INTERNATIONAL BUSINESS LAW
In understanding the difference between domestic and international law, it is important to appreciate that the two legal systems exists concurrently. However, there are clear separation and division in establishing legal orders and provisions under the various disciplines. One of the major differences is that international law deal with the regulation of the relationship between states while domestic law seeks to protect the rights of individual citizens within a state. The doctrine of dualism indicates how the two laws can be used interchangeably to instill proper rules and regulations. The two legal systems conflicts, the domestic courts use the domestic law. Every state has its own obligations that make the legal aspects conflicting in terms of the appropriate system of law. Thus, a country cannot adopt the domestic laws to defend against any allegations of the breaching the international law. For example, during the American domestic was the U.S was given adequate damages against Britain due the going against the required obligations as a neutral state (Simmons, 2009, 102).
The interactions between international law and domestic law can be said to enhance cooperation. Since, international law appreciates the doctrines and provisions developed by domestic. This can illustrated when “the International Court of Justice (ICJ) considers the admissibility of decisions made by the domestic courts.” Even though the applicable primary law is the international law, the evidence from domestic courts is relevant in making the ultimate decisions (Mullerson, 2013, 78). The international and domestic laws are applicable and supreme in their own circumstances. Today, both the international and domestic courts rely on their interpretation to enhance universal court proceedings. Considering the increased integration of international and domestic laws, the domestic laws are facing serious challenges of adopting the international regulations into the domestic legal frameworks (Schaffer, Agusti, & Dhooge, 2014, 210). The use of international law by a domestic court depends on the decisions made within the domestic legal frameworks.
In certain circumstances, the states are forced to implement legislations that conflicts with the international legislations. It can also establish new legislations as provided for in the international agreements developed the domestic courts. For instance, in America, the supervisory units took part in controlling between the domestic and international laws that in turn limits the jurisdiction of the international laws. The interpretation of the domestic laws can be different due to the effects of the international legal systems on the immediate states. In the Vienna Convention article 27, it states a normal rule in the international legal frameworks cannot be allowed to hinder the operation of international duties depending on the domestic frameworks. The international law has been seen to compel domestic courts to adopt international legislation rather than the domestic laws. This implies the effects of the conventionality control in the signing of the treaties and legislations. The international courts have appreciated the obligations in promoting the application of domestic laws (Tweeddale & Tweeddale, 2005, 79). Currently, there are no clear provisions of international law on how various states should integrate international law to the domestic legal systems. Therefore, even though there is a clear separation between the domestic and international laws, both are indivisible.
Riba describes the interest payments that build up from international transactions. The Islamic states imposed the riba regulations in order to control the profits emerging from the various transactions. The applicability of the riba has been prohibited under the Islamic law. The prohibition of riba has significant effects on the transactions within various countries. The operation of the commerce in Islamic region prohibits riba that describes undue profits, interest or even excessive profits from the transactions (Hallaq, 2005, 45). The application of the international contracts is affected the operation of the riba provisions. It is followed the Sharia laws ordained under the systems of law from the Islamic norms of the Arabs.
The Islamic laws are derived from the holy book of the Islamic religion Quran. The book contains the word in spite by the Islamic prophet Mohammed. Quran stands as the primary source of Islamic law as seen from the riba provisions applicable to Islamic commerce. In prohibiting of riba, the Quran states clearly, “God hath permitted trade and forbidden usury.” This limitation is dependent on the provision that makes profits should be justifiable and not at the expense of another person, since it is concluded to be an exploitative practice (Hassan & Lewis, 2007, 56). In addition, wealth accumulation in the Islamic region provides that it is forbidden to gain wealth from something that is not your work. Any wealth gained from interest qualifies to be “haram” and thus, it is prohibited under the Islamic laws.
In spite of the regulations of Islamic laws to family, criminal law, and inheritance, the riba prohibition helps to control the amount of commercial transactions that has increased in the financial community. Thus, the Islamic law states that those transactions should be performed in conformity to the Islamic laws and doctrines (Schaffer, Agusti, and Dhooge, 2014, 210). An Islamic contract contains two main principles that are riba and ghahar. As riba concept prohibits the gaining of interests on any commercial transaction, ghaher principle prohibits gambling and any uncertainties surrounding any commercial transaction. For example, it is forbidden for an Islamic faithful to engage in betting, since betting amounts to ghahar in which is prohibited. According to Muslim Scholars, Riba in a wider perspective covers the wealth that emerges from lending people money or even the exchange of goods (Iqbal & Llewellyn, 2002, 67).
