Reproduced with permission of Janssen / Meyer, eds., "CISG Methodology", Sellier: Munich (2008)
Hossam A. El-Saghir [*]
The achievement of a uniform set of rules that govern contracts for the international sale of goods was realized after half a century of work that culminated in the United Nations Convention for the International Sale of Goods, 1980 (the CISG). The CISG was signed in a diplomatic conference held in Vienna on April 11, 1980. The Convention entered into force on January 1, 1988. So far, the number of parties to the Convention has reached 71 countries having different social, economic and legal systems. It became the uniform international sales law for countries that account more than two-thirds of world trade. The ultimate goal of the CISG is to achieve the uniformity in its application. Towards this end, Article 7 of the Convention lays its autonomous rules of interpretation.
So far, only four Arab countries have acceded to the Convention. Egypt and The Syrian Arab Republic were in the list of first ten countries to adhere to the Convention. Iraq and Mauritania followed. This Article explains how national courts, arbitral tribunals and commentators in the Arab World interpret the CISG. In addition, it explores the interaction between the CISG and national laws in Arab Countries focusing on Egypt. Section B deals with the obstacles that impede the uniform application of the Convention in the Arab World. The rest of the Article proceeds as a case study exploring the case of Egypt. The importance of the Egyptian case study stems from the fact that Arab legal systems are substantially influenced by their Egyptian counterpart and that most of the scholarly writings in the Arab region about the CISG come from Egypt. In addition, no reported cases applying the CISG are found in other Arab countries. Section C analyzes disputes brought before the Egyptian Court of Cassation and arbitral tribunals. This Section also explores the position that Egyptian commentators have taken on some issues concerning the construction of the Convention. Section D addresses the influence that the CISG had on the Egyptian Legislature in the enactment of the New Commercial Code. Section E concludes. I begin by briefly outlining the autonomous rules of interpretation laid by Article 7 of the Convention in Section A. This first section also explores how the enactment of the New Egyptian Commercial Code affects the application of the CISG gap filling rule.
A. ACHIEVING UNIFORMITY: THE AUTONOMOUS INTERPRETATION OF THE CISG
The CISG has its autonomous rules of interpretation. These rules aim at alleviating the risks resulting from the construction of the CISG by national courts. Article 7 of the Convention lays two interpretation rules and dedicates a paragraph to each of them. The first rule deals with interpretation of the CISG itself and the second is a gap filling rule.
1. Principles of Interpretation
According to Article 7(1), in interpreting the Convention, regard is to be had to its international character, the aim of promoting uniformity in its application, and the observance of good faith in international trade. The international character of the Convention requires the interpreter to consider the origin of the CISG rules. It means not to proceed in interpreting the Convention from interpretation rules found in domestic laws and developed by the judiciary.The decision-maker should interpret the convention independent of his national legal system, ( i.e., as a self contained body of rules distinct from those of any specific legal system even after its incorporation into different domestic legal systems). The interpreter should relive himself from resorting to national concepts and approaches and should pay due regards to the fact that the Convention is a compromise aiming at the harmonization of rules governing international sales contracts. Consequently, if the interpreter confronts vagueness that can not be resolved, he may consult the Convention's legislative history.
The uniformity of the CISG application is the ultimate goal of the Convention. This requires the Convention's interpreters to take into account that the Convention aims at unifying the rules governing international sales in countries that have different political, legal and economic systems. Therefore, the interpreter may take into consideration rulings made by foreign courts or arbitral tribunals. Although such decisions are not binding, they can play a significant role in promoting the uniformity in the application of the Convention. Their compilation allows judges all over the world to review decisions made in other legal systems and thus become aware of the way the Convention is interpreted in foreign states.
In this regards, there are a lot of international efforts to compile decisions and awards applying the CISG such as the CLOUT, the Autonomous CISG Network under the leadership of the Institute of International Commercial Law of Pace University School of Law, and UNILEX. In addition the international bibliography and case law digest of Michael Will also represents a remarkable contribution to such efforts. As far as the Arab World is concerned, the Middle East Center for International Commercial Law  was established in 1998 in cooperation with the Institute of International Commercial Law of Pace University. The Center provides electronic database about the CISG in the Arabic language. It aims at disseminating knowledge about the CISG and its application in the Arab World.
The autonomous interpretation of the Convention also requires the interpreter not to attach to the terms of the Convention the meaning that the term has in a specific legal system. In other words, the interpreter should not treat the conventions terms to have a meaning corresponding to those used in a given national law. An exception to this rule is cases where it can be shown that the term is drafted and selected with the intention to embrace its meaning in a given national legal system.
The role that good faith plays in the Convention is a debated issue. The inclusion of good faith in the convention came as a result of disagreement among negotiating states. As a compromise, good faith was included as a matter of interpretation not as a provision imposing a duty on parties to act in good faith.
It is worth mentioning that the rules of interpretation of public international law laid by the Vienna Convention on the Law of Treaties, 1969 (VCLT) are not suitable to interpret the CISG. The VCLT is more concerned with treaties that impose obligations on contracting states. Its rules also emphasize the intentions of contracting states that are bound by such treaties. Unlike such treaties, the first three parts of the CISG addresses matters relating to contract law, (i.e., the obligations of buyers and sellers). However, the applicability of the VCLT interpretation rules to the CISG is not completely excluded. The VCLT applies to the interpretation of the fourth part of the CISG entitled "Final Provisions" as that part is concerned with the obligations of contracting states. In addition, some principles of interpretation laid by the VCLT such as those concerning the interpretation of conventions drafted in several languages can also be applied to the CISG.
