Academia and Innovation

Why is there so little innovation in academia and so much demand for innovative thinking outside the Universities?

Depending on the carreer chosen, the country of studies and your university you will have more or less freedom for creative writing and thinking. In America (understood as the whole continent, not only as the United States of America) there is certainly more creative or free style of learning than in Europe.

This has a positive side as it prepares the student to face challenges and tasks that he or she will find in the real world. On the other hand it has a bad side; there are many students who graduate with the minimum technical skills.

In contrast, and despite the entrance of the Bolonia Convention, European Universities still depend on year or mid year difficult exams. One of the reasons relies of course in tradition. The best Universities in Europe are public and have large numbers of alumni, in classroom, which makes it very difficult to have mid year exams or classwork. Moreover, students in some countries in Europe like the traditional academic system.

The traditional european system has without doubts important advantages. In many European exams the undergraduate exams prepare students for the even more difficult state exams. Moreover, the postgraduate courses such as the PhD or the masters offer students the possibility of getting the profesional skills to succeed as a practitioner or as a researcher, or at least this is what business schools and PhD programs offer. Despite these advantages there are important drawbacks of this system. The first one is that a vast number students rely on the traditional public system not only to pass their exams but to organize their future lives as public servants.

This is how the European University has been traditionally organized. The high costs of masters and the difficult access to the academic positions show the difficulties that student face upon finishing their bachelors degree and their desire in many occations to access the public sector for a more stable position.

Moreover, nowadays getting a masters degree is not a guarantee of accessing to the private practice. The private sector is so competitive and many companies and industries are so powerful and competitive and the labor so accessible for them that they normally hire professionals with an already relevant professional background.

The problems of this option have been clearly shown by the financial and economic crisis. Certainly, one of the most hazardous effect of the financial crisis is the unemployment that young people who rely in the public sector have had to face[1] This is specially true in the case of Spain. This unprecedented high unemployment rate has led to study the causes and solutions for this problem. Evidently, one of the most important causes is the absense of entrepeneural and innovative skills among young people[2].

Certainly, sometimes the rigid and traditional norms of European universities are to blame. In other occations the pasive and depending attitude of Young European bachelor students is also a matter of concern. Most Europeans Universities have carreer advisors and workshops designed to approach young students to the private sector. For example, in some Universities there are seminars and courses given by the University professors to prepare students to the difficult world of the legal profession as well as masters despite this effort, in the mayority of cases there are still not enough participants in these events.

The impact of the financial and economic crisis led to the adoption of several measures specially addressed to tackle the problem of unemployment. Some of these measures included the adoption or assimilation of educational programs which offer degrees close to technical professions such as the ones present in Germany[3].

Another measure consisted in the modernization of the programs present in Universities, an initiative that had already started with the Bolonia convention. Other initiatives consisted in the elaboration of convenants between Universities and the private practice and in the creation of adequate policies from the public sector. Despite the correctness of these measures the persistent unemployment problem and the poor economic figures of several European countries led us to reexamine these measures.

A good way to approach might be to examine the lives of very succesful entrepeneurs, business owners and innovators and their relation with academia. Of course the general rule is that successful students are more successful finding a job in the private market. Despite this fact there are very curious cases that in many occations extraordinary men have been mediocre students or even have drop out from University. Some examples of the latter are the cases of Steve Jobs, Bill Gates and Mark Zuckenberg. Despite droping out there is an undeniable link to their success and academia.

After all, the succesfull projects of these men started as dreams and ideas created in the dormitories and the halls of Universities. What this also demonstate is that really outstanding and creative people soon began to make their own projects or their own schools of thought. This should not come as a suprise, after all the origin of academia can be trace back to the desire of a group of philosophers to create schools of knowledge[4]. Moreover, another crutial issue is that there is an important age to begin the first entrepeneural businesses, the idea is always to make a successfull business.

Nonetheless the there is always a learning process for any venture, this is why the university years are so important. The energy, the curiosity and spirit of this age is ideal for any business or entrepeneurship. The problem is that in some Institutions the course load is so demanding and many times the programs so inflexible that many students end up having to make a decision between studying and undertaking their first proyect. This is certainly one of the reasons why these extraordinary creators and innovators left their studies very soon for other ventures.

The main point of the present article is that despite the irrefutable connection between academia and innovation, there is still great effort and challenges for Universities. Universities should play a crutial role in facilitating the means inside and outside the classroom for students to innovate and interact intellectually. This demands an effort not only from the academic staff but also from students. Students should be active, demanding what is needed at the University, suggesting what kind of new ideas can be integrated in the University and what kind of proposals and innovations can be better to improve the relation between education and innovation.

On their side, the professors, no matter what is their discipline should encourage participation in class the discussion of the relevance of the subject in the present and in the future, this is the way to adequate the needs of education to requirements of the future.




[1] See O Higgins Niall International Labour Office. Geneva. Employment Sector Employment Working paper No. 70. 2010

[2] For more on youth and innovation see Clemensson, Martin, Drying Christensen Jens Dyring, Small Enterprise Programme See how to build an enabling environment for youth entrepreneurship and sustainable enterprises. International Labour Organization, 2010.

[3] Some of the advantages of the German educational system can be seen in the article the German system as a model for education and workforce development. Source: last access 07/04/2014.

[4] On the origin of academy see Gardner, Jostein. Sophie’s world Plato s academy page 70.


The duty of disclosure” s ethical and legal background in U.S. securities law

The duty of disclosure is one of the main pillars of U.S. securities regulation. It is an essential concept of the securities act of 1933 and the Securities Exchange Act of 1934. Disclosure also appears to be also as relevant in the newest securities regulation prompted by financial scandals and the newest financial crisis[1]. Moreover, this duty also finds specific regulation for the specialty of the person, such as in the case of Managers Duty of Disclosure.

Despite the clear relevance which has been given to the duty of disclosure there are important critiques and detractors. This opposition revolves around the idea that the implementation of Disclosure is really a measure which does not contribute to shareholder value. The present chapter explains the concept of Disclosure in U.S. securities in the hopes understanding better its origin, its treatment in the securities legislation and the possible differences it might have with the theory of shareholder value. The same process is to be taken for the notion of shareholder value. By understanding what is currently the notion given to these concepts it will be possible to explain the main discrepancies between these concepts (of course if such was the case)

In order to understand the concept of Disclosure in U.S. securities legislation it is necessary to briefly describe its historical background. Afterwards and explanation on the Fairness and Transparency principles will be developed. These principles have a strong relation with disclosure and their explanation will help us understand better the ethical content of disclosure.

In relation to the concept of shareholder value the explanation of this concept will start with the traditional or classical view of the concept, which identifies shareholder value principally with profit maximization. This section would briefly explain the origin of the term and the past and present economic arguments which endorse it. The analysis of the concept of shareholder value will continue with the critiques that the term has received and and explanation of the alternatives which have been proposed, citing examples of the securities legislation were possible. A special emphasis should be made regarding the alternatives to the classical concept of shareholder value which have emerged after the latest financial and economic crisis.

A. The Concept of Disclosure

The financial crash of 1929 was followed by a series of legislative and governmental responses. The first successful response was the Pecora Hearings, an investigation which sought to understand the main causes of the financial crisis. The investigation was initiated by the Senate banking committee in the U.S. Some of the principal findings of the committee were that they knowingly misled investors as to the desirability of certain securities, engaged in irresponsible behavior and offered privileges to insiders not afforded to ordinary investors[2].

