Courts' lack of openness can hit small business

New research shows that neither Danish nor a number of foreign courts are complying with the UN’s convention for international trade. There is a lack of openness about the judgements. This can have serious consequences for many small Danish businesses involved in international law cases, warns AU researcher.

2013.05.15 | Anne Shirin Ørberg

New research from Aarhus University, School of Business and Social Sciences, shows that both Danish and foreign courts are struggling to comply with the UN convention for international trade agreements. The rules are intended to ensure openness in relation to judgements within the area and lay the foundations for more transparent and international trade.

According to postdoc Thomas Neumann, an expert in contract law and international trade law, the courts’ sloppiness can have serious implications for small Danish businesses involved in international law cases.

 - Small businesses seldom have a complete overview of the rules in force in the countries in which they operate. If they are unable to get clear answers from previous decisions, they can easily find themselves in unexpected difficulties, says Thomas Neumann.

- For example, it can be hard for a small business to know whether it can rely on the quotations it receives from its business partners, or which rights and obligations rest on the business, he explains.

Watch out for China, Russia – and Denmark

Thomas Neumann’s provisional results clearly show that in countries where the courts take a lackadaisical approach to openness with respect to legal judgements, the foreign party usually loses the court case.

At the bottom of the table are China and Russia. Here, the foreign party wins only approx. 40% of the cases which fall under the UN convention. By comparison, decisions in the most exemplary country, Germany, which is very open in relation to its judgements, are, in as many as 60% of cases, in the foreign business’s favour.

Thomas Neumann calls the difference ‘striking’, and adds that Denmark is certainly not a shining example in the area:

- The Danish courts do not have a tradition of providing detailed grounds for their decisions, which is highly criticizable. It means that a Danish business will, in principle, find it easier to predict its legal position in a case if it is being judged in Germany rather than Denmark, China or Russia.

Political short-sightedness

There is little political interest in the subject at the moment, but here Danish and European politicians are making a fundamental error, believes Thomas Neumann. He draws attention to the fact that in both Denmark and the rest of the EU, small and medium-sized enterprises play a key role in generating growth.

- It is in the interest of national economies to make the rules work. The rules are designed to save businesses from having to pay for expensive consultancy when trading internationally, he says, adding:

- It is not in any way unrealistic to demand that the courts live up to the rules which the Danish state has signed up to. All that is required is for someone to make the necessary demands.

FACTS ABOUT THE STUDY

- The UN’s rules for international trading agreements are described in the United Nations Convention on Contracts for the International Sale of Goods (CISG).

- The final reservations to CISG were abolished in Denmark on 1 February 2013, so the same rules on international trade now apply here as in 78 other countries.

- The aim is that the courts in all 79 countries eventually comply with the UN convention in the long term.

- Thomas Neumann, with funding from the Danish Council for Independent Research, is conducting the first major study of country-specific practices in a selection of the 79 countries which have signed the UN convention.

- The three-year research project at School of Business and Social Sciences is being coordinated by Thomas Neumann and ends in summer 2014.

- The project involves more than 1,000 legal decisions in thirteen countries as well as two independent conflict resolution bodies.

- The project is being sponsored by the Danish Council for Independent Research and the Department of Law, School of Business and Social Sciences, Aarhus University.


Contact:

Thomas Neumann

Thomas Neumann, postdoc, LLM, PhD

Department of Law

School of Business and Social Sciences

Aarhus University

E: tneu@asb.dk

T: +45 8716 5051

W: pure.au.dk/portal/da/persons/id(cdb4a199-ca6a-471f-ab1a-63918cb7f143).html

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