Key Essentials of International Trade and Business Law

Contents

List of abbreviations

Foreword

Preface

A International Economic? Business? Trade? Law

B International Law

I. Origins of International Law

II. Sources of International Law

1. Treaties

2. Custom

3. General principles of law

4. Judicial decisions

5. Scholarly contributions

6. Unilateral statements

7. Soft law instruments

8. Hierarchy of sources and ius cogens

III. Law of Treaties

IV. Violation and enforcement of International Law

1. Countermeasures and retorsion

2. Use of force

V. International Investment Law

1. Foreign (Direct) Investment

2. Investment protection

3. Investor-State Dispute Settlement

C International Trade Law

I. Free trade theory

II. How tariffs work

III. Economic integration and Free Trade Agreements

IV. WTO history, agreements and structure

1. Long way to the WTO

2. WTO agreements

3. WTO negotiations

4. WTO institutional structure

V. WTO Principles

1. Most Favored Nation Treatment (MFN)

a. Trade in Goods – MFN

b. Trade in Services – fundamentals and MFN

2. National Treatment (NT)

a. Trade in Goods – NT

b. Trade in Services – NT and Market Access

VI. Exceptions to the GATT

1. Free Trade Agreements exception

FTA conditions and Rules of Origin

2. Developing countries exception

3. General Exceptions

4. Other Exceptions

VII. WTO Dispute Settlement

WTO dispute settlement steps

VIII. Intellectual Property and TRIPS

1. International regulation of Intellectual Property

2. IP licensing

3. TRIPS

a. TRIPS – MFN and NT

b. IP protection and transparency standards

c. Procedural standards

D EU Competition Law

I. Antitrust

1. Cartels

2. Abuse of a dominant market position

3. Mergers

II. State aid

E Private International Law

I. International Jurisdiction

1. Where to litigate?

2. Jurisdiction Requirements and Rules

a. Choice-of-Court Agreements

b. Brussels Ia Regulation

II. Alternative dispute resolution

1. Non-binding alternative dispute resolution

2. Arbitration

a. Arbitration agreements and rules

b. Some Pros & Cons of arbitration

III. International Conflict of Laws

a. Choice-of-Law Agreements

b. EU Regulations and Rome I

IV. International Recognition and Enforcement

Recognition and Enforcement in Brussels Ia and Lugano

V. Uniform Law

1. UN Sales Convention (CISG)

Substantive rules of the CISG

a. Contract conclusion

b. Obligations of the parties and passage of risks

c. Breach of contract

2. UNIDROIT Principles of International Commercial Contracts (PICC)

Substantive rules examples

F Lex Mercatoria

Modern commercial practice

1. Custom in (public) International Law

2. Custom in (private) Business Law

3. Modern Lex Mercatoria

G Contractual Terms

I. INCOTERMS

1. ICC and INCOTERMS

2. Incorporation and interpretation

a. How to include INCOTERMS in a contract?

b. How to interpret INCOTERMS?

3. INCOTERMS for all modes of transport

II. Documentary Credits and securing performance

1. Uniform Customs and Practice (UCP)

2. Documentary Letter of Credit Sales

How does a documentary credit sale work?

3. Standby Letters of Credit

4. Payment against documents

Annex

List of abbreviations

Foreword

It is my pleasure to offer a few introductory words for this handbook on international trade and business law. I strongly support this intentionally concise publication, which aims to provide essential knowledge on critical subjects in international trade and business law. While law and regulations can often be highly technical, frequently left to the domain of legal professionals, their significance extends far beyond the legal community. These laws and rules shape how we collaborate, uphold standards, and ensure prosperity not just for a select few but for society as a whole.

In specific, I want to emphasize the political importance of these subjects. Competitiveness is the central issue that we as the European Union must address. There are two key points I would like to highlight.

First, the positive one: Trade within and outside the EU is a success story. With a total of 74 countries, the EU has the world's largest network of trade agreements. The value of EU trade through trade agreements with global partners now exceeds 2 trillion euros.

Second, the slightly more critical reflection: The pressure of competition is mounting. Thirty years ago, Europe accounted for 25% of global wealth. By 2040, it is projected to shrink to just 11%, placing us well behind China and the United States, and on par with India.

