Purchase and Sale Agreement in International Trade
Foreign trade is called mutual purchase-sale or service exchange between international regions. The basis of foreign trade is the purchase and sale contracts for the export or import of securities.
The contract becomes binding upon acceptance of the terms communicated by one of the parties to the other. The parties can make the contract as they wish, provided that they comply with the mandatory provisions. However, the parties are obliged to state their obligations and rights in the contract. It should be clearly stated in the contract what the obligations will be in the transportation of goods from one place to another, how the risks will be divided in case of non-fulfillment of the obligations, which party the risk will belong to if the goods are lost or damaged during transportation. In addition, it is necessary to show how the delivery of the goods to the buyer will occur in legal terms, that is, in which cases the seller will be deemed to have fulfilled its obligations.
Purchase and sale contracts must be made in writing. In addition to the fact that written contracts bind the parties, the proof strength is also high in case of any dispute.
Disputes may arise between the parties in international trade agreements. The parties may leave the resolution of the disputes that may arise between them due to their commercial relations to the courts, or they may decide that they will resort to other methods (friendly settlement, mediation or arbitration) for the resolution of the dispute. In addition, the parties should have information about which country's legislation will be applied in case of disagreement when making a contract. Because the provisions of each country may have different results.
In a purchase-sale contract, the type and quality of the goods, the quantity of the goods, the price of the goods, the place and time of delivery, the place and time of payment, the method of payment, and how to resolve the disputes must be decided by the parties.
What Are The Risks That Can Be Encountered in International Trade?
Risk is the probability of an event occurring that could lead to loss or damage. The risks that can be encountered in international trade are the risks related to the goods, the risks related to the payment and the market risk.
According to the provisions of the sales contract, any risks that may occur during the delivery of the goods to the delivery point, which is the responsibility of the exporter, belong to the exporter, and the damages after the delivery point belong to the importer company. The exporter or importer should take the necessary precautions regarding the risks related to the goods.
In international trade, it is the risk that arises when the counterparty cannot make the payment. These; If the importer refrains from making a payment (commercial risk), or although the importer wishes to make a payment, it is not possible to transfer money due to the lack of convertible foreign currency in the importer's country (transfer risk), or the imposition of some taxes on the payments (financial risks), or the failure of the exporter to prepare the shipping documents correctly (documentation risk), the delay or the complete disappearance of the payment of the cost of the goods. In addition, the bank risks are that the intermediary bank does not inform the foreign currency from abroad on time, does not examine the export documents carefully or lose them, and the counter bank delivers the export documents without collecting the cost of the goods.
These risks concern not only the exporter and the importer, but also the intermediary financing institutions. In case of these risks, intermediary financing institutions may not be able to get their loans back. The most active methods used in international trade for the management of these risks; effective contracts, sound payment systems, letters of credit, bank transfers, financing techniques used in foreign trade (forward, leasing, etc.), futures exchanges to avoid exchange rate risk. are methods.
Market risk; It is the risk that the financial structure of a company may face due to fluctuations in market prices or price movements in the opposite direction in the markets. To protect the exporter from this risk; research about the buyer, make a good contract, take out export credit insurance and transportation insurance. In addition, alternative financing methods such as the Futures and Options Exchange (VOB) and factoring, forfaiting and leasing can be used.
What are the Solutions for International Commercial Disputes?
There are various methods for resolving disputes arising from international commercial communications. The parties are free to choose the resolution of these disputes.
The parties can apply to the court regarding the dispute, as well as alternative dispute resolution methods.
International commercial disputes can be resolved in the courts of the state of which one of the parties is a citizen upon the agreement of the contract. However, resolution of an international commercial dispute between the parties in state courts poses certain risks. Because there are risks such as the national court may favor the party that is its own citizen, not be impartial and objective, the trial may be long and expensive, and may be insufficient in matters requiring expertise.
Alternative dispute resolution is more advantageous than the way of judgment. These advantages are;
What Are Alternative Dispute Methods?
The negotiation system is when the parties or their representatives come together to seek a solution in case of any dispute. In addition, a third party cannot intervene in any dispute resolution on the road to negotiation. For this reason, it is the least formal method among alternative dispute resolution methods that is completely under the control of the parties.
In the mediation method, the mediator listens and prepares a consensus protocol by bringing the parties together. If the reconciliation protocol is not accepted and signed by the parties, the consensus protocol does not bind the parties. The mediator persons do not make a binding decision.
Persons may assign an expert person to resolve technical problems that may arise during the performance of the contract between each other. This person is called a referee-expertise. If the dispute is resolved as a result of the review of the arbitrator-expert and the parties are convinced, the dispute will be resolved without being brought to the judiciary. The parties may add to the contract the condition that the decision of the arbitrator-expert is binding.
Short trial is not a trial, but a planned dispute resolution process consisting of a combination of negotiation, mediation and arbitration. The parties to the short trial determine the functioning of the short trial. The parties can make an agreement on confidentiality, as well as determine how much information and documents each party will present at the hearings. In short proceedings, a neutral advisor is always chosen to assist the parties throughout the entire dispute resolution process.
