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International Commercial Law : Merchant Transactions Of Business

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International Commercial Law : Merchant Transactions Of Business

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Discuss about the International Commercial Law for Merchant Transactions of Business.

1. Business law is the component of the law that handles merchant transactions of business individuals in domestic and international business environments. Therefore, studying business law is vital in forecasting what the law will be in carrying out businesses at the domestic and international environment. Comprehending laws that govern the laws domestically and internationally will allow one to make informed business decisions without breaching rules tailored by the government (Howard 2013 pp. 495).
Domestic /national/municipal law is a law within a given state that deals with the rights, as well as duties of legal individuals in the state. The law governs the behavior and acts of persons, for instance in Australia. Domestic laws are usually developed by the efforts by the three arms of government: executive, legislature, and judiciary that undertaking the law-making process. In Australia, the domestic law is designed by legislation by the parliaments of the Commonwealth, territories, as well as states and through common law standards tailored by the courts (Rosa 2013, pp. 80). In many countries like Australia, parliaments are the supreme bodies with the authority to make laws, whilst courts are given the powers to interpret the law that governs businesses and uses it on individual cases. This implies that the public international law is mainly concerned with the treaty associations between countries and individuals that are considered the subjects of the international law that governs their business associations. The public international law concepts influence a state’s application of its law (Zanakopoulos & Tams 2013, pp. 537).
Private international law is a system of form laws, regulations, conventions, state laws, legal guides, as well as other legal documents and tools, which control private associations across national boundaries. Private international law is dual in nature, which balances the international accord with home acknowledgment in addition to execution, and balancing independent acts with that of the private segment. Whilst public international law principally concerns with the relationship between states; it too has its objectives of companies and people. The increase of multinational firms, with some of them for several years producing yearly revenues bigger than the gross national product of some countries, raises many important matters (Koeninger & Bales 2014, pp. 480).
On the other hand, public international law is a system of norms, which governs the relationship between legal bodies acknowledged in the realm of the international law. It is divided into diverse branches; however, it is taken to have overarching common standards. For instance, treaties and relationships between two or more nations come under the purview of the public law.  Therefore, the object of the private international law is largely from person to person or business-to-business associations. The private international law will acknowledge the applicable domestic law and handle matters regarding the specific business conflict between one law (Australia) and the other (Sate of Washington). The primary element of the private international law is its acknowledgment that sates might differ in their approaches to the law, and that the difference should be controlled (Nijaz 2016, pp. 60).
Moreover, the comprehending private international law needs a focus on the domestic/national law of different states. The domestic law might expressly integrate public international law. Thus, in some jurisdictions, the mere references to domestic/municipal law imply that public international law is pertinent. Its principles influence the application of public global in national law courts. The overlap between the private and public international law manifests itself in several means. Under dualism theory, international law in addition to national/municipal law are separate entities of law that operate autonomously of each other. This theory implies that the rules and standards of international law (private and public) cannot function unswervingly in national law, and should be integrated into domestic law before they impact individual rights, as well as roles. In a state of a conflict, domestic law within the domestic legal system, this leaves the state responsibility at the international level for any breach of its international law implications. For instance, Australian statue law, which is apparently inconsistent with international law, will supersede the pertinent international law (Sung Pil 2014, pp. 356).
2. Murabaha in Islamic banking entails a kind of sales contract (bai’) that, in its most fundamental form,comprises of bank buying a given asset (mal) and selling back to the client who will make one or  more deferred payment over a period of rime to cater for the payments of the given asset together with a markup  that is the profit part for the financial institution or bank. Murabaha in the traditional context is a scenario that can be structured as a loan to the borrower for the reasons of buying the basic asset. Murabaha financing is broadly employed in modern Islamic banking, as well as finance, which is restricted to the cases in which the client or buyer requires to buy some goods (Hanif 2011, pp. 168).
