Preface

This fifth edition of the book consists of six Parts (Part I: International Sales of Goods, Part II: Regulating the Electronic Commerce Environment, Part III:Transportation of Cargo, Part IV: Financing and Insurance, Part V: Dispute Resolution, and Part VI: Corruption). It aims to provide a comprehensive and informed appreciation of the complexities of an international sale transaction. As with the earlier editions, this revised edition focuses on CIF and FOB contracts for the international sale of goods, and the various contractual relationships that arise as a result of meeting those obligations from transportation through to insurance.

Part I, besides examining standard trade terms and INCOTERMS 2010, includes a chapter on the Convention on the International Sale of Goods 1980 (popularly known as the ‘Vienna Convention’) due to its worldwide impact. Since electronic communications are an inevitable part of modern day commerce, Part II focuses on the regulation of the electronic commerce environment by examining the various European and legal instruments relating to electronic commerce and electronic signatures. Part III on transportation covers all the different modes of international carriage of goods, including multimodal transportation. One of the chapters in Part III is devoted to the Hamburg Rules and the Rotterdam Rules. Part IV examines insurance and financial aspects of an international sale transaction. Part IV on dispute resolution covers issues of jurisdiction and applicable law, along with arbitration and mediation as a form of dispute resolution. I would like to particularly thank Professor Peter Stone of the University of Essex for writing Chapters 16, 17 and 18 of Part V. Part VI discusses corruption in international business. Payment of bribes to foreign public officials to secure licences and contracts is a common problem in the world of cross-border trade, but it is only in the last fifteen years that the international community has taken concerted action to combat corruption through the adoption of regional and international conventions. This Part concentrates on the anti-bribery convention drafted by the Organisation for Economic Co-operation and Development (OECD) and the anti-corruption convention drafted by the United Nations. A new section is included on the UK Bribery Act 2010, which was enacted following immense pressure from the OECD and the international community. Throughout the book, references are made to cases, international developments in the form of conventions, model laws and rules. Each Chapter includes a suggested reading list. Wherever possible, tables and diagrams are included to aid understanding.

This book does not include any legislative or other materials since these are readily available in Carr, I and Goldby, M, International Trade Law Statutes and Conventions, published as a companion volume by Routledge. The reader is also referred throughout the book to website addresses at which he or she can access the relevant legislation. The appendices section in this book is therefore limited and includes those standard forms (e.g., the FIATA Multimodal Bill of Lading and the GENCON charterparty form) that are not included in International Trade Law Statutes and Conventions.

It is hoped that this book will be used by undergraduate and postgraduate law students following international trade law or international commercial law courses and students from other disciplines, such as business studies, export management, banking and finance.

The writing of an academic book involves the support of many – colleagues, friends, family, students, well-wishers and the publication team. I am thankful to all for their contributions. I am greatly indebted as ever to Brian Carr for his companionship, support and encouragement.

The law is stated on the basis of material available to me on 1 May 2013.

Indira Carr Oxshott May 2013

Introduction

Trade between nations and the link between trade and economic growth are neither recent nor novel developments. The existence of trade routes such as the Silk Route1 and the Amber Route2 crossing boundaries and continents, is ample evidence that international trade is not a recent phenomenon.The link between economic growth and trade was widely realised and exploited. Between the fifteenth and eighteenth centuries, the Venetians and Genoese traders with commercial acumen accumulated huge wealth by buying goods at low prices in one port and selling them at high prices at another.This period also saw the emergence of a new form of mercantile venture through corporations.The East India Company established under the Royal Charter in 1600 by Queen Elizabeth I,3 the Dutch East Indies Company4 and the Swedish East Indies Company5 are some such examples. Trade, mainly in spices, silk, opium and saltpetre, between the East and the West thrived and helped in the economic growth of the European states. However, during the seventeenth and eighteenth centuries, mercantilism, which argued for strict regulation that encouraged exports and domestic manufacture of goods to cheaper imports, had gained ground.6 There was, however, strong opposition to mercantilism from Adam Smith (1723–1790), who put forth his theory (often called the theory of absolute advantage) establishing that mercantilism would not enable economic growth. And it is to Adam Smith7 and his successors, such as David Ricardo (1772–1823), that the modern free-trade philosophy owes much.

