EU Law PDF

UNIT 1. INTRODUCTION TO INTERNATIONAL LAW 1. Definition Definition: INTERNATIONAL LAW regulates international relations, i.e. relations between the subjects of international law. If we want to bind international parties, we use international treaties (Schengen) STATES are the main subjec...

UNIT 1. INTRODUCTION TO INTERNATIONAL LAW 1. Definition Definition: INTERNATIONAL LAW regulates international relations, i.e. relations between the subjects of international law. If we want to bind international parties, we use international treaties (Schengen) STATES are the main subjects of international law. They have rights and obligations. States make RULES that apply to States. 2. Art 38 ICJ Statutes No hierarchy between these sources, so you apply the lex posterior and the specific A. INTERNATIONAL CONVENTIONS, whether general or, establishing rules expressly recognized by the contesting states (treaties or conventions). FEATURES OF INTERNATIONAL TREATIES - Based on CONSENT by all parties (similar to contracts in national law). Consent, voluntary. Its not possible to force a State to get in. - Consent must be GENUINE (nothrear/coercion/corruption from other States) - Only binds the States who ACCEPTED. Obligatory only for the states parties to the treaty. Other States (“third states”) left untouched. TYPES OF INTERNATIONAL TREATY They can be BILATERAL (ex. Bilateral Investment Treaties) or MULTILATERAL (regional: only open to a specific part or geographic area / universal: open to all States) EXAMPLES OF INTERNATIONAL TREATY Bilateral treaties: Bilateral Investment Treaties (BITs) on protection of foreign investors Regional treaties: European economic integration (EU treaties) Universal treaties: World Trade Organization (WTO) treaties B. INTERNATIONAL CUSTOM, as evidence of a GENERAL PRACTICE accepted as law. Something that has been happening for a long time FEATURES OF CUSTOMARY INTERNATIONAL LAW - UNWRITTEN– arises from the behaviour of states - Unlike treaties, it binds all States REGARDLESS of their ACCEPTANCE (hence we speak of general international law) o When new states are born, they are automatically bound by old rules of customary international law. International law never made shift from unwritten laws to written, because there is no none that has the role to make it. It binds all the states, that’s why it’s called GENERAL INTERNATIONAL LAW. Ex. Impossibility to arrest Embassadors or Waterˋs Laws (Mare Liberum- Hugo Grotius) EXAMPLES OF RULES OF COSTUMARY INTERNATIONAL LAW Freedom of each state to choose its own economic system(e.g. market economy vs socialist economy). Derives from two basis principles of costumary international law: 1. Principle of TERRITORIAL SOVEREIGNTY (each state has exclusive sovereignty over its territory) 2. Principle of NON-INTERVENTION in yhe internal affairs of other State Obligation to compensation for expropriation/nationalizations foreign-owned assets ELEMENTS OF CUSTOMARY INTERNATIONAL LAW - “GENERAL PRACTICE”. So called diuturnitas. States behave in accordance with the customary rule - “ACCEPTED AS LAW”. So called opinio juris. States consider the customary rule to be binding 3. Relationship between treaties and custom General rule: If there is a conflict, treaties are applied, not custom (principle of specialis): custom is a “DEFAULT RULE” that applies in lack of a relevant treaty EXCEPTION: non-derogable (“peremptory”) customary rules. Ex. prohibition of genocide 1  −−−−−−−−−−−− EXAMPLE: Freedom of each state to choose its own economic system under customary international law Membership to some treaties (e.g. EU treaties; WTO treaties) presupposes a market economy (free trade; limits on state monopolies; etc.) States parties to those treaties are not fully free to choose their own economic system anymore −−−−−−−−−−−− 4. International Organizations SECONDARY SUBJECTS: created by States through an agreement («constituent treaty») to pursue common goals Similar to corporations in national legal systems > «societies of states» Legally DISTINCT from their member states Examples: United Nations; European Union; WTO; World Bank UNIT 2. INTRODUCTION TO EU LAW 1. History 1950: European Coal and Steel Community 1957: European Economic Community & European Atomic Energy Community (Euratom) 1967: «fusion» – the three European Communities share the same organs (Commission, Council, etc.) 1992: birth of the European Union The EU has undergone remarkable CHANGES: - Size: From 6 to 27 - Competences: o Greater powers in the economic field (1993: creation of the European single market) o NOT anymore limited to the ECONOMIC field (eg human rights: 2000 EU Charter of Fundamental Rights) 2. SOURCES OF EU LAW PRIMARY law: main EU treaties establishing EU institutions and their powers It is the SUPREME SOURCE of law in the European Union. It comes mainly from the FOUNDING treaties, notably the Treaty of Rome (which evolved into the Treaty of the Functioning of the European Union) and the Treaty of Maastricht (also called the Treaty on European Union). PRIMARY LAW sets out the DISTRIBUTION of COMPETENCES between the EU and the EU Member States. It provides the LEGAL CONTEXT within which EU institutions formulate and implement policies. - Treaty on European Union (TEU) concluded in 1992 - Treaty on the Functioning of the European Union (TFEU) concluded in 1957 Both changed several times (last amended by the 2009 Lisbon Treaty) SECONDAY law: Regulations REGULATIONS are LEGAL ACTS defined by Article 288 of the Treaty on the Functioning of the European Union (TFEU). They have general application, are BINDING in their entirety and are DIRECTLY APPLICABLE in all European Union Member States. A regulation is part of the EU’s secondary law, the body of law that DERIVES from the PRINCIPLES and OBJECTIVES set out in the EU treaties (primary law). - Most important type of EU legislation - Binding in their entirety and on all EU States - Directly applicable: States need not take any further action Secondary law: Directives 2 A DIRECTIVE is a LEGAL ACT adopted by the EU institutions addressed to the EU Member States and, as laid down in Article 288 of the Treaty on the Functioning of the European Union, is BINDING as to the RESULT to be ACHIVED. A directive is part of the EU’s SECONDARY LAW, the body of law that derives from the principles and objectives set out in the EU treaties (primary law). The NATIONAL AUTHORITIES