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PART A (ii) ESSENTIAL ELEMENTS OF LEGAL SYSTEMS The United Nations (UN) The UN is an international organisation of which most

t independent countries in the world are members. The UN Charter, formulated after World War II and amended sporadically since then, indicates that it has the following purposes: 1. The maintenance of peace and security 2. The development of friendly relations among countries 3. Promoting cooperation in solving economic, social, cultural and humanitarian problems 4. Promoting respect for human rights and international freedoms One of the ways in which the third purpose is fulfilled is stated in the UN Charter: the development and codification of international law. There are a number of UN bodies engaged in the promotion of international law: 1. UN Commission on International Trade Law (UNCITRAL) 2. International Court of Justice (ICJ) 3. International Law Commission UNCITRAL Two of the most significant pieces of legislation produced by the UNCITRAL are the following: 1. Model Law on International Commercial Arbitration 2. UN Convention on the International Sale of Goods (UNCISG) UNCITRAL attempts to overcome the barriers that arise from the fact that different countries have different national laws relating to trade, such as for the sale of goods, arbitration and electronic commerce. It also aims to oil the wheels of international trading itself, in the form of its Hamburg Rules on the carriage of goods by sea, its convention on international bills of exchange, and its rules on cross-border insolvency. As well as drafting laws, UNCITRAL aims to widen their uptake by member states, to ensure that laws are interpreted consistently, and to monitor the need for further modernisation.

International Court of Justice (ICJ) The International Court of Justice has two roles: 1. To settle disputes brought before it in accordance with international law 2. To provide advice on legal issues put before it by international organisations Individuals may not bring cases before the ICJ, only states and international organisations. The Court hears disputes over matters such as frontiers and territorial sovereignty, diplomatic relations, nationality, asylum and other international issues. It reaches decisions in accordance with international treaties and conventions, custom, the general principles of international law and judicial decisions. The Court sits in The Hague, Netherlands and its official languages are English and French. There are 15 judges elected by the UN General Assembly and Security Council for 9 year terms. There may be not more than one judge of any nationality, although judges are charged to act independently and not merely to be representatives of their governments. A country involved in a case may appoint a national judge for the purpose of that case where there is not a previously elected judge from that country. International Court of Arbitration This is not a court but rather an arbitration body set up by the International Chamber of Commerce (ICC). The ICC is the leading organisation in the field of international commercial dispute resolution. The ICA was set up in 1923 and has been at the forefront of promoting the settlement of international commercial disputes by arbitration rather than in courts. This is beneficial to people dealing commercially in countries where the legal systems differ markedly from their own and solutions provided by national laws might not seem fair. The ICA was also the initiator of the New York Convention of 1958, the most important multilateral treaty on the recognition and enforcement of international arbitral awards. It sets out two key principles for arbitration: 1. It requires courts of each contracting state to recognise arbitration agreements in writing and to refuse to try such agreements in court. 2. It also requires domestic courts to recognise and enforce arbitral awards. The ICA offers a place where international disputes can be solved by arbitration, providing all the customary benefits of arbitration.

Conflict of laws Conflict of laws is where parties from different states have a legal dispute and it is necessary to determine which law governs the validity of the legal situation. This is because different solutions might be reached by applying the laws of the two parties. For example, a conflict of law would arise if a contract was made between an English company and a French company to be performed in Germany. If a dispute arose, under which law should it be settled? Generally the problem of conflict of laws is solved by countries making Conventions and Treaties between themselves stating what law will be relevant in certain circumstances. For example, the Rome Convention states that if parties have expressed a written preference for a certain law to govern their proceedings, that written preference will be recognised.

The World Trade Organisation (WTO) The WTO is an international organisation formed on the basis of the General Agreement on Tariffs and Trade (GATT) in 1995. It has more than 150 members and is devoted to the promotion of international free trade in goods and services and also intellectual property (software, music etc). It does this by attempting to remove or overcome the various obstacles to free trade represented by tariffs, customs and import controls. It acts as a forum for the creation of trade agreements and then administers them when they are formed. National trade policies are continuously reviewed by the WTO and developing economies are assisted with formulating their national trade policies. Finally, the WTO has the aim of helping resolve international trade disputes through its Dispute Settlement Body.

