International Commercial Law

This article discusses the history, role, strengths and weaknesses of the World Trade Organization (WTO) in international commercial law. It also explores the advantages and disadvantages of arbitration and the costs of resolving an international commercial dispute by arbitration in Australia. The WTO is an intergovernmental organization that administers trade all over the world. It provides a framework for the negotiation of trade agreements and dispute resolution procedures. The advantages of arbitration include saving time and cost, and the ability to choose a neutral and competent decision maker. However, the major disadvantage is the absence of appeal in international arbitrations. The costs of resolving an international commercial dispute by arbitration in Australia are governed by general regulations which govern the exercise of power in this regard.

Running head: International Commercial Law
International Commercial Law

International Commercial Law 1
Contents
Answer to Q1..............................................................................................................................................2
History and Role of the World Trade Organization (WTO)....................................................................2
Strengths and Weaknesses of WTO.........................................................................................................4
Answer to Q2..............................................................................................................................................7
Advantages and disadvantages of arbitration...........................................................................................7
Costs of resolving an international commercial dispute by arbitration in Australia.................................9
Bibliography...............................................................................................................................................13

International Commercial Law 2
Answer to Q1.
History and Role of the World Trade Organization (WTO)
World Trade Organization (WTO) is an intergovernmental organization which administers the
trade all over the world. It commenced its operations on 1st January 1995 as per the Marrakesh
Agreement. The agreement was signed by 123 nations as of 15th April 1994. It had replaced the
General Agreement on Tariffs and Trade (GATT) which had commenced in 1948. GATT was a
component of Bretton Woods comprising of World Bank and International Monetary Fund1.
After a series of trade negotiations, the rounds of GATT began by the end of World War II and it
was aimed to reduce the tariffs for facilitating the international trade. The rationale of GATT was
established upon the clause of Most Favored Nations (MFN) and it gave the specific countries an
opportunity of trading rights. So it aimed at assisting all the countries to obtain the status of MFN
so that a single country cannot hold the trading advantage over others2.
WTO deals with the administration of trade amongst the participating countries through
providing a framework for the negotiation of trade agreements and dispute resolution procedure.
These procedures aim at enforcing the adherence of the participants to the agreements of WTO
and they are authenticated by the representatives of the member governments. The WTO focuses
on the issues which are derived from the last trade negotiations, particularly from the Uruguay
Round3.
1 Philip G. Altbach ,’Higher Education and the WTO: Globalization Run Amok’(2015)23 International Higher
Education 2
2Brooks E. Allen and Tommaso Soave ,’Jurisdictional Overlap in WTO Dispute Settlement and Investment
Arbitration’(2014)30 Arbitration International 10.
3 Rorden Wilkinson ,The WTO: Crisis and the governance of global trade(NY: Routledge,2013)46

International Commercial Law 3
The Uruguay Round has also laid the basis for administration of trade in services. The General
Agreement on Trade in Services (GATS) is the framework for directing the multidimensional
trade in services. Intellectual property rights were addressed for the formulation of regulations
regarding the safeguarding of trade and investment of ideas, patents, concepts and so forth.
The purpose of WTO is to make sure that global trade is commenced in a smooth and predictable
manner. The WTO establishes the rules for international trade amongst its member nations
offering them a mechanism for global commerce. It is aimed to create economic stability and
peace in the world with the help of multilateral system which is based on consenting member
states4.
The member states have approved the regulations of WTO in their respective countries as well. It
pertains that the rules of WTO have become a part of the legal system of the countries. SO, these
regulations also apply to the local companies which operate their commercial transactions at the
global level. For example, if a country has decided to invest in a foreign country by setting up its
office in that particular country then the regulations of WTO which are imbibed in the local laws
of that country will regulate how this can be executed.
So, when a country becomes a member of WTO, it local laws cannot be in contradiction to the
rules of WTO as it governs almost 97% of the international trade. The Present Director General
of WTO is Roberto Azevêdo from Brazil. In WTO, the decisions are made through consensus
with the ruling of the majority vote which is in rare cases. The Ministerial Committee which is
based in Geneva, Switzerland conducts the meeting once in every two years. The other councils
4Loren Brandt, Johannes Van Biesebroeck, Luhang Wang and Yifan Zhang ,WTO Accession and Performance of
Chinese Manufacturing Firms(2015) < http://groups.chass.utoronto.ca/brandt/wp-content/uploads/WTO9-
complete.pdf>

