5. Article A [became CISG article 89 ] was adopted.
6. Mr. BENNETT (Australia) said that federal systems of government, involving, in one form or another, a constitutionally guaranteed division of power among the constituent units of the federation, gave rise to problems for the States concerned in becoming parties to a convention. If there were to be no federal clause in the present Convention, a federal State acceding to it would assume an unqualified obligation in international law to apply its provisions to contracts falling within the scope of article 1 [became CISG article 1 ]. No problems would arise if the central Government had constitutional power to implement the Convention without legislative assistance from its state or provincial legislatures, but if it had to depend on them for at least some of the necessary implementing legislation it would be in no position to assume an unqualified obligation of that nature. In the case of Australia, there was a distinct possibility that the constitutional powers of the federal Government would be inadequate to implement all the articles of the Convention. His delegation was therefore strongly in favour of the inclusion of a federal clause.
7. With regard to the kind of clause that would be most appropriate, his delegation supported the alternative I for article B [became CISG article 93 ]. It was essentially identical to article 11 of the Convention on the Recovery Abroad of Maintenance and did not go any further than was necessary to meet the difficulties he had mentioned. In the case of articles that came within the legislative jurisdiction of constituent units which were not bound to take legislative action, paragraph (b) faced the realities of the situation by confining the obligation of the federal Government to bringing such articles, together with a favourable recommendation, to the notice of the appropriate authorities of those units. Paragraph (c) made it possible to obtain information on the law and practice of a federal State party to the Convention so that it could be ascertained how far particular provisions were being implemented.
8. Alternative II was essentially identical to article 31 of the Limitations Convention and differed from alternative I in that its purpose was not to qualify the obligation of the central Government but to enable the Convention to be applied progressively to particular units of the State concerned. His Government, however, had no wish to apply the Convention in a piecemeal fashion, since Australia's tradition had always been to accede to international instruments as a whole. Furthermore, his delegation was troubled about other questions raised by alternative II. If, for instance, it was decided that the Convention would be applied in some territorial units of a State but not others, could such units justifiably be treated as Contracting States for the purposes of article 1 [became CISG article 1 ]? In view of those considerations, his delegation was doubtful whether alternative II would be suitable without amendment.
9. Mr. LOW (Canada) said that the inclusion of an appropriate federal State clause which would not require Canada to apply the rules of the Convention throughout its territory was essential if his country was to become a party to the Convention. In view of the importance of article B [became CISG article 93 ] to certain States, he suggested that its consideration should be postponed to give those States more time to discuss their position.
10. Mr. WAGNER (German Democratic Republic) said that although his country did not face the same problems as Australia and Canada, the adoption of alternative I would create difficulties because it would prevent the Convention from being applied as a unity. His delegation therefore preferred alternative II.
11. Mr. NOVOSSILTSEV (Union of Soviet Socialist Republics) said that alternative I for article B [became CISG article 93 ] presented certain specific difficulties, and also suffered from a lack of clarity, especially in paragraph (b). It was not clear why the federal Government would be required to bring the articles in question to the notice of the competent authorities of states, provinces or cantons, together with a favourable recommendation, and what would be the results of doing so. His delegation also had certain difficulties with paragraph (c): the question of the "extent" of application would present great difficulties for the Soviet Union, as it was unclear who would determine the extent to which a provision should be given effect in a state or territorial unit.
12. The CHAIRMAN, referring to the proposal made by the Canadian representative, suggested that discussion of article B [became CISG article 93 ] might be suspended and a small working group established to consider paragraphs (b) and (c) and arrive at a formulation which would be acceptable to all federal States. The members of the working group should be Australia, Brazil, Canada and possibly the Byelorussian or Ukrainian Soviet Socialist Republic. He asked the Federal Republic of Germany whether it wished to be represented as well.
13. Mr. LANDFERMANN (Federal Republic of Germany) said it was not necessary for his country to be represented on the working group because it would be able to apply the Convention without difficulty in view of the legislative powers enjoyed by the federal Government. With reference to the point made by the representative of the Soviet Union, he agreed that paragraph (c) of alternative I might be construed as meaning that every federal State had to make a statement on its law. He hoped that the working group would not make that a binding requirement.
14. Mr. SANCHEZ CORDERO (Mexico) said that the working group should consider the proposal made by Canada for a new article (A/CONF.97/C.2/L.2) as well as alternatives I and II for article B [became CISG article 93 ].
