INTERNATIONAL ECONOMIC LAW

1. INTERNATIONAL ECONOMIC LAW SUN Xiyao Law School Shandong University at Weihai Associate Prof.

2. Ch. I Concept and Subjects of Int’l Eonomic LawSec. I Introduction • 1, Sovereign States: In some western countries, a few scholars hold that only sovereign states can be actors in international economic law, such as Lowenfeld, who composed a book titled International economic law, and British professor, G.Schwarzenberger:General principles of law as applied by international courts and tribunals. These scholars holds that, international economic law is just a branch area of international law. • 2, Besides sovereign states, the corporate entities, including multinational enterprises and natural persons are also subjects of international economic law. The Chinese scholars of international economic law and many foreign scholars, such as P. Jessup and H.J Steiner and D.F. Vagts. They all have the opinion that international economic law is a body of norms dealing with the economic relationships in between/amongst states, corporations and natural persons.

3. Natural persons: the biggest body of subject of IEL, however, natural persons can only be engaged in a relative narrow range of economic activity due to their capacitiy.

4. Scope of IEL • To be more exact, International economic law is a field of international law that regulates the behavior of states, international organizations and firms operating in the international arena. International economic law means international law relating to investment, economic relations, economic development, economic institutions, and regional economic integration. International economic law covers both the conduct of sovereign states in international economic relations, and the conduct of private parties involved in cross-border economic and business transactions.

5. Sources of IEL • National, regional, and international law policy and customary practices are all elements of international economic law. International economic law also includes the following fields such as regional economic integration agreements, such as the European Union, ASEAN (Association of Southeast Asian Nations)and other regional trade organizations, international law and development and international development, international commercial arbitration, international intellectual property law, international business regulation, international trade law, and features of international environmental law

6. CH. I Sec. II The Multinational EnterpriseIntroduction of MNE Introduction: Definition:The multinational enterprise (MNEs，also multinational corporation):Large firms whose operations and functions span national borders. Operates in different countries and adjusts products and practices to each at a lower relative costs. A multinational enterprise is a firm that has productive capacity in a number of countries. The profit and income flows that they generate are part of the foreign capital flows moving between countries.

7. Legal status: The organization of a business is a matter of municipal law. Generally speaking, businesses are created by individual nations in accordance with initiators’ home state law, even though they may be operated internationally. The organizational form that a business can assume depends on its place of creation. The variety of forms, however, is limited essentially to partnerships and corporations. The MNEs take on a variety of operational structures that reflect their international character. If a home or parent organization is located within a single state, it is a national multinational which usually has a simple structure; however, enterprises with several/multiple parents located in various states, are international multinational, which have complex structures.

8. Business forms In states other than a firm’s home state, the business often operates through subordinates-------representative offices, agencies, branches, and subsidiaries, which are dictated by home and host state laws. Like the establishment of a firm, the regulation of multinationals is principally a matter of municipal law. As a general rule, home states regulate parent firms and host states regulate subordinates. Sometimes, however, the home states can regulate foreign subordinates through extraterritorial laws, and host states may regulate parent firms by piercing the fictional veil that separate the subordinates from their parents.

9. A, the business form States authorize or forbid different business forms based on different political ideology and economic and social needs. As a consequence, the company laws of different countries in the world have their own unique features. A prudent business investor planning to establish a business abroad will make careful investigation of company laws of the particular country involved, and make a comparison with company law of his home state. Generally, the sources of company laws are civil law and common law.

10. Business forms in civil law states In civil law states, including France and Germany, form of business organization is a company that must register with state. In France, companies are juridical entities independent of their owners; in Germany, corporations are juridical entities, but partnerships are not. Some civil law companies grant limited liability to their members, others do not. Partnership is a company of two or more persons who co-own and manage a business and who are each liable for its debts to the extent of all their personal assets. Corporation is a company of capital whose owners have limited liability.

11. Civil Law Partnership Civil law partnership The civil law partnership is a company of two or more persons organized to carry on a business. If the number of partners is reduced to one, however, the partnership can continue to function. In France, such partnership can continue for some time for dissolution of partnership. But in Germany, the partnership can continue to carry on business activities under its original name. In France, partnerships are considered as having separate legal or juridical personalities from the partners. In Germany, however, they do not have a separate juridical personality. In some countries, the partnership agreement may include a Leonine clause, which exclude a particular partner from sharing the losses of the company, for example, in Germany, but in France, however the leonine clause is void.

12. There still a specialized form of partnership—limited partnership, which is recognized in civil law. One partner must be a general partner and one must be a limited partner. In France the limited partner can only invest in cash or property, but in Germany services may be fixed and regarded as contribution. In both countries, partners can be either limited of unlimited one, but they can not be both. In France limited partner can participate in the internal administration of the partnership, but can not deal with a 3rd party. In Germany, a limited person may be given power to deal with third parties on behalf of the partnership.

