INTERNATIONAL COMMERCIAL LAW

ASSIGNMENT QUESTION BANK(TOTAL MARKS: 100)

Note: 1) Attempt any 10 questions.

2) All questions carry equal marks.

Q2. What are the essentials of a valid contract?

Ans. Sir William Anson defines contract as "a legally binding agreement between two or more persons by which rights are acquired by one or more to act or forbearances on the part of the other or others". Thus it is an agreement upon a sufficient consideration to do or not to do a particular thing. Essentially, a contract does just that-it draws together the essential elements of an oral or written agreement. Unlike a gratuitous promise or a non-binding agreement, a valid contract is recognized at law and a party can be sued for not fulfilling the terms of the contract. As a result, contracts can just as easily draw people together into the courtroom.A contract is an agreement that is enforceable by law. Modern business could not exist without such contracts. Most business transactions involve commitments to furnish goods, services, or real property; these commitments are usually in the form of contracts. All contracts are agreements, but all agreements are not contracts. Therefore it is necessary to know what are the essentials of a valid contract.

Essentials of a valid contract:

The following are the essentials of a valid contract:

1. Consensus-ad-idem: It means there must be meetings of the minds. There must be two parties to a contract. The minds of both the parties to the contract must be ad-idem. The two parties must have agreed about the subject matter of the contract at the same time and in the same sense.

2. Legal Relationship: The agreement must create legal relationship between the parties. If there is no intention on the part of parties to create legal relationship, there is no contract. An agreement to dine at a friend's house is not an agreement intended to create legal relations and therefore, is not a contract. A father promises to pay his son Rs.200 every month as pocket allowance. Later he refuses to pay. The son cannot recover it as it is a domestic agreement and does not intend to create legal relations.

3. Lawful Consideration: Consideration means "something in return". In other words, it means "something in exchange for something". It is the price for the promise. Every valid agreement without consideration is void. An agreement with unlawful consideration is void. For example, A promises to obtain for B an employment in public service and B promises to pay Rs. 20000 to A. The agreement is void as the consideration for it is unlawful. In English law, no consideration is, however, necessary in the case of formal contracts.

4. Lawful Object: The object or the purpose of an agreement must be lawful. It must not be immoral or illegal or oppose to public policy.

5. Competent parties: At least two parties are essential for every valid contract. Further, the parties must be legally competent to contract. If they are not competent, the contract is not valid. Every person is competent to contract if he has attained the age of majority and he is of sound mind.

6. Free Consent of parties: The consent of the parties to the agreement must be true, full and free. Otherwise, the contract is unenforceable. Consent is said to be free when it is not obtained by coercion, undue influence, misrepresentation, mistake and fraud.

7. Certainty of terms: The terms of the agreement must be precise and certain. They must not be vague or uncertain. If so, the agreement is not enforceable.

8. Possibility of performance: The agreement must be capable of being performed. An agreement to do an impossible act cannot be enforced. Law does not compel anybody to do an impossible act.

9. Agreement not expressly declared void: The agreement must not have been expressly declared void by any law in force in the country.

10. Compliance with the legal formalities: According to the Indian Contract Act, an agreement may be oral or in writing. Where the agreement is to be in writing, it must comply with the necessary legal formalities as to writing, registration and attestation. If the agreement does not comply with the necessary legal formalities, it cannot be enforced by law. In India, writing is required in case of lease, gift, sale and mortgage of immovable properties.

Thus a contract is one that complies with all the essentials of a contract and is binding and enforceable on all parties to it.

Q5. What is meant by the frustration contract ?

Ans. The essential principles on which the doctrine of frustration is based is the impossibility, or, rather, the impracticality in law or fact of the performance of a contract brought about by an unforeseen or unforeseeable sweeping change in the circumstances intervening after the contract was made. In other words, while the contract was properly entered into in the context of certain circumstances which existed at the time it fell to be made, the situation becomes so radically changed subsequently that the very foundation which subsisted underneath the contract as it were gets shaken, nay, the change of circumstances is so fundamental that it strikes at the very root of the contract, then the principle of frustration steps in and the parties are excused from or relieved of the responsibility of performing the contract which otherwise lay upon them.Whether the contract has become impossible of performance can be determined with reference to the terms of the contract and the supervening circumstances. If the supervening circumstances are such which were within the contemplation of the parties at the time of the contract or which could reasonably be within their contemplation, it could take the case out of the purview.The doctrine of frustration is of great significance in the International Trade transactions, as also, are the Force Majeure clauses since there is a greater element of uncertainty in cross border transactions as compared to purely domestic transactions as they are subject to diverse political and economic influences.Frustration emerges whenever the law recognizes that without the default of either party a contractual obligation has become incapable of being performed because of the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract".On the happening of unexpected events which are beyond the control of the parties such as in case of Government Prohibition of Exportation or Importation or a strike or other industrial actions, sellers often take the benefit of the force majeure clauses that may be expressly provided for in a contract or on the principle of frustration of contract in the domain of general law. In these cases the contract may at the beginning of the event in question merely be suspended and later on become frustrated after lapse of reasonable time when it is evident that the delay caused by intervening event affects the foundation of the contract.

Frustration of a contract occurs only where after the conclusion of the contract a fundamentally different situation has unexpectedly emerged. The emergence of some new set of circumstances may make the performance of the contract more difficult, onerous or costly than was envisaged by the parties when entering into the contract, for example, a sudden, even abnormal, rise or fall in prices or the failure of a particular source of supply requiring the seller to obtain supplies from another more expensive source. However, these events will not normally operate to frustrate a contract.

A contract may also become frustrated because subsequent to its conclusion, the Government has prohibited its performance for instance by placing an embargo on the exportation or importation of goods sold in situation other than wartime which absolutely prevents the seller or buyer from performing a contract. However, sometime the governmental prohibition may be only conditional or it may be only temporary. Such Governmental prohibition operates as a frustrating event only if it is final and extends till the whole time still available for the performance of the contract.Frustration of a contract occurs when a contract becomes impossible to perform, or is capable of performance only in a manner substantially different from that originally envisaged. Under these circumstances and in the absence of any express provision by the parties to the contract, further performance is excused under the common law doctrine of frustration.

In contracts there are ‘force majeure’ provisions which essentially set out the circumstances in which a party to a contract can be excused from performing its contractual obligations, if performance is hindered or made impossible by circumstances beyond that party’s reasonable control. In many foreign contracts a party will be automatically excused performance of the contract if a force majeure factor exists. There is no such automatic right under English law and therefore if there is no force majeure provisions in the contract then the common law doctrine of ‘frustration’ of the contract may still apply.

Reliance on this doctrine may be in neither party’s interests, for a number of reasons:

(a) The doctrine of frustration only operates where the frustrating circumstances are not due to the fault of either party. However, it does not follow that in all contracts any act of negligence will deprive a party of the defence of frustration.

(b) If the contract is frustrated, a party may still be entitled to compensation for work that it has undertaken prior to the termination, and to retain any payments previously made under the contract.

(c) Termination of the contract may not be in either party’s interests. They may prefer the contract merely to be suspended for the duration of the frustrating event. Also to mitigate ones loss it would be sensible to take this approach.

(d) Because there is no definite list of frustrating events, and since the doctrine has developed on a case-by-case basis, it is not always possible for a party to know whether an event would be considered by the court to be a frustrating event!

