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Reproduced with permission of 6 Vindobona Journal of International Commercial Law and Arbitration (2002) 30-39

The award of counsel's fees under Article 74 CISG, in
Zapata Hermanos Sucesores v. Hearthside Baking Co. (2001)

John Felemegas [*]

1. Introduction to the CISG issues in Zapata
2. Interpretation of the Convention; International character and uniform application - Art. 7(1) CISG
3. Award of damages for breach of contract; Counsel's fees as foreseeable consequential damages -Arts. 74 CISG; 7(1) CISG
4. Payment of interest and rates of interest (pre-judgment and post-judgment) - Arts. 78 CISG, 7(2) CISG
5. Conclusion

1. Introduction to the CISG Issues in Zapata

In Zapata [1], the U.S. District Court applied the provisions of the United Nations Convention on Contracts for the International Sale of Goods and awarded damages to the plaintiff-seller for a breach of contract, including the claim for its counsel's fees as foreseeable consequential damages under Article 74 CISG, " as an element of consequential loss under the Convention."[2]

The District Court held that Article 74 of the UN Sales Convention provides for the recovery of counsel's fees incurred by a successful litigant in a breach of contract governed by the CISG, "so that [seller] may be made whole for the damages and [page 30] expenses it has been forced to bear due to [buyer's] misconduct."[3]

In doing so, the court also rejected the defendant's claim that in a United States court the well-known "American Rule" (which generally calls for litigants in federal courts to bear their own legal expense) applies instead.[4]

2. Interpretation of the Convention; International Character and Uniform Application - Art. 7(1) CISG

The court in Zapata established the parameters for the proper approach to the Convention's interpretation by noting the explicit international character of the CISG and the mandate for its uniform application, as directed by Article 7(1) CISG:

"[A] treaty, occupying international scope as it does and (as in this case) defining the relationships between nationals of different signatory countries, calls for uniformity of construction." (Zapata, id.)

In support of that statement, the court cited the analysis of the Convention's character and application in MCC-Marble Ceramic v. Ceramica Nuova D'Agostino, (11th Cir, [page 31] 1998), and held

"[that analysis] applies with equal force to mandate universality rather than a purely home-town rule as to the awardability of attorneys' fees under the Convention."[5]

Therefore, the court paid due regard to the Convention's interpretive mandates contained in Article 7(1) CISG and correctly rejected the defendant's argument for the "parochial application of the American Rule" as "totally misleading."[6]

3. Award of Damages for Breach of Contract; Counsel's Fee as Forseeable Consequential Damagess - Arts. 74 CISG, 7(1) CISG

Article 74 CISG provides that the injured party may recover as damages "a sum equal to the loss, including loss of profit, suffered ... as a consequence of the breach." This makes it clear that the basic philosophy of the action for damages is to place the injured party in the same economic position he would have been in if the contract had been [page 39] performed.[7]

No specific rules have been set forth in Article 74 describing the appropriate method of determining "the loss ... suffered ... as a consequence of the breach." The court or arbitral tribunal must calculate that loss in the manner that is best suited to the circumstances. [8]

The principle of recovery of the full amount of damages suffered by the party not in breach is subject to an important limitation - foreseeability.[9] The plain language of the Convention provides that all damages incurred as foreseeable consequential losses of a breach of contract are recoverable (see Art. 74 CISG).[10] The Court's approach to the interpretation of the relevant provisions of the Convention in the matter of counsel's fees was as follows:

"[W]hen purely parochial considerations are put aside (quite properly so), it cannot be gainsaid that the normal unstrained reading of Article 74 coupled [page 33] with the [relevant Stipulation joined by the buyer in the FPTO] calls for [seller's] recovery of its attorneys' fees as foreseen consequential damages."[11] (emphasis added by present writer).

Referring to the specific language of the provisions in Article 74 CISG, the court stated:

"When the searchlight of analysis is [] properly focused on the language of the Convention without any inappropriate overlay from the American Rule, the question becomes a simple one." (Zapata, id.; emphasis added).

