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laia2001 Dret dels Negocis Internacionals 2º Grado en Empresa Internacional Facultad de Economía y Empresa Universidad de Barcelona

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1. Case A: 2 spanish companies company A (seller) and company B (buyer) entering into a contract. Goods must be delivered in Mataro. Company B thinks that goods don’t correspond. Both companies have to reach an agreement for the sales in which company A sells products to company B. 2. CASE B: one spanish company (seller) and an irish company (buyer). DIFFERENCES BETWEEN CASE A AND CASE B: -

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Nationality of the enterprises involved in each case (In case A both companies are based in the same territory while in the case B the companies involved are based in different countries) Different destination of the goods (In case A the destination of the goods is Mataró while in the case B the goods are destined to Marrakech ) Different place of delivery (Taking into account if it's international or not. If there are differences between places of delivery it’s important) Applicable law Different jurisdiction applicable in each case (In case A the only applicable jurisdiction is the Spanish one while in the case B we also have to take into account the Irish courts)

Definition: International business law is a legal branch of a given state legal system that seeks to solve problems derived from international business operations It is not a supranational but it is a legal branch from a given legal state. IB law is equivalent to other legal branches that form a given state legal system. We refer to the relativity of IB law because a case can be solved from many different points of view. Example: Spanish company (seller) → Regulated by the Spanish IB law Irish company (buyer) → Regulated by the Irish IB law Marrakech (destination) → Regulated by the Moroccan IB law Both companies have a contract of international sale of goods between them. So, as it is an IB operation the IB law will have to deal with this IB contract. This is considered to be an IB contract because a forign element is involved. In this particular case there is more than one foreign element, there are 3 different legal systems: - Spanish system - Irish system - Moroccan system As IB law is not supranational, it is a legal branch that belongs to each country, the solution to the problem can be different depending on the point of view of each country, this is the reason for the relativity of the IB law. Prescription: Time period in which the non defaulting party (the claimant) is entitled to initiate legal procedures against the defendant. A maximum number of years of margin to start any claim. Once the period has expired, the claimant loses his or her right to initiate legal procedures.

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SUMMARY OF THE CASES:

SECTIONS COVERED BY IB LAW: There are three main legal areas, in this subject we will only cover the two first areas but in order to understand it we have to be aware of the existence of the three legal areas. 1. Dispute resolution mechanisms Mechanisms available to the contracting parties to claim for the remedies (Remedies = action to the non-defaulting party in order to reach a compensation for the breach of contract. Ex: claim for a reduction of price for damages). Dispute resolution mechanisms will deal with the breach of contract between 2 international companies -

Jurisdiction (courts, judges… a public institution available to everyone that need justice) ADR (alternative dispute resolution mechanisms) Arbitration, mediation and conciliation (all of them are private in comparison with jurisdiction that is public.) A contracting party is only entitled to initiate one of this three remedies if the two contracting parties have previously an agreement on any of these proceedings

2. Conflict of laws (applicable law) When international controversy arrives to a particular jurisdiction the national courts will have to apply, first of all, IB law, not the national law. National courts have to apply the IB law rejecting the national law. When we have determined the competent authority, as we have already said the courts will have to apply the IB law. At this point we can find two different categories of rules: -

Substantive rules: How the offer has to be done. Gives a solution Conflict-of-law rules: Which law will provide us with the final solution. This law seeks to solve controversy. Once this law is applied, in case B, the law that will be applied is the Spanish law as it is the place of residence of the seller. After applying this rule we can apply national substantive rules (ex: in the spanish case we could apply the commercial code, the civil code...). These national rules are considered substantive rules because these rules give us the solution. Conflict-law rules only exist as an international business rule

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But prescriptions are different in the different jurisdictions (countries). For example, in Spain the prescription period is 5 years, in Ireland 10 years and in Morocco 2 years. So, you have to apply the IB law rules of the country where the claimant is, instead of national rules of that country. In this case the claimant (demandante) is the Irish company and the one who sues the defendant (acusado), that is the spanish company, in Ireland. So, in this case, we will take into account the irish IB law. The jurisdiction to take into account is decided by the claimant, as it is an IB affair the jurisdiction will be an IB law, not any other branch of the law of a country. As the case is connected to more than one legal system the irish company can decide to use the IB law of another country (spanish, irish or moroccan).