of each EU country to which the directive is addressed determine the FORM and the METHODS they use to incorporate the directive into their national law (formally known as “TRANSPOSITIONS”). Generally, this needs to be done within 2 years of the directive’s adoption. To take effect, national measures must ACHIEVE the OBJECTIVES set by the directive. National authorities must COMMUNICATE the measures they adopt to the European Commission. Directives may set MINIMUM STANDARDS, often in recognition of the fact that the legal systems in some Member States have already set higher standards. In this case, Member States have the right to set higher standards than those set in the directive. - Normally set objectives that States have to achieve - Must be implemented by States within their national law within a certain deadline 3. FUNDAMENTAL PRINCIPLES OF EU LAW DIRECT EFFECT The judgment states that EU law not only engenders obligations for EU Member States, but also RIGHTS for INDIVIDUALS. Individuals may therefore take ADVANTAGE of these rights and directly INVOKE EU law before NATIONAL and EUROPEAN courts, independently of whether the national law test exists. It has the CONDITION that the obligations must be PRECISE, CLEAR and UNCONDITIONAL and that they must NOT call for ADDITIONAL measures, either national or European. - EU law creates rights and obligations upon INDIVIDUALS, not just the EU Member States - Individuals can invoke these rights before NATIONAL COURTS - Principle developed in CASE LAW (1963 Van Gend en Loos case) PRIMACY (OR SUPREMACY) The PRINCIPLE OF PRIMACY (also referred to as ‘precedence’ or ‘supremacy’) of European Union law is based on the idea that where a CONFLICT arises between an aspect of EU law and an aspect of law in an EU Member State (national law), EU LAW will PREVAIL. If this were not the case, Member States could simply allow their national laws to take precedence over primary or secondary EU legislation, and the PURSUIT of EU POLICIES would become UNWORKABLE. The principle of the primacy of EU law has DEVELOPED over time by means of the case law (jurisprudence) of the Court of Justice of the European Union. It is not enshrined in the EU treaties, although there is a brief declaration annexed to the Treaty of Lisbon in regard to it. The principle of primacy therefore seeks to ENSURE that people are uniformly PROTECTED by an EU law across all EU territories. It should be noted that the primacy of EU law only applies where Member States have CEDED SOVEREIGNTY to the EU – such as the single market, environment, transport, etc. However, it does not apply in areas such as education, culture or tourism. - EU law PREVAILS over the national laws of EU Member States - All national courts are obliged to «DISAPPLY» inconsistent national laws - Principle developed in CASE LAW (1964 Costa v ENEL case) 4. EU LEGISLATIVE PROCESS SAME PROCESSES for all EU secondary law 1. The EUROPEAN COMMISSION submits a LEGISLATIVE PROPOSAL to the EUROPEAN PARLIAMENT 2. During the FIRST READING, the EUROPEAN PARLIAMENT examines the Commission's proposal and may APPROVE it without modifications or AMEND it. 3. During its first reading, the COUNCIL may decide to accept Parliament's position, in which case the legislative act is ADOPTED, or it may AMEND Parliament's position and return the proposal to Parliament for a SECOND reading. a. The legislative proposal is ADOPTED. b. Parliament examines the Council's position and i. APROVES it ii. REJECTS it iii. Proposes AMMEDMENTS and returns the proposal to COUNCIL for a second reading. 4. The Council examines Parliament's SECOND reading position and a. APPROVES all of Parliament's amendments b. NOT approve all amendments, leading to the CONVENING of the CONCILIATION COMMITTEE. 5. The Conciliation Committee, composed of an equal number of MEPs and Council representatives, tries to reach AGREEMENT on a joint text. DIFFERENT from national legislative process 3 Involves VARIOUS EU organs which represent interests of the Member States, the population of Member States, and the EU itself A. European Council > top leader of Member States, sets political agenda B. European Commission > proposes legislation and executes it C. European Parliament > approves legislation together with the Council of the EU D. Council of the EU > approves legislation together with the European Parliament 5. EU COURT OF JUSTICE Ensures respect and uniform interpretation of EU law - PRELIMINARY RULINGS (requests for interpretation by national courts) NATIONAL COURTS of EU countries are required to ensure EU law is PROPERLY applied, but courts in different countries might INTERPRET it DIFFERENTLY. If a national court is IN DOUBT about the INTERPRETATION or validity of an EU law, it can ask the Court for CLARIFICATION. The same mechanism can be used to determine whether a national law or practice is COMPATIBLE with EU law. - INFRINGEMENT PROCEEDINGS (vs Member States for failure to comply with EU law) This type of case is taken AGAINST a NATIONAL government for FAILING to COMPLY with EU law. It can be STARTED by the European Commission or another EU country. If the country is found to be at FAULT, it must put things RIGHT AT ONCE, or RISK a second case being brought, which may result in a fine. - ACTIONS FOR ANNULMENT (vs EU legislation violating EU treaties or fundamental rights) If an EU act is BELIEVED to VIOLATE EU treaties or fundamental rights, the Court can be asked to ANNUL it – by an EU government, the Council of the EU, the European Commission or (in some cases) the European Parliament. PRIVATE INDIVIDUALS can also ask the Court to annul an EU act that directly CONCERNS them. UNIT 3. INTERNATIONAL ECONOMIC LAW 1. DEFINITION OF INTERNATIONAL ECONOMIC LAW A branch of international law Regulatory framework of economic activities at the international level INTERNATIONAL ECONOMIC LAW is a field of international law that INCLUDES the conduct of sovereign states and international organizations in international economic relations and the conduct of private parties involved in cross-border economic and business transactions. 