Frustration of the contract occurs only where, different situation has unexpectedly emerged. Not every turn of events which the parties did not expect qualify for such doctrine, e.g. If the performance of the contract becomes more difficult, onerous or costly; prices rise or fall abnormally; such events do not operate as frustrating a contract of export sale. Only when the subsequent events are of such magnitude as to create a fundamentally different situation do they result in the frustration of contract. The frustration occurs whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract.The frustration in the legal sense occurs in some cases at a stage in a sequence of events which are in gradual transition and it is a matter of degree whether an uncontemplated event does or does not amount in law to frustration.If the effect of certain event or events is to cause delay in the performance of contractual obligations, it is often necessary to wait upon events in order to see whether the delay already suffered and the prospects of further delay from that cause, will make any ultimate performance of the relevant contractual obligations radically different from that undertaken by the contract.An act or omission of either or both the parties rendering the performance of the contract impossible or otherwise a fundamentally different situation, does not qualify as a frustrating event. The frustrating event must be an event beyond the control of the parties. The event must be some outside event or extraneous change of situation.

HAPPENING OF UNPRECEDENTED EVENTS CAUSES FRUSTRATION

To attract the plea of frustration, it must be shown that the situation has changed so drastically and so radically that neither party to the contract could have at all foreseen that because of something happening at another place which may be a foreign country would result in execution of the contract almost as good as an impossibility. The impact which the market receives due to an event happening elsewhere in the guiding factor for determining whether or not frustration has occurred. Where after the firm price contract for supply of transformers there was a subsequent 400% rise in price of transformer oil due to the war, there was frustration of contract. The abnormal increase in price due to war condition, was an untoward event or change of circumstances which "totally upset the very foundation upon which the parties rested their bargain." Therefore, supplier could be said to be finding itself impossible to supply the transformers which it promised to do.

The parties to an executory contract are often faced, in the course of carrying it out, with a turn of event which they did not at all anticipate - a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. Yet this does not in itself affect the bargain they have made. If, on the other hand, a consideration of the terms of the contract, in the light of the circumstances existing when it was made, shows that they never agreed to be bound in a fundamentally different situation which has unexpectedly emerged, the contract ceases to bind at that point - not because the Court in its discretion thinks it just and reasonable to qualify the terms of the contract, but because, on its true construction it does not apply in that situation.

EVENTS LEADING TO FRUSTRATION

In commercial contracts, where the contract becomes impossible of performance by reason of a state of war or by an act of the executive Government, or the contract which would otherwise be expected to be ordinarily performed, is delayed by reason of certain regulations imposed by the Government making the performance of such contract dependent upon the grant of license or permit, the parties need not wait for an indefinite period in the hope of the relaxing of the control orders or the granting of license and permit A contract may be frustrated because subsequent to its conclusion the government has prohibited its performance e.g. by placing an embargo on the exportation or importation of the goods sold.However, not every governmental prohibition has the effect of rendering the contract illegal, the effect may be mere suspension or postponement of the performance of the contract. It is always related to the terms of the contract. The prohibition operates as a frustrating event only if it is final and extends to the whole time still available for the performance of the contract.

Performance of a contract may become impossible because of the destruction of subject-matter or of anything essential to the performance of the contract or, in case of contract of service, by death or illness of the party concerned. A contract may become impossible by change in law which has the effect of rendering a contract, which was lawful at the time it was made unlawful. A contract may also become impossible of performance because a state of things which was the basis of the contract had ceased to exist and finally a contract may become impossible of performance in the sense that circumstances have intervened which render the performance within the time, in the way contemplated, impossible.The provision under the New Act that the award to become a decree naturally without In the context of building and engineering contracts, frustration will normally arise by reason of some supervening event such as destruction of the entire site by fire or flood, or the passage of legislation rendering the work illegal.

It is important to appreciate that the supervening event must so unexpected and beyond the control of the parties, even as a possibility, that neither party can be said to have accepted the risk of the event taking place when contracting. It is precisely for this reason that frustration can only rarely come about in building and engineering contracts, since their performance is, as a matter of reasonable foresight, hedged about with many uncertainties and far more likely to be prevented by physical difficulties than in the case of the other types of contract. In general, the contractor is taken to have assumed the risk of the many uncertainties and difficulties associated with the work in this field. The difficulty of the work is not in general a valid excuse for non-performance of a contract, nor is a contractor entitled to abandon work which proves unexpectedly onerous.

Q7. What is a Letter of Credit ? What are its fundamental principles ?

Ans. A letter addressed by a bank, at the insurance and responsibility of a buyer of merchandise, to a seller, authorizing him to draw drafts to a stipulated amount under specified terms and undertaking conditionally or unconditionally to provide eventual payment for drafts.An open or sealed letter from a merchant in one place, directed to another in another place or country, requiring him that if a person therein named or the bearer of the letter, shall have occasion to buy commodities or to want money to any particular or unlimited amount, either to procure the same or to pass his promise, bill or other engagement for it, the writer of the letter undertaking to provide him the money for the goods, to repay him by exchange, or to give him such satisfaction as he shall require, either for himself or the bearer of the letter.These letters are either general or special. The former is directed to the writer's friends or correspondents generally, where the bearer of the letter may happen to go; the latter is directed to some particular person. When the letter is presented to the person to whom it is addressed, he either agrees to comply with the request - in which case he immediately becomes bound to fulfil all the engagements therein mentioned - or he refuses, in which case the bearer should return it to the giver without any other proceeding unless the merchant to whom the letter is directed is a debtor of the merchant who gave the letter, in which case he should procure the letter to be protested.

The debt which arises on such letter in its simplest form is between the mandator and the mandant; though it may be so conceived as to raise a debt also against the person who is supplied by the mandatory.When the letter is purchased with money by the person wishing for the foreign credit, or is granted in consequence of a check on his cash account or procured on the credit of securities lodged with the person who granted it, or in payment of money due by him to the payee; the letter is, in its effects, similar to a bill of exchange drawn on the foreign merchant. The payment of the money by the person on whom the letter is granted raises a debt or goes into account between him and the writer of the letter; but raises no debt to the person who pays on the letter, against him to whom the money is paid.When not so purchased, but truly an accommodation and meant to raise a debt on the person accommodated, the engagement, generally is to see paid any advances made to him or to guaranty any draft accepted or bill discounted. In such case, the compliance with the mandate raises a debt, both against the writer of the letter and against the person accredited. The bearer of the letter of credit is not considered bound to receive the money; he may use the letter as he pleases and he contracts an obligation only by receiving the money.

The fundamental principles :

The law relating to letters of credit is founded on two principles;i) The autonomy of the letter of credit.ii) The doctrine of strict performance.

(i) The autonomy of the letter of credit

Most sales and purchase contracts, especially international sales and purchase contracts, may require a letter of credit to supplement the security of the payment transaction. Letters of credit are mainly divided into revocable letters of credit and irrevocable letters of credit. The latter may not be withdrawn by the issuing bank unless prior consent is given by the seller who is the beneficiary. The letter of credit is, then, considered as a significant method of payment for international sales where the seller and the buyer may have had few or no dealings with one another in the past and the seller wants to avoid risk in its collection of payment from the buyer. The letter of credit is an assured payment by a commercial bank, which is thus a reliable payer for the seller. The most important characteristic of the letter of credit, which makes it highly recommendable and widely used, is that it has an autonomy principle. This governs the rule that the paying bank – as the agent of the bank which issues the letter of credit – will have to pay without conditions if the beneficiary of the letter of credit complies with the requirements for payment under the letter of credit. This means that the terms and conditions under the sales and purchase contract between the seller and buyer will have no effect on the payment by the bank under the letter of credit.

