AN OVERVIEW OF THE HISTORICAL DEVELOPMENT AND EVOLUTION SHAPING INTERNATIONAL BUSINESS LAW AND ITS GLOBAL FRAMEWORK

Authored By: AADRITY BHATTACHARIA

University of Engineering and Management

Since the first ever civilization proved that be the Indus Valley civilization we have known the most important part of a civilized society is business. Even around 8000 years ago we find traces of trade. And today after 8000 years we as a society are completely dependent on business. There was a time when globalization used to be a concept but today it is a lifestyle and international brands have entered our daily lives in such an intricate way that we sometimes do not even remember such brands are foreign. But sometimes when I do remember it makes me think about how we reached here and what the journey could have been? How such big businesses are regulated and how did we as a globalized world come so close without even realizing it? International business law is a concept and a framework that explains all these questions.

What is international business law?

International business law covers all the major areas that require legal compliance while conducting cross-border business. It governs cross-border commercial activities, including transactions, corporate formation and funding, intellectual property protection, export controls, regulatory compliance, taxation, dispute resolution, and trade policy. It comprises enforceable legal instruments such as conventions, treaties, agreements, domestic legislation, and commercial customs that regulate international commerce. Additionally, it defines the rights and obligations of states and governs their interactions with international organizations, ensuring a structured and compliant global business environment.

International business law encompasses both public and private international laws relating to business. International business law is a broad term that encompasses various other international law/laws. Such as international commercial law, international corporate law, and international trade law. To understand the company law totally and fully we would need to understand these laws first, even though they sound and seem somewhat similar by definition, these laws are very different. Let us define the above-mentioned laws and understand the differences.

International commercial law:-

Unlike International trade law, international commercial law only rules over the principles and practices of cross-border activities of private parties. International commercial law is a part of private international law.

International trade law:-

As mentioned earlier the international trade law is the public international counterpart of the international commercial law. It deals with rules and customs governing trade between the countries, it is a treaty-based international law that governs over trade.

International corporate law:-

As surprising as it might sound International corporate law is neither public nor private international law rather it can somewhat be termed as a soft law as International Corporate Law (ICL) refers to the set of corporate governance rules and standards created by international organizations, agreements, and standard-setting bodies which requires voluntary compliance more than legal enforcement.

Definition

The sources of international economic law are the same as those sources of international law generally outlined in Article 38 of the Statute of the International Court of Justice:

“Article 38― The Court, whose function is to decide by international law such disputes as are submitted to it, shall apply: 1) international conventions, whether general or particular, establishing rules expressly recognized by the contesting states; 2) international custom, as evidence of a general practice accepted as law; 3) the general principles of law recognized by civilized nations; 4) subject to the provisions of Article 59, judicial decisions and the teachings of the most highly qualified publicists of the various nations, as subsidiary means for the determination of rules of law.”

Origins

The international business law that we talk about today started taking shape about 150 years ago but the foundation was laid much earlier. The earliest roots of corporate forms can be traced back to Rome, Italy around the 11th century, where we find a concept called commenda which is a somewhat similar concept to the limited liability of modern day, which was governed by the old guild courts of Northern Italy.

Around the 1600’s The British crown started authorizing monopolies with immense power to groups of investors to start a certain venture that was supposedly too large to be handled by one, which later grew to be called joint stock companies. Until the 1720’s there was little to no engagement of legal regulation before the BUBBLE ACT ( full form shows the true intention of the act i.e- An Act to Restrain the Extravagant and Unwarrantable Practice of Raising Money by Voluntary Subscriptions for Carrying on Projects Dangerous to the Trade and Subjects of this Kingdom came into being), notably the act seemed discouraging and restrictive as it prohibited unincorporated joint stock companies although they played a crucial role during that period. Despite the perceivable restrictions the Bubble Act played an important role in enabling the joint stock companies to play an important role in major fields resulting in them flourishing.

