International Contracts and Law: Transnational Commercial Law Report

This report delves into the intricacies of transnational commercial law, specifically addressing the selection of applicable law and forum in international contracts. It examines the significance of choice of law and forum selection clauses, as well as the role of arbitration in resolving disputes. The report explores the United Nations Convention on Contracts for the International Sale of Goods (CISG), the Hague Principles on choice of law, and various international conventions and national laws that govern international commercial transactions. It highlights the importance of these legal frameworks in providing clarity and certainty for parties involved in cross-border business activities, and the flexibility afforded to parties in selecting their preferred legal systems and dispute resolution mechanisms. The report also discusses the limitations to party autonomy and the application of various treaties and conventions in this context.

Transnational
Commercial Law

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Transnational commercial law means the rules, regulation and legislation that governs
the business transaction. The laws are an essential aspect of business transactions and the
provisions different when the parties belong to different state or nation. In the international
contract this is of important aspect to choose between relative provision from the laws of the
different nation to incorporate under the contractual agreement. In the present report a detailed
discussion related with different laws and their applicability under contract regarding the
relationships as well the dispute resolution are discussed.
TASK 1
Topic: “Parties to an international contract select both the law applicable to their
relationship and the forum that could exclusively adjudicate over any dispute between them
through a choice of forum and arbitration clauses.”
International contracts:
International business transaction can be described as the international contracts which
contains the objectives and commitments of each party to the contract. The written agreement is
defines the performance obligation of the each of the contracting parties must carry out. In the
instances where the parties are from different countries they enter into a contract which are
governed by international contract law unless all parties agree to abide by the laws of one of the
countries (Maniruzzaman, 2017). International contract law is a branch of private international
law. For the sales contactor at international level the provisions are governed by the
international sale contract that is United Nations Convention on contract for the International
Sales of Goods (CIGS) and the principles on choice of law in international commercial contracts
(Hague principle).
The definition in the article 1(2) of Hague principle defines that a contract is said to be
internation when such contract have significant connections with more than one state which
involves a choice between the laws of different states and affects the interests of international
trade.
Article 1(1), of Hague principle stats that a contract is said to be commercial where each
party is acting in the exercise of its trade or profession. As per CIGS the scope of such contract
can be limited to the commercial matters which excludes consumers, family and households
1

contracts. This contracts are purely entered for carrying out the business transaction where
parties belong to different nations and laws of distinct nations are applicable.
When entering or considering an international contract two of the key important aspect which
must be considered are related;
 where the disputes arsing out of contractual relation will be heard; and
 what laws or rules governs the contract.
There are certain exceptions and limitation when the relevant rules from the different
stats allowing the parties to contract autonomy, giving them a right to select forum and
governing from legal frameworks of each parties/s nation laws for their contract (The Choice of
Law Contract, 2018). Generally, parties in the international contract have a practice of including
a choice of forum clause and a choice of law clause in the contract. For instances where parties
fails to select a specific law and its applicability the court which accept jurisdiction of the dispute
will apply the relevant conflicts rules of the private international law for determining which law
is applicable to the contract this also includes the international instruments which might be
applicable to the contract by default. But the facts is not hidden that the rules of private
international law are notoriously complex and this practice also keeps its focus on the
identification of the applicable law which has been chosen by the parties or applicability of the
international instrument.
For the parties entering into an internation commercial contract this is a common
practice to include the arbitration clause in the contract as a method for resolving the dispute.
For the internation business transaction this is popular practice as in the courts procedure of
litigation different in evert state and nation, unlike the court procedures the arbitration process is
almost similar under every legal frameworks providing the parties to contract unanimous and
similar way to solve the dispute with same rules.
The arbitral tribunals are governed by the arbitration law at arbitration seat. Most of the
international commercial arbitration laws and provisions are derived from the UNCITRAL
Model law of the international Commercial Arbitration (Schwartze, 2015). This also allows the
parties to contract to choose the rule of law which they want to apply in the contract.
The Hague Principle on choice of law in the international commercial contracts:
For the parties entering into contract and belongs to more than one state or nation the
major question to be answer while forming the contract clause is related with the decision
2