International Commercial Law 4
are goods council, intellectual property rights council, service council which report to the general
council.
In case of occurrence of any trade disputes, WTO is the resolving authority. If a country creates
barriers of trade in the form of customs duty against a particular country, then WTO might issue
trade sanctions opposing the violating country. It shall also work for a resolution of the conflicts
through negotiation. So, it has an important role to play in the international trade, international
political, legal issues and economics which arise in the international business due to
globalization.
It has emerged as one of the powerful institutions for reducing the barriers related to trade
amongst the member countries and opening new markets. WTO is the only administering body
operating internationally which has replaced the General Agreements on Tariffs and Trade
(GATT) which was formulated in 1948. The goal of WTO is to provide a platform for its
member countries by assisting them in services such as exports, imports and transacting their
business in a peaceful way5.
Strengths and Weaknesses of WTO
The advantages provided to the member countries of WTO are that they are able to lower their
trade relating barriers amongst themselves. In opposition to this, the non-member countries
cannot negotiate the trade relating agreements in an independent manner with their partners. So,
the role of WTO can be summarized as that it helps in facilitating the administration,
implementation and smooth operation of trade-related agreements amongst the member
countries.
5 Yi Lu and Linhui Yu,’ Trade Liberalization and Markup Dispersion: Evidence from China's WTO Accession’(2015)7
American Economic Journal: Applied Economics 222.

International Commercial Law 5
It helps in providing a forum regarding the negotiations of trade amongst the member countries.
It even helps in settlement of disputes amongst the member countries with the help of applicable
rules and regulations. It cooperates with the International Monetary Fund and World Bank for
unifying all the member countries regarding the formulation of international economic policies.
The strengths of WTO are that the disputes are resolved in a constructive manner. As the trade
expands in volume, there are greater chances of emergence of disputes. It helps to resolve these
disputes in a constructive and peaceful manner. It also helps in promoting peace amongst the
nations. It helps in smooth flow of trade and provides the countries with a fair and constructive
outlet for dealing with the disputes over the trade issues. It helps in creating confidence and
cooperation amongst its member countries6.
WTO helps in balancing the power of all its member countries by giving a voice to smaller
countries and freeing the major countries from the complication procedures for negotiating the
trade agreements with each of the countries. It also helps in giving more choice to the consumers
and a wide range of products to choose from.The trade barriers are lessened with the increase in
exports and imports thereby helping the country to earn foreign exchange and income. It also
helps in stimulating the economic growth of a country with the help of careful policy-making
and giving the power of free trade to its member nations.
Amongst the disadvantages, the WTO is undemocratic. Its policies have an impact on all the
aspects of society but it is not democratic and a transparent organization. The rules of WTO are
formulated by the institutions which have an inside access to the negotiations. Secondly, the
6 Geert van Calster and Denise Prévost ,Research Handbook on Environment, Health and the WTO(Edward Elgar
Publishing,2013)100.

International Commercial Law 6
countries with more power dominate the international trade by favoring their personal interests
thereby fueling anger and resentment that makes the weaker countries more unsafe7.
The labor and human rights are trampled. It puts the rights of the corporations to profit over the
labor and human rights. It encourages the workers to fight against each other rather than
promoting the international labor standards. Another disadvantage of WTO is that it seeks to
privatize the essential public services such as education and health which means selling off these
assets to the private corporations which run for profit rather than for the benefit of the public. As
a result, it leads to the sufferings of the people who are unable to pay for these services8.
The defense of WTO towards Trade Related Intellectual Property Rights that is associated with
copyrights, patents and trademarks have come at the expense of lives and health of humans.
Many new conditions have been agreed by WTO which would make more difficult for the
developing countries to produce the generic drugs or import them if they are not able to produce
them.
7 Rodney D. Ludema and Anna Maria Mayda ,’Do terms-of-trade effects matter for trade agreements? Theory and
evidence from WTO Countries*’ (2013) 128 The Quarterly Journal of Economics 1837.
8 Sarah Joseph, Blame It On the WTO: A Human Rights Critique(Oxford University Press,2013)100

International Commercial Law 7
Answer to Q2.
Advantages and disadvantages of arbitration
Most of the specifications of international arbitration are the outcome of its key characteristics
namely autonomous nature of the parties. They are free to choose their place of arbitration, the
procedure for administering the arbitration, language, kind of evidence the parties wish to permit
and the number and identity of the arbitrators who would consult the tribunal. Arbitration is the
alternative form of dispute resolution (ADR) which is intended to eliminate high cost and
unexpected results which could lead to a lawsuit. It is a private form of resolution of disputes.
Unlike a court case, it is not a matter of public record. Maintaining confidentiality is a crucial
feature to either or both of the parties which are involved in the dispute. It also permits the
parties to formulate their own rules for the settlement of the dispute. It comprises of what
evidence can be presented, experts to be consulted and the concepts which will form the basis of
the final decision and agreement. Arbitration is a more formal procedure for dispute resolution
and it follows the rule which is more formal.

