International Commercial Law

The best way to explain international commercial law (“ICL”) is by dividing it into a few
parts. Basically, ICL is about (i) the flow of resources across borders and (ii) the exchange of
goods, services, labor or capital1 between business entities from different nations. As an
attorney, there are few main materials to consider, that consists of (i) the ICL main theories,
(ii) the global institutions that support ICL and (iii) the source of ICL.
a. The ICL main theories
The main ICL theories is divided into two point of view which are theories that
supporting free trade and not supporting free trade.
i. Supporting free trade
The supporting free trade theories are based on two literature as follows:
Adam Smith literature, The Wealth of Nation which published in 17762 and
David Ricardo, The Principles of Political Economy and Taxation which
published in 1817. The similarities Adam Smith and David Ricardo point of
view is the conclusion that “international trade was beneficial to both of the
trading nations.”

Adam Smith, conclude that “if each of two countries makes one of the two
products more efficiently than the other, then each country should specialize
in making the product that it makes more efficiently trade with the other
country to get the other product.” This reasoning was named as the Absolute
Advantage.

David Ricardo, conclude that “two countries that produce two goods where
one of the countries was more efficient than the other at producing both
goods. In other words, one country had an absolute advantage over the other
country with respect to both goods.” This concept was named as the
Comparative Advantage.

Therefore, there is a main distinction between those concepts, the Absolute

Advantage emphasized that the trade should occur when both trading countries
possess equivalent absolute beneficial respectively over both goods, while
Comparative Advantage point out that despite being less efficient than the first
country at producing both goods, the second country would still likely be
relatively better at producing one of the two goods when compared to the
other country.

1
Donald M. McRae, The Contribution of International Trade Law to the Development of International Law, in
Hague Acad. Intl. Law, Collected Courses of the Hague Academy of International Law 99, 110-111, 132-133
(260, Martinus Nijhoff Publishers 1996).
2
Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Edwin Cannan ed., Random
House 1937).
 ii. Not supporting free trade
On World Trade Organizations meetings, some critics arise that increased
trade often means factory closings and lay-offs in jurisdictions where
production is shifting as a result of increased trade. However, the push for free
trade has not been universally well received. In fact, many scholars, politicians
and social activist fiercely fight against the idea of attempting to move toward
more free trade. From some scholars` perspectives, the absolute and
comparative advantage models are plagued with too many assumptions that
are simply unworkable in the complex modern world3

b. International Organizations
There are few international organizations that supporting international trade, which
are: (i) the World Trade Organization (WTO), (ii) the World Bank, (iii) the
International Monetary Fund (IMF), (iv) the International Institute for the Unification
of Private International Law (UNIDROIT), (v) the United Nations Commission on
International Trade Law (UNCITRAL) and (vi) the International Chamber of
Commerce (ICC).

In essence, all of the international organizations mentioned above are absolutely

important to conduct international trade. Because, this international trade always
involved with 2 (two) countries (even if the subject of trade is legal entity) or even
more that having their own regulations, customs, provisions, taxation, geography, etc.
Therefore, in order to conduct international trade with precise, low threat and
uniformity, the existence of international organizations is needed.

c. Source of International Trade

For implementing the “uniformity”, there are few legal sources of international trade
that developed continuously. However, the source of commercial law that are truly
international are very limited, consisting of (i) treaties, and (ii) lex mercatoria4.

A treaty or convention is a written document that has been agreed to by the nations
that have ratified it. They are essentially contracts between nations.5 Nevertheless,
other countries that do not have such a provision automatically makin treatis law can
choose to implement any given treaty through the adoption of a domestic statue.

On the other hand, lex mercatoria is the phrased used to describe international
customs and norms that are so deeply entrenched in the international community that
they evolve to international laws. Black`s law dictionary described lex mercatoria as
“system of laws which is adopted by all commercial nations, and constitutes a part of

3
James M. Cypher & James L. Dietz, The Process of Economics Development (Routledge 1997); Paul R.
Krugman, Rethinking International Trade 118-122 (MIT Press 1990).
4
For further discussion on the differences between civil and common law systems, see John Spanogle, Jr. The
Arrival of International Private Law, 25 Geo. Wash. J. Intl. L. & Econ. 477, 507 – 521 (1991) (describing the
effect of differences between the two legal regimes on the reception of international provate law conventions)
5
Curtis J. Mahoney, Treaties as Contracts : Textualism, Contract Theory, and the Interpreatition of Traties, 166
Yale L.J. 824 (2007) (arguing that contract law principles should be used to interpret treaties).
 the law of the land” such as the Priciples of European Contract Law (PECL) and the
UNIDROIT Principles of International Commercial Contracts (UPICC).

To conclude, ICL has extensive materials because international trade always combining two
different legal systems into one commercial contract with regard to other source of
international trade.