One of the successes of the Committee consisted in revealing the series of abuses that preceded the financial crisis of 1929. The Committee was also successful in revealing the inadequacy of the NYE stock market to conduct the investigation on this matter.[3]

Furthermore, the findings of the Committee were very important from two perspectives. In first place, the hearings highly influenced the subsequent securities acts which were to appear. In second place, the hearings set the grounds to the laissez faire doctrine, a current of though which had dominated the economic activity during the late seventeen century and the early 20 century. Furthermore, and equally as important, the hearings served as a mechanism to inform the public on the operations, the organisms and the persons involved in the crisis. 

Franklin D. Roosevelt was the president in charge of providing a response from the government side to the 1929 financial crisis. In some ways, President Hoover unsuccessful strategy of non intervention set the path for President Roosevelt economic and legal measures of response to the financial and economic crisis.

One of the first issues he addressed was the making of legislation for securities supervision or “Legislation for Federal supervision of traffic in investment securities in interstate commerce.[4]” The purpose or main objective was securities full disclosure[5][6]. This principal objective was strengthened with a regime of civil and criminal responsibility. Surely, these efforts were propitiated by the lost of trust of the public in securities market caused by the financial crisis.

The securities act of 1933 was the first relevant securities legislation in the United States and was elaborated after the financial crisis of 1929 and came into life during the great depression[7]. As William O. and Bates George mention, it is one of the means to endorse the social control over finance[8]. The act was a reaction against abuses and consisted as this text also points out in establishing the duty of full disclosure of the security being offered[9].  The principal objective of the securities legislation is to regulate the initial distribution of securities by issuing to public investors and the goal of the registration is the full disclosure of truthful information regarding the character of the securities offered to the public[10].

As can be extracted from the securities exchange Securities Act of 1934, the main objective continued to be the disclosure of information. In fact the Exchange was considered as the disclosure statue[11].nonetheless, the Securities Exchange act of 1934 differed from the Securities act of 1933 as the securities exchange act of 1934 primarily regulated transactions of securities in the secondary market, that is, sales that take place after a security is initially offered by a company (the issuer)[12].

Moreover the Securities Exchange act also established the Securities Exchange Commission and gave broad powers to this entity[13]. Other reasons for the appearance which can be pointed for the appearance of the Securities Exchange act of 1934 are the many complexities and inadequacies of the Securities Act and the need for an independent administrative body to enforce the federal securities laws, regulate stock market practices, and curb the evils in the stock exchanges themselves[14]. Some of the abuses which the Exchange Act intended to correct were speculation and market manipulation[15]

 The Duty of Disclosure, Fairness and Transparency.

The duty of disclosure had in both securities acts a strong connection with   the need to introduce standards of ethics and the ideas of fairness and transparency[16]. The intention behind fairness and transparency was to be able to ensure the confidence of investors in markets[17]. Of course the problem in using the word “fairness” in securities legislation are the difficulties which appear in trying to provide a proper definition of this concept. A good approximation of fairness consists in identifying the notion with the belief that all investors, big and small, insiders and outsiders, should have equal access to relevant information[18].

A similar but more specific approach to fairness consists in identifying fairness with the notion of transparency. In this case all parties would have access to information relevant to asset valuation, in which case the parties will not have more options. Moreover, the notion of transparency fairness has found the endorsement of some relevant sector of academics and international Organizations. This sector believes transparency, fairness and disclosure increase confidence in investors which also provides the essential liquidity in the market for the markets to work in an efficient way. This line of argument has found space in international regulation[19]. This demonstrates that according to another relevant sector which finds national and international support, transparency and Fairness are principles which can lead to efficient results.

Once an explanation of the concept of disclosure has been explained it will be possible to describe the different arguments relating disclosure and shareholder value. This is a critical issue which is related to the advantages that these measures can really suppose to shareholders. As indicated previously the main objective of the present work consists in analyzing whether the duty of disclosure of managers present in the U.S. securities legislation presents a real interest to shareholder interest.

Both fairness and transparency are relevant manifestations of ethical standards in US securities regulation.

[1] Such is the case of the Dodd Frank Act, in which case there is a specialize legislation in corporate disclosure. See specialized Corporate Disclosure Title XV of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

[2] Introductory comment: A historical Introductory comment: A historical Introduction to the Securities Act of 1933 and the Securities Exchange Act of 1934. Boston College Law School. July 1988.

[3] For a detail explanation of the Pecora Hearings and the role of the Committee see Moss, David, Bolton Cole and Kintgen, Eugene. The Pecora Hearings. Draft. February 13, 2009.

[4] President Roosevelt message to congress March 1933.Ibid. Page 11.

[5]  According to president Roosevelt, the full disclosure would add up to the ancient rule of caveat emptor, the doctrine let the seller beware. Ibid page 12.

[6] An expression which greatly depicts disclosure is a quote by Louis D. Brandeis which was conveniently used by Roosevelt in dealing with the need of disclosure. This expression said that “Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants, electric light the most efficient policeman” Source: Brandeis University. Justice Luis D. Brandeis. http://www.brandeis.ed/legacyfund/bio.html.

[7] Moss David, Bolton Cole, Eugene Kintgen “The Pecora Hearings” Draft February 13, 2009

[8] Douglas. William, E. Bates George, The Federal Securities act of 1933 (Last accessed 13/08/2013)

[9] See Landis, James M: the legislative history of the securities act page 37.

[10] Introductory comment: A historical Introductory comment: A historical Introduction to the Securities Act of 1933 and the Securities Exchange Act of 1934.

[11] Taken from Benston, George J. The Required disclosure and the stock market: An evaluation of the securities exchange act of 1934. American Economic Review, Vol. 63, No. 1 (mar., 1973), pp. 132-155. http://www.jstor.or/stable/1803131

[12] Sarkar, Deepa paper prepared for Cornell Law school Clinic. Source (Last accessed 15/08/2013).

[13] The establishment, the functions and the composition of the Securities Exchange Commission can be found in the 4th section of the securities and Exchange act.

[14] Introductory comment: A historical Introductory comment: A historical Introduction to the Securities Act of 1933 and the Securities Exchange Act of 1934. Boston College Law School. July 1988

[15] To understand the reach of market manipulation see W Moore and M. Wiseman Market Manipulation and the exchange act. The University of Chicago Law Review. http/www.jstor.or/stable/1596296.

[16] The principle of transparency in regulation is well explained by the APEC-OECD Regulatory Reform. 2001 According to this work transparency relates to the openness and impartiality of decision making in the design, introduction, administration and enforcement of new or amended regulations. The reform also describes the specific advantages of transparency, an enumeration that serves to understand the relevance of transparency and fairness in disclosure.

The reform considers that transparent and fair regulatory systems are essential to the development of deep and

Liquid capital markets. In second place a system of regulation which is transparent to market participants instills the confidence needed to attract suppliers and users of capital, improves market efficiency and contributes to increased overall economic activity and investment.

Thus according to the OCDE two major contributions of transparency are the improvement of efficient markets and an increase in Public Trust and Confidence. Source:  Promoting Fair and transparent regulation.  Source:

[17] VII. Source: Benston, George J. Required Disclosure and the Stock Market: An Evaluation of the Securities Exchange Act of 1934. . Investor´s Confidence in the Market-Risk and Fairness The American Economic Review, Vol. 63, No. 1 (Mar., 1973) pp 132-155.

[18]Ibid. According to the author the stock market could be considered “fair” if the prices of securities at any point in time are unbiased estimators of their intrinsic values, at least with respect to the financial data which corporations must disclose under the 34 Act. Ibid. page 152.

