1 OVERVIEW INTERNATIONAL COMMERICAL TRANSACTIONS College of Law University of Saskatchewan STRUCTURE AND GOALS OF THE COURSE The issues examined in this course arise in the context of private commercial relationships that have interjurisdictional features. Some of these relationships involve parties or performance in other provinces of Canada. However, the great bulk of them will be international; they involve legal relations between persons in Canada and persons in other countries. What distinguishes all international transactions from domestic transactions is that the law applicable to the various aspects of international transactions and their performance is not entirely domestic Saskatchewan or Canadian law. Aspects of the relationship may be governed by the national law of another jurisdiction or by transnational commercial law in one form or the other. The goal of the course is to permit students to (i) examine many of the legal issues that arise as a result of one of the parties to a contract of sale or the performance of the contract being in another jurisdiction; and (ii) to identify and apply the law and structures that address these issues. While the great bulk of the course material relates to sales of goods and financing of such sales, many of the principles and approach examined in the course apply to other types of transactions such as sales of services and project performance and financing. The course has two integrated features. The first is class discussion of the full range of nation and transnational (private international law) law applicable to relationships described in the preceding paragraph. Most of the materials (other than those that are available on the internet) can be accessed by course participants through the University on-line system PAWS that hosts the Blackboard program. In the second part of the course - the Negotiation Exercise-, participants are given the opportunity to apply in the context of scenarios the information addressed in the first part. Assessment of the performance of participants in the course ise on the basis of an openbook examination (75%) and the preparation of the relevant documents and associated brief of law involving a specific international sales transaction and/or related financing transaction (25%).
2 AREAS EXAMINED IN PART I Relevant statutes, Conventions and Caselaw (national and foreign) are provided for each item listed below on Blackboard. KINDS OF INTERNATIONAL LAW BACKGROUND TO AND SOURCES OF TRANSNATIONAL COMMERCIAL LAW INSTITUTIONAL SOURCES OF TRANSNATIONAL COMMERCIAL LAW LAW REGULATING INTERNATIONAL SALES OF GOODS Background Factors Relevant To Contracts of Sale and Related Contracts Basic Conflict of Laws Rules applicable to Contracts (Rules of Private International Law) Unidroit Principles of International Commercial Contracts Regulation (EC) No 593/2008 of the EU (Rome I) Commercial Law Conventions (Types) Relationship Between Private International Commercial Law Conventions and National Conflict of Laws Rules Implementation of Commercial Law Conventions in Canada UNITED NATIONS CONVENTION ON THE INTERNATIONAL SALE OF GOODS, 1980 (VIENNA SALES CONVENTION) or CISG The Relevance, Scope and Application of the CISG When Does the CISG apply? Contracts to which the CISG does not apply Contract Formation Seller s and Buyer s Implied Obligations Buyer s Remedies for Various Levels of Non-Performance The issue of avoidance Frustration and Force Majeure ELECTRONIC COMMUNICATIONS IN LEGAL RELATIONS The United Nations Model Law on Electronic Commerce and The Saskatchewan Electronic Information and Documents Act, 2002 Confidentiality of Internet Communications Public Key Infrastructure
3 REGULATORY RESTRICTIONS- Export and Import Permit Act DELIVERY OBLIGATIONS (RISK AND INSURANCE) ICC Incoterms Types of Delivery Contracts Regulation of Delivery Terms (Conventions) PAYMENT Managing Foreign Currency Requirements Payment Obligations under CISG Payment Options Payment by Bills of Exchange or Electronic Systems Payment under Commercial Letters of Credit (UCP) FINANCING INTERNATIONAL TRADE TRANSACTIONS Types of Credit Arrangements Role of Export Development Canadain the light of the features of the Bill Export Credit Insurance Line of Credit Financing Factoring Forfaiting International Financing Leasing Standby Letter of Credit Domestic Secured Financing for Export Contracts (PPSA) The Convention on International Interests in Mobile Equipment Secured Financing in a Canada-US Context What Law Governs (PPSA and UCC Art. 9) DISPUTE RESOLUTION THROUGH THE COURTS Choice of Forum, Jurisdiction, Forum Non-conveniens and Anti-Suit Injunctions Court Jurisdiction And Proceedings Transfer Act Choice of Forum by Agreement The European Approach to Jurisdiction The Lugano Convention 2007
