International Business Agreements Modules 1-3 PDF

INTERNATIONAL BUSINESS AGREEMENTS Thomas Elliot A. Mondez Department of Commercial Law De La Salle University  PART I: INTRODUCTION TO PUBLIC INTERNATIONAL LAW Module 1: History of International Law and its Significance to International Commerce HISTORY OF INTERNATIONAL LA...

INTERNATIONAL BUSINESS AGREEMENTS Thomas Elliot A. Mondez Department of Commercial Law De La Salle University  PART I: INTRODUCTION TO PUBLIC INTERNATIONAL LAW Module 1: History of International Law and its Significance to International Commerce HISTORY OF INTERNATIONAL LAW The Leviathan of Thomas Hobbes – a monster of biblical proportions that has sovereign control over a given territory. There is no such thing as a global Leviathan – sovereign entities transact outside their borders with no governing rules-based order. International law developed because of interactions concerning warfare and commerce. HISTORY OF INTERNATIONAL LAW  Basic structures of human civilizations (from tribes to towns) need basic rules- based systems to govern internal transactions, which normally pertain to the management of scarce resources (trade and enforcement through brute force).  Rules-based systems can come from any form of structured governance or belief systems - basic political organizations or religions.  When these basis structures expand or interact with other structures of similar or greater power, they could no longer impose their internal rules-based systems on the others. This is true because not all human organizations have the same moral and economic values. HISTORY OF INTERNATIONAL LAW Early Manifestations of International Law Greek City-States agreed to become part of a common federal system (Amphictyonic League). How was this made possible? The establishment of a common Greek language as lingua franca and the emergence of Greek philosophy as a unifying ideology over local religious beliefs. Roman Republic/Empire: Roman concept of jus gentium, or law which natural reasons establishes for all men and women, versus jus civile, which is peculiar to a state or people. Canon Law: Roman Catholic Church filled the power vacuum caused by the fall of Rome by establishing a legal religious order in Christian Europe.  BUT WERE THESE EARLY FORMS OF AN INTERNATIONAL LEGAL ORDER TRULY 'INTERNATIONAL LAW'?  No. Greeks did not extend their rules to outsiders. Romans were selective in applying jus gentium.  The Catholic Church had to rely on feudal lords and struggled to remain effective when Latin died a slow death as Europe's Lingua Franca.  These early manifestations of global legal orders were actually just extended municipal laws that governed a larger sovereign collective. WHAT DO WE CONSIDER AS INTERNATIONAL LAW? Traditional Definition: -A branch of public law which regulates the relations of States and of other entities which have been granted international personality. -A body of customary and conventional rules which are considered legally binding by civilized States in their intercourse with each other. Modern Definition: -Deals with the conduct of States and international organizations, their relations with each other and, in certain circumstances, their relations with persons, natural or juridical. EARLY MANIFESTATIONS OF INTERNATIONAL LAW The concept of a nation-state: Peace of Westphalia – collective term for the 1648 treaties of Peace Treaty of Münster and the Peace Treaty of Osnabrück. The first international “treaty” of its scale – over a hundred delegates representing warring sides, nations, and principalities. Established the concept of the nation- state/Westphalian system. Recognized state sovereignty with its own borders (summum imperium), laid the foundations for modern-day international law. Ended the Thirty Years War which ravaged the Holy Roman Empire (HRE, modern-day Germany). Habsburgs (Austria, Spain, plus Catholic allies) vs. the Protestants (HRE principalities, Sweden, Denmark) plus France. EARLY MANIFESTATIONS OF INTERNATIONAL LAW Hugo Grotius (1583-1645), the “father” of international law, author of De Jure Bellie ac Pacis or On the Law of War and Peace. Summum imperium or the concept of sovereign power as the supreme right of governing, which cannot be made void by human will. However, if a sovereign power encounters other sovereign powers, no one holds a superior right to govern since summum imperium only applies within one's territory. International relations as a system of mutual legal restraints based on natural law and custom.  