1

LAW RELATING TO FOREIGN TRADE 24.10.2010

I. Introduction
A. Globalization of the world economy-integration of national economies through
international and regional (such as the World Trade Organisation (WTO)
European Union, the Asean, etc.) organizations.
B. Complex nature of international business transactions:
- traditional forms of international trade was confined only to either sale
of goods and legal issues were largely confined to either sale of goods
or transportation of them at the transnational level or transportation of
goods;
- in modern day parlance even these transactions are concluded for long
period of time;
- added to the above are factors such as complex technologies and
contracts which include more than two parties, sophisticated
international business transactions for example, include the following:
distributorship agreements and manufacture and distribution of goods
in third countries.
C. Diversity of laws
- the international society is highly diverse and represented by states
(political units);
- under international law a state is supreme within its territory and can
legislate in accordance with its own policy goals, subject to the
obligations it has assumed at the international level.
- existence of many national legislations (diversity of laws) dealing with
export-import transactions require harmonization of such laws, at the
international level.
D. Process of harmonization:
- the term unification or harmonization in international context means to devise
a uniform law (single text) whereby states are obligated through bilateral or
multilateral treaties to incorporate these instruments in their respective
domestic spheres.
- harmonization of the laws brings about certain advantages to parties involved
in international commercial transactions as it facilitates international business
by avoiding the application of private international law principles or the
application of foreign substantive law.
2
- early success in the harmonization process at the international level can be
seen in the field of protection of intellectual property (WIPO) and in the field
of transportation of goods by ships and by aircrafts.
II. A. Techniques of harmonization or sources of international commercial laws:
01. international treaties: For e.g: the Vienna Convention on the International
Sale of Goods, 1980 (CISG) or the New York Convention on the
Recognition and Enforcement of Foreign Arbitral Awards 1958. Treaties
create hard law obligations for the state parties to such treaties.
02. transnational sources: they are non-authoritative (soft-law) instruments
which states may incorporate into their domestic spheres with or without
modification. e.g., INCONTERMS (International Commercials Terms)
2000 prepared by the International Chamber of Commerce (ICC)
Model laws:
- most preferred method for unification because a state may modify the
unification text to suit its needs.
- examples of Model Laws;
- The Uncitral Model Law on International Commercial Arbitration,
1985
B. Some important institutions facilitating harmonization of the law of
international trade
1. United Nations Commission on International Trade Law (UNCITRAL):
- Main objective is to promote the progressive harmonization by
- coordinating the works of organizations active in the field of
international trade and encourage international cooperation;
- promoting wider acceptance of existing international
conventions and models and model laws;
- preparing or promote new conventions or model laws;
- promoting means of ensuring a uniform interpretation of
treaty provisions or model law provisions
- dissemination of modern legal development through
publication
2. International Chamber of Commerce (ICC), Paris:
3
- objectives, inter alia, are promotion of international trade and strengthen
private enterprises.
- Major areas of work are in the field of dispute settlement and
international payments.
C. The subject matter of the course covers the following:
- transportation of Goods by Sea with special reference to India;
- transportation of goods and passengers by Air;
- legal principles applicable to international sale of goods; and
- settlement of disputes in international commercial transactions.
LECTURE II
Transportation of Goods by Sea (both international and national perspectives)
I. Introduction to Maritime Transportation understanding some basic
principles
A. contract of sale vs contract of carriage
- contract of carriage is an agreement between an exporter ((consigner/seller)
or his representative (e.g; freight forwarder) and the carrier or his agent (the
loading broker), whereby the latter agrees to carry the goods in his ship from
port of origin to port of destination.
- remuneration to be paid by the exporter to the carrier is the freight.
B. Documents used in maritime transportation:
1. Bill of lading exhibits three principal functions. A bill of lading is
- a receipt for goods;
- an evidence of the contract of carriage;
- a document of title
2. Bill of lading distinguished from mates receipt mates receipt is not a
document of title.
II. International Legal Regimes applicable to Maritime Transportation of Goods
A. The Hague Rules, 1923; is in force; India has ratified it.
B. The Hague Visby Rules, 1968:
C. The Hamburg Rules, 1978: India is not party to it
4
A. The Hague Rules, 1923; India is signatory to this convention and had enacted
the Carriage of Goods by Sea Act;1925
- scope and application of the Hague Rules in India; port of origin must be
in India
- who is a carrier? either the ship owner or the charterer (demise
charterer)
- these Rules are applicable by their own force (ex proprio vigore) to
contracts of carriage covered by a bill of lading or any other similar
document [Art.1(b) of the rules read with Section 2 of the Indian Act].
- most national laws have made it mandatory that the bill of lading must
contain a paramount clause.
- however, in Vita Food Products case an English court had held that the
Rules would still applicable provided there was an intension to apply the
Rules in the bill of lading.
- Indian courts will not apply the Hague Rules if the bill of lading issued
did not contain paramount clause (Province of Madras vs C.Machado
case).