The primary structure of the Murabaha comprises of two classes. First, the financial institution buys the asset from the specific seller at a particular price, where the details of the transaction and the product are also known by the customer. During this transaction, the exchange of the asset for the buying price is undertaken simultaneously. Second, the financial institution sells the specific asset to the customers at a marked-up price that comprises of the initial price paid for the asset by the financial institution, which also includes a profit margin to compensate the financial institution for its responsibility in the entire transaction. The asset being transacted is finally delivered to the customers instantly while the payment of the marked up buying price is deferred to one or more fixed dates in the prospect. It is a common practice in Islamic Law that any transaction using Murabaha method must comply with the general standards that apply to sales contracts and adhere to the goals of the Shari’ah. It is also paramount that the Islamic exclusions against interest, uncertainty, as well as gambling, are adhered to and that the sales contract does not relate to any prohibited product or service, such as pork, alcohol, or banned financial tools (Bälz 2004, pp. 122).
Musharaka in Islamic banking is a joint venture or partnership fashioned fro carrying out some business where all partners in the venture share profits. Musharaka has profound impacts for Islamic banking, as well as finance in the current background and offers an excellent option to the interest-based economy. Musharaka plays a leading duty in funding business operations founded on Islamic principles that outlaw making a profit on interest loans. It permits parties in the partnerships to share both the risks and profits. Thus, the association between the parties is by mutual contract; consequently, all the essential elements of an applicable contract should be present (Hanif 2011, pp. 170).
In this method, the party that is investing the capital will share equally both the profit and loss. However, the percentage or proceeds or profits that are going to be shared should be predetermined and settled up during the time of entering the contract under the Shari’ah law. All the Muslim judges agree that each partner will receive equal profit founded on the original ratio of investment. Musharaka does not allow in-kind contributions since it is considered that it will pose changes to the partnership when liquidation of the assets takes place or redistribution. Also, Musharaka is not a binding contract where any partner in the business can unilaterally cease the contract unless stated otherwise in the agreement (Bilal & Rahim 2014, pp. 156)
3. The parties in the case were Hong Kong Company, Sino Dragon Trading Ltd (Sino Dragon) v and the Singaporean company Noble Resources International Pte Ltd (Noble). The dispute that ensued between the two parties involved a contract for sale and purchase of iron, where the contract is applicable under the laws of Western Australia. In this case, Noble Resources International Pte Ltd  (the buyer and plaintiff) alleged that Sino Dragon Trading Ltd (the seller and first Respondent), violated the contract provisions by failing to open a letter of credit (obligatory of the agreement) or failing to undertake the agreement. The contract had an arbitration agreement that had been sealed between the two companies. Noble served an negotiation notice to Sino Dragon recommending the Australian Centre for International Commercial Arbitration (ACICA) as an appointing body, as well as appointing M as an arbitrator.
The Sino Dragon (plaintiff) and Noble (respondent) entered a contract that entailed selling and buying of iron on January 9, 2014, where the plaintiff agreed to purchase 170,000 dry metric tons of iron ore from Noble for a base price of about AUS $1.9 million, inclusive of shipment to China. The prevailing law in this contract between the two companies undertaking the transaction was provided by the law of Western Australia. This contract between Sino Dragon and Noble offered that any dispute or claim arising from the contract could be referred to arbitration. On May 1, 2014, Noble served a notice of arbitration on Sino Dragon, which was estimated at AUS $1.9 million and proposed ACICA as the appointing power and nominated an arbitrator. Some dealings along with procedural disputes and claims between the two companies in the contract followed.
Dino Dragon never responded nor appointed an arbitrator. The first respondent (Sino Dragon) in this case claimed that it had served notice of its malfunction to undertake the contract on a similar day that the applicant (Noble) had terminated and resold the good (iron) to a third party. Therefore, the dispute focused on whether Noble had suffered loss or injury and whether it had mitigated the injury or loss. Therefore, following the alleged violation of the contract by Sino Dragon, Noble terminated the contract and served a notice of arbitration on the first respondent for an approximated AUS $1.9 million and appointed an arbitrator. In line with the UNCITRAL arbitration provisions under the contract laws, an appointment was subsequently undertaken by an appointing body authorized by the Permanent Court of Arbitration. The arbitration contract, in this case, had an arbitration clause that demands that the dispute should be resolved in Australia founded on the established UNCITRAL Arbitration Rule. Following the adverse judicial comment, Noble (respondent) sought an order from the Australian Federal Courts that Sino Dragon indemnifies it for its costs of application (Friedland & Martinez 2007, pp. 523).
