Queen Mary Case Translation Programme
District Court (Richteramt) of Laufen, Canton Berne
7 May 1993
[…]
[Background facts and contractual agreements of the parties]
2. The business relations between the parties began in the year 1988; more precisely, with the conclusion of the so-called Non-Disclosure Agreement, on 19 January 1988. The commercial long-range objective of the parties, at that point of time, was that the defendant-[buyer] should manufacture and distribute for the plaintiff-[seller] the system […], as mentioned above, in Switzerland under license. In that respect, the Non-Disclosure Agreement constitutes somewhat of a preliminary stage. It sets forth the [seller's] obligation to supply know-how, as far as this seems necessary for the evaluation of a continued and lasting business relation (number 1), and as a corollary the [buyer's] obligation to keep confidential all secrets confided to it (numbers 2 - 6). Number 8 also contains an arbitration clause, wherein the parties submit to an arbitral tribunal having jurisdiction under the rules of arbitration of the International Chamber of Commerce (ICC, Paris), consisting of one arbitrator to be appointed by the Finnish Chamber of Commerce. According to its wording, the arbitration clause is applicable to all disputes arising out of the present agreement. The choice of law in said clause 8 denotes Finnish law as the governing law.
3. On 2 June 1990, the parties concluded a further agreement, the so-called License Agreement. Its central content is constituted by clause 2, wherein the licensee-[buyer] is given the exclusive right to the use, manufacture and sale of the licensed products in Switzerland, as defined in clause 1(c). The licensee commits itself to the payment of a basic license fee and a professional license fee, dependent on success. The substantial and characteristic main constituent is therefore the license-contractual element, understood as the licensor-[seller's] non-gratuitous, territorially limited waiver of the exercise of the exclusivity and the enforceability rights towards the licensee, as derived from the European patent law. In executing this agreement, the parties regard it as the "result of the hitherto existing evaluation of possibilities;" it represents the parties' target since the conclusion of the Non-Disclosure Agreement of 19 January 1988. Thus, in clause 26 number 3, under the heading "Integration", the view is expressed that "this agreement contains the entire understanding between the parties regarding the incorporated matter" and that it "combines all previous discussions". Further, the license contract includes under the heading "Technology Transfer" in clause […] a pre-contractual obligation of the licensee for the future order of single components (clause 5 number 2), which are listed by sort; it deals in particular with […] and with […], whereby prices and terms of payment are governed by Appendix 2 of the contract. Specified orders of work which go beyond this pre-contractual obligation of the licensee / defendant-[buyer] for the order of the said components, listed by sort, are, however, not mentioned in the license contract.
[…]
[Ruling of the Court]
Violation of Federal law
Under OG [*] Art. 43 and Art. 55(1)(c), it can be maintained with an appeal that a decree is based on the violation of Federal law, including an international treaty as concluded by the Federal Government. Under OG Art. 43a(1)(a), a violation of the IPRG [*] can also be maintained. However, an appeal is excluded if the decree (in accordance with the IPRG) correctly applies foreign law, but applies this foreign law in a manner that violates it. As a consequence, the [seller] reasons that in the case at hand an appeal is excluded (Statement of Claim II. 2.)
aa. The law applicable to the present case
Decisive for the determination of the applicable law is again the IPRG. Art. 118 IPRG para. 1, does not answer the question directly, but, for the sale of movables, refers to the Convention on the Uniform Law on the International Sale of Goods, The Hague, 15 June 1955. It is undisputed that the case at hand is essentially concerned with the sale of movables in that sense, as contracts for work and materials are also governed by it. Art. 3 of the Hague Convention lays down that for lack of choice of law by the parties, the applicable law is the law of that State in which the seller, at the time he receives the order, has his ordinary residence. Since there has been no choice of law (in contrast to the Non-Disclosure and the License Agreement) and since the seller had his ordinary residence in Finland at the time of the receipt of the order, Finnish law is applicable.
bb. Applicability of the CISG
Furthermore, the question whether the CISG (Convention on Contracts for the International Sale of Goods, 11 April 1980) is applicable needs to be answered. Thus, the Convention's scope of application as regards the subject matter and the time of the contract have to be examined (cf. v.Cammerer/Schlechtriem, Kommentar zum Einheitlichen UN-Kaufrecht, München 1990).
aaa. Scope of application as regards the time
The CISG was ratified in Finland on 15 December 1987 and entered into force on 1 January 1989. It is undisputed and undisputable that the contracts for work and materials in question were concluded after that point of time (cf. Arts. 2 and 3 of the Statement of Claim with the evidence presented). Therefore, those contracts fall under the scope of the Convention as regards the time according to Art. 100 CISG.