2. Gap-filling Rule
The second rule of interpretation is the gap-filling provision incorporated in Article 7.2 of the Convention. It deals with questions concerning matters not expressly settled by the Convention, although falling within its scope. These questions are to be settled in conformity with the general principles on which the Convention is based. This means that where the CISG does not provide a solution to the issue at stake, resort has to be made to the general principles on which the Convention is based. In the absence of such general principles, reference can be made to the national law applicable by virtue of the conflict of laws rules. The national law thus comes at the tail of the list of resources to be sought in finding the rule applicable to a given question. This gap filling provision aims at furthering the ability of the Convention to resolve issues that fall within its scope to avoid the application of the national laws to the possible extent.
The enactment of the New Egyptian Commercial Code somehow altered the way in which Article 7(2) operates in practice. The Code has regulated for the first time the commercial sales contracts. As far as international sales contracts are concerned, Article 88.2 subjects them to international conventions in force in Egypt as well as to the international commercial usage. It prioritizes international trade usage over the national law. It also subjects such contracts to international commercial terms compiled and adopted by international commercial organizations, e.g. Incoterms, if the parties refer to such terms.
This Article implies that the Egyptian Legislature incorporates international trade usage by reference. It recognizes lex mercatoria at the legislative level. In cases where the Egyptian law governs an issue by virtue of Article 7(2) of the CISG, lex mercatoria prevails over the national law. The substantive rules of the Code only apply where the lex mercatoria fails to resolve the issue at hand. This also creates an important guideline concerning the convention's interpretation. The wording of Art. 88 implies that lex mercatoria may be treated on equal footing with the international conventions governing the international sales of goods. This suggests that the CISG should be interpreted in a manner consistent with the lex mercatoria
B. OBSTACLES TO THE UNIFORM APPLICATION OF THE CISG IN THE ARAB WORLD
1. The CISG is not Known in the Arab World
The legal community in the Arab World lacks awareness of the Convention. Paradoxically, Egypt and Syria were among the first ten countries that adhered to the Convention. However, the Convention still attracts little attention in these two countries. The same is true of the rest of the Arab World. Law professors, jurists and judges in the Arab World know little, if any, about The Convention. Only four Arab Countries, Egypt, Iraq, Mauritania and Syria have adhered to the Convention. Arab Universities pay little attention to the CISG teaching. None of the Egyptian universities offers CISG related courses at the undergraduate level. Moreover, the number of universities that offer courses covering the CISG at the graduate level is limited. None of the Universities in any of the four countries mentioned earlier offers CISG related courses. It is not surprising that Arab universities hardly participate in the Annual Willem C. Vis International Commercial Arbitration Moot Vienna Moot Court. The participation of Arab teams remained non-existent until the Academic Year 2006-2007. In 2007-2008, a team from the American University in Cairo and another from the University of Bahrain participated in the moot. Compared to other law schools around the world, the participation of Arab teams is extremely limited, both in terms of the number of countries and participating law schools.
Moreover, the scholarly writings and court decisions on the CISG are extremely scarce. There are almost no published CISG related judicial opinions. The scarcity of published decisions can be attributed to the general poverty of publishing. For example, Egypt only publishes opinions rendered by the Court of Cassation and the Constitutional Court. Decisions made by lower courts are not published. Therefore, even assuming that lower courts apply the CISG, their opinions remain hardly accessible.
In 2006, almost two decades after entry of the CISG into force, the Egyptian Court of Cassation has issued only one decision incorporating the CISG. This decision has not been published as of the moment of writing this Article. One can only find reference to this decision in the yearly publication that the Court of Cassation circulates to judges and some other relevant institutions. Fortunately, the Judge presiding the Circuit that viewed the case had attended a regional conference organized by Cairo Regional Center for International Commercial Arbitration (CRCICA) in cooperation with UBCITRAL, held in Cairo less than seven months before the decision was made. Thus, he was aware of the fact that the CISG should govern the contract.
In the CISG international bibliography and case law digest of Michael Will, one can not find reference to any Court or Arbitral decisions in the Arab World. In 1998, Will referred to one arbitration decision, the decision No. 24/1991 of Cairo Regional Center for International Commercial Arbitration. He mentioned that the award was written in Arabic and French and published in the Review of Lebanese Arbitration. However, a review of the case reveals that it neither applies the CISG to the dispute at stake, nor does it mention the Convention. The author of this Article has drawn Will's attention to this false reference. Denouncing the situation, Will, in the preface to the following edition of his publication, writes, "[O]ur lonely award from Egypt, so happily included two years ago, was identified by a friend from Menoufia University to be a false jewel and could not yet be replaced." That Will refers to the arbitral award as a "jewel" is not by any means surprising.
It is worth mentioning that the delay in publishing the CISG in the Official Gazette in Egypt created a constitutional obstacle to its application by the judiciary. The Convention has not been published in the Official Gazette until January 30, 1997, almost a decade after its entry into force. Article 151 of the Egyptian Constitution requires publishing international conventions in the Official Gazette in order for them to be applicable as part of the national law. It goes without saying that this delay is one of the main reasons why the legal community in Egypt lacks awareness of the Convention.
