International commercial contracts
This book focuses on non-state rules in the context of international commercial contracts. A commercial contract can be defined as a contract ‘in which both parties deal with each other in the course of business, whether as merchants or as provider and recipient offinancial or other services supplied for business purposes.*0 The UNIDROIT Principles of International Commercial Contracts state in their pre-amble that commercial should be interpreted in a broad manner and the term is mainly intended to exclude consumer transactions and applies to both simple transactions such as sale contracts as well as more complex economic transactions such as investment, concession, agency, and lease contracts.[1] Therefore, the term commercial focuses on the capacity in which the contracting parties act.
The notion of intcrnationality is defined in different ways. Defining factors involve differences in nationalities, domicile, residence, or a contract which concerns the interests of international trade. At its broadest, a contract is international when not all elements of the contract belong to the same legal system. This definition is so broad that it can be artificial as the foreign element would not necessarily be intrinsically important to the contract (such as a German national domiciled in France and engaging a contractor located in France to refurbish his house in France, the German nationality has no real effect on the transaction.)
Article 1504 of the French Procedural Code reads that arbitrage is international when it affects the interests of international commerce. The French courts have extrapolated from this, that a contract is international when it affects the interests of international commerce. Also used in France is the judicial criterion: a contract is international when it is attached to two different legal orders. By combining these criteria the definition would thus be: a contract that is attached to at least two different legal orders and that affects the interests of international commerce.
Place of business is often used to determine whether the contract is international. The English Unfair Contract Terms Act (UCTA) states that Article 26 on international supply contracts is applicable to contracts made by parties whose places of businesses arc in territories of different states.[2] The Convention for the International Sale of Goods (CISG) defines an international contract as: (1) This Convention applies to contracts of sale of floods between parties whose places of business are in different States. This reflects the place of business criterion used in the UCTA.
Other legal instruments have a wider definition whereby place of business is only one of the possible criteria. The Inter-American Convention on the Law Applicable to International Commercial Contracts defines internationality as: a contract is international if the parties thereto have their habitual residence or establishment in different State Parties, or if the contract has objective ties with more than one state party. The Hague Principles of Choice of Law in International Commercial Contracts state in Article 1(2): a contract is international unless each party has its establishment in the same State and the relationship of the parties and all other relevant elements, reflardless of the law chosen, are connected only with that state.
For the purpose of this book, it is not necessary to make a choice between the different criteria to determine when a contract is international, but it is important to keep in mind that diverging definitions exist in different jurisdictions.
Key organisations
This section offers a brief introduction to the key organisations that draft non-state rules. The main international organisations are UNIDROIT, UNCITRAL, and the Hague Conference on Private International Law.
UNIDROIT (the International Institute for the Unification of Private Law) is located in Rome, Italy. It was founded in 1926 as an auxiliary organ of the League of Nations and after the demise of the latter it was re-established in 1940 as an intergovernmental organisation. It has 63 member states. UNIDROIT states that its purpose is: 'to study needs and methods for modernising, harmonising and co-ordinating private and in particular commercial law as between States and flroups of States and to formulate uniform law instruments, principles and rules to achieve those objectives.** Since its establishment, it has developed numerous instruments in the wider area of commercial law, such as international conventions, restatements of law (including the UNIDROIT Principles of International Commercial Contracts), model laws, and guides.
The Hague Conference on Private International Law (HCCH) uses the tagline: ‘The World Organisation for Cross-border Co-operation in Civil and Commercial Matters.’[3] It was first convened in 1893 by Tobias Asset and established as a permanent international organisation in 1951. It has 83 members: 82 states and the EU. Non-member states can ratify instruments promulgated by the Hague Conference. HCCH is focused on the development of private international law instruments, mainly international conventions. In commercial law they developed conventions on the international sale of goods, agency, and securities and the Principles on Choice of Law in International Commercial Contracts.
The United Nations Commission on International Trade Law (UNCITRAL) is ’the core legal body of the United Nations system in the field of international trade law.’ It is a subsidiary body of the United Nations and it was established in 1966 and has 60 full members. The membership rotates between the member states of the UN who are elected for terms of six years. Other states participate as observer states and have voting rights. UNCITRAL contributes to the harmonisation of international commercial law through the creation of international conventions, model laws, model contracts, rules, and guidelines.
Regional organisations contribute to the development of non-state rules. The EU focuses mainly on consumer contracts and not on commercial contracts. The most significant impact of the EU on international commercial law is the Europeanisation of private international law. Several private initiatives have filled this gap by developing non-state rules for international (commercial) contracts in the European context, partly with the goal that these could serve as a foundation for an eventual European contract law instrument. An example is the Principles of European Contract Law, which were developed by the Lando Commission.
A key regional organisation is OHADA (Organisation pour 1’Harmoni-sation en Afrique du Droit des Affaires) that was founded in 1993 to harmonise business law in Africa. It has 17 member states across West and Central Africa. Whilst membership is open to all African states its focus is upon francophone countries which have legal systems based on the French legal system.
OHADA harmonises the law through the development of Uniform Law Acts which are implemented by the Member States. There are currently nine uniform acts covering areas of company law, financial law, contract law, arbitration, and commercial law. The Uniform Acts are supplemented with case law collections, legal opinions, guidelines etc. OHADA set up a court that ensures its laws are applied and interpreted in a consistent way as this leads to greater legal harmonisation
Trade associations play a key role in the development of non-state rules. The International Chamber of Commerce (ICC) describes itself as ‘the world business organization, enabling business to secure peace, prosperity and opportunity for all?13 The ICC plays a key part in the development of non-state rules. The two most well known set of rules it has produced are the INCOTERMS and the Uniform Customs & Practice for Documentary Credits (UCP). The ICC also produces numerous model contracts (clauses), arbitration rules, and uniform rules in international commerce.
There are numerous (international) trade associations that develop contract terms, model contracts, and guidelines, which can all be considered as non-state rules. These organisations often have in-house dispute resolution mechanisms and rules (in the form of ADR and arbitration.) Examples include the Grain and Feed Trade Association, the International Bottled Water Association, the International Cotton Association, and the International Wool Textile Organisation.
- [1] Roy Goode, Commercial Law (Second Edition, Penguin Books 1995) 11. 2 Pre-Amble Comment 2. 3 Michael Joachim Bonell, 'The Unidroit Principles of International Commercial Contracts: towards a new lex mercatoria?’ [1997] International Business Law Journal 5. 4 Jean de la Colette, Les Contrats de Commerce Internationaux (Third edition, De Boeck Université 1996) 12. 5 Code Procédure Civile, Livre IV L’Arbitrage, Titre II L’Arbitrage International, Article 1504. 6 Pierre-Alain Gourion, Georges Peyrard and Nicolas Soubeyrand, Droit du Commerce International (fourth edition, L.G.D.J. Lextenso Editions 2008) 168. 7 Ibid, 169.
- [2] Unfair Contract Terms Act 1977, Article 26 http://www.legislation.gov.uk/ukpga/1977/50/section/26. 2 UNIDROIT https://www.unidroit.org/about-unidroit/overview.
- [3] The Hague Conference on Private International Law: https://www.hcch.net/en/home. 2 UNCITRAL: https://uncitral.un.org/cn/about. 3 The Commission on European Contract Law founded in 1982 and named after its chairman, Professor Ole Lando. 4 OHADA https://www.ohada.org/indcx.php/en/.
