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Foundations of international commercial law

Foundations of international commercial law I


'The twentieth century saw the resurgence of a truly transnational commercial law and all the indications are that the twenty first century will be the century of a truly global commercial law.'


Commercial law is a sub-division of civil law where both public and private issues are addressed: specifically, it constitutes rules and regulations that govern various commercial transactions that are also known by other names, most commonly. business or trade law. Broad areas of business are administered under this law, including both corporate and consumer transactions. The areas covered by commercial law may include company contracts, customer credits, house loans and secured transactions and also global commerce, banking, transport and sales are administered by commercial banking.

As contemporary lifestyle undergoes various changes, commercial activities are experiencing shifts on a global level. For example online trading practices are in pattern, telecommunication and internet has connected business organizations. Due to these changing trends, commercial law is also going through a major reshuffle to fit into the global environment. The business organizations are also required to follow the changing trends of the commercial law. to fit in with the global business transactions. The trade policies are also changing at a global level. Given the new social order, international trade is largely increasing, signifying greater implications with the internationalisation of business regulations. Commercial law is becoming increasingly complicated with industrial corruptions being included in international business. This can be evident from the reports of some international companies like FATF show global commercial corruption is closely associated with money laundering. Due to this money related corruptions, commercial law at trans-national level is also requiring to be modified to be fit into new emerging business trends.

This essay assesses the important features of commercial law included in the resurgence of commercial law in the twentieth century, so that the required changes pertinent to the twenty first century could be made to encourage trade activities. A background to commercial law and its resurgence will be outlined. Furthermore, the transformed commercial law and expected developments with its application in the international trade in the next century will also be shown.

Resurgence of transformational commercial

In the twentieth century, the laws managing global trade have been strengthened, codified and harmonised. Therefore, commercial law needed to change into a denationalised form to encompass all types of business regulatory issues of both private and public activities such as tax rate, protection of rights to do business, etc. To do so, several new features were included appropriate to 21st century business trends. For example, intellectual property law was added to secure the business interests of particular organizations in the international business environment. International arbitration was used to remove trade disputes among the involved countries in international trade practices.

The commercial law in application in the 21st century is different from that used in the nineteenth century due to the resurgence of older aspects. Prior to this it existed, in a certain sense, in the law used in the eighteenth century for marine insurance and shipping activities. During the initial stages, commercial law was largely applicable to marine business transactions and trading by sea. Following the global revival, commercial law has witnessed the inclusion of new conventions, regulations and agreements related a number of business practices. Having been denied recognised market relationships with their own economies, several countries like the UK and US were determined to adopt the practices of private commerce during the 20th century, while some others including South African countries did not find the most suitable and domestic laws preferred to practise the commercial laws which were followed in New York and England.

Similarly, in many regions such as Europe and the US, regulations were introduced in international strategies and policies. In these agreements, one of the most essential steps was harmonising and organising commercial law. For example, in Europe, there was an awareness of a need to harmonise law towards the 1950's due to great changes in economical, cultural and geographical aspects due to the adverse results of the World War. All the member states of the European Union were experiencing a great competition in business practices. Therefore, a Design Directive was established by European Government at the end of the century to harmonise the union's commercial laws and protect the intellectual property of member countries which were involved in international trade practices. Due to such endeavours, the transformation of the commercial law became a subject of international investigation.

The transformation of these laws also came in response to matters raised in relation to marine business transactional practices. Previously, merchant and maritime laws were not considered two separate entities in Europe where there were laws and codes for marine business transactions and international trade practices, which were acceptable regionally; however, in order to administer foreign commerce, the rules and laws were based on local customs area in all the states of Europe. From this essay states that in the 20th century, new commercial law became important in some aspects at a certain extent.

