Giáo trình luật thương mại quốc tế = Textbook on international trade and business law

Youth Publishing House, 2017

TEXTBOOK ON

INTERNATIONAL TRADE AND BUSINESS LAW

HANOI LAW UNIVERSITY

HOCLUAT.VN

YOUTH PUBLISHING HOUSE

HANOI - 2017

Edited by

Professor Dr Surya P. Subedi

DPhil (Oxford); Barrister (England)

Professor of International Law

School of Law, University of Leeds, UK

This Textbook has been prepared with financial assistance from the European Union. The

views expressed herein are those of the authors and therefore in no way reflect the official

opinion of the European Union nor the Ministry of Industry and Trade.

TEXTBOOK ON

INTERNATIONAL TRADE

AND BUSINESS LAW

HANOI LAW UNIVERSITY

4 TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW 5

LIST OF AUTHORS

Nguyen Thanh Tam

and Trinh Hai Yen

Chapter One; and Chapter Three -

Section One, Section Two; and Chapter

Four - Section Three

Nguyen Dang Thang Chapter Two - Section One, Section

Two

Nguyen Duc Kien Chapter Two - Section Three;

and Chapter Five - Section Four

Federico Lupo Pasini Chapter Two - Section Four, Section

Seven; and Chapter Four - Section One

Nguyen Nhu Quynh Chapter Two - Section Five

Nguyen Thi Thu Hien Chapter Two - Section Six

Nguyen Ngoc Ha Chapter Two - Section Eight

Andrew Stephens Chapter Three - Section Three

Trinh Hai Yen Chapter Three - Section Four;

and Chapter Four - Section Two

Le Hoang Oanh Chapter Three - Section Five

Nguyen Minh Hang Chapter Five - Section One

Ho Thuy Ngoc Chapter Five - Section Two, Section

Three (Items Four-Five); and Chapter

Seven - Section Six

Vo Sy Manh Chapter Five - Section Three (Item One,

Item Three)

Marcel Fontaine Chapter Five - Section Three (Item Two)

Nguyen Ba Binh Chapter Six - Section One

Nguyen Thi Thanh Phuc Chapter Six - Section Two

Ha Cong Anh Bao Chapter Six - Section Three

Trinh Duc Hai Chapter Seven - Sections One-Five

Laurent Manderieux

and Nguyen Thanh Tam

Review and update whole Textbook

INTRODUCTION TO THE THIRD EDITION

The European Trade Policy and Investment Support Project (EU￾MUTRAP) and Hanoi Law University (HLU) decided to proceed with the

publication of the third edition of the Textbook following the great

success of the first two editions, published respectively in 2011 and 2014.

All the main universities in Viet Nam adopted the Textbook as the main

academic material. Moreover, law firms, think tanks and State agencies

largely made use of the Textbook as an important instrument supporting

their daily work. This third edition of the Textbook, like the first two,

has been prepared with the financial and expertise contributions of an

European Union funded Project (EU-MUTRAP). Indeed, the EU-MUTRAP

recruited international and local academics for the revision and the

update of the Textbook, taking into consideration the evolution of the

trade policy of Viet Nam of the last few years.

European Trade Policy and Investment Support Project (EU￾MUTRAP) and Hanoi Law University (HLU) would like to introduce the

third republication of the Textbook on International Trade and Business

Law to our valued readers.

Bui Huy Son

Project Director

EU-MUTRAP Project

Le Tien Chau

Rector

Hanoi Law University

6 TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW 7

different attitudes regarding the practical implementation of the day￾by-day commercial operations. The need to improve the trade relations,

particularly important for an open economy like Viet Nam, requires the

ability to understand these different attitudes and, when possible, to

identify the best international practices which could be reproduced into

the domestic legal framework.

The Textbook is also a good instrument for government officials

daily confronted with a dynamic international arena and eager to

know the basic information regarding various aspect of international

trade law.

This Textbook is really a small reproduction of the real world

Vietnamese lawyers and legal experts will have to face and it is an excellent

starting point for all those interested in having a basic knowledge of the

complex set of rules dealing with international trade.

Nguyen Thi Hoang Thuy

Project Director

EU-Viet Nam MUTRAP III

FOREWORD

This Textbook has been prepared with the support of the

Multilateral Trade Assistance Project III (EU-Viet Nam MUTRAP III) funded

by the European Union, and it is the result of the contribution of national

and international academics and trade law experts. The cooperation

between Vietnamese and international experts testifies the definitive

integration of Vietnam in the international cultural system. The trade and

economic world integration of Vietnam achieved with the accession to

the WTO in 2007 contributed in a decisive manner to the full participation

of Vietnamese experts and academics in the world scientific and cultural

community. Indeed, a growing number of Vietnamese students and

academics which are involved in international exchange programmes

and this Textbook are the evidence of this phenomenon.

