Abstract
This Chapter is devoted to a discussion of the harmonization of trade laws which is a central issue in international trade. It examines, first, the desirability of international harmonization of substantive, domestic laws on international trade; secondly, the concept and the various means of harmonization or unification encompassing both—the legislative and non-legislative means like the international conventions, model laws, legislative guides, uniform rules of practice, codification and restatements of general principles; finally, the efforts directed toward achieving harmonization of trade laws at international level by states, international organizations like United Nations Commission on International Trade Laws (UNCITRAL), and International Institute for the Unification of Private Law (UNIDROIT); professional bodies and trade associations like International Chamber of Commerce (ICC).
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Notes
- 1.
Harmonization of the international trade laws has generated considerable interest in the academic circles and a voluminous literature is available supporting it. See, for example Loh (2015), pp. 13–18; Goode (2005), pp. 539–62; David (1968), pp. 13–27; Kamba (1974), pp. 485–519; Rosett (1992), pp. 683–697; Bamodu (1994), pp. 125–43, 125 (1994); Report of the Secretary General, Sixth Committee, A/6396 in Official Records of the General Assembly, Twenty-first Session (Agenda Item 88), Sixth Committee, New York: 1966, at: http://www.uncitral.org/uncitral/en/commission/sessions/pre.html [hereinafter Report of the Secretary General]; General Assembly Resolution 2205 (XXI) of December 17, 1966 establishing the United Nations Commission on International Trade Law which, in its Preamble, reaffirms [the] “conviction” that differences in domestic laws governing international trade transactions are “one of the obstacles to the development of world trade.” http://www.uncitral.org/uncitral/en/commission/sessions/pre.html; Recommendation of the Sixth Committee of the General Assembly on the Report of the United Nations Commission on International Trade Law on the Work of its Fiftieth session, October 26, 2017, which reiterates the need for a unified law on international trade suggesting that “progressive modernization and harmonization of international trade law” will reduce or remove legal obstacles to the flow of international trade, and thereby “would contribute significantly to universal economic cooperation among all States….” http://www.uncitral.org/uncitral/en/GA/6thcommittee_reports.html. But see Jacobson (1954), pp. 659–73, 661–62; Fox (1991), pp. 593–98, 596; Boodman (1991), pp. 699–724; Pistor (2002), pp. 97–130.
- 2.
Unification and harmonization of laws are the labels used to denote a varying degree of harmonization and it is possible that all kinds or techniques of harmonization do not precisely fit into these two categories. Hence, the issue of harmonization of national laws needs to be approached flexibly. As will be noticed below, the reason for using a wide range of harmonization techniques is that the same level of harmonization is not always desirable—in some situations a lesser degree of harmonization suffices (see infra, Sect. 2.2).
- 3.
In practice, however, a strict distinction between unification and harmonization is not generally maintained and the two terms are often used interchangeably. In this chapter also, unless the context otherwise requires, the two terms have been used interchangeably (see Sect. 2.2).
- 4.
While this book is primarily concerned with harmonization of substantive, national laws governing private, commercial transactions, a brief account of the efforts at unification of private international law rules may be found in Sect. 2.3. In deciding a dispute which contains a “foreign element” a domestic court is aided by private international law or conflict of laws rules. On the basis of these rules it has to determine first, whether it has jurisdiction; and secondly, if it has jurisdiction, what system of law shall govern such a case (see Sect. 2.3). The need for harmonization of private international laws of various countries is felt because these laws, like substantive laws, vary country by country which gives rise to the problem of uncertainty in the application of substantive laws.
- 5.
See Fawcett and Carruthers (2008), p. 9.
- 6.
The “choice of law” rules indicate the law by reference to which a dispute under an international contract is to be resolved. The law so identified is called “the applicable law.” For the purpose of determining the applicable law, the parties normally insert a choice of law clause in their contract. But in the absence of any such choice, the “applicable law” is determined on the basis of the law of the forum, called the lex fori. The choice of law rules needs to be distinguished from the choice of court rules. The latter is a set of rules to determine the forum (see infra, Chap. 15).
- 7.
On the utility of “choice of law” and “choice of forum” clauses in international contracts, see Becker (1989), pp. 168–75.
- 8.
- 9.
- 10.
See Goode (2005), 541.
- 11.
