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Reproduced with permission from IBA Section on Business Law, International Sales Quarterly (June 1997) 12-14

VIENNA CONVENTION AND EASTERN EUROPEAN LAWYERS

Dr. Fritz Enderlein [*]
Professor Emeritus, Attorney at Law, Potsdam-Babelsberg

Past and present

Eastern Europe in the past was the GDR, Poland, Czechoslovakia, Hungary, Bulgaria, Romania and the Soviet Union. These countries were not only politically but also economically united and had, as far as international sales were concerned, a common law: the General Conditions for the Delivery of Goods between Organisations of CMEA Member Counties.[1]

These so-called General Conditions were in fact law, and in most part even mandatory law. Having achieved a common international sales law among themselves in the 1950s (revisions took place in 1968 and in 1988), the Eastern European States followed closely all endeavours to unify the sales law and participated actively.[2]

What are the Eastern European countries today? Which states belong to this denomination? The political rift through Europe has gone, the wall dividing Germany has been removed. The CMEA has dissolved itself, its law is no longer applied.

What in a political sense was 'Eastern' is geographically to a great part Central and recently, in a conference organised by the International Arbitral Centre of the Austrian Federal Economic Chamber, Central Europe included not only the Czech and Slovak Republics, Poland and Hungary, but also Bulgaria and Romania and even the Russian Federation and the Ukraine. It seems it is no longer agreeable to be called Eastern.

Nevertheless, I include here all countries in Europe East of (from the north) Finland, Germany, Austria and Italy (with the exception of Greece.)

Accession of States to the Vienna Convention

The diplomatic conference in early 1980 in Vienna would not have been such a great success without the active participation of Eastern European lawyers. It may be recalled in this connection that even UNCITRAL itself was founded on the initiative of Hungary and the late Hungarian Professor Gyula Eörsi played an important part as Chairman of the diplomatic conference. Among the first 10 member countries which brought the Sales Convention to life in 1988 we find Hungary and Yugoslavia. At present the Sales Convention is in force in 15 Eastern European States (in the order of accession, approval, acceptance or succession).[3]

1 January 1988 Hungary 1 June 1992 Romania
1 January 1988 Yugoslavia 1 January 1993 Czech Republic
1 November 1990 Belarus 1 January 1993 Slovak Republic
1 February 1991 Ukraine 1 October 1994 Estonia
25 June 1991 Slovenia 1 November 1995 Moldova
1 August 1991 Bulgaria 1 February 1996 Lithuania
1 September 1991 Russian Federation 1 June 1996 Poland
6 March 1992 Bosnia and Herzegovina

The Convention entered into force in what was Czechoslovakia on 1 April 1991 and in the former German Democratic Republic on 1 March 1990.[4]

If we look at the map of Eastern Europe we see there are only three countries that were not members of the Sales Convention: Albania, Croatia (it seems its government just forgot to send a note to the Secretary General of the UN), and Latvia. [Note: Latvia acceded to the Convention on 31 July 1997]

When Czechoslovakia signed the Convention in 1981 it declared a reservation in regard to Article 95. This article permits states to declare not be bound by subparagraph (1)(b) of Article 1 of the Convention. In other words, states using this reservation, declare the exclusion of reference to conflict-of-law rules which has the effect that the Convention is only applied if both parties to the sales contract have places of business in different Contracting States. Otherwise national law would apply. At the time of this declaration, Czechoslovakia had a special Act on International Trade. The Czech and the Slovak Republics in their declarations of succession have not confirmed the old reservation. (There are only very few states using the reservation of Article 95, i.e. China, Singapore and the United States. Canada, when first acceding to the Convention, made a similar declaration with respect to British Columbia but later withdrew that declaration.) The reservation under Article 95 will lose its importance the more states accede to the Convention.

More important for the business community are reservations under Article 96 where states may declare that contracts always have to be concluded in writing and, therefore, they are not bound by Articles 11 and 29 or any other provision which allows a contract of sale in any other form than in writing. This reservation has been made by Belarus, Estonia, Hungary, Lithuania, Ukraine and the Russian Federation [and Latvia].

