CONTRACT MAIN CHARACTERISTICS

What is a contract? a legal document, a legally enforceable promise, that states and explains a
formal agreement between two different people or groups, or the agreement itself. It can be about
positive or negative obligation.

ENFORCEABLE CONTRACT=An enforceable contract is a written or oral agreement that can be

imposed in a court of law. Contract enforceability comes down to six essential factors: offer,
acceptance, awareness, consideration, capacity, and legality. If your contract doesn’t have all of
these elements, you may not have legal ground to stand on should something go wrong in a business
relationship.

o AUTHORITY= awful ability to enter a contract (otherwise, the contract can be void)
o CAPACITY= in relation to age, mental state, language (ex: minors cannot enter contracts)
NB= legal capacity is the right to be the subject of legal relations, is inherent in every natural
person and is lost only through death. Capacity to act is the power to act with legal effect.
o FREE INTENTION= The parties freely agreed to be bound together in a contract. They are not
forced or not due duress and undue influence (being threaten).
o KEY ELEMENT= IF ONE OF THIS IS MISSING= VOID CONTRACT
1. OFFER= “the act of presenting something, such as a bargain, with the understanding
that should the other party agree, that a bargain will be complete”
2. ACCEPTANCE= final and unequivocal expression of assent to another’s offer to
contract” Unequivocal → it needs to be absolutely clear.
3. INTENTION TO CREATE LEGALLY BINDING AGREEMENT= an agreement is legally
enforceable if the parties are deemed to have indented it to be a binding contract
4. CONSIDERATION= is the change of something of value between the parties bound in
the contract based on reciprocal undertakings – each party must exchange something
of value
5. WRITING= Most contracts are in writing (real estate contracts generally MUST be in
writing). Oral agreement can be enforceable if you can show part performance of an
obligation made in reliance of the agreement.
6. Formation
o CORRECT EXECUTION OF DEEDS AND DOCUMENTS

Content

o RECITALS= Setting the scene: who are the contracting parties, what is the contract about and
where. It represents a description and an introduction of the contract.
o ENFORCEABLE TERMS
They are the legal content of the contract: how the parties are bounded together.
 CONTITION= MAJOR TERM, FONDAMENTAL, BREACH= END OF THE CONTRACT
Major term which goes to the root of the contract. Breach can lead the innocent party
to end the contract and claim damages
Ex: supplier does NOT deliver the right goods (desks instead of chairs)
 WARRANTIES= MINOR TERM, NOT FONTAMENTAL, BREACH= DAMAGE
Warranty → minor term which does NOT go to the essence of the contract. Breach can
allow the innocent party to claim damages (BUT NOT to end the contract) Ex: supplier
delivers the right good (chairs) BUT in a different color
 ENTIRE AGREEMENT CLAUSE= CAUSE WITH WHICH THE PARTIES MAY INVALIDATE ANY
PREVIOUS AGREEMENT MADE IN THE PRE CONTRACTUAL PHASE.
 states that the written contract is the complete and final statement of the parties’
agreement (usually asked at exams). Any pre-contractual material or representation
which the parties wish to be incorporated into the contract MUST be explicitly included
in the contractual documentation (sales “puff”, representations during negotiations etc
are NOT included) → anything which is NOT on the contract does NOT matter, so what
it is signed is the actual deal. Ex: “This agreement, along with any exhibits, appendices,
addenda, schedules and amendments hereto, encompasses the entire agreement of
the parties, and supersedes all previous understandings and agreements between the
parties, whether oral or written”

 LIABILITY= The contract determines: - Which party pays in the case of loss or damage - To
what extend will that party be held liable? (all damage? Some? None?)
EXCLUSION OF LIABILITY= the party does NOT accept any liability Ex: “Contractor shall
NOT be liable for any and all claims, actions, liabilities, losses, damages and expenses
(including legal expense) (“losses”) incurred by customer
LIMITATION OF LIABILITY= → the party is responsible for covering losses and damages
up to a certain amount (benchmark → up to the value of the contract)
UNLIMITED LIABILITY=the party is responsible for covering all losses and damages
 GOVERNING LAW= which law govern the contract and jurisdiction of courts, where the
partis take legal action against the other in case of disputes.
 VARIATION OF THE CONTRACT= change after the contract is signed, it is possible to change
the contract with the written consent of the other party.
 FOCE MAJEURE= EXCUSE FROM NON PERFORMANCE BREACH OF CONTRACT WITHOUT
PAYING DAMAGE.
A party will be excused from non-performance for the duration of an event beyond its
reasonable control provided it notifies the other party within a reasonable time and
takes steps to minimize disruption (suspend contract rather than terminate it!).
 Event beyond its reasonable control, not expected =Ex: Act of God, fire, flood,
earthquake, terrorism, riot, war… at the time parties enter the contract they don’t
know about it.
 Notification within a reasonable time
 Takes steps to minimize disruption(mitigate loss or damage = move the production
where there was not earthquake)
o SCEDULES AND ANNEXURES= contain detailed commercial or technical information, at the back
of the contract. price, service description, service credits, technical specs etc.

So VOID CONTRACT= A void contract is an agreement that is illegitimate and unenforceable from the
moment it is created. ONE OF THE FUNDAMENTAL PARTS OF THE CONTRACT IS MISSING

A contract is void when it is contrary to mandatory rules, when one of the four requirements
(agreement, cause, object, form) is missing or has not been fulfilled, when the cause is unlawful or
the object of the contract is missing (if it is impossible, unlawful or undetermined).

VOIDABLE CONTRACT= Voidable contracts allow the parties to legally terminate the agreement
under certain conditions.

 BREACH=one or either of the parties did NOT do what they have promised to do in the
contract (the contracted is NOT honored). Legal action can be taken.
  FROCE MAJEURE=look before. The contract is suspended for a certain period of time in
which the parties CANNOT take legal action
 INVALIDATING FACTOR
Mistake → erroneous belief that some facts are true (misspell the name)
Misrepresentation. false assurances, lies, fraud (ex: exaggerate your capabilities of doing
something). Create the wrong impression.
Death →The contract is between two people so th the promise dies with the promisor
Customer contracts restriction→ in order to protect consumers in complex transactions.
Consumers, w.r.t. businesses, are considered a special category as less educated and with
less intention to bounded
Frustration → → the contract has been rendered impossible (ex: I’m selling my house BUT
it got burned down) (in this case the contract can be terminated.
Narrower concept w.r.t force majeure. Events MUST NOT only prevent performance BUT
MUST make performance impossible, illegal or radically different form that intended at time
contract was entered → Contract is terminated and parties released from obligations.
 Lack of capacity: If a party to the contract cannot understand the contract, such as a minor
or person under the influence of alcohol, the contract may be void.
 Undue influence: Contracts must have a genuine agreement. If a contract is formed under
duress or threats, undue influence, or fraud, it's generally void. Because one of the content
of the contract is the free intention
Duress → constrain illegally used to force someone to enter a contract
Undue influence → one person takes advantage of his position of power/trust over another
person (ex: gun to my head)

What is not a necessary element of an enforceable contract? Counteroffer

Liability may be limited or excluded in a contract except in the cases of? Fraud, death, or personal
injury caused by its negligence

1. Do the parties have to meet in mediation? YES

TERMINI DA IMPARARE

VOID CONTRACT A void contract was never valid. Even at the beginning, the
agreement wasn’t enforceable. It has no effect on the parties, no
one’s bound to uphold it, and neither party can enforce it through
legal action
VOIDABLE CONTRACT A voidable contract is not the same as a void contract. A voidable
 contract was valid at the beginning. But because of a problem with
the agreement, it’s only binding to one party. The other parties
involved can choose not to follow through with their end of the
agreement or enforce it.
DAMAGES Payment of money (reimbursement) calculated to make good or
restore any damage created by the breach
EQUITABLE REMEDIES Non monetary remedies to fix somethings that money are not
enough to fix (reputation)
RESTITUTION Give up gains
RECTIFICATION Rewrite terms
BREACH OF CONTRACT VIOLAZIONE, where is no performance
UNDUE INFLUENCE When someone fillsn he couldn’t refuse a request (because it is
made by a trust friend or because it is under constriction)
LACK OF CAPACITY Inadequate capacity to enter the contract, probably no mentally
legal, limited capacity based on language, limited business
experience.
FUNDAMENTAL BREACH a breach is fundamental if it results in such detriment to the other
party as to substantially deprive him of what he is entitled to expect
under the contract, unless the party in breach did NOT foresee (or a
reasonable person would not have foreseen) such a result

FORCE MAJEURE “A party in NOT liable for failure to perform his obligations due to
“an impediment” beyond his control and that he could NOT
reasonably be expected to have taken it account at the time of
conclusion of the contract or avoided its consequences”
NB= MUST GIV NOTICE WITH REASONABLE TIME AND ONLY
PROTECT AGAIST A CLAIM OF DAMAGES

CASE STUDY 1 Chester is a young man recently immigrated to the USA from Korea three years ago to
attend University. He had been living with his grandparents who recently passed away, leaving him a
large sum of money. Chester only speaks basic English; he has few friends and has recently been
prescribed anti-depressant medication to deal with the loss of his grandparents. He has limited
business experience. Chester is unsure of what to do with the money and approaches his best friend
and neighbor Julie, who has known him since he moved to USA. Julie runs a fashion outlet called
“Bella Blue”. Julie wants to start a bigger store in LA but lacks the money. She offers to sell the
business to Chester for $400,000 and assures him that she will run the business for another year.
Chester remains skeptical and during negotiations Julie says: “There is no risk in you buying the
business. We have consistently made $15,000 a month and with summer coming you could start a
swimwear range and make at least $20,000 a month – I have studied the trends…” Chester enters a
contract to buy the business and shortly after Chester sees that the earnings are nothing like what
Julie indicated in negotiations. Chester wants out of the contract and wants his money back. What
can he do?

Chester is a young man, he speaks a basic English, his mental condition are not stable because he
lost his grandparents. Julies is the only trust friend and she could take advantage of this situation to
expand her business and using false information force him to enter a contract.

Contract can be voidable if there are some evidences of breach of the contract, force majeure,
invalidating factors, lack of capacities or absence of free intention.
BREACH OF THE CONTRACT= Chester to make a successful claim for breach of the contract, has to
show that the oral statements made by Julie are not true and have not been respected. But in this
case there isn’t a written agreement that shows the obligation of the parties, it is an oral contract, so
there are no evidence of the promises of the performance or accounting documents shown that can
support the breach of contract

INVALIDATING FACTOR= Chester may look for certain invalidating factors that have compromised
the integrity of the contract. Julie says that that there is no risk in buying business and ensures that
he will range and make at least 20 000 £ a month. Chester can ask to invalidate the contract for
misrepresentation since the assumptions of the contract were false and based on a lie that Create
the wrong impression and force him to enter the contract. But in general business are unpredictable
so past performance are not a clear indication of future performance and Chester could have hire a
person to control the information before signing the contract.

Chester is a young man, that doesn’t speak fluent English and trust Julie, so he can use this situation
to invalidate the contract showing that there was no freedom to decide and was forced and circuit
because he feels like he couldn’t refuse the bid. We can argue using undue influence, because Julie
takes advantage of her position of power/trust over another person exploiting his ignorance in
economic matters.

Chester is also an unstable mental situation and he has recently been prescribed anti-depressant
medication to deal with the loss of his grandparents. So he could not have the capacity to enter in a
contract, he is probably not legally competent. He has limited capacity based on his language,
limited business experiences, and metal issues. But no ones of this is enough to effectively limited
his capacity to sign a valid contract.

GOVERNING LAW

IT IS WIDELY ACCEPTED THAT PARTIES ARE FREE TO CHOOSE LAW GOVERNING THEIR CONTRACT.
AMERICA= the contract shall be governed by the law chosen by the parties. Parties’ freedom to
choose the law governing their contract is widely accepted and forms the basis of most modern
bodies of conflict rules. They can choose any law to govern their contract, that can be different from
those where the parties are from

EUROPA= ROMA I regulation= contractual obligations.

The Parties are free to choose the governing law. They may designate the law applicable to the
whole or only part of the contract (Depacage). The combined effect of Rome I Regulation of article
(1) & (3) is that there is almost unlimited freedom to choose the law of any country, irrespective of
any connection with that country, subject to mandatory rules (EU) → free choice subject to
application of mandatory rules

 Simple mandatory rules → a given law would NOT be allowed to be excluded by contract if
that law were the applicable law BUT which could be avoided by choice of a different law
If a law applies to a situation, you can't bypass it through a contract if
choosing a different law would let you avoid it.
(so, free choice provided that the parties do NOT make the choice solely on the basis of
avoiding some kind of liability under the law which would otherwise apply)
 Internationally mandatory rules → apply regardless of the otherwise applicable law (as
mandated internationally) (ex: mandatory application of some consumer protection law for
individual customers regardless the choice of law) (ex: PECL (Principles of European Contract
 Law) and UNIDROIT Principles → rules relating to good faith, curbs on exclusion/limitation of
liability, restricting excessive remedies for non-performance)

Article 4 defines the applicable law in the absence of choice:

The governing law will be determined on the basis of some objective connecting factor= THE LAW OF
THE STATE WHICH HAS THE MOST SIGNIFICANT RELATIONSHIP WITH THE TRASACTION WILL
GOVERN. It is presumed that the contract has the closest connection with the country where the
party has, at the time of the conclusion of the contract, its habitual residence or, in the case of a
company, firm association or legal person, its head office.

 A contract for the sale of goods distribution, franchise and services agreement shall be
governed by the law of the country where the seller has their ‘habitual residence’. (also)
 A contract for the provision of service shall be governed by the law of the country where the
service provider has his habitual residence.
 A contract relating to a right in rem in immovable property or to a tenancy of immovable
property shall be governed by the law of the country where the property is situated.

CONFLICT LAW

 If the law chosen is that of a country other than that relating most closely to the contract,
the provisions of the latter law (the one relating most closely to the contract) need to be
respected.
 If the contract relates to one or more EU States, the applicable law chosen (other than that
of a Member State (e.g. Indian law), must not contradict the provisions of Community law

JURISDICTION OF COURTS

In case of dispute which country’s courts will decide ad resolve it?? FREEDOM OF CHOICE, CAN BE
DIFFERENT FROM GOVERNING LAW, IT IS EASIER IF GOVERNING LAW AND JURISDICTION COINCIDE
NO INTERPRETATION PROBLEMS

 JURISDITION CAUSE= Which country’s Courts will decide a dispute in relation to a contract?
Freedom of choice? → yes Can be different from governing law? → yes Of course, it’s easier
if governing law and jurisdiction coincide → no interpretation problems
 EUROPE= BRUSSELS REGULATION. If the jurisdiction is not expressed, we refer to Brussels I
Regulation. NB=> where at least one party has domicile in an EU Member State

BRUSSELS I REGULATION

IF PARTIES CHOSE THE JURISDICTION THOSE COURST HAVE EXCLUSIVE JURISDICTION UNLESS
PARTIES SPECIFY IT IS NON EXCLUSIVE ART 25
INDIVIDUAL ARE SUED ONLY IN THEIR MEMBER STATE OF DOMICILIE ART 5
PERS. DOMICILED IN EU STATE SHALL BE SUED IN THE COURTS OF THAT MEMBER STATE ART 4

o Brussels I Regulations (Art. 25) → if the parties agree jurisdiction to settle disputes those
courts have in principles exclusive jurisdiction. (unless you specify it’s non exclusive, it will be
exclusive) (you may want a non-exclusive jurisdiction especially in finance contracts where
different parts of the contract follow different jurisdictions)
o Brussels I Regulation (Art.5) → individuals (rather than businesspersons) should only be sued in
their member state of domicile (a person’s habitual or ordinary residence)
o Article 4(1): persons domiciled in a Member State shall, whatever their nationality, be sued in
the courts of that Member State
Exception:
 Ownership/rights in land – jurisdiction is where the land is situated
 Validity of entries in public registers – jurisdiction is where the register is kept
 In disputes concerning the registration or validity of IP rights - where registered
 Enforcement of judgments - the courts of the member state in which the judgment
is to be enforced

WHEN BRUSSELS I DOES NOT APPLY:

1. Family law
2. Bankruptcy or insolvency
3. Social security
4. Arbitration matter

8. A professional designer who has her place of business in France, signs a contract whereby she will
design a line of furniture for a professional manufacturer with its place of business located in
Germany, and whose main market is Italian consumers. The contract says nothing regarding the
applicable law of the contract. Please indicate the national applicable law to this international
contract for services according the Rome I Regulation? (1 mark) (a) French

2. Article 5 of the Brussels I Regulation states that: Individuals should only be sued in their member
state of domicile
Which is not an exception to the rule of domicile under art. 6 of the Brussels I regulation?
Exceptions are: when a property is involves as well as public registers, registration or validity of
IP rights, enforcement of judgement. The combined effect of which articles of the Rome 1
Regulation provide almost unlimited freedom to choose the law of any country irrespective of
any connection with that country (subject to mandatory rules)? Arts. 1 and 3

Which article of the Rome 1 regulations states that a contract for the provision of a service shall be
governed by the law of the country where the service provider has his habitual residence? ART 4

FORUM SHOPPING→ tactical practice pursued by some litigants (the party suing) to commence legal
action in “plaintiff friendly” jurisdiction even where NO connection with claim exists (even if the
contract says otherwise?) Objective → have their legal case heard in the court most likely to produce
a favorable judgment. Why “forum shop”?

 Convenience to pursue action in home country or where witnesses are

 Reduced costs or availability of special payment schemes (ex: in the US there are
contingency fees) - Favorable court procedures (ex: greater discovery)
  Favorable remedies/damages awards
 Language
 Pace of proceedings (fast or stalled)
 Quality of judiciary (competence, corruption)

A plaintiff might have selected one forum on the following grounds:

 The forum is NOT convenient to the defendant or his witnesses (ex: expense of travel,
health or visa or entry permit)
 The court, the judge, or the law is most likely to favor the plaintiff’s case

A defendant may take the following actions to obtain a change of venue:

 Petition the forum court that it should reject the jurisdiction and petition to transfer the
case to a more convenient forum; or
 If a case has been filed in another jurisdiction, the defendant may seek injunction (equitable
remedy) against the plaintiff to discontinue action in 1st forum and submit to more
convenient one.

Contexts in which “forum shopping” can occur:

 Some contractual disputes

 Family court matters (ex: divorce, child custody)
 Criminal cases
 Product liability claims
 Tortious actions

Concurrent litigation → different courts are hearing the same case. “race to judgment” as a result.

 “Race to judgment”: when party A (US) and party B (IT) take action at the same time in the
respective court to take advantage.
 “Italian torpedo” – tactical legal action (slowing down procedures to take time) where a
prospective defendant in a jurisdiction with swift relief (e.g., Germany) would file a suit for
declaratory judgment in a jurisdiction with slow relief (e.g., Italy) to stall the proceedings
against him (sometimes for years..

Which is not an exception to the rule of domicile under art. 6 of the Brussels I regulation? Exceptions
are: when a property is involves as well as public registers, registration or validity of IP rights,
enforcement of judgement.
The term "Italian torpedo" is applied to tactical legal actions often used in the context of which type
of matters? Slow down procedures to gain time in context of current litigation
Forum non conveniens is a tool available at a court's discretion to transfer a case if the court selected
is not the most convenient one on the basis of which consideration? Fairness, other court best
equipped, avoid excessive forum shopping, avoid to waste scares judicial resources
DISPUTE RESOLUTION

It is about resolving the dispute, the conflict. How to resolve disputes in international commercial
contracts? GENERCHICALLY:

1. NEGOTIATION/ ESCALATION=> EFFECTIVE COMMUNICATION BETWEEN PARTIES

Parties try to find a solution themselves, internally, a compromise to avoid legal action/lawyer.
Identify common interests and explore compromises that both parties can agree on. Negotiation
often involves finding a middle ground that meets the needs of all parties involved. PARTIES
RETAIN CONTROL OF WHERE DISPUTE GOES, NO EXTERNAL COSTS, NO WASTE OF TIME

27. What are the advantages of Negotiation? Its Quick, Cheap Process, Privacy

2. MEDIATION AND ADR=> ALTERNATIVE RESOLUTION OUTSIDE THE COURT SYSTEM

If direct negotiation is challenging or unproductive, consider involving a neutral third party, such
as a mediator. Mediation is a voluntary process where the mediator helps facilitate
communication and guide the parties toward a resolution.
Parties are involved in finding solution → more control → it does require participation
and agreement of both parties. NOT binding, it is about finding a compromise with the help of a
third external part
NB=> MEDIATOR FACILITATES THE NEGOTIATION NOT DIRECT IT.
Reasons to choose ADR:
- Costs less than litigation → because it’s NOT adversarial=> parties has to find solution
- Confidentiality (compare with cases argued in open court)
- Parties retain control over the process and can influence outcome
- Mutuality → progress based on compromise
3. ARBITRATION=> RESOLUTION OUTSIDE THE COURT SYSTEM
In cases where an agreement cannot be reached through negotiation or mediation, parties may
agree contractually to submit to arbitration=> So, arbitration is a formal process by which the
parties MUST have already contractually agreed to arbitrate
ARBITRATOR= indipendent 3rd party that review the evidence and impose a decision.
Decision is binding on the parties (NO appeals) → you CANNOT appeal an arbitration
Decision, this help with time, bureaucracy, costs considering that evidence can be destroyed
over time, witnesses can possibly do not remember, people leave job and businesses fail (justice
delayed is justice denied). fast track and certainty provided by arbitration.
REASON TO CHOOSE ARBITRATOR
o Avoid formalities and uncertainties of litigation in national courts
o Quicker, more efficient because time is reduced
o Costs – no appeals so should be shorter process (cheaper but not cheap)
o Enforceability internationally (NY Convention)
o Commercial expertise of arbitrators (highly sophisticated system)
o The parties' freedom to select and design the arbitral procedures
o Confidentiality of proceedings and award=> Confidentiality is preserved (NOT public,
open court case).
REASON TO NOT CHOSE ARBITRATOR:
o Not appropriate in multi-party disputes (1 plaintiff, 1 defendant)
o Limited protection where award is wrong (or not liked) because no appeals!
 o limited powers : no power to make interim judgments (e.g.: injunction: court order to
stop doing something) or to compel witnesses/evidence under threat of fine or
imprisonment (compare with litigation in Court)
 DOMESTIC ARBITRATION
 Applicable to individual (often consumers)
 Result in a legally binding award rather than a negotiated settlement
 Decision reached by arbitrator by the application of rules of law
 Different countries have different rules for arbitration, sometimes involving oversight
by Courts (in the clause saying that the parties will arbitrate in cause of dispute, they
also indicate the jurisdiction in which arbitration will occur)
 INTERNATIONAL:
 Parties MUST have places of business in different States
 Usually involves larger sums of money and corporation or nation States
 Less oversight by Courts
 The applicable law is usually the law of the “seat” of arbitration
 Parties

1985 UNCITRAL Model Law (as amended in 2006)=> SET OF PRINCIPLES TO IMPROVE
INTERNATIONAL COMMERCIAL ARBITRATION=> The Model Law was designed to provide a modern
and harmonized legal framework for the conduct of international commercial arbitration. Its
purpose is to assist countries in updating their national laws to facilitate the use of arbitration as an
alternative dispute resolution mechanism in international trade.

