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Legal Aspects of International Trade & Enterprise: Sandline International Inc. v Papua New Guinea

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Added on  2023/06/04

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This presentation discusses the legal aspects of international trade and enterprise through the case of Sandline International Inc. v Papua New Guinea. The case highlights that a contract is governed by international laws which is formed between the state and a private company. While forming the contract, the parties should clearly define the law which governs their agreement. Since the state can change its internal laws, it cannot deny the performance of a contract based on contravention of domestic laws.

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Legal Aspects of
International
Trade & Enterprise
SANDLINE INTERNATIONAL INC. V PAPUA NEW
GUINEA

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Background of the Case
In Sandline International Inc. v Papua New
Guinea case, the issue regarding payment of an
outstanding amount under a contract was
raised between parties.
The dispute arises between Sandline and PNG
after PNG refused to pay the outstanding sum
of money to Sandline as per the contract
(August, Mayer and Bixby, 2012).
Sandline demanded the money numerous times
after which a suit was brought before an
arbitration tribunal.
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Background of the Case
PNG argued that the contract is unlawful since
it was formed after violating the internal laws of
the country.
The contract contravened with the Constitution
and domestic laws of the country and the
provisions of international laws did not apply in
this case.
The judgement was given in favour of Sandline
by the arbitral tribunal based on the
international laws.
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Brief facts of the case
A contract was formed between Sandline and PNG for
giving military support to PNG.
As per the contract, US$18 million was paid at the
time of the contract and the rest US$18 million were
to be paid once the members of Sandline are
deployed.
Due to a mutiny, the government was overthrown
based on the information given by the chief of
Sandline.
The government of PNG denied repaying US$18
million by providing that the contract is unlawful since
it contravened with section 200 of the constitution
and other internal laws (Jell-Bahlsen and Jell, 2012).

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Legal Issues presented
PNG argued that the contract is not enforceable
since it violated the constitution and other
domestic laws of the country.
PNG argued that it is not liable to pay the
outstanding money since the contract was
formed by the party who did not have the
authority to form such contract.
Sandline argued that PNG is liable under
international law; therefore, it is liable to pay
the outstanding money.
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Arguments of Parties
PNG argued that the contract was formed
without a valid authority, thus, it cannot bind
the country into its terms.
The principle of English law apply on the
arbitration tribunal and the contract is governed
by the same as well.
The provisions of international laws did not
apply in this case.
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Arguments of Parties
The contract violated section 200 of the
Constitution of the country and many other
domestic laws.
Prime minister did not had the authority to form
contractual relationship on behalf of the
country.
Sandline cannot enforce the payment of the
contract since it is unlawful (Matasororo, 2016).

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Arguments of Parties
Sandline argued that PNG is liable under
international law since the half payment of the
contract was refused.
The terms of the contract did not violate the
Constitution and domestic laws of the country.
The international law apply in this case under
which PNG is liable to make the payment of
US$18 million.
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Decision
The arbitral tribunal rejected the claims of PNG
and provided that it has to pay a sum of US$18
million to Sandline.
A contract formed between a private company
and a state is governed by international law.
The international law apply on the arbitral
tribunal rather than English law (May and Haley,
2014).
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Decision
The country can change its internal laws, thus,
the contract formed with a private company are
governed by the international laws.
PNG agreed that it has partially completed the
performance of the contract and partial
performance is denied due to frustration.
Since the presence of a contract is admitted by
PNG, the country cannot refuse its performance,
thus, PNG is liable to pay US$18 million with
interest.

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Importance of the case
This case highlights that a contract is governed
by international laws which is formed between
the state and a private company.
While forming the contract, the parties should
clearly define the law which governs their
agreement.
Since the state can change its internal laws, it
cannot deny the performance of a contract
based on contravention of domestic laws.
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References
Jell-Bahlsen, S. and Jell, G. (2012) The trans-national
gold curse of Papua New Guinea. Dialectical
Anthropology, 36(3-4), pp.317-341.
Matasororo, E. (2016) Standoff in Papua New
Guinea: Students take issue over corruption. Pacific
Journalism Review: Te Koakoa, 22(2), pp.13-19.
May, R.J. and Haley, N. (2014) The military in Papua
New Guinea: A ‘culture of instability’but no
coup. Security Challenges, 10(2), pp.53-70.
August, R.A., Mayer, D. and Bixby, M. (2012)
International Business Law. 6th ed. London: Pearson.
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