With the support of EU-Viet Nam MUTRAP III Project and other

development cooperation programmes, the curricula of the main

universities in Vietnam have been updated to take into consideration

the rapid evolutions of the trade and economic situation. This Textbook,

mainly directed to bachelor students, provides a picture of the legal

aspects of the most relevant international trade issues. While recognizing

the differences between the international ‘public’ and the ‘private’ trade

law, the editor and contributors of the Textbook recognized that the two

different disciplines cannot be studied separately. Lawyers and legal

experts must have a thorough knowledge of all the aspects involving

an international transaction, from the competent jurisdiction to settle

any pathologic aspect of an international contract to the market

access’ rights protected by the WTO in a third country. Besides that,

the Textbook is also a combination of global (WTO, Vienna Convention

of the International Sales of Goods), regional (EU, NAFTA and ASEAN),

bilateral (the agreements between Vietnam and some trading partners)

and Vietnamese relevant rules. The Textbook benefited from the

contribution of experts and academics combining the technical to

the geographical expertise: for example, an US contributor wrote the

section on NAFTA while an European drafted the section dedicated to

the EU, while Vietnamese authors focused on the domestic relevant

trade aspects. The result is a Textbook which captures different views

regarding the law regulating international trade. This Textbook is a good

example of what the Vietnamese lawyers and legal experts will have to

face once they will start their professional life: a world characterized by

harmonized international rules, common rules of legal interpretation but

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PREFACE

International Trade and Business Law is about empowering

states in some areas and facilitating their business or other transactions

with other states and entities - while restraining their activities in other

areas for the greater good of the individual and the society, both national

and international. This body of law aims to lay down the rules of fair

play in the conduct of international economic relations to ensure a

fairer society for all. In other words, the role of International Trade and

Business Law is to ensure a level playing field for all states in order to

enable them to maximize their potential and/or to optimize their unique

selling points. Each and every individual is gifted with some unique

qualities or strengths; the legal system of any state should be designed

to enable these individuals to fulfill their potential without harming or

undermining the interests of others in the society. The objective is for

individuals to pursue their dreams - whatever these may mean to them.

Some people are happy to become millionaires or even billionaires,

while some others are happy to become nuns or monks, or to work for

charitable organizations.

The same is true of nation-states: basically, a collection of

individuals bound by certain common characteristics and objectives.

Therefore, International Trade and Business Law, is designed to enable

states to offer to the international community what they have; this is

in return for what other states have to offer to them. Thus, the element

of reciprocity and the promotion of national interests lie at the heart

of human behaviour, and states are no exception. This is especially the

case with International Trade and Business Law.

Dissimilarly to other specific areas of international law,

International Trade and Business Law is directly relevant to the economy

and prosperity of a nation. In other words, it concerns directly the basic

economic interests of a nation. Hence, each and every state is careful in

accepting the rules governing international trade and business. Every

state knows, however, that without accepting certain basic principles

of international law of trade and business it would not be able to trade

with other states or otherwise to engage in other business activities.

The irony in the world of international trade is that every state

wishes other states to open their doors as widely as possible by pursuing

policies of trade and economic liberalization; conversely, states may also

try to close their own doors as tightly as possible by pursuing protectionist

policies. Here, indeed, is where the law is needed: to intervene to ensure

fair play, and fairly to settle disputes in the case of foul play. The role of

the law may be described as akin to that of a referee or an umpire in a

sports match whose sole purpose is to ensure fair play. Associated with

the idea of fair play is the creation of a level playing field for the business

participants of the day.

Trade is one of the early attributes of human activity. The very

word ‘trade’ signifies an economic activity that is voluntary and is based

on reciprocity. Starting with the barter system in antiquity, humans

began, when forms of money were invented, to trade in goods for

cash. In fact, it was trade that contributed to the invention of money.

As this voluntary reciprocal economic activity began to grow both

geographically and in volume, it was regulated, initially by the traders

themselves and then by the authorities, such that trade was fair; that it

was free from distortions.