EARLY MANIFESTATIONS OF INTERNATIONAL LAW Basis: Natural Law: Natural law is a universal principle of right and wrong discovered by every individual. Since the individuals comprise of a state, the state also becomes bound to natural law. Positivist School: States agree to be bound by it (jus voluntarium). Grotian or Eclectic School: For Hugo Grotius, states ought to be bound by natural law by virtue of both jus gentium, taking inspiration from the Bible and the principles of morality and divine justice, and pacta sunt servanda, or on the basis of observance of commitments. It is thus a combination of natural law and the positivist school. Pacta sunt servanda – Latin term meaning that agreements must be kept/treaties must be complied with.  EARLY INTERNATIONAL AGREEMENTS RELATED TO COMMERCE Treaty of Tordesillas (June 7, 1494) Spain (Castile) and Portugal signed the Treaty of Tordesillas which practically divided the entire world between the two naval superpowers of the early Age of Exploration. Initially, the demarcation line was found over 500 kilometers west of the Cape Verde Islands in the Atlantic Ocean, drawn from the Arctic to the Antarctic Pole. In 1506, the Pope acknowledged the relocation of the demarcation line around 1,500 kilometers to the west, allowing Portugal to claim the eastern portion of Brazil. The said Treaty was entered into in view of the discovery of Christopher Colombus of the Western Hemisphere. EARLY INTERNATIONAL AGREEMENTS RELATED TO COMMERCE The Treaty of Zaragoza (April 22, 1529) established an antimeridian line along the Pacific Ocean to finally settle the dispute between Portugal and Spain. The Treaty of Zaragoza did not divide the world into two equal hemispheres of 180 degrees. Portugal got 191 degrees and Spain was awarded 169 degrees, give or take. EARLY INTERNATIONAL AGREEMENTS RELATED TO COMMERCE  It appears that the Treaties of Tordesillas and Zaragoza were meant to regulate the spheres of influence of the two primary maritime powers – Spain and Portugal – over the Western Hemisphere. But the true catalyst for this rivalry is their race to access Asian markets.  European traders could only access the rich Asian markets via land through the Silk Road. This was blocked by the dominant Muslim land powers since the Middle East, North Africa, and Eastern Europe were under the sphere of influence of the Ottoman Empire.  The inaccessibility of the Silk Road and the sheer distance of the Iberian Peninsula from the Asian mainland forced Portugal and Spain to find a maritime route to Asia.  Vasco de Gama sailed south along the African coast of the Atlantic Ocean. He discovered that the Atlantic connects to the Indian Ocean at the southern tip of the African continent. In turn, the Indian Ocean can be used to reach the Asia Pacific region via the Strait of Malacca. EARLY INTERNATIONAL AGREEMENTS RELATED TO COMMERCE  Christopher Columbus set sail westward hoping to find a western route to Asia. He accidentally discovered the lands in the Western Hemisphere.  Trade-wise, the Treaty of Tordesillas appeared to heavily favor the Portuguese. It practically gave them the entire Eastern Hemisphere as their sphere of influence. More importantly, the maritime routes in the Eastern Hemisphere allowed them to bypass the Ottomans to reach Asia.  However, Spain turned out to be the winning party in the Treaty of Tordesillas. While Magellan eventually proved that the Asia-Pacific can be accessed by sailing west (through the Pacific Ocean), this route was too long and perilous compared to the eastern route. But what both Kingdoms failed to account for was the sheer size of the lands in the Western Hemisphere.  The Treaty of Tordesillas allowed Spain to dominate the Western Hemisphere and take advantage of its natural resources. This is also the reason why most of the Americas speak Spanish instead of Portuguese (except Brazil, the eastern portion of which lies within the Portuguese side of the Treaty of Tordesillas).  One of the main targets of the two Kingdoms was the Moluccas or Spice Islands. This is an early maritime dispute in the Asia-Pacific region since both laid claim over the Moluccas.  Note: The world is round. This is a fact known to most navigators before the successful circumnavigation of Sebastian del Cano and the crew of the Victoria (not Magellan!).  