Reproduced with permission of the author

1. Introduction

2. Interrelation of the Conventions

3. Interpretation of the Conventions

4. Scope of the Conventions

5. Determining the Applicable Law

6. Validity and Formation of International Contracts

7. Scope of the Applicable Law

8. Conclusion

Table of Cases

Official Publications

Bibliography

Appendices

I. Table of the States party to the 1955 Hague Convention, the Rome Convention and the 1980 Vienna Convention; II. Convention sur la loi applicable aux ventes à caractère international d'objets mobiliers corporels (the 1955 Hague Convention); III. La Déclaration et la Recommendation suivantes relatives au domaine de la Convention sur la loi applicable aux ventes à caractère international d'objets mobiliers corporels, conclue le 15 juin 1955; IV. Convention on the Law Applicable to Contractual Obligations (the 1980 Rome Convention); V. First Protocol on the Interpretation by the Court of Justice of the European Communities of the Convention on the Law Applicable to Contractual Obligations; VI. Second Protocol Conferring on the Court of Justice of the European Communities Certain Powers to Interpret the Convention on the Law Applicable to Contractual Obligations; VII. United Nations Convention on Contracts for the International Sale of Goods [Part III omitted] (the 1980 Vienna Convention)

1. Introduction

This principle is recognised by all civilised countries. It is not a problem in itself. The problem is the uncertainty to which the parties to an international contract are exposed by not knowing beforehand which legal system will govern their contract and their respective rights and obligations. This uncertainty is as serious a threat to commercial trade as a protective legislation on import and export and likewise, it is a problem which neither the contracting parties nor the trade itself could solve. It must be solved interstately, i.e. by uniform rules of legislation.

Naturally, since the problem really is the uncertainty of the parties to the contract, these uniform rules of legislation could be either uniform conflict rules or uniform substantive rules. Consequently, under the former the same national substantive law would be identified as the applicable law of the contract regardless of which forum country, and under the latter the same substantive rules of law would be applied. Both solutions have been adopted within this field of law, i.e. contracts of international sales: the 1955 Hague Convention on the Law Applicable to International Sales of Goods (the Hague Convention) and the 1980 Rome Convention on the Law Applicable to Contractual Obligations (the Rome Convention); and the 1980 Vienna Convention on Contracts for the International Sale of Goods (the Vienna Convention), respectively.

One of the purposes of this paper is to show that a uniform substantive law will not render conflict of laws unnecessary or useless: it will only make the latter less used. The reason for this is simply that a uniform law, particularly when based on compromise, can never be comprehensive enough. This means that issues not regulated must be solved either under the uniform law by way of analogy or e contrario interpretation, or under a national domestic law as identified by conflict of laws rules. Another reason is that at times a uniform law will refer matters to local trade practices. In a situation where there are several relevant local trade practices, the conflict of laws rules could provide guidelines, at least by way of analogy or e contrario interpretation, when deciding which of these competing trade practices should be applied. Hence, the two will always work in tandem.

This paper is concerned with the interplay of the above introduced three Conventions, it does not deal with any other legal rules on the same issues within a Contracting State, nor does it deal with any other conflict of laws traditions but that of the European civil law. Its aim is to identify in which situations the substantive rules of the Vienna Convention, in the end, will govern some of the different legal aspects of an international contract. However, since the Rome Convention is not only concerned with international contracts of sale of goods, the other contractual obligations falling under that Convention will not be dealt with.

1.2 Terminology

The term `private international law´ will be used in the broadest sense, covering rules on jurisdiction, conflict of laws rules, internal rules of private international law[2], anational laws, principles of international law, lex mercatoria etc. The term `national substantive law´ is used as its very opposite. Naturally, `private international law´ does not include public international law, just as `national substantive law´ does not include public [national] law. Accordingly, all three Conventions, as interstate agreements on uniform rules for international contracts, are well within the field of private international law.

1.3 Historical Background and Purpose of the Conventions

1.3.1 The Hague Convention [3]

Already at the Sixth Hague Conference on Private International Law in 1928 [4], the issue of a private international law convention regarding sales of tangible goods was discussed. A Committee of experts was appointed to work out a draft. At the Seventh Conference in 1951, the delegates of the participating States came to an agreement on a Draft Convention, which was finally accepted on June 15 1955. The Convention came into force on September 1 1964, after ratification by the Nordic countries but Iceland.[5]

The purpose of the Convention is partly to remove the legal unpredictability the international commercial trade has suffered due to the different national conflict rules and thus prevent forum shopping, partly to remove the legal uncertainty created by the "individualising method" when the applicable law is not obvious.[6] It is also considered to be one of the first steps towards unification of the international sales law even though only twelve States have ratified the Convention.[7] Its importance in the context of this paper lies in that nine out of the fifteen Contracting States to the Rome Convention are parties to this Convention.

1.3.2. The Rome Convention [8]

The work on unification of private international law and codification of the conflict rules within the European Community, i.e. drafting the Rome Convention, started by a proposal by the Governments of the Benelux countries to the Commission of the European Communities in 1967. The Rome Convention was ready for ratification in 1980. In 1988 two Protocols on interpretation of the rules of the Convention by the European Court of Justice were introduced. However, they have not entered into force yet. The Convention came into force on April 1, 1991 after ratification by the United Kingdom.[9]

The Convention is commended to Member States of the European Union as a measure of harmonisation, designed to eliminate differences between national conflict rules which impede the free movement of persons, goods, services and capital.[10] Consequently all new Member States of the European Union have ratified the Rome Convention.

1.3.3 The Vienna Convention [11]

At a Diplomatic Conference in Vienna in 1980, the United Nation Convention on International Sales of Goods was accepted on April 11, 1980. It is the final step of the work on the uniform rules of international sales of goods, a task that has taken more than fifty years to conclude if one takes into account the previous work undertaken by UNIDROIT and not only that of UNCITRAL. The Convention came into force on January 1, 1988 after ratification by China, Italy and the United States.[12]

The purpose of the Convention is to introduce a uniform regime more responsive to the particular needs of international trade than the great number of different national laws could provide and to rule out the uncertainty created by the parties' ignorance of each other's national substantive law. This uniform regime has been criticised by some legal scholars as being even more difficult to predict than the different national laws, since it, being a compromise between different legal traditions, contains references to the applicable law and main rules with equally broad exceptions. Moreover, it only contains few improvements compared with the different domestic laws. However, the number of Contracting States continues to increase, so it is broadly accepted.[13]

The Hague [14] and Rome [15] Conventions are international agreements on uniform conflict of laws rules in contract. They are both of universal character, which means that their application is not limited as between Contracting States. They are also mandatory in the sense that the parties to the contract cannot contract out of their application.[16] This of course does not mean that neither Convention does not recognise the principle of party autonomy: under both Conventions the parties' choice of governing substantive law is recognised and given effect. Through the application of these uniform rules the same national law will be identified as the governing law of the contract, regardless of in which Contracting State the forum is situated. Thus parties to international contracts will be ensured of the necessary predictability needed in commercial trade and deterred from forum-shopping between fora in different Contracting States.

The Vienna Convention [17] on the other hand, is an international agreement on uniform substantive rules governing international sales of goods. It is not of universal character, i.e. it will only apply in relation to Contracting States, neither is it mandatory, since the parties can either contract in or out of its application.[18] In other words, this Convention too recognises the principle of party autonomy. This uniform sales law has been incorporated within the national substantive laws of the Contracting States. Thus it forms an integral part of those laws. Accordingly, the Convention will correspond with what is usually meant by the lex contractus or the governing law in contract. However, despite its incorporation, the Convention will remain an autonomous body of law, which is particularly clear in regard of its interpretation.[19] Here too, the aim is to ensure predictability and deter forum-shopping, though the Convention will also provide a neutral alternative to the otherwise applicable national domestic law of a particular country.

Consequently, the former two Conventions, as sets of universally applicable conflict rules, will occasionally identify the latter, as a set of substantive rules governing international sales, as the law applicable to a contract. Or rather, the law of a Contracting State to the Vienna Convention will be identified as the lex contractus and thus the uniform substantive rules governing international sales of goods are applicable as part of that law.[20]

However, it is important to appreciate that even though the Vienna Convention fits the description of a substantive law, the very subject matter of the Convention, i.e. international sales, is a matter falling under private international law, and the Convention, unlike the substantive domestic laws, contains its own rules regarding its application instead of relying on the national conflict rules. This suggests that the character of the Vienna Convention is dual; that it also contains rules of a private international law character.

According to its Article 1(1)(a) the Vienna Convention is "directly" applicable when the parties to the contract have their relevant places of business in different Contracting States, provided that the Convention has taken effect in the forum State.[21] This means that the traditional applicable law as identified by conflict rules will be disregarded.[22] Logically, since the provision is a rule of the lex fori and it identifies which law, or rather which set of rules, will be applied to such a contract, the provision performs the task of a conflict rule and not that of a rule of substantive law.

