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Law 331 International Trade Law
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UNIT I. Concept of International Trade Law
# Meaning and Concepts
# Genesis
# Importance
# Sources
 International trade law refers to the body of rules and regulations that governs the
relationships of nation states for regulating their domestic markets in relation to international
trade. The law regulates the global exchange of goods and services.
 International trade law is a very complex and an ever expanding area. There are basically
four levels of international trade relationships: unilateral measures (national law), bilateral
relationships (Canada-United States Free Trade Agreement), plurilateral agreements, and
multilateral arrangements (GATT/WTO).
 International trade laws are those areas of law which deal with certain rules and customs
regarding the handling of trade between countries. It is also used for trade between two
private sector companies in two countries. This branch of law has now become independent
as almost every country is now a member of the World Trade Organisation (WTO).
 Since the transaction between private sectors of different countries is an important part of the
WTO activities, this latter branch of law is now a very important part of the academic works
and is under study in many universities across the world.
 International trade law should be distinguished from the broader field of international
economic law. The latter could be said to encompass not only WTO law, but also law
governing the international monetary system and currency regulation, as well as the law
of international development.
 The body of rules for transnational trade in the 21st century derives from medieval
commercial laws called the lex mercatoria and lex maritima — respectively, "the law for
merchants on land" and "the law for merchants on sea." Modern trade law (extending beyond
bilateral treaties) began shortly after the Second World War, with the negotiation of a
multilateral treaty to deal with trade in goods: the General Agreement on Tariffs and
Trade (GATT).
 International trade law is based on theories of economic liberalism developed in Europe and
later the United States from the 18th century onwards.
 International Trade Law is an aggregate of legal rules of “international legislation” and new
lex mercatoria, regulating relations in international trade. “International legislation” –
international treaties and acts of international intergovernmental organizations regulating
relations in international trade. lex mercatoria - "the law for merchants on land". Alok
Narayan defines "lex mercatoria" as "any law relating to businesses" which was criticised by
Professor Julius Stone. and lex maritima - "the law for merchants on sea. Alok in his recent
article criticised this definition to be "too narrow" and "merely-creative". Professor Dodd and
Professor Malcolm Shaw of Leeds University supported this proposition.
Sources of International Trade Law

1. The International Treaty: International agreement is one of the most important sources of law.
In general, international agreements are divided into three types, namely multilateral agreements,
regional, and bilateral.
2. Habit International Law (Customs): As a source of law, common law trade is a source of law
that can be considered as a source of law first born in international trade law. Of development,
which is called the law of international trade it is born of the practice - the practice of traders
who made repeated such that repeated with a relatively long time it becomes binding
3. Principle - the principle of the Common Law: Actually there is no widely accepted definition
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of what is meant to explain the principles of the common law. The role of sources of law are
usually believed to be born, both of national legal systems and international law.
4. Decisions - Court ruling Agency and Doctrine: The legal sources have complementary roles
and functions as well as general legal principles. This will be a source of law played a role when
the previous legal sources do not provide certainty or the answer to a question of law (in
international trade)
5. Contracts: Sources of international trade law which actually is the main source and the most
important is an agreement or contract made by the vendors themselves, the contract is a "law" for
the parties have made.
6. Laws National: National legal significance as a source of law in international trade law
appears in the description of the contract as a source of international trade law above. The role of
national trade law, among others, will begin to be born when disputes arise as the
implementation of the contract. The role of national law actually is broader than simply
regulating international trade contracts.
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UNIT II: Incoterms
# Purpose of Incoterms
# Incoterms 1990 EHW. FCA. FAS. FOB. CLF. CIF. CPT. CIP.
DAF. DES. DEO. DDU. DDP.
The Incoterms rules or International Commercial Terms are a series of pre-defined
commercial terms published by the International Chamber of Commerce(ICC) relating
to international commercial law. They are widely used in International commercial
transactions or procurement processes as the use in international sales is encouraged by trade
councils, courts and international lawyers. A series of three-letter trade terms related to common
contractual sales practices, the Incoterms rules are intended primarily to clearly communicate the
tasks, costs, and risks associated with the transportation and delivery of goods. Incoterms inform
sales contract defining respective obligations, costs, and risks involved in the delivery of goods
from the seller to the buyer. However, it does not constitute contract or govern law. Also it does
not define where titles transfer and does not address the price payable, currency or credit items.
The Incoterms rules are accepted by governments, legal authorities, and practitioners worldwide
for the interpretation of most commonly used terms in international trade. They are intended to
reduce or remove altogether uncertainties arising from different interpretation of the rules in
different countries. As such they are regularly incorporated into sales contracts worldwide.
Purpose of Incoterms
l. The purpose of "Incoterms" is to provide a set of international rules for the interpretation of the
most commonly used trade terms in foreign trade. Thus, the uncertainties of different
interpretations of such terms in different countries can be avoided or at least reduced to a
considerable degree.
2. Frequently parties to a contract are unaware of the different trading practices in their
respective countries. This can give rise to misunderstandings, disputes and litigation with all the
waste of time and money that this entails. In order to remedy these problems the International
Chamber of Commerce first published in 1936 a set of international rules for the interpretation of
trade terms. These rules were known as "Incoterms 1936". Amendments and additions were later
made in 1953, 1967, 1976, 1980 , 1990, 2000 and 2010 in order to bring the rules in line with
current international trade practices.
The purpose of Incoterms is to provide a set of international rules for the interpretation of the
most commonly used trade terms in foreign trade. Thus, the uncertainties of different
interpretations of such terms in different countries can be avoided or at least reduced to a
considerable degree.
It should be stressed that the scope of Incoterms is limited to matters relating to the rights and
obligations of the parties to the contract of sale with respect to the delivery of goods sold in the
sense of "tangibles", not including "intangibles" such as computer software).
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Incoterms 2000 are a set of internationally recognized trading terms, defined by the
International Chamber of Commerce (ICC), which are used for the purchase and shipping of
goods in the international market place.
Each INCOTERM refers to a type of agreement for the purchase and shipping of goods
internationally. There are 13 different terms, each of which helps users deal with different
situations involving the movement of goods. For example, the term FCA is often used with
shipments involving Ro/Ro or container transport; DDU assists with situations found in
intermodal or courier service-based shipments.
INCOTERMS also deal with documentation required for global trade, specifying which parties
are responsible for which documents. Determining the paperwork required to move a shipment is
an important job, since requirements vary so much between countries. Two items, however, are
standard: commercial invoice and the packaging list.
INCOTERMS were created primarily for people inside the world of global trade. Outsiders
frequently find them difficult to understand. Seemingly common words such as "responsibility"
and "delivery" have different meanings in global trade than they do in other situations. In global
trade, "delivery" refers to seller fulfilling the obligation of the terms of sale or to completing a
contractual obligation. "Delivery" can occur while the merchandise is on a vessel on the high
seas and the parties involved are thousands of miles from the goods. In the end, the terms wind
up boiling down to a few basic specifics; COST: who is responsible for the expenses involved in
a shipment at a given point in the shipment's journey, CONTROL: who owns the goods at a
given point in the journey and LIABILITY: who is responsible for paying damage to goods at a
given point in a shipment's transit. It is essential for shippers to know the exact status of their
shipments in terms of ownership and responsibility. It is also vital for sellers & buyers to arrange
insurance on their goods while the goods are in their "legal" possession. Lack of insurance can
result in wasted time, lawsuits, and broken business relationships.
INCOTERMS are most frequently listed by category. Terms beginning with F refer to
shipments where the seller does not pay for the primary cost of shipping. E-terms occur when a
seller's responsibilities are fulfilled when the goods are ready to depart from their facilities. D
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terms cover shipments where the shipper/seller's responsibility ends when the goods arrive at
some specific point. Because shipments are moving in a country, D terms usually involve the
services of a customs broker and a freight forwarder. In addition, D terms also deal with the pier
or docking charges found at virtually all ports and determining who is responsible for each
charge.
Recently the International Chamber of Commerce changed basic aspects of the definitions of a
number of incoterms, buyer and sellers should be aware of these changes. Terms that have
changed have and asterisks (*) alongside them.
S=Seller/B=Buyer EXW FCA FAS FOB CFR CIF CPT CIP DAF DES DEQ DDU DDP
Packing S S S S S S S S S S S S S
Loading B S S S S S S S S S S S S
Inland Freight B S S S S S S S S S S S S
Terminal Charges B B S S S S S S S S S S S
Insurance B B B B B S B S S S S S S
Loading On Vessel B B B S S S S S S S S S S
Freight B B B B S S S S S S S S S
Arrival Charges B B B B B B S S S S S S S
Duty & Taxes B B B B B B B B B B S B S
Delivery To
B B B B B B B B B B B S S
Destination
Incoterms Definitions
EXW - Ex-Works FCA - Free Carrier
One of the simplest and most basic shipment In this type of transaction, the seller is
arrangements places the minimum responsibility responsible for arranging transportation, but he
on the seller with greater responsibility on the is acting at the risk and the expense of the
buyer. In an EX-Works transaction, goods are buyer. Where in FOB the freight forwarder or
basically made available for pickup at the carrier is the choice of the buyer, in FCA the
shipper/seller's factory or warehouse and seller chooses and works with the freight
"delivery" is accomplished when the forwarder or the carrier. "Delivery" is
merchandise is released to the consignee's accomplished at the predetermined port or
freight forwarder. The buyer is responsible for destination point and the buyer is responsible
making arrangements with their forwarder for for insurance.
insurance, exports clearance and handling all
other paperwork.
FAS - Free Alongside Ship * FOB - Free On Board

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In these transactions, the buyer bears all the One of the most commonly used and misused
transportation costs and the risk of loss of terms, FOB means that the shipper/seller uses
goods. FASrequires the shipper/seller to clear his freight forwarder to move the merchandise
goods for export, which is a reversal from past to the port or designated point of origin. Though
practices. Companies selling on these terms will frequently used to describe inland movement of
ordinarily use their freight forwarder to clear the cargo, FOB specifically refers to ocean or inland
goods for export. "Delivery" is accomplished waterway transportation of goods. "Delivery" is
when the goods are turned over to the Buyers accomplished when the shipper/seller releases
Forwarder for insurance and transportation. the goods to the buyer's forwarder. The buyer's
responsibility for insurance and transportation
begins at the same moment.
CFR - Cost and Freight CIF - Cost, Insurance, Freight
This term formerly known as CNF (C&F) This arrangement is similar to CFR, but instead
defines two distinct and separate of buyer insuring the goods for the maritime
responsibilities. One is dealing with the actual phase of the voyage, the shipper/seller will
cost of merchandise (C) and the other (F) refers insure the merchandise. In this arrangement, the
to the freight charges to a predetermined seller usually chooses the forwarder. "Delivery"
destination point. It is the shipper/seller's is above, is accomplished at the port of
responsibility to get goods from their door to the destination.
port of destination. "Delivery" is accomplished
at this time. It is the buyer's responsibility to
cover insurance from the port of origin or port
of shipment to buyer's door. Given that the
shipper is responsible for transportation, the
shipper also chooses the forwarder.
CPT - Carriage Paid To CIP - Carriage and Insurance Paid To
In CPT transactions the shipper/seller has the This term is primarily used for multimodal
same obligations found with CIF, with the transport. Because it relies on the carrier's
addition that the seller has to buy cargo insurance, the shipper/seller is only required to
insurance, naming the buyer as the insured purchase minimum coverage. When this
while the goods are in transit. particular agreement is in force, freight
forwarders often act in effect, as carriers. The
buyer's insurance is effective when the goods
are turned over to the forwarder.
DAF - Delivered At Frontier DES - Delivered Ex Ship
Here the seller's responsibility is to hire a In this type of transaction, it is the seller's
forwarder to take goods to a named frontier, responsibility to get the goods to the port of
which is usually a border crossing point, and destination or to engage the forwarder to move
clear them for export. "Delivery occurs at this the cargo to the port of destination unclear.
time. They buyer's responsibility is to arrange "Delivery" occurs at this time. Any destination
with their forwarder for the pick up of the goods charges that occur after the ship is docked are
after they are cleared for export, carry them the buyer's responsibility.
across the border, clear them for importation
and effect delivery. In most cases the buyer's
forwarder handles the task of accepting the
goods at the border across the foreign soil.
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DEQ - Delivered Ex Quay * DDU - Delivered Duty Unpaid
In this arrangement, the buyer/consignee is This arrangement is basically the same as

responsible for duties and charges and the seller with DDP, except for the fact that the buyer is
is responsible for delivery the goods to the quay, responsible for the duty, fees and taxes.
wharf of port of destination. In a reversal of
previous practice, the buyer must also arrange
for customs clearance.
DDP - Delivered Duty Paid
DDP terms tend to be used in intermodal or

courier-type shipments. Whereby the
shipper/seller is responsible for dealing with all
the tasks involved in moving goods from the
manufacturing plant to the buyer/consignee's
door. It is the shipper/seller's responsibility to
insure the goods and absorb all costs and risks
including the payment of the duty and fees.
# Ex works EXW (named place)

“Ex Works” means that the seller delivers when it places the goods at the disposal of the buyer at
the seller’s premises or at another named place (i.e.,works, factory, warehouse, etc.). The seller
does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for
export, where such clearance is applicable.
In accordance with this term the overseas buyer or his agent must collect the contract goods at
the place where the seller's works, factory, warehouse or store are situated. With this in mind, the
overseas buyer will have to arrange by himself, or through agents, the collection of the goods by
a land carrier to be conveyed to a sea port, airport or railhead so that in pursuance of a further
contract for transport of the goods, they may be carried to the country of destination. Insurance
will also need to be arranged as the buyer will bear the risks of loss or damage to the goods from
the time of their delivery to him. The respective obligations of the parties may be summarised as
follows:
The seller is required to:

(a) supply conforming goods, which have been weighed, checked, measured and packed for
delivery;
(b) supply the invoice and any documents confirming conformity which have been agreed by
whatever method has been agreed, Or by the agreed means including by electronic
communication;
(c) deliver goods to buyer by placing them at the buyer's disposal or otherwise ensuring they may
be collected, at the place agreed or at the usual place for such delivery, at the time agreed and
give the buyer sufficient notice of the fact without delay';
(d) pay any costs incidental to placing the goods at the buyer's disposal;
(e) provide any assistance requested by the buyer in respect of obtaining documents facilitating
export or proving information to enable the goods to be insured.
The buyer is required to:
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(a) accept delivery of and pay for the goods;
(b) obtain appropriate licences, authorisations for the export of the goods, and comply with
customs formalities, whether in the country of delivery or in the exporting country or in a
country of transit;
(c) pay any costs incidental to the exportation of the goods including preshipment inspection
costs, any official charges and the seller's costs in rendering assistance requested by the
buyer.
# FCA Free Carrier

“Free Carrier” means that the seller delivers the goods to the carrier or another person nominated
by the buyer at the seller’s premises or another named place. The parties are well advised to
specify as clearly as possible the point within the named place of delivery, as the risk passes to
the buyer at that point. The risk of loss or damage is transferred at that point. The respective
obligations of the parties may be summarised as follows:

(a) supply conforming goods, which have been weighed, checked, measured and packed for
delivery;
(b) supply the invoice and any documents confirming conformity which have been agreed by
whatever means have been agreed, including by electronic communication;
(c) deliver the goods to buycr by placing them in the charge of the carrier named by the buyer at
the place agreed for delivery, in the manner agreed or which is customary for the place of
delivery, or by loading them onto the carrier's vehicle if that has been agreed;
(d) if no specific point has been named, and if there are several points available, the seller may
select the point at the place of delivery;
(e) obtain any export licence or other official authorization necessary for the export of the goods
if required to do so and pay any taxes, fees and charges associated with exportation;
(f) bear all costs payable in respect of the goods until delivery;
(g) provide at his own expense the customary packing of the goods, unless it is the custom of the
trade to dispatch the goods unpacked;
(h) give the buyer without delay appropriate notice of the delivery of the goods;
(i) assist the buyer in obtaining the contract of carriage and or insurance if agreed.

(a) accept delivery of and pay for the goods;
(b) obtain appropriate licences, authorisations for the export of the goods, and comply with
customs formalities, whether in the country of delivery, in the exporting country or in a
country of transit;
(c) pay any costs incidental to the exportation of the goods and any costs incurred by the seller in
giving any assistance which has been requested by the buyer including costs associated with
the provision of documents or electronic messages;
(d) contract for the carriage of the goods from the agreed point of delivery and give the seller
appropriate notice of the name of the carrier and of the time for delivering the goods to him.
# F.A.S. (named port of shipment)

«Free Alongside Ship» means that the seller delivers when the goods are placed alongside the
vessel at the named port of shipment. This means that the buyer has to bear all costs and risks of
loss of or damage to the goods from that moment. The FAS term requires the seller to clear the
goods for export. THIS IS A REVERSAL FROM PREVIOUS INCOTERMSVERSIONS
WHICH REQUIRED THE BUYER TO ARRANGE FOR EXPORT CLEARANCE. However,
if the parties wish the buyer to clear the goods for export, this should be made clear by adding
explicit wording to this effect in the contract of sale.
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This term can be used only for sea or inland waterway transport. The respective obligations of
the parties may be summarised as follows: .

(a) supply conforming goods, packed appropriately or in accordance with the contract, and the
commercial invoice or equivalent elcctronic message which has been agreed;
(b) deliver the goods to buyer by placing them alongside thc vessel or the loading berth which
has been notified by the buyer in the manner which is usual or customary at that port for such
delivery, at the time agreed and without delay give the buyer sufficient notice of the fact;
(c) pay any costs incidental to delivery of the goods;
(d) provide proof of delivery. in the manner agreed and provide documents confirming
conformity if required to do so;
(e) provide any assistance requested by the buyer in respect of obtaining documents facilitating
export and providing information to enable the goods to be insured."
The buyer is requircd to:

(a) give sufficient notice to the seller of the time and location of thc delivery having, presumably,
contracted for the carriage of the goods from the port of shipment and bear any costs
occasioned by his failure to do so;
(b) obtain any appropriate licences, authorisations for the export of the goods, and comply with
customs formalities, whether in the country of delivery or in the exporting country or in a
country of transit;
(c) pay any costs incidental to the exportation of the goods including preshipment inspection
costs, any official charges and the seller's costs in rendering assistance requested by the
buyer;
(d) pay for the goods.
# F.O.B. (named port of shipment)

«Free on Board» means that the seller delivers when the goods pass the ship's rail at the named
port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to
the goods from that point. The FOB term requires the seller to clear the goods for export. This
term can be used only for sea or inland waterway transport. If the parties do not intend to deliver
the goods across the ship's rail, the FCA term should be used.
The seller when selling f.o.b. ("free on board") assumes still further responsibilities than in the
preceding instances." He undertakes to place the goods on board a ship that has been named to
him by the buyer and that is berthed at the agreed port of shipment. All charges incurred up to
and including the delivery of the goods on board ship have to be borne by the seller while the
buyer has to pay all subsequent charges, such as the stowage of the goods in or on board ship,"
freight and marine insurance as well as unloading charges, import duties, consular fees and other
incidental charges due on arrival of the consignment in the port of destination." The transaction
differs considerably from an ordinary sale in the home market where no dealings in a port have
to be carried out, and yet it does not exhibit the foreign complexion which is a true characteristic
of an export transaction.
The f.o.b. clause is frequently taken as a basis for the calculation of the goods sold and not as a
term defining the method of delivery. Thus, in the practice of the UK Customs and export
licensing authorities, the export value of the goods is founded on an f.o.b. calculation, whatever
the agreed terms of delivery. The obligations of the seller under the f.o.b. contract may be
summarised as follows:
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(a) supply conforming goods, packed appropriately or in accordance with the contract, and any
documents confirming conformity which have been agreed and supply a commercial invoice
or its electronic equivalent;
(b) deliver the goods to buyer by placing them on board, that is over the rail of the vessel which
has been notified by the buyer, in the manner which is usual or customary at that port for
such delivery, at the time agreed and without delay give the buyer sufficient notice of the
fact;
(c) place them on the vessel in the position and manner required;
(d) pay any costs incidental to delivery of the goods;
(e) obtain an export licence, if so required, or any other document necessary for the exportation
of the goods and clear the goods through customs;
(f) provide proof of delivery in the manner agreed-provide any assistance requested by the buyer
in respect of obtaining documents facilitating export and providing information to enable the
goods to be insured.

(a) givd sufficient notice to the seHer of the time and location of the delivery having,
presumably, contracted for the carriage of the goods from the port of shipment, bear any
costs occasioned by his failure to do so and bear the risk of loss or damage to the goods
from the time they pass over the ship's rail;
(b) obtain any appropriate licences, authorisations for the import of the goods, and comply with
customs formalities for importation whether in the country of destination or in a country of
transit;
(c) pay any costs incidental to the importation of the goods, bear the risk in those goods from the
time of their delivery and bear the costs of the provision of assistance by the seller at the
request of the buyer;
(d) pay for the goods . .
In container transport the term f.o.h. is sometimes used as a general delivery term, e.g. in such
phrases as "f.o.b. container freight station", but this is confusing and should be avoided. It is
better in this ease to use the term "free earrier",)
# CFR (CLF)
CFR - Cost and Freight (... named port of destination)

«Cost and Freight» means that the seller delivers when the goods pass the ship's rail in the port
of shipment. The seller must pay the costs and freight necessary to bring the goods to the named
port of destination BUT the risk of loss of or damage to the goods, as well as any additional costs
due to events occurring after the time of delivery, are transferred from the seller to the buyer.
The CFR term requires the seller to clear the goods for export. This term can be used only for sea
and inland waterway transport. If the parties do not intend to deliver the goods across the ship's
rail, the CPT term should be used.
Seller's Obligations
Seller and Buyer obligations
THE SELLER'S OBLIGATIONS THE BUYER'S OBLIGATIONS
1. Provision of goods The seller must deliver 1. Payment The buyer must pay the price of
the goods, provide commercial goods as agreed in the contract of sale
invoice, provide evidence of conformity or
proof of delivery
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2. Licences, authorisations and 2. Licences, authorisations and
formalities The seller must provide export formalities The buyer must get any export
licenses or local authorizations for exporting license and import permit for the export of
goods goods
3. Contracts of carriage and 3. Contracts of carriage and

insurance Contract of carriage at sellers insurance Contract of carriage without
expense in the usual route No obligation to obligation Contract of insurance without
provide insurance obligation
4. Delivery The seller must deliver the goods 4. Taking delivery Take delivery of the
on board the ship goods at the agreed port of destination
5 Transfer of risks The seller is responsible 5 Transfer of risks The buyer must bear all
until goods passed the rail’s ship risks of loss of or damage from the time the
goods have been delivered on board
6. Costs The seller must pay: All cost until 6. Costs The buyer pays for all cost relating
delivery on board, loading cost and carriage since goods are on board, unloading cost
until port of destination, all export duties and unless they are included in the contract of
taxes and customs formalities carriage, customs and taxes at destination as
well as formalities
7. Notice to the buyer The seller must notify 7. Notice to the seller The buyer must
the buyer that goods have been delivered provide time of shipment and port of
destination
8. Proof of delivery, transport document or 8. Proof of delivery, transport document or

equivalent electronic message At his own equivalent electronic message Accept sellers
expense, transport documentation with on transportation document in comformity
board date in full set when originals are
printed.
9. Packing The seller must bear the cost of 9. Inspection Unless it’s a mandatory at
checking, quality control, measuring, origin, pay any pre-shipment inspection
weighing, counting, packing of goods and
marking. If special package is required, the
buyer must inform and the seller and agreed
on extra expenses
10. Other Assist obtaining additional 10. Other Pay all expenses for obtaining
information required by the seller additional documents
# CIF - Cost, Insurance and Freight (... named port of destination)

"Cost, Insurance and Freight" means that the seller delivers when the goods pass the ship's rail in
the port of shipment. The seller must pay the costs and freight necessary to bring the goods to the
named port of destination BUT the risk of loss of or damage to the goods, as well as any
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additional costs due to events occurring after the time of delivery, are transferred from the seller
to the buyer.
From the legal point of view, the choice of the c.i.f term raises complex issues because the c.i.f.
transaction embodies, by necessity, elements of three contracts; the contract of sale, the contract
of carriage by sea and the contract of marine insurance. These issues have in the past
generated a great deal of litigation, but the implications of dealing under c.i.f. terms have been
settled for some time, too
The seller's obligations under a c.i.f. contract may be summarized as follows'·':

(a) to ship goods of the description contained in the contract and clear the goods for export or to
buy conforming goods afloat lOZ. ,
(b) if the goods are not bought afloat, to procure a contract of carriage by sea under which the
goods will be delivered at the destination agreed by the contract and obtain the bill of lading
as evidence of having done so;
(c) to arrange, if this has not already been done, insurance on terms current in the trade which
will be available for the benefit of the buyer and provide a policy or insurance document
which entitles the buyer to make a claim against the insurer;
(d) to make out an invoice which normally will debit the buyer with the agreed price, or the
actual cost, commission charges, freight, and insurance premium, and credit him for the
amount of the freight which he will have to pay to the shipowner on delivery of the goods at
the port of destination.
(e) to tender these documents in the manner agreed whether by presentation directly,
transmission by electronic means or otherwise; the bill of lading, insurance policy and
invoice to the buyer, together with any other documents which may be agreed between the
parties and/or might be required by the customs of the trade so that he may obtain delivery
of the goods or recover for their loss, if they are lost on the voyage, and know what freight
he has to pay.
The duties of the buyer may be summarised as follows:

(a) to accept the documents when tendered by the seller, if they are in conformity with the
contract of sale, and pay the contract price;
(b) to receive the goods at the agreed port of destination and bear, with the exception of the
freight and marine insurance, all costs and charges incurred in respect of the goods in the
course of their transit by sea until their arrival at the port of destination, as well as unloading
costs, including lighterage and wharfage charges, unless such costs and charges have been
included in the freight or collected by the cartying company at the time freight was paid;
(c) if war insurance is to be provided, to bear the cost;
(d) to bear all risks of the goods from the time when they shall have effectively passed the ship's
rail at the port of shipment;
(e) if the buyer has reserved to himself the right to determine the period within which the goods
are to be shipped and/or the right to choose the port of destination, and he fails to give
instructions in time, he must bear the additional costs incurred as a result and all risks of
the goods from the date of the expiry of the period fixed for shipment, provided always that
the goods have been appropriated to the contract, that is to say, clearly set aside or otherwise
identified as the contract goods;
(I) to pay the costs and charges incurred in obtaining the certificate of origin and consular
documents;
(g) to pay all Customs duties as well as any other duties and taxes payable consequent upon the
importation;
(h) to obtain and provide at his own risk and expense any import licence or permit or the like
which he may require for the importation of the goods at destination.
13
Note: if the goods are sold "c.i.f. landed", unloading costs, including lighterage and wharfage
charges, are borne by the seller.
# CPT - Carriage Paid To (... named place of destination)