[19] An example of an international organization which promotes fairness and transparency in securities legislation is the International Organization of Securities Commissions. One of the principal objectives of this organization consists in “ cooperate in developing, implementing and promoting adherence to internationally recognized and consistent standards of regulation, oversight and enforcement in order to protect investors, maintain fair, efficient and transparent markets, and seek to address systemic risks.” One of the specific examples is the issuance of a paper on the objectives and principles of securities Regulation that urged the adoption by all regulators of processes which are consistently applied, comprehensible, transparent to the public, fair and equitable. (Source: Promoting fair and transparent regulation in Securities Markets: A presentation to the APEC_OECD Co-operative initiative on regulation in Securities Markets. Source: )

The decline of shareholder value

This is part of a text that I have written on the duty of disclosure present in US Securities Law which I will share in the near future.


Shareholder value has been  for long accepted as the most relevant corporate strategies. Certainly, the primacy of shareholder value is also the result of economic and ideological perspectives from a historical process. The historical context of shareholder value can be traced back to the emergence of management capitalism to the decisive triumph of capitalism over socialism in the late years of 1980 decade’[1]s.

Before the shareholder value perspective the prevalent managerial trend was managerial capitalism[2]. According to this conception of management was in large measure influenced by the presence and regulation of large public Institutions, the Directors had a fiduciary liaison with the Institution and the shareholder’s value was just one of the collectives which fell inside of Director’s responsibilities[3]. Other sectors included in the Directors and the Managers responsibilities with other stakeholders such as customers, creditors, employees and the community[4]. The triumph of neoliberal views over state interventionism set the stage for a period of market liberalism characterized by strong deregulation and the strengthening of corporations[5]. Certainly, academic´s work had a vital influence in the consolidation of the neoliberal views of the best known intellectuals such as Milton Friedman famous essay on shareholder value in which the author argued that a corporation’s only goal was to maximize its profits[6].

The work which captured the ideas of profit maximization and developed the idea of shareholder value was the paper elaborated by Jansen Michael and Meckling William entitled “”the theory of the firm[7]. Both essays are known for arguing in favor of profit maximization as the main or only objective of corporations. The work of these authors had enormous impact in the creation of the shareholder value concept.  The article integrates three diffent conceptions: the theory of property rights, the agency cost theory and ownership structure theory. Of central importance to the paper is the explanation given regarding the relation of agency between the managers and the firms.

The authors explain that there are several sources of conflict such as the natural tendency of the manager to appropriate the resources of the firm or the problem which can arise if the manager does not employ the necessary effort/ our diligence in his activity. By describing these problems, the authors looked to demote the activity of managers and to favor the shareholder value criteria. By centering all the efforts in the shareholder value the interests of the shareholders or the corporation will be saved. Following Roger Martin  the argument of these authors consisted in the fact that “The the owners were getting short shrift from professional managers who enhanced their own financial well being rather than that of the shareholders. This was bad for shareholders and wasteful for the economy, Jensen and Meckling argued, the managers were squandering corporate and societal resources to  feather their own nests[8].

The notion of shareholder value is thus the result of a specific historical process and until present day it is still a frequently used reference for Managers[9]. The concept has been used as a mean to get efficient results or to maximize profits. The first impression is that it could be a successful mechanism for profit maximization and as mentioned reflects the neoliberal ideas which consolidated during the end of the 1980’s. The theory of shareholder value has been finally elaborated around the notion of the agency contract where shareholder/owners hire directors and these act on their behalf. This concept of shareholder value allows to explain with more detail how the relationship between the stockholders and managers of a corporation fits the definition of a pure agency relationship.

Despite the enormous reception of shareholder value, there is evidence which suggests that the strategy is not the only, the best or even the desired strategy for desirable results[10]. As Denning, Steve suggests, shareholder value encourages hierarchical bureaucracy, it destroys employee morale, it is antisocial in nature, gives business a bad reputation and it cripples job growth[11].

Another argument against the notion of shareholder value consists in that it is a theory which does not take into consideration the long term results of the firm[12]. According to this last critique shareholder value is an overly narrow theory. It is also a measure which does not take into account the full scope of the financial and economic activity, the sense that it ignores that there is a plurality of interest and persons who work around the notion of the firm[13].

The intellectual backbone of shareholder value reflected the economic thinking of an era which did not take into account the role of shareholders in the corporation and of manager’s consumers and other entities involved in the corporate activity.

Moreover, and the following the narrow economic vision of shareholder value from which it was created did not take into consideration that an understanding of the main problem is incomplete without a legal study of the problem. As Lynn A. Stout points out, shareholder value does not take into consideration the notion of “legal entity.”

According to law, the shareholders are not owners of the corporation as the economist Milton Friedman might have argued; there is a contractual relation of the shareholders with the shares. This is of great importance as it shows that the subject regarding shareholders, shares and corporations has necessarily a legal dimension which has to be taken into account. Moreover and as equally important it is a legal entity which gives shareholders limited legal rights.

Alternatives to shareholder value: Stake holder value and Consumer Capitalism

The purpose of describing alternative theoretical approaches to the firm consists in demonstrating that the concept of shareholder value is currently being challenged by other strategies. These new theories of the firm (the stakeholder theory and consumer capitalism) have in common with the Duty of Disclosure exactly the fact that they are all the results of policies or conceptions of the firm which move away from the notion of only recognizing profit maximization as the main objective of the firm.

One of the possible alternatives to shareholder which has already been indicated is the replacement of shareholder value by the concept of stakeholder value[14]. This option would allow to explain the structure and the operations of a corporation in a way that allows to include relevant market participants and issues into the decision making sphere[15]. This would be the case of public institutions, investors, or labor interests. This strategy would allow as well the integration among these concepts. In this case several group interests which have gained enormous importance in the present day and which were completely ignored by shareholder value such as costumers[16].

More over this alternative would certainly be a better option for corporations in the long run than shareholder value[17] criteria. Despite of these evident advantages, the stakeholder value conception has also important inconvenients. For example, as Denning, Steve argues, including a multitude of interests necessarily leads to the existence of different Directors who might have different interests. This situation can certainly lead to conflicts between Managers and Directors, a matter which makes this issue unpractical[18].

 An alternative to stakeholder value is a theory which is gaining now important momentum is the notion of customer value. The advantages of this conception of the firm over the one proposed by share value defenders consists in the fact that it is a theory of the firm which would benefit both shareholders as costumers. It is also a theory which offers as oppose to share holder value, long term solutions as one of its primary objectives consists in creating stable relation with customers. It is also a theory which as it targets or addresses customers offers a high profitability.  Moreover it is a theory which doesn´t necessarily enter into conflict with stakeholder theory or sustainable growth. The reason behind this assertion is that good policies on corporate social responsibilities generally have a positive impact on costumer value.

A corporation with good CSR reputation will enjoy from investor and consumer confidence. The consumer value also serves as a parameter for measuring the successes of corporate social responsibility measures. Following a research by Peloza, John and Shang, Jingzhi, CSR leads to outcomes such as increased customer loyalty, willingness to pay premium prices and lower reputational risks in times of crisis. Moreover, according to the research each of these measures has the potential to support increased profitability[19].

[1] An excellent article on the historical context of shareholder value is the one elaborated by Mizruchi Mark S. and Kimeldor Howard in The Historical Context of Shareholder Value Capitalism ,( Political Power and Social Theory, volume 17, 213-221) According to these authors this facet was characterized by the following institutional conditions: First, most corporations had come to accept the existence of labor unions. Second, the emergence and expansion of a more activist state. In third place, there was a change in social organization and growing activism within corporations. The second stage is the failure of the State to adequately address mainly the economic issues of America and its replacement with the neoliberal policies introduced by Reagan. The final stage coincides with the retreat of the state, labor and the banks from control of corporations and the rise of institutional investors and financial analysts.