One often-overlooked aspect is the significance of the EU internal market, our most critical trade agreement. The EU internal market has developed into the strongest economic area in the world, from which Austria and all EU member states benefit significantly. According to the European Commission, EU export companies save around 2,2 to 5,5 billion euros per year thanks to the elimination of the EU's internal borders. Competition law plays a crucial role in this by promoting fair business practices and ensuring effective competition within the internal market, as thoroughly presented in this book.

The figures are clear: Austrian exports to other EU member states have more than tripled from 33 to 112 billion euros since joining the EU – in 2021, almost 70% of Austrian goods exports were destined for the EU. Thanks to the harmonization of standards and norms, domestic companies can now sell their products and services to 448 million people. Investments by foreign companies have also increased more than fivefold from around 1,3 billion euros per year to around 7 billion euros. The EU single market also means that all Austrians have an average annual income of 1 583 euros more in their wallets.

These figures demonstrate the tangible impact of a shared legal and economic framework. Without international trade and a clear legal structure governing our economy, these achievements would not be possible. That said, there is still vast untapped potential. Completing the EU internal market alone could yield efficiency gains of up to 829 billion euros annually. The possibilities for growth and further integration are immense.

I am excited that this handbook will guide you through the opportunities, challenges, and legal nuances of international trade and business law. May your exploration of these topics inspire new insights and innovations in the future of global commerce.

Othmar Karas

former First Vice-President of the European Parliament 25 years member of the European Parliament’s ECON Committee

Preface

After university or some national experience, most people are directly thrown into international business activity without knowing in detail how the international system works. That is ok.

We do not have to know how International Law and its trade and business related specialized regimes work in detail.

What we do have to know though is – for competence reasons, for not embarrassing ourselves and, finally, for performing most efficiently – how it works in very general terms.

This is what this book does – it provides shortest summaries.

While most books provide broad information of which you only remember 10%, this book displays exactly those 10% you should remember. With practical examples it makes remembering easier. (Often we remember theory thanks to an example that stays in our memory from which we then deduce theory.)

So instead of investing 100% for remembering 10%, you save 90% and directly focus on those 10% worth investing your time in and remembering.

This book is a practical handbook that summarizes and simplifies often dry and hard to handle theory.

In fact, the topics here displayed are very diverse and range from general International Law to WTO Law, EU Competition Law and Private International Law. It further includes common practices in international business, uniform law like the UN Sales Convention and widespread contract clauses like the INCOTERMS.

Normally you would need to buy a separate book for each of them because very rarely all of them are included in one book. If they are, those books usually do not have less than 1000 pages. So you save time and money.

It is a book for non-lawyers, especially students and businesspeople, and lawyers specialized in something else who want to get a glance of a substantial yet thrilling area of law.

Nobody implicated in international business and trade on a higher level should and properly can do without the basic knowledge provided in this book. It is general knowledge every international trader, consultant, accountant, sales manager, trade official and business analyst should have.

Getting a birds-eye view of the topics is ensured not only by conciseness but also by the choice of language made for this book:

The language used in it is kept as simple as possible and includes as few complex vocabulary as possible.

In addition, orientation is facilitated by symbols and graphics as well as bold print and italics in between for highlighting specifically important points or words.

This preface being as succinct as this book, it’s necessary to calling it a day now.

I wish you not to enjoy your reading (who actually enjoys reading textbooks?) but to get the most out of it.

Harald J. Jauk

A International Economic? Business? Trade? Law

The first challenge one encounters when dealing with international economic law is the diversity of terminology used for the subject itself. International Economic Law, International Business Law, International Trade Law… To most, that sounds very similar but – like basically always in law – there is a (possible) distinction between these terms and other related ones.¹

Let us start with the first one – International Economic Law. What is often seen as a specialized legal regime of International Law (and in many general International Law books has its own chapter) can be seen as the broadest one of the mentioned notions. That is why – also due to its ambiguity (in application too) – it does not surprise that Andreas Lowenfeld said

It is not inappropriate to begin by asking whether there is such a thing as international economic law, a body of law that can be subjected to systematic treatment between the covers of a book.²

While to some it might seem too broad and vague to be covered between the covers of a book, Lowenfeld answers his own question by writing exactly such a book and naming it International Economic Law.

