International Trade Law

International trade law is – of course – the law about trade in an international environment. From a legal point of view, international trade is more complicated than national in primarily two aspects – the choice of applicable law and the enforcement of judgments or arbitral awards. From other points of view, there are of course many other complicating factors as well, such as language, culture and geographical distance.

The choice of applicable law

The choice of law problem has by tradition been handled either by choosing one of the parties’ country’s law – of which the other party most often has had little knowledge and equally little practical possibility to obtain knowledge – or the law of a third county – of which both parties most often have little knowledge. The effect of this practice is that at least one of the parties does not known or have possibility to know the full effect of the contract and – as a consequence – has no real possibility to correctly estimate the risks and values involved in the contractual relationship.

A better solution than choosing a national law to govern the contract is to choose a neutral legal instrument that is equally – and practically – available to all parties involved in the contract. Such instruments have for the international sale of goods been available at least since the UN Convention on Contracts for the International Sale of Goods (CISG) entered into force. The convention has been adopted by 76 countries, including most major trading nations in the world. Much useful information about CISG – including presentation of the states and, if any, their reservations etc., case law and scholarly writing – is available on Pace university’s CISG database. Another source of information about CISG is of cource UNCITRAL.

CISG applies only to contracts for the sale of goods, but is not meant to be used for other objects, although it often functions relatively well for them as well. Unidroit Principles of International Commercial Contracts is an excellent alternative for such objects. Another alternative is the Principles of European Contract Law (PECL). Both of them are usually preferable alternatives to any national law. They are similar in content and of equally high quality. One – possibly deciding – disadvantage with PECL is that it has “European” in its name, which may – wrongly, but still – cause non-European parties to suspect that they favor a European party. If one wants to avoid that – psychological rather than legal – possible problem, Unidroit Principles is a better choice. Unidroit Principles are available from Unidroit’s web and – together with much information about CISG – from Unilex. PECL is available from i.a. Copenhagen Business School’s web.

Enforcement of judgments or arbitral awards

Enforcements of foreign court judgments are primarily based on bilateral agreements between countries. Therefore, before one enters into a contract with a party from another country, one needs to obtain information in every specific case whether a future judgment will be enforceable or not. That is of course possible, but creates unnecessary extra work and risks. A better choice in international trade is arbitration. Almost all countries have adopted the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. That means that arbitral awards almost always will be enforceable in the country where they need to be enforced. That advantage is – in itself – enough reason to prefer arbitration to dispute resolution in court.

There are many institutes of arbitration. They are relatively similar and the choice between them is not nearly as important as the choice of the law or other similar instrument that shall govern the contract. Two institutes with good reputation are the Arbitration Institute of the Stockholm Chamber of Commerce and ICC’s International Court of Arbitration.

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Advokat, jur. dr Jon Kihlman | Västra Trädgårdsgatan 15 | 111 53 Stockholm | + 46 70 742 60 12 | jon@avtalsratt.com