International Business Law Vocabulary and Terms

International Business Law Vocabulary and Terms

Doctrine of Comity:  From Latin comitas: “courteousness.”) The practice or courtesy existing between states of treating each other with goodwill and civility. 

Comity is thus understood as an informal principle that nations will extend certain cour- tesies to other nations, particularly by recognizing the validity and effect of their executive, legislative, and judicial acts. This principle is most frequently invoked by courts, which will not act in a way that demeans the jurisdiction, laws, or judicial decisions of another country. In Case 1-1, the limits on a state’s jurisdiction to make and enforce law are discussed in terms of the doctrine of comity.

Self Executing: A treaty containing a term that says that it is directly effective within the signatory states upon ratification.

Non-Self Executing: A treaty that requires state parties to enact enabling legislation before it becomes effective domestically.

The reception rules found in treaties depend on two factors. One is the nature of the treaty, and the other is the constitutional structure of the ratifying state. Treaties may be either self-executing or non-self-executing. A self-executing treaty is one that has a provision stating that the treaty will apply to the parties without their having to adopt any domestic enabling legislation; a non-self-executing treaty has no such provision

Sovereignty: is the full right and power of a governing body over itself, without any interference from outside sources or bodies. In political theory, sovereignty is a substantive term designating supreme authority over some polity. In international law, the important concept of sovereignty refers to the exercise of power by a state.

Kinds and Types of Sovereignty in Politics

There are four elements or ingredients or characteristics of state i.e. population, territory, government and sovereignty. Hence the state cannot be imagined without Sovereignty. It is Sovereignty that not only distinguishes the state from other associations, but also gives it superiority over them. The precise and definite location of Sovereignty is, however, not an easy matter. This problem of location of Sovereignty has, therefore, given rise to a distinction between legal and political Sovereignty. titular and Actual Sovereignty and de jure and de facto Sovereignty.

Following are the important types of Sovereignty:


When sovereign powers are vested theoretically, apparently, or in black and white in an individual or state institution, it is titular or nominal sovereignty. In such conditions, real state powers belong to some one other person or institution. This type of sovereignty appeared because of the parliamentary form of government. The best example of this is England where the king or Queen is the Titular sovereign and parliament is the actual sovereign.


When the state sovereignty is practically exercised by an individual or institution, it is called real sovereignty. For example, in UK the state powers are theoretically in the hands of the British Queen but in practice these powers are exercised by the British parliament. Another example of this type is Prime Minister of India and Prime Minister of Pakistan under original Constitution of 1973.


Sovereign powers of law making vested in an individual or institution by the constitution or fundamental law of the land is legal ‘sovereignty. This type of sovereign is provided constitutional safeguards and all must obey his laws. The laws made by this type of sovereign are final and cannot be question by any one. For example, in Great Britain Parliament is constitutionally empowered to exercise state sovereign powers.


Many political thinkers, scientists and writers reject, legal concept of sovereignty as too narrow and misleading. Dicey, one of them, has said, “Behind the legal sovereignty there is a political sovereignty before whom the legal sovereignty must bow.” For example, in a state where the electorates elect political institutions, their electorates are sovereignty in UK British electorates is to elect the powerful lower house i.e. the house of common. So, Parliament is to legislate keeping in view the demands and needs of the voters.


If the only voters are sovereign, it is political sovereignty and if all the citizens irrespective of any discrimination are given equal opportunities to play their role in state activities, it is popular sovereignty. Its example is the direct democracy in the Greek city state of 5th century B.C. There, all citizen were given equal opportunities to play due role in political activities.


The dejure sovereign is the lawful or constitutional sovereign of the state and recognized by the courts. If the component individual or institutions exercise the state supreme powers completely and permanently, it is dejure sovereignty. Those states have dejure sovereignty that are recognized by the international law.


