Summary of the course – EMBA-BS Y3

PART 1 – INTRODUCTION TO INTERNATIONAL LAW

Definition of international law

International law refers to the rules that govern international relations, activities or operations. There are two main branches of international law: public international law and private international law.

Public international law is focused on the relationships between States.

Private international law, also known as conflict of laws, focuses on the international relationships between private parties. It deals with legal issues that arise in cross-border transactions involving individuals, companies, or other private entities. It provides rules to determine which  jurisdiction  ’s laws apply to a particular case and which courts are competent to judge a dispute, as well as the mechanisms allowing recognition and enforcement of foreign judgments and arbitral awards.

The legal framework of international trade

The legal systems of States form the basis of international law. In practice, international contracts are frequently governed by a State law and disputes relating to these contracts are subject to the jurisdiction of State courts.

In the European Union, EU regulations determine which State law governs an international contract and which courts are competent to adjudicate an international litigation, where the parties did not choose the governing law and the competent court.

The United Nations Convention on Contracts for the International Sale of Goods (CISG) signed in Vienna in 1980 is a multilateral treaty between 97 States (in 2023), governing contracts for the international sale of goods between private businesses, excluding sales to consumers and sales of services, as well as sales of certain specified types of goods. The Convention applies automatically when the contract concerns the international sale of goods between parties who are established in Contracting States (parties to the Convention). The parties to an international contract may, however, decide to exclude its application.

UNIDROIT is an intergovernmental organisation that proposes, notably, a legal regime for international contracts (for the sale of goods, but also for services): the UNIDROIT Principles of international commercial contracts (2016). It is not a treaty (it is not applicable as of right). The parties can freely choose it as a governing law.

The International Chamber of Commerce (ICC) is a private organisation. The ICC defines the Incoterms (International Commercial Terms). These private terms may be legally binding only if the parties so decide freely. The Incoterms are trade terms that may be incorporated in contracts for the delivery of goods. The Incoterms are not a governing law (they do not provide for a legal regime of contracts).

PART 2 – PRIVATE INTERNATIONAL LAW

Conflict of laws and of jurisdiction

In international cases, which have links to several countries or legal systems, it is needed to determine the applicable law and the competent courts. Indeed, the laws of several States as well as international rules may be applicable and the courts of several States may have jurisdiction over a dispute. On the contrary, it may be that no court will assume jurisdiction. Remember that there is no international code applicable to every international case, nor is there an international court competent to hear any international dispute between private persons.

A conflict of laws is when the applicable law is not known a priori.

A conflict of jurisdiction is when the competent courts are not known a priori.

Several solutions make it possible to prevent conflict of laws and of jurisdiction or to resolve them when they arise.

Choice of law clauses or prorogation of jurisdiction clauses. Parties can include choice of law clauses in contracts, specifying which laws will govern their agreement, thereby reducing uncertainty and potential conflicts.

Uniform rules provided by international treaties. Certain treaties stipulate uniform conflict rules and others stipulate uniform substantive rules, which resolve problems related to discrepancies between the conflict rules of different States.

Conflict-of-laws rules  of each State. Ultimately, each State has rules concerning the conflict of laws and of jurisdiction. These rules will at least make it possible to find a solution at the level of each State.

Conflict rule and substantive law

Conflict rules, also referred to as choice of law rules, are rules used to determine which substantive rules (State laws, treaties or other rules) should be applied to an international case (for example an international contract) and which courts are competent in international litigations. These rules help determine which legal system governs the rights and obligations of the parties involved and which judge is competent. 

Conflict rules are provided by the laws of each State, as well as by international treaties and, inside the European Union, regulations.

For example:

• the HAGUE CONVENTION of 15 June 1955 on the law applicable to international sales of goods is an international treaty providing conflict rules,
• the REGULATION (EC) no 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) is an EU regulation providing conflict rules.

Substantive rules, on the other hand, are the actual rules that apply to a specific case once the appropriate jurisdiction has been determined by the conflict rules. Substantive rules vary across different legal systems and jurisdictions.

