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Reproduced with permission of the author

Can the Hardship Provisions in the UNIDROIT Principles Be Applied When the CISG is the Governing Law?

Anja Carlsen/Copenhagen, Denmark [*]

I. Introduction

The United Nations Convention on Contracts for International Sale of Goods [1] (hereafter CISG) and the UNIDROIT Principles of International Commercial Contracts [2] (hereafter the UNIDROIT Principles) are two sets of instruments that govern international commercial contracts.

A. The purpose of this paper

When the market develops drastically and unexpectedly after the conclusion of the contract, the disadvantaged party has an interest in claiming that he is released from his obligations under the contract.

The UNIDROIT Principles contains in section 6.2 specific provisions dealing with hardship which is defined as a change in the market subsequent to the conclusion of the contract that fundamentally has altered the equilibrium of the contract. The CISG does not contain any provisions regarding hardship.

The aim of the present study is to analyze whether the provisions on hardship in the UNIDROIT Principles can be applied to release a party from his obligations under the contract when the CISG is the governing law of the contract. The aim is also to test my hypothesis that the hardship provisions should not be applied because the CISG exhaustively regulates the issue of changed circumstances subsequent to the conclusion of the contract.

The paper is only concerned with international commercial contracts in accordance with the application of both the CISG and the UNIDROIT Principles. The paper presupposes that the CISG is the governing law either by virtue of Article 1 CISG or by the parties' agreement to apply the CISG [3]. It further presupposes that the parties have agreed that the UNIDROIT Principles applies to issues not governed by the CISG. But the paper is not concerned with cases where the parties have agreed on a hardship clause, since there is no doubt that a court or arbitral tribunal can apply the hardship provision in such cases.

II. The CISG and the UNIDROIT Principles

The CISG was prepared by the United Nations Commission on International Trade Law [4] and adopted at a diplomatic Conference in 1980. It entered into force on the 1st of January 1988 and is today widely accepted [5].

The UNIDROIT Principles is a non-binding restatement of general principles of international commercial contracts which are common to most of the existing legal systems [6]. It was drafted by a group of experts representing all of the major legal systems of the world but they participated in their personal capacity and did not represent their Governments [7]. The UNIDROIT Principles is to be regarded as successful, among others, because arbitral tribunals have applied the Principles [8].

A. The relationship between the CISG and the UNIDROIT Principles

Both the CISG and the UNIDROIT Principles are concerned with international commercial contracts. When the two instruments govern the same issue, the provisions laid down in the UNIDROIT Principles are frequently but not always identical or with identical content as the rules laid down in the CISG [9]. However, the UNIDROIT Principles is more exhaustive than the CISG because the UNIDROIT Principles also governs issues that are not governed by the CISG such as the validity issue and the UNIDROIT Principles also applies to other commercial contracts than international sale of goods.

The CISG will normally take precedence over the UNIDROIT Principles because the CISG is a binding instrument whereas the UNIDROIT Principles is a non-binding instrument. Consequently, in cases where the rules of the UNIDROIT Principles and the rules laid down in the CISG are in conflict with each other, in a contract governed by the CISG the rule laid down in the CISG will prevail.

Even though the CISG takes precedence over the UNIDROIT Principles, Article 7(1) CISG demands that "[I]n the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity . . . ". Since the UNIDROIT Principles is an international restatement, where its articles are supportive of the intent of the CISG, it can be logical to seek to apply the UNIDROIT Principles as a guideline or gap filler when interpreting provisions of the CISG [10]. In such cases, the two instruments can supplement each other. The thesis of this paper is the UNIDROIT Principles' approach to hardship is not such a case.

B. The parties' agreement to apply the UNIDROIT Principles as a gap filler for the CISG

The principle of freedom of contract is one of the most widely accepted private international rules. It is restated in Article 6 CISG that reads "The parties may exclude the application of this Convention or subject to Article 12, derogate or vary the effect of any of its provisions". This provision seems to have a clear meaning [11], which entails that the parties can agree that the UNIDROIT Principles applies to issues that are not governed by the CISG [12]. That, in appropriate instances, the UNIDROIT Principles can be applied as a gap filler for the CISG is further recognized by arbitration practice [13].

III. Hardship in the UNIDROIT Principles

The principle of hardship is reflected in the UNIDROIT Principles section 6.2. This section applies to hardship in situations where the balance between the two sides of the contract has become out of proportion because of severe changes in the market after the conclusion of the contract that fundamentally have altered the equilibrium of the contract.

The existence of hardship gives the disadvantaged party a right to request that the parties renegotiate the contract. Upon failure to reach an agreement, the disadvantaged party can request the court or arbitral tribunal to either terminate or adapt the contract [14].

The section on hardship starts off, in Article 6.2.1, by stressing that pacta sunt servanda is an underlying principle of the UNIDROIT Principles. This entails that performance must be rendered even though a change in the market has caused the contract to become more burdensome for one party [15].

Article 6.2.2 of the UNIDROIT Principles defines what is to be understood as hardship. It reads: "[T]here is hardship where the occurrence of events fundamentally alters the equilibrium of the contract either because the cost of a party's performance has increased or because the value of performance a party receives has diminished . . . ". According to this provision, a change in the market after the conclusion of the contract only amounts to hardship if the equilibrium of the contract has been fundamentally altered. The requirement of a fundamental alteration of the contract entails that normal economic risks is not to be regarded as hardship but only developments in the market that lie far beyond the normal economic development [16].

The Comments on the UNIDROIT Principles state, as a guideline in cases of price increases or decreases [17], that an alteration of 50% or more is likely to be regarded as a fundamental alteration of the equilibrium of the contract [18]. At the present time, there is no case law establishing hardship on the basis of the UNIDROIT Principles [19]. Therefore, it can only be assumed that the hardship provisions will be applied in accordance with the Comments on the UNIDROIT Principles. Consequently, hardship is likely to require a price increase of 50% or more [20].

The application of hardship is, according to Article 6.6.2 of the UNIDROIT Principles, further conditioned that the event occurs after the conclusion of the contract, that the event could not reasonable be taken into account, that the event is outside the disadvantaged party's control, and that the risk of the event is not assumed by the disadvantaged party.

IV. Can the Rules of Hardship Be Applied as a Validity Defense

For the disadvantaged party to claim hardship as a validity defense, it requires that the hardship provisions laid down in the UNIDROIT Principles can be regarded as a validity defense. It further requires that this defense can be applied when the CISG is the governing law.