 IT IS A FRAMEWORK=> establishes the framework for the conduct of arbitral proceedings,

including the authority of the arbitral tribunal, the role of the court in support of arbitration,
and the procedures for challenging awards : States are not bound to follow exact wording
and will implement their local law choosing to apply just some principles and not all (it just
gives principles to create similar structures). Indeed, it opposes to decision to ratify a
Convention where States must accept it whole or not at all.
 PARTIES AUTHONOMY=> parties are free to “contract out” of default rules (where, how
many, etc.) BUT they must agree to arbitration process in the contract (but then cannot refer
straight to courts!)
 SUBJECT=> Must be appropriate subject matter – private commercial contracts (not areas of
public interest  State courts)
 LAW=> Law governing the contract may not be the same as that governing arbitration
Ideally the arbitration agreement should contain its own choice of law clause
If not expressed in either contract or arbitration agreement , usually law of place of
arbitration (seat of arbitration) will apply.

1. What does the 1985 UNCITRAL model law (as amended in 2006) regulate?
Sets principles and regulates all stages for on international commercial arbitration

1958 New York Convention on the Recognition and Enforcement of Arbitral Awards

Nb=> An arbitration award is a decision or judgment issued by an arbitrator or a panel of arbitrators

at the conclusion of an arbitration proceeding. The award is the resolution of the dispute submitted
to arbitration and is legally binding on the parties involved.

 RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRATION AWARDAthe primary

objective of the New York Convention is to promote the recognition and enforcement of
 arbitral awards. It establishes a regime for the enforcement of such awards in the courts of
the contracting states. IT GIVES CERTAINTY
 IT IS NOT A FRAMEWORK=> It is prescriptive: everyone is subject to the same law (not a
framework), and it gives immediately/automatically recognition and enforcement once
signed.
 PURPOSE=> GIVE CERTAINTY=> the certainty of enforcement can be a motivation for
agreeing to arbitration. the convention has significantly contributed to the development of
international trade by providing a reliable mechanism for the enforcement of arbitral
awards. It has increased the attractiveness of arbitration as a dispute resolution method in
cross-border transactions.
 Reasons why Arbitral Award may not be Enforced, extraordinary circumstances:
 Breach of natural justice (the defendant was not notified in time, did not have the
appropriate means to defend, etc.)
 Against public policy (local government policy against to certain outcome)
 Subject matter not one which can be resolved through arbitration (e.g.: family core
matters such as marriage/divorce)

Ex: Italian arbitration award (outcome) has to be enforced in South Africa. Through the convention,
the award will automatically be recognized in the foreign jurisdiction without a supplemental step.
This is does NOT hold for a court judgment. Indeed, for the latter to be enforceable, the foreign
jurisdiction MUST view the sentence and give it legal effectiveness (so, an additional step in needed!)

4. LITIGATION=> PUBLIC COURT SYSTEM=> LAWSUIT

Legal proceedings taken by one party(ies) against another, in a court of law presided
over by a judge. Applies to individual, businesses, non-profit.
It involves the parties in a legal dispute presenting their cases before a court, and a judge or jury
makes a decision based on the applicable laws and evidence presented. Litigation can cover a
wide range of legal issues, including civil, criminal, family, and administrative matters.
o PAINTIFF=>brings action and suing
o DEFENDANT=> must respond to the complaint
Reason to choose litigation:
o Process follows established procedures  credible outcome
o Impartial judge, application of law
o Judgment is binding in law (with right to appeal in the event of procedural error which will
depend on the local law) NOT like mediation
o Provides definitive outcome
o Power to compel witnesses/evidence under threat of fine or imprisonment/sequester assets
and have them sold (not available in arbitration)

ENFORCEMENT OF COURT’S JUDGEMENT=>The enforcement of judgment involves the process of

making sure that a court-issued judgment is carried out and the winning party (judgment creditor)
receives the remedies or compensation awarded by the court

o DOMESTIC JUDGEMENTS=> payment of a monetary award or court can award seizure of

assets within jurisdiction to force payment.
May be difficult where there is NO bilateral treaty between the countries (ex: US has
NOT signed any such treaties to enforce foreign judgments).
o FOREIGN JUDGEMENT=>Enforcing an international judgment involves seeking recognition
and enforcement of a judgment obtained in one country in another country. The process can
 be complex and is typically governed by international treaties, conventions, or reciprocal
agreements between countries.
Even where a conflict of laws exists, most courts will recognize the validity of a foreign
judgment in most cases; it is not automatic because a review is necessary.
Under international law, a court will apply comity (reciprocity) by discretion, taking into
account the following:  Did the foreign court have proper jurisdiction?  Were fair
procedures used?
 The Brussels I Regulations (recast) (Art. 36 & 37) ensures that judgments given in a
member State are recognised and enforced in all other Member states without
special procedure, it is automatic
 The European Enforcement Order permits enforcement of foreign judgments within
EU without need for intermediate proceedings (only relevant to uncontested claims)
 Under U.S. law, this authority is part of the Full Faith and Credit Clause of the U.S.
Constitution
NOT POSSIBLE TO ENFORCE A FOREIGN JUDGEMENT IF THE JUDGEMENT:
 Was obtained by fraud
 It is manifestly against public policy (marijuana, and rights of women)
 Conflicts with another final judgment
 Seeks to enforce the tax laws of a foreign jurisdiction
 The defendant was not served with the document in sufficient time to arrange a
defence
 The defendant has no right to appeal
IF THE FOREIGN COURT
 Was NOT an impartial tribunal with compatible procedures (ex: when the judgment
has come from judication which was corrupted)
 Did NOT have personal jurisdiction over defendant/subject matter (ex: court has
accepted jurisdiction which really it should have not)
 The foreign court proceeding was in conflict with a settlement agreement signed by
the parties

Forum non conveniens => It refers to a legal doctrine that allows a court to dismiss a case when
another court, which is considered more appropriate or convenient, is available to hear the case. A
court has discretion to refer a plaintiff a more appropriate forum (jurisdictions).

Courts consider various factors when deciding whether to dismiss a case based on forum non
conveniens. These factors may include the location of witnesses, the availability of evidence, the
convenience of the parties, the connection of the dispute to the chosen forum, and the adequacy of
the alternative forum.

Commonly Applied in International Cases: The doctrine is frequently applied in cases involving
international parties or transactions where disputes may have connections to multiple jurisdictions.
Nb=> IN USA DEFENDANT MAY ASK A COURT TO DISMISS AN ACTION ON THE BASIS OF FCN

IS FORUM OF NON CONVENIENS COMPATIBLE WITH BRUSSELS REGULATION? Brussels Ia

Regulation, is a regulation of the European Union that governs jurisdiction and the recognition and
enforcement of judgments in civil and commercial matters within the EU member states. It aims to
establish a harmonized system to avoid parallel proceedings and conflicts of jurisdiction within the
EU.
Brussels Regulations preclude a court of a Member State from declining jurisdiction conferred on it
by art. 2 on the ground that a court of a non-member state would be a more appropriate forum for
the trial”. Generally, in commercial law, parties own will and free choice should be honored. Courts
MUST balance need for legal certainty versus justice for the individual in specific case.

Pop quiz:

1) Which are the 4 correct methods of ADR? → Arbitration, Negotiation, Conciliation and
Legislation, Mediation → legislation is NOT
2) What are the advantages of negotiation? → quickness, cheap process, privacy (NOT the
outcome is decided by an expert, NO right to appeal)
3) Do the parties have to meet in mediation? → yes
4) What is an arbitrator’s role? → acts like a judge
5) What is the name of the convention that regulates international enforcement of arbitration
awards? → 1958 New York Convention on the Recognition and Enforcement of Arbitral
Awards (say it all!)
6) On what grounds would a court NOT enforce a foreign judgment? → the judgment was
obtained by fraud, against public policy, conflicts with another final judgments, seeks to
enforce the tax laws of a foreign jurisdiction, the defendant was NOT served with the
document in sufficient time to arrange a defense, the defendant has NO right to appeal. Or
the foreign court was NOT an impartial tribunal with compatible procedures, did NOT have
personal jurisdiction over defendant/subject matter, the foreign court proceeding was in
conflict with a settlement agreement signed by the parties
7) domande=> Company A is suing company B for breach of contract in relation to the
disclosure of confidential information relating to a technical solution for an infra-red
sanitising process used to combat the covid-19 virus. On what basis would company A elect
to launch an arbitration proceeding rather than instigating a legal action in the courts? In
order to preserve the confidentiality of the action Confidentiality, quicker process, cheaper
than litigation, parties’ freedom to select and design the arbitral procedures, avoid
formalities and uncertainties, commercial expertise of arbitrators).
8) 1. On what grounds would a court not enforce a foreign judgment?If obtained by
fraud, against public policy, conflicts with another final judgment, the defendant was not
served with the document in sufficient time to arrange a defence, the defendant has no
right to appeal
9) Forum non conveniens is a tool available at a court's discretion to transfer a case if the court
selected is not the most convenient one on the basis of which consideration? Fairness,
other court best equipped, avoid excessive forum shopping, avoid to waste scares judicial
resources
10) Freddy Fogart is the CEO of an Irish company that provides industrial heating products for
commercial and consumer use throughout Europe and the Middle East. It has contracted
with a Mexican company that provides engineered water pressure components to be
integrated in their final products. During contract negotiations Fogart considers whether it
would be better to agree to resolve disputes through litigation or arbitration. The governing
law agreed between the parties is English law. What would be the advantage for him to
choose litigation over arbitration? The right to appeal in case of negative verdict
11) An arbitral award may not be recognized in a State that has ratified The New York
Convention 1958, in which of the following circumstances? The defendant was not given
sufficient time to prepare for arbitration
CROSS-BORDER COMMERCE “COMMERCIAL CONTRACTS”

Commercial contracts (are fundamental to business) → basis on which businesses buy the supplies
and services they need to keep their operations running and on which they sell their goods and
services to their customers to generate revenues.

SUPPLY AGRREMENT Contract to procure good and service

DISTRIBUTION AGREEMENT Contract to distribute the product or service of another

company
LICENCING AGREEMENT Use of another party’s intellectual property for payment of a
fee
FRANCHISING Partnership between the franchisor and the franchisee. It
involves the licensing of the franchisor's brand, trademarks, and
business model to the franchisee for a specified period.
AGENT AGREEMENT one party (the principal) gives authority to another party (the
agent) to negotiate sales on company’s behalf, usually for a
commission
OUTSURCING delegate certain business functions, processes, or tasks to the
service provider.

a) SUPPLY AND SERVICE AGREEMENT

All businesses will require agreements with 3rd parties for products and services necessary to run
their operations. All businesses will need to buy in goods and services (PROCUREMENT) and sell
goods and services to make revenues (SALES)

b) LICENCING AGREEMENT Use of another party’s intellectual property for payment of a fee
(ex: for songs, movies…). NB= The ownership does not change BUT BOTH HAVE THE RIGHT
TO USE IT
 Technology and R&D licensing → exploitation of industrial and technological developments
(ex: patents → usually for an invention, “swipe-up” technology is patented)
 Merchandise and character licensing → licenses are recognized trademark/copyright to a
3rd party in a market NOT currently served by licensor (ex: Disney → backpack of Disney
costs more)
 Merchandising → the brand or image from one product or service is used to sell another (ex:
Justin Bieber or Shakira with perfume)
 Co-branding → increase the premium consumers are willing to pay by combining the
strength of 2 brands, make the product or service more resistant to copying or to combine
the different perceived properties associated with the brands with a single product (ex:
Angry birds and start wars)

Building relationships with customers can take a long time and lack of capital can slow your growth.
Many businesses sell to distributors or work with agents to build market share quickly. Effectively,
it’s like outsourcing sales and marketing activities to a 3rd party.

c) DISTRIBUTION

A distribution contract is a legal agreement between two parties, typically a manufacturer or

supplier and a distributor. This contract outlines the terms and conditions governing the distribution
of products. It specifies details such as pricing, territories, responsibilities, and the duration of the
agreement. The goal is to establish a clear understanding of how the products will be marketed,
sold, and delivered to customers through the distribution channels defined in the contract.

 The distributor buy products from the Company and sell them to have a profit.
TITLE OF GOOD AND RISK PASS TO DISTRIBUTOR
 Distributor has direct relationship with the clients
 ADVANTAGE= pass on a large degree of risk, distributor are highly motivated to sell the
product to have profit, more simple administratively
 DISADVANTAGE= less control over activities of the distributor, risk from a competition law
problem than an agency agreement.

Appointment clause → “Company hereby appoints Distributor as Company’s non-exclusive

distributor of product in the territory and distributor accepts that position. It is understood that
company CANNOT lawfully prevent its distributor located elsewhere from supplying products for
sale/use within the territory and that it has no obligation to do so”

Appointment restriction → “Distributor shall NOT solicit sales of products or promote the sale of
products outside the territory”

d) AGENCY

An agency contract is a legal agreement between two parties, where one party (the principal) gives
authority to another party (the agent) to act on its behalf. In this arrangement, the agent performs
certain tasks or makes decisions for the principal, often in the context of business or legal matters.
The contract outlines the scope of the agent's authority, duties, responsibilities, and any
compensation or commission structure. It serves to define the relationship between the principal
and the agent, establishing the terms under which the agent will represent the interests of the
principal.

 An agent acts on behalf of a principal and is subject to the control of the principal (instead,
in distribution agreement, once company sell to distributor he does NOT care anymore, NO
control). used for bespoke, customized services.
 Sales agents negotiate sales on company’s behalf, usually for a commission.
 Title to goods and credit risk remains with the company, NOT agent
 ADVANTAGE= more control over agent than distributor
 DISADVANTAGE= the agent may have a right to lump sum payments on termination of the
agency agreement, grater risk as the agent’s action are attributed to the principal

Appointment clause → “The company appoints agent to act on its behalf in the sale and promotion
of products in the territory and the parties agree that agent shall devote his time exclusively on the
same”. “Agent shall be reimbursed for reasonable expenses incurred in performance of its
obligations pursuant to this agreement” (ex: agent has to travel to London → he is reimbursed) “The
company agrees to pay agent a commission for sales made, shipped or distributed in the territory, in
accordance with the commission rates set out in schedule 2. Commission shall be paid on the 15th of
each month in arrears.

DIFFERENCES BETWEEN AGENCY AND DISTRIBUTION

Agency and distribution are two distinct business arrangements, each with its own characteristics.
Here are some key differences between agency and distribution:

 Nature of Relationship:
  Agency: In an agency relationship, one party (the agent) acts on behalf of another (the
principal) and makes decisions on their behalf.
 Distribution: In a distribution relationship, the distributor typically buys and resells products
from the manufacturer but does not act as an agent representing the manufacturer.
 Authority and Decision-Making:
 Agency: The agent often has the authority to make decisions on behalf of the principal, and
the principal may be bound by the actions of the agent.
 Distribution: Distributors usually do not have the authority to make decisions on behalf of
the manufacturer. They buy and resell products but don't represent the manufacturer in the
same way as an agent.
 Ownership of Goods:
 Agency: The goods usually remain the property of the principal, and the agent facilitates
transactions on their behalf.
 Distribution: The distributor typically purchases the goods from the manufacturer and takes
ownership before selling them to end customers.
 Risk and Reward:
 Agency: The principal often bears more risk and reward associated with the transactions
facilitated by the agent.
 Distribution: The distributor assumes more risk and reward as they buy the products from
the manufacturer and sell them to customers.
 Customer Relationship:
 Agency: The agent may have a direct relationship with the principal's customers, acting on
behalf of and representing the principal.
 Distribution: The distributor establishes its own relationship with customers and sells the
products under its own business name.
 Contractual Structure:
 Agency: The agency relationship is often more complex, detailing the authority, duties, and
responsibilities of the agent in a more intricate manner.
 Distribution: The distribution agreement typically focuses on terms such as pricing,
territories, and the logistics of buying and reselling products.
e) OUTSURCING=

An outsourcing contract is a legal agreement between a company (the client) and another party (the
service provider) to delegate certain business functions, processes, or tasks to the service provider. It
sometimes includes “off-shoring” → locating a business function to another country to get cost
savings from lower international labor rates (ex: also exploit time difference.

 It is the contracting out of an internal business process, that used to be provided inhouse, to a
third party organization trying to exploit the competitive advantage of it.
 May involve transfer of employees or assets
 RISK=> Consider that process is “invisible” to the end customer therefore the provision of the
service will be perceived as the Company’s service  if there is a problem, the company is
responsible and not the service provider

KEY CONTRACTUAL ISSES

 Employees (TUPE): who will “transfer” over with the services to new provider? Key
personnel. Contractual provisions to rehire at end of outsourcing term.
  Price and Payment : different price during different phases? Does it depend on
performance? Do service credits apply?
 Services during Transition : who deals with what part of services during transfer period? It is
delicate period in contract where most of the problems usually arise. Define who does what
when where.
 Exit : specify what the SP must do to “transition back” the service to Company/ third party.
Often drafted by SP (e.g., train 3rd party employees, transfer back employees/ assets/
contracts, who to pay?). Should be scheduled to contract.
 Service Levels during Term (schedule): level of service the company expects from the service
provider and the company pays for (e.g., call centre: answer to the phone)
 Monitoring service levels  application of service credits/reduce price for poor
service provision  Service credits: remedies of paying less for less performance (that
is provided), reducing the amount payable or poor services.
 Right to remedy/right to terminate?
 Liability : who pays for what when things go wrong? Are there limitations/exclusions?
 Audit : right to audit performance and results/records and check also reputation. Right to
physically inspect premises? See the data to monitor performances.
 Termination and Remedies : when can Company terminate contract if SP under-performs?
Is there a remedy period? What is an appropriate remedy other than termination?
Remedies: service credits, partial termination through injunction.
 Governing law and jurisdiction : which laws and courts?
 Dispute management : set out clear process in the event of disputes (application of service
credits, Escalation, mediation, arbitration, litigation).
 IP rights
f) FRANCHISING

A franchising contract, also known as a franchise agreement, is a legal document that outlines the
terms and conditions under which a franchisee operates a business using the brand, products, and
services of the franchisor. This contract serves as the foundation for the franchisor-franchisee
relationship and typically covers various aspects of the franchise operation.

Franchising is a business model in which many different owners share a single brand name. A parent
company allows entrepreneurs to use the company's strategies and trademarks; in exchange, the
franchisee pays an initial fee and royalties based on revenues. The parent company also provides the
franchisee with support, including advertising and training, as part of the franchising agreement.

ADVANTAGE:

 For the franchisor=> Franchising is a faster and cheaper form of expansion as there is less
capital expenditure in setting up stores in new territories. Limited potential for revenue
growth → company will only get a % of earning from each new store. (still, less costs)
 for the franchisee=> Immediate name recognition (ex: Maria’s burgers nobody recognizes it,
MC yes → you don’t really need to have a persuasive business case)
=>Tried and tested products (successful business in a box)
=>Standard building design and décor
=>Detailed techniques in running and promoting the business
=>Training of employees
=>On-going help in promoting and upgrading of products

Key elements commonly found in a franchising contract:

 1. Franchise Grant: Defines the rights granted by the franchisor to the franchisee, including the
use of trademarks, brand name, and business system.
2. Territory: Specifies the geographical area or location where the franchisee is allowed to
operate the franchised business.
3. Fees and Royalties: Describes the initial franchise fee, ongoing royalty fees, and any other
payments required from the franchisee.
4. Training and Support: marketing assistance and operational guidance.
5. Marketing and Advertising: Specifies the obligations of both the franchisor and franchisee
regarding marketing and advertising efforts
6. Intellectual Property: IPR=> Defines the usage rights and protection of the franchisor's
intellectual property, including trademarks, copyrights, and proprietary business methods.
it’s a trademark agreement, limit IPRs for the specific purposes (ex: franchisee has the right
of using mc brand in running the business BUT NOT for other purposes. Otherwise, brand
start to get diluted)
7. Renewal and Termination: Outlines the conditions under which the franchise agreement
can be renewed or terminated, including any notice periods and procedures.
8. Parties’ obligations → franchisee has to comply to the standards ecc. Franchisor has to
ensure training, provide national adv campaign, provide business process and right to use
the brand…
9. Restrictive covenants: the Franchisee will have many obligations regarding quality control
and following standard procedures. Any deviation from the standard (including changing the
look of the premises) would require authorization from the company

DOMANDE

1. What are the advantages of Negotiation? Its Quick, Cheap Process, Privacy
2. One of the biggest risks in outsourcing is that: the process is invisible to the end customer;
therefore, the provision of the services will be perceived as the company reputational damage if
service levels are not achieved
3. Design lighting Ltd (“Licensor”) agrees to license the registered design of its iconic “artichoke”
lamp to a Dutch company (“Licensee”) for Euro 50.000 on the basis of a “sole” license. Who is
permitted to use the design? Both Licensor and the Licensee have the right to use the design.
4. Outsourcing is defined as: the contracting out of an internal business process to a third-party
service provider
5. Agency is usually used in the context of what type of products? Made to order or customised
products (complex, bespoke)
6. In a selective distribution system: it is possible to restrict an appointed distributor from selling
to an unauthorised distributor located in a territory where the system is currently operated
7. Service levels operate in an Outsourcing contract to do what? monitor the performance of the
services to ensure they are provided in accordance with the levels agreed in the contract
8. Different from an agency agreement, what does a distribution agreement involve? Transfer of
title to goods (ownership) and risks, direct relation with customers

9. A franchise agreement is effectively what? Many different owners share a single brand name as
well as strategies, advertising, trademarks.
10. In an outsourcing contract "service credits" are designed to do what? Provide an incentive for
the service provider to perform in accordance with the agreed service
11. What is a key clause in a franchising agreement?Payment of fee, IP rights, audit, parties’
obligations, scope of franchise, advertising, restrictive covenants, termination
12. Outsourcing is defined as: the contracting out of an internal business process to a third-party
service provider

SALE OF GOODS
Specific contract terms

Incoterms

Conventions

Regional laws

Domestic laws

BACKGROUND TO INTERNATIONAL SALES LAW

 1920’s Austrian jurist, Prof Ernst Rabel began work on the creation of an international
uniform sales law
 Rabel’s work was taken and developed by UNIDROIT (International Institute for the
Unification of Private Law, IIUPL)
 1939 draft document approved but work was suspended due to WWII
 End of war, work resumed resulting in 2 Hague Conventions

CONVENTION? A MULTILATERAL TREATY OR AGREEMENT BETWEEN STATES FORM WHICH IS

GOVERNED BY INTERNATIONAL LAW. (a lot of time to take everybody on board, because they
choose law for everybody). Parties can become “signatories” to that law showing an agreement to
be bound by the terms (e.g., the UN working for an agreement)

HAGUE CONVENTIONS

They were agreed in 1964 and came into force in 1972 by ratification. The action of signing or giving
formal consent to a treaty, contract, or agreement, making it officially valid.

The limitations are that:

 It is Eurocententric not international, only 9 states ratified it, so it didn’t really provide an
international framework
 It failed to get backing of developing nations
 “Opt-in” basis → NOT a uniform application through the states as many states which ratified
it still chose law of national state
 It had technical weaknesses

CISG= VIENNA CONVENTION= MOST SUCCESSFUL COMMERCIAL LAW TREATY

This has a very wide participation (successful). Unlike Hague conventions it is not limited to Europe
but more international so it has a more impact.

 WIDE PARTICIPATION: BUT It was NOT ratified by UK, Ireland, Portugal, Hong Kong, India,
Taiwan, South Africa (to be remembered)
 Convention adopted in April 1980 and Came into force 1 January 1988
 Ratified by 83 states (today we are 93)
  Commonly known as “Vienna Convention”

WHY NOT UK? they have a Sales of goods act so they don’t want to reduce the power of this act. ts
and rights introduced, Doubts of producing uniformity due to various interpretations ,
Incomprehensive – does not cover validity of contract and passing of property.

CHARATTERISTIC= it provides a framework for contract so parties only decides some specific
clauses. It helps small business and provide a balance.