15. The CHAIRMAN said that the working group would naturally consider all the relevant documentation. He asked if the United Kingdom and the Union of Soviet Socialist Republics would also wish to be represented on the working group.
16. Mr. NOVOSSILTSEV (Union of Soviet Socialist Republics) said that in his opinion article B [became CISG article 93 ] was not solely the concern of federal States, but affected the interests of other States as well, in that they might wish to apply the Convention to contracts involving commercial establishments in the territory of a federal State. It would therefore be of interest to non-federal States to see what decision was taken on article B [became CISG article 93 ].
17. The proposed working group might be useful, but he thought it would be preferable for the delegations of Australia and Canada to discuss the problem between themselves first and raise it again later in the Committee.
18. Mr. LOW (Canada) agreed that the Committee should not lose time on such a technically complex problem until the States concerned had thrashed it out and arrived at certain conclusions to present to the Committee.
19. Miss O'FLYNN (United Kingdom) said that her delegation did not foresee any difficulty whether the federal clause was included or not. It was unlikely that her Government would wish to apply the Convention in just one part of the United Kingdom. However, it did have certain views on the proposals put forward, preferring the one made by Canada in document A/CONF.97/C.2/L.2. It was prepared to serve on the working group, if it was set up.
20. Mr. SAM (Ghana) also believed that the matter could be of concern to any State, irrespective of its structure. If a decision was taken to set up a working group, representatives of any country should be allowed to participate at any time in its meetings.
21. Mr. BENNETT (Australia), sensing that members of the Committee tended to prefer alternative II, asked whether their broad approval could accommodate the uncertainty which he detected in its text concerning the relationship between "territorial units" and "Contracting State" as far as the application of the Convention was concerned.
22. Mr. LOW (Canada) observed that the draft before the Committee lacked what was present in other international instruments, namely, an interpretation article to assist in determining the definition of what was a Contracting State. Without such an article, the exact meaning of substantive clauses could give rise to lengthy debate. He was prepared to submit a working paper on that subject to the Committee.
23. The CHAIRMAN suggested that the representatives of Canada and Australia might hold an exchange of views and -- taking account of any observations which any other delegation might wish to make -- prepare a new text for consideration by the Committee.
24. It was so decided.
25. Mr. PIRC (Czechoslovakia) considered that the proposed text was not clear. More particularly, it failed to take account of the fact that a non-Contracting State towards which a unilateral declaration of non-application had been directed might -- during the period in which that declaration was being considered -- become a Contracting State, in other words that the provisions of paragraph (1) could supersede those of paragraph (2). He expressed the opinion that declarations of non-application should be subject to two essential conditions: firstly, they should be made jointly by the States concerned, and not unilaterally; and secondly, they should only be made by Contracting States.
26. The ASSISTANT SECRETARY said that, for the sake of clarity, the Secretariat wished to propose that the final phrase of the French text of article C [became CISG article 94 ], paragraph (2), should be replaced by the words "soit unilatéralement sous condition de réciprocité". The change was not intended to affect the substance.
27. Mr. PLANTARD (France) believed that such a change would in fact make a substantive difference to the text. Reciprocal unilateral declarations were not the same as unilateral declarations subject to reciprocity.
28. He was, in any case, doubtful whether paragraph (2), however drafted, could be implemented, since accessions and ratifications would occur over a lengthy period of time.
29. In his opinion, reciprocity was not an important issue. According to paragraph (1), a Contracting State could make a declaration of non-application at any time; any State to which such a declaration had been made would be free to make a similar declaration, or not to do so, when it acceded to the Convention. That was surely enough.
30. Mr. LOW (Canada) said that he understood the article as drafted to imply that in the absence of joint or reciprocal declarations by two Contracting States with similar laws concerning the sale of goods, a declaration of non-application by one of those States in respect of the other would constitute a unilateral derogation in relation to another Contracting Party. In other words, he believed that the provisions before the Committee derived from strict treaty law and had been drafted with the aim of preventing such derogations. Nevertheless, he found the text ambiguous. In the first place, it was by no means clear what could be declared non-applicable, when such a declaration could be made, or how and when the declaration itself could be applied. That uncertainty was -- in his opinion -- increased by the reference to "the same or closely related rules", since the word "rules" was itself open to different interpretations.
31. Mr. FOKKEMA (Netherlands) asked why the text before the Committee was so far removed from paragraphs 2 and 3 of article II of the 1964 Hague Convention, which appeared to offer a far more acceptable and comprehensible basis for any clauses concerning declarations of non-application.