A. Can the principle of hardship be regarded as a validity defense?

The section on hardship is placed under chapter 6 of the UNIDROIT Principles that relates to performance of the contract. The placement of the hardship provisions indicates that the provisions probably were intended as a defense against performance. This perhaps suggests that hardship is to be regarded as an excuse and not as a validity defense.

The hardship provisions relate to developments after the conclusion of the contract. It has been said that a validity defense can generally be distinguished from an excuse defense on the basis that validity is concerned with the balance between the parties in the formation process while excuse is concerned with the problems arising when an unforeseen development subsequent to the date of the contract renders performance either impossible or difficult [21]. To the extent this is a valid distinction, it can be argued that hardship is to be regarded as an excuse and not as a validity defense.

On the other hand, national doctrines similar to hardship [22] have been regarded as validity defenses. Since the UNIDROIT Principles is regarded as a restatement of general principles, it can therefore be assumed that, in line with the national doctrines, it is possible to argue that hardship under the Principles may be regarded as a validity defense [23].

The conclusion is the hardship provisions of the Principles appear to have elements of both excuse and validity, and it is possible that they may be regarded as a validity defense.

B. Validity issues in the CISG

According to Article 4 CISG [24], the issue of validity is not governed by the CISG. This entails that the specific validity issue addressed is not expressly provided for in the CISG [25]. Validity issues not so provided for are to be solved in accordance with the applicable domestic law determined by the rules of private international law unless the parties have identified a gap-filling law in their contract [26]. The present paper presupposes that the parties have agreed that the UNIDROIT Principles applies to issues not governed by the CISG. Therefore, to the extent that the UNIDROIT Principles addresses them, validity issues are to be solved in accordance with the Principles. Since it is possible that the hardship provision may be regarded as a validity defense [27], the starting point is that, if so, the disadvantaged party can be released from his obligations under the contract.

C. Can the hardship be applied as a validity defense when the CISG is the governing law?

Article 4 CISG states that ". . . except as otherwise expressly provided for in this Convention, it is not concerned with: (a) the validity of the contract . . .". The CISG itself does not provide guidance on how to determine whether or not a question is one of validity or an issue regulated by the CISG.

It has been said that the decisive test is if the rule is invoked by the same operative facts that invoke a rule of the Convention [28] and that domestic law or general principles on validity are not applicable if the CISG provides a functionally adequate solution to the problem which has been settled nationally by a question of the validity of the contract [29]. Such an interpretation is supported by the wording in Article 4 CISG ". . . except as otherwise expressly provided in the Convention . . .". Other than Article 55, the CISG does not contain any other provisions that expressly use the term validity, but it has been said that if a provision in the CISG provides a rule which would contradict the rules on validity of contracts in a national legal system, then the CISG prevails [30].

This interpretation has been criticized for not giving sufficient weight to the drafter's desire to use article 4(a) to protect domestic public policy concerns. Support for this criticism has been said to be that the reference in article 4 to "express" appears to be a historical accident because the CISG, contrary to its predecessor ULIS, does not contain any provisions which expressly govern matters of validity [31]. However, the purpose of Article 4(a) is mainly to protect domestic public policy concerns and this purpose can generally be achieved by the decisive-test approach because of the number of instances in which the CISG does not purport to provide solutions to subjects with important domestic policy concerns. Furthermore, the decisive-test approach to Article 4(a) seems to be in line with the underlying goal of the CISG, namely to promote uniformity [32], because if the CISG does provide a solution then applications of domestic law will result in divergent rulings [33]. Therefore, the decisive-test approach seems to be an appropriate compromise between two divergent goals, namely the goal of uniformity in the CISG as such and the goal of protecting domestic policies in Article 4(a).

In interpreting the CISG, Article 7(1) [34] dictates that regard is to be had to the CISG's international character, the necessity of promoting uniformity and the observance of good faith. This entails that the provisions of the CISG are to be given the widest possible application and that public policy concerns are to be interpreted narrowly [35].

D. Do the hardship provisions invoke the same operative facts as a rule in the CISG?

If a rule in the CISG invokes the same operative facts as hardship then the CISG should prevail and hardship should not be regarded as a validity defense when the CISG is the governing law. A rule of the CISG that might invoke the same operative facts as hardship is Article 79.

1. Article 79 CISG

Article 79 CISG uses the expression "impediment" [36]. The word "impediment" is an elastic word without any indications as to whether it only relates to physical impossibilities or if it also encompasses economic impossibilities. However, in the end of the UNCITRAL discussion, the general view was that impediment covers both economic and physical impediments [37]. Therefore, Article 79 can be said to apply both to economic and physical impediments.

That Article 79 also encompasses economic impediments entails that a party can be excused under the CISG on the basis of economic dislocations but only if it provides an impediment comparable to a non-economic impediment that excuses failure of performance [38].

When determining what is to be regarded as an impediment, the history of the provision does not give much guidance. The Secretariat Commentary indicates that the conditions are strict [39] but it does not indicate how strict or how big the change in the market has to be before a party can be excused on the basis of Article 79.

The only case that suggests what may be understood as an impediment under the CISG is Nouva Fucinati S.p.A v. Fondmetall International A.B. [40],which contains dicta stating that a party is only excused under Article 79 if performance is rendered impossible. On basis of this interpretation, a party cannot be excused as long as performance had not been made physically impossible; consequently, a party cannot be excused in cases of severe price increases because performance is always physically possible in these cases. However, the ruling has been criticized, regarding the CISG as applying the Italian standard of force majeure and not the CISG's standard of an impediment [41]. Since the CISG has developed a system of its own without any references to domestic doctrine, the ruling does not reflect what is to be understood as an impediment. To date, there is no judicial guideline as to what is to be understood as an "impediment".

2. Does Article 79 invoke the same operative facts as hardship?

If the hardship provisions laid down in the UNIDROIT Principles invoke the same operative facts as Article 79 CISG, the hardship provisions should not be applied as a validity defense.

Both the hardship provisions and Article 79 CISG are concerned with changes in the market that happen after the conclusion of the contract and that the changes make the enforcement of the contract very burdensome on one of the parties. On the basis of this, it can be argued that the two provisions do invoke the same operative facts [42]; consequently, a change in the market after the conclusion of the contract should not constitute a reason for applying the hardship provision as a validity defense since the facts are settled in Article 79 as grounds for excuse for damages for failure to perform [43].

One can find further support for the proposition that the two provisions do invoke the same operative facts in the Comments on the Principles. They state that there may be factual situations that can be considered both as hardship and as an impediment [44]. The theory stating that hardship cannot be regarded as a validity defense has been supported by case law [45].

