Sunday, 31 October 2010

Letter of credit briefly explained (or at least what I make of it)

As our first block is coming to an end and we are getting ready to plunge ourselves into the uncertain and complex world of international trade law, I took a sneak peek into our syllabus. Between many commercial concepts prescribed, I noticed the letter of credit, a very interesting mechanism employed in international commercial transactions especially in the carriage of goods by sea.

A typical letter of credit

A letter of credit is essentially a warranty of payment. Both a sign of financial competence for the international buyer and a safe heaven for the seller, in case that the buyer defaults. To get more specific a letter of credit is actually...a letter; issued by the buyers bank and guaranteeing payment (by a transaction from the buyers to the sellers bank) of an agreed sum , in case the buyer is unable to pay the commercial transaction himself. To get the letter, the buyer usually needs to either deposit the agreed sum of money in the bank that is issuing the letter or to take a loan from the bank. One of the most important aspects of the letter is that it has a termination date, meaning that if the buyer fails to pay up in the prescribed time (a certain date) the seller can ignore the buyer and go directly to his bank to collect what he is owed.

In an international market where a transaction can be affected by a large number of unforeseen factors (e.g. pirates, natural disasters, fall of regimes, and stock market crashes) a letter of credit provides much needed safety, essentially creating a protective barrier and guaranteeing that no matter  what happens, the agreed transaction will go through. Further more the letter of credit also deters fraud, a matter difficult to deal with in an international environment with many jurisdictions and little judicial control (especially if the fraudster is in the other side of the world).  

Further facts about the letter of credit



ps. still writing child labour essay...I now can confidently say that international labour law should be called international bureaucracy law...so much red tape so many committees...so little action...

Thursday, 28 October 2010

Public authorities, neoliberal economic practices and war crimes

A few weeks ago as a preparation for a workshop, we had the task of finding the meaning of 'public authority' in the English law, especially in relation to the Human Rights Act of 1998. After conducting my research I concluded that the term public authorities is a truly problematic one especially when it comes to asserting rights. 



In most countries of the world, a legal entity is considered to be public authority when it is regulated by public law, such as the police, local authorities etc. Section 6(3b) of the Human Rights Act 1998  states that any person whose functions are of public nature is a public authority. Looks pretty straight forward...but its not.  The Human Rights Act of 1998 is essentially the implementation of the  European Convention on Human Rights (I not going to analyse the reasons why the act was implemented 50 years after the convention was drafted or the significance of the act being the first bill of rights after the 1689 Bill of Rights1) into the English law.

What might be the problem then? Simply fifty or so years ago public authorities throughout Europe had one major common characteristic they where all public...today in a globalized neoliberal environment...many of them are not (thankfully in this writers opinion, most of the core authorities are still public like say the police).

From the theories of  Milton Friedman 2, to the rise of Thatcherism3, to today's government austerity measures, over the last decades there has been a steady trend to the privatization of parts of the public services spectrum, creating a myriad of problems concerning the legal status of private but yet public authorities. Examples of the above mentioned problems can be seen especially in health care and public authorities where in various cases private elderly homes contracted by local authorities either closed or had to lay off workers in fear of bankruptcy and as a result leave elderly people in the street4. With the free market principles in effect when the said elderly people brought the cases to court alleging a violation of human rights the courts in most cases found that the elderly care homes where private companies, not public authorities thus there was no human rights violation.

But things get even worse... What made me consider writing this post was the front page of the Guardian a couple of weeks ago reporting on the death of an illegal immigrant from Africa during deportation, with witnesses alleging asphyxiation by the security guards accompanying him5. As the newspaper reported the deportation was handled by a private security firm under being under government contract. And so I posed the question to my self if the unfortunate mans family took the  private firm to the courts on a breach of human rights what would be the most possible outcome? Looking at the previews judgements concerning the nature of public authority, there is a high possibility that the security firm as a private company will be held not to be a public authority and thus no human right breach occurred as the right doesn't exist in the first place. It should be also noted that the problem of privatisation in connection to human rights exists in international law too, with the most pivotal example being the alleged human rights violations of the 'private security firms' (i.e. mercenaries) that the American government contracted during the war in Iraq, as they are private companies they are not obliged to act in accordance of various international treaties such as the Geneva Convention6.

What we are witnessing here, in my humble opinion is, commercial law and socioeconomical principles stepping over fundamental human rights in the name of the free market... let us hope that at least in the case of the UK the parliament will find a way to close the legal gap that allows such injustices to take place, something that in my opinion judicial review cannot cover. Finally concerning the international law aspect of the problem, as the saying goes ' in a war, its the victor that writes the history' and the laws also...

-------------------------------------------------------------------------------------------------------
1 .The 1689 Bill of Rights
3.  The dreaded thatcherism http://en.wikipedia.org/wiki/Thatcherism
4. A great example of the current way of thinking of what constitutes a Public Authority in the UK can be found in the judgement of Poplar Housing and Regeneration Community Association v Donoghue [2001] EWCA civ 595
5. The Guardian


On another note here is a video of a rap battle between Hayek and Keynes for who has the better ideas for coming out of the current globalised depression... enjoy

Sunday, 24 October 2010

Is fairtrade fair?


Fairtrade initiatives, theory and practice

 Fairtrade initiatives and their proponents claim that the main objective of their philosophy is the creation of a trading partnership that helps and protects the small farmers and producers, as opposed to the principles of the free market where monetary profit is  the end itself1. To achieve its objectives, fairtrade is using several rules and regulations; a fixed price of produce, a price premium to benefit producers2. Also a strict certification procedure that includes standards such as better working conditions and environmental support based on corporate social responsibility3.

