IMOL 2015 December, 2-3: the Paper

• Before the deadline of the 26 of November, each student must send a paper (no more than 5 pages of the present format) to giancarlo.anello@unipr.it, choosing his argument from the list below. Some research’s papers will be at your disposal (they are indicated in the slides, free-downloading on line or can be requested by email).

• Each student should personalize the topic: a reference to his/her own country would be positively assess, also perhaps from a comparative perspective.

• After receiving the final students’ papers, Professor Anello will choose the author of the most qualified paper to be the Coordinator of the table and communicate the name on line by the 1st of December. The Coordinator will introduce the panel, host the discussion and manage the time.

• Other participants (Not coordinators) must prepare a 5min. presentation for the round-table discussion.

• Please, indicate in the first page clearly your personal infos, the chosen round table, the title of “your” paper.

IMOL 2015 December, 2-3: the Class

• In class, December 2 & 3, students must discuss the topic in a round table session. To ensure the opportunity for collective discussion and engagement with new work, each participant has to limit his or her remarks research to 5 minutes, presenting his/her topic and point of view about the round table topic.

• Ideas and creativity are more than welcome in that phase!

University of Parma - I.B.D.

International Markets and Organization law – Islamic Law and

EconomicsProf. Giancarlo Anello

Main Economic “Institutions”. Law of Contracts: Inter-national/Inter-cultural

Public Economic “Institutions”

• (A) Property, Land and applications (Land Law Reforms: the case of Egypt, Urban Policies, Environment, Water Policies)

• (B) Fiscal Policies and Finance Instruments of the Public Economy: Between tradition and the present (zakat)

• (C) Contracts: International/Intercultural Approach

Essential bibliography

• C. Fried, Contract as Promise. A Theory of Contractual Obligations, Harvard University Press, Cambridge-MA, 1981 pp. 1-162

• F. Bortolotti, Drafting and Negotiating International Commercial Contracts : A Practical Guide, Paris, International Chamber of Commerce (ICC), 2008

• Noor Mohammed, Principles of Islamic Contract Law, in Journal of Law and Religion, Vol. 6, No. 1 (1988), pp. 115-130

Objectives of the lesson:

• - theoretical purpose: to show how a complex legal institution – contract - can be traced to and is determined by a small number of basic moral principles;

• - pedagogic purpose: to display for students the underlying structure of this basic legal institution.

• (The two purposes support each other)

Summary of the lesson

• 1. Theory of contracts: contract as a promise• 2. International contracts Sources of the

Law: Unidroit principles & Rome conventions I and II

• 3. Islamic theory of contracts: the factor of Trust-The prohibition driven principle

• 4. Difference of culture in Cross cultural negotiation

Contract: Process

Contract: parties & authority

• Horizontal agreement between the parties by which they agree the contents of the obligations →

• Moral obligations

• Vertical relationship between the parties and their agreement and the authority (State or God) which guarantees the fulfillment of the obligations →

• Legal obligations

Theory of contracts: in brief• 1. Individual/liberal theory: Individuals have rights: the regime of

contract law respects the dispositions individuals make of their rights. The will theory of contract sees contractual obligations as essentially self-imposed.

• 2. Communitarian Theory: legal obligations may be imposed only by the community, and so in imposing it the community must be pursuing its goals and imposing its standards, rather than neutrally endorsing those of contracting parties.

• 3. Moral Theory: the contract as a promise. The principle by which persons may impose on themselves obligations where none existed before

Elements/consequences of the moral theory

• 1. Benefit: I must benefit from the contract/ moreover if I benefit unjustly I should make restitution;

• 2. Reliance: dependence, confidence, or trust/ the harm you suffer in relying on my promise obliges me to refund if I break the promise.

• 3. Communication of the intention: If I communicate my intention to you changing my mind may put you at risk/ I become the agent of your reliance by telling you, and this makes my responsibility clearer if I change my idea

Difference between national and international contract

• 1) Nationality of the parts• 2) base of the parts (seat

of the firm, company etc.)• 3) place of the conclusion

of the contract • 4) place where the goods

are• 5) money of the payment• 6) place of the payment

• Problems:• 1) Who (and where) is

the judge?• 2) What language for

the interpretation of the contract?

