INTRODUCTION
International commercial law, the body of rules governing cross-border commercial transactions, plays a pivotal role in facilitating global trade and commerce. With the ever-increasing interdependence of economies, it is crucial to have a harmonized legal framework that fosters predictability, efficiency, and fairness in international business dealings. Achieving this harmonization is challenging due to the diversity of legal systems across different nations. However, the use of conventions, also known as international treaties, has emerged as a powerful mechanism to harmonize international commercial law. These scholars believe that traditional treaty law has been gradually supplanted in recent years by softer methods of establishing international law, such as restatements and model laws. Some scholars go so far as to assert that treaty law is either dying or already deceased. This study evaluates whether this viewpoint is justified by providing an overview of the most prominent hard law and soft law instruments used for harmonization and by addressing issues related to the effectiveness of conventions, their advantages, disadvantages, and the tensions that arise in this field. The paper suggests that conventions continue to be necessary in cases involving third parties or public interests. However, further enhancements are required to ensure that conventions become more successful instruments in the context of international commercial law. Conventions may be in the form of treaties or instruments like guidelines, legislations, business transactions, including the commercial ones.
INTERNATIONAL COMMERCIAL LAW AND HOW ITS HARMONIZED
The process of harmonizing international commercial law refers to the efforts made to align and unify legal principles and regulations across different countries and jurisdictions in order to facilitate smooth and consistent international business transactions. This harmonization aims to create a common framework that promotes clarity, predictability, and fairness in international trade and commerce. By establishing shared rules and standards, harmonization seeks to reduce legal uncertainties, eliminate conflicts, and enhance the efficiency and effectiveness of cross-border commercial activities. It involves various aspects such as contract law, sales law, payment methods, dispute resolution mechanisms, intellectual property rights, and other legal elements that impact international trade. The goal is to create a cohesive legal environment that encourages international business growth and fosters a level playing field for all parties involved.
It is first pertinent to know how this harmonization through the utilization of conventions is done.
Conventions, as legal instruments binding on the parties that have ratified them, serve as a fundamental means of harmonizing international commercial law. These international treaties establish uniform rules and principles that govern specific aspects of cross-border trade, such as contract formation, sales, carriage of goods, and dispute resolution. By promoting uniformity, conventions mitigate the uncertainties that arise when parties from different legal systems engage in commercial transactions.
For instance, let’s understand this with the help of various examples; the “United Nations Convention on Contracts for the International Sale of Goods (CISG)” has achieved widespread adoption, with over ninety countries participating. The CISG sets out standardized rules for the formation of contracts, obligations of the parties, and remedies for breach. This uniform framework reduces transaction costs, fosters international trade, and facilitates resolution of disputes, ultimately harmonizing international commercial law.
One of the primary challenges in international commerce is the divergence between the legal systems of different nations. National laws can vary significantly, leading to potential conflicts when parties from different jurisdictions are involved. Conventions act as bridges, connecting these disparate legal systems by providing a common ground for international business transactions.
When parties agree to be bound by a convention, they voluntarily accept a set of rules that supersede their domestic laws in relevant matters. This contractual commitment helps parties navigate the complexities arising from the interaction of various legal systems. For instance, the “Convention on the International Sale of Goods (CISG)” creates a unified set of rules applicable to sales contracts, which prevails over the domestic laws of the contracting parties, ensuring coherence and predictability.
Legal certainty is paramount in international commerce, as it provides a stable and predictable environment for businesses to operate. Conventions offer a clear and standardized legal framework, reducing the risk of misinterpretation and disputes. This predictability encourages foreign investment and enables businesses to assess risks and plan accordingly.
The “New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards” is an example of a convention that enhances legal certainty. By establishing a harmonized framework for recognizing and enforcing international arbitral awards, the convention provides parties with confidence that their arbitration agreements will be upheld in signatory countries, irrespective of their legal systems.
Conventions not only harmonize international commercial law at an international level but also act as guiding principles for domestic legislation. When a country ratifies a convention, it often incorporates its provisions into its domestic law. This process ensures that the state’s legal framework aligns with international standards, promoting consistency and facilitating international trade.
For instance, the “Hague Convention on Choice of Court Agreements” provides guidelines for determining jurisdiction and the recognition and enforcement of judgments in cross-border disputes. When countries incorporate these principles into their legal systems, it creates a shared understanding of procedural rules and enhances the predictability of legal outcomes.
