This guest article was written by William Laraque who is the Managing Director of US-International Trade Services.
Common Law: A Presumptuous Myth
The presumptuous have determined that despite the Brexit, the world will continue to prefer London and England because of the common law. It has been reported that 27% of international business deals are arranged in England because of “a preference for common law.”
Let me disabuse the myth-makers of this delusion. Since 1266 and the Magna Carta, the myth of the superiority of English Law has been perpetrated. The fact is that 11 days after lords and clergy asserted their property rights, and such rights as that to grow oysters in the Thames, and coerced King John to sign the Magna Carta, it was annulled.
Trade and Arbitration
The resolution of international trade disputes and their arbitration are not for the most part conducted in London, nor are such disputes necessarily subject to Common Law. It is my opinion that the superiority of English Common Law is a branding myth perpetrated by English-speaking lawyers for purposes of marketing and personal gain.
This myth has been debunked by no less an authority than the Bard himself, William Shakespeare, in The Merchant of Venice. Shakespeare’s pound of flesh, no more, no less, vividly expresses the greed, vanity, self-entitlement and the limitations of laws and lawyers. In making his case, Shakespeare used a merchant of Venice, an international trader.
The resolution of international trade disputes is principally the province of the ICC, the International Chamber of Commerce, in Paris. The ICC has issued regulations, ‘rule books’ for the conduct of international trade. The ICC has appointed special masters from every nation who have been invited to opine on matters of international trade, in Paris. They are invited to create and improve the international trade rule book.
From these consultations have come such ICC ‘recommendations’ as Incoterms 2010, a common understanding of what international commerce terms are and the roles and responsibilities of all participants in a global trade transaction.
Separating Yourself From the Pack in a Mature FX IndustryGo to article >>
It is suggested that such ICC ‘interpretations’ be used voluntarily to determine the functions and responsibilities of all parties in a trade transaction. Use of this ‘consensual rule book’ precludes such absurdities as the tendency of US traders to describe shipments as Free on Board or FOB Barstow, California, for example (in place of Ex Works), when the actual shipment is made nowhere near a seaport or inland waterway. I’ve been to Barstow. The only water found there involves watering holes.
The utterly surprising fact for me is that nearly two hundred countries have voluntarily accepted the rules and the dispute resolution mechanisms of the ICC. In a world where the popularity of such law-enabling bodies as the US Congress is at 17%; in a world of Brexit, where common understanding and the dispute resolution mechanisms of the European Union are fraying, the ICC regulation of global trade is a remarkable achievement.
Trade Finance, LCs and Open Account
The international business press is filled with limited thinking and yes I dare say, ignorance. Such technological innovations as blockchains and artificial intelligence are not by themselves solutions to the international trade process and to international trade finance settlement. Why? Because in a dispute, and there are always disputes, technological advances do not provide a mechanism for resolution and arbitration, an alternative to continuous lawsuits.
The ICC has set up a mechanism for dispute resolution and arbitration for international trade cases. Disputants pay the ICC so that arbitration is used to settle cases. For such cultures as that of Japan, where harmony is stressed, persons seldom sue one another, and arbitration and resolution are welcomed. In such highly litigious societies as that of the US, arbitration is discouraged because it deprives lawyers of income. Law serving to provide lawyers with income is a US cultural penchant.
A False Argument
It is argued and discussed that if only we used blockchains and similar technological innovations, the problems associated with trust and confidence in business and international business in particular would be resolved. This is another delusion, another absurdity, because it ignores a simple fact: there is need for a rule book and a voluntary dispute resolution mechanism in global trade.
“First thing we do…” Henry VI