The Court held that counsel's fees are recoverable under Article 74 CISG and rejected the "distorted reading of the language" to the contrary suggested by the buyer, by drawing appropriate support from relevant foreign CISG jurisprudence pleaded by the [page 39] seller.[12]

4. Payment of Interest and Rates of Interest (Pre-Judgment and Post-Judgment) - Arts. 78 CISG, 7(2) CISG

4.1 Payment of Interest and Rate of Pre-Judgment Interest

The Convention makes it clear that a party is entitled to the payment of interest as a matter of law, if the other party fails to pay the price or any other sum that is in arrears (Article 78 CISG).[13] This is plainly in accord with the principle of full recovery.[14]

The Court recognised that the CISG provides the payment of interest, although it does not specify the rate of interest:[15] [page 35]

"[T]he drafters of the Convention took note of the fact that some sellers injured by nonpayment for their goods would be made whole by applying the interest rates at their homes, while others would need prejudgment interest to be paid at the rate applicable at their buyers' locales to provide full relief (see Peter Schlechtriem, Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods 98-99 (Manz, Vienna 1986). For that reason the Convention's drafters called for the payment of prejudgment interest (which every unpaid seller needs for full recovery), but compromised by leaving the interest rate open for decision on a case-by-case basis (id.) - so that the injured seller's make-whole expectations are met by compensating it for its own cost of delayed payment as well as recovering the payment itself."

In Zapata, the matter of the applicable pre-judgment interest rate was referred to the jury with an instruction in terms of reasonableness,[16] which then weighed the evidence [page 36] proffered by either side and resolved the matter in seller's favour (see the Zapata opinion of the U.S. District Court, dated 18 July 2001).[17]

4.2 Post-judgment interest

The Court stated that "[n]either party can be held to be at fault in that respect" and applied the internal domestic law as the lex fori, holding that 3.59% post-judgment interest was appropriate.[18] In other words, the court treated the matter of post-judgment interest as one not governed by the Convention; with the result that the interest rate is to be determined according to the domestic law applicable on the basis of the relevant [page 37] conflict-of-laws rules. [19]

5. Conclusion

The U.S. District Court in Zapata possessed the basic awareness of the intrinsic international perspective required for the proper interpretation and application a uniform law treaty like the CISG. In a decision that is in accord with foreign jurisprudence [20] but clearly contrary to established U.S. domestic practices,[21] the court applied the plain [page 38] meaning of the language of the Convention to hold that counsel's fees fall within the scope of application of Article 74 CISG.

The present author submits that the court in Zapata correctly treated the recovery of counsel's fees (as part of damages under the Convention) as a substantive issue governed by the agreement of the parties to the contract and supplemented by the provisions of the Convention (see Articles 6 & 7 CISG). To regard the award of such fees as a procedural issue to be settled by reference to either the lex fori or the otherwise applicable domestic law instead, goes against the plain meaning of the Convention's language and intent, as well as the available international jurisprudence.[22] [page 39]


FOOTNOTES

* John Felemegas (Doctorate in Law, University of Nottingham) is a Fellow of the Institute of International Commercial Law of the Pace University School of Law.

1. Zapata Hermanos Sucesores v. Hearthside Baking Co., U.S. District Court, 28 August 2001, available at <http://cisgw3.law.pace.edu/cases/010828u1.html>. The present writer has had access also to the parties' court briefs.

2. Note that the court also stated that the same conclusion was reached by additional "lines of analysis", relating to domestic federal law - via the court's inherent power to award attorneys' fees in cases of bad faith; and pursuant to the provisions of U.S. federal law on attorneys' misconduct (28 U.S.C. 1927). Id. In addition to the award of damages (Art. 74 CISG), the matter of interest (Art. 78 CISG) was also considered in the Zapata proceedings, see relevant discussion infra.