 Modern → drafted to provide a uniform and fair framework for contract for the
international sale of goods.
 Introduces certainty and reduces costs→ as it provides a framework the parties only have to
decide on the specific clauses and peculiarities of their specific transaction
 It is fair → provides a balance between the interest of the buyer and of the seller
 It helps small and medium-sized businesses → which have limited access to legal advice
when negotiating a contract (there’s already a framework)

Application of this convention: Contract of sales, only if both parties have ratified or if one not but
the governing law is of one nation that has ratified. Parties must be from different state

 CONTRACT= It is applied to CONTRACT OF SALE BETWEEN BUSINESS ONLY B2B

Seller has to deliver the goods, hand over documents and transfer any property in the goods,
whereas the buyer is bound to pay the price and take delivery. It must include payment of
money in exchange.
 INTERNATIONAL= PARTIES’ PLACES OF BUSINESS MUST BE IN DIFFERENT STATE
Not necessary that the goods move from one state to another, IT IS NOT IMPORTANT
WHERE GOOD GOES BUT THE NATIONALITY OF THE COMPANY.
EX Italian company that transport goods in an italian company in Brazil= in this case we can't
apply CISG, only if one is an Italian company and other one a Brazilian company
 CONNECTION= BOTH PARTIES SHOULD BE FROM A STATE WHICH HAS RATIFIED CISG
 BOTH RATIFIED CONVENTION= WE CAN APPLY CISG (but they can decide differently)
 ONE NOT RATIFIED CONVENTION= we have to look to the governing law if the
governing law is that of a ratifying State, we can apply CISG

EXCLUTION:

 We don’t apply this convention if parties SPECIFIC EXCLUDED IT.

Parties, if they ratified the convention, have the freedom to choose if they want to apply the
convention of another domestic law.
 Excludes contracts for “services” (i.e., work and materials)
 Excludes consumer contracts (indeed, it’s only B2B) and sale of services
 Excludes contracts where the buyer supplies a “substantial part” of the materials necessary
for production (i.e., it becomes “services” contract) (ex: if the buyer provides a software,
then the manufacturing is just provision of services (assembly rather than manufacturing))
 Does not apply to barter (exchange, no payment) or Agency agreements= it is not transfert,
we don't have the sales part

Note: sometimes difficult to distinguish sale of “services” in electronic goods and computing in
modern world (e.g., software provided on physical disk (“good”) downloaded (“service”))

What does CISG cover? 4 main areas: (to be known)

  Formation of sales contract
 Contractual rights and obligations of parties (set up provisions)
 Passing of risk of goods (does NOT deal with passing of title)
 Remedies for non-performance
What does CISG NOT cover?

 “passing of title” → CISG does NOT specify when title passes in the goods (too difficult to
unify different nation states laws on this), so it should be dealt within the specific contract.
Doesn't deal with ownership.
 Liability of seller for death/personal injury caused by negligence (as we know that by law
certain things CANNOT be limited)
 Validity of contract
 Contract about the sale of real property (land and buildings)

OBBLIGATION OF THE SELLER (CISG)

 Deliver the goods to a specified place (under contract) or under the convention (depends on
whether or not the contract includes carriage or goods specifically identifiable in contract)
 Ensure conformity of goods (ex: they are the same of what has been represented, what I see
in the sample online is what I get)
 Ensure the goods are free of undisclosed 3rd party claims/rights (ex: if the seller previously
agreed to sell to someone else or I sell something that isn’t mine)
 Where necessary, preserve the goods (ex: refrigerate bananas)

OBBLIGATION OF THE BUYER (CISG)

 Check conformity of the goods (as they arrive)

 Take delivery of goods (important as if the buyer doesn’t take delivery in time, the seller
might sell those goods to somebody else and the customer CANNOT take legal action)
ex: go to the store to pick up 100 chairs, I never go, seller can resell them
 Pay the price
 Where necessary, preserve the goods

REMEDIES= in case of non performance, both can force the other party to perform or terminate the
contract and receive money back.

FONDAMENTAL BREACH= a breach is fundamental if it results in such detriment to the other party
as to substantially deprive him of what he is entitled to expect under the contract, unless the party in
breach did NOT foresee (or a reasonable person would not have foreseen) such a result

IN OTHERS WORDS= A breach is considered fundamental when it significantly hinders the other
party from receiving what they should reasonably expect from the contract. However, this does not
apply if the party in breach could not have reasonably foreseen such a consequence.

SELLER BUYER
IN CASE OF FUNDAMENTAL BREACH

IN CASE OF FUNDAMENTAL BREACH

Affected party can terminate for non-
performance
Buyer can demand substitute goods if NOT in
conformity with contract
Affected party can terminate for non-
performance
Buyer can terminate for partial delivery of
goods
INTEREST= in case of late payment, not relevant the damage caused

 If a party fails to pay the price or another sum due (somma dovuta), the other party is
entitled to interest on the outstanding sum (non-paid amount)
The rate of interest is not defined, because it depends on the interest fixed by central banks
 No need to show “damage” for late payment (the injured party may also have a claim in
damages) (ex: the seller does NOT have to show that, because of no payment, he could not
pay his workers)

FORCE MAJEURE = “A party in NOT liable for failure to perform his obligations due to “an
impediment” beyond his control and that he could NOT reasonably be expected to have taken it
account at the time of conclusion of the contract or avoided its consequences”.

Even if the contract does NOT have a clause dealing with force majeure, if the convention applies,
you are protectedVery similar to “force majeure” clause in most contracts, indeed:

 Excuse for non-performance has effect during the “impediment” event

 MUST give notice within reasonable time
 Only protects against a claim of damages (NOT other remedies like specific performance)
(ex: only when a monetary payment is involved, NOT equitable remedies)
 Potentially includes “non-physical” impediment (like economic difficulty) (ex: under Italian
law it would, under common law it would NOT).

RISK= the risk is to bear the possible loss if goods are accidently damaged or destroyed without the
fault of either party to the contract. So it is necessary to define which of the parties must bear this
risk= COMMON RULE= RISK PASSES WITH THE CONTROL OR CUSTODY

 Risk passes to buyer when he takes over the goods or a “reasonable time” after goods are
placed at his disposal and he fails to take delivery (ex: risk passes to buyer when he goes to
seller shop and picks up the goods or after a reasonable time in which he should have gone
pick up the goods)
 For contracts involving transport of goods, risk is passed to buyer when goods are handed
over the 1st carrier.
 Buyer’s claim for damaged goods would be against the carrier, NOT the seller (unless seller
knew of loss/damage and did NOT disclose it)
 When goods already in transit when sold, risk passes “at time of conclusion of contract”

BUYER= WHEN HE TAKES THE GOOD (immediately or after a reasonable time), WHEN THERE IS THE
TRASPORT THE BUYER HAS THE RISK WHEN GOODS ARRIVED AT FIRST CARRIER (in case of damage,
the claim is against the carrier), BUT IF GOOD IS SOLD DURING THE TRANSIT THE RISK PASSES AT THE
TIME OF CONCLUSION OF THE CONTRACT.

INCOTERMS

It is not a convention but STANDARD INTERNATIONALCOMMERCIAL TERMS INTERNATIONALLY

RECOGNISED THAT DEFINE PRE TEDERMINED TRADE TERMS. They are important to understand
responsibility and help international trade with the definition of standard terms used in all the
world. Originally drafted in 1936 → International Chamber of Commerce (ICC). Updated every 10
years to accommodate new modes of transport (ex: in 1930 transport mainly through ships, now
mainly through plane, future maybe drones)
Underlines the level of risk taken by the seller. Nb= in case of conflicts between incoterms and CISG=
incoterms prevail

DOMESTIC (national) SALE OF GOODS LEGISLATION

 Italy – Italian Civil Code (regulates most commercial relations)

 UK – Sale of Goods Act (1979), Sale of Goods and Services Act
 US – the Uniform Commercial Code (“UCC”) at federal level

NOT SPECIFFICALY WRITE IN A CONTRACT, THIGS OUTSIDE, LAW OUTSIDE THE CONTRACT THAT CAN
HELPS THE PARTIES. So, remember we have expressed terms (by the contract), implied terms (by
legislation) and trade custom (the way we usually do things)

IMPLIED TERMS= protected by law for example in English law it is not important to specify it in the
contract, parties are protected also without say expressly it.

IMPLIED TERMS= Terms added to transaction that are not necessary in the black and white written
document, but the law will apply anyway ( EXPRESS TERMS). A contract generally includes both
implied and expressed terms (there’s always something that will be implied because so obvious

 Good title: that the seller has the right to sell the goods in question (e.g., the good was not
stolen, was not already bought, etc  the seller is the real owner of the good).
ex: I sell my bag to Martina, I don’t need to specify to Martina that I have title of the bag
 Quiet Possession: that the goods are free from undisclosed charges or encumbrances, and
that the buyer will enjoy quiet possession of the goods (e.g., pay for the good, basically all of
it, and no one has other possession on it).
ex: I sell my mountain house and my neighbor had a right to travel across my land. If I don’t
expressively specify it in the contract, it’s free from any 3rd party interests
 Correspondence with description: where goods are sold by description they will comply with
that description (consumer contracts for up to 6 months from delivery)
 Satisfactory quality: relative to price and description (free of defects, durable, safe!)
otherwise sell “as is”, “with defects”
 Fitness for purpose for which it was bought (buying a snowsuit that is waterproof, even it is
not written is implied).
 Complies with sample (quality cannot be different from sample)
 “Cooling off” period for on-line purchases (if mistakes are made)

REMEDIES FOR BREACH OF IMPLIED TERMS

 Reject goods and request full refund of price (if goods have NOT been yet accepted)
 Claim costs for repair of defective goods
 Claim damages (and possibly terminate the contract) (monetary payment)
 Consumers also have the seller to “repair or replace” damages or defective goods

TRADE CUSTOM=> Parties can be bounded by established “customs” of a particular industry or

trade. The parties often assume that their contract will be subject to such customs and therefore do
NOT specifically deal with that matter in the contract.

In the “course of trade” → if 2 parties have regularly conducted business on certain terms, the
terms may be assumed to be the same for each contract made. if the parties have traded in the past,
they may be regularly contracted terms that the parties are used to follow. The parties MUST have
dealt with each other on numerous occasions and have been aware of the terms meant to be
implied. (ex: if goods are normally provided in a certain way, it will become implied.

BATTLE OF THE FORMS=> Each party wants to contract on the basis of its own commercial terms:
“A” offers to buy goods from “B” on its (“A”’s) standard terms and B purports to accept the offer on
the basis of its own standard terms. which terms govern the contract having two different terms?

The battle is often won by the party who fired the “last shot” (the last set of terms that were NOT
explicitly rejected by the recipient) (so, NO lawyers are involved).

Nb= If there’s a clear disparity of bargaining power → the most powerful (ex: Apple) wins. If there’s
not → “last shot” method Ex: A buys, B sells. The last shot fired was by b (they rejected the 1st terms
proposed by A and proposed their term, then A agreed). WINS THE LAST ONE THAT SENT THE TERM
AND ARE NOT REJECTED BY THE OTHER PARTY.

Domande

1. International trade disputes are resolved by which international institution? (1 mark) WTO
2. "Incoterms" regulate what element of a transnational contract?Transport and delivery

3. If parties to a contract for the international sale of goods wish to exclude the operation of
the CISG they may decide to do what? Choose a governing law of a state that has not ratified
the Vienna convention
4. Which countries did NOT ratify the Vienna convention? Portugual, South Africa, UK, Ireland,
Hong Kong, Twain, India
5. Identify which terms the CISG doesn't cover:

ANSWER=> A

ANS=> D
CASO STUDIO. Which contract governs the transaction? Snell wants to relay to his terms, and also
Tollgard on his terms (liability 1 million).

1. SNELL= it is a Canadian company that sell his products to Tollgard. If we apply his terms he
has to pay 33 k
BATTLE OF FORMS= Snell writes the main terms and they are accepted by Tollgard. If Tollgard’s
counteroffer was received, it is unlikely it was accepted. We know that the last one that offers win:
Snell terms are accepted and he starts to work, so they met in person and he agrees to his terms.
Refuse terms after a week later is too late. (Offer and counteroffer in a reasonable time)

FORCE MAJEURE= to avoid liability Snell could argue that it was affected by an "act of god" force
majeure due to the snowstorm and so it is not liable for the delay. We don’t know if in the contract
there is a force majeure cause, we can relay on VIENNA CONVENTION. In this case there is a sell of
good, it is international but UK not ratified it, so we can apply it only if Canadian law governs the
contract. FORCE MAJEIRE= NOTIFY AND MITIGATE IT

But we are in Canada, so it is common to have this kind of weather so Snell has to be prepared to it.
It is unexpected event? No the snow in winter in Canada is not unexpected event, but if it is
unexpected Snell has to notify it and mitigate the problem and damage.

INCOTERMS= provided Snell's terms constitute the contract, FAS apply to delivery so that the buyer
carries liability from the quay alongside the ship, and therefore Snell is not liable for the damage
sustained during shipping.

2. TOLLGARD Tollgard would want its limitation of liability clause to apply so that the full £800k
could be recouped to cover its losses

BATTLE OF THE FORMS= "last shot" rule. Tollgard will want to argue that its terms were the last ones
sent to Snell and that Snell did not reject them, therefore their terms apply. However, it is possible
due to the change in specification it would probably amount to a counteroffer which would then
need to be accepted by Snell. Absent any indication of acceptance, it is unlikely Tollgard 's terms
would apply. Could Tollgard argue that no contract had been formed as there was no final
acceptance? If Tollgard’s terms apply, then Snell could be sued for breach of contract.

IncoTerms – If Snell terms and IncoTerms apply, Tollgard would have to pursue their insurers, as FAS
under IncoTerms shows that the buyer carries the risk in shipping. Tolleard should have insured the
risk and claim against its own insurers for the damage. If Tollgard terms apply and delivery was to be
made to its headquarters, the shipping damage would have to be covered by Snell.

CISG - does it apply? (Probably not, if Tollgard’s terms apply they would be governed by English law -
UK party + UK not a signatory to the CISG.) Was it also specifically excluded?

INTELLECTUAL PROPERTY=> INTANGIBLE ASSETS

Intellectual Property (IP) refers to creations of the mind, such as inventions, literary and artistic
works, designs, symbols, names, and images used in commerce. Intellectual Property is protected
through legal means to encourage innovation and creativity by granting exclusive rights to the
creators or owners.

WIPO (World IP Organization) is Based in Switzerland. Provides a global policy forum, where
governments, intergovernmental organization, industry groups and civil society come together to
address evolving IP issues (it is an area of enormous development). Members meet regularly to
negotiate new rules needed to ensure international IP system moves with changing world

INDUSTRIAL PROPERTY

1)TRADEMARKS graphical sign which can be used to distinguish goods/services from those of
competitors. Trademarks are legal protections for symbols, names, phrases, and logos used to
identify and distinguish goods or services in the marketplace. They help consumers recognize and
associate products or services with a particular source or company.

 Indicate TRADE SOURCE from which the good comes from

 SYMBOLIZE QUALITIES associated by consumers with certain goods
 RAPRESENT A VALUE deserving protection as such (ex: Apple brand’s values → creativity,
innovation, quality and design) (brand value in NOT anymore about functionality but also
about design)

Registration Trademarks can be registered with the relevant government agency, such as the
European Union Intellectual Property Office (EUIPO) in Europe.

Registration typically involves a thorough search to ensure the proposed trademark is unique and
not already in use by another entity. Protection lasts 10 years and can be renewed. Trademark
protection is generally territorial, meaning it is limited to the jurisdiction where it is registered so
they must be registered in all jurisdictions we want them to operate.

European Trademark Directive (EU law that govern trademark): Signs cannot be registered in EU if
they are:

 Devoid (lack) of distinctive character (not original)

 Indicate the kind, quality, or characteristic of (already registered) goods/services
 Customary signs in the trade (commonly used by everyone)
 Contrary to public policy (such as referring to criminality or drugs)

TRADEMARK INFRINGEMENT

 Violation of the exclusive rights attached to a Trademark

 Without authorisation of owner/licensee
 Use of trademark which is identical or confusingly similar
 In relation to products/services identical or similar

EU Trademark Regulation 2015/2424 Some changes to EU Trademark laws as part of the “European
Union trademark reform package” came into effect in October 2017. Main changes:

 A graphical representation is no longer required: “what you see is what you get”.
 TM representation must be clear, precise, self-contained, easily accessible, intelligible,
durable, and objective.
 Non-traditional TM may include multimedia sound or olfactive trademarks – sound, motion
through jpg or mp3 file without a description.

NB=> The trade mark performs the important function of a distinctive sign, (IT CANNOT BE A SIMPLE
DESCRIPTION OF A PRODUCT, IT HAS TO BE DISTINCTIVE) it must enable individuals to attribute a
given product unambiguously to the producing company.

REGISTERED TRADEMARK=> the owner has the right to exclusive use Protection from infringement
and notoriety. Can apply for invalidation of a subsequent registration.

2)PATENTS patent is a form of intellectual property right that grants its holder exclusive rights to
an invention for a limited period, typically 20 years from the filing date of the patent application.
Patents are a way for inventors and innovators to protect their inventions and prevent others from
making, using, selling, or importing the patented invention without permission.
 • It prevents others from making, using, selling and distributing without permission (or pay a
license fee!) → Temporary monopoly to encourage research and innovation (ex: a pharma
company has incentives to develop new drugs, investing a lot of time and spend huge sums
of money only if it will have a competitive advantage through a temporary monopoly or get
concurrent revenue stream by licensing it)
• Types of Patents:
 Utility Patents: Protect new and useful processes, machines, articles of manufacture,
or compositions of matter.
 Design Patents: Protect the ornamental design or appearance of an article of
manufacture.
 Plant Patents: Protect new varieties of plants that have been asexually reproduced.
• Requirements for Patentability:
 Novelty: The invention must be new and not publicly disclosed or known before the
filing date.
 Non-Obviousness: The invention must involve an inventive step that is not obvious to
someone skilled in the relevant field.
 Usefulness: The invention must have a practical use or application.

Patent litigation can be very complex and expensive Many operators in technology and life sciences
may claim breach of patent because of nature of development on top of other innovations.

TO REDUCE PATENT LITIGATION=> Patents cross-licensing → companies in the same sector may
agree to cross-license their patents to gain access to each other’s patent portfolios. It covers
different essential component of a given commercial product. It put emphasis on cooperation to
drive innovation.

3)DESIGN Design rights refer to the legal protection granted to the visual or aesthetic aspects of a
product. These rights are intended to protect the appearance, shape, ornamentation, and overall
design of a product from unauthorized use.

• MUST have a different overall impression w.r.t any other design available on the market (ex:
related to fashion design, architecture design…)
• Cover lines, contours, colors, shape, texture/materials and ornamentation.
• it MUST be “novel” (ex: NO basic chair, YES chair with individual character and different and
special)
• it MUST have an “individual character” (overall impression MUST be different w.r.t. others
in the public domain
• No protection for functional products (here, we protect the looks, NOT functionality, which
is protected by patent)
• No protection for hidden parts of a product.
• Registered design → gives exclusive right up to 25 years (EU), includes 2 and 3 dimensional
shapes and design
• Design right (NOT registered) → gives automatic right to 3-dimensional shape (BUT NOT 2-
dimensional shape), protection for 10-15 years.

LITERARY AND ARTISTIC PROPERTY

1)COPYRIGHTS It gives the original creator of the work exclusive rights (except in employment)

 Copyright protects original works of authorship, including literary, artistic, musical, and
dramatic works, as well as software and other intellectual creations.
  Duration of right for whole life of author plus 50-100 years (depending on the category)
 No formal registration required
 Copyright grants the creator or copyright holder exclusive rights to: Reproduce the work,
Distribute copies of the work, Perform or display the work publicly, Create derivative works
based on the original. The creator will also have the right to be identified as the author and
to object to distortions of his work.

DEFENCE OF COPYRIGHT Fair Use (or Fair Dealing):

Copyright laws often include provisions for "fair use" or "fair dealing," allowing limited use of
copyrighted material without permission for purposes such as criticism, commentary, news
reporting, teaching, scholarship, and research. Depends on purpose of copying (commercial or non-
profit?), the amount copied (ex: photocopy 1 page is okay, NOT the whole book), effect on potential
market value of copyrighted work.

EU COPYRIGHT DIRECTIVE=> European Union (EU) Copyright Directive was adopted in April 2019.
The directive, officially known as Directive (EU) 2019/790 on copyright and related rights in the
Digital Single Market, is aimed at modernizing and harmonizing copyright laws within the EU,
particularly in response to the challenges posed by the digital environment.

 LINK TAX=> This provision addresses the rights of press publishers to the online use of their
publications. It allows publishers to charge online platforms for displaying snippets of their
content, commonly referred to as a "link tax."
 LIABILITY OF CONTENT=> Traditionally internet users were liable for the content they post
on Facebook and YouTube. The new law holds platforms directly accountable for the content
they host, with few exceptions. (Art. 17). No longer considered a “mere conduit”.
Online platforms are required to obtain authorization from the copyright holders for the
content that users upload. This means platforms need to have licensing agreements in place
with rights holders or take other measures to ensure they have the right to host and display
copyrighted content.

NFT=> Intellectual Property (IP) protection in the context of Non-Fungible Tokens (NFTs) involves
safeguarding the rights of creators and owners of digital assets represented by NFTs. NFTs are
unique, indivisible tokens often associated with digital files, such as artwork, music, videos, or other
forms of digital content.

Many NFT’s only grant a license to use, copy and display the NFT but do not assign copyright/
ownership in the asset.

• NFT royalties can give creators compensation each time their NFT is sold
• Brand owners should extent their trademark registrations to cover uses that include NFT’s

IP IN COMMERCIAL CONTRACTS

Intellectual property (IP) is often a critical component in commercial contracts, as it involves the
rights and assets related to innovations, creations, and intangible assets. Commercial contracts that
involve intellectual property can take various forms, and the terms and conditions within these
contracts are designed to protect the interests of the parties involved. IP strategies are formulated
from a broad perspective to support both business and R&D strategies.
ASSIGNMENT => Involves the transfer of ownership or rights related to intellectual property from
one party to another. PERMANENT TRASFER OF IP OWNERSHIP, ONE TIME AGREEMENT,
CONSIDERATION= FIZED AMOUNT

DISTRIBUTION AGREEMENT=> Contract that gives the permission to distribute Ip to another

organization. The distributor can sell it in a predeterminate market and under some conditions

LICENSE AGREEMENT=> Contract that allows to use another party’s intellectual property for
payment of a fee.