One of the differences between the provision in Article 1(1)(a) and traditional conflict rules is that the former identifies the actual situation in which the Convention is applicable and the latter determine which national law will be applied to the contract. That is to say, the former is an in casu rule and the latter are general rules. However, a simple rephrasing will show that the difference is not really substantive as concerns the actual identification of the rules applicable to a contract. Article 1(1)(a) could be generalised as follows: "international contracts shall be governed by the Convention rules when the parties have their relevant places of business in different Contracting States", its connecting factor being the location of the parties' relevant places of business. The conflict rules on the other hand could be concretised as follows: "Swedish domestic law applies to international contracts when the parties have chosen Swedish domestic law or the contract is most closely connected to Swedish domestic law; Finnish domestic law . . . etc., etc."

The fact that Article 1(1)(a) is a rule of a peculiar kind is further emphasised by the various efforts undertaken to classify it. Philip suggests that the provision is an internationally mandatory rule as defined in Article 7 of the Rome Convention.[23] That is to say, it will be applied by the forum regardless of the governing law, which is exactly what all fora of the Contracting States do. The implication of this suggestion is that recourse to the traditional conflict rules is unnecessary, rather than excluded, since the internationally mandatory character of Article 1(1)(a) will render the governing law inapplicable in favour of the uniform substantive rules in the Vienna Convention. However, this does not deal with the question of the proper characterisation of the provision.

In Germany, on the other hand, it is well settled that Article 1(1)(a) is a conflict rule. However, since it only applies in one specific situation, i.e. where the parties have their relevant places of business in different Contracting States, and it only identifies one specific set of rules, i.e. the Vienna Convention, it is classified as a unilateral conflict rule. The German term Anwendungsbestimmende Kollisionsnorm, which could be translated into something like "application-determining conflict rule", is probably the most descriptive one, though the term most commonly used is einseitige Kollisionsnorm (unilateral conflict rule).[24] Hence, the unilateral conflict rule in Article 1(1)(a) differs from the traditional conflict rules in that the latter apply in any possible international situation and identify any one of an indefinite number of national substantive laws as the governing law. That is to say, since they are universal in their scope and application and Article 1(1)(a) is not, it is possible to distinguish between universal conflict rules on the one hand and unilateral conflict rules on the other. It is this distinction that makes Article 1(1)(a) applicable instead of the traditional [universal] conflict rules, when the parties have their relevant places of business in different Contracting States, in accordance with the principle of lex specialis derogat generalis.[25]

Accordingly, the statement that Article 1(1)(a) makes the Vienna Convention generally applicable without recourse to private international law,[26] cannot be altogether correct. The implication of the statement is namely that an international sale would be regarded as a domestic one, which, in considering that all other contractual aspects of the contract outside the scope of the Vienna Convention along with all the non-contractual aspects of it nevertheless will be regarded as international, is really illogical.

The dual character of the Vienna Convention is further supported by Article 7(2), which ultmately refers questions of law unsettled within the Convention to the proper law of the contract, as identified by the conflict rules of the lex fori; and by the presence of the private international law principle of party autonomy in Article 6.[27]

The substantive character of the Vienna Convention is shown inter alia by Article 1(1)(b). The provision expresses a general principle within the field of private international law: that the substantive rules of a legal system will be applied when it is identified as the governing law. Article 1(1)(b) also distributes legal issues between different bodies of law within a legal system, i.e. between the domestic sales law and the uniform international sales law. It follows that the provision is not in itself an international conflict rule.[28]

2.1.1 Illustration

2.2 The General Interplay of the Conventions

Where the parties to contracts of international sales of goods have their relevant places of business in different Contracting States to the Vienna Convention, there will hardly be any interplay between the Conventions, since such contracts will fall exclusively under the Vienna Convention by virtue of Article 1(1)(a) as lex specialis. Any interplay will be restricted to such questions which under Article 7(2) are to be settled in conformity with the law applicable by virtue of the rules of private international law. The Hague and Rome Conventions will only apply to matters within their scope but outside the scope of the Vienna Convention.[29]

Where the Vienna Convention is not directly applicable under Article 1(1)(a), the applicable law of the contract must be identified by the national conflict rules of the lex fori, e.g. the Hague and Rome Conventions. However, according to Article 1(1)(b) of the Vienna Convention, the Convention rules will still govern the contract when the rules of private international law lead to the application of the law of a Contracting State.[30] Within the field of conflict of laws the concept of "law", means the law in force in a State other than its choice of laws rules, i.e. its substantive law. Due to the substantive character of the Vienna Convention, the rule in Article 1(1)(b) will apply whether the forum country is a Contracting State or not. The court seized will apply it as a provision of the internal law of the Contracting State, the application of which is prescribed by the conflict rules of the lex fori. Hence, the court is not performing an obligation under the Vienna Convention as an international treaty by applying its uniform substantive rules to an international sales contract, but simply applying the governing law, of which the Convention rules form an integral part.[31]

The application of the substantive rules is not dependent on the fact that the conflict rules of the Contracting State, the law of which has been identified by the forum as the applicable law, also will identify the law of a Contracting State as the lex contractus, which Bernstein contends.[32] Apart from being contrary to the principle of exclusion of renvoi,[33] as it includes application of the conflict rules of the applicable law, such an interpretation of Article 1(1)(b) would create an additional requirement of "double identification", i.e. that conflict rules of both the lex fori and the lex contractus must identify the law of a Contracting State as the governing law in order for the Convention rules to apply. There is no support for Bernstein's contention in the wording of Article 1(1)(b). The provision simply refers the matter to `the rules of private international law´, which, according to Jayme means that: "[i]n such cases, the applicability of the Convention depends on the rules of private international law of the respective forum . . . [and] it is sufficient that [they] lead to the law of a Contracting State." [34]

Accordingly, when the Vienna Convention is not applicable under Article 1(1)(a), the court seized in a Contracting State will use its other conflict rules, e.g. the Hague and Rome Conventions, to determine the applicable law. Where the law of a Contracting State to the Vienna Convention is identified as the lex contractus, Article 1(1)(b) is fulfilled and the substantive rules of the Vienna Convention will be applied as part of the governing law.[35]

All three Conventions recognise the principle of party autonomy.[36] That is to say, the parties' choice of law will be upheld. However, a choice of law clause simply referring the matter to the law of a Contracting State to the Vienna Convention, will by virtue of Article 1(1)(b) lead to the application of the Convention rules. In order for the domestic law of the chosen Contracting State to apply, the parties' intention must under Article 6 of the Vienna Convention make an express or at least an evident reference to the domestic rules.

Naturally, where the law chosen by the parties is the law of a Contracting State taking the reservation under Article 95 that it will not be bound by Article 1(1)(b), the presumption will be the opposite, i.e. its domestic rules will be applied, rather than the Convention rules, unless the parties contract into the Convention. The reason for this is that a choice of law by the parties renders their contract outside the scope of the Vienna Convention. That is to say, Article 1(1)(a) does not apply and where a reservation under Article 95 precludes the application of Article 1(1)(b), the Convention rules will not apply at all, unless the parties incorporate them by an express or at least evident reference.[37]

The Doctrine of Exclusion of Renvoi

2.3.1 The Hague Convention

The expression `la loi interne du pays´ means that the contract will be governed by the substantive rules of the applicable law. Consequently, the conflict rules of the applicable law will not be applied, i.e. renvoi is excluded.[38]

2.3.2 The Rome Convention

In accordance with the general approach regarding the conflict of laws in contract, the principle of renvoi is explicitly excluded in the Convention. The provision will not be of any major importance between the Contracting States due to the uniformity of the conflict rules. However, when the uniform rules lead to the application of the law of a non-Contracting State, the provision will be important, since the conflict rules of such a State might identify another law as the governing law.[39]

According to the Report,[40] the exclusion of renvoi is simply logical. A choice of law by the parties will exclude any possibility of renvoi to another law, since the parties clearly have intended the substantive rules of their chosen law to apply. Where the parties have not made a choice of law, it would not be reasonable for a court to apply a particular law simply because that law is considered by the applicable law as identified by the conflict rules of the lex fori, to be the proper law of the contract. It would be far too unpredictable.

However, there are national legal rules which, without being conflict rules, nevertheless will govern when other substantive rules are applicable. These rules are sometimes referred to as internal rules of private international law [42] and their application is not excluded under Article 15. They establish either which set of substantive rules is to be applied to the transaction, or the choice could be between a set of substantive rules and no statutory regulation at all. An example of the former kind is Article 1(1)(b) - and consequently Article 95 too - of the Vienna Convention which governs whether the uniform sales law or the domestic rules of the applicable law will be applied.[43] Naturally, the application of the internal rules of private international law is neither excluded under the Hague Convention.