For example, if the letter of credit requires a documentary check, and the seller obtaining benefits from such a letter of credit provides the bank with the full and complete documents as demanded by such a letter of credit, the bank absolutely must make the payment to the seller. The only exceptions are in the case of non-compliance with the documents or fraud.

It could be concluded that the bank does not care whether the seller has committed a breach under the contract of sale or not at the time of the seller submitting the documents. The bank has a duty to pay under the conditions of the letter of credit, even though it knows that the seller has breached the sales contract. This is based on the autonomy principle that makes the letter of credit seem independent and severable from the sales contract, which is an underlining contract between seller and buyer. The autonomy of the letter of credit is an advantage in international sales because it leads to successful agreed terms of goods delivery and price payment between the seller and the buyer, so that the seller has to present documents of delivery in order to conform with the terms of the letter of credit, and the buyer has to reimburse the bank upon the bank’s payment to the seller in compliance with the terms of the letter of credit.

(ii) The doctrine of strict compliance :

As per "the doctrine of strict compliance “ banks must examine all documents stipulated in the Credit with reasonable care, to ascertain whether or not they appear, on their face, to be in compliance with the terms and conditions of the Credit. Pursuant to this doctrine the issuing bank is not, a guarantor of the document's conformity, its duty is discharged by the exercise of reasonable care to ascertain that the documents comply on their face with the terms of the credit. Some courts insist upon literal compliance, so that a misspelled name or typographical error voids the exporter's/beneficiary's/seller's demand for payment. Other courts require payment upon substantial compliance with documentary requirements. The bank may insist upon strict compliance with the requirements of the L/C. In the absence of conformity with the L/C, the Seller cannot force payment and the bank pays at its own risk. Sellers should be careful and remember that the bank may insist upon strict compliance with all documentary requirements in the LC. If the documents do not conform, the bank should give the seller prompt, detailed notice, specifying all discrepancies and shortfalls. The legal principle that the bank is entitled to reject documents which do not strictly conform with the terms of the credit is the doctrine of strict compliance. The reasoning (this is not always appreciated by the exporters) is that the advising bank is a special agent of the issuing bank and the latter is a special agent of the buyer. If such agent who has limited authority acts outside his authority (mandate in banking terminology), the principle is entitled to disown the act of the agent.The issuing duty to receive, examine documents and make payment with "the doctrine of strict compliance" is also the duty owned to the beneficiary. The advantage of the strict compliance rule is obviously important to the applicant, the buyer. The primary concern of the buyer in international sales of goods is that the seller has shipped what was bargained for before the buyer becomes obligated to pay. Although the doctrine does not totally guarantee that the seller has complied with the terms of the underlying contract, it does give evidence as to the performance of the seller and also gives confidence to the buyer. The doctrine of strict compliance may be illustrated by the following examples :In one case the defendants bought vanilla beans from a seller in Jakarta. They instructed the plaintiff bank to open a confirmed letter of credit in favour of the seller and to make finance available thereunder on delivery of certain documents including a certificate of quality to be issued by EXPERTS. Owing to an ambiguity in the cabled codeword, the advising bank in Jakarta informed the seller that the credit was available on the tender of certificate by EXPERT. The seller has fraudulently shipped mainly rubbish and the expert failed to discover the fraud. It was held that the plaintiff bank was not entitled to be reimbursed by the buyers, because, contrary to their instructions, it made available finance on the certificate of one expert only instead of at least two experts.

Q8. Enumerate the different kinds of marine insurance.

Ans. All ship-owners and shipping merchants insure their property against losses or damages. They are not legally bound to insure their own interests or bound to insure against third party liabilities either. However, the modern methods of financing, trade and shipping make it essential that they do so. The capital that is exposed to loss in modern ships is so huge that no shipping corporation can afford to bear the liability incurred. Besides, most of the tonnage is mortgaged to banks and other financial institutions and they require insurance as collateral security.

Marine insurance covers the risk of loss to ships and vessels and also provides Cargo cover. Marine Cargo insurance may be divided into two divisions namely inland marine, which covers property and goods in transit between locations without requiring sea transport, and ocean marine, which covers property and goods subject to a sea voyage. Marine Cargo policies are issued in various forms depending on the requirements of the shipper, the shipowner, the charterer, the consignee, etc.

A marine policy must specify :

(a) the name of the assured or of some person who effects the insurance on his behalf; (b) the subject-matter insured and the risk insured against; (c) the voyage or period of time, or both, as the case may be, covered by the insurance; (d) the sum or sums insured; (e) the name or names of the insurers.

Kinds of marine insurance :

1. Valued policy and Unvalued Policy:

A policy may be either valued or unvalued. A valued policy is a policy that specifies the agreed value of the subject matter insured. Subject to this Act, and in the absence of fraud, the value fixed by the policy is, as between the insurer and assured, conclusive of the insurable value of the subject intended to be insured, whether the loss is total or partial. Unless the policy otherwise provides, the value fixed by the policy is not conclusive for the purpose of determining whether there has been a constructive total loss. An unvalued policy is a policy that does not specify the value of the subject matter insured, but, subject to the limit of the sum insured, leaves the insurable value to be subsequently ascertained in the manner

specified earlier in this Act. In the case of an unvalued policy, the insurable value of the goods or merchandise is the prime cost of the goods, plus the expenses of and incidental to shipping and the charges of insurance upon the whole.In modern export practice, valued policies are the rule. The insured value is the agreed value specified in the policy. The shipping value is defined in identical terms with the definition of insurable value for unvalued policy. If there is possibility of rising market prices during the transit of the goods, the assured who has covered the goods under an ordinary policy can obtain a so-called increased value policy.

2. Voyage, time and mixed policies :

If the contract is to insure the subject matter at and from, or from one place to another or others, the policy is called a "voyage policy", and where the contract is to insure the subject matter for a definite period of time the policy is called a "time policy". A contract for both voyage and time may be included in the same policy.

Cover is provided from warehouse to warehouse and hence the transit clause extends the marine insurance to land risks incidental to the sea voyage. If the transit clause is deleted, the risk commences and terminates at the sea ports.Time policies were rarely used in export transactions but are found more frequently in recent times. These policies may cover a period exceeding twelve months on the continuation clause.

Mixed policies are issued on the frequent instances where the goods are insured under an contract for both voyage and time. Here the insurer is only liable under the insurance when a loss occurs during the period of insurance and while the ship is on the specified voyage.

3. Floating policies :

The use of floating policy has diminished in recent years. The floating policy covers automatically all shipments made thereunder and the assured is obliged to declare the individual shipments to the insurer with due expedition.It lays down the general conditions of insurance, but not the particular of the individual consignments intended to be covered.

