(A/CONF.97/C.1/L.216, L.218, L.222, L.225 and L.226/Rev.l)
1. The CHAIRMAN invited the Committee to consider, in connection with article 69 [became CISG article 84 ], the general question of provisions regarding interest in the Convention.
2. Mr. KOPAC (Czechoslovakia), commenting on his delegation's proposal for a new article 60 bis [became CISG article 78 ] (A/CONF.97/C.1/L.218), said that he believed the Convention should include a specific provision relating to the payment of interest. Although the proposal suggested that the provision should be included as a new article 60 bis [became CISG article 78 ], it could be inserted at any point in the Convention deemed appropriate by the Committee. Unlike the joint proposal (A/CONF.97/C.1/L.216) for a new article 73 bis, which suggested that the applicable interest rate should be that prevailing in the country of the creditor, his delegation's proposal recommended that the rate should be that prevailing in the country of the debtor. If the Committee did not agree to the rate being stipulated as equal to the official discount rate, his delegation could accept its second alternative, namely the rate applied to unsecured short-term international commercial credits plus 1 per cent. The 1 per cent increase was intended as a penalty. Should the interest rate be higher in the seller's than in the buyer's country, the seller was entitled to claim damages under paragraph 2. If the Committee did not agree to that solution, his delegation would be prepared to amend paragraph 2 to state that if the interest rate prevailing in the seller's country was higher than that in the buyer's country, the interest should be paid at that higher rate. His delegation was ready to discuss any other changes in its proposal.
3. The CHAIRMAN asked the Czechoslovakian representative if he did not think it preferable to substitute the words "debtor" and "creditor" for "buyer" and "seller" to take account of the situation set out in article 69 [became CISG article 84 ] and other circumstances. He also wondered if the Czechoslovak proposal would not in fact lead to a situation where the highest interest rates were always applied.
4. Mr. KOPAC (Czechoslovakia) said that his delegation was willing to make that change. He noted the main purpose of the provision was to prevent breaches of contract and to ensure that the price was paid or other debts reimbursed within the specified time-limit.
5. Mr. HJERNER (Sweden) observed that the proposal by the delegations of Denmark, Finland, Greece and Sweden (A/CONF.97/C.1/L.216) covered much the same ground as the Czechoslovak amendment and was, he thought, somewhat simpler. Both proposals were intended to ensure that interest should be dealt with specifically in the Convention and not merely considered as a form of damages. A provision similar to the Czechoslovak proposal existed in ULIS but had been abandoned during discussions in UNCITRAL for various reasons. He understood that the fear that such a provision would be unacceptable under Islamic law was unfounded because interest on arrears was accepted under that law.
6. The joint proposal stipulated that the rate of interest should be that customary for commercial credits at the creditor's place of business. Some flexibility was necessary in view of current interest rate fluctuations. Both paragraphs of article 69 [became CISG article 84 ] should be read in conjunction and the interest rate calculated accordingly. Articles 60 [bis] and 69 [became CISG article 78 and CISG article 84 ] dealt with somewhat different situations and the same rule need not apply to both.
7. The matter of interest was one of the most important issues in the Convention and the duty to pay interest must be clearly stated. Since the various amendments had different points in common, it might be desirable to give the sponsors the opportunity to consolidate them in the light of views expressed during the discussion.
8. Mr. VINDING KRUSE (Denmark) endorsed those views. The wording of the provision should be as flexible as possible. The joint proposal had a broader applicability than the Czechoslovak proposal, which referred only to payment of the price. Other payments might also be in arrears and there should be a general rule covering interest in all those cases.
9. The Czechoslovak proposal was very close to the ULIS rule in its reference to the official discount rate. He drew attention to article 58 of the draft Convention prepared by UNCITRAL in 1977, which gave a choice between the official discount rate and the rate for short-term commercial credits, as did the Czechoslovak proposal. The joint proposal referred only to the latter which he thought clarified the situation.
10. Mr. KRISPIS (Greece) endorsed the views expressed by the two preceding speakers.
11. Mr. DATE-BAH (Ghana) believed that interest should be paid. However, the subject was too complicated to be encompassed by a simple uniform rule. Not only did national policies and structures of interest differ but commercial interest usually operated at several levels. In most countries, payment of interest was subject to national legislation. He therefore preferred the United Kingdom proposal (A/CONF.97/C.1/L.226/Rev.l).