2.3.3 The Vienna Convention

The reference in Article 1(1)(b) to `the rules of private international law´ of the respective forum is not qualified in any way, i.e. the contents of these rules is a matter strictly for the lex fori. Accordingly, whether the principle of renvoi could be used in identifying the law of a Contracting State as the governing law and thus rendering the Convention rules applicable as part of that law, is outside the scope of the Convention.[44]

2.4 The Primacy of the Conventions inter se

2.4.1 The Hague Convention

Apart from the doctrine of exclusion of renvoi, there are no guidelines as to the relationship with other conventions within the Convention.

2.4.2 The Rome Convention

The Rome Convention is subordinate to all other Community acts already in force or later adopted which contain rules of private international law with regard to contractual obligations. This is to avoid conflicts between these acts and the Convention and to allow further development within this field of law regarding particular types of contractual obligations.[45]

The Community provisions contemplated by Article 20 are Regulations, Directives and Conventions concluded by the institutions of the European Community and national laws harmonised in implementation of such acts.[46]

Once ratified, the Rome Convention will completely replace all national conflict rules in force in a Contracting State which are of purely national origin and not part of any convention to which the Contracting State is a Party.[47] These "international" conflict rules will not be replaced and according to the provision the Convention will not prejudice their application.

However, the Article does not provide any uniform procedure, so the difficulties arising from the combined application of the Convention and another concurrent convention are not eliminated and the different Contracting States must seek their own solutions.[48] If the other concurrent convention contains a similar provision on subsidiarity, the issue could be solved by applying general principles of interpretation, in particular the principle of lex specialis derogat generalis, though it is recommendable that the issue is properly settled within the implementation process of the conventions.[49] Where the concurrent convention does not have such a provision, e.g. the Hague Convention, that convention will prevail, though see Plender's suggestion described below in section 2.4.4.

2.4.3 The Vienna Convention

This Article regulates the relation between the Vienna Convention and other international agreements concerning the same matters, i.e. substantive rules on international sales of goods. Since reference is made to `international agreements´, situations falling under Article 94 [50] will not be within the meaning of this provision. The effect of Article 90 is to displace the application of the Convention, but in order not to weaken the universal character of the Convention the provision will only apply where both parties have their relevant places of business in States Parties to another agreement concerning matters governed by the Convention.[51]

Article 90 will not regulate the relationship between the Convention on the one hand and the Hague and Rome Conventions on the other, since the latter two are concerned with the choice of law and do not contain any substantive rules. The fact that the Convention contains a unilateral conflict rule [Anwendungsbestimmende Kollisionsnorm], i.e. Article 1(1)(a), does not mean that its subject matter is conflict of laws. [52]

Article 90 is a rule of priority, therefore it is not necessary for a Contracting State to make a declaration under the provision in order for it to have effect. Despite this, Hungary has made an interpretative declaration, in which it is stated that Hungary regards COMECON General Conditions of Supply to fall under the Article. This declaration has not been contested by any Contracting States and it should state the law as it stands. The provision should cover any international agreement regardless of whether it is bilateral or multilateral.[53]

Herber has suggested that the law of the European Community would be able to claim priority under this provision.[54] He argues that the secondary EC law by way of analogy, since it is a sui generis legal system and not international law, should be given priority because of its basis in the Treaties of Rome and the fact that it, due to this basis, "objectively forms part of a set of rules governed by an international agreement."[55]

However, it is here argued that, first, the correct interpretation of Article 90 should be according to its wording, i.e. analogies are not appropriate. This is even more emphasised by the provisions in Article 94, under which Contracting States can make reservation against the application of the Convention inter se, if their substantive law constitutes a regional uniform legal order.[56] So far there has been no such reservation referring to EC law. Secondly, the secondary EC law is not uniform enough. It consists of de minimis rules, which will be implemented in due course (and sometimes later) by the Member States of the European Community, so how will the contents of the EC law be established? Should all Member States have implemented the Directive; should it be according to the actual Directive, i.e. the de minimis rules; the implementation [of stricter rules] in an individual Member State; or in any other way? Furthermore, even though an unimplemented Directive may have so called direct effect, i.e. that individuals can seek its enforcement it even though it is not yet implemented, this right is usually only against the Member State in question and not against other individuals.[57] All taken together, and apart from the fact that there is no EC contract law, let alone any EC law on international sales of goods, it is arguable that EC law should not even qualify for a declaration under Article 94.[58]

Article 99 concerns the transition from the 1964 Hague Sales Conventions to the new regime established in the Vienna Convention. The essence of the provision is that the rules of the Vienna Convention will replace those of the others.

2.4.4 Conclusion

It is clear that formally the Hague Convention will always prevail in regard to the other two Conventions in case of a collision. The probability of such a collision between the Vienna Convention on the one hand and the Hague and Rome Conventions on the other, is however minute, since they concern different matters, i.e. uniform conflict law and uniform substantive law, respectively.

In this context it must be emphasised, that even though Article 1(1)(a) of the Vienna Convention is a conflict rule, it is not a universal conflict rule, but a unilateral conflict one. As was explained above, the provision in Article 1(1)(a) will identify the specific situation in which the Vienna Convention is applicable, unlike the traditional universal conflict rules which are capable of identifying one, or more national legal systems out of an indefinite number as the governing law. Accordingly, since the unilateral conflict rule in Article 1(1)(a) constitutes lex specialis, it will prevail over the lex generalis contained in the traditional [universal] conflict rules. Therefore, apart from the fact that Article 90 strictly is concerned only with the subject-matter of the Vienna Convention, it is arguable that the provision will not be applicable to the relation between Article 1(1)(a) and any universal conflict rule, since it is aimed only at the principle of lex posterior derogat priori rather than the principle of lex specialis derogat generalis. Be that as it may, it is well settled that international sales of goods between parties who have have their relevant places of business in different Contracting States to the Vienna Convention will fall under its Article 1(1)(a), regardless of whether these places of business are in States parties to international agreements on private international law, such as the Hague and Rome Conventions.[59]

As between the Hague Convention and the Rome Convention, a collision is however quite likely to appear before courts of the nine States parties to both Conventions, since they are both universally applicable. For instance, the Hague and Rome Conventions have similar but inconsistent provisions concerning consumer sales of tangible goods. According to Article 21 of the Rome Convention, the Hague Convention should prevail, which would deprive the consumer of the protection afforded to him by the former. This is not a satisfactory solution and it is likely to jeopardise the observance by the Contracting States of the obligations under the Rome Convention.[60]

However, regarding this particular problem, the Contracting States to the Hague Convention are now by virtue of the 1980 Déclaration[61] allowed to make specific conflict of laws rules regarding consumer sales without committing a breach of their Convention obligations. Accordingly, consumer sales can be excluded altogether from its scope, thus making the Rome Convention exclusively applicable to these transactions.[62]

Regarding the problem in general [63] there are several alternatives: First, the Contracting States of both Conventions could make an additional agreement in which they agreed not to apply the rules of the Hague Convention inter se, but exclusively those of the Rome Convention. Secondly, the Contracting States could revoke the Hague Convention. However, that is likely to create even greater ambiguity and is therefore not really an option.[64]

Plender has suggested a third solution within Article 21 itself. The 1969 Vienna Convention on the Law of Treaties states namely that an earlier treaty will only be applied if it is compatible with later treaties.[65] This general principle of international law could be applied so as to prejudice the application of the Hague Convention, thus making the Rome Convention applicable where appropriate.[66] The wording of Article 21 seems to be able to harbour such a solution. Presuming that such a solution is possible, the crucial question is then whether this should be done rule versus rule, or Convention versus Convention - and here too the wording seems able to harbour both alternatives, since Article 21 refers to the actual application of other international conventions and not only to conventions.

Denmark, Finland and Sweden have, regarding consumer sales of tangible goods, chosen to exclude these from the scope of the Hague Convention. However, the suggested alternative interpretation under Article 21 might prove useful for other collisions between the two Conventions which are not as easily solved without revoking the Hague Convention.

The importance of interpretation should not be underestimated. Clearly the choice of some principles and criteria of interpretation, i.e. methods of interpretation, over others will ultimately be decisive for the precise meaning and application of the individual provisions of the Conventions. Moreover, a method of interpretation could be abused so as to alter the intended meaning of the provision in a more favourable direction, or even to circumvent it. This applies of course to any legislation, whether of national or international origin. However, in applying domestic statutes, one can rely on long established principles and criteria of interpretation to be found within each legal system. This is not the case in regard of international agreements, at least not to the same extent.[67] Accordingly, it is recommendable to include methods of interpretation within a Convention, particularly where its future Contracting States will have different legal traditions. Otherwise those subjected to its rules could be tempted to interpret those rules in accordance with their own national standards and thus seriously threaten a uniform interpretation and application.