• NO TRASFERT OF OWNERSHIP BUT CONTRACT TO ALLOW THE USE OF INTELLECTUAL

PROPERTIES. (Licensor is the owner, licensee Is the party that pays to use it)
• LONG TERM AGREEMENT
• PERMISSION TO USE IP WITH CERTAIN LIMITS
GRANT=> : “Licensor hereby grants to Licensee a (exclusive/non-exclusive) license in the
Licensed Territory to make use and sell any Licensed Products in the Licensed Field of Use”
3 types of license grant:
 Exclusive → only licensee has to right to use the IP (it excludes the owner)
 Sole → licensee and licensor (owner) have right to use the IP
 Non-exclusive → there may be multiple licensees (more revenues for the licensor)


BENEFIT RISKS
-Preserve the capital that would otherwise be - Diminished ability to enforce quality control
required for internal growth and standards and specifications (ex: if
expansion Disney pencils are NOT developed by Disney
- Avoid or settle litigation regarding a dispute itself, the licensee may use toxic substances)
over ownership (ex: Blackberry) - Greater risk of another party infringing upon
- Tax benefits the licensor’s IP
- Spread the risk and cost of development and - Dependence on the skills, abilities and
distribution resources of the licensee as a source of
- Achieve more rapid market penetration revenues
- Differentiate from competitors - Difficulty in recruiting, motivating and
- For licensor → earn initial license fees and retaining qualified and competent licensees
ongoing royalty income - Risk that reputation and goodwill may be
- Enhance consumer loyalty and goodwill (ex: if damaged or destroyed by the act or
you are happy with amazon service omission of a single licensee
delivery, you are probably more predisposed in - Administrative burden of monitoring and
trying amazon for their movie streaming supporting the operations of the network
services) of licenses
BENEFIT

o Revenue Generation: Licensing allows the IP owner (licensor) to generate revenue by

granting permission to others (licensees) to use their IP. This is a direct financial benefit.
o Market Expansion: Licensing enables the licensor to expand the market reach of their
products or services without making significant investments. Licensees can introduce the IP
into new geographic areas or customer segments
o Cost Savings for Licensees: Licensees can benefit from using established and proven IP
without the need for significant investment in research, development, or branding.
o Access to Innovation: Licensees gain access to innovative technologies, processes, or brands
that they may not have developed internally, allowing them to stay competitive.
 o Risk Mitigation:Licensees can mitigate risks associated with developing new technology or
entering new markets by leveraging existing IP through licensing agreements.
o Brand Recognition: Licensees can benefit from the established brand recognition and
reputation associated with licensed trademarks or copyrighted works.
o Strategic Partnerships: Licensing can facilitate strategic partnerships, collaborations, or joint
ventures between companies that leverage each other's strengths.
o Enhanced Product Offerings: Licensees can enhance their product offerings by incorporating
licensed technology, designs, or features into their products. Licensing enables companies to
enter new industries or diversify their product and service offerings without having to
develop expertise in-house.
o Tax Benefits:Licensing arrangements can sometimes offer tax advantages, depending on the
jurisdiction and the nature of the agreement.

Risks of Intellectual Property (IP) Licensing:

o Infringement Risk:Licensors may face the risk of infringement if the licensee uses the IP in a
way that exceeds the scope of the license or if the licensed IP itself infringes on the rights of
third parties.
o Quality Control Issues: Licensors may face challenges in maintaining quality control over the
use of their brand or technology, potentially leading to a negative impact on the licensor's
reputation.
o Competitive Risks:Licensees might become competitors if they gain significant expertise
through the licensed IP, potentially challenging the licensor's market position.
o Loss of Control: Licensors relinquish a degree of control over how their IP is used, and
disputes may arise if the licensee deviates from the agreed-upon terms.
o Market Saturation: Licensing the same IP to multiple licensees in a saturated market may
dilute the exclusivity and value of the IP.

Representation and warranties (promises):

 Licensor warrants that it (is the sole unencumbered legal owner of/has the right to license/sub-
license the use of) the trademarks → licensor has to have the right to license IP right
 Licensor warrants that the trademarks are NOT (to licensor’s knowledge) (as at the effective
date/during the term of this agreement) the subject of any current actual or threated challenge,
claim or proceedings, including for opposition, cancellation, revocation or rectification →
licensor promises they are NOT been sued by anyone else about an infringement
 Licensor (warrants/does not warrant) that the exercise by licensee of the rights granted to it
under this agreement does NOT infringe the IPRs of any 3rd party in the territory → licensor
promise

HOW TO PROTECT CONTRACTUALLY

1)Audit and inspection: (very important!) Tie to quality control, Rights to audit books (anytime you
have royalties (%), slap audit clause) , Rights to enter premises (inspect product)
Example of inspection clause → “The Licensee shall during the term of this Agreement permit Licensor from
time to time on prior written notice to enter upon any premises where the Goods are being manufactured,
packaged or stored and to have access to (including the right to review and take copies of) all relevant books,
records, accounts and other information necessary or appropriate to enable Licensor to verify that Licensee
(and its sublicensees) are in due compliance with its obligations under this Agreement, and comply promptly
with all instructions and directions issued by Licensor on the basis of such inspection to ensure compliance
2)ENFORCEMENT=> Exclusive or non-exclusive licensee • Whose job is it to enforce?

3)CONFIDENTIALITY=> Control your licensee Reduce the risk of re-counterfeiting → “need to know”
Hidden signs of genuine article (ex: Levi has certain red stiches or hidden tags to show that they are
the real deal. Counterfeiting → “look alike” or “smell alike” → It causes brand damage (confuse
consumers) → Enforcement responsibilities (ex: you need to protect, monitor and enforce) →
Funding (who pays for any legal actions?)

4) TERMINATION RIGHT=> Who has the right to terminate? With cause → specify grounds - Cure
period → grant of specific amount of time to fix it, otherwise termination

Domande

If a company develops a new technology that improves its main product, what type of intellectual
property can they use to stop others from copying their invention? Patent

An engineer at Cycle Systems SRL devised a clever way to shape the lid for the battery compartment
on hand-held radiation detectors so that the lid can easily be opened or closed even when the
operator is wearing heavy industrial gloves. Which of the following regimes offers the best prospects
for IP protection for the shape of the battery compartment lid? Patent, design right?

A registered patent in the EU offers what level of protection? 20 years form the date of grant not
renewable to foster innovation

CYBER SPACE

It is an interdependent network of information systems including:  The Internet 

Telecommunications networks  Computer systems  Embedded processors and controllers.
In cyberspace, individuals, organizations, and governments interact, share information, conduct
transactions, and engage in various activities.

So the world is more interconnected but increased risk of theft, fraud and abuse=> it is necessary a
law enforcement to safeguarding and securing cyber space Cybersecurity: Given the increasing
reliance on digital technologies, cybersecurity is a critical aspect of cyberspace. It involves protecting
systems, networks, and data from unauthorized access, attacks, and damage.

CYBER CRIME=> “criminal acts that are committed online by using electronic communications
networks and information systems”. Technology may be used in the commission of a crime or be a
target of the crime:

 Technology as an instrument → ex: use tech for money laundering, mass marketing fraud, IP
infringement (illegal downloading → infringement of copyright), cyberbullying, child
exploitation, identify theft…
 Technology as a target → ex: malware threats, hacking for criminal purposes, criminal
botnet operations

There are Financial Crime (hacking, online fraud, digital piracy) and non Financial crime (hate crimes,
bullying, terrorism) that affect individuals, business or government. Hackers act individually for
financial gain or in organized criminal gangs, they can be supported by a State to target information
of strategic value or also a State employed hackes for military plans, infrastructure access.
THREATS OF CYBERCRIME:

 Economic security, reputation, and social trust (counterfeiting, impersonation, identity

fraud, money laundering, copyright infringement, tax evasion)
 Public interest and national security (pornography, defamatory communication, cyber
stalking, paedophilia, international terrorism.)
 Privacy, domestic and even diplomatic information security (denial of services, and illegal
interception of communications)
 Domestic, as well as international security – no single country can handle the issue on their
own. Global response is necessary)

Addressing cybercrime requires a combination of legal measures, international cooperation,

cybersecurity practices, and public awareness because this crimes are transnational and the costs for
the world are huge ( 6 trillion dollar in 2021).

Cybercrime is one of the fasted growing forms of transnational crime because they are easy money
for criminal: Potentially high returns for low effort, Low risk (difficulties with law enforcement),
Physical presence NOT required.

1) FRAUD AND FINANCIAL CRIME

Fraud and financial crime encompass a range of deceptive activities committed with the intent of
obtaining financial gain through illegal or unethical means. Financial crime is a broader term that
encompasses a range of illegal activities related to financial systems, institutions, or transactions. It
includes fraud but extends to other offenses that compromise the integrity of financial systems.
Fraud involves intentional deception for the purpose of securing unfair or unlawful gain, often at the
expense of others (Identity Theft:, Investment Fraud, credit card fraud).

PHISHING Phishing is a type of cybercrime that involves fraudulent attempts to obtain sensitive
information, such as usernames, passwords, and financial details, by disguising as a trustworthy
entity in electronic communication. Typically, these fraudulent communications come in the form of
emails, messages, or websites that appear legitimate but are, in fact, designed to deceive and exploit
individuals.

2) CYBER-EXTORTION

Extortion=> “gaining of property or money by almost any kind of force, threat of violence, property
damage, harm to reputation or unfavorable government action. While usually viewed as a form of
theft or larceny, extortion differs from robbery in that the threat in question does NOT pose an
imminent physical danger to the victim”. So cyber extortion is an extortion using website, email,
computer system with repeated denial of service or other hacker attacts

DEFINITION Cyber extortion is a form of cybercrime where attackers use various malicious tactics
to threaten individuals, businesses, or organizations with the intent of extracting money, sensitive
information, or other concessions. The primary objective is to coerce the victim into complying with
the extortionist's demands, often through intimidation, manipulation, or disruption of services.

 Ransomware Attacks: Ransomware is malicious software that encrypts files on a victim's

system, rendering them inaccessible.
 Distributed Denial of Service (DDoS) Attacks: DDoS attacks overwhelm a target's online
services, making them inaccessible to users
 3) CYBER-TERRORISM

Cyber terrorism refers to “an act of terrorism committed through the use of cyberspace or computer
resources”. The purpose is to intimidate or coerce a government or organization, attack them based
on ideological or extremist beliefs, using digital means to propagate their messages and gain
attention for their causes.

Examples → hacking, denial of service attacks (ex: attack on infrastructure, communications, banking
systems), preparation of real-world terrorist attacks, generating funding for terrorist activities and
publications of propaganda (ex: ISIS)

4) CYBER WARFARE

Cyber warfare refers to the use of digital attacks, hacking, and other malicious activities in
conjunction with traditional military tactics to achieve strategic and geopolitical objectives.

In contrast to cyber terrorism, which is often motivated by ideological or political goals, cyber
warfare involves the actions of nation-states or state-sponsored to attack and attempt to damage
another nation’s computers or info networks through, for example, computer viruses or denial-of-
service attacks.

 Cyber warfare involves the use of digital tools and techniques by nation-states to gain a
military advantage or achieve strategic goals used in conjunction with conventional military
operations, intelligence gathering, and diplomatic efforts to achieve a comprehensive and
coordinated approach.
 Objectives may range from disrupting the adversary's critical infrastructure and military
capabilities to conducting espionage, influencing public opinion, or sabotaging
communication systems.
 Cyber warfare often employs sophisticated and persistent cyber attacks, known as APTs,
which involve long-term infiltration of target networks to gather intelligence or maintain
access for future actions.
 ESPIONAGE=> → NOT an act of war. Most countries engage in it although some incidents
can cause diplomatic tensions.
 Massive spying by the US on many countries (exposed by Edward Snowden)
 NSA (US) spied of German Chancellor Merkel and other world leaders
 FAKE NEWS=>Is fake news a new form of cyber warfare?
Fake news is a type of propaganda that uses deliberate misinformation or hoaxes spread
via traditional print and broadcast media or online social media with the intent to mislead
or damage an agency/entity or person.
Often uses sensationalist, dishonest headline to increase readership, online sharing and
internet “click revenue.
Laws against “fake news” - No specific EU laws yet
PROBLEM=> Concerns regarding the line between freedom of speech v state sponsored
censorship • Who should decide what we can read?
 France has proposed a new law banning fake news during elections
 Italy (Feb 2017) proposed a new law “Provisions to prevent the manipulation of
information online, ensure transparency on the web and encourage media literacy”
(penalty: euro 5,000) (currently in deadlock) → criticized as providing excessively
broad discretion on the government to prosecute those critical of public or political
figures
  EU commission (Jan 2018) → task force to determine balance between freedom of
speech/rights of citizen to reliable info

Examples of cyber-warfare: 2020 → the UK National Cyber Security Centre found evidence of
Russian military intelligence hackers had planned a disruptive cyber-attack on the postponed.
Tokyo Olympics 2020 → US Dept of Homeland Security revealed Russia and Iran are seeking to
influence US election by showing uncertainty around election results.

5) DATA BREACH

A data breach occurs when unauthorized individuals or entities gain access to sensitive and
confidential information, typically stored on computer systems or networks. These breaches can
have severe consequences for individuals, businesses, and organizations, leading to potential
financial losses, reputational damage, and privacy concerns.

 UNAUTHORISED ACESS
 DISCLOSURE OF PERSONAL INFORMATION=> Personal Information are data which identifies
and relates to living individual, Sensitive personal information – data relating to health,
religion, trade union membership, sexual orientation etc.

DATA PROTECTION=> GDPR General Data Protection Regulation, it is the EU law related to privacy

 Protection of sensitive information related to living individual (no dead individual)

 ART 33=> utlines the requirements for notifying a personal data breach to the relevant
supervisory authority.
 Data controller must advise affected parties within 72 hours of becoming aware of it
 Must describe nature of personal data affected
 Provide details of DP officer/contact point
 Describe likely consequences
 Set out measures taken to mitigate loss (like for force majeure)
 Fines (multa) Euro 10 million (2% global rev) or Euro 20 million (or 4% global rev)
6) PIRACY

Digital piracy refers to the unauthorized reproduction, distribution, or use of digital content, such as
software, music, movies, or other intellectual property, without the permission of the copyright
holder. Forms of Digital Piracy: Software Piracy: Unauthorized copying, distribution, or use of
software. Music and Movie Piracy: Illegally downloading or sharing copyrighted music and movies.
E-book Piracy: Unauthorized distribution of electronic books without the copyright owner's
permission.

Consequences: Digital piracy can lead to financial losses for content creators and copyright holder

INTERNATIONAL LAW AGIAST CYBERCRIME

BUDAPEST CONVENTION ON CYBERCRIME 2004=> 1st international treaty to address internet and
computing crime by harmonizing national laws. The primary objective of the Budapest Convention is
to facilitate international cooperation in the investigation and prosecution of cybercrime.
It aims to harmonize national laws and improve the effectiveness of legal frameworks to combat
cyber threats.

 67 States have ratified it India, Brazil, and Russia – Not Ratified
 Ch. I: definition of terms=> to what extent are we prohibiting on the internet and the
network what is criminal and to what extent do we want to protect out democratic
 rights. Online is that thin line between censorship and preventing cybercrime. Terms
need to be narrowed enough to betargeted and effective.
 2. Ch. II: measures to be taken at national level (substantive criminal law, procedural
law, jurisdiction)
 3. Ch. III: International co-operation
 4. Ch. IV: final provisions

CATEGORIES OF OFFENCES=> The convention defines various cybercrime offenses, including illegal
access to computer systems, illegal interception of data, data interference, system interference,
misuse of devices, computer-related fraud, and content-related offenses such as child pornography.

 Offence against confidentiality, integrity and availability of computer data and systems
(hacking, DOS, malicious codes)
 Computer related offences (forgery, alteration of data, manipulation of digital signatures)
 - Content related offences (pornography, offences relating to children)
 - Copyright related offences (pirated software, entertainment disks)

PENALTIES=> Art 13 COE Convention → States are free to set penalties in line with principles of
criminal justice → perceived weakness of the Convention because cybercrime does NOT respect
border → ununiform penalty approach (we don’t have a global benchmark to a global problem).
So, if you want to conduct an illegal enterprise using cyber means → you go to countries that did
NOT sign convention or to jurisdictions that set low penalties

EU LAW AGAINST CYBER CRIME

 2001 → EU Framework Decision on combating fraud and counterfeiting of non-cash

payment (about electronic payments)
 2002 → ePrivacy Directive → providers of communications services MUST ensure security of
service and confidentiality of client info
 2011 → EU Directive on combating sexual exploitation children online and child pornography
 2013 → EU Directive on attacks against information systems → tackles large scale
cyberattacks by strengthening national cyber-crime laws and new penalties
 Replacement to EU Council Framework decision (2005)
 Sets out offences regarding illegal access to info system and interference with system
and data
 New rules outlaw the use of botnets and malicious software (such as illegally
obtained passwords)
 Penalties → 2-5 years imprisonment → penalties are more severe for criminal
organization or for attacks target key infrastructure/significant damage (ex: attack on
the white house)
 Greater cooperation between Member States authorities
 NIS Directive on Security of Network and Information Systems (“NIS”) (2016/1148)
 the directive is designed to enhance the overall level of cybersecurity across the European
Union by establishing cybersecurity measures and incident reporting requirements for
operators of essential services (OES) and digital service providers (DSPs).
Provides legal measure to boost the overall level of cyber security in the EU by ensuring:
 Member States preparedness by requiring them to be equipped (e.g.: Computer
Security Incident Response Team and competent national NIS authority)
 Cross border collaboration between states to support strategic cooperation and
information exchange
 A culture of security across all sectors (essential services must notify serious
incidents to national authority)
 ENISA (European Union Agency for Network and Information Security) → EU
crossjurisdictions agency that deals across 27 states of E
 NIS2 DIRECTIVE 2021=> revises 2016 NIS directive
 Focus on cyber-attacks on critical infrastructure within the EU
 Requires minimum security compliance for organisations and businesses providing
essential services
2 criteria:
 Companies with Euro 10M turnover and 50 employees
 Services fundamental for economic and democratic processes
 EUROPEAN CYBER SECURITY ACT
The European Cybersecurity Act is a legislative framework adopted by the European Union
(EU) to enhance the cybersecurity capabilities and resilience of digital infrastructures within
the EU. The Act was officially adopted in June 2019 and became applicable on June 27, 2019.
It aims to strengthen the EU's cybersecurity preparedness and response mechanisms.
 CERTIFICATION FRAMEWORK FOR PRODUCT AND SERVICE The Act establishes a
European Cybersecurity Certification Framework that allows for the creation of
European cybersecurity certification schemes for specific categories of information
and communication technology (ICT) products, services, and processes.
 Comprehensive set of rules, technical requirements, standards, and procedures.
 Sets out the intended level of assurance: “basic, substantive and high”
 Certificate will be recognised in all EU Member states indicating the security
features of the product or service
 ROLE OF EINSA Provides more resources for ENISA
 setting up and maintaining the EU cyber security certification framework
 In charge of informing the public on the certifications schemes and issuing
certificates through a dedicated website
 Supports coordination of response to large scale cross-border cyber-attacks
and crises
 ART. 13 NEW EU COPYRIGHT DIRECTIVE (2019 implemented by march 2021)
Article 13 aimed to address the issue of copyright infringement on online platforms. It
proposed that online platforms that host and provide access to a large amount of user-
uploaded content must take measures to prevent the availability of copyright-protected
material without proper authorization.
 Places a responsibility on online content-sharing service providers (such as social
media) to obtain authorization for the copyrighted works uploaded by their users
Platforms such as YouTube will be held liable if their users upload copyright protected
material (unless exceptions)
  Excludes → memes and GIFs, open source software development platforms, cloud
storage service, online marketplaces (ex: E-Bay), online nonprofit encyclopedias
 Licensing Agreements: Platforms are encouraged to conclude licensing agreements
with rightsholders to ensure the lawful use of copyrighted content

JURISDITION IN CYBER CRIME=> Jurisdiction in cybercrime refers to the authority of a legal system
to investigate, prosecute, and adjudicate offenses committed in the digital realm. The borderless
nature of the internet presents challenges in determining which jurisdiction has the right to handle a
particular cybercrime case. Several principles and factors come into play when establishing
jurisdiction in cybercrime cases:

 Location of cyber criminal

 Location of system being attacked (where are the servers?)
 Location of any victims
 Location over which the data involved in the attacks occurs (may cross several state)

Supernational organization: (you need to know the names)

 US → FBI led Violent Crimes against Children (VCAC) and VCAC International Task Force
 InterPol → identifying victims and coordinating inter-government intelligence (190 countr.)
 European Cybercrime Centre (“EC3”)joint investigations conducted across EU (28 Member)
 NATO → cooperation between member states

Responses to cybercrime:

 Legal → legislation and increasing international cooperation

 Technical:
 Internet content control/firewalls/anti-virus software
 Computer forensics/collecting evidence
 Encryption/reinforcing passwords
 Cloud computing/remote infrastructure
 Surveillance and international cooperation

Prevention is better than cure!

 It’s better to improve security first (security software, encryption, reinforce passwords)
  Advances in legislation and increase international cooperation are helping
 Difficulty to identify offenders and sheer scale of attacks makes law enforcement difficult
 Some risks to privacy of individuals with increased power of authorities to monitor
communications of citizens (security over privacy?)

Quiz:

1) What is the name of the international convention relating to cybercrime? → Council of

Europe Convention on Cybercrime (2001) or Budapest Convention on cybercrime
2) What is the European agency that coordinates investigations into cybercrime? → European
Cybercrime Center EC3
3) What is the name of the 2013 EU Directive and the maximum penalty for infringement? →
EU Directive – Attacks against Information Systems (2013) maximum penalty: from 2 to 5
years of imprisonment
4) What practical steps can be taken to reduce exposure to cybercrime? → mostly technical
steps like internet content control/firewalls/anti-virus software + encryption/reinforcing
passwords + surveillance and international cooperation
5) What is the name of the transnational law which addresses internet and computer crime?
Budapest Convention on cybercrime (council of European convention on cybercrime, 2001)
6) What are the penalties for non-compliance with the proposed privacy regulation? Up to 20
M euro or 4% of global annual revenues
7) The Directive on Security of Network and Information Systems (2016/1148) principally deals
with what? Member states preparedness by requiring them to be equipped for cyber
security
10. Copyright could most clearly be claimed over which of the following? A novel computer
program
TECHNOLOGY AND IT CONTRACTS

IT contracts refer to legally binding agreements between parties that outline the terms and
conditions related to information technology (IT) services, products, or solutions. Example

 Computer software licences

 Computer Hardware sales
 Information systems and databases
 Programming languages and code
 IT services of all descriptions (IT helpdesk, systems integration, data management)
 Cyber security/ encryption
 Mobile payment systems
 Content and apps
 e-commerce and m-commerce
 Accessing services and storing data in the “cloud”

They are fundamental for business today=> IT systems facilitate business: Communications
(telephony, email, messaging) - Business systems automation (operational systems – mechanical
processes to ordering) (we organize business processes with IT systems → from mechanical to
automated processes) - Productivity tools (HR programs to financial reporting) (ex: we all use
software and programs to run employment HR prog…) - Connecting with the customers (e-
commerce, social media, CRM reaching out to customers)

THE CLOUD

Cloud computing → mass-market availability, through the internet, of a whole range of computer
and communications technology-enable resources, provided as a service.

Provides what we used to buy in as physical hardware into services provided over the internet. All
menu of communication and tech services are provided over the internet (we don’t need to buy
physical) (ex: music through Spotify NOT through physical CDs).

 Eliminate need to purchase or install software, run own application and data servers
 Delivery of IT services over the internet on standard terms (real change has been mass
market, NOT only for businesses corporations)
 Massive economies of scale mean lower business costs
 Increased reliability of internet coupled with advances in encryption are key to success
(Cloud only works with reliable internet connection and possibility to encrypt info)

Currently there are 4 big operators in the cloud computing market:

1) Amazon Web Service → EC2 (Elastic Compute Cloud) and S3 (Simple Service)
2) Salesforce → [Link]
3) Alphabet (Google) → Google Apps
4) Microsoft – Azure – Office 365
Key benefits:

 Low fixed charges

 Fixed improved support/maintenance
 Anytime, anywhere access=> cloud enables users to access applications and data from
anywhere with an internet connection.
 Minimize capital expenditures (NO longer the need to buy in, instead we rent)=> cloud
eliminates the need for extensive upfront investments in hardware and infrastructure.
 Reduce internal management overhead
 Scalable and flexible => Cloud platforms provide the ability to scale resources up or down
based on demand. Businesses can quickly adapt to changing requirements and scale
operations accordingly and we can buy only what we need.