EARLY INTERNATIONAL AGREEMENTS RELATED TO COMMERCE Declaration of Paris (1856): Declaration Respecting Maritime Law. - First modern multilateral treaty that became open for accession for all states. Signaled the rising importance of commerce as an integral component of international law. However, this agreement was made in the context of naval conflicts as part of the resolution of the Crimean War. Before the Crimean War, England and France had different rules with respect to the capture of goods carried by enemy vessels in the high seas as 'fair game', regardless of the nationality of the ship. France and England were allies with the Ottoman Empire against Russia. They decided to harmonize rules on capture of goods in enemy vessels. Privateering or the commissioning of private vessels to engage in hostility against enemy ships, and allowing them to seize the ships, its cargo, and its crew, was abolished. Enemy goods in neutral vessels were also no longer allowed to be seized. Likewise, neutral goods on enemy vessels should not be seized.   Peace of Westphalia (1648): Ended the Thirty Years War, allowed the nation-state to emerge as the primary subject of international law.  Peace of Utrecht (1713-15): Ended the War of the Spanish Succession, preventing the French Bourbons from gaining control over Spain, which would have upset the balance of power in Europe. It also emphasized the prominence of the nation-state over the ruling monarchs.  Congress of Vienna (1814-1815): Restored the balance of power in Europe after Napoleon's first exile in Elba. STRENGTHENING  League of Nations (1919): First attempt to create a world government to INTERNATIONALISM prevent a world war from ever happening again. It spectacularly failed.  Charter of the United Nations (1945): First successful international organization with almost universal representation. Apart from peace- keeping (UN Security Council), the UN is also engaged in regulating commerce by encouraging economic and trade agreements. THEORIES ON INTERNATIONAL RELATIONS Do these theories affect the way States engage in commerce? 1. Realist Theory – States are in constant struggle for power. Each State acts in pursuit of their individual interests. 2. Institutionalist Theory – The relations of States are a product of their interaction not only among themselves but also as members of various institutions and hierarchical structures. 3. Neoliberalist Theory – States are geared towards gains and profit, which determines how State relations develop. 4. Democratic Theory – Democratic States are generally hesitant to go to war with other democratic States. 5. Hegemonic Stability Theory – A global system is likely to be stable when controlled by a hegemon. INTERNATIONAL BUSINESS AGREEMENTS Module 2: Subjects of International Law and Sources of International Law SUBJECTS OF INTERNATIONAL LAW  Subjects are entities endowed with rights and obligations who have international personality. Objects are those who indirectly have rights under, or are beneficiaries of international law through subjects of international law.  Traditional View: States are the only proper subjects of international law since they are the ultimate representatives of all other entities, including individuals, within their respective territorial jurisdictions.  Contemporary View: Apart from States, the following may also have legal personality in international law: international organizations and administrative bodies such as the UN and World Health Organization (WHO), belligerent communities (e.g. Hamas government of Gaza/West Palestine, local rebel groups like the NPA, ISIL/ISIS, etc.), and even individuals in a limited capacity.  Individuals may have legal personality in international human rights disputes and, pertinent to our course, in trade and investment issues.  However, please note that International Business Agreements are entered into by States.  WHAT ARE THE ELEMENTS OF STATEHOOD? Government – an aggregate of institutions forming the national Permanent Population or People – a government. Temporary absence of community held together by a Defined Territory – a fixed portion of government or foreign occupation common bond of law; must be the planet's land area occupied by do not terminate the existence of a sufficient in number and must have the inhabitants. state. It must be capable of the ability to perpetuate themselves. maintaining law and order within its jurisdiction. Capacity to enter into relations with other states or Sovereignty – independence from outside control. THEORIES ON STATE RECOGNITION Declaratory Theory: recognition by mere declaration depending upon its possession of the required elements and not upon recognition by other states. Statehood is based on fact, rather than discretion. Constitutive Theory: recognition is what constitutes a state, although states may decide to recognize an entity as a state even if it does not have all of the elements of statehood. Recognition is a political act and a matter of policy. THE CASE OF TAIWAN  The One-China Policy is followed by Manila, Washignton, and other governments in the world.  