3.1.1 The Hague Convention

In the preamble to the Convention reference is made to the desire of the Contracting States to establish uniform conflict rules regarding international sales of tangible goods. However, there is no reference in regard of their interpretation. It was thought best solved by the individual Contracting States. On the other hand, the actual conflict rules are rather straight forward.[68] The rules likely to suffer from different interpretative contents are those concerning the scope of the Convention,[69] since there are no general definitions within it.[70] The Swedish Secretary of State for Justice expressed the following view when recommending the Swedish ratification of the Convention:[71]

3.1.2 The Rome Convention

According to Article 18 the courts are not allowed to define concepts in the uniform rules by reference to national systems of law, instead these should be given independent community meanings.[72] It is stated in the preamble that the Convention is a continuation of the harmonisation endeavours of law within the Community. It must also be remembered that the Convention is a part of the Community legal order and is therefore likely to be interpreted and applied in the light of the principles established by the Treaties of Rome and by other Conventions concluded under Article 220 of the Treaty.[73]

Accordingly, the implications of Article 18 are that the courts are under an obligation to use the method of teleological interpretation [74] and "interpret [the Convention rules] by reference mainly to its structure and objectives in order to make it fully effective."[75] Such objectives are, e.g. the unification of the conflict rules; predictability; and further development of the European Community's internal market.

The Giuliano and Lagarde Report explains that the problem of classification must be solved within the spirit of this Article, since there is no special Convention rule concerning this issue.[76]

3.1.3 The Vienna Convention

As has already been explained, the Convention forms part of the internal law of the Contracting States. However, "[the Convention] remains an autonomous body of law even after its formal incorporation into the different national legal systems",[77] which is a characteristic particularly emphasised in the context of its interpretation. Arguably, a court should not be allowed to rely on ordinary national principles and criteria of interpretation, since this would risk corrupting the Convention's international character and the promotion of its uniform application. Instead, the general approach should be liberal and flexible, giving regard to the underlying purposes and policies of the individual provisions and the Convention as a whole.[78] However, the promulgation of six authentic language versions of the Convention and the different reservations adopted by some Contracting States, suggest that this body of law is not truly autonomous at all. Consequently, strict global uniformity is impossible and arguably even inappropriate. In addition, the so called homeward trend, i.e. nationally based application, is difficult to avoid.[79]

Article 7 contains three different provisions: the first part of paragraph 1 states the basic criteria for interpretation of the Convention rules; the second part of paragraph 1 concerns the relevance of the principle of good faith within the scope of the Convention; and paragraph 2 concerns the gap-filling process.

The reference to `its international character´ in the first part of Article 7(1) means that it is necessary to interpret its terms and concepts autonomously within the context of the Convention itself. That is to say, the traditional meaning of a term or a concept within a particular domestic law cannot be decisive. The contents and formal presentation of the Convention and its provisions are a result of negotiations and as such based on a common understanding, which must be respected in their application and interpretation.[80]

The second part of Article 7(1) concerns `good faith in international trade´. It is an additional criterion to be used in the interpretation of the Convention, but its relevance is not limited to this: it is also a general principle capable of imposing additional positive obligations on the parties to the contract. However, since the principle is construed in the light of the specific conditions and requirements of international trade, it will not be applied in accordance with any national legal system. Instead, just as the rest of the Convention, it has an autonomous meaning derived from the Convention itself.[81]

Article 7(2) concerns the process of gap-filling. In order for this provision to apply, the issue at hand must be governed by the Convention but not expressly settled within it. That is to say, issues outside the scope of the Convention [82] will not be settled under Article 7(2) but under non-Convention rules of law as identified by the conflict rules of the lex fori.[83]

It is clear that the provision calls for the code-style interpretation familiar to the civil law systems, since the Convention, representing a veritable codification on the international sales law, wholly replaces the existing domestic law. It is not to be interpreted in the same strict manner as the statutory law in the common law countries which only replaces the common law rules and principles within its strictly defined scope based on its wording.[84]

There are two complementary methods to be used: application by analogy of specific provisions and application of general principles derived from the rules of the Convention. An analogous application of a particular provision presupposes that the case at hand is similar to the ones governed by the provision. However, this is not sufficient, because the rule could be of such exceptional character that it should be applied e contrario instead. Provided that there is no such impediment, the provision can be applied only if the case is so analogous to the ones falling under it, that it would be inherently unjust not to apply the rule analogously.[85]

The recourse to general principles differs "as it constitutes an attempt to find a solution for the case at hand not by a mere extension of specific provisions dealing with analogous cases, but on the basis of principles and rules which because of their general character may be applied on a much wider scale."[86] Some of these principles are expressly stated, such as the principles of good faith and party autonomy, but most of them must be derived from one or more Convention rules, as is the case with the principles of the reasonableness test on the parties' behaviour; of favor contractus; of cooperation between the parties; of estoppel / venire contra factum proprium; and of reasonable measure to mitigate loss. Furthermore, some of these principles are directly applicable, such as the principle of party autonomy, whereas others must be further specified in the particular case in order to provide an adequate solution, such as the principle of the reasonableness test. Even this specification referred to should be performed in an autonomous way, i.e. within the Convention.[87]

The last resort, according to Article 7(2), is the applicable law, which due to the anational character of the Convention only will be used if and to the extent a solution cannot be found any other way. Advocates and activists of the Convention might well prefer to settle matters clearly deemed insoluable by its drafters "within" the Convention.[88] It is clear though, that the provision renders the applicable law not only admissible but even obligatory, when fulfilled.[89]

According to Article 6, the parties may exclude the application of this Convention or, subject to Article 12, derogate from or vary any of its provisions.[90] This is not possible in regard to Article 7. The Convention is an autonomous body of law and as such it will be interpreted in accordance with the criteria specifically laid down in it.[91]

3.1.4 Conclusion

It is clear that the historical contexts of the respective Conventions have affected the choice of methods of interpretation and in particular the very existence of an obligation to use a specific method. The Hague Convention is one of the earlier conventions in this field and simply agreeing on uniform conflict rules, albeit with various national scopes of application, was at the time of its coming into existence considered an achievement. Since then the international efforts to facilitate and encourage international trade have increased. The Vienna Convention is one of these later efforts and is actually more or less a revision of earlier achievements of uniform laws.[92] It contains obligations to use particular interpretative methods in order to ensure its uniform and autonomous application. The Rome Convention differs from the other two, in that it already belongs to a legal context of established principles and criteria of interpretation, i.e. the Community law. It constitutes one of many means to develop the internal market of the European Community.

3.2 Aids to Interpretation

3.2.1 The Hague Convention

The preparatory work by the Conférence de la Haye, the Documents 1951 p. 4 et seq. is an important aid to understanding the Convention.[93] However, since the questions of definition and limitation of its scope were explicitly left to the Contracting States to solve, i.e. classification by the lex fori, the importance of these preparatory works is at least in this respect limited.

Consequently, a court in a Contracting State will have recourse to its own traditional national legal sources: e.g. statutory law; case law; the preparatory work of the Justice Department, etc. [94]; and legal doctrine. The definitions in the substantive law will be used when interpreting expressions such as `tangible goods´, unless the private international law has its own definitions in which case they will be used. The case law and the legal doctrine of other Contracting States could also be of help, at least if the respective legal systems have similar features regarding the issue at hand.

3.2.2 The Rome Convention

The main aid in the interpretation of the Convention is the Giuliano and Lagarde Report,[95] an official commentary written by members of the Working Group responsible for drafting the Convention. The different equally authentic language versions of the Convention should also be considered in applying the Convention. Decisions on interpretation of courts of other Contracting States, and even those of non-Contracting States provided they are based on the same principles, are of persuasive authority. Naturally, the weight of such judgments are dependent on their relevance and cogency and the status of the tribunal in question.[96]

There are also two Protocols [97] on the interpretation of the Convention by the European Court [98], neither of which is ratified. The first Protocol defines the scope of the jurisdiction of the European Court and the conditions under which it is to be exercised. The second Protocol confers powers on the European Court to interpret the Convention and contains rules of procedure. When ratified, these Protocols will enable, but not obligate, the courts of the Contracting States to refer a case to the European Court for a preliminary ruling. It should be noted that there is a distinct separation of functions between the European Court and the national courts. The former will be concerned only with the interpretation of the rule[s] referred and the latter with the application of the interpreted rules. The rulings will have the same authority as the Report.[99]

3.2.3 The Vienna Convention

It is clear that even though the application of the Convention is to be uniform and autonomous, divergent interpretations are still very possible and in fact very likely to occur. This could of course be avoided if an international tribunal with the competence to make preliminary rulings were introduced. However, given the fact that the Convention is not as the Rome Convention restricted to a particular regional area, it would be entirely unrealistic to expect all adhering States to subject themselves to the authority of such a tribunal.

Consequently, the task of ensuring the uniform application of the Convention has in practice been left to the national judges and arbitrators. However, interpretative aids do exist: First, there are several equally authentic language versions of the Convention. The difficulty in understanding a particular rule may not appear within all these versions. As far as a translation of the Convention is concerned, recourse to the official versions is obligatory. Where there are differences between different official language versions, recourse is to be had to the intention of the conference.[100]

Secondly, the case law of Contracting States is an important source of law. If not given the character of binding precedent, its pursuasive value should at least be taken into consideration. Naturally, the appropriate case law to rely upon in this respect should consist of concording and authoritative judgments from more than one Contracting State.[101] In the absence of such a case law, it is possible to either choose the most appropriate solution or to find a new one.