EARLY DEVELOPMENT

As The Bubble Act was repealed in 1825 it was followed by the Joint Stock Companies Act of 1844 in Britain followed by the Revised Joint Stock Companies Act of 1856, which was also enacted in India the next year. While in the USA the New York General Incorporation Act of 1811 was already in full force. But some of the major developments came during 2 acts that were enacted right before the 1944 Joint Stock Companies Act which were The Trading Companies Act of 1834 and the Chartered Company Act of 1837, which gave the right to sue and be sued the companies, while 1844 act, laid down the duty to register the companies under the newly established company house and the registrar of companies office. In 1857 the Joint Stock Companies Act in India introduced limited liability for the first time and by 1866 with the New Companies Act the British had already introduced the winding up of companies.

Moving down to the American legislature which was more complicated in nature due to its federal system of government. The beginning of the American corporate legislature had also derived from the English laws, to be specific the English corporate charter of 1587 granted by Sir Walter Raleigh primarily for American enterprise. Later with the charter of 1606, 1609, and 1612, a company was established aimed to establish their first colony of Virginia named THE TREASURER AND COMPANY OF ADVENTURERS AND PLANTERS OF THE CITY OF LONDON modeled on the EAST INDIA COMPANY which was formed under the Royal charter of 1600 granted by Queen Elizabeth I, with many who were shareholders of both the corporation. Later on, more charters were passed for many more corporations that emerged by 1700, granting them their right to colonize. In 1755, for example, the Massachusetts legislature passed an act providing that deacons, churchwardens, and other governing bodies of Protestant churches should be. Comparatively, the strictly business corporations were fewer in numbers, even though scholars have their differences in opinion but up to nine or ten corporations have been recognized as strictly business corporations. One of the prominent names among those is the Philadelphia Contributionship for the Insuring of Houses from Loss by Fire, formed in 1752 but first incorporated by the Pennsylvania General Assembly in 1768.

Colonial corporations relied on English law and the judicial system dominantly relied upon English law, judgments, and presidents even though English law did not have any consistent approach to the colonies and each colony developed its legal system. Even after the establishment of the American Republic corporate law was still an uncharted sea in the words of Merrick Dodd, a well-known successor of the law faculty in the 1800’s.

COLONIZATION AND IT’S IMPACT ON THE INTERNATIONAL LAW OF TODAY

So, it is right to say that the early onset of international law was colonial law, even though the standards were not always right or quite equal for everybody. From Christianity to universal and moral law, international law was under the scope of the polar opposite definition. But with commercial or business international law the main aim was to promote and protect the business interest in the colonized countries. And even after advocating the “freedom of the sea” to break through the monopolies by the father of international law himself ( HUGO GROTIUS), it gave away something else to the colonizer competitor states, to THE DUTCH EAST INDIA COMPANY it legalized it’s any and every act to break through the competitor’s monopoly even if it meant seizing the Portuguese ship and confiscating all its goods. So, the colonizer states would legislate laws internally and would apply them to the colonial land even though there was another colonizer present in the same land. So to regulate such situations and protect the citizens and their properties in the foreign land the Europeans went through multiple diplomatic actions including treaties, for example in 1758 the treaty “The Law of Nations, swiss jurist Emer de Vattel” concluded that any mistreatment of a citizen abroad cloud be considered an offense against the state. Such treaties served as a basis of the doctrine of foreign investment protection and trade until laws for foreign investment around the second half of the twentieth century. To protect such interest in some places the judges of the colonizer states sat at local courts and in other places use of force became the means.