The Republic of China (Taipei-based) ceased to represent China in the UN when world governments officially recognized the People's Republic of China as the official representative of the Chinese State.  This was part of Richard Nixon and Henry Kissinger's US pivot to China when they tried to court Beijing as an ally against the Soviet Union.  A Taiwan Relations Act was hastily passed into law by the US Congress to maintain "nongovernmental" relations with Taiwan. A Mutual Defense Treaty between the US and the Republic of China (Taipei) was abrogated. TAIWAN RELATIONS ACT  Allowed economic and legal relationships to continue despite the de-recognition of the Taipei government as the official Chinese State.  Pertinent laws governing contracts and the capacity of Taiwan to sue and be sued in US courts were maintained.  Vague with respect to America's defense commitments (if any).  Only relevant section related to defense is a provision allowing the US to sell arms to Taiwan.  The Philippines does not have an embassy or a diplomatic delegation in Taiwan, pursuant to our One-China policy. However, we do have a Manila Economic and Cultural Office (MECO) in Taiwan, which practically serves as our unofficial embassy. SOURCES OF INTERNATIONAL LAW Primary Sources: 1. International Treaties and Conventions: Bilateral and multilateral treaties acquire binding force through voluntary decision of sovereign states. Treaties may create, crystallize, or codify obligations. A treaty may create a new obligation between states, crystallize an existing state practice or emerging custom as a formal legal obligation, or compile existing obligations through codification. Examples: United Nations Convention on the Law of the Sea (UNCLOS), Apostille Convention, Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters, New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. SOURCES OF INTERNATIONAL LAW 2. Customary law: based on: (1) the behavior of states and (2) the belief that it is obligatory (opinio juris). It is formed through constant and uniform usage, accepted as law. Examples: principle of non-refoulement, immunity to a visiting head of state. 3. Generally accepted principles of international law: rules derived from natural law that are found in most legal systems. Examples: the concept of estoppel, pacta sunt servanda, res judicata, and reparations for violations of obligations. SOURCES OF INTERNATIONAL LAW Secondary Sources: 1. Judicial decisions: generally refers to international tribunals, the ICJ being the most prominent. Its binding effect is limited by Article 59 of the Statute of the ICJ to that of the State parties of the particular case only. 2. Writings of highly qualified publicists: learned scholars who are acknowledged authorities in their respective fields. Other Sources: 1. Soft Law – Mere guidelines for conduct. A Resolution of the World Health Assembly (WHA) is considered as a mere soft law and is thus not binding to the Philippines (Pharmaceutical and Health Care Association of the Philippines v. Duque, 2007). 2. Lex Mercatoria - Customary rules and procedures developed within merchant communities to support trade in medieval Europe, without the assistance of government. These rules may have already been codified in international conventions or may have ripened into customary law. INTERNATIONAL BUSINESS AGREEMENTS Module 3: Issues on Jurisdiction JURISDICTION Jurisdiction is the power or authority exercised by a State over land, persons, property, transactions, and events. As an aspect of sovereignty, jurisdiction gives the State the prerogative to carry out executive, legislative, and judicial actions in the course of its self-rule. Types of Jurisdiction: 1. Prescriptive Jurisdiction – The ability of the State to define its own laws with respect to any matter it chooses. This is tied with sovereignty so it is generally unlimited. 2. Enforcement Jurisdiction –The ability of the State to enforce the laws it has created. It is limited by several factors including nationality and territory. Enforcement jurisdiction cannot exist without prescriptive jurisdiction. JUDICIAL JURISDICTION Which local courts have jurisdiction over a specific case under litigation? Generally speaking: 1. Civil Cases – resolved based on the principles of Private International Law (Conflicts of Law) since it usually involves individuals transacting in their private capacity. 