WK 1 TOPIC 1 10.11.14- 16.11.14

Intl Commercial law is a collection of disciplines. Parties may have arrangements internationally etc.

Attorney General’s dept 2012 review paper of Aus contract Law (one option for a possible reform would be to model some of the international models for contracts law in our contracts law) & Negotiations for Transpacific partnership agreement (recently investor state dispute settlements- see Phillip Morris v Aus Gov arbitration proceedings in relation to Aus’ tobacco plain packaging legislation Also the prospect of investor state dispute settlement provisions being included in the transpacific partnership agreement controversy.

ICC= International Chamber of Commerce

What is Intl Commercial Law? Is a collection of legal disciplines- various bodies of law that deal with

international aspects – e.g. International Contract Law, International Dispute Resolution Law, Foreign Investment Law

Public Intl Law v Private Intl Law: public- deals with the law between governments acting in their governmental capacity (e.g. laws that relate to diplomatic immunity, intl climate change initiatives, embassies) private- deals with intl law issues that have a private character (e.g. private commercial transactions trans-border Public usually has a bearing ON private law. Governments can act both publically and privately (e.g. Westinghouse v Iran Govt) in transactions

Sources of Intl Commercial Law Treaties/conventions/protocols- Intl agreements/instruments between

parties that are intended to be binding at Intl commercial law. When a state (country) is bound by such a convention, they have to implement it into their domestic legislation on the terms specified in the convention Convention e.g. UN Convention on Contracts for the International Sale of Goods (CISG): -developed through UNCITRAL (UN Commission of International Trade Law), Vienna 1980 (Also called the Vienna Sales Convention) -101 articles in the Convention -80 signatories/members in the convention http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG.html -Because Aus dualist state, Goods Act 1958 (Vic), Part V s 86 implements the Convention into our domestic state law (gives the convention direct force) http://www.austlii.edu.au/au/legis/vic/consol_act/ga195876/ The Schedule also contains an attachment of the CISG

Convention e.g. UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (The ‘New York Convention’) 1958, NY -Is a dispute resolution instrument http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.html -Aus has implemented this convention through the International Arbitration Act 1974 (Cth). It is contained in Schedule 1, and Part II (ss 3-14) enact the Convention provision by provision into the legislation. http://www.austlii.edu.au/au/legis/cth/consol_act/iaa1974276/ NOTE: This is different to the CISG Convention incorporation into our legislation (even though both are conventions) b/c the CISG is implemented by simply stating under s86 of the Goods Act that it shall apply, whereas the New York Convention is actually included provision by provision in the International Arbitration Act.

Model laws- template legislation that can be looked at by countries when developing their own domestic laws, but model laws are not based on any conventions. Can implement these directly (w/o amendment), partially (with amendment), or use these as evidence/general guidance to make own laws on E.g. the UNCITRAL Model Law on International Commercial Arbitration 1985 (the ‘Model Law’)- an instrument developed by UNCITRAL that deals with how arbitrations are conducted has 36 articles/provisions) http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html Has been implemented in the International Arbitration Act 1974 (Cth), see Schedule 2 where the Model Law is included in the schedule, and s 16 which incorporates the Model Law into our legislation. http://www.austlii.edu.au/au/legis/cth/consol_act/iaa1974276/

Contractually agreed upon rules- e.g. where parties agree to settle a dispute through intl arbitration, the parties can agree to do so by incorporating arbitration rules. These would be contractually binding rules.

Soft law- not binding unless contractually agreed upon. They are regulations that can be used as a guide

Domestic law- Monist v Dualist states Monist= if intl law is automatically applicable in that state when a country signs an Intl treaty (don’t need to accept it with domestic law) Dualist= Australia = treats intl law as different to domestic law, and it does NOT make intl laws binding domestically UNLESS that state specifically implements it within their own domestic legislation. The domestic law is necessary to give Intl law effect in a dualist system (e.g. TIO HC decision). Domestic law is v important sometimes because there may not be an intl instrument that has the necessary solution that a state is looking for.

The Lex Mercatoria:

Is a source of ICL on its own, latin for ‘The law merchant’. The reading article summarises some of the issues with the LM because it is an

instrument that doesn’t come from any country’s own laws.

The LM principles was created between merchants over time because sometimes national laws would not be applicable in the trade. But overtime a country’s national laws started having more force. In 1960s the LM started reappearing more again; being given the idea that it is transnational practices developed through the course of international trade that don’t have any roots from national legal systems.