The WTOs main guidelines on international trade are still contained in GATT, last updated in 1995 following the Uruguay round of negotiations and known as WTO Agreements. These contain principles of trade liberalisation (removal of customs tariffs and other barriers) and the limited exceptions to them which may be negotiated by member states. Members are supposed to operate non-discriminatory trading systems and to guarantee the fair treatment of exports from other member states. There are special concessionary rules for developing economies. The International Chamber of Commerce (ICC) The ICC was formed in 1919. Its purpose is to serve world business in promoting trade, investment and open markets based on free and fair competition among business enterprises. It also aims to help foster economic growth in both developed and developing countries, and to help counter international commercial crime via the ICC Commercial Crime Service. It is a worldwide organisation with thousands of member countries and associations from over 130 states. As part of its aim of promoting trade, the ICC is concerned with the legal processes that support trade, namely agreements between parties and the settlement of disputes. In relation to agreements between parties, the ICC makes representations to governments and other international bodies on international trade issues, particularly to the UN regarding the development of international trade law. It also promotes nonstatutory codes of practice for adoption by businesses. In relation to the settlement of disputes, the ICC set up the International Court of Arbitration (ICA) in 1923, which is a body which promotes and facilitates the use of arbitration in commercial disputes, as an alternative to full legal resolutions. States which

ratify the ICCs New York Convention of 1958 agree to recognise written arbitration agreements, and they also agree not to submit such disputes to national courts. The ICC also produces and promotes standard trade definitions relating to carriage and the passage of risk, called Incoterms. These can be included in international agreements by contracting parties. It also produces guidance on the use of documentary credits, called the Uniform Customs and Practice for Documentary Credits (UCP 500). International Institute for the Unification of Private Law (UNIDROIT) The UNIDROIT is an independent intergovernmental organisation which studies the need for and how to modernise, harmonise and coordinate private international law, particulary trade law, between states and groups of states. It is based in Rome and has operated since 1926. Membership of UNIDROIT is restricted to 60 states which have signed up to the UNIDROIT Statute. They represent all five continents and a variety of different legal, economic and political systems. Because UNIDROIT is an intergovernmental structure, its rules have traditionally tended to take the form of international conventions which apply automatically in preference to a states national law once they have been implemented. Of particular note are UNIDROITs Hague Convention relating to the uniform law on the international sales of goods, and the Geneva Convention on agency in the international sale of goods. UNIDROIT has over the years prepared over 70 studies and drafts, many of which have resulted in international instruments, and its work has also served as the basis for international instruments adopted under the auspices of other international organisations already in force, including the UNCITRAL Convention on Contracts for the International Sale of Goods.

Civil law Civil law exists to settle disputes about the rights and obligations of persons when dealing with each other, and to provide remedies. The state plays no part in such proceedings except to ensure that there is a system of rules and of courts in place for cases to be heard. The is no concept of punishment. In civil cases there is a claimant who sues a defendant, and the case is reported in the names of the two, eg A (claimant) versus B (defendant). There is usually a lighter burden of proof than is found in criminal cases. In the UK for instance cases must be proven on the balance of probabilities. Civil law comprises contract, company, family, tort and property law among others. The court system for civil cases is usually distinct from that for criminal cases. In the UK the civil court system mainly comprises the County Court, the High Court and the Court of Appeal (Civil Division). The parties in all but small cases are usually legally represented, and the system of pre-trial disclosure of documentation means the process is lengthy and costly. The case is heard by a judge in the UK; in some systems, notably the US, there may be a jury as well. Criminal law A crime is defined as conduct prohibited by the laws of the state. In criminal law the state prosecutes a person who has done wrong against the state by breaking its law. The parties to the case are the state (the prosecution) and the accused wrongdoer (the defendant); even if the wrong was harm to a person such as assault, that person plays no actual part in the proceedings. The case is reported as The State versus A. A person can only be convicted of a crime if the case is proved beyond reasonable doubt; there is therefore a higher burden of proof in criminal cases. The state punishes a convicted criminal by imprisonment, fines etc. The court system used is generally separate from civil cases. In the UK it mainly comprises the Magistrates Courts, the Crown Court and the Court of Appeal (Criminal Division). All but the pettiest crimes are heard by a judge and a jury; the judge decides on the law and the jury on the facts. The same act may give rise to both a civil and a criminal case. For instance an accident at work may result in an employee claiming against the employer for damages by way of compensation for the injuries caused and it may also give rise to a criminal prosecution against the directors for breaches of health and safety legislation.

