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INTERNATIONAL COMMERCIAL LAW MLL336

FULL EXAM NOTES

TOPIC 1 – INTRODUCTION TO INTERNATIONAL COMMERCIAL LAW 8

SUBJECT OVERVIEW 8

PRIVATE INTERNATIONAL LAW V PUBLIC INTERNATIONAL LAW 8

INTERACTION BETWEEN PUBLIC AND PRIVATE INT’L LAW 9

CONFLICT OF LAW 9

‘Foreign element’ 10

Determination of jurisdiction 10

DETERMINATION OF GOVERNING LAW 10

MAJOR THEORIES OF CONFLICT RULES 11

i. International comity 11

ii. Economic interdependence 11

iii. Acquired or vested rights 12

iv. Local law theory 12

v. Public (government) interest theory 12

TRUE CONFLICT AND FALSE CONFLICT 13

CONFLICT RULES IN RELATION TO GOVERNING LAW 13

a) Lex domicilli 13

Distinguish nationality from domicile 14

b) Lex Causae 14

c) Lex fori 14

d) Lex situs 15

e) Lex loci 15

f) Renvoi 15

APPLYING THE CONFLICTS RULES IN THE CONTEXT OF CONTRACT LAW 16

Formation of a contract and governing law 17

Performance of contract and proper law 17

Location of the property 17

Discretion of the courts 17

NATURE OF INTERNATIONAL COMMERCIAL LAW 18

SOURCES OF LAW 18

THE ROLE OF DOMESTIC LAW AND DOMESTIC LEGAL SYSTEM 19

CONCLUSION 19

TOPIC 2 – INTERNATIONAL COMMERCIAL CONTRACTS UNDER DOMESTIC LAW 20

COMMERCIAL CONTRACTS 20

INTERNATIONAL SALE OF GOODS 20

SOURCES OF GOVERNING LAW 21

CUSTOMS 21

Effect of customs in the context of ICL 21

CISG 21

EX WORKS ‘EXW’ 22

DELIVERY DUTY PAID ‘DDP’ 22

FREE ON BOARD ‘FOB’ 22

COST, INSURANCE AND FREIGHT ‘CIF’ 23

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DOMESTIC LAW 23

APPLYING GENERAL CONTRACT LAW 23

APPLYING THE SALE OF GOODS LEGISLATION 24

PASSING OF PROPERTY 24

Goods Act 1958 (Vic), s23 Rules for ascertaining intention 25

PASSING THE RISK 26

DELIVERY OF GOODS 26

Presumed place of delivery - S36(1), para.2: 27

Presumed time for delivery - S36(2): 27

Delivery of wrong quantity – S37: 27

Instalment deliveries – S38: 27

Delivery to carrier – S39 28

Goods delivered at distant place – S40 28

Buyer's right of examining goods – S41 29

Acceptance – 42 29

Buyer not bound to return rejected goods - 43 29

Failure to take delivery of goods – S44 29

CONFORMITY OF GOODS 30

Implied undertakings – S17 30

Sale by description – S18 30

Implied conditions as to quality or fitness – S19 30

Sale by sample – S20 31

SELLER’S REMEDIES 32

Definition of unpaid seller – S45 32

Unpaid seller's rights – S46 32

Action for price – S55 32

Damages for non-acceptance – S56 33

BUYER’S REMEDIES 33

Damages for non-delivery – S57 33

Specific performance – S58 34

Remedy for breach of warranty – S59 34

Right to claim interests or special damages – S60 34

INTERACTIONS BETWEEN THESE SOURCES 35

CONCLUSION 35

TOPIC 4 - THE INTERNATIONAL CARRIAGE OF GOODS BY SEA 36

INTERNATIONAL CARRIAGE OF GOODS 36

CARRIAGE OF GOODS BY THE SEA 37