«Carriage paid to...» means that the seller delivers the goods to the carrier nominated by him but
the seller must in addition pay the cost of carriage necessary to bring the goods to the named
destination. This means that the buyer bears all risks and any other costs occurring after the
goods have been so delivered.
The CPT term requires the seller to clear the goods for export. This term may be used
irrespective of the mode of transport including multimodal transport.
Seller and Buyer obligations¶
1. Provision of goods in conformity with 1. Payment of the price The buyer must pay
the contract The seller must deliver the the price of goods as agreed in the contract of
goods, provide commercial invoice or an sale
equivalent electronic document, provide
evidence of conformity or proof of delivery

licenses or local authorisations for exporting license and import permit for the export of
goods goods

insurance Contract of carriage at sellers insurance Contract of carriage: no obligation
expense in the usual route. No obligation to Contract of insurance: no obligation
provide insurance
to the first carrier as agreed on named place goods at the agreed place
and time
5. Transfer of risks The seller is responsible 5. Transfer of risks Assume al risk of loss
for the goods loss and damaged until the and damage at the time the goods have been
goods have been delivered as agreed delivered to the first carrier
6. Division of costs The seller pays all cost 6. Division of costs The buyer pays all cost
until goods have been delivered to the first until goods have been delivered at point of
carrier, including loading at place of origin destination. Cost and charges while cargo is
and unloading at place of destination under in transit not included in the contract of
the agreed contract. All export cost, duties carriage. Duties and taxes at destination as
and taxes until the agreed point of destination well as import clearance
7. Notice to the buyer The seller must 7. Notice to the seller The buyer must
provide notice of the goods delivered provide sufficient notice for the goods to be
delivered as per agreement
8. Proof of delivery, transport document or 8. Proof of delivery, transport document or
14
equivalent electronic message The seller equivalent electronic message Accept the
must provide the usual transport document or transport document as per contract
electronic message equivalent
9. Checking The seller must bear the cost of 9. Inspection of goods The buyer must bear
checking, quality control, measuring, the cost of pre-shipment and exports
weighing, counting, packing of goods and inspection except when is mandatory by the
marking. If special package is required, the government
on extra expenses
10. Other obligations The seller must 10. Other obligations Reimburse the seller
cooperate with all documentation for export for cost related to obtain documentation that
and insurance buyer requires for customs clearance at
destination.
# CIP - Carriage and Insurance Paid Тo (... named place of destination)

Carriage and Insurance paid to... means that the seller delivers the goods to the carrier nominated
by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the
named destination. This means that the buyer bears all risks and any additional costs occurring
after the goods have been so delivered. However, in CIP the seller also has to procure insurance
against the buyer's risk of loss of or damage to the goods during the carriage. Consequently, the
seller contracts for insurance and pays the insurance premium. The buyer should note that under
the CIP term the seller is required to obtain insurance only on minimum cover (Refer to
Introduction paragraph 9.3).
1. Provision of goods in conformity with 1. Payment of the price The buyer must pay
the contract The seller must deliver the the price of goods as agreed in the contract of
goods, provide commercial invoice or an sale

goods goods

insurance Contract of carriage at sellers insurance Contract of carriage: no obligation
expense in the usual route Contract of Contract of insurance: no obligation
insurance. The seller must obtain at his own
expense cargo insurance as agreed in the
contract, such that the buyer, or any other
person having an insurable interest in the
goods, shall be entitled to claim directly from
the insurer and provide the buyer with the
insurance policy or other evidence of
15
insurance cover.
to the first carrier as agreed on named place goods at the agreed place
and time
5. Transfer of risks The seller is responsible 5. Transfer of risks Assume al risk of loss
for the goods loss and damaged until the and damage at the time the goods have been
goods have been delivered as agreed delivered to the first carrier
6. Division of costs The seller pays all cost 6 Division of costs The buyer pays all cost
until goods have been delivered to the first until goods have been delivered at point of
carrier, including loading at place of origin destination, cost and charges while cargo is in
and unloading at place of destination under transit not included in the contract of carriage,
the agreed contract All export cost, duties and duties and taxes at destination as well as
taxes until the agreed point of destination, import clearance
cost if insurance
7. Notice to the buyer The seller must 7. Notice to the seller The buyer must
provide notice of the goods delivered provide sufficient notice for the goods to be
delivered as per agreement
8. Proof of delivery, transport document or 8. Proof of delivery Transport document or

equivalent electronic message The seller equivalent electronic message, accept the
must provide the usual transport document or transport document as per contract
electronic message equivalent
9. Checking The seller must bear the cost of 9. Inspection of goods The buyer must bear
checking, quality control, measuring, the cost of pre-shipment and exports
weighing, counting, packing of goods and inspection except when is mandatory by the
marking. If special package is required, the government
on extra expenses
10. Other obligations The seller must 10. Other obligations Reimburse the seller
cooperate with all documentation for export for cost related to obtain documentation that
and insurance buyer requires for customs clearance at
destination.
# DAF - Delivered At Frontier (... named place)

«Delivered at Frontier» means that the seller delivers when the goods are placed at the disposal
of the buyer on the arriving means of transport not unloaded, cleared for export, but not cleared
for import at the named point and place at the frontier, but before the customs border of the
adjoining country. The term «frontier» may be used for any frontier including that of the country
of export. Therefore, it is of vital importance that the frontier in question be defined precisely by
always naming the point and place in the term.
However, if the parties wish the seller to be responsible for the unloading of the goods from the
arriving means of transport and to bear the risks and costs of unloading, this should be made
16
clear by adding explicit wording to this effect in the contract of sale (Refer to Introduction
paragraph 11).
This term may be used irrespective of the mode of transport when goods are to be delivered at a
land frontier. When delivery is to take place in the port of destination, on board a vessel or on the
quay (wharf), the DES or DEQ terms should be used.
A1 Provision of goods in conformity with B1 Payment of the price

the contract
The buyer must pay the price as provided in
The seller must provide the goods and the the contract of sale.
commercial invoice, or its equivalent
electronic message, in conformity with the
contract of sale and any other evidence of
conformity which may be required by the
contract.
A2 Licences, authorisations and formalities B2 Licences, authorisations and formalities
The seller must obtain at his own risk and The buyer must obtain at his own risk and
expense any export licence or other official expense any import licence or other official
authorisation or other document necessary for authorisation or other documents and carry
placing the goods at the buyer's disposal. out, where applicable (Refer to Introduction
The seller must carry out, where applicable paragraph 14)., all customs formalities
(Refer to Introduction paragraph 14). , all necessary for the import of the goods, and for
customs formalities necessary for the export of their subsequent transport.
the goods to the named place of delivery at the
frontier and for their transit through any
country.
A3 Contracts of carriage and insurance B3 Contracts of carriage and insurance
a. Contract of carriage a. Contract of carriage

i. The seller must contract at his own No obligation (Refer to Introduction
expense for the carriage of the goods paragraph 14).
to the named point, if any, at the place b. Contract of insurance
of delivery at the frontier. If a point at No obligation (Refer to Introduction
the named place of delivery at the paragraph 14).
frontier is not agreed or is not
determined by practice, the seller may
select the point at the named place of
delivery which best suits his purpose.
ii. However, if requested by the buyer,
the seller may agree to contract on
usual terms at the buyer's risk and
expense for the on-going carriage of
the goods beyond the named place at
the frontier to the final destination in
17
the country of import named by the
buyer. The seller may decline to make
the contract and, if he does, shall
promptly notify the buyer accordingly.
b. Contract of insurance
No obligation (Refer to Introduction paragraph
10).
A4 Delivery B4 Taking delivery
The seller must place the goods at the disposal The buyer must take delivery of the goods
of the buyer on the arriving means of transport when they have been delivered in accordance
not unloaded at the named place of delivery at with A4.
the frontier on the date or within the agreed
period.
A5 Transfer of risks B5 Transfer of risks
The seller must, subject to the provisions of The buyer must bear all risks of loss of or
B5, bear all risks of loss of or damage to the damage to the goods from the time they have
goods until such time as they have been been delivered in accordance with A4.
delivered in accordance with A4. The buyer must, should he fail to give notice
in accordance with B7, bear all risks of loss of
or damage to the goods from the agreed date
or the expiry date of the agreed period for
delivery provided, however, that the goods
have been duly appropriated to the contract,
that is to say, clearly set aside or otherwise
identified as the contract goods.
A6 Division of costs B6 Division of costs
The seller must, subject to the provisions of The buyer must pay
B6, pay
 all costs relating to the goods from the
 in addition to the costs resulting from A3 time they have been delivered in
a), all costs relating to the goods until accordance with A4 including the
such time as they have been delivered in expenses of unloading necessary to take
accordance with A4; and delivery of the goods from the arriving
 where applicable (Refer to Introduction means of transport at the named place of
paragraph 14)., the costs of customs delivery at the frontier; and
formalities necessary for export as well as  all additional costs incurred if he fails to
all duties, taxes or other charges payable take delivery of the goods when they
upon export of the goods and for their have been delivered in accordance with
transit through any country prior to A4, or to give notice in accordance with
delivery in accordance with A4. B7, provided, however, that the goods
have been appropriated to the contract,
that is to say, clearly set aside or
otherwise identified as the contract
goods; and
 where applicable (Refer to Introduction
paragraph 14), the cost of customs
18
formalities as well as all duties, taxes and
other charges payable upon import of the
goods and for their subsequent transport.
A7 Notice to the buyer B7 Notice to the seller
The seller must give the buyer sufficient notice The buyer must, whenever he is entitled to
of the dispatch of the goods to the named place determine the time within an agreed period
at the frontier as well as any other notice and/or the point of taking delivery at the
required in order to allow the buyer to take named place, give the seller sufficient notice
measures which are normally necessary to thereof.
enable him to take delivery of the goods.
A8 Proof of delivery, transport document or B8 Proof of delivery, transport document

equivalent electronic message or equivalent electronic message
The buyer must accept the transport document

and/or other evidence of delivery in
i.The seller must provide the buyer at the seller's accordance with A8.
expense with the usual document or other
evidence of the delivery of the goods at the
named place at the frontier in accordance with
A3 a) i).
ii. The seller must, should the parties agree
on on-going carriage beyond the frontier
in accordance with A3 a)
iii. provide the buyer at the latter's request,
risk and expense, with the through
document of transport normally obtained
in the country of dispatch covering on
usual terms the transport of the goods
from the point of dispatch in that country
to the place of final destination in the
country of import named by the buyer.
Where the seller and the buyer have agreed to
communicate electronically, the document
referred to in the preceding paragraph may be
replaced by an equivalent electronic data
interchange (EDI) message.
A9 Checking - packaging - marking B9 Inspection of goods
The seller must pay the costs of those checking The buyer must pay the costs of any pre-
operations (such as checking quality, shipment inspection except when such
measuring, weighing, counting) which are inspection is mandated by the authorities of
necessary for the purpose of delivering the the country of export.
goods in accordance with A4.
The seller must provide at his own expense
packaging (unless it is agreed or usual for the
particular trade to deliver the goods of the
contract description unpacked) which is
required for the delivery of the goods at the
19
frontier and for the subsequent transport to the
extent that the circumstances (for example
modalities, destination) are made known to the
seller before the contract of sale is concluded.
Packaging is to be marked appropriately.
A10 Other obligations B10 Other obligations
The seller must render the buyer at the latter's The buyer must pay all costs and charges
request, risk and expense, every assistance in incurred in obtaining the documents or
obtaining any documents or equivalent equivalent electronic messages mentioned in
electronic messages (other than those A10 and reimburse those incurred by the
mentioned in A8) issued or transmitted in the seller in rendering his assistance in
country of dispatch and/or origin which the accordance therewith.
buyer may require for the import of the goods If necessary, according to A3 a) ii), the buyer
and, where necessary, for their transit through must provide the seller at his request and the
any country. buyer's risk and expense with the exchange
The seller must provide the buyer, upon control authorisation, permits, other
request, with the necessary information for documents or certified copies thereof, or with
procuring insurance. the address of the final destination of the
goods in the country of import for the purpose
of obtaining the through document of
transport or any other document contemplated
in A8 ii).
# DES - Delivered Ex Ship (... named port of destination)

«Delivered Ex Ship» means that the seller delivers when the goods are placed at the disposal of
the buyer on board the ship not cleared for import at the named port of destination. The seller has
to bear all the costs and risks involved in bringing the goods to the named port of destination
before discharging. If the parties wish the seller to bear the costs and risks of discharging the
goods, then the DEQ term should be used.
This term can be used only when the goods are to be delivered by sea or inland waterway or
multimodal transport on a vessel in the port of destination.
Seller's Obligations
 The seller must provide the goods and the commercial invoice, or its equivalent
electronic message, in conformity with the contract of sale and any other evidence of
conformity which may be required by the contract.
 The seller must obtain at his own risk and expense any export licence or other official
authorisation or other documents and carry out, where applicable (Refer to Introduction
paragraph 14), all customs formalities necessary for the export of the goods and for their
transit through any country.
 The seller must contract at his own expense for the carriage of the goods to the named
point, if any, at the named port of destination. If a point is not agreed or is not determined
by practice, the seller may select the point at the named port of destination which best
suits his purpose.
 The seller must place the goods at the disposal of the buyer on board the vessel at the
unloading point referred to in A3 a), in the named port of destination on the date or
within the agreed period, in such a way as to enable them to be removed from the vessel
by unloading equipment appropriate to the nature of the goods.
20


the contract
The buyer must pay the price as provided in the
contract of sale.
A2 Licences, authorisations and B2 Licences, authorisations and formalities

formalities
The buyer must obtain at his own risk and
expense any import licence or other official
authorisation and carry out, where applicable
(Refer to Introduction paragraph 14), all
customs formalities necessary for the import of
the goods.

Contract of insurance No obligation (Refer to Introduction
No obligation (Refer to Introduction paragraph 10).
paragraph 10). b. Contract of insurance
No obligation (Refer to Introduction
paragraph 10).
The buyer must take delivery of the goods when

they have been delivered in accordance with
A4.
delivered in accordance with A4. The buyer must, should he fail to give notice in
accordance with B7, bear all risks of loss of or
damage to the goods from the agreed date or the
expiry date of the agreed period for delivery
provided, however, that the goods have been
duly appropriated to the contract, that is to say,
clearly set aside or otherwise identified as the
contract goods.
21
B6, pay
 all costs relating to the goods from the time
 in addition to costs resulting from A3 a), they have been delivered in accordance
all costs relating to the goods until such with A4, including the expenses of
time as they have been delivered in discharge operations necessary to take
accordance with A4; and delivery of the goods from the vessel; and
 where applicable (Refer to Introduction  all additional costs incurred if he fails to
paragraph 14), the costs of customs take delivery of the goods when they have
formalities necessary for export as well been placed at his disposal in accordance
as all duties, taxes or other charges with A4, or to give notice in accordance
payable upon export of the goods and with B7, provided, however, that the goods
for their transit through any country have been appropriated to the contract, that
prior to delivery in accordance with A4. is to say, clearly set aside or otherwise
identified as the contract goods.
paragraph 14), the costs of customs
goods.
The seller must give the buyer sufficient The buyer must, whenever he is entitled to
notice of the estimated time of arrival of the determine the time within an agreed period
nominated vessel in accordance with A4 as and/or the point of taking delivery in the named
well as any other notice required in order to port of destination, give the seller sufficient
allow the buyer to take measures which are notice thereof.
normally necessary to enable him to take
delivery of the goods.
A8 Proof of delivery, transport document B8 Proof of delivery, transport document or

or equivalent electronic message equivalent electronic message
The seller must provide the buyer at the The buyer must accept the delivery order or the
seller's expense with the delivery order and/or transport document in accordance with A8.
the usual transport document (for example a
negotiable bill of lading, a non-negotiable sea
waybill, an inland waterway document, or a
multimodal transport document) to enable the
buyer to claim the goods from the carrier at
the port of destination.
The seller must pay the costs of those The buyer must pay the costs of any pre-
checking operations (such as checking shipment inspection except when such
quality, measuring, weighing, counting) inspection is mandated by the authorities of the
22
which are necessary for the purpose of country of export.
delivering the goods in accordance with A4.
packaging (unless it is agreed or usual for the
particular trade to deliver the goods of the
contract description unpacked) which is
required for the delivery of the goods at the
frontier and for the subsequent transport to
the extent that the circumstances (for
example modalities, destination) are made
known to the seller before the contract of sale
is concluded. Packaging is to be marked
appropriately.
electronic messages (other than those A10 and reimburse those incurred by the seller
mentioned in A8) issued or transmitted in the in rendering his assistance in accordance
country of dispatch and/or of origin which therewith.
the buyer may require for the import of the
goods.
The seller must provide the buyer, upon
request, with the necessary information for
procuring insurance.
# DEQ - Delivered Ex Quay (... named port of destination)

«Delivered Ex Quay» means that the seller delivers when the goods are placed at the disposal of
the buyer not cleared for import on the quay (wharf) at the named port of destination. The seller
has to bear costs and risks involved in bringing the goods to the named port of destination and
discharging the goods on the quay (wharf).The DEQ term requires the buyer to clear the goods
for import and to pay for all formalities, duties, taxes and other charges upon import.
THIS IS A REVERSAL FROM PREVIOUS INCOTERMS VERSIONS WHICH REQUIRED
THE SELLER TO ARRANGE FOR IMPORT CLEARANCE.

the contract
The seller must provide the goods and the contract of sale.
contract.
23
formalities
The seller must obtain at his own risk and expense any import licence or official
expense any export licence or other official authorisation or other documents and carry out,
authorisation or other documents and carry where applicable(Refer to Introduction
out, where applicable (Refer to Introduction paragraph 14), all customs formalities necessary
paragraph 14), all customs formalities for the for the import of the goods.
export of the goods, and for their transit
through any country.

The seller must contract at his own expense No obligation (Refer to Introduction
for the carriage of the goods to the named paragraph 10).
quay (wharf) at the named port of destination. b. Contract of insurance
If a specific quay (wharf) is not agreed or is No obligation (Refer to Introduction
not determined by practice, the seller may paragraph 10).
select the quay (wharf) at the named port of
destination which best suits his purpose.
No obligation (Refer to Introduction
paragraph 10).
The seller must place the goods at the The buyer must take delivery of the goods when
disposal of the buyer on the quay (wharf) they have been delivered in accordance with
referred to in A3 a), on the date or within the A4.
agreed period.
delivered in accordance with A4. The buyer must, should he fail to give notice in
contract goods.
B6, pay
24
 in addition to costs resulting from A3 a),  all costs relating to the goods from the time
all costs relating to the goods until such they have been delivered in accordance
time as they are delivered on the quay with A4, including any costs of handling
(wharf) in accordance with A4; and the goods in the port for subsequent
 where applicable (Refer to Introduction transport or storage in warehouse or
paragraph 14), the costs of customs terminal; and
formalities necessary for export as well  all additional costs incurred if he fails to
as all duties, taxes and other charges take delivery of the goods when they have
payable upon export of the goods and been placed at his disposal in accordance
for their transit through any country with A4, or to give notice in accordance
prior to delivery. with B7, provided, however, that the goods
have been appropriated to the contract, that
is to say, clearly set aside or otherwise
identified as the contract goods; and
paragraph 14), the cost of customs
goods and for their subsequent transport.
notice of the estimated time of arrival of the determine the time within an agreed period
nominated vessel in accordance with A4, as and/or the point of taking delivery in the named
well as any other notice required in order to port of destination, give the seller sufficient
allow the buyer to take measures which are notice thereof.
normally necessary to enable him to take
delivery of the goods.

The seller must provide the buyer at the The buyer must accept the delivery order or
seller's expense with the delivery order and/or transport document in accordance with A8.
the usual transport document (for example a
waybill, an inland waterway document or a
multimodal transport document) to enable
him to take the goods and remove them from
the quay (wharf).
25
packaging (unless it is usual for the particular
trade to deliver the goods of the contract
description unpacked) which is required for
the delivery of the goods. Packaging is to be
marked appropriately.
country of dispatch and/or origin which the therewith.
buyer may require for the import of the
goods. The seller must provide the buyer,
upon request, with the necessary information
for procuring insurance.
DDU - Delivered Duty Unpaid (... named place of destination)

«Delivered duty unpaid» means that the seller delivers the goods to the buyer, not cleared for
import, and not unloaded from any arriving means of transport at the named place of destination.
The seller has to bear the costs and risks involved in bringing the goods thereto, other than,
where applicable (Refer to Introduction paragraph 14), any «duty» (which term includes the
responsibility for and the risks of the carrying out of customs formalities, and the payment of
formalities, customs duties, taxes and other charges) for import in the country of destination.
Such «duty» has to be borne by the buyer as well as any costs and risks caused by his failure to
clear the goods for import in time.
However, if the parties wish the seller to carry out customs formalities and bear the costs and
risks resulting therefrom as well as some of the costs payable upon import of the goods, this
should be made clear by adding explicit wording to this effect in the contract of sale (Refer to
Introduction paragraph 14).
This term may be used irrespective of the mode of transport but when delivery is to take place in
the port of destination on board the vessel or on the quay (wharf), the DES or DEQ terms should
be used.

the contract
The seller must provide the goods and the contract of sale.
26
contract.

formalities
The seller must obtain at his own risk and expense any import licence or other official
expense any export licence and other official authorisation or other documents and carry out,
authorisation or other documents and carry where applicable (Refer to Introduction
out, where applicable (Refer to Introduction paragraph 1), all customs formalities necessary
paragraph 14), all customs formalities for the import of the goods.
necessary for the export of the goods and for
their transit through any country.

The seller must contract at his own expense No obligation (Refer to Introduction
for the carriage of the goods to the named paragraph 10).
place of destination. If a specific point is not b. Contract of insurance
agreed or is not determined by practice, the No obligation (Refer to Introduction
seller may select the point at the named place paragraph 10).
of destination which best suits his purpose.
No obligation(Refer to Introduction
paragraph 14).
The seller must place the goods at the The buyer must take delivery of the goods when
disposal of the buyer, or at that of another they have been delivered in accordance with
person named by the buyer, on any arriving A4.
means of transport not unloaded, at the
named place of destination on the date or
within the period agreed for delivery.
delivered in accordance with A4. The buyer must, should he fail to fulfil his
obligations in accordance with B2, bear all
additional risks of loss of or damage to the
goods incurred thereby.
The buyer must, should he fail to give notice in
27
contract goods.
B6, pay
 all costs relating to the goods from the time
 in addition to costs resulting from A3 a), they have been delivered in accordance
all costs relating to the goods until such with A4; and
time as they have been delivered in  all additional costs incurred if he fails to
accordance with A4; and fulfil his obligations in accordance with
 where applicable (Refer to Introduction B2, or to give notice in accordance with
paragraph 14), the costs of customs B7, provided, however, that the goods
formalities necessary for export as well have been duly appropriated to the
as all duties, taxes and other charges contract, that is to say, clearly set aside or
payable upon export and for their transit otherwise identified as the contract goods;
through any country prior to delivery in and
accordance with A4.  where applicable (Refer to Introduction
paragraph 14), the costs of customs
goods.
notice of the dispatch of the goods as well as determine the time within an agreed period
any other notice required in order to allow the and/or the point of taking delivery at the named
buyer to take measures which are normally place, give the seller sufficient notice thereof.
necessary to enable him to take delivery of
the goods.

The seller must provide the buyer at the The buyer must accept the appropriate delivery
seller's expense the delivery order and/or the order or transport document in accordance with
usual transport document (for example a A8.
waybill, an inland waterway document, an air
waybill, a railway consignment note, a road
consignment note, or a multimodal transport
document) which the buyer may require to
take delivery of the goods in accordance with
A4/B4.
28
packaging (unless it is usual for the particular
trade to deliver the goods of the contract
description unpacked) which is required for
the delivery of the goods. Packaging is to be
marked appropriately.
country of dispatch and/or of origin which therewith.
the buyer may require for the import of the
goods.
The seller must provide the buyer, upon
request, with the necessary information for
procuring insurance.
DDP
Under DDU the seller is responsible for all costs associated until the seller delivers the goods to
the buyer, cleared for import at named place of destination. In DDP the seller does not pay for
unloading the goods. It is important to mention the exact name of the place of destination. This
term can be used for any mode of transportation including multimodal. The term is used under
the assumption that the seller is capable of clear customs at destination.
Seller and Buyer obligations
1 Provision of goods The seller must deliver 1 Payment The buyer must, pay the price of
the goods, provide commercial invoice or an goods as agreed in the contract of sale
2 Licences, authorisations and 2 Licences, authorisations and

goods goods
29
3 Contracts of carriage and insurance The 3 Contracts of carriage and
seller must contract on usual terms at his own insurance Contract of carriage without
expense for the carriage of the goods to the obligation Contract of insurance without
named place of destinationNo obligation for obligation
contract insurance
4 Delivery The seller deliver the goods in the 4 Taking delivery The buyer must pick up
agreed place of destination at disposal of the the goods once are available
buyer or any nominated person by the buyer,
does not require to unload the goods
5 Transfer of risks The seller is responsible 5 Transfer of risks The buyer must bear all
until are available to the buyer risks of loss of or damage from the time the
goods have been delivered
6 Costs The seller must pay: ll cost until 6 Costs The buyer must pay for unloading
delivery on board, lloading cost and carriage cost unless they are included in the contract
until port of destination, insurance from of carriage
origin and main carriage, all export duties and
taxes and customs formalities, all import
duties and taxes and customs formalities
7 Notice to the buyer The seller must notify 7 Notice to the seller The buyer must notify
the buyer that goods have been delivered the delivery time
8 Proof of delivery, transport document or 8 Proof of deliver Transport document or

equivalent electronic message At his own equivalent electronic messageAccept sellers
expense, transport documentation with on transportation document in comformity
board date in full set when originals are
printed.
9 Checking The seller must bear the cost of 9 Inspection Unless it’s a mandatory at
checking, quality control, measuring, origin, pay any pre-shipment inspection
weighing, counting, packing of goods and
marking. If special package is required, the
on extra expenses
10 Other Assist obtaining additional 10 Other Assist obtaining additional

