14. International Law
International laws are based on customs, treaties, and organizations that guide partnerships among nations.
The purpose of international laws is to permit countries as much authority as possible over their own
international business affairs, while maximizing economic benefits of trade and working relationships with other nations. Since many countries have historically allowed governance by international agreements when conducting global business, there exists an evolving body of international laws that facilitate global trade and commerce
International law relates to the policies and procedures that govern relationships among nations (Clarkson, Miller, & Cross, 2018). These are crucial for businesses for multiple reasons. First, there is not a single authoritative legislative source for global business affairs, nor a single world court responsible for interpreting international law (Cheeseman, 2016, p. 903). There is also not a global executive branch that enforces international law, which leaves global business affairs particularly vulnerable.
Secondly, if a nation violates an international law and negotiation or diplomatic activities fail, then the countries that were violated, or international organizations tasked with overseeing global trade, may act. Often these actions use force to correct the offenses and may include economic sanctions, severance of diplomatic relations, boycotts, or even war against the offending nation (Clarkson, Miller, & Cross, 2018, p. 439).
Treaties and other agreements between nations are authorized and ratified by the countries that acknowledge their legality. There are two different types of agreements: bilateral, which is formed by two nations; and multilateral, which is formed by several nations. The Canada-United Kingdom Trade Continuity Agreement (TCA) is an example of a bilateral agreement. It entered into force on April 1, 2021 and will continue to be in effect until the negotiations for a Canada – United Kingdom Free Trade Agreement are completed.
The North American Free Trade Agreement, or NAFTA, is an example of a multilateral agreement. It was ratified in 1994, when Mexico joined the previous trade agreement between the United States and Canada. In September 2018, the U.S. sought to renegotiate NAFTA with Mexico and Canada resulting in the Canada-United States-Mexico Trade Agreement (CUSMA) which entered into force on July 1, 2020. Among other aims, these negotiations worked to increase auto industry wages for workers in Mexico and modify pharmaceutical regulations with Canada. Additionally, the agreement reduced trade barriers among the three nations and updated NAFTA provisions.
International organizations are comprised of officials who represent member nations that have established a treaty to oversee shared interests, including trade and commerce. International organizations adopt resolutions that standardize behavior and create uniform rules related to trade and commerce. Significant international organizations established in the twentieth century include the World Trade Organization (WTO), European Union (EU), the International Monetary Fund, and the Organization for Economic Co-Operation and Development (OECD).
The United Nations (UN) was created as a multilateral treaty in 1945. The UN’s organizational goals include maintaining global peace and security, promoting economic and social cooperation, and protecting human rights, especially related to women and children (Cheeseman, 2016, p. 905). The UN General Assembly includes representatives from each member nation. As of 2022, the UN acknowledges 195 sovereign states, with all but two participating as full members. These two, Palestine and the Vatican City, are classified as “observer states.” Six additional countries are not UN members but are recognized as a country by at least one UN member country: Abkhazia, Kosovo, Northern Cypress, South Ossetia, Taiwan, and Western Sahara.
The UN Security Council includes five permanent members and 10 countries selected by the General Assembly to serve two-year terms. The five countries that hold permanent membership are China, France, Russia, the United Kingdom, and the United States (Cheeseman, 2016, p. 558). This Council is primarily responsible for overseeing global peace and security measures. The World Bank is a UN organization, financed by contributions from developed countries and headquartered in Washington, D.C. Its primary functions include providing money to developing countries to fund projects that relieve suffering, including building roads and dams, establishing hospitals, developing agriculture, and other humanitarian efforts. The World Bank provides both grants and long-term low interest rate loans to countries, often granting debt relief for outstanding loans (Cheeseman, 2016, p. 559).
The United Nations Commission International Trade Law is one of the most important international organizations to date, establishing the 1980 Convention on Contracts for the International Sale of Goods (CISG), which will be discussed further in the next section.
The European Union (EU) is a regional international organization that includes many countries in Europe. It was established to create peace across the region and promote economic, social, and cultural development (Cheeseman, 2016, p. 561). As of 2022, there are 27 countries affiliated with the EU. The EU organization has established a treaty for its members that creates open borders for trade among member nations, especially for capital, labor, goods, and services. The EU is Canada’s second largest trading partner and the EU-Canada Comprehensive Economic and Trade Agreement (CETA) entered into effect on September 21, 2017.
National sovereignty defines a nation. While clearly defined borders and independent governments also set parameters for a nation, sovereignty is an important legal principle that allows nations to enter negotiated treaties with other countries and honor territorial boundaries. It is among the most important international law principles, thus greatly impacting international trade and commerce.
Since the 1800s, most established nations allowed for absolute sovereignty among the global community.
However, by the 1940s, that allowance was significantly reduced, as countries revisited sovereignty in light of globalization, transportation, and communication advances, and the rise of international organizations (Goldsmith, 2000, p. 959). Consequentially, doctrines of limited immunity were created that established guidelines for how countries may prosecute, or hold foreign nationals accountable, during international trade and commerce dealings. State immunity from civil proceedings is restricted in Canada and is governed by the Canadian State Immunity Act R.S.C. 1985 (CSIA).