International Economic Law and Global Trade Systems

1. What is the Bretton Woods system?

The Bretton Woods system was the international economic order created after the Second World War. Its aim was to avoid the economic chaos of the interwar period and to create stable international monetary and financial cooperation. It was based on cooperation between states, stable exchange rates, and new international institutions. The most important institutions were the IMF and the IBRD, later connected with the World Bank system. The general idea was to support monetary stability, reconstruction, development, and freer international trade.

2. What institutions were created in Bretton Woods?

The main institutions created at Bretton Woods were the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). The IBRD later became the main part of the World Bank system. An International Trade Organization was also planned, but it was not successfully established. Instead, GATT became the main framework for international trade in goods before the WTO.

3. What is the IMF and its essential purpose?

The IMF is the International Monetary Fund. Its essential purpose is to promote international monetary cooperation and exchange rate stability. It helps member states when they have balance of payments problems and can provide financial support under certain conditions. In simple terms, the IMF aims to keep the international monetary system stable.

4. How does the IMF voting system work?

The IMF voting system is not based solely on the principle of "one state, one vote." It is a weighted voting system. Voting power depends mainly on the quota of each member state. The quota is connected with the economic importance and financial contribution of the state. This means that economically stronger states have more influence in IMF decisions.

5. What are Special Drawing Rights (SDR)?

SDR stands for Special Drawing Rights. They are an international reserve asset created by the IMF. They are not a standard currency like the Euro or the Dollar, as private individuals do not use them for daily payments. They are mainly used between states and the IMF. Their value is based on a basket of important currencies.

6. What is the purpose of the World Bank?

The purpose of the World Bank is to support reconstruction and development. Initially, after the Second World War, reconstruction was the priority. Later, its main role shifted to development, especially in developing countries. It provides loans and financial support for projects connected with infrastructure, education, health, agriculture, and economic development.

7. What organizations complement the World Bank?

The World Bank is complemented by institutions such as IDA, IFC, MIGA, and ICSID.

• IDA helps poorer countries with easier financial conditions.
• IFC supports private investment.
• MIGA gives guarantees against political risks.
• ICSID deals with the settlement of investment disputes between foreign investors and host states.

8. What is GATT and its purpose?

GATT stands for the General Agreement on Tariffs and Trade. It was created in 1947 as the main legal framework for international trade in goods. Its purpose was to reduce tariffs and other trade barriers, avoid discrimination between trading partners, and make international trade freer and more predictable. GATT was not originally a complete international organization, which was one of its weaknesses.

9. What is the Most Favoured Nation clause?

The Most Favoured Nation (MFN) clause means that if a member grants a trade advantage to products from one country, it must grant the same advantage immediately and unconditionally to like products from all other members. Its purpose is to avoid discrimination between foreign trading partners. It is one of the basic principles of GATT and WTO law.

10. Are there exceptions to the MFN rule?

Yes. The MFN rule is a basic principle, but it is not absolute. Important exceptions include customs unions and free trade areas, because their members can grant each other more favorable treatment. Preferential treatment for developing countries can also operate as an exception. There can also be special exceptions or waivers in certain situations.

11. What problems did GATT encounter?

GATT had several institutional problems. It was not a real international organization with a strong structure. Decision-making was difficult, and dispute settlement was weak because losing states could block decisions. There were also problems with amendment procedures, the relation to national law, and the status of employees. Another problem was the tension between developed and less developed countries.

12. What were the results of the Uruguay Round?

The Uruguay Round was very important because it led to the Marrakesh Agreement and to the creation of the WTO in 1995. It also made the trade system more complete. The main results included:

• GATT 1994 for goods
• GATS for services
• TRIPS for intellectual property
• The Agriculture Agreement
• The Dispute Settlement Understanding

It made the system more institutional and stronger than the old GATT system.

13. When was the WTO established and who can join?

The WTO was established on 1 January 1995 by the Marrakesh Agreement. Members can be states, independent customs territories, and the European Union. The materials mention Hong Kong and Macao as examples of independent customs areas. The WTO became the central international organization for world trade.