On the other hand, the requirements for change in the market to amount to an impediment under Article 79 are much stricter than the requirements of a fundamental alteration of the equilibrium of the contract under the hardship provisions. But the difference in requirements should not in itself be regarded as sufficient points of distinctions to conclude that Article 79 does not invoke the same operative facts as hardship. The factual situations that are invoked in the two rules can be regarded as similar which entails that the provisions do invoke the same operative facts. On this basis, the hardship provisions should not be accepted as a validity defense because the situation is regulated by Article 79 CISG.

But there are bases for distinguishing between hardship and Article 79. The effect of hardship under the UNIDROIT Principles and an impediment under the CISG are different. According to Article 79(1) CISG, a party is not liable for damages for his failure to perform in the case where an impediment prevents performance; however, other remedies are not affected by the existence of an impediment [46]. The existence of an impediment does not affect the contract as such but merely excuses a party from liability for damages. The effect of hardship under the UNIDROIT Principles is that the contract can be terminated or adapted upon failure to reach a new agreement [47]. That the contract can be terminated or adapted entails that hardship affects the entire contract as such and not just a specific remedy. If hardship and Article 79 are compared on the basis of the distinction between the effect of the two rules, then it entails that the hardship provision and Article 79 do not provide a functionally adequate solution to the issue of changes in the market after the conclusion of the contract. On this basis it could be argued that the two provisions do not invoke the same operative facts.

A further distinction between the two provisions is the possibility of adaptation of the contract. The hardship provisions allow the court or tribunal to adapt the contract. An adaptation of the contract is not expressly allowed under the CISG regime [48]. The possibility of adaptation of the contract also supports the proposition that the two provisions do not provide functionally adequate solution to market changes and that hardship can be accepted as a validity defense under the CISG.

Finally, hardship and Article 79 can also be distinguished by the time of invoking the rule. Article 79 only comes into play in cases of breach of the contract and it is directed to a settlement in cases of non-performance by the party. By contrast, the hardship provisions can be applied before the time of performance has come and therefore, before a party is in breach of the contract. This indicates that Article 79 does not provide a functionally adequate solution to the issue of changed circumstances.

The above discussion reveals that it could be argued that the two provisions do invoke the same operative facts which entails that the hardship provision should not be regarded as a validity defense under the CISG. But at the same time it could also be argued that the provisions do not provide functionally adequate solutions to the problem which entails that the hardship provisions might perhaps be regarded as a validity defense under the CISG.

All factors considered, it would seem that the decisive question ought to be if the CISG intended for the principle of hardship to exist side by side with Article 79.

During the preparations in UNCITRAL and at the Diplomatic Conference, proposals were made to include a CISG provision on hardship. However, these proposals were rejected. The reasons for rejecting a provision on hardship was that such a provision would cut too deeply into the parties' duty to perform their obligations under the contract [49]. The rejection of a hardship provision indicates the CISG never intended that hardship should exist side by side with Article 79.

Furthermore, Article 7(1) dictates that the CISG is to be interpreted to promote uniformity and all provisions of the CISG are to be interpreted in the light of the goal of uniformity. An excuse based on hardship is less strict than an excuse based on Article 79. If the court or tribunal regards it as a gap in the CISG and thereby applies domestic rules on hardship, this would result in divergent solutions [50] and an allowance of the application of domestic rules on hardship under the CISG would jeopardize the goal of uniformity. The concern for uniformity does not have the same hesitations when the hardship provision is reflected in general principles because an application of general principles will not entail divergent ruling and it would therefore not undermine the goal of uniformity. But if the UNIDROIT Principles' provisions on hardship were to be accepted as an applicable validity defense, then domestic doctrines should likewise be applicable in cases where the parties have not agreed on the UNIDROIT Principles, and then the goal of uniformity would be jeopardized.

D. Conclusion on whether the hardship provisions can be applied as a validity defense

The legislative history and uniformity arguments appear dispositive. The conclusion is the hardship provisions of the Principles should not be applied as a validity defense when the CISG is the governing law.

V. Can Hardship Be Applied as a Defense Against Specific Performance?

Section IV has shown that hardship should not be applied as a validity defense. That being the case, the issue in this section is, whether the hardship provisions in the UNIDROIT Principles can be applied as a defense against specific performance when the CISG is the governing law.

A. The UNIDROIT Principles on specific performance

For the disadvantaged party to claim hardship as a defense against specific performance, the hardship provisions in the UNIDROIT Principles have to be able to be applied as such a defense. The provisions of hardship are placed under Section 6 regarding performance of the contract. The placement of the hardship provisions in the section on performance suggests that it was intended as a defense against specific performance.

The UNIDROIT Principles contains a provision regarding excuses for specific performance in Article 7.2.2 [51]. According to this Article, a court or arbitral tribunal is bound to order performance [52] unless the disadvantaged party is excused because performance has become impossible or unreasonable. Subparagraph (b) of Article 7.2.2 entails that performance cannot be required if changes in the circumstances after the conclusion of the contract make it onerous to enforce the contract [53]. The Comments to the Principles refer to the hardship provisions in Article 6.2 [54]. This entails that the requirements for applying Article 7.2.2(b) are the same as the requirements under Article 6.2; consequently, under the UNIDROIT Principles hardship can be applied as a defense against specific performance [55].

There is a cross-reference to hardship in the Comments to Article 7.2.2 (Performance of non-monetary obligation). Although there is no cross-reference to hardship in the Comments to Article 7.2.1 (Performance of monetary obligation), the Comments to Article 6.2.2 (Definition of hardship) state that "[t]he performance may be that either of a monetary or a non-monetary obligation" [56]. Under the Principles, the hardship defense would thus appear to apply to the obligation to pay the price as well as non-monetary obligations.

B. The provisions in the CISG on specific performance

According to Article 46 CISG "[T]he buyer may require performance by the seller of his obligations unless the buyer has resorted to a remedy inconsistent with this requirement" [57]. Regarding the seller's obligation to perform, Article 46 imposes no limits to the right to require specific performance other than if the party has resorted to remedies inconsistent with specific performance such as avoidance. However, the buyer's right to specific performance is restricted by Article 28 CISG that reads as follows: "If, in accordance with the provisions of this Convention, one party is entitled to require performance of any obligation by the other party, a court is not bound to enter a judgement for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention".

These provisions read in conjunction with each other entail that a claim for specific performance is first to be evaluated under the CISG rules but if a party has the right to specific performance under the CISG, then Article 28 can be applied to refuse specific performance [58].

The question is then if a court or arbitral tribunal can apply Article 28 and thereby deny a claim for specific performance based on hardship as it is reflected in the UNIDROIT Principles.