4  2. MAIN AREAS OF INTERNATIONAL ECONOMIC LAW − Finance − Trade − Investments > 2nd half of the course (prof. Marciante) 3. HISTORY – INTERNATIONAL FINANCIAL INSTITUTIONS Purpose: post-WWII economic stability and growth. Following World War II, world leaders sought to stabilize the global economy and foster growth, addressing the financial chaos that had contributed to the Great Depression and the war. Two original institutions: In 1944, during the Bretton Woods Conference in the USA, two major institutions were created to promote international economic cooperation. - INTERNATIONAL MONETARY FUND: An INTERNATIONAL ORGANIZATION that promotes global economic GROWTH and financial STABILITY, encourages international TRADE, and works to reduce poverty. It ASSISTS countries facing financial difficulties through advice and financial support. - WORLD BANK: An INTERNATIONAL FINANCIAL INSTITUTION that provides LOANS and GRANTS to the governments of low- and middle-income countries for the purpose of pursuing CAPITAL projects. After WWII: negotiations to create an International Trade Organization (ITO) 1947: General Agreement on Tariffs and Trade (GATT) - «Provisional» application, supposed to become part of ITO The Havana Charter NEVER entered INTO FORCE, primarily because the U.S. Senate failed to ratify it. As a result, the ITO was dead. Meanwhile, parallel negotiations were conducted on a multilateral agreement for reciprocal reductions in tariff barriers. ITO never created (1948 Havana Charter not adopted) GATT remained «self-standing» until 1995 The General Agreement on Tariffs and Trade (GATT), signed in 1947 by 23 countries, is a treaty MINIMIZING barriers to international trade by ELIMINATING or REDUCING quotas, tariffs, and subsidies. It was intended to BOOST economic recovery after World War II 4. GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) Among the most important and successful international agreements ever concluded Brought about great reduction in tariffs - Definition of TARIFF: TAX or DUTY imposed on goods IMPORTED from other country Revised several times (GATT 1994) Now part of WTO and still in force 5. INTERNATIONAL FINANCIAL INSTITUTIONS 5.1. INTERNATIONAL MONETARY FUND (IMF) Functions: monetary stability (originally); economic stability and mitigation of financial crises (today) Membership: voting power of States depend on size of their national economies («quotas») The IMF currently has a near-global membership of 187 countries. To become a member, a country must APPLY and then be accepted by a MAJORITY of the existing members. Upon joining, each member of the IMF is assigned a QUOTA, based broadly on its RELATIVE SIZE in the world ECONOMY. A member's quota delineates basic aspects of its financial and organisational relationship with the IMF, including subscriptions, voting power, access to financing... Key activities: financial assistance and loans to States + conditionalities The IMF has three main functions: overseeing economic development through policy advice, lending, and capacity development. 5.2. WORLD BANK Official name: International Bank for Reconstruction and Development 5 Membership: voting power of each State depends on its share of subscribed World Bank capital Key activities: international investment bank – only funds States’ PUBLIC projects 5.2.1. WORLD BANK GROUP Financial institutions AFFILIATED to the WB Includes: a. International Finance Corporation: private sector projects b. International Centre for Settlement of Investment Disputes: investment arbitrations (foreign investor vs. host State) 5.3. NEW FINANCIAL INSTITUTIONS Challenge to the MONOPOLY of the Bretton Woods institutions Example: Asian Infrastructure Investment Bank (AIIB) - Sponsored by China, headquartered in Beijing - Might be a competitor to the World Bank - In practice, they are working together 6 UNIT 4. INTERNATIONAL ECONOMIC LAW (WTO) 1. SHORTCOMINGS OF THE GATT Only tariffs. Did not cover other protectionist measures - Example: import quotas Only trade in goods. Did not cover services No effective system to resolve trade DISPUTES Need for a more comprehensive system > WTO 1995 2. INTERNATIONAL TRADE LAW Rules for STATES, not private traders Main institution: World Trade Organization (WTO) - Founded in 1995 - Seated in Geneva (Switzerland) - Main OBJECTIVE: reduce barriers to trade; promote economic development and higher standards of living - Very complex system and very difficult to create 3. WORLD TRADE ORGANIZATION Oversees application of various treaties on trade: 1. GATT 2. General Agreement on Trade in Services (GATS) 3. Agreement on Trade-Related Aspects of Intellectual Property (TRIPs) Effective dispute SETTLEMENT system - Two TIERS: first instance (Panels) + Appellate Body WHAT TARIFF CAN STATE A APPLY TO A PRODUCT FROM STATE B? Determining a tariff under WTO law No PREDETERMINED tariffs under WTO agreements THREE-step process: A. Tariffs determined through BILATERAL NEGOTIATIONS B. Negotiated tariffs are adjusted through the PRINCIPLE OF NON-DISCRIMINATION C. Carve-outs: EXCEPTIONS to non-discrimination A. BILATERAL NEGOTIATIONS Two States offer each other trade CONCESSIONS Trade concessions negotiated by States are BINDING They reflect the principle of RECIPROCITY (with some exceptions for developing countries: «enabling clause» - decision by signatories allows derogations to the most-favored nation treatment in favor of developing countries. Its paragraph 2(c) permits regional or global arrangements among developing countries in goods trade) B. PRINCIPLE OF NON-DISCRIMINATION Two types of NON-DISCRIMINATION provisions: 1. Most-Favored-Nation (MFN) Article I(1) GATT (General Agreement on Tariffs and Trade) «[…] any ADVANTAGE, FAVOUR, PRIVILEDGE or IMMUNITY granted by any contracting party to any product ORIGINATING IN or DESTINED FOR any other country shall be ACCORDED immediately and unconditionally to the LIKE PRODUCT originating in or destined for the territories of ALL OTHER contracting parties» −−−−−−−−−−−−−−−−− 7 EXAMPLE MNF - Through bilateral negotiations, State A and State B have agreed on a 10% customs duty on wines. - State A and State C, by contrast, have agreed on a 5% customs duty on wines. - What tariff on wines imported from B to C? 5% −−−−−−−−−−−−−−−−− 2. National Treatment Article III(2) GATT «The products of the territory of any CONTRACTING party IMPORTED INTO the territory of any other contracting party shall not be subject, directly or indirectly, to INTERNAL TAXES or other internal CHARGES of any kind IN EXCESS of those applied, directly or indirectly, to like DOMESTIC products» −−−−−−−−−−−−−−−−− EXAMPLE 2 - State A’s legislation imposes a 5% sales tax on domestic wines and a 10% sales tax on