What are the sources of the Commercial Law in Nations?
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What are the sources of the Commercial Law in Nations?

Most laws around the world are designed to apply to the jurisdiction within which they exist. Sources of law mean that those origins from wherever it attains its authority and coercive agency. In keeping with the provisions of the Statute of the International Court of Justice, there are sources, on the basis of which the Court will decide a case.

By sources, one means that those provisions operative among the legal system on a technical level, and such ultimate sources as reason or morality are excluded, as there are a lot of purposeful sources like libraries and journals. What is required is a survey of the method whereby rules of law of nations emerge.

There is no such single law-making body that is binding upon everyone, nor there is any system with obligatory and comprehensive jurisdiction to interpret and extend the law. One is thus faced with the problem of discovering where the law is to be found and the way one will tell whether or not a specific proposition amounts to a legal rule. This problem is to be faced due to the nature of international affairs and because of the clash of competing sovereignties.

Rules and norms of any legal system derive authority from their sources. Sources articulate what the law is and where it can be found. In a developed municipal legal system, there is parliamentary legislation and judicial decision which are sources of law but on the international plane, there is neither. Further, there is no written constitution that identifies the various organs.

Sources are of two categories, namely: Formal and material sources. A distinction has generally been created between formal and material sources. The former, it is claimed, confer upon the foundations an obligatory character, whereas the latter comprises the particular content of the principles. Thus, the formal sources seem to embody the constitutional mechanism for distinguishing law whereas the material sources incorporate the essence or subject-matter of the rules. Formal sources constitute what the law is whereas material source identifies where the law is found. Article 38 (1) (a-c) comprises of Treaties, customs and general principles are formal sources, and Article 38 (1) (d) comprises of Judicial decisions and juristic teachings are material sources.

Article 38 of the Statute of the International Court of Justice accepts the following authoritative source of international law:

•           Determinations of the Organs of International institutions

•           Treaties

•           International custom as the proof for the general practice of law

•           General principle of law which is recognized by nations

•           Judicial decisions

•           Other Sources

1. TREATIES

A treaty or convention is a written material that has been agreed to by the nations that have sanctioned it. They are essentially contracts between nations. The term treaty is also outlined as “the agreement entered into by Nation-states for his or her relations with one another and to undertake certain duties, obligations and rights are claimed to be a treaty”. The statute declares that the Court shall need to decide any dispute between the Nation States in accordance with the provisions of the treaty between them if existed. Treaties are authoritative statements of customary law. Most treaties are those unwritten customary rules of law.

In the modern era, International treaties are the most important source of law. Article 38 (a) confer with any international conventions, whether or not general or specific establishing rules expressly recognized by the contesting states. It means if any existing treaty provision binds the parties to the dispute before the court then if relevant the treaty is applied.

In an international dispute, the International Tribunal has to find out whether there is an international treaty on the point. If there is an international treaty the decision of the court is based on the provision of the treaty. Treaties are binding on the states which become a party to them and it is upon the state to decide whether it needs to be a part of the treaty or not.

Article 2 of the Vienna Convention on the Law of the Treaties, 1969 “a treaty is an agreement whereby two or more States establish or seek to establish a relationship between them governed by international law”. Treaties may be between two states (bipartite) or between several states (multipartite).

2. INTERNATIONAL CUSTOMS

Oldest and the original source of International Law. The words Custom and Usage are often erroneously used synonymously. Usage means that those habits that are continual by States. It is the early stage of Custom and does not have the force of law. Usage often fructifies into Custom, which has the force of law. Usage is the twilight stage of custom. Custom begins where usage ends. Usage is a global habit of action that has not however received full legal attestation. Hence every custom is usage but every user is not a custom.

Customary law is both the oldest source and also the one that generates rules binding on all States. Customary law is not a written source. Custom is described as a general practice accepted as law. Vattel defined customary law of nations as ‘certain maxims and customs consecrated by long usage and observed by nations in their mutual relationship with each other as a kind of law.

A rule of customary law is the rule of conduct recognized by the community of nations as the right rule of conduct and having the force of law. In the Asylum case, the custom was considered as a constant and uniform usage accepted as law. 

A new rule of the customary law of nations can’t be created unless each of those components is present. Firstly, practice alone is not enough – the Case of the SS Lotus (1927). Secondly, neither can a rule be created by opinio juris without actual practice – the advisory Opinion on Nuclear Weapons (1996).

• GENERAL PRACTICE – With regard to practice, it is not only the practice of the Government of a state but also of its Courts and Parliament. The practice must examine- what it actually says about law. E.g., some states practising torture does not mean that there is no practice outlawing it. The observance and acceptance of practice give birth to a customary rule of international law. And when more and more states practice, it acquires the status of universal custom.

• OPINION JURIS SIVE NECESSITATIS– The opinio juris, or belief that a state activity is legally obligatory, is the factor that turns the usage into a custom and renders it part of the rules of international law. To place it slightly otherwise, states can behave a definite method because they are convinced it’s binding upon them to do so. It is an independent obligation, a sense on behalf of a state that it is bound to the law in question. It is a belief by states that their practice is legally required by the norm. They have to follow the practice due to this belief instead of due to the demands of courtesy, reciprocity, comity, morality, or straightforward political expediency.