In the case of divergent solutions between various jurisdictions, it has been suggested that the proper interpretation should be the one which is used within the legal system as identified by the relevant conflict rules of the lex fori. The suggestion has been criticised since it involves recourse to conflict rules within the field of the uniform law. But, as Bonell puts it: [102]

There are several reasons for considering this suggestion as `the only possible remedy' in a situation of `insuperable conflict of interpretation between the Contracting States'. First, it is preferable to have an acknowledged lack of uniformity rather than a number of national "autonomous" interpretations, and ultimately a situation of "pope-banning" between the Contracting States in question. Secondly, compared to an application of the interpretation favoured by the lex fori, it would be more in line with the principles underlying Article 7(2). Thirdly, as between fora in different States which have uniform conflict rules, this solution would also lead to the same interpretation regardless of the forum chosen by the parties, thus enhancing predictability for the parties and equally preventing forum-shopping. This would to a certain extent also apply where the parties have made a choice of law, since most countries recognise the principle of party autonomy.[103] That is to say, in this case there is at least similar conflict rules, if not uniform ones.

Thirdly, there is the legislative history of the Convention, the travaux préparatoires, which consists of the acts and proceedings of the Vienna Conference and the summary records of the previous deliberations within UNCITRAL. However, its importance should not be overestimated, since it contains differences in opinions and the arguments put forward are not necessarily decisive for a particular rule. It could also be obsolete due to case law. Therefore the intentions of the drafters should only be relied upon when they are clear and supported by other elements of interpretation. The Secretariat Commentary to the 1978 Draft Convention has also often been referred to.[104]

The application of any of the three Conventions depends, as usual, on whether the contractual obligation in question will be classified, or characterised, by the court as one falling within their respective scope. Traditionally, classification is a matter strictly for the lex fori. However, a Convention may provide further guidelines, such as a definition, for this issue too.[105]

Each Convention contains provisions which lay down the limits of its scope. Unlike the Rome Convention, the Hague and Vienna Conventions are, with some modifications, only concerned with a particular type of contractual obligation, i.e. international sales of tangible goods. Accordingly, the contractual obligation in question must be further characterised in order to find out whether it is within the scope of any of these two Conventions. In some areas the borderlines of the Conventions' scope are not clearly defined, but nevertheless they will provide sufficient guidance at this initial stage.

Some legal aspects of a contract, even though they are of great importance to its parties, are not of a contractual nature and thus inappropriate to be governed by the lex contractus.[106] There are also some contractual obligations which due to their specific character are not suitably governed by the lex contractus as derived from the contract itself.[107] Depending on the general scope and character of the Convention, the matter will be solved either by restricting its scope leaving these issues outside altogether; or by adopting a complementing choice of laws rule thus restricting the scope of application of the lex contractus instead of that of the convention.[108]

When a contractual obligation is caught by such a restriction it is clearly outside the scope of the Convention in question. Hence, the court might not have to deliver an exact classification of any of the above mentioned borderline-cases: it will simply apply its national rules outside that Convention.

Sometimes a Convention contains provision allowing its Contracting States to make reservations against the application of some of its provisions. There is an important difference between a reservation and a restriction. As already explained, a restriction affects the scope of the Convention, thus narrowing it down. A reservation on the other hand, affects only the scope of the application of the Convention, and only in regard of that Contracting State making the reservation: the issue is still within the conventional scope, but the rules of the Convention will not fully be applied. The cardinal example is the doctrine of ordre public or public policy, which will not render a choice of law by the parties nor the application of a conflict rule invalid, but simply in the concrete case "correct" the offensive result otherwise achieved by the full application of the substantive law in question. The doctrine of ordre public is discussed infra section 4.4.

4.2 Limits of the Scope - the Positive Definition

4.2.1 The Hague Convention

There is no definition of what is meant by `ventes à caractère international d'objets mobilier corporels´ in the Convention. This issue was left to be defined by each Contracting State. It is clear though, that the scope within the concept of `international´ is meant to be very wide.[109] In fact, one of the objectives was to create a simple, uniform and universally applicable conflict of laws rule which would promote predictability for anyone, not only lawyers, involved in an international sale of movable corporate objects, i.e. tangible goods. This lead to the rejection of a suggestion during the Seventh Hague Conference [110], that the transaction in question should be defined as a sale between persons habitually resident in different States, since it was regarded as too narrow a definition.[111] The meaning of `objets mobilier corporels´ is discussed infra in section 4.3.1.

The concerns raised that leaving the definition of `international´ to the case law would create discrepancies between the Contracting States and harm the uniform application of the rules in this respect are quite unwarranted. The Convention is primarily concerned with the international commercial trade and from that perspective the borderline cases will be of minor importance, since the transactions of the international commercial trade usually are well within its scope.[112]

Within the field of international commercial trade where the parties normally are in different States the international character is easily established. This is also the case regarding a contract between parties in the same State in which there are concrete international criteria of a constant nature, such as the fact that the conclusion or the performance of the contract is to take place abroad; or that the tangible goods are situated abroad. However, parties to a contract without these concrete international criteria could also have a reasonable interest in the application of a foreign law if, e.g. the performance of the contract is dependent on another international contractual obligation; or, due to its specific nature, the sale of tangible goods by virtue of international trade customs will be governed by the law of a certain country.[113] Naturally, the latter situations are also considered to have an international character.

Note that if the sale of tangibles is connected to only one country, regardless of which and how foreign to the forum, the Convention will not be applicable. Such a transaction has not an international character.[114]

In conclusion, there need not be a very strong connection to another country. In fact, it is safe to say that whenever there is any doubt as to which law should govern the transaction, the Convention is applicable.[115] However, according to paragraph 4 a choice of law clause, an arbitration agreement or an agreement on the choice of court will not suffice on its own.

Any other character of a sale of tangibles is quite irrelevant. The Convention is applicable to commercial sales, consumer sales, contracts of delivery of goods and sales with a public authority as a party to the contract.[116]

4.2.2 The Rome Convention

The Giuliano and Lagarde Report states that the Rome Convention applies "generally to contractual obligations in situations involving a conflict of laws".[117] This renders it necessary to identify the character of the obligation in question in order to establish whether it is contractual, i.e. the normal procedure of classification. However, this classification differs due to the character of the Convention. No particular legal system can be applied to define the obligation as contractual since this would corrupt the uniformity of the uniform rules.[118] Instead, a uniform and autonomous law derived from the Convention itself should be applied. After comparative law studies of the national contract laws of the Contracting States a general and common concept of a contractual obligation within the European Community was identified for the purpose of classification. Plender summarises the results as follows[119]:

Further support can be found within the Convention itself, e.g. Article 18 and impliedly in Article 10(1)(e); and in the case law from the European Court, i.e. the Community law. For example, in Peters v. ZNAV [120], a case concerning the application of Article 5(1) of the Brussels Convention and the interpretation of "matters relating to a contract", the European Court held that `a contract´, for the purposes of the application of the Brussels Convention, is an independent concept which must be interpreted be reference chiefly to the system and objectives of the Brussels Convention. That assumption ought to apply when classifying an obligation as contractual for the purpose of the Rome Convention. Thus, for the purpose of classification of an obligation as contractual, `a contractual obligation´ is defined as `a voluntary agreement giving rise to obligations capable of being enforced by law´.[121]

However, there will still be adjacent areas of law where a uniform classification is not readily performed: the law of tort, restitution, quasi-contract, property, succession and family law. This is so because most of the matters excluded from the scope of the Convention are to be classified by the lex fori.[122]

The Report explains further that a situation involves a conflict of laws when it contains "one or more elements foreign to the internal social system of a country (for example, the fact that one or all parties to the contract are foreign nationals or persons habitually resident abroad, the fact that the contract was made abroad, the fact that one or more obligations of the parties are to be performed in a foreign country, etc.), thereby giving the legal systems of several countries claims to apply."[123]

The wording of the Article means that the Convention rules, subject to reservations under Article 19(2), are applicable also to co-existing systems of law within the same State.[124]

There have been suggestions made that the Convention should apply only in connection with the European Community, as the object and purpose of the Convention are harmonisation and further integration of the internal market of the Community.[125] However, this would be contradictive to the wording of Article 1(1), i.e. `any situation´, and to a Commission's Opinion [126] in which it was stated that the Contracting States must always apply the uniform rules whenever they decide the applicable law of a contractual obligation. In other words, the Convention is universal in its application and thus its scope is very wide. This is also indicated by Article 2, which states that any law specified by the Convention should be applied, not only the laws of the Contracting States.[127]

Article 1(1) refers to `laws of different countries´, which means that a direct choice of an anational law such as the Vienna Convention; international law; general principles of law; or any species of lex mercatoria would not be upheld under the Convention.