imported wines. The imported wines are being subjected to a higher internal tax compared to domestic wines, which is discriminatory and inconsistent with the national treatment obligation under GATT. −−−−−−−−−−−−−−−−− EXAMPLE 3 - Through bilateral negotiations, State A and State B have agreed on a 10% customs duty on whiskey. - State A and State C have agreed on a 5% customs duty on cognac. - Does the MFN apply? As whiskey and cognac are considered products of the same category (“like products”), then State A would be required under the MFN principle to offer the same customs duty to all WTO members. This means that State A cannot discriminate between State B and State C. Both should receive the same lower rate if one of them is benefiting from a more favorable duty. −−−−−−−−−−−−−−−−− EXAMPLE 4 - State A’s legislation provides a 20% internal tax on sales of whiskey, cognac and brandy and a 35% internal tax on sales of vodka. - Does the National Treatment apply? The National Treatment principle under Article III(2) of GATT would apply if whiskey, cognac, brandy, and vodka are considered "like products". This principle requires that imported products must be treated no less favorably than similar domestic products in terms of internal taxes or charges. −−−−−−−−−−−−−−−−− LIKE PRODUCTS OBJETIVE approach: - Physical characteristics of the products - End use of the products - Tariff rates - Other elements (consumers’ habits, process and production method) Japan – Alcoholic Beverages: WTO Appellate Body Report of 4 October 1996 - Measure at issue: Japanese Liquor Tax Law imposing lower sales taxes on shochu than all other spirits (vodka, gin, rum, etc.) - Violation of National Treatment C. EXCEPTIONS TO NON-DISCRIMINATION SAFEGUARD OF FREE TRADE AREAS The WTO allows States to create areas of free trade between them In such cases, they do NOT have to accord MFN treatment to products of third States 8 EXAMPLE: the European Union (trade bloc within the WTO) GENERAL EXCEPTION – ARTICLE XX GATT «Subject to the requirement that such measures are not applied in a manner which would constitute a means of ARBITRARY or UNJUSTIFIABLE DISCRIMINATION between countries where the same conditions prevail, or a disguised RESTRICTION on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: a) necessary to protect PUBLIC MORALS; b) necessary to protect HUMAN, ANIMAL or PLANT life or HEALTH; c) relating to the importations or exportations of GOLD or SILVER; […] f) imposed for the protection of national TRASURES of artistic, historic or archaeological value; g) relating to the conservation of exhaustible natural RESOURCES if such measures are made EFFECTIVE in conjunction with RESTRICTION on DOMESTIC PRODUCTION or CONSUMPTION; […]» Two CONDITIONS: 1. Measure falls under one of the CASES LISTED in letters (a) to (j) 2. Measure meets the REQUIREMENT of the OPENING SENTENCE (chapeau): no «arbitrary or unjustifiable discrimination between countries» and no «disguised restriction on international trade» PRINCIPLE OF PROPORTIONALITY Guiding PRINCIPLE on the LEGITIMACY of any trade restriction and on the application of the exceptions In pursuing a legitimate objective, States should adopt the measure which LESS RESTRICTS trade EXAMPLE on Article XX GATT US – Shrimps (Appellate Body 1998) - Discussed measure: US prohibition of shrimp imports from some Asian countries - US justification: fishing methods threatened endangered sea turtles 9 UNIT 5. PRIVATE INTERNATIONAL LAW Scope of application Private International Law applies to RELATION between PRIVATE parties having a «FOREING ELEMENT» or «transboundary» element – that is, MORE than ONE country is involved Objective The main function of Private International Law is to answer this question: which law SHOULD apply to a private relation having a foreign element? −−−−−−−−−−−−−−−−− EXAMPLE Sales contract between an Italian company and a Vietnamese company The two parts do an oral sales contract Italian company: sells a shipment of prime-quality made-in-Italy textiles Vietnamese company: pays 1 million euros – half upfront, half after delivery of goods 2005 Vietnamese Law on Contracts: «International purchase and sale of goods shall be conducted on the basis of written contracts or other forms of equal legal validity» Is the contract valid or invalid? - Answer: it DEPENDS Should we apply Italian or Vietnamese law? −−−−−−−−−−−−−−−−− This is an issue of Private International Law Conflict of laws: Common expression to refer to Private Int. Law Conflict of laws refers to a DIFERENCE between the LAWS of two or more JURISDICTIONS with some connection to a case, such that the OUTCOME DEPENDS on which jurisdiction's law will be used to RESOLVE each ISSUE IN DISPUTE. Highlights that you need to CHOOSE among different laws all THEORETICALLY APPLICABLE to the same SITUATION How to solve this issue? Possible approaches to Private International Law: 1. NATIONAL LAW 2. CONTRACTUAL CHOICE OF LAW 3. HARMONIZATION a. UNIFORM CONFLICT-OF-LAW RULES b. UNIFORM SUBSTANTIVE RULES APPROACH No 1. National Law This approach applies to the LAW of the country where the dispute is BEING HEARD. COURTS DECIDE which nation's legal rules are most APPROPIATE for resolving the issue. Example (1). National law of Country A provides: «The law applicable to international sales contracts is the law of the state of the SELLER» Example (2). National law provides: «The law applicable to international sales contracts is the law of the state of the BUYER» Problem (1). Legal UNCERTAINTY: If national laws identify DIFFERENT applicable laws, problem REMAINS Problem (2): «FORUM SHOPPING»: PRACTICE of litigants taking ACTIONS to have their LEGAL CASE heard in the court they believe is most likely to provide a favorable judgment. −−−−−−−−−−−−−−−−− 10 Example of «forum shopping» The Vietnamese company did not pay the agreed price. The Italian company wants to take legal action. Q: Where does it go to court? - The Vietnamese company did not pay the agreed price. The Italian company wants to take legal action. A: Italy > contract is valid - Before shipping the goods to Vietnam, the Italian company realizes it could have asked the buyer to pay a higher price. A: Vietnam > contract is invalid, and because of the principle non bis in idem, it’s not possible to take this case to the court again. −−−−−−−−−−−−−−−−− APPROACH No 2. Choice of Law PARTIES involved in a CONTRACT can agree in