Appunti International Business Law - a.a. 2021/2022

08/09 International law - classifications

What is law?

The word ‘law’ has a variety of meanings.

Def.: Law is the sanctionability, it is a system of sanctionable rules. In fact, one of the characteristics of legal rules is that there is a sanction in case of violation of such rules. This is because a certain community accepts these rules, and accepts the fact that not abiding by rules implies a sanction, that is agreed by the community and it is usually enforced by a subject specialised in sanction in case of violation of rules. The violation of such rules is punished by the community with a sanction.

Law is usually enacted by a legislator, the power of which to issue legal rules is recognised by a community (in some jurisdictions judges have a de facto power to legislate) and it is enforced by bodies entrusted of the judicial power. We usually have two main subjects: one is the legislator, the law-maker, the subject who has the power to give the rules. In modern times, the main legislator is the Parliament, there are also supplementary laws that are produced by other subjects. Their power is legislative power, not legal one.

Legislator, legislative, law-making = production of rules.

The activity of the judge is called judicial activity, and the power to which the judge belongs is called judicial power.

Judge, judicially, judicial = enforcement of the legal rules.

Legal pluralism?

In modern times the production and enforcement of legal rules is (almost) a monopoly of national/state legislator, but until one century ago there were a lot of legislators, who actually acted together: states local legislator, the Pope, the Corporation (merchants, workers, they had their rules related to their profession), Rome’s law, ext. Every person had to follow a number of systems of rules (different from each other), with their own legislator and judges. After the French Revolution (Napoleon), in the beginning of the 19th century, the State started to concentrate all the legislative power. The other powers are still there, but the State has concentrated the legislative power and law production in its hands.

The big exception to the monopoly of justice is arbitration, a private system for solving business disputes, very important and successful in international world. Actually, the monopoly of the production of law by the State is not 100% complete, there is still a very small non-state law production. In particular, there are some private organisations that produce small legal rules, as ICC (International Chamber of Commerce).

One of its more successful products are the Incoterms, which are produced privately and can be incorporated into contracts as technical tools. These technical tools can actually get the force of the law, but they are not laws, their power is limited (Incoterms can just described the condition of the sale, such as responsibility, transfer, ownership). They must be incorporated into contracts, in fact they are not valid in general, they are just tools that business players can use to simplify concepts, codify and standardise expressions. When there is a problem (someone sues someone), the Incoterms are there and any judge in the world would read the contract and treat them as a law (it’s the parties between the law), but the parties have no power to enforce this. Plus, the ICC cannot force the enforcement against a subject. In order to become legal, a sanction must be accepted, recognised ed enforced by the States. Still, even if the production of these rules is private, at the end of the day the only object who has power to make a rule legal is the to the main legislator.

Also non-state subjects produce “legal rules”, in particular in the fields of international and business law, but (a) their scope is extremely limited and/or (b) they must be incorporated by the parties into contractual documents and (c) generally speaking those subjects do not have the power to enforce those rules: enforcement power is still closely held by states.

Sources of law

The word ‘source’:

• Source of information;
• Source of production of the law: any act or fact that produces legal rules in a given system.

Example of other systems: Mafia, Islam, Confucian system. The rules of Mafia clan are legal rules within a system because they are clear and there for being respected. Also in China there are a lot of systems of law that still coexisted (the personal relations vs. The Party > more flexible than legal rules). The legislator is the main the subject that produces the law, but the legislator is not always the Parliament.

A) Statute law (or statutory) law (diritto legislativo*): Legislative Acts (laws in the strict sense of the word) are written documents by which an authority vested with the power to legislate (the legislator) draws up legal rules. These sources are organised hierarchically: at the very top usually there is the Constitution, which is considered as ‘Super source of law’. All the laws come from that Super source; then there is ordinary law, the law approved by the Parliament; then there is a notion of subsidiary o secondary legislation that is produced by a lot of legal organs and centers (The Ministers). In Italy these are more or less the only sources of law, and this is true for all the legal systems belonging to Roman Civil law tradition.

*In italiano ‘legge’ può essere una legge specifica o indicare un sistema generale; in English: the system is law, the single law is Statute law.