Another reservation, which is now obsolete, was declared by Hungary in regard to Article 90. Hungary considered the above-mentioned General Conditions for Delivery of Goods between Organisations of the Member Countries of the CMEA as prevailing over the Convention. Other members of the COMECON considered this as self-evident and, therefore, deemed it unnecessary to make such a declaration.

Fortunately, in the Convention the number of possible reservations had been kept small. No Eastern European country made use of a reservation under Articles 92, 93 or 94. Nevertheless, they will be influenced by such reservations made by others. Article 92 especially should be mentioned here, because the Scandinavian countries declared they would not be bound by Part II of the Convention. As will be seen, a Hungarian court had to take this into account.

Legal writing

As the Eastern European States take great interest in the unification of the law in general and the unification of the law of sales especially it is no wonder that we find a great number of authors in those countries who from the very beginning accompanied the creation of the Vienna Sales Convention with their ideas and observations.

Some statistics: in the . . . comprehensive bibliography on the Vienna Sales Convention, published by Michael R. Will [5] and covering the period 1980-1995, he lists more than 70 authors from Eastern European countries, i.e. 20 from Russia, 19 from Yugoslavia (including newly independent republics), 11 from Hungary, 8 from Czechoslovakia, 6 from Bulgaria, 5 from Poland and 2 from Romania. [For citations to these and other commentaries from this region presented on the Internet, see: http://www.cisg.law.pace.edu/cisg/biblio/full-biblio.html].

The first introductory commentaries appeared in the Bulgarian [6] and Serbo-Croatian [7] languages. Commentaries in the Hungarian [8] and Russian [9] languages followed.[10] Scholars and practitioners from Eastern European Countries participated in conferences and symposia all over the world and contributed to commentaries and collections of articles published in Western countries.

Here is no place to refer to all of them but a few names should be mentioned (especially to honour those who are no longer with us), Jacubowski from Poland, Knapp from the Czech Republic, Goldstajn from Croatia (former Yugoslavia), Eörsi from Hungary. Most of them participated actively in the diplomatic conference in Vienna and in the preparatory work of several working groups of UNCITRAL [11] and it is also thanks to their constructive contributions that the Convention became such a success.

Cases

After the entering into force of a convention it usually takes several years before the first cases in which the Convention has been applied as applicable law can be reported. As we have seen, with the exception of Hungary and Yugoslavia, the Convention became law in the other Eastern European countries only recently. No wonder that we know of cases only from Hungary and Russia (four each) and the Czech Republic (one). This does not mean there are no other cases. But the reporting system, introduced by UNCITRAL, with so-called national correspondents in all member countries does not yet work to our full satisfaction.

It is of course of utmost importance to have access to decisions concerning the Sales Convention from other countries not only for judges but for the practising lawyers as well.[12]

UNCITRAL publishes abstracts of court (and arbitral) decisions in a series called CLOUT (Case Law on Uncitral Texts) (A/CN.9/SER.C/ABSTRACTS/). Until August 1996, 10 documents had been published covering 143 cases on the Sales Convention. In contrast, Professor Michael R. Will had already collected 'The First 222 Decisions' in 1995.[13] (Will started in 1994 with 'The First 100 Decisions'.)

It is quite interesting to look at the decisions and the legal problems they deal with. In numerical order:

Article 1

A Hungarian court found that the Convention is not applicable to exclusive distribution agreements (Case 126 of CLOUT).

Article 9

In a case where the Hungarian defendant disputed the existence of a contract the court found that the parties are bound by any practices they have established between themselves and relied upon a sales contract that had previously been concluded between the parties (Case 51 of CLOUT).

Article 14

This was a very controversial article in the discussion during the diplomatic conference, especially as there is a certain contradiction between Article 14 in Part II and Article 55 in Part III of the Convention.

As Parts II and III had been prepared in different working groups, the conference was not able to consolidate the contents of the drafts. Whereas under Article 55 a contract can be valid even with no price stated, under Article 14 an offer is sufficiently definite only if it expressly or implicitly fixes or makes provision for determining the price.