information required by the seller information required by the seller
30
Unit III. Standard Form Contract
Nature, Use and Kinds of Standard Form Contract
A standard form contract (sometimes referred to as a contract of adhesion, a leonine contract,
a take-it-or-leave-it contract, or a boilerplate contract) is a contract between two parties, where
the terms and conditions of the contract are set by one of the parties, and the other party has little
or no ability to negotiate more favorable terms and is thus placed in a "take it or leave it"
position.
While these types of contracts are not illegal per se, there exists a very real possibility
for unconscionability. In addition, in the event of an ambiguity, such ambiguity will be
resolved contra proferentem against the party drafting the contract language.
NATURE
A standard form contract is a contract, which does not allow for negotiation, i.e. take it or leave
it. It is often a contract that is entered into between unequal bargaining partners. It’s a type of
contract, a legally binding agreement between two parties to do a certain thing, in which one side
has all the bargaining power and uses it to write the contract primarily to his or her advantage.
Sometimes it is referred to an adhesion contract or boilerplate contract.
An example of an adhesion contract is a standardized contract form that offers goods or services
to consumers on essentially a "take it or leave it" basis without giving consumers realistic
opportunities to negotiate terms that would benefit their interests. When this occurs, the
consumer cannot obtain the desired product or service unless he or she acquiesces to the form
contract.
Let’s take another example, that, when an individual is given a contract by the salesperson of a
multinational corporation. The consumer is in no position to negotiate the standard terms of such
contracts and the company's representative often does not have the autonomy to do so. While
adhesion contracts, in and of them, is not illegal per se, there exists a very real possibility for
unconscionability.
Theoretical issues
There is much debate on a theoretical level whether, and to what extent, courts should enforce
standard form contracts.
On one hand, they undeniably fulfill an important role of promoting economic efficiency.
Standard form contracting reduces transaction costs substantially by precluding the need for
buyers and sellers of goods and services to negotiate the many details of a sale contract each time
the product is sold.
On the other hand, there is the potential for inefficient, and even unjust, terms to be accepted by
signatories to these contracts. Such terms might be seen as unjust if they allow the seller to avoid
all liability or unilaterally modify terms or terminate the contract.[1] These terms often come in
the form of, but are not limited to, forum selection clauses and mandatory arbitration clauses,
which can limit or foreclose a party's access to the courts; and also liquidated damages clauses,
which set a limit to the amount that can be recovered or require a party to pay a specific amount.
They might be inefficient if they place the risk of a negative outcome, such as defective
manufacturing, on the buyer who is not in the best position to take precautions.
There are a number of reasons why such terms might be accepted:[2][3]
Standard form contracts are rarely read
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Lengthy boilerplate terms are often in fine print and written in complicated legal
language which often seems irrelevant. The prospect of a buyer finding any useful
information from reading such terms is correspondingly low. Even if such information is
discovered, the consumer is in no position to bargain as the contract is presented on a
“take it or leave it” basis. Coupled with the often large amount of time needed to read the
terms, the expected payoff from reading the contract is low and few people would be
expected to read it.
Access to the full terms may be difficult or impossible before acceptance
Often the document being signed is not the full contract; the purchaser is told that the rest
of the terms are in another location. This reduces the likelihood of the terms being read
and in some situations, such as software license agreements, can only be read after they
have been notionally accepted by purchasing the good and opening the box. These
contracts are typically not enforced, since common law dictates that all terms of a
contract must be disclosed before the contract is executed.
Boilerplate terms are not salient
The most important terms to purchasers of a good are generally the price and the quality,
which are generally understood before the contract of adhesion is signed. Terms relating
to events which have very small probabilities of occurring or which refer to particular
statutes or legal rules do not seem important to the purchaser. This further lowers the
chance of such terms being read and also means they are likely to be ignored even if they
are read.
There may be social pressure to sign
Standard form contracts are signed at a point when the main details of the transaction
have either been negotiated or explained. Social pressure to conclude the bargain at that
point may come from a number of sources. The salesperson may imply that the purchaser
is being unreasonable if they read or question the terms, saying that they are "just
something the lawyers want us to do" or that they are wasting their time reading them. If
the purchaser is at the front of a queue (for example at an airport car rental desk) there is
additional pressure to sign quickly. Finally, if there has been negotiation over price or
particular details, then concessions given by the salesperson may be seen as a gift which
socially obliges the purchaser to respond by being co-operative and concluding the
transaction.
Standard form contracts may exploit unequal power relations
If the good which is being sold using a contract of adhesion is one which is essential or
very important for the purchaser to buy (such as a rental property or a needed medical
item) then the purchaser might feel they have no choice but to accept the terms. This
problem may be mitigated if there are many suppliers of the good who can potentially
offer different terms (see below), although even this is not always possible (for instance,
a college freshman may be required to sign a standard-form dormitory rental agreement
and accept its terms, because the college will not allow a freshman to live off-campus).
Some contend that in a competitive market, consumers have the ability to
shop around for the supplier who offers them the most favorable terms and
are consequently able to avoid injustice. However, in the case of credit cards
(and other oligopolies), for example, the consumer while having the ability
to shop around may still have access to only form contracts with like terms
and no opportunity for negotiation. Also, as noted, many people do not read
or understand the terms so there might be very little incentive for a firm to
offer favorable conditions as they would gain only a small amount of
business from doing so. Even if this is the case, it is argued by some that
only a small percentage of buyers need to actively read standard form
contracts for it to be worthwhile for firms to offer better terms if that group is
able to influence a larger number of people by affecting the firm’s
reputation.
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Another factor which might mitigate the effects of competition on the
content of contracts of adhesion is that, in practice, standard form contracts
are usually drafted by lawyers instructed to construct them so as to minimize
the firm’s liability, not necessarily to implement managers' competitive
decisions. Sometimes the contracts are written by an industry body and
distributed to firms in that industry, increasing homogeneity of the contracts
and reducing consumer's ability to shop around.
The following are some potential solutions or partial solutions to begin to address some of the
problems with the use of fine print standard form contracts, though reasonable people may
disagree with one or more of the suggestions or their efficacy.
 First: Contracts should be transparent and accessible. This means, at bare minimum, that
standard form contracts must be disclosed prior to the consumer transaction; if a consumer will
not read it, perhaps a third party, such as the press or a consumer advocacy organization, will
read it for its fairness and be able to compare it to other sellers' contracts in the industry;
 Second: Disclosures should be clear and simple, not pages upon pages of illegible and
incomprehensible fine print; they must be easy to read and understand; businesses should
endeavor to do this themselves, and if they don't, legislators and regulators at the state or federal
level should require it;
 Third: The public and private sectors should test these disclosures in real life situations to make
sure consumers can understand the terms in a timely manner before the point of sale;
 Fourth: Consumers need to pay attention to the contents of contracts, to prevent against fraud
and deception, and to demand accessible, fair contracts;
 Fifth: Regulators responsible for regulating industries in which standard form business-to-
consumer contracts are used must require copies of the contracts used in the industries they
regulate to be submitted to the governement agencies and be easily obtainable from government
databases, if not from the industries themselves;
 Sixth: Regulators must do more to remove unfair and deceptive practices in business-to-
consumer standard form contracts. More disclosure alone of bad practices is not a sufficient
answer to the problem, though better disclosure may be a step toward eliminating harmful
provisions and practices;
 Seventh: Certain provisions should be banned from contracts or not enforced by the courts,
including the seller's unilateral modification of terms, forced arbitration and waiver of the right
to a jury trial; a fair contract symbol could be used to distinguish contracts devoid of these
provisions at a glance, such as other symbols of good form, societal benefit or fair practices;
 Eighth: The private and public sectors need to teach consumers how to understand the
importance of fair contract terms, and to pursue empirical research about the effect of terms and
disclosures;
 Ninth: The media needs to report about businesses that are doing the right thing by consumers
by making their contracts accessible and fair;
 Finally, Courts should consider changing the presumption of enforceability of harmful terms not
knowingly agreed to but buried in the fine print in standard form contracts between business and
individual consumers.
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UNIT IV Bill of Lading
Definitions of Bill of Lading as defined in different International Instruments
Kinds and Characteristics of Bill of Lading
Rights and Duties of shipper and carrier with particulars reference to the UN
convention on carriage of goods by sea (Hamburg rules)
A bill of lading (sometimes abbreviated as B/L or BoL) is a document issued by a carrier (or
his agent) to acknowledge receipt of cargo for shipment. In British English the term relates to
ship transport only, and in American English to any type of transportation of goods.[citation needed]
A bill of lading must be negotiable,[1][2] and serves three main functions:
 it is a conclusive receipt,[3] i.e. an acknowledgement that the goods have been loaded;[4] and
 it contains or evidences[5] the terms of the contract of carriage; and
 it serves as a document of title to the goods,[6] subject to the nemo dat rule.
Bills of lading are one of three crucial documents used in international trade to ensure
that exporters receive payment and importers receive the merchandise.[7] The other two
documents are a policy of insurance and an invoice.[8] Whereas a bill of lading is negotiable, both
a policy and an invoice are assignable.
The features of a bill of lading are:

 It is an evidence of contract.
 It serve as a document of title-to-goods.
 It may be marked freight paid or freight forward.
 A clean bill states that packing of goods are free from defects.
 A foul bill states that the packing is defective.
Nature of the bill of lading

One of the principal purposes of the bill of lading is to enable the owner of the goods, to which it
relates, to dispose of them rapidly, although the goods are not in his hands but are in the custody
of a carrier. When goods are on the high seas in transit from London to Singapore and the bill of
lading has been airmailed to the buyer in Singapore and the buyer has thus become the owner of
the goods, the bill of lading representing the goods enables the buyer to pledge the goods with
his bank in Singapore or to resell them to a repurchaser in New York. The bill of lading is a
creation of mercantile custom, a typical institution of international trade. It came into use in the
sixteenth century. A book on mercantile law, published in 1686, stated that "bills of lading are
commonly to be had in print in all places and several languages"." The character of the bill of
lading as a document of title was first recognised by the courts in 1794 in LickbarrolV v Mason"
From the legal point of view, a bill of lading is:
(a) a formal receipt by the shipowner acknowledging that goods alleged to be of the stated
species, quantity and condition are shipped to a stated destination in a certain ship, or at least are
received in the custody of the shipowner for the purpose of shipment;
(b) evidence of the contract of carriage, repeating in detail the terms of the contract which was in
fact concluded prior to the signing of the bill; and
(c) a document of title to the goods enabling the consignee to dispose of the goods by
indorsement and delivery of the bill of lading.
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Before considering in more detail the above three properties of the bill of lading, it is necessary
to summarise the international rules which govern them and differentiate between the various
types of bills of lading and other transport documents.
TYPES OF BILLS OF LADING

There are several types of bills of lading and these include the following:
1. Shipped bill of lading: Under the Carriage of Goods by Sea Act 1924, the shipper can
demand that the shipowner supplies bills of lading proving that the goods have been actually
shipped. For this reason most bill of lading forms are already printed as shipped bills and
commence with the wording: "Shipped in apparent good order and condition". It confirms that
the goods are actually on board the vessel. This is the most satisfactory type of receipt, and the
shipper prefers such a bill as there is no doubt about the goods being on board and consequent
dispute on this point will not arise with the bankers or consignee, thereby facilitating earliest
financial settlement of the export sale.
2. Received bill of lading: This arises where the word "shipped" does not appear on the bill of
lading. It merely confirms that the goods have been handed over to the shipowner and are in his
custody. The cargo may be in his dock warehouse/transit shed or even inland. The bill has
therefore not the same meaning as a "shipped" bill and the buyer under a C.I.F. contract need not
accept such a bill for ultimate financial settlement through the bank unless provision has been
made in the contract. Forwarding agents will invariably avoid handling "received bills" for their
clients unless special circumstances obtain.
3. Through bills of lading: In many cases it is necessary to employ two or, more carriers to get
the goods to their final destination. The on-carriage may be either by a second vessel (e.g. to the
Seychelles Islands via Mombassa or Bombay) or by a different form of transport (e.g. to
destinations in the interior of Canada). In such cases it would be very complicated and more
expensive if the shipper had to arrange on-carriage himself by employing an agent at the point of
transhipment.
4. Groupage Bill of Lading: Forwarding agents are permitted to "group" together particular
compatible consignments from individual consignors to various consignees, situated usually in
the same destination country/area, and despatch them as one consignment. The shipowner will
issue a groupage bill of lading, whilst the forwarding agent, who cannot hand to his principals
the shipowners' bill of lading, will issue to the individual shippers a Certificate of Shipment
sometimes called "house bills of lading". At the destination, another agent working in close
liaison with the agent forwarding the cargo will break bulk the consignment and distribute the
goods to the various consignees. This practice is on the increase, usually involving the use of
containers and particularly evident in the continental trade and deep sea container services. It
will doubtless increase with containerisation development and is ideal to the shipper who has
small quantities of goods available for export. Advantages of groupage include less packing:
lower insurance premiums; usually quicker transits; less risk of damage and pilferage; and lower
rates when compared with such cargo being dispatched as an individual parcel/consignment.
5. Transhipment Bill of Lading: This type is issued usually by shipping companies when there
is no direct service between two ports, but when the shipowner is prepared to tranship the cargo
at an intermediate port at his expense.
6. Clean Bills o Lading: Each bill of lading states "in apparent good order and condition", which
of course refers to the cargo. If this statement is not modified by the shipowner, the bill of lading
is regarded as "clean" or "unclaused". By issuing clean bills of lading the shipowner admits his
full liability of the cargo described in the bill under the law and his contract. This type is much
favoured by banks for financial settlement purposes.
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7. Claused Bills of Lading: If the shipowner does not agree with any of the statements made in
the bill of lading he will add a clause to this effect, thereby causing the bill of lading to be termed
as "unclean", "foul", or "claused". There are many recurring types of such clauses including:
inadequate packaging; "unprotected machinery”; "second-hand cases”; “wet or stained cartons";
"damaged crates"; "two cartons missing"; etc. The clause "shipped on deck at owner's risk" may
thus be considered to be a clause under this heading. This type of bill of lading is usually
unacceptable to a bank.
Article 15
Contents of bill of lading
1. The bill of lading must include, inter alia, the following particulars:
(a) the general nature of the goods, the leading marks necessary for identification of the goods,
an express statement, if applicable, as to the dangerous character of the goods, the number of
packages or pieces, and the weight of the goods or their quantity otherwise expressed, all such
particulars as furnished by the shipper;
(b) the apparent condition of the goods;
(c) the name and principal place of business of the carrier;
(d) the name of the shipper;
(e) the consignee if named by the shipper;
(f) the port of loading under the contract of carriage by sea and the date on which the goods were
taken over by the carrier at the port of loading;
(g) the port of discharge under the contract of carriage by sea;
(h) the number of originals of the bill of lading, if more than one;
(i) the place of issuance of the bill of lading;
(j) the signature of the carrier or a person acting on his behalf;
(k) the freight to the extent payable by the consignee or other indication that freight is payable by
him;
(l) the statement referred to in paragraph 3 of article 23;
(m) the statement, if applicable, that the goods shall or may be carried on deck;
(n) the date or the period of delivery of the goods at the port of discharge if expressly agreed
upon between the parties; and
(o) any increased limit or limits of liability where agreed in accordance with paragraph 4 of
article 6.
# Rights of Shipper
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3. "Shipper" means any person by whom or in whose name or on whose behalf a contract of
carriage of goods by sea has been concluded with a carrier, or any person by whom or in whose
name or on whose behalf the goods are actually delivered to the carrier in relation to the contract
of carriage by sea.
Hague-Visby Rules
Packing of goods
The Hague/Hague-Visby Rules contain no provision imposing a duty on the shipper to pack
sufficiently, but instead relieves the carrier from liability. It provides that “Neither the carrier nor
the ship shall be responsible for loss or damage arising or resulting from insufficiency of
packing.”
Marking of and labelling of goods

The Hague/Hague-Visby Rules require the shipper to mark the goods and indicate the leading
marks necessary for identification of the goods if the shipper wants the carrier to issue a bill of
lading in accordance with Art. III.3. “The bill will be prima facie or conclusive evidence of the
shipment in good order or condition of the indicated quantity of goods, identified by leading
marks.”
The Shiper's Duties

By contrast, the shipper has fewer obligations (mostly implicit), namely: (i) to pay freight; (ii) to
pack the goods sufficiently for the journey; (iii) to describe the goods honestly and accurately;
(iv) not to ship dangerous cargoes (unless agreed by both parties); and (v) to have the goods
ready for shipment as agreed;
# Rights and Duties of Carrier
1. "Carrier" means any person by whom or in whose name a contract of carriage of goods by sea
has been concluded with a shipper.
2. "Actual carrier" means any person to whom the performance of the carriage of the goods, or of
part of the carriage, has been entrusted by the carrier, and includes any other person to whom
such performance has been entrusted.
Carrier’s responsibilities under the Hague-Visby Rules

The carrier has three basic obligations:
i) to ensure the vessel’s seaworthiness;
ii) to care for the cargo; and
iii) to issue a bill of lading where the shipper requests one.
Obligation in respect of seaworthiness

Article III paragraph 1 provides that the carrier must, before and at the beginning of the voyage
(i.e. up to the moment of sailing), exercise due diligence to:
• make the ship seaworthy;
• properly man, equip and supply the ship; and
• make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods
are carried, fit and safe for their reception, carriage and preservation.
Carrier’s obligation in respect of the cargo
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Article III paragraph 2 provides that, subject to the provisions of Article IV, the carrier must
“properly and carefully load, handle, stow, carry, keep, care for and discharge any goods
carried”. Unlike seaworthiness, this duty extends throughout the voyage and implies a greater
degree of care than exercising “due diligence”. The courts do not expect perfection from the
carrier, but it has been held that stowage was improper where -
• contamination of other goods occurred;
• there was inadequate or no ventilation;
• dry cargo was damaged by liquid goods; and
• vehicles were secured only by their own brakes.
The carrier must have a proper system for looking after the cargo when stowed.
Obligation to issue a bill of lading

Article III paragraph 3 provides that after receiving the goods into his charge, the carrier, the
master or the carrier’s agent must, if the shipper demands, issue a bill of lading to the shipper
showing, amongst other things:
• all leading marks for identification of the goods, as stated by the shipper before loading (in his
shipping note), provided these are visible on the goods or their coverings;
• either the number of packages or pieces, or the quantity, or weight, as stated by the shipper (in
his shipping note); and
• the apparent order and condition of the goods.
Carrier’s rights and immunities

• the carrier’s exceptions from liability;
• the carrier’s right to deviate; and
• the carrier’s rights in respect of dangerous goods.
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Chapter V. International Sales of Goods
History of International Sale of Goods
Importance of unified International Sales of Goods
UNCITRAL Convention
Obligation of Seller
Right of Seller
Obligation of Buyer
Rights of Buyer
Risk of loss
Remedies for breach of the Contract
# History of CISG
1. The draft Convention on Contracts for the International Sale of Goods, which has been
referred by the General Assembly to the United Nations Conference on the International Sale of
Goods, is the outcome of a long process of unification whose origin goes back to the early days
of the movement in respect of the unification of international trade law.
2. In April 1930 the International Institute for the Unification of Private Law (UNIDROIT)
decided to undertake the preparation of a uniform law on the international sale of goods. Two
drafts were prepared and distributed to Governments for comments through the League of
Nations prior to the cessation of work on this project in 1939 on account of the Second World
War.
3. In 1951, the Government of the Netherlands organized a Diplomatic Conference on the
International Sale of Goods in order to consider the draft prepared by UNIDROIT and to
determine the means by which the work could be brought to a successful conclusion. The
Conference decided that the work should be continued and appointed a "Special Committee" to
prepare a new draft. on the basis of the suggestions made at the Conference."
4. The Special Committee prepared a revised draft in 1956 which was circulated by the
Government of the Netherlands to interested Governments for comments.' On the basis of the
replies a modified draft was prepared by the Special Committee in 1963. In 1964 the
Government of the Netherlands convened a diplomatic conference at The Hague to which it
submitted the 1963 draft for consideration.
5. In the meantime UNIDROIT had prepared a draft of the Uniform Law on the Formation of
Contracts for the International Sale of Goods. The Government of the Netherlands also circulated
this draft to interested Governments for their comments. The draft and the comments thereon
were also submitted to the 1964 Hague Conference.
6. The 1964 Hague Conference adopted the two uniform laws as well as the conventions to
which they were annexed, Le. the Convention relating to a Uniform Law on the International
Sale of Goods" (1964 Hague Sales Convention) and the Convention relating to a Uniform Law
on the Formation of Contracts for the International Sale of Goods' (1964 Hague Formation
Convention). The two 1964Hague Conventions were opened for signature on 1 July 1964.
7. The 1964 Hague Sales Convention entered into force on 18 August 1972. It has been ratified,
or acceded to, by Belgium, the Gambia, Germany, Federal Republic of, Israel, Italy, the
Netherlands (for the Kingdom in Europe), San Marino and the United Kingdom of Great Britain
and Northern Ireland. The 1964 Hague Formation Convention entered into force on 23 August
1972. It has been ratified, or acceded to, by the States listed above with the exception of Israel.
8. At the first session of the United Nations Commission on International Trade Law
(UNCITRAL) held in 1968, it was decided that, in respect of the two 1964 Hague Conventions,
39
which were then not yet in force, the Commission should determine the position of States in
respect of those Conventions. Accordingly, the Commission requested the Secretary-General to
send a questionnaire to States Members of the United Nations and States members of any of its
specialized agencies."
9. The replies and an analysis of the replies were submitted to the second session of the
Commission in 1969. After consideration of the 1964 Hague Conventions and the replies the
Commission decided to create a Working Group on the International Sale of Goods of 14
member States which was instructed to ascertain: "which modifications of the existing texts
might render them capable of wider acceptance by countries of different legal, social and
economic systems, or whether it will be necessary to elaborate a new text for the same purpose . .
."
10. The Working Group, which was subsequently enlarged to 15 members, held nine sessions. At
its first seven sessions it considered the Sales Convention," and at its eighth and ninth sessions it
considered the Formation Convention." In both cases the Working Group recommended that the
Commission adopt new texts. These texts modified the rules contained in the two uniform laws
to make them more acceptable to countries of different legal, economic or social systems.
11. The Commission, at its tenth session in 1977, adopted the draft Convention on the
International Sale of Goods based upon the text proposed by the Working Group, and at its
eleventh session in 1978adopted the rules on the formation of contracts for the international sale
of goods based upon the text proposed by the Working Group. 10 At its eleventh session the
Commission also decided to combine the draft Convention on the International Sale of Goods
which it had adopted at its tenth session with the rules on formation of contracts into the draft
Convention on Contracts for the International Sale of Goods." It is this draft Convention which
the General Assembly, on the recommendation of the Commission, has submitted to the
Conference of Plenipotentiaries for its consideration.
The United Nations Convention on Contracts for the International Sale of Goods (CISG;
the Vienna Convention)[1]is a treaty that is a uniform international sales law. It has
been ratified by 88 states that account for a significant proportion of world trade, making it one
of the most successful international uniform laws. Cameroon is the most recent state to ratify the
Convention, having acceded to it on 11 October 2017.
The CISG was developed by the United Nations Commission on International Trade
Law (UNCITRAL), and was signed in Vienna in 1980. The CISG is sometimes referred to as
the Vienna Convention (but is not to be confused with other treaties signed in Vienna). It came
into force as a multilateral treaty on 1 January 1988, after being ratified by 11 countries.[2]
The CISG allows exporters to avoid choice of law issues, as the CISG offers "accepted
substantive rules on which contracting parties, courts, and arbitrators may rely".[3] Unless
excluded by the express terms of a contract,[4] the CISG is deemed to be incorporated into (and
supplant) any otherwise applicable domestic law(s) with respect to a transaction in goods
between parties from different Contracting States.[5]
The CISG has been regarded as a success for the UNCITRAL, as the Convention has been
accepted by states from "every geographical region, every stage of economic development and
every major legal, social and economic system".[6]Countries that have ratified the CISG are
referred to within the treaty as “Contracting States”. Of the uniform law conventions, the CISG
has been described as having "the greatest influence on the law of worldwide trans-border
commerce".[7] It has been described as a great legislative achievement,[8] and the "most
successful international document so far" in unified international sales law,[9] in part due to its
flexibility in allowing Contracting States the option of taking exception to certain specified
articles. This flexibility was instrumental in convincing states with disparate legal traditions to
subscribe to an otherwise uniform code. While certain State parties to the CISG have lodged
declarations,[10]the vast majority – 67 of the current 88 Contracting States – have chosen to
accede to the Convention without any declaration.
40
The CISG is the basis of the annual Willem C. Vis International Commercial Arbitration
Moot held in Vienna in the week before Easter (and now also in Hong Kong). Teams from law
schools around the world take part. The Moot is organised by Pace University, which keeps a
definitive source of information on the CISG.
# UNCITRAL Convention
34. A convention is designed to unify law by establishing binding legal obligations. To become a
party to a convention, States are required formally to deposit a binding instrument of ratification
or accession with the depositary (for conventions prepared by UNCITRAL, the Secretary-
General of the United Nations). The entry into force of a convention is usually dependent upon
the deposit of a minimum number of instruments of ratification.
35. A convention is often used where the objective is to achieve a high degree of harmonization
of law in the participating States, reducing the need for a party to undertake research of the law
of another State party. The international obligation assumed by that State on adoption of the
convention is intended to provide an assurance that the law in that State is in line with the terms
of that convention. If a high degree of harmonization cannot be achieved or a greater degree of
flexibility is desired and is appropriate to the subject matter under consideration, a different
technique of harmonization, such as a model law or legislative guide, might be used.
36. Except to the extent that they permit reservations or declarations, conventions afford little
flexibility to adopting States. The conventions negotiated by UNCITRAL generally do not allow
reservations or declarations by States or allow them only to a very limited extent. In some cases,
the ability to make a reservation or declaration represents a compromise that will enable some
States to become a party to the convention without being obliged to comply with the provision to
which the reservation or declaration relates.
Main Conventions under UNCITRAL are as follows:

International Commercial Arbitration & Conciliation
 United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (New
York, 2014) (the "Mauritius Convention on Transparency")
 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York,
1958) (the "New York Convention")
International Sale of Goods (CISG) & Related Transactions
 United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980)
(CISG)
 Convention on the Limitation Period in the International Sale of Goods (New York, 1974)
Security Interests
 United Nations Convention on the Assignment of Receivables in International Trade (New
York, 2001)
International Payments
 United Nations Convention on Independent Guarantees and Stand-by Letters of Credit (New
York, 1995)
 United Nations Convention on International Bills of Exchange and International Promissory
Notes (New York, 1988)
International Transport of Goods
 United Nations Convention on Contracts for the International Carriage of Goods Wholly or
Partly by Sea (New York, 2008) (the "Rotterdam Rules")
 United Nations Convention on the Liability of Operators of Transport Terminals in
International Trade (Vienna, 1991)
 United Nations Convention on the Carriage of Goods by Sea (Hamburg, 1978) (the "Hamburg
Rules")
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Electronic Commerce
 United Nations Convention on the Use of Electronic Communications in International
Contracts (New York, 2005)
# Obligation of Seller
# Contracts involving carriage
if the goods are not specific i.e. they are unidentified goods from inventory, the seller must notify
the buyer about the details of the consignment giving clear indication about the particular goods
allocated to the buyer's contract;
In addition, the choice of transport should be appropriate to the particular goods
- inanimate or non-perishable goods, no problem
- but perishable goods should be placed in the hands of an appropriate carrier
# Time of the delivery
Delivery should be effected on the date specified in the contract (or within a specified period)
If no date or period is specified, the seller should deliver within a reasonable time of the
formation of the contract
# Specific goods - those particular units/items which are to be sold i.e. "this particular pair of
trousers"
# Unidentified goods drawn from inventory - not individually indentifiable, rather they are part
of general inventory i.e. "a packet of biscuits" rather than "that packet of biscuits"
Contract Involving Carriage

# Two main areas
- delivery
- quality
# Delivery
- the seller is obliged to deliver the goods, hand over any documents relating to the
goods and transfer title to the goods as required by the contract
- if a place for delivery is specified within the contract, then the goods must be
delivered to that specified place.
# If no place is specified, implied terms apply
- if carriage of the goods is involved in the contract, the seller's obligation ceases
when the goods are delivered to the carrier (or first carrier if more than one is
involved)
- If unidentified goods are in the seller's inventory, the seller's obligations are
complete upon placing the goods at the buyer's disposal,
- if specific goodsare involved, again, the seller's obligations are complete upon
placing the goods at the buyer's disposal.
 #If none of the above three "place" situations is apparent, the seller's obligations cease
when the goods are placed at the disposal of the buyer at the seller's place of business.
Quality
# the seller must deliver goods which are of the quantity, quality and description required by the
contract, and….
# …which are contained or packaged in the manner required by the contract
# however, if the contract fails to specify quantity and quality and there is no description within
the contract, the seller must nevertheless meet "conformity requirements"
- goods deliverd should be fit for any purpose which has been specified
- if no purpose has been specified, the goods delivered should be fit for the purpose
for which goods of that description would normally be used
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- if a sample is offered by the seller for inspection by the buyer, the goods delivered
must be exactly the same quality as the sample offered. it is irrelevant whether the
buyer does in fact inspect the sample.
- if no sample is offered, the goods delivered must be exactly in accordance with
any description given
- The goods should be packaged in the manner which is normal for goods for that
description
 #There is no obligation on the seller to ensure that the goods comply with legislation in
the buyer's state unless
- that same legislation applies in the seller's state, or
- the buyer made the seller aware of the legislation, or
- the seller knew the requirements imposed by the legislation
 # The seller will not be liable for breach of the conformity requirements in the situation
where the buyer knew that the goods would not conform
 # The seller will be liable if the non-conformity existed at the date the title/risk to the
goods passed to the buyer
 # This is so even if the failure to conform became apparent only after the date the
title/risk passed
 #In addition, the seller is liable even after title/risk has passed where the seller is in
breach of obligations
- for example, where there is a guarantee that the goods will remain fit for the
purpose for a period of time after delivery
 # finally, if the quantity delivered is less than the quantity ordered but delivery is before
the contract date for delivery, the seller is able to make good the short-fall at any time up
to the contract date of delivery with no penalty
 # the only exception is where, as a result of the reduced quantity, the buyer incurs
unreasonable expense or inconvenience, in that situation, the buyer may seek
compensation in the form of damages
The Buyer's duty to examine the goods