B) Case law: judicial precedents are decisions already rendered in the past in cases which appear analogous to the case to be decided (stare decisis). England, US and all the former British colonies have a system of law called Common law (English traditional model) and its functioning is different from the Civil law system. In their tradition the legislator (Parliament) is there but in practice the main legislator is the judge itself. While we have a very clear distinction between the legislator, the parliament, and the judge (judges have their own professional career, they have a separated power, there is the principle of separation of powers (judicial, legislative and executive), which is strictly respected, in these countries the judge makes the law because these countries’ law is based on cases (‘diritto casuistico’). When the judge is called to judge a certain case, at first they check the precedents of similar cases, they do not actually refer to the law, even though if there is a Parliament law, they respect it too of course. Many subjects of English law, such as contract law, have not been regulated by any laws in history, they are just regulated by a huge set of judicial precedents, that have developed through the centuries on the basis of a system which is called Precedent Law (‘diritto precedenziale’).

C) Customary law (costumi, tradizioni, usi): almost disappeared in formal adjudication in modern times but still existent as social practice (customs). It is a system which is not controlled by the State. It is a use that is accepted by the community as a law. There is no sanction, just a vague social or cultural sanction. Italian law says that customs can be used by the judge only where the law is silenced and when there is evidence of the fact that is really recognised and custom applied by the community.

Legal systems

Legal systems are usually divided into «legal families»: this part of comparative laws is called macro-comparison.

In the past these differences were very clear but the globalisation have led to a standardisation of formal law and of the language (we commonly use a lot of English words, such as franchising). But still, the fact of importing certain legal model from abroad (generally speaking from the US) does not necessarily mean that you enforce the rules in the same way of the importing country. China is an example of the formal part of the law that gradually have become more and more similar to the one of the most industrialised countries. Actually, the kind of enforcement (first of all, the language itself) was similar but not completely identical. Furthermore, there are huge differences between countries on the ways the law written in the books is actually practiced (law in the books v law in action). Above these differences, legal systems can be divided into:

• Territorial systems: can be classified as follows:

Civil law: based on the Roman-German tradition; organised on big legal texts called Civil Code. Civil law is an ambiguous expression because it means:

• The jurisdiction that is based on Roman-German tradition and that is distinguished from the Common law;
• ‘Diritto civile’, the part of the law related to civil relations.

China, Japan, Korean, Vietnam all belong to the Civil law tradition, they have imported the Roman-German Civil law model. China, for example, approved its first Civil Law in history last year.

Common law: is based on the British tradition. It is not been very successful in terms of diffusion in the world (limited to former British colonies), but actually it is the law that is written in the most important and globalised language. This is a very important point because law is a matter of language and being English the language of international trade, the Common law gains an advantage in terms of legal market.

Hong-Kong: it was a former colony, it has a Common law system, it is gradually abandoning the English language. Slowly Hong Kong is becoming more Chinese and Common law remains there: how could it develop?

Mixed-jurisdiction: Common law and Civil law mixed up.

An example is Japan, which is a Civil law country. It has a Civil code, and the organisation of courts is similar to ours, judges use legislative law, they don’t refer to presidential one. However, at the same time, when we move the perspective to constitutional law then it is really almost identical to the US (because in 1947 the Constitution is actually written by American officials). Also, the way the judge can raise constitutional questions is similar to the US + Japanese law in terms of market, competition regulations. The mixed-jurisdiction of Japan law is due to the stratification of Confucian tradition, German Civil tradition during the Meiji reform period and then after the US occupation.

Mixed-(post) socialist: General influence of politics on the rule of law.

Mixed – religious/customary (or with religious/customary elements).

• Personal systems: usually religious systems, as Islamic law, Jewish law, Canonic law, ext. = some rules out of the system of the country you live are legal for you.

vs. Egypt: the law is laic, but article 1 of the Constitution says that the first source of the law is the Sharia. In many countries the idea is that religious law cannot be a personal choice, but should be part of the law of the country, even if it can be applied only to believers. The main sanction of the violation of religious system is sin.

Modern legal classification

• Public law (‘diritto pubblico’): is the set of rules regulating public institutions (state, governmental centres and local agencies, public bodies in general > how they organise, how they work) and their relations with individuals. There is a specialised judge who judge cases that belong to public law, it is called administrative judge (In Italy TAR).
• Private law: is the set of rules regulating of individuals personal and economic relations between themselves. Some state-owned companies act as private subjects Eni deals a dispute as a private subject, that is it is managed by a common judge. Personal is related to marriage, adoption, hesitance, ext., while contracts, ownership are ‘diritti patrimoniali’, related to economic relations. In the Italian system, private and civil law are homonyms, they can be used interchangeably. Private law includes commercial law (intellectual property, trade markets).