2. The Several Official Texts of the CISG: Errors in the Arabic Version
The Convention is issued in a single original instrument of which six languages texts are equally authentic. In theory, the texts of the six versions of the Convention have the same meaning. However, this is not the case. For instance, Shafik, an eminent Egyptian scholar who represented Egypt before the UNCITRAL, has noticed a difference between Article 1 of the English and Arabic versions of the Convention on the one hand and the corresponding article of the French version on the other hand. In the English and Arabic versions of the Convention, it is crucial for the "place of business" of the seller and the buyer to be located in different states in order for the Convention to apply. The discrepancy lies in that the French version uses the term "éstablishment" instead of "place of business" and thus adopts a physical approach to determining whether the Convention applies. Shafik argues that the terminology "éstablishment" used in the French version is more accurate than the corresponding term of the English and Arabic versions. He contends that the Convention is not concerned with the place where the parties conduct their business and that it is rather concerned with the physical location of their establishments. He therefore uses the term "éstablishment" throughout his book.
More seriously, the comparison between the Arabic version of the Convention and its English counterpart reveals that the texts diverge. Sometimes there is even a contradiction between the Arabic and the English versions. Articles 19, 20, 25, 31, 34, 36, 40, 52, 73, 76, 91, 92, 96, and 99 were originally drafted with mistakes. This leads judges from different countries to attach different meanings to the convention depending on the version on which they rely, which impedes achieving the uniformity in the application of the Convention. Unfortunately, Egypt has adopted the Arabic version of the Convention and published it in the Official Gazette without any review. Therefore, it has become part of the national law with all the inaccuracies that it contains.
In reaction to such situation, The Middle East Center for International Commercial Law has notified Gerold Herrmann, the UNCITRAL General Secretary at the time of the problems of the Arabic version. The Center has also requested curing all the errors mentioned earlier to enhance the uniform application of the Convention. Afterwards, the UN General Secretary took the steps necessary to cure such errors. In 2001, an amended Arabic version was issued to correct the mentioned errors.
However, the errors are not completely cured. The 2001 Arabic version of the Convention still contains three errors. When bringing the Arabic version of the convention in compliance with the English version, the UN overlooked Articles 25 and 36. It has not corrected the errors in these Articles. Article 25 of the Arabic version and its English counterpart are still in contradiction with each other, and the Arabic and English versions of Article 36 still make different presumptions.
The inconsistency between the Arabic and English versions of Article 25 of the Convention clearly illustrates the difficulties associated with the inaccuracy of the Arabic version. Article 25 in the English version stipulates that "[a] breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in beach did not foresee and the reasonable person of the same kind in the same circumstances would not have foreseen such a result." However, the Arabic version omits the negation in the second phrase of the mentioned Article. According to the Arabic version, a breach is not fundamental if the breaching party foresees such breach, and if a reasonable person in the same circumstances would have foreseen its occurrence. Article 25 of the Arabic version is therefore hugely problematic.
In addition, Article 36(2) of the Arabic version conveys a meaning that differs from that of the English version. The English version of this paragraph deals with lack of conformity which does not exist when passing of risk to the buyer. It provides that the seller is liable for any lack of conformity which occurs after the passing of risk to the buyer and which is due to a breach of any of the seller's obligations. However, the Arabic version of the same article uses the term appears instead of occurs. This discrepancy is likely to have some implications. The term appears used in the Arabic version leads to the meaning that, the seller is liable, due to a breach of his obligations, for inconformity whether it comes into existence before or after the time of passing of risk to the buyer. Therefore, one of the incidents that the Arabic version of paragraph (2) of Article 36 covers is already governed by paragraph (1) of the same Article, (i.e., seller's liability for the lack of conformity which exists at the time of passing of risk).
Paradoxically, the 2001 Arabic version contains an error that did not exist in the original Arabic one. Article 35 in the original Arabic and English versions had the same meaning. However, Article 35(2)(b) of the amended Arabic version contradicts with its English counterpart and with the original Arabic version. Article 35(2)(b) in the current Arabic version omits the negation concerning the buyer's reliance on the seller's skill and judgment. In other words, according to the Arabic version, the goods conform with the contract if they are fit for the particular purpose known to the seller except where the circumstances show that the buyer relies on the seller's skill and judgment. The Article should have stipulated that the goods conform if they are fit for their particular purpose known to the seller except in the cases where the circumstances show that the buyer did not rely on the seller's skill and judgment.
In reaction to the impediments that Arab Countries face, the CRCICA & UNCITRAL Conference mentioned earlier recommended Arab countries that joined the Convention to enumerate the errors that the Arabic version of the Convention contains. It also encouraged their governments to notify the UNCITRAL so that it takes the procedures required for their correction. It also urged Arab Universities to include CISG related courses in their curricula. The Conference finally took the view that it is crucial to improve public access to CISG related decisions and awards in the Arab states by publishing them.
C. THE INFLUENCE OF NATIONAL LAW ON THE INTERPRETATION OF THE CISG IN ARAB COUNTRIES
1. Court Decisions
The way in which the Egyptian legal system influences judges' interpretation of international conventions is obvious. In other words, judges tend to resort to national legal concepts to articulate their understanding of international agreements. For example, the Court of Cassation understands the concept of "default equivalent to willful misconduct" mentioned in Article 25 of Warsaw Convention (1929) to refer to the concept of "gross fault", a well settled national legal concept. There are no CISG related judicial applications that illustrate this point. However, one can plausibly argue that the court is likely resort to the national legal system whenever it is requested to interpret the CISG.