WORLD WAR II

However, the face of international law took a major change after World War II. international business in particular took a huge fund, as it became a separate identifiable body. Post-war international business activities such as the protection of foreign investment which were dependent upon just the state legislature became part of the public international law, and the Bretton Woods institutions were set up in 1944 which are the World Bank and the International Monetary Fund, and on 1948 the General Agreement on tariffs and trade was established which was replaced by the WORLD TRADE ORGANIZATION in 1995

DECOLONIZATION

It is quite evident to date that decolonization did not bring much change to the international law in the colonized land and for many years ahead the countries maintained the laws of the colonizers internationally as well as internally even though the countries took full control over their resources. So the disputes went far beyond local jurisdiction and the control of the legislature which was uncertain at this point in itself. Arbitration turned out to be a good solution, but the challenge became the enforceability of awards in the countries. The International Chamber of Commerce drafted a convention, the NEW YORK CONVENTION, signed in 1958, with minor changes it became enforced and to be known as “the Convention on the Recognition and Enforcement of Foreign Arbitral Awards”. Later‘’ the International Center for Settlement of Investment Disputes” became the most widely used arbitration tribunal for investment disputes under the Free Trade and Investments Agreement under another convention that was signed in 1965.

EU AND INTERNATIONAL LAW

As mentioned earlier the colonizing Eurocentric powers maintained their treaties and built bodies of law to regulate international law-making among themselves for various reasons starting from peacekeeping at home to smooth business and colonial rule. Treaties like the Congress of Vienna,1815 and Treaty of Versailles,1919 were signed between nations for settlement of disputes, and along with this came international labor organizations and the International Court of Justice as the stepping stone of a new beginning of international business law. Like the Second World War where the community between the nations of Europe faced a huge setback, the First World War was also the time when the capitalists of the European countries were protecting measures to defend their economic interests leaving behind the ideals of free trade.

THIRD WORLD COUNTRIES IN THE SCENARIO

Post World War many Africans and Asians started gaining independence posing new challenges to global international law and validation of prior treaties with their new laws and regulations emerging. From 1950 to 1960 many newly independent states dramatically grew and the scope of Bretton Woods Institutions started failing to address changing Economic problems, and there was a subsequent restructuring of international economic relations even at a political and diplomatic level. On December 17 1966 the UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW ( UNCITRAL) was established by the general assembly. To this date the commission works by holding annual sessions in the headquarters of the UN.

Around 1960-80 was the time of sustainable development which became intertwined with international business or economic law. asaroun 190 the vision of sustainable development was brought into the limelight under international law as the 1972 Stockholm conference seemed to limit the growth of the developing countries. However, the 1980s saw a different light as sustainable international business law became a prominent way of thinking. On the other hand, time was also crucial for seabed laws and regulations, in 1970 the common heritage of mankind declaration halted the unilateral claims over areas of the Deep Seabed and unilateral exploitation of the resources.

NEW ERA

1980-90 embarked the NEW ERA of international business law, while the UN got divided between lobbies of developed and developing nations and with a presenting majority in numbers won the vote for NEW INTERNATIONAL ECONOMIC ORDER.

Even though it was being proposed for a longer time than that, it became fruitful around that time. And the new areas of business law became privatization, marketization, globalization, and liberalization both nationally and internationally. The wave was so huge that even China had to open its doors and embark on economic liberalization and openness, in the next decade India also had its journey to liberalization. While the developing countries found themselves striving in the newfound competitive market it put the traditional European communist countries in political confusion and under the pressure of opening doors communism collapsed.

AMBITIOUS TIME

By the General Assembly of 17th Nov. 1989 the UN declared 1990-1999 to be the United Nations Decade of International Law along with that came huge opportunities for multinational companies. It was considered one of the most ambitious decades in recent times for the globalization of the economy. Some of the milestones it reached were the end of URUGUAY ROUND,1994, the ratio of assets owned by foreign residents to world GDP rising from 25% ( approx) in 1980 to 92% ( approx) in 200, China’s share in the world manufacturing production rose from 2.7% in 1990 to 7.0% in 2000, India opening its door in 1997 e.t.c.

