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CISG Article 78: Endless disagreement among
commentators, much less among the courts

Francesco G. Mazzotta [1]
July 2004

  1. Introduction
  2. Article 78 background
  3. History of Article 78
  4. Operation of Article 78
    A. Whether the interest rate and/or its method for calculating it is expressly settled in the Convention
    B. Whether the interest rate and/or its method for calculating it is within the Convention
    C. Uncertainty deriving from solutions based on the general principles of the Convention
    D. Other general principles: UNIDROIT and PECL
    E. Resorting to the domestic rules of private international law
  5. Conclusion

I. Introduction

Once again, an Italian court decision sets another example of clarity and thoroughness in tackling difficult issues posed by some provisions of the United Nations Convention on Contracts for the International Sale of Goods [2] (hereinafter "Convention" or "CISG"). The decision,[3] among other matters, considered the interest issue. In dealing with it, the court, chaired by Judge Alessandro Rizzieri, who previously handed down another exemplar decision,[4] gave full application to the requirements set forth by CISG Article 7(1), acknowledging that "[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." Indeed, almost twenty decisions from several jurisdictions were cited in construing the meaning of CISG Article 78. In addition, the court fully explained its reasoning, as opposed to the vast majority of cases where courts briefly, and often vaguely, state the logic supporting their decisions. But the most important lesson some courts should take is that the construction of the meaning of CISG provisions should be done by giving due regard to CISG case law and, although it should be obvious, no reliance should be made to domestic cases not concerned with the CISG.

When I first started working on this introduction, I was going to compare the Italian decision with a negative example of how courts should not operate in applying the CISG. One of the most recent negative examples was an American case, Chicago Prime Packers v. Northam Food Trading Co.,[5] where the court disdained reference to any CISG Article 39 cases; instead, the Chicago Packers court (like some other American courts [6]) cited only American Uniform Commercial Code case law.[7] Things change, however. Gladly, I note that, on a new ruling on the same case,[8] the court showed a different approach. The court, in fact, has cited seven foreign cases (four German, two Italian, and one Dutch), which is more than any other U.S. judge has previously cited. The new ruling of the Chicago Packers court must be, therefore, commended for the new approach toward foreign case law.

As it concerns the topic of this paper, I must also underscore that the court offered a very well-crafted analysis of the current status of the matter. The court, in fact, after acknowledging that commentators and courts put forward several approaches in dealing with the interest rate issue, applied domestic law (private international law rules) to determine the proper rate of interest. This, I believe, is the proper method, in light of CISG case law.

II. Article 78 background

It is well known that Article 78 is "more conspicuous for the questions it fails to answer than the questions it answers"[9] and it does not come as a surprise that interest rates are one of the most litigated and discussed topics of the Convention.[10] Because the delegates to the Vienna Convention could not reach an agreement,[11] the present version of Article 78 does not fix any rate of interest. It should be noted, however, that although considered a "headless corpse", Article 78 introduces a far-reaching principle of the general entitlement to interest,[12] which is still rather important because it makes clear that a fixed interest (even if not set by the Convention) must be applied to sums paid with delay (the "normativity" feature),[13] and that the entitlement to interest is not limited by grounds for release as provided for by CISG Article 79 (the "absoluteness" feature).[14]

As the CISG does not directly state how to determine the applicable interest rate, Article 7(2) requires that "[q]uestions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law." Our task is, therefore, to establish whether the interest rate (the actual figure and/or its method of determination) is an issue that can be settled in conformity of the general principles of the Convention and, if so, determine which principles may be useful to this end. If the interest rate cannot be determined by the CISG or through its general principles pursuant to Article 7(2), the domestic rules of private international law must determine the proper law that fixes the applicable interest rate. However, resorting to domestic law should be limited to those cases where the CISG does not apply either because the issue is explicitly excluded from the scope of the CISG (see e.g., Article 4) or because the CISG did not directly or indirectly settle the matter. If, however, a court deems that the matter is totally outside the CISG, the very same court can then apply its own rules to determine the proper interest. It is extremely important, therefore, to better understand the mechanics of Article 78 reviewing its history and its precedents. The reader may also find, in an appendix, a list of the cases used to prepare this article, arranged by country. For those decisions where an English translation and/or an abstract in English were available, the relevant phrases/sentences were reported.

III. Brief history of Article 78

The interest issue was expressly settled by the Uniform Law on the International Sale of Goods ("ULIS") (the "1964 Hague Sales Convention"), Article 83, which reads:

"Where the breach of contract consists of delay in the payment of the price, the seller shall in any event be entitled to interest on such sum as is in arrears at a rate equal to the official discount rate in the country where he has his place of business or, if he has no place of business, his habitual residence, plus 1%."[15]

In 1969 the United Nations Commission on International Trade Law ("UNCITRAL") set up a Working Group on the International Sale of Goods ("Working Group") with the purpose, inter alia, of ascertaining "which modifications of the Hague Convention of 1964 relating to Uniform Law on the International Sale of Goods might render it capable of wider acceptance by countries of different legal, social and economic systems and to elaborate a text reflecting such modification."[16] The Working Group at the fifth session (January 1974) completed its initial examination of the ULIS. The Working Group, after considering some proposals to change the current draft of ULIS Article 83,[17] decided to keep it as it was.[18]

Later, however, upon observation of the Norway delegation,[19] the Working Group decided to amend the previous draft so that the phrase "or, if he has no place of business, his habitual residence" would be deleted. The Working Group also decided to add the following phrase to the end of the Article 83 with the purpose of avoiding the debtor purposefully delaying payment: "but his entitlement shall not be lower than the rate applied to unsecured short-term commercial credit in the seller's country."[20] Thus, the provision concerning interest (now Article 56), reads:

"Where the breach of contract consists of delay in the payment of price, the seller shall in any event be entitled to interest on such sum as is in arrears at a rate equal to the official discount rate in the country where he has his place of business plus one per cent but his entitlement shall not be lower than the rate applied to unsecured short-term commercial credits in the seller's country."[21]

The Working Group completed its mandate of reviewing the ULIS at its seventh session (January 1976) by approving the "Draft Convention on the International Sale of Goods" (the "1976 Draft Convention").[22] The provision pertaining interest (now Article 58) reads:

"If the breach of contract consists of delay in the payment of the price, the seller is in any event be entitled to interest on such sum as is in arrears at a rate equal to the official discount rate in the country where he has his place of business, plus 1 per cent, but his entitlement is not be lower than the rate applied to unsecured short-term commercial credits in the country where the seller has his place of business."[23]

As the commentary on this Article underscores, this

"rule of damages is an exception to the rule expressed in Article 55 that the injured party recovers 'a sum equal to the loss' in that the seller need not prove that the delay in payment caused him any loss.... The interest rate formula set forth in article 58 is available to the seller 'in any event'. This makes it clear that pursuant to article 55 the seller can claim any other loss over and above the loss of interest if can prove the loss was caused him by the delay in paying the price."[24]

As required by a decision taken by the UNCITRAL at its eighth session (April 1975), the text of the 1976 Draft Convention was sent to governments and international Organizations for their comments. Czechoslovakia observed that "[i]t should be considered whether it would be more appropriate for the seller to be entitled to interest charges in the country of the debtor instead of the creditor, or to combine the discount rate of interest valid in both countries in such a way (or manner) that the non-performance of the monetary obligation be advantageous for the debtor (for instance in cases when the rate of interest is higher in his country)."[25] The Federal Republic of Germany proposed [26] that at the end of Article 58 the words "but his entitlement is not [to] be lower than the rate applied to unsecured short-term commercial credits in the country where the seller has his place of business" be deleted. The German delegation was not in favor of having the seller paying such a high rate interest in any case of delay. Payment of interest should be limited to those situations where the seller had to actually borrow money. The delegation also observed that the rate applied varies greatly depending on the customer's credit worthiness. The International Chamber of Commerce ("ICC"), acknowledging that the current rule fixed by Article 58 was an improvement over ULIS Article 83, merely proposed to increase the surcharge over the official discount to 2 per cent from 1 per cent, as required by the current draft of Article 58.

At its tenth session (May 23 - June 17, 1977), the UNCITRAL established the Committee of the Whole to consider the 1976 Draft Convention [27] in the light of the comments and proposals submitted by governments and international organizations. On May 24, 1977, this Committee established a Drafting Group for the purpose of redrafting

"those articles of the draft Convention in respect of which modifications of substance had been agreed upon in the Committee, to consider drafting proposals submitted by Governments and international organizations in their written comments and in the course of the Committee's discussion and, generally, to examine the text of the draft Convention from the point of view of consistency of the terminology used and to ensure consistency between language versions."[28]

The discussion on the interest provision (Article 58) proved to be extremely controversial. The frustration is clear in the relevant paragraph of the report: "In view of these difficulties, coupled with the fact that the article was, in any version, inherently unacceptable to a number of representatives, particularly those of developing countries, the Committee, after considerable deliberation, decided to delete article 58."[29]

At its eleventh session, the UNCITRAL considered the question "whether the rules on formation of contracts for the international sale of goods should be the subject matter of a convention separate from the Convention on the International Sale of Goods."[30] After some discussion, it decided to integrate the draft convention on the formation of contracts, which the Working Group completed at its ninth session (Geneva, September 1977),[31] with the draft Convention on the International Sale of Goods into a single text named "Draft Convention on Contracts for the International Sale of Goods" (the "1977 Draft Convention").

Article 55 of the 1977 Draft Convention as well as Article 69 of the similarly worded 1978 Draft Convention on Contracts for the International Sale of Goods ("1978 Draft Convention"), only provided for the seller to pay interest on the purchase price when he was under the obligation to refund the price after the avoidance of the contract (similar to CISG Article 84), but no provision similar to CISG Article 78 could be agreed upon due to irreconcilable divergences among the delegations.

As the comments and proposals by governments and international organizations on the 1978 Draft Convention indicate,[32] however, Czechoslovakia, Finland, the Netherlands, Sweden and the ICC proposed to have a provision expressly dealing with the right to receive interest. They believed that it should be clearly stated that a "buyer who does not pay the price at the time of its maturity should be obliged to pay interest on overdue payments in principle at a rate one per cent higher than the official discount rate valid in the country of the debtor."[33]

In 1980, the Diplomatic Conference held in Vienna assigned to a first committee (the "First Committee") the review of the various proposals to amend the 1978 Draft Convention and to a second committee the review of other draft provisions concerning implementation, declarations, reservations and other final clauses of the 1978 Draft Convention. A Plenary Conference would then consider the drafts submitted by the First Committee for inclusion into the CISG. The First Committee considered the interest issue at its 28th meeting (March 28, 1980), 29th meeting (March 31, 1980), 34th meeting (April 3, 1980), and 37th meeting (April 7, 1980). At the 29th meeting, a working group composed of the representatives of Argentina, Czechoslovakia, Ghana, Greece, India, Italy, Pakistan and Sweden was established to consider the proposals relating to Article 69 (now Article 84) and the issue of interest on sums that are in arrears. At the 34th meeting, the following alternatives were proposed:[34]

"Alternative I:

"If a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest thereon at the rate for a short-term commercial credit or at another similar appropriate rate prevailing in the main domestic financial centre of the party claiming payment.

"Alternative II:

"If a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest thereon at the rate for a short-term commercial credit or at another similar appropriate rate prevailing in the main domestic financial centre of the country of the party in default, or, in case the other party's actual credit costs are higher, at a rate corresponding thereto but not at a rate higher than the first said rate in his own country.

"Alternative III:

"If a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest thereon at the rate for a short-term commercial credit or at another similar appropriate rate prevailing in the main domestic financial centre of the party in default. However, in case the party claiming interest is not fairly compensated by such rate, he may claim interest up to the first said rate in his own country."