14. Is the EU a member of the WTO?

Yes, the European Union is a member of the WTO. The EU member states are also WTO members. This is important because the EU has competences in trade matters and participates directly in the WTO system.

15. What are the main WTO agreements?

The main WTO agreements are the WTO Agreement itself, GATT for trade in goods, GATS for trade in services, TRIPS for intellectual property rights, and the Dispute Settlement Understanding. The materials also mention the Agriculture Agreement and plurilateral agreements, such as the Agreement on Government Procurement and the Agreement on Trade in Civil Aircraft.

16. What are the sources of investment law?

The sources of international investment law include treaties (especially BITs), multilateral conventions, customary international law, general principles of law, national law, investment contracts, and arbitral awards. BITs are especially important because they are directly created to protect foreign investors and investments.

17. What are the benefits and risks for investors?

For the investor, one benefit is access to new markets. Another benefit is the possibility of making profit in another country. The dangers are political risk (for example, expropriation or nationalization) and legal uncertainty (for example, changes in the law or discrimination by the host state).

18. What are the benefits and risks for host states?

For the host state, one benefit is foreign capital. Another benefit is economic development, such as new jobs, technology, or infrastructure. The dangers are loss of control over important economic sectors and possible disputes with foreign investors. Foreign investment can also create environmental or social problems.

19. What was the Iran-US Claims Tribunal?

The Iran-US Claims Tribunal was an international arbitral tribunal connected with claims between Iran, the United States, and their nationals. It is relevant for international investment law because it dealt with questions such as expropriation, nationalization, compensation, and state responsibility for foreign property.

20. What is ICSID and its function?

ICSID stands for the International Centre for Settlement of Investment Disputes. Its function is to provide arbitration and conciliation for investment disputes between foreign investors and host states. It offers a neutral forum outside the national courts of the host state and is an important mechanism for investor protection.

21. What is nationalization?

Nationalization occurs when a state takes private property or private economic activity and transfers it into public ownership. It can concern a single company or an entire economic sector, such as natural resources or banking. Nationalization is not automatically unlawful, but it must respect international law, specifically regarding public purpose, non-discrimination, and compensation.

22. What is indirect nationalization?

Indirect nationalization means that the state does not formally take the property, but its measures have the same practical effect. The investor may remain the formal owner but loses the actual use, control, or economic value of the investment. This concept is closely related to indirect expropriation.

23. What are the criteria for lawful nationalization?

The main criteria are public purpose, non-discrimination, and compensation. A complete answer can also mention due process of law. This means that nationalization may be lawful, but only if it is justified, not discriminatory, follows legal procedure, and compensation is paid.

24. What are two mechanisms for investor protection?

Two important mechanisms for the protection of investors are BITs and ICSID arbitration. BITs give legal protection to foreign investors through treaties between states. ICSID arbitration provides a neutral procedure for solving disputes between investors and host states.

25. What is a stabilization clause?

A stabilization clause is a provision in an investment contract that protects the investor against future changes in the law of the host state. It can freeze the legal regime or require compensation or renegotiation if subsequent legal changes harm the investment. Its purpose is to provide greater legal security to the investor.

26. What is an internationalization clause?

An internationalization clause is a clause which connects the investment contract with international law, general principles of law or international arbitration, not only with the national law of the host state. Its purpose is to make the contract more neutral and to avoid that the host state controls the whole contract only through its own law.

27. MIGA: what is it? Its function?

MIGA means Multilateral Investment Guarantee Agency. It is part of the World Bank Group. Its function is to promote foreign investment by giving guarantees against political or non-commercial risks, for example expropriation, war, civil disturbance or restrictions on transfer of currency.

28. What are BITs?

BITs are Bilateral Investment Treaties. They are treaties between two states for the protection and promotion of foreign investment. They normally protect investors of one state when they invest in the territory of the other state. They often include protection against unlawful expropriation and mechanisms for investor-state dispute settlement.