advance which JURISDICTION’s laws will govern any future DISPUTES, giving them more PREDICTABILITY and CONTROL over potential conflicts. It respects the AUTONOMY of the parties and is widely recognized in international private law, provided the choice is VALID and does NOT contravene PUBLIC POLICY. Example. The parties include a CLAUSE in the sales contract providing: «The present contract will be subject to the law of Italy» Problem (1): Parties may fail to choose Problem (2): National law may limit their ability to choose (limitations on party autonomy) −−−−−−−−−−−−−−−−− Example of limitation on party autonomy National law provides: «The law applicable to sales contracts with non-Vietnamese parties is necessarily the law of the state of the buyer. Any contract clause to the contrary is without effect» −−−−−−−−−−−−−−−−− APPROACH No 3. Harmonization Goal: to bring greater UNIFORMITY to the rules identifying APPLICABLE law Through INTERNATIONAL TREATIES or REGIONAL COOPERATION, legal systems seek to ALINE their conflict-of-law RULES or substantive LAWS to MINIMIZE discrepancies. The goal is to achieve a degree of legal CONSISTENCY across jurisdictions, thereby reducing conflicts in cross-border disputes. Realized by MEANS of: a. International treaties b. EU regulations Two possible TECHNIQUES of harmonization: 1- Uniform conflict-of-law rules Jurisdictions ADOPT standardized rules for RESOLVING conflict-of-law issues, typically through international CONVENTIONS EXAMPLE Treaty provides: «Sales contracts shall be regulated by the law of the state of the buyer» 2- Uniform substantive rules EXAMPLE Treaty provides: «International sales contracts can be concluded by written or verbal means» −−−−−−−−−−−−−−−−− International institutions involved in harmonization: ▫ Hague Conference on Private International Law 11  ▫ United Nations Commission on International Trade Law (UNCITRAL) ▫ International Institute for the Unification of Private Law (UNIDROIT) UNIT 6. INTERNATIONAL CONTRACTS (II) 1980 CISG. The purpose of the CISG is to provide a modern, UNIFORM and fair regime for contracts for the international sale of GOODS. Thus, the CISG contributes significantly to introducing CERTAINTY in commercial exchanges and decreasing transaction costs. Rome I Regulation Nº 593/2008. It is a REGULATION which governs the CHOICE OF LAW in the European Union. 1. EU Rome I Regulation VS. 1980 Convention on Contracts the International Sale of Goods (CISG) Difference No. 1 – GEOGRAPHICAL coverage 1980 CISG: 95 States (includes most EU States with exceptions: eg Portugal, Ireland) + can be chosen by parties to a contract Rome I: EU Member States except for Denmark Difference No. 2 – Scope of application 1980 CISG: only CONTRACTS for the sale of GOODS (not services) with many exceptions (Art. 2 CISG) Art 1 CISG: “This Convention applies to contracts of sale of goods between parties whose places 10 of business are in different States...” Art 2 CISG: “This Convention does not apply to sales: a. of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use; b. by auction; c. on execution or otherwise by authority of law; d. of stocks, shares, investment securities, negotiable instruments or money; e. of ships, vessels, hovercraft or aircraft; f. of electricity.” Rome I: all contractual obligations with minor exclusions Article 1(1): «This Regulation shall apply, in situations involving a conflict of laws, to contractual obligations in CIVIL and COMMERCIAL matters. It shall not apply, in particular, to revenue, customs or administrative matters. » Difference No. 3 – Harmonization technique 1980 CISG: uniform SUSTANTIVE rules (CISG provisions applied in lieu of national law) Rome I: uniform CONFLICT-OF-LAW rules. The regulation tells us which national law will apply to a contract, without changing the content of national law > NB: Rome I creates no «European contract law» 2. Rome I and the 1980 CSIG NOT ALTERNATIVE to each other, can apply TOGETHER under certain circumstances 1. CISG requires APPLICATION of Italian law – Italy is a party to the CISG – CISG applied as part of Italian law 2. Rome I allows parties to CHOOSE applicable law – including CISG if they want 3. 1980 CISG Its scope in brief Applies to PHYSICAL GOODS only (no services) Partial harmonization ONLY covering SOME ASPECTS of the law of contracts: a. FORMATION of the contract (offer/acceptance) b. Obligations of the buyer and seller c. Validity of the contract (to an extent) Formation of a sales contract Article 23 CISG: “A contract is CONCLUDED at the moment when an ACCEPTANCE of an OFFER becomes EFFECTIVE in accordance with the provisions of this Convention.” 12 Article 18(2) CISG: “An acceptance of an offer becomes effective at the the moment INDICATION of assent (asentimiento) reaches the OFFEROR. An acceptance is not effective if the indication of assent does not reach the offeror WITHIN the time he has fixed or, if no time is fixed, within a REASONABLE time, due account being taken of the circumstances of the transaction, including the rapidity of the means of communication employed by the offeror. An ORAL offer must be accepted IMMEDIATELY unless the circumstances indicate otherwise.” −−−−−−−−−−−−−−−−− EXAMPLE 1 You receive this email: «Dear friend, hello! I want to sell you some jewels worth 1 million euros. Let’s conclude an international sales contract! Please reply ASAP» −−−−−−−−−−−−−−−−− EXAMPLE 2 You receive this email: «Dear friend, hello! I want to sell you some jewels worth 1 million euros. Let’s conclude an international sales contract! Please reply ASAP» Your reply: «Okay.» −−−−−−−−−−−−−−−−− Article 14 CISG: “A proposal for CONCLUDING a contract addressed to one or more specific persons constitutes an OFFER if it is sufficiently DEFINITE and indicates the INTENTION of the offeror to be BOUND in case of ACCEPTANCE. A PROPOSAL is sufficiently definite if it indicates the GOODS and expressly or implicitly fixes or makes provision for determining the QUANTITY and the PRICE.” Article 16 CISG: “Until a contract is CONCLUDED an offer may be REVOKED if the revocation reaches the offeree before he has DISPATHED an ACCEPTANCE. However, an offer CANNOT be REVOKED: A) if it indicates, whether by STATING a FIXED time for ACCEPTANCE or otherwise, that it is irrevocable B) if it was REASONABLE for the offeree to rely on the offer as being IRREVOCABLE and the offeree has acted in RELIANCE on the offer.” Validity