3. SOURCES OF POSITIVE LAW IN INTERNATIONAL BUSINESS

3.1 Material and Formal Sources

• Formal sources: the legal norms themselves, e.g., laws, Royal Decrees.
• Material sources: authorities or institutions issuing these norms, e.g., Parliament.

Example: Formal Sources in Spain:(Civil Code, art. 1).

• Law: norms issued by public authorities  Includes laws, Royal Decrees, and international treaties. Written law is the main source for private law.
• Custom: repeated behaviour accepted as binding.
• General principles: guide the interpretation and integration of the legal system.

Formal Sources and hierarchy in Commercial Law (Código de Comercio, art. 2):

1. Commercial legislation: Código de Comercio and special laws
2. Commercial customs (usages of local markets)
3. Civil or common law

Formal Sources and hierarchy in Commercial Law. Exception for contracts (Código de Comercio, art. 50): customs are excluded; hierarchy:

1. Commercial law (Código de Comercio and special laws)
2. Civil law

Beyond formal sources- Secondary/Complementary Sources of the Law in Spain:

• Case Law: (art. 1.6 Cci) court doctrine (in Spain, Supreme Court decisions on similar cases). In common law, “case law” and “precedent” are binding; landmark cases are called “leading cases.” In Civil Law Countries, their force is different to Common Law Countries

• Equity (art. 3.2 Cci): supplements judicial decisions to ensure justice.

• Analogy (art. 4 Cci): applies norms from similar cases (e.g., Agency Law applied to Distribution Law).

Territorial and Subject-Matter Application:

• Subject-matter specialisation is essential. Commercial law (core of International Business Law) applies only to private relations with commercial content (subject-matter).

• Territorial application depends very much on the material instrument and the formal source involved.

3.2 Legislative Competence and Material Sources in Spain

• Spanish State Competence: exclusive for commerce, banking, insurance, and foreign trade (Constitution, art. 149.1.6 and 149.1.10).

• Autonomous Communities: limited competences (art. 148 CE), e.g., consumer protection, economic promotion.

3.3 International Treaties (covenants/signed arrangements/ etc)

• Treaties (also called conventions) are negotiated, signed, ratified by Parliament, and published in the BOE. Article 96 CE: Treaties have the force of law when published.
• Some treaties require parliamentary approval (art. 94 CE); others only notification (mostly commercial treaties).
• Some classification (types of Treaties):
  • Bilateral: e.g., between country A and B in trade matters.
  • Multilateral: agreed among various countries, they come into force after a number of ratifications. Can be managed by IOs (UN, WTO).
    • Examples of Treaties under WTO (please see section 1 and 2 of this lesson):

3.4 Transfer of Sovereign Competence to International Organizations

• The transfer of sovereign powers is possible in Spain under constitutional procedures (art. 93 CE): which requires «organic law» authorising the government to negotiate such treaties. (ie: Treaty of the EU)

EU Law:

• Spain joined the EU in 1986 under art. 93 CE; sovereign competences transferred, especially legislative, judicial, and competition control.

• Primary Law: founding treaties (e.g., Treaty of Lisbon, TUE, TFUE)

• Secondary Law: regulations, directives, decisions

  • Regulations: directly applicable; sometimes optional clauses (“OPT”)
  • Directives: binding goals; states free in implementation; EU may sanction non-compliance
  • Decisions: addressed to specific entities (e.g., competition cases)

• Non-binding EU law: recommendations, opinions (used when legislation is not feasible, e.g., executive remuneration).

Special: EU Commercial Treaties

• EU has legal personality; so it can sign agreements with third countries or IOs.
  • Mixed agreements: both EU and member states participate.
• Types of agreements entered into by the EU: association, free trade (FTAs), partnership, cooperation.

4. SOURCES OF SOFT LAW IN INTERNATIONAL BUSINESS AND OTHER ISSUES

• Soft Law
  It is increasingly common to find, in certain areas of practice—especially highly professionalised sectors—that alongside positive law we also encounter guidelines, recommendations, and model laws (a model of a law that has not been formally adopted by any parliament or government). This trend is strong in contemporary international business. In fact, in commerce, the technique is very old: even medieval artisans had their own legal rules, distinct from the King’s law.
• There has been a significant proliferation of sector-specific recommendations, some of which are issued by public bodies.
  • For example, in the European Union, there are Recommendations and Opinions; in the OECD (1961), there are Guidelines for Multinational Enterprises; and UNIDROIT (1926), an international institute based in Rome, develops Model Laws for the unification of private law.
• Another part of soft law originates from the private sector. For instance, the International Chamber of Commerce (ICC, 1919), based in Paris, issues guidelines and provides one of the most important sources of arbitration rules. Similarly, the International Federation of Consulting Engineers (FIDIC) drafts over 80% of the standard forms used in international construction contracts.

Soft law can appear under different designations depending on the context, often linked to self-regulation or voluntary codes.

• Self-Regulation
  This concept is widely used in international business and has multiple meanings. On one hand, it refers to the internal organisation of a company or group (e.g., the bylaws of a corporation). On the other hand, it refers to the rules or mandates issued by private organisations that must be followed by those who wish to participate. Examples include the internal rules of a market or exchange venue. Although private, these rules must be observed for companies to operate in such markets. Self-regulatory norms often gain such prestige that states eventually incorporate them into law, in adapted form.

Other Rules Derived from Autonomy of Will (autonomía de la voluntad)

• Contracts and the Will of the Parties: The law recognises the importance of individual will, both in unilateral acts (declarations) and in bilateral or multilateral acts (contracts). In commercial law, contracts primarily reflect the parties’ intentions, are binding, and are interpreted in accordance with good faith and the diligence of an orderly businessperson, taking into account provisions of the civil and commercial codes.

• General Contract Terms (GCTs): These are standardised clauses drafted by one party for repeated use across multiple contracts (often in “small print”). They are not law in themselves but form part of the contract; if not included in the contract, they are not binding.

• Other Pre-Formulated Clauses Not Classified as GCTs: For example, INCOTERMS. These are pre-drafted not by a party to the contract but by an international organization such as the ICC. Their inclusion depends on agreement between the parties.