Arbitration Arbitration is an alternative dispute resolution procedure for settling civil cases, whereby the dispute is taken not to a court and a judge to decide, but to an independent and mutually agreed third party. It is an alternative to the full process of civil law but it is still focused on resolving disputes between persons. There is no element of criminal law in arbitration. Advantages 1. Cost Because there is not the same process surrounding pre-trial disclosure of documentation and representation by solicitors and barristers in court, the arbitration process is generally cheaper. Costs of venue and the arbitrator fall on the parties but as the venue is a place that is convenient for the parties, the benefit should outweigh the added costs. 2. Speed Arbitral decisions are usually made and acted on much quicker than is the case with court proceedings. This is helped by the fact that the venue does not need to be in a court room, during court time etc, and the arbitrator is not normally a judge, so the flexibility of the arbitration procedure speeds up the process. 3. Privacy Arbitration proceedings are kept as private as the parties wish. This is often essential to the parties, as what may be at issue are commercially sensitive details. Court proceedings are public and the fact that there have been proceedings is a matter of public record, which in itself can mean bad publicity. 4. Informality Arbitration proceedings are usually very informal without the fuss of court rooms etc. This in itself can often lead to better solutions. The proceedings are more like a business meeting than a legal battle. 5. Expertise The person conducting the arbitration, the arbitrator or adjudicator, should be an expert in the matter under dispute. This is a major advantage over the court system where the judge is an enlightened amateur or well-informed layperson.

6. Innovation The decisions of arbitration are often more innovative and cover a wider range of solutions (apology, promise, change in behavior, explanation, correction of mistake etc) than would be available at law. Usually the decision is a form of compromise and not based on the adversarial winner-loser split. 7. Enforceability Depending on the arbitration agreement, an arbitral decision should be binding on both parties and enforceable in the courts, although there may be a limited right of appeal to the courts. Disadvantages 1. One party may actively want the publicity that court proceedings entail. 2. Judges are experts in interpreting and applying the law so may be preferred if the root of the dispute is of a legal rather than a commercial nature. 3. In common law systems based on precedent there is greater predictability of the outcome in court proceedings as opposed to arbitration, where decisions are ad hoc and may be inconsistent. Also, taking a dispute to court should result in a precedent being set that parties can rely on in future dealings. 4. The right to appeal may be important. Under an arbitral process, the right to appeal to the courts may be limited.

Arbitration agreement The arbitration agreement may be governed by one partys national law, such as the UKs Arbitration Act 1996, or it may be international arbitration under the UNCITRAL Model Law on International Commercial Arbitration. Arbitration is international if the parties have their places of business in different countries. Arbitration is commercial if it covers matters relating to trade.

Model Law on International Commercial Arbitration The Model Law sets out that arbitration agreements must be in writing. An arbitration clause which refers to a commitment to submit future disputes to arbitration must be generally written into the contract at the outset, or it can be by a separate contract. An arbitration clause is said to be in writing, if it was contained: in a document signed by the parties in an exchange of documents giving a record of the agreement in an exchange of documents relating to legal proceedings referring to it as a reference in another written contract between the parties