So what does International Economic Law cover?

Areas generally included in literature about this topic are International Trade Law (see below), International Investment Law (investment protection etc.) and International Monetary Law (providing liquidity, exchange rate stability, etc.).

Sometimes international economic sanctions (such as those mandated by the UN) and International Competition Law (anti-competitive acts by enterprises or states etc.) are also included in such books. The bulkier books³ sometimes also comprise International Capital Markets Law (which state’s capital markets law should be applied) and additionally focus on specific areas such as telecommunication, transport, financing and international payments.

Some of the literature that refers to itself as International Economic Law also includes private law aspects⁴, such as factual international trading practices between private parties (incl. model laws and contractual clauses) and uniform law (see chapter Uniform Law). Sometimes also International Corporate (or Company) Law (see below), Private International Law (PIL, see below) and other areas of (partly) internationally regulated matters are covered in such books.

In other words, the scope of International Economic Law – also due to its inclusion in its broadest sense of both public and private law⁵ matters – is indeed very broad, maybe even confusingly broad to be seen (and studied) as one area of law.

Therefore, other terms provide a more reduced scope but are often also only imprecisely delimited.

What about International Business Law?

There are several books, courses of study and university subjects/courses that bear this name, but this label does not clearly define what they actually comprise either.

What seems certain though is that it comprises some private law areas⁶, like International Corporate (or Company) Law (international M&A, corporations’ legal forms and transformations, international transfer of shares, etc.) or Private International Law (Where is the dispute being heard, which rules govern it and is the decision recognized and enforced?) and arbitration (see Arbitration). Generally, also International Trade Law (see next paragraph) is included here.

In Europe, International Business Law courses⁷ (of study) often also cover European Union (EU) Law, especially EU Competition Law.

Since the term International Business Law (such as International Economic Law), thanks to its imprecision, leaves space for other subjects it can also cover other areas of (international) law.⁸

Comparing both concepts, International Economic Law is mostly understood as the broader concept with a clear public law focus (but some possible private law aspects), whereas International Business Law is narrower and generally tends to have a stronger private law emphasis and include only core principles of public International Law, such as

International Trade Law.⁹ What they both have in common is their imprecise definition, which leaves lots of space for flexible focus placing as well as expanding or narrowing down the covered matters.

At last, is the concept of International Trade Law sharper?

After having seen the imprecisely delimited concepts of International Economic Law and International Business Law, it nearly surprises that there is more consensus (and therefore clarity) on the term International (or World) Trade Law. This goes back to the centrality of one International Organization in this sphere: the World Trade Organization (WTO).

the term ‘World Trade Law’ (…) emphasises the central role of the World Trade Organization (WTO) in regulating the rules of world trade. The WTO is not the only relevant legal instrument or international organization, but it is the broadest and most comprehensive in its coverage.¹⁰

In other words, International Trade Law in most cases is understood as the legal system and framework of the WTO, including both its international treaties and its case law. In short, it focuses on trade barriers both in goods and services (including quotas and tariffs) and partly also on the harmonization of regulation in its member states (e.g. regarding intellectual property rights¹¹).

Hence, in comparison to the meanings of International Economic Law and International Business Law, International Trade Law is the narrowest term (despite being itself a big and substantive legal area) and, at the same time, integrates itself in the former two concepts as a part of them.

Since we now understand what might¹² await us in this book, we can proceed to the general setting in which International Trade and Business Law is embedded – International Law itself.

¹ Also take into account that in law (doctrine), in many cases there is no such thing as unanimity of opinions, but instead there is a prevailing view and there are other views of the same subject matter.

² Lowenfeld, Andreas F., 2008: International Economic Law², Oxford University Press, New York, preface.

³ Such as Kronke, Herbert et al., 2017: Handbuch Internationales Wirtschaftsrecht², Linde, Vienna.

⁴ Some authors clearly distinguish between International Economic Law as exclusively public law regulating international economic matters and, on the other hand, International Business Law as exclusively private law and practices in the international economic sphere. See e.g. Fernández Rozas et al., 2013: 37, 43 et seq.

