The CISG[1] has thus far attracted 94 signatories, thanks to its accommodating legal framework, as it encompasses cross-border transactions without constricting them to a stringent set of modalities. However, the reluctance of the UK to ratify it necessitates a re-assessment of the Convention to help us determine if its strengths truly outweigh its shortfalls. It is only fair to do so before we recommend that the UK takes that opportunity with open arms.
This blog post will direct the reader’s attention to two key elements of the CISG, the concepts of good faith[2] and the Convention’s gap-filling rules,[3] to illustrate their function and advantages. It will, then, determine whether each of them can be transposed in the common law tradition of the UK to encourage ratification.
Good faith: a pressure point or a blessing in disguise?
The most contested point can be found in Article 7. It states that the interpretation of the Convention is linked to the observance of good faith.[4] The issue lies with the fact that good faith forms an integral part of civil law but not the common law tradition,[5] thus, casting doubt over the suitability of the CISG as a harmonising tool.
Arguments against the practicability of including good faith as part of the interpretational principles, generally, fail to recognise the legislative history of Article 7. Such arguments tend to focus on the imbalance of familiarity between the common law and civil law systems with good faith.[6] Contrary to such popular concerns, the CISG’s inclusion of the good faith principle is, in fact, of compromissory nature, as it is a principle of interpretation and not of duty.[7] This, theoretically, allows both common and civil law practitioners to utilise it as it does not prescribe particular duties to the parties. It is merely a tool for interpretation. In practice, it is certainly true that case law reflects a more far-reaching approach to good faith by civil law signatories as this concept has more significance in such jurisdictions.[8]
Nevertheless, common law signatories can benefit from the true legislative design of Article 7. Such jurisdictions can legitimately adopt a narrower approach to good faith that reflects its original blueprint, namely, to use it in discouraging abuse of rights and contradictory behaviour[9] rather than as a ‘super-tool’[10] for general obligations.[11] Indeed, a number of jurists, who are not as eagerly embracing the German imposition of good faith as a duty, have expressed criticism of how far the concept has been strained away from its original compormissory design.[12]
Moreover, in a 1997 ICC Arbitration case, it was duly noted that interpreting good faith as having a broader scope of imposing a duty on the parties is contrary to the role afforded to it under the Convention, and that the narrowest interpretation of it is the only legislative correct approach.[13] To use it as a tool to impose duties further undermines uniformity[14] and discourages common law jurists from engaging with the concept, as it is over-burdened with mistaken understandings. The resolution to this is to go back to basics. The black letter approach to good faith should be employed as it reflects the sufficiently balanced legislative intent behind the CISG’s inclusion of the concept. This would certainly be a better approach if we are to promote legal uniformity and encourage the common law ratification of the CISG.
Furthermore, this black letter approach is in line with the prescribed autonomous interpretation of Article 7’s principles,[15] meaning that good faith ought to be utilised free from any domestic encumbrances. This allows common law courts to attribute weight to good faith that better reflects its compromissory design rather than be expected to follow the traditional German reliance on good faith as a normative doctrine.[16] Its prescribed autonomous interpretation is indicative that the CISG intends to provide equal footing for both types of systems by including good faith, but only as a ‘statesmanlike compromise’.[17] To confine it to its civil law underpinnings is to go against the design of the Convention. With all that in mind, it is reasonable to say that the inclusion of good faith is a moderate solution to the gaps between the common and civil law jurisprudence and its original design shall be determinative of its treatment.
This conclusion supports the recommendations that the UK should ratify the CISG. If the UK is to do so, it would be able to preserve its piecemeal approach, uphold an autonomous interpretation of good faith following the black letter approach, and provide balance in the treatment of this concept as it would equal out the more stringent civil law interpretation.[18] To elaborate, the UK would be able to shape good faith as an interpretational mechanism under the Convention as this principle lacks a single meaning. Such statements are in line with the Court of Appeal’s ruling that good faith is context-dependant,[19] hence its function under the CISG would encourage jurisprudential buildout rather than an imposition of civil law interpretations.