- The Egyptian Court of Cassation's Lonely Decision
In 1991, an Italian seller and Egyptian buyer entered into a contract for the sale of marble. The buyer paid part of the price and refused to pay the rest of it. The seller brought a case before the first instance court seeking the payment of the amounts due. The seller presented two invoices containing the quantity of goods and the price. He also presented the faxes in which he requested the buyer to pay the unpaid portion of the price plus interests. The First Instance Court applied the Egyptian law to the dispute without paying any attention to the CISG. It ruled in favor of the seller and ordered the buyer to pay the price due. The buyer appealed to the Court of Appeals arguing that the seller failed to meet the burden of proving that he took delivery of the goods. The Appellate Court affirmed the decision. Again, the buyer challenged the decision before the Court of Cassation. It found that the Court of Appeals erred in applying the domestic law to the dispute. Therefore, it ruled that the CISG should govern the dispute and remanded the case so that the Appellate court issues another decision to that effect. The Court reasoned that the CISG is applicable to the dispute by virtue of Article 1.1(a). It emphasized the international nature of the Convention and the role that good faith plays in its application. It also emphasized that regard should be paid to the evidentiary rules of the CISG before resorting to the national law. For example, parties are liable for terms incorporated in their written communications even if such communications are not signed by the parties. Moreover, the definition of writing under the Convention is flexible enough to include telex, fax, email and other electronic means of communication.
Surprisingly, none of the disputing parties requested the application of the CISG to the dispute. The Court of Cassation took the initiative to apply the Convention. This illustrates that neither the parties nor lower courts have adequate knowledge of the Convention. To a great extent, this decision rang a bell that alerts lower courts that they should apply the CISG whenever applicable.
2. Arbitral Awards
The UNILEX cites two arbitral awards of the CRCICA that apply the CISG. The first dispute concerns a C&F contract for the sale of grains concluded between an Asian seller and an Egyptian buyer. The contract contained a dispute settlement clause that provides for arbitration and that the provisions and terms of international contracts in practice in foreign commercial transactions for the sale of such commodities apply to such disputes. When inspected at the port of destination, the Egyptian Agricultural Quarantine Department found the grains to be infected with insects. The Department thus ordered the grains to be dusted. Consequently, the buyer initiated arbitration proceedings.
The Panel relied on the fact that the contract was C&F to rule in favor of the seller. The Panel reasoned that under C&F contracts, the risk passes to the buyer at the time the goods cross the ship's rail. It added that the buyer has failed to prove that the defect existed at that moment. Surprisingly, the Panel referred to the CISG, Article 36, but based its decision on the application of the Incoterms. It did so without inquiring the applicability of the CISG to the dispute. Why the Panel mentioned Article 36 and the extent to which it based its decision on its application is ambiguous.
The Second award concerns a dispute between an Egyptian seller and a US buyer who entered into a contract for the sale of a certain amount of apparatus. The contract contained a dispute settlement provision that refers to arbitration disputes concerning contract interpretation and performance that can not be settled amicably. It also provided that arbitration is to be conducted according to the rules of Cairo Regional Center for International Commercial Arbitration (CRCICA) and that all issues are to be interpreted according to the conditions of the contract, the CISG and the Egyptian Law, respectively. The Convention was applicable to the contract by virtue of Article 1.1(a). After delivery of the units, a dispute arose between the parties. The dispute concerned the conformity of some of the supplied units and the seller's non-performance of his duty to extend the bank guarantee for the period to which they agreed. The buyer thus initiated arbitration seeking damages. A single arbitrator-panel was composed.
The Arbitrator deviated from the autonomous interpretation rules of Article 7 of the Convention. He applied the CISG in parallel with the Egyptian law. He should have applied the Egyptian law only to matters that the Convention fails to resolve either expressly or through the application of its general principles, instead.
The Arbitrator cited Article 45 of the Convention outlining the way in which it operates. He continued that the Convention's provisions regulating remedies do not differ from those laid by the contract and the Egyptian law. To support his point, the arbitrator mentioned the Egyptian rules concerning contractual liability. He even cited a decision rendered by the Egyptian Court of Cassation applying the Egyptian law. The Arbitrator thus concluded that the seller breached his contractual obligations by not extending the bank guarantee. He thus ruled that that buyer is entitled to recover damages.
I have also managed to identify two other unpublished awards regarding the CISG. The first award concerns a dispute between an Egyptian seller and a Moroccan buyer. The dispute concerns a contract for the sale of semi-dried dates concluded on July 24, 2002. The contract contained a dispute settlement provision stipulating that disputes are to be settled by arbitration in accordance with the rules of Alexandria Center for International Commercial Arbitration and that arbitration is to be located in Alexandria, Egypt.
The seller claimed that the buyer failed to perform his contractual obligations by not paying the full price and not taking delivery of the goods, although the seller notified him to that effect. The seller consequently resold the dates and initiated arbitration proceedings claiming damages for demurrage, storage expenses and commercial premium. The defendant failed to attend any of the arbitral proceedings. The arbitration was therefore held ex parte. The seller claimed that the CISG applies to the dispute and the Panel agreed. The Panel quoted Article 1 of the CISG and concluded that the CISG applies by virtue of Article 1(1)(b).