The substantive law may be:

• the law of a State (for example French law, notably the French civil code),
• the rules provided by an international treaty (for example the Convention of Vienna on the International Sale of Goods – CISG, 1980),
• the rules proposed by an intergovernmental organisation (for example the UNIDROIT Principles of International Commercial Contracts (2016)),
• or other rules (for example lex mercatoria, or regulations of the European Union).

Applicable law

Applicable law refers to the set of rules and principles that apply to a case, and notably that a court or arbitral tribunal applies to a particular case to decide the rights and obligations of the parties involved. Applicable law refers to a substantive law.

While determining applicable law, courts and legal practitioners must also consider public policy limitations. Even if a certain law is identified as the applicable law, either because the parties chose it or based on the relevant conflict rule, a court may refuse to apply that law (at least parts of that law) to the extent that it violates its own public policy. In addition, the court will apply the imperative rules provided by the laws applicable in the jurisdiction of said court.

International litigation

In the area of international litigation, a fundamental distinction arises between State courts and international arbitration. State courts, representing the legal systems of specific countries, are traditionally involved in resolving disputes falling under their jurisdiction. On the other hand, international arbitration, a “private justice”, provides parties that expressly agree on it with the option to resolve disputes through a private neutral arbitration tribunal, avoiding potential biases that may sometimes be associated with State courts.

The procedure of exequatur is significant in international litigations, governing the enforcement of decisions of foreign courts or arbitral awards. This process typically involves the review and validation of foreign judgments or arbitral awards by local courts, thereby granting them authority for enforcement within the respective jurisdiction. The integrity and efficacy of international legal decisions are upheld through this vital mechanism.

In agreements with international implications, the inclusion of prorogation of jurisdiction clauses is paramount. These clauses establish the choice of court or arbitration jurisdiction in the event of a dispute, offering parties a clear framework for resolving potential conflicts. By inserting prorogation clauses in contracts, parties can preemptively define the jurisdiction and procedural mechanisms for addressing disputes, thereby enhancing legal certainty and minimising ambiguities concerning the resolution of cross-border conflicts.

Enforcing the decisions of State courts

An international dispute potentially involves the jurisdictions of several States. We have already dealt with the upstream phase of jurisdictional conflicts, at the stage of launching procedures.

Once a State court has issued its decision in an international dispute, it is generally necessary to enforce that decision in one or more countries other than the one in which the court is located.

Imagine an international dispute between a French company and a Canadian company. Assume that the French courts have jurisdiction under a prorogation of competence clause. The French court renders its decision and orders the Canadian company to pay damages to the French company. The Canadian company has no assets in France. It refuses to voluntarily and spontaneously execute the French court decision. The French company must therefore pursue the enforcement of the court decision. However, the decision of a French judge is only enforceable in France. It is therefore not possible to apply directly to a Canadian bailiff in order to obtain enforcement of the French decision (for example, by having a seizure carried out on the Canadian company’s bank account held in a Canadian bank). In this case, it is necessary to carry out an exequatur procedure before a Canadian judge. This procedure consists of asking the Canadian judge to recognise the decision of the French judge and to make it enforceable in Canada in the same way as a Canadian court decision. The Canadian judge will review the French judge’s decision. If the Canadian judge considers that the foreign decision does not contravene Canadian public policy, he will make it enforceable in Canada.

In the European Union (EU), the recognition and enforcement of judgments is simplified thanks to EU Regulation no 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters is applicable. In short, a court decision of one EU Member State can be easily enforced in another Member State, without an exequatur procedure before a judge. Only if the defendant objects to the enforcement of the court decision may he bring an action before the court of the Member State in which enforcement of the judgment is pursued.

International arbitration

International arbitration is a method for resolving disputes between parties from different countries, outside of traditional court systems. This form of dispute resolution is governed by both national laws and international treaties, as well as the mutual agreement of the involved parties. International arbitration is a private justice, requiring an agreement between the parties.

Here are the main advantages of international arbitration: neutrality, confidentiality, expertise of the arbitrators, flexibility.

The main disadvantage associated with international arbitration is its cost since the parties pay the arbitrators (whereas State justice is generally free).

Two primary options exist for structuring the arbitration process: ad hoc arbitration and institutional arbitration.