A different matter, in the context of conflict of laws, is that these sources of law may still be applied indirectly, either as part of the governing law or by way of incorporation by reference, i.e. as actual terms of the contract. In other words, whether they are applicable in principle and whether they are applicable in a particular case, depend entirely on the internal rules of private international law of the governing law, which, as was explained above [128], do not form part of the international conflict rules of the governing law. For instance, where the Vienna Convention forms part of the governing national substantive law as a set of special rules for international sales, it will be applied indirectly by virtue of Article 1(1)(b), being an internal rule of private international law of the governing law.[129]

That is to say, if, by virtue of the uniform conflict rules, Swedish law is identified as the applicable law, the rules of the Vienna Convention will be applied to the contract as part of that law, provided the contract falls within its scope. An example of a specie of lex mercatoria, which may be applied indirectly through the governing law is usage of trade under Article 9 of the Vienna Convention. Where these anational laws are made to apply by way of incorporation by reference, whether they are applicable will depend entirely on the contents of the substantive law, i.e. whether there are any mandatory rules governing the matter.[130]

The Report does more than just indicate the universal character of the Convention. It is said that "the Convention is a uniform measure of private international law which will replace the rules of private international law in force in each of the Contracting States, with regard to the subject matter which it covers and subject to any other convention to which the Contracting States are party (see Article 21)."[131]

4.2.3 The Vienna Convention

There is no definition of `contracts of sale of goods´ in the Convention. However, the exclusions in Articles 2 and 3 of some types of sales and contracts of services, respectively, and what under Articles 30 and 53 constitutes the reciprocal obligations of seller and buyer should provide some guidelines. There are different opinions whether hire-purchase contracts and leasing contracts fall under the provision.[132] In the majority of the cases, the expression will refer to a sale of tangible goods, but the Convention is not limited to such sales: sales of computer standard software and sales of water and gas are within its scope.[133]

If the Convention is to apply to the contract, the parties' places of business must be located in `different States´. This is not the case if they are simply located in different legal units within the same Contracting State. The reference to `different States´ will also have the consequence that the Convention will be applicable to a transaction which takes place within one State only, simply by the fact that the parties have their relevant places of business in different States.[134]

There is no definition of `place of business´ either. However, it is clear that the expression does not refer to the place of contract nor the place of negotiations. It is to be understood as the place of a permanent and stable business organisation including any subsidiary, such as a branch, an agent or any other establishment, which excludes places of temporary sojourn such as an international fair or a hotel.[135] It has been suggested that the mere presence of an agent's place of business who has authority to conclude a contract, is not enough to establish that his principal has his place of business in that same State. It would not be reasonable to let the mere presence of a subsidiary be decisive when determining the location of a principal's place of business.[136]

Under subparagraph (a) the rules of the Convention will "automatically" apply even though the conflict rules of the lex fori would identify the law of a third country as the applicable law. That is to say, the traditional applicable law will be disregarded.[137] However, since the Convention is concerned with the contract of sale itself and not the conflict of laws, a choice of law clause will at least be of importance for contractual issues left outside the scope of the Convention [138], e.g. under Articles 2, 3 and 7(2) and due to reservations.[139] By virtue of subparagraph (b) the Convention will apply when the conflict rules of the lex fori identify the law of a Contracting State as the applicable law. Accordingly the Convention may apply even though neither of the parties have their places of business in Contracting States.[140]

In the situation where one of the parties to a contract has more than one place of business, the place relevant for the application of Article 1(1) and the rest of the Convention will be, by virtue of Article 10, the place which has the closest relationship to the contract and its performance. Naturally, this connection has to be real, a fictitious registration will not be enough.

Some difficulties may occur when determining which one of a party's places of business should be the one with the closest relationship to the contract, if the contract is entered into and concluded by one of the party's places of business and the contract stipulates that its performance is to be executed by another of her places of business located in another State, i.e. the conclusion and the performance of the contract are separated. Which one of these places of business should be considered to have the closest relationship to the contract and thus be the relevant one? Unfortunately, there is no indication given in Article 10 as to which of its criteria should prevail,[141] even though the factors on the scales may be reduced by the rule in Article 10(a).[142]

Where one of the party's two places of business is located in the same Contracting State as that of the other party, it has been suggested that a principle of in dubio pro conventione should be invoked so as to give preference to the place that leads to an application of the Convention, since the Convention is becoming the global law of international sales. That is to say, that party's place of business which is situated in the other Contracting State should prima facie be regarded as the relevant place of business, regardless of whether it was the place of conclusion or performance of the contract.[143] Whether this is appropriate can be discussed.

Provided that both the States, in which the party's two places of business are situated are Contracting States, the issue will not cause any substantive differences: the rules and principles of the Convention will apply (subject to Article 7(2)). However, if one of these States has not ratified the Convention, and given that - after taken all relevant factors under Article 10 into account - there is a total equilibrium between these two places of business, this preliminary question must be solved.

In order to do this, it is vital to understand the proper function and nature of Article 10. This provision is concerned with the singling out the relevant place of business from a number of possible ones, for the purpose of determining whether the Vienna Convention, primarily under Article 1(1)(a), is applicable. Hence, it forms an interpretative part of the unilateral conflict rule contained in that provision. That is to say, Article 10 together with Article 1(1)(a), constitute the lex specialis of conflicts of laws in contract applicable to contracts of sale of goods between parties whose places of business are in different Contracting States to the Vienna Convention.

Therefore, in such an unusual case of total equilibrium [144], where neither Article 10 nor its case law will provide an answer, this preliminary question, it is suggested, should be solved under the traditional, universal conflicts rules in contract of the lex fori. This seems to be the logical conclusion to follow from the principle of lex specialis derogat generalis, as applied e contrario. The reason for this is that, whereas it is true that a rule of lex specialis will prevail over lex generalis, it is equally true that where the specific rule in question cannot provide the answer, recourse must be had to more general principles. Accordingly, recourse should be had to the universal conflict rules of the lex fori, e.g. Article 4(2) of the Rome Convention [145], when Article 10 cannot provide the answer to the preliminary question of which one of a party's equally connected places of business is the one relevant for determining whether the Convention is applicable or not.[146]

Honnold gives the following piece of advice: "However, where the balance seems close the parties would be well advised to settle the point by contract - by stating whether the Convention or specific domestic law is applicable."[147]

The second paragraph of Article 1 contains a requirement that the parties must have knowledge ab initio of their places of business, or habitual residences, being in different States, or at least that this fact is not concealed. Note that the provision does not refer to different Contracting States, nor is it necessary that the application of the Convention was foreseeable. If not, the location of their places of business will be disregarded and consequently the Convention will not apply. This is to protect an unknowing party from a surprise application of the Convention rules, such as in the situation of an undisclosed principal.[148]

Paragraph (3) of Article 1 clarifies the rule in the first paragraph of Article 1. It emphasises the importance given to the location of the parties' places of business as the sole requisite. Thus it will not matter that a party is a national of a non-Contracting State for the purpose of whether the Convention is applicable, nor will a party's civil or commercial character.[149]

4.2.4 Conclusion

The differences in the wordings of the three Conventions suggest that different criteria should be examined when determining whether they are applicable. To start with, a comparison between the Hague Convention and the Rome Convention suggests that under the former the provisions of the contract are primarily of importance, and under the latter it is the circumstances of the case.[150] In one sense, this difference is really negligible. The character of both Conventions as universal conflict rules are the same: any element of "internationality" will bring the contractual obligation within their respective scope. The Conventions are of a universal character.

However, since the Hague Convention only regulates the choice of laws issues for a certain type of contractual obligations, i.e. international sales of tangible goods, the provisions of the contract do have to be examined in order to classify the contractual obligation properly to see whether it will apply. Formally, the Rome Convention will not prejudice the application of the Hague Convention [151] and accordingly the classification of a contractual obligation as an international sale of tangibles will be enough for the latter to prevail.[152]

There is also another difference between the two Conventions: the scope of the Rome Convention is not limited to contracts of an international character, but any matter of private international law in contract will render it applicable.[153] This means that a sale of tangibles which is not international but nevertheless contains a choice of laws will only be within the scope of the Rome Convention. One example of such a situation would be where there is a conflict between co-existing systems of laws within the same State. This is definitely a conflict of laws, but it is certainly not international. It is questionable whether there are any more examples, since the connection to another country need not be very strong in order to bring a sale of tangibles within the scope of the Hague Convention.[154]

Under the Vienna Convention on the other hand, no regard is given to criteria referring to the actual transaction. Instead, prima facie, a personal objective criterion is used, i.e. that the parties' relevant places of business are in different States. Its scope as a "conflict rule", or Anwendungsbestimmende Kollisionsnorm rather, i.e. its scope under Article 1(1)(a),[155] is even more limited compared with the other two Conventions. That is to say, it has only a unilateral application in this respect, since the Convention, under that provision, only applies between Contracting States.

