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Saggi, Conferenze e Seminari 9. Reproduced with permission of Centro di studi e ricerche di diritto comparator e straniero, diretto da M.J. Bonell

The United Kingdom and the Vienna Sales Convention: Another Case of Splendid Isolation?

Barry Nicholas
Roma (March 1993)

I am grateful to Professor Bonell not only for inviting me to give this lecture, but also for suggesting its subject. It is indeed an appropriate choice, since Professor Bonell and I first met (nearly twenty years ago, in New York) at a meeting of the UNCITRAL Working Group which was in the early stages of drafting what later became the Vienna Convention. But Professor Bonell did not stop short at proposing the subject; he also proposed the provocative title. He clearly missed his vocation: he should have been the sub-editor on a newspaper, responsible for drafting the headlines.

I should make it clear, however, that though I represented the United Kingdom in the drafting of the Convention, I have had no official concern with it since the meeting at Vienna in 1980. Nothing therefore that I say to-day reflects British government policy, nor do I have any knowledge of what that policy may be.

It is indeed well known that the reception initially accorded to the Convention by legal and commercial interests in the United Kingdom was at best mixed and it was therefore not surprising that the British government took no early steps towards ratification. A policy of wait and see was obviously sensible. Matters changed, however, after 1988, when not only had a sufficient number of states ratified the Convention for it to come into force, but, more significantly from the British point of view, those states included on the one hand the United States and Australia [1] and on the other hand most of the states of the European Community. It seemed plain that a decision was called for. The ministry principally concerned is the Department of Trade and Industry and in 1990 they sent out to interested bodies a Consultation Paper. There was an expectation that there would be an official statement in the summer of 1991, but none was in fact made. What the reason for the silence may have been, I do not know, but I should explain that legislation on matters of private law is not usually put before Parliament if it is markedly controversial.

It is a pity that, although there has been this unpublished consultation, there has been very little published discussion of the question whether the U.K. should now ratify the Convention. I am aware of only four published comments. On 27th March 1990 The Times published a short article by a leading member of the English Bar (Mr Derek Wheatley Q.C.) opposing ratification. He had two principal grounds. The first was that because the Convention excluded questions of validity and the passing of property, much would still be left to national law and the Convention would not therefore achieve one of the main objectives of uniform laws. The second was that at present much international commercial litigation took place in London and according to English law. It would be foolish to abandon the known and internationally respected virtues of English law in favour of the uncertainties of the Convention. I shall come back to this point. A little later The Times published a reply by my colleague Professor Roy Goode, but since I am concerned with possible objections to ratification, I do not think that before this audience I need rehearse the arguments in favour.

The other published comments have been by two judges of the Commercial Court and I should therefore say something about the importance of that court. As I have said, London has long been established as a centre for making and litigating international commercial contracts. To provide for this there has been for a long time now a special section of the High Court the function of which is to deal expeditiously with big commercial cases. This court is supported in turn by members of the Bar who regularly practise before it. This "commercial bar" attracts some of the most able barristers and it is of course from their number that the judges of the Commercial Court are drawn. In short, this court comprises a relatively small body of the cream of bench and bar and it deals with a large amount of business. Indeed its success has been such that there have recently been complaints of delays and a promise of an increased number of judges.

The business of the court is heavily international. In at least 50% of the cases before it one party is not British and in 30% neither is. And of course in addition a large amount of arbitration takes place in or is derived from London.

The views of judges of the Commercial Court therefore carry great weight and two opposing views have been expressed in the matter of the Vienna Convention.

Mr Justice Hobhouse contributed a long note to the Law Quarterly Review in 1990, just after the publication of the Department of Trade and Industry's Consultation Paper. The note was principally directed to what, from my point of view this afternoon and indeed from the point of view of the Consultation Paper, was only the first of two questions presented to the United Kingdom by the Convention. The question which Mr Justice Hobhouse in effect asked was whether uniform law conventions in general and the Vienna Convention in particular are desirable. And his answer was an emphatic negative. First, like Mr Wheatley in The Times, he pointed out that recourse to municipal law would still be necessary. He then went on to insist that the paramount need of the commercial community was certainty. A uniform convention, however, is what he called a "multi-cultural compromise", drawing elements from different legal cultures. Such conventions therefore lack coherence and consistency and introduce uncertainty where no uncertainty existed before. He compared the movement in favour of such conventions with the movement for the adoption of Esperanto as a universal language. "International commerce", he said, "is best served not by imposing deficient legal schemes upon it, but by encouraging the development of the best schemes in a climate of free competition and choice".

