European and International Law

Topics that have been analyzed through the course

• Introduction to international and commercial law …………… p.2
• Applicable law ……………………………………………………………………… p.7
• Rome I Regulation 2008
• Hague Convention CISG …………………………………………………………………………………… p.14
• Jurisdiction …………………………………………………………………… p.26
• Brussels I Regulation 2012
• UN Convention on the Law of the Sea 1982
• Arbitration ……………………………………………………………………… p.33
• NY Convention 1958

Introduction

Basic concepts to get into International Law and its roots.

Roman Empire

In the early ages, commerce between the colonies was limited to commodities. Commerce was not a major concern for Romans as it was limited and the cost of moving goods was very high. Moreover, goods and chattels were produced and consumed locally; only pater familia had the opportunity to negotiate everything.

With the fall of the Western Roman Empire there had been the edification of a special set of rules dedicated to merchants, which were being developed like maritime law or company law “societas”.

Medieval era

International trade was very uncommon because of the de-urbanization, depopulation and invasions. All products, goods and chattels were produced and consumed locally. The turning points was in 1000 b.c., thanks to a growth in population and to innovations, commerce was possible to flourish. Therefore, craftsman carpenters, for instance, tended to form association based on the idea that they were the secret owner of traditionally imparted trade seen as an “art”.

These associations gave birth to the creation of guilds, associations of people comprising the same profession, manufacturing same type of products. Within those guilds, who took part of them, started to develop internal rules so that people were not subjected to jus civil. Guilds were seen as important part of the city life.

G. have been created to preserve the rights and privileges of their members. Therefore, they controlled commerce because only members of guilds could trade locally to merchants or consumers. People who didn’t belong to guilds couldn’t sell goods to anyone but people from guild could do so. In addition, they had a sort of monopoly over activities with foreigners. What’s more, people from guilds have internal arbitration courts devoted to solve disputes among its members.

Renaissance

International trade increased and developed following the guilds patterns. Merchants became really important people, especially in Italy who developed set of rules which were different from the so-called Jus Comune, used as a tool to settle dispute among ordinary people. This set of rules took the name of Lex Mercatoria, law of merchants relying on experiences and activities of guilds.

Under Lex Mercatoria new rules and institutions were developed such as Bankruptcy and Bill of landing. As far as Bankruptcy is concerned, in Roman Times, if someone has a debt towards many people, the first creditor will be the one who gets back all the amount and who comes later may run the risk of not receiving money at all. Since merchants recognized their activities as risky, they wanted to share as losses as profits. In case of debts, merchants wanted to modify the previous concept about bankruptcy and state that all creditors must have back a share of the money which they had put in the trade.

As far as Bill of landing is concerned, it is a document issued by a carrier which details a shipment of merchandise and gives title of that shipment to a certain party and also that the goods in question are transported legally. It is a very important document used in international trade even in these days, since it guarantees that exporters are going to receive a payment and importers receive merchandise.

Once in 1648, there was the time for a big change known as “The Peace of Westphalia”. It develops the concept of contemporary states, states and citizens are now considered to be as a population within boundaries of a certain state, where there will be one official law/freedom of movement.

Westphalian sovereignty is seen today as the principle of international law, according which each state has sovereignty over its territory and domestic affairs, to the exclusion of all external powers; it’s based on the principle of non-interference in another country's domestic affairs, and that each state is equal in international law regardless dimension of countries.

This important concept determined the:

• Birth of the State, in the sense that each state become independent one to another, meaning also the closing of each legal system to the others, giving rise to the NATIONAL LAW;
• Definitive supervention of the territorial principle, according which a sovereign state has exclusive jurisdiction for all the matters within its borders BUT is barred from exercising jurisdiction beyond its borders;
• Legal equality among states.

After the Peace of Westphalia

Thanks to Westphalia sovereignty merchants had problems seeing that they used to act with their principles/law worldwide, but after P. of W. they couldn’t do so anymore. Why? Because there were a process of fragmentation as every king started to codify their own law in their state. All this led to different solutions and unpredictable outcomes.

That’s why there was the time to shift from Lex Mercatoria to International Law.

After the closing of each state legal system, there should have been an area devoted to international conflict solving. Each jurisdiction therefore created a conflict of law or private international law, the branch of any legal system that deals with cases having a foreign element and that determines which national law governs the solution of the various problems involved in the case. In this way, a national can rule or accept ruling from abroad.