However, the appointments of the Chairperson, as well as the arbitrator that was appointed by the designated bodies were ineffectively challenged by the plaintiff many times on the diverse ground, and these challenges were rejected by the appointing entities. Nonetheless, before the last challenge had been determined by the appointing entities, an application was brought to the Federal Court of Australia. Sino Drago served the Tribunal with many challenges to the arbitrator’s appointments filed a court application that challenges the appointments of the arbitrators. Sino Dragon claimed that the court did not have the authority to judge a challenge to arbitrators under the Model Law, Article 13 (3). Sino Dragon also sought a pronouncement that the arbitrators had not been authentically appointed (Breznitz & Murphree 2011).
The prime subject in the case was whether the court would ascertain Sino Drago’s challenge to the arbitrators before the matter had been settled by the appointing powers. Eventually, the Court discarded all claims for the court’ authority to consider the challenge before the appointing authority had reached a verdict. The court held that Sino Dragon’s court application disrupted the arbitration procedure, as well as fashioned the prospective redundant holdup to an arbitration that was not in itself complicated founded on the provisions of the ACICA and the Model Law (Chamlongrasdr 2007, pp. 112). The court maintained that under Article 13 of the Model Law, has elaborate procedures for challenging an arbitrator. Originally, the parties in their contract had agreed on the process of challenging an arbitrator, where the parties had approved that adjudication would be carried out founded on the provisions of the UNCITRAL Arbitration Rules. Furthermore, the court discarded Sino Dragon’s application on the ground that it was unexpected submission, which the court had an independent universal law influence to take out a mediator outside the application of Article 13 (3). The court’s decision to reject the many applications was anchored on the fact that the court founded the exercise of such power in the background of the case will contradict the purpose of arbitration, as well as undermine the careful procedure defined in the Model Law. This perspective of the court was taken by the acknowledged significance and merits of arbitration in guaranteeing the effectiveness along with practicality. Therefore, the court rejected the alleged implied authority to challenge an arbitrator as it contradicted Article 5 of the Model Law (Ahmad 2015, pp. 298).
4. States have diverse common laws, as well as statues, which apply to the majority of contracts in the US. This may make things complex for firms, which frequently perform businesses on a national level. Thus, the choice of law matters may emanate, and there would be noteworthy conflicts concerning the type of state laws are controlling a particular contract. The default United States law that governs the sales contract under the standard form US contract will be the Uniform Commercial Code (UCC) (Walt 2015, pp. 46).  The UCC regulates the contracts for sales of goods, which is a standardized compilation of guidelines, which preside over the law of business transactions. Domestic contracts in the US are crafted based on the fundamental principles of US contract law- chiefly those that are set in Article 2 of the UCC. All the United States territories and states have embraced the UCC provisions; however, some of the states have changed some to rule to suit their particular circumstances (Saunders & Rymsza 2015, pp. 16). The UCC establishes the regulations, which apply to the contract for the sale of goods. The regulations handle everything from the manner the contracts must be interpreted to what standard form provisions are employed when a contract does no handle a specific contract manner. The UCC offers that the choice of law will be the buyer’s locale. In the case of Geo Corp Ltd, the choice law will be UCC in the US. Nonetheless, the buyer, as well as seller (Geo Corp Ltd and North Dakota company) under the UCC are allowed to negotiate the specific jurisdiction that will apply to the specific transaction (Schroeter 2015, pp. 230). 
Since 1988, the United Nations Convention on Contracts for the International Sale of Goods (CISG) has been the US law, which preempts the Uniform Commercial Code (UCC) when contracting parties are from other nations, which have ratified. The CISG is the default law for sales contract if there is no other mention is made in the contract of sale of goods between two parties that have their major position of business in diverse contracting nations, like the US and Australia. CISG offers an opportunity for a company to “opt out” through inserting a choice law provision in the international sale contract (Murray 2010). Therefore, the CISG applies automatically to all contacts for that touches the sale of goods from two diverse nations, in which the two countries have ratified the CISG (Ferrari 2012). Several United States importers, as well as exporters, presume that the governing law of any sales contract will be the UCC of the state specified in the purchase order or sale contract.  In the US, the CISG applies to contracts between a US party and a party place of business is a country that has adopted the CISG. As with the UCC, it is feasible to “opt out” of particular CISG provisions or the CISG wholly. Therefore, it is promising based on the US law to select CISG for the law of the contract (Pintar 2015).