International Commercial Law 8
The arbitrators are third parties who are also legally trained. They have some expertise in the
area which is subjected to dispute. The arbitrator is authorized to make decisions and
determinations which will be binding on the parties. His job is to listen to both the parties and
make decisions on the basis of that which would be binding on both of them. It eliminates the
risk that either of the parties won’t agree thereby ending up in a legal procedure as his decision is
legally binding on both of them9.
The major advantage is with the help of adopting the arbitration procedure, they can save cost
and time as well and can have a greater degree of probability regarding the decision making
process. The parties are also free to choose a neutral and competent decision maker. The arbitral
tribunals are comprised of two or more arbitrators. Either of the parties is free to choose one
arbitrator. They can then mutually agree on selecting the chairman.
They can either permit the arbitrators selected by them to choose the arbitrator. In case of failure
of those attempts, the chairman can be chosen by the authority who is appointing them.
However, the major disadvantage is either of the parties may be not satisfied with the decision.
There is an absence of appeal in international arbitrations. There is a limited scope of review for
the arbitral awards thereby proving to be frustrating for the parties for not able to have another
review of the tribunal10.
Sometimes there is a need for intervention of the court as most of the arbitral tribunals lack
imperium or intimidating power. As a result, their procedural power is less efficient than the
9Leon E. Trakman,’ Investor-State Arbitration: Evaluating Australia’s Evolving Position’(2014)15 The Journal of
World Investment & Trade 153.
10Alan Redfern and Martin Hunter , Redfern and Hunter: Law and Practice of International Commercial
Arbitration( Oxford University Press, 2015)

International Commercial Law 9
courts and it may be imposed through a special court order. It is recognized that a party can
apply to the court for protective measures even though a tribunal has been constituted11.
Depending upon the regulations of the place of arbitration, the courts can be requested for the
facilitation of the production of evidence comprising of the ordering third parties over whom the
tribunal does not have any authority for production and verification of the documents. Such
inventions of the court can complicate the arbitral process hence becoming the biggest
disadvantage of the international arbitration.
Costs of resolving an international commercial dispute by arbitration in Australia
The courts in Australia have discretion over the costs of all the proceedings and they have the
right to charge the amount which is justified as per the circumstances. There are general
regulations which govern the exercise of power in this regard. Usually, a party is entitled to
costs regarding any issue on which it has been succeeded and evaluated on an ordinary basis.
The burden is on the party which has failed, to show the special circumstances which are
sufficient for the court to depart from the regulations which impose costs following the specific
event.
11 Cathleen Cimino-Isaacs and Jeffrey J. Schott, Trans-Pacific Partnership: An Assessment (Peterson Institute for
International Economics,2016) 100.

International Commercial Law 10
There are two main categories of cost in this regard:
1. Those arisen through the order of the court, either ordinarily or on an indemnity basis.
The indemnity costs are those awarded against the third party in situations when it has been
engaged in irrational behavior relating to the conduct of the proceeding.
2. Those which have been arisen due to the retainer with the client and are administered by
contract12.
The action proceedings of the class are unique in a number of ways. The successful respondent
has the right to recover the costs from the lead applicant because the members of the group have
the immunity from cost orders awarded against them. The immunity is supported by policy
considerations which also includes the affordable access to justice. However, it also means that
the respondents would be forced to defend their actions at considerable costs with their
incapability to recover those in case they are successful13.
It would impact many aspects of proceedings including negotiating the settlements. It would shift
the power balance in favor of applicants. The offer of settlement may authorize the party making
the offer for obtaining the costs on the basis of indemnity. It can be a certain factor if not the
only issue for determining the decision of the court on the issue14.
12 Global Legal group , Litigation & Dispute Resolution 2018(2018)< https://www.globallegalinsights.com/practice-
areas/litigation-and-dispute-resolution-laws-and-regulations/australia#chaptercontent4>
13 Christina L. Davis ,Why Adjudicate?: Enforcing Trade Rules in the WTO(Princeton University Press,2012) 100
14Jürgen Kurtz,’ Australia’s Rejection of Investor–State Arbitration: Causation, Omission and Implication’(2012)27
ICSID Review - Foreign Investment Law Journal 65.

