On the Necessity to Reform the CISG in the light of the Governments’ Approaches and Modern Global Requirements

Document Type : Original Independent Original Article

Authors

• Farhad Kabali Samartoie ¹
• Moosa Akefi Ghaziani ²

¹ Master of International Law, Department of Law, Payame Noor University (PNU), Tehran, Iran.

² Assistant Prof. at International Law, Department of Law, Payame Noor University (PNU), Tehran.

Abstract

Highlights

Introduction

International legal cooperation is essential for transferring experiences and legal interactions among States. It is through cooperation that legal systems can better overcome their challenges and increase their efficacy. Such cooperation may lead to the harmonisation of laws among states on several issues. It is a process through which two or more governments modify their laws to create compatibility and consistency of common standards in a certain field and across their jurisdictions. The World Trade Organisation (WTO), the Energy Charter Treaty (ECT), the UN Convention on the Law of the Sea (UNCLOS), and the UN Convention on the Contracts for the International Sale of Goods (CISG) are a few examples of this process.

The CISG is a prominent instrument aimed at the harmonisation of contract and commercial law principles. The CISG is particularly significant since it offers a modern and relatively fair uniform law in international sales and thereby considerably reduces the costs that may be associated with international commercial transactions. The Convention is the result of a series of broad comparative studies of different legal systems of common law and civil law carried out during 50 years of international endeavours within the framework of different international organisations, and the United Nations Commission on International Trade Law (UNCITRAL) in particular.

Today the CISG may apply to the contracts of sale of goods between the Contracting States, where the parties are from different States parties to the Convention, or where the contracting parties have their respective places of business in different States. Besides it is applicable by virtue of the choice of contracting parties (Libertas contractuum) or when the rules of private international law lead to the application of the law of a Contracting State.

However, 40 years after the adoption of this instrument, half of the Governments and some of the major economies including the UK, India, and South Africa have not ratified it. This indicates the failure of CISG compared to other international instruments such as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) (1965), and the Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement) (1994) that have been ratified by more than 150 States each. On the other hand, there are criticisms received from Governments and lawyers about the efficacy of the CISG and the certainty of its provisions. But what is the reason behind the non-acceptance of the CISG among Governments and the criticisms raised against it?

The fact is that despite the justifications provided by some Governments for not having ratified the CISG, the international community and the international trade mechanisms have experienced major changes in the last few decades and these changes have made the shortcomings of the CISG and the need to amend its provisions more visible.

Methodology

This research employs a qualitative data analytics technique and case study method. For this purpose, the recent approach of States and other stakeholders to the Convention is descriptively analysed. In this context, we have scanned and used more than 40 primary and secondary sources, including books, journal articles, research papers, reports, new publications, etc.

Results and Discussion

The main question this article tries to answer is: how have the Governments approached the CISG and what are the necessary reforms in the light of trade and sustainable development? This article attempts to answer this question and prove the hypothesis that the CISG needs to be reformed in order to meet modern global requirements and gain more acceptability. To this aim the present article examines its assumption after providing an introduction, research background, theoretical foundations, and a brief history of the concept. Firstly, it sheds some light on the peculiarities of the provisions of the CISG and analyses the overall approach of States to this instrument. Secondly, the emerging issues and the evolution of international trade and sustainable development requirements have been assessed as aspects of the global changes that reveal the weaknesses of the convention and call for the reform of this instrument.

Conclusion

Harmonisation of laws with the aim of increasing legal certainty and predictability has been on the agenda for decades. Particularly in the field of international trade, replacing multiple scattered national legislation and international regulations with uniform laws is of paramount importance since it can facilitate trade by mitigating the costs associated with acquiring information about different laws and adapting to them. The CISG is one of these efforts. The overall success of international instruments purporting to create legal harmonisation is to be assessed based on the level of acceptability and certainty that they have.

As we have seen this research proves the hypothesis that the CISG suffers from shortcomings and criticisms have been received from Governments and lawyers about the certainty of its provisions and structure that call for an alternative to this instrument or a modified version of it. From the proofs of the hypothesis we should remark that, so far, the CISG has neither gained a significant political acceptance nor enjoyed its expected legal admissibility.

Still, 40 years after the adoption of this instrument, half of the Governments, and some of the major economies including the UK, India, and South Africa have not ratified it. On the other hand, despite the ratification of the convention, some governments such as Switzerland remain critical of its provisions and the efficacy of this mechanism in toto. Criticisms that have also been approved by the UNCITRAL. Given the staggering status of this instrument, it is clear that even assuming most States ratify the CISG that will not necessarily lead to greater legal admissibility. The prevailing approach among the lawyers and businessmen of many member countries in excluding their contracts from the rule of the CISG is proof of this claim. Moreover, the CISG is not a self-contained regime and there is always a need to refer to internal laws and/or conflict resolution rules to fill its gaps. In contrast, by using English contract law, for instance, there is no need to deal with different and sometimes inconsistent interpretations or other scattered regulations governing the contracts for the sale of goods. As a result, the internal laws of the UK appear to have much more efficacy in this regard compared to the CISG. The CISG unlike other international law instruments such as the Agreement Establishing the WTO and the UNCLOS does not contend its provisions as a preferable and mandatory mechanism to govern contracts of sale of goods. It grants the contracting parties a considerable amount of contractual freedom (Libertas contractuum) that along with language difficulties often leads practitioners to exclude their contracts from the CISG's sphere of application.

Furthermore, the legal doctrine is critical of the way in which the Convention responds to the emerging requirements of international trade and sustainable development. For instance, environmental challenges have grown in number and severity since the adoption of the CISG in 1980. Frustratingly there is no single interpretation of how the Convention meets the emerging requirements of international trade and sustainable development. This has resulted in the uncertainty and unpredictability of the decisions of tribunals.

Another concern is about the definition of goods in the CISG, and the increasing combination of goods and services in the same economic transactions has raised controversies about the efficacy of the CISG since it provides no specific criterion for measuring the ratio of the value of services to goods in the sale of goods-service systems.

All these shortcomings of the provisions of the CISG prove the hypothesis of this research that the CISG needs to be reformed in order to meet modern global requirements and gain more acceptability.

Keywords

• CISG
• Harmonisation
• Trade
• Sustainable Development
• Services

Main Subjects

• Economic
• International Law
• State