[For more current case annotated texts by this author, see Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed. (2003) and Lookofsky, Understanding the CISG in the USA, 2d ed. (2004).]

I. Convention Interpretation: Uniformity and Good Faith

76. The Convention is a supranational statute, a binding piece of international legislation. And so the courts of all CISG Contracting States are bound to respect the letter of the law. Indeed, when a question arises as to how a given part of the Convention should be understood, the most natural interpretation is likely to be the 'plain meaning' of the treaty text.[1]

77. In many cases, however, the 'plain meaning' and/or proper application of (the six, equally authentic versions of) a given Convention' provision will not be clear, thus giving rise to more than one possible interpretation or application in the concrete case. In these cases, Convention interpreters can seek guidance in secondary sources of the CISG rule of law.[1]

Since the Convention is a statutory instrument (a treaty), some interpreters will seek evidence of the international legislator's intent. Some might, for example, look back to the ULIS (that which came before CISG): but although a number of CISG provisions seem similar to those in ULIS, that does not necessarily mean that the (different) legislators of these (different) treaties possessed the same legislative intent.[2] Indeed, the entire CISG 'legislative history' (travaux préparatoires), while voluminous, it is often inconclusive.[3] Nor should the unofficial 'Secretariat Commentary' to the 1978 draft Convention be allowed to serve (anywhere) as an authoritative CISG guide.[4]

Given these unclear international guideposts, it is understandable that national courts may sometimes - perhaps unwittingly - tend to interpret the CISG in accordance with well-entrenched domestic views, inter alia, in cases where the Convention terminology seems reminiscent of (older) local law.[5] Indeed, the [page 49] problem here is not just the risk of diverging (yet viable) interpretations; in some casest a given 'domestic' interpretation may lead to a clearly wrong CISG result.[6]

In order to guard against such inappropriate consequences, Article 7(1) tells courts and arbitrators that regard is to be had to the international character of the Convention and to the need to promote uniformity in its application. The implication here is that an independent (autonomous) interpretation should be undertakent (at least) with a view towards achieving results acceptable to a significant number of CISG Contracting States.[7] On the other hand, the flexible command set forth in paragraph (1), working in tandem with the equally flexible (governed-but-not-settled) rule in paragraph (2), hardly compels courts and arbitrators to pursue the uniformity goal at all costs.[8]

As regards case law (precedent), it is significant that no international court has been made competent to interpret the CISG.[9] And yet, since Article 7(1) requires courts to display (due) 'regard' to the international character of the Convention and to the need to promote uniformity in its application, national courts are bound to at least take account of CISG foreign precedents [10] - a task made easier by CLOUT (Case Law on UNCITRAL Texts) and other systems which report the numerous CISG decisions rendered by courts and arbitral tribunals around the world.[11] Of course, since the decisions from (even the highest) courts of other jurisdictions can at best achieve status as 'persuasive' (as opposed to binding) precedent, a truly 'international' interpretation of the Convention remains a most difficult task.[12]

When interpreting the CISG treaty, 'regard is [also] to be had' to the observance of good faith in international trade. Hardly by accident, this aspect of the Article 7(1) mandate might seem to fall short of domestic analogues which lay down the good faith duties of contracting parties (indeed, some Convention drafters feared the 'uncertain' contours of that kind of thing). But the distinction between good faith interpretation and good faith performance is proving to be more apparent than real, especially since 'matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based';[13] in fact, general Convention principles of reasonable conduct and venire contra factum proprium have already been identified as specific elements of an even more general Convention principle which requires both CISG parties to act in good-faith.[14]

II. Convention Interpretation: Matters Governed But Not Settled

First, it should be emphasized that paragraph (2) can only be applied with respect to matters which are governed by the Convention but which are not expressly settled in it ('les matières régies par la présente Convention et qui ne sont pas expressément tranchées par elle'). Conversely, it seems clear that certain questions - such as those relating to the validity of the sales contract, third party rights, etc. which are not governed by the Convention can only be settled by resort to rules outside the Convention, (usually) domestic rules of law.[1]