Ad hoc arbitration refers to a scenario where the parties themselves are responsible for managing and administering the arbitration process. This includes tasks such as selecting arbitrators, defining procedural rules, and overseeing the logistical and administrative aspects of the arbitration proceedings. Ad hoc arbitration often involves a more hands-on approach from the parties, requiring them to navigate the process with less external support and guidance.

In contrast, institutional arbitration involves conducting the arbitration through specialised institutions or organisations that provide comprehensive administrative support and procedural frameworks for the resolution of disputes. These institutions, such as the International Chamber of Commerce (ICC) or the London Court of International Arbitration (LCIA), offer established rules, administrative services, and panels of arbitrators to streamline the arbitration process. Parties benefit from the institutional expertise and framework, which can contribute to greater efficiency and clarity in the resolution of their disputes.

Once the arbitral tribunal reaches a decision on the dispute, it issues an arbitration award. This award is binding on the parties. The arbitral award can have the same enforceability as a judge’s decision, thanks to the exequatur procedure. This means that the parties can pursue the enforcement of the arbitral award and in particular have seizures carried out by a bailiff.

Mediation

Mediation in the context of international disputes involves a structured negotiation process facilitated by a neutral third party, known as a mediator, who assists the conflicting parties in reaching a mutually acceptable resolution. This method is increasingly recognised as an effective alternative to traditional litigation in the resolution of cross-border disputes.

The mediator cannot impose a decision.

PART 3 – INTRODUCTION TO INTERNATIONAL CONTRACTS

Definition of the international contract

A contract is a legally binding agreement freely concluded between two or more parties. Each party undertakes to do something in return for the commitments of the other party. For example, in a sales contract, the seller undertakes to deliver a good to the buyer, who undertakes to pay the price.

Basically, a contract is international if it produces effects in several States or concerns operations in several States.

Criteria of the international contract

The criteria for qualifying a contract as international are:

• subject matter of the agreement
• currencies / exchange rates
• place of residence of the parties
• nationality of the parties
• languages used to negotiate / draft the contract
• place of conclusion of the contract

The main criterion is the subject matter of the contract. The contract is international if its subject matter is international, that is to say if the contract has effects in several States or concerns operations in several States.

The other criteria generally give a good indication as to whether the contract is international or not, but they are not as conclusive.

Legal regime of the international contract

Contractual freedom

The legal regime of the international contract is characterised by greater contractual freedom than for a domestic contract.

Public policy

The international contract must nevertheless comply with the international public policy (overriding mandatory provisions / public order) of each State in which it is likely to be enforced or to produce effects.

Law governing the contract

The governing law is the law under which the contract exists. Remember that a contract is a concept existing within a legal system, that defines its existence, its validity, its effects (its legal regime).

The parties may choose:

• that the contract will be governed by the law of a State connected with the contract;
• that the contract will be governed by the law of a State which has no connection with the contract (i.e., a neutral law);
• that the contract will be governed by an international convention, provided it is a substantive law defining a legal regime of contracts (like the Convention of Vienne on the International Sale of Goods);
• that some parts of the contract will be governed by the law of one State and others by the law of another State;
• that the contract will be governed by certain State laws or certain freely defined stipulations of international conventions (to the exclusion of other provisions of said State laws or conventions);
• that the contract will be governed by optional rules proposed by private organisations or intergovernmental organisations such as UNIDROIT;
• that the contract will be governed by lex mercatoria (although this is not recommended);
• to free the contract from all State rules, with the exception of mandatory rules (such an international contract is known as autonomous contract / lawless contract); indeed, exceptionally, judges generally accept that an international contract may exist outside any legal system, that is to say without any governing law.

The governing law shall be a substantive law providing for a legal regime of contracts.

Therefore, the governing law cannot be a treaty, private rules or other rules that do not provide for a legal regime of contracts. Notably, the governing law cannot be a conflict rule or Incoterms.

If the parties did not choose the governing law of the contract:

• in the European Union, EU regulation n° 593/2008 determines which State law should govern the contract (this regulation provides conflict rules);
• for an international sale of goods, the Convention of Vienna on the International Sale of Goods (CISG) often applies as of right, since it is in force in 97 States (this convention is a substantive law providing for a legal regime of contracts);
• otherwise, it is necessary to check whether a treaty is applicable or, failing that, to check the rules of the States concerned by the case.