The Hungarian Supreme Court, in a dispute between an American plaintiff and a Hungarian defendant, found that no contract was concluded as the parties failed to explicitly or implicitly fix or make provision for determining the price and thus overturned the decision of the court of first instance (Case 53 of CLOUT).

The same question, whether a contract had been validly concluded, was considered by the Moscow Tribunal of International Commercial Arbitration. As the parties had in their telex communication referred only to the quality and quantity of the goods and the period for delivery but omitted to indicate the price of the goods or any means of determining the price, the tribunal held, that in accordance with Article 14, no contract had been concluded, especially as the parties had indicated up to what date an agreement on the price should be reached (Case 139 of CLOUT).

Articles 18 and 19

The Court of Arbitration attached to the Czech Chamber of Commerce and Industry decided the following case in 1994. An Austrian supplier asked for advance payment in relation to four contracts which had been concluded between the parties. The Czech buyer denied the existence of the contracts as there was no agreement on the payment conditions. The Czech offer stated payment after delivery, the Austrian acceptance stated payment in advance and the Austrian claimant insisted its counteroffer had been accepted.

The Court of Arbitration applied Article 19 of the Sales Convention according to which different terms in the offer and the acceptance relating to the payment are considered to alter the terms of the offer materially and, therefore, for the buyer it was not necessary to object to the discrepancy. No contract was concluded and the claim rejected.

Articles 52 and 53

Under the contract, a Swiss seller was to deliver goods after receipt of a banker's guarantee from the buyer. As delivery was timed to fit in with the forthcoming Christmas holidays the seller dispatched the goods on the basis of the buyer's written statement regarding guaranteed payment of goods without waiting for the banker's guarantee. The buyer considered this to be a breach of contract and refused to pay. The Moscow Tribunal of International Commercial Arbitration found that under Article 52 the buyer could have refused to take delivery but had not done so. As under Article 53 one of the main obligations of the buyer was to pay the price established for the goods, the Tribunal found in favour of the seller. Violation by the seller of the terms specified for dispatch of the goods could not be considered sufficient grounds for discharging the buyer from its obligation to pay for the goods (Case 141 of CLOUT).

Article 54

Under this article a buyer's obligation to pay the price of the goods includes taking such measures and complying with such formalities as might be required to enable payment to be made. In a case decided by the Moscow Tribunal of International Commercial Arbitration, a Russian buyer had just sent instructions to the bank for the amounts payable under the contract to be transferred, but had not taken any measures to ensure that the payment could actually be made (Case 142 of CLOUT).

Articles 74 and 75

A Russian seller failed to supply a specific quantity of goods within a period specified in the contract. The German buyer repeatedly informed the seller that it insisted on the goods being delivered and was even ready to extend the time-limit for delivery. As no delivery took place, the buyer purchased the goods from a third party and claimed damages consisting in the difference between the price of the goods established in the contract and the price which the buyer was obliged to pay to the third party. The Moscow Tribunal of International Commercial Arbitration held that establishing the extent of damages on the basis of the difference between the contract price and the replacement purchase price was consistent with the provisions of the Convention (Case 140 of CLOUT).

Article 78

As to the rate of interest which is not regulated by the Convention, a Hungarian Court applied the law of the seller's country in accordance with its Act on Private International Law (Case 52 of CLOUT).

Article 79

The Moscow Tribunal considered the defence by the Russian seller who maintained that it should be discharged from liability for nondelivery on the grounds that it had been unable to deliver the goods for reasons beyond its control, namely because of an emergency production stoppage at the plant manufacturing the goods specified in the contract. The Tribunal decided that the seller was unable to prove the facts that would have discharged it from its liability for non-performance of its obligations since refusal on the part of the manufacturer of the goods to supply them to the respondent could not be deemed sufficient grounds for such discharge of liability. In addition, the respondent was unable to establish that it could not reasonably be expected to take into account, when concluding the contract, the obstacle preventing its compliance with the contract or to avoid or surmount the obstacle or its consequences (Case 140 of CLOUT).