See Goode ibid; Bridge (2007), p. 507.
- 12.
Loh (2015), p. 13; General Assembly Resolution 2205 (XXI) of December 17, 1966.
- 13.
- 14.
- 15.
- 16.
See Fox, ibid.
- 17.
Pistor (2002), p. 107.
- 18.
- 19.
Jacabson (1954), p. 663.
- 20.
Graveson (1968), p. 10.
- 21.
Goode (2005), p. 554.
- 22.
- 23.
Fox, ibid. There may be some force behind the argument that there is no “right” law which is the same across the world but as noted in the previous chapter an underlying unity is clearly noticeable in the commercial laws of different countries which is a major force behind the current unification drive.
- 24.
Pistor (2002), id., p. 103.
- 25.
See ibid, note 14 and the authorities cited therein.
- 26.
UNIDROIT Principles, the current version of which appeared in 2016, were first published in 1994. The text is available at: www.unidroit.org.
- 27.
The most recent revision of the UCP is the 2007 Revision of Uniform Customs and Practice of Documentary Credits, USP 600 (ICC Publication No. 600). Text is available at: iccwbo.org.
- 28.
INCOTERMS were first published in 1936 by International Chamber of Commerce (ICC). The texts of different editions of INCOTERMS are available at: https://iccwbo.org/resources-for-business/incoterms-rules/.
- 29.
For an insightful discussion of different approaches to harmonization, see generally Boodman (1991), pp. 699–724; Pistor (2002), pp. 97–130; Fox (1991), pp. 593–98; David (1968), pp. 13–27; Zaphiriou (1990), pp. 71–97. See also: Bridge (2007), pp. 506–07; Kamba (1974), p. 501; Rosett (1992), pp. 683–94.
- 30.
In the context of the laws to govern purely private relationships, such as contract law, it is the former approach to harmonization which is commonly preferred. Instead of adopting a particular country’s law as a model law, the efforts have been directed toward finding a common solution taking into account common elements of different legal systems. It must also be said that harmonization or unification may have a quite different meaning in other contexts, such as setting international standards for the protection of human rights, environment, intellectual property rights (IPRs), and promotion of international trade. Many of the multilateral trade agreements (MTAs), environmental agreements (MEAs), and human rights instruments signed by states are examples of harmonization of a kind different from harmonization of domestic contract laws. While in the case of the former, efforts at standardization of the domestic norms or standards are driven by the necessity of ensuring minimum standards, in the latter case, harmonization is seen as a driver to economic development.
- 31.
Kamba (1974), p. 501.
- 32.
Adopted on April 11, 1980; entered into force on January 1, 1988; 90 states parties. India is not a party. For the text, see 19 ILM 668-69 (1980), the text can also be accessed from the official website of the United Nations Commission on International Trade Law (UNCITRAL): www.uncitral.org. The text of the Convention together with explanatory note is available at: http://www.uncitral.org/pdf/english/texts/sales/cisg/V1056997-CISG-e-book.pdf [hereinafter referred to as the “CISG”]. Conventions linked to the CISG are: the (New York) Convention on the Limitation Period in the International Sale of Goods, adopted on June 14, 1974, entry into force August 1, 1988. The New York Convention sets out uniform rules on the period of time within which a party to an international sale contract must commence legal action against another party to the contract; and the Geneva Convention on the Agency in the International Sale of Goods, 1983. The texts are available at: http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1974Convention_limitation_period.html.
- 33.
- 34.
The position may be compared to the law of a supra national organization, like the European Union (EU). The EU Regulations as well as the decisions of the European Court of Justice (ECJ) take precedence over the laws of the member countries. The EU was created by the Treaty of Maastricht signed on February 7, 1992 by the members of the European Community (EC). But the position regarding an EU Directive seems to be different. Directives often give a certain degree of flexibility in implementing them resulting into harmonized law, rather than uniform law.
- 35.
Adopted on June 10, 1958, entered into force on June 7, 1959 (159 parties including India).
- 36.
Entry into force: November 1, 1992, 34 State Parties.
- 37.
Entry into force: March 1, 2013, 11 State Parties.
- 38.
Adopted on December 11, 2008. Not yet in force.
- 39.
- 40.
See UNIDROIT: History and overview. www.unidroit.org/about-unidroit/overview.
- 41.