# as soon as possible after delivery, the buyer should examine the goods
# when the buyer is going to dispatch the goods immediately on receipt, and the seller is aware
of that fact, the buyer may inspect the goods upon receipt at that next destination,
# notice of non-conformity should be given to the seller within a reasonable time after the non-
conformity was discovered
# failure to give notice within that reasonable time will lose the buyer the right to sue for breach
# If non-conformity notice is not given within two years of delivery, the buyer will lose the right
of compensation
# However, if the seller knew of the non-conformity, and failed to disclose this to the buyer, the
seller will remain responsible.
Third Party Rights
# the seller must deliver goods which are free from any third party right or claim
# ….unless the buyer agrees to accept those goods subject to the right or claim of the third party.
# special provisions related to the situation where the right or claim is based on intellectual
property or industrial property
# in these situations the seller must deliver goods which are free from these property rights
provided the rights exist in the law of
- the state where the goods will be resold or used, or
- the state where the buyer has a place of business
# Intellectual property includes
- trade marks
- Patents
- copyrights
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# such a contract where these third party property rights are affected must involve the buyer's
awareness and acceptance that the rights exist and will be respected
Rights and obligatios of the Buyer and the Sellers

# The buyer's remedies arising from the seller's breach of contract
# Risk of Loss
Risk Of Loss Under Article 66- 70 Of The CISG

In case of accidental damage or loss after risk has passed, the most beneficial remedy for a buyer
to whom the risk has been transferred is likely to be exceptions under the Articles 66-70 of the
CISG since other remedies regulated under the Convention are not applicable for casual damages
or loss. According to Bridge, a buyer might not have the rights compelled by the CISG because
risk is not pointed out in other provisions of the CISG and the inherent nature and function of
risk that it makes ineffective normal rules. As a result of this, to better understand the approaches
of the Convention to the doctrine of risk the Articles 66- 70 of the CISG should be carefully
analysed.
Article 66 of the Convention briefly mentions the implications of the risk on the parties of a
contract by saying that damage or loss of goods does not give the right to the buyer not to fulfil
his obligations of payment. In other words, the buyer to whom risk has passed is still obliged to
accept damage goods and make the payment for them. As above mentioned as long as the loss or
damage is accidental the buyer has to fulfil his obligations without having the right to claim that
it is seller's non-performance. It seems to be helpful to see reflection of this Article to case law.
An Italian wine manufacturer (plaintiff) sued the German buyer (defendant) for payment of the
price of bottles of wine since the defendant avoided paying for them. The German buyer claimed
that the goods were not suitable for use because of deterioration during the shipment. The goods
were subject to “ex factory” delivery. The Regional Court held that the buyer had declared its
refusal to pay on contract; therefore, the plaintiff was not entitled to ask for payment. Upon the
appeal of the seller, the Higher Regional Court affirmed the decision of Court of First Instance
by stating that it was non-performance of the seller in accordance with the Article 35(2) (d)
CISG. Indeed, although the risk passed to the buyer, the Court considered that the seller was still
responsible for the damage due to lack of preserving under Article 36(2) and 66 CISG.
The above case should be interpreted in a way with regard to the seller obligations under the
CISG, which are providing the goods, preserving them and properly bringing them to the point
of delivery. In this respect, it can be said that Article 66(2) of the CISG brings an exception to
obligations of the buyer which is indeed that if the damage or loss occurs as a result of the
seller's mistake, omission or act, he will remain responsible for this loss or damage until
successfully handing over the goods. Consequently, the buyer obligation to pay for the goods
will be delayed when this exception applies. There are different approaches to explain the phrase
of “act or omission of the seller”. According to one of those, it is a breach of seller's obligations
under the CISG or their contract. Proponents of another approach argue that it could be any
behaviour of the seller which caused the damage or loss; therefore, it is difficult to say that such
acts of the seller should be regarded as a breach of the CISG. Schlechtriem and Honnold, as
supporters of this second view, state that any behaviours of the seller which resulted in the loss
or damage should not be interpreted as a breach of obligations of the seller, it also might be
unlawful behaviours under the tort law.
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Unit VI. Financing of International Trade
- Bill of Exchange
A bill of exchange is a non-interest-bearing written order used primarily in international trade
that binds one party to pay a fixed sum of money to another party at a predetermined future date.
A bill of exchange is an instrument in writing containing an unconditional order, signed by the

maker, directing a certain person to pay a certain sum of money only to, or to the order of, a
certain person, or to the bearer of the instrument.
13. The Convention provides its own definitions of the terms "bill of exchange" and "promissory
note" and explicitly states the conditions on which a bill of exchange or promissory note is
considered to be international. According to the Convention, a bill of exchange is a written
instrument which: a) contains an unconditional order whereby the drawer directs the drawee to
pay a definite sum of money to the payee or to its order; b) is payable on demand or at a definite
time; c) is dated; and d) is signed by the drawer.
A bill of exchange is generally drawn by the creditor on his debtor. It should be accepted either
by the debtor or any person(s) on his/her behalf. It is worth mentioning that before its acceptance
by the debtor, it is just a draft. It should be accepted either by a person upon whom it is drawn or
someone else on his/her behalf. The stage at which the purchaser of goods signs the draft and
writes ‘Accepted’ on it, it becomes a bill of exchange.
Features of Bill of Exchange

1. It should be in writing.
2. It is an order to make payment.
3. The order of payment is unconditional.
4. It should contain a certain amount to be paid.
5. The date of payment should be certain.
6. The amount must be payable either to a certain person or to his order or to the bearer of the
bills of exchange.
7. It should be paid either on the expiry of a fixed period of time or on demand.
8. Bill of exchange must be signed by its maker.
9. In certain cases, it must be stamped also.
Parties to a Bill of Exchange:

There are three parties viz. ‘Drawer’, ‘Drawee’ and ‘Payee’ to a bill of exchange.
(i) Drawer:
A bill of exchange is drawn upon the buyer/debtor by the seller/creditor and the drawer is the
person who makes and draws the bill. The drawer is entitled to receive money from the debtor.
(ii) Drawee:
The person upon whom the bill of exchange is drawn is known as drawee. Bill of exchange is
drawn on the drawee who is the purchaser of goods. The drawee of a bill is called the acceptor
when he writes the words “accepted” and puts his signatures on it. This process is known as
acceptance.
After acceptance, the bill of exchange becomes a legal document. This document now binds the
drawee to honour the bill on due date. This acceptance may be general or qualified. In the case of
general acceptance, without stating any conditions, only signature of the accepter is required.
However, in the case of qualified acceptance, name of the bank or specified place for payment is
mentioned.
(iii) Payee:
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The person to whom the payment is made is known as payee. In some cases, the drawer of the
bill also becomes the payee when he himself keeps the bill till the date of maturity.
Drawer and Payee is usually the same person.
Contents of Bills of Exchange:
The contents of bills of exchange are as under:
(i) Date:
The date of the bill on which it is drawn should be written on the top right comer of the bill. This
aspect is very important to determine the maturity date of the bill.
(ii) Term:
This is the tenure of the bill and runs from the date of the bill. This should be specified in the
body of the bill. Grace period of three days should be given after the expiry of the term from the
date of the bill.
(iii) Amount:
Amount of the bill should be given both in figures and words. Amount in figures should be
mentioned on the top left corner of the bill and amount in words should be mentioned in the body
of the bill.
(iv) Stamp:
Stamp of proper value which depends on the amount of bill shall be affixed on the bills of
exchange.
(v) Parties:
There may be three parties to the bills of exchange, drawer, drawee and payee. However, in some
cases drawer and payee may be the same person. All the names of the parties and their addresses
should also be invariably mentioned in the bills of exchange.
(vi) For Value Received:
This aspect is most important in the sense that law does not consider those agreements which
have been made without consideration. Consideration means in lieu of and in the context of bills
of exchange, it means that the bill has been issued in exchange of some consideration i.e., benefit
has already been received.
Advantages of Bills of Exchange:

The bills of exchange are used frequently in business as an instrument of credit due to the
following reasons:
(i) Legal Relationship:
Issuing bills of exchange provides a framework which converts and establishes a legal
relationship between seller and buyer, from creditor and debtor to drawer and drawee. In the case
of any dispute between the parties, this relationship provides a conclusive proof in the court of
law.
(ii) Terms and Conditions:
Bill of exchange contains all terms and conditions of payments viz., amount of the bill, date of
payment, place of payment, interest to be paid, if any. The maturity date of the bill is also known
to the parties of the bill so they can make necessary arrangement for funds
(iii) Mode of Credit:
Bill of exchange has been defined as a negotiable instrument under the Negotiable Instruments
Act, 1881. The buyer can buy the goods on credit and pay after the period of credit with the help
of bill of exchange. In case of urgency, the drawer can also get the payment through discounting
the bill from the bank and without waiting for the maturity period.
(iv) Easy Transferability:
Bill of exchange can be used for settling the debt of the creditors. Mere delivery and
endorsement of the bill give a valid title to the endorsee.
(v) Wider Acceptance:
In case of foreign bill, wider acceptance is given to the parties through which payments can be
received and made easily.
(vi) Mutual Accommodation:
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Sometimes, bill can be issued for mutually accommodating the parties so that financial help can
be given to each other.
# Letter of Credit (L/C)/Documentary Credits

 Letter of Credit (L/Cs) are one of the most secure instruments available to international
traders;
 An L/C is a commitment by a bank on behalf of the buyer that payment will be made to
the exporter, provided that the terms and conditions stated in the LC have been met, as
verified through the presentation of all required documents;
 The buyer pays his or her bank to render this service;
 An LC is useful when reliable credit information about a foreign buyer is difficult to
obtain, but the exporter is satisfied with the creditworthiness of the buyer's foreign bank;
 An LC also protects the buyer because no payment obligation arises until the goods have
been shipped or delivered as promised.
 L/C: Procedure
o 1. Sale Contract (between Importer and Exporter)
o 2. Importer requests for Credit to the Bank
o 3. Importer's Bank send credit to Exporter's Bank (Advising Bank)
o 4. Exporter's Bank Delivered LC to Exporter
o 5. Exporter deliver goods to Importer
o 6. Exporter presents documents to Exporter's Bank
o 7. Exporter's Bank presents documents to Importer's Bank (Issuing Bank)
o 8. Importer's Bank documents and claim for payments from Importer
Types of Letter of Credit
 Ireevocable and revocable L/C: A revocable letter of credit can be changed or cancelled
by the bank that issued it at any time and for any reason. An irrevocable letter of credit
cannot be changed or cancelled unless everyone involved agrees. Irrevocable letter of
credit provide more security than revocable ones.
 Confirmed and unconfirmed/Advised Letters of Credit
o When a buyer arranges a letter of credit they usually do so with their own bank,
known as the issuing bank. The seller will usually want a bank in their country to
check that the letter of credit is valid.
o For extra security, the seller may require the letter of credit to be 'confirmed' by
the bank that checks it. By confirming the letter of credit, the second bank agrees
to guarantee payment even if the issuing bank fails to make it. So a confirmed
letter of credit provides more security than an unconfirmed one.
o In case of unconfirmed LC, the advising bank forwards an unconfirmed letter of
credit directly to the exporter without adding its own undertaking to make
payment or accept responsibility for payment at a future date, but confirming its
authority.
 Transferable Letters of credit: A transferable letter of credit can be passed from one
'beneficiary' (person receiving payment) to others. They're commonly used when
intermediaries are involved in a transaction.
 Stand-by LC: A standby LC is like a guarantee that is used as support where an
alternative, less secure, method of payment has been agreed; It is an assurance from a
bank that a buyer is able to pay a seller. The seller doesn't expect to have to draw on the
LC to get paid.
 Revolving LC: The revolving is used for regular shipments of the same commodity to
the same importer. It can revolve in relation to time or value. If the credit is time
revolving once utilized is re-instated for further regular shipments until the credit is fully
drawn. if the credit revolves in relation to value once utilized and paid the value can be
reinstated for further drawings. Revolving letters of credit are useful to avoid the need for
repetitious arrangements for opening or amending letters of credit.
47
 Back to Back LC: A back-to-back LC can be used as an alternative to the transferable
letter of credit. Rather than transferring the original LC to the supplier, once the letter of
credit is received by the exporter from the opening bank, that LC is used as security to
establish a second LC drawn on the exporter in favour of his importer. Many banks are
reluctant to issue back-to-back letters of credit due to the level of risk to which they are
exposed, whereas a transferable credit will not expose them to higher risk than under the
original credit.
# Documentary Credits
The documentary credit is one of the most secure payment methods in international trade,
offering the exporter a conditional payment guarantee from the importer’s bank.
Documentary credits usually require the presentation of certain documents, which must be
complied with before payment can take place. You must be aware that banks examine the
documents only with respect to the documentary credit and do not look at contracts, agreements
or the condition of the goods.
- Direct Payment
- Documentary Credits (Letter of Credits (L/C))
48
Unit VII Foreign Exchange
# Importance of foreign exchange in International Trade
# Foreign Exchange Restrictions
# Main Provisions of the foreign exchange (Regulations) Act, 2019 (1962) BS
The term “foreign exchange” basically refers to buying the currency of one country while
selling the currency of another country. All nations have their own, different kinds of money
(currency). This has existed throughout the ages, probably since the time of the Babylonians. As
trading developed between nations, the need to convert one kind of money to another also
developed. This is how a formal system of foreign exchange arose.
As trade between nations developed, Britain, as the nation with the largest and strongest navy,
could spread its commercial interests far and wide. It therefore became the most active trading
nation, with a vast empire of colonies. As a result, Britain’s currency, the pound sterling, became
a benchmark to which other currencies were compared (and exchanged) for most of the
seventeenth, eighteenth and nineteenth centuries. Today, most currencies are compared to the
U.S. Dollar, currently the most active and commercially strong trading nation; many currencies
are still “pegged” to the U.S. Dollar for their exchange rate.
How exactly are currencies traded?

A company that wants to import goods into the United States has to buy the foreign currency of
the country the goods are coming from, in order to pay for them. The following is an example: an
American shoe store may sell a lot of Brazilian shoes, since Brazil is a large exporter of leather
goods (about $1.9 Billion per year). The owner of this store would have to buy Brazilian Reals
(the currency of Brazil) to pay for a shipment of shoes. He has a number of choices. First, he
could buy the Reals through his bank or a foreign exchange broker at fixed rate of exchange, and
then order the shoes. Since he knows the exchange rate, he knows how much the shoes are worth
in dollars, and how much his bill (in dollars) will be when he has to pay for the shipment of
shoes. When he “takes delivery” of the Reals (that is, he tells his bank to pay the Brazilian
exporter), his bank will debit him the U.S. Dollar equivalent at the rate agreed upon when he
purchased the Reals.
This importer has the second option of waiting until the shoes arrive in the United States, and
then buy the Reals to pay for them. He will not know how much he has to pay for this shipment
of shoes until he pays for the Reals, rather when he entered into the contract to purchase the
shoes. If the Real got stronger, in other words, became more expensive compared to the dollar,
he would pay more for them in dollars than on the day of his contract. He could also pay less if
the Real became weaker. But most businessmen want to protect themselves and the price of their
products against higher costs and be able to manage their budgets.
Knowing the exchange rate of the real when he processed his order with the Brazilian exporter
would allow him to include that rate into his selling costs. If he risks that the rate will come
down (by not buying Reals ahead of time), and it goes up instead, he may end up with a loss in
the price of his shoes. Most businessmen would rather leave this kind of “speculating” to foreign
exchange traders.
Foreign exchange represents a system with the help of which trading countries settle their
international indebtedness and includes all institutions, credit instruments mechanism etc. Foreign
exchange is a very important element in foreign trade. Its importance from national point of view can
be discussed as follows.
49
Importance of Foreign Exchange:
(i) Foreign exchange situation of a country indicates the strength of the economy. If it possesses
large reserves of foreign exchange, it is an indication of developed economy whereas tight
foreign exchange position. indicates an underdeveloped economy. Thus, foreign exchange
position is indicative of the stage of development.
(ii) Shortage of foreign exchange refers to the position of adverse balance of payments and Its
surplus a position of favorable balance of payments. In case of adverse balance of payments
situation, the central bank or the government must try to balance the situation by increasing its
exports and restricting the outflow of foreign currency.
(iii) Foreign exchange simplifies the complexities arising out of the vast participation of nations
in the international trade. Payments are easily made on the mutually accepted and predetermined
rates. Thus, it makes the international trade easy.
(iv) The foreign exchange ‘ratio shows a direct relationship between the prices of the
commodities in the national and international markets.
(v) Foreign exchange position shows a comparative soundness of two nations. A hard-currency
nation is certainly a sound nation for the other country for which the currency of that nation is
not easily available. For example, for India, American Dollar and British Pound-sterling are hard
currencies. It means, the economies of America and Britain are certainly richer.
(vi) The stability in exchange rates, is of high importance without which various other problems
may crop up. Instability in exchange rate may lead a country to devaluation or revaluation.
Thus, problem of foreign exchange is very important in foreign trade especially for developing
nations because they have paucity of foreign exchange to meet their foreign exchange liability.
They are required to restrict the outflow of foreign exchange very carefully.
Foreign Exchange Restrictions (Controls)

Foreign exchange controls are various forms of controls imposed by a government on the
purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by
nonresidents.
Common foreign exchange controls include:
 Banning the use of foreign currency within the country

 Banning locals from possessing foreign currency
 Restricting currency exchange to government-approved exchangers
 Fixed exchange rates
 Restrictions on the amount of currency that may be imported or exported
Countries with foreign exchange controls are also known as "Article 14 countries," after the
provision in the International Monetary Fund agreement allowing exchange controls for
transitional economies. Such controls used to be common in most countries, particularly poorer
ones, until the 1990s when free trade and globalization started a trend towards economic
liberalization. Today, countries which still impose exchange controls are the exception rather
than the rule.
Often, foreign exchange controls can result in the creation of black markets to exchange the
weaker currency for stronger currencies. This leads to a situation where the exchange rate for the
foreign currency is much higher than the rate set by the government, and therefore creates a
shadow currency exchange market. As such, it is unclear whether governments have the ability
to enact effective exchange controls.
Main Provisions of the Foreign Exchange (Regulations) Act 2019 (1962) BS

50
Preamble: it is expedient to further regulate the foreign exchange related transaction in order to
maintain the economic interests1 of the general public
Application: (2) It shall extend to throughout Nepal4 and also apply to all citizens of Nepal who
reside outside of Nepal, 5 and all firms, companies, bodies and branches and agencies of such
firms, companies or bodies which have been registered in Nepal6 and operating in any place
outside of Nepal.
“foreign currency” means any currency other than the Nepalese currency, and this term also
includes special rights to draw funds (Special Drawing Rights) from the International Monetary
Fund, the Asian Currency Unit, the European Currency Unit and such other instruments as may
be prescribed by the Bank, by publishing and broadcasting a public notice;
“foreign exchange” means a foreign currency, deposits, credits and balances of all types which
are paid or received in a foreign currency, foreign securities and cheques, drafts, travelers
cheques, electronic fund transfers, credit cards, letters of credit, bills of exchange and promissory
notes which are in international circulation and are or can be paid in a foreign currency, and this
term also includes any other such monetary instruments as may be prescribed by the Bank by
publishing and broadcasting a public notice;
(d1)15 "foreign exchange transaction" means the purchase, sale, lending and borrowing the
foreign exchange or receiving or giving of the foreign exchange in any other manner, and this
term also includes the act of giving permission by the Bank to convert the foreign exchange;
(g1) "foreign investment" means the following investment made by a foreign investor in any
firm, company or body: (1) investment made in shares, (2) investment made in deposits, (3) re-
investment of income earned from the investment as referred to in Clauses (1) and (2), (4)
investment made in the form of a loan or loan facility.
(g2) "technology transfer" means the transfer of technology to be made by entering into an
agreement between any firm, company or body and a foreign investor in relation to the following
matters: (1) use of right to any technology, of specialization, formula, process, patent or technical
know-how of foreign origin, (2) Use of any trademark of foreign origin, (3) Acquiring any
foreign technical, consultancy, management and marketing service.
License to be obtained to carry on foreign exchange transaction: (1) A person, firm,
company or body who intends to carry on the foreign exchange transaction shall obtain the
license from the Bank.
Power of Bank to take action: (1) If a licensee fails to abide by the order or directive issued by
the Bank pursuant to this Act, the Bank may take any or all of the following actions against such
a licensee: (a) To admonish, (b) To impose restriction on any or all of the foreign exchange
transaction, (c) To forfeit the cash deposit in the Bank or make recovery from the guarantee, (d)
To suspend or cancel the license.
No licensee or any other person whoever shall carry on the foreign exchange transaction by
giving the Nepalese currency and taking foreign currency and vice versa at a rate that is different
than the exchange rate specified by the Bank.
Power of Government of Nepal to obtain foreign exchange: (1) In the event of foreign
exchange crisis due to economic and monetary crisis in the country, the Government of Nepal
may, by a Notification in the Nepal Gazette, order the citizens of Nepal who are owner of the
foreign exchange to do as follows in relation to the foreign exchange owned by them:
(Plz Read out the Act… imp)
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UNIT VIII . Transnational Enterprises (TNCs) and Int. Trade
# Meaning of TNCs and Joint Ventures

# Role of TNCs in International Trade
# TNCs and Joint Ventures in Nepal
# Transnational corporations (TNC)
Transnational corporations (TNCs) are incorporated or unincorporated enterprises comprising
parent enterprises and their foreign affiliates. A parent enterprise is defined as an enterprise that
controls assets of other entities in countries other than its home country, usually by owning a
certain equity capital stake.
An equity capital stake of 10 per cent or more of the ordinary shares or voting power for an
incorporated enterprise, or its equivalent for an unincorporated enterprise, is normally considered
as a threshold for the control of assets (in some countries, an equity stake other than that of 10
per cent is still used. In the United Kingdom, for example, a stake of 20 per cent or more was a
threshold until 1997.).
A foreign affiliate is an incorporated or unincorporated enterprise in which an investor, who is

resident in another economy, owns a stake that permits a lasting interest in the management of
that enterprise (an equity stake of 10 per cent for an incorporated enterprise or its equivalent for
an unincorporated enterprise).
Also known as MNCs (Multinational Companies) these are large businesses that operate in a
number of countries. They often separate their production between various locations, or have
their different divisions – Head Office and Administration, Research and Development,
Production, Assembly, Sales – separated around a continent or the globe.
Reasons for growth of TNCs
 Global expansion of a major product with worldwide markets, such as Coca Cola
 Take-over of foreign competitor firms, such as BMW
 Merger with foreign firms into one large international company, such as
GlaxoSmithKline
 Vertical integration: acquiring the companies that sell you materials and components,
and/or that you sell on to for manufacture, assembly or sales.
 Horizontal integration: acquiring the companies that make similar components that,
along with yours, will go into the final product.
 Diversification: using the profits from one major company to purchase companies
dealing with different products in order to spread risks from loss of sales or financial
fluctuations.
 Risk dispersal: firms may find it advantageous to distribute their plants in a range of
countries so that union disputes, government instability, supply disruptions and financial
uncertainty in any one country does not disrupt overall production. Production can be
switched to alternative plants relatively quickly if need be.
 Profit maximisation: firms may set up divisions abroad for a range of reasons:
o Locate in low business-tax countries and ensure their profits are registered there
so they pay minimum tax. Ireland has one of the lowest tax regimes in the EU at
12.5% (20% in UK) and attracts many US firms marketing to Europe.
o Locate to avoid trade tariffs and tax barriers. Some Japanese car firms set up
plants inside the EU to avoid import taxes being imposed on cars from Japan.
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o Locate in low production-cost countries where wages are lower. As these are
often the single largest cost for a firm, locating production in low-wage
economies can maximise profits at a stroke.
o Locate in low-regulation countries where there are fewer laws (or less
regulation/enforcement) governing employment rights, trade union rights and
environmental protection.
Over time amalgamations of firms results in a trend towards fewer, larger corporations that
operate with an international workforce selling to an international market. As a result of greater
economies of scale (the larger the scale, the cheaper it is to do) TNCs are able to make greater
profits, enjoy a higher share price and can absorb or take-over smaller, independent national
companies or simply put them out of business by capturing the majority of the market and
offering a product at a lower price.
The divisions of an organisation will often be located in countries with different characteristics:
 The head office registered is usually in the country of origin, or a low business-tax
country.
 Research and Development (R&D) often takes place in countries with highly skilled
scientists and engineers and with world-class universities.
 Branch plants: manufacturing of components takes place where a reliable product can be
efficiently produced without threats to long-term continuity.
 Assembly will often occur close to the major market for the final product.
 Sales, Marketing and Service: take place close to the main markets for the product.
It would be incorrect to imagine all TNCs are involved in manufacturing. Some of the largest are
involved in resource extraction and production (oil and gas companies, copper and gold-mining),
some are financial and insurance companies (major banks), some are media companies (such as
News Corporation – owners of SKY as well as The Times newspaper).
In terms of their location, TNCs can affect where in the world employment is growing, where it
is declining, which national economies are expanding and which are contracting, and the
movement and flow of goods, services and employees between various parts of the world.
Problems Arising from TNCs
Intra-Company Trade and Manipulative Price Transfers

The post-Second World War period witnessed not merely a rise in TNCs' control of
world trade, but also growth of trade within related enterprises of a given corporation, or
"intra-company" trade. While intra-company trade in natural resource products has been a
feature of TNCs since before 1914, such trade in intermediate products and services is
mainly a phenomenon of recent decades. By the 1960s, an estimated one-third of world
trade was intra-company in nature, a proportion which has remained steady to the present
day. The absolute level and value of intra-company trade has increased considerably
since that time, however. Moreover, 80 per cent of international payments for technology
royalties and fees are made on an intra-company basis.
Influence in Nations' Political Affairs

TNCs' influence over countries, particularly those in the less-industrialised world, has not
been manifest solely in sheer economic power or manipulative price transfers. Such
influence has also been reflected in corporations' willingness and ability to exert leverage
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directly by employing government officials, participating on important national economic
policy making committees, making financial contributions to political parties, and
bribery. Furthermore, TNCs actively enlist the help of Northern governments to further or
protect their interests in less-industrialised nations, assistance which has sometimes has
involved military force. In 1954, for instance, the US launched an invasion of Guatemala
to prevent the Guatemalan government from taking (with compensation plus interest)
unused land of United Fruit Company for redistribution to peasants.
TNCs and International Politics

Especially since the 1980s, TNCs' involvement at international political negotiations and
fora has accompanied and encouraged the rise of global corporate economic power. In an
effort to reduce barriers to trade and investment capital flows in the last decade, TNCs
have lobbied vigorously to shape to their liking Europe's Single Market agreement, the
North American Free Trade Agreement (NAFTA), and the Uruguay Round of the
General Agreement on Tariffs and Trade (GATT). For TNCs, so-called free trade lessens
governmental restrictions on their movement and ability to maximise returns. "The
deregulation of trade aims to erase national boundaries insofar as these affect economic
life," economists Herman Daly and Robert Goodland have noted. "The policy-making
strength of the nation is thereby weakened, and the relative power of TNCs is increased."
TNCs, Human Health, and the Environment

The unwillingness or inability of national governments to control TNCs in a period of
deregulated global trade and investment does not bode well for people's health or the
environment. TNC operations routinely expose workers and communities to an array of
health and safety and ecological dangers. All too often these operations erupt into
disasters such as the gas release at the Indian subsidiary of the US-based corporation
Union Carbide in Bhopal.
TNCs and Occupational Safety

There have been many instances of TNCs failing to control industrial hazards at their
facilities in less-industrialised nations as thoroughly as in their home countries. The
situation in Bhopal, where comparison of operations of Union Carbide's Indian subsidiary
and a similar plant in the US has revealed many double standards, is only the most
infamous example of what the Industrial Labour Organisation acknowledges is a
prevailing trend: "In comparing the health and safety performance of home-based [TNCs]
with that of the subsidiaries, it could generally be said that the home country operations
were better than those of subsidiaries in the developing countries."28 The case of the
German TNC Bayer's chromate production factory in South Africa is illustrative.
Chromate is a corrosive compound which can cause respiratory illness including lung
cancer. Bayer has owned the facility, Chrome Chemicals, since 1968. In 1976, a South
African government report noted health problems in nearly half the plant's employees
which were related to their work and which, it said, "are extremely disturbing and would
appear to indicate a lack of concern regarding the physical welfare of the workers."
TNCs and Employment

In an era of declining constraints on their mobility and the attraction of cheaper wages in
less-industrialised nations eager to draw foreign investment, TNCs are eliminating jobs in
their home countries and shifting production abroad. Although overall TNCs'
employment in their home countries has changed little in the last decade, among the 300
largest corporations employment in 1989 was lower than it had been in 1980. US-based
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TNCs have eliminated jobs especially vigorously. Between 1982 and 1993, for example,
US TNCs cut over three-quarters of a million jobs at home but added 345,000 jobs
outside the United States.31 For workers in the US and other industrialised countries,
TNCs' increased willingness to move operations to lower wage areas along with their
greater use of automation, subcontractors, and part-time labour have rendered the strike
relatively ineffective and undermined trade unions' collective bargaining power. In the
US, there were one-tenth the number of strikes in 1993 as in 1970, and only 12 per cent
of the US workforce is currently unionised, a lower proportion than in 1936.
Joint Venture
A joint venture (JV) is a business entity created by two or more parties, generally characterized
by shared ownership, shared returns and risks, and shared governance. Companies typically
pursue joint ventures for one of four reasons: to access a new market, particularly emerging
markets; to gain scale efficiencies by combining assets and operations; to share risk for major
investments or projects; or to access skills and capabilities.[1]
According to Gerard Baynham of Water Street Partners, there has been a lot of negative press
about joint ventures, but objective data indicate that they may actually outperform wholly owned
and controlled affiliates. He writes, "A different narrative emerged from our recent analysis of
U.S. Department of Commerce (DOC) data, collected from more than 20,000 entities. According
to the DOC data, foreign joint ventures of U.S. companies realized a 5.5 percent average return
on assets (ROA), while those companies’ wholly owned and controlled affiliates (the vast
majority of which are wholly owned) realized a slightly lower 5.2 percent ROA. The same story
holds true for investments by foreign companies in the U.S., but the difference is more
pronounced. U.S.-based joint ventures realized a 2.2 percent average ROA, while wholly owned
and controlled affiliates in the U.S. only realized a 0.7 percent ROA."
Most joint ventures are incorporated, although some, as in the oil and gas industry, are
"unincorporated" joint ventures that mimic a corporate entity. With individuals, when two or
more persons come together to form a temporary partnership for the purpose of carrying out a
particular project, such partnership can also be called a joint venture where the parties are "co-
venturers".
The venture can be a business JV (for example, Dow Corning), a project/asset JV intended to
pursue one specific project only, or a JV aimed at defining standards or serving as an "industry
utility" that provides a narrow set of services to industry participants.
Key elements of a joint venture's design include:
1. the number of parties;

2. the geographic, product, technology and value-chain scope within which the JV will
operate;
3. the contributions of the parties;
4. the structural form (each country has specific options, e.g. in the U.S. the main options
are a C Corporation or an LLC/partnership structure);
5. the valuation of initial contributions and ownership split among the parties;
6. the economic arrangements, post-deal (e.g. Is the joint venture intended to general profits
vs. operate as a cost-sharing or production-sharing venture; if a for-profit entity, will the
parties share profits in proportion to equity ownership, or some other way?);
7. governance and control;
8. Talent/HR model; will the JV have its own staff on own payroll vs. seconded staff from
the parent companies;
9. contractual arrangements with the parent companies for inputs, outputs or services;
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10. exit and evolution provisions?
JV process[edit]
Overall, the JV process has a series of steps:
 Defining the business strategy.

