International Commercial Law: Lex Mercatoria and Trade Terms

Lex Mercatoria: International Commercial Law

The Lex Mercatoria is a set of rules governing international commercial transactions.

Key Features of Lex Mercatoria

• Multiple participants.
• Multiple regulatory techniques.
• Standardization of multiple procedures.

Operators leverage the legal autonomy recognized in international law to self-regulate their contractual relations. This self-regulation is achieved by incorporating the following elements into contracts:

1. General Conditions and standard clauses.
2. Standard contract models (e.g., charter party).
3. Internationally accepted business practices.
4. Principles and rules of conduct elaborated outside state frameworks by various agencies and professional associations.

The possibility of recourse to international arbitration is a core component of this system.

Relevant International Rules and Conventions

1. Vienna Convention 1890 (International Sale of Goods).
2. 1924 Brussels Convention on the Unification of Bills of Lading.
3. 1929 Warsaw Convention on Air Transport.
4. 1980 Rome Convention on the Law Applicable to Contractual Obligations.

INCOTERMS: International Trade Terms

INCOTERMS are international rules for the interpretation of trade terms commonly used in international transactions. Their scope is limited to defining the rights and obligations of the parties to a contract of sale, specifically concerning the relationship between sellers and buyers regarding the delivery of the goods sold.

Common INCOTERMS Examples

• EXW: Ex Works
• FCA: Free Carrier
• FAS: Free Alongside Ship
• FOB: Free On Board
• CFR: Cost and Freight (agreed destination port)
• CIF: Cost, Insurance, and Freight (destination port)
• CPT: Carriage Paid To (destination)
• CIP: Carriage and Insurance Paid To (destination)
• DAF: Delivered At Frontier
• DES: Delivered Ex Ship
• DEQ: Delivered Ex Quay
• DDU: Delivered Duty Unpaid
• DDP: Delivered Duty Paid

Documentary Credit (Letters of Credit)

Documentary credits can be Revocable or Irrevocable (and further categorized as confirmed or not confirmed).

This mechanism involves a bank extending credit to its client (the buyer) and notifying an intermediary bank. The intermediary bank pays the seller (debt collector) upon presentation of the required documentation. This documentation typically includes proofs related to:

• Customs procedures
• Export documentation
• Product quality certification
• Origin/Nationality
• Warranty
• Shipping documents

Bills of Exchange or Promissory Notes

These instruments can be guaranteed or not guaranteed, often utilized with a discount effect (e.g., through factoring or negotiation).

Contractual Models and Practices

Contractual Models

These include self-policies (such as the charter party dictated by the long-standing agency Lloyd's International), permanent contracts, or contracts of adhesion.

Business Practice

Key elements include various Payment Systems and the use of INCOTERMS.

Rules of Conduct (Soft Law)

Examples include Soft Law instruments, such as the Code of Conduct elaborated by the European Commission (e.g., the Code Olivenza).

International Arbitration Forum (Dispute Resolution)

Recourse to international arbitration provides an independent alternative to national courts. The resulting decision is known as an Arbitration Award.

The International Chamber of Commerce (ICC), based in Paris, sets the conditions that an arbitration award must meet.

Advantages of International Arbitration

1. The arbitrator possesses powers similar to a judge.
2. The process is not strictly subject to any single national law.
3. It operates under the customs and rules of International Trade (CAAM).
4. The award is subject to executive action (enforcement).