regarding the legal rules that will govern the transaction necessarily arises. This is important as
the same will give a clarity to the court or arbitral tribunal who will revolve a dispute between
the parties. Moreover, this of key necessity for the parties as well as this only will guide them in
planning the transaction and performing the contract, to determined the set of rules which will
govern their obligations.
Determination of the applicability of the law to a law with no clear and expressed terms
definitely lead to creation of uncertainties because of the difference between the solution from
state to state.
For the same Hague principle set out the rule of laws and forum that guides the provision
of the internation commercial contracts (International Commercial Contracts, 2018). This
defines the choice of law and it can be seen as both illustrating the comprehensiveness of the law
regime giving effect to the autonomy of the parties and as a guidance for the best practice in
establishing and refining the regime.
The purpose of this principle can be served as reinforcement of the independence of the
parties to contract of ensuring that the law which has been selected by the parties have a wide
scope of application. The article 11 provides the limitation to the autonomy of the parties which
results in overriding the mandatory rules and public policy. The purpose serves by the limitation
is to ensure that in certainty situation the choice of law of the parties do not affect the exclusion
of rules and policies which are of fundamental importance to states.
The Hague principle provide rules for those situations where the parties have made a
choice of law by agreement. This ensure the independence of the parties with providing
comprehensive body of principles for determining the applicable laws to the internation
commerce transaction.
The inclusion of best practices as per article 2(2) in international transaction is
encouraged by this principle as it provide assistance and clarification for those states that accept
the autonomy of the parties. This includes the provision which adders the ability of parties to
chose the different laws that are applied to different parts of the contract. Article 7 gives a
separate treatment of the
Decision regarding the Applicability of laws and rules:
The governing law is also referred as choice of law which is fundamental component of
international component. This means that in the international transactions the parties must
3

mutually agree upon the law of a jurisdiction which will be applicable to contract and govern the
terms of contract in the event of challenges and disputes.
Convention:
In certain cases the contracting parties refer to treaty convention as provided in their
contract. Under the UNCITRAL there three different treaties that provides the applicable rules
that governs certain specific contracts.
1. CIGS: The United Nations convention on contracts for international sale of good is
the most popular and widely used treaty which gives substantive contract rules. The 84 stats
around the CIGS contribute more than 75% of the international trade. The provision of this
treaty provides the scope of the application, formation of contract, obligation of the parties to
contract, remedies, passing of the risks, damages, dispute resolution etc.
This is treaty convection is applicable to commercial contract only fro the cross border
sales. As per the Article 6, contractual parties have an option to opt out of the CISG or any of
its provisions but the same is applicable differer situations (Ginsburg and Sirinelli, 2015). This
is applicable to those stats which are member states of CIGS where the rules of private
internation law at the point of application are applied. In the contractual parties have opted for
the option of arbitration for settlement of the dispute the CIGS rules are also applicable. There
is always a slight different in the process and rules of arbitration process of different state and
with applicability of CIGS the arbitrations also apply CIGS where the parties have selected it on
their own without any reference to any state law.
For successful interpretation of the CIGS the parties need to adopt and use it. The courts
and tribunals are required to interpret the provisions and rules of CIGS in uniformity and
thorough the lens of domestic law. This is necessary as with unharmonised regime it will get
expensive for the parties and the jurisdiction will also get confused on how to interpret the
conversion.
2. Limitation convention: The Convention on the Limitation Period in the International
Sale of Goods is another treaty convention which drives the transfection of internation trade
contracts. This is also applicable to commercial sales contract only but it deals with the certain
limitation or prescriptions which defines certain limits or the disputes in the international sales
contract. Till data there are 30 member states to it.
4

3. Electronic communication convention: The United Nations Convention on the Use
of Electronic Communications in International Contracts is the most recent treaty convention.
This convention removes the barriers and obstacles present in the use of electronic
communication in international contracting (Cuniberti, 2016)(Hepburn, 2015). This creates
certainty to the contracting parties about the contact terms and other communication is
exchanged electronically are valid and enforceable as they are applicable in the traditional paper
bases contracts.
National laws: However the parties have a choice to apply national laws to the
international commercial contracts. The party which have a greater bargaining power may insist
to follow the laws of its nation other parties may chose to opt for a legal structure of their nation
where they operate the business transaction.
Other: Another laws or treaties which can be referred to decide upon the rules of law in
international commercial contract can be done with the help of incoterms, UCP 600, Lex
Mercatoris etc. The incoterms are developed by the international chamber of commerce (ICC)
defining specific set of rules that governs the trade terms ad describe the obligation of the
purchaser and sellers. UCP 600 is also a product of ICC is a standard soft law instrument that
regulates the letter credit, common method of payment in the sales transfection at international
level. Lex mercatoria is a synthesise of generally held and accepted commercial principles that
are applied to the contracts among major trading nations (Watt, 2016). This also includes certain
controversies relating to the matter of this principle but the same is applied by the arbitral
tribunal when dispute is referred for arbitration.
With this it can be stated that the parties to internation commercial transaction are open
with the option to chose from any of their respective national laws or choose any of the above
mentioned international treaty and convention to govern their business contract. This is clear
form the above explanation of determine international convention that it is easy to opt fro
private internation laws as convention and treat as for the member nation it is very easy to
conduct the business operation under the provisions of the treat (The Applicable Law to
International Commercial Contracts, 2018). However, it is determined that the applicability of
hies tarty is restricted to commercial and sales contract only and for this the arbitration clause
does not hold any validity. The tribunal refers the CGIS rules when it is comes to resolve the
dispute under the CIGS contract.
5