12. Mr. SONO (Japan) said that his delegation's proposal (A/CONF.97/C.1/L.222) was concerned with the calculation of damages rather than the payment of interest. His delegation supported the joint proposal (A/CONF.97/C.1/L.216) and if it was adopted, would withdraw its own proposal.
13. Mrs. FERRARO (Italy) also favoured the joint proposal (A/CONF.97/C.1/L.216). The Convention should include a provision about the payment of interest. There was a basic distinction between interest, which should be payable whenever payment of sums due was delayed, and damages which were associated with other problems and breaches of contract. The Czechoslovak proposal (A/CONF.97/C.1/L.218) was clear with regard to interest but not with regard to damages. The calculation of the rate at which interest should be payable was a difficult matter and might perhaps be left unregulated in the Convention. In any case, her delegation could not accept the Czechoslovak proposal as to the rate of interest, which would be difficult to define or to foresee.
14. Mr. ZIEGEL (Canada) said that the Convention should clarify the cases in which claims for payment of interest were justifiable. However, a number of questions were involved. Interest rates might be assessed differently according to whether they related to a restitutionary claim, in which case the object was to deprive the defaulting party of unjustifiable enrichment, or to claims for damages for breach of contract, the object was to compensate the claimant for the loss of use of his money and the creditor's place of business should determine the rate of interest. In a period in which interest rates in North America had fluctuated by up to 50 per cent over the preceding year one problem was to establish whether the rate should be that prevailing at the time when judgement was rendered or on the date when payment was actually made. As the whole matter deserved more attention than it could readily be given in the Committee, he favoured setting up a working party consisting of the sponsors of the various proposals to work out a generally acceptable solution.
15. Mr. BOGGIANO (Argentina) said that the first question to be decided was whether or not the Convention should contain rules on the payment of interest. If there was a wish that it should do so, the next point to consider was the scope of the rules. Article 69 [became CISG article 84 ], paragraph 1 referred to restitutionary interest payable by the seller to the buyer, but there was also the case of delayed payment by the buyer and symmetry seemed to require that in both cases the creditor should recover interest at the rate prevailing at his place of business. At all events, any proposal for calculating the rate of interest should be based on realistic assumptions and for that reason his delegation favoured the joint proposal (A/CONF.97/C.1/L.216). The rate should certainly take into account current inflationary conditions. It it was impossible to achieve agreement as to the rate, the solution might be to omit any reference to it and leave it to the interpretation of the courts.
16. Mr. LEBEDEV (Union of Soviet Socialist Republics) said that payment of interest was a complex matter and was subject to national legislation in many countries. When UNCITRAL was preparing the present draft Convention, it had discovered that it was not possible to adopt a rule like that in ULIS article 83 but the joint proposal (A/CONF.97/C.1/L.216) was based on the same principle. In view of national legislation, it was more logical to accept the legal rate of interest in the country where the physical or legal entity of the debtor was situated, as was proposed in document A/CONF.97/C.1/L.218. However, one idea might usefully be taken from the joint proposal. In order to establish a general rule, reference should be made to the defaulting party and to overdue payment rather than to the buyer and the seller.
17. Mr. WAGNER (German Democratic Republic) said that his delegation would welcome a rule to regulate the payment of interest but he feared it would not be possible to devise one which was generally acceptable. He would support, with some improvements of drafting, the Czechoslovak proposal (A/CONF.97/C.1/L.218), but the discussion had shown that other delegations favoured a different principle. It was a matter on which differences between economic systems were involved and it would be impossible to find an equitable solution. He therefore favoured the United Kingdom proposal (A/CONF.97/C.1/L.226/Rev.l) to give up the idea of including the subject in the Convention.
18. Mr. VENKATASUBRAMANYAN (India) said that since delayed refunds and payments were unfortunately frequent features of international sales, the matter of interest should be regulated by the Convention so that the rights and obligations of both parties were clearly known. The basic principle on which the rate of interest was determined should be to give the defaulting party the least possible incentive to delay payment. He should therefore be under a legal obligation to pay interest at the rate prevailing either at his own or the other party's place of business, whichever was the higher, and at the rate prevailing at the time payment was actually made rather than at the date judgement was rendered. Account should be also taken of the currency in which the debt had been incurred, since interest rates varied greatly from one currency to another.