[2] The rise of managerial capitalism in the United States is very well explained by Lazonick, William in “Organizational Capabilities in American Industry: The rise and Decline of Managerial Capitalism”. The author relates the rise of  managerial capitalism with the arising of organizational capabilities in American Industry, which were means to coordinate, integrate and plan divisions of labor to organize goals. According to the author managerial capitalism was both a cause and effect of the growth of American or the growing and technical and social complexity of the specialized divisions of labor are explanations of the emergence of managerial capitalism (p1.),

[3] Lynn A. Stout: The shareholder value Myth: Cornell Law school-Jack G. Clarke Business Law Institute. April 1, 2013. European Financial Review, April-May 2013.

[4] Ibid. Page 2.

[5] As Mizruchi, Mark S. and Kumeldorf, Howard point out, in the period of 1980´s American presidency, “by freeing up markets and implementing fiscal and tax policies designed to encourage investment americans would enjoy a level of personal freedom never before experienced under the shadow of big government. (p 6)   

[6] Friedman, Milton “The social responsibility of business is to increase its profits, New York Times Magazine, September 13, 1970.

[7]  C. Jensen, Michael, Meckling William H. The Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economic 3. Received January 1976.

[8] Martin, Roger. The age of customer capitalism. The magazine January 2010. Harvard Business Review

[9] Despite recent publication which severly critique shareholder  value ( see Jesse Eisinger, “Challenging The Long-Held Belief in ‘Shareholder Value’”, New York Times, (June 27, 2012); Joe Nocera, “Down With Shareholder Value,” New York Times (August 10,2012); Andrew Ross Sorkin, “Shareholder Democracy Can Mask Abuses,” New York Times, shareholder value theory is still a used criteria and is still defended by many authors ( see Why is shareholder value still matters. Hansell, Gerry and Olsen, Eric. Bloomberg Business week. Companies & Industries. March 23, 2010.


[10] According to Stout, Lynn points out the only empirical finding that has been replicated “ is that when governance changes cause directors to sell a company, the buyer pays a premium over market price. Cornell Law school- Jack G. Clarke Business Law Institute. April 1, 2013. European Financial Review, April-May 2013.

[11] Denning, Steve. Can the dumbest Idea in the world be saved?  last accessed 25/08/2013.

[12] As Stout, Lynn A. points out there is strong evidence which demonstrates that the shareholder value is not an adequate strategy especially for policymakers. According to the author “shareholder value-increasing strategies that are profitable for one shareholder in one period of time can be bad news for shareholders collectively over a longer period of time.”(p4).

[13] The article Corporate Governance: Stakeholder Value Versus Shareholder Value Charreauz, Gerard and Desbrieres, Philippe propose the replacement of the concept of shareholder value by the notion of stakeholder value. According to the authors, stakeholder value is a more suitable definition as it permits the formation of the pluralist view of the firm and stakeholder value. Charreaux, Gerard and Desbrieres Philippe. Corporate Governance: Stakeholder Value Versus shareholder value. Journal of Management and Governance 5: 107-128, 2001.

[14] Following Freeman, R. Edward “Stakeholer theory of the modern corporation” stakeholders are groups, individuals who benefit from or are harmed by, and whose rights are violated or respect by corporate actions.

[15] A good explanation of the stakeholder theory can be found in Donaldson Thomas and Preston Lee E. “The stakeholder theory of the Corporation: Concepts, Evidence, and implications” According to the author the theory of stakeholder value can be understood according to three different views: the descriptive, the instrumental and the normative aspects.

In synthesis, the descriptive point of view of the author argues that stakeholder theory is used to describe and to explain, specific corporate characteristics and behaviors. According to the author, the instrumental perspectives uses of stakeholder theory to make a connection between stakeholder approaches and commonly desired objectives such as profitability (p7) finally the normative theory tries to interpret the idea of investor owned corporation on the basis of philosophical doctrines. Another issue of great relevance to understand the concept of stakeholder value dealt by the author consists on the issue regarding the justification problem or why is this theory relevant or better than other theories. Source: The academy of Management Review, Vol. 20, No 1 (Jan., 1995), pp.65-91. Published by Academy of Management. Stable URL:

[16] A close idea to stakeholder value is presented by   Rebernak Kathee. In this case the author argues that idea of integrating sustainable principles into corporate strategy and implementing them in operations would generate business value. As the author expresses this would demonstrate that shareholder value does not suffer in the pursuit of “sharevalue”.

(Source: Framework strategies for sustainable advantage, 2012. From last accessed 25/08/2013) 

[17] Ibid. In this article the authors stand out that corporate governance as a crucial criteria for value creation. The authors intend to give a definition of  stakeholder value in accordance to a pluralist view of the firm( p 108)

[18] Denning, Steve “Is the Tyranny of shareholder value finally ending?  The risk of return to garbage organizations. According to the author the problem of the concept of stakeholder value is that it  has the danger of going back to “garbage organizations” characterized by “ a variety of inconsistent and ill defined preferences.”  8/29/2012 (Source last accessed 26/08/2013 p).

[19] Peloza, John and Shang Jingzhi “Sustainability and Customer Value. Sustainability Matters. Why and how Corporate Boards should become involved. The conference Board Center for Sustainability.  The main hypothesis of this article is that CSR activities have the potential different forms of value for the customers. (p53)

¿Por qué escribir en un Blog?

He tratado en varias ocasiones de escribir en mi Blog. Por cuestiones de tiempo no le he dado el tiempo que se merece. Ahora que me encuentro en un lugar de manera permanente espero realizar esto con más frecuencia. Antes de retomar la actividad bloguera me parece que lo más sensato consiste en explicar por que es importante escribir en un blog. Aunque seguro hay una cantidad de razones (espero que algunas salgan como comentarios del blog) He decidido incluir de manera no exhaustiva las que a mi entender son las más relevantes. Desde mi punto de vista la razón primordial es que escribir en un blog es la manifestación máxima de la libertad de expresión en la era moderna. Esto puede que en presente parezca algo obvio, pero si nos ponemos a pensar hasta hace solo unos anos las publicaciones por internet estaban todas bajo el control o el dominio de las empresas tecnológicas. La vida internauta de la gente común se limitaba al intercambio o a la lectura de información proveniente de otras fuentes. Junto a otros medios, el blog es un medio de participación directa de los ciudadanos en el proceso de difusión de la información a través del internet. Esto es un gran paso para todos los ciudadanos ya que esta opción ofrece a la gente un sin número de posibilidades ya sea para dar a conocer sus opiniones, como una herramienta de negocio o bien como una alternativa para la difusión del conocimiento. Esta última cuestión es lo que me lleva a la siguiente razón de la importancia del blog. El blog permite a la gente participar en la transmisión del conocimiento. En la actualidad el conocimiento sigue siendo, al igual que la información en general monopolizado por muchas instancias. Esto no es una crítica a las respectivas y necesarias autoridades, sino más bien una llamada de atención a la necesaria participación ciudadana en el proceso de creación y difusión del conocimiento. El internet permite transmitir información a una velocidad que antes era impensable. Existen comunidades con más fácil acceso a la información veraz, esta información puede llegar sin lugar a duda a comunidades que tienes más difícil acceso a los medios modernos de comunicación. Por otro lado, el blog es una manera que facilita la transmisión de información, que si bien debe contar con las necesarias reglas de autoría, permite a los ciudadanos expresar sus intereses culturales, intelectuales y profesionales sin la necesidad de someterse a los siempre duros y a veces innecesarios procesos de evaluación, para poder generar ideas. Y es que, y así me gustaría terminar, el blog también es una herramienta al alcance de todos los ciudadanos que fomenta la innovación. Forma parte del proceso de innovación pues permite que la gente genere y difunda sus ideas. Las ideas al fin y al cabo son la base de toda creación humana. Habrá relatos o cuentos de todo tipo y lectores de todo tipo también pero creo que, siempre que se realice con respeto al prójimo deberá siempre fomentarse.