However, the way the Panel applied the Convention is defective. The Panel reasoned that "the provisions of the CISG do not apply to the exclusion of the national Egyptian law but in addition to it. However, since both texts coincide, it is worth mentioning that applying either, i.e., the Vienna Convention or the ECC, would not affect the decision on the principal issues in dispute." The Panel consequently applied the Egyptian Civil Code (ECC) and the CISG simultaneously.
In applying the Civil Code in parallel with the CISG, the Panel failed to observe the autonomous rules of interpretation mentioned earlier. The Panel reasoned that both, the CISG and the Civil Code rules would lead to the same outcome. To be noted however that the Panel should have applied the Egyptian law only if both, the CISG provisions and the principles on which the Convention is based fail to resolve the question. Moreover, on the assumption that the national Egyptian law applies to the dispute, the Panel should have applied the Commercial, not the Civil Code. Therefore, there are two reasons why the application of the Civil Code to the dispute is flawed. First, the CISG precedes the national law. Second, had the Egyptian law been applicable to the dispute, the Commercial, not the Civil Code, should have governed.
Finally, the Panel failed to mention the basis on which it entitled the seller to resell the dates. Nothing in the award clarifies whether the seller exercised his right to avoid the contract as per Article 49, or whether the seller was performing his duty to preserve the goods as per Article 85. If the seller sold the dates in performance of his duty to preserve them, he should have fulfilled Article 88 requirement to notify the buyer of his intention to do so. Nothing in the facts suggests that the seller made this notice. The award is simply silent as to which article applies to the situation.
The second award involves a dispute between an Austrian supplier and an Egyptian buyer who entered into a contract for the supply of electronic scales and their spare parts in January 2004. The contract contained a dispute settlement clause that provided for arbitration in Cairo. The contract has neither contained a choice of law clause, nor has contained a clause excluding the applicability of the CISG. The buyer took delivery of the goods and found them not fulfill the technical specifications of the contract. The buyer thus initiated arbitration proceedings.
The Panel failed to apply the CISG to the dispute, although the requirements for its application as laid by Articles 1(1)(a) and 3 are met. First, the places of business of both contracting parties are located in Contracting States. Second, the contract qualifies as a sale contract within the meaning of Article 3 of the Convention as the buyer did not undertake to provide "substantial part of the materials necessary for the manufacture or production." The Panel subjected the dispute to the Egyptian Civil Code instead.
Again, the Panel clearly erred in applying the Civil Code to the dispute. The parties have not opted out of the CISG. In addition, the contract qualifies as a commercial sale contract within the meaning of Article 88 of the Egyptian Commercial Code. Thus, even on the assumption that the parties opted out of the CISG, the panel should have subjected the dispute to the rules mentioned in the Commercial Code. Applying the Civil Code to the dispute is therefore unjustified.
The composition of the panel illustrates the extent to which the legal community in Arab Countries lacks knowledge of the CISG and its rules. The panel before which this case was brought was composed of three arbitrators. Two of them are distinguished law professors and the third is an internationally well known and reputable arbitrator.
3. Scholarly Writings
In interpreting the CISG scholars in the Arab World are affected by their culture and national legal system. We will confine ourselves to clarify how they interpret the CISG in some debated issues.
- Good Faith
The role the CISG attributes to the principle of good faith is limited. Commentators disagree as to whether Article 7(1) CISG concerning the "observance of good faith in international trade" lays a principle of interpretation or a rule of conduct. Some commentators adopt a narrower view of Article 7(1). They understand the good faith to refer to a mere instrument at judges' and arbitrators' disposal when applying the convention to disputes. The broader view however understands good faith to be one of the general principles on which the CISG is based. According to this view, the CISG imposes on contracting parties a general duty to act in good faith.
Influenced by their national legal system, Egyptian scholars tend to adopt a broad interpretation of Article 7(1) concerning the "observance of good faith in international trade". They tend to consider good faith one of the principles on which the Convention is based, not only a matter of interpretation. They argue that good faith under the Conventnion addresses both, judges and contracting parties. Differently put, they argue that good faith is more than a principle of interpretation that judges should observe when interpreting the Convention. They argue that the Convention imposes on parties of sales contracts a duty to act in good faith throughout contract conclusion and performance.
The Egyptian legal system is a combination of codified civil law rules and Islamic law. Good faith in both, the Civil Code and Islamic law is broader than that in the Convention. Under the Egyptian Law, good faith is not considered a principle of interpretation of the law. It is rather an obligation that contracting parties have to fulfill as per Article 148 of the Civil Code. In other words, Article 148 lays a rule of conduct that contracting parties have to perform contracts in good faith.
Despite of the fact that Islamic Law does not use the term "good faith", the concept is even broader in Islamic Law. Good faith in Islamic Law includes a duty to act altruistically. This is natural because Islamic law does not lay a bright line separation between law, morality and religion. It addresses society's interests, not only those of contracting parties. The way in which this influences the formulation of rules is most obvious when the interest of contracting parties conflict with those of the society at large. Islamic law goes beyond the narrower interest of contracting parties. For example, traders should pay due regards to the public interest and thus should not restrict their goals to making profit. They should also take into account the need to make products available to consumers at reasonable prices.