THE CONTRACT OF CARRIAGE BY SEA 37

BILLS OF LADING 38

THE B/L V THE CONTRACT OF CARRIAGE 38

‘CARRIER’ 38

Carrier as defined by the Conventions 39

Carrier as defined by domestic law 39

Carrier as defined by the contract 39

‘SHIPPER’ 39

‘CONSIGNEE’ (OR ENDORSEE) 39

‘CONSIGNOR’ (OR ENDORSER) 40

THE CHARACTERISTICS AND THE FUNCTION OF A B/L 40

DETERMINING WHETHER A DOCUMENT IS A B/L 40

IMPORTANCE OF THE B/L 40

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HAGUE-VISBY RULES ON B/L 41

CLEAN B/L, OR A CLAUSED B/L 41

NEGOTIABLE/NON-NEGOTIABLE B/L 42

CHARTERPARTY V BILL OF LADING 42

CHARTERPARTY BILL 43

Inconsistency between the charterparty and the B/L 43

Other categorisation of B/L 43

Other terms relevant to the B/L 43

THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THE HAGUE-VISBY RULES 44

CARRIER’S LIABILITIES 44

‘Seaworthiness’ 45

‘Due diligence’ 45

CARRIER’S RIGHT TO INDEMNITY 45

Necessary or reasonable deviation – Art 4(4) 45

Limits of carrier’s financial liability – Art 4(5) 46

SHIPPER’S LIABILITY 46

THE CARRIAGE OF GOODS BY SEA ACT 1991 (CTH) ‘COGSA’ 46

THE STATUS OF THE HAGUE-VISBY RULES IN AUSTRALIA 47

CONFLICT OF LAWS 47

Exclusive jurisdiction under s11, COGSA 47

THE ROTTERDAM RULES 47

SIGNIFICANCE OF THE ROTTERDAM RULES 48

SCOPE OF OPERATION 48

TRANSPORT DOCUMENTS 48

OBLIGATIONS OF THE CARRIER AND RELATED PERSONS 49

Key provisions 49

OBLIGATIONS OF THE SHIPPER AND RELATED PERSONS 49

CONCLUSION 51

TOPIC 5 – MEANS OF PAYMENT IN INTERNATIONAL TRADE 52

PAYMENT 52

RISKS AND UNCERTAINTIES IN PAYING THE PRICE 52

THE SOURCES OF LAW 53

DIFFERENT MEANS OF PAYMENT 53

CASH IN ADVANCE 53

LETTER OF CREDIT/DOCUMENTARY CREDIT 53

BILL FOR COLLECTION 53

OPEN ACCOUNT 54

CONSIGNMENT SALE 54

VARIOUS ROLES OF BANKS AND OTHER THIRD PARTIES 54

DIFFERENCES IN ARRANGEMENT OF AN INTERNATIONAL SALE AND ARRANGING THE PAYMENT 54

BUYER AND SELLER PREFERENCE 55

LETTERS OF CREDIT/ DOCUMENT OF CREDIT 55

THE OPERATION OF THE DOCUMENTARY CREDIT 56

The Privity of a documentary credit 56

The doctrine of strict compliance 56

Limitations on the bank’s examination on the documents 57

CONSEQUENCES OF NON-CONFORMING DOCUMENTS 58

Exception 58

FRAUD 58

Remedies for the buyer 59

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BANK’S LIABILITY TO THE SELLER/ BENEFICIARY 59

BANK’S LIABILITY TO THE BUYER/ APPLICANT 59

Liabilities between banks 60

CATEGORIES OF DOCUMENTARY CREDIT 60

REVOCABLE/IRREVOCABLE CREDIT 60

IRREVOCABLE STRAIGHT CREDIT /IRREVOCABLE NEGOTIATION CREDIT 61

CONFIRMED/UNCONFIRMED CREDITS 61

Transferrable credit 61

Back-to-back credit 61

Other types 61

CREDITS DIVIDED ACCORDING TO THE PAYMENT ARRANGEMENT 62

THE IMPACT OF UCP500/600 62

CONCLUSION 62

TOPIC 6 – INTERNATIONAL & REGIONAL TRADE AGREEMENTS 63

GLOBALISATION & INTERNATIONAL TRADE BARRIERS 63