Re-Thinking the basis of the global order: Threats and challenges.

The recent financial crisis, the outrageous ongoing human right violations, continuous detriment to the environment and global terrorism threats are constant problems whose magnitude indicate from our perspective the beginning of a new era. The principal characteristic of this stage is the dimension of the perilous effects that these problems have brought to earth and society. Undoubtedly there is a connection among these problems and our task will consist in constructing a framework composed of philosophical, ethical, political and economical tools to tackle these new global challenges. Our intention is not only to describe the state of these issues but to propose solutions from a multidisciplinary optic.

We consider necessary that a critical review of Utilitarianism and Capitalism is to be made. From our perspective, the recent economical and financial crisis evidence the need to move beyond the hazardous effects of capitalism. Such option is only possible by tackling the ethical support of this economical system, that is of course, utilitarianism. Without any doubt, it is human behavior what has caused the latest economical turmoil. Thus, we consider as one of the most important objectives to discuss alternatives to utilitarianism as the prevalent ethical movement. To achieve this we believe as pertinent to discuss a historical recount of utilitarianism principally taking into account its progressive and definite penetration in society. This will be done exposing the most important utilitarian defenders and its final fusion as capitalism backbone. Our intention is to explain past critiques towards the utilitarian approach such as the ones present in John Rawls a theory of justice or in Amartya Sen´s work.  This analysis will principally take into consideration why alternative theories have not been successful. Moreover, this study will discuss the present alternatives and to propose ways from an economical, political, sociological philosophical ways on how to introduce them in society. Finally, an analysis regarding the relationship between utilitarianism, capitalism and the recent economical and financial crisis will be made. We will explain how the prevailing utilitarian approach has let to recent catastrophic events and we will take as well a multidisciplinary approach to identify the different solutions present to amalgamate this problem ( For example intervention of the state, self regulation or social responsibility ideal)

From our point of view human rights hold a close relationship with ethics, as the latter finds a normative representation in the former. We believe human rights also play a crucial role in the path towards a more just, equitable society. Certainly there is already a vast amount of research regarding their history, their concept and even the necessary need for their implementation. Despite these efforts and considering the nature of the latest economic and financial crisis and the ongoing human right violations we would like to undertake a different approach to their study, taking into account considerations that, even if they have been dealt with until present day we believe a more in depth research could be done. In order to achieve this we believe it is critical to undertake a research on the historical approach of Human Rights and their relationship with corporate activity. Only with a strong profound historical review of this relationship we will be able to get a sincere approach of corporate behavior towards human rights. We believe that this perspective will allow us to notice the deficits of this behavior and will consequently allow us to propose more appropriate solutions. After this study we will examine the possibilities to strengthen effectively the implementation of human rights in corporate activity, undertaking a crucial study of the present alternatives and proposing new solutions. These solutions will necessarily take in consideration the role of international Financial Institutions, International Tribunals and NGO´s in the effective and global enforcement of human rights. In the search for solutions we will also study what from our point of view is a relevant and very conflictive issue: How to foster human rights maintaining peace and national sovereignty in developing countries. Finally we will like to present the relationship between human rights, ethics, liberties and economic development exposing existing theories and developing, one more in touch with contemporary problems.

Another important topic we will like to discuss is the role of democracy during and after the financial crisis. Democracy has been the scenario of the mentioned turmoil and we believe this is an important opportunity to discuss the impact that this event has had over some of its essential Institutions.  The fact that the financial crisis emerged from stable democratic countries demonstrate the need to undertake a serious study regarding the means to monitor corporate activity and to evaluate the present mechanisms to secure its transparency. An assessment of the decisions taken to solve the crisis is the United States and in Europe should be made as well as a study on the impact on human development. Moreover from a sociological, legal and economical point of view the effects that the crisis has had on national and regional governance. Finally we believe special considerations should be made regarding special vulnerable collectives: Workers and Inmigrants.

Researchers, academics and policy makers have achieved important advances to move towards a new regulatory era. We believe the latest financial scandal necessarily entails the creation of a new social contract between society and the financial sector. Thus, our discussion regarding the new regulatory framework should focus on the protection of consumers, tax payers and families. To achieve this we will carefully examine the regulatory proposals to enhance the protection of the civil society as well as to suggest new alternatives. Of course, this study should take into consideration the Global aspect of the financial crisis. This certainly adds complexity to our analysis as we will have to take into consideration different global scenarios in our study. For this reason we will undertake the effects of this analysis in North America, South America,Europe and Asia.

Analysis of CISG and a description of the requirements for its validity in Spain.

The purpose of the present work is to discuss the importance of CISG from an economical and legal perspective. The relevance of this analysis relies in the fact that this Covenant elucidates the efforts of the international community in the creation of a legal international framework that responds to the unprecedented growth of commercial relations between nations. After achieving this we will analyze from a technical legal perspective the legal requirements for the adoption of this instrument in Spain. Once completed, this assignment will unravel the State requirements for a successful implementation of a commercial driven International Covenant in Spain.

1. Advantages of the CISG

The increase of trading between nations had without doubt an important impact on their legal systems. Legal organizations had to respond to this circumstance eliminating barriers that present an obstacle to international commerce. It was in this context that International Instruments such as the Convention on contracts for the international sale of goods (CISG) and the UNIDROIT principles were created. The preamble of the CISG is very descriptive regarding the goals of this Covenant. According to this text, “Being of the opinion that the adoption of uniform rules which govern contracts for the international sale of goods and taking into account the different social, economic and legal systems would contribute to the removal of legal barriers in international trade and promote the development of international trade…”[1]

Developing nations surely have benefited enormously with the appearance of these normative texts. Removal of international barriers clearly enhances the existence of more just and equitable rules regarding international transactions. Moreover, attorneys recognize the success of the CISG from a practical point of view[2]. Thus, the existence of these instruments is almost obvious; it appears as a normative response to the globalization phenomena.

The normative harmonization tackles other substantial problems besides promoting international trading.  These problems are detailed in a European Union consultation exercise[3]. According to the European Union, normative differences impose in first place additional costs due to the need to find out about foreign law. If the costs are high, a business may decide that it would not be worth entering into international deals and might choose to forego otherwise profitable economic activity. On the other hand, a lack of uniform legislation could foster the existence of legal relationships with legal consequences that are not known. Finally, this may also motivate foreign companies to not risk international trading[4].

The success of The United Nations Convention on Contracts for the International sale of goods is also shown by  the wide acceptability that this Covenant has had until present day. According to the UNCITRAL secretariat, the acceptance of the Covenant can be seen as every mayor geographical region, every stage of economic development and every major legal, social and economic system. Moreover as until 1 of September 2010, 76 States are parties of the Convention.[5]

II. Problems of the CISG and their possible amendments.

Certainly, the legal harmonization process responds to the constant increasing trade among nations. Legal systems cannot ignore the need to find a common ground to regulate a complex reality. On the other hand, the process of harmonization has had their strong opponents. We will expose some of the various arguments against the creation of uniform legislation. Our intention is to evaluate these arguments in the light of the precepts of the CISG and of critical assessments presented by academics.