Key risks:

 Untailored solution (it’s a mass market, “standard” offering) (ex: bigger companies usually
pay for tailored solutions)
 Contracting on fixed terms with limited warranties (representation of promises) (ex: sky suit
NOT waterproof)
 Lack of integration with legacy systems (legacy → the existing system that a company may
have) - Lack of control over data (risk of hacking or risk of NOT getting the data back at the
end of the contract)
 Security Concerns: security in cloud area must focus on data rather then infrastructre
 Data Breaches: The cloud introduces potential vulnerabilities, and if not properly secured,
it can be susceptible to data breaches.
 Data Loss: Inadequate data backup and security measures may result in data loss.
 Compliance and Legal Issues:
 Data Jurisdiction: Determining where data resides and ensuring compliance with data
protection laws can be challenging.
 Contractual Obligations: Understanding and meeting contractual obligations with the
cloud provider is critical for compliance.
SO KEY RISKS ARE:

PRIVACY AND DATA PROTECTION=> Compliance issues (privacy, encryption). Storing sensitive data
in the cloud can be a target for malicious attacks. A flaw in the iCloud platform allowed an unlimited
amount of account password tries via the Find My iPhone interface Hackers were able to implement
“brute forcing” (systematically trying multiple popular passwords until access is granted).

Contractual provision about privacy/data protection MUST cover:

 Access to personal data

 Non-disclosure obligations
 Return of all data at the end of contract

Provider Transparency: Understanding the privacy policies and practices of cloud service providers is
crucial. Organizations should be aware of how their data is handled, who has access, and the
purposes for which it is used. User Consent: Organizations should ensure that their cloud provider
obtains user consent for processing personal data in accordance with applicable privacy laws.

CYBER SECURITY=> Increase security in order to prevent data breach

SERVICE LEVELS AND SERVICE CREDIT=> monitoring performances ensuring the quality of the
service being provided

 Service levels/credit regarding availability and performance service credits: paying less
in case the quality of the services is less than the one agreed
 Point of access for measurement?
 Liquidated Damages/Service Credits
 LDs/Penalties  LD: genuine pre-estimation of loss or damage

EXIT AND TERMINATION=> RISK TO BE LOCKED IN ex: difficulty to change provider) (ex: contract
lasting 3 years BUT after 1 year you are NOT satisfied). Danger (risk) of being “locked-in”, ensure at
the end of the contract we will receive back our data-.

 Consider the use of escrow (we see it a lot with open source software, ex: you buy a house
and in between signing of contract and actual delivery a sum of money has been paid).
Escrow → we untrust the data to an independent 3rd party
 Disputes → carefully consider choice of law and means of dispute resolution

E COMMERCE

E-commerce is a rapidly growing sector that involves the buying and selling of goods and services
over the internet. As the digital marketplace expands, regulations become crucial to ensure fair
business practices, protect consumers, and address various legal and security concerns.

Business advantages:

 Provides an additional sales channel

 CRM (Customer Relationship Management) advantages (“getting closer to your customer”,
profiling for marketing) (critical!)
 Globally increase of B2C ecommerce sales. Growth driven by:
 Rapidly expanding online user bases in emerging markets
 Increases in m-commerce sales
 Advanced shipping and payment options
 Push into new international markets by major brands

Challenges presented by e-commerce

- Making electronic transaction secure through the legal recognition of emerging technologies
→ boost integrity and reliability of electronic messages.
- Increase protection of electronic medium from external threats (hacking, viruses, worms)
- Need to build certainty
- Intangibility of electronic communications raise problems:
 Does an email originate from the person claiming to send it?
 How secure is the message?
 Is the message received the same as that sent?
 What legal status does an electronically signed message have?

TYPES OF E COMMERCE CONTRACTS=> Types of E-commerce contracts (required for any e-

commerce activity, like constructing an ecommerce website)

 Website design and development agreements (look, feel, graphic, functionality of the
website) - Hosting agreements (agreement with hosting service provider)
 Content and linking licenses (ex: certain content is licensed)
  Consumer facing documents: o Sales terms and conditions o Website terms of use o
Privacy policy

REGULATION

USA REGULATION=> Government intervention should be to ensure competition, protect IP and

privacy, prevent fraud, foster transparency, support commercial transactions and facilitate dispute
resolution” → from a Framework for Electronic Commerce (Clinton Administration)

No specific ecommerce regulation → just general FTC (Federal Trade Commission) and Uniform
Commercial Code, State common law . It includes regulation for:

 Commercial email
 Online advertising
 Consumer privacy

UNICITRAL MODEL LAW ON E COMMERCE=> UNCITRAL stands for the United Nations Commission
on International Trade Law. . It is a subsidiary body of the United Nations General Assembly that
plays a crucial role in the development and harmonization of international trade law.

UNCITRAL has addressed legal issues related to electronic commerce, including electronic contracts,
electronic signatures, and online dispute resolution.

 1996=> LAW ON E COMMERCE=> Aims to enable the commercial use of modern means of
communications and storage of info . Establishes rules for formation and validity of contract
concluded electronically and retention of data messages . Enacted in 70 jurisdictions
 2001 MODEL LAW ON ELECTRONIC SIGNATURE=> The Model Law aims to facilitate
electronic commerce by recognizing the legal validity of electronic signatures and promoting
their use in various transactions. Enacted in 38 states and 39 jurisdition
 Legal Recognition of Electronic Signatures: The Model Law establishes the legal
equivalence of electronic signatures with handwritten signatures, ensuring that electronic
signatures are recognized as valid and legally binding.
 Functional Equivalence: It emphasizes the principle of "functional equivalence," which
means that electronic signatures should be afforded the same legal effect as handwritten
signatures, provided they meet certain criteria.
Founding principles:
 Harmonization and certainty → good alternative to international convention which takes
years to negotiate and ratify
 Flexible → Model law may be amended by States which adopt it to better suit its needs
therefore more likely to be widely adopted → more international certainty –
 Model law preserves party autonomy (Art 5)
 Parties may vary the law subject to any limitations that may be imposed by the applicable
law (ex: public policy)
 Technology neutral (Art 3) → does NOT specify type of technology (ex: asymmetric
cryptosystem) therefore does NOT become outdated as new tech emerges
 Non-discrimination → the place of origin of ES and certificates does NOT determine the
legal effectiveness (just because somebody signed from Nigeria, it won’t be discriminate in
other places)
 Applicability → used in “commercial” context (Art 1) BUT probably NOT intended to
override consumer protection legislation
 Reliability of e-signature, it looks at
 1) Identification o Intention to be bound
2) Could include digital signature, digitized image of handwritten signature,
biometrics (fingerprint, iris scan)
 Creation of electronic signature MUST be linked to a signatory and NO other person and
MUST be under control of signatory and NO other person - Creation of electronic
signature envisages 3 parties:
1) The signatory (the party signing)
2) A 3rd party certificate provider (validator)
3) The party who relies on the data provided (receiver)
4) Cross-border recognition of certificates and e-signature (Art 12) → based
on “reliability” NOT the geographic location where the signature was
created or certified

EUROPEAN REGULATION

 EU Directive on Electronic Signatures (2000)

 ECC (Electronic Communication Convention)
 Electronic Commerce Directive adopted in 2000
 Eprivacy regulation

EU Directive on Electronic Signatures (2000) - Intended for the EU internal market. Has some
similarity with UNICTRAL Model Law.

 Makes distinction between “certificate” and “qualified certificate” (MUST meet

benchmark in Annexes)
 Provides legal equivalence of e-signatures to handwritten signatures and admissible as
evidence in legal proceedings (Art 5)

ECC (Electronic Communication Convention)=> Builds on and updates provision of both Model Laws -
Enhances legal certainty of electronic communications across borders

Electronic Commerce Directive adopted in 2000=> Its primary purpose is to establish a legal
framework for electronic commerce within the EU, providing rules and regulations to facilitate the
development of online services and the digital economy. The directive addresses various aspects of
electronic commerce, including the liability of service providers, the provision of information, and
the recognition of electronic contracts.

APPLY TO DOES NOPT APPLY TO

-News services (such as news websites) - The field of taxation (governed by states)
- Selling (books, financial services, travel - Data protection
services…) - Gambling activities
- Advertising
- Professional services (lawyers, doctors, estate
agents)
- Entertainment services
- Basic intermediary services (internet access,
transmission and hosting of info)
- Free services funded by advertising,
sponsorship…

Key elements
 Internal market clause → providers of online services are subject to law where established (NOT
where service is accessible)
Revised Payment Services Directive and new rules on cross border parcel delivery services
- New rule to stop unjustified geo-blocking (Dec 2018)
- Revised consumer protection rules (2020)
- New VAT rules for online sales (2021)
- GDPR → data protection and privacy (2018)
 Liability of Intermediaries NO liability for intermediaries, expect where illegal content is
notified, they MUST remove it.
the liability of intermediaries, stating that, under certain conditions, service providers are
not held liable for the information they transmit or store on behalf of their users.
 Online service providers who act as “mere conduit”, caching or hosting service providers
are NOT responsible for the info they transmit or host if they fulfil certain conditions
 In the case of hosting service providers, they are exempted from liability as long as:
o They do NOT have actual knowledge of illegal activity of info
o They obtain such knowledge or awareness and they act at once to remove or to
disable access to the information
 Operator have to comply with laws of the EU country where they have their registered
headquarters (NOT where the serves, email addresses are located) “country of origin rule”
the directive introduces the "country of origin" principle, meaning that service providers are
generally subject to the laws and regulations of the country where they are established. This
principle is aimed at promoting the free movement of services within the EU.
 Information Requirements Operators MUST publish basic info on their activities (name,
address, trade register number…) in a permanent and easily accessible form
 Commercial Communications: It addresses rules for commercial communications, including
requirements for unsolicited commercial communications (spam).Mandatory consumer info +
rules on online advertising and SPAM
 ADVERTISING=> Communications MUST be clearly identifiable as advertising
o Clearly identify the person/company responsible
o Promotional offers, games or competitions are clearly identifiable
o Conditions MUST be easily accessible and presented in clear and simple terms
 SPAM=> Unrequested e-mail MUST be clearly identifiable
o Companies who send out spam email MUST respect “opt-out registers”
o Member states can decline to outlaw Spam (ex: In Italy and Austria it is illegal to
send spam) (legislative decree no.196/2003 – Sections 121-132=)
 Electronic Contracts: The directive recognizes the legal validity of electronic contracts and sets
out principles for the conclusion of contracts through electronic means.
 All EU countries MUST give equivalent legal status to online contracts as paper contracts
 Consumers MUST be able to save and print out contracts and general conditions
 They MUST specify:
o The technical steps to conclude the contract
o Whether or NOT the contract will be filed by the service provider and whether
consumers can view it at a later stage
o How consumers can identify and correct typing errors before placing their order
o The languages in which the contract can be signed
 Online orders:
  The service provider MUST confirm receipt of the order without undue delay and
electronically
 The order is considered to have been received when the seller (consumer) is able to access it
 Some “home” laws will apply in case of consumers

EPRIVACY REGULATION=> Draft presented in January 2017, by the European Commission it is a

proposal for a new Regulation on electronic communications to consolidate rules across member
states and align with General Data Protection Regulation (into force May 2018).

 Establishes the principles of security and confidentiality of all forms of electronic communication
 Establishes "opt in consent" rules about the retention and use of traffic data in electronic
communications.
 It will repeal the Privacy and Electronic Communications Directive (2002)
 Unsolicited Marketing: opt in consent to marketing (including via email and SMS) =>spam
 Cookies: now tracked within software and the user’s browser rather than pop up consents from
individual websites
 Confidentiality: privacy requirements extend to including “over the top” providers like Gmail,
Facebook messenger, WhatsApp, and Netflix
 Penalties for noncompliance are up to Euro 20 million or 4% of total worldwide annual turnover,
whichever is higher.
 Broader than the GDPR because it extends beyond personal data to include:  Metadata (info
that makes the data easier to find e.g.: author, date modified, key terms)  Confidentiality of
communications data

SOCIAL MEDIA AND APPS

What are they selling?anytime a tech company is given you a service for free, you are the product!
Consumer IT contracts → PROBLEM: any 3rd parties and any kind of info!. FB → privacy setting
controversies “We may share your information with 3rd parties, including responsible companies
with which we have a relationship” Following the Cambridge Analytica scandal, FB users now have
more control over privacy settings.

TRENDS= INTERNET OF THINGS, WEREABLE TECH, BIG DATA

1) INTERNET OF THINGS

It is network of physical object, devices, vehicles, buildings and other items, which are embedded
with electronics, software, sensors and network connectivity, which enables these objects to collect
and exchange data. (it’s really about communications). Es: ex: smart grids, smart homes, intelligent
transportation, smart cities

 allows objects to be sensed and controlled remotely across existing network infrastructure
 creates opportunities for more direct integration of the physical world into computerbased
systems
 improves the efficiency, accuracy and economy benefit
 BUT=> more device that listen to us, monitoring us, tracking us, recording us
 Countries with highest penetration of IoT: CHINA, USA, JAPAN, KOREA, GERMAN

RISKS AND LEGAL ISSUES:

 DATA PROTECTION/PRIVACY
 Data Collection and Consent: IoT devices often collect vast amounts of data. Ensuring user
consent for data collection, storage, and processing becomes challenging, especially when
users may not be fully aware of the extent and implications of data collection.
Key issues for businesses using IoT:
 Filtering vast amount of data so that personal data that is irrelevant is NOT collected
 Risk that data may be re-purposed → consent only given for purpose it was originally
collected
 With many IoT applications operating together and communicating with each other
autonomously, data subjects will be unaware of all the processing taking place
 Difficult to give right consent and exercise their rights in respect of the data collected.
Data Transparency: IoT devices and platforms may not always be transparent about their data
practices. Users might be unaware of what data is being collected, how it's used, and with whom
it's being shared.
Data Storage and Retention: Clear policies on data retention and the duration for which data is
stored may be lacking. Prolonged storage of IoT data increases the risk of unauthorized access
and potential privacy violations.
 NETWORK SECURITY RISKS=> lack of security credential for devices
Device Vulnerabilities: IoT devices may have security vulnerabilities that could be exploited by
malicious actors, leading to unauthorized access to sensitive data.
Data Integrity: Ensuring the integrity of data transmitted and received by IoT devices is crucial to
prevent unauthorized modifications or tampering.
 MANAGING BIG DATA

REGULATION

US REGULATION

 US regulators are also starting to focus on privacy and security

 The Technology industry must start adopting some industry standards on this – by designing
into the system security and privacy features from the start
 The US regulator (FTC, 2015) – no need for specific IoT legislation yet
 Issued non-binding guidance - “it’s up to industry to do right by their customers”
 Recommendations for device manufacturers to improve security standards
 Recommended - strong, flexible, and technology-neutral legislation that requires companies
to tell customers when there's a security breach
 Cyber security Act (2020) : sets minimum security standards for devices connected for
Federal Government use (note: does not apply to consumers) * Will be interesting to see if
manufacturers decide to implement the same security standards for all products, also in
private sector

EU REGULATION None specifically for IOT.

o Balancing privacy with need to stimulate innovation.

o Network and Information Security Directive (EU) – obliges “operators of essential services”
to implement appropriate cyber-security measures (NIS).
o Some coverage through GDPR (May 2018)

EUROPE’S ARTICLE 29 WORKING PARTY=> Focus on some concerns about data protection. Key
concerns raised in WP Opinion:
  Loss of control → over personal data which is communicated between individuals, devices
and backend systems
 Low-quality consent → NO obvious point at which the end user can give consent to IoT
devices and NO alternatives to the end user’s personal data being created, stored or shared -
Risk of re-purposing data → collected for a purpose BUT used for another
 Intrusive identifications → of behavior patterns and user profiling
 Limitations in remaining anonymous → while using services (wearing IoT objects that are
close to the data subjects results in a range of identifiers being available (ex: MAC address)
with re-identification of anonymized data also an issue
 Security risks → low quality security can make the data vulnerable to being attacked at
various points

WP Opinion published (October 2014) focusing on:

 Wearable technology → clothes, watches and contact lenses that have embedded sensors,
microphones and camera that can record, monitor and communicate data.
 Quantifies self → pedometers or sleep monitors allow individuals to record and monitor their
lifestyle o Home automation (demotics) → connected households using smart fridges, lighting
and security systems

2) WEAREBLE TECHNOLOGY=> Wearable technologies refer to electronic devices that can be

worn as accessories or embedded in clothing. These devices are designed to collect,
monitor, and transmit data, often related to health and fitness, communication, or other
aspects of daily life. Here are some key aspects of wearable technologies:
1. Types of Wearables:
 Fitness Trackers: Devices that monitor physical activity, heart rate, sleep patterns, and other
health-related metrics.
 Smartwatches: Watches with additional features such as notifications, apps, and health tracking.
 Smart Glasses: Glasses that display digital information, such as augmented reality content.
 Wearable Cameras: Devices that capture photos or videos from the user's perspective.
 Health Monitors: Devices for monitoring specific health conditions, such as glucose levels or
blood pressure.
3) BIG DATA=> is a broad term for data sets. Big Data refers to large volumes of structured and
unstructured data that is generated at a high velocity, and sometimes with varying levels of
variety, complexity, and veracity. This data, when effectively processed and analyzed, can
provide valuable insights, patterns, and trends that may not be readily apparent with
traditional data processing methods. The concept of Big Data is often characterized by the
three Vs: Volume, Velocity, and Variety.
Challenges:
Privacy and Security: Protecting sensitive information within large datasets.
Data Governance: Managing and ensuring the quality of data.

Quiz

3. Name the legislation which regulates "internet of things"

None specifically
 Cloud computing now touches many parts of our personal and professional lives. What is/are
some of the factor(s) which have facilitated the massive growth of the industry in recent years?
Increased reliability of the Internet plus advances in encryption

1. In which situation may a data controller process sensitive data? The data subject has made the
data public

PRIVACY AND DATA PROTECTION

Data protection is relevant because:

 Economic and social integration of Europe has led to huge increase in exchange of personal data
between public and private entities
 Rapid technological developments and globalization led to massive increase in collection and
sharing of data (ex: social media)
 Personal data protection is considered a human right
PERSONAL DATA=> Personal data” → any information relating to an identified or identifiable
natural person (“data subject”) Personal data refers to any information that relates to an
identified or identifiable individual. This can include a wide range of information, and it's not
limited to just sensitive data.
including name, ID number, location data, online identifier, physical, phycological, genetic,
mental, economic, cultural or social identity (MUST be a living individual → protection of
personal data dies when natural person dies) (ex: only the name is NOT sufficient, name,
address, date of birth yes).
 BOARD DEFINITION
 TECHOLOGY NEUTRAL
 DOESN’T MATTER HOW PERSONAL DATA IS STORED

KEY DEFINITION

 “Processing” → any operation or set of operations which is performed on personal data,

whether or NOT by automated means, such as collection, recording, organization,
structuring, storage, adaptation or alteration, retrieval (going back to database),
consultation, use, disclosure by transmission, dissemination or otherwise making available,
alignment or combination, restriction, erasure or destruction. (very broad definition)
 “Data controller” → the responsibility for compliance rests on the shoulders of the
“controller”, meaning the natural person/entity which alone or jointly with others
determines the purpose, conditions and means of processing personal data
 “Data processor” → a natural or legal person, public authority, agency or other body which
actually processes personal data on behalf of the controller (ex: billing processor, call center,
consultant) Important to know difference between controller and processor
  Pseudonymization” → the processing in such a manner that the personal data can NO longer
be attributed to a specific data subject without the use of additional information accessible
elsewhere (ex: Author Mrs. Silence Doogood is a pseudonym for Benjamin Franklin)
Ex: clinical medical trial → for privacy reasons the observer of the published material of the
clinical trial CANNOT see the names of patients as a pseudonymization is used (patient
a,b,c…). The hospital, however, has a list (additional info) linking patient to the actual person
and can decode the puzzle. Living individual CANNOT be identified unless additional
information from elsewhere (it’s like you need a code) ≠ Anonymization → personal data is
strict (ex: 48 years old in Milan)
 Consent” → any freely given, specific, informed and unambiguous indication of the data
subject’s whishes by which he/she by statement or clear affirmative action, signifies
agreement to the processing of personal data relating to him/her

It's important to note that the definition and categorization of personal data can vary, and data
protection laws, such as the General Data Protection Regulation (GDPR) and others, provide specific
guidelines on how such data should be handled by organizations. These laws also grant individuals
certain rights regarding the processing of their personal data, including the right to access, rectify,
and delete their information. Organizations that handle personal data are obligated to comply with
these regulations to ensure the privacy and protection of individuals' information.

ART 9 GDPR=> SPECIAL CATEGORIES OF PERSONAL DATA

Article 9 of the General Data Protection Regulation (GDPR) pertains to the processing of special
categories of personal data. Special categories of personal data, often referred to as sensitive
personal data, are considered more sensitive, and the GDPR imposes additional safeguards on their
processing due to the increased risks to individuals' rights and freedoms.

Special categories of personal data include information revealing:

 racial or ethnic origin,

 political opinions,
 religious or philosophical beliefs,
 trade union membership,
 genetic data,
 biometric data for the purpose of uniquely identifying a natural person,
 health data, and data concerning a natural person's sex life or sexual orientation.

Article 9(2) provides specific conditions under which the processing of special categories of personal
data is allowed, such as when processing is necessary for the establishment, exercise, or defense of
legal claims, reasons of substantial public interest, public health, archiving purposes in the public
interest, scientific or historical research purposes, or statistical purposes.

Processing of these special categories of data is prohibited unless:

 CONSENT => The data subject has given explicit consent to the processing of their sensitive data
for one or more specified purposes.
 Employment → necessary for carrying out obligations/rights of the data controller or data
subject in employment or social security (ex: if prof. is Covid positive, university needs to know +
give info about your medical condition as employer as to pay for insurance)
 Publicly disclosed → already made public data subject - Legal claims - Public interest (when it
affects enough of society)
 Medicine → preventative or occupational medicine, diagnosis, provision of health care
 Public health → protecting against serious cross-border threats to health/ensuring high quality
care (ex: temperature checks for Covid)
 Research → archiving, scientific, historical research, statistics
 VITAL INTERESTS=> Processing is necessary to protect the vital interests of the data subject or of
another natural person where the data subject is physically or legally incapable of giving
consent. (ex: someone is unconscious for a car accident BUT urgently needs medical care, for the
vital interest we do a checkup without consent)
 MEMBERSHIP ORGANIZATION=> Processing is carried out in the course of legitimate activities by
a foundation, association, or any other not-for-profit body with a political, philosophical,
religious, or trade union aim and on condition that the processing relates solely to the members
or to former members of the body or to persons who have regular contact with it in connection
with its purposes and that the data is not disclosed outside that body without consent.