It is highly controversial, some authorities and scholars debate that it exists and its usefulness and merits. e.g. in Intl arbitration parties can be elect to be bound by LM as oppose to State court proceedings (the ordinary litigation between ordinary state courts)

The conflict of laws ‘private Intl laws’:

this refers to the legal issues that arise with cases that have an Intl element Conflicts:

-Issues of jurisdiction (including States jurisdiction) that applies (forum shopping- parties seek out a jurisdiction for the best home ground advantage, where the procedure and language used are most advantageous) -Issues of what countries laws apply in an Intl case -Issue of enforcement of a decision e.g. an Australian business buying from a Chinese supplier, so how do you enforce an arbitral award (rendered by an arbitral tribunal)?

These issues can effect the outcome of the case, how it is decided or how it is enforced.

1. ISSUE OF JURISDICTION: -does the medium/body used to resolve a dispute have the authority/jurisdiction to hear and resolve the dispute? If yes, should the court nevertheless decline to hear the case on the basis that it is an inappropriate forum for hearing the case (forum non conveniens)? See Voth v Manildra Flour Mills HC case- Is the Australian court an appropriate venue to hear the Intl dispute? The UK test is different, it assesses the appropriateness of other countries to hear the dispute, as well as its own when assessing its ability to hear a case with a foreign element. 2. ISSUE OF APPLICABLE LAWS: -Which countries laws get applied by the court or the arbitrators? -Look at both substantive (the merits- laws that apply to the parties rights and obligations) v procedural laws (how the dispute resolution occurs- the procedural rules) -the substantive law that applies = lex causae or lex contractus -Do the parties have a clause in the contract that states their ‘choice of law’? I.e. that states which law will govern them (if yes, then it will apply)? Or…is it a case where the parties have not chosen in the contract, so we have a conflict of laws that the judges or arbitrators have to figure out which applies? I.e. the judges or arbitars ask what system of law has the closest connection to the parties dispute

(–Bonython v The Commonwealth, Akai v The People’s Insurance Company)? -Picking the right legal system that applies is important, e.g. the statute of limitations may be different in one legal system than in another. I.e. you can substantially affect outcomes even before cases are underway. -Some countries may not punish parties with ‘penalty clauses’, and will instead just place a higher emphasis on fining the breaching party. -True conflicts- where a different outcome would result under each country’s law False conflicts- where the same outcome would result under each country’s law -‘Renvoi’, going from one country’s laws that apply to another country’s NOTE: Arbitrators are not as confined as courts are, they can more or less set the jurisdiction they decide on 3. ISSUE OF ENFORECEMENT -Intl enforcement may be necessary because thereis a dispute resolution procedure that happens in one country but the decision cannot come into fruitition because the party may not have any assets in the country that the jurisdiction applies. -NOTE Intl enforcement does NOT automatically apply, it will only apply if the country that the breacher is in decides to enforce the judgement in that country- it decides whether it recognises a foreign decision or not see Foreign Judgements Act 1991 (Cth), where court decides whether to enforce the decision of the foreign court/arbitrators (they do not rehear the case)? SO…basically private/domestic law resolves the Intl law.

Wk 2 & 3 Topic 2

The International Sale of Goods

and

CISG (United Nations Convention on Contracts for the

International Sale of Goods/ Vienna Sales Convention)

2 instruments/bodies:

1. UNCITRAL – United Nations Commission on International Trade Law = CISG was one of

its programs

2. UNIDROIT – United Nation International Institute for the Unification of Private Law

It has the principles on international commercial contracts

The primary instrument for regulating the international sale of goods around the

world is the CISG. Prof Schwenzer at the University of Basel estimates the CISG to

govern as much as 80% of the world’s international transactions

CISG is also known as the Vienna Sales Convention because its text was concluded in

Vienna 1980 or also called the Common International Sales Law or also called the

UNCITRAL (UN Commission on International Trade Law) Convention

UNCITRAL is the branch of the UN that is responsible for international trade law issues,

and the CISG was one of its programs (because UNCITRAL is responsible for many

conventions)

UNIDROIT was responsible for a number of uniform law initiatives before UNCITRAL,

but is still responsible for many projects that unify and harmonise international law

CIETAC- China International and Economic Trade Arbitration Commission

CIETAC renders and award

A. THE INTERNATIONAL SALE OF GOODS

What is the international sale of goods?

They are commercial contracts (commercial arrangements that are enforced by

law). The subject matter of these contracts are the sale goods.

