A Basic Guide to International Business Law

Harm Wevers

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000418033
• Edition: 5
• Topic: Business
• Subtopic: Business generale
• Index: Business

A Basic Guide to International Business Law aims to give students an understanding as well as practical knowledge of legal problems arising in the area of international business, and to equip them with the skills needed to prevent and tackle these problems.

All Chapters employ the same didactic structure. Introductory case studies, examples, annotated case law, glossaries, diagrams, summaries and exercises are all designed to familiarize students quickly with relevant aspects of international (business) law. A Basic Guide to International Business Law deals with the following topics:

• Introduction to International Private Law and European Law

• Legal aspects of negotiations

• International contracts: matters of jurisdiction and the law applicable to these contracts

• International contracts of sale

• Competion law

• Free movement of goods, workers, the freedom of capital and establishment and the freedom to provide services

• International payments

• Carriage of goods by road and sea

• Incoterms

• Entry modes (agents, representatives, distributors, licensing, franchising)

1
Introduction to International Private Law and European Law

1.1 Introduction to International Private Law

1.2 Introduction to European Law

1.3 Cases of the European Court of Justice

International law is laid down in rules referred to as Conventions, Treaties, Regulations and Declarations. Even though such terms might imply that their importance is limited, the international law, which they create, is indeed a part of the national law of many states, or at least those states that adhere to the rule of international law. It is also a part of everyday life for the nationals of those states who enjoy additional rights deriving from international law. The importance of international law is explained with particular regard to the fields of International Private Law, International Business Law and International Public Law. The structure and institutions of the European Union as well as the fundamentals of EU law are also explained in this chapter.

International Private Law in action

Mulder, a Dutch national living in Arnhem (The Netherlands), buys a new kitchen for his home at Küchen Wunder GmbH, a company established in Oberhausen (Germany). On 1 April he signs a contract of sale in Oberhausen. The kitchen will be delivered and installed on 1 June in Arnhem. Mulder makes a down payment of 50% of the total sale price of €20,000. Klaus Wunder, the owner of the company, explains that a down payment such as this is customary in Germany.

The terms of sale in the contract – handed to Mulder by Wunder – state that the contract of sale will be governed by German law. In case of litigation, a German court of law will have jurisdiction. On 1 May, Küchen Wunder GmbH files for bankruptcy.

Mulder will never see the new kitchen arrive at his home. He wants his money back, but his claims are rejected by both Küchen Wunder GmbH and its owner. Mulder hires a German lawyer to try to get some of his money back. Mr. Schmitt informs Mulder that the EU has issued a Directive in order to protect consumers from a seller’s bankruptcy. Mulder wonders what a Directive is and whether he or his lawyer can rely on this Directive in a German court of law. Mulder has heard a colleague of his mention the Convention on the International Sale of Goods (CISG). He wonders, the Directive apart, if this Convention can do him any good.

In this case a German court of law has jurisdiction. German law will govern the contract unless Dutch law offers a more favourable outcome to Mulder. If the Directive has direct effect, Mulder can rely on the Directive in a German court of law. If not, Mulder has to look for a different solution. As Mulder is a consumer, he cannot rely on the provisions of the CISG. The reason for this is that, though The Netherlands and Germany are Contracting States of the CISG, the convention refers to places of business rather than consumers and therefore does not apply. The German court of law must therefore apply either Dutch or German law. Either way it should be possible to nullify Mulder’s contract with Küchen Wunder GmbH and uphold his claim. Whether Mulder will get his money back, though, depends on the provisions of the Directive. This verdict of the German court of law is enforceable in Germany.

1.1 Introduction to International Private Law

International law is law agreed by two or more states and is applicable to those states and in most cases their nationals. It is laid down in rules referred to as Treaties, Conventions, Regulations and Declarations. Most states around the world have signed up to several thousand of these rules, each state being referred to as a Contracting State of this Treaty or that Convention. The effects of signing a Treaty or Convention can vary. States that sign a Treaty or Convention agree to be bound by its rules. Sometimes states reserve the right to determine at a later date to what extent a treaty or convention will affect the state or its nationals.

International Public Law

International law can be divided into International Public Law and International Private Law. International Public Law is concerned with such issues as the set-up of international institutions (the United Nations, the European Community, and the European Court of Human Rights), human rights (European Convention on Human Rights) and the extradition of nationals from another country to their home country.