Furthermore, in recent cases, the parties’ contractual freedom to include an express choice to negotiate in good faith has been upheld,[20] indicating that the UK is hospitable towards this principle. This, coupled with historical evidence of cases where good faith was deemed not so dissimilar to the concepts of fairness and reasonableness,[21] should encourage the UK to ratify the Convention and contribute to the good faith precedent.
Gap-filling under Article 7(2): a flexible tool
In assessing whether the UK should ratify the CISG, we cannot understate the centrality of the gap-filling mechanisms under Article 7(2). In essence, they remedy issues that fall under the scope of the CISG but have not been expressly settled by it. They give re-course to principles of private international law. These mechanisms, similar to the good faith doctrine, lack a uniform understanding. The ambiguity of such general principles and terms of international law,[22] in turn, creates obscurity as to what exactly Article 7(2) is referring to.
However, benefits from this obscurity can again be easily missed by those who are set against the CISG. The 'elusive' nature of Article 7(2) can easily be transformed into a flexible tool that aids judges in, both, settling the dispute in question and developing the Convention in light of modern, ever-growing themes in international trade. This means that dispute resolvers can look at the underlying principles of the Convention to make a decision by analogy,[23] based on broader concepts enshrined in, for example, Article 7(1). This allows for an individual basis approach, as it promotes the utilisation of general principles that are identifiable in the text of the Convention rather than affording a carte blanche to domestic law solutions.
Therefore, the practicable operation of Article 7(2) upholds the international character of the Convention and provides a flexible framework to parties who wish to incorporate its application.[24] Importantly, this also appeases concerns over interpretive obscurity because paragraph 2 of Article 7 essentially reinforces the notion of uniformity by giving primacy to the finding of a solution within the CISG itself and its principles.[25]
Additionally, the spirit of Article 7(2), contrary to much scepticism,[26] in actuality, fits well within the common law traditions. It has, thus far, been mistakenly noted that this Article will allow common law jurisdictions to have direct recourse to common law rules and precedents.[27] The basis for such concerns lies in the obscurity of the notion of general principles. However, as Hofmann notes,[28] recent developments in common law jurisprudence indicate a far more liberal and relaxed interpretation, which, in turn, would be a satisfactory ground for the interpretation of Article 7(2). Put simply, concerns over direct recourse to common law rules are becoming more irrelevant, and the ratification of the CISG should not be based upon them as the legal reality in common law countries demonstrates otherwise.
Furthermore, Article 7(2) provides for recourse to private international law rules, which suggests that the drafters anticipated reliance on domestic law where necessary.[29] Therefore, internal gaps that are intentionally left to national law, following the conflict of law rules, would allow domestic systems to exercise retained national gap-filling methods. Hence, the Convention does not threaten the legal tradition of signatories, as some sceptics argue.[30] This is supplemented by the option to fill gaps via the UNIDROIT principles[31] in compliance with the Convention. This reinforces the notion that the CISG prescribes a hierarchy of sources[32] that can be used to fill gaps whilst recognising the need to allow for domestic law and UNIDROIT-based fillers to avoid an absolute reliance on one specific method.
Based on these points, it is reasonable to state that Article (2) does not lead to irreconcilable complications. The UK would, again, be enabled to contribute to the jurisprudential progress of the CISG as it has displayed a departure from the stricter common law interpretative methods. This is significant in that it displays its readiness to welcome a more international approach, i.e., as that prescribed under Article 7. Its adoption would additionally reinforce party autonomy,[33] which is already recognised within the UK, as it would essentially allow a British party to a contract to expand their choice-of-law freedom by incorporating the CISG.
Further, this is in harmony with Lord Denning’s ruling that every Convention’s articles shall be afforded the same meaning across its signatories,[34] which makes the UK perfectly suited to promote and enforce uniformity as the cornerstones of the CISG. This, coupled with the more relaxed interpretative approach, showcases that Article 7(2) is a workable tool that would enable the common law tradition of the UK to build precedence under the CISG. It is highly probable that the UK will be a leading source of precedent for other common law signatories.[35] As a last resort, it would also be able to look at national legislation, such as the Sale of Goods Act 1979, in case all other gap-filling tools have been exhausted. Put simply, Article 7 does not threaten the legal system of the UK.
