International Business Law

International Business Law

Introduzione generale

Law is a system of sanctionable rules (il diritto è un sistema di regole), all these rules shall be protected by sanction. If one subject violates a rule, then there shall be a sanction. The sanction is the most important characteristic of legal rules (also a social sanction, disapproved by society; in legal terms, it is the all community that provides a system of formal sanctions against the violation of legal rules; the border between social rule and legal rule is very vague).

In the last years, we are accustomed to consider the law as a matter of the state. There is a certain connection between law and state, legal rules and state rules. Religious rules nowadays are not part of the legal sphere, but there are countries where religious law is part of the state (Art 1 in the Egyptian constitution says that the Shariah is the main source of Egyptian law). In the past, before the French Revolution, there was no border between the law of the kingdom and the law of the church; they were contemporaneously effective on subjects. Since then, the law has become a kind of monopoly of the state.

Creazione e applicazione delle regole legali

Il ruolo del legislatore

Law in modern times is enacted by a legislator, a subject who produces legal rules. Any subject who has the power to enact legal rules (Italy -> Parliament, in some cases the government, decreti legislativi issued by government and approved in a certain time by the Parliament; UK -> judge can be a legislator because in some cases his decisions are law).

L'applicazione delle regole legali

Once legal rules have been enacted by a legislator, the enforcement of these rules is the competence of the judge (magistrati divided in two main groups: magistrati requirenti (prosecutors) and pubblici ministeri those who have the power to accuse and investigate a subject, and magistrati giudicanti the real judges).

Ruolo dei soggetti non statali

There is still a minor role played by non-state subjects, especially in the field of international business law. These subjects have a wide scope of intervention in international law, but they do not have the power of the state to enforce their rules by themselves. Therefore, the rules produced by these non-state subjects, for example, the International Chamber of Commerce, must be accepted by the parties because they are not binding as state rules. They represent some kind of private codification that is produced in specialized associations.

Esempi di codificazioni private

For example, the International Association of Engineers has its own contract standards that are not technically law but can become binding once the parties themselves have accepted to take them as an example and put them in their contracts. This incorporation by the parties in their documents and contracts makes them, at least for the parties, legal and enforceable rules.

Fonti del diritto

A source is a document in which we can find information of a certain kind:

Fonti principali del diritto moderno

• Statute/statutory law (diritto legale): law produced by the legislator and more specifically produced by a legislative body. Typical of civil law systems, the judge has to first check the law enacted by the parties.
• Case law: judicial precedence, decisions rendered by judges in the past in cases which appear analogous to the case to be decided, typical of common law systems. The present judge has to follow the decision made by the precedent judge.
• Customary law (legge consuetudinaria): an habit with a long history that has become something people consider binding. Nowadays, the application of customary law is very occasional and it can be applied only in specific occasions.

Sistemi legali

Legal systems (territorial legal systems, territorial law is applicable to people in a certain territory) can be divided into two families:

Sistemi di diritto civile

Examples include Italy, France, Germany, Switzerland, Japan, and China that imported the Roman-German model in the 19th century. It's based on written laws enacted by the Parliament, particularly on Codes (Codici) that are laws. It had great success in the world based on its own characteristics and prestige.

Sistemi di common law

Based on the British system, it circulated in the world thanks to the English language. It is mainly the law of former English colonies.

Sistemi misti

Examples include Israel, South Africa, Japan - civil law for family, marriage, contracts, successions; common law for business, constitutional law.

Diritti pubblico e privato

Diritti pubblico

Public law (diritto costituzionale o amministrativo): institutional law is the core of public law but covers also some relations between institutions and private subjects. Criminal law is public because it involves the relation between the state and the accused. Procedural law is public (related to process). Economy law (competition, financial institutions, the state has a direct interest to regulate them).

Diritti privato

Private Law: only related to the personal and economic relations between individuals. It includes businesses, civil law (private matters, marriage, contracts, ownership, obligation), and business law (diritto commerciale). The distinction is misleading because the Italian civil code is related to both civil law and business law.

Codici civile e penale

Civil and criminal code provide definitions of crimes and institutions, procedural codes only deal with the process, how the right and duties provided in the substantial laws are actually enacted by the judge.

Il diritto internazionale

International law is part of public law because it is the law regulating the relations between states, quasi-diritto law with unusual characteristics. It is divided into three main areas:

• Public international law: relations between states and treaties and international organizations, law of international treaties.
• Private international law.
• International business law: law and practices of the global business community.