International Private Law

The aim of International Private Law is to solve problems in international legal relationships which arise from different legal systems. As every country has its own legal system, a legal relationship e.g. arising out of a contract of sale may involve at least two national legal systems. If the legal conflict only involves two parties living in the same country, there can be no choice over which legal system to use. International Private Law provides a set of rules either to decide the matter, or to refer the litigating parties to a national legal system where the answer lies. Basically every country has its own International Private Law. However, over the years several Treaties and Regulations have been set up to deal internationally with these legal problems. International Private Law deals with three main issues: jurisdiction in cases of litigation between two parties from different states (including the possibility of executing the verdict given by the court of law that has jurisdiction, in the countries of the litigating parties), the law to be applied in cases of international litigation between two private parties, and solutions to legal problems arising out of an international legal relationship.

Apart from the developments in the field of International Private Law, the law applying to the Member States of the European Union (EU) has become more voluminous and more important over the years. EU law means: the Treaty on the Functioning of the EU and all legislation which is based on it, binding for all Member States of the EU. EU law deals with several aspects of International Private Law.

International Business Law

International Business Law as a part of International Private Law is a specific field in itself. Until recently every country had its own ‘international private law’. Various treaties covering wider areas of International Private Law were drawn up to offer guidance to the use and development of International Private Law.

First, here are some examples of topics with which International Private Law is concerned. Every act or conflict under national private law can have an international dimension and give rise to several questions, as demonstrated in the examples below.

EXAMPLE 1.1

A car driver living in Germany causes a traffic accident with a driver living in France in a car park in Amsterdam (The Netherlands). The accident results in unbearable psychological damage to the Irish setter owned by the German driver, a crushed box of very valuable Cuban cigars and a broken bottle of Scotch whisky. The questions are:

• Does a Dutch court of law have jurisdiction in this case? Or should the parties turn to an English, German, Irish, Cuban, Scottish, UK or French court of law?
• What law must be applied to this case?

As we shall find out, the answer to which court of law has jurisdiction depends on the places where the two parties involved live and where the accident occurred. The law and law courts of Ireland, Cuba, Scotland and the UK obviously have no part to play in this problem.

EXAMPLE 1.2

A Dutch national living in Enschede (The Netherlands) works for a German employer established in Gronau (Germany). At the end of his first year, there his employer decides to fire him for no apparent reason.

The relevant questions in this situation are:

• Can a Dutch court of law rule on this conflict between a German employer and a Dutch employee?
• Does Dutch law apply to the individual employment contract?

This legal conflict involves two parties, living in different countries. As we shall find out, in a situation like this the employee is in a better position than his employer, as he is seen as the weaker side in this legal conflict.

EXAMPLE 1.3

A seller, established in the UK, delivers 1,500 pair of ladies’ shoes to a buyer who is established in Italy. However, the buyer, despite several reminders, does not pay the price they agreed on. The English seller starts litigation against the Italian buyer, in an attempt to cancel the sales contract and to get back the shoes he delivered. The questions in this case are:

• What court of law has jurisdiction?
• Is English law applicable to the sales contract?
• Is there an international treaty dealing with matters such as these?
• If there is a treaty, does it supersede English law or not?
• Is it possible for the seller – in one way or another – to declare the sales contract null and void, and if so, what would be the effects of such an act? Would the shoes be returned by the buyer?

Again, the two parties to the contract of sale are living in different countries. This enables them to choose which court of law will have jurisdiction over their conflict.

They can also choose which law will apply to their contract. As the Convention on the International Sale of Goods (CISG) is applicable to this case, this law only applies to situations to which the CISG does not provide an answer. Either the CISG or the law chosen by the parties provides the solution to the conflict and the answers to the abovementioned questions.

The rules of International Private Law provide answers to such cases by focussing on aspects such as the place of residence of the defendant, the place where the employee usually works, or the place of business of the seller and (sometimes) the nationality of one of the parties.

Most of the questions mentioned in the examples given in this paragraph will be dealt with in Chapters 2 to 5 inclusive, which examine the contents of three relevant international Treaties and Regulations.

Three main issues of International Private Law can be deduced from the above-mentioned examples. These main issues are also referred to as the three ‘pillars’ of international private law. Hereafter, the three questions raised will have to be linked with the words ‘main issues’.

Three main issues of International Private Law

Question 1: What court of law has jurisdiction in a case of litigation? How is the verdict of a court of law that has jurisdiction executed?

EXAMPLE 1.4

A seller established in The Netherlands supplies 1,500 kilos of cheese to a buyer established in Germany. The buyer however, despite sev...