The application of riba is universal across the different schools of Islamic law that has still remained functional today. Nevertheless, the interpretation of the principle is controversial. In the contract of sales of goods, the Islamic law requires that all aspects of the sale of goods should be certain. For instance, the goods must be in existence, the sale should be made instantly, the price, and delivery period should certain. Thus, Islamic law requires that the seller should clearly indicate the costs of sales and the profit margins (Hassan & Lewis, 2007, 120). When he/she adds on the costs of sales, this contravenes the provisions of riba provisions as could lead to excessive profits. The effects of entering a contract that has contravened the riba prohibitions provisions is that it cannot be enforced by the Islamic courts. Thus, the courts could result to equitable remedies forcing the parties back to their initial positions (Folsom, Gordon, Spanogle and Van Alstine, 2013, 219).
Few Islamic countries have acknowledged the introduction of the interest payments in commercial transactions in their legal frameworks while most of them have strictly prohibited. For example, the application of interest payments in United Arab Emirate (UAE) is acceptable and legally admissible. However, In Iran such contracts are illegal and unenforceable under the provisions of riba prohibition. The application of prohibition of riba does not apply when commercial transactions are done with non-Muslims. Since, the non-Muslims are not covered under the Islamic law implying that the amount charged will not an injustice to them (Hallaq, 2005, 79).
- The applicant of the case was Armada PTE Ltd and the respondent was Gujarat who had entered in a contract in October in 2007. The parties had agreed that of a scheme of transporting six cargoes of coal annually between 2008 and 2012. In addition, the contract had a clause of arbitration in case any dispute or any conflict that requires that a three members team would be applied to solve the arising disputes. The three members of the arbitration committee must be form the Institute of Arbitrators in London. The approach of appointing the three members would involve Armada and Gujarat each appointing one member and the two members could in turn another third party to the arbitration (Tweeddale and Tweeddale, 2005, 219).
In June 2009, Armada was controlled under judicial management. In Singapore, judicial management comprises of the courts helping the company with debt and corporate restructuring. Thus, Gujarat was no longer producing coal, despite the assurance by Armada that the contractual obligations would be undisrupted.
Considering the ambiguity of the situation, Armada sought for the arbitration redress at the Tribunal in London in order to enforce their contractual agreements. The tribunal was tasked with three award obligations;
- One of the awards included the determination of the jurisdiction of the arbitration tribunal in hearing the case. This relied on the rules of the Arbitration Act 1996(Eng) (UK act). It was found out that it could follow its substantive jurisdiction where there was relevant legal jurisdiction. It also ignored the claims of Gujarat that the two arbitrators appointed by both parties were not commercial men. The claims were deemed too late under based on UK Act and thus, Gujarat had to remove any claims on the appointments (Conrad & Ritter, 2013, 401).
- Secondly, it sought to deal with whether Gujarat had breached the contractual agreements of shipping. If he was to be found guilty, the damages were to be assessed and evaluated. Later, the tribunal found Gujarat guilt due to the breach of the contractual agreements and provided for the method of calculating the damages.
- Thirdly, the award involved the quantification of the damages to be awarded to Armada.
This summarizes the facts of the case and relief sought by Armada of being compensated for damages suffered from Gujarat’s breach of contract.
- In the case, various basic legal aspects were in contention between the two parties. After Armada commenced court proceedings in the Federal Court of Australia, the party relied on the three-arbitral awards. However, Gujarat denied the enforcement of the three courts awards on five basic legal bases.
- Gujarat claimed that the two arbitrators appointed were in breach of the International Arbitration Act 1974(Cth) (IAA), as they were not commercial men. Thus, the tribunal was in contravening to the provisions of conducting an acceptable arbitration agreement. This is one of main legal grounds in contention between the two parties. The two parties contested the legality of the two arbitrators to conduct the arbitration.
- Secondly, if the two arbitrators were deemed not commercial men, the tribunal would be deemed unenforceable and unacceptable based on section 5(5)(e).
- Gujarat also challenged the legal binding of the second award as it provdde3d for future damages in period when the damages had not been suffered. Thus, the two parties had to contest on the when the damages to contract becomes legally binding. The party referred to section 8(5) of the Act.