WORLD TRADE ORGANISATION 64

THE CORE FUNCTIONS OF WTO 64

MINISTERIAL CONFERENCE 65

GENERAL COUNCIL 65

DISPUTE SETTLEMENT BODY 65

Other bodies and persons involved 65

How to become a WTO member 66

KEY WTO AGREEMENTS: GATT AS AN EXAMPLE 66

KEY CONCEPTS AND PRINCIPLES REFLECTED IN THE WTO AGREEMENTS 67

A. Most Favoured Nation ‘MFN’ 67

B. National Treatment ‘NT’ 67

C. Non-Discrimination 67

Quantitative restriction 67

THE TRADE BARRIERS: ANTI-DUMPING AND COUNTERVAILING DUTY 68

DUMPING 68

ANTI-DUMPING MEASURES 68

COUNTERVAILING DUTY 68

SUBSIDY 69

DISPUTE SETTLEMENT BODY ‘DSB’ 69

PROCEDURE 69

Step 2: Panel Proceeding 69

Step 3: Appellate proceeding 70

THE CRITICISMS AGAINST THE DISPUTE SETTLEMENT BOARD 70

AUSTRALIA’S PARTICIPATION IN WTO 71

RECENT CASES IN WHICH AUSTRALIA AS A RESPONDENT 71

TOPIC 6.2 71

1. THE CONNECTION BETWEEN WTO AND OTHER RTAS 71

THE LIMITATION OF WTO 71

REGIONAL TRADE AGREEMENTS 72

RTAS AND WTO 72

Degrees of economic integration 72

2. THE EUROPEAN UNION 73

KEY AREAS OF COOPERATION IN RELATION TO TRADE 73

FREE MOVEMENT WITHIN THE EU 74

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THE EU AND THE WTO 74

ELIMINATION OF TRADE BARRIERS 74

3. ASSOCIATION OF SOUTH-EAST ASIAN NATIONS (ASEAN) 74

AIMS OF THE ASEAN 75

FRAMEWORK OF ASEAN 75

4. NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) 75

CONTENTS OF THE AGREEMENT 76

ORGANISATIONAL STRUCTURE 76

MAJOR PRINCIPLES 76

DISPUTE SETTLEMENT 77

NAFTA AND WTO 77

5. CHINA AUSTRALIA FREE TRADE AGREEMENT 77

Benefits 77

6. THE ISDS SCHEME 77

THE INTERNATIONAL INVESTMENT LAW 77

The Investor-State Dispute Settlement 78

Nature of the dispute 78

Eligibility of bringing a claim 78

AUSTRALIA’S HESITATION IN REACHING AGREEMENTS ON ISDS CLAUSES 78

Impact of such hesitation 78

ENFORCEABILITY OF THE RULING 79

TRANSPARENCY OF ISDS 79

Other doubts of the ISDS 79

CONCLUSION 79

TOPIC 7 – FOREIGN INVESTMENT LAW 80

FOREIGN INVESTMENT 80

FOREIGN DIRECT INVESTMENT (FDI) 81

FOREIGN PORTFOLIO INVESTMENT (FPI) 81

FORMS OF FOREIGN INVESTMENT 81

MULTINATIONAL/ TRANSNATIONAL CORPORATIONS 81

JOINT VENTURE 82

SOLE FOREIGN VENTURES 82

Other types of foreign investment 82

REGULATION AT INTERNATIONAL LEVEL 82

ISDS 82

CONDUCT OF THE ARBITRATION 83

Outcome of the arbitration 83

For Investors 83

REGULATION AT DOMESTIC LEVEL 83

AUSTRALIA’S DOMESTIC LAW 84

DEFINITION OF FOREIGN PERSON 84

DEFINITION OF INTEREST 84

DEFINITION OF SUBSTANTIAL INTEREST 85

Meaning of an Australian Business 85

Meaning of interest in a security 85

Current scope of sensitive business 85

APPLICATION OF THIS ACT 85

MEANING OF SIGNIFICANT ACTION-ENTITIES 86

THE FOREIGN INVESTMENTS APPROVAL 87

The current threshold for approval requirement 87

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THE NATIONAL INTEREST TEST 88