In Common law countries, this difference is less evident: in Italy criminal cases belongs to public law, in England the two parties are put in the same level (The Queen against Pinco Pallo) in a private way, the judge is the same, there are not specialisations.

Public and private law

Public law

• Constitutional law;
• Administrative law: is the core part of public law, it regulates public organs and the disputes between them;
• Criminal law (‘diritto penale’);
• Civil and criminal procedure law: the procedure law is a part of the public law, the procedure is the way courts work (how the processes are held from the very beginning to the end, formalities…). In Italy it is a public activity. ‘Procedura’, ‘Codice di procedura civile e penale’ are the codes that regulate the process, they do not regulate the matter itself (for criminal cases, there is a criminal code that says what is a murder and how many years are needed, and then a criminal procedure law, which doesn’t consider the single crime);
• Economic law: regulates the market (competition, regulated markets (finance, banks, hospital), tax, etc…), it strong affects the business environment but it is strictly public.

≠Business Law, which is private law.

In some cases, there is a conflict between private and public law. I am the largest pharmaceutical company, I want to buy one more small company in EU: by private law, contract law I am fully allowed to do it, but then there are rules related to antitrust (economic law, public law) that forbid the concentration of too large share of certain market within Europe or single European country.

Private law

• Civil law (in the strictest meaning: ownership, obligations, torts/civil liability): economic part, the most traditional one because all of these are also a matter for individuals, not just or companies;
• Family law;
• Inheritance/succession law;
• Commercial law or business law (‘Legge commerciale’: enterprises and companies, business contracts, bankruptcy law, etc…).

≠International Trade Law, which is included in Economic Law, so public law.

International law

Is international law a real “law”?

• Public international law (‘diritto internazionale del pubblico’): it is a law of treaties or international agreements (‘accordi internazionali’) and law of international organisations. In fact, it is not that different in terms of language and contracts from private contracts between private subjects. However, while a contract in case of dispute has a natural judge (the court of a State or a private arbitrator), in International Law there is no legal way to enforce the decision, there are few courts that are competent for international disputes. For the first, the judge not only has the power to decide the potential dispute on a contract, but also to enforce their decision using public force (you are liable, you must pay a damage). If the losing party does not spontaneously perform this obligation, the judge has the power to say the goods of the losing party who did not execute the decision of the judge. There is nothing like that in International Law and this is a problem, international courts that have their own capability to enforce their decisions are still missed. International law is a midway between law and politics.

Generally speaking, all disputes related to international agreements are sold by states through negotiation.

Exception: WTO has its own dispute settlement board: internally the organisation has its own power to decide about the dispute between two or more member states. It has court of appeal, so it has two degrees, it decides who is right and who is wrong. So, if Europe introduces some duties on the import of any kind of goods from the US, and these duties are not lawful (against the agreement), the board can issue the decision and punish the EU by giving to the US the power to make counter measures against the damage that has been created by the duties. It is actually similar to a sanction because the political balance within the WTO is broken, but it cannot change the decision of the country, it can just allow it to make counter measures to balance the damage > the enforcement is more political than legal.

Treaties have no much to do in daily business life, international trade, investors. Exception: the contract of sale (‘contratto di compravendita’) is regulated by national law but there is an agreement, a treat called the Vienna Convention (on the sale of movable goods, this convention is not applicable to real estate, houses and non-movable goods), which is very successful and an unusual example of the potential impact of a public international law convention (more political) on a part of the business that is very common in daily life;

• Private international law (‘diritto internazionale privato’): a very specific kind of law, related to conflict of laws, conflict of jurisdictions > which law will be applicable to cases in which the two subjects are from different countries? It is part of national law, all the countries in the world have their own rules on conflict of laws. In Italy we have the ‘legge 218’ (1992), that covers both the conflict of laws (which legal rule is applicable in certain situation (marriage, murder, …)?) and conflict of juridsdiction (which judge will be competent in case of dispute related to this case?);
• International business law (‘diritto commerciale internazionale’/‘diritto degli affari’): part of national rules and treaties, private ≠ International Trade Law (‘diritto del commercio internazionale’): part of public international law related to trades, to commercial relations between states.

22/09 International business law

The set of rules and practices regulating international business transactions (contracts) and disputes.

Not only is a matter of codifying written laws, but also a matter of doing business. International Business rules are mainly produced (and enforced) by national legislators and courts (judge), but with a significant contr