The question which Mr Justice Hobhouse did not expressly address is of course the following. Now that the Vienna Convention is in force and, more importantly, now that it has been ratified by the United States and other Common law countries and by our main trading partners in the European Community, can the United Kingdom afford to remain outside? This is, of course, a pragmatic, prudential question and Mr Justice Hobhouse was considering the matter of principle, but presumably his answer is contained in the passage which I have just quoted. The matter should be left to free competition. Let the market decide. Let the commercial world show whether it prefers the familiar certainties of English law or the Utopian and unpredictable ideals of Esperanto conventions.

In the following year, 1991, in a lecture given at Oxford [2] another judge of the Commercial Court took a quite different view. He was shortly afterwards moved into the Court of Appeal and so I shall refer to him by his current designation as Lord Justice Steyn. It is perhaps significant that though he studied law at Oxford, he came from South Africa and it was in that jurisdiction, with its mixture of Civil law and Common law, that he first practised.

Lord Justice Steyn's lecture was not primarily concerned with the Vienna Convention, but with the role of good faith in the law of contract, but he did have something to say about the Convention. He noted, as I have done, the rising number of ratifications and said:

"No international convention will ever completely satisfy all countries. But the text of the Vienna Convention represents a satisfactory compromise between contrasting points of view. Hopefully, there will shortly be a ministerial announcement that the United Kingdom will ratify the convention. If the will to ratify this convention now is absent, our businessmen will be placed at a disadvantage in international commerce. The Vienna Sales Convention bears the badge of neutrality, and it will prove popular among businessmen worldwide. If the United Kingdom does not ratify the convention now, commercial realities will compel ratification later."

We are now two years further on and Lord Justice Steyn's expected ratification has not come and so the matter seems to be left to what he called "commercial realities", and they are presumably the same as Mr Justice Hobhouse's "climate of free competition and choice".

It is important, however, to note that for both judges the first requirement of commercial law is certainty. There is here, I think, an important difference of emphasis between the Common law and the Civil law. Any generalisation is an exaggeration, but I think that one can venture to say this. The philosophy of the Common law is utilitarian and its primary concern is with the economic exchange between the parties. The philosophy of the Civil law, it has been said, is closer to that of Kant. It is primarily concerned, not with the economic exchange between the parties, but with the exchange of consents and with the moral evaluation of the behaviour of the parties.

This difference reflects differences in the histories of the two systems -- the influence of Canon law on the Civil law and of commercial practice on the Common law. A consequence of this commercial orientation of the Common law is that if a choice has to be made between certainty and justice in the individual case, it is likely to be made in favour of certainty.

This preference for certainty is reflected in a different conception of what is meant by agreement. Both systems start from the premise that agreement is necessary for a contract. To be precise, the Civil lawyer will probably speak of an agreement of wills and the Common lawyer of a meeting of minds, but this is not a practically important distinction. Both agree in speaking of an agreement. But beyond this we find important contrasts. And all these contrasts reflect, in one way or another, the fact that for the Common law what matters is the objective appearance of agreement, whereas the agreement which the Civil looks for is more likely to be a subjective one. Whereas the Civil law will try to inquire into the true states of mind of the parties, the Common law will ask what a dispassionate observer would have thought the parties had agreed.

In other words, the Common law prefers the objective approach and it does so because the subjective approach leads to uncertainty. Of course the difference is not in the end as simple or black and white as I have said, because the Civil law may correct the excesses of subjectivity by recourse, for example, to the law of delict, but there is no time this afternoon to pursue that matter.

The contrast between the subjective and the objective approaches explains why defects of consent play a much larger part in the Civil law. For example, English law allows only a very limited recourse to error.

Again, the Common law has a much narrower conception of good faith. The parties must not actively deceive one another, but there is no duty to give unrequested information, except in some specific situations and except of course for consumer contracts. To this I shall return in a moment in another context.

For the Common lawyer, then, in commercial matters certainty may be more important than justice in the individual case. I may refer in this conection to an observation made by the late Professor Eörsi of Budapest, who presided over the Diplomatic Conference which agreed the Vienna Convention and who played an influential and valuable part over many years in the drafting of the Convention and its predecessor at the Hague in 1964. In an entertaining and witty article on the Vienna Convention,[3] in which he reviewed some of the issues which had given rise to controversy over the years, he referred to what he called this rigor commercialis of the Common law (a characteristic which he disliked) and found less of it in the Vienna Convention than in the Hague Sale Conventions. This difference he attributed to the presence at Vienna of a large non-Western representation and added an appropriately Marxist explanation. "Rigor commercialis", he said, "served the interests of strong and highly developed Western countries with centuries of trade traditions and a high level of legal expertise". But this is not enough to explain why rigor commercialis is found only in the Common law and not also in Western systems of the Civil law tradition.