Meanwhile criticism of the rules and regulations of fairtrade also exist, as well as concerns for the core ideology behind them. On the subject of certification critics claim that fair trade is being unfair by having standards that fail its own principles (i.e. helping the poorest)4. Further more, case studies imply a problematic approach to technology and agricultural development and their benefits to the producer, that lies within the fairtrade model5. Other case studies report that rules concerning labour regulations are unjust to the workers as they promote unfair benefits cuts in favour of part-time labour4.  Apart from the deconstruction of fairtrade regulations, critics also assert the existence of corruption within the system with several cases that suggest  misappropriation of the price premium6.

Fairtrade has also being criticised for its economic model with many supporting that it fails to take into consideration major macroeconomic principles having catastrophic consequences to the market7. Finally, the marketing of fairtrade goods to consumers, has been deemed by opponents as controversial, creating a 'guilty concience'8 .

Concluding, fairtrade has a great concept to battle poverty and injustice in the third-world, however its implementation and operation, showcases many problems, some of them of fundamental nature.

In my opinion; a great idea yet problematic in practice.




-----------------------------------------------------------
  1. World Fair Trade Organisation, ‘What is fair-trade?’  http://www.wfto.com/index.php?option=com_content&task=view&id=1&Itemid=13
  2. Fair Trade Labelling Organisations International, ‘What is fairtrade?’ http://www.fairtrade.net/what_is_fairtrade.html
  3. Fair Trade Labelling Organisations International, ‘Benefits of fairtrade’ http://www.fairtrade.net/benefits_of_fairtrade.html
  4. M Sidwell, Unfair Trade (Adam Smith Institute, London 2008)
  1. Mugged: Poverty in your coffee cup’, Oxfam International, 2002 p.18
  1. P Bahra, ‘Tea workers still waiting to reap Fairtrade benefits;  Premium paid for ethical goods may not be passed on, reports Parminder Bahra’ [2009] London Times http://www.timesonline.co.uk/tol/news/uk/article5429888.ece http://www.lexisnexis.com/uk/nexis/docview/getDocForCuiReq?lni=4V8W-X8W0-TX5B-909P&csi=10939&oc=00240&perma=true
  2.  D Henderson, ‘Fair Trade is Counterproductive and Unfair’ (2008) Economic Affairs 6  http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0270.2008.00847.x/full (can be accessed through NORA)
  3. K Deconinck, ‘Free marketeers attack Fairtrade principle’ (London 16 March 2004) < http://news.bbc.co.uk/1/hi/business/3542517.stm 
ps. my life lesson out of this?...we as consumers should try and look for what is going on behind the facade, cause some times things are not as good as they seem to be.

Thursday, 21 October 2010

Lex Mercatoria, a medieval tale...

Since this blog is pretty much dedicated to commercial law and this is my first post I thought I'd start with a simple history lesson; especially in common law jurisdictions, legal evolution essentially shapes the contemporary aspect of any legal field.


A quite long intro (with quite a lot of lyricism)

Many aspects of our lives changed over the last three centuries; from the legal invention of limited liability and the shift from partnerships to new commercial company models to the constant technological advancement that started with the two industrial revolutions. Later on, the invention of the internal combustion engine and finally during the last 10-15 years with the rise of the internet and the age of economic globalization. With all those empirical evidence it is not weird for someone to assume that commercial law is an invention of capitalism to facilitate its vast different needs in comparison to the feudal society of the medieval times.

If we look back before the rise of the modern enterprises, the invention of the stock-market and the move from liveries to the modern industry we will find something familiar; Lex Mercatoria, the predecessor of contemporary commercial law.

So what is this Lex Mercatoria?

Lex Mercatoria, literally translated as merchant law, was a custom law containing trading and best practice rules could be described as the international commercial law of the medieval times (especially in respect to arbitration and dispute resolution).

Even by this minimal definition we start to see similarities it has with its contemporary counterpart; the main on being that it was of commercial nature. On the other hand Europe was quite a different (and a bit horrible) place to live during the medieval times; wars and invasions that constantly changed the borderlines, famine, the black death and the occasional highway man were but a few things a man of commerce had to deal with at the time. But even at those difficult times commerce flourished.

Thus the need for a system that will resolve injustice and disputes was needed...after all time was money and constantly new trade roots were discovered providing wealth to those who ventured them (e.g. Marco Polo that opened a trading route with China and incorporated past into the Italian culture)

Thus in many of the major trading routes tribunals where established with justice being administered by the merchants themselves (and usually no state interference). It could be truly called international as the custom rules that operated in the tribunals where pretty much common in most European countries making sort of one of the first international tribunals.

Another interesting fact was the use of the legal maxim ex aequo et bono to decide the cases presented in front of the tribunal. The maxim is literally translated as "according to the right and good" meaning that the cases where resolved with consideration of what was fair and good solely on the facts of the case drawing from the theories of natural law.

Hope you enjoyed our journey to the medieval times as much as I did...

Further reading (I omitted quite a lot like the link between the Lex and common law)
Enough with my rumblings have a nice weekend every one and good luck with the next essay title....

ps. I know this was a long post, lacking in coherency but I'm still trying to adjust to the fact that this is nor an essay nor my facebook page.

An obligatory welcome post…


Welcome to my humble legal blog,  lex naturalis (i.e. natural law), a blog that (hopefully) will provide criticism and analysis in legal affairs as part of my legal research module, especially issues and aspects of contemporary commercial law. In addition I look forward for it to be a testament in my (at least I hope) awesome quest(sic),to become a fully fledged researcher of law.
Regular posting will commence in the near future