 Determining whether a JV is the right vehicle. This requires comparing the JV option against
acquisition, non-equity partnership, contractual alliance, or go-alone approaches. Generally
JVs are most appropriate when 1) they are focused on combining complementary capabilities
(e.g. products and market access), sharing risks, or 2) merging businesses where an outright
M&A transaction isn't possible or where the premium involved in an acquisition can't be
recovered via operating synergies and 3) when go-it-alone is too risky or too slow, and 4)
simpler vehicles like contractual agreements aren't sufficient.
 Screening partners.
 Developing the JV deal concept.
 Negotiating detailed terms and conditions.
 Planning and launching the JV.
 Evolving, or terminating, the JV.
Company incorporation[edit]
A JV can be brought about in the following major ways:
 Foreign investor buying an interest in a local company

 Local firm acquiring an interest in an existing foreign firm
 Both the foreign and local entrepreneurs jointly forming a new enterprise
 Together with public capital and/or bank debt
Dissolution[edit]
The JV is not a permanent structure. It can be dissolved when:
 Aims of original venture met

 Aims of original venture not met
 Either or both parties develop new goals
 Either or both parties no longer agree with joint venture aims
 Time agreed for joint venture has expired
 Legal or financial issues
 Evolving market conditions mean that joint venture is no longer appropriate or relevant
 One party acquires the other
Benefits to the Host Country

 Increase the investment level and thereby income and employment
 transfer technology mainly in developing countries
 Also kindle a managerial revolution through professional and highly sophisticated
management techniques
 MNCs enable to increase their export and decrease the import
 Equalise the cost of factors of production around the world
 Provide an efficient means of integrating national economies
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 MNCs make a contribution to inventions and innovations through research and
development systems
 MNCs may encourage and assist domestic supplier
 MNCs help increase competition and break domestic monopolies
MNCs and International Trade
 According to Peter Drucker MNCs and international trade are the two side of the
same coin
 The period of fifties and sixties was the most rapid growth of multinational trade
 Foreign affiliates of MNCs account for about one-third of the world exports
 More than 40% of total exports of China is done by MNCs
 Apart from trade in commodities other transaction also take place extensively: the
granting of loans, licensing of technologies, provision of services
Problems faced by Host Country
 MNCs technology is designed for world wide profit maximization, not the
development needs of poor countries
 Through there power and flexibility, MNCs can evade or undermine national
economic autonomy and control
 MNCs may destroy competition and acquire monopoly powers
 On political involvement, MNCs have been accused on occasion of:
o supporting repressive regimes;
o Paying protection money to terrorist groups
o Paying bribes to secure political influence
o Not respecting human rights
o Destabilizing national government of which they do not approve
 MNCs retard growth of employment in the home country
 Transfer pricing enables MNCs to avoid taxes by manipulating prices on intra-
company transactions
 MNCs have been accused of the following environmental problems
o Polluting the environment
o Not paying compensation for the environmental damages
o causing harmful changes in the local living conditions
o paying little regard to the risks of accidents causing major environmental
catastrophes
 The MNCs criticized for their business strategies and practices in the host
countries for:
o Undermine local cultures and traditions
o Change the consumption habits for their benefits
o Promote conspicuous consumption
o Dump harmful products in developing countries etc.
Perspectives
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 Increasing emphasis on market forces
 Growing role for the private sector in nearly all developing countries;
 Rapidly changing technologies that are transforming the nature of organization
 the Rise of services to constitute the largest single sector in the world economy
 The Globalization of firms and industries
 Regional Economic integration
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Unit IX WTO and Regional Trade Organizations
A. WTO
- Introduction
-Genesis
- Principles
- Organs and working of WTO
- Settlement of Disputes under WTO set up
- Need to align Nepali law in tune with WTO Norms
Genesis of WTO
1947 The General Agreement on Trade & Tariffs (GATT) is drawn up to record the
resultof tariff negotiations among 23 countries. The agreement entered into force
on January 1, 1948.
1948 The GATT provisionally enters into force. Delegations from 56 countries meet
in Havana, Cuba to consider the final draft of the International
TradeOrganization (ITO) agreement; in March 1948, 53 countries sign the
Havana Charter establishing an ITO.
1950 China withdraws from GATT. The US administration abandons efforts to

seekcongressional ratification of the ITO.
1955 A review session modifies numerous provisions of the GATT. The US is granted
a waiver from GATT disciplines for certain agricultural policies. Japan accedes
to GATT.
1965 Part IV (on trade and development) is added to the GATT, establishing new
guidelines for trade policies of & towards developing countries. A Committee on
Trade & Development is created to monitor implementation.
1974 The Agreement regarding International Trade in Textiles, better known as

theMultiFibre Agreement (MFA), comes into force. The MFA restricts export
growth in clothing & textiles to 6% per year. It is renegotiated in 1977 & 1982 &
extended in 1986, 1991 & 1992.
1986 The Uruguay Round is launched in Punta del Esta, Uruguay.
1994 In Marrakesh, on April 15, ministers sign the final act establishing the WTO &
embodying the results of the Uruguay Round.
1995 The WTO comes into force on January 1.
1996 Ministerial meeting in Seattle fails to launch a new round. Wide scale protests in
Seattle and elsewhere on the proposed inclusion of labour clause in the WTO.
2001 Doha Ministerial Meet
2003 Fifth Ministerial Meet in Cancun, Mexico from 10-14 September 2003*
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2005 Sixth Ministerial Meet held in December 2005 in Hong Kong
2006 The mini-minterial conference of the WTO held in Geneva during June-July
2006 ended in a deadlock over the issues raised by the developing countries.
2007 Another mini-ministerial proposed in Davos in January and yet another meeting
in July to finish negotiations by 2007.
 In 1944, Bretton Woods Conference (United Nations Monetary and Financial

Conference) was convened to discuss
o Post-war recovery of Europe
o Monetary issues, such as unstable exchange rates and protectionist trade

policies
 Delegates from 44 countries discussed the establishment of
o International Trade Organization (ITO)
o International Bank for Reconstruction and Development
o International Monetary Fund
 Phased opening of markets by reducing/removing all forms of trade barriers
 Rules-based system to curb tendencies of unilateral action by larger trading

countries Transparency in the making of global trading rules
 Predictability in the setting of trade rules provides ideal environment for business to
operate
 1945: The US and the UK mooted the idea of a World Conference on Trade and
Employment
 1946: The UN Economic and Social Council of the United Nations adopted a US
resolution Convene an International Conference on Trade and Employment to
promote expansion of the production, exchange and consumption of goods
 October 1947: 23 countries (accounting for 70 per cent of world trade) signed an ad
hoc agreement, the General Agreement on Tariffs and Trade (GATT)
 1948: Adoption of the Final Act of the UN Conference on Trade and Employment
in Havana in March 1948 “Havana Charter” for an International Trade
Organization (ITO)
 1950: ITO became a non-starter as the US Congress did not ratify the Havana
Charter President Truman never submitted the Havana Charter to the Congress in
the face of weakening US business support
Objectives of GATT
o To assure a large and steadily growing volume of real income and effective
demand,
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o To increase the production, consumption and exchange of goods … and thus to
contribute to a balanced and expanding world economy
o To foster and assist industrial and general economic development, particularly of

those countries which are still in the early stages of industrial development
o To encourage the international flow of capital for productive investment
o To promote on a reciprocal and mutually advantageous basis Reduction of tariffs

and other barriers to trade Elimination of discriminatory treatment in
international commerce
o To facilitate through the promotion of mutual understanding, consultation and co-

operation the solution of problems relating to international trade in the fields of
employment, economic development, commercial policy, business practices and
commodity policy
1948-1995: Eight Rounds of Multilateral Trade Negotiations
- Geneva Round, 1948 – tariff reduction
- Annecy Round, France, 1949 - tariff reduction
- Torquay Round, England, 1951 - tariff reduction
- Geneva Round, 1956 - tariff reduction
- Dillon Round, 1960-62 - tariff reduction
- Kennedy Round: 1964-67
 Reducing tariffs by one-half on an average
 Disciplining non-tariff barriers
 Strengthening of the GATT rules
 Adoption of measures to help developing economies to

strengthen their production potential and export capacity in
order that the expansion of international trade may contribute
to their economic development
Tokyo Round: 1973-79
 Overall reduction of tariffs by an average level of 35 per cent
 Codes on non-tariff barriers
 Government procurement
 Rules governing customs valuation
 Subsidies and countervailing measures
 Anti-dumping measures
 Agreement on Technical Barriers to Trade

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 Import licensing
1986-94: Uruguay Round
 Widening the negotiating mandate of the GATT
o Services
o Intellectual Property rights
o Investment issues
 Inclusion of agriculture
 Integration of textiles and clothing sector
 Tightening the rules
 All contracting parties expected to take commitments for liberalisation of trade-

‘Single Undertaking’
 Establishment of the World Trade Organization
What is the WTO?

The World Trade Organization (WTO) is the only global international organization dealing with
the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed
by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help
producers of goods and services, exporters, and importers conduct their business.
Who we are
There are a number of ways of looking at the World Trade Organization. It is an
organization for trade opening. It is a forum for governments to negotiate trade
agreements. It is a place for them to settle trade disputes. It operates a system of trade
rules. Essentially, the WTO is a place where member governments try to sort out the trade
problems they face with each other.
The WTO was born out of negotiations, and everything the WTO does is the result of
negotiations. The bulk of the WTO’s current work comes from the 1986–94 negotiations called
the Uruguay Round and earlier negotiations under the General Agreement on Tariffs and Trade
(GATT). The WTO is currently the host to new negotiations, under the ‘Doha Development
Agenda’ launched in 2001.
Where countries have faced trade barriers and wanted them lowered, the negotiations have
helped to open markets for trade. But the WTO is not just about opening markets, and in some
circumstances its rules support maintaining trade barriers — for example, to protect consumers
or prevent the spread of disease.
At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading
nations. These documents provide the legal ground rules for international commerce. They are
essentially contracts, binding governments to keep their trade policies within agreed limits.
Although negotiated and signed by governments, the goal is to help producers of goods and
services, exporters, and importers conduct their business, while allowing governments to meet
social and environmental objectives.
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The system’s overriding purpose is to help trade flow as freely as possible — so long as there are
no undesirable side effects — because this is important for economic development and well-
being. That partly means removing obstacles. It also means ensuring that individuals, companies
and governments know what the trade rules are around the world, and giving them the
confidence that there will be no sudden changes of policy. In other words, the rules have to be
‘transparent’ and predictable.
Trade relations often involve conflicting interests. Agreements, including those painstakingly
negotiated in the WTO system, often need interpreting. The most harmonious way to settle these
differences is through some neutral procedure based on an agreed legal foundation. That is the
purpose behind the dispute settlement process written into the WTO agreements.
What we do
The WTO is run by its member governments. All major decisions are made by the membership
as a whole, either by ministers (who usually meet at least once every two years) or by their
ambassadors or delegates (who meet regularly in Geneva).
While the WTO is driven by its member states, it could not function without its Secretariat to
coordinate the activities. The Secretariat employs over 600 staff, and its experts — lawyers,
economists, statisticians and communications experts — assist WTO members on a daily basis to
ensure, among other things, that negotiations progress smoothly, and that the rules of
international trade are correctly applied and enforced.
Trade negotiations
The WTO agreements cover goods, services and intellectual property. They spell out the
principles of liberalization, and the permitted exceptions. They include individual countries’
commitments to lower customs tariffs and other trade barriers, and to open and keep open
services markets. They set procedures for settling disputes. These agreements are not static; they
are renegotiated from time to time and new agreements can be added to the package. Many are
now being negotiated under the Doha Development Agenda, launched by WTO trade ministers
in Doha, Qatar, in November 2001.
Implementation and monitoring

WTO agreements require governments to make their trade policies transparent by notifying the
WTO about laws in force and measures adopted. Various WTO councils and committees seek to
ensure that these requirements are being followed and that WTO agreements are being properly
implemented. All WTO members must undergo periodic scrutiny of their trade policies and
practices, each review containing reports by the country concerned and the WTO Secretariat.
Dispute settlement
The WTO’s procedure for resolving trade quarrels under the Dispute Settlement Understanding
is vital for enforcing the rules and therefore for ensuring that trade flows smoothly. Countries
bring disputes to the WTO if they think their rights under the agreements are being infringed.
Judgements by specially appointed independent experts are based on interpretations of the
agreements and individual countries’ commitments.
Building trade capacity

WTO agreements contain special provision for developing countries, including longer time
periods to implement agreements and commitments, measures to increase their trading
opportunities, and support to help them build their trade capacity, to handle disputes and to
implement technical standards. The WTO organizes hundreds of technical cooperation missions
to developing countries annually. It also holds numerous courses each year in Geneva for
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government officials. Aid for Trade aims to help developing countries develop the skills and
infrastructure needed to expand their trade.
Outreach
The WTO maintains regular dialogue with non-governmental organizations, parliamentarians,
other international organizations, the media and the general public on various aspects of the
WTO and the ongoing Doha negotiations, with the aim of enhancing cooperation and increasing
awareness of WTO activities.
Functions:
 Administering WTO trade agreements

 Forum for trade negotiations
 Handling trade disputes
 Monitoring national trade policies
 Technical assistance and training for developing countries
 Cooperation with other international organizations
What we stand for (Principles)

The WTO agreements are lengthy and complex because they are legal texts covering a wide
range of activities. But a number of simple, fundamental principles run throughout all of these
documents. These principles are the foundation of the multilateral trading system.
Non-discrimination
A country should not discriminate between its trading partners and it should not discriminate
between its own and foreign products, services or nationals.
More open
Lowering trade barriers is one of the most obvious ways of encouraging trade; these barriers
include customs duties (or tariffs) and measures such as import bans or quotas that restrict
quantities selectively.
Predictable and transparent

Foreign companies, investors and governments should be confident that trade barriers should not
be raised arbitrarily. With stability and predictability, investment is encouraged, jobs are created
and consumers can fully enjoy the benefits of competition — choice and lower prices.
More competitive
Discouraging ‘unfair’ practices, such as export subsidies and dumping products at below cost to
gain market share; the issues are complex, and the rules try to establish what is fair or unfair, and
how governments can respond, in particular by charging additional import duties calculated to
compensate for damage caused by unfair trade.
More beneficial for less developed countries

Giving them more time to adjust, greater flexibility and special privileges; over three-quarters of
WTO members are developing countries and countries in transition to market economies. The
WTO agreements give them transition periods to adjust to the more unfamiliar and, perhaps,
difficult WTO provisions.
Protect the environment

The WTO’s agreements permit members to take measures to protect not only the environment
but also public health, animal health and plant health. However, these measures must be applied
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in the same way to both national and foreign businesses. In other words, members must not use
environmental protection measures as a means of disguising protectionist policies.
Overview
The WTO provides a forum for negotiating agreements aimed at reducing obstacles to
international trade and ensuring a level playing field for all, thus contributing to economic
growth and development. The WTO also provides a legal and institutional framework for the
implementation and monitoring of these agreements, as well as for settling disputes arising from
their interpretation and application. The current body of trade agreements comprising the WTO
consists of 16 different multilateral agreements (to which all WTO members are parties) and two
different plurilateral agreements (to which only some WTO members are parties).
Over the past 60 years, the WTO, which was established in 1995, and its predecessor
organization the GATT have helped to create a strong and prosperous international trading
system, thereby contributing to unprecedented global economic growth. The WTO currently
has 164 members, of which 117 are developing countries or separate customs territories. WTO
activities are supported by a Secretariat of some 700 staff, led by the WTO Director-General.
The Secretariat is located in Geneva, Switzerland, and has an annual budget of approximately
CHF 200 million ($180 million, €130 million). The three official languages of the WTO are
English, French and Spanish.
Decisions in the WTO are generally taken by consensus of the entire membership. The highest
institutional body is the Ministerial Conference, which meets roughly every two years.
A General Council conducts the organization's business in the intervals between Ministerial
Conferences. Both of these bodies comprise all members. Specialised subsidiary bodies
(Councils, Committees, Sub-committees), also comprising all members, administer and monitor
the implementation by members of the various WTO agreements.
More specifically, the WTO's main activities are:

— negotiating the reduction or elimination of obstacles to trade (import tariffs, other barriers to
trade) and agreeing on rules governing the conduct of international trade (e.g. antidumping,
subsidies, product standards, etc.)
— administering and monitoring the application of the WTO's agreed rules for trade in goods,
trade in services, and trade-related intellectual property rights
— monitoring and reviewing the trade policies of our members, as well as ensuring transparency
of regional and bilateral trade agreements
— settling disputes among our members regarding the interpretation and application of the
agreements
— building capacity of developing country government officials in international trade matters
— assisting the process of accession of some 30 countries who are not yet members of the
organization
— conducting economic research and collecting and disseminating trade data in support of the
WTO's other main activities
— explaining to and educating the public about the WTO, its mission and its activities.
The WTO's founding and guiding principles remain the pursuit of open borders, the guarantee of
most-favoured-nation principle and non-discriminatory treatment by and among members, and a
commitment to transparency in the conduct of its activities. The opening of national markets to
international trade, with justifiable exceptions or with adequate flexibilities, will encourage and
contribute to sustainable development, raise people's welfare, reduce poverty, and foster peace
and stability. At the same time, such market opening must be accompanied by sound domestic
and international policies that contribute to economic growth and development according to each
member's needs and aspirations.
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Organs and Working of WTO
The WTO is run by its member governments. All major decisions are made by the membership
as a whole, either by ministers (who meet at least once every two years) or by their ambassadors
or delegates (who meet regularly in Geneva). Decisions are normally taken by consensus.
In this respect, the WTO is different from some other international organizations such as the
World Bank and International Monetary Fund. In the WTO, power is not delegated to a board of
directors or the organization’s head.
When WTO rules impose disciplines on countries’ policies, that is the outcome of negotiations
among WTO members. The rules are enforced by the members themselves under agreed
procedures that they negotiated, including the possibility of trade sanctions. But those sanctions
are imposed by member countries, and authorized by the membership as a whole. This is quite
different from other agencies whose bureaucracies can, for example, influence a country’s policy
by threatening to withhold credit.
Reaching decisions by consensus among some 150 members can be difficult. Its main advantage
is that decisions made this way are more acceptable to all members. And despite the difficulty,
some remarkable agreements have been reached. Nevertheless, proposals for the creation of a
smaller executive body — perhaps like a board of directors each representing different groups of
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countries — are heard periodically. But for now, the WTO is a member-driven, consensus-based
organization.
Highest authority: the Ministerial Conference

So, the WTO belongs to its members. The countries make their decisions through various
councils and committees, whose membership consists of all WTO members. Topmost is the
ministerial conference which has to meet at least once every two years. The Ministerial
Conference can take decisions on all matters under any of the multilateral trade agreements.
Second level: General Council in three guises

Day-to-day work in between the ministerial conferences is handled by three bodies:
The General Council
The Dispute Settlement Body
The Trade Policy Review Body
All three are in fact the same — the Agreement Establishing the WTO states they are all the
General Council, although they meet under different terms of reference. Again, all three consist
of all WTO members. They report to the Ministerial Conference.
The General Council acts on behalf of the Ministerial Conference on all WTO affairs. It meets as
the Dispute Settlement Body and the Trade Policy Review Body to oversee procedures
for settling disputes between members and to analyse members’ trade policies.
Third level: councils for each broad area of trade, and more
Three more councils, each handling a different broad area of trade, report to the General Council:
The Council for Trade in Goods (Goods Council)
The Council for Trade in Services (Services Council)
The Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council)
As their names indicate, the three are responsible for the workings of the WTO agreements
dealing with their respective areas of trade. Again they consist of all WTO members. The three
also have subsidiary bodies (see below).
Six other bodies report to the General Council. The scope of their coverage is smaller, so they
are “committees”. But they still consist of all WTO members. They cover issues such as trade
and development, the environment, regional trading arrangements, and administrative issues. The
Singapore Ministerial Conference in December 1996 decided to create new working groups to
look at investment and competition policy, transparency in government procurement, and trade
facilitation.
Two more subsidiary bodies dealing with the plurilateral agreements (which are not signed by all
WTO members) keep the General Council informed of their activities regularly.
Fourth level: down to the nitty-gritty

Each of the higher level councils has subsidiary bodies. The Goods Council has 11 committees
dealing with specific subjects (such as agriculture, market access, subsidies, anti-dumping
measures and so on). Again, these consist of all member countries. Also reporting to the Goods
Council is the Textiles Monitoring Body, which consists of a chairman and 10 members acting in
their personal capacities, and groups dealing with notifications (governments informing the
WTO about current and new policies or measures) and state trading enterprises.
The Services Council’s subsidiary bodies deal with financial services, domestic regulations,
GATS rules and specific commitments.
At the General Council level, the Dispute Settlement Body also has two subsidiaries: the dispute
settlement “panels” of experts appointed to adjudicate on unresolved disputes, and the Appellate
Body that deals with appeals.
67
‘HODs’ and other bods: the need for informality
Important breakthroughs are rarely made in formal meetings of these bodies, least of all in the
higher level councils. Since decisions are made by consensus, without voting, informal
consultations within the WTO play a vital role in bringing a vastly diverse membership round to
an agreement.
One step away from the formal meetings are informal meetings that still include the full
membership, such as those of the Heads of Delegations (HOD). More difficult issues have to be
thrashed out in smaller groups. A common recent practice is for the chairperson of a negotiating
group to attempt to forge a compromise by holding consultations with delegations individually,
in twos or threes, or in groups of 20-30 of the most interested delegations.
These smaller meetings have to be handled sensitively. The key is to ensure that everyone is kept
informed about what is going on (the process must be “transparent”) even if they are not in a
particular consultation or meeting, and that they have an opportunity to participate or provide
input (it must be “inclusive”).
One term has become controversial, but more among some outside observers than among
delegations. The “Green Room” is a phrase taken from the informal name of the director-
general’s conference room. It is used to refer to meetings of 20–40 delegations, usually at the
level of heads of delegations. These meetings can take place elsewhere, such as at Ministerial
Conferences, and can be called by the minister chairing the conference as well as the director-
general. Similar smaller group consultations can be organized by the chairs of committees
negotiating individual subjects, although the term Green Room is not usually used for these.
In the past delegations have sometimes felt that Green Room meetings could lead to
compromises being struck behind their backs. So, extra efforts are made to ensure that the
process is handled correctly, with regular reports back to the full membership.
The way countries now negotiate has helped somewhat. In order to increase their bargaining
power, countries have formed coalitions. In some subjects such as agriculture virtually all
countries are members of at least one coalition — and in many cases, several coalitions. This
means that all countries can be represented in the process if the coordinators and other key
players are present. The coordinators also take responsibility for both “transparency” and
“inclusiveness” by keeping their coalitions informed and by taking the positions negotiated
within their alliances.
In the end, decisions have to be taken by all members and by consensus. The membership as a
whole would resist attempts to impose the will of a small group. No one has been able to find an
alternative way of achieving consensus on difficult issues, because it is virtually impossible for
members to change their positions voluntarily in meetings of the full membership.
Market access negotiations also involve small groups, but for a completely different reason. The
final outcome is a multilateral package of individual countries’ commitments, but those
commitments are the result of numerous bilateral, informal bargaining sessions, which depend on
individual countries’ interests. (Examples include the traditional tariff negotiations, and market
access talks in services.)
So, informal consultations in various forms play a vital role in allowing consensus to be reached,
but they do not appear in organization charts, precisely because they are informal.
They are not separate from the formal meetings, however. They are necessary for making formal
decisions in the councils and committees. Nor are the formal meetings unimportant. They are the
forums for exchanging views, putting countries’ positions on the record, and ultimately for
confirming decisions. The art of achieving agreement among all WTO members is to strike an
68
appropriate balance, so that a breakthrough achieved among only a few countries can be
acceptable to the rest of the membership.
- Settlement of Disputes under WTO set up

A unique contribution
Dispute settlement is the central pillar of the multilateral trading system, and the WTO’s unique
contribution to the stability of the global economy. Without a means of settling disputes, the
rules-based system would be less effective because the rules could not be enforced. The WTO’s
procedure underscores the rule of law, and it makes the trading system more secure and
predictable. The system is based on clearly-defined rules, with timetables for completing a case.
First rulings are made by a panel and endorsed (or rejected) by the WTO’s full membership.
Appeals based on points of law are possible.
However, the point is not to pass judgement. The priority is to settle disputes, through
consultations if possible. By January 2008, only about 136 of the nearly 369 cases had reached
the full panel process. Most of the rest have either been notified as settled “out of court” or
remain in a prolonged consultation phase — some since 1995.
Principles: equitable, fast, effective, mutually acceptable

Disputes in the WTO are essentially about broken promises. WTO members have agreed that if
they believe fellow-members are violating trade rules, they will use the multilateral system of
settling disputes instead of taking action unilaterally. That means abiding by the agreed
procedures, and respecting judgements.
A dispute arises when one country adopts a trade policy measure or takes some action that one or
more fellow-WTO members considers to be breaking the WTO agreements, or to be a failure to
live up to obligations. A third group of countries can declare that they have an interest in the case
and enjoy some rights.
A procedure for settling disputes existed under the old GATT, but it had no fixed timetables,
rulings were easier to block, and many cases dragged on for a long time inconclusively. The
Uruguay Round agreement introduced a more structured process with more clearly defined
stages in the procedure. It introduced greater discipline for the length of time a case should take
to be settled, with flexible deadlines set in various stages of the procedure. The agreement
emphasizes that prompt settlement is essential if the WTO is to function effectively. It sets out in
considerable detail the procedures and the timetable to be followed in resolving disputes. If a
case runs its full course to a first ruling, it should not normally take more than about one year —
15 months if the case is appealed. The agreed time limits are flexible, and if the case is
considered urgent (e.g. if perishable goods are involved), it is accelerated as much as possible.
The Uruguay Round agreement also made it impossible for the country losing a case to block the
adoption of the ruling. Under the previous GATT procedure, rulings could only be adopted by
consensus, meaning that a single objection could block the ruling. Now, rulings are automatically
adopted unless there is a consensus to reject a ruling — any country wanting to block a ruling
has to persuade all other WTO members (including its adversary in the case) to share its view.
Although much of the procedure does resemble a court or tribunal, the preferred solution is for
the countries concerned to discuss their problems and settle the dispute by themselves. The first
stage is therefore consultations between the governments concerned, and even when the case has
progressed to other stages, consultation and mediation are still always possible.
How long to settle a dispute?back to top
These approximate periods for each stage of a dispute settlement procedure are
target figures — the agreement is flexible. In addition, the countries can settle their
dispute themselves at any stage. Totals are also approximate.
69
60 days Consultations, mediation, etc
45 days Panel set up and panellists appointed
6 months Final panel report to parties
3 weeks Final panel report to WTO members
60 days Dispute Settlement Body adopts report (if no appeal)
Total = 1 year (without appeal)
60-90 days Appeals report
30 days Dispute Settlement Body adopts appeals report
Total = 1y 3m (with appeal)
How are disputes settled?