3) Commercial law: Changes during the 20th century

As stated, the 20th century saw changes to commercial law. In this period, just after WW2, there was a tremendous growth in international trade which increased the need for international trade laws. With a rise in international commerce, business companies functioning in different countries experienced a great need to harmonise their commercial laws. In this regard there was a great need for bilateral treaties for phrasing the adjusted commercial relations among various nations. This bilateral treaty was made in for the matters related to foreign direct investment. These treaties were formed between the developed and developing countries to improve their trade relations. An example of this might be the movements in Western Europe to harmonise and unify business regulations and to achieve trade globalisation. Meanwhile, some changes in Latin America included the political and legal educations of law harmonisation were provided for business people. The main changes were tested by UNIDROIT to verify their appropriateness in the future business world.

Another crucial development in the international trading law was the launching of the multinational agreements like the UN (United Nations) and the economic improvement in the collaboration and partnerships between the different member states. For instance, in 1960, Europe was the only market for global trade, but in 1980 a Free-Trade Zone was founded by Canada and United States. Then, in 1990, a tripartite trade agreement involving Canada, United States and Mexico was launched. This way several trade related changes were made in the major countries during resurgence of commercial law. From this discussion, it is observed that commercial law experienced growth in acceptance at international level.

International Commercial law: Functional areas

The major functional areas of international commercial law in the twentieth century are commercial customs and practices, which were maintained by the International Chamber of Commerce. The ICC regulated trade practices and customs in the early twentieth century.. These rules were included in all types of business contracts and were also occasionally altered due to evolving trading realities .

Another change related to international trade was the invention of unified Hague rules which were related to sea and inland waterways and related transport facilities. Countries engaged in international trade practices altered their business agreements to suit the Hague Rules. Accordingly, these developments marked the resurgence of international commercial law during this period where a major part of the trade practices was administered according to them. Similarly, the Hague Rules witnessed considerable amendments and were reformed into the Brussels Protocol. Later, the practices of these modified rules were to be transferred in to the commercial practices at the international level. The Rotterdam Rules were another modification taken into consideration in the commercial law during this period. All the above rule modifications were passed to have similar business impacts on the international trade practices, demonstrating that commercial law changed the functional areas as per the inclusion of the rules stated above to have coordination with the global business practices.

British Laws: In terms of trade law aspects, the majority were governed according to British Law. In fact, British trade practices were historically known for their effectiveness and appropriateness to govern international commercial law. Britain also introduced the financial and banking systems considered among supportive measures for international trade practices. There were major developments in the British trading practices in the 19th century with the Bill Of Exchange Act being pioneered in the year 1882 to maintain common trade practices worldwide.

Clearly, in taking these aspects into account, the resurgence in commercial law during the twentieth century was very efficient. This resurgence was followed by various effective measures and rules related to the commercial laws. As a result, the commercial law in the twenty first century would be developed as a globally applicable commercial law.

Challenges in 21st century

International trade laws followed at a very limited level in the previous century have been transformed in the modern business world. Accordingly, the commercial practices will also be changed to cope with the pace and scale of the new century. Therefore, harmonisation of commercial law and intellectual property rights will have great ramifications and effects on the global business practices of the present days. At a global level, the protection of intellectual property rights is essential in cross border business transactions.

In the era of harmonized trade practices the need for intellectual property rights is more as competition level in international trade practices has increased due to globalization. The enforcement procedures against parties or countries involved in the business are crucial factors for international trade to work globally in a harmonised fashion. To ensure this, the rights of parties involved in the business transactions at the international level should be protected and acknowledged.

The essay will now move to another example of commercial law which is international arbitration. This is because despite the various new challenges witnessed by the global international trade in the 21st century, the resurgence in transnational commercial law in the previous century is enough to effectively contain these challenges. To start with, international arbitration has been an effective procedure in commercial trade for several centuries resolving disputes on the international stage since businesses of one country run many branches in large number of nations worldwide. For example, the British Empire, which was a centre of trade, also applied international arbitration in its trade practices during 20th century to solve trade related disagreements.

Suitability in the 21st century

Arbitration has become an important point of international commerce in global business, as an established procedure in resolving disputes in international trade practices mainly focusing on disputes among sovereign countries with overseas investors at a time when globalisation started to expand; thus, opening new markets for foreign investors. Soon after, international arbitration was undertaken by many bilateral investment treaties in the globalised business environment to manage disputes in international trade through a process of integration being forced to enhance these practices. With this the commercial law became globalized because the trade disputes were resolved between the involved nations in international trade practices. The free flow of business activities made the trade relations effective and strong for further business practices.