Final thoughts
The bedrock of the regime, namely Article 7, in fact, constitutes a flexible tool for the attainment of broader policies such as the encouragement of international trade and more importantly, legal harmonisation. The Convention’s good faith and gap-filling methods provide a suitable environment for the development of the Convention as a uniform framework that is free from rigid requirements. Hence, its advantages should attract the UK as a signatory as it would allow judges to add to the CISG’s interpretation and overall jurisprudence whilst not requiring them to make a large compromise on their current understandings and legal traditions. Perhaps the key to solving this never-ending debate is by looking at Article 7 as a flexible tool and not as the apple of discord.
Endnotes
[1] United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980) (CISG).
[2] Art. 7(1) CISG.
[3] Art. 7(2) CISG.
[4] Nathalie Hofmann, 'Interpretation Rules and Good Faith as Obstacles to the UK's Ratification of the CISG and to the Harmonization of Contract Law in Europe' (2010) 22 Pace Int'l L Rev 145, 145.
[5] Michael Bridge, 'Good Faith, the Common Law and the CISG' (2017) Uniform Law Review, 22 (1), 1.
[6] Lisa Spangnolo, 'Opening Pandora's Box: Good Faith and Precontractual Liability in the CISG' (2007) 21 Temp Int'l & Comp LJ 261, 268.
[7] Nadia Saba, 'To Believe or Not to Believe: Good Faith in the CISG' (2012) 9 Macquarie J Bus L 118, 121.
[8] Benedict Sheehy, ‘Good Faith in the CISG: The Interpretation Problems of Article 7’ [2004], SSRN Electronic Journal 4-5, accessed 30 March 2022; Nathalie Hofmann, 'Interpretation Rules and Good Faith as Obstacles to the UK's Ratification of the CISG and to the Harmonization of Contract Law in Europe' (2010) 22 Pace Int'l L Rev 145, 167; in particular see BRI Production 'Bonaventure' v. Pan African Export, Cour d' Appel Grenoble, No. 93/3275 1995 and Hungarian Chamber of Commerce and Industry Court of Arbitration, Arbitral Award, No. VB/94124, Nov. 17, 1995.
[9] Christoph Brunner and Benjamin Gottlieb, Commentary on the UN Sales Law (CISG) (Wolters Kluwer 2019), 88.
[10] Peter Huber, ‘Some Introductory Remarks on the CISG’ (2006) 6 Internationales Handelsrecht 228, 228-29.
[11] For a detailed discussion on good faith as a general obligation see Paul J. Powers, 'Defining the Undefinable: Good Faith and the United Nations Convention on the Contracts for the International Sale of Goods' (1999) 18 JL & Com 333, 336-337; §242 of the German Civil Code (Bürgerliches Gesetzbuch), Werner Ebke and Bettina Steinhauer, ‘The Doctrine of Good Faith in German Contract Law’ in ack Beatson, and Daniel Friedman (eds), Good Faith and Fault in Contract Law (Oxford 1997), 172-173.
[12] Larry Di Matteo, International Sales Law: A Global Challenge (2014 Cambridge University Press), 133-134; Camilla Baasch Andersen, 'General Principles of the CISG – Generally Impenetrable', in Sharing International Commercial Law across National Boundaries (London: Wildy, Simmonds & Hill, 2008), 13.
[13] ICC Arbitration Case No. 8611 of 23 January 1997; Benedict Sheehy, ‘Good Faith in the CISG: The Interpretation Problems of Article 7’ [2004], 32, SSRN Electronic Journal, accessed 12 October 2022.
[14] United Nations Conference on Contracts for the International Sale of Goods, Vienna, Austria, Mar. 10-Apr. 11, 1980, 40-56, UN Doc. A/CONF.97/19 (1991).
[15] Christoph Brunner and Benjamin Gottlieb, Commentary on the UN Sales Law (CISG) (Wolters Kluwer 2019), 87.
[16] For detailed discussion see Martijn Hesselink, ‘The Concept of Good Faith’ (2004) Kluwer Law International 619, 621-623.