19. Mr. SEVÓN (Finland) considered that the main point was to have some provision in the Convention about the payment of interest. He would therefore be prepared to accept an amendment of the joint proposal (A/CONF.97/C.1/L.216), of which he was one of to the sponsors, to take account of the objections raised by the Czechoslovak and Soviet delegations. He was even prepared to accept the United Kingdom proposal, which made it clear that the provisions with regard to damages did not cover the question of interest, although he would consider that an unfortunate solution. He suggested that the best course would be for the sponsors of the various proposals to attempt to produce a consolidated text.
20. Mr. INAAMULLAH (Pakistan) said that his delegation's proposal (A/CONF.97/C.1/L.225) related only to the specific point of the rate at which interest should be payable under article 69 [became CISG article 84 ], paragraph 1. He supported the suggestion that a working party should be set up to consolidate the proposals on other aspects of the question.
21. Mr. NICHOLAS (United Kingdom) commented that his delegation's proposal (A/CONF.97/C.1/L.226/Rev.l) started from the general recognition that the present text was unsatisfactory in that it required the seller to pay interest on refunds but there was no corresponding obligation laid on the buyer who was late in paying the price. One solution was that the Convention should contain a general provision for the recovery of interest on all sums in arrears. However, previous experience had convinced his delegation that it would be unrealistic to hope to reach a generally acceptable text within the ambit of the Conference. He therefore felt that the only practical solution was to accept the United Kingdom proposal, which made it clear that the Convention did not deal with the question of interest, but left it to the applicable national law.
22. The CHAIRMAN said that there appeared to be general agreement that the defaulting party should pay interest both in the special case referred to in article 69 [became CISG article 84 ] and more generally whenever payment of sums due was delayed. The point at issue was whether it was feasible to work out rules for the calculation of interest by reference to one of the formulations which had been proposed or whether the question of interest could clearly be left outside the scope of the Convention. If the Committee wished to explore the possibility of finding a generally acceptable rule, it would be necessary to set up a working group for the purpose and to defer for the time being taking a vote on the various proposals before the Committee.
23. Mr. HJERNER (Sweden) said he would prefer a consolidated proposal based on proposals by those representatives who were in favour of the principle of defining an interest rate in the Convention. The main difficulty with the United Kingdom solution was that it might lead to difficulties in regard to conflicting legislations.
24. Mr. PLANTARD (France) believed that an effort should be made to formulate a provision on the question which would satisfy all concerned. In 1977 an earlier provision on the subject had been deleted precisely because it had not met with general support, and the time had now come to make a fresh attempt to find a solution. He pointed out that the provision would need to define the date to which reference was to be made to calculate the rate of interest, particularly where the rate was calculated on the basis of the discount rate or the rate used for commercial credits, which fluctuated, and in his delegation's view that time should be the moment of effective payment.
25. The CHAIRMAN suggested that a working group, consisting of the representatives of Argentina, Czechoslovakia, Ghana, Greece, India, Japan and Sweden should be set up to formulate a consolidated proposal for a rule regarding rate of interest.
26. It was so decided.
27. Mr. DATE-BAH (Ghana) suggested that one Islamic country be included in the working group.
28. Mrs. FERRARO (Italy) said that her delegation would also like to participate in the group's work.
29. Mr. ZIEGEL (Canada) pointed out that two distinct proposals had been put forward. The first was that an attempt should be made to elaborate a comprehensive rule on interest that would be applied whenever one party owed money to another. The second was that, on the contrary, the Convention should not attempt to deal with any aspect of the problem of interest. He suggested that it might be useful to take an indicative vote in order to establish the balance of opinion between the two proposals.
30. Mr. FARNSWORTH (United States of America) said that as he saw it the purpose of the interest requirement was to compensate a party concerned for the loss of the use of money which he should have been paid. It did not seem to him likely that that party would have made use of that money in the other party's place of business; he would more probably have done so in his own place of business. His delegation preferred the joint proposal put forward in A/CONF.97/C.1/L.216, but, if that were to be abandoned, he would prefer the United Kingdom solution to the compromise solution suggested by the representative of Finland. He agreed that it would be useful for the working group to know in advance what has the measure of support for either solution.