• 3) Which law?

UNIDROIT PrinciplesUnidroit Principles of international commercial

contract

The International Institute for the Unification of Private Law, also known as Unidroit, is an independent intergovernmental organisation.

Its purpose is to study needs and methods for modernising, harmonising, and coordinating private international law and in particular commercial law between states, and to draft international Conventions to address the needs

OBJECTIVES OF UNIDROIT PRINCIPLES

Summarize the rules and practice relating to a contract that appear common to majority of the legal systems.Give body to the lex mercatoria, which has always suffered criticism for being too vague and uncertain about its contents.Propose some innovative solutions that meet the needs of international trade

WHEN AND HOW USE THE UNIDROIT PRINCIPLES I.

With reference to the possible use of the UNIDROIT principles, the preamble of the Principles of 2004 establishes that:These Principles set for the general rules for

international commercial contract.They shall be applied when the parties have agreed

that their contract will be governed by them.They may be applied when the parties have agreed

that their contract will be governed by general principles of the lex mercatoria

WHEN AND HOW USE THE UNIDROIT PRINCIPLES II.

They may be applied when the parties have not chosen any law to govern their contract

They may be used to interpret or supplement international uniform law instruments

They may be used to interpret or supplement domestic law

They may serve as a model for national and international legislators

Unidroit GENERAL PROVISIONS• Article 1.1 (Freedom of contract)• Article 1.2 (No form required)• Article 1.3 (Binding character of contract)• Article 1.4 (Mandatory rules)• Article 1.5 (Exclusion or modification by the parties)• Article 1.6 (Interpretation and supplementation of the

Principles)• Article 1.7 (Good faith and fair dealing)• Article 1.8 (Inconsistent behaviour)• Article 1.9 (Usages and practices)• Article 1.10 (Notice)• Article 1.11 (Definitions)• Article 1.12 (Computation of time set by parties)

Art. 1.1Freedom of contract

The parties are free to enter into a contract and to determine its content

• Comment: The principle of freedom of contract is of paramount importance in the context of international trade.

• The right of business people to decide freely to whom they will offer their goods or services and

• by whom they wish to be supplied, as well as the possibility for them freely to agree on the terms of individual transactions,

• are the cornerstones of an open, market-oriented and competitive international economic order.

2. Economic sectors where there is no competition

• There are of course a number of possible exceptions to the principle laid down in the present article.

• As concerns the freedom to conclude contracts with any other person, there are economic sectors which States may decide in the public interest to exclude from open competition.

• In such cases the goods or services in question can only be requested from the one available supplier, which will usually be a public body, and which may or may not be under a duty to conclude a contract with whoever makes a request, within the limits of the availability of the goods or services.

3. Limitation of party autonomy by mandatory rules

• With respect to the freedom to determine the content of the contract, in the first instance the Principles themselves contain provisions from which the parties may not derogate.

• Moreover, there are both public and private law rules of mandatory character enacted by States (e.g. anti-trust, exchange control or price laws; laws imposing special liability regimes or prohibiting grossly unfair contract terms, etc.), which may prevail over the rules contained in the Principles. See Art. 1.4.

Art. 1.2 (No form required)

Nothing in these Principles requires a contract, statement or any other act to be made in or evidenced by a particular form. It may be proved by any means, including

witnesses.

Contracts as a rule not subject to formal requirements

• Comment: • This article states the principle that the conclusion of a contract is not

subject to any requirement as to form. The same principle also applies to the subsequent modification or termination of a contract by agreement of the parties.

• The principle, which is to be found in many, although not in all, legal systems, seems particularly appropriate in the context of international trade relationships where, thanks to modern means of communication, many transactions are concluded at great speed and by a mixture of conversations, telefaxes, paper contracts, e-mail and web communication.

• The first sentence of the article takes into account the fact that some legal systems regard formal requirements as matters relating to substance, while others impose them for evidentiary purposes only.

• The second sentence is intended to make it clear that to the extent that the principle of freedom of form applies, it implies the admissibility of oral evidence in judicial proceedings.

