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Reproduced with permission of CISG-Brasil website

CISG-Brazil interview with UNCITRAL Legal Officer Luca Castellani

April 2010

  1. Benefits a developing country can derive from adhesion to the CISG
  2. Impact of broad acceptance of CISG in China
  3. Plans to reform or update the CISG
  4. Steps being taken to preserve the international character of the CISG
  5. Experience with the CISG in common law and civil law systems
  6. Effective usage of the CISG as the applicable law in sales contracts

Luca Castellani is a legal officer in the Secretariat of the United Nations Commission on International Trade Law (UNCITRAL), where he discharges the functions of secretary of Working Group IV (Electronic Commerce) and is tasked, inter alia, with the promotion of the adoption and uniform interpretation of UNCITRAL texts relating to sale of goods and electronic commerce. The views expressed herein are his personal and do not necessarily reflect the views of the United Nations.

1. What benefits can a developing country such as Brazil derive from the adhesion to the CISG? From your experience, could you affirm that the adhesion can effectively reduce transaction costs and provide more certainty?

Several benefits may arise from the adoption of the CISG. This is particularly true for developing countries. For instance, the CISG balances the interests of exporters and importers, while national laws may not achieve the same balance. Moreover, the rules of the CISG may fit different trades, from commodity to high-tech machinery. Since Brazil is changing its trade patterns towards increasing the export of high-value manufactured goods, the flexibility of the CISG may support such trend. Moreover, a practical consideration relates to the choice of applicable law during contract drafting, when each contractual party typically wishes to apply its national law. This may often lead to choosing the law of a third nation. In that case, if a dispute arises, additional research at significant cost is necessary to ascertain the actual content of the law chosen. The CISG is a neutral ground easily acceptable to all parties. Moreover, the significant amount of commentaries and case law available on the CISG, often for free, renders the legal analysis of its application simple and affordable for all.

With respect to the reduction of transaction costs, I should like to focus on the case of lack of choice of applicable law. This happens more often where limited legal advice is available, which is the case, for instance, of small and medium-sized enterprise. In this case, lack of clarity on the applicable law (which could change depending on the lex fori) does not assist in having clear positions at the pre-litigation stage. Thus, often the weaker party has to accept the requests of the stronger one or to drop its case as significant resources are necessary for litigation. These resources include not only litigation costs, but also financial losses arising from uncertainty over disputed sums and goods, etc. If the CISG is applicable to the contract, the legal analysis of the case is usually faster and easier than on the basis of a national law to be ascertained under private international law rules. This may also increase the chances of a settlement of the case, which is always a welcome option for business.

2. China is becoming one of Brazil's most important trade partners. In view of that: (a) - How often is the CISG being applied in international trade contracts by Chinese parties? (b) - Since China has a sui generis law system, do you believe that choosing the CISG as the applicable law for international sales contracts with Chinese counterparties will provide more certainty to Brazilian companies?

China has been a supporter of the CISG from the early days of the Convention and has further strengthened its favour over the years. Indeed, the CISG is seen as an early successful element of the trade law reform associated with the "Reform and opening policy", and it has also significantly inspired the text of the new Chinese domestic contract law. Decisions from China relating to the application of the CISG -- in particular, arbitral awards -- are made available on a regular basis, and academics show constant interest in studying and teaching the Convention. Chinese constant reliance on the CISG might have been an important factor in Japan's decision to join the Convention; it has also recently been cited as a strong reason for US lawyers to apply the CISG -- and therefore, get to know it -- rather than opting out of it.

There is no doubt that Brazilian companies would benefit from the application of the CISG: let's not forget that, while a domestic law may well reproduce the provision of the CISG, the CISG comes with a duty of uniform interpretation in light of its trans-national nature that may not be present in national legislation.

Moreover, in my opinion there could be another profile of interest: both Brazilian and Chinese companies are expanding very fast their trade and investment operations in developing countries, especially in Southern Africa, and would greatly benefit from the adoption of modern trade law in those countries. The adoption of the CISG could be a first, very important step in that direction. It would be truly desirable to see Brazil and China undertaking efforts to support this goal, in the interest of all parties involved.

3. Are there any plans to reform or to update the CISG, having in mind the latest technological developments, specially the increase of e-commerce transactions?

