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Reproduced with the permission of 4 Vindobona Journal of International Commercial Law and Arbitration, Issue 1 (2000) 95-98

Book Reviews

Friedrich Blase [*]

CISG and China - An Intercontinental Exchange

If one looks back at the 1990's, one will recollect that China has been the window of golden opportunity for lawyers and business people. Only recently has the hype on the WorldWideWeb managed to deter the enthusiasm on the potential of the "sleeping superpower." While the talk of the day is about the global internet economy, a focus on one single country whatever its size seems almost a matter for backward and provincial academics. China has awakened and provides at least as many opportunities as the internet. The latter feeds its claim to fame from the overheated irrational expectations of influential market participants and the mass media. It thus impacts on the Wall Streets around the globe and the value of stock portfolios of a generation of nouveaux flemmards, whose declared aim in life is to earn their living through speculation. China is entirely different. Its impact translates into the balance sheets of companies. It generates business that is reproduced by phenomenal rates of domestic growth and international trade. The upcoming ascent to the World Trade Organisation will boost this trend.

On 1 October 1999 - on the fiftieth anniversary of the Chinese state - a new Chinese Contract Law (CCL) entered into force. Simultaneously, the Economic Contract Law (ECL) applying to domestic contracts, the special Law on Technology Contracts and the Law on Contracts Involving Foreign Interests (FECL) were invalidated. In one step China replaced almost its entire legal basis for domestic and international contracts through a single body of rules - the new CCL. The new Chinese Contract Law is the last contract law codification of the 20th century and is likely to turn out to be of its most important. Michael Will's plea for "due attention" to it in his newly edited book "CISG and China - Theory and Practice" may thus only be reiterated.

The book published on 1 October 1999 delivers plenty in its 201 pages. Commencing with an "Intercontinental Exchange" which comprises two articles by Professor Bruno Zeller from Melbourne, Australia and Professor Ding Ding from Beijing, China on the reciprocal influence of China and the UN Convention on Contracts for the International Sale of Goods (CISG). The CISG has had a crucial influence on the development of Chinese contract law. China was the tenth signatory state to the CISG, which therefore became effective in its territory on 1 January 1988. Three years before, but well after the CISG had been finalised, China drafted the Law on Contracts Involving Foreign Interests or Foreign Economic Contract Law (FECL). It applied to all contracts [page 95] between "enterprises or other economic organizations of the People's Republic of China and foreign enterprises, other foreign economic organizations or individuals" (Article 2 FECL).

The CISG as an international convention should override the domestic FECL. However, Bruno Zeller points out that "[...] in the Chinese case I feel that the words 'to override and replace' are far too positive and final and not sufficiently fluid. In my view, the words 'to modify or replace' would nearly but not quite achieve the effect of overriding. Such 'near precise' language fits much better into Chinese decision making as it allows to interpret the CISG within the confines of policy."

Since the FECL and the CISG differed on several important issues, Chinese courts might well have applied a mixture of the two, thereby restricting the effect of the CISG within the ideas of the FECL, which in turn is tailored towards serving the policies of the Chinese government. The new CCL will reduce the differences between the laws applicable to domestic and international contracts. China also aims to fully extinct the requirement that contracts must be in writing. The new CCL already breaks with this restriction. However, contrary to initial ambitions the reservation on Art. 11 CISG has not been withdrawn so far. In more general terms, the CCL demonstrates the Chinese willingness to open its legal system to foreign influences and to receive inspiration from foreign laws. Ding Ding points out that "Many foreign contract laws and civil laws and international unification laws had been under thorough comparison and discussion. The CISG and the Unidroit Principles [of International Commercial Contracts] were the main references."

The academic overture by Zeller and Ding is followed by an extensive choice of material including a Bibliography on writings on the CISG and Chinese contract law as well as a list of 19 cases on the CISG, three abstracts from the UNILEX Collection and four full arbitration awards which concern the CISG and/or FECL. This material clearly shows the hand of the distinguished editor Michael Will, whose collections of writings and cases should not be missing in any well furnished library. Several highlights strike while investigating the collections in the book. Most publications are in Chinese - including contributions and translations of John Honnold's work. Hence, it seems that international contract and the CISG with a Chinese influence provide a vast playing field for young academics. Secondly, the awards provide unique evidence of the more fluid interpretation of the relationship between Chinese domestic legislation and the CISG. In the "Award on Dispute concerning Delivery of Bread Improving Tablets" of 27 February 1993, the claimant relies for a breach of contract on Art. 16, 18 and 19 FECL as well as Arts. 61, and 74 CISG. One may note a rather peculiar legal opinion of the tribunal set up under the China International Economic and Trade Arbitration Commission. It had to decide the applicable law since the parties had not made a choice. It failed to declare the nationalities or places of business of the parties, but nevertheless decided the question in favour of the law of China since the contract was signed in Harbin, China. In a second step it failed to signal which body of law - FECL or CISG - it applied to the material [page 96] questions of the case. Finally, however, the list of awards without any instructions and explanations for its use seems a little superfluous, since some of the annotations (especially the "L" signs) rather resemble forgotten editor's remarks than helpful guides through the awards.