Settling disputes is the responsibility of the Dispute Settlement Body (the General Council in
another guise), which consists of all WTO members. The Dispute Settlement Body has the sole
authority to establish “panels” of experts to consider the case, and to accept or reject the panels’
findings or the results of an appeal. It monitors the implementation of the rulings and
recommendations, and has the power to authorize retaliation when a country does not comply
with a ruling.
First stage: consultation (up to 60 days). Before taking any other actions the countries in
dispute have to talk to each other to see if they can settle their differences by themselves. If that
fails, they can also ask the WTO director-general to mediate or try to help in any other way.
Second stage: the panel (up to 45 days for a panel to be appointed, plus 6 months for the panel
to conclude). If consultations fail, the complaining country can ask for a panel to be appointed.
The country “in the dock” can block the creation of a panel once, but when the Dispute
Settlement Body meets for a second time, the appointment can no longer be blocked (unless
there is a consensus against appointing the panel).
Officially, the panel is helping the Dispute Settlement Body make rulings or recommendations.
But because the panel’s report can only be rejected by consensus in the Dispute Settlement Body,
its conclusions are difficult to overturn. The panel’s findings have to be based on the agreements
cited.
The panel’s final report should normally be given to the parties to the dispute within six months.
In cases of urgency, including those concerning perishable goods, the deadline is shortened to
three months.
The agreement describes in some detail how the panels are to work. The main stages are:
Before the first hearing: each side in the dispute presents its case in writing to the panel.
First hearing: the case for the complaining country and defence: the complaining country (or
countries), the responding country, and those that have announced they have an interest in the
dispute, make their case at the panel’s first hearing.
Rebuttals: the countries involved submit written rebuttals and present oral arguments at the
panel’s second meeting.
Experts: if one side raises scientific or other technical matters, the panel may consult experts
or appoint an expert review group to prepare an advisory report.
First draft: the panel submits the descriptive (factual and argument) sections of its report to the
two sides, giving them two weeks to comment. This report does not include findings and
conclusions.
70
Interim report: The panel then submits an interim report, including its findings and
conclusions, to the two sides, giving them one week to ask for a review.
Review: The period of review must not exceed two weeks. During that time, the panel may
hold additional meetings with the two sides.
Final report: A final report is submitted to the two sides and three weeks later, it is circulated
to all WTO members. If the panel decides that the disputed trade measure does break a WTO
agreement or an obligation, it recommends that the measure be made to conform with WTO
rules. The panel may suggest how this could be done.
The report becomes a ruling: The report becomes the Dispute Settlement Body’s ruling or
recommendation within 60 days unless a consensus rejects it. Both sides can appeal the report
(and in some cases both sides do).
Appeals
Either side can appeal a panel’s ruling. Sometimes both sides do so. Appeals have to be based on
points of law such as legal interpretation — they cannot reexamine existing evidence or examine
new issues.
Each appeal is heard by three members of a permanent seven-member Appellate Body set up by
the Dispute Settlement Body and broadly representing the range of WTO membership. Members
of the Appellate Body have four-year terms. They have to be individuals with recognized
standing in the field of law and international trade, not affiliated with any government.
The appeal can uphold, modify or reverse the panel’s legal findings and conclusions. Normally
appeals should not last more than 60 days, with an absolute maximum of 90 days.
The Dispute Settlement Body has to accept or reject the appeals report within 30 days — and
rejection is only possible by consensus.
The case has been decided: what next?

Go directly to jail. Do not pass Go, do not collect … . Well, not exactly. But the sentiments
apply. If a country has done something wrong, it should swiftly correct its fault. And if it
continues to break an agreement, it should offer compensation or face a suitable response that
has some bite — although this is not actually a punishment: it’s a “remedy”, the ultimate goal
being for the country to comply with the ruling.
The priority is for the losing “defendant” to bring its policy into line with the ruling or
recommendations, and it is given time to do this. The dispute settlement agreement stresses that
“prompt compliance with recommendations or rulings of the DSB [Dispute Settlement Body] is
essential in order to ensure effective resolution of disputes to the benefit of all Members”.
If the country that is the target of the complaint loses, it must follow the recommendations of the
panel report or the appeals report. It must state its intention to do so at a Dispute Settlement
Body meeting held within 30 days of the report’s adoption. If complying with the
recommendation immediately proves impractical, the member will be given a “reasonable period
of time” to do so. If it fails to act within this period, it has to enter into negotiations with the
complaining country (or countries) in order to determine mutually-acceptable compensation —
for instance, tariff reductions in areas of particular interest to the complaining side.
If after 20 days, no satisfactory compensation is agreed, the complaining side may ask the
Dispute Settlement Body for permission to retaliate (to “suspend concessions or other
obligations”). This is intended to be temporary, to encourage the other country to comply. It
could for example take the form of blocking imports by raising import duties on products from
the other country above agreed limits to levels so high that the imports are too expensive to sell
— within certain limits. The Dispute Settlement Body must authorize this within 30 days after
the “reasonable period of time” expires unless there is a consensus against the request.
In principle, the retaliation should be in the same sector as the dispute. If this is not practical or if
it would not be effective, it can be in a different sector of the same agreement. In turn, if this is
not effective or practicable and if the circumstances are serious enough, the action can be taken
under another agreement. The objective is to minimize the chances of actions spilling over into
unrelated sectors while at the same time allowing the actions to be effective.
71
In any case, the Dispute Settlement Body monitors how adopted rulings are implemented.
Any outstanding case remains on its agenda until the issue is resolved.
Special and Differential Provisions in WTO for LDCs

WTO Agreement S&D provisions for LDCs
Understanding on the Balance- Simplified consultation procedures may be used.

of-Payments Provisions of the
General Agreement on Tariffs
and Trade 1994
Agreement on Agriculture LDCs are exempt from undertaking reduction
commitments.
Application of Sanitary and LDCs had the possibility of delaying for up to five years,
Phytosanitary Measures the implementation of the provisions of the Agreement
with respect to their sanitary and phytosanitary measures
affecting imports.
Agreement on Textiles and LDCs are accorded significantly more favourable
Clothing treatment than other groups in the application of the
transitional safeguard.
Agreement on Technical Particular account to be taken of LDCs in the provision of
Barriers to Trade technical assistance and in the preparation of technical
regulations.
Trade-related Investment LDCs had a seven-year transitional period to eliminate
Measures (TRIMS) TRIMS that are inconsistent with the Agreement.
Agreement on Import Licensing In allocating non-automatic licences, special consideration
to be given to importers who import products from LDCs.
Agreement on Subsides and LDCs are exempted from prohibition on export subsidies.
Countervailing Measures Prohibition on subsidies that are contingent upon export
performance is not applicable to LDCs for eight years.
General Agreement on Trade in Special priority given to LDCs in implementing Article IV
Services (GATS) of GATS (Increasing Participation of Developing
Countries) and particular account to be taken of the
difficulties encountered by LDCs in accepting negotiated
commitments, owing to their particular needs. Special
consideration is given to LDCs with regard to encouraging
foreign suppliers to assist in technology transfers, training
and other activities for developing telecommunications.
Agreement on Trade-related Delay for up to 10 years in implementing most of TRIPS
Aspects of Intellectual Property obligations. Possibility of extension following duly
Rights (TRIPS) motivated request. Members to provide incentives for
encouraging the transfer of technology to LDCs.
Understanding on Rules and Particular consideration should be given to the special
Procedures Governing the situation of LDCs in all stages of a dispute involving an
Settlement of Disputes (DSU) LDC. Members to exercise due restraint in raising matters
involving an LDC. LDCs may request use of the good
offices of the Director-General or the Chairman of the
DSB.
Trade Policy Review Greater flexibility given to LDCs concerning the
Mechanism (TPRM) frequency of their reviews. Particular attention given to
LDCs in the provision of technical assistance by the
Secretariat.
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A. INTRODUCTION - THE CONCEPT OF SPECIAL AND DIFFERENTIAL
TREATMENT After the end of the Second World War the main trading nations of that
time wanted to create an International Trade Organisation (ITO). The effort was stillborn
and, as a second best to a new international institution, the General Agreement on Tariffs
and Trade (GATT) was concluded in 1947 by 11 industrialised and 12 developing
countries (most of them were either not yet independent or had only just gained
independence). 1 Already in the negotiations for an ITO there were doubts that all
countries could be treated equally in international trade, namely that tariff reductions and
other concessions offered by a country should always be reciprocated by the negotiating
partner country. Brazil, supported by other developing countries, thought that the central
aim of a global trade organization should be to “encourage and promote the industrial and
economic development of member countries, particularly of those whose development is
less advanced”2 .
The original GATT does not mention any exception to the basic rule of reciprocity nor
other ways to treat developing countries “especially and differentially”. 3 The call for
special and differential treatment (S&D) became stronger after the accession of a number
of newly independent and often small developing countries in the late 1950s and the early
1960s. It was quite obvious that they could not compete in international trade with
industrial powerhouses. Non-reciprocity is described for the first time in Part IV of
GATT, introduced in 1965: “The developed contracting parties do not expect reciprocity
for commitments made by them in trade negotiations to reduce or remove tariffs and
other barriers to the trade of less-developed contracting parties.” (Article XXXVI.8 of
GATT)
Since 1965, other forms of SDT have also become part of global trade policy. For
instance, the 1979 Enabling Clause Tariff allows the granting of preferences by
developed countries to developing countries (which otherwise would be a violation of the
MFN principle). The Uruguay Round agreement contains a wide variety of different
types of S&D in order to appease developing countries. In the Uruguay Round,
developing countries had to accept all agreements including the plurilateral agreements,
the ‘Codes’ that they were formerly not part of. Consequently, some provisions in
GATT/WTO agreements allow for postponing a developing country’s trade
commitments; in some cases WTO notification obligations have been simplified.
(Limited) exceptions are possible to the protection of intellectual property rights and
other obligations. Low-income countries can continue export subsidies for non-
agricultural goods. Positive efforts by developed members are called for to take into
account the interests of developing countries and to provide technical assistance.
The WTO Secretariat distinguishes six (6) types of S&D provisions:4
1. Provisions aimed at increasing the trade opportunities of developing country Members;
2. Provisions under which WTO Members should safeguard the interests of developing
country Members;
3. Flexibility of commitments, of action, and use of policy instruments;
4. Transitional time periods;
5. Technical assistance;
6. Provisions relating to LDC Members.
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UNIT X UNCTAD
The United Nations Conference on Trade and Development (UNCTAD) was established in
1964 as a permanent intergovernmental body.
UNCTAD is the principal organ of the United Nations General Assembly dealing with trade,
investment, and development issues. The organization's goals are to: "maximize
the trade, investment and development opportunities of developing countries and assist them in
their efforts to integrate into the world economy on an equitable basis."[1]
The primary objective of UNCTAD is to formulate policies relating to all aspects of
development including trade, aid, transport, finance and technology. The conference ordinarily
meets once in four years; the permanent secretariat is in Geneva.
One of the principal achievements of UNCTAD (1964) has been to conceive and implement
the Generalised System of Preferences (GSP). It was argued in UNCTAD that to promote
exports of manufactured goods from developing countries, it would be necessary to offer special
tariff concessions to such exports. Accepting this argument, the developed countries formulated
the GSP scheme under which manufacturers' exports and some agricultural goods from the
developing countries enter duty-free or at reduced rates in the developed countries. Since imports
of such items from other developed countries are subject to the normal rates of duties, imports of
the same items from developing countries would enjoy a competitive advantage.
The creation of UNCTAD in 1964 was based on concerns of developing countries over the
international market, multi-national corporations, and great disparity between developed nations
and developing nations. The United Nations Conference on Trade and Development was
established to provide a forum where the developing countries could discuss the problems
relating to their economic development. The organisation grew from the view that existing
institutions like GATT (now replaced by the World Trade Organization, WTO), the International
Monetary Fund (IMF), and World Bank were not properly organized to handle the particular
problems of developing countries. Later, in the 1970s and 1980s, UNCTAD was closely
associated with the idea of a New International Economic Order (NIEO).
The first UNCTAD conference took place in Geneva in 1964, the second in New Delhi in 1968,
the third in Santiago in 1972, fourth in Nairobi in 1976, the fifth in Manila in 1979, the sixth
in Belgrade in 1983, the seventh in Geneva in 1987, the eighth in Cartagena in 1992, the ninth
at Johannesburg (South Africa) in 1996, the tenth in Bangkok (Thailand) in 2000, the eleventh
in São Paulo (Brazil) in 2004, the twelfth in Accra in 2008, the thirteenth in Doha (Qatar) in
2012 and the fourteenth in Nairobi (Kenya) in 2016.
Currently, UNCTAD has 194 member states and is headquartered in Geneva, Switzerland.
UNCTAD has 400 staff members and a bi-annual (2010–2011) regular budget of $138 million in
core expenditures and $72 million in extra-budgetary technical assistance funds. It is a member
of the United Nations Development Group.[2]There are non-governmental organizations
participating in the activities of UNCTAD.
74
UNIT XI European Union
The European Union (EU) is a political and economic union of 28 member states that are
located primarily in Europe. It has an area of 4,475,757 km2 (1,728,099 sq mi), and an estimated
population of over 510 million. The EU has developed an internal single market through a
standardised system of laws that apply in all member states. EU policies aim to ensure the free
movement of people, goods, services, and capital within the internal market,[11] enact legislation
in justice and home affairs, and maintain common policies on trade,[12] agriculture,[13] fisheries,
and regional development.[14] Within the Schengen Area, passport controls have been
abolished.[15] A monetary union was established in 1999 and came into full force in 2002, and is
composed of 19 EU member states which use the euro currency.
The EU traces its origins from the European Coal and Steel Community (ECSC) and
the European Economic Community (EEC), established, respectively, by the 1951 Treaty of
Paris and 1957 Treaty of Rome. The original members of what came to be known as
the European Communities, were the Inner Six; Belgium, France, Italy, Luxembourg, the
Netherlands and West Germany. The Communities and its successors have grown in size by the
accession of new member states and in power by the addition of policy areas to its remit. While
no member state has left the EU or its antecedent organisations, the United
Kingdom enacted the result of a membership referendum in June 2016 and is currently
negotiating its withdrawal. The Maastricht Treaty established the European Union in 1993 and
introduced European citizenship.[16] The latest major amendment to the constitutional basis of the
EU, the Treaty of Lisbon, came into force in 2009.
The European Union accumulated a higher portion of GDP as a form of foreign aid [clarification
needed]
than any other economic union.[17] Covering 7.3% of the world population,[18] the EU in
2016 generated a nominal gross domestic product (GDP) of 16.477 trillion US dollars,
constituting approximately 22.2% of global nominal GDP and 16.9% when measured in terms
of purchasing power parity.[citation needed] Additionally, 27 out of 28 EU countries have a very
high Human Development Index, according to the United Nations Development Programme. In
2012, the EU was awarded the Nobel Peace Prize.[19] Through the Common Foreign and Security
Policy, the EU has developed a role in external relations and defence. The union maintains
permanent diplomatic missions throughout the world and represents itself at the United Nations,
the World Trade Organization, the G7, and the G20. Because of its global influence, the
European Union has been described as an emerging superpower.[
History
Main articles: History of the European Union and History of Europe
Background
Main article: Ideas of European unity before 1945
“ A day will come when all nations on our continent will form a European brotherhood ... A day will come
States of America and the United States of Europe face to face, reaching out for each other across the seas.
Victor Hugo, International Peace Congress, 1849.
After the fall of Rome in 476, several European States claimed to be the successors
(translatioimperii) of the defunct Empire. The Frankish Empire (481–843) of Charlemagne as
well as the Holy Roman Empire (962–1806) were attempts to resurrect the Empire in the West.
In the Eastern regions of Europe, the Russian Tsardom (1547–1721) declared Moscow to
be Third Rome as inheritor of the Byzantine tradition after the fall of the second Rome,
Constantinople, in 1453.[21][22]
75
Ideals of European unity re-emerged during the 19th century after the demise of Napoléon's
Empire (1804–1815) and the outcomes of the Congress of Vienna, in the writings
of WojciechJastrzębowski[23], Giuseppe Mazzini or Theodore de KorwinSzymanowski.[24] The
term United States of Europe (French: États-Unis d'Europe) was famously used at that time
by Victor Hugo during a speech at the International Peace Congress held in Paris in 1849, when
he favoured the creation of "a supreme, sovereign senate, which will be to Europe what
parliament is to England".[25]
One of the first to imagine of a modern union of the European nations was Richard von
Coudenhove-Kalergi, who wrote the Pan-Europa manifesto in 1923 before founding the Pan-
Europa Movement.[26] His ideas influenced his contemporaries, of whom the Prime Minister of
France Aristide Briand. In 8 September 1929, the later gave a famous speech in favour of a
European Union before the assembly of the League of Nations, ancestor of the United
Nations[27].
Preliminary (1945–57)
After World War II, European integration was seen as an antidote to the extreme nationalism
which had devastated the continent.[28] In a speech delivered on 19 September 1946 at
the University of Zürich, Switzerland, Winston Churchill postulated the emerging of a United
States of Europe during the 20th century.[29] The 1948 Hague Congress was a pivotal moment in
European federal history, as it led to the creation of the European Movement International and of
the College of Europe, where Europe's future leaders would live and study together.[30] 1952 saw
the creation of the European Coal and Steel Community, which was declared to be "a first step in
the federation of Europe."[31] The supporters of the Community included Alcide De Gasperi, Jean
Monnet, Robert Schuman, and Paul-Henri Spaak.[32] These men and others are officially credited
as the Founding fathers of the European Union.
Treaty of Rome (1957–92)
In 1957, Belgium, France, Italy, Luxembourg, the Netherlands and West Germany signed
the Treaty of Rome, which created the European Economic Community (EEC) and established
a customs union. They also signed another pact creating the European Atomic Energy
Community (Euratom) for co-operation in developing nuclear energy. Both treaties came into
force in 1958.[32]
The EEC and Euratom were created separately from the ECSC, although they shared the same
courts and the Common Assembly. The EEC was headed by Walter Hallstein(Hallstein
Commission) and Euratom was headed by Louis Armand (Armand Commission) and
then Étienne Hirsch. Euratom was to integrate sectors in nuclear energy while the EEC would
develop a customs union among members.[33][34]
During the 1960s, tensions began to show, with France seeking to limit supranational power.
Nevertheless, in 1965 an agreement was reached and on 1 July 1967 the Merger Treaty created a
single set of institutions for the three communities, which were collectively referred to as
the European Communities.[35][36] Jean Rey presided over the first merged Commission (Rey
Commission).[37]
In 1973, the Communities were enlarged to include Denmark (including Greenland, which
later left the Communities in 1985, following a dispute over fishing rights), Ireland, and
the United Kingdom.[38] Norway had negotiated to join at the same time, but Norwegian voters
rejected membership in a referendum. In 1979, the first direct elections to the European
Parliament were held.[39]
Greece joined in 1981, Portugal and Spain following in 1986.[40] In 1985, the Schengen
Agreement paved the way for the creation of open borders without passport controls between
76
most member states and some non-member states.[41] In 1986, the European flag began to be
used by the EEC[42] and the Single European Act was signed.
In 1990, after the fall of the Eastern Bloc, the former East Germany became part of the
Communities as part of a reunified Germany.[43] A close fiscal integration with the introduction
of the euro was not matched by institutional oversight making things more troubling. Attempts to
solve the problems and to make the EU more efficient and coherent had limited success. [44] With
further enlargement planned to include the former communist states of Central and Eastern
Europe, as well as Cyprus and Malta, the Copenhagen criteria for candidate members to join the
EU were agreed upon in June 1993. The expansion of the EU introduced a new level of
complexity and discord.[44]
Maastricht Treaty (1992–2007)
The European Union was formally established when the Maastricht Treaty—whose main
architects were Helmut Kohl and François Mitterrand—came into force on 1 November
1993.[16][45] The treaty also gave the name European Community to the EEC, even if it was
referred as such before the treaty. In 1995, Austria, Finland, and Sweden joined the EU.
In 2002, euro banknotes and coins replaced national currencies in 12 of the member states. Since
then, the eurozone has increased to encompass 19 countries. The euro currency became the
second largest reserve currency in the world. In 2004, the EU saw its biggest enlargement to
date when Cyprus, the Czech
Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia joined the
Union.[46]
Lisbon Treaty (2007–present)
In 2007, Bulgaria and Romania became EU members. The same year, Slovenia adopted the
euro,[46] followed in 2008 by Cyprus and Malta, by Slovakia in 2009, by Estonia in 2011,
by Latvia in 2014 and by Lithuania in 2015.
On 1 December 2009, the Lisbon Treaty entered into force and reformed many aspects of the
EU. In particular, it changed the legal structure of the European Union, merging the EU three
pillars system into a single legal entity provisioned with a legal personality, created a
permanent President of the European Council, the first of which was Herman Van Rompuy, and
strengthened the position of the High Representative of the Union for Foreign Affairs and
Security Policy.[47][48]
In 2012, the EU received the Nobel Peace Prize for having "contributed to the advancement of
peace and reconciliation, democracy, and human rights in Europe."[49][50] In 2013, Croatiabecame
the 28th EU member.[51]
From the beginning of the 2010s, the cohesion of the European Union has been tested by several
issues, including a debt crisis in some of the Eurozone countries, increasing migration from the
Middle East and the United Kingdom's withdrawal from the EU.[52] A referendum in the UK on
its membership of the European Union was held on 23 June 2016, with 51.9% of participants
voting to leave.[53] This is referred to in common parlance throughout Europe as Brexit. The UK
formally notified the European Council of its decision to leave on 29 March 2017 initiating
the formal withdrawal procedure for leaving the EU, committing the UK to leave the EU on 29
March 2019.
Structural evolution
Main article: Treaties of the European Union
77
The following timeline illustrates the integration that has led to the formation of the present
union, in terms of structural development driven by international treaties:
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Institutions
Main article: Institutions of the European Union
The EU operates through a hybrid system of supranational and intergovernmental decision-
making.[130][131]
EU policy is in general promulgated by EU directives, which are then implemented in
the domestic legislation of its member states, and EU regulations, which are immediately
enforceable in all member states. The EU's seven principal decision making bodies—known as
the Institutions of the European Union are:
 the European Council, which sets the general political directions and priorities of the
Union by gathering together its member states' heads of state/government (elected chief
executives). The conclusions of its summits (held at least quarterly) are adopted by
consensus.
 the European Commission, the "Guardian of the Treaties" consists of an executive
cabinet of public officials, led by an indirectly elected President. This College of
Commissioners manages and directs the Commission's permanent civil service. It turns the
consensus objectives of the European Council into legislative proposals.
 the Council of the European Union is an executive meeting of ministers of member states
governments' departments, which meets to amend, approve or reject proposed legislation
from the Commission. It forms the upper house of the EU's essentially bicameral legislature.
Its approval is required for any proposal to enter into law.
 the European Parliament consists of 751 directly elected representatives, forming the
EU's lower house of its bicameral legislature. It shares with the Council of the EU equal
79
legislative powers to amend, approve or reject Commission proposals for most areas of EU
legislation. Its powers are limited in areas where member states' view sovereignty to be of
primary concern (i.e. defence). It elects the Commission's President, must approve the
College of Commissioners, and may vote to remove them collectively from office.
 the Court of Justice of the European Union ensures the uniform application of EU law and
resolves disputes between EU institutions and member states, and against EU institutions on
behalf of individuals.
 the European Central Bank is responsible for monetary stability within member states.
 the European Court of Auditors investigates the proper management of finances within
both the EU entities and EU funding provided to its member states. As well as providing
oversight and advice, it can refer unresolved issues to the European Court of Justice to
arbitrate on any alleged irregularities.
As outlined in Title I of Part I of the consolidated Treaty on the Functioning of the European
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Unit XII Settlement of Disputes
- Arbitration, Judicial settlement, negotiation, good offices,
mediation, conciliation, or inquiry
Dispute resolution is the process of resolving disputes between parties. The term dispute
resolution may also be used interchangeably with conflict resolution, where conflict styles can be
used for different scenarios.
Methods[edit]
Methods of dispute resolution include:
 lawsuits (litigation)
 arbitration
 collaborative law
 mediation
 conciliation
 many types of negotiation
 facilitation
One could theoretically include violence or even war as part of this spectrum, but dispute
resolution practitioners do not usually do so; violence rarely ends disputes effectively, and
indeed, often only escalates them.
Dispute resolution processes fall into two major types:
1. Adjudicative processes, such as litigation or arbitration, in which a judge, jury or

arbitrator determines the outcome.
2. Consensual processes, such as collaborative law, mediation, conciliation, or negotiation,
in which the parties attempt to reach agreement.
Not all disputes, even those in which skilled intervention occurs, end in resolution.
Such intractable disputes form a special area in dispute resolution studies.[citation needed]
Dispute resolution is an important requirement in international trade, including negotiation,
mediation, arbitration and litigation.[1][full citation needed]
Judicial dispute resolution[edit]

The legal system provides resolutions for many different types of disputes. Some disputants will
not reach agreement through a collaborative process. Some disputes need the coercive power of
the state to enforce a resolution. Perhaps more importantly, many people want a professional
advocate when they become involved in a dispute, particularly if the dispute involves perceived
legal rights, legal wrongdoing, or threat of legal action against them.
The most common form of judicial dispute resolution is litigation. Litigation is initiated when
one party files suit against another. In the United States, litigation is facilitated by the
government within federal, state, and municipal courts. The proceedings are very formal and are
governed by rules, such as rules of evidence and procedure, which are established by the
legislature. Outcomes are decided by an impartial judge and/or jury, based on the factual
questions of the case and the application law. The verdict of the court is binding, not advisory;
however, both parties have the right to appeal the judgment to a higher court. Judicial dispute
resolution is typically adversarial in nature, for example, involving antagonistic parties or
opposing interests seeking an outcome most favorable to their position.
87
Retired judges or private lawyers often become arbitrators or mediators; however, trained and
qualified non-legal dispute resolution specialists form a growing body within the field
of alternative dispute resolution (ADR). In the United States, many states now have mediation or
other ADR programs annexed to the courts, to facilitate settlement of lawsuits.
Extrajudicial dispute resolution[edit]