GLOBAL FINANCIAL CRISIS

In 2008 came the Global Financial Crisis, a meltdown caused by risky financial practices such as banks giving out risky loans, crashing of the stock market, and finally Recession. This crisis severely affected the United States, the United Kingdom, and other European countries, to the extent of collapsing their economic systems and creating unimaginable unemployment. While some Asian and South American countries closely tied to the European economy were also affected moderately. After the turmoil subsided it became important to avoid similar events in the future and that was possible through the reformation of the regulations of the financial sector. Such reforms were Basel III, which increased the capital requirement for the banks and introduced liquidity coverage ratios; The formation of the FINANCIAL STABILITY BOARD, established by G20 aimed to ensure better coordination among national regulators which will help in monitoring global financial risks, also introduces “SYSTEMICALLY IMPORTANT FINANCIAL INSTITUTION”. SIFI is a designation requiring stricter oversight for key banks. Following this came the EU banking reforms, shadow banking regulations, IMF and World Bank reforms, and many more.

GLOBALISED MARKET

In recent years with a globalised economy in the scenario, new trends have been emerging. Not only international investments but doing business across borders has also become equally important. Multinational companies have become global citizens and as for their consumers there is no boundary or border but regulating that is an equally big hassle with such a trend came cross-border mergers, acquisitions, and insolvency laws. For example, let’s take the example of India the case of State Bank of India vs. SEL Manufacturing Co. Ltd. It is where the financial creditor (State Bank of India ) filed a petition under section 7 of the Insolvency and Bankruptcy Code 2016 and the national law tribunal of Chandigarh declared a moratorium to initiate CIRP ( corporate insolvency resolution process). The decision of the court in India was recognized by the US Bankruptcy Court for the District of Delaware as a foreign main proceeding under Chapter 15 of the U.S Bankruptcy Code. This was possible due to the incorporation of the UNCITRAL model law which facilitates collaboration and communication among insolvency experts and courts internationally.

DIGITALISATION

With digitalization, the legal system is and will be facing a potential change. Digitalization brings a new and different world of cyberspace and virtual reality which are nonphysical in nature. Which forces the creation of the digital identity of every being even if they are corporations. Which brings the immense importance of copyright, trademark, and other intellectual property rights. With a global market, it is only given that worldwide IPR would be needed, and IPR is in the form of public international rules essentially set out by treaties between the countries. As the IPR also falls under the peripheral scope of private international law it refers to the conflicts of such required jurisdiction of courts. The World Intellectual Property Organization and the World Trade Organization play a crucial role in maintaining such aspects of intellectual property rights.

FUTURE OF INTERNATIONAL BUSINESS LAW

Presently International business law has been developing at a high pace but with changing technologies and lifestyles almost every day, it is to be hoped that the evolution of international business law will be able to keep up. Shortly, the legal framework would have to cater to multiple aspects of technology. Apart from that the environmental factor might still be a reason to worry about and we can hope for a more effective legal framework on sustainability and Environmental, Social, and governance. Again, the changing scenario of the geopolitical landscape might create some confusion of power dynamics in international organizations in the future causing exponential matters delaying subsequently. Those are some of my predictions for the near future of International Business law but at the end of the day, we can only hope for a system that maximizes harmony between all possible components of society on a global stage.

CONCLUSION

International business law has evolved over centuries through trade, colonialism, and legal developments. Its origins lie in Roman law and the formation of joint-stock companies, adapting alongside the rise of multinational corporations and digital complexities.

Post-World War II institutions, notably the World Trade Organization (WTO) and Bretton Woods organizations, have reshaped international trade and finance. Additionally, decolonization and the emergence of new nations have introduced unique challenges and perspectives.

As globalization progresses, international business law must continue to adapt to trends such as digital economies, cross-border mergers, and environmental sustainability. The future of this field will focus on balancing technological advancements with sustainability and geopolitical changes, ensuring effective regulation.

Ultimately, international business law is vital for fostering global cooperation, protecting investments, and navigating the intricacies of a dynamic marketplace.

Sources and Citations

WHAT IS INTERNATIONAL BUSINESS LAW

1.The-world-is-flat-international-business-law

https://www.londontfe.com/blog/the-world-is-flat-international-business-law?srsltid=Afm

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