Hence, customary practice even when it is general and consistent is not customary law unless the practice is recognized as being required by international law. This sense of obligation distinguished from motives of fairness, convenience, or morality that underlies customary law

DEVELOPMENT OF CUSTOM

Custom may be developed from the practice of states.

• Diplomatic relations between states: Acts or declarations by statesmen, opinion of legal advisers to the state government, bilateral treaties, and official statements of government spokesperson constitute evidence of usage followed by states.

• Practice of international organs: It may lead to customary laws relating to status, powers, and responsibilities. It may be by actual conduct or by a declaration made in the course of application of international law.

• State laws and decisions of state courts: Customs can also be derived from state laws or from judicial decisions of state courts or of state practice. If the state practice or state law of many states concur then it will be recognized as a principle of law.

3. GENERAL PRINCIPLES OF LAW

This source helps international law to adapt itself to the changing times and circumstances. General principles of law recognized by civilized nations mean those principles which are recognized by almost all the states. For instance, a principle of law is recognized by the domestic law of a large number of states will not have an international character. It becomes a principle of international law only when it is recognized as such by the world court.

General Principles of Law Recognized by Civilized Nations – This source helps International Law to adapt itself to the changing times and circumstances. It can be interpreted in 2 ways, i.e., General Principles of other laws which can be applied to international legal questions. Forex: Principles of Natural Justice, Res Judicata, Estoppel, and other is Natural law, as interpreted in the modern era.

There are certain principles of law that are incorporated, within the domestic laws of many countries due to their universal application. So, in default of any pact or international custom, the statute reveals that the court then shall have to be compelled to decide the case within the light of such general principles of law as recognized by civilized nations of the world.

US v. Schooner, The US Supreme Court ruled against the international slave trade and held that law ought to be supported by the general principles of law recognized by civilized states. He was giving a decision with reference to the abolition of the system of slavery.

In Chorzow Factory (Indemnity) Case applied the principle of res judicata and also held that one who violates a rule is liable to make reparation.

4. DECISIONS OF JUDICIAL OR ARBITRAL TRIBUNALS

ICJ was established as a successor of PCIJ (Permanent Court of International Justice). The decision of ICJ does not create a binding rule of international law. Article 59 of the Statute of the International Court of Justice makes it clear that the decisions have no binding force except between parties and in respect of that particular case.

A prior decision of the court is not a binding precedent but it is considered for guidance alone. Normally court does not deviate from its earlier decision and if at all it deviates it is under special circumstances. Hence, it does not follow the doctrine of precedent but in practice, it is ordinarily followed. Judicial decision do not make law they generally state the law

In the Asylum case, it was held that the decisions in a particular case have deep repercussions in IL the views confirmed by decision acquires a quasi-legislative value, in spite of legal principle to the effect that the decision has no binding force except between parties and in respect of that particular case.

5. JURISTIC WORKS

Though jurist’s work cannot be considered to be a source of law it can help in the development of the law. The works of highly qualified jurists are subsidiary means for the determination of rules of International law.

The jurists or publicists also declare rules by philosophy and analogy and also by comparison different legal systems of the world and that they also analyze the historical views of the various legal systems of the world.

So, as they have devoted their lives to the legal study, they must be deserving to consult in deciding a dispute. In other words, their opinion on a particular question of law weights owing to their valuable experiments and sound study on the subject. So, the statute further reveals that if there’s no pact, legal custom, and general principles of law then the Court shall resort to writings of those jurists.

The importance of juristic work was laid down by Justice Gray in The Paquete Habana case. Paquete Habana and Lo la were two fishing vessels with Spanish flags on them. During a war between Spain and America, the warships of America blocked the northern coast of Cuba which was a colony of Spain. The American warship seized these vessels and initiated proceedings against them in the District Court of America. The court declared the shipping vessel and its cargo as a prize. The owners of the ship filed an appeal in the Supreme Court of America and the decision of the lower court was reversed. It was ruled that the claimants be given money derived from the sale of the vessel, cost of the case, and compensation. On the basis of precedents and established rules of international law, the court concluded that the vessel and the unarmed sailors were pursuing their duty honestly and peacefully. Hence, they cannot be seized during state blockade.

6. DECISIONS OR DETERMINATIONS OF THE ORGANS OF INTERNATIONAL INSTITUTIONS

Decisions of international organs and institutions give rise to a source of international law. Some organs are entitled to give general decisions and or directions of a quasi-judicial nature. Hence, they find a place among the sources of law even though it is not mentioned in Article 38 of the Statute of ICJ. At that time, International Institutions and international organizations had not assumed vital importance. It was developed later on. It has been accepted as a source of International Law in the modern era. After the establishment of the United Nations, most of the development of International Law has taken place through I.O.’s and I.I.’s. Forex: FAO, WHO, ILO, ILC, ICAO, etc.

7. OTHER SOURCES

Besides the above sources, there are other sources that the court can resort to for the decision of a case. For instance “Equity” and the resolution by the United Nations organization. nowhere within the statute, these sources have been declared for the Court to derive law however by practice the common and universal principles of equity are ascertained by the courts while deciding cases. And also, the UN organization once passes a resolution on the specific subject the Court feels its ethical duty to decide the case within the light of such resolution if there are no specific provisions for deciding a case.