2. Criminal Cases – resolved based on Public International Law since it involves the enforcement of a State's penal laws. TERRITORIAL PRINCIPLE The State may exercise jurisdiction within its territory only. Generally, a State has criminal jurisdiction over offenses committed within its territory. The exceptions are: continuing offenses, acts prejudicial to the national security or vital interests of the State, and universal crimes. What is the territory of the State? 1. Land Area 2. Internal Waters 3. Territorial Sea (12 Nautical Miles) 4. Air Space (Land Area/Internal Waters plus Territorial Sea) 5. Flag aircrafts and ships. TERRITORIAL PRINCIPLE Areas with limited application of the territorial principle: 1. Contiguous Zone (24 nm) - limited to enforcement of customs, sanitary and immigration rules. 2. Exclusive Economic Zone – limited to enforcement of sovereign economic rights over economic resources of the sea, seabed, and subsoil; other States have freedom of navigation and may lay submarine cables (e.g. for internet), pipelines, and other lawful uses. Subjective Territoriality – enables a State to take jurisdiction over an act which began in its territory (continuing crime). Objective Territoriality – enables a State to take jurisdiction over an act which ended in its territory. TERRITORIALITY PRINCIPLE For cases involving violations of the Expanded Anti-Human Trafficking Act: - The State shall exercise jurisdiction even if committed outside the country, if the offense, being a continuing offense, was either commenced in the Philippines or committed in another country (provided that the suspect is a Filipino citizen, permanent Philippine resident, or has committed the act against a Filipino citizen). - If the offender is already being prosecuted abroad, he or she cannot be prosecuted here unless an approval from the Secretary of Justice is obtained. NATIONALITY PRINCIPLE The State has jurisdiction over its nationals anywhere in the world. A citizen is entitled to the protection of the State wherever he or she may be, and thus, is bound to it by its duty of obedience and allegiance. It generally applies to civil matters. Article 15 of the New Civil Code provides that laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad. States are free to determine who are their nationals. The Philippines follows jus sanguinis or citizenship by blood, regardless of the place of birth. The United States uses jus soli to determine Amercian citizenship, regardless of the nationality of the parents. PROTECTIVE PRINCIPLE Posits that a State has jurisdiction over acts committed abroad by nationals or foreigners which are prejudicial to its national security, territorial integrity, political independence, or any other vital interests. Attorney General v. Adolf Eichmann (1961, District Court of Jerusalem, Israel): Eichmann was an Austrian Nazi official who was Head of Section for Jewish Affairs in the implementation of the' Final Solution', causing the deaths of millions of Jews in World War II. He was captured by Israeli forces in Argentina. He contested the jurisdiction of the Jerusalem court, but was nonetheless convicted since Israel applied the protective principle. PROTECTIVE PRINCIPLE Somchai Liangsiriprasert v. Government of the United States (1991, Hong Kong Court of Appeal [under UK]): Somchai was a Thai drug dealer importing heroin to other countries. The overt acts of conspiracy to traffic in drugs were committed in Thailand. The US Drug Enforcement Agency (DEA) had an agent pose as a drug importer to arrange a deal with Somchai to bring heroin to the US. He had to travel to Hong Kong in furtherance of the deal. He was promptly arrested by Hong Kong officials pursuant to an extradition treaty between the US and the UK. The Hong Kong Court of Appeal took cognizance of the case despite the overt acts of conspiracy to traffic in illegal drugs being done outside its jurisdiction. It was held that the Hong Kong courts have jurisdiction and could apply Hong Kong legislation on illegal drugs because of the potential threat of the drug trade to the UK colony. PROTECTIVE PRINCIPLE Revised Penal Code – Philippine courts have jurisdiction over: 1. Offenses committed on board a Philippine ship or airship; 2. Forgery and counterfeiting of Philippine