It is worth noting that unification efforts through international conventions in general have fallen short of expectations. Only a limited number of conventions have been widely ratified by states, for example, the CISG which has 90 states parties, and the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, entered into force on June 7, 1959, which has 159 states parties including India. However, a significant number of conventions have not been ratified by sufficient number of states and some of these have not entered into force yet. The 1974 Convention on the Limitation Period in the International Sale of Goods, entered into force on August 1, 1988, has been ratified only by 23 states; the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (“Rotterdam Convention”), adopted on December 11, 2008, has not entered into force yet and has so far received only four ratifications; the 1978 UN Convention on the Carriage of Goods by Sea (“Hamburg Rules”), entered into force on November 1, 1992, has only 34 parties; the 2005 Convention on the Use of Electronic Communications in International Contracts, entered into force 1 March 2013, has been ratified only by 11 states; the 1988 UN Convention on International Bills of Exchange and International Promissory Notes, not yet in force; the 1995 UN Convention on Independent Guarantees and Stand-by Letters of Credit, entered into force on January 1, 2000 between eights states only.
- 42.
For the texts of the UNCITRAL’s model laws and uniform clauses, visit: www.uncitral.org.
- 43.
See David (1968), pp. 20–21.
- 44.
See Bridge (2007), p. 506.
- 45.
See generally Zaphiriou (1990), pp. 71–72.
- 46.
On April 12, 2017, the Central Goods and Services Tax Act, Integrated Goods and Services Tax Act, Union Territory Goods and Services Tax Act and Good and Services Tax (Compensation to States) Act were passed by the Parliament to implement a uniform indirect taxes regime in the country.
- 47.
Notably, many of the arguments against unification noted above do not apply to the regional unification of laws.
- 48.
- 49.
- 50.
The two instruments will be discussed in some detail in Chap. 4 (Sect. 4.6) dealing with the nature of a contract in general.
- 51.
OHADA was established by the 2008 Treaty on the Harmonization of Business Law in Africa (OHADA), at: https://www.ohada.org/index.php/en/au-droit-commercial-general-presentation-en/audcg-presentation-and-innovations.
- 52.
Adopted on December 15, 2010, entry into force May 15, 2011. Web address: www.ohada.org.
- 53.
Adopted on March 22, 2003, entry into force, January 1, 2004. Web address: www.ohada.org.
- 54.
Adopted on November 23, 2017, entry into force, March 15, 2018. Web address: www.ohada.org.
- 55.
See Nelson (2007), pp. 95–116.
- 56.
Foreign element means a contact with the law of a different country. See Collins (ed.) (2006), pp. 3–4.
- 57.
- 58.
Fawcett and Carruthers, id., p. 11.
- 59.
Report of the Secretary General, supra note 1.
- 60.
Nadelmann (1965), supra note 18, p. 450.
- 61.
Ibid.
- 62.
Report of the Secretary General, supra note 1.
- 63.
See Fawcett and Carruthers (2008), pp. 480–81. The Brussels Convention was implemented in UK law by the Civil Jurisdiction and Judgments Act, 1982.
- 64.
The Brussels Convention still applies to the territories of the Contracting States, such as the French overseas territories and Aruba in relation to the Netherlands. See Fawcett and Carruthers (2008), p. 342.
- 65.
The new Lugano Convention is binding on the EU member states and the European free Trade Association (EFTA) states. See Fawcett and Carruthers (2008), pp. 342–43.
- 66.
June 17, 2008. The Rome I Regulation was implemented in UK by the Law Applicable to Contractual Obligations (England and Wales and Northern Ireland) Regulations 2009.
- 67.
The Rome Convention was implemented by the Contracts (Applicable Law) Act 1990 largely replacing the common law rules on the subject. On the Rome Convention and the Rome I Regulation, see Chap. 15 infra.
- 68.
Directive 93/13/EEC on Unfair Terms in Consumer Contracts (1993) OJ L95/29.
- 69.
Directive 96/71/EC on the posting of workers in the framework of the provision of services (1997) O.J. L18/1. For a discussion of the impact of these special conflicts provisions on the normal choice of law rules provided for by the Rome Convention, see Knofel (1998), pp. 439–45.
- 70.
HCCH was given a permanent character following the Second World War.
- 71.
- 72.
Lipstein, ibid.