13. Example In Germany, another special kind of partnership is known as silent partnership, which is a secret relationship. Of the partners, there is an unknown partner to third parties. As long as the silent partner is not disclosed , the risk of the silent partner is limited to the amount he invested.(tax avoidance ). But in France it is treated as a loan, and governed by contract law, and regarded as a simple loan arrangement. A hybrid of the partnership and stock corporation is the partnership limited by shares, which consists of one or more general partners with unlimited liability and limited participation by investors in the form of share. But it is regarded as a capital company rather than an association of persons, thus it has a disadvantage, assigning unlimited liability to the general partners and is taxed as a corporation, it seldom used.

14. Civil law corporations There are two basic kinds of civil corporations: stock corporations and limited companies. The stock corporation is the only civil law company that can raise money in the public marketplace. One begins the organization of a stock corporation by drafting articles of incorporation and finding subscribers to purchase shares. Subscriptions to corporate stock are raised in two ways. In the first, known as incorporation by stages, the promoters issue a prospectus and invite the public to subscribe. Subscribers are then called to a meeting to approve the draft articles of incorporation, to ratify the issuance of shares for other than cash, and to endorse other premiinary matters. A minimum capitalization is required to establish a civil law corporation. In France, this is currently set at 1,500,000 francs and in Germany at 100,000 deutsche marks. Unlike common law countries, the civil law states generally do not recognize the concept of authorized by unissued shares.

15. Once subscriptions have been paid in, an initial organizational meeting is held, a board of directors is appointed or elected, and the initial formalities are completed. The stock corporation must then register its articles of incorporation with the appropriate public offices, such as the commercial registrar. Although the civil law generally requires that threw be more than one subscriber to set up a stock corporation, in Germany, after incorporation, the shares can be transferred to a single owner so that a wholly owned stock corporation can be set up. In France, however, a stock corporation can have no fewer than seven shareholders; and if the number should fall below seven, the corporation can be forced to dissolve. Commonly, the only shares that subscribers may purchase are par shares, which are shares that must be sold by a company for at least par value printed on the stocks’ face. The amount of the fund that the subscribers contribute is part of the company’s capital.

16. Common Law Corporate Traditionally, in common law countries, the owners of corporate shares were entitled to vote on the operation of their stock corporation. Shareholders in a stock corporation are responsible for electing the board of directors, reviewing the annual statements of earnings and operations and declare dividends.

17. Requirment by Law Quorum(法定人数) and requirements vary widely. In Germany, no quorum is required for ordinary resolutions. In France and many other countries quorum cannot be met at a first meeting, then a second meeting may be held at which a lower percentage of shares will constitute a quorum and resolutions can then be adopted by majority of those present. Corporate financial statements must be prepared annually in advance of the shareholders’ meeting. Outside auditors or statutory auditors must employed by the stock corporation to examine its books.

18. Comparison between France and Germany The civil law limited liability company in France and Germany. In Germany, where the form originated, it is widely used for setting simpler entity; it does not issue negotiable share certificates and it is subject to less stringent public disclosure laws. The least amount of capitalization needed to set up a limited liability company varies greatly from country to country. As a general rule, the amount is les than that required for stock corporations. Investors in limited liability company are known as members –rather than shareholders-and are said to own a participation rather than shares.

19. Sec. III International Economic Organizations • Definition and types: An international organization is an organization of international scope or character. According to the Charter of the UN, there are two main types of international organizations: international intergovernmental organizations, whose members are sovereign states; and non-governmental organizations (NGOs), which are private organizations. Generally the term international organization is used to mean international governmental organizations only. It is in this sense that the term is used in the remainder of this article.

20. IGO • IGOs are permanent organizations set up by two or more states to carry on activities of common interests. Modern IGOs evolved from European practice of convening conference at the end of wars to draw new boundaries and sign peace treaties. These conferences were generally convened to sponsor multilateral treaties to maintain the peace and to carry on a variety of international activity of common interests. Following world war I, the league of nations was founded as the first and most important international organization both in scope and membership. But unfortunately, because its failure to stop the biggest disaster that mankind has ever suffered in human history ,world war II, the league of nations was taken place by U.N. and its activities were taken over by U.N. and well developed by U.N . • Today there are some 400 IGOs. Most significantly, IGOs have evolved from the simple meetings or conferences of states to entities which have permanent structure and staffs, and carry on a variety of activities of common interests. In case of IGOs, they have supranational powers, which evolves from conventions, unlike sovereign immunity.

