International Contract law

What is International Business Transactions

Trade of goods and services between different parties from different countries
Actors to the international treatues
Demarcation between private and public parties
Transactions between private individuals is what we mean by International Business Transacyions
Why International Contract law
Different actors, different jurisdictions
Certainty and uniformity of the law plus incentivize the business and dispute settlement
Plus framing the behaviour of the merchants, incoterms and the Vienna convention
International Trade Law and Business Law
History of international trade and international business law
Roman empire to middle age and big trade cities
The law of merchant – see the maxim in latin lex machei

Renaissance, modern times and the internationalization of trades

The intensity of the development of int trade depends on political stability

Montesquire, the spirit of laws: Peace is the natural effect of trade

The actors in international trade
Regulators, private actors, natural and physical persons
International organisations

Ar.2 of the vienna convention of 1969- definition of the treaty

Three type of treaties
Treaty contract: investment law treaty- two sovereign powering concluding a contract
Treaty law: creates that aim to create a legal regime- eg. To, genocide conventions, TRIPS
Treaty creating institutions: WTO, ICSID

International Contracts
What is an international contract?
Latin maxim for the contract
Rome 1 regulation for the EU- the same qualified as international contract (GISC vs Rome 1)-
Vienna convention on the sale of goods- necessary entails that the buyer and the seller come from
different countries
International contract that has contact point of more than one states
Which one will supersede over other
Why do we formulate international contract

 Details
 Concise
 Dispute settlement
 Enforcing mechanism
 Pact sun servenda- contract must be respected- contract is the law between the parties
Choice of the parties

 Forum
 Laws
Two aspects of binding contract:

 Linking the international contract to the domestic legal regime of a state

 2nd approach: linking contract to the international law. Eg. Linking contract to Quebec court
and uebec law
 Choice of forum
Advantage of linking it to the domestic law
Advantages of linking a contract to the international law
Intenational law at times come with gap. Eg. Other than sale of goods the in the vienna conventions
The domestic courts might no always be the proper and appropritate court
The arbitrators come with neutrality, with better procedure for dispute settlement
Advantages and disadvantages of both of the approach
Domestically you have full fledged la but regime might not always be taylor made for ome transactions
which international law can be
Specific law for transportation of energy (eg) not all domestic courts have it
Dualism and monoism
Judge not experts in energy or specific niche complex issue while the arbitrators might be
 Lecture:2

Always starts with the competence of the forum and then to choice of laws
1. Link with the state laws
Article 318 of CCQ
Between choice of law and choice of court always choice of the party is given preference to
Article 3111 of CCQ

 Priority given to the choice of the party

Can we choose non-state laws:

 Lex marcetoria- Non-state laws- International convention; we can but with some variations
Can we petrify the applicable law

 Stabilization clauses: Seen in both private contract and investment contract

 Fixed or petrify its legal regime
 It undermines states ability to change or amend laws
 At times the stabilization clause may become hardship for the state
 Dangerous for the state to have stabilization clause: Change in environmental regulation, labor
and criminal
 See Yokos vs Russia
Two parties form contract and applicable law is Quebec law on 18.0.2023. 10 years down the line, the
law on this date will be applicable.
Incentives to do it
2033, the judge has to apply it. What law is it? It is not state law anymore. It has become something
else.
So, in 2033, will the qc judge only the law of 2023 or any law of 2033:
Public Policy and Order, Peremptory norms- These will be applied according to the change in 2033.
Part of the regime will be applicable
Can we split (depecage) the applicable law to the contract?
Article 3111(3) of the CCQ- It has to be clearly provided in the contract
Can have different legal regime applicable to the different parts of the contract
Quid: If the parties do not choose the applicable law- Which law applies
Private international law
3112-3113- How judge choose applicable law if the parties have not mentioned it in the contract. The
state applies law of the state concerned – ask question about it
We will not see the court applying French private law
Not all rules have the same weight in given domestic legal regime
Mandatory norms and overriding mandatory norms
Overriding mandatory norms protect values of a society. Overriding mandatory norms prevails over
regular mandatory norms. However, overriding mandatory norms also prevails over the rules/norms of
the contract.
QC court has jurisdiction over contract. But under a mandatory provision, the QC law will not be
applicable but the laws of contract. In this case, the choice of law provision will prevail over mandatory
provisions.
Contract-choice of courts-qc-choice of law-qc-something runs over an overriding mandatory norms- in
that case-I do not even look at the law you choose, and mandatory law will apply. Example: Labour
law, in some states, franchise law (alberta). So essential that I am applying it directly.