3l. The CHAIRMAN asked the Canadian representative whether he was suggesting that the Committee should vote on the United Kingdom proposal.
32. Mr. ZIEGEL (Canada) said his suggestion had been not that the Committee take a formal vote, but merely an indicative vote as between the United Kingdom proposal and the other solutions proposed, so that the working group would have some knowledge of where the main interests of representatives lay.
33. Mr. LEBEDEV (Union of Soviet Socialist Republics) said it seemed to him a better course to let the working group first prepare a consolidated version of the various proposals put forward for a provision on interest rate, and only after that to proceed to a vote on that version and on the United Kingdom proposal. To take a vote first on the United Kingdom proposal might complicate the issue.
34. The CHAIRMAN pointed out that some representatives had objected to the taking of an indicative vote on the grounds that no provision was made for it in the Rules of Procedure. He would therefore prefer to avoid the taking of such a vote.
35. Mr. ROGNLIEN (Norway) said that although the Rules of Procedure made no provision for indicative voting, neither did they prohibit it. An indicative vote on the question at issue would be useful in giving the working group guidance on how to go about its work. He agreed with the Soviet representative that it would be premature to take a formal vote on the United Kingdom proposal, since that would mean that there would be no opportunity to make a choice between the various alternative solutions.
36. Mr. BENNETT (Australia) said it was desirable in principle that the Convention should make clear that interest would be payable when the parties were in default; in practice, however, it would be difficult to find a formulation that would cover the complex considerations that arose in regard to the very different legal and economic systems involved. He hoped that the working group would come forward with some satisfactory proposals, but if that were not the case, he would support the United Kingdom solution.
37. Mr. WANG Tian ming (China) said there was a clear division of opinion in the Committee on whether or not the Convention should include a provision concerning interest. His delegation favoured the inclusion of such a provision, and supported the suggestion that an indicative vote should be taken to establish how much support there was for either view. Without such a vote, it would be difficult for the working group to carry out its work.
38. Mr. SAMI (Iraq) supported that view.
39. Mr. OLIVENCIA RUIZ (Spain) said the question of the payment of interest was a complex one from the juridical viewpoint. If the Convention did not clearly lay down the basis on which the interest was to be applied, in other words in what currency it was to be paid, it would be difficult to establish a rule that would be universally applicable. Since his delegation's proposal (A/CONF.97/C.1/L.201) had been rejected, he could now favour the United Kingdom solution. However, in order to reach a decision the Committee would need to have before it all the possible options, and he awaited with interest the outcome of the working group's work.
40. Mr. HERBER (Federal Republic of Germany) said that as he saw it, there were only two courses open. The first was to include a provision stating the duty to pay interest on sums in arrears and the second was to leave the whole question of interest outside the Convention, as the United Kingdom delegation proposed.
41. The CHAIRMAN said that he took it that the Committee agreed to defer the discussion on article 69 [became CISG article 84 ] until the working group submitted its report.
42. It was so agreed.
43. In reply to a question by Mr. DATE-BAH (Ghana), the CHAIRMAN said that since the draft did not contain any rule on the calculation of interest, any proposal that the proposed working group might make on the subject was bound to be further removed from the existing text than the United Kingdom's proposal to drop the reference to interest. Accordingly, when the time came for voting, the working group's text would be voted upon first and the United Kingdom proposal second.
44. The CHAIRMAN drew attention to the revised article 51 [became CISG article 55 ] (A/CONF.97/C.1/L.232) submitted by the 10-member ad hoc working group.
45. Mr. HJERNER (Sweden), introducing the proposal (A/CONF.97/C.1/L.232), said that the members of the ad hoc working group had encountered several difficulties in their task of redrafting article 51 [became CISG article 55 ]. The first concerned the introductory sentence, which involved the relationship between the provisions of article 51 [became CISG article 55 ] and those of article 12(1) [became CISG article 14(1) ] on the subject of price. The second concerned the concluding portion of the first sentence of article 51 [became CISG article 55 ], which contained a rule that some delegations considered too favourable to the seller. Lastly, a number of delegations favoured the deletion of article 51 [became CISG article 55 ].