1. Is Article 28 CISG to be regarded as a procedural rule or a discretionary rule?

There is no provision on hardship as a defense against specific performance in the CISG. In order to apply the hardship rule in the UNIDROIT Principles as a defense against specific performance when the CISG is the governing law, Article 28 CISG has to be regarded as a discretionary rule and not just a procedural rule. [59]

When determining whether Article 28 contains a discretionary rule, the history of the provision is relevant. Article 26 of the 1978 Draft, the antecedent to Article 28 CISG, was understood as a procedural rule to the effect that it only referred to whether the court was authorized to award specific performance [60]. The question is then, if Article 28 CISG is to be understood to the same effect as Article 26 of the 1978 Draft. There is a significant difference between the wording of Article 28 CISG and Article 26 of the 1978 Draft. The 1978 Draft reads ". . . unless the court could not . . . " whereas Article 28 CISG reads ". . . unless the court would not . . . ". This change in the wording can be understood to the effect that Article 28 CISG, contrary to Article 26 of the 1978 Draft, does contain a discretionary rule.

This understanding of Article 28 is supported by the leading scholars on the CISG who refer to Article 28 as a safety valve [61]. In line with these scholars, it can be concluded that Article 28 leaves it at the discretion of the court not to enter a judgment for specific performance and the relevant test is if the court would grant specific performance in similar contracts of sale that are not governed by the CISG.

Consequently, it will be possible for a court to apply "its own law in respect of similar contracts of sale not governed by th[e] Convention,", and thereby its hardship or other relevant provisions, through the application of Article 28 [62].

2. Does Article 28 refer to the law of the forum or the governing law of the contract?

Article 28 CISG uses the expression "its own law" but it does not specifically state whether this refers to the law of the forum or the governing law of contract.

Traditionally, the law that governs issues falling outside the scope of the CISG will be the law selected by the principles of private international law of the law of the forum [63]. The application of the rules of private international law entails that the governing law may be the CISG and the UNIDROIT Principles where the parties have agreed on these instruments as the governing law.

But the question is if Article 28's wording ". . . its own law . . ." is to be understood as a traditional private international law conflict or as a reference to the law of the forum. It has been held by Professor Schlechtriem that the wording "its own law" in itself indicates that it refers to the law of the forum [64]. This view finds support in a comparison between the wording of Article 7(2) CISG and Article 28 CISG. Article 7(2) refers to the principle of private international law and uses the expression ". . . the law applicable by virtue of the rules of private international law" whereas Article 28 uses the expression ". . . under its own law . . .". It is reasonable to assume that if Article 28 were to be understood as a reference to the private international law, then it would be expected that it would apply the same wording as Article 7(2). The difference in the wording indicates that the two provisions are not to be understood in the same way. This supports the view that Article 28's wording is to be understood as a reference to the law of the forum and not to the governing law of the contract.

The view that Article 28 refers to the law of the forum is also supported by the predecessors of the article because the wording in the Hague Convention of July 1st 1996 Article VII [65] was understood as an reference to the law of the forum regarding specific performance [66]. The similarities between Article VII of the Hague Convention and Article 28 CISG indicates that the wording in Article 28 is to be understood as an reference to the domestic rules of the forum and not as a reference to the norms of the private international law [67].

Finally, the view that Article 28 CISG refers to the law of the forum is supported by the purpose of Article 28. Article 28 is a compromise between two conflicting views regarding specific performance, namely the common law system and the civil law system [68]. The purpose of Article 28 is to prevent verdicts that are offensive to the forum court [69]. If Article 28 were to be understood as a reference to the governing law of the contract, then Article 28 would not prevent verdicts offensive to forum courts because the private international law in a common law system could point at a civil law as the governing law and vise versa. Consequently, the purpose of Article 28 can only be achieved if Article 28 is to be regarded as a reference to the law of the forum.

On the other hand, there are also arguments for the view that Article 28 should be understood as a reference to the governing law of the contract.

First of all, one of the reasons for making a uniform law is to create certainty in international commercial contracts. If Article 28 is to be understood as a reference to the law of the forum it will create uncertainties because a party's right to specific performance will depend to the forum of the dispute and this can lead to forum shopping. Therefore, the parties will not be able to predict their rights unless they have agreed upon the forum of the dispute. Consequently, the consideration of the necessity of certainty in commercial contracts supports the view that Article 28 should be understood as a reference to the governing law.

Finally, if one takes into consideration that the CISG is also to be applied by arbitral tribunals, it may not be reasonable to regard the wording in Article 28 as a reference to the law of the forum. An arbitral tribunal is also bound by Article 28 to the extent that "its own law" may be applied to deny a claim for specific performance [70]. It has been said that the Article 28 reference to the law of the forum likewise applies to an arbitral tribunal [71]. This entails that the arbitral tribunal is to consider the law of where the tribunal is situated and not the law applicable according to the rules of private international law when considering whether a party should be granted an award on specific performance. However, the seating of an arbitration tribunal is often in a state to which the parties have no special relationship [72]. The lack of relation to the law of the forum may perhaps make it appear unreasonable to require the arbitral tribunal to consider lex fori when ruling on the substance of the dispute [73]. Furthermore, when an arbitral tribunal is to decide on the substance of the dispute, the international arbitration rules normally state that the applicable law is the law designated by the parties [74]. The law designated by the parties in the case we are considering is the CISG with the UNIDROIT Principles as the gap-filling law; consequently, the tribunal may wish to apply these instruments. It seems to be contrary to the rules regarding the governing law if the tribunal should consider the law of the forum when dealing with the issue of specific performance. Moreover, the purpose of arbitration is often to detach the dispute from any national law and solve the dispute on a more international level than is possible for a court. A recourse to the law of the forum when considering a party's right to specific performance would be contrary to this purpose. Therefore, the purpose of an arbitral tribunal and the rules regarding the governing law can point to the position that the wording "its own law" in Article 28 CISG should be regarded as a reference to the law designated by the parties. And, an arbitral tribunal may well so rule.

However, the better approach -- in keeping with the intent of Article 28 -- would be to regard it as a reference to the law of the forum, and it is probably to be interpreted in accordance with its purpose, namely to prevent verdicts that are offensive to the forum court. This purpose can only be achieved if Article 28 refers to the law of the forum. Therefore, Article 28 should properly be understood as a reference to the law of the forum.

3. Can the parties derogate from the meaning of the wording "its own law" in Article 28?

An underlying principle of the CISG is freedom of contract as reflected in Article 6 CISG. According to this Article "[T]he parties may . . . derogate from or vary the effect of any of its [CISG] provisions". It has been said that Article 6 is to be taken literally which entails that the parties may derogate from or vary the effect of all the provisions of the CISG other than article 12 [75]. Such an understanding of Article 6 means that the parties ought to be able to derogate from Article 28.