bbb. Scope of application as regards the subject matter
According to Art. 1(1)(b) CISG, this Convention applies to contracts of sale of goods between parties whose places of business are in different States when the rules of private international law lead to the application of the law of a Contracting State. It was submitted that the rules of the IPRG (Art. 118 IPRG para. […] in connection with Art. 3 of the Hague Convention) lead to the application of the law of Finland and that Finland was, at the time of the conclusion of the contract, a Contracting State to the CISG. It is just as evident that the parties have their places of business in different States. Consequently, the court had only to examine whether the contract of sale in the case at hand was a contract of sale in the terms of the CISG. Under the contract-autonomous term "contract of sale", every contract in which goods are traded against the payment of the price is understood as such (Reinhart, UN-Kaufrecht, Kommentar zum Übereinkommen der Vereinten Nationen vom 1. April 1980 über Verträge über den internationalen Warenkauf, Heidelberg 1991, Art. 1 lit. f ). It should be undisputed that both the transaction […] and […] as well as the prospective delivery are such countertrade transactions. According to Art. 3(1) CISG, contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production. In the case at hand, the [seller] committed itself to the delivery of two specific and yet to be manufactured products and for that purpose it had to keep the whole working material ready. The [buyer], however, does not have to deliver a substantial part of the raw materials or intermediate products for the manufacture of the products. The contract is therefore a contract for work done and materials supplied in the sense of Art. 3(1) CISG, and is to be considered a sales contract. According to Art. 3(2) CISG, the Convention does not apply to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labor or other services. With this provision, contracts primarily for the performance of work services are to be excluded. In the case at issue, the [seller] committed itself to the performance of works and other services, however, these secondary obligations do not outweigh the primary obligation to deliver goods. Since there are no other obvious provisions which could exclude the factual scope of application of the CISG regarding the contracts to be evaluated (e.g., Art. 2(a) CISG: exclusion of consumer purchases), both the contract for work done and materials supplied regarding projects […] and […], as well as the contract of sale regarding the prospective delivery are to be evaluated in accordance with the provisions of the CISG.
ccc. Complex of regulations
Even though the present case lies within the scope of application of the CISG as regards the subject matter and the time of the contract, there still remains room for the pure national law of the proper law of the contract under certain circumstances. According to Art. 4 CISG, the Convention governs the formation of the contract of sale and the rights and obligations of the parties arising from such a contract. In that respect, Finland has, however, made a reservation in accordance with Art. 92 CISG, under which Part II of the Convention, which governs the formation of the contract, shall not be binding for Finland. Presently, the conclusion of the contract is not disputed by either party, so that the applicability of Part II of the Convention, or instead the national Finnish law, is not a matter of dispute. Furthermore, Art. 4(a) CISG excludes from the Convention questions of the validity of the contract. But even those questions are not at issue. As far as questions regarding the construction of the content of the contract should be concerned, however, the CISG provides rules of construction for that (Arts. 8-13 CISG, which are fully applicable for Finland). Particularly, the Convention governs the effects of the contract, the provisions regarding the breach of contract and their consequences. In that respect, the CISG contains the applicable provisions for the obligation to pay the price, the obligation to pay interest and the liability for damages, which is why there is no room for the Finnish law as claimed by the [seller] (cf. especially Art. 6 of the Statement of Claim). Only in regard to the determination of the interest in arrears does the national law gain significance, since Art. 78 CISG only constitutes the obligation to pay interest, however, without determining the rate of interest. It is especially controversial in German doctrine, what national law should be applicable to that matter. Following Schlechtriem/Eberstein (Art. 78, para. 3), the law determined by the conflict of laws provisions shall be applicable, whereas following a dissenting and significant opinion, the rate of interest should be determined by the law of the interest-creditor (cf. the references in Schlechtriem/Eberstein, Art. 78, para. 9). However, this controversy is only of significance when the seller is in arrears with his obligation to pay the price, e.g., with the liability for damages for defective goods under Art. 74 CISG et seq.; here, applying the conflict of laws provisions, the rate of interest is determined by the statute of the seller, whereas the rate of interest is determined by the statute of the buyer when applying the law of the interest-creditor. In cases where, as brought forward by the [seller], the buyer is in arrears with his obligation to pay the price, which should be the majority of all cases, the rate of interest is - under both approaches - to be determined by the law of the seller, which in the case at issue is Finnish law. Nevertheless, it is all in all clear that the present case, regarding the matters disputed, is solely governed by the scope of application of the CISG; in other words, on the merits of the case, the CISG is relevant and has to be referred to for the solution of the matter of dispute, and not any pure national Finnish law. Finnish law is presently significant only for the determination of the rate of interest, as far as the [buyer] owes interest at all and this is disputed.
cc. CISG as Finnish Law or as a treaty concluded by the Federal Government in the sense of OG Art. 43(1)?