The last 80 pages present the raison d'etre of the book. Both in Chinese and in English, the text of the new Chinese Contract Law is reprinted as far as it concerns sales contracts. This includes the general provisions (Chapters 1 to 8; Art. 1 to 129) and the specific provisions on sales contracts (Chapter 9; Art. 130 to 175). In total, the new CCL provides special provisions for 15 types of contracts including financial leasing and construction projects.

Reading the provisions while acknowledging the particular cultural, political and economic situation, one is dazzled by the familiarity of most of the black-letter-rules, but one is also amazed by some of the unexpected surprises that the new CCL may provide. It might be the only general contract law that explicitly mentions e-mails not only as a tool for contract conclusion, but also as a proof of writing, Art. 11 CCL. It has rules on the liability for misusing confidential information obtained during pre-contractual negotiations, Art. 43 CCL. It also supports the hardship doctrine and provides for a whole chapter on the modification of contracts, Chapter 5, Art. 77 et seq. But most of all one may be struck by the detailed interaction of the freedom of contract on the one hand and the Chinese socio-economic order and the political goals on the other hand. Art. 1 CCL sets the scene clearly: "This Law is formulated with a view to protecting the lawful rights and interests of the parties to contract, maintaining the social economic order and promoting the progress of the socialist modernisation drive." While the freedom to enter (and therefore also to not enter) into contracts is praised in Art. 4 CCL, this principle is disregarded by Art. 38 CCL which demands that "[i]n case the State issues a mandatory plan or a State purchasing order task based in necessity, the relevant legal persons or other organisations shall conclude contracts between them [...]". Art. 52 declares contracts invalid which "[...] [are] concluded though the use of fraud or coercion by one party to damage the interests of the state [or] conducted to damage the interests of the State, a collective or a third party [or which are] damaging the public interests." Despite the influences of the state and its socialist ideals, the delicate wording of Art. 47 CCL suggests almost a sense of overly excited capitalism when the provision reads "A contract concluded by a person with limited civil capacity of conduct shall be effective after being ratified afterwards by the person's statutory agent, but a pure profit-making contract [...] need not be ratified [...]." Finally, the repetitive reliance on consultation and arbitration to which the parties are subjected throughout the entire life of the contract seems to resemble much of the cultural specifics of Chinese trading habits. One would hope that at least in this point the Western lawmakers would allow themselves to be as much inspired by the work of their Chinese counterparts as the latter were by the work of the former.

The book "CISG and China" provides an excellent entry into new Chinese Contract Law by using the uniform sales law as an appropriate aid to understanding. Its timely release and low cost of 25 Swiss Francs make it an essential buy for anyone interested or involved in trade with China.[page 97]

"CISG and China - An Intercontinental Exchange," edited by Michael Will, with contributions by Bruno Zeller and Ding Ding, Geneva 1999, ISBN 2-9700092-2-6, DEM 30,00, SFR 25,00, for ordering contact Claudine Zbinden at Claudine.Zbinden@droit.unige.ch.

Law and Practice of International Commercial Arbitration

When confronted with the advertising for the recently released third edition of Allan Redfern and Martin Hunter's "Law and Practice of International Commercial Arbitration" one is struck by Lord Justice Steyn's evaluation of the previous edition: "It is quite simply the best book in the field." When offered the challenge of reviewing the new edition, such appraisal seems a natural starting point.

Redfern and Hunter are great protagonists of international arbitration but start off with a word of warning: "The modern arbitral process has lost its early simplicity" (1-04). In fact, ". . . [S]ome arbitrations are conducted as if they were a form of 'offshore litigation', with professional trial lawyers and large teams of camp followers expecting to deploy all the weapons in their armory that are used in major jury trials" (Preface). Indeed, when reading from cover to cover one repeatedly encounters a very subtle kind of scepticism which regrets the formalisation of the arbitral process and its growing similarity to litigation. A possible exit would be to bet on "even more alternative" forms of dispute resolution. But the authors dim this prospect rather bluntly: "For some of its protagonists, ADR is the future. It is a new way of resolving disputes, which will make existing conventional techniques as outmoded as horse and carriage. This is almost certainly going too far." (1-72) Redfern and Hunter clearly stand on the side of an efficient, informal arbitral process which derives its inherent quality not from any abstract rules on which it is based but from the unchallenged integrity, experience and wisdom of the impartial arbitrator. Hence, the scepticism on the past development of arbitration in comfortably overshadowed by the authors' conviction of the benefits of arbitration and their enthusiasm for so many details of this dispute settlement process.

In this edition the content of the book has been reorganised, the findings are now presented in a more logical structure of ten chapters. These effectively follow the course of events which begin with the acknowledgement of arbitration as a mode of dispute resolution on the side of the client and end with the enforcement of the award.