Art. 1.4(Mandatory rules)

Nothing in these Principles shall restrict the application of mandatory rules, whether of national, international or

supranational origin, which are applicable in accordance with the relevant rules of private international law

Comment: Given the particular nature of the Principles, they cannot be expected to prevail over applicable mandatory rules, whether of national, international or supranational

origin. In other words, mandatory provisions, whether enacted by States autonomously or to implement

international conventions, or adopted by supranational entities, cannot be overruled by the Principles.

Art. 1.7 (Good faith and fair dealing)

(1) Each party must act in accordance with good faith and fair dealing in international trade.

(2) The parties may not exclude or limit this duty.Comment: This means that good faith and fair dealing may be

considered to be one of the fundamental ideas underlying the Principles. By stating in general terms that each party must

act in accordance with good faith and fair dealing, para. (1) of this article makes it clear that even in the absence of special provisions in the Principles the parties’ behaviour throughout

the life of the contract, including the negotiation process, must conform to good faith and fair dealing

Art. 1.9 (Usages and practices)

(1) The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves.

(2) The parties are bound by a usage that is widely known to and regularly observed in international trade by parties in the particular trade concerned except where the

application of such a usage would be unreasonable.

Comment: This article lays down the principle according to which the parties are in general bound by practices and usages which meet the requirements set forth in the article. Furthermore, these same requirements must be met by practices and usages

for them to be applicable in the cases and for the purposes expressly indicated in the Principles.

Practices established between the parties

• A practice established between the parties to a particular contract is automatically binding, except where the parties have expressly excluded its application.

• Whether a particular practice can be deemed to be “established” between the parties will naturally depend on the circumstances of the case, but behaviour on the occasion of only one previous transaction between the parties will not normally suffice.

Art.1.12 (Computation of time set by parties)

(1) Official holidays or non-business days occurring during a period set by parties for an act to be performed are included in calculating the period.

(2) However, if the last day of the period is an official holiday or a non-business day at the place of business of the party to perform the act, the period is extended until the first business day which follows, unless the circumstances indicate otherwise.

(3) The relevant time zone is that of the place of business of the party setting the time, unless the circumstances indicate otherwise.

Convention on the Law Applicable to Contractual Obligations - 1980

The Convention on the Law Applicable to Contractual Obligations 1980

(the "Rome Convention") is a measure in private international laws which

aims to create at least a harmonised, if not a unified, choice of law system in contracts within the European Union. It was signed in Rome on

19 June 1980.

Rome Conventions I and IIThe need for a regulation derived from the conflicts of law arising between parties of different countriesThe aim of the Convention was in fact to harmonise the choice of law system in contracts involving EU member state by establishing uniform rulesReplaced by The Rome II Regulation (EC) No 864/2007 is an European Union Regulation regarding the conflict of laws on the law applicable to non-contractual obligations. From 11 January 2009, the Rome II Regulation creates a harmonised set of rules within the European Union to govern choice of law in civil and commercial matters (subject to certain exclusions) concerning non-contractual obligations, including specific rules for tort/delict and specific categories of tort/delict, unjust enrichment, negotiorum gestio and culpa in contrahendo

Introduction to the Islamic Theory of Contracts

• Qr, 5 (al-Ma’ida): 1: 1. O ye who believe! fulfill (all) obligations.• Qr, 9 (Al-Tauba): 111. Allah hath purchased of the believers

their persons and their goods; for theirs (in return) is the Garden (of Paradise): they fight in His Cause, and slay and are slain: a promise binding on Him in Truth, through the Torah, the Gospel, and the Qurán: and who is more faithful to his Covenant than Allah? Then rejoice in the bargain which ye have concluded: that is the achievement supreme.

• Q. 16 (An-Nahl): 91 Fulfill the Covenant of Allah when ye have entered into it, and break not your oaths after ye have confirmed them; indeed ye have made Allah your surety; for Allah knoweth all that ye do.

the religious paramount of the contract

• So basic is the notion of contracts in Islam that every political theory is grounded on an agreement that defines the rights and obligations of the parties.

• The mithaq: it imposes on humans the duty of remaining faithful to the creator, God protects the interest of Humanity

• The mubayaa: the highest temporal office, khalifa, is inaugurated by a contract between the ruler and the community

The factor of “Trust”

• It should be noted that there is a strong interdependence between contract and trust; without trust, contracts become difficult to negotiate and conclude and costly to monitor and enforce: when and where trust is weak, complex and expensive administrative devices are needed to enforce contracts.

