as they were revised in 2010.

The characteristics of the norms adopted by the UNCITRAL:

The UNCITRAL does not have the power to impose the normative rules. This is a crucial difference between what happens in the EU and the UNCITRAL.Should the UNCITRAL adopt a particular agreement/convention, the convention shall only come into force when a sufficient number of countries have ratified the convention. When the UNCITRAL adopts a model law, the provisions of said model law will only be applicable if the member countries have adopted these laws.

When the UNCITRAL proposes a model or standout contract to the market regulators, it is necessary, in order for the provisions to be applicable, that the contracting parties agree to be bound by the agreements.

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Giving these circumstances, it is quite remarkable that the UNCITRAL documents are not only integrated into national law, but the international operators have freely agreed to adopt these documents.

IV: THE HAGUE CONFERENCE (HCCH)The Hague conference on private international law (HCCH)

A. CREATION, PURPOSE AND INSTITUTIONAL STRUCTURE OF THE HCCHThe HCCH is an intergovernmental organisation, the purpose of which is to “work for the progressive unification of the rules of private international law” –article 1.

The first session of the HCCH was convened in 1894 by the Dutch government on the initiative of Noble Prise winner T.M.C ARTHUR. The HCCH works in sessions. Prior to WWII six sessions have been held. The 7th session in 1951 marked the beginning of a new area, with the preparation of statute, which made the HCCH a permanent intergovernmental organisation. This statute entered into force 15th July 1955. Since 1956, regular sessions have been held every 4 years.

The purpose of the HCCH:1. To work for a world in which individuals, families, as well as companies and other entities whose lives and activities transcend the boundaries between different legal systems, enjoy a high degree of legal security. 2. To promote the orderly and efficient settlement of disputes, good governance and the rule of law, while respecting the diversity of legal divisions.3. To be a forum for the member states, for the development an implementation of common rules of international law, in order to coordinate the relationships between different private law systems in international situations or contexts. 4. To promote international judicial and administrative coordination in the field of protection of the family and children, civil procedure and commercial law. 5. To provide high standard legal services and technical assistance for the benefit of member states and state parties to The Hague conventions, their government officials, the judiciary and practitioners. 6. To provide high quality and readily accessible information to member states and states party to Hague conventions, along with the public in general.

The methods of operation: The main method used to achieve the purposes of the conference, consist of the negotiation and drafting of multilateral treaties and conventions in the different fields of international private law. After preparatory research has been done by the secretariat, preliminary drafts of the conventions are drawn up by the ‘special commission’, which is made up of governmental experts. The drafts are the discussed and adopted at a plenary session which is a diplomatic conference.The secretariat maintains contact with its members via the organ of a designated member. For the purpose of the operation of certain treaties involving judicial and administrative cooperation, the permanent bureau enters into direct contact with the central authorities designated by the states party to those treaties. In order to promote international coordination and to ensure coordination of the work undertaken by relevant bodies, the Hague maintains close contact with international organisations including the world bank, the EU, The Asian African legal consultative organisation, WTO and IMF etc. Certain nongovernmental organisations such as international social service, the ICC etc. maintain close contact with the permanent bureau and send observers in order to maintain conference meetings. For the development of new conventions as well as for the monitoring of the practical operation of existing conventions, the permanent bureau often appeals to other international organisations that have specific knowledge of the subject matter in question.

The institutional structure:

The plenary session:The sessions are every 4 years, however where need be, an extraordinary session may be held to discuss and adopt draft conventions prepared by the special commissions. They also take decisions on the subjects to be included on the agenda for the conference work. All of the texts adopted are brought together in a final act, which is signed by the delegates of each country. Under the rules of procedure of the plenary sessions, each member state has one vote.

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Decisions are made by the majority of the votes cast by the member states which are present. A non-member state invited to participate on an equal footing to member states, will also have the right to vote.The president elected for the plenary session is by tradition, the president of the Netherland’s standing government committee.

The directing organs:Under statute, the operation is assured by the Netherland’s standing committee on the international private law. Formally, it is the committee that sets the date and agenda of the conference. However, in practise, the member states have come to exercise a more direct influence on the decision making process in this respect, as well as with other matters. This means that the special commissions of governmental experts meet between sessions; make recommendations to the plenary sessions, which in turn, makes decisions regarding the agenda.

The Secretariat:The activities of the conference are organised by what is known as the permanent bureau, located in The Hague, with officials of different nationalities. The Secretary General is assisted by 5 lawyers. The bureau’s main task is the preparation and organisation of the plenary session and the special commission. Its members carryout the basic research required for any subject that the conference takes up. The Secretariat maintains and develops contacts with the national organs, experts and delegates of member states, as well as the central authorities designated by the states’ party to the Hague convention.It also maintain contact with international organisations and respond to requests by users of the convention e.g judges, lawyers notaries, companies etc.

B. MAIN ACHIEVEMENTS OF THE HCCHBetween its first plenary session between 1893 and 1904, the conference adopted 7 international conventions, 6 of which have been replaced by a more modern instrument.From 1951 to 2008, the conference adopted 38 international conventions. Until the 1960s, the conventions were only written in French, but they have since been drawn up in French and English.

Among the conventions that have been the most widely ratified, the following topics are worth mentioning: Civil procedure Service of process (signification et notification à l’étranger) The taking of evidence abroad (obtention de prevue à l’étranger) Legalisation Conflicts of laws relating to testamentary dispositions Maintenance obligations (family law) Recognition of divorce Protection of minors International child abduction Intercountry adoption

Some of the Hague conventions deal with the determination of applicable law; some with the conflict of jurisdictions; some with the recognition and enforcement of foreign judgements (l’ex equatur). Some of the Hague conventions combine one or more of these aspects of international private law. From time to time special commissions are held at The Hague to monitor practical operation of the HCCH. The most recent include:

- The “choice of court agreements” 2005- The law applicable to certain rights in respect of securities held with an intermediary.- Conventions on contracts especially regarding consumer sales (vente aux consommateurs) and sales contracts

(contrat de vente). - When it comes to torts, conventions have been adopted on product liability- For securities and adoption has been adopted on the securities held with intermediaries- Trusts have been used as a method for developing economic activities where it was difficult to create a

corporation- Conventions on the recognition of companies

NB: Securities = titre

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In the future, cross boarder mediation in family matters, choice of law in international contracts, accessing international law and the need for the development of global instruments, are also on the agenda along with:

- Questions of private international law raised by the information society including electronic commerce. - Jurisdiction, recognition and enforcement in matters of succession upon death- Assessment and analysis of transnational legal issues relating to indirectly held securities and security interests.

IV. THE INTERNATIONAL INSTITUTE FOR THE UNIFICATION OF PRIVATE LAW (UNIDROIT)

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