Legal aspects

The emphasis in this chapter is on the legal merits of what has been discussed in the previous chapters. This chapter addresses the key areas of the laws as reflected in the ITC Model Contracts (or as may be triggered by implementing those contracts in real life). The main subject matters that will be discussed are:

  • (an introduction to) the Unidroit Principles of international commercial contracts (section 5.1);
  • the U.N. Convention on contracts for the international sale of goods (‘CISG’, Vienna 1980 – section 5.2);
  • the ICC Incoterms 2010 (section 5.3);
  • various cross-border payment conditions and usages (e.g. letters of credit, standby practices, demand (bank) guarantees – section 5.4);
  • intellectual property rights (section 5.5); and
  • competition (‘antitrust’) law (section 5.6).

Important subject matters in international contracting that will not be addressed include:

  • Corporate Social Responsibility (CSR) in contracts. Over the past few decades, multinationals have become very keen on the people and companies with whom they conduct their business. This attitude has been triggered by scandals, pressure exercised by the public, or a fundamental belief that a business must be conducted responsibly. Adopting CSR means that these multinationals refrain from purchasing goods and services from parties engaged in questionable practices or dealings, and they strictly monitor full compliance with the standards. Key focus points of CSR policy typically include the avoidance of:
    • child labour
    • violations of human rights
    • substandard employment conditions
    • use of hazardous substances
    • application of environmentally unfriendly materials or practices
    • engagement in bribery or corrupt practices
    • committing a criminal offence or involvement in any illegal business

Obviously, these multinationals do not only adopt the CSR policies internally but expect them to be applied by all suppliers across the entire supply chain (i.e. also by suppliers to suppliers). Many multinationals take a step further and organise their business in such manner that they serve as an example for their business sector (industry stewardship).

  • Public procurement. Contracts with governments are typically subject to rules and regulations ensuring fair treatment of market parties. The procurement of goods or services by governmental (or semi-governmental) institutions is well-regulated in many countries: the preparation of specifications and criteria for goods or services to be purchased, contacting potential suppliers, tender and selection – the entire process is subject to many specific rules preventing any unjustified preferential treatment and making sure that the government does not pay too much for its goods or services.
  • Personal data protection. Companies are not entitled to collect and store personal data from consumers, end-users, potential (individual) customers, or even their employees, unless it serves a proper and legally justified purpose. With the increased relevance and importance of the internet, it is possible to use such personal data for purposes that do not correspond to the intent of the persons concerned. National and international rules have tended to become more and more restrictive, to protect the privacy of each individual.
  • International taxation (VAT, corporate income tax, wage tax). Taxation is not only a national affair but also an international arena: governments compete with each other to attract multinationals to establish their business headquarters in one country instead of another. International tax treaties ensure that a company will not be directly or indirectly charged twice for the same taxable income in different tax jurisdictions. The mere existence of these treaties also encourage companies to establish their business in a certain country (and avoid another).
  • Import and export regulations. Various types of business are subject to import or export restrictions. These restrictions attempt to prevent technology, nuclear materials, chemical or biological substances, or military-technical information from being transferred to certain countries where the information or goods may be abused.

These matters will not be addressed either because the related rules and regulations are of a technical nature, or because there is little uniformity among national implementations of those rules and regulations. One exception, however, is competition (‘antitrust’) law. Despite a lack of uniformity – especially between the laws of the U.S. and those of the EU – competition law is of such critical importance that it has been included in this chapter.

Continue