coins or currency notes; 3. Introduction into the Philippines of forged or counterfeit coins or notes; 4. Offenses committed by public officers or employees in the exercise of their official functions; and, 5. Crimes against national security and the law of nations. PROTECTIVE PRINCIPLE Effects Doctrine – Where the effects of an act are felt within the territory of the State, it may take jurisdiction over the matter. Application: Philippine Competition Act (Republic Act No. 10667) Section 3 of the said law provides that it is applicable to international trade having direct or substantial, and reasonably foreseeable effects in trade, industry, or commerce in the Philippines, including those that result from acts done outside the Philippines. PRINCIPLE OF UNIVERSALITY A State has jurisdiction over offenses considered as universal crimes regardless of where committed and who committed them (see Eichmann case). Universal crimes are those which threaten the international community as a whole and are considered as criminal offenses in all countries, such as piracy, genocide, hijacking, terrorism, war crimes, and the like. Take note that the International Criminal Court (ICC) may also acquire jurisdiction.  Act of State Doctrine – A State should not inquire into the legal validity of the public acts of another State done within the territory of the latter. EXEMPTIONS Underhill v. Hernandez (US Case, 1897): Underhill filed a case for FROM damages against Hernandez, a Venezuelan military commander, for allegedly being assaulted, coerced, and detained by Hernandez. The JURISDICTION court refused to inquire into the acts of Hernandez since his government was recognized by the US. Hence, the Act of State Doctrine applies.  9th Circuit (1988): Republic 2nd Circuit (1989): Republic of the Philippines v. of the Philippines v. Ferdinand Marcos, Sr. - Ferdinand Marcos, Sr. [Case involving the [Injunction case to prevent Racketeer Influenced and the transfer or Corrupt Organization Act encumbrance of properties Act of State Doctrine or RICO.] Act of State allegedly acquired through Conflicting Rulings of the Doctrine applied. It was illegal means.] Act of State US Court of Appeals: ruled that taking Doctrine NOT considered. cognizance of the case There must be a distinction would interfere with US between Acts of State and foreign policy (and even purely private acts. The cause embarassment to it) injunction was granted to. preserve the status quo. EXEMPTIONS FROM JURISDICTION   Diplomatic Immunity – Part of customary international law to uphold their dignity as the representatives of their respective States and to allow them free and unhampered exercise of their functions.  Immunity of the UN, its Organs, Specialized Agencies and Other International Organizations and its Officers. Liang v. People (2001): Slander committed by an official of the Asian EXEMPTIONS Development Bank (ADB) is not covered by the immunity afforded to the ADB via its agreement with the Republic of the Philippines. FROM Westfall v. Locsin, et. al. (2024): Westfall applied as a technical consultant JURISDICTION in the ADB. He was not selected and said that the statements made by the ADB Screening Committee in their Panel Notes and Interview Report were defamatory and damaged his reputation. It was held that the subject acts were done by the Committee members in their official capacity, which is covered by the immunity granted to ADB officials.  Foreign merchant vessels exercising the right of innocent passage through our territorial sea or arriving under duress: Note that the Philippines follow the English Rule (law of the coastal state applies for all offenses committed in the vessel, except if the peace of the port was not compromised), not the French Rule (flag State of the ship has jurisdiction). Foreign armies passing through or stationed in the territory with the permission of the State. EXEMPTIONS Tubb and Tedrow v. Griess (1947): The Philippine Supreme Court denied the petition for the issuance of a writ of habeas corpus filed by 2 US Citizens who FROM were apprehended by the US Army for misappropriating US military property. It was held that it is a settled principle of international law that a foreign army JURISDICTION allowed to march through or stationed in another country is exempt from civil and criminal jurisdiction. Warships and other public vessels of another State operated for non- commercial purposes: Includes crewmembers on shore duty. However, they are not immune if they are on furlough or off-duty.