Now that Brexit is official, the cut-off date has passed, and the UK is on its own, it is time to think about the future. What trade partnerships does the UK wish to strengthen and what is the best way to do that? International trade conventions have always played an important role in fostering advantageous trading environments for their contracting states, by forming an integral part of their private international law. One international trade convention has been particularly popular in this context; the UN Convention on United Nations Convention on Contracts for the International Sale of Goods 1980 (CISG). Despite this success, the UK has a complicated past with the CISG, and adoption has seemed highly unlikely for many years.
One of the main reasons the UK has resisted adoption has been the interpretation of the Convention as harmonised sales law. Indeed, there are manifold concerns about the CISG, but the uniform interpretation challenge might be the most alarming. [1] Uniform application of the Convention is interdependent to its internationality and crucial for its viability. [2] Interpretation difficulties are inherent to the CISG. During the drafting of the Convention, each legal tradition and culture were called forth to create uniform law. [3] Reaching agreement on legal points was challenging if at all possible, leading to compromise rather than genuine consensus. [4]
With the only intrinsic interpretative guidance being Article 7, external sources such as domestic law are not (at least, should not be) available to cure uncertainties. [5] Therefore, any linguistic errors, gaps and ambiguities unavoidably lead to inconsistencies. An added complexity is that there is no supranational court passing down binding precedent on the CISG’s interpretation (and there is no realistic prospect of establishing one). The hefty task of uniform interpretation of vague points and gaps is, therefore, left to arbitral tribunals and national courts. Although textual ambiguities have a benefit – they allow for development and adaptation to future circumstances,[6] the absence of a supreme international court producing binding CISG precedent and the unlikeliness of establishing one makes the task rather frivolous.
The above being said, it is worth wondering whether Article 7, the intrinsic interpretative tool of the CISG, suffices for its consistent application. If so, a major argument posed against the UK adoption of the CISG will be defeated. Article 7 was designed to safeguard the uniform interpretation, by setting interpretative rules and the dynamic for developing international jurisprudence, a body of case law common to contracting states. [7] Nonetheless, the general scholarly opinion is that Article 7 aims are yet to be achieved. [8] This is owed to three issues identified with regards to Article 7, two of which belong to Article 7(1) and are analysed here; a) the extent to which judges and arbitrators are capable of interpreting the CISG in an international manner and acknowledging previous precedent, and b) the uncertainty surrounding the ‘good faith’ requirement.
The prospect of uniform international interpretation
The CISG is an international convention, and Art 7(1) explicitly mentions that ‘in the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application.’ The requirement to have regard to the Convention’s international character originated from ULIS; [9] and while not explicated by the Convention, it is a direction to domestic courts to abstain from their national methods of interpretation. This is necessary to fulfil the second indent of Art 7(1) – to promote the uniform application of the Convention. As understood in practice, the exercise involves ‘at least consider[ing] [relevant] opinions of tribunals in other contracting states, [10] and respecting the Convention’s autonomous standing. [11]
Yet, this is not a straightforward task. The nominated interpreters of the CISG, especially national courts and to a lesser extent, arbitral tribunals, are highly familiar with applying domestic laws and cannot automatically interpret the Convention (or other supranational law) in an utterly international and autonomous fashion. [12] Inevitably, judges construe the Convention’s text through their ‘domestic legal lens’, thus generating subtle but important variant interpretations. [13] As Salama noted, a judge will necessarily employ their domestic law at least as a ‘framework’ to interpret the CISG concepts. [14] An added issue is that experience from the Convention has proved that national courts are reluctant to rely on foreign court decisions as a valid source of interpretative guidance for the CISG.[15]
Reluctance is allegedly caused because Article 7 does not determine the degree national courts are to rely upon international jurisprudence and the impracticability of timeously accessing foreign decisions. These are valid but not insurmountable concerns. The answer to the first could be the case of Tribunali di Vigevano. [16] In this case, the tribunal referred to cases of foreign courts, rejected the minority view, considered the ‘better-reasoned, numerous authorities’ and therefore, reduced inconsistencies. [17] Additionally, the tribunal discussed an international jurisprudence ‘stare decisis’; a doctrine as consolidated as stare decisis cannot be assumed from Article 7, [18] nor conform to the international environment unless a supranational court passing binding precedent exists. [19] Nonetheless, the case is an instance of correctly exploiting extraneous case law authoritatively, to yield judgement. [20] Moreover, it might have been ‘unpractical for courts to exchange CISG case reports beforehand’ however, the current CISG case databases make the task of disseminating national decisions worldwide a mission possible. [21]