The state power temporarily exercised by the individuals or institutions is de-facto sovereignty. Those states where governments are instable or unable to conduct international affairs are never permanently recognized by the other states. Such state has defacto sovereignty. For example, General Pervaiz Musharaf got powers through military coup. His government was defacto, but through constitutional amendment and restoration of the constitution, he became the President and hence dejure sovereign.

The Making of International Law

Within states, law is made by legislatures, courts, and other agencies of government. However, at the international level, no formal lawmaking machinery exists. In working together, the different states in the international community function in the roles of both lobbyists and legislators.

Under Positivist principles, international law comes into effect only when states consent to it. The general consent of the international community can be found in state practice, that is, in the conduct and practices of states in their dealings with each other. Statements or evidence of general consent can be found in the decisions of the International Court of Justice (ICJ) (or its predecessor, the Permanent Court of International Justice [PCIJ]), in resolutions passed by the General Assembly of the United Nations, in lawmaking multilateral treaties, and in the conclu- sions of international conferences. Sometimes, when a provision is repeated over and over in bilateral treaties, courts and law writers will regard the provision as having the general consent of the international community. In addition, legal writers often cite unratified treaties and reports of international agencies, such as those of the International Law Commission, as indicating a trend toward general consent.

The particular consent of a state to be bound by an international law can be found in the decla- rations of its government, in its domestic legislation, in its court decisions, and in the treaties (both bilateral and multilateral) to which it is a party.

Sources of International Law

The sources of international law are what courts and other international tribunals rely on to determine the content of international law. Article 38(1) of the Statute of the ICJ lists the sources that the court is permitted to use. Most writers regard this list as being reasonably complete and one that other international courts should use as well. Article 38(1) provides that:

The Court, whose function is to decide in accordance with international law such dis- putes 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 a subsidiary means for the determination of rules of law.

This listing implies a hierarchy, or order, in which these sources are to be relied on (see Figure 1.1). That is, treaties or conventions are to be turned to before custom, custom before general principles of law, and general principles before judicial decisions or publicists’ writings. Strictly speaking, Article 38(1) does not require a ranking or hierarchy; but in practice the ICJ and other tribunals turn first to treaties. This is appropriate because treaties (especially those ratified by the states’ parties involved in a dispute) are clear-cut statements of the rules the court should apply. Also, customary law, which is based on practice, is often more specific than general principles of law, which are usually found inductively by legal writers who have examined the long-standing practices of states.

Refusal to exercise Jurisdiction

As indicated earlier, municipal courts are seldom required to exercise jurisdiction over cases involv- ing international disputes. The doctrine used by common law courts to refuse jurisdiction is called forum non conveniens. (From Latin: “inconvenient forum.”) Doctrine that a municipal court will decline to hear a dispute when it can be better or more conveniently heard in a foreign court.

ICJ Jurisdiction

The International Court of Justice acts as a world court. The Court’s jurisdiction is twofold: it decides, in accordance with international law, disputes of a legal nature that are submitted to it by States (jurisdiction in contentious cases); and it gives advisory opinions on legal questions at the request of the organs of the United Nations, specialized agencies or one related organization authorized to make such a request (advisory jurisdiction).

Servitude: (From Latin servitudo: “slavery.”) A right to the use of another’s property.

Positive Servitude: A positive servitude is a real servitude that allows a person or state to do something on the servient landowner’s property. For example, a positive servitude permits the servient holder to walk on the servient landowner’s property.

The following is an example of a state statute (Puerto Rico) defining the term.

Negative Servitude: Servitudes can also be negative. That is, they may prevent one state from doing something within its territory that causes injury to a second state. Case 1-3 provides an example of a negative servitude based on air pollution affecting another state.

State Responsibility: Liability of a state for the injuries that it causes to aliens and foreign businesses.

To establish that a state is responsible for an injury to an alien or foreign business, there must be (1) “conduct consisting of an action or omission . . . attributable to the State under international law,” and the conduct must (2) “constitute . . . a breach of an international obligation of the State.”2 But read- ers should bear in mind that all notions of state responsibility are set within the framework of an international legal system where sovereignty is the most basic principle. In the Positivist view of inter- national law, responsibility adjudged by another state or an international tribunal can only be of conse- quence where a sovereign agrees that it is not the sole judge of its responsibility toward others.