However, with regard to Article 28, it has been said by Professor Huber that Article 28 restricts the scope of the application of the CISG in relation to specific performance and therefore also restricts the scope of Article 6 [76]. Accordingly, the effect of an agreement regarding specific performance is to be evaluated under the law of the forum and not under the CISG. Furthermore, it has been argued by Professor Lando that a court may refuse to order specific performance of a contract even if the parties have agreed that the contract is to be performed specifically [77]. A refusal of specific performance by virtue of Article 28 despite the parties' agreement on the right to specific performance presupposes that Article 28 prevails over Article 6. This view seems to be supported by the fact that Article 28 is mainly directed to courts or arbitral tribunals. The article gives the court or arbitral tribunal the discretionary power to refuse specific performance [78] and this can indicate that Article 28 is not subject to the parties' agreement. If this is the case, it would mean that the parties cannot derogate from Article 28.

Furthermore, the purpose of Article 28, namely to serve as a safety valve for the forum court, supports the view that Article 28 is not subject to the parties' agreement. This purpose cannot be achieved if the parties were free to derogate from the effect of Article 28. In order to respect the purpose of the article, Article 28 should probably be understood as a mandatory rule in the sense that it is not subject to the parties' agreement.

On the other hand, an interpretation of Article 28 to the effect that it is not subject to the parties' agreement is contrary to the literal wording of Article 6 that allows the parties to derogate from any provisions other that Article 12. If Article 28 were not subject to the parties' agreement it would be reasonable to expect that Article 28 was included in Article 6 since it expressly excludes only Article 12. Since Article 28 is not specifically mentioned in Article 6, it can be argued that Article 28 is subject to the parties' agreement [79]. A literal reading of Article 6 entails that the parties can derogate from the discretionary rule laid down in Article 28 CISG and direct the court to apply general principles of international commercial law or the UNIDROIT Principles to the issue of specific performance.

However, considering the uncertainties regarding the parties' ability to derogate from Article 28 and that a derogation from Article 28 deprives the court or arbitral tribunal from using the discretionary rules laid down in the law of the forum, it is reasonable to assume that a court or arbitral tribunal will require very clear indications of a derogation from Article 28. Therefore, a contract clause on the governing law will probably not in itself be regarded as a derogation from Article 28. Consequently, the hardship provision in the UNIDROIT Principles should not be applied as a defense against specific performance under the CISG.

C. Does the CISG exclude the application of hardship as a defense against specific performance

If one assumes that the parties have expressly derogated from the reference to the law of the forum in Article 28 to the effect that the UNIDROIT Principles applies to excuses for specific performance, then the question is if Article 7.2.2. of the UNIDROIT Principles can be applied when the CISG is the governing law.

Even though Article 28 CISG is to be regarded as a discretionary rule that allows a court or tribunal to deny specific performance, the provision should be read in conjunction with the rest of the CISG. This entails that a court or tribunal cannot deny specific performance if such an award would be contrary to specific provisions of the CISG.

A denial of an award of specific performance on basis of hardship could possibly be contrary to Article 79 CISG according to which a party is not subject to damages liability for failure to perform if the failure to perform was due to an impediment beyond the party's control. The question is then if this provision also can be regarded as an indication of the reasons for denying specific performance.

It has been held by Professor Huber that the German doctrine of "Wegfall der Geschaftsgrundlage" cannot be relied upon as a defense against specific performance because Article 28 does not enable exemptions that are more extensive that those under Article 79 [80]. Considering the similarities between hardship in the UNIDROIT Principles and the doctrine of "Wegfall der Geschaftsgrundlage" [81], it is reasonable to assume that the same will apply to the hardship provision in the UNIDROIT Principles.

However, Article 79(5) expressly states that "[N]othing in this article prevents either party from exercising any right other than to claim damages under this Convention". This entails that Article 79 cannot be regarded as an indication of the grounds for denying specific performance. The application of Article 79 to other remedies than damages was rejected during the preparation of the CISG [82] and on this basis, it can be concluded that Article 79 does not indicate the reasons for denying specific performance.

On the other hand, it has also been held that if Article 79(5) CISG is to be given full effect, then the consequences would be that a party can claim specific performance even though the other party was exempted from liability for damages [83]. Such an understanding of Article 79 would be inconsistent. But the effect of Article 79(5) is not as harsh as it appears at the first glance because Article 28 gives the court the right to deny specific performance reasoned by an impediment by applying domestic law [84].

D. Conclusion on whether the hardship provision can be applied as a defense against specific performance

The hardship provisions of the UNIDROIT Principles should not be applied as a defense against specific performance of a contract governed by the CISG. An exception may apply in the unlikely event that the parties have expressly agreed upon the UNIDROIT Principles as the applicable law regarding excuses for specific performance. If the parties have done that, then the CISG ought not to prevent application of the excuses laid down in the UNIDROIT Principles. However, the effect of so applying Article 7.2.2 of the UNIDROIT Principles with the other provisions of the CISG intact would seem to make little practical sense as while the party may be excused from the obligation to perform, the CISG's damages remedy could remain unaffected. This entails that the party could still be liable for damages absent the excuse provided in CISG Article 79, and consequently, the other party can still claim full compensation.

VI. Conclusion

The present study has shown that the hardship provisions in the UNIDROIT Principles has similarities to both a validity defense and an excuse defense. If one consider hardship as a validity defense, then the present study has shown that the hardship provisions in the UNIDROIT Principles should not be applied as a validity defense when the CISG is the governing law because the CISG governs this issue in Article 79. In addition, if hardship is regarded as an excuse for specific performance, then the CISG specifically leaves it to the court or arbitral tribunal to apply the discretionary rules laid in the substantive domestic law of the forum. Thereby, the UNIDROIT Principles should not be applied.

The present study has generally verified my hypothesis, namely that the hardship provisions in the UNIDROIT Principles should not be applied in a gap-filling manner when the CISG is the governing law. That the hardship provisions in the UNIDROIT Principles should not be so applied when the CISG is the governing law seems to be in line with the intent and goal of the CISG.


FOOTNOTES

* Pace Essay Submission, June 1998

1. The United Nations Convention on Contracts for International Sale of Goods, 10th of April 1980.

2. The UNIDROIT Principles of International Commercial Contracts, Rome, 1994.

3. According to Article 1 CISG, the CISG is applicable when the parties have their places of business in different States that are Contracting States or when the rules of private international law lead to a Contracting State. The parties are, according to Article 6 CISG, free to agree that the CISG applies to contracts that are not governed by the CISG. See Peter Schlechtriem, Commentary on the UN Convention on the International Sale of Goods (CISG)", 2nd ed. (in translation) Clarendon Press (Oxford, 1998) [cited as Schlechtriem, CISG], p. 58. Such an application would, of course, be subject to otherwise applicable mandatory laws.