Much of human civilization has developed with and around the

expansion of trade and the desire firstly, to survive and subsequently,

to create wealth through trade. Early attempts to regulate trade were

designed to facilitate trade by providing the basic code of conduct

for those engaged in international trade. This code of conduct was

developed in due course under both public and private international

law to cater for the growth in trade and business activities. Accordingly,

one of the visions of the new world order conceived towards the end

of World War II was the liberalization of international trade to stimulate

economic growth through the establishment of an International Trade

Organization (‘ITO’).

Although the ITO never came into existence, its fundamental

concept of the liberalization of international trade was pursued through

the GATT and some other international legal instruments; many of

these eventually became part of the WTO law when this world trade

organization was established in 1995, following the conclusion of

the Uruguay Round of Multilateral Trade Negotiations between 1986

and 1994. There have been a number of developments within private

international law, too, since the end of World War II. These were designed

to facilitate as well as to regulate international trade and business.

Consequently, there is now a considerable body of public and private

international law dealing with international trade and business, and this

10 TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW 11

Textbook entitled, International Trade and Business Law, is an attempt to

provide a comprehensive yet succinct overview of this body of law.

The Textbook covers a wide range of topics in International Trade

and Business Law pertaining to both public and private international

law. It is the result of an ambitious project designed to produce a

comprehensive tool of study for Vietnamese students, government

officials, lawyers and scholars.

Vietnam adopted a new economic reform policy, known as

‘Doi Moi’, in order to usher the country along the road to economic

liberalization and economic reform in 1986. As part of that drive, Vietnam

made an application to join the WTO and was in 2007 duly admitted

to this world trade organization. Since the introduction of ‘Doi Moi’ and

membership of the WTO, in particular, Vietnam has witnessed a massive

growth in international trade and business activity, requiring new laws,

regulations and policies to regulate such activities.

Vietnam’s membership of the WTO was a catalyst for a number

of new developments in the legal system of the country, because

Vietnam had to undertake a number of new commitments to join the

WTO. Complying with these commitments required enacting new laws

and adopting new policies. Vietnam’s membership of the WTO has

transformed the legal landscape in the country. Consequently, Vietnam

is now not only a fully-fledged member of the WTO; it is also a thriving

market economy with a socialist political system. The country has in

the recent past attracted a huge amount of foreign investment and

has become one of the world’s fastest-growing economies. Parallel to

such opportunities come the responsibilities to operate within agreed

international rules. There has, for Vietnam’s success, to be a well￾educated or-trained human resource capable of interacting with other

global actors and promoting and protecting the national interests of

the country.

Vietnam’s interaction with the actors in the field of international

trade and business has increased a great deal. The Vietnamese legal

system has responded and is still responding to the challenges

stimulated by these changes in the sphere of international economic

and legal activity. Therefore, there is a need to prepare a new generation

of Vietnamese lawyers and government officials who can understand

and handle appropriately the matters raised by these phenomenal

changes taking place nationally and internationally; they must help the

people of the country to maximize the benefits resulting from these

changes. For this, they need good academic material - and this Textbook

on International Trade and Business Law is designed to meet that need

and demand.

It includes chapters authored by both Vietnamese and foreign

authors dealing with both international legal and Vietnamese legal

issues pertaining to both public and private international trade and

business law. Such an inclusive approach provides the students with

both international and Vietnamese perspectives into these areas of law.

The various contributors provide a comprehensive treatment of

the topics selected for inclusion in the Textbook. These range from WTO

law, including the trade in goods and services, and intellectual property

protection, to international commercial dispute resolution, including

international commercial arbitration, regional trading arrangements or

regional economic integration schemes such as NAFTA, EU and ASEAN,

and e-commerce. The chapters are both informative and analytical and

are contributed by academics, practitioners, government officials and

researchers of both older and younger generation most of whom carry a

wealth of expertise and experience in the areas concerned.

Since this Textbook is designed primarily for law students,

government officials, researchers and lawyers in Vietnam, the approach

is obviously a legalistic one based on the analysis of national and

international legal instruments, case law or jurisprudence and

established customs and norms of behaviour. An attempt has been

made to make it as reader- or student-friendly as possible. All chapters

end with a list of questions for reflection by students and other readers

in order to stimulate their thinking and analysis. Similarly, all chapters

provide a list of further reading for those willing to develop further their

understanding of a given area of law. Although the length and the style

of presentation vary from one chapter to another, as is quite natural

for a collection of this nature, consisting as it does of contributions

by many people with their own different legal, practical and scholarly

backgrounds, an attempt has been made to achieve uniformity and

consistency throughout the text in order to present it as a cohesive

Textbook. All in all, it is hoped that this Textbook would prove to be a

valuable academic material and source of reference for those interested

in International Trade and Business Law and in its application and

ramifications in Vietnam.