32. Mr. PLANTARD (France) said that as a result of the discussion, his understanding of the article had become clearer. Paragraph (1) was essentially concerned with declarations of non-application made by Contracting States in respect of non-Contracting States. Paragraph (2) covered cases where two Contracting States were involved. He remained doubtful, nevertheless, with regard to the practical implementation of the provision and wondered whether the Committee might not usefully ask itself whether the article was really necessary. If the answer was affirmative, a small group might be set up with the task of examining the two paragraphs and preparing a more satisfactory draft.
33. Miss O'FLYNN (United Kingdom) suggested that in view of the fact that such a situation might frequently occur, paragraph (2) should be modified to allow for joint or reciprocal unilateral declarations of non-application by a Contracting State on the one hand, and one which would very soon accede to the Convention, on the other.
34. Mr. BENNETT (Australia) said that his delegation was in favour of a provision to the general effect of article C [became CISG article 94 ]. Such a provision could be useful in dealing with matters of trade between two countries that were closely connected geographically and otherwise, as in the case of Australia and New Zealand. He agreed with the representative of France that the article as drafted, in particular paragraph (2), posed certain difficulties and should be looked at by a working party.
35. Mrs. BELEVA (Bulgaria) said that article C [became CISG article 94 ] was basically acceptable to her delegation as it stood.
36. Mr. FOKKEMA (Netherlands) said that article C [became CISG article 94 ] was of special interest to his delegation, particularly with regard to Benelux. The Netherlands was seeking to make its laws on the offer and sale of goods, and the transfer of property, uniform with those of other countries. Article D [became CISG article 90 ] might help to avoid the need to invoke article C [became CISG article 94 ], but it would save trouble if both were kept.
37. Mr. ROUTAMO (Finland) felt that as it stood the text of the article presented a number of difficulties.
38. The CHAIRMAN noted that opinion in the Committee was generally in favour of keeping article C [became CISG article 94 ]. He suggested that a drafting group, consisting of the representatives of Canada, Finland, France and the Netherlands, should be appointed to prepare a final version.
39. It was so decided.
40. Mr. BENNETT (Australia) said that the new article proposed by his delegation had the same effect as article V of the Convention relating to a Uniform Law on the International Sale of Goods (ULIS). It would allow a Contracting State to make a declaration that it would apply the Convention only where the parties had chosen it as the law governing the formation and interpretation of their contract. In other words, the article would enable the State, through a declaration, to adopt an "opting-in" approach, rather than the "opting-out" approach provided for in article 5 [became CISG article 6 ]. His delegation did not agree that if individual States were permitted to adopt an "opting-in" approach, the Convention might prove to be little more than a model law. He felt that the Convention would quickly commend itself to a number of States, so that they would see no need to make a declaration of the kind provided for in the new article. Regardless of the fate of the Australian proposal, the Convention would come into operation and would apply in a significant number of States. In some States, however, including Australia, there was a certain anxiety on the part of businesses engaged in international trade that the Convention might not be well suited to their needs. Where such anxiety existed, the Governments concerned would naturally be reluctant to become parties to the Convention and thereby force it on their businesses. It would be better for businesses to be given an opportunity to move gradually and by their own decision to make the Convention apply to their contracts. After that had come about, the further step could be taken of applying the "opting-out" approach.
41. He believed that the Australian proposal would help to encourage the maximum number of States to become Parties to the Convention. The more States became Parties to it, the more businessmen would see it as in their own interest to have their dealings governed by the Convention, and the better the prospects would be of one day achieving a law of universal application.
42. Mr. TARKO (Austria) was unable to support the Australian proposal. His delegation felt that it was most important that there should be no reservations to the Convention, except minor ones affecting secondary issues. If reservations were to be permitted concerning the whole sphere of application of the Convention, as in the Australian proposal for an "opting-in" clause, or as in ULIS, the entire work of UNCITRAL would probably have been in vain. In his delegation's view, a State making an "opting-in" declaration could hardly be counted as a Contracting Party. Such a declaration would narrow the scope of application of the Convention to an extraordinary extent. If an article of the kind proposed were adopted, it would be very difficult for Austria to accept the Convention as a whole.
43. Mr. PIRC (Czechoslovakia) had no general objection to discussing the Australian proposal. However, he felt that reservations to the Convention should probably be discussed at the end of the Conference. If the Australian proposal was to be discussed in the Second Committee, the Czechoslovak proposal on article C [became CISG article 94 ] and a new article C bis [not adopted] should also be circulated and discussed.