Arbitration is an alternative to litigation in the courts that helps to resolve conflicts out of the court, especially those that touches on contract. The arbitration clause is a language in a written agreement such that if a dispute arises between the parties in a transaction between Geo Corp Ltd, and Geo Corp Ltd and North Dakota company, the dispute will be resolved via arbitration. Therefore, compulsory arbitration is an arbitration needed or mandatory by detailed law on the parties involved in dispute because of breach of contract in the sale of goods, for instance. This implies that the parties are forced to submit their case for arbitration purposes, even if they are not willing to arbitrate (Sandford & TanKiang 2011, pp. 469). Compulsory arbitration is a non-binding, adversarial conflict pledge process where one or more arbitrators hear the claims from the two parties, weighs the presented proof, and issue a non-binding judgment on advantages following an accelerated hearing. One of the merits of the mandatory arbitration clause is that it enables the company to avoid lengthy court processes and lengthy trials and appellate procedures. This will allow companies to embark on other important business activities. Mandatory arbitration clause allows the parties to maintain a high level of confidentiality concerning the details of the contract on the sale of goods (Walker 2015). Furthermore, the process is faster and more effective.
In the US, the Federal Arbitration Act (FAA) will be applicable in the case of Geo Corp Ltd, and Geo Corp Ltd and North Dakota company. The FAA was established in 1925 by an act of Congress, which offers for judicial facilitation of private dispute resolution via arbitration. It applies in the transaction between parties that involve interstate business. The FAA provides for contractual-based mandatory, as well as binding arbitration. The arbitration bodies include the American Arbitration Association (AAA), ADA Mediation Program, Arbitration and Mediation Center (AMC), Association for Conflict Resolution, Commercial Arbitration and Mediation Centre for the Americas (CAMCA), and Federal Mediation & Conciliation Service.
c. For Queensland arbitration award to be recognized under the US legal system, the arbitration contract concerning the sale of goods should be in writing. The arbitration agreement, normally defines the development contract, fashions, as well as defines the powers of the arbitration, and within the pertinent Commercial Arbitration Act, the process of the arbitration, particularly provided under Commercial Arbitration Act 2013 (Queensland). Thus, subject to the terms of the arbitration contract, the two parties might have the arbitrator. The number of arbitrators will generally be provided in the arbitration contract that might offer for a single arbitrator or a tribunal of three or more (Kronke 2010, pp. 508).  A authentically selected mediator has power to determine those issues to the arbitrator in the notice of dispute plus within the compass of the arbitration contract (Sandford & TanKiang 2011, pp. 470). However, in Queensland, there is the need to use international arbitration between the parties because the two companies come from two different nations and it allows the US legal system to recognize and enforce the agreement. The agreement will be subjected to International Arbitration Act 1974. This act governs Queensland’s obligations to acknowledge and enforce foreign arbitration contracts along with arbitral awards. Unless the two parties to an international arbitration agreement otherwise settle in writing, the dispute that will arise will be determined in line with the UNCITRAL Model Law that will put into consideration the requirements and features of international commercial arbitration. Accordingly the primary benefit of international arbitration is the development of an award between the two companies that is capable of enforcement in all nations. This will allow the US legal system to recognize and enforce Queensland arbitration.
Ahmad, J, 2015, “Review of the UNCITRAL Arbitration Rules–A Commentary (Second Edition) by David D. Caron and Lee M. Caplan”, Berkeley Journal Of International Law, 33, 1, pp. 294-305.
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Bell, GF 2005, “Why Singapore Should Withdraw Its Reservation to the United Nations Convention On Contracts For The International Sale Of Goods (Cisg)”, Singapore Year Book Of International Law, 9, pp. 55-73.
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