Gopalan succeeds in exposing clearly the arguments against the harmonization process[6]. According to his work, detractors of legal uniformity denounce the obstruction to innovation that homogenous international trading could bring about. In the opinion of these detractors, this process entails the loss of the vital legal autonomy of national legal orders. This obstruction could represent a real impediment to developing countries as their own normative initiatives could be affected. On the other hand, the actual application of these covenants could find unsolvable barriers as courts with different legal traditions will normally resist the application of extravagant legislation. This is especially true regarding common law legal systems.  In the U.S the difference between the precepts presented by CISG is so meaningful that there is the possibility that judges will ignore the application of the CISG to resolve a case. Academics, lawyers and judges have recognized this reality up to the point that some even argue that this treaty lacks applicability.[7] Moreover, the flexibility in the interpretation of the Covenant present in article 7 has had as a result the proliferation of reserves and the consequent inapplicability of the Covenant or its partial application.

Not all of CISG critics rely in the covenant harmonization intention .There are important observations regarding the CISG´s technical content. These deficiencies could entail the non application of the Covenant in favor of internal legislation. From our perspective, the most relevant problems present in this precept consist in its flexibility and ambiguity. In relation to its flexibility, the parties can, according to the Covenant, “exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.”[8] The liberty bestowed to potential contractual parties obstructs the objective of the treaty, making its real implementation relative. John E. Murray clearly demonstrates this problem arguing that

“If we are to have a highly effective uniform law for international contracts for the sale of goods, there is the basic challenge of ascertaining that CISG will be the governing law. (…) CISG allows the parties to exclude its application entirely or derogate from or vary the effect of its provisions. Lack of familiarity with CISG may induce lawyers to avoid it because they fear the unknown and the attendant uncertain risks. Substantial familiarity with the Convention may still suggest avoidance, because counsel may decide that domestic law is more desirable for a client such as a buyer in a “battle of the forms” situation, which CISG Article 19 retrogresses to a pre-U.C.C. view that typically favors the seller. Even if counsel with such familiarity finds CISG provisions generally desirable, the unreliability of potential interpretations by courts of his own or other Contracting States may suggest that the safest course is to opt for domestic law.”[9]

As previously mentioned, another problem found in the Covenant is the ambiguity of some of its precepts. For example, Article 7 of the Covenant refers to Good Faith or to the application of its general principles. Legal academics and practitioners coincide in recognizing the superfluous reference to these precepts[10]. Regarding good faith, its vagueness generates authentic confusion on its accurate use. Indeed, a question that necessarily arises is how to interpret the result of this compromise and whether the principle of good faith in Article 7 is relevant only as an interpretative tool of the Convention or if it is also relevant as a standard of behavior for the contracting parties[11]. The reference that article 7 makes to the general principles also finds similar problems. Although the mentioned article alludes to the covenant as the source of the general principles, the CISG does not contain such principles. How then, are parties to the treaty suppose to interpret the reference to the “principles” that this article makes?

In this sense, Professor John Honnold argues that “international unifying conventions, unlike true (civil law) codes, lack a general framework from which general principles can be derived.”If general principles of the Convention itself cannot be discovered, the alternative is to discover principles in conformity with the rules of private international law”[12].

Due to these problems new proposals regarding the creation of more appropriate legal instrument have emerged. According to this idea, the loops of the CISG claim the construction of a more comprehensive normative compendium. The supporters of this idea find in the Uniform Commercial Code a model that should guide future efforts to be followed by the international community. These authors see the Uniform Commercial Code as an excellent precedent of a legal body which has fostered  the  development of trade. According to Christopher Shifferthe, “UCC could be and effective guide for a Global Codification in three ways: First, and although no court is bound by a decision in separate sovereign state, courts interpreting the UCC often defer to other jurisdictions that have interpreted the Code (…) Second, in order to avoid any ambiguity in the Code, the UCC contains an official, systematic commentary to aid its interpretation(…) Finally, when the UCC was adopted by individual states, each jurisdiction was free to adopt the law as a whole or modify it(…) Nevertheless, it is necessary that any variation permitted under the Global Code is minimal and does not rise to the level of reservations acceptable under CISG”

From our point of view the problems presented by the CISG do not necessarily demand the creation of a new global Code. We also believe the ambiguity of the CISG and its excessive flexibility can definitely obstruct the application of the CISG in favor of national Laws. Nonetheless, this flexibility and ambiguity maintains from our point of view a realistic legal approach as it tries to maintain a balance between national sovereignty of the states and the statutory regime present in the CISG. Instead of fostering a harmonious trade between nations, the creation of a stricter global code would play in detriment of international commerce as more countries will “opt out” of the convenient. We believe a possible solution relies in facilitating the knowledge of the Covenant to members of the judicial power from national members. A stronger commitment by common law systems should be required as well.

III.  The requirements for the validity of the CISG in Spain


The process of concluding International Conventions and the relations among these agreements and the internal law of the States can be explained by describing two different currents of thought. According to the first one, the dualist theory, international Law and internal Law are two completely different legal orders in their formation, material content and origin.[13] This assumption implies that, in order for a legal system to adopt an international treaty, it is necessary to transform this international norm into an internal rule using the proper legislative mechanism. Moreover, the supporters of this doctrine assert that once the international rule transforms into an internal norm, the former can be voided or modified by subsequent regulations. On the contrary, the other current, led by Kelsen, affirmed that both orders were part of the same legal system, although international regulations prevail over the internal norms due to the fact that the latter can only be functional if it obeys and respects the system that has allowed its own formation.

As the majority of its neighboring countries, Spain has adopted the Kelsian model, thus its legal system, in one hand, does not demand the transformation of international norms into internal ones and, on the other, establishes the preference of International Law over internal Law. Taking this into consideration, the present work will briefly analyze the formal, the material and the constitutional revisions that Spain has to pursue to conclude[14]the United Nations Convention on Contracts for the International sales of goods (CISG) in respect to the principles of freedom of form for the contract, good faith and general principles present in this Treaty.

 The Formal Revision

     A    The Negotiation of the Treaty


          In first place, in order to determine the rule of law in the process of negotiation and celebration of the CISG, it is important to underline that Spain acceded to the Vienna Convention on the Law of Treaties on May 2, 1972 (CLT), Treaty that was taken into effect the 27th of January, 1980 after its publication on the Official Bulletin of the State (BOE). The other regulation to consider is the Decree 801/1972 which regulates the activity of the State Administration in the Law of Treaties.

According to article 3 of the Decree and 7 of the Vienna Convention, several authorities are competent to represent Spain in the negotiation of the Treaties, such as the Heads of State, Heads of Government and Minister of Foreign Affairs. Other persons not listed in these articles need to have full powers and to have been designated by the Ministry of Foreign affairs or to carry out the negotiation. 