Leggi commerciali internazionali

International trade law is part of public international law related to treaties and tariffs. International business law is related to international activities of private subjects, closer to private law but with an international perspective. International business law is a set of rules regulating international business transactions and disputes.

Contratti internazionali

Contracts are the tools for almost all business transactions (negozio giuridico). They are regulated by legal rules produced by legislators and by international treaties that must be ratified by national legislators to become law. [United Nations convention on the international sale of goods 1980, enacted by the UN, ratified by almost all the important countries in the world, through ratification countries make this agreement part of their national system]

Parti dei contratti

Contracts are negotiated usually by companies and managers. An important role is played by general counsels (legal managers of a company, they play a specific role in contractual drafting), lawyers or law firms (they draft the contract) and judges and arbitrators (in case of conflict).

Art.1321 cc

"A contract is the agreement between more parties to establish, regulate or extinguish a patrimonial (che comporta dei valori monetari) legal relationship among themselves" (any country has its own definition).

In general terms, a contract is a voluntary, deliberate, legally binding, and enforceable agreement creating mutual obligations between the parties. Once the contract has been signed, the parties are obliged to do something the parties agree to regulate their relationship with a contract becoming sanctionable. The violation is sanctioned by payment, for example.

Autonomia contrattuale

The parties can be natural or legal persons (faren) -> corporations and companies represented by an individual but he behaves on behalf of the legal person not on behalf of himself, a business subject established in a certain legal form that provides legal personality to the subject.

Contractual Autonomy: widespread principle of contractual autonomy (freedom of form and freedom of content of a contract), the parties are free to set the rules of their agreement in the way that they prefer/to regulate their economic relation as they want, all systems of rules give large freedom to the parties to regulate the contract as they prefer but there are some limits:

• Freedom of contract against social interest: there can be restrictions relating to urban planning, fair distribution of services, environmental protection, etc. If the state considers that there is a social interest that must be protected, then the freedom of the parties is limited by an interest of the state. (You cannot open the same kind of shop in the same street and vice versa)
• Freedom of contracts against free competition: restrictions against monopoly practices and concentrations, anti-trust
• Freedom of contract against protection of weaker parties: the state provides a set of rules that cannot be freely negotiated for example by the employer against workers or by sellers against consumers. If one party is bigger than the other, the state should intervene and limit his freedom.

Evoluzione dell'autonomia contrattuale

Until the Second World War, freedom of contract was considered a kind of untouchable principle, part of the most important freedoms of the French Revolution. Freedom of contract was created with the Industrial Revolution and it was incorporated into the law by Civil law countries in 1804. In the last 50 years, there have been a number of new contracts invented by business people that became tradition, for example franchising, leasing, joint venture.

Limitazioni

Basic limitation of freedom: contracts should not be against the law. Natural obligations (obbligazioni naturali) for example for gambling and prostitution, agreements that are not protected by the law, it means that there is no sanction, the law considers that for moral reasons these kinds of agreements should not be protected as contracts.

Contratti internazionali e nazionali

The definition of contract is applicable to both domestic contracts (between two Italian parties) and international contracts (between two parties from two different countries or a contract that has something to do with another jurisdiction).

Elementi dei contratti internazionali

International contracts: contracts that contain one or two foreign elements (elements of extraneity) and therefore are connected with more than one state/legal system. Contracts between parties belonging to different states and different legal systems or contracts that must be performed in a third country. Main sources of international contracts:

• National laws: a contract is regulated by national contracts law
• International conventions: the United Nations Convention on Contracts for the International Sales of Goods (CISG) or the Vienna Convention of 1980, they are enforceable only when they become part of the state regulations
• Non-state rules or Lex Mercatoria: Incoterms (ICC)
• Customary business practices

Leggi applicabili ai contratti internazionali

In any event, national laws are still at the foundation of the whole international business legal framework. Competition is regulated and evaluated at the national level and European level, a lot of contracts that could negatively affect the principle of free competition can be stopped or modified by anti-trust competition authorities at both levels. Concentration of economic power is the main anti-trust topic, it is not allowed to concentrate too much the economic power in a certain industry in the hands of just one subject, there are some thresholds (soglie) over which the anti-trust authorities can intervene they can approve the transaction in some conditions. For example, a merger between two companies that already cover a wide portion of the market, they allow it but the seller shall sell a part of his business in order to avoid that concentration of market share.

Bilanciamento delle relazioni contrattuali

Attempt to rebalance relations that are unbalanced, the law is based on the principle of equality between subjects, all subjects are considered to have the same rights but after the end of the 19th century they realized that formal equality does not correspond to substantial equality, that there are contractual parties that are weaker than others, the law tried to protect some categories of people such as workers, consumers, gender.