Some use the term dispute resolution to refer only to alternative dispute resolution (ADR), that
is, extrajudicial processes such as arbitration, collaborative law, and mediation used to resolve
conflict and potential conflict between and among individuals, business entities, governmental
agencies, and (in the public international lawcontext) states. ADR generally depends on
agreement by the parties to use ADR processes, either before or after a dispute has arisen. ADR
has experienced steadily increasing acceptance and utilization because of a perception of greater
flexibility, costs below those of traditional litigation, and speedy resolution of disputes, among
other perceived advantages. However, some have criticized these methods as taking away the
right to seek redress of grievances in the courts, suggesting that extrajudicial dispute resolution
may not offer the fairest way for parties not in an equal bargaining relationship, for example in a
dispute between a consumer and a large corporation. In addition, in some circumstances,
arbitration and other ADR processes may become as expensive as litigation or more so.
# Arbitration
Arbitration, a form of alternative dispute resolution (ADR), is a way to resolve disputes outside
the courts. The dispute will be decided by one or more persons (the "arbitrators", "arbiters" or
"arbitral tribunal"), which renders the " arbitral award". An arbitral award is legally binding on
both sides and enforceable in the courts.[1]
Arbitration is often used for the resolution of commercial disputes, particularly in the context
of international commercial transactions. In certain countries such as the United States,
arbitration is also frequently employed in consumer and employment matters, where arbitration
may be mandated by the terms of employment or commercial contracts.
Arbitration can be either voluntary or mandatory (although mandatory arbitration can only come
from a statute or from a contract that is voluntarily entered into, in which the parties agree to
hold all existing or future disputes to arbitration, without necessarily knowing, specifically, what
disputes will ever occur) and can be either binding or non-binding. Non-binding arbitration is
similar to mediation in that a decision cannot be imposed on the parties. However, the principal
distinction is that whereas a mediator will try to help the parties find a middle ground on which
to compromise, the (non-binding) arbitrator remains totally removed from the settlement process
and will only give a determination of liability and, if appropriate, an indication of the quantum of
damages payable. By one definition arbitration is binding and non-binding arbitration is
therefore technically not arbitration.
Arbitration is a proceeding in which a dispute is resolved by an impartial adjudicator whose
decision the parties to the dispute have agreed, or legislation has decreed, will be final and
binding. There are limited rights of review and appeal of arbitration awards. Arbitration is not
the same as:
 judicial proceedings, although in some jurisdictions, court proceedings are sometimes

referred as arbitrations[2]
 alternative dispute resolution (ADR)[3]
 expert determination
 mediation (a form of settlement negotiation facilitated by a neutral third party)
88
Advantages and disadvantages[edit]
Parties often seek to resolve disputes through arbitration because of a number of perceived
potential advantages over judicial proceedings. Companies often require arbitration with their
customers, but prefer the advantages of courts in disputes with competitors:[4][not in citation given]
 In contrast to litigation, where one cannot "choose the judge",[5] arbitration allows the parties
to choose their own tribunal. This is especially useful when the subject matter of the dispute
is highly technical: arbitrators with an appropriate degree of expertise (for example, quantity
surveying expertise, in the case of a construction dispute, or expertise in commercial
property law, in the case of a real estate dispute[6]) can be chosen.
 Arbitration is often faster than litigation in court.[5]
 Arbitral proceedings and an arbitral award are generally non-public, and can be made
confidential[7]
 In arbitral proceedings the language of arbitration may be chosen, whereas in judicial
proceedings the official language of the country of the competent court will be automatically
applied.
 Because of the provisions of the New York Convention 1958, arbitration awards are
generally easier to enforce in other nations than court verdicts.
 In most legal systems there are very limited avenues for appeal of an arbitral award, which is
sometimes an advantage because it limits the duration of the dispute and any associated
liability.
Some of the disadvantages include:
 Arbitration agreements are sometimes contained in ancillary agreements, or in small print in

other agreements, and consumers and employees often do not know in advance that they
have agreed to mandatory binding pre-dispute arbitration by purchasing a product or taking a
job.
 If the arbitration is mandatory and binding, the parties waive their rights to access the courts
and to have a judge or jury decide the case.
 If the arbitrator or the arbitration forum depends on the corporation for repeat business, there
may be an inherent incentive to rule against the consumer or employee
 There are very limited avenues for appeal, which means that an erroneous decision cannot be
easily overturned.
 Although usually thought to be speedier, when there are multiple arbitrators on the panel,
juggling their schedules for hearing dates in long cases can lead to delays.
 In some legal systems, arbitration awards have fewer enforcement options than judgments;
although in the United States arbitration awards are enforced in the same manner as court
judgments and have the same effect.
 Arbitrators are generally unable to enforce interlocutory measures against a party, making it
easier for a party to take steps to avoid enforcement of member or a small group of members
in arbitration due to increasing legal fees, without explaining to the members the adverse
consequences of an unfavorable ruling.
 Discovery may be more limited in arbitration or entirely nonexistent.
 The potential to generate billings by attorneys may be less than pursuing the dispute through
trial.
 Unlike court judgments, arbitration awards themselves are not directly enforceable. A party
seeking to enforce an arbitration award must resort to judicial remedies, called an action to
"confirm" an award.
International agreements[edit]
By far the most important international instrument on arbitration law[citation needed] is the 1958 New
York Convention on Recognition and Enforcement of Foreign Arbitral Awards, usually simply
89
referred to as the "New York Convention". Virtually every significant commercial country is a
signatory, and only a handful of countries are not parties to the New York Convention.
Some other relevant international instruments are:
 The Geneva Protocol of 1923

 The Geneva Convention of 1927 [1]
 The European Convention of 1961
 The Washington Convention of 1965 (governing settlement of international investment
disputes)
 The Washington Convention (ICSID) of 1996 for investment arbitration
 The UNCITRAL Model Law on International Commercial Arbitration of 1985, (revised in
2006).[27]
 The UNCITRAL Arbitration Rules (providing a set of rules for an ad hoc arbitration)
# Judicial Settlement (Litigation)

A lawsuit (or suit in law[a]) is "a vernacular term for a suit, action, or cause instituted or
depending between two private persons in the courts of law."[1] A lawsuit is any proceeding by a
party or parties against another in a court of law.[2]
Sometimes, the term "lawsuit" is in reference to a civil action brought in a court of law in which
a plaintiff, a party who claims to have incurred loss as a result of a defendant's actions, demands
a legal or equitable remedy. The defendant is required to respond to the plaintiff's complaint. If
the plaintiff is successful, judgment is in the plaintiff's favor, and a variety of court orders may
be issued to enforce a right, award damages, or impose a temporary or permanent injunction to
prevent an act or compel an act. A declaratory judgment may be issued to prevent future legal
disputes.
A lawsuit may involve dispute resolution of private law issues between individuals, business
entities or non-profit organizations. A lawsuit may also enable the state to be treated as if it were
a private party in a civil case, as plaintiff, or defendant regarding an injury, or may provide the
state with a civil cause of action to enforce certain laws.
The conduct of a lawsuit is called litigation. The plaintiffs and defendants are
called litigants and the attorneys representing them are called litigators.[3] The
term litigation may also refer to criminal trial.
# Negotiation
Negotiation is a dialogue between two or more people or parties intended to reach a beneficial
outcome over one or more issues where a conflict exists with respect to at least one of these
issues. This beneficial outcome can be for all of the parties involved, or just for one or some of
them.
It is aimed to resolve points of difference, to gain advantage for an individual or collective, or to
craft outcomes to satisfy various interests. It is often conducted by putting forward a position and
making small concessions to achieve an agreement. The degree to which the negotiating
parties trust each other to implement the negotiated solution is a major factor in determining
whether negotiations are successful. In many cases, negotiation is not a zero-sum game, allowing
for cooperation to improve the results of the negotiation.
90
People negotiate daily, often without considering it a negotiation.[1][page needed] Negotiation occurs
in organizations, including businesses, non-profits, and within and between governments as well
as in sales and legal proceedings, and in personal situations such as marriage, divorce, parenting,
etc. Professional negotiators are often specialized, such as union negotiators, leverage buyout
negotiators, peace negotiator, or hostage negotiators. They may also work under other titles, such
as diplomats, legislators, or brokers.
# Good Offices
Good offices and mediation
Mediation and good offices are diplomatic methods of dispute settlement involving third parties. The
third party can be a single state or a group of states, an individual, an organ of a universal or
regional international organisation, or a joint body.
The good offices method is where the third party offers ‘good offices’ to the conflicting states to facilitate
dialogue and assist states towards peaceful settlement of the dispute. The third party offering good
offices must be acceptable to all the parties.497 Once the negotiations have started, the functions of
good offices are usually considered to be completed.498
Mediation involves more active third party participation in the negotiations. The mediator conducts the
negotiations between contending parties on the basis of proposals made by the mediator aimed at a
mutually acceptable compromise solution.499 Mediation may be set in motion either upon the initiative
of a third party whose offer to mediate is accepted by the parties to the dispute, or initiated by the parties
to the dispute themselves agreeing to mediation.500 The mediator’s role can involve communication,
clarification of issues, drafting of proposals, identifying areas of agreement between parties, and
elaboration of provisional arrangements to minimise contentious and propose alternate solutions.501 The
World Bank provided good offices and mediated the solution to the Indus River dispute, which resulted in
the negotiation of the 1960 Indus Waters Treaty. Another example of a mediated dispute is the Israeli–
Jordanian bilateral negotiations which were combined with informal discussions where American and
Russian diplomats acted as mediators which resulted in the 1994 Treaty of Peace between Israel and
Jordan.
# Mediation
Mediation is a dynamic, structured, interactive process where a neutral third party assists
disputing parties in resolving conflict through the use of specialized communication and
negotiation techniques. All participants in mediation are encouraged to actively participate in the
process. Mediation is a "party-centered" process in that it is focused primarily upon the needs,
rights, and interests of the parties. The mediator uses a wide variety of techniques to guide the
process in a constructive direction and to help the parties find their optimal solution. A mediator
is facilitative in that she/he manages the interaction between parties and facilitates open
communication. Mediation is also evaluative in that the mediator analyzes issues and relevant
norms ("reality-testing"), while refraining from providing prescriptive advice to the parties (e.g.,
"You should do... .").
Mediation, as used in law, is a form of alternative dispute resolution (ADR), a way of resolving
disputes between two or more parties with concrete effects. Typically, a third party, the mediator,
assists the parties to negotiate a settlement. Disputants may mediate disputes in a variety of
domains, such as commercial, legal, diplomatic, workplace, community and family matters.
91
The term "mediation" broadly refers to any instance in which a third party helps others reach
agreement. More specifically, mediation has a structure, timetable and dynamics that "ordinary"
negotiation lacks. The process is private and confidential, possibly enforced by law. Participation
is typically voluntary. The mediator acts as a neutral third party and facilitates rather than directs
the process. Mediation is becoming a more peaceful and internationally accepted solution in
order to end conflict. Mediation can be used to resolve disputes of any magnitude.
The term "mediation", however, due to language as well as national legal standards and
regulations is not identical in content in all countries but rather has specific connotations and
there are quite some differences between Anglo-Saxon definitions and other countries, especially
countries with a civil, statutory law tradition like Germany or Austria. [1][2]
Mediators use various techniques to open, or improve, dialogue and empathy between disputants,
aiming to help the parties reach an agreement. Much depends on the mediator's skill and training.
As the practice gained popularity, training programs, certifications and licensing followed,
producing trained, professional mediators committed to the discipline.
# Conciliation
Conciliation is an alternative dispute resolution (ADR) process whereby the parties to a dispute
use a conciliator, who meets with the parties both separately and together in an attempt to resolve
their differences. They do this by lowering tensions, improving communications, interpreting
issues, encouraging parties to explore potential solutions and assisting parties in finding a
mutually acceptable outcome.
Conciliation differs from arbitration in that the conciliation process, in and of itself, has no legal
standing, and the conciliator usually has no authority to seek evidence or call witnesses, usually
writes no decision, and makes no award.
Conciliation differs from mediation in that in conciliation, often the parties are in need of
restoring or repairing a relationship, either personal or business.
Conciliation Technique[edit]
A conciliator assists each of the parties to independently develop a list of all of their objectives
(the outcomes which they desire to obtain from the conciliation). The conciliator then has each of
the parties separately prioritize their own list from most to least important. He/She then goes
back and forth between the parties and encourages them to "give" on the objectives one at a time,
starting with the least important and working toward the most important for each party in turn.
The parties rarely place the same priorities on all objectives, and usually have some objectives
that are not listed by the other party. Thus the conciliator can quickly build a string of successes
and help the parties create an atmosphere of trust which the conciliator can continue to develop.
Most successful conciliators are highly skilled negotiators. Some conciliators operate under the
auspices of any one of several non-governmental entities, and for governmental agencies such as
the Federal Mediation and Conciliation Service in the United States.
# Inquiry
Inquiry and fact-finding are procedures specifically designed to produce an impartial finding of
disputed facts by engaging a third-party.507 The terms ‘inquiry’ and ‘fact finding’ have often
been used (sometimes interchangeably) for this type of procedure under which states refer
92
questions to a panel of experts (commission of inquiry or a fact-finding commission) for
investigation of factual or technical matters after diplomatic negotiations.508
Fact-finding and inquiry can also be undertaken by one expert alone.509Fact-finding
under Article 33(3) is the only element of the Convention’s dispute settlement procedures which
does not require every disputing party’s prior agreement, and may be invoked unilaterally by
any of the parties to the Convention at any time after six months from the commencement of the
consultations and negotiations between parties (provided the parties have not already initiated
one of the legal dispute resolution processes (Arbitration and Adjudication)). The rationale of the
inclusion of these provisions was to avoid stalemate in the dispute settlement and to assist parties
in moving forward with data and information exchange which are essential for the operation of
the principle of equitable utilisation, and to enable the resolution of a dispute in good faith.510
Article 33(4)-(9) provides for the establishment of the fact-finding commission which will have
three members, one from each disputing country and one from a third country who will act as
chair. The chair must be agreed upon by both parties. If the parties are unable to agree on a
chairman within three months of the request for the establishment of the Commission, any party
concerned may request the Secretary- General of the United Nations to appoint the chair. These
provisions are intended to avoid the dispute settlement mechanism being frustrated by the lack o
cooperation of one of the parties.511
# UNCITRAL Rules on International Commercial Arbitration

UNCITRAL Arbitration Rules
 UNCITRAL Arbitration Rules (with new article 1, paragraph 4, as adopted in 2013)

 UNCITRAL Arbitration Rules (as revised in 2010)
 UNCITRAL Arbitration Rules (1976)
The UNCITRAL Arbitration Rules provide a comprehensive set of procedural rules upon which
parties may agree for the conduct of arbitral proceedings arising out of their commercial
relationship and are widely used in ad hoc arbitrations as well as administered arbitrations. The
Rules cover all aspects of the arbitral process, providing a model arbitration clause, setting out
procedural rules regarding the appointment of arbitrators and the conduct of arbitral proceedings,
and establishing rules in relation to the form, effect and interpretation of the award. At present,
there exist three different versions of the Arbitration Rules: (i) the 1976 version; (ii) the 2010
revised version; and (iii) the 2013 version which incorporates the UNCITRAL Rules on
Transparency for Treaty-based Investor-State Arbitration.
The UNCITRAL Arbitration Rules were initially adopted in 1976 and have been used for the
settlement of a broad range of disputes, including disputes between private commercial parties
where no arbitral institution is involved, investor-State disputes, State-to-State disputes and
commercial disputes administered by arbitral institutions. In 2006, the Commission decided that
the UNCITRAL Arbitration Rules should be revised in order to meet changes in arbitral practice
over the last thirty years. The revision aimed at enhancing the efficiency of arbitration under the
Rules without altering the original structure of the text, its spirit or drafting style.
The UNCITRAL Arbitration Rules (as revised in 2010) have been effective since 15 August
2010. They include provisions dealing with, amongst others, multiple-party arbitration and
joinder, liability, and a procedure to object to experts appointed by the arbitral tribunal. A
number of innovative features contained in the Rules aim to enhance procedural efficiency,
including revised procedures for the replacement of an arbitrator, the requirement for
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reasonableness of costs, and a review mechanism regarding the costs of arbitration. They also
include more detailed provisions on interim measures.
With the adoption of the UNCITRAL Rules on Transparency in Treaty-based Investor-State
Arbitration (the "Rules on Transparency") in 2013, a new article 1, paragraph 4 was added to the
text of the Arbitration Rules (as revised in 2010) to incorporate the Rules on Transparency for
arbitration initiated pursuant to an investment treaty concluded on or after 1 April 2014. The new
paragraph provides for utmost clarity in relation to the application of the Rules on Transparency
in investor-State arbitration initiated under the UNCITRAL Arbitration Rules. In all other
respects, the 2013 UNCITRAL Arbitration Rules remain unchanged from the 2010 revised
version.
# UNCITRAL Model Law
Model laws
 UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments
as adopted in 2006
 UNCITRAL Model Law on International Commercial Conciliation (2002)
1. UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as

adopted in 2006
Text of the Model Law (amended in 2006) - Explanatory Note

Text of the Model Law (original 1985 version)
Status / map
The Model Law is designed to assist States in reforming and modernizing their laws on arbitral
procedure so as to take into account the particular features and needs of international commercial
arbitration. It covers all stages of the arbitral process from the arbitration agreement, the
composition and jurisdiction of the arbitral tribunal and the extent of court intervention through
to the recognition and enforcement of the arbitral award. It reflects worldwide consensus on key
aspects of international arbitration practice having been accepted by States of all regions and the
different legal or economic systems of the world.
Amendments to articles 1 (2), 7, and 35 (2), a new chapter IV A to replace article 17 and a new
article 2 A were adopted by UNCITRAL on 7 July 2006. The revised version of article 7 is
intended to modernise the form requirement of an arbitration agreement to better conform with
international contract practices. The newly introduced chapter IV A establishes a more
comprehensive legal regime dealing with interim measures in support of arbitration. As of 2006,
the standard version of the Model Law is the amended version. The original 1985 text is also
reproduced in view of the many national enactments based on this original version.
2. UNCITRAL Model Law on International Commercial Conciliation (2002)
Text - Guide to enactment

Status
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Adopted by UNCITRAL on 24 June 2002, the Model Law provides uniform rules in respect of
the conciliation process to encourage the use of conciliation and ensure greater predictability and
certainty in its use. To avoid uncertainty resulting from an absence of statutory provisions, the
Model Law addresses procedural aspects of conciliation, including appointment of conciliators,
commencement and termination of conciliation, conduct of the conciliation, communication
between the conciliator and other parties, confidentiality and admissibility of evidence in other
proceedings as well as post-conciliation issues, such as the conciliator acting as arbitrator and
enforceability of settlement agreements.
# UNCITRAL Conciliation Rules (1980)
Text
Adopted by UNCITRAL on 23 July 1980, the UNCITRAL Conciliation Rules provide a

comprehensive set of procedural rules upon which parties may agree for the conduct of
conciliation proceedings arising out of their commercial relationship. The Rules cover all aspects
of the conciliation process, providing a model conciliation clause, defining when conciliation is
deemed to have commenced and terminated and addressing procedural aspects relating to the
appointment and role of conciliators and the general conduct of proceedings. The Rules also
address issues such as confidentiality, admissibility of evidence in other proceedings and limits
to the right of parties to undertake judicial or arbitral proceedings whilst the conciliation is in
progress.
Article 7: Role of Conciliator
Article 7 (1) The conciliator assists the parties in an independent and impartial manner in their
attempt to reach an amicable settlement of their dispute.
(2) The conciliator will be guided by principles of objectivity, fairness and justice, giving
consideration to, among other things, the rights and obligations of the parties, the usages of the
trade concerned and the circumstances surrounding the dispute, including any previous business
practices between the parties.
(3) The conciliator may conduct the conciliation proceedings in such a manner as he considers
appropriate, taking into account the circumstances of the case, the wishes the parties may
express, including any request by a party that the conciliator hear oral statements, and the need
for a speedy settlement of the dispute.
(4) The conciliator may, at any stage of the conciliation proceedings, make proposals for a
settlement of the dispute. Such proposals need not be in writing and need not be accompanied by
a statement of the reasons therefor.
TERMINATION OF CONCILIATION PROCEEDINGS
Article 15 The conciliation proceedings are terminated:
(a) By the signing of the settlement agreement by the parties, on the date of the agreement; or
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(b) By a written declaration of the conciliator, after consultation with the parties, to the effect
that further efforts at conciliation are no longer justified, on the date of the declaration; or
(c) By a written declaration of the parties addressed to the conciliator to the effect that the
conciliation proceedings are terminated, on the date of the declaration; or
(d) By a written declaration of a party to the other party and the conciliator, if appointed, to the
effect that the conciliation proceedings are terminated, on the date of the declaration.
# MIGA
The Multilateral Investment Guarantee Agency (MIGA) is an international financial
institution which offers political risk insurance and credit enhancement guarantees. These
guarantees help investors protect foreign direct investments against political and non-commercial
risks in developing countries.[1] MIGA is a member of the World Bank Group and is
headquartered in Washington, D.C., United States.
MIGA was established in 1988 as an investment insurance facility to encourage confident
investment in developing countries.[2] MIGA is owned and governed by its member states, but
has its own executive leadership and staff which carry out its daily operations.
Its shareholders are member governments that provide paid-in capital and have the right to vote
on its matters. It insures long-term debt and equityinvestments as well as other assets and
contracts with long-term periods. The agency is assessed by the World Bank's Independent
Evaluation Group each year.
Governance[edit]
MIGA is governed by its Council of Governors which represents its member countries. The
Council of Governors holds corporate authority, but primarily delegates such powers to MIGA's
Board of Directors. The Board of Directors consists of 25 directors and votes on matters brought
before MIGA. Each director's vote is weighted in accordance with the total share capital of the
member nations that director represents. MIGA's board is stationed at its Washington, D.C.
headquarters where it meets regularly and oversees the agency's activities.[1][9][10][11] The agency's
Executive Vice President directs its overall strategy and manages its daily operations. As of 15
July 2013, Keiko Honda serves as Executive Vice President of MIGA.[12]
Membership[edit]
Multilateral Investment Guarantee Agency member states.

MIGA is owned by its 181 member governments, consisting of 156 developing and
25 industrialized countries. The members are composed of 180 United Nations member
states plus Kosovo. Membership in MIGA is available only to countries who are members of the
World Bank, particularly the International Bank for Reconstruction and Development.[2][10]
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As of 2015, the seven World Bank member states that are not MIGA members
are Brunei, Kiribati, Marshall Islands, San Marino, Somalia, Tonga, and Tuvalu. (The UN states
that are non-members of the World Bank, and thus MIGA,
are Andorra, Cuba, Liechtenstein, Monaco, Nauru, and North Korea.) The Holy
See and Palestine are also non-MIGA members. Bhutan is the most recent country to have joined
MIGA, having done so in December 2014.[13]
Investment guarantees[edit]
MIGA offers insurance to cover five types of non-commercial risks:
currency inconvertibility and transfer restriction; government expropriation; war, terrorism, and
civil disturbance; breaches of contract; and the non-honoring of financial
obligations.[14][15][16] MIGA will cover investments such as equity, loans, shareholder loans, and
shareholder loan guarantees. The agency may also insure investments such as management
contracts, asset securitization, bonds, leasing activities, franchise agreements, and license
agreements.[17][18] The agency generally offers insurance coverage lasting up to 15 years with a
possible five-year extension depending on a given project's nature and circumstances.[19] When
an event occurs that is protected by the insurance, MIGA can exercise the investor's rights
against the host country through subrogation to recover expenses associated with covering the
claim. However, the agency's convention does not require member governments to treat foreign
investments in any special way.[20] As a multilateral institution, MIGA is also in a position to
attempt to sort out potential disputes before they ever turn into insurance claims.[21]
The agency's Small Investment Program aims to promote FDI into specifically small and
medium enterprises. The program offers standard MIGA coverage types except it does not cover
breaches of contract. Under the program, small and medium enterprises may take advantage of
discounted insurance premiums and no application fees, which are not available to larger
investors. To qualify an investment for the Small Investment Program, MIGA defines small and
medium enterprise projects as having 300 or fewer employees, total assets not to exceed
$15 million and annual revenues not to exceed $15 million. MIGA limits the request amount for
the investment guarantee to $10 million, and will guarantee only up to 10 years with a possible
5-year extension.[22]
MIGA's annual reports offer an overview of the agency's business.
Investment Guarantee Basics
Q What products does MIGA provide under its investment guarantee program?
A MIGA provides non-commercial guarantees (insurance) for cross-border investments into
developing countries. MIGA's guarantees protect investors against the risks of transfer restriction
(including inconvertibility), expropriation, war and civil disturbance, breach of contract, and
non-honoring of financial obligations.
Q Who is eligible for a MIGA guarantee?
A In general, investors who are citizens of, or entities that are incorporated in, MIGA member
countries—other than the country in which the investment is being made (called host country)—
are eligible for MIGA guarantees. However, MIGA can insure an investment made by a national
of a host country if the funds to be invested come from outside the country and the application
for coverage is made jointly by the investor and the host country.
Q What is the typical term of a MIGA guarantee?
A MIGA issues guarantees for periods of up to 15 years, and occasionally, 20 years. The
minimum length of a guarantee is three years. In guarantees that cover loans, MIGA usually
issues coverage to match the length of such loans.
Q What types of investments are eligible for MIGA guarantees?
A MIGA insures cross-border investments. This includes new investments as well as investments
associated with the expansion, modernization, improvement, or enhancement of existing
projects, or where the investor demonstrates both the development benefits of, and a long-term
commitment to, the project. Acquisitions by new investors, including the privatization of state-
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owned enterprises, may also be eligible. Projects must support the host country's development
goals, comply with MIGA's Policy on Social and Environmental Sustainabilityand anti-
corruption and fraud standards, and also be financially viable.
Forms of eligible investments include equity interests, shareholder and non-shareholder loans,
loan guarantees, as well as certain types of transactions in which the remuneration of the investor
largely depends on the revenues or production of the investment project (e.g., technical
assistance contracts, management contracts, operating leases, profit sharing contracts, and
franchising agreements).
Q What sectors are eligible for MIGA guarantees?
A Most sectors are eligible for MIGA guarantees, including (but not limited to) financial,
infrastructure, oil and gas, mining, telecommunications, services, agribusiness, and
manufacturing. For examples of projects recently covered by MIGA please search our project
database.
Q What factors does MIGA consider when making a risk assessment?