of a sales contract Article 4(1) CISG: “This Convention governs only the FORMATION of the contract of sale and the rights and 27 obligations of the seller and the buyer arising from such a contract. In particular, except as otherwise expressly provided in this Convention, is NOT concerned with: A. the VALIDITY of the contract or of any of its PROVISIONS or of any usage; B. the EFFECT which the contract may have on the PROPERTY in the goods sold.” Article 11 CISG: “A contract of sale NEED NOT to be concluded in or evidenced BY WRITING and is NOT subject to any other REQUIREMENTS as to form. It may be proved by ANY MEANS, including witnesses.” Article 29(2) CISG: “A contract in writing which contains a PROVISION requiring any modification or termination by AGREEMENT to be in writing may NOT be otherwise MODIFIED or TERMINATED by agreement.” Article 13 CISG: “For the purposes of this Convention “WRITING” includes telegram and telex.” Article 12 CISG: “Any provision of article 11, article 29 or Part II of this Convention that allows a contract of sale […] to be made in any form other than in writing does NOT APLLY where any party has his place of business in a CONTRACTING STATE which has made a DECLARATION under article 96 of this Convention. […]” Article 96 CISG: “A Contracting State whose LEGISLATION requires contracts of sale to be concluded in or evidenced BY WRITING may at any time make a declaration in accordance with article 12 that any provision of article 11, article 29, or Part II of this Convention, that allows a contract of sale […] to be made in any form other than in writing, does NOT apply where any party has his place of business in that State.” EXAMPLE. Declaration of Vietnam: “In accordance with Article 12 and Article 96 of the United Nations Convention on Contracts for the International Sale of Goods, done at Vienna on 11 April 1980, the Socialist Republic of Viet Nam makes the following declaration: Any provision of Article 11, Article 29, or Part II of the Convention that allows a contract of sale or its modification or termination by AGREEMENT or any OFFER, acceptance, or other indication of intention to be made in any form other than in writing, does not apply” 4. The EU Brussels I bis Regulation 4.1. Ways to solve international business disputes 13 National courts: NATIONAL courts are often called upon to RESOLVE international business disputes when one or more parties are based in DIFFERENT countries. ▫ Private international law issue: the court of which country is competent? (conflict of laws) ▫ EU Brussels I Regulation ARBITRATION: Popular method for resolving international business disputes because it offers several advantages ▫ International Commercial Arbitration ▫ Investment Arbitration > 2nd part of the course (Marciante) −−−−−−−−−−−−−−−− EXAMPLE An Italian company sells a factory in Germany to a French company. After some time, a dispute arises. The French company wants to bring the Italian company to court. But where? > in Italy, Germany, France or somewhere else? −−−−−−−−−−−−−−−− Rome I Regulation: substantive law - Determines the LAW applicable to a contract - Does not address which COURTS are COMPETENT Brussels I Regulation: procedural law - Determines which COURTS are COMPETENT - Does not address which LAW they will APPLY −−−−−−−−−−−−−−−− EXAMPLE An Italian company sells a factory in Germany to a French company. In the contract, the parties choose Italian law (Rome I). The judge will apply Italian law to the contract regardless of which judge that is (Italian, French, German, etc.). Identifying the competent judge (Brussels I) does not change the applicable law (Rome I). −−−−−−−−−−−−−−−− 4.2. History − 1968 Brussels Convention FIRST private international law INSTRUMENT of the European Community, aiming to establish RULES regarding jurisdiction and the recognition and enforcement of judgments in CIVIL and COMMERCIAL matters across the EU member states. − 1988 Lugano Convention Reproduced Brussels Convention with Switzerland, Norway and Iceland (non-EU States). It aimed to EXTEND the jurisdictional rules of the Brussels Convention to these non-EU countries, ensuring that judgments in CIVIL and COMMERCIAL matters could also be recognized and enforced in these countries. − EU Regulation 44/2001 (Brussels I Regulation) Replaced the 1968 Brussels Convention. It aimed to MODERNIZE and SIMPLIFY the rules governing jurisdiction and the RECOGNITION and enforcement of judgments in civil and commercial matters within the EU. − 2007 Lugano Convention Reproduced Brussels I Regulation in relations with Switzerland, Norway and Iceland (non-EU States) − EU Regulation 1215/2012 (Brussels I bis Regulation a.k.a. Brussels Regulation Recast) Replaced EU Regulation 44/2001 with FEW but SIGNIFICANT changes. Entered into force in 2015 14  − No Lugano equivalent of Brussels I bis Regulation yet Article 1 (1) Regulation (EU) No 1215/2012: “This Regulation shall apply in CIVIL and COMMERCE matters whatever the nature of the court or tribunal. […]” Article 4 Regulation (EU) No 1215/2012 – General rule. “1. Subject to this Regulation, persons DOMICILED in a Member State shall, whatever their nationality, be SUED in the courts of that Member State. 2. Persons who are NOT NATIONALS of the Member State in which they are domiciled shall be GOVERNED by the rules of JURISDICTION applicable to nationals of that Member State.” Article 25(1) Regulation (EU) No 1215/2012– CHOICE of COURT: “If the PARTIES , regardless of their domicile, have AGREED that a court or the courts of a Member State are to have JURISDICTION to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts SHALL HAVE jurisdiction, unless the agreement is NULL and VOID as to its substantive validity under the law of that Member State. Such jurisdiction shall be EXCLUSIVE unless the parties have agreed otherwise.” General rule vs exceptions RATIONALE of the GENERAL RULE: usually HARDER to DEFEND oneself in the courts of a foreign country than in those of the country where one is domiciled General rule may have EXCEPTION when there are countervailing reasons Possible reasons behind the EXCEPTIONS: A. STRONGER CONNECTION with the courts of another country > Example: contracts B. INTEREST of some (weaker) PARTIES must be protected Article 7(1) Regulation (EU) No 1215/2012– contracts “A person domiciled in a Member State MAY BE SUED in ANOTHER Member State: a. in matters relating