DATA PROTECTION DEVELOPMENT

1. OEDC Guidelines

In 1980 → in an effort to create a comprehensive data protection system throughout Europe, the
OECD issued “Guidelines for the Protection of Privacy and Trans-Border Flows of Personal Data”.
OECD Guidelines → 7 principles (these same principles were picked up for the UE Directive). This
guidelines are NOT BINDING

 Notice → data collection should be limited and data subject should be given notice when their
data is being collected (ex: privacy notice → we collect these data to carry out the service)
 Purpose → data should only be used for the purpose stated and NOT for any other purposes
 Consent= data should NOT be disclosed without the data subject’s consent or by authority of law
 Security → collected data should be kept secure from any potential abuses (ex: British Airways
site got hacked and hacker got credit card info)
 Openness → data subjects should be informed as to who is collecting their data and why, and
should be infirmed of policies/changes of data controller
 Access → data subjects should be allowed to access their data and make corrections to any
inaccurate data
 Accountability → data controller should be accountable for compliance

However, ALL 7 principles were later incorporated into EU Data Protection Directive (1995)

2. 1981 Convention for the Protection of Individuals with regard to Automatic Processing of
Personal Data

1981 Convention (convention → multilateral agreement that agrees to a standard set of terms and it
is ratified into local law by states) In 1981 → Convention for the Protection of Individuals with regard
to Automatic Processing of Personal Data was negotiated by Council of Europe Convention requires
enactment of legislation → many countries did Diverging data protection legislation with Europe was
an obstacle to free flow of data within EU → as a result → proposal for Data Protection Directive

3. EU Data Protective Directive 1995

EU Directive → legislative act that sets out a goal which the member states MUST achieve. It is a
framework that all member states need to implement into local law (indeed, differences across
countries may be present as a result of different local country’s implementations). It is complicated
and costly to comply. (ex: a multi-jurisdictional survey must be carried out)
 Adopted in 1995
 Regulates the processing of Personal Data in the EU
 Note: it’s a framework legislation → difficulty is that each member state implemented the
directive into local law with some differences. Therefore, NO consistent EU wide approach
 Applies NOT only when the controller is established within the EU, BUT whenever the controller
uses equipment situated within the EU in order to process data
 Controllers from outside the EU, processing data in the EU, will have to follow data protection
rules
 In principle, any online business trading with EU residents would process some personal data
and would be using equipment in the EU to process the data (ex: customer’s computer)
 Therefore, the website operator would have to comply with the European data protection rules

EU Data Protection Directive principles (like OECD Guidelines principles):

 Personal data should NOT be processed at all, except when certain conditions are met
 Conditions fall into 3 categories (principles):
o Transparency→ the data subject has the right to be informed when his personal data is
being processed. Data controlled MUST provide:
- Name and address
- The purpose of processing
- The recipients of the data
- All other info required to ensure the processing is fair (Art 10 and Art 11)

Data may be processed only under the following circumstances (Art 7)

 When the data subject has been given consent (easiest way)
 When the processing is necessary for the performance of or entering into a contract (ex: online
sale need your credit card number + your address)
 When processing is necessary for compliance with a legal obligation
 When processing is necessary in order to protect the vital interest of the data subject
 When processing is necessary for the performance of a task carried out in the public interest
 When processing is necessary for the purposes of the legitimate interests pursued by the
controller or by the 3rd party to whom the data are disclosed (except where overridden by the
interest of the data subject)
 The data subject has the right to access all data processed about him
 The data subject even has the right to demand the rectification, deletion or blocking of data that
is incomplete, inaccurate or is NOT being processed in compliance with the data protection rules
(Art 12)
o Legitimate purpose personal data can only be processed for specified, explicit and
legitimate purposes and may NOT be processed further in a way incompatible with
those purposes (Art 6b)
o Proportionality personal data may be processed only insofar as it is adequate,
relevant and NOT excessive in relation to the purposes for which they are collected
and/or further processed (ex: delete data which is NO longer needed).
- Data MUST be accurate and kept up date.
4) All steps MUST be taken to ensure that data which are inaccurate or incomplete are erased
or rectified.
- Data should NOT be kept for longer than is necessary for the purposes for which the
data were collected or for which they are further processed
 - Extra restrictions apply to sensitive personal data (Art 8)
- The data subject may object at any time to the processing of personal data for the
purpose of direct marketing (Art 14)
4. EU General Data Protective Regulation 2018 (GDPR)

The General Data Protection Regulation (GDPR) is a comprehensive data protection and privacy
regulation that came into effect on May 25, 2018, in the European Union (EU) and the European
Economic Area (EEA). It replaced the Data Protection Directive 95/46/EC and introduced significant
changes to data protection laws, aiming to strengthen and unify data protection for individuals
within the EU/EEA.

The GDPR represents a significant step in data protection, emphasizing transparency, accountability,
and the rights of individuals over their personal data. Organizations that process personal data of
individuals in the EU/EEA must adhere to its provisions to ensure the protection of individuals'
privacy and data rights.

SUMMARY. Here are key aspects of the GDPR:

A. Scope: Territorial Scope: The GDPR applies to the processing of personal data of individuals
in the EU/EEA, regardless of where the processing takes place. It also applies to
organizations outside the EU/EEA that offer goods or services to, or monitor the behavior of,
individuals in the EU/EEA.
B. Key Principles:
Lawfulness, Fairness, and Transparency: Personal data must be processed lawfully, fairly,
and transparently.
Purpose Limitation: Data should be collected for specified, explicit, and legitimate purposes
and not further processed in a manner incompatible with those purposes.
Data Minimization: Only the necessary data for the intended purpose should be collected
and processed.
Accuracy: Personal data must be accurate, and steps should be taken to ensure it remains
accurate.
Storage Limitation: Data should not be kept longer than necessary for the purposes for
which it is processed.
Integrity and Confidentiality: Organizations must implement appropriate security measures
to protect personal data.
C. Individual Rights:
Right to Access: Individuals have the right to obtain confirmation of whether their data is
being processed and, if so, access to that data.
Right to Rectification: Individuals can request the correction of inaccurate or incomplete
personal data.
Right to Erasure (Right to be Forgotten): Individuals have the right to request the deletion of
their personal data under certain circumstances.
Right to Restriction of Processing: Individuals can request the limitation of processing in
certain situations.
Right to Data Portability: Individuals can receive their personal data in a structured,
commonly used, and machine-readable format.
Right to Object: Individuals can object to the processing of their personal data in certain
situations..
 D. Data Protection Officers (DPO):Certain organizations are required to appoint a Data
Protection Officer, responsible for overseeing data protection strategy and implementation
to ensure compliance with the GDPR.
E. Data Breach Notification:Organizations must report data breaches to the relevant
supervisory authority within 72 hours of becoming aware of the breach, unless the breach is
unlikely to result in a risk to the rights and freedoms of individuals.
F. Penalties: The GDPR introduces substantial fines for non-compliance. Organizations can be
fined up to 4% of their annual global turnover or €20 million, whichever is higher.

NB EU Regulation → binding legislative act that needs to be activated into local law exactly the
same in all member states’ jurisdictions (specific and conclusive) We are moving from directives to
regulations (know the difference!)

 Effective from 25 May 2018 (replacing EU data protection Directive)

 New, higher standards of privacy protection
 Removes differences between Member States – one set of rules for companies operating in
Europe. All business that process EU citizen’s personal data will be affected including those that
are established outside the EU
 focus is on the data subject, NOT the data controller  GDPR applies to individual who can be
customers, employees, suppliers, 3rd parties. Ultimate responsibility → data controller
 Increased penalties → applies to both controller and processor, meaning that the “cloud” will
NOT be exempt from GDPR enforcement. Tiered approach: (2 tiers, one for less and one for
most severe breaches)
o Penalty 2% annual revenues for NOT having records in order (Art 28), NOT notifying of
breach
o Up to 4% of annual revenues for insufficient consent / violating privacy by design
concepts
 Territorial Scope: The GDPR applies to the processing of personal data of individuals in the
EU/EEA, regardless of where the processing takes place. It also applies to organizations outside
the EU/EEA that offer goods or services to, or monitor the behavior of, individuals in the EU/EEA.
Personal data may only be transferred to 3rd parties outside the EU if they:
o Guarantee an adequate level of protection, or
o Data subject agrees to the transfer, or
o Binding corporate rules / model contract clauses have been authorized=>
Binding corporate rules=> Privacy protection can be at an organizational level, where a
multinational organization produces and documents its internal controls on personal
data (like a code of conduct). For transfers of personal data internationally within the
same corporate group to countries that do NOT provide “adequate protection”.
Model clauses: European Commission has approved a standard set of contractual
clauses that a company can enter into to offer adequate safeguards regarding data
protection.
Extra territorial applicability: One of the biggest changes is that GDPR will apply to the
processing of EU citizen’s data regardless of company’s location. Previously, the DP Directive
referred to data process “in the context of establishment” (some kind of link had to be present).
GDRP applies when a non-EU company:
o Offers goods/services to EU citizens (even if NO payment is required, ex: search engine)
(it affects all data-driven companies)
 o Monitors behavior that takes place within EU In these cases, the non-EU company MUST
appoint a representative in EU
The new EU Data Protection Regulation extends the scope of the EU data protection law to
all foreign companies processing data of EU residents, regardless of the company’s location
o Businesses will have to carry out privacy impact assessments prior to processing
personal data
o Rules on what constitutes a legitimate “opt-in” consent are stricter
o Further stricter rules apply to special categories of sensitive personal data (ex: biometric
data)
o It is a regulation which all member states MUST adopt consistently → removes
differences between member states → 1 set of rules for all companies operating in
Europe - Significant penalties → up to 4% of annual worldwide revenues or 20 million
euros (rather than small fines) → indeed, higher compliance
o All companies MUST notify data breach within 24 hours (ex: loss of data subject’s info
from the company by a 3rd party, ex: hacking)
o Right to be forgotten (ex: Google case)
o Data portability provisions (how customers can move their data from one provider to
another)
o Appointment of Data Protection Officer for larger companies

 Privacy shield (for transfers to the US)

The Privacy Shield was a framework for regulating transatlantic exchanges of personal data for
commercial purposes between the European Union (EU) and the United States. It was designed
to provide a legal mechanism for U.S. companies to meet the data protection requirements
when receiving personal data from the EU. The framework aimed to ensure that the transfer of
data between the EU and the U.S. complied with the EU's data protection standards.
Replacement for Safe Harbor: The Privacy Shield was introduced as a replacement for the Safe
Harbor Framework, which was invalidated by the European Court of Justice in 2015 in the
"Schrems I" case due to concerns about the lack of privacy safeguards for EU citizens' data when
transferred to the U.S.
EU-US Privacy Shield:
 Became operational in August 2016
 Framework which protects fundamental rights of EU citizens data when transferred to US for
commercial purposes
 Regular reviews of companies’ compliance by Department of Commerce
 Safeguards on US government access to data
 Commitment against mass surveillance on data transferred
 Effective protection and redress for individuals Appointment of an Ombudsman
 On-going annual joint review of EU & US
How does Privacy Shield work?
 Self-Certification: U.S. companies that wanted to receive personal data from the EU had to self-
certify their compliance with the Privacy Shield principles US companies need to register to be
on the privacy shield and self-certify compliance
 Department of Commerce monitors activities and verifies compliance  he U.S. Department of
Commerce played a role in overseeing and enforcing the Privacy Shield framework.

GDPR applies to individual who can be customers, employees, suppliers, 3rd parties. Ultimate
responsibility → data controller GDPR key requirements: (need to know!!)
 1) Legitimate basis for data → organization MUST know and be able to prove that processing
of personnel data has a legitimate purpose
2) Information you hold → organization should keep data only in so far as necessary
3) Individual rights → individuals have the right to ask questions about their personal data (ex:
what info are you holding about me?
4) Consent → there should be explicit and clear consent for processing of personal data, easy
to understand and withdraw. Sensitive data requires “opt-in” consent, other data requires
“unambiguous” consent (ex: click the button)
5) Children’s data → explicit consent of the child’s parents (or guardian) for minors less than 16
years of age for online services
6) Privacy notices → organizations MUST transparently state their approach to personal data
protection in a privacy notice
7) Data breaches → organizations MUST maintain a data breach register and, based on risk the
regulator and data subject should be informed within 72 hours
8) Privacy by design → mechanisms to protect personal data should be incorporated in design
of new systems and processes
9) Privacy impact assessment → organizations MUST conduct a privacy impact assessment to
review the impact and possible risks
10) Data Protection Officers → organizations should assess the need to assign a Data Protection
Officer (public authorities, large scale systematic monitoring, large scale processing of
sensitive data)
11) Third parties → the controller of personal data has the responsibility to ensure that personal
data is protected by 3rd parties (ex: if a company provided personal data to a supplier, it has
to ensure that the supplier complies with GDPR, usually through ethics conducts or clauses
within the contract)
12) Awareness → among staff about key principles on data protection, conduct regular training

Proposal for a new E PRIVACY Regulation on electronic communications (so specific to online
activity, GDPR is general) presented in January 2017. The proposed regulation was intended to
replace the existing ePrivacy Directive (2002/58/EC) and harmonize privacy rules across the
European Union (EU) member states. The regulation aimed to address the confidentiality of
electronic communications, including the processing of personal data and the use of tracking
technologies like cookies.

 It establishes “opt-in consent” rules about the retention and use of traffic data in electronic
communications
 The ePrivacy Regulation aimed to extend the privacy rules to cover not only traditional
telecommunications services but all forms of electronic communication also new communication
services. It now applies to all forms of “over the top” electronic communications (NOT just
emails and websites). It includes voice over IP (Skype, Facetime), instant messaging (WhatsApp,
iMessage) and web-based email services (Gmail)
 Streamline consent for “cookies”  The proposed regulation included provisions to enhance
user control over cookies and other tracking technologies. It required explicit user consent for
the use of cookies, with limited exceptions for certain types of cookies necessary for the
functioning of a service.
 Protection against “SPAM” (unsolicited mail, illegal in Italy)  The proposed regulation included
provisions to enhance user control over cookies and other tracking technologies. It required
explicit user consent for the use of cookies, with limited exceptions for certain types of cookies
necessary for the functioning of a service.
 Businesses in the digital advertising industry or those who operate an electronic
communications service or “big data” or “analytics” will be more significantly affected

REGULATION IN USA

US approach: Data protection in the United States does not have a comprehensive, federal-level
privacy law similar to the General Data Protection Regulation (GDPR) in the European Union.
Instead, the United States has a patchwork of sector-specific and state-level privacy laws that govern
the protection of personal information in various context

 The US has NO single federal data protection law comparable to the EU’s Data Protection regime
 Sector-Specific Laws: Privacy legislation is adopted on an ad hoc basis specific to sectors (ex:
video privacy act, fair credit reporting act)
 US relies on combination of legislation, regulation and self-regulation
 State-Level Privacy Laws=Some consumer privacy laws coming from the states (NOT federal law)
 Give priority to technology innovation (not privacy)
US Federal Law:
 Sectors with specific privacy laws: (they don’t look at the data subject but specific sectors!)
- Financial services (Gramm Leach Bliley Act, fair credit reporting act)
- Healthcare (HIPAA)
- Telco
- Education (Family Educational Rights and Privacy Act)
→ NO specific regulator → FTC (Federal Trade Commission) sets the tone
US Privacy Act 1974:
 Rights of US citizens to access data held by government agencies (NOT private companies)
 Right to correct errors
 Agencies should follow data minimization principles when collecting data – “relevant and
necessary”
 Access data on need-to-know basis
 Sharing data between agencies is restricted

HIPAA (Health Insurance Portability and Accountability Act) 1996

 Security rule → data protection

 Privacy rule → who gets to see medical data (family, healthcare provider). Marketing
requires specific authorization
 Safeguards to limit “unnecessary or inappropriate” access to protected health data

How is privacy on the internet dealt with? → in the US, it is NOT → the internet is deregulated

 Federal Trade Commission Act (1914) (→ very old, NOT tech specific) has been used against
social media companies
 Section 5 prohibits “deceptive practices”
 FB was sued by FTC → agreed a $5billion settlement → told users it won’t sell their data when
they did!

States laws:

 State laws protect a wide range of privacy right of individual

 Large differences between states
 Areas covered differ from protecting library record to keeping homeowners free from drone
spying
States laws – CCPA (California Consumer Privacy Act) (2000)

 Provides some consumer data privacy (NO equivalent to federal law)

 Consumers have the right to access data
 Businesses CANNOT sell personal information without providing a web notice + optout (active
action is needed)
 Very broad definition of personal data (biometric, geo-localization, browsing history, email)
- *may impact data-driven business models

CCPA → Californian → lower standard but better the nothing. Other states are following California →
Nevada, Maine, Massachusetts, NY, Hawaii, Maryland and ND

ExtraTerritoriality → Businesses may be subject to both federal and state data protecting
laws for activities impacting US residents whose information the business collects, holds,
transmits or shares.

CASE OF STUDY

NSA v Edward Snowden Edward Snowden → American former US Government contractor copied
classified info from National Security Agency (NSA) in 2013 without authorization.

Info revealed numerous global surveillance programs run by NSA with secret service from Australia,
UK and Canada. He was charged with espionage and is currently living in temporary asylum in Russia.
NSA was harvesting millions of email and instant messaging contact lists, searching email content,
tracking and mapping locations of cell phones and undermining attempts at encryption.

Using tools by internet advertisers to pinpoint targets for government hacking and to bolster
surveillance. Secretly taping into Yahoo and Google data center to collect info from hundreds of
millions of account holders worldwide. Leaked documents showed the NSA had been involved
tracking:

 Online sexual activity of people they termed “radicalizers” in order to discredit them
 Charities including UNICEF as well as allies like the EU chief and Israeli Prime Minister
 122 “high ranking leaders” including Chancellor Merkel of Germany 90% of those monitored
were ordinary Americans.

Snowden though that spying program would be struck down by the Courts as unconstitutional. Why
is this important? → after September 11 we lost huge amount of privacy → gov said it’s more
important to be safe than privacy

Post Snowden: Pres. Obama issued a directive stating that data collection by intelligence services
should be target to: (so, don’t stop the spying but make it more targeted)

 Espionage (spying) , Terrorism, Weapons of mass destruction, Threats to cyber security/armed

forces ,Transnational criminal threats

Google case (2014) → “Right to be forgotten” Spanish individual google searched a news article
which reported historical nonpayment of debts relating to land holding (Costeja Case). He made
complaint to Spanish Data Protection Authority and then it went all the way to the ECJ (European
Court of Justice). ECJ → Google MUST respond to requests to have information removed Google did
NOT write the article, it just searched it! Ruling allows individuals to request removal of info which is
“inadequate, irrelevant or NO longer relevant”. Google now needs to create processes to
accommodate requests to have links to their names removed. Exemption for companies listed ad
“media” (newspapers, journalists). It’s interesting that newspaper can keep the link BUT Google
NOT. (so, info is still available BUT Google CANNOT amplify its effect in such disproportionate way).
It is reflected in new GDPR. Google has removed a total of 3.8 million URL’s since 2014. 90%
requested by private individuals. Google complied with 44% of requests for erasure.

ECJ is currently deciding the limits of the rule:

 What type of info should be delisted? Should sensitive personal data be automatically removed
upon request? (ex: religious affiliation)
 Are search engines required to delete links globally or only within the EU? (ex: only from
European Google or also [Link]?) Decision → they are NOT required to delete globally (ex:
only from EU sites, NOT from US sites) (it’s about balancing interests)
France, Germany and UK have the most requests.

Google case influence around the world → data protection authorities and courts in Canada, India,
Colombia and Brazil are also considering similar right to be forgotten GDPR Art.17 “Right to be
Forgotten” (important)

 Data subject shall have the right to make the controller to erase personal data and block further
dissemination with 3rd parties
 Burden of proof reversed → controller MUST show the data is still relevant
 Google does NOT have to comply with all requests → it can refer the request to the information
commissioner in the relevant country
 Non-EU companies MUST comply when offering services to EU consumers
 Balance freedom of expression and the press

Specifically, Art 17 GDPR: Data subject shall have the right to erasure of PD when:

 No longer necessary for purposes collected

 Withdrawal of consent
 Data subject objects to processing and NO legal grounds
 Unlawful processing
 In compliance with legal obligations
 PD collected relating child without appropriate consent by parent (under 16 years)
Video → Issues regarding privacy and freedom of speech → find the right balance

FBI v Apple - Recent case of privacy, February 2016

 FBI asked Apple to unlock an iPhone 5C used by 2 terrorists who killed 14 people in California in
December 2015
 Apple refused arguing that the order goes too far and that bypassing the password means
creating a “backdoor” in its iOS mobile operating systems that could be used to access every
other iPhone.
 Apple was able to give the FBI backups only up to October 19, BUT terrorists stopped backing up
the phone - FBI wanted to access data on the phone
 The iPhone was locked with a passcode, 10 tries to enter correct passcode or all data would have
been wiped clean
 FBI wants Apple to deactivate function that wipes data clean after 10 password tries
 Even if they do, delay feature means it may take 5,5 years to brake 6-digit code

What does the FBI want Apple to do?

 Create a “backdoor” into passcode protected phone
 Create a new, custom version of iOS o Disable the auto-wipe function o Disable the delay that
limits how quickly new passcodes can be entered
 Add a way to attach a cable or wirelessly connect to the iPhone so the FBI can automatically
enter passcodes with a supercomputer

What data does FBI want?

 Text messages, iMessage, photos, videos, contact list and call history + audio recordings
 Any additional email accounts or social networking accounts
 To see who the terrorists were speaking to, whether they were part of a terrorist cell, whether
other terrorist acts were planned?

Why wouldn’t Apple comply? (stated reasons)

 Creating the software will ultimately endanger all other phones as hackers and governments
could steal it risking the privacy of all iPhone users
 It will create a precedent for future government requests for newer models of iPhone
 BUT Apple has complied with other court orders in the past “You can’t have a back door that’s
only for the good guys” Tim Cook (interview 2015)
Why wouldn’t Apple comply? (real reasons?)
 Possibly, Apple really believes it has civic duty to protect customers personal info
 Possibly, Apple is tired of complying with law enforcement requests to hack its own phones
 Probably, Money→ After Snowden scandal → This shows Apple devices are secure so more
people will buy them!
Who agrees with Apple?
 The tech industry → the Information Technology Industry Council, a lobbying group that
represents Google, FB, Microsoft, Samsung, Blackberry
 Edward Snowden → “the FBI is creating a world where citizens rely on Apple to defend their
rights, rather than the other way around”

Resolution → one day before the hearing was supposed to happen, the government found a 3rd
party able to assist in unlocking the iPhone. On March 28, 2016, the FBI had unlocked the iPhone
and withdrew its request.

Cambridge Analytica case (political)

 British political consulting firm which combined data mining, data brokerage and data analysis
with strategic communication during the electoral process
 Used by Trump Campaign in 2016
 Rumored to be used in Brexit BUT recent Information Commissioner investigation said it was
limited (2020)

Facebook: - In March 2018 media reported that CA had acquired and used personal data about FB
users from an external researcher who told FB he was collecting it for academic purposes

 Gleaned info from FB app “this is your digital life” from users and “their friends’ networks”
without their permission
 Only 270.000 users installed the app BUT due to FB’s sharing policies, the app was able to
gather data on millions of their friends
 Approximately 87 million users were affected
CA’s methodology:
 CA used a Data Profiling System using general online data → “likes”, demographics, consumer
behaviors, internet connectivity
 Personality data derived from online surveys
 Used “behavioral micro-targeting” to predict the “needs” of subject and tailor voter contact
scripts to influence voters
“Today in the United States we have somewhere close to four or five thousand data points on
every individual...so we model the personality of every adult across the US, some 230 million
people” → CE of CA, 2016
FB was fined half a million pounds (NOTHING!) by ICO (UK), the maximum under the Data
Protection Act (UK) for failing to safeguard user’s data and inform them on their data was being
harvested. If FB would have been fined after May 2018 → GDPR applies → 4% of annual
worldwide revenues as fine

FB data breach: - September 2018 → FB announced an attack on its computer network had exposed
the personal info of nearly 50 million users

 Attackers exploited a feature in FB’s code to gain access to user account and potentially take
control of them
 3 software flaws in FB’s systems allowed the hackers to break into accounts
 After a video-uploading program was introduced a flaw in the system which allowed hackers to
steal “access tokens” (digital keys that keeps you logged in without having to enter your
credentials every time you log in)
 Attack could have happened as far back as July 2017 - EU authorities are investigating legal
action
 If found guilty of breaching GDPR, FB faces a fine up to 4% global revenues (on $40 billion)
 Also faces a class action in California

Impact of scandal for FB:

 Impact share-price (at one point down 24% → $123 billion in market value)
 Adverting revenue down
 Congress ordered a hearing into the breaches and required Mr. Zuckerberg to respond
 Will US lawmakers hit back with new regulation of social media or leave selfregulation?