International Commercial Law 11
In this regard, there are two types of offers of settlement viz. informal offers referred to as
Calderbank Offers and those which are made according to the rules of the court that are also
called offers of compromise. A Calderbank Letter is referred to as an informal order of
compromise which is made on the basis of without prejudice amongst the parties and according
to the principles which are formulated in Calderbank v Calderbank15 and its subsequent
authorities.
Though such letters are considered to be without prejudice, they may be regarded by the courts
in respect of costs and the parties who have rejected the offer of settlement can be ordered for the
payment of the legal costs of the successful party.They can be ordered regarding the payment of
the legal costs on an ordinary basis up to the time the offer was made and on an indemnity basis
with effect from the date on which the Calder bank offer was made. However, the provisions
concerning the formal offers of compromise are to be found in the rules of the court.
Although it is up to the courts to decide whether to award costs or not. It has been provided in
the rules that the courts upon their discretion can reject a more favorable offer which has been
complied with the regulations which will authorize the offeror to a higher proportion of costs
from the date on which the offer was made16.
The security for orders of cost is sought when the defendant accuses that the plaintiff shall not
hold funds to reimburse the order of the cost. The court is requested by the defendant to order the
plaintiff to provide a security for safeguarding the defendant from this to happen. The forms of
security comprises of money which is to be paid in the court. The payment made to a bank
15 (1975) WLR 586
16 Valentina Valdi and Lukasz Gruszczynski ,’Standards of Review in International Investment Law and Arbitration:
Multilevel Governance and the Commonweal’(2013)16 Journal of International Economic Law 613.

International Commercial Law 12
account which is under the control of a third party who has mentioned the circumstances in
which the money would be released. A bank guarantee in favor of the court in the control of the
court and lastly a deed of guarantee relating to which another entity agrees to guarantee the
payment of money so that the court orders can be satisfied17.
17Asif H. Qureshi, Interpreting WTO Agreements(Cambridge University Press,2015)100.

International Commercial Law 13
Bibliography
Altbach Philip G.,’Higher Education and the WTO: Globalization Run Amok’(2015)23
International Higher Education 2.
Allen Brooks E. and Soave Tommaso ,’Jurisdictional Overlap in WTO Dispute Settlement and
Investment Arbitration’(2014)30 Arbitration International 10.
Wilkinson Rorden,The WTO: Crisis and the governance of global trade(NY: Routledge,2013)46
Loren Brandt, Johannes Van Biesebroeck, Luhang Wang and Yifan Zhang ,WTO Accession and
Performance of Chinese Manufacturing Firms(2015) <
http://groups.chass.utoronto.ca/brandt/wp-content/uploads/WTO9-complete.pdf>
Schnepf Randy, Status of the WTO Brazil-U.S. Cotton Case (2014)
<http://www.ipmall.info/sites/default/files/hosted_resources/crs/R43336_140211.pdf>
Lu Yi and Yu Linhui,’ Trade Liberalization and Markup Dispersion: Evidence from China's
WTO Accession’(2015)7 American Economic Journal: Applied Economics 222.
Calster Geert van and Prévost Denise ,Research Handbook on Environment, Health and the
WTO(Edward Elgar Publishing,2013)100.
Hoekman Bernard, Supply Chains, Mega-Regionals and Multilateralism: A Road Map for the
WTO (2014) < https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2406871##>
Joseph Sarah, Blame It On the WTO: A Human Rights Critique(Oxford University
Press,2013)100

International Commercial Law 14
Ludema Rodney D. and Mayda Anna Maria ,’Do terms-of-trade effects matter for trade
agreements? Theory and evidence from WTO Countries*’ (2013) 128 The Quarterly Journal of
Economics 1837.
Trakman Leon E.,’ Investor-State Arbitration: Evaluating Australia’s Evolving
Position’(2014)15 The Journal of World Investment & Trade 153.
Redfern Alan and Hunter Martin , Redfern and Hunter: Law and Practice of International
Commercial Arbitration( Oxford University Press, 2015)
Cimino-Isaacs Cathleen and Schott Jeffrey J., Trans-Pacific Partnership: An Assessment
(Peterson Institute for International Economics,2016) 100.
Dutt Pushan , Mihov Llian and Zandt Timothy Van ,’The effect of WTO on the extensive and
the intensive margins of trade’(2013)91 Journal of International Economics 205.
Global Legal group , Litigation & Dispute Resolution 2018(2018)<
https://www.globallegalinsights.com/practice-areas/litigation-and-dispute-resolution-laws-and-
regulations/australia#chaptercontent4>
Davis Christina L. ,Why Adjudicate?: Enforcing Trade Rules in the WTO(Princeton University
Press,2012) 100
Kurtz Jürgen,’ Australia’s Rejection of Investor–State Arbitration: Causation, Omission and
Implication’(2012)27 ICSID Review - Foreign Investment Law Journal 65.
Calderbank v Calderbank(1975) WLR 586

International Commercial Law 15
Valdi Valentina and Gruszczynski Lukasz ,’Standards of Review in International Investment
Law and Arbitration: Multilevel Governance and the Commonweal’(2013)16 Journal of
International Economic Law 613.
Qureshi Asif H., Interpreting WTO Agreements(Cambridge University Press,2015)100.