As far as contracts are concerned, Islamic Law imposes a general duty to act in good faith in all transactions. It requires parties to act in good faith during negotiations, contract conclusion and performance. For example, a party who negotiates with another only to access that other party's confidential information violates the Islamic Law duty to act in good faith. In addition, a creditor bears a duty to give his debtor a grace period if he was unable to pay his debt. The broad scope that good faith has in both the Civil law and Islamic law induces Egyptian commentators to attach a broad interpretation to the CISG Article 7(1). It is evident that their national legal system affects their understanding of the Convention.
- Barter Contracts
The CISG does not require that the consideration in sale contracts to be in money. The question whether the CISG governs barter contracts is therefore a matter of interpretation. Honnold took the view that the exchanges of goods (i.e., barter contracts) remain governed by the Convention and that they only fall beyond the reach of the Convention if parties so agree.
The Egyptian commentators, interpreting the CISG against the background of their own legal culture, argue that the CISG does not apply to barter transactions. This argument is based on the distinction that the Egyptian Civil and Commercial Codes make between barter and sales contracts. Under Article 418 of the Civil Code barter contracts are not considered sales. In addition, Article 88 of the Commercial Code requires the consideration to be monetary in order for the transaction to qualify as a sale contract. It provides that in cases where part of the consideration is non-monetary, the contract is considered a sale if the value of the non-monetary portion of the consideration does not exceed the monetary portion. With this background, Egyptian commentators understand the CISG to apply only to sales contracts. In other words, they understand barter transactions not to be governed by the CISG.
D. THE INFLUENCE OF THE CISG ON THE DOMESTIC LAW OF EGYPT
Although the CISG has limited judicial applications in Arab Countries, it has significantly influenced the Egyptian legislature in the enactment of the New Commercial Code, Law No. 17 for the year 1997. The Code entered into force on October 1, 1999, replacing the old Commercial Code that was enacted in 1883. The repealed Commercial Code contained no provisions regulating commercial sales. Therefore, the Civil Law governed all sales contracts disregarding whether or not such sales were commercial.
Chapter II of the New Commercial Code regulates obligations and commercial contracts. The Chapter is divided into seven Sections preceded by a set of general principles. The general provisions provide a set of rules that apply to all kinds of commercial obligations. The seven Sections regulate seven types of commercial contracts, the second of which deals with commercial sales. The New Code regulates commercial sales in a way that significantly differs from the way the Civil Code regulates non-commercial contracts. However, the Commercial Code is not all inclusive. In other words, the Civil Code applies in the absence of a governing rule in the Commercial Code.
Therefore, the enactment of the New Commercial Code created a distinction between two kinds of sales transactions, commercial and non-commercial sales. The former is primarily governed by Commercial Code rules. In other words, Civil Code rules only complement the rules governing commercial sale. Non-commercial sales are, on the other hand, exclusively governed by the Civil Code.
The code incorporated as domestic law many of the CISG concepts and rules. The preparatory memorandum explicitly mentions the CISG as one of the international instruments that the legislature influenced in the drafting of the New Commercial Code. Hereinafter we are citing some examples to manifest such influence.
1. Party Autonomy
Article 2 of the New Commercial Code corresponds with Article 6 of the CISG. Both give superiority to parties' agreement. This is the first time that the Egyptian Legislature expressly incorporates party autonomy in the Commercial Code. Thus, contracting parties have extensive latitude to structure their deals in a way that enables them to protect their interests. It is noted that Article 2 is located among the General Provisions of Chapter I of the Code. Party autonomy is thus a principle that equally applies to all transactions regulated by the Code, including commercial sales.
According to Article 2 of the Commercial Code, the provisions of the Code only apply as default rules. They only apply absent parties' agreement on the issue. Parties can derogate from the provisions of the Commercial Code. They can alter, or exclude some or all of the Code's provisions. Public policy is the only limitation to party autonomy. If the parties' agreement violates public policy provisions, their agreement will be set aside.
2. Open-Price Contracts
The introduction of open price contracts is another manifestation of the impact that the CISG had on the regulation of commercial sales contracts. As mentioned earlier, prior to the adoption of the Commercial Code, the Civil Code governed all sales contracts. The Civil Code requires for the sale contract to be validly concluded that the parties agree on the price either expressly or impliedly. It is well settled that the absence of parties' agreement about the price or about the means for price determination renders the contract invalid. The absence of parties' agreement about the price, either expressly or implicitly, is therefore fatal for contract validity.
However, the promulgation of the New Commercial Code, and the introduction of the commercial/non-commercial sales contracts distinction has resulted in a reform. For the first time, the legislature allowed for the conclusion of a commercial sales contract even if the parties do not agree about the price. In this regard, Article 89 of the Code lays the rules to which resort is to be made when the parties do not agree about the price.
The way in which the New Commercial Code deals with situations where the parties fail to agree about the price is significantly influenced by the CISG, Article 55. Article 89 of the Commercial Code stipulates that if parties do not agree about the price, either expressly or implicitly, such price will be that charged in previous deals between them. If no previous deals exist, reference is to be made to the market price.
3. Avoidance for Non-Delivery with "Nachfrist" Notice
The New Commercial Code has also regulated contract avoidance in a way that resembles the CISG. The default rule in the Civil Code is that contract avoidance requires a court decision. The party alleging breach has to bring a claim before the competent court. The court has discretion whether to avoid the contract taking into account the degree of breach. The Civil Code does not require for avoiding the contract that the breach must be serious.