I now return to Lord Justice Steyn and his Oxford lecture. After referring to the importance of certainty, he went on to draw attention to an important difference of legal technique between the Common law and the Civil law. The difference lies in the level or degree of generality of legal rules. The Common law favours empirical and concrete solutions to particular problems, whereas the Civil law prefers to proceed from broad principles.

In this connection he quoted from a recent case in which Lord Justice Bingham spoke of the Civil law's inclination towards a wide overriding principle of good faith. By contrast, Lord Justice Bingham said,

"English law has, characteristically, committed itself to no such overriding principle but has developed solutions in response to demonstrated problems of unfairness."

It is in the context of this Civil law liking for the general and the Common law's preference for the particular that I wish now to look at article 7 of the Vienna Convention, an article which gave rise to repeated controversy all through the years of drafting.

I shall take the two parts of the article in the reverse order, paragraph (2) first. This provides that questions concerning matters governed by the Convention which are not expressly settled in it are to be settled in conformity with "the general principles on which it is based" (or, in the absence of such principles, in conformity with the proper law).

Common lawyers, I think, have much greater difficulty than do Civil lawyers with the idea that there can be general principles in a legislative text (unless of course they are expressly stated in it). Take an example from outside the Vienna Convention. In recent years French law has been developing a pre-contractual duty to give information. In negotiations leading up to a contract it is not sufficient for the parties to refrain from actively deceiving each other. They must actively disclose information. I am not here concerned with how this duty to give information is defined. What concerns me is that one of the foundations of the duty is found in a number of recent legislative texts imposing duties to give information in particular situations - mainly in consumer contracts. These, it is argued, can be seen as expressions of a general principle which underlies all the particular texts.

To the Common lawyer the conclusion to be drawn would seem to be the exact opposite. The legislator could, if he had wished, have formulated a general principle. Since he did not, it must be presumed that he intended the duty to give information to be confined to the particular circumstances expressly covered by the texts.

What may worry a Common lawyer about the reference in article 7(2) to the general principles on which the Convention is based is that courts in Civil law countries will adopt a similarly creative approach. Professor Schlechtriem, for example, argues that because a number of provisions in the Convention refer to the concept of what is reasonable, it is open to the courts to treat "reasonableness" as a general principle with which to fill what they may see as gaps in the Convention.[4] The Common lawyer may think that the freedom to discover general principles such as this creates uncertainty.

The same is true of the first paragraph of article 7, which provides that in the interpretation of the Convention regard is to be had to, among other things, "the need to promote...the observance of good faith in international trade". As is well known, the question of good faith was a source of conflict between the Common law and the Civil law all through the drafting of the Convention. The Common law countries, aware of the sweeping use which had been made by the German courts, for example, of the "Treu und Glauben" provision in article 242 of the German Civil Code, were concerned that a wide provision in the Convention might be used in similar way and would therefore undermine the certainty of commercial contracts. This risk would be much greater in an international convention which would be interpreted by the courts of a large number of countries, with widely varying traditions, than it is in the context of a single country, such as Germany.

Proposals that good faith should be required in the formation and performance of the contract were therefore rejected. And so was a proposal that good faith be required in the interpretation of the Contract. The present text, confining the relevance of good faith to the interpretation of the Convention was the final compromise before the Vienna meeting. At that meeting a last attempt was made to require good faith to be observed in the formation, interpretation and performance of the contract, but that was again rejected.

It may therefore be disturbing for the English lawyer to find an increasing number of suggestions that good faith is nevertheless to be applied to the performance and enforcement of the contract. Professor Eörsi,[5] for example, argued that interpretation of the Convention cannot be separated from interpretation of the contract. Professor Schlechtriem [6] goes further and argues that the substance of the rejected provision on good faith can be found in the "general principle" of reasonableness.

My conclusion therefore is that there are indeed grounds for an English lawyer to feel disquiet about the Convention and the way in which it is developing. But this is no longer a ground, if it ever was one, for refusing to ratify the Convention. On the contrary, it is a ground for ratifying quickly, so that the experience of English lawyers and of the English Commercial Court may influence the way in which the Convention is applied.


1. Canada and, I understand, New Zealand have since followed.

2. 'The Role of Good Faith and Fair Dealing in Contract Law: A Hair-Shirt Philosophy?', The Royal Bank of Scotland Law Lecture, 1991, by The Hon. Mr Justice Steyn.

3. 'A propos the 1980 Vienna Convention on Contracts for the International Sale of Goods' in American Journal of Comparative Law, 31 (1983) 333.

4. P. Schlechtriem, Uniform Sales Law (1986) 39.

5. In N.M. Galston and N. Smit, ed., International Sales (1984) ss.2-31ff.

6. Loc. cit.

©Pace Law School Institute of International Commercial Law - Last updated December 15, 2009
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