Turning to the UK, the interpretation challenge might be greater for common law judges. There is no binding precedent under the Convention as it exists in common law and the interpretation method prescribed by Article 7 departs from the traditional common law ‘literal rule’ [22] and narrow interpretation. [23]
Nonetheless, common law courts are well-suited for the development of jurisprudence since this function is enshrined in their domestic system, having a lifetime experience of developing precedent in national law. UK judges recognise the necessity of interpreting international conventions coherently and thus, considering foreign precedent. In James Buchanan, Lord Denning opined that concerning international conventions, Articles ‘should be given the same meaning in all countries who are parties’. [24] In Fortergill, in interpreting international conventions, the full bench thought ‘the traditional "plain meaning" approach adopted in interpretation must yield to the more flexible approach adopted by other countries which were parties.’ [25] Hayward et al also found that, if interpreting the Warsaw Convention having regard to its international character is possible, as was accomplished in Fortergill, the Convention’s interpretation should not pose a greater challenge, considering intrinsic and extrinsic interpretation aids. [26]
Within the Convention’s context, external materials are accepted as an interpretation source, although their authority is limited next to precedent. [27] A further obstacle identified by the UK legal practice is that common law interpretation methodology, which, in principle, refrain from referring to external materials such as travaux préparatoires and scholarly writings, comes in stark contrast to the opposite approach of civil systems and their interpretation of the CISG. [28] Scotland must be excluded from this statement as several Scots scholarly writings have an institutional status,[29] albeit these institutional writings do not perform the same function modern, expert, scholarly opinions do in civil systems.
Although common law courts are adamant about their legal heritage, the restrictive interpretative rules have been relaxed for a more ‘purposive and rationale-oriented analysis.’ [30] Magnus suggested an alternative approach UK courts may adopt to not circumvent their interpretation principles. Instead of viewing Article 7 as the interpretation method of the CISG, courts could use familiar to them methods of interpretation and set the Article’s contents as achievable aims. [31] Employing ‘dynamic treaty interpretation’ methods could mean that the judiciary may interpret the ‘deeper message’ instead of its literal surface. [32] Implemented in a coherent manner, the result achieved would be the same, albeit in a method familiar and trusted in each state. Nevertheless, this proposition has been criticised for its ‘expansionist line’ and would probably not be favoured in systems valuing certainty over ‘unwritten CISG principles’, [33] such a system being the UK.
Uncertainty and the good faith requirement
The insertion of good faith in the Convention’s text was controversial because, as a concept, it differs significantly among legal traditions. Under UK laws, there is no express obligation concerning good faith, though the principle is not entirely unknown. [34] There are several mechanisms addressing bad faith. [35] For instance, the SGA renders a contract void or voidable in sales where vulnerable persons are involved and a reasonable price for the goods is not paid. [36] An academic had stated that good faith exists in Scottish law as a general concept but this position has not found broader support. [37] Wilson, who represented Scotland in the European Contract Commission, is thought to be behind a statement that there is ‘an underlying principle of good faith in the Scottish law of contract although it is difficult to find a clear and comprehensive statement of it’. [38] Nonetheless, good faith has been introduced in the UK via EU law. [39] Legatt J has condemned the English hostility towards good faith [40] while the Directive 93/13/EEC on consumer contracts directly imposes good faith obligations. [41] It is unclear, however, if these influences will persevere in light of Brexit and if they do, what shape or form they will take. [42]
Inclusion of good faith in more strategic Articles in the Convention was systematically rejected by common law states. Its position in Article 7 as an interpretative guide (instead of a legal obligation) reveals the common law influence on the Convention. [43] Yet, the insertion of good faith in the awkward position of Article 7 creates uncertainty as to what exactly it involves. [44] Despite being ‘honourably buried’, [45] good faith raises controversy among scholars over its role, ‘leaving common law lawyers in discomfort’. [46] It must be noted that good faith, as found in the Convention does not source from domestic law. [47] Nonetheless, common law scholars perceive it as a tool of last resort for national courts to avoid inequitable results [48] or at points of uncertainty, whereas others opine it has a deeper reach and could apply to the interpretation of the contract. [49] Even if it is accepted good faith has a contained role, its uniform interpretation is a demanding task, given its subjective nature. Therefore, UK scholars’ uneasiness is partly justified, although their categorical position towards good faith could be transforming.