Sources of law of any international transaction

So far it’s possible to highlight that in case of disputes with private international law it could be possible that one country may not accept rules by one of the state. That’s why had been pointed out 3 ways to provide solutions to act once this problem may arise.

• Freedom of parties or freedom of contract, a general principle according which parties can define themselves the contents of their transactions regardless their national law (this came from merchants way of acting), making reference to private regulations: drafted as laws but not emanated from the state. This way of acting derives from guilds system.
• Lex Mercatoria, refers to merchants special rules identified as a body of commercial law used by merchants throughout Europe during the medieval period and boosted between 10th and 13th century under the experiences of maritime republics. It had functioned as international commercial law and also as a system of best practices and customs enforced by a system of merchants courts along the main trade routes.
• State law is a body of law promulgated by a state legislature, the opposite concepts of freedom, which sets limitations in transactions and determines the freedom of one self and if his/her agreement is valid or not.

Actual conflicts of law rules

As the time went by states really felt the need to open up to foreigners so it’s important to provide an efficient set of rules, a multilayered system.

In 1957, thanks to Rome Treaty, several states of Europe joined the European Community, one of the major concern of the EU was to create a common market, an automatic enforcement to decrease costs of international trade as well as downsize the concept of Westphalian sovereignty in civil and commercial matters. EU started legislating and providing rules that were the same in all EU member states, providing the same protection, increasing the efficiency of cross border transactions. Thereby there were several rules that acted better than the national ones.

This led to the creation of a system which is made of:

• National Internal Rules: defined by each state, they can differ from one state to another, so different judges can provide different solutions for the same problem. These type of rules are not efficient in case the state in question is exported orientated.
• Bilateral agreement: refers to all those agreement made between two nations to provide shared solutions in litigations between citizens from different countries. (i.e. Italy and China determined a set of shard rules in order to determinate what happens if Italian people want to start a legal action against someone in China)
• Multilateral agreement or conventions: models of rules which are provided by permanent bodies or international organizations, which became part of the legal system of the states that ratifies the convention. Those rules will be applied only in those countries which ratifies the multilateral agreement and only in them there will be the same outcome. Furthermore, states can decide which rules to ratify. (i.e. Brussels 1968 convention or NY 1958 convention).
• European Union Law: it’s automatically binding in every EU member state. Those states can’t decide whether to ratify it or not, it’s mandatory for all of them. It creates same outcome and shared solution in all EU member states.

It’s relevant to highlight which one prevails over the others. EU law prevails over everything; multilateral agreement prevails over bilateral agreement and national law; bilateral agreement prevails over national law. Basically national rules are the weakest and EU law is the strongest.

The sources of EU law

Now once EU law has been introduced, similarly it’s important to have a closer look at the sources of EU law. EU sources may differentiate themselves into primary, secondary and supplementary legislation.

Primary legislation

It’s created by the legislative branches of European government. It issues treaties of the EU which mainly settle the fundamental rules all this fundamental principal that lays down the very basis of the whole European population. Principles like freedom of trade, freedom of movement/working/money transfer.

The example par excellence is TEU where are listed all fundamental rights of the EU but also TFEU treaty on the functioning of the EU. Another example is EURATOM, treaty establishing the European atomic energy community.

Treaties and its principles are at the top of the hierarchy of the EU law.

Secondary legislation

It’s created by the executive branch of European government. It issues the so-called “acts” that provide a set of tools in order to achieve agrees objectives. In art. 288 of TEU are listed 5 EU instruments that are: regulations, directives, decisions, recommendations and opinions. We will look only at the first 3.