[17] Reid Mortensen, Richard Garnett and Mary Keyes, ‘Background and Interpretation of the CISG’ in Private International Law in Australia, 73; Allan Farnsworth, ‘The Eason-Weinmann Colloquium on International and comparative Law: Duties of Good Faith and Fair Dealing under the UNIDROIT Principles, Relevant International Conventions, and National Laws’ (1994) 3 Tul J Int'I & Comp L 47, 55-56.
[18] DTI, United National Convention on Contracts for the International Sale of Goods (the Vienna Convention): A Consultation Document 1997, paras 22 and 23 in Indira Carr and Peter Stone, International Trade Law (4th edn Routledge 2009), 59; Angelo Forte, ‘The United Nations Convention on Contracts for the International Sale of Goods: Reason or Unreason in the United Kingdom’ (1997) 26 U of Baltimore LR 51, 65.
[19] Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd [2013] EWCA Civ 200.
[20] Petromec Inc v Petroleo Brasileiro S.A. Petrobras [2004] EWHC 127 (Comm), at [120] - [121]; Cable & Wireless Plc v IBM United Kingdom Ltd [2002] EWHC 2059 (Comm).
[21] Nadia Saba, 'To Believe or Not to Believe: Good Faith in the CISG' (2012) 9 Macquarie J Bus L 118, 120-121.
[22] For discussion on obscurity see Luiza Lins and Silva Dutra, ‘Article 7 of the CISG: Interpreting the Convention and Filling Its Gaps’ (2017), 17; Denis Philippe, ‘Gap filling on the basis of general principles (article 7.2. of the CISG) and Unidroit Principles’ (Philippe & Partners, 2020) at 6, accessed 15 October 2022.
[23] Joseph Lookofsky, ‘Walking the Article 7(2) Tightrope Between the CISG and Domestic Law’ (2005) 25 Journal of Law and Commerce.
[24] For a good application of Article 7(2) and its general principles see James Quinn, ‘he Interpretation and Application of the United Nations Convention on Contracts for the International Sale of Goods’ (2004) 9 International Trade and Business Law Review 221 discussion on Handelsgericht Zurich (Commercial Court of the Canton of Zurich).
[25] Franco Ferrari, 'Gap-Filling and Interpretation of the CISG: Overview of International Case Law' (2003) 2003 Int'l Bus LJ 221, 226-227.
[26] C Massimo Bianca and Michael Joachim Bonell, Commentary on the International Sales Law: The 1980 Vienna Sales Convention (Giuffré 1987), 77-78.
[27] Note the design of Article 7(2) that gives rise to such concerns; discussed in Luiza Lins and Silva Dutra, ‘Article 7 of the CISG: Interpreting the Convention and Filling Its Gaps’ (2017), 17.
[28] Nathalie Hofmann, 'Interpretation Rules and Good Faith as Obstacles to the UK's Ratification of the CISG and to the Harmonization of Contract Law in Europe' (2010) 22 Pace Int'l L Rev 145, 156.
[29] Franco Ferrari, 'Gap-Filling and Interpretation of the CISG: Overview of International Case Law' (2003) 2003 Int'l Bus LJ 221, 226.
[30] Angelo Forte, ‘The United Nations Convention on Contracts for the International Sale of Goods: Reason or Unreason in the United Kingdom’ (1997) 26 U. BALT. L. REV. 51, 57; Hofmann (n7) 86.
[31] The UNIDROIT Principles of International Commercial Contracts (UNIDROIT Principles).
[32] Christoph Brunner and Benjamin Gottlieb, Commentary on the UN Sales Law (2019 11th edn), Ch2 para.7; Luiza Lins and Silva Dutra, ‘Article 7 of the CISG: Interpreting the Convention and Filling Its Gaps’ (2017), 15; Reid Mortensen, Richard Garnett and Mary Keyes, ‘Background and Interpretation of the CISG’ in Private International Law in Australia, 59.
[33] Paul Torremans and others (eds), Cheshire, North & Fawcett: Private International Law (Fifteenth Edition, Oxford University Press 2017), 684-6.
[34] James Buchanan & Co Ltd v Bobco Forwarding and Shipping (UK) Ltd [1977] 1 All ER 518, Lord Denning at [211].
[35] Silvia 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 SM’ 3 Pace Int’l L. Rev. Online Companion 69 (2012), 99.