4. Also referred to as UNCITRAL.

5. The CISG has been adopted by 53 States including the U.S., Germany, China, Australia and the Scandinavian Countries.

6. Michael Joachim Bonell, "An International Restatement of International Commercial Contracts", 2nd ed. Transnational Publications (Irvington, New York, 1997) [cited as Bonell, A Restatement], p. 230. [Chapter 4 is also reported at http://www.cisg.law.pace.edu/cisg/biblio/bonell.html].

7. Michael Joachim Bonell, "The Unidroit Principles of International Commercial Contracts and the Vienna Convention (CISG) - Alternatives or Complementary Instruments?", http://www.cisg.law.pace.edu/cisg/biblio/ulr96.html [cited as Bonell, UNIDROIT and CISG], p. 3. [The article is also published in Uniform Law Review 1996-1, p. 26-39].

8. In ICC case no. 7110, the arbitral tribunal stated that the UNIDROIT Principles is the most genuine expression of general rules. See also Court of Arbitration of International Chamber of Commerce rendered in 1996 and an ad hoc arbitral tribunal sitting in Rome on 4 December 1996. All cases are reported in Bonell, A Restatement supra n. 6 at p. 244 and 248.

9. However, there are instances where rules laid down in the UNIDROIT Principles do not reflect the rules in the CISG, for example Article 1.7 of the UNIDROIT Principles imposes upon the parties a duty to act in good faith whereas good faith under Article 7(1) of the CISG is stated only to relate to the interpretation of the CISG as such. See "UNIDROIT, International Institute for the Unification of Private Law, Principles of International Commercial Contracts", (Rome, 1994) [cited as Comments on the UNIDROIT Principles], p. viii.

Even though the black letter rule of the CISG regarding good faith only applies the principles of good faith to the interpretation of the CISG, most commentators agrees that the principle of good faith is a general principle of the CISG. Consequently, the parties are under a duty to act in good faith. In this sense, the CISG and the UNIDROIT Principles can be said to impose somewhat similar obligations to act in good faith. See Fritz Enderlein and Dietrich Maskow, "International Sales Law, United Nations Convention on Contracts for the International Sale of Good", Oceana Publications [cited as Enderlein and Maskow], p. 56. See also C.M Bianca and M.J Bonell, "Commentary on the International Sales Law, the 1980 Vienna Sales Convention", Guiffré (Milan, 1987) [cited as Bianca and Bonell], p. 84-85.

10. Bonell, UNIDROIT and CISG supra n. 7 at p. 6.

11. Peter Winship in Nina M. Galston, "International Sales Law, United Nations Convention on Contracts for the International Sale of Good", Oceana Publications (New York * London * Rome, 1992) [cited as International Sales], p. 1-33.

12. An agreement to apply the UNIDROIT Principles to issues that are not settled by the CISG could be drafted as follows: "This contract shall be governed by CISG, and with respect of matters not governed by this Convention, by the UNIDROIT Principles of International Commercial Contracts". The example is taken from Bonell, UNIDROIT and CISG supra n. 7 at page 8.

But since the UNIDROIT Principles is an restatement of general principles for international commercial contracts, it can also be applied if the parties merely have referred to "general principles" or "lex mercatoria". See Preamble of the UNIDROIT Principles, and Comments on the UNIDROIT Principles supra n. 2 at p. 4.

13. Two awards rendered by the International Court of Arbitration of Federal Chamber of Commerce of Vienna and ICC award No. 8128 of 1995 rendered by the Court of Arbitration of the International Chamber of Commerce refer to the UNIDROIT Principles in order to fill a gap in the CISG regarding the interest rate. All cases are reported in Bonell, A Restatement supra n. 6 at p. 247.

14. UNIDROIT Principles Article 6.2.3.

15. Comments on the UNIDROIT Principles supra n. 2 at p. 145. See also an award rendered in 1996 by the Court of Arbitration of the International Chamber of Commerce where the Arbitral Tribunal stressed that hardship is to be regarded as an exemptional character which requires a fundamental alteration in the original contractual equilibrium and not just a mere increase in the cost of performance. The case is reported in Bonell, A Restatement supra n. 6 at p. 243.

16. Maskow Dietrich, "Hardship and Force Majeure", The American Journal of Comparative Law (Vol. 40, 1992, p. 657-669) [cited as Maskow, Hardship and Force Majeure], p. 662.

17. In the following, a change in the prices will only be referred to as a price increase. But it applies just as much to price decreases.

18. Comments on the UNIDROIT Principles supra n. 2 at p. 147.

19. Although the case Nouva Fucinati S.p.A v Fondmetall International A.B is not concerned with the CISG nor the UNIDROIT Principles, it does state that a 43,71 % price increase did not amount to hardship under Italian Law. The case is reported on http://cisgw3.law.pace.edu/cases/930329i3.html

20. However, the provisions of hardship are not only applicable in cases of price increase or decrease, but also to other alterations of the contract because a fundamental alteration of the contract can be caused by other events than price increases, among others, in cases where the purchased good has lost all value for the buyer. See Court of Arbitration of Berlin in 1992. The case is reported in Bonell, A Restatement supra n. 6 at p. 240 and in Maskow, Hardship and Force Majeure supra n. 16 at p. 667.

21. Todd Weitzmann, "Validity and Excuse in the U.N. Sales Convention", http://www.cisg.pace.edu/cisg/biblio/1weitzm. html [cited as Weitzmann], p. 6. [The article is also published in 16 Journal of Law and Commerce, 1997, p. 265-290].

22. Hardship in the UNIDROIT Principles is being compared to the German doctrine of "Wegfall der Geschäftsgrundlage", the French doctrine of "imprévision", the Italian doctrine of "eccessiva oneosità supra ventuna" and the American doctrine of "frustration of purposes". See Comments on the UNIDROIT Principles supra n. 2 at p. 146.

23. Weitzmann supra n. 21 at p. 46.

24. Article 4 CISG reads " . . . [I]n particular, except as otherwise expressly provided in this Convention, it is not concerned with: (a) the validity of the contract or of its provisions or of any usage; . . . ".

