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International Law in Global Economy Chapter 7
International Law in Global Economy Chapter 7
International law can be defined as the a body of law formed as a result of international customs,
treaties and organizations that govern relations among and between nations.
National law is the law of a particular nation such as Brazil , Germany, Japan or the US.
The objective of study is to examine how both international law and national law frame business
operations in the global context.
The major difference between international law and national law is that government authorities can
enforce a national law.
What government then can enforce an international law ? A nation is a sovereign entity which means
that there is no higher authority to whom a nation needs to submit itself. If a national violates an
international law and persuasive tactics fail, other countries have no other option but to take coercive
action from severance of diplomatic relations to as a last resort, war.
International law attempts to reconcile the need of each country to be the final authority over its own
affairs and each nation’s individual desire to benefit economically from trade and harmonized relations
with one another.
3 SOURCES OF INTERNATIONAL LAW :
INTERNATIONAL CUSTOMS
TREATIES AND INTERNATIONAL AGREEMENTS
INTERNATIONAL ORGANIZATIONS
A treaty is defined as an agreement or a contract between two or more nations that must be
authorized and ratified by the supreme power of each nation. Under Article II, Section 2 of the US
Constitution, the President has the power by and with the Advise and Consent of the Senate to make a
treaty provided 2/3rd of the Senators present concur.
A bilateral agreement is defined as an agreement formed by two nations to govern their commercial
exchanges or other relations with one another.
A multilateral agreement is formed by several nations. Association of South East Asian Nations,
European Union are the result of multilateral trade agreements.
In international law, an international organization refers to an organization that is mainly composed of
officials of member nations and is usually established by a treaty. These organizations adopt
resolutions, declarations and other types of standards that require nations to behave in a particular
manner . For example the General Assembly of the United Nations has adopted numerous non binding
resolutions and declarations that embody principles of international law. Disputes are brought before
the International Court of Justice. These courts have authority to settle legal disputes only when
nations voluntarily submit to their jurisdiction.
The major achievement of the United Nations Commission has been its success in trade and commerce
by creating the 1980 Convention on Contracts for the International Sale of Goods (CISG) It is designed
to settle disputes between parties to sales contracts if parties have not agreed otherwise in their
contracts. The CISG governs only sales contracts between trading partners in nations that have ratified
the CISG.
LETTERS OF CREDIT:
Buyers and sellers engaged in international business transactions are separated by thousands of miles .
To ensure financial performance under the contract , sellers want to avoid selling to buyers without
the danger of delivering goods in absence of receiving payment. Likewise buyers too need an
assurance that sellers will not be paid until there is evidence that seller has shipped the goods. L/C
facilitates carrying out international transactions smoothly and safely.
Parties to a Letter of Credit :
- Issuer (Bank)
- Beneficiary ( Seller)
- Account party (Buyer)
- Advising bank , paying bank / negotiating bank
Value of the letter of credit :
The payment under the L/C against documents presented by the beneficiary as per the terms and
conditions specified therein and not against the facts that the documents purport to reflect.
Chronology of events under Letter of Credit :
- Buyer contacts with issuer bank to issue a L/C which sets forth bank’s obligation to pay on the
letter of credit and buyer’s obligation to pay the bank
- L/C is transmitted to seller intimating that upon compliance with the terms mentioned in the
Letter of Credit, the bank will issue the payment for the value stated therein.
- Seller delivers goods to the carrier and receives a bill of lading
- Seller delivers the bill of lading to the issuing bank along with other relative documents and
claims his payment
- Issuer bank delivers the bill of lading to buyer
- Buyer delivers bill of lading to carrier agent in his country
- Carrier delivers goods to buyer
- Buyer settles amount with the issuing bank