21. Legal capacity of IGO • Legal capacity :for an international person has to have to deal with international relationships with other international persons or to sue or to be sued in an international court or a municipal court. Legal capacity must be recognized so as to deal with its own member states. Nonmember states of IGOs are also required to recognize legal capacity of an IGO, as is in the united states,because the u.s. regards IGO as an agency of its members and recognition will be implied. But this is not a uniform rule , in U.K. the fact that the executive becomes a member of an intergovernmental organization does not mean the government recognize its legal capacity automatically. The U.K. courts does not recognize the capacity of an IGO to bring suit or to be sue in the U.K. unless the U.K. government specifically certifies that the IGO has such capacity .

22. some important IGOs • WTO:The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business.

23. Purpose and aim: that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development. In other word:

24. The system’s overriding purpose is to help trade flow as freely as possible — so long as there are no undesirable side effects — because this is important for economic development and well-being. That partly means removing obstacles. It also means ensuring that individuals, companies and governments know what the trade rules are around the world, and giving them the confidence that there will be no sudden changes of policy. In other words, the rules have to be ‘transparent’ and predictable. • Available at: http://www.wto.org/english/thewto_e/whatis_e/who_we_are_e.htm more details, see the following charter

25. IMF • The International Monetary Fund (IMF) is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. • History : Cooperation and reconstruction (1944–71) 1,As the Second World War ends, the job of rebuilding national economies begins. The IMF is charged with overseeing the international monetary system to ensure exchange rate stability and encouraging members to eliminate exchange restrictions that hinder trade.

26. 2, The end of the Bretton Woods System (1972–81) After the system of fixed exchange rates collapses in 1971, countries are free to choose their exchange arrangement. Oil shocks occur in 1973–74 and 1979, and the IMF steps in to help countries deal with the consequences. 3, Societal Change for Eastern Europe and Asian Upheaval (1990–2004) The IMF plays a central role in helping the countries of the former Soviet bloc transition from central planning to market-driven economies.

27. 4,Globalization and the Crisis (2005 - present) The implications of the continued rise of capital flows for economic policy and the stability of the international financial system are still not entirely clear. The current credit crisis and the food and oil price shock are clear signs that new challenges for the IMF are waiting just around the corner. See: http://www.imf.org/external/about/history.htm

28. World bank group • The World Bank is a vital source of financial and technical assistance to developing countries around the world. Our mission is to fight poverty with passion and professionalism for lasting results and to help people help themselves and their environment by providing resources, sharing knowledge, building capacity and forging partnerships in the public and private sectors.

29. institutions of World bank • the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).Each institution plays a different but collaborative role in advancing the vision of inclusive and sustainable globalization. The IBRD aims to reduce poverty in middle-income and creditworthy poorer countries, while IDA focuses on the world's poorest countries. • Their work is complemented by that of the International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA) and the International Centre for the Settlement of Investment Disputes (ICSID).

30. Nature of World Bank • We are not a bank in the common sense; we are made up of two unique development institutions owned by 187 member countries: Together, we provide low-interest loans, interest-free credits and grants to developing countries for a wide array of purposes that include investments in education, health, public administration, infrastructure, financial and private sector development, agriculture and environmental and natural resource management. • The World Bank, established in 1944, is headquartered in Washington, D.C. • Details available at: http://www.worldbank.org/

31. Regional Organizations • 1, EU: The European Union • History :European Coal and Steel Community (ECSC), 1st treaty organization of what has become the European Union; established by the Treaty of Paris (1952). It is also known as the Schuman Plan, after the French foreign minister, Robert Schuman, who proposed it in 1950. Member nations of ECSC pledged to pool their coal and steel resources by providing a unified market for their coal and steel products, lifting restrictions on imports and exports, and creating a unified labor market. Economically, the Coal and Steel Community achieved early success; between 1952 and 1960 iron and steel production rose by 75% in the ECSC nations, and industrial production rose 58%.

32. When overproduction of coal became a problem after 1959, especially in Belgium, the ECSC demonstrated its flexibility by reducing Belgium’s coal-producing capacity by 30% and by making available large sums of money to aid in retraining miners and developing new industries. The ECSC had, by 1970, granted about $150 million in aid to retrain over 400,000 coal miners. The executive machinery of the ECSC provided an important precedent for the future growth of a united Europe: the nine-member High Authority, which became a part of the European Commission in 1967, was chosen by the member governments and made independent of those governments. Its independence was guaranteed by providing the authority with its own source of income.

33. The European Union (EU) is a union of twenty-seven independent states based on the European Communities and founded to enhance political, economic and social co-operation. Formerly known as European Community (EC) or European Economic Community (EEC). • The European Union (EU) is not a federation like the United States. Nor is it simply an organisation for co-operation between governments, like the United Nations. It is, in fact, unique. The countries that make up the EU (its "member states") pool their sovereignty in order to gain a strength and world influence none of them could have on its own.

