Area of Operation of the International Sales Conventions
Rights: Copyright: CISG Database, Pace Institute of International Commercial Law. Reproduced with permission from 29 "American Journal of Comparative Law" (1981) 513-522
The 1964 Hague Convention relating to a Uniform Law on the International Sale of Goods (ULIS) has been ratified by nine States,
The absence of uniform regulation of international trade has always been considered an obstacle to its development. In establishing UNCITRAL, the United Nations sought to eliminate this impediment. Should the VIENNA TEXT come into operation, international economic circles will have at their disposal two Conventions competing for universal application. [page 513]
The object of this Comment is not to compare the substantive merits of ULIS and the VIENNA TEXT, but to examine their respective fields of application.
Art. 1 of ULIS
Earlier drafts, prior to 1964, would have made the uniform law applicable only when the conflicts rules of the forum selected the law of a signatory State. This formula would have operated as follows: the forum settles the conflict in conformity with its own municipal conflicts law or with rules based upon an international convention; if these select the law of a country signatory to the Convention, recourse would be had to ULIS rather than to its general sales law. Next arises a question of "qualification": was the transaction a sales contract within the purview of ULIS? Naturally this would be decided by reference to ULIS (secondary qualification): if affirmative, the dispute could then be settled on the merits.
The Hague Conference of 1964 thought that this solution was highly complex and, accepting the recommendation of the Federal Republic of Germany, decided that ULIS should be applied without recourse to conflicts rules. The German delegation proposed that the courts of Contracting States should apply ULIS to all international sales, without more. This proposal was however supplemented by a compromise, viz. the permissible reservation to Art. III by which a Contracting country need apply ULIS only to deals with merchants whose places of business are situated in other Contracting States.
Accordingly, the application of ULIS became unconditional, and [page 514] Art. II categorically precluded recourse to the rules of private international law once ULIS was applied. Since at that time a number of States had already undertaken in conventions to apply the law governing international contracts of sale in conformity with uniform Conflicts rules,
Hence the "uniformity" of the uniform law was undermined at the very outset by allowing recourse to the reservations in Art. II, III and IV. The acceding state could, therefore, in a manner departing from the wording of the Convention, determine when it regarded theother state as "different" (Art. II), make the application of ULIS dependent on conflicts rules (Art. IV), and narrow the sphere of application by applying the uniform law only in respect of another Contracting country (Art. III).
Open Door to the Non-Acceding Countries The German recommendation met the demand for universality and would have advanced the spread of ULIS. The reservations aside, ULIS is part and parcel of the municipal law of the judge, who can apply it even when the country of neither Contracting party has ratified the Convention and even when the forum has no other connection with the transactions.
This is a novel "legal effect" in the law of international conventions. According to the dominant opinion a country can only apply a convention it has ratified to another such country. A foreign convention cannot be forced upon a non-acceding country, nor can its benefits be conferred on a non-signatory. But according to ULIS this difficulty disappears when the acceding country incorporates ULIS into its own domestic law or promulgates it as such (Art. II).
Moreover, consider the following case: the Federal Republic of Germany ratified ULIS with the reservation provided in Art. III: the German courts will not therefore apply ULIS to deals between a German merchant and an alien whose country is not signatory to the Convention. Instead they will look to the German conflicts rule. However, if that rule points to the law of a signatory which ratified, without the Art. III reservation, German courts will still, by a round about way, apply ULIS.
Hence ULIS will have to be applied:
1. between two signatory countries;
2. between a signatory and non-signatory when the forum is in the signatory country; [page 516]
3. between two non-signatories if the forum is in the territory of a signatory;
4. if the country of the forum is a non-signatory, yet in conformity with its conflicts law the law of a signatory has to be applied to the sales contract;
5. if, in conformity with Art. IV of the Convention, the parties stipulate the application of ULIS.
However, even in these cases ULIS cannot be applied:
1. between two countries if either of them has made the reservations in Arts. II, IV or V;
2. between a signatory and non-signatory state if the signatory state has made the reservation in Art. III;
3. if the Contracting parties preclude the application of ULIS (Art. III).
This multifariousness calls into doubt the success of ULIS as legislation purporting to regulate international sales under a uniform rule.
Much criticism has been vented against the omission in ULIS of a "conflicts" orientation among the conditions of its availability.
The VIENNA TEXT (Art. 1) defines the scope of its application as follows:
"This Convention applies to contracts of sale of goods between parties whose places of business are in different States:
a. when the States are Contracting States;
b. when the rules of private international law lead to the application of the law of a Contracting State."
Hence, the VIENNA TEXT has taken over the subjective condition of ULIS: the places of business of Contracting parties must be in two different States.
Similarly the VIENNA TEXT retained the expedient that in the mutual relationship between two Contracting States the Convention applied unconditionally rather than being made dependent [page 517] on whether the conflicts rules of the Contracting countries or of either of them "approved" the application of the Convention.
Hence for the VIENNA TEXT it is sufficient for the application of the uniform law that the Contracting parties have their places of business in two different countries ratifying the Convention. By contrast, ULIS demands additionally that any three objective conditions -- delivery of goods beyond the frontier, offer-acceptance across the frontier, close of the deal and performance in two different countries -- be established.