Sales of goods = the transfer of ownership in goods from one party to another

against the payment of $

Sales of goods are regulated by different bodies of law

e.g. the Common Law rules + Statutory laws (such Goods Act 1958 Vic) of contract

in Aus apply for the sale of goods

International sale of goods = a sale of goods contract that has an ‘international’

element present.

‘International’ – has an international element that the law recognizes is relevant

(not just the physical aspect of international).

We need specific laws dealing with the international sales of goods because there

are benefits that flow from harmonizing and unifying the law- even though various

countries/bodies already regulate the international sale of goods by their own

legal system. This is exemplified in the preamble of the CISG, which states that:

‘when law is harmonized or unified (same) it will promote international trade and

international economic activity and therefore contribute to an overall global

economic and social wellbeing because transaction costs (costs incurred by parties

in concluding their dealings) faced by merchants are reduced. Transaction costs

are obviously an obstacle to trade otherwise. Furthermore a unified or harmonized

law makes international transactions LESS risky, because otherwise you may not

know what law applies/and or know the laws of the countries you are attempting

to transact with: so the less risk, the more trade will occur (professor Fleckner’s

song). Uniform or harmonized laws hence mitigate the risks and costs posed by

fragmented laws in different countries, hence promoting trade. However, Art 6

allows parties to exclude the CISG’s operation...so what’s the reason- the reason is

that the CISG is meant to serve the interests of commercial contracts and it is

generally accepted that parties to a contract are the best judge of their interest, so

because of this the CISG needs to be flexible and if parties have considered the

ordinary laws of the State then the parties should be able to make such a choice to

exclude the CISG. Also remember that Art 2A provides that the CISG doesn’t apply

to personal contracts but instead to Business contracts…which means that the

parties are more likely to be operating on a more equal bargaining power and

hence the party autonomy principle is justified (this is opposed to a business->

consumer contract where most countries recognize that there should be additional

non-excluding consumer protection laws).

Goods trading is a building block of international economic activity.

B. INTRO TO THE CISG

Because the gains from harmonization/unification of international sale of goods

are so great, their efforts have been going on for nearly a century.

The efforts were championed by Prof. Dr. Ernst Rabel, through UNIDROIT in the

1920s. UNIDRIOT’s task was interrupted by war, but then two landmark

international conventions occurred in 1964 (The Hague Conventions):

1. Formation of international sales contracts (=the uniform law on formations)

2. Substance of the international sales contracts/ obligations and remedies (=the

uniform law on sales)

These two conventions were not very successful, were laden with problems and

had a fairly limited uptake by countries around the world (due to their perception

that they reflected only a Western Law view on the regulation of contracts).

UNCITRAL tried to remedy this perception.

UNCITRAL started by developing a UN Limitation Periods (for international sales of

goods) Treaty. This was a successful project and gave UNCITRAL momentum to

start its 2nd project on the CISG.

• In 1980, the text of the CISG Convention was settled. The CISG came into force in

accordance with its own rules on Jan 1st 1988 through the joint efforts of China

and USA being the 9th and 10th signatory. However, the particular date that the

CISG became effective in each country that ratified it has to be looked at on a case

by case basis (because it is not retrospective):

http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.h

tml

SO…e.g. in Brazil the CISG entered into force on April 1st 2014

Aus April 1st 1989

USA 1st Jan 1988

CISG will turn 35 years next year, and there will be a conference held in Basel next

year. There are now 83 member states (countries) to the Convention- 5 added

since 2013

CISG governs CONTRACTS for the INTERNATIONAL SALE of GOODS but it is not a

comprehensive code, it does not cover every single legal matter than may arise in

relation to the international sales of goods contract. Hence the CISG ‘involves an

eclectic model of regulation’ (Philippe Delai article Journal Law and Commerce)-

because there are supplementary bodies/laws that need to sometimes be

considered when regulating the international sales of goods contract where an

issue falls outside the CISG scope.

The CISG tried to correct the ineffiencies and problems of the 1965 Hague

Convention by using a mix of concepts and ideas that are familiar to States and are

comprehensible easily to business community. Remember below Art 7(1) the

principle of autonomous interpretation means that the CISG is a separate body of

law that should be interpreted on its own because it needs to be uniformly applied

to the 83 member States that utilize it.

CIETAC Case No. 0291-1 / 2004 at Unilex, Case (2004) = case that recognizes the eclectic

model of regulation

This was an arbitral award, but there was a controversy in this case as to whether the CISG

was an exhaustive code that governed all legal issues or whether it needed to be

supplemented by Chinese Law or Swiss Law (the two countries that were at issue). The

arbitrators discusses how the CISG is part of a larger body of law, so that the CISG answers

the questions it deals with and the supplementary laws will govern the other questions

that the CISG doesn’t provide the answer to.

