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CML - WS 5 - International Trade
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WS 5 – International TradeINTRODUCTION TO INTERNATIONAL SALE AGREEMENTS
In an international sale, cash payment will usually be impractical.
It may be possible to arrange for payment in advance, but more usually the buyer will demand a credit
period, so payment may not take place until sometime after the goods have been shipped, resulting in
obvious cash flow problems.
RISKS
(a) physical risk of damage to the goods associated with sea or air transport and the associated extra handling;
(b) financial risks, for example due to changes in currency exchange rates;
(c) increased risks of not being paid, or being paid late, possibly by reason of buyer insolvency;
(d) political risks, possibly even of war, terrorist attack or blockades (a recent example is the problems for
shippers with Somali pirates);
(e) legal risks if the contract is subject to foreign law (are you qualified to advise on foreign law?); and
(f) The difficulties associated with litigation, or enforcing contractual remedies outside of the seller’s jurisdiction
(eg how practical is it to attempt to enforce a retention of title clause?).
The Contract
International sale of goods contracts commonly include terms dealing with international transport
arrangements, insurance provision, complex financing and credit provision, and closely related payment
provisions.
As a result, there will be a series of additional contracts with third parties, which are essential to ensure
that the parties fulfil their obligations under the principal sale of goods contract.
1. The freight contract between the shipper and the carrier
The party arranging (and paying for) the contract is the ‘shipper’
2. The contract of marine insurance
Whether the buyer or seller arranges for insurance will again depend on what has been agreed
between the parties and will be normally provided for in the sale contract.
Where the seller is obliged to insure, the obligation will often be created by incorporation of the
relevant Incoterm
3. The finance arrangements will be provided for in the sale of goods contract, and the method and the
degree of security for payment will again depend on the relationship between the parties
TERMINOLOGY
Shipper This is the person who arranges for goods to be sent by ship, and will usually be the
seller itself but may also be the seller’s agent
Shipment This is the act of putting the goods onto the ship before it sails. ‘When were the
goods shipped?’ means ‘When were the goods put onto the ship?’.
Carrier This is the shipping company on whose ship the goods are transported.
Consignee The person collecting the goods at their destination (which will often be the buyer
itself but may also be the buyer’s agent).
Freight This is the cost of carriage, not the goods themselves (the cargo).
CHOICE OF JURISDICTION AND LAW
Jurisdiction means the courts which would hear the dispute.
Choice of law obviously means choosing which law would apply to the contract.
The basic principle is that if the parties choose the law and jurisdiction which they wish to cover the contract
then that choice prevails.
EU Regulation 593/2008 (Rome I) deals with choice of law.
choice of jurisdiction is dealt with by the recast Brussels I Regulation (Regulation 1215/2012) which replaces
Regulation 44/2001
, WS 5 – International Trade
BRUSSELS I – REGULATION 1215/2012 – (PAGE 172)
This Regulation deals with jurisdiction. It applies, generally, where defendants are domiciled in Member States,
or the parties have chosen a court or courts of a Member State to govern the contract.
The basic rule is that the defendant is sued in the courts of his home country, subject to the other provisions of
the Regulation (Article 4).
If the dispute is a contract matter then there is the option of suing the defendant in the Member State where
the contract should have been performed (Article 7(1)(a)).
In the case of a sale of goods contract, it is presumed that the ‘place of performance of the obligation in
question’ is the Member State where the goods were delivered, or should have been delivered (Article 7(1)(b)).
Thus, for sale of goods contracts, there is only one ‘place of performance of the obligation in question’ for the
whole of the contract.
Car Trim GmbH v KeySafety Systems Srl [2010] - ruled that the place of delivery (and therefore performance)
was the place where the physical transfer of the goods took place, giving the purchaser actual power of disposal
over those goods.
Exclusive jurisdiction
Under Article 24 of Regulation 1215/2012, there are situations in which certain courts are regarded as having
particular expertise and so are given exclusive jurisdiction. This overrides the normal rules on general and special
jurisdiction. The main instances are:
(a) proceedings concerning rights in rem in immovable property, or tenancies of immovable property: the
Regulation normally gives exclusive jurisdiction to the courts of the Member State in which the property is
situated;
(b) proceedings concerning the constitution or dissolution of companies: the Regulation gives exclusive
jurisdiction the courts of the Member State in which the company has its ‘seat’ (in the UK this will usually be
the registered office); and
(c) Proceedings concerning the registration or validity of registered IP rights: the Regulation gives exclusive
jurisdiction to the courts of the Member State in which the right is registered, or in which registration has
been applied for.
Special rules for insurance, consumer contracts and employment contracts
- In order to redress the balance, the rules on jurisdiction are shifted in favour of the ‘weaker’ party. Generally he
can be sued only in his own courts, but is given the choice as to whether he sues the other party in his own
courts or in the other party’s courts.
- This can mean that an Internet business could be sued in any jurisdiction in which its website happens to be
accessible to potential customers.
Contracting out: express choice of jurisdiction
- Article 25 allows the parties to override the rules on general and special jurisdiction by agreeing that the courts
of a specified Member State are to have jurisdiction. The Article lays down the formal requirements for such an
agreement.
- Generally, it must be in writing.
FIRST TO FILE
The court which is first involved in the proceedings (first seised) will generally have jurisdiction.
Any other court may decline jurisdiction, or stay proceedings if the actions are related (Article 29).
, WS 5 – International Trade
OUTSIDE THE EU/EFTA – P.174 - 175
Suing in England
There are three circumstances in which the English courts may have jurisdiction to hear a claim:
1. if a claim form is served on the defendant whilst he is physically present within the jurisdiction (however
briefly);
2. if the defendant submits to the jurisdiction of the English courts; or
3. If the courts authorise service of a claim form out of the jurisdiction.
Being sued abroad
Apart from the Brussels Regulation and Lugano Conventions, England is not a party to any other convention on
jurisdiction. The question of whether an English defendant can be sued in a foreign country depends on that
country’s jurisdiction rules.
ROME I – REGULATION 593/2008
This Regulation applies to Member States of the EU. It deals with the choice of laws, that is, the question of
which law applies to the contract
Article 3(1) allows the parties to choose the law of the contract, either expressly or impliedly. If they have
done so, then that is the applicable law that governs the contract
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