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TABLE OF ABBREVIATIONS

It has been a pleasure for me to work with the Coordinating

Committee of the Action of the Hanoi Law University (HLU) on this

Textbook and I wish to thank them for their excellent cooperation.

Professor Dr. Surya P. Subedi

DPhil (Oxford); Barrister (England)

Professor of International Law

University of Leeds, UK

Editor

AAA American Arbitration Association

AANZFTA ASEAN-Australia-New Zealand Free Trade Area

ABAC APEC Business Advisory Council

ACFA Framework Agreement on Comprehensive Economic

Cooperation between ASEAN and China

ACFTA ASEAN-China Free Trade Area

ACIA ASEAN Comprehensive Investment Agreement

ACP African, Caribbean and Pacific Countries

AD Anti-dumping

ADA Anti-dumping Agreement

ADR Alternative Dispute Resolution

AEC ASEAN Economic Community

AFAS ASEAN Framework Agreement on Services

AFT ASEM Fund of Trust

AFTA ASEAN Free Trade Area

AHTN ASEAN Harmonized Tariff Nomenclature

AIA ASEAN Investment Area

AITIG ASEAN-India Trade in Goods

AJCEP ASEAN-Japan Comprehensive Economic Partnership

AKAI ASEAN-Korea Agreement on Investment

AKFA ASEAN-Korea Framework Agreement on

Comprehensive Economic Cooperation

AKTIG ASEAN-Korea Trade in Goods Agreement

AKTIS ASEAN-Korea Trade in Services Agreement

AMS Aggregate Measurement of Support

APEC Asia-Pacific Economic Cooperation

APEC-MRA Mutual Recognition Agreement within the APEC

ASEAN Association of South-east Asian Nations

ASEM Asia-Europe Meetings

ATC Agreement on Textiles and Clothing

ATIGA ASEAN Trade in Goods Agreement

14 TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW 15

BC Before Christ

BDC Beneficiary Developing Country

BFTAs Bilateral Free Trade Agreements

BIT Bilateral Investment Treaty

BTA Agreement between the United States of America and

the Socialist Republic of Vietnam on Trade Relations

BTAs Bilateral Trade Agreements

CAP Common Agricultural Policy

CDB Convention on Biodiversity

CEPEA Comprehensive Economic Partnership in the East Asia

CEPT Agreement on the Common Effective Preferential Tariff

Scheme for the ASEAN Free Trade Area

CFI Court of First Instance

CFR Cost and Freight (formerly known as C&F)

CIETAC Chinese International Economic and Trade Arbitration

Commission

CIF Cost, Insurance and Freight

CIP Carriage and Insurance Paid to

CISG United Nations Convention on Contracts for

International Sales of Goods 1980; or Vienna Convention

1980

CJ Court of Justice (formerly known as ECJ - European

Court of Justice)

CJEU Court of Justice of the European Union

CLMV Cambodia, Laos, Myanmar and Vietnam

CM Common Market

COMESA Common Market of Eastern and Southern Africa

CPC United Nations Central Product Classification

CPT Carriage Paid to

CTG Council for Trade in Goods

CTS Council for Trade in Services

CU Customs Union

CVA WTO’s Agreement on Customs Valuation

DAP Delivered at Place

DAT Delivered at Terminal

DCs Developing Countries

DDP Delivered Duty Paid

DSB WTO’s Dispute Settlement Body

DSU WTO’s Dispute Settlement Understanding

EAFTA East Asia Free Trade Area

EC European Communities; or European Commission

ECB European Central Bank

ECJ European Court of Justice (it is now CJ - Court of Justice)