Article 3076 of QCC a and article 3079 of the QCC

Domestic and Foreign overrding mandatory norms

At times it is explicit and in most of the case it will not be so, and the judges will decide if the norm is
overriding mandatory or not
“’You cannot derogate by contract”- mandatory norms
Third notion: Public order and public policy
Jus cogens
The Concept of order public and policy and difference between them and overriding mandatory norms
Overriding mandatory norms, regardless of the provisions, will be applied directly. For public order or
policy the enforceability mechanism is different. For example: the French law goes against my public
order or policy, the judge will apply its public order explaining. First look at the applicable law and
then only regard void that part of that French law that is in contradictory to public order.

5. Section 5 and 4: General Principles applicable to International contracts- From an international

perspective:

 Dispute resolution aspect: Arbitration (and alternative means of dispute resolution) ( Article
3148 of the CCQ) ( last para, even if choice of court provision)
 If an arbitration provision in the contract, the Quebec judge will say that it is not eligible
 If the defendant goes before the Quebec court- then it will be decided in the QC court
Institutional (rules and panels are pre-made…eg: ICC, ICSID and Ad hoc arbitration ( procedural
rules still may be taken. Eg. UNCITRAL. No deadlocks that institutanal arbitration can solve except
the disputed award
Model Contracts and Model Laws
General Principles
 Lex Mercatoria
Lex Mercatoria comes from the practice of the merchants. Sometimes it is crystalized . Vienna
convention. This were the norms the merchants were abiding. 2016- gudilines applicable in the field of
international commercial contracts. Soft law and binding so far as the parties entrench them in the
contract.
Is it a legal regime:
Ideological axis- anything can be lex mercatories. Unsure about what can be part of it
Theoretical axis- In order to have legal regimes you need to have proper institutions, actors and
practices..and these are what make legal regime. Others say it is a legal regime, it has institutions: ICC,
WTO- international institutions specific to merchants. We have specific practices and actors including
merchants….example: Incoterms
Practical axis: Who would interpret it in case of conflict? There is no world court or world authority
to interpret it with authority. No natural pre-existing enforcement mechanisms. Some businesses will
try to act out of good will and act out of reputation (as an informal sanction is pretty intense). You
would excluded from a community if you do not abide by the rules of the community. (example: Share
price may go down). NAFTA was amended to CUSMA, and one of the reasons were the reputation
mechanism as in first treaty there was no scope of investor-state arbitration (re-check it)

ICSID- arbitrators choose president-president mostly not from the concerning state
Section:2 The Consideration of non-state norms by arbitrators and state courts

 Practices, international case law, international conventions

 Case of the international convention that is directly applicable to the dispute
 Broader acceptance of lec mercatoria through an international convention: The Lorraine Tubes
Case
Details:
Vieenc convention may be applied
Directly and indirectly. B and S from two different countries- and parties to the Vienna convention-
judges will apply the rules directly. The judges will not look into any …eg. French law. (article 11a)
In some cases might be applied indirectly. B and S. One of the countries representing one of the parties
hav not ratified it. The QC judge eg. May ..eg.UK ( article 11b). In that case the Vienna convention
may be applied indirectly. QC will look into 3115 and 3116 first and as QC recognised Vienna
convention, the convention will apply indirectly.
 Lecture: 3
Lorraine Tubes case
Just because we do not have the applicable law in Vienna convention and contract does not mean judges
cannot use it (Article 7(2)) of the Vienna Convention. Decision of the Court of Appeal (Antwrep)
The nature of the contract changes so much that you need to renegotiate the contract.
Applicable law was French Law
Filling up the lacuna by using private international law
The court adjudicates renegotiation of the contract of the basis of good faith principle under the French
Law
70% of the price of the seller has increased
CISG
There was no hardship clause
On the first decision: on the basis of good faith
Seller from France that is why French Law- Court of appeal

Supreme Court: Renegotiation of the contract not under the French law but under the basis of lex
marcotoria (Article 7 of the Vienne Convention). In conformity with the General Principles of law. The
fact that CISG only addresses explicitly force majure (article 79) does not mean that it explicitly
excludes the theory of uneforceability and thus the possibility to negotiate the price.