“Pop Quiz”

A. What is personal data? → data which identifies a living individual

B. What are special categories of sensitive personal data? → data relating to health, religion,
trade unions, membership, sexual life, political opinions
C. What is the right to be forgotten concept? → individual can request erasure of info which is
“inadequate, irrelevant or no longer relevant”. Reflected in GDPR (does NOT apply to media
companies)
D. Why did we need a new EU Regulation? → to provide a uniform European law across all 27
member states and to adapt laws to the post-internet world

2. Which statement is true about the data breach notification obligation? It must be done within
72 hours of becoming aware of the data breach, must describe the nature of data affected,
provides details, describe the likely consequences, measures taken to mitigate the loss
3.
4. What are the penalties for non-compliance with the proposed privacy regulation?
Up to 20 M euro or 4% of global annual revenues
HARMONISATION OF COMMERCIAL LAW

Harmonisation= SET OUT A FRAMEWORK FOR PRINCIPLES O F LAW BUT DOES NOT REPLACE
EXISTING SYSTEM WITH A WHOLE NEW SYSTEM. The main objectives are:

 Eliminate major differences

 Create minimum requirements and standards= to reduce differences
 Incorporate different legal system under a basic framework

WHY WE NEED TO HARMONISE? In order to transact internationally they need to be rules of

engagement. Conflict of law= when parties don’t choose a governing law in an international
contract.

 It is necessary to reduce the complexity, so the difficulties and expenses connected with
familiarising oneself with foreign laws and regulation. Costs to have different type of rules,
whit harmonisation we have a unique one the sum up all the law to create a unique point of
view.
It is also risky to have different type of law, because it is difficult to apply them and choose
which one govern.
 Risk of wars and conflicts will be reduced trough trade and trust
 Unity based on universal private law is no longer objective= because it is difficult to have
everyone on board, every one what his rule and opinion. It is not longer the objective
because it is no longer impossible= so the objective is not to unify law but accept reality
HARMONIZATION IS NOT THE SAME THING OF UNIFICATION= because it is practically
impossible.

It is easier to harmonize conflicts rules rather than harmonize substantive law. (actual law).

PROCESS= it might happen in the UN

1. Economic benefit analysis= the harmonization must have an economic payback

2. Which agency is most suitable for the project?
3. What does the current law say about those issues? Survey of current legal environment
4. Approval of project by agency
5. Establishment of study or working group
6. What type of instrument?
7. Distribution of drafts and meetings
8. Approval of text

PROBLEMS OF HARMONISATION

 Tensions in international conventions

 Technical problems= Differences in legal concepts • Drafting and language • Interpreters
 Organizational problems= Long and complicated process • Document management •
Expensive! • Limited frequency of meetings

INSTRUMENT OF INTERNATIONAL HARMONIZATION

1. BILATERAL OR MULTILATERAL TRATIES OR CONVENTION

In this case we achieve unification, the same law for every one that sign it. required ratification and
implementation into domestic law or which created themselves uniform laws applicable to all
contracting states. ADVANTAGES= CERTAINTY OF LAW it is the same everywhere, UNIFEROM
APPLICATION OF LAW.

DISADVANTAGES= it is hard to do, because it takes time to find an agreement between different
states. The first step is ratification than implementation in the domestic law.

 Local ratification is difficult= Many Conventions have never come into force
(implementation). It is because there is lack of sufficient interest from Government,
difficulties in reconciling with local laws, pressure from lobby groups.
 Conventions can’t adapt to changing circumstances= static nature
 Mutual hold backs= states waiting to see what others do.

TRADE TREATIES EXAMPLES= USMCA (=NAFTA2), TTP, TTIP, Brexit Trade and Cooperation
Agreement.

2. MODEL LAWS

They are not prescriptive as convention, but they propose, a way of regulating certain type of
transactions or certain area of law. The Nation legislatures are free to

 Not make use of the proposal at all

 To transplant into domestic law
 To adopt in part

EXAMPLE= UCC: uniform commercial code in USA, 1985 UNICITRAL MODEL LAW on International
arbitration.

3. NON-BINDING RULES PROMULGATED BY INTERNATIONAL ORGANIZATIONS (INCOTERMS)

They are model contracts and general conditions of the contract, codification and restatements.

4. GUIDES

Best practice guides usually aimed at professional or trade associations (government and legislators),
it outlines legal concepts and possible solutions as well as recommendations.

REGIONAL HARMONIZATION= EU

 Primarily to promote free trade, remove barriers and customs duties

 International Harmonization is slow and meets lots of divergence in interests
 Regional Harmonization is a fast track to uniformity (closer cultural connections)= inter-
regional conflicts!
 Risks and Challenges • Makes global unification/harmonization more difficult • Weakens the
idea of universal law • Preserves cultural identities

Instruments of regional harmonization:

 Legislative • Brussels 1 and Rome 1

 Regulations • GDPR
 Model Laws
 Regional non-binding principles • PECL: Principles of European Contract Law

THE BRUSSELS EFFECT=Effect about being a power in the creation of law is called Brussels effect. It is
the effect of international trade on national legislation, usually there is the “race to bottom” so
people like lower regulation, because costs less and attract capital. So, the Brussels effect
  means higher increased EU Standards effect global standards
 EU creating a “single market” makes the EU more influenceable!
 has a bi-product: EU exporting its regulatory framework globally Examples? Anti Trust (EU
permitting deals), Privacy (GDPR), Environmental (Emission Permits)

In USA it’s the “California Effect”: It has effect on the world! Environmental standards (California’s
influence here is disproportionate to the size of the market! standards in all the US go up to
California Standard, because it would cost too much to produce specifically for that large market in
the US (=complexity costs)

Requirements for the “Brussels Effect” (NEED TO KNOW!)

1. Larger Market (450 Million Consumers)

2. Legislative Capability to Create Regulations
3. Preference for Strict Rules (until 80s US was stricter)
4. Regulate Inelastic Markets (Consumer Markets)
5. Non-divisible standards (companies have incentive to apply same standards globally) à
Complexity Costs

The Brussels effect is the process of unilateral regulatory globalisation caused by the European
Union de facto (but not necessarily de jure) externalising its laws outside its borders through market
mechanisms. Through the Brussels effect, regulated entities, especially corporations, end up
complying with EU laws even outside the EU for a variety of reasons

The Brussels Effect builds on the so-called “California Effect”, expanding its dynamics from a US
federal system to a global context.

both are customs unions with a single trade policy, with unimpeded internal commerce hinging on
a large degree of internal regulatory harmonization. The extent to which member states can
autonomously enact regulations is limited in both unions: by the U.S. government’s constitutional
power to regulate interstate commerce and by foundational treaties in the EU that codify the so‐
called “single market.”

The California effect and the Brussels effect are a form of "race to the top" where the most stringent
standard has an appeal to companies operating across multiple regulatory environments as it makes
global production and exports easier.[8][9][10] The effects are the opposite of the Delaware effect,
a race to the bottom where jurisdictions can purposefully choose to lower their regulatory
requirements in an attempt to attract businesses looking for the least stringent standard. [

CALIFORNIA EFFECT= California has a high level of regulation; it is a huge market it cannot be
ignored. Environmental standards (California’s influence here is disproportionate to the size of the
market! standards in all the US go up to California Standard, because it would cost too much to
produce specifically for that large market in the US (=complexity costs)

In the United States, state‐level regulation has grown increasingly disharmonious. Intervention‐
friendly states such as California are blazing regulatory trails in environmental, labor, and digital
privacy regulation through what has come to be called the “California effect” (a term coined by
University of California, Berkeley economist David Vogel in a 1999 paper), while other states have
adopted a light regulatory touch in order to attract jobs and investment in a strategy often called
(appropriately or not) the “Delaware effect.” Meanwhile, the EU has relentlessly pushed for
increasingly harmonious regulation among its member countries.
RIASSUNTO

The Brussels Effect and the California Effect are phenomena related to the influence in creating laws,
stemming from powerful customs unions.

The Brussels Effect refers to the impact of the European Union (EU) on shaping global standards
through international trade. It leads to elevated EU standards influencing global norms, particularly
due to the creation of a "single market" and the global export of its regulatory framework. Examples
include Anti-Trust (permitting deals), Privacy (GDPR), and Environmental regulations (Emission
Permits).

Conversely, the California Effect in the United States is its opposite. California's high regulatory
standards, especially in environmental matters, exert a disproportionate influence on the entire U.S.
market. This prompts all U.S. states to align with California standards to avoid production
complexities and costs.

Requirements for the Brussels Effect include a larger market (450 million consumers), legislative
capability for regulations, a preference for strict rules, regulation of inelastic markets (consumer
markets), and non-divisible standards to minimize complexity costs.

The Brussels Effect is the process of unilateral regulatory globalization initiated by the EU,
externalizing its laws beyond borders through market mechanisms. Regulated entities, especially
corporations, end up complying with EU laws globally for various reasons.

The Brussels Effect builds on the California Effect, expanding its dynamics from a U.S. federal system
to a global context. Both are customs unions with a single trade policy, relying on internal regulatory
harmonization for unimpeded internal commerce. Member states' autonomy to enact regulations is
limited, governed by the U.S. government's constitutional power and foundational treaties in the EU
codifying the "single market."

The California and Brussels effects represent a "race to the top," where the most stringent standards
appeal to companies operating globally, facilitating global production and exports. This is in contrast
to the Delaware Effect, where jurisdictions intentionally lower regulatory requirements to attract
businesses seeking the least stringent standards.

In summary, the California Effect showcases high state-level regulation in a vast market, influencing
other states. The EU, through the Brussels Effect, strives for harmonious regulation among its
member countries, while both effects contribute to global regulatory dynamics.

INSURANCE CONTRACTS

Different type of insurance contracts, in term of business the important one is the liability insurance
contract to reduce the responsibility and important to shifting risk. It’s all about risk allocation.

EX= INCOTERM= liability, who is responsible for

MARINE INSURANCE

 1906 Marine Insurance Act – codified common law, extremely precise document
 Oldest type of insurance= Because it is the first way people deliver goods.
 Today: Marine, Aviation and Transit (Cargo) are together as MAT
 It is important Because the majority of international cargo is still transported by sea in
globalised market. Shipping traditionally high risk affair
 Scope and nature= Cover the RISK
o The insurer (underwriter) undertakes to indemnify (= promise to pay, being responsible for) the
insured (assured) against future losses or damage to goods (for specific circumstances) => The
insurer makes undertakings (warranties) and takes on liabilities in exchange for a fee.
It is about the future, there is a gap because it is something that might occur in the future.
INSURED PAYS MONEY TO THE INSURER, AND HE MAKES WARRANTIES AND TAKE ON
LIABILITY.
WE PAY MORE TO HAVE MORE COVER
o Usual to instruct an insurance broker – information regarding the cargo, the voyage, date of
shipment etc. The broker then finds an underwriter to cover risk. BROKER= AGENCY SET UP (task
of finding an underwriter) UNDERWRITER= ACCEPT THE RISK, THEY CAN BE MORE THEN ONE.
Types of underwriters:
 Lead: the first underwriter – will write the percentage of the risk he is willing to underwrite
 Other underwriters - will then need to participate until the entire risk is covered
o When the entire risk is covered, the insured will receive a cover note (= immediate pre-
contractual documentation) from the broker
 Time lag for the policy to be issued – therefore commonly a seller will “facilitate
business” (in CIF Contract or Letter of Credit Arrangement)
 The ICC has relaxed the rule where IncoTerms are incorporated
 Cover note is not “good tender à not enforceable
 Signed insurance Certificate will be good tender
o Payment of premium= “the insured pays the insurance broker – the broker pays the
insurer/underwriter” (MIDDLEMAN) Where no payment is yet made, the broker is “lien on the
policy” until payment is made!

DIFFERENT KIND OF POLICIES

o Voyage policy: valid for a particular voyage, (eg: Rotterdam to New York) commonly used in
international sale transaction
o Time policy: insures the subject matter for a fixed period of time (eg: 2 years)
o Pre and post shipment: depends of stage of delivery

Valued policy and unvalued policy

o Valued Policy: Where agreed value of the subject matter is specified= DOES NOT FOLLOW A
LEGISLATION OR A SPECIFIC FORMULA
 Does not have to represent the real value of the goods (can be higher (costs more) or lower
(costs less)). It does not have to reflect the actual or real value of the goods (eg: it could be
far less or more than the real value)
 IT DOES NOT HAVE TO REFLECT THE ATUAL VALUE OF THE GOOD, IT IS THE AGREED VALUE
OF THE GOOD, IT COULD BE LESS OR MORE THAN THE ACTUAL VALUE=> why?? Some time
can be over insured or under insured= the client pays money for the insurance, more money
more cover, but they might decide to insure something and pay less or pay more to have
more cover. A value policy is what it is agreed between the parties, not the real value. It
general use in international sales.
 Generally used in international sales because it includes anticipated profits
 If I’m selling 100 000 $ of metal component moving for Europe to Asia= 100 000 is the value
of the goods. This does not include a profit margin (the price of selling goods)= 30 % mark up
In a valued policy we can decide in advance to value the 100 000 $= the cost to replace the
material, or pay more and include any anticipated profit (in case of a disaster)
  Some times the commodities are sold during the transportation, so the value change over
the time depending on the market and the time of the sell
o Unvalued policy: the value of the subject matter is left to be calculated by applying the rules set
out in legislation= IT IS A FORMULA BASED ON THE LAGISLATION
 EG: prime cost of the goods plus the expenses of shipping and the charges of insurance
 Profit margin is not included.
POLICY CAN COVER:
 “Prime cost” = value at the commencement of the risk
 “True value” = not necessarily the original cost but the commercial value of the goods
(receipts and invoices).

Floating policy and open cover

o Floating policy: useful where several consignments of cargo are sent over a period of time and
the insurer does not have all the details (name of vessel, date of shipment).
A floating policy is a type of marine insurance policy that covers a fluctuating quantity of goods
over a specified period. It is not limited to a specific shipment but rather covers various
shipments or consignments as long as they fall within the agreed-upon terms.
 Problem: Once the amount is exhausted, cover ceases immediately= cargo is uninsured!
The premium for a floating policy is often calculated based on estimated values or quantities
of goods to be shipped within a specified period. If the actual shipments differ significantly
from these estimates, there may be a misalignment between the premium paid and the
actual risk exposure. This can result in overpayment or underinsurance.
 Probably cost less than a time policy, because the higher is the level of protection more it
costs.
o Open cover: like a floating policy but it is not a policy
An open cover is a standing agreement between the insured and the insurer that provides
coverage for a series of shipments. It is a flexible arrangement where individual shipments are
automatically covered without the need for separate documentation for each one.
 Arrangement where the insurer undertakes to issue policies, floating or specific, when
required by the assured= It is an arrangement where the insurer undertakes to issue
policies, floating or specific, when required by the assured
 Popular cause it helps flexibility

NB= Principles of marine insurance law= Contract of “utmost good faith”

This principle is also known by its Latin term, "uberrimae fidei." The concept of utmost good faith is
crucial in establishing trust and ensuring the fair operation of insurance contracts. Here are key
aspects related to this principle. Both the insured and the insurer have a duty of good faith
throughout the life of the insurance contract. This duty includes providing accurate and complete
information, avoiding misrepresentation, and dealing fairly with each other.

 The insurer and the assured are placed under an obligation to disclose information that
is likely to affect the judgment of the other.
 Important cause in insurance contracts the insurer relies solely on the information
provided by the assured to decide whether to provide insurance cover and fixing
premium.
 What does the customer need to do? the assured must disclose all material
circumstances known to him before the conclusion of the contract! The assured must
 declare the truth, we give the information and we must gave to declare the right
information.
 Utmost good faith is a foundational principle in insurance relationships, emphasizing the
need for honesty, transparency, and fair dealing between the insured and the insurer. It
ensures that both parties have the necessary information to make informed decisions
throughout the insurance contract's life.
 Consequences of Breach: Failure to uphold utmost good faith can have significant
consequences. If the insured provides false information, conceals material facts, or acts
in a manner contrary to the principle, the insurer may have grounds to void the policy,
deny a claim, or adjust the terms of the coverage.

KEY ELEMENTS

 Fundamental insurance contracts

 Includes circumstances which “in the ordinary course of business” (=the way we do
business normally) ought to be known by him à objective test
 Knowledge of agents will be imputed (important term) to the assured even if the
assured is not personally aware (=whether or not they actually knew!) à objective test
 Exception to general contract law principles
 If not disclosed: FRAUD à TEST: would a prudent insurer be influenced on his judgement
in fixing the premium or accepting to take on the risk?
 Prohibits either part from not disclosing what he privately knows to draw the other
party into a bargain (don’t hide what you know!)=> FRAUD

Warranties on the part of the insured

WARRANTIES= RAPPRESENTATION OF PROMISE (something shall be or shall not be done).

Warranties are undertakings that some particular thing shall or shall not be done, or that some
condition will be fulfilled or that a particular state of affairs does or does not exist. In insurance
contracts, a warranty is a specific promise or statement made by the insured party to the insurer.
Warranties are important elements that define the terms and conditions of the insurance coverage.
2 types:

 EXPRESS
These are explicitly stated in the insurance policy. They are clear and specific commitments
made by the insured, and their fulfillment is a condition for the insurer's liability. Failure to
comply with an express warranty may result in the voiding of the policy or limitations on
coverage
 Where they are contained in another document, that document must be incorporated into
the policy
 Where there is a breach -> the insurer is discharged from liability as from the date of the
breach
 EX=The ship will sail before a certain date, The ship will not carry certain types of cargo
 IMPLIED= imposed by law, that obvious
These are not explicitly stated in the policy but are assumed to exist based on the nature of the
insurance contract. For example, there is an implied warranty that the insured will act in good
faith and provide accurate information. Breach of implied warranties can also have
consequences for the insurance coverage.
  EXAMPLE= The ship is seaworthy (onerous for the cargo owner as he has no way of knowing
whether the ship can withstand the risks of the journey or if ship
is in a fit state of repair etc). May be excluded in some contracts.
 The underwriters waive any breach of the implied warranties of seaworthiness of the ship
and fitness of the ship to carry the subject matter insured to destination unless the assured
or their servants are privy to such unseaworthiness or unfitness.”

Liability of insurer

Doctrine of proximate causation= The insurer is liable for any loss proximately caused by a peril
(danger) insured against unless the policy provides otherwise. (CHAIN OF CAUSATION)

The doctrine of proximate causation is a legal concept used in tort law to determine the scope of
liability for a particular event or harm. It helps courts establish the connection between the
defendant's actions and the resulting harm to determine if the defendant should be held legally
responsible for the consequences.

Proximate causation is concerned with the directness or closeness of the connection between the
defendant's actions and the harm suffered by the plaintiff. It seeks to identify whether the harm was
a foreseeable and natural consequence of the defendant's conduct. In other words, the doctrine
helps to determine whether the defendant's actions were the legal cause of the injury, considering
both the cause-in-fact and legal causation.

In the context of insurance, proximate causation refers to the idea that the insurer is generally
responsible for covering losses that are directly caused by covered perils or events. Insurance
policies typically outline the specific risks or perils for which coverage is provided. If an insured event
occurs, and it is the proximate cause of the loss, the insurer is generally obligated to indemnify the
policyholder.

What is proximately caused? Something close that make the insurer liable. Court look for a net not
for a chain anymore. It is not what is the final strow

 Used to be - the cause which is nearest in time to the loss

 Now legal thought says “causation is not a chain, but a net”

For example, if an insurance policy covers damage caused by a fire, and a fire breaks out in the
insured's property, the insurer would likely be liable for the resulting damage. However, if an
intervening or superseding event occurs that breaks the chain of causation between the covered
peril and the loss, the insurer may not be liable.

EXAMPLE= Leyland Shipping v Norwich Union Fire Insurance (1918)

 A ship was torpedoed by a German boat near Le Havre

 Ship managed to reach the harbour
 Large storm and sea swell -> ship was moved to an outer harbour where it sank
 HOL: found that the real and efficient cause of the sinking was the torpedo despite the
storm being more “proximate” in terms of time
 The cause which is “proximate” is proximate in efficiency. That efficiency may be preserved
although meanwhile, other causes may meantime have spring up which have not yet
destroyed it, or truly impaired it, and it may culminate in a result of which it still remains
the efficient cause to which the event can be ascribed” (Leyland Shipping v Norwich Union
Insurance)
 IT IS NOT MEASURED BY TIME, BUT BY THE IMPACT. THE TORPETO NOT THE STORM (it is
not only the last thing that happens). What is the real cause? If it was not being bomb it
can survive the storm, if the storm does not happen the ship can survive. PROXIMATION
NOT IN TIME, BUT WE LOOK FOR THE IMPACT THAT AN EVENT HAS.

EXCEPTIONS

 Parties can choose not to use proximation, they can exclude it

 Insurer will not be liable for loss that is proximately caused by DELAY, ORDINARY USE (over
time it is more used), RATS OR VERMIN
 Where loss is attributable to a number of proximate causes and one of them is excepted, the
insurer is not liable for the loss
 Burden of proof is on the insured! (to show that causation is “proximate”)

TYPE OF LOSES

o Total loss: may be actual total loss or constructive total loss

o Actual total loss: when the entire subject matter is destroyed when the insured is irretrievably
deprived of the subject matter
o Constructive total loss: cost more to save something not destroyed, cost of preservation it more
than the value of the subject matter.
 Where it is reasonable to abandon the subject matter insured since actual total loss seems
unavoidable
 Where the cost of preserving the subject matter from actual total loss exceeds the value of
the subject matter
 Where the owner is deprived of goods and recovery is unlikely
 In this event, the insured can either
 Treat the constructive total loss as a partial loss or as an actual total loss -> he must
abandon the subject matter to the insurer
 In this event, the insured can either  Treat the constructive total loss as a partial loss or as
an actual total loss -> he must abandon the subject matter to the insurer
o Partial loss: is not total loss (eg 20 boxes of a cargo of 100 boxes of whisky are loss = partial
loss)

Fraudulent Claims (fraud terminate a contract, void it. We can not limit liability for fraud)

 Means, the insurer is not liable to pay! He can even recover the sums paid in respect to the
loss and terminate the contract from the date of fraud (no obligation to repay premium
 Termination for fraud also does not affect the rights and obligation of the parties regarding
events prior to the fraud

Payment of Insurance

 Payment usually made against the tending of documents

 Most popular: Letters of Credit

European Insurance Law

 Governed by national contract laws (not EU!) à domestic: no real harmonization à insurers
need to tailor products to different markets! (Costly!)
 “Cross-Boder” Insurance: Insurer is domiciled in different Member State from the insured
 There are some products being geographically resctricted (household)
  When we have large risk contracts, we have multiple parties

EU Directive on Insurance of Ship-Owners for Maritime Claims (2009)

 Obligation for large ships to have insurance

 Ships need to show insurance in port
 Penalties are different in member states

CASE STUDY 1

A Greek exporter of olive products “Tzanis” contracted to send a large shipment to a restaurant
group in Singapore on a CIF basis. It contacted a logistics agency called HPP to have the goods
collected and delivered to the port for shipment. On the way to the port the HPP truck was involved
in a traffic accident and 50% of the crates were damaged. However, the truck driver was running
late on his consignments and did not report the damage.

“La Isola” was a cargo ship sailing under an Italian flag. It had just returned from a voyage to
Indonesia where there had recently been a storm and the hull had been badly damaged. Repair
work had been carried out in the port of Napoli and the ship resumed its voyages in October.

The Italian ship owner had been under financial pressure due to fierce competition from Chinese
vessels, and decided not wait the recommended 30 days for the hull repairs to fully cement. He
chartered the ship for the voyage to Indonesia.

Pulling out of the port of Napoli “La Isola” was hit on the stern by a Lybian oil tanker. Towards the
end of its journey, it was caught in a tsunami and sank.