4 ENFORCEMENT OF JUDGMENTS The Enforcement of Canadian Judgments Act, 2002 The Enforcement of Foreign Judgments Act, 2005 SOVEREIGN IMMUNITY JURISDICTION AND RECOGNITION The State Immunity Act. DISPUTE RESOLUTION (ARBITRATION) Types of Arbitration: Institutional and Ad Hoc Domestic Arbitration International Commercial Arbitration The Enforcement of Foreign Arbitral Awards Act, 1986 The International Commercial Arbitration Act
5 PART 2 NEGOTIATION EXERCISE The negotiation assignments represent 25% of the final grade in the course. Each participant is marked on her or his individual contribution to the negotiations as displayed in the contracts and the report to his or her client (described below). The class participants are placed in groups of two or three student negotiators. A different scenario is given to each group. A scenario involves a hypothetical set of transactions involving a Saskatchewan party, a foreign party and, in most cases, a financing organization. In each group, one student represents the seller (or equivalent) a second, the buyer (or equivalent) and, where appropriate, the third the financing organization. Each group of negotiators will negotiate the relevant contracts (sales contract and financing contract). Each negotiator will assume the role of a solicitor who negotiates the legal terms of the contracts and related undertakings as representative of his or her client. (You must assume that, throughout the negotiation process you are in constant contact with your client). The negotiators will prepare basic contracts and explain to their clients what other contractual arrangement will have to be made (e.g., shipping). The representative of the financing agency will work with the representatives of the seller and or buyer to shape the financing contract arrangements and prepare the relevant financing documentation. The contracts must reflect the applicable national or transnational law and address all of the relevant factors that have legal significance in the most efficient and effective way to accomplish the parties goals. In so doing, each negotiator must anticipate legal problems that could arise and try to build in protection against loss, inconvenience or extra cost to his or her client should one or more of the problems arise. A negotiator should proceed on the assumption that a dispute leading to judicial intervention (court or arbitrator) could well occur. The form contracts should contain all of the crucial clauses arising out the negotiation. There is no need to include the boiler plate found in most precedents. Crucial clauses are those that are particularly important in the context of the transaction. Each negotiator will prepare a short electronic report to her or his client in which the crucial clauses of the contracts (and associated factors) are identified and their legal significance explained. A copy of it along with the negotiated contracts is made available to the instructor. A negotiator who gave concessions in the negotiation will explain the reason the concessions were given and the risk (if any) that the concessions entail. Participants can gain most of the needed information and guidance from the Course Materials published in Blackboard. However, it will be necessary to access other sources
6 (e.g., library and webpages) to get precedent forms of contracts and to address matters that are of particular relevance to the type of contracts or type of property involved. I am willing to discuss your assignment with you should you encounter matters which create significant problems. In particular, there may be a few technical issues associated with the financing arrangements with respect to which you might need guidance. Some of the negotiated arrangements will be presented to the class. (Time will likely not permit presentation of all of them). The number of presentations will be determined by the amount of class time available. Electronic copies of the written explanations (along with the contract and all related documents) will be presented to all members of the class.