UK courts have been hesitant in recognising good faith duties in commercial contracts.
In Walford v Miles the court held that in pre-contractual negotiations between parties, it was not possible to enforce a good faith obligation to not negotiate with third parties. [50] Lord Ackner argued that good faith, as a principle, is ‘unworkable in practice as it is inherently inconsistent with the position of a negotiating party’. In a similar vein, Lord Steyn observed that socio-economic changes constantly shape legal systems, and that ‘winds of change’ could mould UK law into being more receptive to notions of good faith and fair dealing. [51]
However, considering that the leading reason behind the Brexit campaign was the ‘reclamation of sovereignty’ (from the EU), it is questionable whether the UK has indeed become more receptive to civil concepts, as Lord Steyn foresaw years ago. The change Lord Steyn was referring to is partly demonstrated in cases such as Petromec v Petroleo [52] and Cable Wireless v IBM [53] where in the first, an express obligation to negotiate in good faith was upheld while the second upheld a duty to follow ADR procedures in good faith. Lord Steyn’s suggestion was that the ‘principle of reasonable expectation’ in the course of dealings should be adopted as a notion that has the same ideological base as good faith but is expressed in more familiar terms. [54]
Although reservedly, UK courts are familiar with good faith and should they have to interpret Article 7, they are equipped to do so. Good faith might be a deal-breaker for the UK if viewed traditionally. Yet, the longer UK courts do not actively contribute to CISG precedent, the more chances the UK loses to influence the evolution and practical application of the Convention [55], especially considering that currently, civil law states are producing the most CISG precedents. [56]
Endnotes
[1]Silvia E. Nikolova ‘UK’s Ratification of the CISG – An Old Debate or a New Hope for the Economy of the UK on Its Way Out of the Recession: The Potential Impact of the CISG on the UK’s SME’ (2012) 3(3) Pace International Law Review Online Companion 69, 86. Accessed 15 October 2021.
[2] ‘Thus, the initial theoretical question regarding Article 7 is whether these two phrases should be considered separate principles or must be applied as a single concept. As the following analysis demonstrates, these two criteria are actually two facets of a single goal.’ John Felemegas, An International Approach To The Interpretation Of The United Nations Convention On Contracts For The International Sale Of Goods (1980) As Uniform Sales Law (1st edn, Cambridge University Press 2007), p.12; James E Bailey, 'Facing The Truth: Seeing The Convention On Contracts For The International Sale Of Goods As An Obstacle To A Uniform Law Of International Sales' (1999) 32 Cornell International Law Journal 273, 292.
[3] Felemegas fn(2), 20.
[4] Ibid, 21..
[5]Ibid, 12 at [n46].
[6] ‘Any uniform law has to rely on certain imprecision’ Ingeborg Schwenzer and Paschal Hachem, 'The CISG - Successes And Pitfalls' (2009) 57(2) American Journal of Comparative Law 457, 469.; Ulrich Magnus ‘The Vienna Sales Convention (CISG) Between Civil and Common Law- Best of All Worlds?’ (2010) 3(1) J. Civ. Stud. 68, 95. Accessed 15 October 2021; Similar view on adaptation to future circumstances: ‘Given also the lack of machinery for legislative amendment in the CISG, the importance of case law in understanding international sales law will be all the greater’; Felemegas fn(2), 15-16.