Following are the provisions of the floating policy:a) A floating policy is a policy that describes the insurance in general terms and leaves the

name of the ship and other particulars to be defined by subsequent declaration. b) The subsequent declaration may be made by endorsement on the policy or in other

customary manner.

c) Unless the policy otherwise provides, the declarations must be made in the order of dispatch or shipment. They must, in the case of goods, comprise all consignments within the terms of the policy, and the value of the goods or other property must be honestly stated, but an omission or erroneous declaration may be rectified even after loss or arrival, provided the omission or declaration was made in good faith.

d) Unless the policy otherwise provides, if a declaration of value is not made until after notice of loss or arrival, the policy must be treated as an unvalued policy as regards the subject matter of that declaration.

The Act discourages shippers from waiting until they have knowledge as to whether or not a particular shipment has arrived safely, before deciding whether or not to declare it. Were it not for this stricture, shippers would only declare losses. The floating policy often contains a clause obliging the assured to make declarations of shipment as early as possible.The floating policy is not a time policy but the aggregation of voyage policies. The assured, who desires to avoid leaving some of his shipments undeclared, has to take out a further floating policy before the expiration of the current policy. This is a disadvantage of the floating policy because, if the assured forgets to take out a new policy the goods may travel uninsured. This is avoided if an 'always open' open cover is taken out.The floating policy may contain a clause limiting a risk per vessel. The assured who wishes to ship in excess of the limit per vessel, should make arrangements for a separate additional cover prior to shipment.The limit clause is regularly supplemented by a location clause by which the insurer restricts to a fixed maximum sum his liability for accumulation of covered risks in onelocality. This clause in invariably inserted where insuring the land risks incidental to sea transit. The individual location risk is often limited to the same amount as per the limit clause. As a result of the location clause, if goods stored in warehouse prior to the shipments are destroyed, the insurer are only liable to the sum stated in the location clause although the aggregate insurable value of the goods may far exceed the limit.The premium is often arranged at fixed rates for specified kinds of goods, e.g. textiles hard-ware, cars etc.

4. Open covers:

Open cover is usually issued for import/export. The open cover is a contract effected for a period of 12 months , whereby the insurance company agrees to provide insurance cover to all shipments coming within the scope of the open cover. Open cover is not a policy. It is an unstamped agreement. As and when shipments are declared , specific policies are issued as evidence of the contract and on collection of premium.

Open cover, combined with the issue of insurance certificates, has become the most common and popular form of insurance used in the export trade. It is another method of effecting a general insurance for recurring shipments, the details of which are unknown when the insurance is taken out. This method resembles, in many respects, the floating policy, in particular, the assured likewise bound to declare all individual shipments effected there under. The open cover, like the ship, is not an insurance policy, but is a document by which the underwriter undertakes subsequently to issue duly executed floating policy or specific policy within the terms of the cover.The open cover normally contains a maximum limit of the insurer's liability and a location clause. Conditions are laid down in the open cover for the determination of the insurable value.

5. Blanket policies :

In the case of floating policies and open covers the assured has normally to make declarations of the individual shipments falling under these insurance to the insurer. Where the various consignments are of small value or the duration of the voyages is short, the normal method becomes inconvenient to the exporter. In these cases, the assured can take out a blanket policy which provides that the exporter need not advise the insurer of the individual shipments and that a lump-sum premium would cover all shipments.

Q9. Discuss different types of bills of lading.

Ans. Bill of Lading is a document issued on behalf of the carrier describing the kind and quantity of goods being shipped, the shipper, the consignee, the ports of loading and discharge and the carrying vessel. It serves as a document of title, a contract of carriage, and a receipt for goods.

The bill of lading is a contract of carriage and has three functions:

1. It defines in detail, the terms of the contract between the shipper and the shipping line for the carriage of goods from one specified port to another.

2. It is a formal, signed receipt for a specified number of packs e.g. crates, drums etc. which is given to the shipper by the shipping line when the shipping line receives the consignment.

3. It is a document of title (i.e. a certificate of ownership) to the goods. As such, it must be produced at the port of final destination by the consignee in order to claim the goods. As a document of title, the bill of lading is also a negotiable document and the consignee may sell the goods by endorsing or handing over the bill of lading to another authorised party, even while the goods are still at sea. Although negotiable bills of lading are in common use, some countries do not allow them or make it difficult to be used and exporters should enquire whether it is accepted in the buyers country.

Bills of lading may be negotiable or non-negotiable: With a negotiable bill of lading, ownership of the goods may be transfered to a third party. The shipper marks the bill of lading, 'to order' to ensure that the bill of lading may be negotiated by a third party, e.g. the bank, through blank endorsement i.e. by signing on the reverse side of the bill of lading. The third party is then able to take ownership of the goods. The shipper can also ensure that the bill of lading is only negotiated by the buyer by entering the name of the consignee on the document, instead of 'to order'. The buyer then has the option of transferring title of the goods to a third party by endorsing in blank or to a named third party. Bills of lading can become highly negotiable documents. All original bills of lading are thus negotiable documents to some extent - it is only the copy bills of lading that are absolutely non-negotiable.

A shipped bill of lading : It indicates that goods have been loaded on

board the vessel. This bill is required if payment is being made on the basis of a letter of credit. It is also known as an on board bill of lading. A received for shipment bill of lading acknowledges that the carrier has received the goods and are in the custody of the carrier, but have not actually been loaded on board the vessel. This may be

used when there is congestion at the port or in the case of dock strikes. Once the goods are on board, the bill of lading is stamped 'on board', in accordance with the International Chamber of Commerce (ICC) rules.

Clean and claused bills of lading : If the cargo is apparently in good order and properly packed when received by the shipping line, the bill of lading which the shipping line issues, is termed 'clean'. The shipowner thus admits full liability for the cargo described in the bill. If, however, a defect is noted such as a bale is torn or a cask is leaking, a clause will added to the bill. The bill then becomes 'unclean', 'dirty', or 'claused'. When an export transaction is conducted on the basis of a letter of credit, banks will refuse shipping documents bearing such clauses, unless the letter of credit specifically states that they are acceptable, e.g. it may be the custom of the trade to use second-hand packing, an aspect may be noted as a defect.

Freight pre-paid or freight collect bills of lading : When an exporter pays freight to the shipping line in advance, for example on a c.i.f. basis, the exporter will acquire a bill of lading marked freight pre-paid. However in instances when freight is paid on arrival of goods, e.g. under an f.o.b. contract, the bill of lading is marked freight collect.

Stale bills of lading : This is a bill of lading which has been presented so late after the due date of delivery of goods to the port, that as a result of the delay in its presentation, the consignee/buyer has become involved in legal or administrative complications. According to Uniform Customs and Practice for Documentary Credits of the ICC, banks may refuse a transport document that is presented more than 21 days after the date of shipment. The bank may accept a stale bill of lading 'with recourse' if the buyer repudiates payment on the basis of non -confirming documents, the exporter must return the funds received. Preferably the shipper should approach the buyer to have the letter of credit amended to permit the presentation of a stale document, or indicate that the documents will be accepted when presented.

There are different categories of the bill of lading:

A) Charter party bill of lading: Normally if commodities are to be transported

in bulk (e.g. grain, coal, oil etc), a shipper may charter (hire) a whole vessel by entering into a contract of carriage with the shipowner, the terms of which are embodied in a legal document called the charter party. As this type of bill of lading does not contain all the essential terms of the contract of carriage, banks will refuse to accept it under a letter of credit unless instructed to the contrary by the buyer.