The General Agreement on Tariffs and Trade (GATT) 1947, borne out of the cornucopia of horrors that the world witnessed in the 1930s and 1940s, enshrined the philosophy of free trade using the principles of non-discrimination8 (also known as Most Favoured Nation obligation) and

1Refers to the combination of ancient land and sea routes connecting East, Southern and Western Asia with the Mediterranean and North Africa.

2 Refers to the route that connected Europe to Africa and used for the amber trade.

3This company was also imparted with powers to make laws and tax the locals. There were other corporations given charters for trading activities in specific countries – for instance, the Levant Company for trading in Russia and the Morocco Company for trading in Morocco. For more on the origins of corporations, see Davis, Corporations: A Study of the Origin and Development of Great Business

7Comparing the state to a household, Adam Smith wrote:

It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor … All of them find it in their interest to employ their whole industry in a way in which they have some advantage over their neighbours, and to purchase with a part of its produce or what is the same thing, with the price of a part of it, whatever else they have occasion for.

What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage. Smith, The Wealth of Nations, New York: Modern Library Edition, 1937, p. 424.

8The principle of non-discrimination requires that a contracting party should treat all contracting states alike so that where a trade advantage has been contracted by one contracting party to another, that advantage should be granted equally to all other

contracting parties. Also, no discrimination should be made between imported products and domestically produced like products.

9 Refers to quotas, import/export licences or other measures.

10Set out in Annex 1A to the World Trade Organization Agreement, it contains many of the key provisions of the GATT 1947.

11See Bhagwati, In Defense of Globalization, 2004, OUP; Held and McGrew, Globalization/Anti-Globalization, 2002, Polity; Carr, ‘Towards reconciling free trade and environment’, in Eonomides, Betten, Bridge et al (eds), FundamentalValues, 2000, Hart Publishing.

Alongside these organisations, the International Chamber of Commerce (ICC) also plays a dominant role in ensuring a level of harmonisation through the formulation of rules for incorporation by those engaged in international business transactions. Many of these rules are based on what the merchants or specific sectors may have adopted as standard practices over time for their own convenience.12 The Uniform Customs and Practice for Documentary Credits (UCP), International Standard Banking Practice (ISBP) and International Rules for the Interpretation of Trade Terms (INCOTERMS) are well-known formulations emanating from the ICC. Alongside the ICC there are also other organisations, such as the International Federation of Freight Forwarders Association (FIATA), that play an important role in the harmonisation of international commercial law through the promotion and use of standard forms, such as the FIATA Multimodal Transport Bill of Lading. References to rules and standard forms are found in many of the chapters in this book (e.g., Chapters 1, 13, 14, 15, 19 and 20).

The subject of international trade can be approached from different perspectives. For instance, a study of the regulatory framework provided by the WTO and GATT 1994 and other regional agreements, such as the North American Free Trade Agreement (NAFTA) or Common Market of the Southern Cone (MERCOSUR),13 would qualify as a study of international trade. Equally, the legal incidents surrounding an international business transaction, be it sale of goods, distribution agreements or transfer of know-how, also form part of international trade law. In writing a book of this modest length, it has been necessary to be highly selective. This book focuses on international sale of goods, use of electronic data interchange for commercial transactions, transportation of goods using different modes of transport, payment of the price and the law affecting the different methods of resolving disputes from litigation through to mediation. This book is unique in including a chapter on the international efforts to fight corruption, which is a constant problem faced while conducting international business. The emphasis of this book is on the international. However, reference to domestic legislation is made as and where relevant. The book, divided into six parts, is comprised of 21 chapters, and it would not be an exaggeration to say that each chapter in this book could easily be converted into a book of around 500 pages, at the very least.