29. What is an internationally wrongful act?

An internationally wrongful act exists when two elements are present. First, the conduct must be attributable to a state. Second, the conduct must be a breach of an international obligation of that state. The conduct can be an act or an omission. So, it is not enough that damage happened; the act must be connected to the state and must violate international law.

30. Which legal document contains rules applicable to State responsibility? And what is its legal nature?

The main document is the Articles on Responsibility of States for Internationally Wrongful Acts, prepared by the International Law Commission in 2001. They are not a treaty, so formally they are not binding like a convention. However, many of their rules reflect customary international law and are often used by courts and tribunals.

31. Can a State be responsible for acts of individuals who are not its organs?

Yes, but only in special situations. Normally, acts of private individuals are not automatically attributable to the state. However, a state can be responsible if individuals act under the instructions, direction or control of the state. A state can also be responsible if it later acknowledges and adopts the conduct as its own.

32. Why was it important to unify the international sales law?

It was important to unify international sales law because international trade involves parties from different legal systems. Different national laws create uncertainty, higher costs and legal risks. A uniform law makes international sales more predictable and easier. This supports international trade and reduces the need to study many different national sales laws.

33. Why were the ULIS and ULFIS not successful?

ULIS and ULFIS were the 1964 Hague Conventions on international sales law. They were not very successful because the earlier unification efforts had only limited success and did not become a truly universal solution. Because of this, a new and more accepted convention was later prepared by UNCITRAL.

34. Which institution prepared the CISG?

The CISG was prepared by UNCITRAL, the United Nations Commission on International Trade Law. UNCITRAL was created to promote the harmonization and unification of international trade law.

35. Explain the structure of the CISG.

The CISG has four main parts. Part I deals with the sphere of application and general provisions. Part II deals with the formation of the contract, especially offer and acceptance. Part III deals with the sale of goods, including obligations of the seller and buyer, remedies, damages, avoidance and risk. Part IV contains final provisions, including reservations.

36. Explain the sphere of application of the CISG.

The CISG applies to contracts for the sale of goods between parties whose places of business are in different states. It applies when both states are Contracting States, or when private international law leads to the law of a Contracting State. It does not apply to some sales, such as consumer sales, auctions, stocks, ships, aircraft and electricity. It also does not govern validity of the contract, property effects or liability for death or personal injury.

37. Explain the party autonomy as regards the CISG.

Party autonomy is very important under Article 6 CISG. The parties may exclude the application of the CISG or derogate from some of its provisions. This is called opting out. However, the exclusion must be clear. If the parties choose the law of a Contracting State, the CISG may still apply because it is part of that state’s law, unless they clearly exclude it.

38. How should the CISG be interpreted?

The CISG must be interpreted according to its international character. Courts should promote uniformity in its application and the observance of good faith in international trade. It should not be interpreted only through national legal concepts. The text, legislative history, Secretariat Commentary and decisions from other states can also be useful.

39. Does the CISG require that sales contracts it governs must be in writing?

No. Under Article 11 CISG, a contract of sale does not need to be concluded or proved in writing. It may be proved by any means, including witnesses. This reflects the principle of non-formality. However, there is an exception when a state has made a declaration under Articles 12 and 96 CISG. In that case, some formal requirements may still apply.

40. Which rules apply to international sales when the CISG is not applicable?

When the CISG is not applicable, the applicable rules are normally determined by private international law. This means that the court or arbitral tribunal must look at the conflict-of-law rules and at any choice of law made by the parties. The applicable law may be national sales law, another international convention, or rules chosen by the parties, such as lex mercatoria or UNIDROIT Principles.

3. What is IMF and which is its essential purpose?

The IMF is the International Monetary Fund. Its essential purpose is to promote international monetary cooperation and exchange rate stability. It helps member states when they have balance of payments problems and can give financial support under certain conditions. In simple words, the IMF tries to keep the international monetary system stable.