Promulgation and Enforcement of Principles of Commercial Law

There are four basic instruments for developing and promulgating

principles of commercial law external to the contract itself: (1) treaties,

(2) statutes, (3) court decisions (and occasionally decisions by arbitral

bodies) and (4) government regulations. Most International scholars

also believe that legal principles can emerge from pronouncements of

international organizations such as the United Nations and through

the growth of international custom; but in most instances, these latter

sources have less to do with actual day-to-day commercial arrangements

than the four basic sources first enumerated.

Treaties. Treaties are documents that control relationships between

nations. They may be negotiated and executed between two countries

(bilateral treaties) or among a number of countries (multilateral trea-

ties). Conceptually, they are devices by which each country voluntarily

surrenders some sovereignty in order to enter into the agreement. In

other words, there is no power currently in existence (other than per-

haps victory in war) that can compel a country to enter into a treaty,

but once a country enters into the treaty, it generally becomes bound

to the terms of that treaty. There are, of course, occasional problems of

enforcement of treaty obligations. The International Court of Justice

at the Hague (sometimes referred to as the World Court) is viewed as an

appropriate body to adjudicate disagreements under a treaty, but some

countries consider themselves free to ignore the court’s jurisdiction in

certain circumstances.

There are three steps in implementing a treaty. First, the terms of the

treaty are negotiated and the participating countries prepare a final draft.

Second, the final version is signed by the participating countries as a sig-

nal that they approve the final version of the negotiated document. This

does not mean, however, that the treaty becomes immediately enforce-

able. Third, the treaty is ratified by each country’s government. The pro-

cess of ratification differs from country to country. Some countries per-

mit ratification decisions to be made by the executive authority. In other

countries a legislative body must give its approval before the ratification

process is complete. Fourth, treaties enter into force when a sufficient

number of countries (a number generally spelled out in the treaty itself)

ratify the agreement. A country may acceed to a treaty, thus considering

itself bound by the treaty’s terms without formal ratification.

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There are many different types of treaties that affect commercial re-

lationships. One of the most common is the bilateral treaty known as

“Treaty of Friendship, Cooperation and Navigation”. Such treaties spell

out many of the details of one country’s commercial relationship with

another. Multilateral treaties are having an increasing impact on com-

mercial relations among countries.

Statutes. As the term is used in this section, statutes refers to the

promulgation of principles of law by the governments of individual coun-

tries that govern commercial transactions as a whole. In some countries,

these principles are stated as part of the civil code. In the United States,

private commercial dealings are governed mainly by statutes enacted

by the legislatures in the individual states, rather than by the national

government.

Court decisions. In virtually all countries, a great deal of commercial

law is developed by courts’ deciding individual cases brought by parties

who claim to have suffered some legal injury in the context of a specific

commercial undertaking. Many disputes arising out of international

commercial agreements are first decided in the context of an arbitration

proceeding, after which the winning party takes the arbitral award to

some court for enforcement. In a common law system, the cumulation

of individual court decisions leads to the development of legal principles

(so-called “judge-made” law) that are just as valid as anything enacted

by the country’s legislature. Even in countries outside the common law

system, the resolution of individual cases in court often helps fill in the

gaps in that country’s civil and commercial code.

Government regulations. In many countries with a centralized system

of government, there is no difference between government regulations

and statutes since virtually all authority flows directly from the central

government.

Look through the text once again and say whether the following sen-

tences are true or false. Correct the false ones.

1. There are three basic instruments for developing and promulgating

principles of commercial law.

2. Treaties are documents that control relationships between nations.

3. The international Court of Justice at the Hague is viewed as an ap-

propriate body to conclude treaties.

4. There are four steps in implementing a treaty.

5. The process of treaty verifications doesn’t differ from country to

country.

6. The most common type of treaties is Treaty of Friendship, Coope-

ration and Navigation.

7. Multilateral treaties are having a decreasing impact on commercial

relations among countries.

8. A great deal of commercial law is developed by courts’ deciding

individual cases brought by parties.

9. Many disputes are first decided in the context of an arbitration

proceedings.

10. In a common law system, the cumulation of individual court de-

cisions leads to the development of legal principles.