A In addition to country risks, MIGA considers project risks, including location, project
viability, the sector and its importance for the host country, financial viability, potential for
earning export proceeds in freely usable currency, environmental impact, and participation of
local partners as well as domestic and multilateral institutions.
# ICSID
The International Centre for Settlement of Investment Disputes (ICSID) is an international

arbitration institution established in 1965 for legal dispute resolution and conciliation between
international investors. The ICSID is part of and funded by the World Bank Group,
headquartered in Washington, D.C., in the United States. It is an autonomous, multilateral
specialized institution to encourage international flow of investment and mitigate non-
commercial risks by a treaty drafted by the International Bank for Reconstruction and
Development's executive directors and signed by member countries.[2][3] As of May 2016, 153
contracting member states agreed to enforce and uphold arbitral awards in accordance with the
ICSID Convention.
ICSID is the world’s leading institution devoted to international investment dispute settlement. It
has extensive experience in this field, having administered the majority of all international
investment cases. States have agreed on ICSID as a forum for investor-State dispute settlement
in most international investment treaties and in numerous investment laws and contracts.
ICSID was established in 1966 by the Convention on the Settlement of Investment Disputes
between States and Nationals of Other States (theICSID Convention). The ICSID Convention is
a multilateral treaty formulated by the Executive Directors of the World Bank to further the
Bank’s objective of promoting international investment. ICSID is an independent, depoliticized
and effective dispute-settlement institution. Its availability to investors and States helps to
promote international investment by providing confidence in the dispute resolution process. It is
also available for state-state disputes under investment treaties and free trade agreements, and as
an administrative registry.
ICSID provides for settlement of disputes by conciliation, arbitration or fact-finding. The

ICSID process is designed to take account of the special characteristics of international
investment disputes and the parties involved, maintaining a careful balance between the interests
of investors and host States. Each case is considered by an independent Conciliation Commission
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or Arbitral Tribunal, after hearing evidence and legal arguments from the parties. A dedicated
ICSID case team is assigned to each case and provides expert assistance throughout the process.
More than 600 such cases have been administered by ICSID to date.
ICSID also promotes greater awareness of international law on foreign investment and the ICSID
process. It has an extensive program of publications, including the leading ICSID Review-
Foreign Investment Law Journal and it regularly publishes information about its activities and
cases. ICSID staff organize events, give numerous presentations and participate in conferences
on international investment dispute settlement worldwide.
Special Features of ICSID
ICSID is the world’s leading institution devoted to international investment dispute settlement. It
is available to administer investor-State and State-State disputes under bilateral and multilateral
investment treaties, free trade agreements, investment laws and contracts. The Centre is also
available to act as an administrative registry for investment treaties and free trade agreements. It
is uniquely positioned to fulfill this role owing toseveral special features:
Specialized Proceedings and Wide-Ranging Support Valuable Source of Publicly
Enforcement Mechanism Throughout Accessible Investment Law
Proceedings
The ICSID process is specifically A dedicated ICSID case team Promotion of transparency is
designed to is assigned to a
complement the unique each case and provides full central goal of ICSID.
characteristics of legal and
international investment disputes, administrative support
maintaining a careful balance throughout the
between the process.
interests of investors and host
States.
ICSID’s facilities provide for ICSID has the expertise to The ICSID website provides
settlement of provide assistance online
disputes by conciliation, under its own Rules, the case registers for all ICSID
arbitration or factfinding. UNCITRAL Rules, cases,
Detailed regulations and rules and other procedural rules with a description of each
apply contained in case, upto-
to each type of case to ensure treaties, and is the only date listings of the steps
procedural institution that can taken in
fairness and enhance efficiency. administer cases under all of the case and links to awards
these rules. and
other case materials.
Each case is considered by an The ICSID Panels include ICSID offers parties the
independent many of the world’s option of
conciliation commission or most experienced conciliators holding public hearings,
arbitral tribunal, and arbitrators including
which can rule on procedural and provide a useful resource the live webcasting of
issues and for parties in hearings. It
resolve the parties’ dispute. the appointment process. can also facilitate the
Parties may also participation
select arbitrators or of non-disputing parties.
conciliators from outside
of the Panels.
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Participants in cases governed ICSID offers state-of-the-art ICSID maintains an extensive
by the ICSID hearing facilities program of publications on
Convention enjoy immunity from in locations around the world. investment law and dispute
legal There is no resolution procedure,
process in the conduct of the rental fee for hearings held at including the
proceedings. World Bank ICSID Review-Foreign
premises in cases Investment
administered by ICSID. Law Journal.
An award rendered under the As a non-profit organization, ICSID legal counsel make
ICSID ICSID maintains presentations on ICSID
Convention is enforceable as a a cost-effective fee structure. procedure in
final Measures to numerous academic and
judgment of courts in every control costs include a low professional fora around the
ICSID Member annual fee for world.
State. Awards rendered in other ICSID services and a cap on
ICSIDadministered daily fees of
cases are enforceable under arbitrators and conciliators.
the New York Convention.
# International Chamber of Commerce Rules on International Commercial Arbitration
International commercial arbitration is an alternative method of resolving disputes arising out

of commercial transactions between private parties across national borders that allows the parties
to avoid litigation in national courts.
International commerce is greatly facilitated by allowing business firms to settle their differences
and adjust their obligations through the mechanism of final, enforceable international arbitration.
The benefits of freedom of contract are well known in economic theory, but the benefits of
sorting out conflicts and differences through a relatively peaceful, private, mutually trustful
mechanism such as international arbitration are still sometimes underestimated. This may be
because the ground rules for international arbitration have been in place for a long time and are
taken for granted. The New York Convention on the Recognition and Enforcement of Foreign
Arbitral Awards of 10 June 1958 is invaluable because it basically states that an award made in
accordance with the requirements of the Convention will be enforced directly in any Convention
country where a losing party holds assets, without having to go through judicial proceedings
anew.
International Chamber of Commerce (‘ICC’) arbitration has been around for much longer than
the New York Convention. Multinational companies have been using the ICC Rules of
Arbitration since the establishment of the ICC International Court of Arbitration (‘Court’) in
1923. The Court’s headquarters are in Paris, but most ICC arbitrations do not take place there.
On the contrary, the Court operates on a truly international field, supervising arbitrations all over
the world. The Court has its Secretariat in Paris, but also has a branch of the Secretariat in Hong
Kong to service the Court’s considerable Asian caseload.
The Court remains one of the world’s best-known and most respected international arbitration
institutions and, as the figures below attest, ICC arbitration is a frequently sought after
mechanism for business firms seeking to settle their differences. In fact, a recent empirical
survey of leading global corporations found that ‘the ICC is the most preferred and widely used
arbitration institution’, with 50% of survey participants indicating that the ICC was their
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preferred arbitral institution. The second most preferred institution scored 14% of participants’
preferences.
5 Distinguishing features of the ICC Rules of Arbitration
The Rules are designed to be flexible and can be used for virtually any kind of commercial
dispute, whether involving individuals, companies or governments, and whether arising from
contracts, non-contractual commercial relationships or international treaties. The 2012 Rules
contain a number of provisions designed specifically to facilitate treatybased arbitrations and
arbitrations involving state entities as parties. The only requirement is an arbitration agreement
providing for arbitration under the Rules. Some distinguishing features of the Rules are described
below.
5.1 Prima facie jurisdictional decisions, multi-party and multi-contract arbitrations
Article 6.2 of the 1998 Rules empowered the Court to examine the prima facie existence of an
arbitration agreement before an arbitral tribunal is even constituted. Under that provision, the
Court did not analyse sua sponte whether an arbitration agreement under the Rules exists. Article
6.2 was rather triggered only when the respondent did not file an answer to the request for
arbitration and/or objected to the arbitration clause. If there was no ICC arbitration agreement,
the case was dismissed. Conversely, if the Court found prima facie that an ICC arbitration
agreement existed, the arbitral tribunal would rule on its own jurisdiction after hearing full
argument on the issue.
5.2 Terms of reference
As briefly mentioned above, a key feature of ICC arbitration is the terms of reference, drafted by
the arbitral tribunal in consultation with the parties. The 2012 Rules maintained the requirement
for terms of reference, which has been a hallmark feature of ICC arbitration since the Court was
established. The terms of reference describe the case, define the issues and indicate the place and
applicable rules for the arbitration. The terms of reference are submitted to the parties for
comment (the arbitral tribunal may or may not amend the document according to the parties’
input), then submitted to the parties for signature and ultimately to the Court. If any of the parties
refuses to sign the terms of reference, the Court will decide whether or not to approve them. If all
parties sign, the Court will only take note of the terms of reference.
5.3 Awards and award scrutiny
A large number (a little less than half10) of ICC arbitrations are settled or otherwise withdrawn
at some stage before a final award is issued. If a case is not withdrawn, obtaining a well-reasoned
enforceable award is the ultimate outcome of an arbitration. In 2011 alone, the Court received,
scrutinised and approved 508 draft awards, comprising 347 final awards, 120 partial awards and
41 awards by consent.
6 Conclusion
The ICC has to exercise considerable caution before changing any practices or Rules of the
Court. This is because of the influence that any such change will have on international arbitral
practice generally. The Court is probably the world’s busiest and best-known international
arbitral institution. It also has the broadest geographical reach across the broadest range of
industry sectors. The changes to the Court’s Rules will surely impact upon the practice of
international arbitration globally. ICC arbitration has and will continue to play an important role
worldwide. The twenty-first century will bring new challenges. Whatever the future may hold,
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the Court and Secretariat are well equipped to cope thanks to the institution’s long and diverse
experience and the quality and experience of the Court members, both present and future, and
staff of the Secretariat. The Court has been able to generate practices and to find practical
solutions to the many challenges that face parties engaged in international arbitration. It should
continue to do so.
Current as of 1 March 2017, the ICC Rules of Arbitration are used all around the world to
resolve disputes. They define and regulate the management of cases submitted to our
International Court of Arbitration®.
These rules assure parties of a neutral framework for the resolution of cross-border disputes.
Introductory Provisions
Article 1 International Court of Arbitration
Article 2 Definitions
Article 3 Written Notifications or Communications; Time Limits
Commencing the Arbitration

Article 4 Request for Arbitration
Article 5 Answer to the Request; Counterclaims
Article 6 Effect of the Arbitration Agreement
Multiple Parties, Multiple Contracts and Consolidation

Article 7 Joinder of Additional Parties
Article 8 Claims Between Multiple Parties
Article 9 Multiple Contracts
Article 10 Consolidation of Arbitrations
The Arbitral Tribunal

Article 11 General Provisions
Article 12 Constitution of the Arbitral Tribunal
Article 13 Appointment and Confirmation of the Arbitrators
Article 14 Challenge of Arbitrators
Article 15 Replacement of Arbitrators
The Arbitral Proceedings

Article 16 Transmission of the File to the Arbitral Tribunal
Article 17 Proof of Authority
Article 18 Place of the Arbitration
Article 19 Rules Governing the Proceedings
Article 20 Language of the Arbitration
Article 21 Applicable Rules of Law
Article 22 Conduct of the Arbitration
Article 23 Terms of Reference
Article 24 Case Management Conference and Procedural Timetable
Article 25 Establishing the Facts of the Case
Article 26 Hearings
Article 27 Closing of the Proceedings and Date for Submission of Draft Awards
Article 28 Conservatory and Interim Measures
Article 29 Emergency Arbitrator
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Article 30 Expedited Procedure
Awards
Article 31 Time Limit for the Final Award
Article 32 Making of the Award
Article 33 Award by Consent
Article 34 Scrutiny of the Award by the Court
Article 35 Notification, Deposit and Enforceability of the Award
Article 36 Correction and Interpretation of the Award; Remission of Awards
Costs
Article 37 Advance to Cover the Costs of the Arbitration
Article 38 Decision as to the Costs of the Arbitration
Miscellaneous
Article 39 Modified Time Limits
Article 40 Waiver
Article 41 Limitation of Liability
Article 42 General Rule
Appendix I – Statutes of the International Court of Arbitration

Article 1 Function
Article 2 Composition of the Court
Article 3 Appointment
Article 4 Plenary Session of the Court
Article 5 Committees
Article 6 Confidentiality
Article 7 Modification of the Rules of Arbitration
Appendix II – Internal Rules of the International Court of Arbitration

Article 1 Confidential Character of the Work of the International Court of Arbitration
Article 2 Participation of Members of the International Court of Arbitration in ICC
Arbitration
Article 3 Relations between the Members of the Court and the ICC National Committees
and Groups
Article 4 Committee of the Court
Article 5 Court Secretariat
Article 6 Scrutiny of Arbitral Awards
Appendix III – Arbitration Costs and Fees

Article 1 Advance on Costs
Article 2 Costs and Fees
Article 3 Scales of Administrative Expenses and Arbitrator’s Fees
Appendix IV – Case Management Techniques

Appendix V – Emergency Arbitrator Rules
Article 1 Application for Emergency Measures
Article 2 Appointment of the Emergency Arbitrator; Transmission of the File
Article 3 Challenge of an Emergency Arbitrator
Article 4 Place of the Emergency Arbitrator Proceedings
Article 5 Proceedings
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Article 6 Order
Article 7 Costs of the Emergency Arbitrator Proceedings
Appendix VI – Expedited Procedure Rules

Article 1 Application of the Expedited Procedure Rules
Article 2 Constitution of the Arbitral Tribunal
Article 3 Proceedings
Article 4 Award
Content
INTRODUCTORY PROVISIONS
Article 1: International Court of Arbitration
1)
The International Court of Arbitration (the “Court”) of the International Chamber of Commerce
(the “ICC”) is the independent arbitration body of the ICC. The statutes of the Court are set forth
in Appendix I.
2)
The Court does not itself resolve disputes. It administers the resolution of disputes by arbitral
tribunals, in accordance with the Rules of Arbitration of the ICC (the “Rules”). The Court is the
only body authorized to administer arbitrations under the Rules, including the scrutiny and
approval of awards rendered in accordance with the Rules. It draws up its own internal rules,
which are set forth in Appendix II (the “Internal Rules”).
3)
The President of the Court (the “President”) or, in the President’s absence or otherwise at the
President’s request, one of its Vice-Presidents shall have the power to take urgent decisions on
behalf of the Court, provided that any such decision is reported to the Court at its next session.
4)
As provided for in the Internal Rules, the Court may delegate to one or more committees
composed of its members the power to take certain decisions, provided that any such decision is
reported to the Court at its next session.
5)
The Court is assisted in its work by the Secretariat of the Court (the “Secretariat”) under the
direction of its Secretary General (the “Secretary General”).
ICC International Court of Arbitration
The International Court of Arbitration® is the world’s leading arbitral institution. Since
1923, we have been helping to resolve difficulties in international commercial and business
disputes to support trade and investment.
We perform an essential role by providing individuals, businesses and governments alike with a
variety of customisable services for every stage of their dispute.
Although we are called a court in name, we do not make formal judgments on disputed matters.
Instead, we exercise judicial supervision of arbitration proceedings. Our responsibilities include:
 confirming, appointing and replacing arbitrators, as well as deciding on any challenges
made against them
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 monitoring the arbitral process to make certain that it is performed properly and with the
required speed and efficiency necessary
 scrutinising and approving all arbitral awards to reinforce quality and enforceability
 setting, managing and — if necessary — adjusting fees and advances
 overseeing emergency proceedings before the start of the arbitration
Our purpose is to ensure proper application of the ICC Rules, as well as assist parties and
arbitrators in overcoming procedural obstacles. These efforts are supported by the Court’s
Secretariat, which is made up of more than 80 lawyers and support personnel.
English and French are the Court’s official working languages. However, we can administer
cases in any language and communicate in all major languages, including Arabic, Chinese,
German, Italian, Portuguese, Russian and Spanish.
We continuously seek to improve efficiency, control time and costs and aid enforcement and
confidentiality by introducing innovative new arbitration tools and procedures. This ongoing
focus makes certain that we are always in touch with the concerns and interests of trading
partners throughout the world.
# Arbitration Act, 1999
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UNIT XIII Enforcement of Foreign Judgment and Awards
# Recognition and Enforcement of Foreign judgment and awards
In law, the enforcement of foreign judgments is the recognition and enforcement in
one jurisdiction of judgmentsrendered in another ("foreign") jurisdiction. Foreign judgments may
be recognized based on bilateral or multilateraltreaties or understandings, or unilaterally without
an express international agreement.
Definition of terms[edit]
The "recognition" of a foreign judgment occurs when the court of one country or jurisdiction
accepts a judicial decision made by the courts of another "foreign" country or jurisdiction, and
issues a judgment in substantially identical terms without rehearing the substance of the original
lawsuit.
In American legal terminology, a "foreign" judgment means a judgment from another state in the
United States or from a foreign country. To differentiate between the two, more precise
terminology used is "foreign-country judgment" (for judgments from another country) and
"foreign sister-state judgment" (from a different state within the United States).
Once a foreign judgment is recognized, the party who was successful in the original case can
then seek its "enforcement" in the recognizing country. If the foreign judgment is a money
judgment and the debtor has assets in the recognizing jurisdiction, the judgment creditor has
access to all the enforcement remedies as if the case had originated in the recognizing country,
e.g. garnishment, judicial sale, etc. If some other form of judgment was obtained, e.g.
affecting status, granting injunctive relief, etc., the recognizing court will make whatever orders
are appropriate to make the original judgment effective.
Foreign judgments may be recognized either unilaterally or based on principles of comity, i.e.
mutual deference between courts in different countries. In English courts, the bases of the
enforcement of foreign judgments are not comity, but the doctrine of obligation. [1]
Between two different States in the United States, enforcement is generally required under the
"Full Faith and Credit Clause" (Article IV, Section 1) of the U.S. Constitution, which compels a
State to give another State's Judgment an effect as if it were local. This usually requires some
sort of an abbreviated application on notice, or docketing. Between one State in the United
States, and a foreign country, Canada, for example, the prevailing concept is comity. The Court
in the United States, in most cases, will unilaterally enforce the foreign judgment, without proof
of diplomatic reciprocity, either under judge-made law or under specific statutes.
Recognition will be generally denied if the judgment is substantively incompatible with basic
legal principles in the recognizing country. For example, U.S. courts, in accordance with
the Securing our Enduring and Established Constitutional Heritage Act, are prohibited from
recognizing or enforcing foreign libel judgments against any United States person unless the
foreign country in which the judgement was made protects freedom of speech to at least the same
degree as the United States and the foreign court's conduct of the case in which the judgement
was reached respected the due process guarantees of the U.S. Constitution to the same extent as a
U.S. court would've.
Exercise of jurisdiction in recognition cases[edit]

If the country that issued the judgment and the country where recognition is sought are not
parties to the Hague Convention on Foreign Judgments in Civil and Commercial
Matters (presently only ratified by Albania, Cyprus, Kuwait,
[2]
the Netherlands and Portugal ), the Brussels regime (all European Union countries, as well as
Iceland, Norway and Switzerland)[3] or a similar treaty or convention providing for the routine of
106
registration and enforcement between states, the courts of most states will accept jurisdiction to
hear cases for the recognition and enforcement of judgments awarded by the courts of another
state if the defendant or relevant assets are physically located within their territorial boundaries.
Whether recognition will be given is determined by the lex fori, i.e. the domestic law of the court
where recognition is sought, and the principles of comity. The following issues are considered:
 Whether the foreign court properly accepted personal jurisdiction over the defendant;
 Whether the defendant was properly served with notice of the proceedings and given a
reasonable opportunity to be heard which raises general principles of natural justice and will
frequently be judged by international standards (hence, the rules for service on a non-resident
defendant outside the jurisdiction must match general standards and the fact that the first
instance court's rules were followed will be irrelevant if the international view is that the
local system is unjust);
 Whether the proceedings were tainted with fraud; and
 Whether the judgment offends the public policy of the local state.
There is a general reluctance to enforce foreign judgments which involve multiple or
punitive damages. In this context, it is noted that the U.S. is not a signatory to any treaty or
convention and there are no proposals for this position to change. When it comes to seeking the
enforcement of U.S. judgments in foreign courts, many states are uncomfortable with the amount
of money damages awarded by U.S. courts which consistently exceed the compensation
available in those states. Further, the fact that the U.S. courts sometimes claim extraterritorial
jurisdiction offends other states' conceptions of sovereignty. Consequently, it can be difficult to
persuade some courts to enforce some U.S. judgments. The Hague choice of court
convention provides for the recognition of judgement given by the court chosen by the parties in
civil and commercial cases in all other parties to the convention. The convention has as of 2013
not entered into force. Regarding maintenance obligations, the Hague Maintenance
Convention (in force between Albania, Bosnia and Herzegovina and Norway), provides for
recognition of all kinds of maintenance related judgements (including child support).
Exceptions[edit]
A state may not enforce a foreign-country judgment in the following cases:
 The judgment was not rendered by an impartial tribunal under procedures compatible with
the requirements of due process of law;
 The foreign court did not have personal jurisdiction over the defendant;
 The foreign court did not have jurisdiction over the subject matter;
 The defendant did not receive notice of the proceedings in sufficient time to enable him to
defend;
 The judgment was obtained by fraud;
 The judgment is repugnant to the public policy of the state where enforcement is sought;
 The judgment conflicts with another final and conclusive judgment;
 The proceeding in the foreign court was contrary to an agreement between the parties under
which the dispute was to be settled;
 In the case of jurisdiction based only on personal service, the foreign court was an
inconvenient forum for the trial; or
 The judgment seeks to enforce the revenue and taxation laws of a foreign jurisdiction.
 If the judgement was obtain through an illegal transaction.
 If the judgement is not conclusive
 If it is the judgement of an inferior court.
107
# The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral
Awards
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also
known as the New York Convention, was adopted by a United Nations diplomatic conference
on 10 June 1958 and entered into force on 7 June 1959. The Convention requires courts of
contracting states to give effect to private agreements to arbitrate and to recognize and
enforce arbitration awards made in other contracting states. Widely considered the foundational
instrument for international arbitration, it applies to arbitrations that are not considered as
domestic awards in the state where recognition and enforcement is sought.
Although New York Convention is very successful, nowadays many countries have
adopted UNCITRAL Model Arbitration Law and widely recognize foreign arbitral awards.
Therefore the New York Convention is not as important as it once was. For a non-contracting
state, such as Taiwan, its arbitral awards can be recognized by other countries according to their
domestic laws, and vice versa.
Background[edit]
In 1953, the International Chamber of Commerce (ICC) produced the first draft Convention on
the Recognition and Enforcement of International Arbitral Awards to the United Nations
Economic and Social Council. With slight modifications, the Council submitted the convention
to the International Conference in the Spring of 1958. The Conference was chaired by Willem
Schurmann, the Dutch Permanent Representative to the United Nations and Oscar Schachter, a
leading figure in international law who later taught at Columbia Law School and the Columbia
School of International and Public Affairs, and served as the President of the American Society
of International Law.
International arbitration is an increasingly popular means of alternative dispute resolution for
cross-border commercial transactions. The primary advantage of arbitration over court litigation
is enforceability: an arbitration award is enforceable in most countries in the world. Other
advantages of arbitration include the ability to select a neutral forum to resolve disputes, that
arbitration awards are final and not ordinarily subject to appeal, the ability to choose flexible
procedures for the arbitration, and confidentiality.
Once a dispute between parties is settled, the winning party needs to collect the award or
judgment. If the loser voluntarily pays, no court action is necessary.[1]Otherwise, unless the
assets of the losing party are located in the country where the court judgment was rendered, the
winning party needs to obtain a court judgment in the jurisdiction where the other party resides
or where its assets are located. Unless there is a treaty on recognition of court judgments between
the country where the judgment is rendered and the country where the winning party seeks to
collect, the winning party will be unable to use the court judgment to collect.
Cases and statistics[edit]
Public information on overall and specific arbitration cases is quite limited as there is no need to
involve the courts at all unless there is a dispute, and in most cases the loser pays
voluntarily.[1] In China, a review of disputed cases in China found that from 2000 to 2011, in 17
cases the Supreme People's Court upheld the refusal to enforce the arbitration agreement due to a
provision in Article V; China has an automatic appeal system to the highest court, so this
includes all such refusals.[2]
108
Summary of provisions[edit]
Under the Convention, an arbitration award issued in any other state can generally be freely
enforced in any other contracting state, only subject to certain, limited defenses. These defenses
are:[3]
1. a party to the arbitration agreement was, under the law applicable to him, under
some incapacity, or the arbitration agreement was not valid under its governing law;
2. a party was not given proper notice of the appointment of the arbitrator or of the
arbitration proceedings, or was otherwise unable to present its case;
3. the award deals with an issue not contemplated by or not falling within the terms of the
submission to arbitration, or contains matters beyond the scope of the arbitration (subject
to the proviso that an award which contains decisions on such matters may be enforced
to the extent that it contains decisions on matters submitted to arbitration which can be
separated from those matters not so submitted);
4. the composition of the arbitral tribunal was not in accordance with the agreement of the
parties or, failing such agreement, with the law of the place where the hearing took place
(the "lex loci arbitri");
5. the award has not yet become binding upon the parties, or has been set aside or
suspended by a competent authority, either in the country where the arbitration took
place, or pursuant to the law of the arbitration agreement;
6. the subject matter of the award was not capable of resolution by arbitration; or
7. enforcement would be contrary to "public policy".
Additionally, there are three types of reservations that countries may apply:[4]
1. Conventional Reservation - some countries only enforce arbitration awards issued in a

Convention member state
2. Commercial Reservation – some countries only enforce arbitration awards that are related
to commercial transactions
3. Reciprocity reservation – some countries may choose not to limit the Convention to only
awards from other contracting states, but may however limit application to awards from
non-contracting states such that they will only apply it to the extent to which such a non-
contracting state grants reciprocal treatment.
States may make any or all of the above reservations. Because there are two similar issues
conflated under the term "reciprocity", it is important to determine which such reservation (or
both) an enforcing state has made.
109

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Law 331 International Trade Law

Sources of International Trade Law

Duty & Taxes B B B B B B B B B B S B S

FAS - Free Alongside Ship * FOB - Free On Board

CFR - Cost and Freight CIF - Cost, Insurance, Freight

CPT - Carriage Paid To CIP - Carriage and Insurance Paid To

DAF - Delivered At Frontier DES - Delivered Ex Ship

In this arrangement, the buyer/consignee is This arrangement is basically the same as

DDP - Delivered Duty Paid

DDP terms tend to be used in intermodal or

# Ex works EXW (named place)

The seller is required to:

The buyer is required to:

# FCA Free Carrier

The seller is required to:

The buyer is required to:

# F.A.S. (named port of shipment)

The seller is required to:

The buyer is requircd to:

# F.O.B. (named port of shipment)

The seller is required to:

The buyer is required to:

CFR - Cost and Freight (... named port of destination)

3. Contracts of carriage and 3. Contracts of carriage and

8. Proof of delivery, transport document or 8. Proof of delivery, transport document or

# CIF - Cost, Insurance and Freight (... named port of destination)

The seller's obligations under a c.i.f. contract may be summarized as follows'·':

The duties of the buyer may be summarised as follows:

# CPT - Carriage Paid To (... named place of destination)

2. Licences, authorisations and 2. Licences, authorisations and

3. Contracts of carriage and 3. Contracts of carriage and

8. Proof of delivery, transport document or 8. Proof of delivery, transport document or

# CIP - Carriage and Insurance Paid Тo (... named place of destination)

THE SELLER'S OBLIGATIONS THE BUYER'S OBLIGATIONS

2. Licences, authorisations and 2. Licences, authorisations and

3. Contracts of carriage and 3. Contracts of carriage and

8. Proof of delivery, transport document or 8. Proof of delivery Transport document or

# DAF - Delivered At Frontier (... named place)

THE SELLER'S OBLIGATIONS THE BUYER'S OBLIGATIONS

A1 Provision of goods in conformity with B1 Payment of the price

A2 Licences, authorisations and formalities B2 Licences, authorisations and formalities

A3 Contracts of carriage and insurance B3 Contracts of carriage and insurance

a. Contract of carriage a. Contract of carriage

A4 Delivery B4 Taking delivery

A5 Transfer of risks B5 Transfer of risks

A6 Division of costs B6 Division of costs

A7 Notice to the buyer B7 Notice to the seller

A8 Proof of delivery, transport document or B8 Proof of delivery, transport document

The buyer must accept the transport document

A9 Checking - packaging - marking B9 Inspection of goods

A10 Other obligations B10 Other obligations

# DES - Delivered Ex Ship (... named port of destination)

A1 Provision of goods in conformity with B1 Payment of the price

A2 Licences, authorisations and B2 Licences, authorisations and formalities

A3 Contracts of carriage and insurance B3 Contracts of carriage and insurance

a. Contract of carriage a. Contract of carriage

A4 Delivery B4 Taking delivery

The buyer must take delivery of the goods when

A5 Transfer of risks B5 Transfer of risks

A6 Division of costs B6 Division of costs

A7 Notice to the buyer B7 Notice to the seller

A8 Proof of delivery, transport document B8 Proof of delivery, transport document or

A9 Checking - packaging - marking B9 Inspection of goods

A10 Other obligations B10 Other obligations