B) Through bill of lading: It is often necessary to employ two or more carriers to transport a consignment of goods to its final destination. Shipping lines issue bills of lading which cover the whole transit and the shipper need only deal with the first carrier. Normally, a through rate is quoted. The following clauses are usually found in through bills:

1. The freight received is inclusive of the cost of forwarding to.. which would be arranged through the present carrier acting for the shipper and/or consignees of the goods without any liability whatsoever, the conditions of such forwarding to be covered by the current lawful forms of contract.

2. To avoid the tendering of further documents at each state of the journey delivery at the destination would be given only on the presentation of one of these sets of bills of lading unto.. or to his or their assigns and notice to this effect shall be included in the on-carrier's bills of lading or other freight contracts.

The shipper has only to deal with the carrier who signs the through bill. It is the responsibility of the carrier to arrange the transshipment with the on-carriers.

C) Through bills of lading covering on-carriage by air: This type of through bills is used where the goods, after having been unloaded at the port of discharge, are carried to their ultimate inland destination by air. The legal difficulty in this method or type is that the bill of lading is a document of title but the air consignment note is not. It is thought that a combination of these two documents does not give the combined through bill the character of a document of title. Nevertheless, this method is used where inordinate delay is expected if inland transport is used for the on-carriage.

D) Container bills of lading: These are issued by a shipping line which engages in combined transport. All container bills of lading are normally 'received for shipment' bills and not 'shipped on board' bills. They are different where the goods are received at a container freight station inland. These bills adopt the network liability system.

E) Groupage or House bill of lading: Freight forwarders are permitted to group various compatible consignments from different consignors together, and to dispatch the cargoes as one containerised consignment. The shipping

line issues a 'master' bill of lading to the forwarder once the full container has been loaded. The freight forwarder cannot hand the original shipping line's bill of lading and therefore issues a house bill of lading to the individual shippers. At the destination, an agent of the forwarder breaks down the consignment and distributes the goods subject to an original house bill of lading being presented. Under letter of credit, the banks may reject this form of bill of lading unless it is specifically stated that this type of bill of lading is acceptable.

F) Delivery orders : These are documents issued by or on behalf of ship owners while the goods are in their possession or at least under their control and containing some form of undertaking that they will be delivered to the buyers on presentation of the documents. Ship's delivery orders are addressed to the carrier and instruct him to deliver the goods to the holder. They are of a higher legal quality than delivery orders addressed to an agent of the seller in so far as they give the holder in certain circumstances a direct right of action against the carrier, and where it is stipulated in a c.i.f. contract of sale that the seller may tender them in the place of bills of lading, the contract is regarded in law as creating the typical effect attributed to a c.i.f. contract viz. that in certain circumstances and respects the tender of the shipping documents constitutes the performance of the contract.

G) Non-negotiable liner waybill: Containerisation increased the speed with which cargo was transported and goods tended to arrive before the importer received the bill of lading required to take delivery of the goods. As a result, certain shipping lines introduced an alternative to the bill of lading, the non-negotiable liner waybill. This document provides for the automatic delivery of cargo to a named consignee. In contrast, the bill of lading document must reach the destination of the goods and be surrendered to the carrier before delivery can be authorised. The non-negotiable liner waybill is not a document of title and must be made out to the consignee. It acts only as a receipt for the cargo and as evidence of the contract of carriage.

H) Airway bill: An airway bill is a bill of lading which covers both domestic and international flights transporting goods to a specified destination. It establishes the terms between a shipper and an air transportation company for the transport of goods. Included in the document are the conditions, limitations of liability, shipping instructions, description of commodity, and applicable transportation charges. In addition, the air waybill is a non-negotiable document which serves as a receipt for the shipper, indicating that the carrier has accepted the goods listed and obligates itself to carry the consignment to the airport of destination according to specified conditions.

This transport document serves as:

1. documentary evidence of the conclusion of a contract of carriage 2. proof of receipt of the goods for shipment 3. an invoice for the freight 4. a certificate of insurance 5. guide to airline staff for the handling, dispatch and delivery of the

consignment.

The airway bill is a fairly complex document and is seldom completed by the exporter. The services of an airfreight forwarder are usually engaged for this purpose and clear instructions should be provided by the shipper noting any specific requirements if the transaction is under a letter of credit. Most airlines and forwarders have a standardised form for this purpose, the shipper's letter of instruction.

Q10. What is arbitration ? Discuss the characteristics of arbitration ?

Ans. Arbitration is defined as a form of alternative dispute resolution in which the parties bring their dispute to a neutral third party and agree to abide by his or her decision. In arbitration there is a hearing at which both parties have an opportunity to be heard.

Arbitration is typically an out-of-court method for resolving a dispute. The arbitrator controls the process, will listen to both sides and make a decision. Like a trial, only one side will prevail. Unlike a trial, appeal rights are limited. In a more formal setting, the arbitrator will conduct a hearing where all of the parties present evidence through documents, exhibits and testimony. The parties may agree to, in some instances establish their own procedure, or an administrating organization may provide procedures. There can be either one arbitrator or a panel of three arbitrators. An arbitration hearing is usually held in offices or other meeting rooms.

The result can be binding if all parties have previously agreed to be bound by the decision. In that case, the right to appeal the arbitrator's decision is very limited. An arbitrator's award can be reduced to judgment in a court and thus be enforceable. In non-binding arbitration, a decision may become final if all parties agree to accept it or it may serve to help you evaluate the case and be a starting point for settlement talks.

Its principal characteristics are:

1. Arbitration is consensual : An arbitration can only take place if both parties have agreed to it. In the case of future disputes arising under a contract, the parties insert an arbitration clause in the relevant contract. An existing dispute can be referred to arbitration by means of a submission agreement between the parties.

2. The parties choose the arbitrator(s) : The parties can select a sole arbitrator together. For example, parties can choose a technical person as arbitrator if the dispute is of a technical nature so that the evidence will be more readily understood. the parties have an opportunity to choose their own arbitrator, and accordingly, may decide to utilise the services of an expert with knowledge as to their particular dispute, rather than a legal expert with little knowledge of the practical issues in dispute. The parties may even decide to be represented by experts rather than having legal representatives present at the hearing.

3. Arbitration is neutral : In addition to their selection of neutrals of an appropriate nationality, parties are able to choose such important elements as the applicable law, language and venue of the arbitration. This allows them to ensure that no party enjoys a home court advantage.

4. Arbitration is a confidential procedure : Arbitration hearings are confidential, private meetings in which the media and members of the public are not able to attend. As well, final decisions are not published, nor are they directly accessible. This is particularly useful to the employer who does not want his ‘dirty laundry’ being aired.

5. Arbitration is flexible : It is more flexible than adjudication. The disputants can usually choose their own arbitrator, who can be an expert in the topic in dispute, which a judge seldom is. This makes arbitration especially useful in complex, technical commercial disputes.

6. Efficiency : Arbitration can usually be heard sooner than it takes for court proceedings to be heard. As well, the arbitration hearing should be shorter in length, and the preparation work is less demanding.

7. Arbitration is quicker : Arbitration is quiker than litigation.. It is widely known that going through the litigation system takes time, this is due to the fact that a case must wait its turn in the court timetable. It is a totally different system through arbitration, here the timetable is arranged by the parties and the arbiter himself. Therefore an arbiters decision is far quicker to obtain.