Applicable laws

The governing law is also known as the applicable law. These terms are often used synonymously. However, beyond the terms, two concepts must be distinguished.

The governing law in the meaning of the law governing the contract refers to the specific legal system that defines the existence, validity and effects of the contract. This governing law is the foundation that defines the legal framework for the contract.

The applicable laws, in the meaning of the laws potentially applicable to the operations provided for in the contract, encompass the various legal provisions that could affect the operations outlined in the contract. This may include State laws and generally all mandatory regulations applying to the operations provided for by the contract or carried out pursuant to the contract. For example, regardless of the law governing the contract, the parties must comply with applicable regulations such as: taxation, customs duties, formalities to be carried out for importation, compliance with safety standards and environmental standards, respect for consumer rights and of competition law.

While the governing law dictates the overall legal rules that govern the contract itself, the applicable laws pertain to the potential legal implications and requirements that may arise from the operations outlined in the contract, extending beyond the contract’s formation and execution.

Jurisdiction – competent courts

The parties to an international contract may choose:

• to confer exclusive jurisdiction on the courts of a State;
• to confer non-exclusive jurisdiction on the courts of one or more defined States;
• to resort to institutional or ad hoc arbitration.

The parties may, for the same international contract, combine any of the choices of law governing the contract with any of the choices concerning jurisdiction.

PART 4 – PRACTICING INTERNATIONAL COMMERCIAL CONTRACTS

SOURCING, BUYING, SELLING

In a contract for the international sale of goods, particular attention should be paid to the following points.

Product – Definition of the product. Specifications. Quality. Compliance with regulations (safety).

Volume – Definition of the quantity.

Price – Specify the price and the currency. Indicate a net price. The price should be taxes and costs excluded (notably bank commissions and fees should be excluded).

Exchange rate risk – Stipulate a clause enabling to revise the price in the event of a fluctuation in exchange rates between currencies (specifically for a framework agreement).

Price revision – Stipulate a clause enabling to revise the price in the event of a significant change in the cost of raw materials (specifically for a framework agreement).

Price indexation – For a framework contract, the execution of which lasts over time, it is desirable to provide for the automatic revision of the price according to the evolution of a relevant index.

Expenses – You should specify which party will pay expenses (duties, transportation…). This can be addressed with an Incoterm.

Payment terms – Specify when and how the payment should be made.

Late payment interest – Specify late payment interest.

Delivery terms / Incoterm – Specify when and where the products should be delivered, when ownership and risks will be transferred, who will perform formalities and bear transportation costs. Specify an Incoterm to ease these issues.

Retention of title – When you are selling, insert a clause specifying that you will retain the ownership of the goods until the price is fully paid.

Penalties – When you are buying, provide for penalties for late delivery.

Governing law and jurisdiction . – As always, specify the governing law and the jurisdiction in case of litigation.

OUTSOURCING MANUFACTURING

In an international contract for the manufacturing of goods, particular attention should be paid to the following points, in addition to those above-mentioned for the international sale of goods.

Intellectual property (IP) – Specify that you own intellectual property rights relating to the products designed by you.

Impose confidentiality obligations concerning your products, know-how, projects (launch of new projects…). You don’t want your manufacturer to share such information with its other customers (your competitors).

Guarantees / IP – Ask your supplier to guarantee that he will not infringe intellectual property rights of third parties (for example by using patents of third parties).

Guarantees / Compliance – Ask your supplier to guarantee that the products will comply with the regulations applicable in the markets where you intend to sell them. For example, the products marketed in the European Union (EU) should comply with REACH (the EU regulation concerning chemicals).

DISTRIBUTING PRODUCTS

Define the appropriate distribution contract.

The reseller will purchase the products from the seller and then resale them to the customer.

The commission agent acts in his own name. The commission agent will sell the products of the principal without paying them (and without owning them). He will receive the payment from the customer and then he will pay the price to the principal, after deduction of his commission.

The agent acts in the name and on behalf of the principal. The principal will directly invoice the customer, receive payment and then pay a commission to the agent. If you consider appointing an agent, anticipate that you should in principle indemnify the agent upon termination of the contract (based on the turnover made thanks to the agent).