Many texts and standards present at international levels presents with the variety, to be
chosen by traders to govern their contracts. These rules are termed as “rules of law,” “soft law”
or “trade usages,” but they are connected by their use in international contracting and potential
direct application by arbitral tribunals.
Even otherwise binding texts, such as the CISG, may fall into this category when chosen
by parties to apply to their contracts without reference to a specific State law. Like arbitral
tribunal, State courts may recognize and apply these rules, but, depending on the relevant
domestic law, they may do so simply as a set of rules that are considered to be part of the
contract and not overriding any mandatory law (Buxbaum, 2018)(Symeonides, 2017). The
Hague Principles when followed legitimize the rules or law and forms along with the dispute
resolution techniques entered in the contract.
International commercial contracts in the context of increasing globalization of national
markets have emerged a great question related with the decision regarding the laws and their
applicability when the parties to contract belong to different stare. In the context many different
convention, international laws and treaties have been developed with time proving guidelines to
parties with choice of law. The Hague prince furthered the autonomy of the parties where that
can decide upon application of refreshments laws for different clauses in the contrast such as
CIGS, limitation convention, electronic communication convection, incoterms, UCP 600 and
Lex Mercatoris. However, the parties to internationalist contract always have arbitration clauses
to refer the dispute as laws and provision of arbitral tribunal are more or less in every states
providing the parties a resolution to the dispute with unanimity of the legal statues. Hence, for
the international commercial contracts it is clear that parties have to selected laws with utter care
but are provided with significant laws and guideline to decided upon the rule of law and for the
adjudication for the dispute almost all of international contract have arbitration clause to avoid
ambiguity.
CONCLUSION
From the above report it can be concluded that in the internation commercial contract
two of the important factor before peening down the contract is deciding the rule of laws and the
technique to be used for resolving any dispute. Before deciding the laws and form for the
contract factors which have been considered by the parties are the convections, CISG rules, the
scope of the application on of rule of each stats as well as international laws. Moreover, it has
6

been articulated from the above evolutional is that the moral contract practice are often referred
while preparing the internation business transactions but are too expensive. The dispute reforms
are decided as per the rule of law and forum to be referred in the contract. Furthermore, it has
been interpreted that almost all the international trade contract have an arbitration clause in their
agreement to refer any dispute to arbitration, and this is because of the fact the all the national
have similar rules and provision for arbitration providing the parties a solution to other business
issue under a legal framework unanimous for both the nations.
7

REFERENCES
Books and Journals
Buxbaum, H. L., 2018. The Interpretation and Effect of Permissive Forum Selection Clauses
Under US Law. The American Journal of Comparative Law. 66(suppl_1), pp.127-152.
Cuniberti, G., 2016. The Laws of Asian International Business Transactions. Pac. Rim L. & Pol'y
J. 25. p.35.
Ginsburg, J. C. and Sirinelli, P., 2015. Private International Law Aspects of Authors' Contracts:
The Dutch and French Examples. Colum. JL & Arts. 39. p.171.
Hepburn, J., 2015. The UNIDROIT Principles of International Commercial Contracts and
Investment Treaty Arbitration: A Limited Relationship. International & Comparative Law
Quarterly. 64(4). pp.905-933.
Maniruzzaman, A. F. M., 2017. International development law as applicable law to economic
development agreements: a prognostic view. In Globalization and International
Investment. (pp. 71-126).
Schwartze, A., 2015. New Trends in Parties' Options to Select the Applicable Law-The Hague
Principles of Choice of Law in International Contracts in a Comparative Perspective. U.
St. Thomas LJ. 12. p.87. Routledge.
Symeonides, S. C., 2017. What Law Governs Forum Selection Clauses. La. L. Rev. 78. p.1119.
Watt, H. M., 2016. Theorizing transnational authority: a private international law perspective.
In Authority in Transnational Legal Theory. Edward Elgar Publishing.
Online
The Applicable Law to International Commercial Contracts. 2018. [Online] Available Through:
<http://www.universal-publishers.com/book.php?method=ISBN&book=1599423030>
International Commercial Contracts. 2018. [Online] Available Through:
<http://www.nyulawglobal.org/globalex/International_commercial_contracts.html>
The Choice of Law Contract . 2018. [Online] Available Through:
<https://media.bloomsburyprofessional.com/rep/files/9781849467643sample.pdf>
8