[7] Felemegas, ibid, 8.
[8] Ingeborg H Schwenzer and Peter Schlechtriem, Commentary On The UN Convention On The International Sale Of Goods (CISG) (3rd edn, OUP 2010),
10.
[9] Articles 2 and 17. Bailey, fn(2), 287.
[10] Monica Killian, ‘CISG and the Problem with Common Law Jurisdictions’ (2001) 10 J Transnat’l L. & Pol’y 217, 226.
[11] Bailey, fn(2), 287-288; Magnus, fn(6), 270.; Ibid, 228.
[12] John E Murray, 'The Neglect Of CISG: A Workable Solution' (2018) 17 Journal of Law and Commerce, 365; Felemegas fn(2), 12; Gilles Cuniberti, 'Is The CISG Benefiting Anybody?' (2006) 39 Vanderbilt Journal of Transnational Law, p1517; Killian, fn(10), 228.
[13] Ibid, p 365; Felemegas fn(2), 12; Gilles Cuniberti, 'Is The CISG Benefiting Anybody?' (2006) 39 Vanderbilt Journal of Transnational Law, p1517; Killian defines the same concept as “a judge’s ‘inertia of habit’” Killian, fn(10), 228.
[14]Shani Salama, ‘Pragmatic Responses to Interpretative Impediments: Article 7 of the CISG, An Inter-American Application’, [2006] University of Miami Inter-American Law Review 225, 225. Accessed 25 February 2022.
[15] Felemegas fn(2), 72.
[16]
Rheinland Versicherungen v. S.r.l. Atlarex and Allianz Subalpina S.p.A, Tribunale [District Court] di Vigevano (Italy), 12 July 2000, n. 405.
[17] Ibid, at [22] and [23]
[18] Bailey, fn(2), 294.
[19] Ibid.
[20] Franco Ferrari, 'Applying The CISG In A Truly Uniform Manner: Tribunale Di Vigevano (Italy), 12 July 2000' (2001) 6 Uniform Law Review <https://academic.oup.com/ulr/article/6/1/203/1701400> accessed 26 March 2021, 208-209.
[21] There are at least three CISG case law online databases. CLOUT database, Albert H. Kritzer Database; CISG-Online.
[22] Henning Lutz, ‘The CISG and Common Law Courts: Is There Really A Problem?’ (2004) 24 V.U.W. Law Rw 711. Accessed 15 October 2021.
[23] Common law judges have traditionally interpreted statute narrowly because they are considered an exception to common law itself. Bernard Audit, ‘The Vienna Sales Convention and the Lex Mercatoria in Lex Mercatoria and Arbitration’ in Thomas E. Carbonneau ed., rev. ed., (Juris Publishing 1998) 173-194,p 187.; “Adding to the difficulty in interpreting CISG is the fact that common law jurisdictions have specific methods for interpreting statutes, which generally require narrow interpretation”, Killian, fn(10), 228-229.
[24] ‘(…). As such, it [Contract for the International Carriage of Goods by Sea (CMR) Convention of Geneva] should be given the same interpretation in all the countries who were part of the convention. It would be absurd that the courts of England should interpret it differently from the courts of France, or Holland or Germany (…)’ James Buchanan & Co Ltd v Bobco Forwarding and Shipping (UK) Ltd [1977] 1 All ER 518, per L. Denning at [211].; Lutz, fn(22), 716.
[25] Fothergill v. Monarch Airlines Ltd. 3 W.L.R. 209 (H.L. 1980); Allison Williams, ‘Forecasting the Potential impact of the Vienna Sales Convention on International Sales Law in the United Kingdom’ [2000-2001] Pace Review of the Convention on Contracts for the International Sale of Goods (CISG) 9, 11.