Impute  (From Latin imputare: “to charge.”) To attribute something done by one person, such as an act or crime, to another.

Doctrine Imputability

A theory known as the doctrine of imputability says that a state is only responsible for actions that are imputable (attributable) to it. The usual interpretation of this theory is that the state is respon- sible for acts done by officials within their apparent authority. This includes (1) acts within the scope of officials’ authority and (2) acts outside their scope of authority if the state provided the means or facilities to accomplish the act.3 Thus, states are responsible both for mistaken actions and even for actions done contrary to express orders or even the internal laws of the state, as Case 2-1 makes clear.

Non imputable Acts

Because states are only responsible for actions taken by their officials, they are not responsible for the acts of private persons, acts of officials of other states or international organizations, or acts of insur- rectionaries within their own territories.

Ultra Vires

Ultra vires is a Latin phrase meaning “beyond the powers”. … Most countries have restricted the doctrine of ultra vires in relation to companies by statute. Similarly, statutory and governmental bodies may have limits upon the acts and activities which they legally engage in.

Ultra vires acts are any acts that lie beyond the authority of a corporation to perform. Ultra vires acts fall outside the powers that are specifically listed in a corporate charter or law.

Standard of Care

Once a court or other tribunal decides that a state is connected to an action, it has to determine the criteria it is to be judged by. Two criteria have appeared in the case law: the international standard (or sometimes the international minimum standard) and the national standard.

The National Standard of Care 

Doctrine that a state must treat aliens the same way that it treats its own nationals.

Third World states (especially in Latin America before World War II and in Asia and Africa after World War II) have often pressed for a national standard of care. That is, a state should treat an alien exactly as it treats its own nationals—no better, no worse. But the critics point out that this is not protection for aliens if the nationals are ill-treated; and if the rule were carried to its extreme, it would mean that aliens should be given the same privileges (voting, health care, etc.) as nationals.

International support for the national standard or equality of treatment doctrine has fluctuated over the years.27 Efforts by the Soviet Union to obtain support for a 1962 United Nations General Assembly resolu- tion that would have established “the inalienable rights of peoples and nations to the unobstructed execution of nationalization, expropriation, and other measures” was defeated by a vote of 48 to 34, with 21 absten- tions. Among those nations voting against the resolution were 16 Latin American states and 10 African and Asian states. Two Latin American and 19 African and Asian states abstained. In the debate leading up to the vote, the representatives of many developing countries sought to reassure the capital-exporting states of Western Europe and North America that they had no intention of confiscating foreign investments.

The role that foreign capital plays in development and the fear of offending states that extend economic and other kinds of assistance—matters frankly admitted to in the debates—were important factors in defeating the Soviet proposal. On the other hand, the less developed countries generally have been unwilling to reject the national treatment doctrine and sign treaties obliging them to pay just compensation if they expropriate foreign investments.

The International Standard of Care

Doctrine that a state is responsible for injuring an alien when the state’s conduct violates international norms.

The standard of care favored by major Western countries is known as the international standard of care. This standard says that although a country has no obligation to admit aliens to its territory, once it does, it must treat them in a civilized manner. In the Neer Claim, the arbitrator held that the mis- treatment of an alien constitutes a “delinquency” (and thus a violation of the international standard) if it “should amount to an outrage, to bad faith, to willful neglect of duty or to an insufficiency of governmental action so far short of international standards that every reasonable and impartial man would readily recognize its insufficiency.”


Depriving a person or company of private property without compensation.

Expropriation or nationalization is the state’s taking or deprivation of the property of foreigners. The right of states to expropriate foreign property is universally recognized; in municipal law, the right of a government to “take” property for public purposes is known as eminent domain. Western countries regard expropriation, much as they regard eminent domain, as proper so long as it is done for a legitimate public purpose and the state pays prompt, adequate, and effective compensation.