3. Zapata, supra note 1. The result is in accordance with one of the general principles upon which the Convention is based: full compensation.

It has been said that the rule in Article 74 expresses the "principle of full compensation" or, in other words, "the promisee has a right to be fully compensated for all disadvantages he suffers as a result of the promisor's breach of contract"; see Stoll in the Commentary on the UN Convention on the International Sale of Goods (CISG), editor: Peter Schlechtriem, (Second Edition, 1998), at 553; see also Landgericht Essen, 10 June 1980, 45 O 237/79, (also available at <http://cisgw3.law.pace.edu/cases/800610g1.html>), where the court stated that the principle of full compensation was applicable to Article 82 ULIS.

Note that prior to the CISG, the relevant uniform law was to be found in ULIS. "ULIS Article 82 and CISG Article 74 are substantively identical. Therefore, ULIS Article 82 precedents may be relevant to the proper interpretation of CISG article 74." Insert to presentation of Secretariat Commentary on Article 70 of the 1978 Draft Convention [draft counterpart of Article 74 CISG], available at <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-74.html>.

The recoverability of counsel's fees by the successful litigant is also consistent with the international norm; for a thorough analysis of the subject and an examination of the prevailing practice internationally, see John Gotanda, "Awarding Costs and Attorneys' Fees in International Commercial Arbitrations", 21 Michigan Journal of International Law 1, (1999).

4. The court referred to the exception built into the "American Rule" itself, by citing the relevant quote from F.D. Rich Co. v. United States f/u/o Industrial Lumber Co., 417 U.S. 116, 126 (1974) (with appropriate emphasis added):

"The so-called 'American Rule' governing the award of attorneys' fees in litigation in the federal courts is that attorneys' fees are not ordinarily recoverable in the absence of a statute or enforceable contract providing therefor. Accord, such cases as Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 US 240, at 257 (1975)."

5. The court cited the following passage from MCC-Marble Ceramic Ctr., Inc. v. Ceramica Nuova D'Agostino, S.p.A., 144 F.3d 1384, 1391 (11th Cir, 1998):

"One of the primary factors motivating the negotiation and adoption of the CISG was to provide parties to international contracts for the sale of goods with some degree of certainty as to the principles of law that would govern potential disputes and remove the previous doubt regarding which party's legal system might otherwise apply. See Letter of Transmittal from Ronald Reagan, President of the United States, to the United States Senate, reprinted at 15 U.S.C. app. 70, 71 (1997). Courts applying the CISG cannot, therefore, upset the parties' reliance on the Convention by substituting familiar principles of domestic law when the Convention requires a different result. We may only achieve the directives of good faith and uniformity in contracts under the CISG by interpreting and applying the plain language of Article 8(3) as written and obeying its directive to consider this type of parol evidence."

Cf. Professor J. Lookofsky, "Commentary: Zapata Hermanos v. Hearthside Baking", (2002) 6 Vindobona Journal of International Commercial Law and Arbitration 27, at fn 11; available at <http://www.cisg.law.pace.edu/cases/010828u1.html>):

"The Zapata Court's heavy emphasis on the MCC Marble 'precedent' seems [] misplaced, since that case involved the relationship between a domestic substantive rule (the so-called 'parol evidence' rule) and the directly conflicting CISG rules (Articles 8(3) and 11)."

6. Zapata, id.

In holding in favour of the Convention's international and uniform construction and against the use of a purely domestic rule, the court noted the following:

"This country is in the minority of commercial jurisdictions that do not make prevailing parties truly whole by saddling their adversaries with the winners' legal expenses - an omission that does not (as does the vast majority of other jurisdictions' fee-shifting approach) put the winners in contract disputes into the same economic position as if the breaching parties had performed their required obligations under the contracts [citing John Gotanda, Awarding Costs and Attorneys' Fees in International Commercial Arbitrations, 21 Mich. J. Int'l Law 1, 6-7 & nn. 20, 27 (1999)]."

