Sources of International Trade Law

Agreements between States

In international relations, those international agreements entered into between the states and/or
between one state and one international organization to exercise sovereignty is called a treaty .As
per article 2, clause 1 of 1969 Vienna convention concerning treaties’ law, treaty means, “An
international agreement which has been made between the states in writing and was included by an
international law.” But agreements concluded between a state and the other states and/or
international organizations to exercise incumbency and performance of business and commercial
affairs are not treaties.

A treaty may include special obligations and certain legal requirements for its members such as: a
convention, a charter, a protocol and a code or regulates the general framework of its members’
obligations such as framework convention and outline convention or solely states the parties’
viewpoints concerning a subject matter or reflects their moral obligations.

Contracts under international law are concluded and subsequently ratified by the legal entities
involved. A difference exists with regard to bilateral contracts. These include trade agreements and
multilateral agreements such as the Kyoto Protocol. The application of these treaties is a matter to
be decided by the individual states as long as the principle pacta sunt servanda (agreements must
be kept) remains intact. People’s right to self-determination, which is an essential basic concept of
international law, requires the consent of the parliaments. Basically, standards of international law
are directly applicable. At least this is the case if the treaty explicitly implies their direct application.

General Practises between states/International commercial practice

If it does not, it is subject to interpretation as to whether the standards will be directly applied.
International commercial practice includes operations and behavioral norms between merchants and
commercial companies binding to some extent.

Another approach considers international commercial practice as an implied condition in

international contracts and its binding feature arises from parties’ implied agreement. According to
article 1-205, clause 2 of American Uniform Commercial Code(UCC), trade practice means,’’

 any operation or behavioral method observed regularly in a jurisdiction, profession or trade and is
expected to be observed in the same contract and transaction.”

Decided trade disputes/cases and academic writings

United States v. Capps, Inc.

• Facts: Government agreed to purchase all potatoes grown by eligible American farmers that
could not be sold at commercial prices. To protect US market from foreign competition, the
secretary of state entered into an agreement with Canada that it would buy potatoes, but that
they could only be used for seed and not for food. A US company bought Canadian potatoes
and resold them. US gov sues.
• Breach of power by the executive. The power to regulate interstate and foreign commerce is
not among the powers incident to the Presidential office, but is expressly vested by the
Constitution in the Congress.
• No breach of contract between US corporation and Canadian Corp. No relief granted to gov.

Dames & Moore v. Regan

• Facts: President Carter issued a series of executive orders to negotiate the release of US
hostages. Part of the agreement was to suspend all existing claims of Iranian defendants in
federal courts. Dames & Moore had brought a breach of contract action against several
Iranian defendants, so they filed suit against gov.
• Arguments:
o Companies: actions are beyond the president’s constitutional power
o Government: relies on IEEPA as authorization for these actions-this is a
congressional act.
• Rule of IEEPA:
o The President may void or nullify the exercising by any person of any right, power
or privilege with respect to any property in which any foreign country has any
interest.
• Holding: Court thinks both the legislative history and cases interpreting the TWEA fully
sustain the broad authority of the Executive when acting under this congressional grant of

 power. However, even though there is authorization to the President to nullify the
attachments and order the transfer of Iranian assets, the President cannot authorize to
suspend claims pending in American courts.
• Reasoning: The claims of American citizens against Iran are not in themselves transactions
involving Iranian property or efforts to exercise any rights with respect to such property.

Generally recognized principles of law

General principles of law are those principles and rules which are general and have been recognized
by different states. The principle of binding power of contracts loyal towards its provisions (pacta
sunt servanda) is one of the general principles of law accepted by different law systems. The general
principles of law are composed of the totality of domestic legal orders based on common principles,
i.e. principles that are immanent in any legal order, e.g. pacta sunt servanda, lex specialis derogat
legi generali (a law governing a specific subject matter overrides a law which only governs general
matters) or lex posterior derogat legi priori (the most recently enacted legal provisions prevail
against those previously in place), venire contra factum proprium (no one may set himself in
contradiction to his own previous conduct), and principles of legal logic.

Agreement between traders/Trade custom law (lex mercatoria)

Customary international law is made up of elements of long-term exercise (several years) and the
belief that this exercise is lawful (opinion iuris). Although laid down in writing, the international
law
of treaties has no priority over customary international law. If a state does not want to be bound by
nascent customary international law, explicit objection has to be filed, and, as long as the other
states cling to their conviction, the objection has to be repeated.

Trade custom law or mercantile law in UK law has been existed since many years ago. Generally,
trade custom law features in the Middle Ages were as follows:

1. Firstly, this branch of law didn’t belong to a certain state and was used in commercial relations
with foreign countries.



 2. Secondly, this branch of law was based on the customs and commercial practices especially of
marine trade made between the merchants.

3. Thirdly, the commercial disputes and claims were basically settled by the merchants-not by the
judges-themselves very quickly with the least procedure of proceedings based on usual customs
and practices.

4. Fourthly, the principle of equity and good faith had a special position in this legal system. In
this period, the merchants established new legal institutions based on their need including bill of
exchange.

Domestic laws

Another source of international trade law is the domestic laws of the states related to the considered
economic and business activities. Domestic laws can be divided into public law and private law.

I. Public law

Each state legislates and enacts statutes to regulate economic and commercial activities in its own
country and also to provide special policies and social- economic objectives. In this respect, some
of the activities are forbidden, some are promoted and some become restricted. The most important
of these rules and regulations are those of export and import, foreign investment and economic
activities done by foreign companies and individuals, rules and regulations concerning purchase and
sale of goods, currency transfer, banking, employment law, taxes and duties.

II. Private Law

In this field of law, there are few certain rules solely concerning international economic and
commercial activities in Iran, and the existing rules govern both local and foreign commercial
activities. For example, the civil law and the rules of making contracts, rights and obligations of the
parties and/or contract termination cases govern both local and international contracts subject to the
governance of Iranian law. While in some countries there are certain local laws solely govern the

international contracts. There is the same situation, in Iran, for commercial law. Commercial
activities, local or foreign, are subject to commercial law and there are no certain rules but public
law for foreign commercial activities in Iran.