8. Finality : The proceedings of arbitration are simple and convenient and the arbitral award is final without the recourse to appeal or retrial. There is in general, no right of appeal in arbitration.(Although, the court has limited powers to set aside or remit an award).

9. ‘Splitting the Baby’ : Thomas Crowley states that because of the relaxation of rules of evidence in arbitration, and the power of the arbitrator to ‘do equity’ (make decisions based on fairness), the arbitrator may render an award that, rather than granting complete relief to one side, splits the baby by giving each side part of what they requested. Thus both parties are leave the table feeling that justice was not served.

Q13. How does the GATT propose to settle the disputes between member countries?

Ans. The dispute settlement system of the GATT is generally considered to be one of the cornerstones of the multilateral trade order. The system has already been strengthened and streamlined as a result of reforms agreed following the Mid-Term Review Ministerial Meeting held in Montreal in December 1988. Disputes currently being dealt with by the Council are subject to these new rules, which include greater automaticity in decisions on the establishment, terms of reference and composition of panels, such that these decisions are no longer dependent upon the consent of the parties to a dispute. The Uruguay Round Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) will further strengthen the existing system significantly, extending the greater automaticity agreed in the Mid-Term Review to the adoption of the panels’ and a new Appellate Body’s findings. Moreover, the DSU will establish an integrated system permitting WTO Members to base their claims on any of the multilateral trade agreements included in the Annexes to the Agreement establishing the WTO. For this purpose, a Dispute Settlement Body (DSB) will exercise the authority of the General Council and the Councils and committees of the covered agreements.

Dispute Settlement Procedure

A. General: The dispute settlement process can be completed within approximately 14 months from the date of a request for consultations, even with an appeal.

B. Complaints:1. Violation Complaint: Most complaints concern claims by one Member that another has taken a measure inconsistent with specific WTO rules, to the injury of the complaining party. 2. Non-Violation Complaints: A Member may bring a complaint even if there has been no violation of an agreement. It may allege that another Member has taken a measure that nullifies or impairs a benefit that the complaining Member had reason to expect to receive under the provisions of a WTO agreement.

C. Consultations: A complaining Member must seek consultations with the Member whose measure is in dispute before requesting the establishment of a panel to hear the matter. Consultations are confidential and are to be held without prejudice to the rights of Members in further proceedings.

1) Members must respond to requests for consultations within 10 days and enter into consultations within 30 days after receipt of a consultations request. The consultations are notified to the DSB.

2) In urgent cases, e.g., where perishable goods are concerned, consultations must begin no more than 10 days after receipt of the request, and if not resolved within 20 days after receipt of the request, the requesting Member may request the establishment of a panel.

3) Members other than the consulting parties may participate in consultations if the Member to which the request for consultations was addressed agrees that they have a "substantial trade interest" in consultations.

D. Establishment of Panels :

1. The Member requesting consultations may request establishment of a panel if a Member does not respond within the allotted time period to a request for consultations or, generally, if consultations do not resolve a dispute within 60 days after the request for consultations. 2. Requests: A party must submit a written request for the establishment of a panel, and indicate whether consultations were held, identify the measures at issue and summarize the legal basis of the complaint. 3. Composition of Panels: Panels normally consist of three persons, but the parties to the dispute may agree to five panelists. If within 20 days of establishment of a panel, the parties to the dispute cannot agree on the panelists, the WTO's Director-General appoints panelists after consulting with the disputing parties. 4. Multiple Complainants: The DSU reflects a strong preference for the formation of a single panel to hear complaints of multiple parties with regard to the same measure. 5. Third Parties: Third parties with a substantial interest in a matter before the panel are given an opportunity to make written submissions and oral presentations to the panel.

E. Panel Procedures: The DSU provides guidance on procedures that panels are to follow. Although each panel fixes the timetable for its proceedings, panels are instructed to normally follow procedures set out in a DSU appendix, which include strict time limits for submissions to the panel and provisions for scheduling panel meetings. 1. Panels must submit written reports, which are to include findings of fact, a statement regarding how the pertinent WTO agreements apply to the disputed matter and the reasons for any findings and recommendations. 2. Panels must provide parties to a dispute with a draft report and allow them to provide written comments on it. Generally, the final report must be issued within six months of the panel's establishment (maximum time is nine months). The draft is not made public.

3. Panels may seek advice from relevant experts, and may establish an "expert review group" to provide an advisory report on any factual issue concerning scientific or other technical matters. 4. Panel deliberations and documents submitted to it are confidential, but a party to a dispute may disclose its submissions to the public.

F. Adoption of Panel Reports: The DSB must adopt panel reports within 60 days after issuance, unless a party to the dispute appeals the decision or the DSB decides by consensus to reject the report.

G. Appellate Review: Parties to a dispute may appeal legal issues in panel reports to the standing Appellate Body. Three-person appellate panels will be drawn from an the seven-person Appellate Body.

1. The Appellate Body may uphold, modify or reverse the legal findings and conclusions of a panel. 2. As a general rule, the Appellate Body must make its findings within 60 days (and at most 90 days) after a party files an appeal.3. The DSB must adopt an Appellate Body report within 30 days after it is issued, unless there is a consensus to not do so.

H. Recommended Remedies: Where a panel or Appellate Body finds that a measure is inconsistent with a WTO agreement, it must issue a recommendation directing the Member to bring the offending measure into conformity with the agreement, and it may make non-binding suggestions as to ways the recommendation could be implemented.

I. Implementation :

1. The Member concerned must state its intentions on implementation of the recommendations of a panel or the Appellate Body at a DSB meeting held within 30 days after the adoption of the report. 2. Where the Member cannot comply immediately with the rulings and recommendations, it will be given a "reasonable period of time" to do so. A reasonable period of time may be: a period suggested by the Member and approved by the DSB; a period agreed on by the parties to the dispute; or a period determined through binding arbitration within 90 days after the adoption of the recommendations and rulings.

J. Compensation and Retaliation: If a Member fails to implement a panel or Appellate Body recommendation to bring a measure into conformity with a WTO agreement, the Member must enter negotiations, on request, with the complaining party to reach agreement on mutually acceptable compensation.

1. Implementation of a recommendation to bring a measure into conformity with the agreement is preferred to compensation or the suspension of concessions or other obligations. Compensation is voluntary and must be consistent with the WTO agreements. 2. If agreement on compensation is not reached within 20 days after expiration of the period for implementing the panel or Appellate Body decision, a party may request the DSB to authorize retaliation (suspension of concessions). 3. As a general principle, a complaining country must first consider taking retaliatory action in the sector affected by the measure in question. Cross-retaliation is permissible, i.e., across agreements and sectors.

K. Arbitration: As an alternative means of dispute settlement, Members may seek arbitration within the WTO in situations where the issues in conflict are "clearly defined" by both parties to a dispute. The parties must agree to arbitration and the procedures to be followed. Where the parties decide to arbitrate, they must agree to abide by the arbitration award. All Members must be given prior notice of the arbitration. Third parties may join the arbitration only with the consent of the parties that have agreed to arbitration.

Q14. Define the intellectual property. What is a patent ?