to a CONTRACT, in the courts for the place of performance of the OBLIGATION in question; b. for the purpose of this provision and unless otherwise agreed, the PLACE of PERFORMANCE of the obligation in question shall be: - in the case of the sale of GOODS, the place in a Member State where, under the contract, the goods were DELIVERED or should have been delivered; - in the case of the provision of SERVICES, the place in a Member State where, under the contract, the services were PROVIDED or should have been provided; […]” Court of Justice, Falco, 23 April 2009: Rationale of Article 7: PROXIMITY and PREDICTABILITY, i.e. clear and simple connecting factors. «Under that rule of SPECIAL JURISDICTION, the defendant may also be SUED in the court for the PLACE of PERFORMANCCE of the obligation in question, since that court is PRESUMED to have a CLOSE LINK to the contract. In order to reinforce the PRIMARY objective of legal certainty which governs the rules of jurisdiction which it sets out, that criterion of a LINK is defined autonomously by [the Regulation] in the case of the sale of goods» 4.3. Contracts for the sale of goods What if there are MULTIPLE places of DELIVERY? EU Court of Justice in Color Drack v. LEXX International (3 May 2007) → Jurisdiction on all deliveries belongs to the courts of the principal PLACE of DELIVERY to be determined on the basis of ECONOMIC CRITERIA. The ECONOMIC CRITERIA typically refer to the PLACE that holds the GREATEST ECONOMIC SIGNIFICANCE in the transaction, such as the location where the largest quantity or the most valuable part of the goods are delivered. By applying this standard, the court ensures that the dispute is handled in the location that is most CLOSELY CONNECTED to the CORE of the delivery OBLIGATIONS under the contract. → If there is NONE, one of the places of delivery at the PLAINTIFF’s (demandante) choice. If NO SINGLE place of DELIVERY can be identified as the PRINCIPAL place based on economic criteria, the plaintiff may CHOOSE any one of the places of delivery to bring their case. This gives the plaintiff some FLEXIBILITY in SELECTING the jurisdiction, but it must be a place where goods were ACTUALLY DELIVERED. 4.4. Contracts for the provision of services 15 What if there are multiple places where the service should be provided? EU Court of Justice in Rehder v. Air Baltic Corporation (9 July 2009) → Where to sue Air Baltic (Latvian company) for cancellation of flight from Germany to Lithuania? → Place of the main provision of services The Court ruled that, under Article 7(1)(b) of the Brussels I Regulation, JURISDICTION lies in the place where the SERVICES are PRINCIPALLY PROVIDED. In cases where services are provided in MULTIPLE LOCATIONS, the Court confirmed that the PLAINTIFF can SUE in any one of the places where the main service is provided, if NO single PRINCIPAL location can be determined. → Both countries of departure and arrival 4.5. General rule vs exceptions Possible reasons behind the EXCEPTIONS: 1. STRONGER CONNECTION with the courts of another country 2. INTEREST of some (weaker) PARTIES must be protected > Example: employees – more favorable rules Article 20(2): “Where an EMPLOYEE enters into an individual contract of EMPLOYEMENT with an employer who is NOT DOMICILED in a Member State but has a BRANCH, agency or other ESTABLISHMENT in one of the Member States, the employer shall, in disputes arising out of the operations of the branch, agency or establishment, be DEEMED to be domiciled in that Member State.” Article 21: “1. An employer DOMICILED in a Member State may be SUED: a. in the COURTS of the Member State in which he is DOMICILED; or b. in ANOTHER Member State: Iii. in the courts for the place where or from where the employee HABITUALLY carries out his WORK; or in the courts for the LAST PLACE where he did so; or Iv. if the employee does NOT or did not habitually carry out his work in any one country, in the courts for the place where the BUSSINESS which ENGAGED the employee is or was situated. 2. An employer NOT domiciled in a Member State may be sued in a court of a Member State in ACCORDANCE with point (b) of paragraph 1” Article 23 – CHOICE of court in employment contracts “The provisions of this Section may be departed from only by an AGREEMENT: 1. which is ENTERED into after the dispute has arisen; or 2. which allows the employee to bring PROCEEDINGS in courts OTHER THAN those indicated in this Section.” UNIT 7. INTERNATIONAL CONTRACTS: ROME I REGULATION AND CISG 1. Harmonization in the field of international contracts 1980 UN Convention on Contracts for the International Sale of Goods (CISG): uniform substantive rules The CISG provides uniform SUBSTANTIVE rules governing the FORMATION of CONTRACTS and the rights and obligations of buyers and sellers in international sales of goods. It aims to HARMONIZE and SIMPLIFY international trade by offering a unified set of rules that apply to cross-border sales contracts, provided that the countries involved are SIGNATORIES to the convention. The CISG provides DIRECT RULES for the content of the contract, meaning that the substantive law is HARMONIZED across contracting states, REDUCING the need to refer to national laws. EU Rome I Regulation: uniform conflict-of-law rules Regulation (EC) No 593/2008 = EU Rome I Regulation The Rome I Regulation governs CONFLICT-OF-LAW rules in the European Union for CONTRACTUAL obligations in civil and commercial matters. Unlike the CISG, which provides substantive rules, Rome I focuses on WHICH NATIONAL LAW should apply to a given contract in cross-border disputes within the EU. 16  2. Features of EU regulations (recap) BINDING in their entirety and on all EU States DIRECTLY applicable: States need NOT take any FURTHER action and national courts simply have to APPLY the regulation PRIMACY over NATIONAL LAW: if national law is inconsistent with a regulation, the national judge will disapply national law and apply the regulation 3. Content of the EU Rome I Regulation Principle of FREEDOM of CHOICE (party autonomy) Article 3(1): “A contract shall be governed by the LAW CHOSEN by the parties. The CHOICE shall be made EXPRESSELY or CLEARLY DEMONSTRATED by the terms of the contract or the circumstances of the case. By their choice the parties can SELECT the law APPLICABLE to the whole or to part only of the contract.” Article 3(2): “The parties may at ANY TIME AGREE to subject the contract