As stated by the Swedish representative, introducing the alternatives, "[t]he proposals formulated by the working group constituted neither a package deal nor a compromise, but offered three possible solutions to the problem of interest."[35] The working group could not find a single satisfactory alternative to the United Kingdom's proposal seeking to introduce a provision of this effect: "This Convention does not affect any right of the seller or buyer to recover interest on money."[36]

Each of the alternatives formulated by the working group was composed of two parts: an introductory phrase defining the rate of interest, and a second provision dealing with the place at which interest should be calculated. With respect to the second part, most members of the working group favored Alternative I, which offered the simplest solution. It seemed "natural" to calculate the rate of interest on the basis of the interest rate prevailing in the country of the creditor's place of business, as the creditor was the injured party who had to take steps to remedy that injury. With regard to Alternative II, all the members of the working group agreed that, if the rate of interest prevailing in the country of the party in default was lower than that prevailing in the creditor's country, the latter would suffer injury; the injured party should be enabled to obtain the rate which he would have to pay for the credit which he required. On the other hand, the injured party should not be permitted to demand an excessive rate of interest. The final part of Alternative II took account of those considerations. Alternative III, which comprised a simplification of Alternative II, with a slight difference of substance, did not obtain much support in the working group. Eventually, Alternative II, as orally amended by the representatives of Spain,[37] although criticized by some delegations as obscure and ambiguous, was adopted. The text, however, was remitted to the drafting committee to improve its wording.

The First Committee submitted to the Plenary Conference the following draft:[38]

"(l) If a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it at the normal rate for a short-term commercial credit prevailing in the main financial centre in the State where the party in default has his place of business or, in the absence of such a rate, at another similar appropriate rate prevailing in that centre.

"(2) However, if the other party's actual credit costs are higher, he is entitled to interest on the sum in arrears at a rate corresponding to such credit costs, but not in excess of the rate defined in the preceding paragraph prevailing in the main financial centre in the State where he has his place of business."

At the 37th meeting of the First Committee, held on April 7, 1980, at 10 a.m., due the criticism raised by some delegations, it was decided to keep the last draft of the Article 78 as proposed, with the understanding that the drafting committee would produce a clearer text. In the meantime, the following amendments were proposed:[39]

(i) Denmark, Finland, Greece, Sweden proposed to add Article 73 bis (now CISG Article 78), to read as follows:

"If a party fails to pay the price or any other sum as is in arrears, the other party is entitled to interest thereon at the customary rate for commercial credits at his place of business.

"As a result, the title 'Section IV. Damages' should be amended to read 'Section IV. Damages and interest' "[40]

(ii) Czechoslovakia proposed to add Article 60 bis (now CISG Article 78), to read as follows:

"(1) If the breach of contract consists of delay in the payment of the price, the seller is in any event entitled to interest on such sum as is in arrears at a rate equal to the official discount rate prevailing in the country where the buyer has his place of business, at the time of delay increased by one per cent or, if there is no such a rate, at the rate applied to unsecured short term international commercial credits increased by one per cent.

"(2) The seller may claim damages as provided in this Convention, if the loss is not covered by interests."[41]

(iii) Japan proposed to add Article 73 bis (now CISG Article 78), to read as follows:[42]

"If a party has failed to pay the price or any other sum that is in arrears, the other party is presumed to have suffered damages equivalent to the amount calculated at the interest rate for [unsecured short-term commercial credits prevailing] at his place of business."

(iv) The United Kingdom proposed to delete paragraph (1) of Article 69 (now CISG Article 84) and add new article in Part I, Chapter I (sphere of application), to read as follows:

"This Convention does not affect any right of the seller or buyer to recover interest on money." [43]

However, all of the preceding proposals were later withdrawn. The United Kingdom then submitted to the Plenary Conference the following proposals and amendments (also later withdrawn, infra):

(i) Add, in Part I, Chapter I (sphere of application), a new article to read as follows:[44]

"This Convention is not concerned with the payment of interest."

(ii) Delete Article 73 bis (now CISG Article 78). [45]

At the 7th Plenary Meeting held on April 8, 1980, the main issue involving Article 78 was whether Article 45 ("Remedies for breach of contract by the seller") should also include reference to Article 78. Some representatives argued that reference to Article 78 should be made as Article 45 dealt with all remedies available to the buyer. Others, the majority, argued that the list provided under Article 45 was not exhaustive and that interest was not limited to the buyer but also to the seller, as Article 78 expressly made reference to "any other sum". The representatives took a vote on whether the scope of Article 45 should be interpreted as including also Article 78. The result of the voting was 20 in favor, 14 against, with 12 abstentions. As the required two-thirds majority had not been obtained, the interpretation had not been adopted. It remained to be considered whether the Conference would adopt the contrary interpretation.

At the 8th Plenary Meeting, held on April 9, 1980, although many representatives agreed that Article 45 did not provide an exhaustive list of the remedies available to the buyer and therefore was of no legal significance such inclusion, the issue whether reference to Article 78 should be made within Article 61 ("Remedies for breach of contract by the buyer") was tackled. The representatives agreed to postpone any decision concerning Article 45 upon the decision concerning Article 78.

At the 10th Plenary Meeting held on April 10, 1980, at 10 a.m., Mr. Nicholas (United Kingdom) announced that he was withdrawing the draft amendment in document A/CONF.97/L.18 to delete Article 78, and requested that, if Article 78 were not to be adopted, the draft amendments in documents A/CONF.97/L.16 [46] and A/CONF.97/L.17[47] should be put to the vote. Notwithstanding the fact that the British representatives had withdrawn their proposal to delete Article 78, some delegations (Mexico and Ghana) expressed support for it due to the strong differences among the delegations. Other delegations, instead, deemed that if the Convention were not to deal with the interest issue, it would not facilitate its application. Even these delegations, however, criticized the latest draft of Article 73 bis. In particular, the Belgian representative noted that both paragraphs of Article 73 bis were unclear, although the first paragraph was less troublesome. They, therefore, proposed to take a separate vote on the two paragraphs composing Article 73 bis. However, the proposal was quickly criticized by some delegations. The Sweden representative, particularly, noted that the latest draft of Article 73 bis "struck a balance between the views of delegations which wished the rate prevailing where the debtor had his place of business to be taken into account in the calculation of interest, and those of delegations which preferred that the rate where the creditor had his place of business should be taken into account. To adopt only one of the two paragraphs of the article would be to upset that compromise."[48] The majority of the Conference rejected (35 votes to 4, with 7 abstentions) the proposal to take a separate vote on the two paragraphs of Article 73 bis. The Egyptian delegation unsuccessfully renewed the proposal to have the Convention providing explicitly for the possibility of making reservation to Article 73 bis.[49]

A vote on Article 73 bis was then taken. There were 24 votes in favor, 17 against and 10 abstentions. Having failed to obtain the required two-thirds majority, Article 73 bis was not adopted. The Swedish representative noted that, although Article 73 bis had not obtained the required two-thirds majority, a substantial majority had pronounced in its favor. Given such a favorable attitude, the Swedish representative argued that it would "indispensable to set up a working group in an attempt to remove the outstanding uncertainties in the text of paragraph 2."[50] The Swedish proposal was adopted by 16 votes to 12, with 16 abstentions. The Working Group set up to prepare a new text for Article 73 bis included Canada, Egypt, Singapore, Sweden, the United Kingdom and the Union of Soviet Socialist Republics.

At the 11th Plenary Meeting, held on April 10, 1980, at 3 p.m., the Working Group set up at the previous meeting had agreed to submitted the following proposals to the Conference:

  1. The words "and interest" should be deleted from the title of Section II, so that it would read (only): "Damages".
  2. There should be a new section II bis entitled "Interest", consisting solely of article 73 bis;
  3. Article 73 bis should read:

    "If a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it, without prejudice to any claim for damages recoverable under article 70 [became CISG Article 74]."

Here is, in the words of the drafters of the Convention, the explanation of the current wording of Article 78:

"Mr. KHOO (Singapore), speaking as the Chairman of the working group set up at the previous meeting, said that it had initially tried to work on the basis of the text of article 73 bis, as it appeared in document A/CONF.97/11/Add.2,[51] but had finally come to the conclusion that fundamental differences in the approach of different national legal systems to the question of interest rendered that task too difficult. A further difficulty arose from the attempt to treat damages and interest under the same heading. The working group had decided to recommend a provision based, as it were, on the highest common factor, so that the Convention might at least contain a clear statement on the question of interest. The text of article 73 bis [became CISG article 78] just read out by the Secretary represented such a solution. The first part of the article established that a party which failed to pay the price or any other sum in due time was under obligation to pay interest on that sum to the other party. The second part of the article, intended to accommodate legal regulations under which interest was considered to be part of the damages recoverable in default situations, referred to the right of the second party to claim damages under article 70 [became CISG article 74]" (emphasis added).[52]

Article 73 bis as proposed by the Working Group was adopted by 30 votes to 2, with 12 abstentions. The title of Chapter V, Section II bis, proposed by the Working Group, "Section II bis: Interest", was adopted by 35 votes to 1, with 3 abstentions. The title of Chapter V, Section II, as amended by the Working Group ("Section II: Damages") was adopted by 42 votes to none.

IV. Operation of Article 78

Article 78 reads as follows "If a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it, without prejudice to any claim for damages recoverable under article 74." If, however, the seller must return the purchase price after the contract has been avoided, Article 84 applies.

Failure to pay the price or any other sum that is in arrears is the only condition to be satisfied under Article 78.[53] Failure refers to a failure to comply with the obligation to pay the price by a specific time, whether the time is set by contract[54] or by the CISG (Article 58).[55] Interest is due regardless of proof of any losses[56] and it is independent of any claim for damages.[57] While there are no problems in determining the time when the buyer is bound to pay the price (as said, it will be governed either by the agreement between the parties or, as a default rule, by the CISG, Article 58);[58] however, there are no default rules with respect to the time of performance of "other sums". In this case, in the absence of any other indication, it must be assumed that interest is to be paid from the day the other sum is due.[59] It is not required to satisfy any additional requirements under domestic law (e.g., the issue of a formal prior warning).[60]

As noted in the previous sections, due to irreconcilable differences among the delegations participating to the Vienna Convention with regard to the appropriate method for fixing the interest rate, the drafters left the issue unanswered in the text of Article 78.[61] Notwithstanding the fact that the interest rate method was not fixed, the delegations wanted to make sure that a general entitlement to interest arises in certain circumstances and that such a right is not subject to any limitations otherwise applicable to claims of damages.[62]

As to the relationship between Article 78 (concerning interest) and Article 74 (concerning damages), there are several cases tackling the matter. It is well-settled that the aggrieved party is entitled, in addition to interest, to damages under Article 74 if it proves them.[63] Such a possibility may be particularly relevant in those situations where the applicable interest rate is lower than the one applied in the country where the creditor may have to borrow money.[64] On the other hand, given that interest under Article 78 should be awarded without furnishing any evidence of actual damages and that the limitations under Article 79 do not apply to interest, a claim under Article 78 may be the fastest and the cheapest way to get the award.