7. See Secretariat Commentary on Article 70 of the 1978 Draft [draft counterpart of CISG Article 74], Comment 3, available at <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-74.html>.

8. See Secretariat Commentary, op.cit., at p. 4.

9. See Secretariat Commentary, op.cit., at p. 8:

"The amount of damages that can be recovered by the party not in breach 'may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters which he then knew or ought to have known, as a possible consequence of the breach of contract'. [] This principle of excluding the recovery of damages for unforeseeable losses is found in the majority of legal systems."

The Secretariat Commentary, in the context of discussing some common situations which might arise under Article 74 CISG so as to suggest means of calculating "the loss ... suffered ... as a consequence of the breach", also states that any "additional elements of the buyer's damages will often be limited by the requirement of foreseeability discussed [above]." Ibid., at fn. 3.

10. Cf. Professor P. Schlechtriem, "Urteilsanmerkung: Anwaltskosten als Teil des ersatzfähigen Schadens", IPRax (forthcoming May 2002); a translation of this annotation "Attorneys' Fees as Part of Damages" will appear in Pace International Law Review (forthcoming 2002). The present writer is thankful for the access to a pre-publication draft of Professor Schlechtriem's comment on the Zapata case. Schlechtriem discusses the reimbursement of counsel's fees as part of the consequential damages awarded under Article 74 CISG and points out that there are two limits imposed on such award - i.e., the two relevant rules found in the provisions of the Convention: foreseeability (Art. 74 CISG) and mitigation (Art. 77 CSIG). Id.

Note that the recovery of counsel's fees is also found in the majority of legal systems (see generally, J. Gotanda, op.cit.). Thus, the District Court judgment also promotes the "observance of good faith in international trade" (see Art. 7 (1) CISG).

Conversely, a line of decisions to the contrary (by the courts of a member-State) would create issues of forum shopping and divergent interpretations of the Convention; see John Felemegas, The U.N. Convention on Contracts for the International Sale of Goods: Article 7 CISG and Uniform Interpretation (Feb. 2001), available at <http://www.cisg.law.pace.edu/cisg/biblio/felemegas.html>; see especially, Chapter 3, infra.

11. Zapata, ibid.

It is stated in the court's opinion that the two stipulations joined by the Buyer, "bury [the Buyer's] efforts to escape liability via the American Rule." Id. The court placed considerable weight on the Buyer's relevant pre-trial admissions to hold that counsel's fees qualified as "consequential damages." The present writer contends that even without those stipulations on behalf of the Buyer, the proper interpretation of the Convention ultimately leads to the same substantive conclusion that the court reached.

Cf. J. Lookofsky, supra note 5, at fn.11:

"Although the value of the Zapata ruling as a precedent is perhaps limited by what the District Court characterized as the defendant's (implied) agreement ('stipulation') that attorney's fees were 'foreseeable' damages, the decision also provides support for the more general - yet hardly tenable - position that CISG Article 74 qualifies a 'fee shifting' statutory rule. For although the CISG surely qualifies as substantive federal law, Article 74 can hardly be categorized as a 'fee-shifting' statute."

The present writer respectfully disagrees with Professor Lookofsky on point: The operation of Article 74 CISG (in the context of a purely-domestic American litigation that is marked by the American Rule - which is distinctly local and is not followed in nearly any other member-State to the Convention) may indeed produce a result which on its face resembles a "fee-shifting" approach/rule; however, the quintessence of the relevant CISG provisions (to be found via the proper interpretation of the Convention as a whole - i.e., looking at the plain language of the provisions, the legislative history of the Convention and any relevant jurisprudence and doctrine), is one of substantive law and it should be regarded and treated as such in international litigation of contracts governed by the U.N. Sales Convention.