It should also be noted some problems which might be solved by the application of Article 7(2) might also/alternatively be solved by means of analogy, even though Article 7(2) surely also authorizes a more fluid kind of judicial decision-making than that associated with analogy in the traditional sense.[2] For example, since CISG Article 13 clearly governs the issue (matter) of how to define a 'writing', one might argue that the possible extension of Article 13 to more modern means of communication (e.g. telefax) is a 'matter' governed-but-not-settled by the CISG,[3] although it might then require some creativity to locate a CISG general principle with which to resolve this matter. But we might also try to resolve the matter by simply making an analogy between telefax and the means expressly listed in the Convention text.[4]

In any case, one can hardly maintain that the CISG governs all 'matters' which relate to sales contract formation and the rights and obligations of the parties, i.e., even though the Convention obviously governs a long list of individual matters within this broad range.[5] For example, although Article 8 contains rules which govern certain aspects of a larger problem - i.e., the interpretation of CISG contracts - we cannot on that basis conclude that the CISG governs the entire (contract interpretation) 'matter'. In other words, Article 8 does not displace (preempt) all other rules of contract interpretation, (e.g.) the familiar rule that unclear terms should be interpreted contra proferentem; and since Article 8 does not even 'govern' this particular 'matter', there is no occasion to search for a 'general [CISG] provision' with which to resolve it.[6]

Still, those decision-makers who favour a highly autonomous interpretation and application of the treaty will be able to open the Article 7(2) flood-gates quite wide, and commentators have already fleshed out numerous CISG 'general principles' for use in pursuing that end, inter alia, the (very general) principle of good faith.[7]

Two arbitral awards from Vienna (both concerning the buyer's refusal to pay for non-conforming metal sheets) illustrate the scope of the gap-filling power of Article 7(2).[8] The first (and more controversial) application relates to the fact that [page 52] Article 78 provides for the payment of interest (on the price and other sums in arrears) but does not set the rate.[9] Most courts and arbitrators have filled this 'gap' by resorting to domestic law, but the tribunal in these cases decided that the rate of interest was a 'matter' governed-but-not-settled by the CISG and then proceeded to settle the 'matter' (the rate) by reference to the (general CISG) 'principle of full compensation', i.e., the principle that a CISG promisee should be compensated for all (foreseeable) losses caused by the other party's breach. Seeking to rise above other, more provincial solutions, this Viennese tribunal thus found the means to 'settle' a matter which (in 1980) could not be settled by the Vienna treaty drafters.[10]

The second Article 7(2) application by the same tribunal concerned the failure by the buyer, upon receipt of the goods, to comply in timely fashion with the notice requirements of Articles 38 and 39.[11] Since the seller previously had led the buyer to believe that the notice defense would not be raised, the question was whether the seller should now be estopped (venire contra factum proprium) from setting it up. Having assumed that this 'matter' (the seller's possible forfeiture of the defense of late notice) is governed but not expressly settled by the Convention, the tribunal held that estoppel was a general CISG principle (a special application of the even more general CISG principle of good faith), thus paving the way for a - just and reasonable - ruling without recourse to non-Convention rules of law.[12]

In a bolder - and more controversial - expedition within the Article 7(2) realm, a German appellate court ruled that, for purposes of determining its jurisdiction vis-à-vis an American defendant-seller, the place at which that seller was to pay damages (if ultimately held liable to the German plaintiff-buyer in respect of third-party personal injury claims) was a matter governed-but-not-settled by the CISG.[13] The court cited Article 57(1)(a), which deals expressly with the buyer's duty to pay the price, as evidence of a CISG general principle that all 'payments' (including damages awarded for a CISG breach) are to be made at the creditor's place of business; and since the plaintiff-buyer's business was in Germany, the German court held it had jurisdiction to decide the case. CISG commentators have criticized this decision on various grounds,[14] and the court's application of Article 7(2) might well head the list.[15]

80. If no relevant CISG 'general principle' can be found, then Article 7(2) provides that the 'matter' in question must be settled 'in conformity with the [substantive] law applicable by virtue of the rules of private international law' (PIL).

Usually, the PIL (choice of law) rules will point to a domestic substantive law rule.[1] In some commercial situations, however, the applicable substantive rule may prove to be an international rule, e.g., a rule located within the larger body of lex mercatoria; in such case, the decision-maker will in all likelihood have located a highly appropriate adjunct to the international CISG regime.[2]

---

Pace Law School Institute of International Commercial Law - Last updated April 1, 2005

---