International contracts are fully contracts, there is no distinction between international contracts and domestic contracts, the only difference is that there is one or more element of extraneity and in international contracts two or more legal systems are involved. There are some exceptions to the most important way of defining an international contract, that is according to the nationality of the parties (individual or legal persons).

Giudici e leggi applicabili

Which law would regulate the contractual relation? Which judge will have the power to decide on the conflict between the parties? In the case of a domestic contract (if the parties do not decide otherwise) is the Italian judge. In international contracts, most likely the applicable law will be the Italian one because of a technical reason. The decision of which judge is based on the international private law applicable.

Legge internazionale privata

Who is the competent judge and which is the substantial law to be applied are regulated by the international private law (diritto internazionale privato) (different from international law which is the law of treaties and international agreements and it is part of public law), when there is a conflict two main questions arise: conflict of law or of jurisdiction (or International civil procedural law), every country has its own international private law system. International private law is national/internal in every country. It is the branch of national law of a country that establishes rules for dealing with private law cases involving a foreign element.

Legge internazionale privata italiana

Italian international private law -> legge 218 del 1995: it covers both the conflict of jurisdictions and the conflict of laws (Rome Convention 1980 replaced by a EU Rome I Regulation 2008).

Giurisdizione e legge sostanziale

• Jurisdiction: in general terms, the judge competent is the judge of the defendant (passive part, he is sued by the claimant/attore), the claimant should go to the court in the country of the defendant and start the procedure there but there is always the freedom of the parties to decide otherwise and decide that all disputes related to their contract shall be resolved by the court that they decide, it is established in a clause of the contract.
• Substantive law: in terms of often applicable law is the competent judge that decides according to his/her international private law system. (Exceptions: public order/overriding mandatory provisions)

Legge applicabile al contratto

• Freedom of choice of the applicable law: the applicable law can be decided by the parties, explicit (in a clause of the contract) or implied (the judge can pick up from the interpretation of the contract an agreement of the parties to apply a certain law). In some cases, the application and enforcement of contracts do not always follow what is established in the contract, the final decision is that of the judge who examines and evaluates which is the law to be applied. [contracts become valid when dispute arises, before dispute the parties are free to behave as they want]
• Depecage: the parties are free to apply different laws to different parts of the contract, parts of the contract are subjected to different laws, it needs to be handled by a specialist.

Identificazione della legge applicabile

If they don’t decide, they are silent on the matter: understand who is the judge and he shall identify which is the applicable law. Most employed criteria:

• The closest connection: diritto del paese che ha il più stretto collegamento con il contratto [transfer of ownership of a real estate in London, probably the German judge would think that the most closely connected law is the English law because the object of the contract is located there]
• Principle of most characteristic performance: the judge would presume that the applicable law depends on which party is expected to perform the most characteristic performance (in the case of a sale, the seller provides the most characteristic performance because paying is not considered characteristic).

There is a presumption that a contract is most closely connected to the country where the party who is to effect the “performance which is characteristic” of the contract has its residence or administration. Commonly used criteria:

• The habitual residence/domicile/nationality of the parties
• The parties' main places of business and of incorporation
• The place(s) where performance is to occur
• The place where the contract is made (which may not be obvious where negotiations were concluded by letter, fax, or email)

Limitazioni nella scelta della legge

Choice of law is limited; parties enjoy a wide freedom but there are two kinds of limitations:

• Preventive restrictions: the parties cannot decide to apply a certain law in order to avoid restrictions and in general regulations that are put as protection over some sensitive fields (competition, trade) -> Overriding mandatory rules (norme di applicazione necessaria): every country has a list of provisions that are mandatory and overriding, they are compulsory [Chinese law says that in joint venture contracts, all contracts of joint venture or exploitation of natural resources in China shall be governed by Chinese law]
• Subsequent restrictions: prevent the chosen law to be applied to the matter concerned, the law chosen is valid but there are some provisions of that law that go against the public order/public policy (set of rules that are considered fundamental in a certain jurisdiction and that are part of the public regulation) in the recipient state [gender discrimination, choice of a national law that does not ensure compensation for an agent upon termination]

Diritto generale e speciale dei contratti

General law of contracts: deals with their formation (how the contracts are established and become valid and binding), object, form, validity (when are valid and when may become void) or interpretation. These rules are common to all contracts of any kind. Special law of contracts: regulates specific types of contracts (micro approach to different types of contracts).