Furthermore, in Spain the initiative to negotiate the conclusion of a Treaty belongs exclusively to the Government in accordance to article 97 of the Spanish Constitution.[15] The decision to negotiate is taken in the cabinet and the competence to carry out this act corresponds to the Ministry of Foreign Affairs, previously authorized by the Executive Power (article 9 of the Decree). No other authority has the power to initiate the negotiation although Independent Communities (CCAA) are able to request the Government the celebration of Treaties in matters that redound in their interest.[16] Moreover, the Government has the duty to inform the Independent Communities the negotiation and subsequent celebration of Covenants that might affect their interests, as expressed in several dispositions of the Statues of these Communities.[17]

B   Adoption and authentication 

In order to explain the process of the adoption and authentication of an international text it is convenient to clarify the meaning of these procedures. According to article 9 of the CLT, the adoption of the text of a treaty takes place by the consent of all the States participating in its drawing up. On the other hand, if the adoption was done at an international conference it will take place by the vote of two-thirds of the States present and voting, unless that, by the same majority, they decide to apply a different rule. Meanwhile, the authentication is an act in law that provides testimony of the veracity of the adopted text that should follow the formalities present in article 10 of the CLT.

In Spain the competence to authorize the adoption and authentication of the CISG or any other international instrument belongs to the Cabinet of the Government as established in article 13 of the Decree and article 5.d) of the Law of Government (Law 50/1997, 27 of November). Nonetheless, as article 11 of the decree stipulates, it is possible that the rubric needed to authenticate the text is given by one of the representatives mentioned in article 3 of this norm and 7 of the Vienna Convention. In these cases, article 14 of the Decree establishes that, exceptionally, the Minister of Foreign Affairs can also authorize the signature ad referendum (rubric of the representatives) although it is necessary to seek the final approval form the Cabinet.

Finally, it is crucial to point out that the adoption and authentication of the text is not a mean to bound Spain to an International Covenant, this effect only emerges when the procedures to express the consent present in articles 13 to 17 of the CLT and the Constitution of Spain are followed. Moreover, the only obligations that derive from the adoption and authentication are the need to act in good faith and to respect the obligation of not defeating the object and purpose of the Treaty.[18]

 C. Intervention of the General Courts

The involvement of the General Courts in the process of concluding a Treaty is legally justified by means of the supervision and control that article 66 of the Spanish Constitution concedes to this authority over the foreign activity of the Executive Power.

This control translates, depending on the issue or the obligations established in the Treaty, in the need to obtain the authorization of the Covenant by the Courts or in the obligation of informing this power the conclusion of an international agreement.

The Spanish Constitution indicates in articles 93 and 94.1 that, in order to consider binding the expression of the consent given in the Treaties mentioned in these articles, it is necessary to evoke previously the authorization of the Court. The first article refers to Treaties that attribute the exercise of competences derived from the Constitution in favor of Institutions or international Organizations, case in which the previous authorization of the Court needs the approval of the absolute majority of its members. The second precept lists different kinds of Covenants such as Treaties with political or military content; being only necessary in these cases the vote of the simple majority of the Courts. Moreover, and, as mentioned before, the authorization is not required  if the subject of the Treaty is not regulated in these articles, in which case the Courts only have to receive immediate information about the Treaties already celebrated (art 94.2 SC).

Taking into consideration the aforementioned mechanism, the expression of the consent for Spain to be bound by the CISG wouldn’t need the authorization of the Courts due to the fact that its content does not match the ones present in articles 93 and 94.1 of the Constitution. Nevertheless, it would be necessary to comply with the need to provide the information to the General Courts demanded in article 94.2 of the Constitution.

      D   The expression of the consent to be bound by a Treaty


Initially, the consent to be bound by the CISG or any other Treaty is given by the king of Spain when it is expressed by ratification or accession (article 63.2 of the Constitution). Moreover, the consent of the king is always countersigned by the Minister of Foreign affairs, and is not necessary in the other means of expressing the consent present in articles 11-17 of the CLT.

E) Moment of Efficacy of the International Treaty in the internal order


As mentioned in the introduction, the Spanish legal system doesn’t require the creation of an internal Law in order to assume the regulations of an International Covenant celebrated by the competent authorities. In this sense, article 96.1 of the Spanish Constitution establishes that “international Treaties validly celebrated, once officially published in Spain, will comprise the internal ordering”, rule similarly displayed by article 1.5 of the Civil Code although the latter specifies that the Treaty needs to be published in the Official Bulletin of the State (BOE) . According to these articles, the only formal requirement that is needed for the CISG to become part of the internal system is its official publication, and once this has been accomplished, the international Treaty becomes a direct source of law and completely effective or self-executive in the internal Law, “maintaining its international nature and its special legal efficacy.”[19]

II The material and Constitutional revision

The CISG recognizes in articles 7 to 11 the principles of free-will autonomy, good faith and liberty of form. These principles are also recognized in the Spanish internal law: The principle of free-will autonomy is included in article 12555 of the Civil Code, provided that it does not contradict other laws or disturbs the public order, while good faith is incorporated in article 1258 of the same legal text. Furthermore, the liberty of form is explicitly recognized in articles 1278 of the Civil Code and 51 of the commercial Code. Finally and, regarding the first two principles, although the Spanish Constitution does not recognize them literally, the exercise of several fundamental rights implies the indirect Constitutional recognition of the principles of free-will autonomy and good faith.[20] Moreover, due to the compatibility between the general principles of the Covenant and the internal Law it is possible to assert that no conflict would emerge in the reception of this Treaty by Spain,

Nonetheless, supposing that the CISG was effective in Spain but contained principles that contradicted the ones present in the internal order, the superior legal hierarchy of the Treaty over the internal law would obstruct the allegation that a Treaty infringes internal norms such as the ones that recognize good faith or the free-will autonomy. This assertion is corroborated by article 95.2 of the Constitution, precept that consolidates the primacy of the international Treaties over internal norms by establishing that “the dispositions (of the treaties) can only be modified annulled, or suspended by the means of the same Treaties or according to the general norms of international Law.” This is also the criteria that the Spanish Supreme Court follows in its decisions such in the sentence 22 of may, 1989, case when it declared that a Covenant was not annulled by the subsequent publication of a Law due to the primacy of the Treaty over internal Law.[21] In addition, the Constitutional Court has also adopted this position, affirming in many decisions the superiority of the Treaty and indicating as well that, in case of a collision among these norms, the internal law should not be applied.[22]

Furthermore, the relationship between the Constitution and International Treaties follows a different path. In these cases, the principle of hierarchy is not an adequate instrument to solve the conflicts given the complexity of the confronted norms, although the constitutional articles that attend this issue implicitly manifest the preponderance of the Constitution. As important authors have noted, in these cases the solution given should be based instead on “the principle of the coherence that has to rule the interior and exterior activity.”[23]

Moreover, the Constitution and the CTL contain articles that refer to possible solutions of conflicts that might arise between international Treaties and the Constitution such as in the case of adopting a Covenant that contains principles that collide with the fundamental norm. The first of these solutions is the constitutional control of the international Treaties previous to the expression of the consent (article 95.2 SC). According to this mechanism, the Government or any of the Chambers can demand the Constitutional Court to declare whether the CISG or any other treaty contains stipulations that contradict the Constitution. The second possibility is the constitutional control of the Treaty through the action of unconstitutionality present in article 161.1a) in the cases in which the international norm has already been received by the internal order. The last feasible control is the reformation of the Constitution for the State to become a party of the Treaty (articles 166-169).

Finally, the formulation of reservations in accordance with articles 19 and 20 of the CTL can also prevent the adoption of international rules that violate constitutional norms. This is possible since the reservation is, according to Diez de Velazco, a declaration of will from a State to be party of a Treaty with the purpose of not accepting completely the general terms of the Treaty.[24] Hence, if a State believes that a precept of the international Treaty infringes a Constitutional or internal law it can prevent this violation by deciding to exclude or modify the legal effects of certain provisions of the Treaty in their application to that State (article 2.d CTL


Fair trade directs a special mandate to the International Community that consists in the progressive elimination of economical barriers. This process entails as well a harmonization of legal systems. The United Nations Convention on contracts for the international sale of goods is a good example of a text product of this homogenization. Its appearance is in terms with the increase of trading practices and, as its preamble clearly stipulates, is an instrument which has as one of its goals the promotion of equality. The aim of the present work consisted in assessing the accomplishments of this Treaty. We have been able to expose the virtues of the Covenant as well as its material and formal legal holes. Although far from perfect, we believe it presents a realistic framework to balance legal national needs with the interests of the international community.