ECSC European Coal and Steel Community

EDI Electronic Data Interchange

EEC European Economic Community

EFTA European Free Trade Association

EMU Economic and Monetary Union

EP Export Price

EPAs Economic Partnership Agreements

EU European Union

EURATOM European Atomic Energy Community

EXW Ex Works

FAS Free Alongside Ship

FCA Free Carrier

FDI Foreign Direct Investment

FIOFA Federation of Oils, Seeds and Fats Association

FOB Free on Board

FOR Free on Rail

FOT Free on Truck

FPI Foreign Portfolio Investment

FSIA US Foreign Sovereign Immunities Act of 1976

FTAs Free Trade Agreements

GAFTA Grain and Feed Trade Association

GATS WTO General Agreement on Trade in Services

GATT WTO General Agreement on Tariffs and Trade

GCC Gulf Cooperation Council

GSP Generalized System of Preferences

16 TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW 17

HFCS High Fructose Corn Sweetener

IACAC Inter-American Commercial Arbitration Commission

IAP Individual Action Plan

IBRD International Bank for Reconstruction and Development

ICA International Commercial Arbitration

ICC International Chamber of Commerce

ICDR International Centre for Dispute Resolution

ICJ International Court of Justice

ICSID World Bank’s International Centre for the Settlement of

Investment Disputes

IEG Investment Experts Group

IGA ASEAN Agreement for the Promotion and Protection of

Investments

IL Inclusion List

ILO International Labour Organization

ILP WTO Agreement on Import Licensing Procedures

IMF International Monetary Fund

INCOTERMS International Commercial Terms

IPAP Investment Promotion Action Plan

IPRs Intellectual Property Rights

ISBP International Standard Banking Practice

ISP Rules on International Standby Credit Practices

ITO International Trade Organization

LCIA London Court of International Arbitration

LDCs Least-developed Countries

LMAA London Maritime Arbitration Association

LME London Metal Exchange

MA Market Access

M&A Merger and Acquisition

MAC Maritime Arbitration Commission

MERCOSUR Southern Common Market (‘Mercado Común del Sur’ in

Spanish)