• Regulations shall have general application. It shall be binding in its entirety and directly applicable in all Member States. R. prevail over decisions but not over directives, they’re mandatory in all the member states, immediately. The principle that lays on r. is the one of UNIFORMITY, in fact thanks to r. there are same legal texts with same legal power that leads to same consequences. In this way, unpredictability may not occur.
• Directives aren’t directly applicable, they represents the usual way for EU to push rules in the law of member states, in fact through them states are requested to provide internal rules in order to achieve these results and to modify their law in order to achieve same results within a time frame. D. may provide different solutions, approaches that’s way nowadays they are losing importance because they're not efficient. The principle that lays on d. is the one of HARMONIZATION, they’re binding just to the result to be achieved, upon any or all of the Member States to whom they are addressed, but they leave to the national authorities the choice of form and methods. National legislators must adopt a transposing act or ‘national implementing measure’ to transpose directives and bring national law into line with their objectives. Individual citizens are given rights and bound by the legal act only once the transposing act has been adopted.
• Decisions prevail over everything, they represents the sentences issued by the Court of Justice of EU, providing a unique interpretation of EU law. The principle that lays on d. is the one of UNIFICATION, they’re binding in their entirety only to those sates to whom they’re addressed. D. give interpretation of the regulations and directives, saying the final word in ambiguous situations of regulations and directives.

Supplementary legislation

Represents Court decisions that supply default rules to deal with cases not covered by parties’ agreement.

Applicable law

What is its fundamental regulation?

Is the n° 593/2008 of the EU Parliament and Council of 2008, on the applicable law to contractual obligations. It’s called the Rome I regulation, because it’s the development of a former convention (Rome 1980 convention on the law applicable to contractual obligations).

There’s a difference between regulation and convention: in fact a convention is a treaty multilaterally agreed by several countries contrary to the regulation.

All EU countries ratified and adopted Rome 1980 convention and so EU wanted to develop it as a Regulation, so that it was automatically applicable to all the members and creating a common legal text.

Why applicable law is important?

Because as each state has sovereignty over its citizens and everything happens into its borders, any agreement has to deal with at least one national law. So:

• It is not possible to have a super national law/universal law;
• There’s always the influence of a national state law, even if there’s an arbitration;
• Because even in arbitration case, we need to go to other party to have an enforcement that need to be done under the jurisdiction of a state judge, who will apply his internal national rules, in order to give effectiveness to his sentence.

Rome I Regulation 593/2008

It helps to understand which is the applicable law in default of expressed choice especially in cross-border transactions.

It represent an automatic enforcement of the principles of the Rome 1980 Convention and its rules are affecting all the member of the EU.

This Regulation shall apply to contractual obligations in civil and commercial matters only — as mentioned in art.1.

Art.2: “Universal application”

Gives the opportunity to submit an agreement to a foreign law, not only if such law is part of EU but also if the applicable law is the law of the country not part of the EU.

This regime applies only to EU members but parties may use in contracts also the law of a nation not part of the EU.

This art. moves towards the “freedom of choice” rather than default provisions.

Art.3: “Freedom of choice”

There’re several legal concepts in this article.

• The contract shall be governed by the law chosen by the parties;
• This choice can be made expressly or clearly demonstrated by the terms the circumstances;
• So there’s no need to have a written evidence of the choice as: “the choice can be made expressly or clearly demonstrated by the terms the circumstances”.

So it’s possible to have witnesses, oral evidence in order to support the choice made by simply shaking hands seeing that no formalities are requested. On the other hand parties can also provide explicit choice of law.

• Their choice about the applicable law can affect the whole or a part of the contract;
• Parties may have several laws to govern the legal relationship, having an unlimited freedom in deciding the contents at a worldwide level. We can have an agreement ruled not only by a foreign law but by several laws. Any law of the world can be applicable to the agreement.

Art.4: “Applicable law in the absence of choice”

In case the applicable law hasn’t been chosen the law governing the contract shall be:

• For contract for the sale of goods, the law of the country where the seller has his/her habitual residence. Residence is different from nationality or domicile.

Domicile: actual and temporary presence in a country.

Nationality: being a citizen of the country.

Residence: permanent presence in a country, the place of administration, the place of business.

• For contract for the sale of services, the law of the country where the service provider has its habitual residence;
• For contract of immovable property or tenancy of immovable property, by the law of the country where the property is situated;
• For a tenancy of immovable property concluded for private use for no more than 6 months, by the law of the country where landlord has his habitual residence;
• For a franchise contract, by the law where the distributor has habitual residence;

2. Where the contract isn’t covered by par.1 or by more than 1 point from a) to h) contract shall be governed by the law of the country where the party required to effect characteristic performance, has his habitual residence.

3. When it’s clear from all the circumstances that the contract is manifestly more closely connected with a country, the law of that other country shall apply.

4. Where the law cannot be determined by para. 1 and 2 by the law to the country with which it is most closely linked.

Art. 6 “Customer contracts”