25. Bianca and Bonell supra n. 9 at p. 45.

26. Albert H. Kritzer, "International Contract Manual, Guide to Practical Application of the United Nations Convention on Contracts for the International Sale of Goods", Kluwer Law and Taxation Publishers (Deventer, Boston, 1989) [cited as Kritzer], p. 81 and Schlechtriem, CISG supra n. 3 at p. 43.

27. See supra Section IV.A..

28. John O. Honnold, "Uniform law of International Sales under the 1980 United Nations Convention", 2nd ed. Kluwer Law and Taxation Publishers (Deventer, Boston, 1990) [cited as Honnold 2], p. 115 and Bianca and Bonell supra n. 9 at p. 48.

29. Enderlein and Maskow supra n. 9 at p. 41.

30. The Secretariat Commentary, in the Official Records, page 17, states: "Although there are no provisions in this Convention which expressly govern the validity of the contract, some provisions may provide a rule which would contradict the rules on validity of contracts in a national legal system. In case of conflict the rule in this Convention would apply". The Secretariat Commentary seems to restrict this principle by stating "The only article in which the possibility of such a conflict is apparent is [Article 11]". Id. But elsewhere the Commentary illustrates the fact that there are other ways and places in which the Convention has expressly provided for a matter, for example, by pointing out that the Article 29(1) rule that a contract may be modified by the mere agreement of the parties also conflicts with the pre-empts a domestic validity doctrine of consideration. See Official Records, p. 28. See also Article 78 and 84(1) which expressly state that interest is allowed and thus contradict domestic validity rules in effect in certain Islamic jurisdictions.

31. See Helen Elisabeth Hartnell, "Rousing the Sleeping Dog: The Validity Exceptions to the Convention on Contracts for the International Sales of Goods", http://www.cisg.law.pace.edu/cisg/biblio/hartnell.html [cited as Hartnell], p. 25-26 and 29. [The article is also published in the Yale Journal of International Law, 1993, p. 1-93]

32. Honnold 2 supra n. 28 at p. 115.

33. For example, it has been held that Article 8 CISG overrules the American validity rule of parol evidence. See a 29 June 1998 ruling by the United States Court of Appeals for the Eleventh Circuit where the court stated: "[G]iven article 8(1)'s directive to use the intent of the parties to interpret their statements and conduct, article 8(3) is a clear instruction to admit and consider parol evidence regarding the negotiations to the extent they reveal the parties' subjective intent." The case is reported on http://cisgw3.law.pace.edu/cases/980629u1.html

See also Professor Honnold's discussion in Honnold 2 supra n. 28 at p. 310, on how the validity rule in the American Uniform Commercial Code Article 2-316 on exclusion or modification of warranties are ousted out by Article 8 CISG.

34. Article 7(1) CISG reads: "[I]n the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.".

35. Bianca and Bonell supra n. 9 at p. 48; Hartnell supra n. 31 at p. 25 and 35 and Phanesh Koneru, "The International Interpretation of the UN Convention on Contracts for the International Sales of Goods: An Approach Based on General Principles", http://www.cisg.pace.edu/cisg/biblio/koneru.html [cited as Koneru], p. 20 [The article is also published in the Minnesota Journal of Global Trade, 1997 on p. 105-152].

36. Article 79 CISG reads: "a party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and he could not reasonable have expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences."

37. Peter Schlechtriem, "Uniform Sales Law", Manzsche Verlags- und Universitätsbuchandlung (Vienna, 1986) [cited as Schlechtriem, Uniform Law], p. 102.

38. Honnold 2 supra n. 28 at p. 543 - 544.

39. See The Secretariat Commentary, the Official Records, page 55 paragraph 5 and Honnold 2 supra n. 28 at p. 542.

40. Issued by Tribunale Civile di Monza on the 14th of January 1993. Reported in UNILEX.

Another case concerning impediments is Clout Case 166 issued on the 21st of March 1996 by Schiedsgericht der Handelskammer Hamburg where the court ruled that a Chinese manufacture is not excused on basis of Article 79 because of financial difficulties. But the reasoning in this case is that the financial difficulties were within the control of the Claimant. It does not comment on whether the financial difficulties could be regarded as an impediment as such. The case is reported in A/CN.9/SER.C/ABSTRACTS/12

41. Weitzmann supra n. 21 at p. 15.

42. That hardship and force majeure do invoke the same operative facts are, among others, supported by Tallon in Bianca and Bonell supra n. 9 at p. 594; Schlechtriem, CISG supra n. at p. 45 and Schlechtriem in von Caemmerer/Schlechtriem, "Kommentar sum Einheitliched UN-Kaufrecht", 2nd ed. C.H. Beck (München, 1995) [cited as v. Caemmerer/Schlechtriem], p. 75.

43. Enderlein and Maskow supra n. 9 at p. 41.

44. Comments on the UNIDROIT Principles supra n. 2 at p. 150.

45. In a ruling of 14th of May 1993 by Landsgericht Aachen, the court stated that the German doctrine of Wegfall der Geschäftsgrundlage could not be applied when the CISG is the governing law because these matters are exhaustively covered by the CISG. The doctrine of Wegfall der Geschäftsgrundlage is similar to the rules of hardship and it can therefore, on the basis of this ruling, be concluded that the issue of changed circumstances is regulated by the CISG. Consequently, this is a ruling that the hardship provision cannot be regarded as a validity defense under the CISG. Furthermore, in a ruling in the case of Nuova Fucinati S.p.A. v. Fondmetal International A.B issued on the 14th of January 1993 by Tribunale Civile di Monza, the tribunal stated, in an obitor dictum because the dispute was not governed by the CISG, that a domestic law on hardship could not be applied when the CISG is the governing law because hardship is not expressly excluded from the scope of the CISG by Article 4(a) CISG. Both cases are reported on the UNILEX.

46. Cf. Article 79(5) CISG.

47. Cf. Article 6.2.3 of the UNIDROIT Principles.

48. Honnold 2 supra n. at p. 543-544: "[E]xtreme prices and (especially) currency dislocations may be sufficient widespread to lead to laws or administrative regulations that require contract readjustment. The Convention (Art. 4(a)) does not interfere with such domestic rules on validity". See also Bianca and Bonell supra n. 9 at p. 592

49. John O. Honnold, "Uniform law of International Sales under the 1980 United Nations Convention" 1st ed. Kluwer Law and Taxation Publishers (Deventer, Boston, 1982), p. 442-443: "In the UNCITRAL and at the Diplomatic Conference proposals were made to enlarge the grounds for exemption to include situations in which performance would cause economic hardship. These proposals were rejected on the ground that they cut too deeply into the parties´ obligation to perform the contract. This legislative history does not show that extreme and unforeseeable change in economic circumstances cannot constitute an "impediment" leading to exemption under paragraph (1). What this development does show is that Article 79 of the Convention addresses the general question of exemption based on difficulties of performance, and therefore bars recourse to domestic law in this field. Certainly the fact that a domestic legal system provides for exemption by terminology not used in the Convention (e.g., "frustration", imprévision, "failure of presupposed conditions" or the like) does not justify recourse to the domestic law - an approach that would undermine the Convention's central objective to provide uniformity".