The Hague Convention and the Vienna Convention both concern the same type of contractual obligation, i.e. international sales of tangible goods, though the latter is not limited to such goods.[156] However, since the Vienna Convention has a limited scope of direct or unilateral application, it will only prevail over the Hague Convention where the parties' relevant places of business are in different Contracting States, i.e. under Article 1(1)(a).[157] In all other situations the choice of laws issues will be solved by the application of the Hague Convention. A different matter is that the rules of the Vienna Convention may govern the contract of sale in the end by virtue of Article 1(1)(b), where the parties have their relevant places of business in different States, but that is not the same as solving the choice of laws issues.

Just as the Rome Convention, the Hague Convention will identify the law of a country as the applicable law, i.e. `la loi interne du pays´. This would mean that a direct choice of an anational law such as the Vienna Convention; international law; general principles of law; or any species of lex mercatoria would not be upheld under the Convention.

A different matter, in the context of conflict of laws, is that these sources of law may still be applied indirectly, either as part of the governing law or by way of incorporation by reference, i.e. as actual terms of the contract. In other words, whether they are applicable in principle and whether they are applicable in a particular case, depend entirely on the internal rules of private international law of the governing law, which, as was explained above [158], do not form part of the international conflict rules of the governing law. For instance, where the Vienna Convention forms part of the governing national substantive law as a set of special rules for international sales, it will be applied indirectly by virtue of Article 1(1)(b), being an internal rule of private international law of the governing law.[159]

That is to say, if, by virtue of the uniform conflict rules, Swedish law is identified as the applicable law, the rules of the Vienna Convention will be applied to the contract as part of that law, provided the contract falls within its scope. An example of a specie of lex mercatoria, which may be applied indirectly through the governing law is usage of trade under Article 9 of the Vienna Convention. Where these anational laws are made to apply by way of incorporation by reference, whether they are applicable will depend entirely on the contents of the substantive law, i.e. whether there are any mandatory rules governing the matter.[160]

Due to its subordinate nature in relation to other private international law conventions, the Rome Convention will normally not within the meaning of Article 1(1)(b) of the Vienna Convention, identify the rules of the latter as the applicable legal system of a contract. Only when the contract concerns a sale of intangibles within the scope of the Vienna Convention but outside that of the Hague Convention, will the Rome Convention be capable of rendering the rules of the Vienna Convention, as part of the governing law, applicable to a contract of sale between parties who have their relevant places of business in different States.

It has been explained above that the Vienna Convention, by virtue of Article 1(1)(a), could be applicable to what would be a national contract of sale were it not for one party having his place of business abroad. It could be argued that these contracts are outside the scope of the Hague Convention, since the contracts themselves do not have an evident international character. However, such a literal reading of Article 1(1) of the Hague Convention would be contradictive to its universal character as a conflict rule. The fact that one party has his place of business abroad is a strong enough connection to another country for the purpose of that Article. Especially when considering that according to paragraph 4 of that Article, the only thing which will not suffice on its own to give the contract an international character is the sole declaration by the parties. E contrario, this would mean that such a contract has an international character.

4.3 Restrictions of the Scope - Negative Definition

4.3.1 The Hague Convention

Since the Convention only applies to international sales of tangible goods, an interpretation e contrario of Article 1(1) seems to be appropriate in order to identify some of the matters excluded from its scope. It follows from such an interpretation that international sales of immovables, including fixtures; intangible movables, such as debts, companies, patents, copyright, goodwill, stocks and shares; and electricity are outside the scope of the Convention.[161]

All matters excluded, both explicitly and implicitly, are to be classified in accordance with the lex fori, since the definition of `ventes à caractère international´ in Article 1(1) has been left to each Contracting State. Their governing law will be identified by its conflict rules.

According to paragraph 2, the Convention will not apply to `ventes de titres´. Clearly, the expression covers negotiable instruments as a term of art. That is to say, an instrument which will give a bona fide transferee a better title than that possessed by the transferor, e.g. bills of exchange, cheques and promissory notes. However, it is arguable that any negotiable document and money should be included in the expression.[162]

Registered ships, vessels and aircraft are excluded. The requisite is the actual registration and not the duty to register. Thus, a contract with a shipbuilding yard to buy a ship not yet built, or simply not yet registered, is within the Convention; and a sale that will lead to an "unregistration" of such a registered object is excluded.[163] The register in question must be sanctioned by the national authorities and its registration carry legal rights.[164]

"Fixtures" of immovables, ships, vessels and aircraft are excluded from the Convention when they are sold in connection with a sale of immovables, ships, vessels and aircraft, respectively. However, it is not quite clear how sales of fixtures should be classified when they are not connected with such an excluded sale, e.g. a contract of sale of spare parts for an aeroplane. Arguably they should be included.

Sales on executions and otherwise by authority of law are also excluded.

Note that documentary sales are not excluded. In these cases the documents are only the means of the transaction and not its object. It has been argued that a subsequent sale by the first buyer of such documents would be within the scope of the Convention.[165]

According to paragraph 3, a contract of delivery is within the scope of the Convention when the seller will provide the material necessary for the delivery. So called mixed sales, where the "buyer" will provide some of the material himself, is not within the Convention.

The capacity of the parties, formal validity, transfer of title in the goods as between the parties and other proprietary aspects of the contract are excluded from the scope of the Convention and will consequently be governed by the lex fori including its conflict rules. According to some legal systems the transfer of risk and title are not separated, therefore it is explicitly stated that the transfer of the risk is to be governed by the proper law of the contract, even though it could be included among the parties' obligations.[166]

It is a common comprehension that the Convention is not applicable to the questions of agency. It has been argued though, that the exclusion should only affect the relationships between principal and agent; and principal and third parties, since an international sale of tangibles between an agent and a third party will still be an ordinary international sale of tangibles.[167]

The reason for adopting the Déclaration is of course the changes over the last quarter century in the substantive law regulating consumer sales contracts which required some form of adaption of the Convention. It has the effect of permitting the Contracting States to the Convention to adopt specific conflict rules for consumer sales contracts, i.e. exclude these sales from its scope, without violating their Convention obligations. It does not, however, ac-tually exclude consumer sales from the scope of the Hague Convention[169]

Another reason for excluding consumer sales from the scope of the Convention is that it is not reasonable to single out sales of tangible goods from all other consumer transactions when determining their respective governing law. Instead they should all fall under the same set of uniform conflict rules, i.e. the Rome Convention.[170]

4.3.2 The Rome Convention

The Report states that: [171]

Unlike the other two Conventions, these matters are not expressly excluded in the text of the Rome Convention. The exclusion is to be understood e contrario.

The reason for an explicit exclusion of status and legal capacity is that in the common law systems these issues are regarded as aspects of contract. This is not the case in the civilian traditions. The exclusion means that they will be governed by their proper law according to the conflict rules of the lex fori, subject to Article 11.[172]

The purpose of subparagraph (b) is to exclude all matters of family law from the scope of the Convention.[173] It is not meant to exclude contractual obligations between family members per se, but only those which are covered by family law. That is to say, contracts which either vary or record a legal obligation which otherwise would be imposed between the parties by operation of law in consequence of family law are excluded. Gifts and other voluntary unilateral obligations are within the scope of the Convention.

Subparagraphs (a) and (b) use the same terminology as the Brussels Convention in order to obviate any possibility of misconstruction. Thus, the case law under the Brussels Convention has authority within the wording of the Articles.[174]

Obligations arising from bills of exchange, cheques and promissory notes are excluded since the uniform rules are too flexible to suitably regulate them. Commercial considerations make it necessary to identify their applicable law very precisely and the instruments themselves are sufficiently homogenous to be regulated by a set of rules with greater precision.[175] There are also international conventions regarding these matters which several of the Member States of the Community already are parties to. Moreover, these obligations are regarded as non-contractual by certain Contracting States.

As far as `other negotiable obligations´ are concerned, only the obligations which arise out of their negotiable character are excluded. This means that neither the contracts pursuant to which such instruments are issued nor contracts for the sale and purchase of such instruments are excluded. The classification of a document as a negotiable instrument is for the lex fori, its conflict rules included.[176]

The exclusion of arbitration agreements and agreements on the choice of courts depends mostly on their procedural character. Both free-standing agreements and clauses within a contract are excluded. In the latter case, the rest of the contract will not be excluded. Notwithstanding its exclusion, such a clause may be used as a connecting factor when identifying the applicable law under Article 4. The applicable law of the agreement itself will be identified by the conflict rules of the lex fori.

According to subparagraph (e) questions covered by the law of companies, etc. will not be governed by the Convention. One of the reasons is that the European Union have already made quite separate progress on harmonisation on company law under the Treaties of Rome.[177]

All acts within the scope of company law are excluded, accordingly the list in the provision is an exemplification and not confined to its wording. However, acts or preliminary contracts between interested parties in order to create such a legal entity [178]; and agreements of cooperation between a number of companies, etc.[179] are within the scope of the Convention. Plender suggests "that the relations between a member and an association, resulting from membership, are not (or not necessarily) excluded from the Rome Convention" [180], since the language of the provision is not broad enough to cover these issues.