The operation of the CISG in the electronic environment has been examined by the UNCITRAL Working Group on Electronic Commerce and it was felt that, in general terms, the provisions of the CISG were suitable not only for traditional contracting but also for contracting conducted with electronic means (see UN Docs. A/CN.9/484, paragraphs 94 ff., and A/CN.9/WG.IV/WP.91, both available on the UNCITRAL website at <http://www.uncitral.org/uncitral/en/commission/working_groups/4Electronic_Commerce.html>). However, the CISG is not an instrument specifically designed for electronic commerce, nor does it aim at widening the use of electronic transactions: these important goals require a separate, dedicated text. Moreover, the legal challenges posed by the use of electronic communications in international trade are not unique to the CISG, but common to all instruments drafted before the widespread adoption of electronic means. In light of these considerations, and consistent with the UNCITRAL approach aiming at establishing general functional equivalence between paper and electronic media, UNCITRAL prepared in 2005 the United Nations Convention on the Use of Electronic Communications in International Contracts. The Convention complements the CISG, as well as other international treaties, such as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (the "New York Convention"), with respect to the use of electronic communications. It also fulfils a number of other functions, including providing core modern e-commerce legislation to those countries which have not yet adopted one. Therefore, Brazil should seriously consider adopting the Electronic Communications Convention both for international and domestic commercial transactions. More information on the Electronic Communication Convention is available on the UNCITRAL website at <http://www.uncitral.org/uncitral/en/uncitral_texts/electronic_commerce/2005Convention.html>

4. Can UNCITRAL take any actions in regard of divergent application and interpretation of the CISG by national courts in order to preserve its international character, pursuant to its Article 7?

UNCITRAL has established a system for collecting and disseminating information on court decisions and arbitral awards interpreting UNCITRAL Conventions and Model Laws. The purpose of the system is to facilitate uniform interpretation and application of UNCITRAL texts. While other databases containing case law relating to the CISG exist, the advantage of CLOUT is that it is available in the six official language of the United Nations, thus reaching a much larger audience. A Digest of CISG case law was also prepared, illustrating interpretative trends of each article of the Convention. It is available on the UNCITRAL website at <http://www.uncitral.org/pdf/english/clout/08-51939_Ebook.pdf> (English language; other UN official languages are also available).

5. Since the CISG has elements stemming from both Civil and Common Law systems, do you consider that courts, companies and the legal community in Brazil will find any difficulties to adapt themselves to its rules? What can you tell about the experience of other countries in that regard?

With respect to the substantive content of the CISG, we received limited reports of difficulties in application. For instance, art. 71 CISG, on anticipatory breach, at the time of drafting had attracted concerns about the innovation it brought in the general theory of contract law; however, in practice it had limited application and did not create the expected problems. This might be explained in light of a certain uniformity of international trade law in the various legal systems, sometimes expressed by reference to the notion of lex mercatoria. The real challenge might consist in introducing a culture of uniform interpretation in light of the nature and spirit of the Convention, and, of course, in line with what its article 7 mandates. The fact that Brazilian academia and bar seem aware and supportive of the philosophy underpinning the CISG may provide a major contribution to achieving its uniform interpretation.

6. Given that the use of CISG is voluntary (since parties can derogate from its provisions), how often is the CISG effectively used around the world as the applicable law in sales contracts?

There were several attempts to measure the actual application of the CISG to sales contracts. The most recent is the Global Sales Law survey, in the framework of the Global Sales Law Project (see <http://www.globalsaleslaw.org/> ). We look forward to seeing the results of that survey for an updated picture of the use of the CISG.

However, it should be stressed that the CISG does not have a hegemonic approach towards regulating sales contracts. It can be derogated at will and often this happens for good reasons; moreover, it is complemented and integrated by trade practice and usages under its own terms which might vary significantly its provisions. Those contracting parties which have already found the most appropriate law for their contract outside the CISG should and will continue doing so. The CISG is meant to assist in cases where the choice of applicable law is difficult or did not occur at all, as mentioned above. In this respect, the CISG may help much more parties with insufficient legal advice than parties which enjoy the support of large firms. This is why disseminating information on the CISG at all levels is of critical importance.


©Pace Law School Institute of International Commercial Law - Last updated April 12, 2010
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