Creeping Expropriation

A series of admin- istrative acts that in combination result in depriving persons of their property.


of property previously held by private persons or companies, usually in exchange for some consideration.

At its essence, an expropriation is the taking of private property by a government acting in its sovereign capacity. Nationalisation, a form of expropriation, generally covers an entire industry or geographic region. Nationalisations typically occur in the context of a major social, political or economic change. While international law recognises that states have the right to nationalise or expropriate

Apparent Authority

Apparent authority refers to a situation where a reasonable third party would understand that an agent had authority to act. This means a principal is bound by the agent’s actions, even if the agent had no actual authority, whether express or implied.


States can raise several objections to complaints brought against them, including lack of standing, lack of nationality, lack of a genuine link, and failure to exhaust remedies.

Lack of Standing

Objection that may be made to an international tribunal’s exercise of jurisdiction when a plaintiff is not qualified to appear before the court.

A common objection states raise to being sued in international tribunals is lack of standing. If a plaintiff is not qualified to appear before the particular court, the case must be dismissed. In most international tribunals, such as the ICJ, only a state can file a complaint. If a private person or com- pany were to appear as a plaintiff, the case would be dismissed for want of standing.

 Lack of Nationality

Objection that may be made to an international tribunal’s exercise of jurisdiction when the state bringing suit is doing so on behalf of a person who is not a national of that state.

This rule is easily applied with respect to persons with a single nationality and to stateless per- sons (the first have a claim if they are sponsored by the state of their nationality; the second cannot be sponsored by any state). Its application becomes more complex, however, with dual nationals. The traditional rule is that either state can complain to a third state; but between the two, neither can complain.37 In the Canevaro Case, a person who had both Italian and Peruvian nationality sought the sponsorship of Italy in a complaint against Peru.

Lack of a genuine Link

Objection that may be made to an international tribunal’s exercise of jurisdiction when there is no real and bona fide relationship between the state bringing the suit and the person on whose behalf the suit is brought.

A person whose suit is being sponsored by a state in an international tribunal must be a real and bona fide national of that state. That is, the person’s nationality must be genuine and not based on a token relationship. If it is based on a token or insignificant relationship, the opposing state can raise an objection of a lack of a genuine link to the sponsoring state. In the famous Nottebohm Case, the ICJ held that an individual who went to Liechtenstein for three weeks to acquire that state’s nationality and then returned abroad did not establish a real or effective link that would justify Liechtenstein in bringing a complaint against another state for depriving that individual of his property.41

For companies, the ability of a state to sponsor a complaint depends on the particular company’s nationality. States have a wide variety of national rules that define the nationality of a company. Regardless of these tests, international tribunals now require that a company have a genuine link with its sponsoring state.

Failure to exhaust Remedies

Objection that may be made to an international tribunal’s relief from the defendant state

Before an individual or business firm can seek the help of its home state in supporting a complaint of mistreatment by a foreign state, the individual or firm must exhaust all of the local remedies available to it within the foreign state.42 Failure to exhaust remedies is thus an objection that the foreign state may raise in an international tribunal. As is the case in municipal law, the requirement that complainants must exhaust their local remedies serves to resolve problems at the lowest level and with the least use of a sovereign’s time.

Fault and Causation

The case law and most law writers suggest that a country is responsible for injuries regardless of fault. In other words, there is no requirement to show culpa (fault) by the country (either through knowledge or negligence).25 This rule reflects the difficulties of proving a lack of proper care by a state. Instead, courts look to causation. That is, did the state or its officials actually cause the injury? In the Lighthouses arbitra- tion between France and Greece, a question arose about Greece’s eviction of a French firm from its offices in Salonika and its responsibility for the loss of merchandise destroyed by a fire at the firm’s temporary location.

Causation (From Latin causa: “rea- son.”) The act or agency that produces an effect, result, or consequence.

Culpa  (From Latin: “fault or error.”) Responsibility for wrongdoing.

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