In writing includes a number of methods, for example telex, telegram or other means of telecommunication which provide a record of the agreement. Composition of the arbitral tribunal Under the UNCITRAL Model Law on arbitration, the composition of the arbitral tribunal depends on what the parties have agreed between themselves in their arbitration agreement. If the parties have not agreed about how the tribunal shall be composed, the Model Law states that there shall be three arbitrators, one chosen by each of the parties and the other chosen by the two arbitrators chosen by the parties. The parties should elect their arbitrator within 30 days of being asked to do so. The two arbitrators should then choose the third arbitrator within a further 30 day period. Person of the arbitrator The qualifications the parties require of the arbitrators will be set out in the arbitration agreement, for example, if they are required to be an expert in a particular product or area of law. If there is no specification in the agreement, no special qualifications are required. No one can be stopped from being an arbitrator solely on the grounds of his nationality.

However, arbitrators are required to be independent and impartial of the parties and their dispute. When someone is asked to be an arbitrator, they must disclose any relevant facts or circumstances that might impair their independence or impartiality. If it becomes impossible for an appointed arbitrator to act, he can withdraw or the parties can agree that the appointment is terminated. Challenging an arbitrator If a party does not feel that an arbitrator meets the requirements of independence or impartiality, or does not possess the qualifications required in the agreement, he may challenge the appointment of that arbitrator in accordance with the challenge procedure laid down in the arbitration agreement. In the absence of a challenge procedure, the Model Law procedure applies as follows: 1. The challenger must send a written statement of challenge to the tribunal within 15 days of becoming aware of grounds for a challenge or of becoming aware of the tribunals composition. 2. At this point, the arbitrator may withdraw voluntarily, or the other party may agree to the challenge so the arbitrator has to withdraw. 3. If there is no withdrawal the tribunal must decide on the challenge. 4. If the challenge is not successful the challenger has 30 days to apply to the courts to decide it. 5. Once the court has decided on a challenge there is no further right of appeal. No party may make a challenge on the basis of information that they possessed at the time the arbitrator was appointed. While any challenge is being decided the original tribunal, including the challenged arbitrator, may continue its proceedings and make an award. The nature of proceedings There are three general principles in the Model Law with regard to the nature of arbitral proceedings: 1. Parties will be treated with equality, and both parties given a full opportunity to present their case. 2. The parties are free to agree on a procedure, subject to the requirements of the Model Law. 3. If the parties do not agree on a procedure, the tribunal will proceed as it sees fit. The claimant (the person initiating tribunal proceedings) will make a statement of claim, setting out the facts supporting his claim, the points at issue and any remedy claimed. The defendant will set out a statement of defence, answering these points.

The parties will be given full access to all documents presented by the other party. If either party fails to present their statement or fails to provide evidence required, the tribunal will continue on the basis of the evidence available to it. The tribunal will decide whether proceedings will be conducted orally or in writing, but they shall be conducted orally if requested by one of the parties. The tribunal or one of the parties with the tribunals consent, may request assistance in taking evidence from the courts.The tribunal may make use of expert witnesses, if they choose. The parties will also decide upon practical issues such as where proceedings are to take place, when and in what language. If they do not agree, the tribunal shall decide. The tribunal proceedings end either by order of the tribunal or when an award is made. Enforceability of awards The award by the tribunal shall be made in writing, state the reasons behind the award and the place of the award, be dated and signed by a majority of the arbitrators, and be sent to both parties. Regardless of where the award was made, it shall be binding on both parties. The party may apply to the courts to enforce the award, by making a written application and supplying a certified copy of the award to the court. When the award is not enforceable The parties may have recourse against the arbitral award. Parties may apply to the relevant court or authority to have the arbitral award set aside in the following circumstances: 1. A party to the arbitration agreement was under some incapacity or the agreement was not valid under the relevant laws. 2. A party was not given proper notice of an arbitrators appointment or of the proceedings or that party was otherwise unable to present its case. 3. The award deals with a matter not contemplated by the parties or not falling within the terms of the original arbitration agreement. 4. The composition of the tribunal was incorrect. 5. The subject matter of the dispute is not capable of being dealt with by arbitration under the law of the state. 6. The award conflicts with public policy in that state.

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