The approach of international and domestic contracts is very different. The international commercial contracts are governed by the bodies of International Principles such as UNIDROIT, UNCISG and European Contract Law.

Domestic contracts are governed by the national laws of the respective parties in respective jurisdictions. The courts of that country will have jurisdiction over the disputes arising out of those contracts. There is a clear legal framework which is applicable to the domestic contracts. Whereas, in case of international contracts, it is to be analysed on case-to-case basis as to which laws will be applicable to that case.

Following factors are to be considered while considering the applicability of the international contracts:

  1. What law will apply to those contracts?
    1. The domestic law of one of the parties?
    2. The law of the other country?
    3. International Trade Convention?
    4. The trade Usages?
    5. Transnational rules of law not belonging to the domestic legal system.
  2. If there is a dispute, which courts will have jurisdiction?
  3. In case of arbitration, will the courts of seat be of the claimant or the defendant?

So, the main issues that arise in the international contracts is the applicable law and the jurisdiction of the courts to resolve disputes arising out of those contracts.

International contracts, if looked from the view of the national laws, domestic legal systems, tend to provide the skewed view and unbalanced situation giving one of the parties the advantage to apply their own rules. Enforceability of such contracts is also problematic, where the parties do not make an express choice for applicability of the law. In case of any dispute, the parties (unless they settle on international arbitration) have resort to the domestic courts of one of the countries involved. The parties usually make express choice of the applicable law in their contract. And then one of the party appears before the National court of other country and have to abide by their rules and procedures. A party appearing before a foreign court face multiple challenges regarding the rules and procedures applied by the courts of that country, which will many a times be surprising to the foreign party. The judges will be nationals of that country, and the only admissible language in the court will be that of this country. It makes litigation extremely difficult.

The solution to this is that there must be some special legal system with the courts that are supernational, and they have the authority and jurisdiction to hear the cross-border disputes. Their judgements are applicable all over the world. Even though such kinds of courts and procedures have not been put in place, some of the attempts have been made to overcome the difficulties in the cross-border disputes. These are:

  1. Creating uniform laws on certain international contracts
  2. By facilitating recognition and enforcement of foreign judgements.
  3. By favouring in various ways, the international arbitration.

Self Sufficient Contracts:

The practice of drafting contracts, specifically for the cross-border transactions has evolved, wherein the contracts drafted are not self-sufficient and are independent of the national laws that govern them. The standard clauses of those contracts are drafted in such a way that they tend to impose themselves in the contractual practice, independent of the national law that will govern them. The risk of conflict is reduced to drafting the contracts that are both detailed and exhaustive as possible, and by choosing the rules from the legal systems that few mandatory rules of the mandatory rules that conform to the expectations of the international traders.



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