The exclusion in subparagraph (f) only concerns the relationships between the principal and third parties. That is to say, "whether the principal is bound vis-à-vis third parties by the acts of the agent in specific cases."[181] Other contractual aspects of agency are within the Convention.

Trusts as understood under the common law and similar institutions of continental law are excluded because they are alien to many legal systems of the Contracting States and they are also ill-suited for the test of characteristic performance under Article 4.[182]

By virtue of subparagraph (h) evidence and procedure are excluded, subject to Article 14.[183] Accordingly, the burden of proof and the admissibility of modes of proving are governed by the applicable law, to the extent that it raises presumptions of law and establishes the onus of proving any fact. How these matters are to be proved is left to the lex fori as a matter of procedure, but what facts are allowed will be decided by the lex contractus.

Contracts of insurance which cover risks situated in the territories of the Member States of the European Community are excluded. Instead, the European Community has harmonised certain rules related to these contracts. Accordingly the governing law is the law of the country where the policy-holder has her habitual residence or central administration.[184]

To establish where the risk is situated within the Community, the internal rules of the lex fori, i.e. excluding its conflict rules, will be applied. By a council directive [185] this issue has been settled within the Community law, thus creating uniformity. Reinsurance contracts are not excluded, since here there is not the same need to protect those insured as there is under an insurance policy.[186]

4.3.3 The Vienna Convention

Here too, since the Convention only applies to international sales of goods, an interpretation e contrario of Article 1 seems appropriate. This would mean that a sale of immovable property is excluded from the scope of the Convention. However, a sale of a mobile building which is intended to be permanently affixed to immovable property would be within its scope. That would also be the case where the goods as a result of the sale will become movable, e.g. growing crops.[187] Furthermore, it has been held by a Hungarian court [188], that a contract for the acquisition of part of an enterprise does not constitute a sale of goods under the Convention, i.e. it falls outside its scope.

The purpose of Article 2 is to further clarify the scope of the Convention in order to avoid unnecessary conflicts between the rules of the Convention and the mandatory domestic law.

The definition of a consumer sale in subparagraph (a) gives an objective and simple formula, "there [is] no longer any reference to the "kind" and "quantity" of the goods sold, or to the goods being bought by an individual."[189] However, as it is important for the parties, and especially for the seller, to know ab initio whether the Convention is applicable, it must be shown that the seller had knowledge of the consumer character of the sale before or at the time of its conclusion. The Convention does not deal with the question of burden of proof, that is left to the lex fori as a matter of procedure. However, it is very likely that the onus will be on the seller to show her absence of knowledge and on the buyer to show that she did clarify the purpose of the purchase, i.e. the onus is placed on the party claiming the applicability of the Convention.[190] The reason for excluding consumer sales is to avoid a conflict between the rules of the Convention and the mandatory domestic consumer law.

Auctions are excluded because otherwise the seller would not know until the hammer was down whether the Convention, by virtue of Article 1(1), would apply, as the identity of the buyer and the place of his business would be unknown until that point. The choice of laws principle of lex loci contractus is the most appropriate for auctions. Besides, this category of sale transactions is only of minor importance to the international commercial trade.

Executions and sales by authority of law are excluded due to the fact that these are governed by special rules of the domestic laws and their definition will vary considerably according to the respective systems of law. However, it must at least be a compulsive procedure of law performed by a judicial or quasi-judicial power. Notwithstanding, a sale in accordance with Article 88 or on a similar basis ought not to be within the exclusion.[191] According to Khoo, a sale without any intervention of the court in pursuance of a security document giving power to one party to sell in the event of default would also be outside the scope of this paragraph.[192]

Sales of commercial papers and money are excluded since some national laws do not regard them as "goods". Apart from that there are problems peculiar to these kinds of goods, which the Convention is not designed for. The same reasons will apply to the sales of electricity.[193]

It is not quite clear what exactly is meant by ships, vessels, hovercraft or aircraft, since there are no registration requirements.[194] That has been left to the lex fori to define in accordance with Article 7. Though it is clear that the sales of aircraft components are within the Convention.[195]

There is no distinction made between contracts of sale relating to objects already in existence and objects which do not exist at the time of conclusion of the contract.[196] However, contracts where the presumptive "buyer" already owns a substantial part of the materials are excluded, since such a contract is more akin to a contract for the supply of services or labour.

`A substantial part´ does not mean that the material supplied must be essential for the manufacture or the production or even that it is an essential part. Instead, it is a matter of degree and should be understood as "a considerable part" which need not be a major part. Honnold has suggested that in certain circumstances 15 % could constitute `a substantial part´.[197] `A preponderant part´ on the other hand is "a major part".[198]

Whether such a mixed contract is to be considered as one contract or could be separated into two different contracts, thus making the Convention applicable to the actual sale of goods, is a matter for the lex fori including its conflict rules, and having regard to Article 7.[199]

Legal issues not concerned with rights and obligations of the buyer and the seller arising from a contract of sale; validity of the contract, etc.; and property in the goods are excluded from the Convention, unless there are express provisions dealing with them. Arguably, neither validity nor property are expressly dealt with in the Convention.[200] However, it should be noted that validity is not completely excluded: for example Article 29(1) - `A contract may be modified or terminated by the mere agreement of the parties.´ - complements Part II - Formation of the Contract - in that it deals with the common law doctrine of consideration in the situation of modification or termination of a pre-existing contract.[201] Claims against other parties in the manufacturing or distribution chain should be excluded as well.[202] Instead these excluded issues will be governed by their respective applicable law, as identified by the conflict rules of the lex fori.[203]

However, there may arise difficult problems of interplay between the Convention and the applicable domestic law under this Article. What are rights and obligations "arising from" a contract? If a contractual issue is not dealt with in the Convention the domestic contract law will apply, since the Convention will not take away rights outside its scope which the parties otherwise would have under the law. The problem is that some of these issues can be made to "arise from" the contract by presenting the claim in a certain way, where others can be incorporated as a provision of the contract.[204]

The purpose of this Article is to remove the law of product liability from the scope of the Convention, as this is too complex a matter to be regulated by it. This means that a recourse action by the buyer due to personal injury will be classified and governed by the lex fori including its conflict rules.

The Article ought to be interpreted e contrario, which would mean that the seller's liability for damage caused to the buyer's property by defective products is within the scope of the Convention.[205]

The first part of this Article recognises one of the basic principles of private international law, i.e. the principle of party autonomy. Thus the parties may exclude the application of the Convention.[207] As has been explained, the Convention is not a set of conflict rules but a uniform anational substantive law on international sales of goods and one of its purposes is to constitute a neutral alternative to the various national substantive laws. It is clear, though, that in order to be an alternative it cannot be superior to these other laws. In this respect it must have the same status as they. This includes the parties' right to exclude its application to the advantage of another [national] substantive law, e.g. the domestic rules of a Contracting State, just as their choice of law would exclude the application of any other national law, subject to the conflict rules of the lex fori.

The second part recognises one of the basic principles of contract law, i.e. the principle of freedom of contract. Traditionally this area of contract law is governed by non-mandatory rules and since consumer sales are excluded from the scope of the Convention, there was no need to include mandatory rules in the Convention. Thus the parties may derogate from or vary the effect of any of its provisions. [208]

In conclusion, since the Convention is not mandatory, its scope may be altered by the parties to the contract. However, its scope can only be decreased, not increased. Should the parties wish the Convention to apply to transactions outside its scope, i.e. where Articles 1, 2 and 3 are not fulfilled, the matter will be solved under the conflict rules of the lex fori and the governing law of the contract, and not by virtue of Article 6, as will any agreement of incorporation.[209]

4.3.4 Conclusion

It is important to appreciate the differences in character between the three Conventions. Simplified it could be said that the Hague and Rome Conventions contain a number of conflict of laws rules for different types of contractual obligations. The Vienna Convention on the other hand replaces the applicable substantive law as identified under two of their conflict rules, i.e. the lex contractus as derived from the contract itself from either the parties' intention or other objective connecting factors, and in some cases the lex loci solutionis.[210] Consequently, matters within the scope of the former two which will be governed by another applicable law than the lex contractus strictly so defined, will not be within the scope of the Vienna Convention.

Another important fact is that even though the Rome Convention has a much broader scope than the Hague Convention its conflict rules will not identify the lex contractus strictly so defined, as the applicable law any more often, or in any other situation within the scope of the Hague Convention, than will those rules of that Convention. Thus, the differences in the matters excluded are not as profound as they may first appear. Taken all together, this will explain why some issues excluded from the scope of one Convention are within the scope of another without causing any contradictory results. One could even take as far as to say that the scope of the Hague Convention is well within the scope of the Rome Convention.

Matters excluded from the scope of all three Conventions are: property; intellectual property; capacity; agency though only the relationship between the principal and third parties according to the Rome Convention; negotiable inst