2ND EDITION AN INTRODUCTION TO COMMERCIAL LAW OF AFGHANISTAN An Introduction to the Commercial Law of Afghanistan Second Edition Afghanistan Legal Education Project (ALEP) at Stanford Law School www.afghanistanlegaleducation.com [email protected] Stanford Law School Crown Quadrangle 559 Nathan Abbott Way Stanford, CA 94305-8610 www.law.stanford.edu 1 Table of Contents PREFACE ..................................................................................................................................VII! CHAPTER 1: COMMERCIAL LAW AND ECONOMIC DEVELOPMENT.......................1! I.! INTRODUCTION...............................................................................................................1! II.! AN ECONOMIC OVERVIEW OF AFGHANISTAN........................................................2! A.! Economic Snapshot .........................................................................................................3! B.! Recent Economic Reforms..............................................................................................4! C.! The Markets.....................................................................................................................5! D.! Doing Business in Afghanistan .......................................................................................6! III.! ISLAMIC COMMERCIAL LAW.......................................................................................9! IV.! COMMERCIAL LAW AND ECONOMIC DEVELOPMENT ........................................13! A.! Symptoms of Weak Commercial Law ..........................................................................14! V.! CONCLUSION .................................................................................................................23! GLOSSARY..................................................................................................................................24! SOURCES CONSULTED ................................................................................................................26! CHAPTER 2: HISTORY OF COMMERCIAL LAW IN AFGHANISTAN ........................27! I.! INTRODUCTION.............................................................................................................27! II.! EARLY COMMERCE, TRADE, AND LAW...................................................................28! A.! The Pre-Durrani Period (1600-1747) ............................................................................28! B.! The Durrani Period (1747-1800s) .................................................................................29! III.! THE CONSOLIDATION OF THE AFGHAN STATE.....................................................30! A.! Amir Abd al-Rahman Khan (1880-1919) .....................................................................30! B.! The Early Twentieth Century and Aman-Allah Khan...................................................32! IV.! THE FOUNDATION OF THE CURRENT SYSTEM......................................................35! A.! Nadir Shah.....................................................................................................................35! B.! Bank-i-Melli, Da Afghanistan Bank, and the Birth of Afghanistan’s Financial Sector ............................................................................................................................35! C.! The 1940s and 1950s.....................................................................................................40! D.! The 1964 Constitution and Subsequent Legal Reforms................................................43! E.! The Financial Sector Faces Challenges.........................................................................46! F.! Revolution and Civil Turmoil (1973-2001) ..................................................................54! V.! CONCLUSION .................................................................................................................60! GLOSSARY..................................................................................................................................62! SOURCES CONSULTED ................................................................................................................63! CHAPTER 3: COMMERCIAL LAW IN PRESENT-DAY AFGHANISTAN.....................65! I.! INTRODUCTION.............................................................................................................65! II.! LEGAL PLURALISM AND THE SOURCES OF COMMERCIAL LAW IN AFGHANISTAN...............................................................................................................65! III.! THE FORMAL COMMERCIAL LAW SYSTEM ...........................................................69! A.! The Constitution ............................................................................................................69! B.! Statutory Law ................................................................................................................69! C.! The Executive Branch ...................................................................................................74! D.! The Judicial Branch.......................................................................................................81! ii E.! The Legislative Branch .................................................................................................84! F.! Da Afghanistan Bank ....................................................................................................84! G.! The Afghan Investment Support Agency (AISA).........................................................85! IV.! INFORMAL COMMERCIAL INSTITUTIONS ..............................................................86! A.! Hawala Banking............................................................................................................87! B.! Informal Credit Practices...............................................................................................87! V.! CONCLUSION .................................................................................................................89! SOURCES CONSULTED ................................................................................................................90! CHAPTER 4: CONTRACTS.....................................................................................................91! I.! INTRODUCTION.............................................................................................................91! II.! SOURCES OF CONTRACT LAW IN AFGHANISTAN................................................93! III.! KEY CONCEPTS OF CONTRACT LAW.......................................................................97! A.! What Is a Contract? .......................................................................................................97! B.! How Is a Contract Formed?...........................................................................................98! C.! What Happens When a Contract Is Ambiguous or Incomplete?.................................104! D.! How Can the Rights and Duties That Flow from a Contract be Transferred from the Original Promisors to Another Party?...................................................................107! E.! What Do We Do When a Contract Is Broken? ...........................................................109! IV.! REALITIES OF CONTRACT LAW IN AFGHANISTAN TODAY ............................112! V.! LAWYERING SKILLS APPLICATION: THE EMPLOYMENT CONTRACT..........116! VI.! GOVERNMENT CONTRACTS AND THE LAW OF PROCUREMENT...................121! VII.! CONCLUSION ...............................................................................................................122! GLOSSARY................................................................................................................................124! SOURCES CONSULTED ..............................................................................................................126! CHAPTER 5: CORPORATIONS ...........................................................................................127! I.! INTRODUCTION...........................................................................................................127! II.! SOURCES OF COMPANY LAW..................................................................................128! III.! LAW OF AGENCY ........................................................................................................130! A.! Introduction to Agency Costs and Agency Law .........................................................130! B.! Agency Formation and Agent Duties..........................................................................131! C.! Liability of the Principal to Third Parties....................................................................132! IV.! OVERVIEW OF BUSINESS FORMS ...........................................................................133! V.! PARTNERSHIP LAW....................................................................................................135! A.! Partnership Formation .................................................................................................135! B.! Partnership Rights and Obligations.............................................................................137! C.! Partnership Dissolution and Liquidation.....................................................................140! VI.! CORPORATION AND LLC LAW ................................................................................142! A.! Elements