⁵ According to the subject theory, Public and Private Law can be distinguished by the parties taking part at a legal action. If at least one of the parties acts with imperium (state power), we talk about Public Law. If none of the concerned parties acts with imperium (there are only private persons or entities), we talk about Private Law. See e.g. Bydlinski, Franz, 1994: „Kriterien und Sinn der Unterscheidung von Privatrecht und öffentlichem Recht", in Archiv für die civilistische Praxis, vol. 194, 329 et seq.

⁶ Some authors even consider that International Business Law exclusively deals with international transactions performed by private individuals (Fernández Rozas et al., 2013: 37, translated), i.e. private law issues.

⁷ Some university etc. courses avoid the ambiguity of the terminology and instead opt for course names like "Law for International Business", which opens the concept to any legal matter of interest for international business relations.

⁸ Like this book, which also quickly outlines some key concepts of International Law in general.

⁹ To make it clear that this book about International Business Law focuses, among other subjects, also on International Trade Law, it was named "… International Trade and Business Law".

¹⁰ Lester, 2018: 3.

¹¹ For more information, see TRIPS.

¹² Might, since, as we know now, the term International Business Law is imprecise.

B International Law

Before having a closer look at specific areas of International Law¹³, such as International Investment Law and International Trade Law, it is worth getting a basic understanding of International Law as such.

Due to the broad material scope the term (public) International Law covers, there are numerous definitions of it (definitions by sources of law, by legal sanctions, by topics covered, etc.). In short and simplified, it can be defined as follows:

Legal provisions of not exclusively national belonging that regulate the relations between subjects of International Law.

Subjects of International Law are, primarily, states and International Organizations, i.e. entities with legal personality created (mainly) by states by means of international treaties.

Notably not included in this concept is the in the later chapters of this book also covered Private International Law (PIL), which refers to the relations not between states/International Organizations but between private persons or entities.¹⁴ Due to its completely different nature, PIL is not discussed in this chapter but in the second part of this book.

The legal provisions mentioned in the expounded International Law definition are law and should have the enforcement power of law but, in many cases, are broken with no consequences.

If national law is violated (A drives too fast), a superordinated entity (the state) – with its coercive power – will sanction the violation and/or take care of compliance (A will get a fine or loose his/her license).

In International Law there is no superordinated entity (all states are equal). Therefore, it is unclear from where this sanctioning and enforcing coercive power should come from. In fact, apart from special cases like the UN Security Council or the European Union, there is no central entity that makes International Law subjects (and others) comply with International Law (!).

States and International Organizations (IIOO) comply with International Law due to other negative consequences if not (political, economic, etc.) which have their origin in their peers – other states. Nevertheless, if these disadvantageous consequences are considered less important by the infringing state than the advantages of the violation, it most likely will not comply with International Law.

Due to this often politically dominated voluntariness in implementation (...), which results from the non-obligatory enforcement (...), the term soft law regularly appears to be somewhat accurate for International Law.¹⁵

Example

When the Russian Federation invaded Ukraine in 2022, it did not comply with the UN Charter’s prohibition of use of force-rule (Art. 2) and the UN General Assembly’s Resolution on the end of the Russian Federation's illegal use of force against Ukraine.¹⁶

Although many states (and the EU) imposed political and economic sanctions and it had severe diplomatic consequences, to date, the illegal use of force in Ukraine is still ongoing.

Nevertheless, most of International Law is complied with anyway and a story of success.¹⁷

Why do states generally honor their international obligations if there is no enforcement?

Due to the many benefits it has, e.g.

the long-term benefit of a well-functioning international legal system,

the good reputation of a state, which would be lost if it stopped following international rules,

the many benefits of IIOO (political, economic, etc.), such as the EU.

But also due to the negative consequences non-compliance with International Law can have, e.g.

the threatening retorsion or even countermeasures by other states,

the threatening sentences (and punishments) of international (or national) courts,

the negative precedence-effect a breach can have, with a possible chain reaction of many states not complying with an international rule,

the possible loss of international goodwill and negative effects on future cooperations with other states and IIOO.

¹³ General International Law, which is covered in this first chapter, refers to