46. The group had decided that article 12 [became CISG article 14 ] would be left untouched and had decided to retain the reference to a contract which had been "validly" concluded. It had also decided to replace the words: "price generally charged by the seller" by: "price generally charged at the time of the conclusion of the contract". That last change was particularly important in that the seller would be able to look not only to his own price but also to the price charged for the goods in the particular trade concerned. The joint proposal represented a well-balanced compromise and he urged the Committee to adopt it.
47. Mr. STALEV (Bulgaria) supported the joint proposal.
48. Mr. KRISPIS (Greece) suggested the elimination of the proviso "in the absence of any indication to the contrary", which might lead to difficulties of interpretation. In fact, an indication as to the price might be express or implied, or may derive from an hypothetical or presumptive intention of the parties. Since the latter two possibilities were excluded, while the former two were expressly dealt with in article 51 [became CISG article 55 ], it was impossible for "other indications" to exist.
49. Mr. OLIVENCIA RUIZ (Spain) took the view that the joint proposal could not affect the legal assumptions on which the rule embodied in the former article 51 [became CISG article 55 ] was based. He also criticized as inadequate the use of the adverb "validly" before the verb "concluded" since the provisions of article 51 [became CISG article 55 ] were governed by those of article 4 (a) [became CISG article 4(a) ] on validity. He agreed with the previous speaker that the proviso "in the absence of any indication to the contrary" should be deleted.
50. Mr. ALKIN (Ireland) suggested the deletion of the words "or implicitly" in the first sentence of the joint proposal. With that deletion, the text would offer three possibilities: first, that the price should be fixed; second, that provision should be made for determining the price and, third, that there should be an implied (or an implicit) price. His proposed deletion would serve to remove the confusion which resulted from the double reference to implied price in the text of the joint proposal.
51. Mr. KRISPIS (Greece) supported the suggestion.
52. Mr. DATE-BAH (Ghana) thought that the Irish representative's suggestion would destroy the compromise achieved by the working group. With the deletion suggested by the Irish representative, it would be possible to have a contract without any agreement on the price. His delegation was totally unable to accept such a notion.
53. Mr. MANTILLA-MOLINA (Mexico) regretted that he could not fully support the joint proposal. He agreed with the Spanish representative that a reference to the validity of the contract would conflict with the provisions of article 4 of the draft [became CISG article 4 ]. He supported the suggestion for the deletion of the proviso "in the absence of any indication to the contrary".
54. On the most important aspect of the compromise proposal, he opposed the idea of replacing the reference to the price "generally charged by the seller" by the alternative wording "generally charged at the time of the conclusion of the contract". The formula would lead either to the same conclusion as the existing text or else to an absolutely unfair result.
55. Mr. BENNETT (Australia) supported the joint proposal (A/CONF.97/C.1/L.232) and said that he agreed with the comments made by the Ghanaian representative on the Irish representative's suggestion. He opposed the suggested deletion of the proviso "in the absence of any indication to the contrary" since there were circumstances in which it could be useful.
56. Mrs. FERRARO (Italy) said that, although she had been a member of the ad hoc working group, she proposed that the word "validly" should be deleted on the grounds that the question of validity was already covered by the provisions of article 4 [became CISG article 4 ]. She agreed with the Mexican representative that the reference to the "price generally charged at the time of the conclusion of the contract" was undesirable.
57. Mr. KRISPIS (Greece), commenting on the Italian representative's suggestion, pointed out that the reference to a "validly concluded" contract was not confined to the question of validity under the Convention itself. It was meant to cover validity under the national law, validity under the Convention and even validity under a combination of both.
58. Mr. HJERNER (Sweden) reaffirmed his determination to abide by the compromise reached in the ad hoc working group.
59. Mr. BOGGIANO (Argentina) said that his delegation too would uphold the compromise proposal. In particular, he attached great importance to the retention of the adverb "validly" before the verb "concluded".
60. The CHAIRMAN said that as a majority appeared to oppose the Italian subamendment to delete the word "validly" from the first sentence of the joint proposal, he would, if there was no objection consider the subamendment rejected.
61. It was so agreed.
62. The joint proposal was adopted by 29 votes to 4.