MFN Most Favoured Nation

MMPA Marine Mammal Protection Act

MNCs Multinational Corporations

MTO Multimodal Transport Operators

MUTRAP EU-Viet Nam Multilateral Trade Assistance Project

funded by the EU

NAALC North American Agreement on Labour Cooperation

NAFTA North American Free Trade Area

NGOs Nongovernmental Organizations

NME Nonmarket Economy

NT National Treatment

NTBs Nontariff Barriers

NTR Normal Trade Relations

NV Normal Value

PCA Partnership and Cooperation Agreement

PECL Principles of European Contract Law

PICC UNIDROIT Principles of International Commercial Contracts

PNTR Permanent Normal Trade Relation

PPM Process and Production Method

PSI WTO Agreement on Preshipment Inspection

PTAs Preferential Trade Arrangements

ROK Republic of Korea

RoO WTO Agreement on Rules of Origin

RTAs Regional Trade Agreements

S&D Special and Differential Treatment

SA WTO Agreement on Safeguard

SAA Statement of Administrative Action

SCC Stockholm Chamber of Commerce

SCM WTO Agreement on Subsidies and Countervailing

Measures

SMEs Small and Medium-sized Enterprises

SMEWG APEC’s Small and Medium-sized Enterprise Working Group

SOMs Senior Officials Meetings

SPS WTO Agreement on the Application of Sanitary and

Phytosanitary Measures

SSG Special Safeguard

18 TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW 19

CONTENTS

Textbook on

INTERNATIONAL TRADE AND BUSINESS LAW

List of Authors 04

Introduction to the Third Edition 05

Foreword 06

Preface 08

Table of Abbreviations 13

INTRODUCTORY PART 23

Chapter One. General Introduction 24

Section One. International Trade and Business and Related

Transactions 25

Section Two. Sources of the International Trade and Business Law 40

Summary of the Chapter One 51

Questions/Exercises 53

Required/Suggested/Further Readings 53

PART ONE: INTERNATIONAL TRADE LAW 55

Chapter Two. Law of the WTO 57

Section One. Introduction 58

Section Two. Some Basic Principles of the WTO and

Exceptions 71

Section Three. Trade in Goods and the WTO’s Agreements 119

Section Four. Trade in Services and the GATS 149

SectionFive. Intellectual Property Rights and the TRIPS Agreement 167

Section Six. WTO’s Dispute Settlement Mechanism 189

Section Seven. Some New Issues of the WTO 201

Section Eight. Viet Nam and the WTO’s Accession Commitments 218

Summary of the Chapter Two 238

Questions/Exercises 239

TBT WTO Agreement on Technical Barriers to Trade

TEC Treaty of the European Communities

TEL Temporary Exclusion List

TEU Treaty of the European Union

TFAP Trade Facilitation Action Plan

TFEU Treaty of Functioning of the European Union

TIFA Trade and Investment Framework Agreement

TIG Trade In Goods

TNC Trade Negotiations Committee; or Transnational

Coorporations

TPP Transpacific Economic Strategic Partnership Agreement

TPRB WTO Trade Policy Review Body

TPRM WTO Agreement on Trade Policy Review Mechanism

TRIMs WTO Agreement on Trade-related Investment Measures

TRIPS WTO Agreement on Trade-related Intellectual Property

Rights

TRQs Tariff-rate Quotas

UCC US Uniform Commercial Code

UCP ICC Uniform Customs and Practice for Documentary Credits

UNCITRAL United Nations Commission for International Trade Law

UNIDROIT International Institute for Unification of Private Law

URDG Uniform Rules for Demand Guarantees

USDOC US Department of Commerce

WCO World Customs Organization

WIPO World Intellectual Property Organization

WTO World Trade Organization

20 TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW 21

Required/Suggested/Further Readings 240

Chapter Three. Rules on the Regional Economic Integration 243

Section One. Introduction 244

Section Two. EU Internal Market Regulations 251

Section Three. North American Free Trade Agreement (NAFTA) 274

Section Four. Rules on ASEAN’s Economic Integration 293

Section Five. Trans-Pacific Partnership Agreement (TPP) 304

Section Six. Viet Nam and the Regional Economic Integration 313

Summary of the Chapter Three 325

Questions/Exercises 326

Required/Suggested/Further Readings 326

Chapter Four. Agreements on Bilateral Trade Cooperation

between Viet Nam and Some Partners 329

Section One. Viet Nam-European Union, including the EU-Viet

Nam Free Trade Agreement (EVFTA) 330

Section Two. Viet Nam-United States 341

Section Three. Viet Nam-China 352

Summary of the Chapter Four 365

Questions/Exercises 367

Required/Suggested/Further Readings 367

PART TWO: INTERNATIONAL BUSINESS LAW 369

Chapter Five. Rules Governing International Sales of Goods 370

Section One. Introduction 371

Section Two. International Commercial Terms - INCOTERMS 380

Section Three. Rules on International Sales of Goods Contracts 383

Section Four. Methods of Financing of International Sales of Goods 416

Summary of the Chapter Five 441

Required/Suggested/Further Readings 444

Chapter Six. Rules Governing Some Other International

Business Transactions - Overview 447

Section One. Rules Governing International Franchising -

Overview 448

Section Two. Rules Governing International Logistics -

Overview 465

Section Three. Rules on E-Commerce for International

Business Transactions - Overview 480

Summary of the Chapter Six 492

Questions/Exercises 493

Required/Suggested/Further Readings 494

Chapter Seven. International Commercial Dispute

Settlement 495

Section One. Introduction 496

Section Two. Modes of the Dispute Resolution - The Choice 499

Section Three. Choice of Laws and Jurisdictions for the

Dispute Settlement 526

Section Four. Recognition and Enforcement of the Foreign

Arbitration’s Awards 539

Section Five. Recognition and Enforcement of the Foreign

Court’s Judgments 545

Section Six. Vietnamese Rules Governing International

Commercial Dispute Settlement 549

Summary of the Chapter Seven 558

Questions/Exercises 559

Required/Suggested/Further Readings 560

22 TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW INTRODUCTORY PART 23

INTRODUCTORY PART

24 TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW CHAPTER ONE. GENERAL INTRODUCTION 25

CHAPTER ONE.

GENERAL INTRODUCTION

Section One. INTERNATIONAL TRADE AND BUSINESS AND RELATED

TRANSACTIONS

1. Historical Development of International Trade and Business

Transactions

International trade and business transactions and the law governing

these are not a new phenomenon. According to historians, since

humans first lived in tribal societies, they have known how to exchange

goods. The prehistoric equivalent of fairs existed in the boundary

areas between tribal territories. The first international trade network

discovered by archæologists appeared in approximately 3,500 BC in the

ancient Mesopotamia (modern-day Iran and Iraq). Mention must also

be made of the trade networks existing in China during 1,000-2,000

BC, the ‘Silk Road’. Before Greek civilization, the Mediterranean Sea was

an international trade centre very successfully organized by Phoenicia.

Greek city-states started to compete with Phoenicia from 800 BC onwards

in a growing trade network alongside their developing civilization.

Alexander the Great’s Conquest created trade paths extending to Asia

and the Mediterranean Sea. Later, the Romans built a vast Empire with

trade expanding to include what is nowadays the United Kingdom

(hereinafter the ‘UK’) and Northern Europe.

International trade in Europe in the pre-mediæval period

experienced a depression arising from the collapse of the Roman

Empire. Later, during the Middle Ages, Arabian merchants continued the

tradition of international trade, creating broad trade networks around

the Persian Gulf, Africa, India and South-east Asia. In that period, the

international trade between China and India, Malaysia and South-east

Asia also developed.