Switzerland has also ratified the CISG on 21 February 1990. It entered into force on 1 March 1991, thus, obviously before the time of filing the action. The Convention is thus an international treaty concluded by the Federal Government in the sense of OG [*] Art. 43(1). The court therefore has to answer the question whether the matter of dispute at issue could yet be appealable.
Strictly formally, the IPR rules refer to Finnish law whose component, the CISG, would then be applicable under Art. (1)(a) CISG. Thus, strictly formally, Finnish law would be applicable, which is why the civil law appeal to the Federal Supreme Court would have to be denied according to OG Art. 43(1). However, it has to be considered that this Finnish law is materially congruent to all points with Swiss law, should this be held applicable. Despite the fact that this is formally foreign law, the court holds that there are significant reasons in favor of the appealability.
- For one thing, the complex of provisions to be applied in the present case is, as mentioned above, materially absolutely identical with Swiss law. This is because the matter of dispute of the present proceedings extends exclusively to questions governed by the CISG and because the judge is barred from stretching the matter of dispute to undisputed matters, due to the principle of party disposition.
- Secondly, the CISG requires uniform interpretation on grounds of its multilaterality, whereby special regard is to be had to its international character (Art. 7(1) CISG). Therefore, it is supposed to be interpreted autonomously and not out of the perspective of the respective national law of the forum. Thus, Finnish law cannot have any significance for the interpretation; it is generally not decisive whether the Convention is formally applied as particularly this or that national law, as it is to be interpreted autonomously and with regard to its international character.
- Thirdly, it has to be taken into account that an internationally uniform interpretation can only then nearly be realized, if possibly all judgments of first or second instance are subject to the decision by the respective Supreme Courts of each State. On the one hand, only the instances of the Supreme Court can unify the intra-governmental jurisdiction and make sure that a multilateral agreement is not subject to different interpretation and application already within one State. On the other hand, only the instances of the Supreme Court will be likely to be in the position to survey the jurisdiction of the other Contracting States and consequently to maintain an internationally uniform interpretation across the borders.
Furthermore, it is to be considered that the lower courts have a tendency to lack the ability to survey the international jurisdiction. This could lead to decisive uncertainty in law for Swiss companies dealing in international trade if foreign companies file a claim against them under the CISG and if the former could not gain access to the Federal Supreme Court on grounds of a formalistic argument. For the rest, there is no argument evident that companies of the Swiss export-trade - requiring the competence of the Swiss courts - should gain access to the Federal Supreme Court, although those of the import-trade should not gain this access, especially since in both cases the CISG will be materially applicable.
Moreover, regard is to be had to the rationale of OG [*] Arts. 43 and 43a, which essentially flows out of the original concept of the Federal Supreme Court as an instrument for judicial restraint and supervision. The Federal Supreme Court shall not and cannot review a violation of foreign law essentially on two grounds:
- Firstly, the object of the civil law appeal is to secure the uniform and cantonal interpretation and application of the federal civil law (Habscheid, Schweizer Zivilprozess- und Gerichtsorganisationsrecht, 2d edition, Basel 1990, N. 782), and not of foreign civil law.
- Secondly, the Federal Supreme Court shall not have the impudence to interpret foreign law,
somewhat as the "Keeper of the Holy Grail" of that same foreign law, and lay down its correct
interpretation on the highest instance.
However, none of the aims of those provisions allows the exclusion of an appeal [to the Federal Supreme Court] in the case at hand.
- On the one hand, the CISG is materially federal civil law, whose uniform and correct interpretation through the cantons is to be guaranteed even if it comes to application as formally "foreign" law.
- On the other hand, it cannot be regarded as "interference" if the Federal Supreme Court applies the CISG that has been ratified by the State concerned: As mentioned above, the Convention has to be interpreted autonomously and based on international principles internationally uniform, and not according to the respective national law. This makes obvious that the aim of OG Art. 43 not only does not exclude an appeal in cases as the one at issue, but moreover commands an appeal.
- Furthermore, it cannot be said that with such an extension, the Federal Supreme Court would move along the edge of its capacities/jurisdiction to an even higher degree through the mostly extensive, difficult and time-consuming establishment of foreign law in the future. Such a time-consuming establishment of Finnish law is out of the question, since - as has been shown - only the CISG is to be applied; however, under no circumstances can the Federal Supreme Court evade the establishment and knowledge of the CISG, as it is applicable as formally Swiss Law under the reservation of a choice of law in nearly all contractual relations of the Swiss export-trade; where disputes arise out of such contractual relations, the Federal Supreme Court is competent as the last instance - under the presumption of the local jurisdiction of the Swiss courts - and it has to apply the CISG.