Penalty 88

INTERNATIONAL PROTECTION 88

FOREIGN ACQUISITIONS AND TAKEOVERS ACT 1975 (CTH) 88

ACQUISITION OF SHARES 89

APPLYING THE ACT 90

TREASURER’S POWERS UNDER THE FOREIGN ACQUISITIONS AND TAKEOVERS ACT 1975 (CTH) 91

APPLICATION OF THE FOREIGN ACQUISITIONS AND TAKEOVERS ACT 92

CONCLUSION 92

TOPIC 8 – INTERNATIONAL DISPUTE RESOLUTION 94

DISPUTE RESOLUTION IN THE CONTEXT OF INTERNATIONAL COMMERCIAL LAW 94

CATEGORIES OF PRIVATE DISPUTE RESOLUTION 94

The relevance of conflicts rules 95

CHOICE OF FORUM IN LITIGATION 95

WHY THERE IS A CHOICE? 95

THE DIFFICULTIES AND SIGNIFICANCE OF CHOICE OF FORUM 95

THE KEY QUESTION: APPROPRIATENESS/INAPPROPRIATENESS 95

TESTS 96

1. Oppression and vexation 96

2. Forum non conveniens 96

2.2 Clearly inappropriate forum test 97

Clearly inappropriate forum v forum non conveniens 97

Factors to be taken into account 97

ENFORCEMENT OF FOREIGN JUDGMENT 97

COMMON LAW PRINCIPLES 98

ENFORCEMENT IN AUSTRALIA 98

Refusing the registration of a judgment – ss 5, 6 99

Stay of enforcement of a registered judgment 99

THE HCCH AND ITS ‘JUDGEMENTS PROJECT’ 99

THE JUDGMENTS PROJECT 99

THE CHOICE OF COURT CONVENTION 2005 100

APPLICATION OF THIS CONVENTION 100

THE SINGAPORE INTERNATIONAL COMMERCIAL COURT (SICC) 100

THE JUDGES 101

JURISDICTION 101

Commentaries on the performance of SICC 102

INFORMAL DISPUTE RESOLUTION, AND INTERNATIONAL COMMERCIAL LITIGATION 102

INTERNATIONAL COMMERCIAL ARBITRATION, AND THE ENFORCEMENT OF AWARDS 104

CONCLUSION 106

TOPIC 8.2 – INTERNATIONAL COMMERCIAL DISPUTE RESOLUTION 107

INTERNATIONAL COMMERCIAL ARBITRATION (ICA) 107

KEY PRINCIPLES OF INTERNATIONAL COMMERCIAL ARBITRATION 107

1. PARTY AUTONOMY 107

Ad hoc v institutional arbitration 108

2. CONFIDENTIALITY 108

3. COMPETENCE-COMPETENCE 108

4. PROCEDURAL FAIRNESS 108

5. EFFICIENCY 109

LEGAL FRAMEWORK GOVERNING INTERNATIONAL COMMERCIAL ARBITRATION 109

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1. THE ARBITRATION AGREEMENT 109

Effect of a valid arbitration agreement 109

2. THE ARBITRATION PROCEDURE RULES 110

Important arbitration institutions and arbitration rules 110

Key issues governed by Arbitration Rules 110

3. THE LEX ARBITRI 110

Important provisions 111

The International Arbitration Act (1974) 111

4. THE ENFORCEMENT SCHEME 112

The New York Convention 112

Art V of the New York Convention 112

The Relationship between the Model Law and NYC 113

Drafting AA 113

5. THE TCL CASE 114

CHALLENGES ON JURISDICTION BEFORE HC 114

HIGH COURT RULING 114

GROUNDS FOR SETTING ASIDE/ DENYING ENFORCEMENT: FCA 114

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Topic 1 – Introduction to International Commercial

Law

Subject Overview

• International commercial law is best thought of as a collection of several different

but related disciplines, rather than one specific area of law. In MLL336

International Commercial Law, the range of disciplines we cover is reflected in

the content of Topics 2 to 8 of this Unit. Over the course of those Topics, we will

be addressing:

o The international contracts under domestic law;

o The international contracts under major international regimes;

o The international carriage of goods;

o Letters of credit, and other means of payment in international trade;

o International trade and investment agreements;

o Regional trade and investment agreements;

o Foreign investment law, at the international and domestic level;

o International dispute resolution, focusing on international commercial

arbitration.