[26] Benjamin Hayward, Bruno Zeller, Camilla Baasch Andersen ‘The CISG and the United Kingdom -Exploring Coherency and Private International Law’ (2018) 67(3) ICLQ 607, 616. Accessed 15 October 2021.
[27] Felemegas fn(2), 18.
[28] Killian, fn(10), 228.
[29] Angelo Forte, ‘The United Nations Convention on Contracts for the International Sale of Goods: Reason or Unreason in the United Kingdom’ (1997) 26 University of Baltimore Law Review 51, 62.
[30] Ibid.
[31] Magnus, fn(6), 270.
[32] Michael Van Alstine, ‘Dynamic Treaty Interpretation’ (1998) 146(3) U Pa L Rev 687, 731. Accessed 18 February 2022.
[33] Joseph Lookofsky ‘Not Running Wild with the CISG’ (2011) 29(2) Journal of Law and Commerce 141, 141 and 167-8. Accessed 17 October 2021.
[34]Angelo Forte, ‘The United Nations Convention on Contracts for the International Sale of Goods: Reason or Unreason in the United Kingdom’ (1997) 26 University of Baltimore Law Review 51, 63. Accessed 12 February 2022.
[35] Richard Zimmerman, Daniel Visser, Kenneth Reid, Mixed Legal Systems in Comparative Perspective: Property and Obligations in Scotland and South Africa, (1st edn.,OUP, 2005), 95; ‘English law has, characteristically, committed itself to no such overriding principle [good faith] but has developed solutions in response to demonstrated problems of unfairness’ Lord Bingham as quoted in Barry Nicholas, ‘The United Kingdom And the Vienna Sales Convention: Another case of splendid isolation?’ (Lecture at Saggi, Conferenze (Seminari 9) directed by M.J. Bonell in Roma 1993) < https://unov.tind.io/record/5555?ln=en> Accessed 30 January 2022.
[36] Section 3, Part II, Sale of Goods Act 1979.
[37] ‘T.B. Smith claimed that “in the Scottish law of contract bona fides is a general concept.” However, this view lacked authority and, at least up until recently, the better view was that whilst certain nominate contracts could be regarded as contracts of good faith, there was no general principle of the sort described by Smith.’ Zimmerman et al, fn(35), 95.
[38]Hector L. MacQueen, ‘Good Faith in the Scots Law of Contract: An Undisclosed Principle?’ in A.D.M. Forte (ed), Good Faith in Contract and Property Law, (1st edn., Hart Publishing Oxford, 1999), 5.
[39] Roger Brownsword, Contract Law: Themes for the Twenty-first Century, (2nd edn, Oxford University Press, 2006), 112-113.
[40] ‘In the light of these points, I respectfully suggest that the traditional English hostility towards a doctrine of good faith in the performance of contracts, to the extent that it still persists, is misplaced.’ Legatt J at [153] in Yam Seng Pte Limited v. International Trade Corporation Limited [2013] EWHC 111 (QB).
[41] Preamble and Paragraph 1 Article 3 Directive 93/13/EEC refer to obligations of good faith.; This version of the Directive has remained operative post-Brexit, however, no further amendments will be applied. Accessed 25 February 2022.
[42] See Andre Janssen and Navin G. Ahuja, ‘Bridging the Gap: The CISG as a Successful Legal Hybrid between Common Law and Civil Law?’ in Francisco De Elizadalde (ed), Uniform Rules for European Contract Law? A Critical Assessment (1st edn, Hart Publishing, 2018).
[43] Eörsi refers to the shift of the good faith requirement from a legal obligation to interpretation guide as ‘an honourable burial’ of the principle since it is deprived of the full functions it has under civil law systems. Gyula Eörsi, ‘General Provisions’ in Galston & Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale Of Goods, (1st edn., Matthew Bender, 1984) at [2.01]; Nicholas, fn(35); Angelo Chianale, 'The CISG As A Model Law: A Comparative Law Approach' (2016) 29 Singapore Journal of Legal Studies, 32.