Some commentators believe that providing international arbitration would ensure a dominant role in running international trade practices. Thus, nowadays it has an international implication. For instance, dispute resolution with regards to international trade was conducted by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. During this convention, the arbitral awards were made easy worldwide. Thus, international arbitration is an indicator of globalisation emerging during the resurgence of commercial law in the twentieth century and continues to be so in the business environment of the twenty first century.

For proving that commercial trade practices became part of international commercial issues another aspect is electronic commerce, as shown through the rise of internet trading. Early in the 20th century, telecommunication technologies evolved making it easy to access foreign markets through investments, which were based on regulatory trading compliance. Towards the end of the twentieth century, online trading systems have been part of international trade, which was considered legal in the practices of commercial law. E-commerce or online trading has been flourishing in this millennium because of the implication of information technology aspects in all the fields of business.

While discussing the suitability of the commercial law in the 21st century the intellectual property rights can be viewed as a significant aspect because of their use in the current business circumstances for the protection of practices and processes which have become crucial requirements for globally operating firms. Through this law, intellectual property rights can be protected from being violated by competitors.

Generally, any copywriting of the specific work made by any trade company was restricted by the law in commercial laws of the twentieth century. For example, some acts for the protection of the intellectual property came into existence during the reign of the British Empire. Among these acts are the Patent Act of 1977 and the Trade Mark Act of 1994 as well as the Act of Registered Design of 1949. The introduction of these acts during the previous century has greater applicability in the present international trade practices for its fair running as the current competitive market has several business insecurities such as harming of intellectual property rights. The fundamental change in trade practices required a perceived urgency to develop an IPR framework. Acts such as the copyright act, patent protection, and licensing acts are all constructively practised in the twenty first century global commercial laws, while the copyright act is currently seen as vital in the protection of trade practices in most countries as well as those parties caught up in the global race.

Supported by twentieth century intellectual property rights, licensing has become one of the most important practices in overseas business in the current century. Accordingly, some agreements relating to Internet trading and e-commerce formed the main basis for business dealings in 21st century. Interestingly, the IP law developed during this period was applicable to all types of properties including commercial, industrial and creative ones. One reason for all these property rights in the twentieth century is the emergence of internet trading as an alternative to existing trading practices.

Positive and Negative aspects of Commercial law:

Drawing on our earlier discussion, transnational commercial law of the twentieth century seems to be qualified to be implemented on a global stage in the current century since its main precepts such as arbitration, harmonisation and intellectual property are crucial in contemporary business practices. However, there are many challenging issues encountered while implementing these modifications including lack of harmonisation due to conflicting business regulations, technological developments and business disagreements.

Despite their advantages, commercial law practices are not welcomed universally and face obstacles such as harmonisation, which is a great challenge for commercial trade practices at present. Due to diversified national laws, the implementation of the harmonized commercial law is becoming critical. In opposition to this, Ansel has argued that disparity in national laws is harming the requirements of economy of present century. The harmonization of law is done in a complete manner and it is not in an inclusive form. This is because on a particular subject, there is not any sole authority to handle it. There are certain limits of the authorities of law, beyond which they can not take any action. The concept of harmonization of commercial law is not a systematic one as there is no existence of any inclusive parameter for the commercial law with the European Union's Directives. In relation to the given question it is analyzed here that all the changes made in the resurgence of commercial law are not suitable in the present century but some are critical to be handled.

Undoubtedly, having diverse laws in different nations is a thorny issue in harmonisation. For example, the East European legal system has an internal coordination problem within some countries' trading laws which are hard to be harmonised. In addition, all countries have their own laws for running businesses. On the other hand, global businesses have to collaborate with international commercial laws to achieve harmonisation which require adoption of global treaties so that multilateral business practices can be administered by involved parties. Since there is some fierce competition between countries, harmonisation of differing laws and trade practices can be a major hurdle for total harmonisation. Due to this amalgamating different types of commercial laws has become an essential requirement of international trade. This is because with the implementation of the unified commercial law various types of business costs such as transportation and facilitation of the business activities around the world could be reduced.