Other relevant topics to be considered include the following:

  1. Compound interest

  2. As to the compound interest issue, CISG Article 78 does not expressly deal with it. Although controversial, compound interest cannot be claimed.[65]

  3. The meaning of "sums" under Article 78

  4. As to the meaning of the word 'sums', interest should accrue with regard to any sum which is due, even if it is not "liquidated" (i.e., made certain).[66]

  5. Whether interest can be also awarded on the "other sums"

  6. While there are no issues on the obligation to pay interest on the primary contractual obligation (price), it is not totally clear whether the interest is owed on secondary monetary obligations, such as damages.[67]

    It has been also suggested that the otherwise applicable law should define the term "sums".[68]

  7. Interest and public policy limitations

  8. Interest should be awarded even though it may be unlawful pursuant to the applicable domestic law.[69] In those countries, if a court deems that the CISG (an international treaty) prevails over domestic rules, lacking any domestic interest provision, the court should determine the applicable rate pursuant to the reasonableness principle, which would lead to the standard interest rate applied in international transactions of that kind.[70] If a court, on the other hand, cannot directly award interest due to domestic law validity concerns, it may still circumvent such prohibition by awarding interest under a different heading (damages).[71]

    The main reasons in support of the approach herein suggested may be summarized as follows: i) the CISG expressly entitles the creditor to a general right to collect interest; ii) there is no CISG provision whereby a signing country may make a reservation to Article 78; iii) the issue of providing a reservation to Article 78 was proposed by some countries but never adopted;[72] iv) parties to a contract who believe that an interest provision may invalidate a contract or part thereof may partially opt out pursuant to CISG Article 6; v) the current trend in Islamic countries with regard to charge of interest seems to suggest that interest may be awarded.[73] It would not surprise me, however, if domestic courts decide not to award interest due to public policy considerations.[74] However, the downside of this approach is that it negates the express mandate of Article 78.[75]

  9. Interest pursuant to Article 78 and Article 84

  10. It should be noted that interest as described under Article 78 is different from interest under article 84(1). Interest under Article 84(1) is intended to compensate the creditor (buyer) for the fruits (interest) of not having benefited the money owed by the debtor (seller) due to the avoidance of the contract. In other words, interest under Article 84(1) is based on the principle that money produces fruits, but is owed only when, as a result of the avoidance of the contract, the price must be refunded to the buyer. Moreover, interest under CISG Article 84(1), as opposed to Article 78, must be paid from the date on which the price was paid [76] and there is no reference to any "arrears" requirement.

A. Whether the interest rate and/or its method of calculation is expressly settled in the Convention

As mentioned, Article 78 does not fix any specific interest rate. There is a disagreement with regard to how to determine the appropriate rate of interest under the Convention,[77] which looks unjustified if one reviews the case law on this matter: the overwhelming majority of the courts, as well as some arbitration tribunals, determine interest pursuant to the law otherwise applicable to the contract,[78] although, in the majority of the cases considered for the purpose of this paper, it is not clear where the courts position the interest issue, whether within the CISG or outside the CISG.

There are many cases where the law of the country of the creditor has been applied without making any reference to rules of private international law.[79] The law of the country of the debtor has also been applied by courts[80] or suggested by commentators.[81] There are also cases in which the law of the country of the legal tender to be used was applied (lex monetae), [82] as well as cases in which the law of the country where the price must be paid.[83] Finally, some courts have applied the rate of interest as determined by the UNIDROIT Principles of International Commercial Contracts (Art. 7.4.9)[84] and usage.[85]

As mentioned, however, the majority of authors and courts have clearly stated that the interest is to be governed by the law of the country as determined by the rules of conflict of laws of the forum state (lex contractus).[86] If the contract is between European Community nationals, for example, absent a choice of law, the law of the country in which the seller has his principal place of business will be applied, according to Article 4(2) of the EEC Convention on Law Applicable to Contractual Obligations.[87]

B. Whether the interest rate and/or its method of calculation it is within the Convention.[88]

The question of the interest rate calculation raises several other issues. As noted, the interest rate issue is not expressly settled in the Convention. Is it, however, to be deemed governed by the CISG although not expressly settled (lacuna praeter legem)?[89] Or, is this a matter excluded from the sphere of application of the CISG (lacuna intra legem)?[90] If it is a matter that must be solved according to the principles of the Convention, what are the principles on this issue?[91] On the other hand, if the issue is not within the CISG, how a court should determine the proper interest rate?

The current application of Article 78, as well as the way it is construed by commentators, suggests that there are two broad ways of understanding Article 78. The majority of the commentators believe that the interest rate issue is not governed by the Convention and therefore they suggest that domestic rules of private international law should fix the proper interest rate. Similarly, some courts clearly state that the issue is not within the CISG,[92] even though the majority of the courts resort to its own domestic law of private international law without even saying whether the gap is praeter or intra legem. The minority, on the other hand, believes that the interest rate issue is within the scope of the Convention and struggles to find a general principle able to discipline the issue, trying, at the very same time, to avoid any deference to domestic rules. These authors suggest that although the mechanism for determining the interest of rate is not expressly settled by the Convention, the general principles of the Convention resolve the matter; it must be said, however, that even within this view it is not clear which general principle best fits the problem.[93]

I believe, for the reasons stated below, that the interest issue is within the sphere of application of the CISG (as the CISG does establish a general entitlement to interest [94]) although the actual figure it is not to be determined through the Convention or its general principles, but by resorting to the domestic law that otherwise applies to the contract would the Convention not be applicable.[95]

It is beyond dispute that when a matter is not directly solved by the Convention, the general principles of the Convention must be the first guide. However, the Convention also expressly states that when its general principles do not give any help, the domestic law should be applied. Determining the actual interest rate is one those cases where the general principles of the Convention (if there are any in the matter of interest) cannot be applied. Besides, even if there are general principles that may give some guidance on this matter, as abundantly shown by those cases where they were actually applied, they are not helpful in terms of assuring either certainty or uniformity. As further evidence of the uncertainty governing the matter, one should consider that commentators cannot even agree on which, if any, general principle should govern the matter. How can we expect that a domestic court, overwhelmed by thousands of cases, would be willing to figure out the meaning of Article 78 in the light of the general principles of the CISG, given that, since its inception more than 20 years ago, no solution (even on the general principles) has been agreed upon? Regardless of some confusion among the commentators, the vast majority of courts and arbitral tribunals have spoken: the rate of interest must be determined according to the law that would otherwise govern the contract.[96]

C. Uncertainty deriving from solutions based on the general principles of the Convention

Solutions calling for the application of the general principles deserve some credit, but they both defy the express text of the Convention and have failed to produce either uniformity or certainty. Indeed, in those very limited instances where the courts resorted to the general principles of the Convention, two arbitral awards ended up applying the interest rate commonly practiced in the creditor's country with respect to the currency of payment (based on full compensation),[97] other courts applied LIBOR rates.[98] In a very recent case tried in U.S., the actual interest rate was to be determined by the jury based on reasonableness.[99]

Full compensation and reasonableness principles may not be used mainly because (i) they fail to consider the core function of interest as defined by Article 78, (ii) reliance on them has been clearly excluded in the final written text of the provision, and (iii) the legislative history of Article 78. In particular, pursuant to the full compensation approach, the obligation of paying interest on sums due is aimed at fully compensating the aggrieved party for the benefit of the bargain. Accordingly, this view applies Article 74 of the Convention to determine the interest rate. This view, however, results from a misunderstanding of the nature of the interest as defined by Article 78, the express wording of Article 78 and its legislative history.

Article 78 draws a clear, distinct line between damages as defined under Article 74 and interest as defined under Article 78.[100] Under Article 78, interest is not meant to fully compensate the creditor of the benefit for the bargain. A party is generally entitled to interest, but it may not be entitled to damages. Article 78 expressly excludes that interest is at any rate linked to damages since interest is due even when damages are excluded under Article 79 (a party is entitled to interest "without prejudice to any claim for damages recoverable under article 74").[101] Interest under Article 78 is based on the general principle that the party who benefited from property belonging to another must remunerate the latter. This remuneration is based on the assumption that money automatically produces interest. Interest is due as a result of failure to pay according to the terms of the contract or the applicable default rules, but it is not a kind of damage, as it is not measured by damages that may have actually occurred, but pursuant to pre-existing fixed rules. As interest is not intended to cover damages, the aggrieved party may be entitled to both damages and interest.

It should also be considered that the interest rate provision belongs to Section III (Interest) which is completely separate from the section dealing with damages (Section II. Damages).[102] The legislative history of Article 78 tells us that the choice of keeping the two concepts distinct and separate was an informed decision.[103] Thus, thoseprovisions normally used to calculate damages (Article 74) cannot be used to calculate the interest rate under Article 78.

With the exceptions referred below, resorting to reasonableness principles for purposes of determining the appropriate interest rate raises even more concerns. Lacking any guidance from the Convention, lacking any international common understanding of what the reasonable interest to be applied to a certain transaction might be, uncertainty and unpredictability reign. International businesses should not need to take chances on these legal aspects of a transaction as well.[104]

I am not implying that reasonableness is not to be used at all. I am only saying that reasonableness may not be used as the only guiding principle in order to determine the proper interest rate. In fact, while the reasonableness principle may not be used to accomplish those tasks mentioned in Article 7(2), it may still play a role pursuant to the requirements set forth by Article 7(1), which provides for courts to promote, inter alia, good faith and the international character of the Convention. While courts may not seek uniformity in this matter (as noted, there is no uniformity requirement in this context), good faith and international character requirements prevent a party from deliberately delaying payment to take advantage of more favorable interest rates or to take advantage of unforeseeable (and excessive) fluctuations of the applicable interest rate resulting in an unjustified impoverishment of one party over the other.

Seller and buyer know that interest is going to be charged in certain circumstances. Businesspeople, even when they have not specifically considered choice of law, forum and private international law rules, can easily foresee that the interest rate is going to be something close to the current or foreseeable applicable rates in one of the countries involved in the transaction. However, if due to unforeseeable conditions, that rate has gone beyond any foreseeable expectation, good faith in the contract relationship should prevent any unreasonable enrichment. So, while interest must be paid, excessive interest (windfall) must not. Moreover, while domestic sellers and buyers may have a better knowledge of domestic political and economic major events, such knowledge may be lacking in an international context. Even though contracting with a foreign party may be more risky, a party to a contract may not be charged with the results of unforeseeable political and economic changes. Parties to a contract, however, are well aware that some interest will be charged as a result of delays. Similarly, when the debtor deliberately delays payment with the intent of taking advantage of the more favorable rates of the applicable interest, a court should prevent such party from harming the other party. It is, of course, very difficult to show that a party purposefully delayed payment.

Therefore, although reasonableness is not a general principle directly applicable pursuant to Article 7(2) (in other words, although it may not prevent recourse to the private international law rules for the purposes of determining the proper rate), it may play a role in the context of excessive unforeseeable interest rate which unreasonably impoverishes one party over the other and in the context of lack of good faith by the debtor. In such circumstances, interest is to be limited to what is reasonable in the context of the transaction. Any other additional claim in connection with interest actually paid should be allowed only to the extent that the requirements of CISG Article 74 are met.

As mentioned earlier, a court should also resort to general principles of reasonableness when dealing with domestic laws that do no not provide for interest at all. In those circumstances, given that the CISG does entitle the creditor to interest, the proper rate should be what it is reasonable in international transactions of that kind.[105]

D. Other general principles: UNIDROIT and Principles of European Contract Law ("PECL")[106]

As mentioned, interest under Article 78 is based on the general principle that the party who unreasonably benefited of property belonging to another must remunerate the latter including the payment of interest. This remuneration is based on the assumption that money automatically produces interest. Interest is due as a result of failure to pay according to the terms of the contract or the applicable default rules, but it is not a kind of damage, as it is not measured by damages actually occurred, but pursuant to pre-existing fixed rules. As interest is not intended to cover damages, the aggrieved party may be entitled to both damages and interest.