[44] Felemegas fn(2), 13.
[45] Eörsi, fn(43), at [2.01].
[46] Nicholas, fn(35).
[47] John O Honnold and Harry M Flechtner, Uniform Law For International Sales Under The 1980 United Nations Convention (3rd edn, Kluwer Law Internat 1999), at [92].
[48] “After lengthy discussions, a proposal of an ad hoc Working Party recommended that as a compromise good faith could survive but should be shifted to the provisions on an interpretation of the Convention, thus consigning it to a ghetto and giving it an honourable burial. This recommendation was adopted (No. 60) even though practically everybody was convinced that the clause was dead.” Eörsi, fn(43), 6; Felemegas fn(2), 13.
[49]There have been cases where good faith was applied to the substance of the contract: ‘Finally, it ordered the [buyer] to pay damages amounting to 10,000 French francs for abuse of process, finding that the conduct of the buyer, "contrary to the principle of good faith in international trade laid down in article 7 CISG, aggravated by the adoption of a judicial stand as plaintiff in the proceedings, constituted abuse of process.”’ SARL Bri Production "Bonaventure" v. Société Pan African Export (Cour d'Appel de Grenoble, Ch. Comm.)(Fr.), No. RG 93/3275, UNILEX (22 February 1995); ‘In the Court's opinion, the issuance of a bank guarantee which had already expired would be contrary to the principle of good faith (Art. 7(1) CISG) and to the understanding that a reasonable person would have had in the same circumstances (Art. 8(3) CISG).’ Arbitral Award of the Hungarian Chamber of Commerce and Industry, Court of Arbitration, No. VB/94124, UNILEX (17 November 1995).; See also in Allison Williams, ‘Forecasting the Potential impact of the Vienna Sales Convention on International Sales Law in the United Kingdom’ [2000-2001] Pace Review of the Convention on Contracts for the International Sale of Goods (CISG) 9; Eörsi, fn(43), 6.
[50] Walford v Miles [1992] 2 AC 128.
[51] J. Steyn as quoted in Allison Williams, ‘Forecasting the Potential impact of the Vienna Sales Convention on International Sales Law in the United Kingdom’ [2000-2001] Pace Review of the Convention on Contracts for the International Sale of Goods (CISG) 9, 11.
[52] Petromec Inc v Petroleo Brasileiro S.A. Petrobras, Braspetro Oil Services Company v Petromec Inc, Petro-Deep Inc, Maritima Petroleo e Engenharia Ltda [2004] EWHC 127 (Comm).
[53] Cable & Wireless Plc v IBM United Kingdom Ltd [2002] EWHC 2059 (Comm).
[54] Supporting Lord Steyn’s views on the matter, Brownsword analogises traders’ dealings with and without good faith with prisoners (not) having confidence in each other that they will not confess in a Prisoner’s Dilemma context. Brownsword argues when traders have confidence in each other they achieve the best achievable outcome from negotiations. Brownsword, fn(39), 127 and 129. See also; Platsas argues ‘unreasonableness could be the Trojan horse of good faith’ and refers to ss15 and 30(2A) of the Sale of Goods Act 1979, the relevant provisions dealing with unreasonableness in the Act. Antonios Platsas, ‘The Potential Impact of the CISG on the Common Laws of England and the Republic of Ireland: A Legal Anactataxis or a Trivial Matter of Implementations? Lessons of Comparative Law’ (2005) 17 (1) The Denning Law Journal 43, 58. Cf Brownsword, fn(39), 132.
[55]Angelo Forte, ‘The United Nations Convention on Contracts for the International Sale of Goods: Reason or Unreason in the United Kingdom’ (1997) 26 University of Baltimore Law Review 51, 65. Accessed 12 February 2022.
[56] See III, C1 in Allison Williams, ‘Forecasting the Potential impact of the Vienna Sales Convention on International Sales Law in the United Kingdom’ [2000-2001] Pace Review of the Convention on Contracts for the International Sale of Goods (CISG) 9.