Cf. Professor Harry Flechtner, "Recovering Attorneys Fees as Damages under the U.N. Sales Convention: A Case Study on the New International Commercial Practice and the Role of Foreign Case Law in CISG Jurisprudence", 22 Northwestern J. Int'l. L. & Bus. (forthcoming 2002), available at <http://www.cisg.law.pace.edu/cisg/biblio/flechtner4.html>. The present writer thanks Professor Flechtner for kindly providing a pre-publication draft of this forthcoming case study [and the later added "Post Script" to it, addressing the specific issue in the context of the Zapata court judgment]. In that case study, Professor Flechtner draws very similar conclusions on point with Professor Lookofsky's commentary on Zapata - as such, the present writer respectfully raises the same disagreement on the issue in question with Professor Flechtner as well.

For a detailed analysis of the operation of Article 7 CISG in the context of the important mandates contained therein for the Convention's proper interpretation and application, see generally Felemegas, supra fn 10.

12. The court in Zapata considered and adopted the rationale of the precedent in the German jurisprudence that counsel's fees are recoverable under Article 74 CISG: Case No. 17U 146/93 (OLG Düsseldorf, Germany Jan. 14, 1994), CLOUT no. 130, also available at: <http://cisgw3.law.pace.edu/cases/940114g1.html>; Hamburg Arbitration Proceeding, June 21, 1996), CLOUT no. 166, also available at: <http://cisgw3.law.pace.edu/cases/960621g1.html>; Case No. 2C 22/97 (AG Berlin-Tiergarten, Germany 13 March 1997), CLOUT no. 296, also available at: <http://cisgw3.law.pace.edu/cases/970313g1.html>.

13. Note that this occurs "without prejudice to any claim for damages recoverable under Article 74" (see Art. 78 CISG). However, regulations on interest independent from damages do not fix the rate of interest. The drafting notes of the Convention explain why it was impossible to fix the rate of interest; see John O. Honnold, Uniform Law for International Sales 420 (2d ed. 1991) (referencing legislative history).

14. See text in fn 3, supra.

15. The court rejected a buyer's attempt "to draw an inference from cases that decide the applicable interest rate under the Convention - not the right to the payment of interest, which the Convention admittedly calls for - under local law" (Zapata , 28 August 2001), op.cit.

For a summary of relevant CISG jurisprudence on the issue - "presented with a view to fostering uniform interpretation" - and the various solutions adopted by the courts that have considered the issue of interest rate, see UNCITRAL digest of CISG Article 78 case law (despite the variety of solutions mentioned there, there is a clear tendency to apply the rate provided for by the law applicable to the contract - i.e., the law that would be applicable to the sales contract if it were not subject to the Convention), available at: <http://www.cisg.law.pace.edu/cisg/digest/art78.html>.

The lack of a specific formula to calculate the rate of interest has led some tribunals to consider this matter as one governed by, albeit not expressly settled in, the Convention and therefore has to be settled in conformity with the general principles on which the Convention is based or, in the absence of those principles, in conformity with the law applicable by virtue of the rules of private international law (as per Art. 7(2) CISG). Other tribunals consider this matter one that is not governed at all by the Convention and therefore must be settled in conformity with the law applicable by virtue of the rules of private international law, without any recourse to the "general principles" of the Convention.

The method of setting the interest rate may depend on whether interest is awarded under Art. 74 CISG, or under Art. 78 CISG; see P. Schlechtriem, Uniform Sales Law, at p. 99, available at <http://www.cisg.law.pace.edu/cisg/biblio/schlechtriem.html>.

For an excellent analysis of the institution of interest under the CISG followed by that author's conclusion that "judges and arbitrators should pave the way to uniform application of the CISG by resorting to these principles in determining applicable interest rates", see Alan F. Zoccolillo, Jr., "Determination of the Interest Rate under the 1980 United Nations Convention on Contracts for the International Sale of Goods: General Principles vs. National Law", (1997) 1 Vindobona Journal of International Law and Arbitration 3, also available at: <http://www.cisg.law.pace.edu/cisg/biblio/zoccolillo.html>.