Article 96 of the New Commercial Code gives buyer in commercial sales contracts the option to avoid the contract without resort to the judiciary. It borrowed the concept of Nachfrist notice from Articles 47(1) and 49(1)(b) of the CISG. Accordingly, where the seller fails to perform his obligation to deliver the goods, the buyer is entitled to specify an additional period of time and notify the seller to perform his delivery obligation during this period. Otherwise the contract is ipso facto avoided. In all the cases the buyer retains the right to claim damages.
In this article I have argued that the Arab Countries have achieved little success in applying the CISG in a way that achieves the uniformity in its application. This has mainly resulted from the ignorance of the Convention and its interpretation rules. As the article has shown, Arab universities pay very little attention to the teaching of the Convention. Arab commentators also write little about it. Court decisions and arbitral awards applying the Convention are similarly limited.
I have analyzed the lonely decision made by the Egyptian Court of Cassation. The Court of Cassation issued its lonely decision in connection with a dispute in which the lower courts failed to apply the CISG despite of the fact that the conditions of applicability were clearly met. To a great extent, the Court drew the attention of lower courts that they should apply the CISG where the requirements for its application are fulfilled.
I also commented on four arbitral awards. The common factor among all such awards is that the arbitrators failed to observe the rules of applying the CISG. Sometimes the arbitrators failed to observe the autonomous rules of interpretation of the Convention and applied it in parallel with the national law. At other times, they ignored the applicability of the Convention to the dispute and applied the national law instead. Oddly enough, they even sometimes referred to the CISG without inquiring into its applicability. I hope that the commentary on the court decision and arbitral awards gives courts and tribunals in Arab Countries better guidelines when applying the CISG. However, when applying the Convention, decision makers have to confront a major issue. The Arabic version of the Convention has some drastic errors that make it difficult for the Convention to achieve its unification purpose without having such errors cured.
Surprisingly, one can find a mutual interaction between the CISG and the Egyptian legal system. On the one hand, the legal culture of Egyptian commentators affects their interpretation of the Convention. They adopt the interpretations most compliant with their legal system. This is manifest in their interventions in the debates concerning the role of good faith in the CISG and its applicability to barter transactions. On the other hand, the New Commercial Code adopts some of the CISG rules, concepts and principles. This is most obvious in the strengthening of party autonomy and in the introduction of open-price contracts and "Nachfrist" notice in the Commercial Code.
* Professor of Commercial Law & Vice Dean, Helwan University, Egypt; Director of the Middle East Center for International Commercial Law, Pace University School of Law, USA, attorney at law and arbitrator. The Author is extremely grateful to his daughter, Marwa El-Saghir, LL.M. Harvard Law School, for her insightful comments. Without her contribution, this article would not have been in its present form.
1. The CISG replaced two treaties that date back to 1964, The Uniform Law for the International Sale of Goods (ULIS) and The Uniform law on the Formation of Contracts for the International Sale of Goods (ULIF). These two Conventions achieved little success as they were only ratified by a limited number of states.
2. CISG, Article 99
3. Pace University School of Law CISG database: http://www.cisg.law.pace.edu/
4. The Syrian Arab Republic and Egypt acceded to the Convention on October 19 and December 6, 1982, respectively. Iraq and Mauritania acceded on March 5, 1990 and August 20, 1999, respectively.
5. Mohsen Shafik, Ittifaqiyat al-Umam al-Muttahidah bi-sha'n al-Bay' al-Dawli lil-Bada'i': dirasah fi qanun al-tijarah al-dawli (The UN Convention on Contracts for the International Sale of Goods: A study in International Commercial Law - in Arabic) Cairo , 1988, pp. 79.
6. Hossam El-Saghir, Tafsîr Ittifaqiyat al-Umam al-Muttahidah bi-sha'n 'or c qûd al-Bay' al-Dawli lil-Bada'i': [The Inerpretation of the United Nations Convention on Contracts for the International Sale of Goods - in Arabic] , Cairo2001 pp. 79
7. Case Law on UNCITRAL Texts. The system is explained in the UN document (A/CN.9/SER.C/GUIDE/1/Rev.1)
8. The leading CISG database is developed by the Institute of International Commercial Law, School of Law, Pace University: http://www.cisg.law.pace.edu/
9. UNILEX, International Case Law & Bibliography on the UN Convention on Contracts for the International Sale of Goods, (eds. Michael Joachim Bonnel, et al).
10. Michael R. Will (ed), Twenty Years of International Sales Law Under the CISG (The UN Convention on Contracts for the International Sale of Goods): International Bibliography and Case Law Digest (1980-2000).
12. For more details about the position of Arab commentators on good faith see infra Section C.III(1).
13. The CISG is divided into four parts; Part I: Sphere of Application and General Provisions; Part II: Formation of the contract; Part III: Sale of Goods; Part IV: Final provisions.
14. Peter Schlechtriem (ed.), Commentary on the UN Convention on the International Sale of Goods (CISG) (ed.) , translated by Geoffrey Thomas, 2nd Edition, 1998, publisher Clarendon Press, Oxford. Chapter II, para 12.
15. By Dec.11, 1986 the instruments of adherence, ratification, or accession had been deposited with the UN Secretary General by 11 states; Argentina, China, Egypt, France, Hungary, Italy, Lesotho, Syrian Arab Republic, United States of America, Yugoslavia, and Zambia.
16. However, as of 1997, the Author of this Article has taught the CISG in three Egyptian universities at the post-graduate level; Menoufia, Cairo and Helwan Universities.