When two companies conclude a contract of sale the law to be applied is the national law of the country of residence of the seller. Applicable law depends on dispute resolution mechanisms 3. Recognition and enforcement of foreign decisions Example case B: Spanish company establishes a contract with an Irish company who decides to sue the Spanish company in the Irish courts because of a breach of contract. Irish courts establish that the Spanish company has to pay the Irish company as compensation. The defendant is not domiciled in Spain he is domiciled in another country, the decision taken by the Irish courts can only be established inside their territory so they have to initiate further proceedings, they have to initiate legal proceedings in Spain in order to get their compensation. Since both companies are established in countries of the EU. The rules of IB law are the same but the problem arises in these situations in which contracts are established in different countries or countries that are not member of the EU When the second proceeding is started the Spanish Law is the only one that is taken into consideration, in this second procedure the law applied is the one enforced in the country where the proceedings are taken. In this case as the both countries form part of the EU there is not a big problem because the IB laws are the same. But in this case the irish company sues the spanish company in spain the irish company knows the enforcement will be directly enforced in spain. Then, the irish company will get their compensation.

The irish company has to analyze some different factors before deciding where to initiate legal proceedings: -

The applicable law Prescription time which is subject to the applicable law Economic costs Language Recognition and enforcement: Country in which the judgement should be

enforced Example case A: In this case the contract is between Spain and Thailand. Spanish company invoques a breach of contract. Spanish company has two option

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In a situation in which the 2 kinds of rules (substantive and conflict-of-law rules) regulate simultaneously a contract, substantive rules take priority over conflict-of-law rules. The reason is connected to the difference between these 2 types of rules, substantive rules give the information we are looking for, they give the direct solution, while conflict-of-law rules require the use of additional national substantive rules.

Sue the defendant in Thailand, initiate legal proceedings in Thailand: Thai courts are forced to apply thai rules of IB law, because this is an international case, international sale of goods. Applying the rules the solution can be the application of the thai rules, spanish rules or the rules of another third country. Let’s imagine that they apply the thai law and according to this law they have not breached the contract. They don’t find the thai company guilty, this is because thai courts have established thai laws. So the spanish company won’t receive any compensation. Another situation is the situation in which thai courts find the thai company guilty so the thai company has to pay a compensation to the spanish company. In this second situation since the judgement has been held in the thai courts and the defendant is established in the same country, this courts can directly enforce the thai judgements in the thai company and the spanish company will receive the amount of money established in the thai court. Since the defendant is established in Thailand, in the same country in which the judgement was held, courts have the power to enforce the judgement directly. In this case as the thai company is established in Thailand, it is presumed that the company has all its bank accounts in Thailand so thai courts can directly go against their assets because they are in the same country. Then, the spanish company would receive the amount of money established in the thai law

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Sue the defendant in Spain, fail the lawsuit in Spain: In that case Spanish courts will have to apply rules of IB law. According to the art. 4 of the EU regulation the law applicable to a contract for international sales of goods is the law of the country where the seller has his or her habitual residence. Let’s imagine that the habitual residence of the seller is in Spain, then the spanish courts will have to apply national spanish law. Spanish courts find that indeed the thai company breached the contract, and find thai company guilty. Spanish courts establish a compensation. Spanish judgement cannot be directly enforced to a foreign country like thailand. To be enforced in another country an additional lawsuit is required, this lawsuit has to be taken in a foreign country where the judgement can be enforceable in Thailand. Thai courts can determine whether the judgment is enforceable or not. In this case although thai company is found guilty if the thai company is not satisfied with the compensation the spanish company will not get its compensation because if spanish courts try to make their judgement enforceable in thailand thai courts will ban that situation. The option of the spanish company is to initiate another lawsuit in thai courts to make the spanish judgement enforceable in thailand otherwise the spanish judgement won’t be able to be enforced in thailand. Thai courts decide to declare that the spanish judgement can not be enforceable in the thailand. In this situation the Spanish company won’t receive any compensation. Although IB law covers three different legal areas all these legal areas are interconnected and all of them have to be taken into consideration from the beginning of the negotiation of an international contract. All of them represent legal risks.

Exercise 1

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1. In case the Thai company does not deliver conforming goods according to the contract, could the Spanish company bring an action against the Thai company before the Spanish courts? And before the Thai courts? This question refers to the block of dispute resolution mechanisms, we have to determine the competent authority, the jurisdiction. The question asks for the competent courts. 2. Which law would govern the contract? This question refers to the conflict of laws. 3. Who would be entitled in the Thai company to conclude a binding contract? It refers to the legal area of applicable law because there is a law that establishes who is the person entitled to conclude a binding contract. Requires us to determine the law applicable to the thai company 4. Would a possible Spanish judgment produce legal effects in Thailand? Or, conversely, would a possible Thai judgment produce legal effects in Spain? It refers to enforcement and recognition of foreign decisions. RECAP: IB law: State legal branch that deals with the problems raised between crossborder business conflicts There are as many IB law as countries, each country has its own IB law