- 73.
For the text of the Draft Convention on the Law Applicable to International Sale of Goods, see 1(3) American Journal of Comparative Law 275–77 (1952).
- 74.
- 75.
The texts of the various uniform law instruments including The Hague principles adopted under the auspices of the HCCH can be accessed from the official website of the Conference: https://www.hcch.net/en/home.
- 76.
The 1986 Convention has now paled into insignificance in view of the success of the CISG laying down substantive law on the international sale of goods which can be applied uniformly in disregard to the rules enacted by the former.
- 77.
See Graveson (1968), pp. 4–12.
- 78.
Rosett (1992), p. 685.
- 79.
The reception of Roman and common law in different countries was not prompted by any general desire to unify different legal systems and was indeed for reasons essentially different from those that explain the rise of uniform laws over the course of a century. See Graveson (1968), p. 7. Regarding the lex mercatoria, it may be stated that it was essentially a kind of (informal) law which developed out of mercantile custom and was not a product of any formal process of law-making or conscious decision-making. Notably, the modern efforts toward harmonization, in contrast, represent concerted and organized endeavors which are founded on the drawing up of a variety of instruments of harmonization by a variety of actors—states, various international organizations, trade associations and scholars.
- 80.
Bergsten (2015). Thirty-five years of the United Nations Convention on Contracts for the International Sale of Goods: expectations and deliveries. In Thirty-five Years of Uniform Sales Law, supra note 1, p. 8.
- 81.
- 82.
Kamba, ibid.
- 83.
Geneva System applies to civil law countries while in common law jurisdictions it is the Anglo-American system that applies. As will be seen in Chap. 14, there now exists the UNCITRAL’s 1988 Convention on International Bills of Exchange and Promissory Notes which is intended to harmonize the bill of exchange rules of two systems.
- 84.
- 85.
The UNIDROIT was reestablished in 1940 following the demise of the League of Nations. For a more detailed account of the work of the UNIDROIT, visit the official website of the Organization: www.unidroit.org.
- 86.
UNIDROIT’s work is devoted to harmonizing substantive law. It touches private international law rules only incidentally, at www.unidroit.org/about-unidroit/overview.
- 87.
For a brief historical account of the attempts to unify international sales law, see Schwenzar and Hachem (2009), p. 459; Lando (2005), pp. 379–80; Jacobson (1954), p. 660; Reczei (1981), p. 522; Ndulo (1989), pp. 1–4; Honnold (1964), pp. 451–53; Honnold (1979), pp. 223–24, 223–30; Nadelmann (1965), p. 449.
- 88.
In fact, the Seventh Hague Conference on Private International Law (1951) and the (Seventh) Hague Conference on substantive law were held in the same year in The Hague. While the former took place in the month of October resulting in the 1951 Draft Convention (see Sect. 2.3), the latter (The Hague Conference on the unification of Sales Law) took place in November resulting in the draft of the substantive law aspects of international sale of goods which became basis for the adoption in 1964 of the twin international conventions establishing uniform rules for international sale of goods by the UNIDROIT.
- 89.
- 90.
For the text, see 13 American Journal of Comparative Law 453–56 (1964).
- 91.
For the text, see 13 American Journal of Comparative Law 470–74 (1964).
- 92.
In fact, the formal Conventions merely contain the procedural matters and the (uniform) substantive laws, namely the ULIS and ULF, collectively referred to as the “Uniform Laws” are contained in the annexes of the 1964 Conventions.
- 93.
- 94.
ULIS, Article 2. See Reczei (1981), p. 515.
- 95.
Reczei (1981), id, p. 514.
- 96.
Ibid.
- 97.
- 98.
- 99.
See Reczei (1981), p. 515.
- 100.
Ibid.
- 101.
This reservation was proposed by United Kingdom (UK) which ratified the Convention subject to the condition that the contracting parties would be bound by the ULIS only when they chose it as the applicable law. See Nadelmann (1965), p. 455.
- 102.
Nadelmann, id., p. 455.
- 103.
Of the nine states parties, seven were European states: Belgium, Federal Republic of Germany, Italy, Luxembourg, San Marino, The Netherlands, and UK.
- 104.
- 105.
Lando, id., p. 380.
- 106.
Bridge (2007), pp. 510–11.
- 107.