The Short Jury Trial is a short trial with a jury inside. Short jury trials are often used after the investigation phase of a case being heard is completed, or when it is understood that the case cannot be resolved before the hearing.
Arbitration is a method in which the two parties in dispute agree to leave the dispute resolution to private persons and the dispute is examined and resolved by private persons. People who will resolve this dispute are called arbitrators.
The arbitration clause can be included in the contract as well as in the form of an arbitration agreement. It is a way to be applied in matters not prohibited by the law. For the arbitration to be valid, the parties must clearly state their will about the arbitration. It is necessary to appoint an arbitrator in the contract.
The seller and the buyer can choose two types of arbitration, namely "ad hoc arbitration" or "institutional arbitration" when contracting.
Ad hoc arbitration is when the parties make an arbitration clause or an arbitration agreement to determine the rules to be applied to the ion of arbitrators, the merits and the procedure. In this case, the parties determine the arbitration procedure to be applied according to their needs. On the other hand, parties can decide this way by referring to the arbitration rules prepared by some institutions in their contracts.
In ad hoc arbitration, the election of a president is important because, if the arbitrators disagree, the president determines the outcome.
Arbitration made by an institution according to predetermined rules and whose compliance with the rules is guaranteed by the relevant institution is called institutional arbitration. In this type of arbitration, there is a permanent institution that administers the arbitration, performs secretarial services and thus provides organization and statute in the resolution of the dispute.The most commonly used form of institutional arbitration for settling commercial disputes is the "Conciliation and Arbitration Provisions" of the International Chamber of Commerce (ICC) and the "Arbitration Rules" of the United Nations International Law Commission (UNCITRAL).
The International Chamber of Commerce (ICC) was established in Paris in 1919 for the development of international trade. The International Chamber of Commerce (ICC) established a court in 1923 under the name of the International Trade Arbitration Court to settle international commercial and economic disputes through arbitration. The ICC Arbitration court is not a permanent arbitral tribunal that directly resolves the dispute. The arbitrator or arbitral tribunal, which will directly resolve the dispute, is formed by the Arbitration Court in each concrete case at the will of the parties or in cases authorized by the parties. The work of arbitral tribunals is monitored by the ICC International Arbitration Court, which meets three or four times a month.
ICC has developed a set of concepts (Incoterms) that express the way of delivery of goods in commercial disputes and can be used in commercial contracts. It is aimed to prevent the emergence of disputes that may arise from different interpretation of the terms, as each concept clearly reveals the commercial obligations of the parties.
Parties that want to apply the "Incoterms Rules" in commercial contracts must state that these rules will be valid in their contracts and in case of a dispute, the International Chamber of Commerce (ICC), the parties must decide that this dispute will be resolved by the Arbitration Court. In order to apply to this Court, the parties must clearly indicate.
The arbitration rules adopted by the United Nations International Business Law Commission (UNCITRAL) in 1976 are used in commercial disputes around the world. In establishing the rules, UNCITRAL has taken into account all existing international arbitration agreements and important arbitration rules in force in various countries. The UNCITRAL Arbitration Rules do not stipulate the administration of an arbitration, but recognize that an existing arbitration body can serve as an agreed authority and assist the parties in the method of appointment of arbitrators.
Some chambers of commerce have created their own arbitration rules. Examples of these are the "London Arbitration Court (LCA)" financed by the London Chamber of Commerce and the "Arbitration Institute" established by the Stockholm Chamber of Commerce. There is also an Istanbul Arbitration Center in Turkey.
Istanbul Arbitration Center, Turkey as well as in need through institutional binding arbitration of disputes between commercial parties located abroad, offers services for the resolution of the final judgment and can be exercised.
Some important associations have also established arbitration rules for disputes that fall within their field of activity. For example: Federation of Oil Seeds and Fats Association (FOSFA) and Grain and Feed Trade Association (GAFTA) are among them.
The American Arbitration Association (AAA) established in the USA does not act as an arbitrator. It undertakes the administration of the arbitration upon the agreement of the parties and provides a list of arbitrators to the parties.
Recognition of Arbitral Awards in Turkey
Since there is an element of foreignness in disputes arising from international trade, the Turkish judge has to determine which law he will apply in the case brought before him. Parties are free to choose the law to be applied pursuant to Article 24 of Private International and Procedural Law in cases to be filed in disputes regarding international trade.
In order for the decisions of foreign courts to be implemented in Turkish courts, the Turkish court must enforce that decision. Foreign declarations for enforcement replace those issued by Turkish courts.
The New York Convention on the Recognition and Execution of Foreign Arbitral Awards requires that the signatory to accept and implement the arbitral awards duly made in each other's countries as if they had been made in their own country.
Private International and Procedural Law Articles 60-63 are arranged between the implementation of foreign arbitral awards in Turkey. According to the aforementioned articles, foreign arbitral awards, which are finalized, have enforceability and are binding for the parties, are enforced by Turkish courts.