Private International Law v Public International Law

• First of all, it is important to understand different aspects of the international law,

particularly, the difference between private international law and public

international law, when attempting to understand the nature of international

commercial law. The private international law / public international law

distinction can be applied to the range of disciplines covered in MLL336

International Commercial Law.

Public International Law Private International Law

Interactions between different states Interactions between private parties in

international contexts

Reflections of sovereign power Rights and liabilities of private parties

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Example of areas of Law: International

Criminal Law, Law governing war,

human rights, law of the sea, space law

Examples of areas of Law: international

commercial contracts, international

carriage

Example of sources of public

international law: Conventions, treaties

Example of sources of private

international law: international and

domestic legislation, custom, industrial

practice

Interaction between public and private int’l law

• In some circumstances, both can be applied in the context of international

commercial law.

o E.g. In the area of international commercial law, some activities are

between private parties and governed by private international law;

however, these rules were made by States via schemes provided by public

international law

• Also, public international law can be applied in the context of international

commercial transactions/disputes in supporting the private international law.

o Grace v MacArthur 170 F Supp 442 (1959) (US DCED, Arkansas):

service of a writ was made on board an areoplane when flying over

Arkansas; the decision of jurisdiction (a private international law issue)

was based on the law of territory (public international law issue)

Conflict of Law

• International commercial law implicates the interaction of many State legal

systems with each other, and with international legal instruments, it raises the

possibility of encountering conflicts of laws.

o The phrase ‘conflicts of laws’ broadly refers to legal principles that apply

to cases involving an international element, and it is a term sometimes

used to refer to situations where there are differences between potentially

applicable laws.

• Used in its first sense, there are three types of conflicts of laws issues that might

arise:

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1. Identifying whether a court or a tribunal has jurisdiction to resolve a

dispute;

2. Identifying the law that a court or a tribunal will apply in resolving a

dispute; and

3. Identifying whether a court judgment or an arbitral tribunal’s award will

be recognised and enforced in different States.

‘Foreign element’

• Foreign element refers to any facts, connections or considerations that may raise

the issue of foreign law, foreign jurisdiction or international treaties that are not

part of domestic law.

Determination of jurisdiction

• Conflicts rules apply when the court needs to decide its own jurisdiction in

dealing with a foreign-related dispute.

• Whether the court of the competing jurisdictions is the best, or a clearly more

appropriate, or most convenient.

o Voth v MFM: the ‘clearly inappropriate forum’ test by the majority of the

HC

▪ NB: skipped in Topic 1, further discussion in Topic 8.

Determination of governing law

• Express ‘choice of law’ prevails.

o The ‘Anders Maersk’ [1986]: the US law applied, because it was

incorporated by express wording of the B/L

• Problem may arise if there lacks an expressed choice of law, even if there is

expressed choice of law, issues may arise:

o The chosen law may include ‘conflicts rules’ and redirect it to other sets of

law, if the clause is not clearly drafted (renvoi, to be discussed later).

o The choice of law may be illegal, or violates public policy.

• Balance of different rationales, rules, factors or considerations that may justify the

choice of one law over another

o The theories, key rules, factors and schemes to be introduced.

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Major Theories of Conflict Rules

• Explaining the reasons and rationale for the existence of conflicts of law, and how

these rules are applied

• Key theories include:

i. International comity

ii. Economic interdependence

iii. Acquired or vested rights

iv. Local law theory

v. Public (government) interest theory

i. International comity

• It is a theory to explain international law in general.

o Sovereigns/states respect each other

• Huber:

o ‘sovereigns act out of comity so that the laws of each nation, brought into

existence within its territory, may hold their force everywhere so far as

they do not prejudice the power of law of another sovereign and his

subjects. From which it follows that this is derived not merely from the

civil law, but from convenience and the tacit consent of nations.’

• Based on courteous conduct and discretion.

o Only explains the existence of conflicts rules from a moral perspective.

o Reciprocity, mutual convenience (further developed to the economic

interdependence theory).

o Cannot explain certain mandatory rules, or exclusive jurisdiction, in the

conflict rules

o Limited function in explanation and application.

ii. Economic interdependence

• The adoption of customs, usages, lex mercatoria by the Piepowder courts in the

UK.

• Application of foreign law between foreign merchants in seventh century China

(Tang Code).