A franchise agreement includes the distribution of products, as well as a licence to use the trademark of the supplier and a transfer of know-how from the franchisor to the franchisee.

Selective and exclusive distribution networks may infringe competition law. They should be justified by the characteristics of the products.

A supplier cannot impose minimum resale prices to his distributors. Such practice is prohibited by competition law.

Exclusivity – Distribution contracts generally involve the definition of exclusivities. The distributor is granted exclusive distribution rights in a defined territory. In return, it is necessary to ensure that he will seriously exploit the rights granted (for example by stipulating minimum purchase amounts). In an exclusive distribution network, the distributor is required to market exclusively the supplier’s products (to the exclusion of all other products).

Passive sales – It is not possible to prohibit a distributor from making passive sales outside the territory granted to him. Passive sales are sales requested by customers who are not located in the distributor’s territory, without the distributor having undertaken any targeting action outside his territory.

Pre-contractual information of the distributor subject to exclusivity – Under French law, any person who makes available to another person a trade name, a trade mark or a sign, by requiring him to undertake exclusivity or quasi-exclusivity for the exercise of his activity, shall be required, prior to the signing of any contract concluded in the common interest of both parties, to provide the other party with a comprehensive document giving sincere information, that allows him to make an informed commitment. Said document and the draft contract shall be communicated at least twenty days before the contract is signed, or, where applicable, before payment of any amount by the distributor (article L. 330 of the French commercial code). Comparable regulations exist notably in Belgium and in two provinces of Canada.

PROTECTING INTELLECTUAL PROPERTY

COPYRIGHT – Copyright is a legal right that grants the creator of an original work exclusive rights to its use and distribution, usually for a limited time, with the intention of enabling the creator to receive compensation for their intellectual effort. In terms of formalities, in most jurisdictions, copyright protection is automatic upon the creation of the work and does not require any formal registration. The duration of copyright protection commonly lasts for the life of the author plus an additional 50 to 100 years depending on the jurisdiction and the type of work.

TRADEMARK – A trademark is a recognizable sign, design, or expression which identifies products or services of a particular source from those of others. It is a form of intellectual property, and typically includes a name, word, phrase, logo, symbol, design, image, or a combination of these elements. Trademark registration usually involves an application to the relevant intellectual property office where the mark will be used, including a depiction of the mark and a list of goods or services the mark will be used to represent. The duration of trademark protection potentially extends indefinitely, as long as it is being actively used and renewal fees are paid, subject to meeting certain renewal requirements.

These are some examples of assets that can be protected by a trademark.

• Brand names. A company name, product name, or service name can be protected through a trademark. For example, “Nike” is a widely recognized brand name protected by trademark law.
• Logos. Graphic symbols or designs used as a representation of a company or product, such as the iconic Nike “swoosh” logo.
• Slogans. Catchphrases, taglines, or mottos associated with a brand, like McDonald’s “I’m lovin’ it”.
• Product packaging. Distinctive shapes, colors, or imagery used in the packaging or labeling of products, as seen in the unique Coca-Cola bottle shape.
• Sound marks. Recognizable audio elements, such as the Intel jingle or the MGM lion roar.
• Service marks. Identifiers for services rather than physical products, such as the American Express “Don’t leave home without it” slogan for its credit card services.

DESIGN – A design right protects the visual design of objects that are not purely utilitarian. It can apply to a wide variety of products, including industrial items and handicrafts, as well as two- or three-dimensional features such as graphics, icons, typefaces, and other elements. Formalities for design protection often involve registering the design with the relevant intellectual property office, including providing representations or samples of the design. The duration of design protection varies by jurisdiction, but it typically ranges from 5 to 25 years from the filing date, subject to the payment of periodic renewal fees.

PATENT – A patent is an exclusive right granted for an invention, which is a product or a technical process that provides, in general, a new way of doing something, or offers a new technical solution to a problem. Patent protection typically involves a formal application process, including a detailed description of the invention and often various other documentation. The duration of patent protection varies, but it generally lasts for 20 years from the filing date of the patent application, subject to the payment of maintenance fees.