These concepts are embodied in the texts of the UNIDROIT Principles of International Commercial Law and PECL. However, we must be careful in referring to the rules and principles set forth by them. While we may take into consideration the UNIDROIT Principles and PECL in order to better understand the nature of interest and its relationship to damages, we may not, in the context of a CISG dispute, rely on their methods for determining the proper interest rate.[107]

UNIDROIT Principles

Article 7.4.9 [108] reads:

"(1) If a party does not pay a sum of money when it falls due the aggrieved party is entitled to interest upon that sum from the time when payment is due to the time of payment whether or not the non-payment is excused.

"(2) The rate of interest shall be the average bank short-term lending rate to prime borrowers prevailing for the currency of payment at the place for payment, or where no such rate exists at that place, then the same rate in the State of the currency of payment. In the absence of such a rate at either place the rate of interest shall be the appropriate rate fixed by the law of the State of the currency of payment.

"(3) The aggrieved party is entitled to additional damages if the non-payment caused it a greater harm."[109]

UNIDROIT reaffirms the rule requiring the non-performing party to pay interest on an unpaid sum, which also includes damages.[110] Interest accrues from the time when payment of the money was due to the time of actual payment. Interest is payable simply as result of the delay in payment, without any need for the aggrieved party to give formal notice of the default. If the delay in the payment is due to force majeure "interest will still be due not as damages but as compensation for the enrichment of the debtor as a result of the non-payment as the debtor continues to receive interest on the sum which it is prevented from paying."[111] UNIDROIT fixes the rate of interest at the average bank short-term lending rate to prime borrowers. The rate in question is the rate at which the aggrieved party will normally borrow at the place of payment for the currency of payment. If no such rate exists, reference is made in the first instance to the average prime rate in the State of the currency of payment. In the absence of such a rate at either place, the rate of interest will be the "appropriate" rate fixed by the law of the State of the currency of payment. In most cases this will be the legal rate of interest and, as there may be more than one, the most appropriate for international transactions should be applied. If there is no legal rate of interest, the rate will be the most appropriate bank rate.

Although it may not seem clear from reading the comment to Article 7.4.9,[112] one may argue that interest is not a kind of damage, even under UNIDROIT. In fact, the comment to the Article states that "the aggrieved party may not prove that it could have invested the sum due at a higher rate of interest or the non-performing party that the aggrieved party would have obtained interest at a rate lower than the average lending rate referred to in paragraph 2." Interest, therefore, is to be determined solely pursuant to paragraph 2 of Article 7.4.9. Thus, interest is a lump sum due to the aggrieved party as a result of delay in the payment. Such lump sum must be determined not in consideration of the damage actually suffered (the full compensation principle does not apply for the determination of the interest rate), but by resorting to preexisting parameters, as set forth by the applicable law. Similar to Article 78, should the delay in the payment cause additional harm, UNIDROIT provides that the aggrieved party, if it can prove the existence and the foreseeability of such harm, can also seek damages.

UNIDROIT, therefore, similar to the CISG, reaffirms the existence of a right to interest on unpaid sums, even in case of force majeure. However, under UNIDROIT, interest is a kind of damage and both actual damages and interest are meant to fully compensate the aggrieved party of the benefit of the agreement. Under CISG, on the other hand, the two concepts are kept clearly separate. Due to substantial and conceptual differences, therefore UNDROIT principles may not be taken into consideration in construing CISG Article 78.

PECL

Article 9:508(1) of PECL simply states that "[i]f a payment of a sum is delayed, the aggrieved party is entitled to interest on that sum."[113] Interest is owed from the date payment is due. [114] Moreover, interest is owed regardless of whether or not payment may be excused under Article 8:108.[115] The aggrieved party is entitled to it regardless of whether it has taken reasonable steps to mitigate its loss. The rate of interest is fixed by reference to the average commercial bank short-term lending rate applicable to prime borrowers prevailing for the contractual currency of payment [116] at the place of payment.[117] It should be noted that a right to interest arises only on primary contractual obligations to pay; the provision does not cover interest on secondary monetary obligations, such as damages or interest. Finally, interest is not a species of ordinary damages. Thus, the general rules on damages do not apply.

PECL gives a definition of the nature of interest similar to the definition herein contended. Indeed, the commentary to PECL Article 9:509 clearly states that interest is not a damage and that it cannot be determined by resorting to the rules for calculating damages.[118] Clearly under PECL, interest is meant to remunerate one party for having conferred a benefit on another; it does not have a compensatory goal (in other words, it is not a species of ordinary damages), and general rules on damages do not apply. In fact, the aggrieved party is entitled to it regardless of whether it has taken reasonable steps to mitigate its loss.

Similar to Article 78, PECL Article 9:508 (2), provides that "[t]he aggrieved party may in addition recover damages for any further loss so far as these are recoverable under this Section." Therefore, both CISG Article 78 and PECL Article 9:508 allow the damaged party to recover additional damages as long as the requirements for recovery of damages (CISG Article 74) are met. Thus, PECL 9:508 is very useful to understand the nature of the interest and its relationship to damage provisions. It has, however, limited relevance as a tool for construing the meaning of CISG Article 78 with regard to the method of calculating the interest rate.

E. Resorting to the domestic rules of private international law

The main difference between the UNIDROIT Principles and PECL, on the one hand, and CISG, on the other, relates to the method of computing interest. While CISG Article 78 expressly leaves the issue out of the Convention, UNIDROIT and PECL, on the other hand, set a precise method for computing interest. Methods like those set by UNIDROIT and PECL may be useful and may encourage uniformity, however, they cannot be used under the CISG.[119] The CISG does not set a method because states' delegations could not reach any agreement on the issue. This means that there was not a uniform and commonly accepted rate of interest that could be applied in all transactions falling within the scope of the Convention. This is still true today. The majority of courts clearly prefer the domestic law solution. Allowing courts to use the UNIDROIT, PECL, or any other single method,[120] would go against the spirit of the Convention and the will of the majority of the member States.[121]

It must be acknowledged that the proposal to include express reference to the domestic rules of conflicts (within Article 78) was not accepted either. Some commentators have drawn the conclusion that the "drafters saw the question at issue not outside the scope of the Convention but rather wanted it to be governed by Article 7(2)."[122] I believe that had the drafters wanted to have the interest rate issue dealt with by the Convention, there would have been no better place to do it (Ubi lex voluit. Dixit. Ubi noluit. Tacuit.). Although resorting to domestic rules of private international law is not, of course, the best solution, it is, however, the only possible correct way to apply Article 78. Rules of private international law, although not expressly indicated as the applicable method under Article 78, nonetheless should be applied ex Article 7(2).[123] Thus, absent any general CISG principle for the determination of the appropriate interest, solving the issue according to the applicable domestic law is expressly provided for by the Convention as a default rule, while resorting to any other method is expressly outside the scheme of the Convention. As mentioned earlier, however, recourse to the domestic rules of private international law should be subject to the good faith and international character requirements set forth by Article 7(1) of the Convention.[124]

V. Conclusion

Once we acknowledge that the interest rate is not expressly settled in the Convention and that the general principles of the CISG do not answer the issue either, and that the CISG requires resorting to the domestic rules of private international law, it is clear that any other method cannot be of any help. By allowing courts to apply any ad hoc and ex post method is a clear violation of the Convention. Thus, UNIDROIT, PECL as well as any other formula, although they state a clear method for calculating the interest rate in a way that may be acceptable in many countries, is not of any help in the construction of the current text of Article 78 of the CISG. Those methods may, however, be a very good starting point in a de jure condendum analysis when a new Article 78 is drafted, if an interest rate method is ever to be embodied in the text of an international agreement.

In order to avoid arbitrary results,[125] taking into consideration the transaction between the parties (the contract), and without aiming at any uniformity in calculating the rate which is neither sought nor required by Article 78 of the Convention,[126] the interest rate must be determined according to the law otherwise applicable, but for the CISG, as result of the application of the rules of the private international law rules of the forum state (as required by CISG Article 7(2)). Notwithstanding any contrary domestic provision proscribing payment of interest, the express text of the CISG requires award of it. [127] In light of the good faith and international character requirements, excessive unforeseeable interest resulting in an unreasonable enrichment of one party over the others may not be awarded. In these cases, the applicable interest rate should be determined pursuant to reasonableness principles.

The view based on the private international law rules accomplishes much more certainty than any other approach. Certainty in the case of Article 78 is given by the fact that the vast majority of the courts clearly prefers such approach,[128] although

"[t]his result in different outcomes based on different regulations in non-unified private international law [footnote omitted]. While this might be considered deplorable, in no respect are these differences a violation of the principle of uniformity in application of the Convention. The lack of uniformity actually conforms to the standards of the Convention. Uniformity in the outcome of the case would be obviously be preferable. This deficiency in the Convention must be accepted."[129]


FOOTNOTES

1. Dottore in Giurisprudenza, Università degli Studi di Napoli, "Federico II", (Italy), 1993; LL.M. in International & Comparative Law, University of Pittsburgh School of Law (U.S.A.), 2000; Associate of the Institute of International Commercial Law of the Pace University School of Law. I would like to thank Professor Albert Kritzer for his precious comments and Professor James Flannery for kindly editing this article. Of course, any mistake I may have made is to be attributed only to this author.

2. United Nations Convention on Contracts for the International Sale of Goods, opened for signature April 10, 1980, Preamble, U.N. Doc. A/Conf. 97/18, Annex I, English version reprinted in 52 Fed. Reg. 6264 (1987) and in 19 I.L.M. 668 (1980).

3. Tribunale [District Court] di Padova, 31 March 2004 (Italy), available at <http://cisgw3.law.pace.edu/cases/040331i3.html>.

4. Tribunale [District Court] di Vigevano 856/1997, July 12 2000 (Italy), available at <http://cisgw3.law.pace.edu/cases/000712i3.html>.

5. U.S. District Court, Northern District of Illinois, Eastern Division [federal court of 1st instance], 01 C 4447, 29 May 2003 (U.S.A), available at <http://cisgw3.law.pace.edu/cases/030529u1.html>. [2003 WL 21254261, N.D. Ill., May 29, 2003].

6. See, e.g., Delchi Carrier S.p.A. v. Rotorex Corp., 71 F.3d 1024, 1028 (2d Cir. 1995): "caselaw interpreting analogous provisions of Article 2 of the Uniform Commercial Code ("UCC") may also inform a court where the language of the relevant CISG provisions track that of the UCC."

7. For a very recent example of this kind of approach see [Raw Materials, Inc. v. Manfred Forberich GmbH & Co., KG, WL 1535839 (ND Ill. 2004), where the District Court used the UCC test for commercial impracticability to interpret CISG Article 79.

8. U.S. District Court, Northern District of Illinois, Eastern Division [federal court of 1st instance], 01 C 4447, 24 May 2004 (U.S.A.), available at <http://cisgw3.law.pace.edu/cases/040524u1.html>.[ -- - F.Supp.2d -- -- , 2004 WL 1166628, N.D. Ill., May 21, 2004].

9. See Jacob S. Ziegel, Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods 149 (1981).

10. See, e.g., Jeffrey S. Sutton, Measuring Damages Under the United Nations Convention on the International Sale of Goods, 50 Ohio St. L.J. 737, 737-752 (1989); Phanesh Koneru, The International Interpretation of the UN Convention on Contracts for the International Sale of Goods: An Approach Based on General Principles, 6 Minn. J. Global Trade 105-152 (1997).

11. For an historical account on the issue of the rate of interest raised during the drafting period of the Vienna Sales Convention, see Pace University School of Law, Institute of International Commercial Law, Guide to CISG Article 78, visit <http://cisgw3.law.pace.edu/cisg/text/roadmap/intro-78.html>. For literature specifically relevant to the provisions of CISG Article 78 visit <http://cisgw3.law.pace.edu/cisg/text/mono78.html>.