Conventions encourage nations to cooperate and work collectively towards the common goal of facilitating international trade. Participating in the development and adoption of conventions reflects a nation’s commitment to global commercial law standards and reinforces its dedication to a fair and transparent international business environment.
Furthermore, conventions promote mutual trust among states, businesses, and individuals engaged in cross-border commerce. By adhering to shared legal principles, parties can better assess the legal consequences of their actions and ensure that their counterparts will honor their obligations.
The question of what determines the success of conventions is a topic frequently discussed by scholars and practitioners. Finding an answer can help identify effective approaches, enabling agencies to implement best practices and avoid future tensions during drafting. According to “Goode”, success is gauged by the absence of constant or periodic divergences in the interpretation and application of harmonizing instruments.[1]
“Kronke” highlights that a convention’s success is linked to factors such as a significant number of ratifications, a growing body of case law ensuring uniformity, and the absence of calls for revision, However, he also acknowledges that the number of ratifications and technical qualities may not be relevant if traders don’t appl the convention in their transactions. Ultimately, a uniform law convention is considered successful if it reduces costs and increases benefits in the realm of transnational commercial transactions.[2]
In the beginning, bilateral and multilateral treaties or conventions served as the main means of achieving harmonization among states in critical areas of commercial trade, aiming to resolve issues and promote smoother trade relations. These methods involved ratifying States either adjusting their domestic laws to adhere to the conventions or adopting uniform laws established by these conventions. As business and commercial transactions diversified, the landscape changed, and to cater to the evolving needs of businesses, various soft law instruments were introduced by formulating agencies.
What could be the advantages of utilization of such conventions?
According to “Kronke”, one of the significant benefits of conventions is their ability to provide legal certainty, in contrast to the flexibility and adaptability offered by other sources of soft law. When private international law (conflict of laws) lacks satisfactory solutions for a specific area of substantive law, the necessity for uniform law conventions becomes even more apparent. Hence, rather than discarding conventions, they should be enhanced based on past successful experiences. Conventions will continue to be essential, particularly in complex areas beyond contract law. Relying solely on market operators and loosely framed soft law instruments for the harmonization and unification of commercial law would be a misconception. Notably, soft law instruments would prove inadequate in addressing property-related issues, such as delicate matters like title acquisition from a non-owner.
The researcher will now pose some reasons as to why there is still a necessity to
1. Uniformity and Legal Certainty: A convention would establish uniform rules that govern international commercial transactions. This uniformity would promote legal certainty and predictability for businesses engaged in cross-border trade, reducing the risks and complexities associated with dealing with different legal systems.
2. Clarity and Simplification: A convention would provide clear and concise rules that address common issues in international commercial transactions. This clarity would simplify the legal framework and enhance the understanding and application of the law by businesses, lawyers, and judges, leading to more efficient dispute resolution.
3. Facilitating Cross-Border Transactions: Harmonized commercial law would help remove barriers and obstacles in international trade. By having a consistent legal framework, businesses would be encouraged to engage in cross-border transactions, as they would have confidence in the legal protections and remedies available to them.
4. Conflict Resolution: A convention would provide a mechanism for resolving conflicts of laws that arise in international commercial transactions. It would establish rules to determine which jurisdiction’s law should apply in a particular situation, reducing uncertainties and disputes regarding applicable laws.
5. Promoting Fairness and Equity: Harmonization of international commercial law would strive to promote fairness and equity among parties involved in cross-border transactions. By establishing common standards and principles, it would help create a level playing field and ensure that parties are treated fairly regardless of their jurisdiction or bargaining power.
6. Keeping Pace with Globalization: As globalization continues to expand, the need for harmonized international commercial law becomes more pronounced. With the increasing interconnectedness of economies and the rise of e-commerce, a convention would address emerging legal challenges and provide a framework that reflects the realities of modern international trade.
7. Promoting Legal Cooperation: A convention would encourage legal cooperation among countries, fostering dialogue and collaboration in the development and implementation of international commercial law. This cooperation would promote consistency, mutual understanding, and the exchange of best practices among legal systems.
It is important to note that the success of the convention hinges on the effective implementation of specific modifications concerning its overall approach and structure. Notably, the conventions ought to be forward-thinking, introducing novel techniques to meet the requirements of participants engaged in international trade. One of the primary challenges in organizing international conventions is striking a delicate balance between catering to commercial interests and upholding the rights of all involved parties. This issue arises because the business community, being adept at identifying commercial and financial issues, plays a significant role in the harmonization process, potentially overshadowing the consideration of other stakeholders’ interests.
