29 Oct 2018

Settling International Disputes

by Stephen Rayment, Group Managing Director -

A brief summary of The New York Convention, the Vienna Convention, UNCITRAL, the ICC and the Charming Betsy and their effects on international trade and arbitration

Many professionals within the Construction industry are aware of the New York Convention and the other international trade treaties that exist, however many do not really know much about them and the importance of these treaties in relation to doing business with overseas companies. This article is a brief synopsis of the history behind them and the other legal instruments which support them.

Evolution of the International Trade Treaties:
1958 – The New York Convention
The rise of international trade during the 20th century necessitated that countries co-operate in order to increase trade efficiencies. On 10th June 1958, a Convention on the Recognition and Enforcement of Foreign Arbitral Awards was adopted in New York (The New York Convention). It was entered into force on 7th June 1959. The number of countries involved vary, however, at present, there are 156 States party to the Convention.

Although the Convention allows for Arbitral awards to be enforced in signed countries, it is not designed to interfere with the laws of another nation. This law stemmed from the case of Murray v. Schooner Charming Betsy, (1804) where the US supreme court judge stated, “An act of Congress ought never to be construed to violate the law of nations if any other possible construction remains”.

1964 – UNCTAD
Since 1958, a series of additional treaties occurred ranging from multilateral human rights conventions to bilateral treaties for the protection of foreign investment.

In 1964, the United Nations Conference on Trade and Development (UNCTAD) was established. It is a permanent intergovernmental body established by the United Nations General Assembly, which is governed by its 194 member States. It is the United Nations body responsible for dealing with development issues, particularly international trade.

In 1966, the United Nations Commission on International Trade Law (UNCITRAL) was established by the UN General Assembly. It was brought into force in 1969. UNCITRAL is the core legal body of the United Nations system in the field of international trade law, with a mandate to further the progressive harmonisation and unification of the law of international trade.

1980 – The Vienna Convention
On 11th April 1980, the United Nations Convention on Contracts for the International Sale of Goods (CISG) (The Vienna Convention) was adopted. It was brought into force on 1st January 1988. The purpose of the CISG is to provide a modern, uniform and fair regime for contracts for the international sale of goods. Thus, the CISG contributes significantly to introducing certainty in commercial exchanges and decreasing transaction costs. The sale of goods is vital to all countries. The CISG is therefore considered one of the core international trade law conventions whose universal adoption is desirable.

1985 – The Model Law
Trade means faster growth, higher living standards, and new opportunities through commerce. In order to increase these opportunities worldwide, UNCITRAL is formulating modern, fair, and harmonized rules on commercial transactions. These include:

  • Conventions, model laws and rules which are acceptable worldwide
  • Legal and legislative guides and recommendations of great practical value
  • Updated information on case law and enactments of uniform commercial law
  • Technical assistance in law reform projects
  • Regional and national seminars on uniform commercial law

On 21st June 1985, UNCITRAL developed the Model law on International Commercial Arbitration. The Model Law is directed at States, while the Arbitration Rules are directed at potential (or actual) parties to a dispute. Whilst the commission has a set membership, non-member countries and organisations are able to contribute during the work sessions but are not allowed to vote.

Other related entities and laws:
1919 – The International Chamber of Commerce (ICC):
In 1919, the International Chamber of Commerce (ICC) was set up in the aftermath of the First World War when no world system of rules governed trade, investment, finance or commercial relations. Without waiting for governments to fill the gap, the ICC’s founders acted on their conviction that the private sector is best qualified to set global standards for business. They called themselves “The merchants of peace.” In 2003, the ICC became signatory of the UN Global Compact. In 2016, the ICC was granted observer status at the UN General Assembly. Their rules apply when the ICC is empowered to act as appointing authority by agreement of the parties, designation by the Secretary-General of the Permanent Court of Arbitration, or otherwise. The ICC’s role as appointing authority under the Rules would include the appointment of arbitrators and any service described in the Rules.

1804 – The Charming Betsy law:
This is the case of Murray v. Schooner Charming Betsy (1804).

There was a conflict with France at the turn of the 19th century. U.S Congress had passed the Non-Intercourse Act of 1800, which prohibited commerce between U.S. and French citizens. Enforcement of the statute was vested in the U.S. Navy, which was under orders to capture any ship suspected of trading with France.

On 10th April 1800, American merchant vessel called “the Jane” sailed from Baltimore under a U.S. flag and U.S. captain to St. Thomas, where it was purchased by a Danish citizen Mr Jared Shattuck.

Mr Shattuck renamed the vessel “the Charming Betsy” and put a cargo onto the vessel. The Charming Betsy was captured by the U.S. Navy under suspicion of trading with Guadaloupe, a French dependency, in violation of the Non-Intercourse Act. Shattuck argued that the seizure violated international law because he was a citizen of a neutral country. The Court agreed, and construed the Act as not applying to Shattuck because he was not an American citizen. In reaching its decision, the Court held that federal statutes should be interpreted in harmony with international law, which discouraged the capture of neutral nations and their citizens in a declared war.

While Chief Justice Marshall did not cite any specific legal authority in support of the holding, it continues to influence international law more than two centuries later. The cannon of statutory interpretation is referred to as the Charming Betsy cannon.

Prior to signing a contract, one should review the dispute resolution clause. If it is governed by the ICC, then the rules of UNCITRAL and the other international treaties should be aligned. One should also check whether the country of the parties have signed up to the above-mentioned international trade agreements. This will ensure that in the event of a dispute which leads to arbitration, the Arbitral award will be enforced by the relevant authorities.

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