One may argue that the book is written for four different readers. The first chapter (Introduction) is addressed to business people and attempts to comfort them with the idea of referring their dealings [page 98] to arbitration. Chapters 2 and 3 (Applicable Laws; Arbitration Clauses and Submission Agreements) facilitate the work of the legal counsel involved in contract drafting. Chapters 4 and 5 (Establishment and Organisation of an Arbitral Tribunal; Powers, Duties and Jurisdiction of an Arbitral Tribunal) become of interest once the dispute has arisen and are therefore tuned to arbitration counsel and the arbitrators. Chapters 6 to 8 (The Conduct of the Proceeding; The Role of National Courts During the Arbitration Proceedings; The Award) focus on the work of the arbitrator. The closing chapters 9 and 10 (Challenge of Arbitral Awards; Recognition and Enforcement of Arbitral Awards) also address counsel to arbitration and arbitrators, but highlights their potentially contradicting interests after the award is rendered. The further the book examines the arbitral process, the less the client is the addressee and the more technical the topics develop.

In a fair number of aspects the book leads to the ultimate legal frontiers in arbitration. But at any time, it remains concise, readable and understandable even for the unexperienced lawyer. Every chapter and some subsections open with a thorough introduction of their topic. An excellent example is found at 2-51 dealing with transnational law as the substantive law of the dispute. This highlights the authors desire to offer more than a practitioner's bible: Their work is intended to be also a study book for the young law student or trainee who encounters arbitration without prejudice, but also without experience. Throughout the book Redfern and Hunter seem to successfully manage the bridging of the vast gap between these two aims.

Although not safe from criticism, the language is refreshingly simple avoiding legal terms where possible. A highlight in this respect must be the reference to a British left-hand driving motorist to visualise the legal (and other!) problems arising when crossing national frontiers (2-23). Such examples and such language are the result of the pragmatic approach to which the authors adhere: "This is probably the most useful approach, since in practice lawyers and arbitrators are concerned with a particular dispute or series of disputes rather than with some 'general theory' of law" (2-52). Hence the book is packed with pragmatic advise - unparalleled in quality and quantity.

Some examples include: Redfern and Hunter strongly urge party counsel to conduct a due diligence on the party appointed arbitrators as a liability claim by the party against its counsel could be the result of failing such investigation (4-45). They give precautionary - almost parental - advice to arbitrators when holding hearings in a hotel (4-91). But they do not fail to criticise either. Their analysis of a good reasoning for the award ("The parties want the essential reasoning underlying the decision, not a lesson in the law" (8-58)) is matched by criticism on the tactics for causing substantial delay employed by some counsel to arbitration ('[A] new breed of litigation lawyers - [page 99] mainly from large law firms with substantial reserves from both sides of the Atlantic Ocean - entered an arena that had hitherto been the preserve of a tightly-knit group of specialist practitioners who were more attuned to the "spirit" of international trade dispute resolution that had prevailed in Europe' (6-43)).

This review shall not close its eyes on the weaknesses of the book. But it must be admitted that there seem few and far between: As a handbook for practice it naturally discusses the various arbitral institutions (1-85 to 1-96). But all that is written seems to end in a description, rather than a share of the authors' unique inside knowledge of the strengths and weaknesses of these institutions.

When discussing applicable laws to the substance of the dispute (2-21 to 2-72), Redfern and Hunter devote considerable space to the use of transnational law, including general principles of law, the lex mercatoria, codified terms and practices as well as trade usage. Inter alia they bow to the apparent success of the Unidroit Principles of International Commercial Contracts by introducing them in a separate section. However, the authors fail to determine their position on the quality of such instruments in dispute settlement. Their description of the Unidroit Principles, the lex mercatoria at large or any other transnational legal instrument lacks a clear position on whether the authors consider them as practical and useful tools or as an academic exercise whose success in practice is based on the enthusiasm of a handful of arbitrators.

Any such criticism concerns lateral aspects of the book and does not detract from the magnitude of the book. Allan Redfern and Martin Hunter are to be congratulated on their newest edition. It is a detailed practitioner's handbook which should not be missing in the library of anyone involved in arbitration. It would also be a great leader for students and young professionals. The language, the structure, the interplay of general introduction and detailed surveys make it a natural student's choice.

But not even this concern can distract from the apparent conclusion of this review, without doubt the book is a staggeringly concise and affectionately composed handbook covering the entire process of an international commercial arbitration.

"Law and Practice of International Commercial Arbitration ", by Allan Redfern and Martin Hunter, 3rd edition, London 1999, ISBN 0-421-561 300, GBP 165.00.[page 100]

* Friedrich Blasé is the Chancellor of the Alumni Association of the Willem C. Vis International Commercial Arbitration Moot.

© Pace Law School Institute of International Commercial Law - Last updated July 5, 2001
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