Ans. In law, particularly in common law jurisdictions, intellectual property refers to a legal authorization which sometimes attaches to the expressed form of an idea, or to some other abstract subject matter. In general terms this legal authorization sometimes enables its holder to exercise exclusive control over the use of the intellectual property. The term intellectual property reflects the idea that the subject matter of this property is the product of the mind or the intellect, and that once established; such authorizations are generally treated as equivalent to physical property and may be enforced as such by the courts. An intellectual property shall include the rights relating to: literary, artistic and scientific works, performances of performing artists, phonograms, and broadcasts, inventions in all fields of human endeavor, scientific discoveries, industrial designs, trademarks, service marks, and commercial names and designations, protection against unfair competition, and all other rights resulting from intellectual activity in the industrial, scientific, literary or artistic fields.Intellectual property is a creation of the intellect that has commercial value. It includes copyrighted property such as literary or artistic works, and ideological property, such as patents, titles of origin, business methods, as well as industrial processes. Intellectual property is a term often used to refer generically to property rights created through intellectual and/or discovery efforts of a creator that are generally protectable under patent, trademark, copyright, trade secret, trade dress or other law.If creators don’t look after their property and it becomes well known or copied, then they can lose out. Here are some examples:Nestlé UK Limited have registered ‘Have a break, have a KitKat®’, but not just the first three words alone. Mars opposed Nestlé’s attempts to register ‘Have a break’, and wants to use the words on its own product. The High Court has said Nestlé do no own those three words – but Nestle may yet appeal.Common types of intellectual property rights protect different types of abstract subject matter. The five main types of non-physical things considered to comprise intellectual property are:

1. Copyright/©: A copyright protects original works of authorship fixed in a physical medium of expression. Copyrights can include published and unpublished works—literary, dramatic, and musical and dance compositions, films, photographs, audiovisual works, paintings, sculpture, and other visual works of art, as well as computer programs—from being copied.

2. Patent: A patent is a grant issued by the federal government giving an inventor the right to exclude others from making, having made, using,

leasing, offering to sell, selling, or importing an invention in the United States. A patent does not necessarily guarantee inventors the right to make, use or sell their inventions; in some cases, utilizing a patented invention depends on another person's prior, unexplored patent.

3. Trademark/™ ®: Trademark protection covers a non-functional word, logo, slogan, symbol, design—or any combination of these—that distinguishes a product or service. Essentially trademarks are the brand names that promote competition by giving products corporate identity and marketing leverage.

4. Trade Secret: A trade secret is a formula, pattern, manufacturing process, method of doing business, or technical know-how that gives its owner a competitive advantage. Trade secrets cover a wide range of information, including chemical compounds, machine patterns, customer lists and software.

5. Designs: Intellectual property of design refers to the form of appearance, style or design of an industrial object, for example furniture or textiles.

A patent in an exclusive right granted by a country to the owner of an invention to make, use, manufacture and market the invention, provided the invention satisfies certain conditions stipulated in the law. Exclusivity of right implies that no one else can make, use, manufacture or market the invention without the consent of the patent holder. This right is available only for a limited period of time. However, the use or exploitation of a patent may be affected by other laws of the country which has awarded the patent. These laws may relate to health, safety, food, security etc. Further, existing patents in similar area may also come in the way. A patent in the law is a property right and hence, can be gifted, inherited, assigned, sold or licensed. As the right is conferred by the State, it can be revoked by the State under very special circumstances even if the patent has been sold or licensed or manufactured or marketed in the meantime. The patent right is territorial in nature and inventors/their assignees will have to file separate patent applications in countries of their interest, along with necessary fees, for obtaining patents in those countries.Patents allow the creator of certain kinds of inventions that contain new ideas to keep others from making commercial use of those ideas without the creator's permission. For example, Tom invents a new type of hammer that makes it very difficult to miss the nail. Not only can Tom keep others from making, selling or using the precise type of hammer he invented, but he may also be able to apply his patent monopoly rights to prevent people from making commercial use of any similar type of hammer during the time the patent is in effect (20 years from the date the patent application is filed).

Q17. What are the inventions that are not patentable ?

Ans. A patent in an exclusive right granted by a country to the owner of an invention to make, use, manufacture and market the invention, provided the invention satisfies certain conditions stipulated in the law. Exclusivity of right implies that no one else can make, use, manufacture or market the invention without the consent of the patent holder. This right is available only for a limited period of time. However, the use or exploitation of a patent may be affected by other laws of the country which has awarded the patent. These laws may relate to health, safety, food, security etc. Further, existing patents in similar area may also come in the way. A patent in the law is a property right and hence, can be gifted, inherited, assigned, sold or licensed. As the right is conferred by the State, it can be revoked by the State under very special circumstances even if the patent has been sold or licensed or manufactured or marketed in the meantime. The patent right is territorial in nature and inventors/their assignees will have to file separate patent applications in countries of their interest, along with necessary fees, for obtaining patents in those countries.

India has steadily grown to be the world's 18th largest economy in terms of total GDP. Over the years, progress in technology has been promising, particularly in pharmaceuticals and healthcare; automobiles; textiles; chemicals; dyes and pigments; biotechnology; information technology; electronics and communication; building materials and furniture. To promote economic growth and development, the Government is focusing on liberalised policies to promote investment and provide better incentives for domestic and foreign investors. At this point in time IP rights are becoming increasingly important and are encouraging the sharing and commercial transaction of new and innovative knowledge across India.Among IP rights, patents, due to their high technical content and the complexity of patent law, pose the greatest challenge.

A Patent is a monopoly right granted to person who has invented a new and useful article or an improvement of an existing article or a new process of making an article.

Defining inventions :

Under the 1970 Act, invention means any new and useful art, process, method or manner of manufacture; machine, apparatus or other article; substance produced by manufacture, and includes any new and useful

improvement of any of them, and an alleged invention;

Inventions That are not Patentable

1. Inventions that are Frivolous or obvious inventions. 2. Inventions which could be contrary to law or morality or injurious to human,

animal or plant life and health or to the environment. 3. Mere discovery of the scientific principle or the formulation of an abstract

theory or discovery of any living thing or non-living substances occurring in nature

4. Mere discovery of any new property or mere new use for known substance or the mere use of a known process, machine or apparatus- unless results to new products or employs one new reactant.

5. Producing a new substance by mere admixtures of substances. 6. Mere arrangement / rearrangement or duplication of known devices

functioning independently. 7. Method of agriculture and horticulture 8. Any process for the medicinal or surgical, curative prophylactic, diagnostic,

therapeutic or other treatment of human beings, animals to render them free of disease or to increase their economic value or that of their products.

9. The biological processes for production or propagation of plants and animals in whole or any part thereof other than micro-organisms but including seeds, varieties and species (new plant varieties can be protected by the protection of plant varieties and farmers act 2001).

10. A mathematical or business method or algorithms.11. A Computer Programme per se other than its technical application to

industry or a combination with hardware.12. Aesthetic creation including cinematography and television production. 13. Method for performing mental act or playing game. 14. Presentation of information. 15. Topography of Integrated Circuits. 16. Invention which in effect, is traditional knowledge or which is an

aggregation or duplication of known properties of traditionally known components.