50. Tallon in Bianca and Bonell supra n. 9 at p. 594 "If it were to be regarded as a legal basis of the theory of imprévision in international sales, harmony would be jeopardized and the aim of the Convention, as stated in Article 7(1) would not be attained". See also Schlechtriem, Uniform Law supra n. 37 at p. 102, note 422a.

51. Article 7.2.2 reads: "[W]here a party who owes an obligation other than one to pay money does not perform, the other party may require performance, unless (a) performance is impossible in law or in fact; (b) performance, or where relevant, enforcement is unreasonable burdensome or expensive . . . ".

52. Comments on the UNIDROIT Principles supra n. 2 at p. 173.

53. Comments on the UNIDROIT Principles supra n. 2 at p. 174.

54. Comments on the UNIDROIT Principles supra n. 2 at p. 174: "As to other possible consequences arising from drastic changes of circumstances amounting to a case of hardship, see Arts. 6.2.1. et seq.".

55. Even though hardship can be applied as a defense against specific performance, there are differences between the hardship defense under Section 6.2 and the hardship defense under Article 7.2.2. First of all, the effects of hardship under Section 6.2. and Article 7.2.2 are not the same. Article 7.2.2. only releases a party from the obligation to perform the non-monetary obligation, whereas the effect under Section 6.2. is either termination or adaptation of the contract. Consequently, the application of hardship as a defense against specific performance does not affect the contract as such.

56. Comments on the UNIDROIT Principles supra n. 2 at p. 172.

57. The right to specific performance likewise adheres to the seller according to Article 62 CISG.

58. Joseph Lookofsky, "Understanding the CISG in Scandinavia", DJØF Publishing (Copenhagen, 1996) [cited as Lookofsky, Understanding the CISG], p. 83.

59. If Article 28 only is to be regarded as a procedural rule, the only relevant test is if the court has the authority to award specific performance whereas if Article 28 is to be regarded as a discretionary rule, then it will be possible to apply substantive law and consequently, it might be possible to apply the hardship provisions as a defense against specific performance.

60. Secretariat Commentary, in Official Records, p. 27 and E. Allan Farnsworth, "Damages and Specific Relief", http://www.cisg.law.pace.edu/cisg/biblio/farns.html, p. 3. [The article is also published in the American Journal of Comparative Law, 1979, p. 247-253].

61. Lookofsky, Understanding the CISG supra n. 58 at p. 82 - 83; Bianca and Bonell supra n. 9 at p. 237 - 238; Honnold 2 supra n. 28 at p. 272; Schlechtriem, CISG supra n. 3 at p. 200 and Enderlein and Maskow supra n. 9 at p. 121.

62. It should be noted that Article 28 does not require that the court applies that law, it simply allows that if it so chooses.

63. Honnold 2 supra n. 28 at p. 272.

64. Schlechtriem, CISG supra n. 3 at p. 205.

65. The wording of Article 28 is comparable with the wording in the Hague Convention of July 1st 1996 Article V11 and also the ULIS Article 16. See Secretariat Commentary, in Official Records, p. 27.

66. The Commission preparing the Hague Convention emphasized that the wording referred to lex fori. See Honnold 2 supra n. 28 at p. 273.

67. Honnold 2 supra n. 28 at p. 273.

68. Under the common law system, specific performance is regarded as a specific remedy which generally entails that it is only awarded if damages does not provide adequate compensation. Contrary to the common law system, specific performance is regarded as a natural remedy under the civil law system which generally entails that specific performance can be granted unless such an award is impossible or unreasonable burdensome.

See Schlechtriem, CISG supra n. 3 at p. 200; Schlechtriem, CISG supra n. 3 at p. 199-200; Joseph M. Lookofsky, "Consequential Damages in Comparative Context, From Breach of promise to Monetary Remedy in the American, Scandinavian and International Law of Contracts and Sales", Jurist- og Økonomforbundets Forlag (1989), p. 116-119 and John Fritzgerald, "CISG, Specific Performance and the Civil Law of Louisiana and Quebec", http://www.cisg.law.pace.edu/- cisg/biblio/1fitz.html, p. 4-6 [The article is also published in the Journal of Law and Commerce, 1997, p. 291-313].

69. Honnold 2 supra n. 28 at p. 277.

70. Schlechtriem, CISG supra n. 3 at p. 208.

71. Schlechtriem, CISG supra n. 3 at p. 208.

72. Joseph M. Lookofsky, "Transnational Litigation and Commercial Arbitration, A Comparative Analysis of American, European, and International Law" Transnational Juris Publications, Inc. (Ardsley-on-Hudson, New York) and DJØF Publications (Copenhagen, Denmark, 1992), p. 566.

73. Even though the parties might have little relationship to the forum, an arbitral tribunal is to some extent bound by the law of the forum in the sense that lex arbitri will often be the law of the forum. However, the lex arbitri regulates procedural questions and validity questions regarding the agreement to arbitrate. This does therefore not entail that the arbitral tribunal should be bound by the law of the substantive law and the lack of relations to the forum support that the arbitral tribunal need not apply the substantive law of the forum.

74. See for example the UNCITRAL Arbitration Rules Article 33(1) and the UNCITRAL Model Law of International Commercial Arbitration Article 28(1).

75. Winship in International Sales supra n. 11 at p. 1-33.

76. Schlechtriem, CISG supra n. 3 at p. 208.

77. Lando in Bianca and Bonell supra n. 9 at p. 239.

78. Lando in Bianca and Bonell supra n. 9 at p. 239.

79. Articles 89 to 101 are not expressly mentioned in Article 6 either. However, these provisions are within Part IV regarding final provisions which are directed to the Contracting States and not to the parties.

80. Schlechtriem, CISG supra n. 3 at p. 209.

81. See supra note .

82. Schlechtriem, Uniform Law supra n. 37 at p. 102-103.

83. Lando in Bianca and Bonell supra n. 9 at p. 237 and 588-589; Kritzer supra n. 26 at p. 219 and Nicholas in International Sales supra n. 11 at p. 5-19

84. Schlechtriem, Uniform Law supra n. 37 at p. 102-103.


Pace Law School Institute of International Commercial Law - Last updated December 14, 1998
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