See Farnsworth (1972), p. 317.
- 108.
Ibid.
- 109.
See Martonyi (2015), p. 3. For more information, see A Guide to UNCITRAL: Basic facts about the United Nations Commission on International Trade Law (2013), Vienna, at: http://www.uncitral.org/uncitral/en/about/origin.html [hereinafter referred to as the Guide to UNCIRAL]. It may be noted that the UNCITRAL is one of the two core international legal bodies created by the United Nations for the purpose of codification. The other is the International Law Commission (ILC). The difference between the two organizations is that the mandate of UNCITRAL is the unification and harmonization of private or domestic law while the ILC is engaged in “the progressive development of international law and its codification” in pursuance of Article 13(a) of the UN Charter.
- 110.
Resolution 2205 (XXI), December 17, 1966, supra note 1, sect. II, para. 8.
- 111.
Other organizations tasked to the unification of private law such as The Hague Conference on Private International Law (HCCH), and the UNIDROIT are not created by the UN.
- 112.
Sono (1984), p. 8.
- 113.
A Guide to UNCITRAL, supra note 109.
- 114.
Ibid.
- 115.
Ibid.
- 116.
For example, UNCITRAL in 2003 adopted the Model Legislative Provisions on Privately Financed Infrastructure Projects to supplement its legislative guide on the same subject.
- 117.
Information available at: www.uncitral.org/uncitral/en/about/origin.html.
- 118.
See further Kozolchyk (1998). The UNIDROIT Principles as a model for the unification of the best contractual practices in the Americas, pp. 151–179.
- 119.
Pistor (2002), supra note 1, pp. 101–02. See also Model Clauses for the Use of the UNIDROIT Principles of International Commercial Contracts, UNIDROIT Principles Model Clause No. 1. 29 (a), International Institute for the Unification of Private Law (UNIDROIT), Rome (2013). The text can be accessed from: www.uniddroit.org. [Hereinafter referred to as the “Model Clauses].”.
- 120.
- 121.
Id., p. 550.
- 122.
Ibid. See also Symeonides (2013), p. 892.
- 123.
See Commentary to the Principles on Choice of Law in International Commercial Contracts, p. 24 at: www.hcch.net; Goode, supra note 1, p. 553; Symeonides (2013) ibid; Model Clauses, supra note 119.
- 124.
Preamble to the UNIDROIT Principles, Article 1.1. See also ‘Introduction’ to the UNIDROIT Principles of International Commercial Contracts 2016, International Institute for the Unification of Private Law (UNIDROIT), Rome, at: www.uniddroit.org.
- 125.
Bonell (1992), p. 622.
- 126.
See generally ibid; Model Clauses, supra note 119.
- 127.
See Michael Joachim Bonell (ed.), The UNIDROIT Principles in Practice: Case law and Bibliography on the UNIDROIT Principles of International Commercial Contracts, Second Edition (NY: Transnational Publishers, 2006), Preface to the Second Edition, xi.
- 128.
Foreword to (The Hague) Principles on Choice of Law, approved on 19 March, 2015. The text can be accessed from the official web site of the HCCH.
- 129.
See Symeonides (2013), p. 876.
- 130.
See Preamble to the (The Hague) Principles on Choice of Law, approved on 19 March, 2015. Text can be accessed from the official web site of the HCCH.
- 131.
Commentary to the Principles on Choice of Law in International Commercial Contracts (The Hague: HCCH, 2015), p. 24, at: www.hcch.net.
- 132.
Id., p. 27.
- 133.
Symeonides (2013), p. 876.
- 134.
Information is available at: www.icc.org.
- 135.
See Fahey (1921), p. 128.
- 136.
ICC’s Rules of Arbitration of, Article 1.
- 137.
Ibid. Article 1 provides that the International Court of Arbitration of the International Chamber of Commerce “is the arbitration body attached to the ICC.”.
- 138.
The ICA does not itself settle a dispute. It monitors the application of the arbitration rules of the ICC.
- 139.
For the text, see 36 International Legal Material 1604 (1997).
- 140.
Web address: http://fidic.org/.
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Srivastava, A. (2020). International Unification of Trade Laws. In: Modern Law of International Trade. International Law and the Global South. Springer, Singapore. https://doi.org/10.1007/978-981-15-5475-9_2
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