34. More information: • The European Union (EU) is an economic and political union of 27 member states which are located primarily in Europe .The EU traces its origins from the European Coal and Steel Community (ECSC) and the European Economic Community (EEC) formed by six countries in 1958. In the intervening years the EU has grown in size by the accession of new member states , and in power by the addition of policy areas to its remit. The Maastricht Treaty established the European Union under its current name in 1993. The last amendment to the constitutional basis of the EU, the Treaty of Lisbon , came into force in 2009. • The EU operates through a hybrid system of supranational independent institutions and intergovernmentally made decisions negotiated by the member states. Important institutions of the EU include the European Commission, the Council of the European Union, the European Council, the Court of Justice of the European Union, and the European Central Bank. The European Parliament is elected every five years by EU citizens.

35. The EU has developed a single market through a standardised system of laws which apply in all member states including the abolition of passport controls within the Schengen area.It ensures the free movement of people, goods, services, and capital,enacts legislation in justice and home affairs, and maintains common policies on trade,agriculture, fisheries and regional development, A monetary union, the eurozone, was established in 1999 and is currently composed of seventeen member states. Through the Common Foreign and Security Policy the EU has developed a limited role in external relations and defence. Permanent diplomatic missions have been established around the world and the EU is represented at the United Nations, the WTO, the G8 and the G-20. • More details, see: http://en.wikipedia.org/wiki/European_Union, http://europa.eu/index_en.htm

36. NAFTA • Introduction • The North American Free Trade Agreement or NAFTA is an agreement signed by the governments of Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It superseded the Canada – United States Free Trade Agreement between the U.S. and Canada. In terms of combined GDP of its members, as of 2010 the trade bloc is the largest in the world. • The North American Free Trade Agreement (NAFTA) has two supplements, the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC).

37. Objectives of NAFTA The objectives of this Agreement, as elaborated more specifically through its principles and rules, including national treatment, most-favored-nation treatment and transparency, are to: • a) eliminate barriers to trade in, and facilitate the cross-border movement of, goods and services between the territories of the Parties; • b) promote conditions of fair competition in the free trade area; • c) increase substantially investment opportunities in the territories of the Parties; • d) provide adequate and effective protection and enforcement of intellectual property rights in each Party's territory; • e) create effective procedures for the implementation and application of this Agreement, for its joint administration and for the resolution of disputes; and • f) establish a framework for further trilateral, regional and multilateral cooperation to expand and enhance the benefits of this Agreement.

38. ASEAN • The Association of Southeast Asian Nations, or ASEAN, was established on 8 August 1967 in Bangkok, Thailand, with the signing of the ASEAN Declaration (Bangkok Declaration) by the Founding Fathers of ASEAN, namely Indonesia, Malaysia, Philippines, Singapore and Thailand. • Brunei Darussalam then joined on7 January 1984, Viet Nam on 28 July 1995, Lao PDR and Myanmar on 23 July 1997, and Cambodia on 30 April 1999, making up what is today the ten Member States of ASEAN.

39. Purpose and Aims • 1,To accelerate the economic growth, social progress and cultural development in the region through joint endeavours in the spirit of equality and partnership in order to strengthen the foundation for a prosperous and peaceful community of Southeast Asian Nations; • 2,To promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among countries of the region and adherence to the principles of the United Nations Charter; • 3,To promote active collaboration and mutual assistance on matters of common interest in the economic, social, cultural, technical, scientific and administrative fields; • 4,To provide assistance to each other in the form of training and research facilities in the educational, professional, technical and administrative spheres;

40. 5,To collaborate more effectively for the greater utilisation of their agriculture and industries, the expansion of their trade, including the study of the problems of international commodity trade, the improvement of their transportation and communications facilities and the raising of the living standards of their peoples; • 6,To promote Southeast Asian studies; and • 7,To maintain close and beneficial cooperation with existing international and regional organisations with similar aims and purposes, and explore all avenues for even closer cooperation among themselves

41. Section IV History of IEL • Long before: from 9th century BC, 17th century. Lex mercatoria (law merchant): Rhodian Sea-Law, Consulado del Mar Period of capitalist development: from 17th century to World War II：Friendship Commerce Navigation Treaty • Modern times : from 1944 to present： Domestic legislation Treaties and conventions

42. Chapter questions for review • Multinational enterprise • IGO • Major International IGO • Home state regulation of MNE • Host state regulation of MNE • Standards of care • Points of objections to complaints brought against a state about expropriation, nationalization or confiscation