44. Mr. NOVOSSILTSEV (Union of Soviet Socialist Republics) felt that a declaration of the kind referred to in the Australian proposal would demonstrate more clearly that the Contracting Parties had chosen the Convention as the applicable law. In addition to the interpretation of contracts, however, the proposal should cover their implementation. He therefore suggested that the last part should be broadened in scope. He also suggested that the words "acceptance, approval" should be inserted between "ratification" and "or accession".
45. Mr. BAN (Hungary) felt that the Australian proposal merely offered a further possibility of avoiding the application of the Convention. Article 5 [became CISG article 6 ] already provided for exclusion, variation or derogation by the Contracting Parties. Seen in that context, the Australian proposal ran counter to the main thrust of the Convention, and his delegation would be unable to support it.
46. Miss O'FLYNN (United Kingdom) said that her delegation fully endorsed the principle underlying the Australian proposal. The parties to a contract for the international sale of goods ought to be able to choose the law they considered most appropriate to their circumstances. That principle had been recognized in article 5 [became CISG article 6 ] of the draft Convention, which permitted exclusion. Clearly, there were differences of opinion on the way in which such exclusion should be effected, but however article 5 [became CISG article 6 ] was interpreted it did not go far enough. Where important issues were involved a State should be able to decide that the parties to a contract should not be bound by the terms of the Convention unless they positively chose it to apply.
47. She felt that delegations ought to have more confidence in the Convention. If it proved a satisfactory instrument for governing the international sale of goods, those concerned would adopt it readily enough. Contracting States should be able to specify that it applied only where it had been chosen as the law to govern the contracts in question. Such a provision would ensure more ratifications.
48. She agreed with the representative of the USSR that the text as it stood was too restrictive. She proposed, therefore, that the last part of article C bis [not adopted] should run: "as the law governing the contract and its formation". She also endorsed the addition suggested by the representative of the USSR.
49. Mr. PFUND (United States of America) said it was not desirable that the burden should be on the parties to a contract to apply the Convention rather than to exclude it, if they wished, under article 5 [became CISG article 6 ]. The Australian wish to meet the possible anxieties of parties about the Convention could be taken care of through the provisions of that article. The Convention should not require affirmative action to make it applicable to particular contracts. His delegation considered that the First Committee had reached the right decision in that respect, and it was therefore unable to support the Australian proposal.
50. Mr. WAGNER (German Democratic Republic) also doubted the usefulness of the Australian proposal, which would limit the application of the Convention. Under article 5 [became CISG article 6 ], the parties to a contract were allowed to exclude its application entirely. If that was not done, the terms of the Convention should be implemented. That was the meaning of accession to the Convention.
51. Mr. COPITHORNE (Canada) believed that the Australian proposal could be helpful, since it would permit more parties to determine the choice of the law applying to their contractual arrangements. Such a provision would make the Convention more attractive and result in more accession to it. His delegation would therefore support some version of the new article proposed by Australia. The exact wording could be considered further in a smaller group.
52. Mr. BENNETT (Australia) said that the amendments suggested by the United Kingdom were acceptable to his delegation.
53. Mr. PLANTARD (France) said that his delegation was opposed to the Australian proposal for the reasons already put forward by the delegations of Austria, the United States, Hungary and the German Democratic Republic. Contracting States that were allowed to make reservations of the kind provided for in the new article would have no obligations under the Convention. If such States were among the Parties whose accession made it possible for the Convention to enter into force, the anomalous situation might arise in which the Convention would become operative with many of its original signatories not bound by its terms. The Australian proposal would upset the whole process of progress towards the unification of private law.
54. Mr. HERBER (Federal Republic of Germany) said that his delegation was strongly opposed to the Australian proposal. The experience of the Hague Conventions, in which provision had been made for similar reservations, showed how dangerous such a course could be. It was one of the reasons for the failure of the Hague Conventions, even among those States which were willing to accept them. A State making use of a reservation of the kind in the Australian proposal was not really a Contracting State. If a State was not willing to accept the rules of the Convention as non-mandatory law, it was not a Contracting State and should not be counted as such.
55. Mrs. BELEVA (Bulgaria) shared the views of the representative of the Federal Republic of Germany and other delegations opposing the Australian proposal. She could see no reason for the proposal if both the States concerned were parties to the Convention.
56. Mr. LI Chih-min (China) considered the Australian proposal reasonable and flexible. Its provisions were in line with the general principles of the Convention and would enable more countries to accept it. His delegation was therefore ready to discuss the proposal further.