Harmonization can lead to the creation of instruments that impose either binding legal obligations, commonly known as “hard law,” or non-binding norms, often referred to as “soft law.” Supporters of harmonization believe that by establishing uniformity in cross-border commercial transactions, it lowers costs and simplifies international trade for private companies, as they no longer need to navigate the unique laws of each State where they operate. However, critics argue that achieving a genuine synthesis of diverse legal systems and cultures is impractical and tends to produce diluted and insignificant standards that disproportionately benefit Western business interests.
Disparities among various legal traditions such as common law and civil law, economic systems like socialism and capitalism, and the developmental status of countries create significant challenges. These differences have also led to a lack of harmony in international commercial law, as national legal systems vary widely. Therefore, when implementing harmonized laws, domestic legal systems must carefully consider these variations. While contractual interpretation approaches may seem similar, putting them into practice can yield contrasting results due to the distinctions between civil law and common law systems. The real issue lies in selecting the most effective legal rules from different systems without proper testing in the real-world context, akin to conducting experiments in a controlled laboratory setting. International agreements that take into account the concerns of all involved parties must strive to achieve a just equilibrium between civil law and common law systems to which the respective parties belong. Consequently, reaching a unanimous international consensus becomes a challenging task.
The potential success of this endeavor is open to debate due to the significant disparities between procedural systems. Additionally, the challenge is further complicated by the principle that individuals seeking relief through the court system must accept its existing framework. On the other hand, the conflict of laws rule grants parties the freedom to select their preferred governing law in their agreement. Lawyers and legal systems are resistant to relinquishing their own laws, as they firmly believe in the superiority of their legal frameworks. Additionally, they may fear that their national laws could lose their dominant position. As a consequence of these disparities in national laws, cross-border transactions are constrained. Moreover, nations that hold a strong belief in the superiority of their legal systems might be reluctant to adopt changes, particularly when these modifications pertain to transactions between businesses in different states.
It has been proposed that addressing jurisdictional issues could be achieved through the concept of a “global community of courts.” This idea surpasses the mere pursuit of enhanced political cooperation and entails a greater inclination among international courts to reference each other’s precedents in the resolution of legal disputes. This phenomenon has led some to argue that the term “community” appropriately characterizes this growing practice.[3]
CONCLUSION
In conclusion, harmonization of international commercial law is essential for fostering global trade and commerce. Conventions, as powerful instruments, play a pivotal role in achieving this harmonization. By providing a common legal framework, bridging the gap between legal systems, promoting legal certainty, guiding domestic legislation, and fostering international cooperation, conventions facilitate predictability, efficiency, and fairness in cross-border transactions. To summarize, yes, there is still a need for a convention in the field of harmonization of international commercial law. Harmonization refers to the process of aligning and unifying legal rules and principles across different jurisdictions to facilitate international trade and commerce. While efforts have been made to harmonize commercial law through various means, including model laws, guidelines, and international organizations, a comprehensive convention would provide a more robust and standardized framework for resolving legal issues in international commercial transactions.
While progress has been made in harmonizing commercial law through non-binding instruments and regional agreements, a comprehensive convention would offer a more comprehensive and widely accepted framework for international commercial transactions. It would promote legal certainty, facilitate cross-border trade, and contribute to a more efficient and equitable global business environment. The comparatist faces additional challenges due to the prevalence of harmonization endeavors and the achievements of the C.I.S.G. These challenges encompass understanding the character and efficacy of the harmonized framework that arises, its interaction with domestic legal systems, the extent to which harmonization can be achieved, and the emergence of novel notions of precedent.
As businesses become increasingly interconnected and globalized, the importance of harmonizing international commercial law through conventions becomes even more evident. Continued efforts to develop and implement conventions that address emerging challenges in the commercial landscape will contribute to a robust and sustainable framework for international trade, benefitting businesses, nations, and individuals alike.
[1]Anzhela, K. (2014). Do we still need a Convention in the field of harmonisation of the international commercial law?. BRICS Law Journal, 1(1), 82-97.
[2] Herbet Kronke , International Uniform Commercial Law Conventions: Advantages, Disadvantage, Criteria for choice, S(1) Unif. Rev. -13,15-(2000)
[3] See Slaughter “A Global Community of Courts” (44) Harvard International Law Journal 191 (2003) 193.
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