12. Fritz Enderlein & Dietrich Maskow, INTERNATIONAL SALES LAW, UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS - CONVENTION ON THE LIMITATION PERIOD IN THE INTERNATIONAL SALE OF GOODS 310, 311 (1992). See also Tribunale di Padova, supra note 3, citing ICC International Court of Arbitration award No. 7785 [1995], available in Journal du droit international, 1015 et seq.; Oberlandesgericht [OLG] [Provincial Court of Appeal] Koblenz 2 U 1230/91, 17 September 1993 (Germany), available at <http://cisgw3.law.pace.edu/cases/930917g1.html>; Tribunale [District Court] di Pavia, 29 December 1999 (Italy), available at <http://cisgw3.law.pace.edu/cases/991229i3.html>; ICC International Court of Arbitration award No. 8908 [1998], available at <http://cisgw3.law.pace.edu/cases/988908i1.html>; Landgericht [LG] [District Court] Landshut 54 O 644/94, 5 April 1995 (Germany), available at <http://cisgw3.law.pace.edu/cases/950405g1.html>.

13. Enderlein & Maskow, supra note 12.

14. Id.

15. ULIS Article 83

16. See Report of UNCITRAL on the work of its second session (March 1969), Official Records of the General Assembly, Twenty-fourth Session Supplement, No. 18 (A/7618).

17. For the text of proposals see Paragraph 61 of A/CN.9/WG.2/WP.17.

18. A/CN.9/87 - Progress report of the Working Group on the International Sale of Goods on the work of its fifth session (Geneva, January 21- February 1, 1974).

19. A/CN.9/100, Annex II - Text of Comments and Proposals of Representatives on the Revised Text of a Uniform Law on the International Sale of Goods as Approved or Deferred for Further consideration by the Working Group at its first five sessions.

20. See A/CN.9/100 - Report of the Working Group on the International Sale of Goods on the work of its sixth session (New York, January 27- February 7, 1975).

21. See A/CN.9/100, Annex 1 - Revised text of the Convention on the International Sale of Goods as approved or deferred for further consideration by the Working Group on the International Sale of Goods at its first six sessions.

22. A/CN.9/116, Annex 1 - Draft Convention on the International Sale of Goods. Annex 2 reproduces a Commentary on the draft Convention.

23. Id.

24. See A/CN.9/116, Annex 2 - Commentary on the draft Convention on the International Sale of Goods.

25. See A/CN.9/125/Add. 2.

26. A/CN.9/125 and A/CN.9/125/ Add. 1 to 3 - Comments by Governments and international organizations on the draft convention on the international sale of goods.

27. See supra note 22.

28. See A/32/17 - Report of the United Nations Commission on International Trade Law on the work of its tenth session (Vienna, May 23 - June 17, 1977).

29. Id., at paragraph 499.

30. See A/33/17 - Report of the United Nations Commission on International Trade Law on the work of its eleventh session (New York, May 30 - June 16, 1978).

31. A/CN.9/142 and Add. 1 - report of the Working Group on the International Sale of Goods on the work of its ninth session (Geneva, September 19-30, 1977).

32. U.N. Document A/CONF.97/9.

33. Id.

34. U.N. A/CONF.97/C.1/L.247.

35. Id.

36. U.N. A/CONF.97/C.1/L.226.

37. The Spanish delegation proposed: "It would, however, be appropriate to clarify the rate of interest charged and to add, in the three texts proposed - the first three lines of which were identical - the word 'normal' before the word 'rate' in the second line since short-term commercial credit was affected by variable conditions and it was therefore important that the 'normal' rate of interest should be applied." See U.N. Document A/CONF.97/C.1/L.247.

38. U.N. Document A/CONF.97/11/Add.1 and 2 (April 4, 1980).

39. U.N. Document A/CONF.97/11.

40. U.N. Document A/CONF.97/C.1/L.216.

41. U.N. Document A/CONF.97/C.1/L.218.

42. U.N. Document A/C0NF.97/C.1/L.222.

43. U.N. Document A/CONF.97/C.1/L.226/Rev.1, replacing A/CONF.97/C.1/L.226.

44. U.N. Document A/CONF.97/L.16.

45. U.N. Document A/CONF.97/L.18.

46. See supra note 44.

47. A/CONF.97/L.17 reads "Delete paragraph (1) of Article 69 [now CISG Article 84]."

48. Summary Records of the Plenary Meetings, 10th Plenary Meeting, April 10, 1980, available at <http://cisgw3.law.pace.edu/cisg/plenarycommittee/summary10.html>.

49. Id.

50. Id.

51. See supra note 38 and accompanying text.

52. See Summary Records of the Plenary Meetings, 11th Plenary Meeting, April 10, 1980, at 3 p.m., available at <http://cisgw3.law.pace.edu/cisg/plenarycommittee/summary11.html>.

53. See, e.g., Kantonsgericht [KG] [District Court] Zug A3 2001 34, 12 December 2002 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/021212s1.html>; Amtsgericht [AG] [Petty District Court] Koblenz 16 C 1056/96, 12 November 1996 (Germany), available at <http://cisgw3.law.pace.edu/cases/961112g1.html>; Oberlandesgericht [OLG] [Provincial Court of Appeal] Rostock 1 U 247/94, 27 July 1995 (Germany), available at <http://cisgw3.law.pace.edu/cases/950727g1.html>.

54. Handelsgericht [HG] des Kantons Aargau [Commercial Court], OR.97.00056, 19 December 1997 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/971219s1.html>.

55. See Landgericht [LG] [District Court] Stendal 22 S 234/94, 12 October 2000 (Germany), available at <http://cisgw3.law.pace.edu/cases/001012g1.html>; Oberlandesgericht [OLG] [Provincial Court of Appeal] Frankfurt am Main 5 U 15/93, 18 January 1994 (Germany), available at <http://cisgw3.law.pace.edu/cases/940118g1.html>; Oberlandesgericht [OLG] [Provincial Court of Appeal] Frankfurt am Main 5 U 261/90, 13 June 1991 (Germany), available at <http://cisgw3.law.pace.edu/cases/910613g1.html>.

56. See OLG Frankfurt am Main, 5 U 15/93, supra note 55; Landgericht [LG] [District Court] Hamburg, 5 O 543/88, 26 September 1990 (Germany), available at <http://cisgw3.law.pace.edu/cases/900926g1.html>; Amtsgericht [AG] [Petty District Court] Oldenburg in Holstein, 5 C 73/89, 24 April 1990 (Germany), available at <http://cisgw3.law.pace.edu/cases/900424g1.html>.

57. See, e.g., Bundesgericht [BGer] [Supreme Court] 4C.179/1998/odi, 28 October 1998 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/981028s1.html> Handelsgericht [HG] [Commercial Court] Zürich HG 930476, 21 September 1995 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/950921s1.html>; OLG Frankfurt am Main, 5 U 15/93, supra note 55; Oberlandesgericht [OLG] [Provincial Court of Appeal] Düsseldorf, 17 U 146/93, 14 January 1994 (Germany), available at <http://cisgw3.law.pace.edu/cases/940114g1.html>; OLG Koblenz, 2 U 1230/91, supra note 12; ICC International Court of Arbitration, award No. 7197 [1992] available at <http://cisgw3.law.pace.edu/cases/927197i1.html>; AG Oldenburg in Holstein 5 C 73/89, supra note 56. See also, e.g., Enderlein & Maskow, supra note 12, at 311; Rolf Herber and Beate Czerwenka, INTERNATIONALES KUAFRECHT 348 (1991); Hans Stoll, Internationalprivatrechtliche Fragen bei der landesrechtlichen Ergänzung des einheitlichen Kaufrechts, in Festschrift für Murad Ferid 495, 509-10 (Andreas Heldrich ed., 1988). But see F.J.A. van der Velden, Het Weense Koopverdrag 1980 en zijn Rechtsmiddelen 405 (1988) who sustains that interest is part of damages. According to this view, payment of interest could be exempted on the grounds of impediments.

58. See, Hans H. Eberstein & Klaus Bacher, Annotations 1-36 on Article 78, in COMMENTARY ON THE UN CONVENTION ON THE INTERNATIONAL SALE OF GOODS 591-99, 593 (Peter Schlechtriem, ed., 1998) [hereinafter Eberstein & Bacher, Annotations]; Enderlein & Maskow, supra note 12, at 313. See also Oberlandesgericht [OLG] [Provincial Court of Appeal] Rostock 6 U 126/00, 25 September 2002 (Germany), available at <http://cisgw3.law.pace.edu/cases/020925g1.html>; Amtsgericht [AG] [Petty District Court] Viechtach 1 C 419/01, 11 April 2002, available at <http://cisgw3.law.pace.edu/cases/020411g1.html>; Handelsgericht [HG] [Commercial Court] Zürich HG 930634/O, 30 November 1998, available at <http://cisgw3.law.pace.edu/cases/981130s1.html>; HG Aargau OR.97.00056, supra note 54; Amtsgericht [AG] [Petty District Court] Kehl 3 C 925/93, 6 October 1995, available at <http://cisgw3.law.pace.edu/cases/951006g1.html>. There are, however, several cases whereby the "due date" is determined pursuant to other factors: Landgericht [LG] [District Court] München 12 HKO 5593/01, 30 August 2001, available at <http://cisgw3.law.pace.edu/cases/010830g1.html> [interest due as of the day as the request from the attorney]; Landgericht [LG] [District Court] München 12 HKO 3804/00, 16 November 2000 (Germany), available at <http://cisgw3.law.pace.edu/cases/001116g1.html> [receipt of invoice]; Tribunal Cantonal [Canton Appellate Court] Vaud 01 93 1061 [163/96/BA and 164/96/BA], 11 March 1996 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/960311s2.html> [by domestic law]; Cour d'appel [CA] [Appeal Court] Grenoble 93/2821, 29 March 1995 (France), available at <http://cisgw3.law.pace.edu/cases/950329f1.html> [from the date of the interest pleading]; ICC International Court of Arbitration, award No. 7531 [1994], available at <http://cisgw3.law.pace.edu/cases/947531i1.html> [from the date when buyer communicated the amount of its claim to seller].

59. Eberstein & Bacher, Annotations supra note 58. See also Herber & Czerwenka, supra note 57; Ulrich Magnus, UN-Kaufrecht (1995) (separate volume of Staudingers KOMMENTAR ZUM BÜRGERLICHEN GESETZBUCH (13th ed. 1994); Herbert Bernstein & Joseph Lookofsky, UNDERSTANDING THE CISG IN EUROPE 149 (2nd ed. 2003).