- In addition, Gujarat also claimed that the concept of the futures damages clause made the performance of the second award in contrary to the public policy. The two parties sought to determine the legality of the future damages award as provided in the contractual agreement.
- Lastly, the two parties contested whether the contract was a binding to the arbitration clause. Gujarat claimed that the contractual agreement was only a sea carriage document as provided for under section 11 of the Carriage of goods in Sea Act 1991 and thus, it had no effect on the arbitration provisions of the contractual agreement.
The court’s decision relied on the various legal backgrounds in order to substantiate the facts of the case and the enforceability of the damages. The federal court agreed in favor of Armada application and then provided for the application of the three arbitration awards. In terms of whether the lawyers were commercial men, the federal court cited the findings in Dampskibsselskabet Norden A/S v Beach Building& Civil Group Pty Ltd(2012)292 ALR 161. The facts supported Armada’s application of the three awards to contain the acceptable facts for the contract to be binding between the two parties, Armada and Gujarat. The court relied on the curriculum vitae of the arbitrators and found notable experience in handling in commercial arbitration disputes. Thus, they were sufficient to take part satisfy the requirements of the contracts.
In addition, the two parties had initially agreed on the appointment of the two appointments and thus, Gujarat was not reasonable in challenging the appointment of the two arbitrators. In terms of the future contractual damages, the federal court provided that Armada’s claim for the damages were unacceptable and premature. The court decline the application of the damages as sought by Armada. However, the court provided for additional awards in the reserved judgment. In addition, the court provided that section 11 of the Carriage of Goods Act 1991(Cth) has no effect on the operation of the arbitration process.
c) The federal court made the various orders in relation to the case. These orders includes
- The court dismissed the application of the respondent that sought the variation of the freezing orders.
- The respondent must pay the applicant’s expenses and costs incidental to the application of the freezing orders variation
- Liberty would be awarded to the applicant to amend the original application to seek the enforcement of the three arbitral awards
- Before 15th July 2014, the respondent was required to provide information on whether they agreed with order needed by the applicant.
- If the respondent was in agreement with the proposed orders, the respondent was required to file a draft that considered the court making the order based on the reasons stated therein.
- The court proceedings to provide clear guidelines and judgments on 29th July 2014.
- The law of default in the application of CISG is the contractual freedom and precedence allowed to the parties involved. Under articles 6 and 9 of the U.S law on CISG, the standards terms of trade are allowed to enter into a contract. Even though the CISG does have sale judgments in UK, it depends on the previous arbitration cases and national judgment decisions. The U.S domestic law also covers the uniform requirements of international sales of the agreed property. The interactions of the seller and the buyer are seen to be different due to the changes in type of goods to be sold, parties involved and the specific characteristics of the goods in the contract. In the case above that relies on the supply of manufactured foods, the US law requires the detailed provision of the particular requirements in writing. In addition, the law provides that the price of manufactured goods be not subject to price fluctuations or even instabilities. However, in case on any variations, the standard form of the U.S contract supports the eligibility of the negotiations in handling the queries. The negotiations help to perform impersonal agreements with the opposite parties in the application of the standard form contracts. However, the standard form contracts provides for arbitration clauses in the U.S and other countries in any international trade (Redfern, 2004, 207).
It is quite possible to select CISG under the US law for the contractual obligations in the selling of the drill, a manufactured product. CISG provides that the transactions between parties located in different states be bound to acceptance. The court will also consider that the language used under CISG confirms to the CISG regulations. The selection of CISG relies on the provisions of the Uniform Commercial Code (UCC) that address any disputes of the implied warranties and terms of the sale agreements. Thus, CISG is acceptable under US domestic law, as it helps in meeting the obligations of the international sales including the meeting of the implied warranty terms and obligations. The written clauses of the UCC help to substantiate the efficiency of CISG in meeting the parties’ agreements. Therefore, the CISG is selected under US law, as it assists in solving any disputes relating to international trade.