The fact that the CISG provides a uniform, final and autonomous Sales Convention, which is not intended to be bindingly attached to the law of one State, but is effective on its own instead, is displayed by Art. 1(1)(a) CISG. Accordingly, the CISG is applicable when the parties have their places of business in different States and when those States are Contracting States to the Convention. The determination of this scope of application lacks any point of contact to the law of a certain State; the CISG is autonomously applicable regardless of the intra-governmental regulation concerning the conflict of laws provisions, without being State-specifically qualified. Assuming, purely hypothetically, that the agreements in question in the present case had been concluded prior to the effectiveness of the Convention on 1 March 1991, the said provision would come in effect, since it regularly precedes the "Pre-Solution" of Art. 1(1)(b) CISG (Reinhart, Art. I, N. 2 f); this is why the CISG is applicable to all contracts concluded by the Swiss import-trade after 1 March 1991 as provided in Art. 1(1)(a) CISG. In this case, the Convention does not come in the formal shape of national Finnish law, but as a part of the material private international law. It is obvious that now the appeal would be admissible according to OG [*] Art. 43(1), as the case at hand is indisputably concerned with an international treaty concluded by the Federal Government. If one were to deny the appealability of CISG disputes where the Convention becomes applicable pursuant to the Pre-Solution of Art. 1(1)(b) CISG, this would lead to a differentiation regarding the question of appealability which could not be objectively explained and which can factually simply not be reasoned and which cannot be upheld in the court's opinion.
Finally, even the anticipated objection, that for the determination of the rate of interest one would have to have recourse to Finnish law, does not change in the least the result that the matter of dispute in the case at hand is appealable.
- For one thing, as shown above, the rate of interest for owed interest in arrears has to be determined by Finnish law, according to Art. 78 CISG. However, it is not obvious that this matter of law is a matter of dispute in the present proceedings. The [buyer] raises no objections to this method for calculating the rate of interest, as already brought forward by the [seller] and even attached to the Statement of Claim. The [buyer] rather contests the existence of an obligation to pay interest. This is why a court which is materially concerned with the matter - heeding the above repeatedly mentioned principle of party disposition - does not have to deal with the rate of interest, due to the lack of it being a matter of dispute and also does not have to make it part of the judgment. It is therefore not obvious in what way the violation of Finnish (interest-) law should be asserted before the Federal Supreme Court and in what way the appealability [of the decision of first instance] would have to be negated by that.
- Furthermore, even if, in the course of the proceedings, a dispute arose regarding the rate of interest next to the already disputed points - which would not exceed the degree of probability of a mere hypothesis - the appealability of the matter is altogether not to be negated. In that case, the Federal Supreme Court could allow the appeal in the main issue and could avoid embarking on the question of the rate of interest, as a mere minor issue, due to the lack of appealability [of the minor issue of the rate of interest]. In such proceedings, where due to only partly missing procedural prerequisites, a federal appeal is not dismissed as a whole, but is embarked on as much as possible; this corresponds with the uninterrupted practice of many years of the federal justice in all chambers (cf., e.g., BGE [*] 118 Ia 174). As mentioned, this requires however, that there is a dispute over the rate of interest, which is at the time of the present proceedings not obvious and has to be regarded as a mere hypothesis. All in all, even a dispute arising in the future about the rate of interest will not be able to influence the appealability of the matter.
[Synopsis of ruling]
In summary and in condensed form, it will be made clear why the appealability of the matter of dispute at issue has to be affirmed: Claims under delivery transactions whose subject are services in the nature typical to the contracts here and whose judicial constellations and problems in the presently disputed manner are to be authoritatively disentangled, fall under the factual and temporal scope of application of the CISG. This conclusion takes effect due to formal views according to Finnish law. However, today and already at the time of filing the action (bound to the proceedings according to ZPO [*] Art. 160), the rules of the mentioned international Convention not only represent, but in a decisive way also respect Swiss private law. Therefore, it cannot depend on the coincidence of the point of time of its effectiveness as a result of the temporal assertion of our jurisdiction, whether a civil matter of dispute is appealable or not. If the validity and applicability of formally existing and effective Swiss law throughout the whole litigation yields to the reference of a foreign system of law, this merely coincidental moment does not change in the least the need for protection of the interest in the ability to review through the Federal Supreme Court because of violation of Swiss private law and its qualification and determination for that.
FOOTNOTES
* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff of Finland is referred to as [seller]; the Defendant of Switzerland is referred to as [buyer].
Translator's note on abbreviations: BGE = Entscheidungen des Bundesgerichts [Official Reporter of the Federal Court, the highest Swiss court in civil matters]; OG = Bundesgesetz über die Organisation der Bundesrechtspflege [Swiss Federal Code on Court Organization]; IPRG = Bundesgesetz über das Internationale Privatrecht [Swiss Federal Act on International Private Law, which came into force on January 1, 1989]; ZPO = Zivilprozessordnung [Swiss Code of Civil Procedure].
Pace Law School Institute of International
Commercial Law - Last updated December 5, 2005
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