It held first you need to consult general principles of law to fill up the lacuna and only after it do you
use the private inational law (in this case French law).
What do the general principles of international trade law tell us… (UNIDROIT Principles 6.2.1 a 6.2.3.
(2016) (See new article)

Article 7 of the CISG (United Nations Convention on Contracts for the International Sale of Goods
(Vienna, 1980) (CISG) | United Nations Commission On International Trade Law

The contract can however deliberately exclude hardship

That decision essentially created a huge opening for lex mercatoria
The court found a real basis to include the hardship
Is it wise or dangerous?
SP vs Arab Republic
Dangerous: We choose explicitly the Viennea convention and did not choose lex mercotoria. The choice
of the law of the parties should be respected.
See SPP vs Egypt for this view
Joint Venture- Some country has local requirement provision (local equity requirements): because of
that they are key sectors and countries have national security interest.
Nationalization
Goes to arbitration- the arbitrators were not competent (state challenged) then goes to investor-state
arbitration
Investor was expropriated
Reasoning:
The issue: Egyptian law is applicable to the contract (under the contract)
The question of the dies a quo for compensatory interests is not regulated by the Egyptian Law
Both parties argued on the basis of the Egyptian law and no dispute on that

ICSID law- Egyptian says that in case of conflict ICSID law can be referred to
Article 42 (1) of the ICSID convention –What to do when we have a gap
Applicability of the general principles of international law

Argument from the investor: When International law apply we do not have agreement of the parties.
Essentialy the majority of the tribunal said whenever we have gap that gap amounts scope of choice of
law. The investor’s position (pp. 350-351).
Argument for the state: The provision implies that no ther law than Egyptian law has been choosen by
the parties ans that any lacunae must be filled by the Egyptian common law (article 42(1) of the ICSID
Convention.

See the argument of the dissenting arbitrators:

We have the choice of the parties. But for those aspects that have not been regulated
The Dissent: PP. (478-479)
Article 1 of the Egyptian Civil Code:
Main or Moot issue: The consent/will of the parties
The provision does not permit the existence of lacunae in the Egyptian regulatory regime which would
lead to a finding of non liquet
This issue may open the wholesale applicability of lex mercotoria

However, the arbitrators could use the article 1 of the Egyptian Civil Code (Equity) and apply the
International Law (lex mercotoria) under it.
Section 3 of the Lex Mercatoria: List vs Method (Gill)
Lex Mercatoria as a list and as a method: Cannot do as a list as laws are evolving

Lex Mercotoria is a two step method: SSP VS Egypt

First method: Choice of the Parties whether it is lex mercotoria or national law or UNDROIT principle
Second Method: Identify applicable legal rules on the basis of comparative law: Eg. Lorren tubes
case..E gillerd: SPP vs Egypt..the Tribunal used comparative rules to find out the law very well.
However, the first method was not followed.

Section:4 LEx Mercatoria as the paties contractual choice of applicable law

Can we choose it as applicable law
What is the value of a choice of law provision designating domestic law
Applying two step method E Gillerd
It will be recognised – It gains domestic identity- You will always have to make link with domestic
regime when you try to enforce it in domestic setting. You cannot have a contract that is fully lex
mercatoria. For the enforcement, you still need to go to domestic court.
New York convention for the enforcement of awards (When there is dispute as to enforcement)
Article 5 of the New York Convention. Does Lex Mercatoria applies disregarding overriding mandatory
norms in a country?
Loren Tube: Possibility of a contract to be fully subject to lex mercatoria: There was a legal regime
applicable (Lorren Tube Case). Only where there is a gap that we can use it fill up the lacuna.
 Chapter :2 (Class 3 and 4)

Phases of Contract: Negotiation—(Framework of the Negotiation)-costs incurred by either parties.

The letter of Intent: What type of obligation?
LOI; What happens when there is breach of it. TO organise the negotiation
Example 6 from the PPT: Subject to the contract
Clauses Essential for LOI: Exclusivity clause: not negotiate with other parties; Confidentiality
Article 69 of the VLCT