The other aim of the preset work consisted in describing the legal requirements for the validity of International Covenants in Spain. According to the formal, the material and the constitutional revision of the CISG it is possible to conclude that the reception of this Treaty by the Spanish legal order would not present many problems. In first place, there is not an observable inconvenient for the CISG to comply with the formal requisites that are necessary to validly negotiate and celebrate a Treaty. Instead, the formal process in the conclusion of this treaty presents an advantage since it is not an international instrument which would require the authorization of the General Courts. Secondly, the ratification of the CISG wouldn’t entail the infringement of the internal Spanish Law since its general principles respect and coincide with the notions of free-will autonomy, good faith and liberty of form present in the Spanish Civil and Commercial Law. In addition, due to the supremacy of international Treaties over internal Law that exists in Spain, once the Covenant has become  part of the Spanish system it would be impossible to oppose the violation of an internal provision by an international clause. In third place, from a constitutional perspective is possible to assure that adoption of the CISG wouldn’t present any problem due to the fact that principles of the Covenant correspond generally with the articles of the Constitution. Nevertheless, in this case there are legal mechanisms to prevent the contravention of the Spanish Constitution. Finally, we can also verify that Spain has adopted the Kelsen’s monist system, which at the same has served to explain the reception in Spain of international Treaties.



Cook, Susanne CISG from the perspective of the practitioner. Journal of Law and Commerce (1998) p.343-253.

– Diez de Velazco, Manuel “Instituciones de Derecho Internacional Publico” Madrid, 2001

-Gopalan, Sandeep, The creation of International Commercial Law: sovereignty failed? HeinOnline — 5 San Diego Int’l L.J. 267 2004


-Kroll, Stefan Selected problems concerning the CISG´s scope of applicaltion Law Centre for European and International Cooperation, R.I.Z., Cologne, LL.M. (London).

-John Honnold, The United States Uniform Commercial Code: Interpretation by the Courts of the States of the Union, 181, 183, in International Uniform Law in Practice.

-Sheaffer, Christopher. The failure of the United Nations Convention on contracts for the international sale of goods and a proposal for a new uniform global con in International sales code. On (as of 26 of may 2011)


Ferrari, Franco What sources of law for contracts for the International Sale of Goods. Why one has to look beyond the CISG. International Review of Law and Economics 25 (2005) 314-341

-Zaccaria, Elena Christine The dilemma of Good Faith in International Commercial Trade. (as of 26 of may 2011)



-United Nations Commission on International trade Law, United Nations Convention on Contracts for the International Sale of Goods. New York 2010.

–  Constitution of Spain, 1978

–  Convention on the Law of Treaties on May 2, 1972

–   United Nations Convention on Contracts for the International sales of goods, 1980

–   Decree 801/1972

–  Law of Government 50/1997, 27 of November

-Spanish Civil Code

-Spanish Commercial Code


– STS 22 of May, 1989, Aranzadi n.9680

– STC 155/1997, 29 of September, BOE , October 30 1997

[1] United Nations Commission on International trade Law, United Nations Convention on Contracts for the International Sale of Goods. New York 2 010

[2] See Cook, Susanne CISG from the perspective of the practitioner. Journal of Law and Commerce (1998) p. 343-253

[3] Dr. Ole Lando and Dr. Christian v Bar. Communication on European Contract Law: Joint Response of the Commission on European Contract Law and the Study Group on a European Civil Code available at ,  (as of oct 25,2001)

[4] Gopalan, Sandeep, The creation of International Commercial Law: sovereignty failed? HeinOnline — 5 San Diego Int’l L.J. 267 2004

[5] United Nations Commission on International trade Law, United Nations Convention on Contracts for the International Sale of Goods. New York 2010.

[6] Id.

[7]For more on the problems regarding the application of the CISG in common law legal systems see Kilian, Monica CISG and the Problem with common Law jurisdictions  at (As of may 26, 2011)

[8] United Nations Commission on International trade Law, United Nations Convention on Contracts for the International Sale of Goods. New York 2010. Article 6.

[9] John E. Murray, Jr., The Neglect of CISG: A Workable Solution, 17 J.L. & COM. 365 (1998), available at See also John P. McMahon, When the U.N. Sales Convention Applies and Some of the Reasons Why it Matters to You and Your Clients, PACE DATABASE ON THE CISG AND INT’L COM. L. (1996), at

[10] John Honnold, The United States Uniform Commercial Code: Interpretation by the Courts of the States of the Union, 181, 183, in International Uniform Law in Practice, Acts and Proceedings of the 3rd Congress on Private Law Held by the International Institute for the Unification of Private Law, UNIDROIT, Rome, September, 1987; Kroll, Stefan Selected Problems Concerning the CISG´s Scope of application.

[11] Zaccaria, Elena Christine The dilemma of Good Faith in International Commercial Trade. (as of 26 of may 2011)

[12] John Honnold, The United States Uniform Commercial Code: Interpretation by the Courts of the States of the Union, 181, 183, in International Uniform Law in Practice, Acts and Proceedings of the 3rd Congress. on Private Law Held by the International Institute for the Unification of Private Law, UNIDROIT, Rome, September, 1987.

[13] Diez de Velasco, Manuel “Instituciones de Derecho Internacional Publico” Capitulo IX La recepción del Derecho Internacional por los ordenamientos internos, pp.194 y SS, Madrid, 2001.

[14] We have replaced the term nationalization given in the main exercise by the word conclusion due to the fact that, in our opinion, nationalization would refer to a dualist system, model that, as we mentioned, is not the one that Spain has adopted.

[15] Article 97 of the Spanish Constitution establishes that  one of the functions of the Government is the “Direction of internal and external policy”

[16] The internal Statues of The Communities include the possibility to make this request in several issues such as for  the establishment of cultural relations among States – art 6 of the Statue of  El Pais Vasco, article 27.4 of the Statue of Cataluna and 35.3 of the Statue of Galicia-, as well as for  the negotiation of Treaties relevant to immigrant reception-Article 23, Statue of Analucia, article 40.3,Statue of Castilla-La Mancha.-

[17] Article 26.5 Statue of Cataluna, article 12.2 Statue of Murcia, article 20.5 Pais Vasco…

[18] Diez de Velazco, Manuel “Instituciones de Derecho Internacional Publico” Capitulo VI Los Tratados Internacionales II, p.148, Madrid, 2001.

[19] Diez de Velazco, Manuel “Instituciones de Derecho Internacional Publico” Capitulo IX La recepción del Derecho Internacional por los ordenamientos internos, pp.194 y SS, Madrid, 2001

[20] Article 17,22,32,38 of the Spanish Constitution

[21] STS 22 of May, 1989, Aranzadi n.9680

[22] STC 155/1997, 29 of September, BOE , October 30 1997

[23] Diez de Velazco, Manuel “Instituciones de Derecho Internacional Publico” Capitulo IX La recepción del Derecho Internacional por los ordenamientos internos, p 200, Madrid, 2001

[24] Ibid, Capitulo V Pag. 135

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