60. Tribunale di Padova, supra note 3; KG Zug, A3 2001 34, supra note 53; AG Viechtach, 1 C 419/01, supra note 58; Tribunal de commerce [District Court] Namur 985/01, 15 January 2002 (Belgium), available at <http://cisgw3.law.pace.edu/cases/020115b1.html>; Rechtbank van Koophandel [District Court] Kortrijk A.R. 04576/00, 4 April 2001 (Belgium), available at <http://cisgw3.law.pace.edu/cases/010404b1.html>; Rechtbank van Koophandel [District Court] Kortrijk A.R. 3669/2000, 3 October 2001 (Belgium), available at <http://cisgw3.law.pace.edu/cases/011003b1.html>; LG Stendal, 22 S 234/94, supra note 55; Landgericht [LG] [District Court] Flensburg, 2 O 291/98, 24 March 1999 (Germany), available at <http://cisgw3.law.pace.edu/cases/990324g2.html>; Handelsgericht [HG] [Commercial Court] Aargau, OR.96.0-0013, 26 September 1997 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/970926s1.html>; Amtsgericht [AG] [Petty District Court] Nordhorn 3 C 75/94, 14 June 1994 (Germany), available at <http://cisgw3.law.pace.edu/cases/940614g1.html>; Tribunale d'Appello [Appellate Court] di Lugano 12.95.00300, 12 February 1996 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/960212s1.html>; Schiedsgericht der Handelskammer [Arbitral Tribunal] Hamburg, 21 March 1996 (Germany), available at <http://cisgw3.law.pace.edu/cases/960321g1.html>; Tribunal Cantonal [Canton Appellate Court] Vaud 01 93 0661, 11 March 1996 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/960311s1.html>; Landgericht [LG] [District Court] Aachen, 41 O 111/95, 20 July 1995 (Germany), available at <http://cisgw3.law.pace.edu/cases/950720g1>; Cour d'appel [CA] [Appeal Court] de Grenoble 93/4879, 26 April 1995 (France), available at <http://cisgw3.law.pace.edu/cases/950426f2.html>; Landgericht [LG] [District Court] München 10 HKO 23750/94, 20 March 1995 (Germany), available at <http://cisgw3.law.pace.edu/cases/950320g1.html>; ICC International Court of Arbitration, award No. 7585 [1992], available at <http://cisgw3.law.pace.edu/cases/927585i1.html>; Amtsgericht [AG] [Petty District Court] Zweibrücken 1 C 216/92, 14 October 1992 (Germany), available at <http://cisgw3.law.pace.edu/cases/921014g1.html>; Pretore [District Court] della Giurisdizione di Locarno-Campagna 15/91, 16 December 1991 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/911216s1.html>. But see Hovioikeus of Turku, 12 April 2002, available at <http://cisgw3.law.pace.edu/cases/020412f5.html>; Landgericht [LG] [District Court] Zwickau 3 HK O 67/98, 19 March 1999 (Germany), available at <http://cisgw3.law.pace.edu/cases/990319g1.html>; Bulgarska turgosko-promishlena palata [Bulgarian Chamber of Commerce and Industry] 11/1996, 12 February 1998 (Bulgaria), available at <http://cisgw3.law.pace.edu/cases/980212bu.html>; ICC International Court of Arbitration, award No. 7331 [1994], available at <http://cisgw3.law.pace.edu/cases/947331i1.html>.

61. See footnote 52 and accompanying text.

62. Id.

63. See, e.g., Tribunale di Padova, supra note 3; KG Zug, A3 2001 34, supra note 53; Cour d'appel Grenoble, 28 November 2002 (France), available at <http://cisgw3.law.pace.edu/cases/021128f2.html>. Oberlandesgericht [OLG] [Provincial Court of Appeal] Schleswig 11 U 40/01, 22 August 2002 (Germany), available at <http://cisgw3.law.pace.edu/cases/020822g2.html>; Landgericht [LG] [District Court] Darmstadt 10 O 72/00, 9 May 2000 (Germany), available at <http://cisgw3.law.pace.edu/cases/000509g1.html>; Amtsgericht [AG] [Petty District Court] Duisburg 49 C 502/00, 13 April 2000 (Germany), available at <http://cisgw3.law.pace.edu/cases/000413g1.html>; Landgericht [LG] [District Court] München 12 HKO 4174/99, 6 April 2000 (Germany), available at <http://cisgw3.law.pace.edu/cases/000406g1.html>; LG Flensburg 2 O 291/98, supra note 60; BGer, 4C.179/1998/odi, supra note 57: Handelsgericht [HG] [Commercial Court] Zürich HG 95 0347, 5 February 1997 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/970205s1.html>; Pretura di Torino, 30 January 1997, available at <http://cisgw3.law.pace.edu/cases/970130i3.html>; AG Koblenz, 16 C 1056/96, supra note 53; Amtsgericht [AG] [Petty District Court] Bottrop 12 C 177/96, 25 June 1996 (Germany), available at <http://cisgw3.law.pace.edu/cases/960625g2.html>; Landgericht [LG] [District Court] Düsseldorf 36 O 178/95, 5 March 1996 (Germany), available at <http://cisgw3.law.pace.edu/cases/960305g1.html>; HG Zürich, HG 930476, supra note 57; Oberlandesgericht [OLG] [Provincial Court of Appeal] Hamm 11 U 206/93, 8 February 1995 (Germany), available at <http://cisgw3.law.pace.edu/cases/950208g3.html>; ICC International Court of Arbitration, award No. 7197, supra note 57.

64. See, e.g., KG Zug, A3 2001 34, supra note 53; OLG Schleswig, 11 U 40/01, supra note 63; AG Koblenz, 16 C 1056/96, supra note 53; Landgericht [LG] [District Court] Flensburg 4 O 369/99, 19 January 2001 (Germany), available at <http://cisgw3.law.pace.edu/cases/010119g1.html>. Klaus Peter Berger, INTERNATIONAL ECONOMIC ARBITRATION 626 (1993). See also UNIDROIT Principles of International Commercial Contracts, Article 7.4.9.

65. See Eberstein & Bacher, Annotations supra note 58, at 599; Enderlein & Maskow, supra note 12, at 315. But see John O. Honnold, UNIFORM LAW FOR INTERNATIONAL SALES UNDER THE 1980 INTERNATIONAL SALE LAW 469 (1999). See also ICC International Court of Arbitration, award No. 8908, supra note 12; ICC International Court of Arbitration, award No. 8611 [1997] available at <http://cisgw3.law.pace.edu/cases/978611i1.html>; see also PECL Article 9:508. But see, Schiedsgericht der Börse für Landwirtschaftliche Produkte [Arbitral Tribunal], Wien, S 2/97, 10 December 1997 (Austria), available at <http://cisgw3.law.pace.edu/cases/971210a3.html>, Cour d'appel Grenoble, 93/2821, supra note 58 and, again, Cour d'appel Grenoble, 93/4879, supra note 60.

66. See Eberstein & Bacher, Annotations, supra note 58, at 593 stating "[t]he wording of Article 78 ... hardly provides for such an assumption. Nor are there any substantive grounds discernible for such a restriction on the obligation to pay interest. Interest is therefore payable also in respect of periods during which the claim had arisen, even though the precise amount of the claim had not yet been made certain"; but see Barry Nicholas, COMMENTARY ON THE INTERNATIONAL SALES LAW 568, 571 (Massimo C. Bianca & Michael Joachim Bonell eds., 1987); Honnold, supra note 65, at 468-469.

67. Any "other sum" on which courts awarded payment of interest: Supreme Court of Western Australia WASC 11; CIV 1647 of 1998 consolidated by order 12/5/2000, 17 January 2003 (Australia), available at <http://cisgw3.law.pace.edu/cases/030117a2.html>: ("[Buyer] is also entitled to interest on such damages [breach of contract] at the rate of 6 per cent per annum, pursuant to s 32 [section 32] of the Supreme Court Act 1935 (WA), calculated from 10 December 1997 (when formal demand for damages was made following the third recall of the goods in question) until judgment)"); Hoviokeus of Helsinki S 00/82, 26 October 2000 (Finland), available at <http://cisgw3.law.pace.edu/cases/001026f5.html> (legal expenses): "[Seller] will be made to pay for [buyer's] legal expenses accrued in the Court of First Instance in the amount of Fmk [....]. The sum is subject to interest on arrears as defined in the Finnish Law of Interest starting from one month after the issuance of judgment onwards"); Kantonsgericht [KG] [District Court] Zug A3 1997 61, 21 October 1999 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/991021s1.html> ("Interest accrues from the due date for claims of damages as well, i.e., from the original date of breach"), ICC International Court of Arbitration, award No. 9187 [1999], available at <http://cisgw3.law.pace.edu/cases/999187i1.html> ("damages interest calculated from the date of occurrence of the damage"); and LG Landshut, 54 O 644/94, supra note 12 ("According to the prevailing opinion, Art. 78 CISG also applies to claims for damages (cf. von Caemmerer / Schlechtriem - Eberstein/Bacher, Kommentar zum einheitlichen UN-Kaufrecht, Art. 78, Annotation 15). The claim comes into existence with the occurrence of the loss."). See also UNIDROIT Principles of International Commercial Contracts, Article 7.4.10: "Unless otherwise agreed, interest on damages for non-performance of non-monetary obligations accrues as from the time of non-performance." But see PECL Article 9:508.

68. Id. See also Nicholas, supra note 66.

69. Enderlein & Maskow, supra note 12, at 312; Franco Ferrari, Specific Topics of the CISG in the light of Judicial and Scholarly Writing [hereinafter Specific Topics], 15 J. L & Com. 1, 125 (1995). As to case law, see Internationales Schiedsgericht der Bundeskammmer der gewerblichen Wirtschaft, Wien, SCH-4366, 15 June 1994 (Austria), available at <http://cisgw3.law.pace.edu/cases/940615a3.html>; Internationales Schiedsgericht der Bundeskammmer der gewerblichen Wirtschaft, Wien, SCH-4318, 15 June 1994 (Austria), available at <http://cisgw3.law.pace.edu/cases/940615a4.html>.

70. Franco Ferrari, FONDAMENTI DELLA VENDITA INTERNAZIONALE 132 (1998) [hereinafter Ferrari, Fondamenti].

71. Fatima Akaddaf, Application of the United Nations Convention on Contracts for the International Sale of Goods (CISG) to Arab Islamic Countries: Is the CISG Compatible with Islamic Law Principles, 13 Pace International Law Review 1-58, 53 (2001).

72. See supra note 52 and accompanying text.

73. Akaddaf, supra note 71 at 56; T.S. Twibell, Implementation of the United Nations Convention on Contracts for the International Sale of Goods (CISG) under Shari'a Law: Will Article 78 of the CISG Be Enforced When the Forum Is an Islamic State? 9 International Legal Perspectives 25-92, 77-85 (1997); and John Yukio Gotanda, Awarding Interest in International Arbitration, 90 American Journal of International Law 40 (1996); in general, see Daniel Klein, The Islamic and Jewish Laws of Usury: A Bridge to Commercial Growth and Peace in the Middle East, 23 Denv. J.L. & Policy 535 (1995).

74. See Peter Schlechtriem, UNIFORM SALES LAW - THE UN CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS [hereinafter Uniform Sales Law] 99, 100 (1986). See also Joseph M. Lookofsky, The 1980 United Nations Convention on Contracts for the International Sale of Goods, in INTERNATIONAL ENCYCLOPEDIA OF LAWS 1, 128 (Blanpain ed., 1993) (stating "the validity of a contractual claim to interest ... remains a national concern. ... In those countries where interest is forbidden, the mere mention of interest in the agreement will render it invalid"); Peter Schlechtriem, From Hague to Vienna -- Progress in Unification of the Law of International Sale Contracts? in The Transnational Law of International Commercial Transactions 132 n. 21 (Horn & Schmittoff eds.) (stating "[I]nsofar as a national law does not allow interest -- for religious reasons, for example -- [Article 78] has no effect"). See also Kantonsgericht [KG] [District Court] Berlin 2 U 7418/92, 24 January 1994 (Germany), available at <http://cisgw3.law.pace.edu/cases/940124g1.html>, noting that "[t]he interest rate is determined by the national law and its prerequisites."

75. Ferrari, Fondamenti, supra note 70. It should also be noted that there is no language on the interest issue that recognizes and/or tries to compromise the differences among different legal systems similar to the provisions set forth by CISG Article 28, according to which, where under domestic law in a similar case specific performance would not be granted, a court is allowed not to grant specific performance.

76. ICC International Court of Arbitration, award No.  6653 [1993], available at <http://cisgw3.law.pace.edu/cases/936653i1.html>.