In another case (referred to above) a defendant submitted that the fact that it did not have available foreign currency resources should be regarded as force majeure discharging it from liability for the non-performance of its contractual obligations. The Tribunal found that the contract agreed between the two parties included an exhaustive list of force majeure circumstances discharging them from liability for non-performance of their contractual obligations and that the buyer's lack of foreign currency was not included in that list (Case 142 of CLOUT).

Article 92

In a case between a Swedish seller and a Hungarian buyer, the existence of a valid contract was disputed. The Metropolitan Court of Budapest found that the Convention was applicable but that in regard to the formation of contract, Sweden had made a reservation excluding Part II of the Convention. The court, therefore, on the basis of Hungarian Private International Law, applied Swedish law and found that the contract had been validly concluded (Case 143 of CLOUT).

Hopefully, we shall have more cases to be reported from other countries as well in the future. Not included in this survey are cases which had been decided by the national courts of Western countries or by the Arbitral Tribunal of the ICC even if such decisions affect parties from Eastern European Countries. Also not included is the approach by practising lawyers. I am told that many law firms still advise their clients to exclude the Vienna Sales Convention from their contracts on the basis of Article 6.


FOOTNOTES

* First presented at the IBA 26th Biennial Conference, October 1996, Berlin.

1. See Register of Texts of Conventions and other Instruments concerning International Trade Law, Volume 1, United Nations 1971.

2. Enderlein, Problems of the Unification of Sales Law from the Standpoint of the Socialist countries in: Problems of Unification of International Sales Law (IALS Colloquium Potsdam 21-24 August 1979) New York/London/Rome (Oceana) 1980, also in: Digest of Commercial Laws of the World, Dobbs Ferry, NY (Oceana) VII (March 1980).

3. Status of Conventions as of 21 June 1996 (UNCITRAL Secretariat)

4. The Convention was in force for the German Democratic Republic from 1 March till 2 October 1990. As the Federal Republic of Germany became a party only on 1 January 1991 the question arose whether there was a gap or whether the Convention continued to be applicable for enterprises situated in Eastern Germany in the last quarter of 1990. See Enderlein Graefrath, Nochmals: Deutsche Einheit und internationales Kaufrecht (Erwiderung zu Herber, BB-Beilage 37 zu Heft 30/1990) in: Betriebs-Berater (Heidelberg) 46 (1991) Beilage 6.

5. Michael R. Will, CISG The UN Convention on Contracts for the International Sale of Goods, International Bibliography 1980-1995, The First 150 or so Decisions 1988-1995, 1995 Geneva.

6. Zhivko Stojanov Stalev, The Vienna Convention on the International Sale of Goods. Short Commentary. Sofia 1981

7. Jelena Vilus, Commentary on the United Nations Convention on the International Sale of Goods, Zagreb 1981.

8. Tamas Sandor, The International Contract of Sale. Commentary article by article. Budapest 1990.

9. MM Boguslavskij and others, Vienna Convention on Contracts for the International Sale of Goods. Commentary article by article. Moskva 1994.

10. In Eastern Germany the first commentary on the Sales Convention was published in 1985 by Fritz Enderlein/Dietrich Maskow/Monika Stargardt. See also Enderlein/Maskow, International Sales Law, United Nations Convention on Contracts for the International Sale of Goods -- Convention on the Limitation Period in the International Sale of Goods, Commentary, New York/London/Rome (Oceana) 1992

11. See John Honnold, Documentary History of the Uniform Law for International Sales, Deventer (Kluwer) 1989.

12. Fritz Enderlein, Uniform Law and its Application by Judges and Arbitrators - General Report, in: UNIDROIT (ed), International Uniform Law in Practice (International Congress Rome 7-10 September 1987) New York (Oceana)/Rome (Unidroit) 1988.

13. Michael R. Will, International Sales Law under CISG. The UN Convention on Contracts for the International Sale of Goods (1980). The First 222 or so Decisions. 1995 Geneva.


Pace Law School Institute of International Commercial Law - September 30, 2008
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