Using the CISG as lex mercatoria
The CISG is ratified by 94 states, which means that it is the applicable law to the international sale of goods in almost two thirds of the world. The application of the CISG as lex mercatoria could only occur in sale of goods contracts. The CISG does not contain general contract principles (contrary to the UPICC) and this hampers its application as lex mercatoria. Despite this the CISG is regularly applied as a reflection or expression of the lex mercatoria. The assimilation of a convention with the lex mercatoria is problematic as it introduces the limits that conventions have into the lex mercatoria. Conventions arc defined by existing state legislation and are the result of compromises between states. The influence of the business community on the drafting differs (less so with the CISG and the Hamburg Rules and more influential in the Cape Town Convention for instance.) Even if the business community has influence, conventions still do not originate within the business community and arc more shaped by state interests. It is difficult to consider a convention as lex mercatoria, in origin, in form, and in application. Regardless of these objections in practice we can observe a linkage between the CISG and the lex mercatoria.54
In a case before the Iran-US Claims Tribunal the CISG was found to reflect the ‘recognised international law of commercial contracts.’33 In this case the buyer (Iran) and the seller (a US company) concluded a contract for a sale of electronic communication equipment. The choice of law was for Iranian and US law. The buyer did not pay the agreed price. To mitigate the damage, the seller sold some of the equipment on to a third party, after having informed the buyer of this intention. On mitigation of damages American law and Iranian law differed. The tribunal ruled that the seller did have the right to do so under the UCC and that this right was ‘consistent with recognized international law of commercial contracts’ as observed from
- 34 Below case abstracts are all taken from the UNILEX database unless otherwise specified.
- 35 Watkins-Johnson Co. & Watkins-Johnson Ltd. i>. The Islamic Republic of Iran & Bank
Saderat Iran 28.07.1989 Iran-United States Claims Tribunal, number 370 (429-370-1),
The CISG is applicable in the USA and came in force there in 1988. However, due to the article 1.1(b) reservation the US made under article 95 the CISG would not have been applicable in this case. Iran has not (yet) joined the CISG. Furthermore, events occurred before the CISG entered into force.
CISG article 88 and thereby acknowledges the CISG as the recognised international law of commercial contracts.
In an ICC Arbitration, the seller claimed that, despite the CISG not being applicable by law, it should be applied as lex mercatoria. This claim was rejected mainly on grounds that the issues raised in the case would not be covered by the CISG, but the court did state that ‘[Seller] points out that the application of the lex mercatoria would be tantamount to the application of the Vienna Convention,]...). This is certainly true.’ib The court notes that in this particular case the application of the lex mercatoria might not stand up to the scrutiny of the court, because an earlier interim award decided that all arbitral proceedings in this case should be governed by one and the same law. At the same time the tribunal confirms the claim of the seller that applying the lex mercatoria would result in the application of the CISG. Therefore, the tribunal sees the CISG as an important (even defining) expression or reflection of the lex mercatoria.
The CISG is applied as a reflection of the lex mercatoria. In an arbitral award the contract did not contain a choice of law clause, but the parties referred to the INCOTERMS and the UCP.[1] Based on this, the tribunal concluded that the wish of the parties was for the contract to be governed by trade usages and accepted principles of international trade. In its decision the tribunal referred to the CISG and the UPICC as evidence for admitted practices in international trade for any issues not regulated by the INCOTERMS and the UCP. In a 1998 arbitral award where Italian law was applied the tribunal referred to the CISG and the UPICC as ‘normative texts that can be considered helpful in the interpretation of foreign contracts.98
In a 1989 ICC Arbitration, regarding the conformity of goods, the applicable law was the law of the country of the seller. In accordance with the ICC Arbitration Rules the tribunal took into account the relevant trade usages and stated that ‘there is no better source to determine the prevailing trade usages than the terms of the United Nations Convention on the International Sales of Goods’ and that ‘the Vienna Convention, which has been given effect to in 17 countries [at the time], may be fairly taken to reflect the generally recognized usages regarding the matter of the non-conformity of goods in international sales.’ The CISG was not ratified in the countries of the seller and the buyer and was applied as a reflection of current trade usages on the non-conformity of goods.
The CISG is applied as an expression of the lex mercatoria or one of its elements. In a 1999 arbitral award the tribunal applied general standards and rules of international contracting. The tribunal held that the CISG
The application of codified non-state rules 199 embodies the universal principles of contract law and that it should therefore be applied.[2]
In a 1994 ICC Arbitration concerning lack of conformity of goods, where the contract did not contain a choice of law clause, the tribunal decided that the dispute would be governed by general principles of international commercial practice. The tribunal stated that for the present case those principles are "most aptly contained in the United Nations Convention for the International Sale of Goods.' The court argued that: 'the dominant theme of the Vienna Convention is the role of the contract construed in the light of commercial practice and usage, which was produced by agreement among States resulting from collaboration sustained for over a decade. ’The narrative is thus that as the CISG is the result of a reflective long-term cooperation between states it is as an adequate expression of the general principles of international commercial practice. This is problematic, as international commercial practices should emerge from cooperation between merchants and not necessarily cooperation between states.
Recently in a Brazilian case the CISG was applied alongside the UPICC as an expression of the new lex mercatoria. Of the CISG the court stated that its regular observance by business people worldwide, may be considered the expression of the most widespread “practice” in the international trade ofgoods and as such become relevant according to Article 113 of the Brazilian Civil Code which provides that the interpretation of legal transactions must be in accordance with usages and customs.
The CISG is therefore applied as a reflection and an expression of the lex mercatoria. In one case the CISG is the recognised transnational commercial law and in another case the application of the lex mercatoria is described as tantamount with the application of the CISG. These two cases date from 1989 and 1990 and precede the publication of the UPICC and the PECL. It is questionable whether the tribunals would use the same wording with regards to the CISG now that the landscape of codified non-state rules is more diffuse than it was in 1990.
It is interesting to note that most of the newer cases refer to the UNIDROIT Principles more readily than they do to the CISG. Consequently, the UPICC have now taken the leading role in defining the lex mercatoria. Most of the cases using the CISG as lex mercatoria date from the period before the UNIDROIT Principles were published. In newer cases both the CISG and the UPICC are applied or the court refers solely to the UPICC.
- [1] ICC Award No. 6149 (1990). 2 ICC Award No. 8052 (1996). 3 ICC Award No. 8909 (1998). 4 ICC Award No. 5713 (1989). 5 ICC Award No. 9474 (1999).
- [2] Of the UNIDROIT Principles and the PECL the tribunal said it would apply these for any issues not covered by the CISG as these express general standards and rules of commercial law. 2 ICC Award No.7331 (1994). 3 Court of Appeal of Rio Grande do Sul, Noridane Foods S.A. v. Anexo Comcrcial Importance Distribui^ao Ltda. 14.02.2017.