3 paragraphs dealing with the Chinese Law supplementing the CISG (see Art 4 below)

when the CISG doesn’t deal with a particular matter. Because the CISG governs only the

formation of the contract of sale and the rights and obligations of the seller and buyer

arising from the contract.

C. The UNIDROIT Principles (now in 3rd ed)

Remember the CISG ‘involves an eclectic model of regulation’ (Philippe Delai)-

because there are supplementary bodies/laws that need to sometimes be

considered when regulating the international sales of goods contract where an

issue falls outside the CISG scope. Hence the UNIDROIT principles are an important

source of rules of law for regulating the international sales of goods

The UNIDRIOT Principles are similar to the CISG, but they are different in what

they achieve.

UNIDRIOT Principles 3rd Ed 2010 are not a convention- it is ‘soft law’

http://www.unidroit.org/english/principles/contracts/principles2010/blackletter2

010-english.pdf

It is not binding at Intl Law and don’t exist as a part of any state’s domestic law.

Hence, they can be revised/amended/updated/changed without the requirement

of international negotiations (unlike the CISG).

UNIDRIOT principles deal with the International Commercial Contracts overall (so

is broader), whereas the CISG governs the international sales of goods only (which

is just one type of International Commercial contract)

e.g. international agency contracts would be governed by UNIDRIOT only.

Furthermore, UNIDRIOT covers a wider range of legal issues than the CISG where

the international sales of goods are in dispute. So e.g. the CISG does not itself deal

with limitation periods for the international sales of goods, but the UNIDRIOT

Principles do contain these.

So the reason we have the UNIDRIOT principles even though there is overlap with

the CISG, and its not binding law or part of any state’s law or a convention is

because of the above AND also because they are useful in influencing the

development of the law- they are designed to collect together a common

accepted principles of international contracting- so they reflect the international

standard. Countries may hence look to them when developing/reforming

domestic laws. UNIDRIOT principles can also help interpret other bodies of law

(such as the CISG)

Parties CAN however choose the UNIDRIOT Principles to govern their international

contracts or arbitrators may choose to adopt the UNIDRIOT Principles where

parties are at arbitration and have made no choice of laws in the international

contract.

D. HOW THE CISG APPLIES DIFFERENTLY AROUND THE WORLD

Now only the UK and India are the only most prominent trading states that have

not adopted the CISG (Brazil and Japan have joined already).

Prof Schwenzer at the University of Basel estimates the CISG to govern as much as

80% of the world’s international transactions

The CISG is an international convention so it binds countries (not individuals within

countries) at public international law. The CISG can only bind individuals within

countries if the country incorporates the CISG into its own domestic system.

e.g. Aus (a dualist state) has incorporated the CISG (an international treaty) into its

own domestic system through the Goods Act 1958 Vic ss 84-88

s 86: The CISG has the full force of law in Vic (so applies to international only)

s 87: The CISG prevails over any other law in force in Vic to the extent of any

inconsistency

e.g. Sale of Goods Act 1979 (UK) DOES NOT incorporate the CISG (UK is not a

signatory State). So the CISG DOES NOT apply in the UK for the international sale

of goods contracts. It is the ordinary CL of contracts and the statute UK that will

govern the international sale of goods contract- hence their domestic law is the

source of an international commercial law dispute.

Why has the UK not adopted the convention?

Bc there hasn’t been any demonstrated desire by the business community there to

lobby the govt to adopt the convention. Also, the UK views its law as highly

regarded in international trade (backed by statistics), and also “if it ain’t broke,

don’t fix it”. It also means that business will continue to be generated by the

London Law business practices (they seem to have a monopoly on giving advice) if

contracts continue to be agreed upon by parties to be governed by the UK law and

not the CISG (as statistics show)

See Sally Moss, ‘Why the United Kingdom Has Not Ratified the CISG’ (2005 – 2006)

25 Journal of Law and Commerce 483

<http://www.cisg.law.pace.edu/cisg/biblio/moss.html>

E. THE RULES FOR APPLYING THE CISG

The first thing we have to establish in an international commercial dispute for contracts

for the international sale of goods is whether the CISG actually applies.

Requirement 1:

Art 1 (Ch 1 Part 1) ‘Sphere of application’

a. ‘Contract’- the term can be understood as a legally binding contract as

understood under the CISG rules for contract formation