17. The Moot is organized by the Association for the Organization and Promotion of the William C. Vis International Commercial Arbitration Moot. Pace University is the founding member of the Association. The number of participating universities in the fifteenth Annual Willem C.Vis Moot (2007-2008) has reached 203 team from 52 countries.
18. Court of Cassation, Commercial Circuit, April 11, 2006, Case No. 979 Judicial Year 73.
19. Celebrating Success: 25 Years, The United Nations Convention for the International Sale of Goods, organized by CRCICA in cooperation with UNCITRAL, held in Cairo, Egypt, 14 and 15 September 2005 [hereinafter CRCICA & UNCITRAL Conference].
20. Michael R. Will (ed), Twenty Years of International Sales Law Under the CISG (The UN Convention on Contracts for the International Sale of Goods): International Bibliography and Case Law Digest (1980-2000).
21. Michael R. Will, International Sales Law under the UN Convention on Contracts for the International Sale of Goods: The First 464 or so Decisions, 7th ed. (Geneva, 1998), page 30.
22. Michael R. Will, International Sales Law under the UN Convention on Contracts for the International Sale of Goods The First 555 or so Decisions, 8th ed. (Geneva, 1999).
23. Official Gazette, Volume 5, January 30, 1997.
24. Shafik, n 5.
25. Shafik, n 5, pp. 56.
26. El-Saghir, n. 6, pp 195.
27. Communication letter of the author dated 18 May, 1998.
28. Depository Notification CN. 862 1998 Treaties--5 of 19 February 1999. Process-Verbal of rectification the Authentic Arabic Text.
29. Final Statement and Recommendations of the Participants to the Conference "Celebrating Success: 25 Years United Nations Convention on Contracts for the International Sale of Goods (CISG)" held in Cairo, Egypt, 14 and 15 September 2005, at http://www.uncitral.org/pdf/english/news/Cairoen.doc..
30. Article 25.1 stipulates that "[t]he carrier shall not be entitled to avail himself of the provisions of this Convention which exclude or limit his liability, if the damage is caused by his wilful misconduct or by such default on his part as, in accordance with the law of the Court seised of the case, is considered to be equivalent to willful misconduct.", Convention for the Unification of Certain rules relating to International Carriage by Air, signed at Warsaw on 12 October 1929 (Warsaw Convention).
31. Court of Cassation, Civil Circuit, January 26, 1976, Judicial Year 27, page 896
32. South Cairo First Instance Court, Commercial Circuit 14, December 24, 2002 (unpublished decision, on file with author).
33. Cairo Court of Appeals, Commercial Circuit 50, August 24, 2003.
34. The Case is still re-reviewed before the Court of Appeals.
35. UNILEX, International Case Law & Bibliography on the UN Convention on Contracts for the International Sale of Goods, (eds. Michael Joachim Bonnel, et al).
36. Cairo Regional Center for International Commercial Arbitration (CRCICA), Cairo, Award No. 19/1990, April 13, 1991, published in Mohie Eldin I. Alam Eldin (ed.) Arbitral Awards for the Cairo Regional Center for International Commercial Arbitration, Kluwer Law Int'l., 2000, 23-27.
37. Cairo Regional Center for International Commercial Arbitration (CRCICA), Cairo, Award No. 50/1994, October 3, 1995.
38. Alexandria Center for International and Commercial Arbitration, case no.6 for the year 2003
39. Decision issued September 18, 2006, Ad hoc arbitration held at the premises of Egyptian National Committee for International Chambers of Commerce (Cairo).
40. Shafik n. 5, pp. 30.
41. For more examples see: Fatima Akaddaf, Application of the United Nations Convention on Contracts for the International Sale of Goods (CISG) to Arab Islamic Countries: Is the CISG Compatible with Islamic Law Principles?, (2001) 13 Pace International Law review. pp. 1-58
42. John Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention, 2nd ed., 1991, pp.102
43. Shafik, n. 5, pp. 47.
44. Article 418 of the Civil Code defines sale as "a contract whereby the seller undertakes to transfer to the buyer the ownership of a thing or any other proprietary right in consideration of a price in money"
45. Articles 47-71, Commercial Code.
46. The Code is divided into 5 chapters. Chapter I lays the general provisions on which the code is based. Chapter II deals with Commercial Obligations and Contracts; Chapter III regulates Banking transactions; Chapter IV provides for the rules governing negotiable instruments; Chapter V, finally, deals with bankruptcy.
47. Article 2 of the New Commercial Code stipulates that "1. In issues relating to commercial matters, the terms of the agreement between contracting parties applies. Absent such agreement, the provisions of the present law, or other laws relating to commercial matters, then the rules of trading practices and custom shall apply. If no trading practices or custom exist, the provisions of the Civil Code shall apply.
2. The agreement between contracting parties, or the rules of trading practices or custom shall not be applicable where they contradict with the public order in Egypt."
48. Article 418 and 424, Civil Code.
49. Abd al-Razzak Ahmad al Sanhuri, al Wasit: part IV: Sales (1986), pp. 448.
50. Disregarding the debate concerning the potential conflict between Article 14 and 55 of the Convention in respect of open price contracts.
51. Article 157 of the Civil Code provides that
2. The judge may grant an additional time to the debtor, if it is necessary as a result of circumstances. The judge may also reject an application for rescission when the part of the contract which the debtor has failed to perform is of little importance in comparison with the obligations in entirety."