Codification of International Trade Law

Meaning of International Trade Law

(ITL) is the law regulating international commerce. It has two aspects: public
and private. The public aspect of ITL seeks to coordinate commercial policies
of states; and it is a part of Public International Law. The private aspect of ITL
governs international commercial transactions between the people belonging to
different states. This is substantially covered under Private International Law. In
addition, the bodies like the United Nations Commission on International Trade
Law have been trying to develop standard laws on various aspects of
transnational transactions and states are expected to incorporate them in their
respective legal system.

Need for codification

International law serves to increase international trade, investment and promote

prosperity. These laws and mechanisms fall into two main categories, the
private law of international trade and international public law, albeit there is a
significant overlap between the categories. The law on private trade deals with
the rights and obligations of international traders and investors facing each
other. Here, there is a need for codification to resolve the conflicts of laws
between persons from different legal systems. There is also a value in
promoting codification initiatives to reduce trade transaction costs between
people from different legal cultures. Where there is a law on international trade,
there is a need to develop an appropriate compromise between the sovereign
rights of the nation states and the desire for cooperative behavior between them.
Here, there is a special need to identify processes and mechanisms to promote
the normative effect of international rules, given the lack of any form of
coercion over national states. Insufficient and inefficient laws and mechanisms
will be a disincentive to trade and productive investment. So codification.
Codification by harmonization, unification, and modernization of the law of
international trade.

Codification- Two modes—

A) National into harmonised(weak law weak codified – strong law weak

codified—weak law strong codified—strong law strong codified)

B) Domain expansion and development of ITL through Codification.

Brief- The progressive development of international law encompasses the

drafting of legal rules in fields that have not yet been regulated by international
law or sufficiently addressed in State practice. In contrast, the codification of
international law refers to the more precise formulation and systematization of
rules of international law on subjects that have already been extensively covered
by State practice, precedent and doctrine.

Codification – Two Domains--

A) Private – lex mercatoria to present

B) Public- National but on trade (was it really international) to present( GATT

to WTO)

Private Domain examples

International Commercial Mediation, International Sale of Goods (CISG) and

Related Transactions, Procurement and Public-Private Partnerships, Micro,
Small and Medium-sized Enterprises, International sale of goods, Formation of
contracts, Negotiable instruments and banker's commercial credits, International
Payments,Laws relating to conduct of business activities pertaining to
international trade, Insurance, Transportation, Carriage of goods, Industrial
property and copyright, Commercial arbitration.

In an increasingly economically interdependent world, the importance of an

improved legal framework for the facilitation of international trade and investment
is widely acknowledged. The United Nations Commission on International Trade
Law (UNCITRAL), established by the United Nations General Assembly by
resolution 2205 (XXI) of 17 December 1966 (see annex I), plays an important role
in developing that framework in pursuance of its mandate to further the progressive
harmonization and modernization of the law of international trade by preparing and
promoting the use and adoption of legislative and non-legislative instruments in a
number of key areas of commercial law. UNCITRAL is formulating modern, fair,
and harmonized rules on commercial transactions. These include conventions,
model laws and rules which are acceptable worldwide, legal and legislative guides
and recommendations of great practical value, updated information on case law and
enactments of uniform commercial law, technical assistance in law reform projects,
regional and national seminars on uniform commercial law.

As indicated in the preamble to General Assembly resolution 2102 (XX),

"conflicts and divergences arising from the laws of different States in
matters relating to international trade constitute an obstacle to the
development of world trade". In order to reduce such conflicts and
divergences Codification have been followed.

Codification of the law of international trade

Stages
In the form of the medieval lex mercatoria, a body of universally accepted
rules.
Incorporated into the municipal law of the various national States
The third stage in the Codification of the law of international trade is
contemporary- has remarkable similarity in all municipal jurisdictions,
application in the various municipal jurisdictions is provided for by authority of
the national sovereigns and their formulation is brought about by international
agencies created by Governments or by non-governmental bodies.

Some Entities in Codification

GATT, WTO

The International Institute for the Unification of Private Law- UNIDROIT

The Hague Conference on Private International Law

Substantial Progress in codification

The law of international sale of goods; the law relating to the supply and
erection of plant and machinery abroad; the law relating to bills of exchange;
matters relating to industrial property and transportation the law relating to
bankers' commercial credits; and the law of commercial arbitration.

Methods of Codification

Codification by- normative regulations devised and elaborated within the

framework of international treaties and agreements concluded by two or
more States.

Codification by model laws to serve as guides for local adaptation

Codification by uniform laws to be incorporated by States into their legislation.

Codification by formulation, normally under an international agency, of
commercial customs and practices which are founded upon the usages of the
international commercial community.

Codification by adoption for example, a State which is not a party to an

international convention decides to apply the principle on which the convention
is founded, or when a unifying technique used in one international instrument is
subsequently made part of another

Advantages of codification

(a) Co-ordinating and encouraging co-operation the work of organizations

active in ITL.

(b)Promoting wider participation in existing international conventions, and

wider acceptance of laws, international trade terms, provisions, customs and
practices etc.

(d) ensuring a uniform interpretation and application of international

conventions and uniform laws in the field of the law of international trade

(e) Collecting and disseminating information on national legislation and

modern legal developments in the field of the law of international trade

Challenges
Codification more easily achieved in technical branches of the law than in
subjects closely connected with national traditions and basic principles of
domestic law.

Codification process is desirable per se only when there is an economic

need and when unifying measures would have a beneficial effect on the
development of international trade.

Difficulties inherent in any attempt to bring about changes in national

legislation and practices

Limited membership and authority of formulating agencies.

Small percentage of the present Members of the United Nations have

become parties.

Less say of developing countries