Cf. Christian Thiele, "Interest on Damages and Rate of Interest Under Article 78 of the U.N. Convention on Contracts for the International Sale of Goods", (1998) 2 Vindobona Journal of International Law and Arbitration 3, also available at <http://www.cisg.law.pace.edu/cisg/biblio/thiele.html>.

16. Reasonableness is one of the Convention's most recognised general principles; it is specifically mentioned in thirty-seven provisions of the CISG and clearly alluded to elsewhere in the Uniform Sales Law. As a general principle of the Convention reasonableness is to be read into each Article of the CISG whether or not specifically mentioned in the CISG. For overview comments on reasonableness as a general principle of the CISG and further references and confirming citations, see Albert H. Kritzer, Editorial Remarks, available at <http://www.cisg.law.pace.edu/cisg/text/reason.html#view>.

The Zapata court (both in its 18 July opinion and in the interest reference contained in its 28 August opinion) used full-recovery language, a principle deduced from Article 74, so it is arguable that the court considered the matter of pre-judgment interest to be one "governed but not settled by the Convention", rather than a matter of internal domestic law. The court dismissed as "absurd" the buyer's submission for the application of the U.S. Treasury bill rate since that rate did not represent "a reasonable commercial rate as between a business seller and its business customer." See Zapata Hermanos v. Hearthside Baking Co., U.S. Dist. Ct., 18 July 2001; available at <http://cisgw3.law.pace.edu/cases/010718u1.html>.

At least two arbitral tribunals have shown preference for the application of what seem to be general CISG principles; see Austria 15 June 1994 Vienna Arbitration proceeding SCH-4366, CLOUT no. 93, translation available at: <http://cisgw3.law.pace.edu/cases/940615a3.html>; Austria 15 June 1994 Vienna Arbitration proceeding SCH-4318, CLOUT no. 94, translation available at: <http://cisgw3.law.pace.edu/cases/940615a4.html>; Unilex database 1995/II, D.1994-13.

For a relevant discussion of whether and how European courts and commentators are trying to develop sound interpretations and convincing uniform applications of CISG on the issue of interest rates, see V.Behr, "The Sales Convention in Europe: From Problems in Drafting to Problems in Practice", 17 Journal of Law and Commerce (1998) 263-299, also available at: <http://www.cisg.law.pace.edu/cisg/biblio/behr.html>.

See also Phanesh Koneru, "The International Interpretation of the U.N. Convention on Contracts for the International Sale of Goods: An Approach Based on General Principles", 6 Minessota Journal of Global Trade (1997) 105-152, also available at <http://www.cisg.law.pace.edu/cisg/biblio/koneru.html>.

17. The court was critical of the buyer's basic position before and during the trial that

"[no interest was payable at all because the parties' course of dealing demonstrated that [buyer] was never "in arrears" - that the parties' failure to have discussed the subject of interest, when coupled with [buyer's] course of conduct (which was marked by its nonpayment on anything remotely approaching a current basis for tins admittedly delivered and used), somehow entitled [buyer] not to make current payments as a matter of right without having to account for its delay in such payments."

On the other hand, the seller countered that position, by pointing "not only to the express provisions of its invoices (which uniformly required the payment of interest and specified the rate to be charged) but also to [buyer's] own purchase orders, which always contained the type of provision thoroughly familiar to business people - "1% 10 days net 30 days" or "1% 10 days net 60 days." (Zapata, 18 July 2001).