• More pragmatically, it is generally recognized that unambiguous contracts do not exist, as not all contingencies can be foreseen.

• In case that trust is weak, transaction costs - that is, search and information costs, bargaining and decision costs, contract negotiation and enforcement costs- are high

The linguistic definition• The Arabic word ‘aqd/'uqud' covers the entire field of

obligations, including those that are spiritual, social, political, and commercial. Literally it means “tie” or “bind”, but we can translate it with “obligation”.

• In the spiritual realm ‘aqd/'uqud' deals with the individual's obligation to Allah;

• in social relations the term refers to relations including the contract of marriage;

• in the political arena it encompasses treaty obligations, and similarly,

• in the field of commerce, it covers the whole spectrum of obligations of parties in regard to their respective undertakings.

Nature of contract

• The very nature of Islamic contracts law is rida (consent). It is also the fundamental rule behind investment transactions. The origin of this principle is rooted in the Qur'anic guidance of Islamic law. Therefore, mutual consent allows the contracting parties to rescind or reinstate a contract for as long as they remain in the contract session. This option is terminated once the contract is concluded

The theory of human acts in the Islamic legal and ethical framework (al-Ahkam al-khamsa)

• This is the classification of human deeds in• (1) What is explicitly commanded (wajib); • (2) What is recommended but not

expressly ordered (mandub); • (3) What is permitted or neutral (mubah); • (4) What is condemned but not explicitly

prohibited (makruh); • (5) What is expressly forbidden (haram).

The prohibition driven principle• the principle of permissibility is the

opposite to the prohibition driven principle and it is, instead of freedom of contract, the meaning of liberty. As a consequence, individuals are free to enter into a contract if that contract is not prohibited under Islamic law. Too politics and economy are limited, to some extent, to the same principle in order to serve both public and private interests and not only the interest of either.

Void Contracts. 1. Riba• Usury is one of the few illegal contract that has been

rarely questioned among Muslim scholars. Usury applies to loan contract (riba al-jahiliyya), increase of return for an extension given to a borrower who is unable to pay his debt when due.

• Pure speculation is then a principle of risk in contract which goes against the function of distribution of risk. It is illegality is driven directly from the Qur’an. The reason behind this prohibition in financial arrangements, for example, is the purely inherited risks which dislocate resources unjustly and invoke enmity within the society.

Void Contracts. 2. Gharar

• Gharar is variously defined in English as 'uncertainty' or 'deceptive uncertainty'. a gharar transaction occurs where one party can only benefit by the other's loss, under conditions of uncertainty. Commercial insurance is given as an example of this, since either the insured pays a premium and receives no countervalue, or the insurer pays out much more on a claim than was received by way of premium.

Civil Codes provisions & definitions

• Egyptian Civil Code "A contract is created, subject to any special formalities that may be required by law for its conclusion, from the moment that two persons have exchanged two concordant intentions.“

• Iranian Civil Code (as amended 1983) states that a contract is "an agreement between two or more persons concerning certain subjects to which they consent. Offer and acceptance, therefore, can be expressed in any form”.

• Bahrain Contract Law 1969 defines "contracts": "All agreements are contracts if they are made by free consent of parties, competent to contract, for a lawful consideration and with lawful object, and are not hereby declared to be void."

Cross-cultural negotiations and the prohibition driven principle

• to convert this argument from an obstacle to an instrument is divided into three phases. 1. “Locate the prohibition”, which in split into two activities: a. Individuate the prohibition rule (haram) b. draw the boundaries of the prohibition (that is the most difficult target to center, considering the methods of the Islamic interpretation, notably the importance of qyias, the precaution principle based in avoiding sins) 2. Cross interpretation of the limits of prohibition: a concrete limitation of the prohibition can be realized with the help of the party at the moment of negotiation or pre-negotiation; 3. Make a difference of the practice, using the semiotic profile.

Seven special barriers to global deal making

• 1. Negotiation environment• 2. Culture• 3. Ideology• 4. Foreign organizations and bureaucracies• 5. Foreign laws and governments• 6. Multiple money• 7. Instability and sudden change