17. Inventions relating to Atomic Energy.

Q18. Write briefly on:

(a) Paris Convention

(b) TRIPS

(c) Berne Convention

Ans. (a) Paris Convention

The Paris Convention is an international convention for promoting trade among the member countries, devised to facilitate protection of industrial property simultaneously in the member countries without any loss in the priority date. All the member countries provide national treatment to all the applications from the other member countries for protection of industrial property rights. The Convention was first signed in 1883. Since then, the Convention has been revised several times, in 1900 at Brussels, in 1911 at Washington, in 1925 at the Hague, in 1934 at London, in 1958 at Lisbon and in 1967 at Stockholm. The last amendment took place in 1979. India became a member of the Paris Convention on December 7, 1998.

The principal features of the Paris Convention have been listed below

National treatment Right of priority Independence of patents Parallel importation Protection against false indications and unfair competition

National Treatment is a very important concept in Paris Convention and is essential for successfully achieving the fundamental aim of the Paris Convention. The idea is to provide equal treatment to applications from member countries, in a given member country and not to differentiate between the nationals of one country and nationals of the other countries for the purpose of grant, and protection of industrial property in that country. For Example a national of country X applies for grant of a patent in India. According to the Paris Convention, the Indian Patent Office shall apply the same norms and rules, to the applicant from X, as applicable to an Indian applicant, for granting a patent. Similarly the applicant from X shall have the same protection after grant and identical legal remedies against any infringement shall be available to the applicant provided the conditions and formalities imposed upon Indians are complied with. No requirement as to domicile or establishment in the

country where protection is claimed, may. be imposed.There are a number of international conventions and treaties, which are open only to the members of the Paris Convention. Some of these are:

Patent Cooperation Treaty (PCT) Budapest Treaty (for deposition of microorganisms)UPOV (for protection of

new varieties of plants) Madrid Agreement (for repression of false or deceptive indications of source

on goods) Madrid Protocol (concerning registration of marks) Hague Agreement (concerning deposits of industrial designs)

(b) Trips

The TRIPS Agreement is often described as one of the three “pillars” of the WTO, the other two being trade in goods (the traditional domain of the GATT) and trade in services. The TRIPS Agreement is part of the “single undertaking” resulting from the Uruguay Round negotiations. That implies that the TRIPS Agreement applies to all WTO members. It also means that the provisions of the agreement are subject to the integrated WTO dispute settlement mechanism which is contained in the Dispute Settlement Understanding (the “Understanding on Rules and Procedures Governing the Settlement of Disputes”).One of the fundamental characteristics of the TRIPS Agreement is that it makes protection of intellectual property rights an integral part of the multilateral trading system, as embodied in the WTO.The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) is an international treaty which sets down minimum standards for most forms of intellectual property regulation within all member countries of the WTO.Specifically, TRIPs deals with copyright and related rights (ie. rights of performers, producers of sound recordings and broadcasting organisations); geographical indications (including appellations of origin); industrial designs; integrated circuit layout-designs; patents (including the protection of new varieties of plants); trademarks; and undisclosed or confidential information, (including trade secrets and test data). TRIPs also specifies enforcement procedures, remedies, and dispute resolution procedures.The obligations under TRIPs apply equally to all member states, however developing countries are allowed a longer period in which to implement the applicable changes to their national laws.TRIPS agreement itself introduced intellectual property law into the international trading system for the first time, and remains the most comprehensive international agreement on intellectual property to date.

Major characteristics of the TRIPS Agreement:

Objectives: Article 7, establishing the objectives of the TRIPS Agreement, states that “The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations”.

Minimum standards: The TRIPS Agreement establishes minimum standards for the protection of IP. States are free to introduce systems of protection not referred to in the Agreement, for example, to protect informal knowledge, or the rights of indigenous communities. They are also free to set higher standards of protection for existing rights.

Enforcement: The Agreement establishes general principles that are applicable to Intellectual Property Rights enforcement procedures so that rights’ holders can effectively enforce their rights. In addition, it contains provisions on court procedures, court orders, suspension of custom clearances for goods and criminal penalties.

Dispute settlement: The WTO includes a procedure for settling disputes between Members. Any Member can bring proceedings against another Member. A panel of specially appointed trade experts interprets the various agreements of the WTO, including the TRIPS Agreement. Once the panel issues its report, it is adopted unless one of the parties to the dispute appeals the decision or there is a consensus by WTO Members not to adopt the decision. If a party to a dispute fails to abide by a decision of either a Panel or the Appellate Body, the other party can impose trade sanctions on that Member.

Developing countries’ transitional periods: While developed countries should have complied with the obligations under the TRIPS Agreement by 1 January 1996, developing countries and countries with economies in transition have until 1 January 2000. Leastdeveloped countries have until 2006 to implement the Agreement.

Built-in agenda: The TRIPS Agreement includes a built-in agenda of review.

Specifically, Article 27(3)(b) provides for the review in 1999 of certain provisions relating to the patentability of plants and animals, and the protection of plant varieties. In the area of geographical indications, Article 23(4) provides that, in order to facilitate the protection of geographical indications for wines and spirits, negotiations shall be undertaken in the TRIPS Council on the establishment of a multilateral system of notification and registration.

(c) Berne Convention

The Berne Convention for the Protection of Literary and Artistic Works, sometimes called the Berne Union or Berne Convention, adopted at Berne in 1886, first established the recognition of copyrights between sovereign nations. It was developed at the instigation of Victor Hugo. Prior to the adoption of the Berne Convention, nations would often refuse to recognize the works of foreign nationals as copyrighted. Thus, for instance, a work published in London by a British national would be protecteqd by copyright in the United Kingdom, but freely reproducible by France; likewise, a work published in Paris by a French national would be protected by copyright in France, but freely reproducible in the United Kingdom.The Berne Convention provided that each contracting state would recognize as copyrighted works created by nationals of other contracting states. The convention requires its signatories to protect the copyright on works of authors from other signatory countries in the same way it protects the copyright of its own nationals. The applicable law under the Berne Convention is by default the law of the signatory country where a copyright claim is made . Copyright under the Berne Convention is automatic; no explicit registration is required.The Berne Convention provided for a minimum term of copyright protection of the life of the author plus fifty years, but parties were free to provide longer terms of copyright protection, as the European Union did with the 1993 Directive on harmonizing the term of copyright protection. The United States has for many years extended its copyright terms as well.Countries under the older revisions of the treaty may choose to provide, and certain types of works (such as phonorecords and motion pictures) may be provided shorter terms.

Under Berne Convention the author has the following exclusive rights. None of the actions below can be carried out without permission:

The right to authorise translations of the work. The exclusive right to reproduce the work, though some provisions are

made under national laws which typically allow limited private and educational use without infringement (as discussed on our page P-09: Copyright law, fair use).

The right to authorise public performance or broadcast, and the communication of broadcasts and public performances.

The right to authorise arrangements or other types of adaptation to the work.

Recitation of the work, (or of a translation of the work). The exclusive right to adapt or alter the work.

The author also has the following moral rights: The author has the right to claim authorship The right to object to any treatment of the work which would be

‘prejudicial to his honour or reputation’.

The Berne Convention has been revised a few times: Berlin (1908), Rome (1928), Brussels (1948), Stockholm (1967) and Paris (1971). Since 1967, the Berne Convention has been administered by WIPO, the World Intellectual Property Organization.Since almost all nations are members of the World Trade Organization, the TRIPs Agreement requires non-members to accept almost all of the conditions of the Berne Convention.As of January 2006, there are 160 countries which are parties to the Berne Convention.