Chapter 1 starts with an examination of the obligations of the buyer and seller under two of the most popular standard terms used in international sale contracts: CIF and FOB. Devised by merchants for their own convenience, the ICC has done a great deal in standardising and popularising trade terms through its INCOTERMS. The chapter concludes with a brief overview of other standard terms recommended for use with modes of transport other than sea. Chapter 2 focuses on the Convention on the International Sale of Goods 1980. Its wide ratification by the member states of the European Union (EU) and the United States means that it plays an important role in determining the obligations and liabilities of the seller and the buyer to an international sale of goods contract. This factor cannot be lightly dismissed, and it will not be long before the courts in the United Kingdom are called on to interpret this convention. As to whether the United Kingdom is likely to ratify it in the very near future remains debatable.

Part II, consisting of Chapters 3 and 4, addresses the legal issues surrounding the use of electronic communication for the purposes of contracting. It considers the legislation adopted by UNCITRAL, both in relation to electronic contracting and the use of digital signatures for securing the electronic transaction. Where relevant, developments within the EU and proposals from organisations such as the ICC are also highlighted. An interesting exploration in this part is the threat posed to e-commerce by cybercrime and the attempts to combat the problem at both domestic and international levels. Part III, consisting of nine chapters, is the longest section in this book. It

12This is frequently referred to as ‘law merchant’ or lex mercatoria.

13Texts of both of these agreements are available at www.sice.oas.org.

deals with the different types of international transportation of cargo, ranging from the unimodal (i.e., sea, air, rail and road) to a combination of modes, besides examining transport documentation, especially the bill of lading. Undoubtedly there is a surfeit of conventions affecting unimodal transportation of cargo. Part III, besides examining these conventions, also considers the initiatives by organisations such as FIATA and the ICC, in harmonising rules in respect of multimodal transportation of cargo, which, as yet, is not subject to the mandatory application of an international convention.

The goods sold are often subject to an insurance contract. Chapter 14 in Part IV, using marine insurance as an illustration, highlights the general principles underlying insurance contracts. Since payment for the goods is a major feature of the sale contract, Chapter 15 considers the various payment mechanisms available but focuses on letters of credit, described often as the life blood of commerce.

Harmonisation of international commercial law has, to some extent, been achieved through international conventions, adoption of standard forms formulated by trade associations and incorporation of rules formulated by organisations such as the ICC. Where such conventions and other legal materials exist, they are not comprehensive. Furthermore, the harmonisation is far from complete. In these circumstances, it is common for sale contracts and other associated contracts, such as the carriage contract or the letter of credit arrangement, to contain clauses in respect of the law that is to be applied to the contract and jurisdiction. They may also contain arbitration and alternative dispute resolution clauses, thus giving the opportunity for the parties to settle the dispute using mechanisms other than litigation. Chapters 16 and 17 of Part V deal, respectively, with the civil jurisdiction of English courts and the rules applicable by English law for determining the substantive law applicable to a contract. Chapter 18 considers the recognition in England of foreign judgments. Chapter 19 deals with arbitration as an alternative to litigation and examines arbitration in the context of the Arbitration Act 1996. The penultimate chapter deals with mediation and international development in the form of a model law from UNCITRAL.

Bribery is a constant issue faced by businesses when doing business abroad. Although the ICC had drawn up Rules of Conduct on Extortion and Bribery in International Business Transactions as far back as 1977, it is only since the mid 1990s that there has been a conscious shift on the part of the international community to fighting corruption through conventions aimed at harmonisation of anti-corruption laws across jurisdictions.The two conventions that have taken off in terms of the number of ratifications received are the OECD Anti-Bribery Convention and the UN Convention against Corruption, and these are examined in Chapter 21.

Part I

International Sales of Goods

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