Seasonal fairs were created in the European cities in the Middle

Ages. These were places where merchants brought goods from

different countries for sale. Since then, emperors, such as the Emperor

of Lombardy (Italy) in the eleventh century, had the policy of imposing

a sales tax applicable in fairs and tariffs on goods transported to fairs.

During the late Middle Ages, the regional trade networks had

developed considerably in Europe, such as the region along the coast

GENERAL INTRODUCTION

26 TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW CHAPTER ONE. GENERAL INTRODUCTION 27

of Mediterranean Sea, Venice, Florence, Genoa, and northern Africa. In

northern Europe, in the mid-fourteenth century, approximately eighty

trading cities and their merchants joined to create a flexible political

union, the Hanseatic League; they had their own common commercial

rules and enough military and political power to counter any invasions

by emperors or other invaders. In that period, emperors and other

heads of state began to conclude treaties aimed at the protection of

commercial interests, and the application of a tariff policy in favour of

their merchants.

In the late fifteenth century, when Christopher Colombus

discovered America, and science, technical progress and maritime

development opened the era to the conquering of world trade by

Europeans. Then the European states created a worldwide colonial

network. The task of their respective colonies was the provision of the

raw materials for their European cities and manufacturing bases. The

cities produced the completed products then colonies imported the

finished goods produced by European centres.

A new international economic order began to appear when the

World War II was coming to an end. At the Bretton Woods Conference

of 1944, the global economic organizations the International Monetary

Fund (hereinafter the ‘IMF’) and the International Bank for Reconstruction

and Development (hereinafter the ‘IBRD’ which is known as the World

Bank) were born. A proposal for a global trade organization also

appeared in the Havana Conference of 1948, i.e., the International Trade

Organization (hereinafter the ‘ITO’). However, the ITO did not come

into existence ; the rules of international trade were then included in

a ‘provisional’ mechanism governing international trade in goods, i.e.,

the General Agreement on Tariffs and Trade 1947 (hereinafter the ‘GATT

1947’). This ‘provisional’ Agreement governed the global trade in goods

for nearly 50 years, until the creation of the World Trade Organization

(hereinafter the ‘WTO’) in 1995 (see Chapter Two of the Textbook).

Since the end of World War II, the global trade system, which has

continuously developed over more than 65 years, is now standing in the

multi-route crossroads. Where the WTO will head, together with global

commitments to the liberalization of trade in goods; trade in services;

protection and enforcement of intellectual property rights (hereinafter

the ‘IPRs’), and international investment issues, among other issues,

remains to be seen. To overcome the relative ineffectiveness of the

commitments to the liberalization of global trade, regional economic

integration is now becoming an alternative foreign trade policy planned

by most states. The models of regional economic integration, such as the

European Union (hereinafter the ‘EU’), the North American Free Trade

Area (hereinafter the ‘NAFTA’), and ASEAN Free Trade Area (hereinafter

the ‘AFTA’), to name but a few, have become familiar topics in many

basic textbooks and casebooks of international trade law (see Chapter

Three of the Textbook). Bilateral trade and investment agreements

(hereinafter the ‘BTAs’) will also play an important role (see Chapter Four

of the Textbook).

2. Relative Distinctions between International Trade Involving

Mainly States and Public Entities, and International Business

Transactions Involving Mainly Traders

A. International Trade and Trade Policy

1. Why Do States Trade?

There are two main reasons advanced for why states trade with each

other, such as (a) economic reasons; and (b) political reasons.

(a) Economic reasons

Free trade is not a new idea. It exists in different economic theories

since - between the fifteenth and the eighteenth centuries in Europe,

such as mercantilism, Adam Smith’s absolute advantage theory, and the

Ricardian comparative advantage theory, among others.

