Business today is international: a Swiss engineering company sells machines to a customer in Brazil, a Kenyan exporter ships coffee to Japan, a Canadian company hires software developers in India. Every one of these transactions raises the same questions: which rules apply, who enforces them, and what happens if something goes wrong? International business law is the set of rules that answers these questions. This chapter explains why rules exist at all, where the rules of international business come from, when a case becomes international, and why this field is more demanding than national law.
Why do we need rules?
Law is often perceived as a burden on business. In fact, it is what makes business possible. Rules serve four basic functions:
- Cooperation: Rules define roles, responsibilities and duties. They create a shared framework within which individuals and companies can pursue their interests without obstructing one another. By stabilising expectations, law creates trust, the precondition of any lasting cooperation.
- Dispute prevention: Clear norms prevent conflicts before they arise. Those who know what is permitted and what is prohibited act with foresight. Where disputes nevertheless occur, the law provides orderly procedures for resolving them.
- A common language: Law provides a shared vocabulary. Concepts such as property, contract or liability are legally defined and therefore predictable for everyone involved. This clarity eases communication between parties, authorities and courts and lowers transaction costs.
- Trade: Economic exchange requires legal certainty. Contract law, the protection of property and liability rules give companies and individuals the confidence that agreements will be honoured and claims can be enforced. Without this foundation, neither markets nor the international division of labour would exist in their present form.
Law is therefore not an end in itself but a social instrument: it serves peace, reliability and prosperity. In business terms, law is the operating system of the economy.
Three layers of international business law
Economic activity is regulated at every level, nationally and internationally. For an international business, three layers of rules matter:
- Intergovernmental law: Bilateral or multilateral agreements between states. The most important multilateral example is the World Trade Organization (WTO), based in Geneva, whose purpose is to ensure that international trade flows as smoothly, predictably and freely as possible; it provides the framework for negotiating trade agreements, reducing trade barriers and settling disputes between its members. Intergovernmental law is either directly applicable to companies (self-executing) or must first be transposed into national law (non-self-executing). Rules are only as strong as their enforcement: the WTO’s Appellate Body has been unable to hear appeals since 2019 because the United States blocks the appointment of new members; 58 members, including the EU and Switzerland, use an interim arrangement (MPIA) instead.
- Uniform private law: Rules drafted by international organisations and adopted by states or chosen by the parties, so that the same rules apply to a contract regardless of where the parties are based. Key instruments: the CISG (UN Convention on Contracts for the International Sale of Goods, adopted by more than 90 states, but not by the United Kingdom or India), the UNIDROIT Principles of International Commercial Contracts, the Incoterms of the ICC, and the New York Convention on the enforcement of arbitral awards. The CISG applies automatically to sales contracts between parties based in different contracting states unless the parties exclude it. In Swiss practice it is usually excluded in general terms and conditions in favour of the Swiss Code of Obligations, a reflex that is worth questioning: for a Swiss exporter, a neutral uniform law that the foreign counterparty also knows can be an advantage over Swiss domestic law that the counterparty will resist. Chapters 03 and 05 return to these instruments.
- National law for international cases: Every state has its own rules for cross-border situations. In Switzerland, this is the Federal Act on Private International Law (PILA), which determines which courts have jurisdiction, which law applies, and how foreign judgments and arbitral awards are recognised and enforced.
In addition, there is a growing body of soft law: self-regulation by private international organisations. These rules are not enforced by state authorities or courts but by the organisations themselves, through sanctions against their members. Examples are the codes and rules of the International Chamber of Commerce (ICC), Paris. Soft law is flexible and close to practice, but it binds only those who submit to it.
International business law is the legal compass of the world economy.
Check your jurisdiction
Ask a chatbot of your choice (Claude, ChatGPT & Co.): «Is [my country] a member of the WTO, and has it ratified the CISG? Since when? Is it common practice in my country to exclude the CISG in contracts? Give me the sources.»
Validate the answer against the original sources: WTO members and observers; UNCITRAL, CISG status.
In class: we will compare your findings and discuss what WTO and CISG membership mean for a company in your country.
When is a business case international?
A business case is international when a relevant element of the case is connected with more than one state. Typical connecting factors are:
- The parties: they are based (seat, place of business, residence) in different states.
- The performance: the goods are delivered, the service rendered or the payment made across a border.
- The object: the asset in question (a property, a trademark, a company share) is located or registered in another state.
- The damage: in liability cases without a contract, the damage occurs in another state (a machine sold from Switzerland causes an accident in Brazil).
One element is enough. The Swiss engineering company from the introduction sells machines to a customer in Brazil: the parties are based in two states, the machines cross a border, and the payment comes from abroad. Even a purely domestic-looking contract can become international, for instance when a Swiss company sells to a Swiss customer but delivers directly from its factory in Germany.
Example
A student from India, living in Luzern, orders a notebook online from a Swiss retailer. The retailer ships it from its warehouse in the Netherlands. Is this an international case?
In class: we will take this case apart.
The first two questions in every international case
Before any question of substance can be answered, two questions must be settled in every international case:
- Which law applies? The law of which state governs the contract or the claim (applicable law).
- Which court decides? The courts of which state, and at which place, have jurisdiction; or whether the parties have agreed on arbitration instead of a state court.
In contract law, the parties can settle both questions in advance: with a choice-of-law clause and a choice-of-court or arbitration clause in their contract. Outside contracts, for instance in liability cases, and wherever the parties have not made a choice, the rules of private international law decide, in Switzerland the PILA. Chapter 05 deals with both questions in detail.
Check your jurisdiction
Ask a chatbot of your choice (Claude, ChatGPT & Co.): «Can two companies in [my country] agree in a contract that the law of another country applies and that a foreign court or an arbitral tribunal decides their disputes? Are there limits? Give me the sources.»
Validate the answer against an official source in your country (statute or court decision).
In class: we will compare your findings and see where party autonomy is wide and where it is restricted.
Territorial law, global business
Law is made and enforced by states; business does not stop at borders. This mismatch makes international business law more demanding than national law, for four reasons:
- Borders: Each state makes and enforces its own law within its territory. A transaction that crosses a border touches at least two legal systems, which may contradict each other.
- Speed: Digital business models emerge within months; treaties and laws take years. Gaps appear, and clever players use them.
- Private rule-making: Global platforms such as Amazon, Apple or Meta set de facto rules for millions of businesses through their terms of use, with worldwide effect and without democratic legitimacy. Where software decides what is possible, the code itself becomes the rule: «Code is Law», as Lawrence Lessig put it.
- Enforcement: Even where a rule exists, enforcing it across borders is slow, expensive and sometimes impossible. A judgment is only worth as much as its enforcement abroad.
intla.ch therefore does not attempt to teach the law of every country. It explains the concepts that recur in every legal system, uses Swiss law as a reference, and trains you to find and check the rules of your own country, with the help of AI.