P.S.P.G.

Vithanage
lecturer
Attorney- at- Law
Department of Commercial Law
Faculty of Law
University of Colombo
 The Global Trade- Background
• Modern states can not remain self-sufficient
• The impact of ‘Globalization’ on global trade
(Further reading is necessary)
• Global trading rules are structured to reduce
the tensions which may arise in dealings and
to facilitate the free flow of goods and
services.
 Role played by the WTO
• WTO play a vital role in regulating global trade
• Membership ???
• Promoting the idea of trade liberalization
• Agreements at different layers
– Bi-lateral
– Regional
– Multi lateral
 Sri Lanka & Global Trade
• A small island nation in the Indian ocean
• Its unique and privileged location (Further
reading on The Belt and Road Initiative and its
impact to Sri Lanka)
• Impact of foreign dominance
• Post independence-
• Where do we stand now?
http://www.intracen.org/country/sri-lanka/,
 The concept of ‘Trade’
• Was not available in the ancient times
• Lex mercatoria and lex maritima – the law of the
merchants and the law for merchants on sea
• The modern international trade law is based on
theories of economic liberalism developed in Europe
and later in the US from the 18th century onwards
• Trade between Romans and Indians- Arabs- Chinese
markets- Japan and piracy and smuggling
• Modern era- WWI and WWII
• Move towards a global forum to deal with issues
 The Role of Law in International Trade

• There is a considerable diversity of laws throughout

the world. We have seen that there are various legal
systems. The rules on contract in, the common law
countries are not the same as those in the Roman-
Germanic systems.
• This diversity of laws is not conducive to
international trade.
 International Trade
• It may be;
– Sale of goods
– Contract for Services
– FDI or Portfolio investment
– Carriage of goods
– Insurance
– Licensing, Franchise
– Other
 Introduction to the structures and legal
relationships in International Trade
• The study of International Trade Law might be said to entail
the analysis of:

• The legal relationships between parties who sell and buy

goods from each other;
• Their relationships with persons willing to carry the goods
from one place to another;
• The arrangements they have with insurers to protect the
goods in the event of loss or damage, and;
• Any financing or payment agreements with banks or
financial institutions.
 The law of International Trade
• By definition international trade crosses
national boundaries and involves more than
one country. In the cases of an international
trade sale of goods the buyer may be resident
in one country and the seller in another.
• In these circumstances it may be asked whether
the arrangement between the parties is
governed by the law of the buyer’s states or the
law of the seller’s state.
• How are these problems being solved?
 Contd…
• The law of international Trade can be looked at-
• Public International Law- the perspective of the states from
which these goods are being exported or the states where
these goods are shipped to.
• Private International Law- primary relationships must also be
examined in regard to the entirety of international trade
relations. The questions of what it means by an international
contract?
 Which legal system will govern a particular contract?
 Whether the court or forum of a particular country has jurisdiction
over the contract/s in question?
 Any Compensatory measurers?
 Which Alternative Dispute Resolution methods are available-
 ( Mediation, Conciliation, Arbitration…)
The functions of international commercial law
are necessarily linked to their sources.
• Commercial contract
• Municipal Law
• International and European Law
• European Union Law
• International Law

• Harmonization of Commercial Law ?

 Laws involved
• Domestic laws
• Private International Law
• Conventions
• Uniform Codes
• Bi-lateral, Multi-lateral Treaties
• Trade Traditions
• Case Law
 How international trade is structured?
• Direct Exporting
– Transfer of the property in the goods to the buyer by
shipping the goods to him or his agent, payment being
made to the seller either directly or through a bank
payment system. (transfer of the document of title
relating to the goods to the buyer or his agent)
Countertrade
 May take any of the following forms;
 Barter
 Counter-purchase
 Offset
 Buy-back
 Switch trading
 Evidence accounts
1. Barter
Barter trade is characterized by the exchange of goods for
goods. There is in theory no money settlement or
consideration involved.
2. Counter- purchase
In a counter-purchase agreement, two distinct contracts as
against barter trade. The first contract details all the
incidences of exports sale, for ex. Time of delivery, any
credit period mode of delivery.
The second provides for the purchase or the intention to
purchase by the exporter of agreed goods or services from
the buyer’s country. This may be for a value equal to or
greater than that in the first contract.
3. Offeset
Offset enables the importer to commit the exporter to using
local production forces or factors when the former “buys”
large, costly plants, factories, systems or other similar
goods.
4. Buy- back
This refers to the undertaking made by the exporter to
accept as payment, either in part or entirely, the goods
produced by the plant or factory (the plant having been
purchased by the importer, usually the government of a
lesser developed country) and bought back from the
importing country.
5. Switch trading
In conventional trading, exports are paid for out of the
foreign exchange earned by the importing country on a
multinational trading basis. Some states trading nations
have in the past found it more convenient and strategically
sound to enter into bilateral agreements whereby goods
exported to the corresponding country will be paid for
from the proceeds of the sale of goods from that country.
6. Evidence accounts
The exporter undertakes to purchase goods from the
importing state at an agreed quantity or rate, in
consideration of the importing state reducing or removing
certain trade restraints. This arrangement obliges the
exporter to maintain an evidence account through which
all exports and imports of a specified period will be
passed.
 Composite Arrangements in an International
Sales Contract
• The international sales agreements will entail several contracts
other than the main sale contract.
• In the first place, the parties will enter into an agreement for
the sale and purchase of certain identified goods.
• The sale contract will normally spell out the parties duties and
rights in relation to the following matters.
– - time of shipment
– - mode of shipment and delivery
– - mode of payment
– - documentary requirements
– - insurance
– - choice of law and/or choice of forum clauses
– - arbitration clause
 Fundamental principles in Global trade
(further reading)
• Competition- unfair trade,
• ‘ comparative advantage’
• Principles of non-discrimination
• National treatment & MFN
• Market access – tariffs, duties, Quantitative
restrictions
• Rules on conlicts
Further reading
Thank you