Is the scope of application of the VIENNA TEXT any wider than ULIS as a result of abandoning these conditions? It appears not. No doubt it is the common goal of both instruments to bring about uniform regulation of the international sale of goods. Neither positive defines what a sales contract is,
Condition (a) of VIENNA's Art. 1 will come into full operation only when the forum is also in either of the Contracting countries. In the court of a non-Contracting country the Convention cannot preclude application of the conflicts law of the forum. Hence the VIENNA TEXT will not come into operation if a lawsuit is instituted in a country whose conflicts rule selects the law of the forum or of another non-Contracting State. This possibility however also obtains, under ULIS. On the other hand, if the forum selects the law of either Contracting party, the court of a non-Contracting country will be deciding in accordance with the VIENNA TEXT. However the forum will be mindful of the rule that a foreign law has to be applied as the judge of the foreign country would apply it.
Under paragraph (b) of Art. 1, even if the Contracting parties have no place of business in the Contracting country, it suffices that under the conflicts rule of the forum the law of a signatory country becomes applicable. This will, of course, hold only when the subjective condition of Art. 1 has also been met, i.e. the parties' places business are in different countries.
Thus the appetite of the VIENNA TEXT reveals itself as much smaller than that of ULIS. Can the forum stem this appetite? Is it proper that when neither the judge nor the two litigants belong [page 518] to a Contracting country, the case should still be decided under a convention that their countries have never ratified? Or is it acceptable that the forum apply the foreign law just like the foreign court? And what will happen when under the conflicts rule of a signatory state the law of some other state will prevail, as in the case of renvoi? Yet if the forum of the non-Contracting State ignores the renvoi, it would not determine the case as would the judge of the foreign forum. On the other hand, if this forum were to take account of the renvoi it would infringe its own law.
Paragraph (b) of Art. 1 gave rise to protracted disputes and provoked a series of counterproposals. Some delegates would have discarded the whole paragraph; others put forward less ambitious suggestions, but finally the above-quoted text was submitted to the diplomatic conference. Still, on the proposal of the Czechoslovak delegation the conference admitted the following new reservation (Art. 95):
"Any State may declare at the time of the deposit of its instrument of ratification, acceptance, approval or accession that it will not be bound by subparagraph l(b) of Article 1 of this Convention."
It follows from the permissive character of trade law that before applying the provisions of the Convention, priority be given to the contract of the parties, to their practices (if any) and to trade usages. Like ULIS, the VIENNA TEXT through its reservations opens a possibility of granting priority to other international conventions or even to municipal statutes, thereby weakening the universal character of the Convention. Reservations contained in Art. 90
The reservation in Art. 95 is due to a recent development in the legal systems of some socialist countries, which deserves a short explanation. The international trade between socialist countries has been regulated by a jointly elaborated set of rules called General Conditions.
Consequently the situation in these two countries is different from that in the rest of the socialist states. Take the following example:
In a lawsuit between a Hungarian company and its foreign partner from a non-socialist country, the applicable law is the VIENNA TEXT if
- both countries are Contracting States, or,
- when the rules of private international law (of the forum) lead to the application of the law of a Contracting State (Art. l(b)).
If Hungary is not a party to the Convention and Hungarian law is applicable, this will be the Civil Code which generally regulates civil law relations between citizens and legal entities. If Hungary becomes a party to the Convention, the Civil Code cannot be applied, save under Art. 7 of the VIENNA TEXT.
It must be admitted however that in case Czechoslovakia and the GDR accede to the Convention, their Foreign Trade Codes can only be applied in a limited way. This is because in their relations with socialist countries the General Conditions govern, in relations with other countries the VIENNA TEXT. The first consequence of their accession would be that their Foreign Trade Code, enacted and specialized exactly for foreign transactions, would become inapplicable [page 520] to most contracts for the sale of goods. (The Czechoslovak Code contains 726 articles, one third of them dealing with such contracts.) The Code is inapplicable to internal contracts and ratification of the VIENNA TEXT will exclude its application to international contracts. What is left to these Codes then are contracts other than sales and cases where neither rules nor general principles are to be found for settling the particular dispute.
The reservation under Art. 95 extends the application of international legislation to the extent that it reduces the applicability of the Convention itself. In case of accession by these two States the VIENNA TEXT will apply only if both States, that of the seller and the buyer, are parties to the Convention. If Czechoslovakia or the GDR accedes alone to the Convention and not the State of the other Contracting party, the applicable law will be determined by the conflicts rules of the forum. In case Czechoslovak or GDR law thus becomes applicable their Foreign Trade Code will govern the contract.
It is plausible that Czechoslovakia and the GDR when acceding to the Convention will resort to this reservation, though it greatly reduces the Convention's field of application. In addition, the interpretation and gap-filling rule of Art. 7 provides a good chance of keeping the Codes "alive." The rule reads as follows:
"1. 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 and the observance of good faith in international trade.
"2. Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law."
Art. 7 by offering another possibility of recourse to domestic legislation thereby significantly reduces the applicability of the Convention and jeopardizes the main objective of UNCITRAL, uniformity.
One of the barriers to the application of para. (a) and (b) of Art. 1 is set up by Art. 1(2), according to which either Contracting party must acquire, somehow, knowledge of the fact that the other's place of business is in a foreign country.
Both Conventions appropriately ignore the nationality of the Contracting parties and whether the deal was made in the capacity of merchants or any other capacity.
The bracket phrase page followed by a number is used to identify the page number of the original publication.
(a) where the contract involves the sale of goods which are at the time of the conclusion of the contract in the course of carriage or will be carried from the territory of one State to the territory of another;
(b) where the acts constituting the offer and the acceptance have been effected in the territories of different States.
(c) where delivery of the goods is to be made in the territory of a State other than that within whose territory the acts constituting the offer and the acceptance have been effected. (Art.1(1))."