77. See Volker Behr, The Sales Convention in Europe: From Problems in Drafting to Problems in Practice, 17 J.L. & Com. 263-299 (1998). See also 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, 2 Vindobona Journal of International Commercial Law and Arbitration (1998) 3-35; Karin Kizer, Minding the gap: Determining interest rates under the UN Convention for the International Sale of Goods, University of Chicago Law Review, vol. 65, Fall 1998, 1279-1306. For a list of the various approaches applied by the courts to determine the rate of interest, see, e.g., ICC International Court of Arbitration, award No. 7585, supra note 60.

78. It is not feasible to mention all cases decided "pursuant to the law otherwise applicable". Among the most recent cases adopting such an approach, see, e.g., OLG Schleswig, 11 U 40/01, supra note 63; ICC International Court of Arbitration, award No. 9448 [1999], available at <http://cisgw3.law.pace.edu/cases/999448i1.html>; Hof [Gerechtshof] [District Appeal Court] Arnhem 95/570, 15 April 1997 (Netherlands), available at <http://cisgw3.law.pace.edu/cases/970415n1.html>; KG Zug, A3 1997 61, supra note 66; CA Grenoble, 28 November 2002, supra note 63; Arbitration Court of the Chamber of Commerce and Industry of Budapest VB 96074, 10 December 1996 (Hungary), available at <http://cisgw3.law.pace.edu/cases/961210h1.html>; Tribunale di Pavia, supra note 12; Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 196/1997, 22 October 1998, available at <http://cisgw3.law.pace.edu/cases/981022r1.html>.

79. See, e.g., AG Duisburg, 49 C 502/00, supra note 63; Bezirksgericht [BG] [District Court] Arbon 341/1994, 9 December 1994 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/941209s1.html>; Landgericht [LG] [District Court] Frankfurt am Main 3/11 O 3/91, 16 September 1991 (Germany), available at <http://cisgw3.law.pace.edu/cases/910916g1.html>; Landgericht [LG] [District Court] Stuttgart 3 KfH O 97/89, 31 August 1989 (Germany), available at <http://cisgw3.law.pace.edu/cases/890831g1.html>.

80. See, e.g., AG Duisburg, 49 C 502/00, supra note 63; Tribunal Cantonal Vaud, 01 93 1061, supra note 58.

81. See Stoll, supra note 57.

82. Handelsgericht [HG] [Commercial Court] Aargau OR.2001.00029, 5 November 2002 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/021105s1.html>; OLG Rostock, 6 U 126/00, supra note 58; Arbitration Court attached to the Hungarian Chamber of Commerce and Industry Vb 94131, 5 December 1995 (Hungary), available at <http://cisgw3.law.pace.edu/cases/951205h1.html>; Arbitration Court attached to the Hungarian Chamber of Commerce and Industry Vb 94124, 17 November 1995 (Hungary), available at <http://cisgw3.law.pace.edu/cases/951117h1.html>. See also Wolfang Grunsky, Anwendbares Recht und gesetzlicher Zinssatz, in Festschrift für Franz Merz 147, 147-157 (Walter Gerhard et al. eds., 1992).

83. HG Zürich, HG 95 0347, supra note 63; Arrondissementsrechtbank [Rb] [District Court] Almelo 4367, 9 August 1995 (Netherlands), available at <http://cisgw3.law.pace.edu/cases/950809n1.html>; ICC International Court of Arbitration, award No. 7331, supra note 60; ICC International Court of Arbitration, award No. 5460 [1987], available at <http://cisgw3.law.pace.edu/cases/875460n1.html>.

84. ICC Court of Arbitration, award No. 9333 [1998], available at <http://cisgw3.law.pace.edu/cases/989333i1.html>; ICC International Court of Arbitration, award No. 8128 [1995] available at <http://cisgw3.law.pace.edu/cases/958128i1.html>; Cour d'appel [Appeal Court] de Paris, 6 April 1995 (France), available at <http://cisgw3.law.pace.edu/cases/950406f1.html>. See also Internationales Schiedsgericht der Bundeskammmer der gewerblichen Wirtschaft, Wien, SCH-4366, supra note 69); Internationales Schiedsgericht der Bundeskammmer der gewerblichen Wirtschaft, Wien, SCH-4318, supra note 69, which expressly mention the UNIDROIT Principles.

85. Landgericht [LG] [District Court] Saarbrücken 8 O 68/02, 25 November 2002 (Germany), available at <http://cisgw3.law.pace.edu/cases/021125g1.html> [although usage was not actually used to determine the applicable interest]; Juzgado Nacional de Primera Instancia en lo Comercial No. 10 [National Commercial Court of First Instance] 56.179, 6 October 1994, available at <http://cisgw3.law.pace.edu/cases/941006a1.html>; Juzgado Nacional de Primera Instancia en lo Comercial No. 10 [National Commercial Court of First Instance], 23 October 1991, available at <http://cisgw3.law.pace.edu/cases/911023a1.html>.

86. See, e.g., Nicholas, supra note 66, at 570; Schlechtriem, Uniform Sales Law, supra note 74; Leif Sevón, INTERNATIONAL SALES OF GOODS: DUBROVNIK LECTURES 229 (Petar Sarcevic & Paul Volken eds., 1986); Enderlein & Maskow, supra note 12, at 311; Herber & Czerwenka, supra note 57, at 349; Ulrich Magnus, Währungsfragen im Einheitlichen Kaufrecht: Zugleich ein Beitrag zu Seiner Lückenfüllung und Auslegung, Rabels Zeitschrift für Ausländisches und Internationales Privatecht 116 (1989); Burghard Piltz, INTERNATIONALES KUAFRECHT 280 (1993); Martin Karollus, Judicial Interpretation and Application of the CISG in Germany 1988-1994, Cornell Review of the Convention on Contracts for the International Sale of Goods 51-94 (1995); Leif Sevón, Obligations of the Buyer under the Vienna Convention on the International Sale of Goods, 106 Jurisdisk Tidskrift 341 (1990). As to case law, see LG Hamburg, 5 O 543/88, supra note 56; OLG Frankfurt am Main, Germany, 5 U 261/90, supra note 55; Pretore [District Court] della Giurisdizione di Locarno-Campagna, 15/91, supra note 60; Fovárosi Biróság [FB] [Metropolitan Court] of Budapest 12.G.41.471/1991/21, 24 March 1992 (Hungary), available at <http://cisgw3.law.pace.edu/cases/920324h1.html>; Zivilgericht [ZG] [Civil Court] of Basel-Stadt P4 1991/238, 21 December 1992 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/921221s1.html>; ICC International Court of Arbitration, award No. 7153 [1992], available at <http://cisgw3.law.pace.edu/cases/927153i1.html>; Handelsgericht [HG] [Commercial Court] of Zürich HG 930138, 9 September 1993 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/930909s1.html>; OLG Koblenz, 2 U 1230/91, supra note 12; Rechtbank van Koophandel [District Court] Arnhem 1992/1251, 30 December 1993 (Netherlands), available at <http://cisgw3.law.pace.edu/cases/931230n1.html>; ICC International Court of Arbitration, award No. 6653, supra note 70; OLG Frankfurt am Main, 5 U 15/93, supra note 55; Oberlandesgericht [OLG] [Provincial Court of Appeal] Düsseldorf 6 U 152/95, 10 February 1994 (Germany), available at <http://cisgw3.law.pace.edu/cases/960711g1.html>; Oberlandesgericht [OLG] [Provincial Court of Appeal] München 7 U 4419/93, 2 March 1994 (Germany), available at <http://cisgw3.law.pace.edu/cases/940302g1.html>; Oberlandesgericht [OLG] [Provincial Court of Appeal] Hamm 7 U 1720/94, 8 February 1995 (Germany), available at <http://cisgw3.law.pace.edu/cases/950208g1.html>; Tribunal Cantonal [Canton Appellate Court] Valais C1 97 167, 28 October 1997 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/971028s1.html>; Oberlandesgericht [OLG] [Provincial Court of Appeal] Koblenz 2 U 31/96, 31 January 1997 (Germany), available at <http://cisgw3.law.pace.edu/cases/970131g1.html>; BGer, 4C.179/1998/odi, supra note 57; LG Flensburg, 2 O 291/98, supra note 60; Oberlandesgericht [OLG] [Provincial Court of Appeal] Stuttgart 5 U 118/99, 28 February 2000 (Germany), available at <http://cisgw3.law.pace.edu/cases/000228g1.html>; LG Stendal, 22 S 234/94, supra note 55.

87. See EEC Convention on the Law Applicable to Contractual Obligations of June 19, 1980, 1980 O.J. (L 266), a treaty which may be converted into a EU Community instrument: See COM/2002/0654 final. See Schlechtriem, Uniform Sales Law, supra note 74, at 99; Behr, supra note 77, at 288. KG Zug, A3 1997 61, supra note 66. Note, however, that the Hague Convention of June 15, 1955, on the law applicable to international sales of goods may come into play when the forum is located within a contracting state of the Hague Convention. See Corte di cassazione [Supreme Court], Sezioni unite, 448, 10 March 2000 (Italy), available at <http://cisgw3.law.pace.edu/cases/000310i3.html>; Tribunal Cantonal Valais, C 323/94, 20 December 1994, available at <http://cisgw3.law.pace.edu/cases/941220s1.html>. However, recourse to the Hague Convention may not be the correct approach, as underlined, among other courts, by Tribunale di Padova, supra note 3.

88. Some cases whereby the issue of whether or not the interest rate is within the Convention is clearly posed: Tribunale di Padova, supra note 3; HG Aargau, OR.2001.00029, supra note 82; Tribunale di Pavia, supra note 12; Amtsgericht [AG] [Petty District Court] Alsfeld 31 C 534/94, 12 May 1995 (Germany), available at <http://cisgw3.law.pace.edu/cases/950512g1.html>; LG Aachen, 41 O 111/95, supra note 60; ICC International Court of Arbitration, award No. 7565 [1994], available at <http://cisgw3.law.pace.edu/cases/947565i1.html>.

89. Id. See also Franco Ferrari, Uniform Application and Interest Rates Under the 1980 Vienna Sales Convention, 24 GA. J. Int'l & Comp. L. 467, 477 (1995) [hereinafter Ferrari, Uniform Application]. See also Ferrari, Specific Topics, supra note 69, at 120; Behr, supra note 77, at 295.

90. Id. See also Ferrari, Uniform Application, supra note 89.

91. See Honnold, supra note 65, stating that the issue is within the CISG because "[t]he mandate of Article 7(1) to construe the Convention to promote 'uniformity in its application' requires us to seek a principle governing the scope of Article 78 that can be considered as a basis for uniform application of the Convention"; see also Koneru, supra note 10; Sutton, supra note 10; Joanne M. Darkey, A U.S. Court's Interpretation of Damage Provisions Under the U.N. Convention On Contracts for the International Sale of Goods: A Preliminary Step toward an International Jurisprudence of CISG or a Missed Opportunity? , 15 J.L. & Com. 139, 149 (1995); Dominique Hascher, Commentary on Journal of Law and Commerce Case III: International Court of Arbitration, Matter No. 7153 in 1992, 14 J.L.& Com. 220, 224 (1995); James J. Callagan, U.N. Convention On Contracts for the International Sale of Goods: Examining the Gap-Filling Role of CISG in Two French Decisions, 14 J. L. & Com. 183, 200 (1995); Alan Zoccolillo, Determination of the Interest Rate Under the 1980 United Nations Convention on Contracts for the International Sale of Goods: General Principles vs. National Law, 1 Vindobona Journal of International Commercial Law and Arbitration (1997) 3-43; John Felemegas, The Award of Counsel's Fees Under Article 74 CISG, in Zapata Hermanos Sucesores v. Hearthside Baking Co., 6 Vindobona Journal of International Commercial Law and Arbitration (2002) 30-39; 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 Sucesores v. Hearthside Baking Co., 6 Vindobona Journal of International Commercial Law and Arbitration (2002) 40 et seq. As to case law, see U.S. District Court, Northern District of Illinois, Eastern Division, 28 August 2001 (U.S.A.), available at <http://cisgw3.law.pace.edu/cases/010822u1.html>; Juzgado Nacional de Primera Instancia en lo Comercial n. 10, 56.179, supra note 85; Juzgado Nacional de Primera Instancia en lo Comercial n. 10, Argentina, 23 October 1991, supra note 85; Internationales Schiedsgericht der Bundeskammmer der gewerblichen Wirtschaft -- Wien; SCH-4366, supra note 69; Internationales Schiedsgericht der Bundeskammmer der gewerblichen Wirtschaft -- Wien; SCH-4318, supra note 69.