Jury Instruction No. 28 (the instruction that spoke to the damages recoverable by [seller] if the jury found a breach of contract on [buyer's] part) read in relevant part:

"Unless you find that the parties agreed otherwise, either expressly or through a course of conduct, [seller] is also entitled to recover interest on the amounts past due. If interest is recoverable, the rate of interest is that rate, if any, to which the parties agreed. If you find that no rate was agreed to by the parties, then the rate is that which you determine to be reasonable." (emphasis added)

For a thorough (and approving) discussion of the manner in which the court addressed the matter of the rate of pre-judgment interest, see Arthur B. Colligan Jr., "Applying the General Principles of the United Nations Convention on Contracts for the International Sale of Goods to fill the Article 78 interest rate gap in Zapata Hermanos, S.A. v. Hearthside Baking Co. Inc. (2001)", (2002) 6 Vindobona Journal of International Commercial Law and Arbitration 40. The present writer thanks Arthur Colligan for kindly providing a pre-publication draft of his commentary regarding the interest rate issues in the Zapata judgment.

18. See Zapata, (18 July 2001), op.cit.:

Since December 21, 2000 (the date of enactment of Public Law 106-554), post-judgment interest on federal judgments must be calculated from the date of entry of judgment at a rate equal to the weekly average one-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System for the calendar week preceding the date of judgment (28 U.S.C. 1961(a)).

19. This is in contrast to the interpretation of pre-judgment interest, where the court approached the matter as a gap praeter legem calling for the operation of Article 7(2) CISG; the applicable interest rate to be determined in conformity with the general principles underlying the Convention (e.g., full recovery, reasonableness).

20. See generally Flechtner (2002), supra fn 11.

21. "Although the norm in our own judicial system is for each litigant in a purely United States-based dispute to bear the burden of its own legal expense, that does not at all equate to the notion that public policy (or anything else) forbids a federal court's judicial enforcement of a different rule that is appropriately brought into play [] that instead establishes a 'loser pays' regime." Zapata, id.

Note, however, that the Zapata case is not a purely U.S.-based dispute; rather it is an international dispute governed by the CISG - i.e., substantive international law that must be applied regardless of any conflicting local law, according to the well-known mandates of Article 7(1) CISG. Although it may be customary that matters regarded as procedural domestic law be settled in accordance with the law of the forum, this practice cannot be allowed to trump the provisions of the CISG.

In an analogous setting of the different rules for torts and contracts that can vary between regimes, two leading CISG commentators have said: "[T]he label that the state law bears should be irrelevant." John O. Honnold, "Uniform Law for International Sales -- The 1980 United Nations Convention", 18 Asian Pacific Regional Trade Law Seminar (1984) 195. "The substance rather than the label or characterization of [the] rule of domestic law determines whether it is displaced by the Convention. In determining [this], the tribunal . . . should be guided by the provisions of Article 7, and give to the Convention the widest possible application consistent with its aim as a unifier of legal rules governing the relationship between parties to an international sale." Warren Khoo, "Commentary on the International Sales Law", Cesare Massimo Bianca & Michael Joachim Bonell eds. (Milan 1987) 48. For further discussion of this theoretical battle between substantive CISG rules and domestic procedural rules (which has considerable practical consequences on the uniform application of the Convention nonetheless), see Albert H. Kritzer, "Editorial Remarks on Delchi Carrier S.p.A. v. Rotorex Corp., U.S. Court of Appeals (2nd Circuit) 6 December 1995", IX Pace International Law Review (1997) 187-222, also available at <http://cisgw3.law.pace.edu/cisg/wais/db/editorial/951206u1editorial.html>; see especially the Section on Damages, available at <http://cisgw3.law.pace.edu/cisg/wais/db/editorial/951206u1editorial.html#damages2">; and the Section on Interest, available at <http://www.cisg.law.pace.edu/cisg/wais/db/cases2/951206u1editorial.html#interest>.

The present writer agrees that since the proper interpretation of the Convention regards counsel's fees as foreseeable, consequential damages under Article 74 CISG - i.e., a substantive rule - then there is no legitimate space for any domestic or other system of law (via either a domestic procedural, or other substantive rule) that could produce a divergent result.

22. Contra: Flechtner, supra fn 11, at pp. 36-7, where the author declares:

"Treating the issue as a procedural question beyond the scope of the Convention provides a satisfactory and convincing resolution consistent with the purposes and underlying principles of the CISG."


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