to a law OTHER than that which previously governed it, whether as a result of an EARLIER CHOICE made under this Article or of other provisions of this Regulation.” −−−−−−−−−−−− EXAMPLE OF CHOICE OF LAW Contract provides: «This contract shall be governed by, and interpreted in accordance with, the law of Germany.» −−−−−−−−−−−− Effects of choice of law The chosen national law will govern many aspects of the contract INCLUDING: 1. VALIDITY and FORMALITIES required for its conclusion 2. OBLIGATIONS of the parties 3. Rules of INTERPRETATION of contract 4. Consequences of VIOLATIONS (eg damages) 5. CONDITIONS for TERMINATING the contract Principle of UNIVERSAL application Article 2: “Any law specified by this Regulation shall be APPLIED whether or not it is the law of a Member State.” LIMITATION on party autonomy Article 3(3): “Where all other elements relevant to the situation at the time of the choice are located in a country other than the country whose law has been chosen, the choice of the parties shall not prejudice the application of provisions of the law of that other country which cannot be derogated from by agreement.” Law applicable in the lack of choice Article 4(1): “To the extent that the law applicable to the contract has NOT been CHOSEN in accordance with Article 3 […], the law governing the contract shall be DETERMINED as follows: a. a contract for the sale of GOODS shall be GOVERNED by the law of the country where the SELLER has his habitual residence; b. a contract for the provision of SERVICES shall be governed by the law of the country where the service PROVIDER has his habitual residence; […]” Article 19(1): “For the purposes of this Regulation, the HABITUAL RESIDENCE of companies and other bodies, corporate or unincorporated, shall be the place of CENTRAL ADMINISTRATION. The habitual residence of a NATURAL person acting in the course of his business activity shall be his PRINCIPAL PLACE of BUSINESS.” Article 4(2): “Where the contract is NOT covered by paragraph 1 or where the elements of the contract would be COVERED by more than one of points (a) to (h) of paragraph 1, the contract shall be governed by the LAW of the country where the PARTY required to EFFECT the CHARACTERISTIC PERFORMANCE of the contract has his HABITUAL residence.” −−−−−−−−−−−− EXAMPLE 17 Italian company sells a factory building in Germany to a German company (contract on immovable property). Contract provides that, after the sale of the factory, the Italian company will help the German buyer run the factory for 1 year (contract on services) Article 4(1)(c): contracts on IMMOVABLE property – law of the country where the PROPERTY is SITUATED Article 4(1)(b): contract for the provision of SERVICES – law of the country where the service PROVIDER has HABITUAL residence −−−−−−−−−−−− Article 4(3): “Where it is clear from all the CIRCUMSTANCES of the case that the contract is MANIFESTLY more CLOSELY CONNECTED with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply.” Article 4(4): “Where the law applicable CANNOT be determined pursuant to paragraphs 1 or 2, the contract shall be governed by the law of the country with which it is most CLOSELY CONNECTED.” Consumer contracts Article 6(1): “[…] a contract concluded by a NATURAL PERSON for a PURPOSE which can be regarded as being OUTSIDE his trade or PROFESSION (the consumer) with ANOTHER person acting in the EXERCISE of his trade or profession (the professional) shall be governed by the law of the country where the CONSUMER has his habitual residence, provided that the professional: a. pursues his commercial or professional ACTIVITIES in the country where the CONSUMER has his habitual residence, or b. by any means, DIRECTS such ACTIVITIES to that country or to several countries including that country, and the CONTRACT falls within the scope of such activities.” Article 6(2): “Notwithstanding paragraph 1, the parties may CHOOSE the law applicable to a contract which fulfils the requirements of paragraph 1, in accordance with Article 3. Such a choice may NOT, however, have the RESULT of depriving the consumer of the protection afforded to him by provisions that CANNOT be derogated from by agreement by virtue of the law which, in the absence of choice, would have been applicable on the basis of paragraph 1.” Employment contracts Article 8(1): “An individual EMPLOYMENT CONTRACT shall be GOVERNED by the law chosen by the parties in accordance with Article 3. Such a choice of law may NOT, however, have the result of DEPRIVING the employee of the protection AFFORDED to him by PROVISION that cannot be derogated from by agreement under the law that, in the ABSENCE of choice, would have been applicable pursuant to paragraphs 2, 3 and 4 of this Article.” Article 8(2): “To the extent that the law applicable to the individual employment contract has not been CHOSEN by the parties, the contract shall be governed by the law of the COUNTRY IN which or, FAILING that, FROM which the employee habitually CARRIES OUT his work in performance of the contract. The country where the work is HABITUALLY carried out shall not be deemed to have changed if he is temporarily employed in another country.” Article 8(3): “Where the law applicable CANNOT be determined pursuant to paragraph 2, the contract shall be governed by the law of the country where the place of business through which the employee was ENGAGED is situated.” Validity of contracts Article 11(1): “A CONTRACT CONCLUDED between persons who, or whose agents, are in the SAME country at the time of its CONCLUSION is formally VALID if it satisfies the FORMAL REQUIREMENTS of the law which governs it in substance under this Regulation or of the law of the country where it is concluded.” Article 11(2): “A CONTRACT concluded between persons who, or whose agents, are in DIFFERENT countries at the time of its conclusion is formally VALID if it satisfies the FORMAL REQUIREMENTS of the law which governs it in substance under this Regulation, or of the law of either of the countries where either of the PARTIES or their agent is present at the time of conclusion, or of the law of the country where either of the parties had his habitual residence at that time.” Public Policy Article 21: “The APPLICATION of a provision of the law of any country SPECIFIED by this Regulation may be REFUSED only if such application is manifestly INCOMPATIBLE with the PUBLIC POLICY (ordre public) of the forum.” 18