92. See Tribunale di Pavia, supra note 12. See also supra note 88.

93. ICC International Court of Arbitration, award No. 7565, supra note 88. See also André Corterier, A New Approach to Solving the Problem of the Interest Rate Under Article 78 CISG, 5 International Trade and Business Law Annual 39, 32-42 (2000).

94. See supra note 52 and accompanying text.

95. See Richteramt [RA] [District Court] Laufen des Kantons Berne, 7 May 1993 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/930507s1.html>: "Only in regard to the determination of the interest in arrears does the national law gain significance, since Art. 78 CISG only constitutes the obligation to pay interest, however, without determining the rate of interest ...Nevertheless, it is all in all clear that the present case, regarding the matters disputed, is solely governed by the scope of application of the CISG; in other words, on the merits of the case, the CISG is relevant and has to be referred to for the solution of the matter of dispute, and not any pure national Finnish law. Finnish law is presently significant only for the determination of the rate of interest." See also Franco Ferrari, Tasso degli interessi ed applicazione uniforme della Convenzione di Vienna sui contratti di vendita internazionale (hereinafter Tasso degli interessi), Rivista di Diritto Civile II 277 (1995); Ulrich Magnus, Stand und Entwicklungen des UN-Kaufrechts, ZEITSCHRIFT FÜR EUROPÄISCHES PRIVATRECHT 202 (1995). See also AG Alsfeld, 31 C 534/94, supra note 88; ICC International Court of Arbitration, award No. 7660 [1994], available at <http://cisgw3.law.pace.edu/cases/947660i1.html>; Bezirksgericht der Saane (Zivilgericht) [District Court] T 171/95, 20 February 1997 (Switzerland), available at <http://cisgw3.law.pace.edu/cases/970220s1.html>.

96. Out of 220 cases reviewed (only those for which an English translation/abstract was available), at least 94 clearly made reference to this approach. I believe, however, that the actual number of cases relying on it is much higher.

97. See Internationales Schiedsgericht der Bundeskammmer der gewerblichen Wirtschaft -- Wien; SCH-4366, supra note 69; Internationales Schiedsgericht der Bundeskammmer der gewerblichen Wirtschaft -- Wien; SCH-4318, supra note 69.

98. ICC International Court of Arbitration, award No. 8128, supra note 84; ICC International Court of Arbitration, award No. 8769 [1996], available at <http://cisgw3.law.pace.edu/cases/968769i1.html>. With regard to issues arising from using LIBOR, see infra comments on UNIDROIT and PECL. See also Franco Ferrari, Interpretation of the Convention and gap-filling: Article 7, in THE DRAFT UNCITRAL DIGEST AND BEYOND: CASES, ANALYSIS AND UNRESOLVED ISSUES IN THE U.N. SALES CONVENTION, 138, 170 (Franco Ferrari et al. eds., 2004) [hereinafter Ferrari, Interpretation], who sustains that "Article 7(2) CISG clearly refers to 'the general principles on which it [the CISG] is based.' Thus, recourse to external principles, such as the UNIDROIT Principles and the Principles of European Contract Law, appears to be excluded [footnote omitted]. This does not mean, however, that the UNIDROIT Principles and the Principles of European Contract Law are meaningless with respect to a contract governed by the CISG. These principles can be useful, for instance, to corroborate a solution reached through the application of the CISG's rules, as evidenced not only by several arbitral awards [footnote omitted], but also by one state court decision."

99. See U.S. District Court, Northern District of Illinois, Eastern Division, United States, supra note 85.

100. Behr, supra note 77, at 286

101. Id.

102. See Nicholas, supra note 66, at 570; Schlechtriem, Uniform Sales Law, supra note 74; Behr, supra note 77, at 286; Dionysios P. Flambouras, The Doctrines of Impossibility of Performance and clausula rebus sic stantibus in the 1980 Vienna Convention on Contracts for the International Sale of Goods and the Principles of European Contract Law: A Comparative Analysis, 13 Pace International Law Review 261 (2001). See also UNIDROIT Principles of International Commercial Contracts, Article 7.4.9, and the Official Comment of Article 9:508 of the Principles of European Contract Law: "Interest is not a species of ordinary damages. Therefore the general rules on damages do not apply [emphasis added]. Interest is owed whether or not non-payment is excused under Article 8:108. Also, the aggrieved party is entitled to it without regard to any question whether it has taken reasonable steps to mitigate its loss." Consider also that ULIS Article 83, which provides for interest under the damages provisions, was clearly rejected by the drafters of the CISG. For case law, ex plurimis, ICC International Court of Arbitration, award No. 7585, supra note 60; Tribunale di Pavia, supra note 12.

103. See Summary Records of the Plenary Meetings, 11th Plenary Meeting, April 10, 1980, available at <http://cisgw3.law.pace.edu/cisg/plenarycommittee/summary11.html>, and compare to the amendment proposed by Denmark, Finland, Greece, Sweden (A/CONF.97/C.1/L.216) (seeking to have an interest and damages under the same section), which was later withdrawn. See also Schlechtriem, Uniform Sales Law, supra note 74, at 99, where he states: "The goal of the delegations that believed that a special interest provision was necessary was precisely to prevent interest from being considered as damages and thereby to maintain the obligation to pay interest in case of exemptions under Article 79." See also supra note 29 and accompanying text.

104. Reasonableness, although is one the most important principle sustaining the Convention, is not capable of setting a method of calculating interest which complies with the express wording of Article 78 and its legislative history. Moreover, it is not capable to warrant uniformity either. Reasonableness must be determined on a case-by-case basis, which, by its terms, contradicts the concept of uniformity. As to the meaning of the reasonableness concept, see Professor Albert H. Kritzer's Commentary available at http://cisgw3.law.pace.edu/cisg/text/reason.html>.

105. See supra footnote 69 et seq. and accompanying text.

106. According to ICC International Court of Arbitration, award No. 8128, supra note 84, UNIDROIT and PECL principles must be considered general principles on which CISG is based (Art. 7(2) CISG. But see Ferrari, Interpretation, supra note 98.

107. Ferrari, Interpretation, supra note 98.

108. For a match-up of CISG Article 78 with counterpart provisions of UNIDROIT Principles visit <http://cisgw3.law.pace.edu/cisg/principles/uni78.html>.

109. See UNIDROIT Article 7.4.9.

110. UNIDROIT Article 7.4.10.

111. See Official Comments on Article 7.4.9 of the UNIDROIT Principles available at <http://cisgw3.law.pace.edu/cisg/principles/uni78.html>.

112. Also consider that Article 7.4.9 falls within Section 4 "Damages".

113. See PECL Article 9:508 available at <http://cisgw3.law.pace.edu/cisg/text/textef.html#a9508>.

114. PECL Article 7:102 available at <http://cisgw3.law.pace.edu/cisg/text/textef.html#a7102>.

115. PECL Article 8:108 available at <http://cisgw3.law.pace.edu/cisg/text/textef.html#a8108>.

116. PECL Article 7:108 available at <http://cisgw3.law.pace.edu/cisg/text/textef.html#a7108> for the definition of "Currency of Payment" under the PECL.

117. PECL Article 7:101 available at <http://cisgw3.law.pace.edu/cisg/text/textef.html#a7101> for the definition of "Place of Performance" under the PECL.

118. Guide to CISG Article 78 & 84(1), Comment and Notes on PECL 9:508 available at <http://cisgw3.law.pace.edu/cisg/text/peclcomp78.html>.

119. Id. Professor Kritzer notes "The weight of all current judicial authority is to the effect that it is inappropriate to use the UNIDROIT Principles as an aid to the interpretation of CISG Article 78." See also Ferrari, Interpretation, supra note 98.

120. ICC International Court of Arbitration, award No.  6653, supra note 70.

121. See Official Records of the United Nations Conference on Contracts for the International Sale of Goods, Vienna, March 10 - April 11, 1980 (United Nations publications, Sales No. E.81.IV.3), pp. 137-138. See Eberstein & Bacher, supra note 58, at 596, stating "[i]f the Conference was unable to solve that task [determining an uniform interest rate], any solutions proposed by legal writers and courts will need to be treated with particular caution [emphasis added]." See Behr, supra note 77, at 290.

122. See Thiele, supra note 77. The English delegation sought to introduce a provision such that the Convention would not be "concerned with the payment of interest". However, it was later withdrawn due to lack of support. The delegations, although were unable to reach any agreement on the method of calculating the interest, nonetheless, wanted to make clear that the aggrieved party does have a right to interest, which is owed regardless of any damage claim. By no means, however, one should also draw the further conclusion that the drafters wanted to have the Convention also governing the matter of the method of calculating the interest rate. See Summary Records of the Plenary Meetings, 11th Plenary Meeting, April 10, 1980, available at <http://cisgw3.law.pace.edu/cisg/firstcommittee/Meeting37.html>. See also Schlechtriem, Uniform Sales Law, supra note 74, at 99, where he states: "The goal of the delegations that believed that a special interest provision was necessary was precisely to prevent interest from being considered as damages and thereby to maintain the obligation to pay interest in case of exemptions under Article 79."

123. Ferrari, Tasso degli interessi, supra note 94. See also AG Alsfeld, 31 C 534/94, supra note 88. Therefore, it seems very difficult to see how "by applying national law to fill the interest rate gap, national courts and arbitral tribunal may contravene the intent of the Convention and further promote discontinuity." See Zoccolillo, supra note 91.

124. See supra note 104 et seq. and accompanying text.

125. Tribunale di Padova, supra note 3.

126. ICC International Court of Arbitration, award No. 7331, supra note 60: "Regarding the precise rate of interest to be applied, there is no single internationally accepted rate of interest. This is reflected in the Vienna Convention, which only generally provides that parties are entitled to interest without specifying any particular rate of interest." See also Behr, supra note 77 at 296: "[T]here is no governing principle governing the rate of interest."

127. See, however, supra note 74 and accompanying text.

128. Tribunale di Padova, supra note 3, is one of the latest examples taken into consideration in the drafting of this article.

129. Behr, supra note 77, at 296-97. As Professor Flechtner made clear: "The uniformity principle is only of several interpretative principles that co-exist in Article 7(1)....[T]he uniformity principle of Article 7(1), while fundamental to the purposes of the Convention, is neither a rigid nor a simple mandate.... [A]ttempts to apply the uniformity principle in a rigid or absolutist fashion not only are unjustified by the Convention, but also could undermine the substantive purposes and the political underpinnings of the CISG." See Harry M. Flechtner, The Several Texts of the CISG in a Decentralized System: Observations on Translations, Reservations and other Challenges to the Uniformity Principle in Article 7(1), 17 J.L. & Com. 187-217, 188 (1998).


Pace Law School Institute of International Commercial Law - Last updated November 15, 2004
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