- A mandatory binding arbitration seeks to require the buyers to submit any conflicts or disputes that may arise during any business transactions to a binding arbitration clause. It helps to limit the buyer’s options in terms of resolving any conflicts arising between the parties, since the contract stipulates the arbitration company to be consulted in the arising of any dispute. One of the requirements is that the mandatory arbitration clause should be a subject of agreement between the two parties. Arbitration being an informal process, the two parties had to consent to the compulsory arbitration clause. In addition, the nature of products to be sold affects the application of the compulsory arbitration clause in the sale. The absence of adequate judicial review proves instrumental in the application of the compulsory arbitration clause. Parties are allowed to observe the available judicial review in the handling of any disputes. The findings of the legal provisions helps in advocating for court proceedings, but both parties could agree to seek to arbitration awards. A compulsory arbitration clause should clearly state the nature of conflicts to be covered under the clause. This helps to avoid the ambiguity on the admissibility of the conflicts before the arbitration team selected. It also should state the party to bear for the costs of application of the case in the federal courts. This indicates some of the merits that should met in adopting a compulsory arbitration clause between parties (Ware, 2009, 4).
Arbitration process based on US followed the legal procedures of the Federal Arbitration Act. The nature of the Federal Arbitration Act helped to detail the arbitration agreements and awards in the United States. It helped to ensure that all awards were valid and enforceable with any contracts. In the implementation of the Arbitration provisions in the U.S, the clauses should cover contract –related aspects. The parties involved in the arbitration process as stipulated under FAA includes the applicants, respondents and the arbitrators. The U.S FAA has given the arbitrators the power to appoint third-party witnesses. The witnesses help to provide material evidence in order to enforce effective judgment. The Arbitration Act is helpful in the creation of substantive legal frameworks for resolving any claims. Some of the trusted Arbitration bodies include the following “International Chamber of Commerce (ICC), London Court of International Arbitration(LCIA), World Intellectual Property Organization (WIPO), and American Arbitration Association (AAA)” among others.
- Among the Queensland law, CISG, and the Queensland arbitrations, I would support the use of the CISG for the settlement of the contract conflicts and any additional disputes. The CISG follows standards universal guidelines on the sales of goods in the different states. This makes it more appropriately to settle the contract disputes. In terms of cross-border arbitration application in the U.S, Queensland law and arbitration awards are recognizable under the International Arbitration Act 1974. In addition, the US provides for the enforceability of international arbitration awards provided in conformity with the international acts and provisions. The enforceability of the arbitration awards from Queensland is dependent on the admissibility of the Queensland law provisions in the US. The objects clause in the International Arbitration Act is relevant in directing the enforceability of awards in the U.S. It seeks to facilitate the recognition of the arbitral awards in U.S. It also applies pursuant to the virtues of the arbitration agreement. The US domestic law provides that the enforcement of the foreign arbitral awards rely on the Queensland laws.
Arbitration Act 1974. Act No. 136 of 1974.
Carriage of Goods by Sea Act 1991. No. 160 of 1991.
Conrad, C. R. and Ritter, E. H., 2013. Treaties, tenure, and torture: The conflicting domestic effects of international law. The Journal of Politics, 75(02), pp. 397-409.
Dampskibsselskabet Norden A/S v Beach Building& Civil Group Pty Ltd (2012), 292 ALR 161.
Flechtner, M. H., 2009. Selected issues relating to the CISG’s scope of application. The Vindobona Journal of International Commercial Law and Arbitration, 13(2), p. 91.
Folsom, R. H., Gordon, M. W., Spanogle Jr, J. A. &Van Alstine, M. P., 2013. Principles of International Business Transactions. Saint Paul, MN: West Academic.
Hallaq, W., 2005. The origins and evolution of Islamic law. Cambridge: Cambridge University Press.
Hassan, K. & d Lewis, M.,2007. Handbook of Islamic banking. Cheltenham, UK: Edward Edgar Publishing Limited.
Iqbal, M. & Llewellyn, D., 2002. New perspectives on profit sharing and risk. Cheltenham, UK: Edward Edgar Publishing Limited.
Mullerson, R., 2013. International law, rights and politics: developments in Eastern Europe and the CIS. London: Routledge.
Redfern, A., 2004. Law and practice of international commercial arbitration. Hong Kong: Sweet & Maxwell.
Schaffer, R., Agusti, F. & Dhooge, 2014. International business law and its environment. Boston, MA: Cengage Learning.
Simmons, B. A., 2009. Mobilizing for human rights: international law in domestic politics. Cambridge: Cambridge University Press.
Tweeddale, A. & Tweeddale, K., 2005. Arbitration of commercial disputes: International and English law and practice. Oxford: Oxford University Press.
Ware, S. J., 2009. ‘Opt-In’for judicial review of errors of law under the revised uniform Arbitration Act. The American Review of International Arbitration, 8(1). pp.3-4.