Another serious challenge for global commercial laws is arbitration because some nations have their own business regulations which can conflict with other global trade practices. Normally, international arbitration considers the similarities as well as dissimilarities in different regulatory systems around the world. With different developments in telecommunications and computer networking, the international commercial arbitrations are required to change into a digital format. Since international arbitration was established to settle trade disputes between nations involved in international trade, there is an urgent need in the 21st century to reform the arbitral process because practices such as sales and transportation have taken new shapes and include modern technologies. In order to meet the criteria of different legal global entities, international arbitration needs to undergo certain changes in the composition process, agreements and control of the arbitral process.

Another change in the present century is the introduction of electronic trade practices. More recently, commercial practices have increasingly been combined with the internet and electronic technologies. Technologies like online trading, internet based communication among nations engaged into international trade, and a worldwide network involving multiple business organisations, ordinary trade practices are progressively taking an electronic dimension. For example, e-bills and money transfers via electronic means are changing trade practices between nations.

Consequently, legal procedures are essential for the best management of new practices. In essence, there should be some measures in place to effectively deal with these issues such as the ratification of the Lisbon Treaty where all EU member states should endorse the treaty prior to entering into the commercial law of 21st century. As for the most practical steps to ratify the treaty, parliamentary votes can facilitate joint decision making on any amendments to the law. In doing so, favourable decisions for all would be implemented in an appropriate manner. In spite of the uncertainties surrounding the implementation of this treaty in the EU, some of the provisions of the treaty such as ACP-EU are arguably expected to have positive effects on trade relations of the EU member states with foreign countries in trading worldwide. Regarding the Lisbon Treaty, trading in the EU would be changed positively, and so would trade relations of the member states with their trade partners. Therefore, the EU will ensure suitable trade practices, while embracing the relevant changes, challenges of the commercial law in the 21st century can be resolved appropriately.

In addition, several other changes can be noted such as new technologies, with information technologyical practices being involved in the trade such as use of internet in the communication process which should be followed by countries engaged into global trade like the views of the World Trade Organization. Eventually, this would facilitate the sharing of changes in trade practices between the many countries involved. In relation to the suitability of the commercial law further development is required to cope with changing technologies. With the introduction of these changes, serious challenges within commercial law can be resolved constructively.


This essays has examined the resurgence of commercial law in the 20th century and its importance during the current century. Several new changes have been implemented in the commercial law such as international arbitration, intellectual property rights and Hague rules. In the meantime, regional commercial laws of the countries practised codification progresses, while reformation of the commercial law took place with the introduction of several new elements in the transnational commercial law. As a result, harmonisation of different nations' commercial laws went into effect during this century. In addition, implementation of international arbitration shows a recognised need for multinational agreements.

From the above analysis on the development and resurgence of commercial law in the twenty first century, the new aspects of technology should also be considered in commercial law practices. Transnational trading laws can be employed efficiently in modern times with the introduction of computer network based technologies in the trade practices. Intellectual property rights have also become essential for international trading as with the emergence of IPR, disputes between nations can be resolved without having to depend on international arbitration.

Contrary to the 20th century where several changes were introduced into commercial law to make it applicable for business dealings on the global scene, in the twenty first century trade practices have become much more globalised as more companies go international business. Therefore, transnational commercial law has proved its suitability for this modern age of global business.

It can also be concluded that major changes made in transnational commercial law during 20th century are found suitable for fulfilling the requirements of the global business practices. Several barriers of trade have been solved with the resurgence process. The volume of transnational trade is rapidly and increasingly moving forward in the present century where economies of different nations are being integrated and reforming in accordance with the global business system. Further resurgence is also required in translational commercial law to meet the new business challenges of global commercial practices in the present scenario.


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