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The Spanish company “Pamex” has the intention to conclude with a Thai Company “Shinga” a contract of sale of silk clothes. However, before coming to such an agreement, the Spanish company’s legal representative wishes to know the answer to the following questions:

We have to take into account the 3 blocks of the IB law 1) Dispute resolution mechanisms, jurisdiction 2) Applicable law, conflict of laws 3) Recognition and enforcement If we apply these 3 legal areas 2 important questions appear: -

Which courts will be competent to hear de Irish claim? This question refers to the first legal area, it seeks to determine the competent legal authority. The solutions can be different, if we take the irish company side they have 3 different options to sue the spanish company. They can sue the spanish company in Ireland (before the Irish courts), in Spain (before the Spanish courts) or in Morocco (the place of destination) (before the Morocco courts). These 3 countries are involved in the case. They have to determine whether they are competent or not. Sue the Spanish company in Ireland doesn’t mean that the competent courts are the Irish courts, the same happens with Spain and Morocco. The courts of any of these countries can be competent to solve the Irish claim. If Irish company fails the lawsuits in Spain (before spanish courts) in this case for the spanish courts to continue with the proceedings they need a legal rule making them competent, otherwise they won’t be allowed to continue with the claim. The same happens if the Irish company sue the Spanish company in Ireland or Morocco, the courts need a legal rule that makes them competent otherwise they will have to decline the case. We have to find the rule inside the rules of IB law dealing with jurisdiction.

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Which law will govern the contract? This question refers to the second legal area, the applicable law. If the irish company sues the spanish one in Spain and we have determined that the spanish courts are competent Spanish courts will have to apply their own rules of IB law, as IB law is relative, each country has their own set of rules. The same happens if the irish company sues the spanish one in Ireland or Morocco. The courts of each state have to apply their own IB law dealing with the applicable law and their jurisdiction

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Irish company (claimant) vs Spanish company (defendant)

1) The plurality of legal sources 2) The interaction among legal rules Plurality of sources 1) Legal sources (public sources) a) European Union Law b) International conventions c) Internal Law 2) Non-legal sources: Lex mercatoria (private rules) Public sources Public sources, the rules that have been adopted by public institutions with power to adopt legal purposes. Always bind the contracting parties. European Union Law: An economic and political International organisation. When it was created it only had economic objectives, nowadays this organisation not only seeks to achieve economic goals it also has social and political objectives. It is the law governing the European union. Rules can be divided into: -

Primary legislation: Refer to the treaties of the European Union that establish the framework (values, principles…) of the European Union actions. There are 3 main treaties (Treaty on the European Union, treaty on the Functioning of the EU and charter of fundamental rights of the EU) all of them establish the basis of the european actions. In the second treaty the article 81 establishes the EU competence on IB law.

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Secondary legislation: Refers to the fact that this kind of rules have been adopted by the European union institutions, Parliament, commission and council. There are 5 categories of rules, the most relevant ones are regulations and directives. The difference between them is that regulation is entirely binding and applies directly to all member states. Is self-executing, it applies directly without requiring the member state regulations to implement the content of that EU regulation. Directives need a legal rule to make them competent.

International conventions: In terms of international trade law the most important international organisation States may conclude either multilateral or bilateral conventions. Multilateral the most common ones, mainly adopted in the context of international organisations

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IB law has to cope with two main difficulties

The Spanish parliament is the only public entity to adopt legal rules in the field of IB law. In Spain there are some regions that are competent to adopt legal rules (Catalan parliament, Valencian parliament…). However we should bear in mind that in the field of IB law only the Spanish parliament is competent to adopt rules, not the regional parliaments. ( art. 149 of the Spanish constitution) Ex: Taking back the example of the irish and the spanish company, if the irish company sue the spanish one in Spain, they must find a rule that makes the spanish courts competents. The first thing they have to do is to analyze the plurality of sources, they have sued the spanish company before the spanish courts but they have to be competent, the rule that makes them competent may be found either in the EU Law, International conventions or in the internal law. They have to learn to how to manage the problem of plurality of legal sources Private rules. Lex mercatoria Private rules have been adopted by private persons like traders or professional organisations or even private organisations as the international chamber of commerce. The main difference between public and private rules is that private rules (those rules contained in the Lex mercatoria category) are adopted by professionals, private parties (traders, professional institutions…). For instance, there are companies that when entering into negotiations in order to conclude the contract, with another company, already have a standard model of contracts. This standard contract is an example of a private rule because they have been adopted by traders. In other situations there are also professional organizations that also ad...