Tzanis sued “La Isola” for the value of the cargo. La Isola, in turn, made an insurance claim with
Lloyd’s of London. Lloyd’s started investigating the claim before agreeing to payment.

Are there any issues Lloyd’s may be able to rely on in order to refuse paying out on the policy?

ANSWER

1. “Utmost good faith” –insured must disclose all material information which may effect
insurers decision to insure
2. Implied warranties –damage to the hull. Was the ship “unseaworthy”?
3. Tsunami- “proximate causation”

SUMMARY

Greek exporter Tzanis sent a large shipment to a Singapore restaurant via HPP logistics. The truck
carrying goods was damaged in a traffic accident, but the driver didn't report it. Italian cargo ship "La
Isola" faced financial pressure, sailed with recent hull repairs, collided with a Libyan tanker, and sank
in a tsunami. Tzanis sued for cargo value, and "La Isola" made an insurance claim with Lloyd's,
triggering an investigation before payout approval.

ANSWER

1. “Utmost good faith” –insured must disclose all material information which may effect
insurers decision to insure

– Tzanis did not personally know about the truck accident and the damaged goods,
but the test is objective “in the ordinary course of business”
 – If it is enough to amount to fraud -> contract is voidable

– Knowledge of servants and agents is imputed, therefore Tzanis did not need to
personally know about the accident

– (In reality Tzanis would then have a cause of action against the courier HPP)

2. Implied warranties –damage to the hull. Was the ship “unseaworthy”?

• Nothing indicates that not waiting the full 30 days rendered the ship unseaworthy, but if it
was, the insurance policy may be voidable, and the damage will not be covered.

• Was there anything in the insurance policy excluding “seaworthiness”?

3. Tsunami- “proximate causation”

– What was the real cause of the ship sinking?

– Oil tanker collision or Tsunami? Should they sue the oil tanker instead?

– Not necessarily proximate in terms of time only. The key test is “efficiency”. This
will be a question of fact (which we cant be sure in the facts provided). If the sinking
happened towards the end of the trip, indicates that the collision with the oil tanker
was not the cause as it would have sunk earlier.

– Did the weakened hull also contribute to the sinking? In that case some portion of
blame would lie with shipping company’s decision and the insurance may not cover
the damage

CULTURAL ASPECTS OF NEGOTIATION= culture and how it impacts on negotiation

WHAT IS CULTURE??

o Culture includes a set of beliefs, attitudes, customs, norms and values of a particular people
or society, whether a nation, an ethnic group or even an organization
o Culture is a set of behaviours and beliefs that are familiar and acceptable to a certain group
of people. Different groups of people have different culture (by definition)
o Consider: religious differences, strength of tradition, role and expectation of women in
society, individualism v collective, power of authority, hierarchy (or lack of!)

WHAT IS NEGOTIATION? Not always involve a writing contract, it not always contractual

o Persuasion, compromise, concession, agreement

o It is a step in the contractual process, we have offer for tenders, meeting, strategy
formulation, negotiation and implementation (execution)

Example of Cross-cultural misunderstanding

Entering the Soho Grand Hotel lobby in his most conservative suit, Stan brimmed with confidence as
he approached an important potential customer, Vice President Sugimoto of MTV – Japan. Spotting
the stylishly dressed Sugimoto chatting with some musicians, Stan approached him with a deep bow
and traditional Japanese greetings of respect. When he heard Sugimoto’s reply – “What’s up with
that, my man?” – Stan felt a sinking sensation in his stomach.

As Stan understood in hindsight, he needlessly raised cultural barriers between himself and his
customer that night. He should have realised – based on Sugimoto’s employer, his hotel choice, and
even his clothes – that his awkward attempt at traditional Japanese manners would only embarrass
his guest.

Most of us can identify with Stan’s faux pas. In our era of diversity and globalisation, respect for
cultural differences is constantly stressed. Yet our counterparts are complex people who won’t
necessarily follow their cultural scripts. Sometimes culture matters a lot, sometimes not at all!

When making judgment calls, we rely on schemas: cognitive templates that provide low-effort,
ready-made answers. Cultural schemas account for the distinctive behavioural biases exhibited by
negotiators from a particular culture.

WHAT WE UNDERSTAND? We need to be quite specific about different culture, because it can
create a barrier. In international deal we deal with different people, so we need to understand this
differences= IT IS NECESSARY ADAPTABILITY!! Before negotiation we need to be prepared about the
possible contract but also about the culture to understand the counterpart and anticipate potential
misunderstanding.

• UNDERSTAND THE COUNTERPART Our profession, personal history, ingrained personality

and experiences also define how we negotiate

o International deals are not only cross-border, they are cross-cultural.

o Differences between cultures can create barriers that impede or completely obstruct the
process of negotiating deals.
o Culture impacts the kind of transactions parties make, and the way they are negotiated.
o Important to consider cultural differences before commencing negotiations
o It can provide an obvious competitive advantage to “closing the deal”
o Have a framework for guiding the negotiating team before they meet with the other side
o Best ways to understand your counterpart and anticipate possible misunderstandings
o Do not rely too much on cultural stereotypes as they may not apply to any given
individual/company

Cultural alignment= understanding allows to get the deal done, reduce conflicts and ultimately help
in dispute resolution during the contractual term. Whit the understanding we create trust.

KEY PRINCIPLES TO CROSS CULTURAL NEGOTIATIONS

1. Negotiation objective

Each party has its own objective, it is necessary to understand also the counterpart.

Depends on the culture=> Some cultures intend to get a signed contract which other cultures use
the negotiating process to create a relationship of trust. In general contrast US pressure to rush
through a deal v Indian companies who dedicate more time and effort to negotiation to get to know
the counterpart thoroughly

• Tip: Try to agree an overall roadmap of what parties expect to get out of negotiating process

2. Attitude= how we negotiate

o WIN-LOSE= we are negotiating the contract; one interest beat the other, one win the other lose
 Confrontational, “zero-sum” game, one party wins/one “looses” (eg: USA Pres. Trump)
It is not good for the long term, because we don’t built trust. CONFRONTATION
o WIN-WIN= both parties get what they need, it is a process of collaboration to make an eco-
system that works for both, in which both parties can gain, collaborate, problem solve.
COLLABORATION
POSITIVE ASPECT= build trust, necessary to have a long relationship
– Make multiple offers simultaneously (shows flexibility and accommodation while
allows you to understand “drivers” of counterpart)
– Include a matching right to 3rd pty offers.
– Try a contingent agreement (“if, then” promises – incentives for
compliance/penalties for non-compliance. Allows parties to move on from an
impasse). If that happens we do this kind of thing, on the contrary we do another
thing= FLEXIBILITY

TIPS:

 Negotiate the damages upfront: include liquidated damages clause (genuine “pre-estimate
of loss”)
LIQUIDATED DAMAGES= genuine pre-estimation of loss
PENALTY= it is a punishment
 Search for post-settlement settlements: in cases where you feel you could have squeezed
out a better deal – ask counterpart to renegotiate.
Must have established trust in initial negotiation to do this

3. Personal style

What it is?? The way the way someone talks, uses titles, dresses, interacts with others- Eg: generally,
Germans or Italians have a more formal style than Americans or Australians.

 FORMAL= use surname and very respectful.

 INFORMAL= use first names, quickly seeks to develop a personal friendly relationship, talks
about personal life, take off jacket, roll up sleeves (this may be considered disrespectful to a
Japanese negotiator!). in some culture it is a way to built the trust, for other it is
disrespectful.

 Tip: Safer to adopt formal style at beginning and move to informal stance if warranted

4. Communication= how we interact with people, how we express ourself but also how we
receive and understand the world of others. What we say, what we hear and see (non-
verbal)
 Direct v indirect and formal v informal= how we communicate influence the negotiation
Indirect uses figurative forms of speech, nuances, implication. Careful not to
“disrespect” or confront the counterparty.
Non verbal communication: facial expressions, gestures, burping, body language,
personal space, touching, kissing, pauses and silence. 90% of communication is non
verbal
 Varies depending on culture.
Eg: peace deal between Egypt and Israel at Camp David (US): Israeli preferred direct
communication instead the Egyptian interpreted it as aggressive and an insult. Israeli's
viewed the Egyptian indirect form as insincere and obtuse
 Example: In response to a proposal a Japanese supplier says “That’s difficult” – you may
consider that the door is still open to further discussion, instead coming from a culture
that avoids confrontation, may mean a flat “no”.

 Tip: be observant about how counterpart behaves and adapt your own communication to
ensure maximum understanding

5. Emotional Element

Generally, in negotiation we don’t show emotion, but it depends on culture: As a generalisation,

Latin Americans, Italians, Spanish demonstrate emotion during the negotiation process.
Germans and English generally rank as least emotional negotiators in Europe. As a
generalisation, parties from Japan, China and other Asian nations tend to hide their feelings
more.

• Tip: it is better to start with less emotion and gauge the climate of the talks (reed the room)

6. Question of time

Sensitivity to time is important, for some culture is unrespectful and it is considered a loss of time.
So, it is important to understand how the other party generally act (few time or long negotiations)

 Eg: Swiss can generally be considered punctual while Latins can be often late, Japanese
negotiate slowly, Americans are quick to make a deal.
 For Americans/English - “time is money”
 Asian teams – invest more time for building relationship (eg: Middle eastern or Indian
companies)

 Tip: you will need to respect what your stakeholders value most here and try to balance that
against what is important to the counterpart

7. Form of agreement= document

 General v specific document

 Cultural factors influence the form of a written agreement.
Eg: Americans prefer very detailed contracts to anticipate all possible contingencies,
even if unlikely – because the “deal” is the contract itself.
Whereas Chinese parties usually prefer a contract of general principles rather than
detailed rules – because the “essence of the deal” is the relationship rather than the
contract.
 Another aspect is unequal bargaining power – the stronger party always seeks to “seal the
deal” in all possible situations.
The strongest party define the rule, the standard term, it is a take or leave.
 The weaker party may prefer a general agreement to give them room to “wiggle out” of
unfavourable circumstances

 Tip: This process should be clarified at the beginning of the process otherwise a lot of time
could be wasted if objectives are not aligned

8. Method of Building an agreement

  Depends on the culture= Research shows French, Argentinian, Indians tend to view the deal
as a “top down” process while Japanese, Mexicans and Brazilians tend to see it as “bottom
up” approach
 Bottom up vs top down= from general to specific, from specific to general ones
 Bottom-up approach – one side begins by proposing a minimum deal that can be
broadened and increased as the other party accepts additional conditions
 Top-down approach – negotiator begins by presenting the maximum deal if the
other side accepts all stated conditions
9. Team organisation

 One leader vs group consensus

 Leadership vs consensus
 Culture Some cultures emphasize the individual (UK, USA) while others rely on a group
(Chinese)

 Tip: in a bigger group it can be difficult to understand who the leader, it can be sometimes
intimidating and can take longer to conclude the deal.

10. Risk profile

 High vs low
 Culture=> some cultures are more risk adverse than others (eg: Japanese v US). If a party is
risk adverse we need to convince them not push them, FIND A WAY TO ADRESS THEIR
CONCERNS.
 Devote attention to proposing mechanisms that will reduce the apparent risk
 Ensure the counterpart has sufficient information about you, the company and the
proposed deal
 Focus efforts on building relationship and trust
 Consider restructuring deal so that it proceeds in increments step by step, rather
than all at once

SUMMARY THE IMPACT OF CULTURE ON NEGOTIATION

Why can Cross Cultural Talks Fail?

o Not understanding different ways of thinking

o No attention to the necessity to “save face”
o Culture and image of foreigners
o Insufficient allocation of time
o Not understanding the role of personal relations
o Not recognizing decision-making process

Strategies for Dealing with Cultural Differences (!!!)

o Don’t forget to study your supplier’s culture= Through reading and conversations a lot can be
learned, but do not fall into the trap of stereotypes! Research the whole person/company
o Show respect for cultural differences = construct a problem solving conversation about
difficulties posed by unfamiliar customs
o Be aware of how others might perceive your culture = adjust your behaviours to minimise
negative perceptions of you
o Find a way to bridge the culture gap= look to build on commonalities such as a shared
experience, interests or goals to build trust
o Negotiate like a diplomat= Consider the broader context of your negotiation. Think several steps
ahead – diplomats tend to consider broad issues related to a negotiation, the likely response
o Take the pressure off = To encourage deeper thinking, lessen the stress surrounding negotiation
and take frequent breaks, get to know one another, make sure deadlines are not too tight
o But remember cross- cultural negotiations do not just refer to “national” cultures but include:
Education culture, Age culture, Race culture, Gender culture, Religious culture, Corporate
Culture

“Break bread” together

 The best way to build trust is getting to know each other, it is as important as a negotiation
meeting. It about understand what we have in common, to reduce the distance between
different cultures. In many cultures the social element is as important as “getting down to
business”
 Sharing a meal or coffee can build trust. Can be used to “tune” into each other. “Small talk”
(common in Italy)

VIRTUAL NEGOTIATION

The Pandemic there was a shift from in person meeting to virtual meeting, From board room to
zoom call. It ads a layer to negotiation:

 It is quite difficult to be successful in negotiations if people never meet in person, in

negotiation you need a sensitive trust. It is also difficult to reed their reaction and
understand if your point of view arrived.
 Set realistic ambitions – difficulties in launching complex talks with unfamiliar partner
online.
 Toggle between media – a variety of tools from: video call, email, text can work at different
stages.
 Be patient and adaptable.
  Stay accessible – ensure that all relevant parties continue to be heard.

ADVANTAGES:

 Less travel, more time to talk

 More connections at local level improve preparations for high-level talks
 More variety in negotiation format – EU agreement re financial recovery plan were initiated
digitally and concluded in person later

PHYSICAL MEETING

 Where to meet? Decide the party with bargaining power or let the weakest part decide

Consider the case of a manager who was negotiating a joint venture between his Silicon Valley firm
and a major Japanese electronics company. Communication and trust had disintegrated, and
meetings in San Jose and Tokyo had failed to restore a common understanding. In both settings, the
visitors felt off-guard and defensive, while the hosts were surrounded by distractions and cultural
primes. So the two sides decide to meet at a Hawaiian resort, a halfway point geographically and in
other ways as well. Though within the US, the resort catered primarily to Japanese tourists. The
primary language was English, but the ambiance was a s much Asian as American. In this setting,
cultural barriers diminished, and trust was restored

 Who to bring? Build a unified negotiating team

– counterpart may exploit differences between individuals
– “Strength in numbers”
– Team support and assurance helps in persisting for a better deal Vs solo negotiators
who tend to accept minimum offer
– Research shows that teams exchange more information than solo negotiators, make
more accurate judgments of the other side and create more value
– Consider including someone who is familiar with the culture you’re dealing with
TRASLATOR to better understand the counterpart
– Hire your own professional translator (Consulate or other independent agency)
– Brief the translator before starting negotiation
– Stay on guard (power play, keep control of the talks)
– Try to “chunk” it – speak in short bite-sized chunks, pause, so as not to confuse
translator
– Translator must be a professional translator – an approximate understanding of
what is being said is not sufficient for commercial negotiations.
 Where to sit? Managing physical space
– Meet in person – superior to other forms of meeting (online, telephone, email, text)
– Plan Seating around conference table
– Try not to sit in “teams” across from the counterpart.
 Sit on same side of table - shows willingness to work together and encourages
building of report
 Ability to make casual comments and build “feeling”
– Build trust and relationship by showing “we’re here to find agreement

BASIC STRATEGIES FOR CROSS- BORDER NEGOTIATION

 Understand the Drivers of the other party (profits, value for money, reputation?)
  Preparation is Key – know what you want to “walk away” with, ensure you have a mandate
to act
CREDIBILITY AND IT IS EASIER TO ACHIEVE WHAT WE WANT
 Build Trust – start with easier issues to feel a sense of success
 Keep a “helicopter view” – focus on the big picture and move on from contentious issues
 Keep it professional not personal

Advanced Strategies to adopt for best results

1) Consider unusual deal terms Keep open mind! Approach every deal as unique, do not simply
apply same template to all deals
2) Brainstorm new ideas Keep creative! Accept input from all sides. Focus on finding mutually
acceptable solutions
3) Curb overconfidence Important to be respectful and not arrogant. People do business with
people they like!
4) “Good cop – bad cop” Assign different roles to different team members to help progress when
at an impasse
5) Break difficult problems into “bite sized” parts Consider the use of special teams/committees
for specific areas. Eg: 2015 US-Iran Nuclear talks
6) “Park” unresolved issues Remember the whiteboard! List agreed outstanding items in a
shared, transparent log to be dealt with later
7) Emphasise areas of agreement so parties feel closer, despite outstanding issues. Build
momentum. We’ve made too much progress to quit now!
8) Don’t over estimate cultural difference. Don’t underestimate. Adjust in correct measure.
9) Understand if the “culture” of the negotiation itself is competitive or collaborative?
10) Identify a BATNA Best Alternative To Negotiated Agreement
 Prepare for a scenario where no agreement is reached= sometimes the best deal is not deal
at all.
 Establish a head of time a “walkaway” point
– List your alternatives
– Evaluate the alternatives
– Establish your BATNA based on alternatives
– Calculate your reservation value (lowest acceptable)
 If the final offer is higher than the reservation value you should accept it.

Biggest Mistakes in Negotiations (P-E-C-E-P)

1) PREPARATION Failure to adequately prepare

 Having strong opinions about what you want is not preparation!
 Research your counterpart and anticipate problems
 Think about BATNA
 Calculate reservation value and estimate your counterparts reservation value so you
understand the “walkaway” points
2) COMPETITION AND NOT COLLABORATION Parties focus on competing rather than
collaborating
 Fear of being taken advantage of, novice negotiations may make unreasonable demands or
use threats to coerce agreement
 Focus on creating and claiming “value”
 Creating trust means both sides are willing to share underlying interest
  Exchange concessions on an issue that is not important to you
 Looking for “win-win” outcome
3) EMOTIONS Letting emotions overtake you
 Emotions can prevent us from doing our best
 Can keep us from thinking rationally
 Anger can lead to risky choices
 Sadness can lead to overpayment
 Keep it professional, not personal
4) ETHICAL SHORTCUTS
 Research from Harvard show that most people are willing to cheat now and then in
negotiations when financial incentive to do so
 Important to be aware to ethical pitfalls to avoid going against our ethical code
5) PRINCIPLES OVER SUCCESS (monetary cost vs. damage to reputation)
Being rigid about principle, they don’t compromise it even if it will cost it a million dollars.
 EX=Vinod Khosla v San Mateo County – Martin’s Beach Case study
In 2008 Billionaire Sun Microsystems founder bought 53 acres of land which provides access
to Martins beach for $37.5M. Locals and families had access for generations under previous
owner
In 2010 he locked the gate without applying for a $200 permit and ignored a judge’s order
to reinstate public access. He was threatened with $11,000 per day for locking the gate.
Man that has a strong idea about private property and doesn’t want to change them, even
if it would have meant paying more. Monetary cost and damage to reputation, he lost a lot
more, because it is about 10 years dispute and costs him a lot.

So PITTING PRINCIPLE OVER SUCCES

 An irrational commitment to a personal definition of “principle” can loose “the big picture”
 Escalating commitment to a failing strategy – “double down” investing more resources into
failure
 Resolution: understanding and reframing ultimatums!
• Ultimatums Try to reframe an ultimatum – most ultimatums are not really deal breakers
Make concessions on your own “sacred” issue in exchange for lasting peace

CASE STUDY 2 Case Study- Spain/Taiwan

“Nin hao”, Alex said to her colleague who responded likewise. For weeks she had been practicing
her Mandarin in preparation for the negotiation of a lifetime.

Alex owned a small import-export business outside of Madrid which was growing and she was
looking for a partner with a manufacturer in Taiwan. She had contacted an old university friend Mei-
ling who helped make the introduction a set up a meeting with a Taiwanese firm. All she needed to
do was pack her bags and get to the airport. As the plane took off, Alex closed her eyes and thought,
“This should be easy”.

Hours later, Alex landed in Taiwan Taoyuan International airport. Her friend Mei-ling was waiting at
the arrivals hall ready to accompany her to the hotel.

After a quick shower, Alex met her friend in the lobby. In order to be as efficient as possible she had
arrange to go straight into meetings, even though it was the middle of the night in Spain.
When Mei-ling and Alex walked into the conference room, they were met by six member of the Sun
Manufacturing Group. Feeling outnumbered, Alex started to feel anxious and her stress levels
soared. But she took a deep breath and got straight down to business. The deal was fairly
straightforward, the terms were favourable, and she hoped to have a deal agreed by the end of the
day so she could fly out the following morning. But things did not go so well….

First of all, Alex was having trouble focussing on her presentation and was not able to order her
thoughts well. Her iPhone was constantly lighting up as her colleagues in Madrid emailed her on
various business matters. Also, it seemed like Mei-ling was struggling to translate the exact meaning
of Alex’s offer to the manufacturing group. There was quite a bit of talking amongst the
manufacturing group not directed at her, which was disconcerting.

The parties got stuck early on the issue of price and did not progress onto other issues such as
quality control, timeframes, delivery etc. At the end of a day of unproductive conversation, the
group invited Alex to join them for dinner that evening, but she was tired and frustrated and
returned to her hotel room feeling deflated. The deal was clearly in trouble….

Q: What could Alex have done differently? TO SECURE A BETTER OUTCOME

The main problem: Alex is anxious because it feels outnumbered, go straight to the point, have
problem in communication because of her translator and she doesn’t go to the dinner, that is a very
important way to built trust and save the deal.

1) IDENTIFY THE ISSUES

2) TRY TO FIND A SOLUTION
I. PREPARATION=> learn more about the culture, as we know Asian culture take negotiation in
a slow way. Alex wants immediately to conclude it.
 Planning: Alex should have thought through in advance factors of the negotiation such as
location, members of the team and a solid agenda. This could have been shared before the
meeting in order to align negotiation objectives.
 Research: Alex could have used her time to learn more about Taiwanese business practices
and the specific company, rather than spending time learning a few words in Mandarin. For
example, how Asian firms often use a collaborative approach and decide by committee.
 Time: She should have planned more time for the trip, acknowledging the importance of
building a relationship, rather than just signed the deal. She should have used the first day
to rest and brief her translator and started the meeting the next day. In addition, she should
have allowed time for proper breaks throughout the meeting to help defuse the emotional
element.
 Culture clash: Having a better idea of culture, Alex should have not taken the group chatter
as a sign they did not appear interested in the deal. She should have considered accepting
the invitation to dine together as a sign of respect and hospitality, and a way to forge a
better relationship
II. TAKE INTO CONSIDERATION EMOTIONAL FACTORS=> Emotions can prevent us from doing
our best
 Stressors: Alex should have considered triggering factors such as emotional stressors, email
distractions, jet lag and should have planned to have a good night’s sleep before the
meeting
 Managing difficult issues: Alex should have “parked” the difficult issue of price and return to
it later so that they could move on to other issues and create “momentum”. She should
 have already considered BATNA and have calculated the reserve value so that she is aware
of the highest price she would be willing to accept or walk away from the talks.
III. CHOOSE THE CORRECT PEOPLE TO BUILD A TEAM=> because Alex has a small business, so
she hasn’t bargaining power.
 Translator: she should have chosen a professional experienced commercial translator and
brief her well before the meeting to share terms of the deal and the objectives of the
negotiation. It is not enough to have a person who only “speaks the language” but need
someone who can communicate the meaning.
 Team: Following Asian custom, Alex should have considered not going there alone. By
arriving with a team they could have exchanged more information and it would have
“balanced out” the dynamic during talks. Also it would have been easier to accept the
dinner invitation with company.
6 vs 1 it is not a good way to negotiate, she has to ask in advance.