According to Adam Smith,

… [T]he tailor does not attempt to make his own shoes, but

he buys them from the shoemaker. The shoemaker does not

attempt to make his own clothes, but employs a tailor.… [W]hat

is prudence in the conduct of every private family can scarce be

folly in that of a great kingdom. If a foreign country can supply us

with a commodity cheaper than we ourselves can make it, better

buy it… [w]e have some advantage.1

Adam Smith’s arguments, mentioned above, regarding

‘specialization’ and ‘absolute advantage’ in international trade, were

1 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, (1776), edited by

E. Cannan, University of Chicago Press, (1976), vol. 1, at 478-479.

28 TEXTBOOK ON INTERNATIONAL TRADE AND BUSINESS LAW CHAPTER ONE. GENERAL INTRODUCTION 29

further developed by David Ricardo who, in his book ‘The Principles of

Political Economy and Taxation’ of 1817, offered the theory of ‘comparative

advantage’. ‘Comparative advantage’ is a concept central to international

trade theory; it holds that a country should specialize in the production

and export of those goods, and should concurrently import those

goods in which it has a comparative disadvantage. This theory formed

the basis for increasing the economic welfare of a country through

international trade. The theory usually favours specialized production

in which the country is relatively well endowed, such as raw materials,

fertile land, skilled labour, or accumulation of physical capital. The

comparative advantage theory is the explanation for why developed

and developing countries can and do benefit from international trade.

Following this theory, even the poorest countries with little or no

absolute advantage can participate in international trade and benefit,

on the basis of its comparative advantages. It seems not excessive to

say that David Ricardo is the ‘architect’ of the current WTO. Economists

in the nineteenth and twentieth centuries have endeavoured to refine

the models of David Ricardo, such as Heckscher-Ohlin, Paul Samuelson,

and Joseph Stiglitz, etc.

Economists through the ages saw so clearly, the citizens of a state

benefit from getting as large a volume of imports as possible in return

for its exports or, equivalently, from exporting as little as possible to pay

for its imports. Openness to trade and investment promotes growth in a

number of ways, including:2

it encourages economies to specialize and

produce in areas where they have a comparative advantage over other

economies; trade expands the markets to where domestic producers

can access; trade diffuses new technologies and ideas, increasing

domestic workers’ and managers’ productivity; eliminating tariffs on

imports gives consumers access to cheaper products, increasing their

purchasing power and living standards, and gives producers access

to cheaper inputs, reducing their production costs and boosting their

competitiveness.3

Liberalized trade and rapid growth, in not few countries, are

responsible for much of the poverty reduction, such as China, India,

Thailand, and Viet Nam.4

2 Simon Lester et al., World Trade Law - Text, Materials and Commentary, Hard Publishing,

Oxford and Portland, Oregon, (2008), at 12-13.

3 AusAid, ‘Trade, Development and Poverty Reduction’, http://www.ausaid.gov.au/

publications/pdf/trade_devel_poverty.pdf

4 D. Dollar and A. Kraay, ‘Trade, Growth and Poverty’, World Bank Policy Research Working Paper,

(2001).

(b) Political reasons

It is often stated that ‘if goods do not cross frontiers, soldiers will’.5

In

reality, trade protectionism is frequently a source of conflict. In 1947,

representatives from 23 countries met in Geneva (Switzerland) to

negotiate the GATT aiming at lowering import tariffs under the

nondiscrimination principle and the rule of law, since they understood all

too clearly that the ‘beggar-thy-neighbour’ protectionist policies of the

1930s had been truly an economic disaster of the humanity, even one of

reasons led to World War II. Therefore, international trade becomes one

of the most important foreign policies of most states today. The thinking

is that countries which trade with each other are less likely to declare

war against each other; the risk of armed conflict is reduced.

For many developing countries (hereinafter the ‘DCs’), economic

power is a determinant factor of the existence and position of a state

in the international arena. All are well aware of the impact of the

international trade on national trade policy. Besides, international

trade is a very important tool of the international integration process

performed by states.

Following supporters of international trade, free trade among

states is seen as the key to economic growth, peace and higher

standards of living. However, the philosophy of free trade has not gone

unchallenged.

2. Why Do States Restrict International Trade?

The reasons for international trade restrictions are multiple, including

both economic and political. There are trade theorists who think that ‘free

trade does not provide the best solution in economic terms. Protectionism

and unfair trade practice are seen as providing greater economic benefit

to a country’.6

Since the fifteenth century, economists have been advising that

states should follow policies aimed at promoting international trade in

their own interest on the basis of their comparative advantage; however

politicians, do not always appreciate this advice as they have various

reasons to pursue a protectionist policy.7

The first is the ‘national security’

5 Peter Van den Bossche, The Law and Policy of the World Trade Organization - Text, Cases and

Materials, Cambridge, Cambridge University Press, 2nd edn., (2008), at 19.

6 Indira Carr, International Trade Law, Cavendish Publishing, 3rd edn., (2005), at 1xxxvii.

7 Simon Lester et al., supra, at 23-24; Peter Van den Bossche, supra, at 20-24.