7 SCENARIO 1 Seller: Saskatoon Agricultural Machinery Manufacturing Co. Ltd. (SAMMCO) Head office and manufacturing facility in Saskatoon, Saskatchewan, Canada. Buyer: Marchuk Agricultural Machinery Importers Виступи І Коментарі 253 Parkovaya Doroga Kiev, 01021, Ukraine Subject-Matter Twenty SAMMCO Air Seeders (computerized machines for use in placing seeds and fertilizer in dry soil conditions.) Delivery: Negotiable as to method, but may be influenced by financing arrangement. Financing and Payment: The buyer has arranged for payment and financing through the Kredobank, ( "КРЕДОБАНК") Kiev, Ukraine. The seller has no expert knowledge of the Ukrainian banking system and wants assurance of payment. Special Considerations: The equipment was originally designed for sale to farmers in Prairie Canada. It has not been tested in Ukraine which has a wide variety of soil conditions. Ukraine has not ratified either the Vienna Sales Convention or the Enforcement of Foreign Arbitral Awards Convention. Dispute Resolution: The seller is not prepared to accept litigation in Ukrainian courts and the buyer will not accept litigation in Canadian courts. Solicitor for SAMCO Lawyer for Marchuk Agricultural Machinery Importers Lawyer for Kredobank ( "КРЕДОБАНК")
8 SCENARIO 2 Seller: Prairie Spice Ltd. Head office: Outlook, Saskatchewan, Canada (Small family corporation grower and seller of spices) Buyer: American Spice Wholesale Ltd. Head office: Chicago, Ill. U.S.A. (Large wholesale importer and distributor of spices throughout the United States). Subject-Matter: Spices (detailed in the contract) grown in Saskatchewan, to be supplied over a 12 month period beginning March 1, Delivery: Negotiable as to method and obligation. Payment; Open account, 180 days. Financing: Accounts factored with Canadian Factors Ltd., Toronto, Canada. Special Considerations: Growing conditions are variable and hard to predict. As a small company, fair and accessible dispute settlement is a concern. Solicitor for Prairie Spice Ltd. Attorney for American Spice Wholesale Ltd. Solicitor for Canadian Factors Ltd.
9 SCENARIO 3 Seller: Sask. Field Sprayers Ltd. Head office: Regina, Saskatchewan, Canada ( A small manufacturer of computerized, multipurpose field sprayers) Buyer: Idaho Potatoes International Inc. Head office: Boise, Idaho. U.S.A. Large potatoes producer and distributor with operations in Idaho, Montana, Saskatchewan and Manitoba. Subject-Matter: 20 Field Sprayers to be used in Idaho, Saskatchewan and Manitoba. Delivery: Negotiable as to method and obligation. Financing: Bridge secured financing arrangement offered by seller providing for payment by instalment over a period of three years. (Contract [chattel paper] to be bought by Export Development Canada). Solicitor for Sask. Field Sprayers Ltd. Attorney for Idaho Potatoes International Inc. Solicitor for Export Development Corp.
10 SCENARIO 4 Seller: Bavarian Machinewerks, Aktiengesellschaft AG Head Office:36 Statstrass, Bemerhaven, Germany Buyer: Kamico Mining Company Head Office: 123 Spring Road, Saskatoon, Saskatchewan Financing: Scotia Bank Saskatoon, Saskatchewan. Subject-matter: Uranium processing machine. Payment: Payment when machine is installed and operable in accordance with contractual standards. Payment and Financing: Sight Drafts drawn on buyer to be honoured by buyer s bank (Scotia Bank) upon presentation by seller s bank. Arrangements between buyer and bank to secure the bank s position. Delivery: Negotiable as to method and obligation. Special Considerations: This machinery is of a new design. Kamico requires a legal mechanism to ensure that it meets contract requirements. All communications have been by . Lawyer for Bavarian Machinewerks Aktiengesellschaft AG Solicitor for Kamico Mining Company Solicitor for Scotia Bank
11 SCENARIO 5 Supplier: American Oil-Field Equipment Ltd. Head Office: 2000 Bush Drive, Huston, Texas, USA Lessee: Sask Hydrocarbon Explorations Ltd. Head Office: 234 Souris Ave. Estevan, Saskatchewan Lessor: Lease International Ltd., 1515 Broadway Ave. New York, N.Y. USA Subject-matter: AOE Drilling Rig, 5000 ft. vertical and horizontal drilling capacity. Delivery: Negotiated Payment: Pursuant to financing arrangement. Financing: Long term finance leasing provided by Lease International Ltd., New York, N.Y. USA. Solicitor for Sask Hydrocarbon Explorations Ltd. Attorney for American Oil-Field Equipment Ltd. Attorney for Lease International Ltd.,