(A/CONF.97/C.1/L.5, L.15, L.16, L.22, L.28, L.49, L.52 and L.59)
4. The CHAIRMAN invited the Committee to consider article 6 [became CISG article 7 ], dealing with the interpretation of the future convention, together with the amendments thereto proposed by Bulgaria (A/CONF.97/C.1/L.16), Czechoslovakia (A/CONF.97/C.1/L.15), France (A/CONF.97/C.1/L.22), Italy (A/CONF.97/C.1/L.49 and L.59), Norway (A/CONF.97/C.1/L.28) and the United States of America (A/CONF.97/C.1/L.5).
5. After a brief discussion in which Mr. ROGNLIEN (Norway), Mr. FARNSWORTH (United States of America) and Mr. BUHOARA (Romania) took part, the CHAIRMAN noted that there appeared to be a consensus in favour of considering as drafting amendments the proposals submitted by France (A/CONF.97/C.1/L.22) and the United States of America (A/CONF.97/C.1/L.5). If there were no objection, he would therefore take it that the Committee wished to refer those two amendments to the Drafting Committee.
It was so decided.
6. In reply to a question by the CHAIRMAN, Mr. ROGNLIEN (Norway) explained that his delegation's proposal (A/CONF.97/C.1/L.28) differed materially from the United States amendment (A/CONF.97/C.1/L.5); it was in fact more akin to the Italian proposal for a new article 6 [became CISG article 7 ] ter (A/CONF.97/C.1/L.59). The Norwegian proposal that the reference to the "observance of good faith in international trade" should be deleted from article 6 [became CISG article 7 ] and transferred to article 7 [became CISG article 8 ] was designed to make it clear that the principle of good faith was relevant to the interpretation of the contract of sale, but not to the interpretation of the future convention as such.
7. Mr. GORBANOV (Bulgaria), introducing his delegation's proposal to insert in article 6 [became CISG article 7 ] a new paragraph (2) [became CISG article 7(2) ] (A/CONF.97/C.1/L.16), said that its purpose was to avoid the danger that the existing single paragraph might be interpreted in the sense of articles 2 and 17 of the Uniform Law of 1964 (ULIS) i.e., as ruling out the possibility of using the conflict-of-law rules of the lex fori to remedy gaps in the uniform rules on international sales, a solution that his delegation could not accept.
8. In the view of most specialists, the experience gained with articles 2 and 17 of ULIS had shown that it was a costly illusion to imagine that all gaps in an international legal instrument could be filled solely by means of the interpretation of its own provisions and without the help of private international law and that the conflict rules were necessary for the purpose of finding alternative substantive rules.
9. He stressed that the formula in the Bulgarian proposal -- namely, resort to the law of the seller's place of business -- was offered as a remedy of last resort. It offered an element of security in that the applicable law was thereby predictable. The lex venditori rule was embodied in many important agreements among countries members of CMEA and was steadily gaining ground in international trade practice. His delegation had therefore decided to incorporate that rule into its proposed new paragraph (2).
10. Mr. KOPAC (Czechoslovakia), introducing his delegation's amendment (A/CONF.97/C.1/L.15) said that it represented a compromise formula. It was offered to meet the contingency that the Bulgarian proposal (A/CONF.97/C.1/L.16) -- which his delegation supported -- did not gain acceptance.
11. Like the Bulgarian amendment, his delegation's proposal entailed the insertion of a new paragraph (2) to deal with the matter of the law applicable in the event of a gap in the Convention but, instead of specifying that it would be the lex venditori, it stated that the law applicable would be determined by the rules of private international law (i.e., the conflict-of-law rules).
12. Turning to the Italian proposal (A/CONF.97/C.1/L.59) that the problem of gaps should be "settled in conformity with the general principles on which this Convention is based", he said that the proposed wording was very dangerous. The questions to be settled were bound to be concrete in character and it was totally unrealistic to try and solve them solely with the aid of general principles.
13. The Italian amendment went on to state that, in the absence of such principles, the matters in question would be settled by "taking account of the national law of each of the parties". That formula for the distributive application of two different and possibly conflicting legal systems would be very difficult to apply in practice.
14. Mr. BONELL (Italy), introducing his delegation's two amendments (A/CONF.97/C.1/L.49 and L.59), said that their thrust was twofold. The first aim was to remove the reference to the principle of good faith from its existing place and transfer it to a new article 6 ter whereby it would clearly apply to the interpretation and performance of the contract of sale itself, and not to the application and interpretation of the Convention. The second aim was to deal with the problem of gaps, a problem which -- as already indicated by the Bulgarian and Czechoslovak delegations -- could not be settled by means of the provisions of article 6 [became CISG article 7 ] alone but needed to be dealt with much more specifically.
15. However, in respect of the substance of the matter, the Italian proposal was diametrically opposed to both the Bulgarian and Czechoslovakian proposals.
16. As a matter of fact, according to them when a judge found a gap in the Convention he would have to refer to the relevant rule of conflict to determine the applicable national law. Such an approach doubtless had the advantage of being backed by a long tradition. Nevertheless his delegation would prefer the opposite approach, one more or less similar to that adopted in ULIS (articles 2 and 17), according to which the Convention, it being a step towards the creation of a new jus commune, should be interpreted. If necessary its gaps should be filled not on the basis of the rules taken from a particular national law, but on the basis of those principles and criteria which reflected the letter and spirit of the Convention itself.
17. Admittedly, reference to those principles might not solve the problem in a number of cases, since the general principles in question would often be difficult to determine. Accordingly, his delegation proposed, as a fallback alternative, the reference to the "national law of each of the parties". That comparatively novel formula would, he believed, help to solve the difficulty. If there were no such formula, in the event of a gap in the Convention and of no relevant general principle being found therein, the result would be that the law of the stronger party to the contract would prevail. Under the Bulgarian proposal (A/CONF.97/L.16), it would be the law of the seller's place of business (lex venditori) and that was precisely the kind of solution which his own delegation was attempting to avoid.
18. The point he was making could be demonstrated by a reference to the "letter of confirmation" principle familiar in the practice of the Federal Republic of Germany: a buyer who received from the seller a letter of confirmation containing new claims found that his silence was construed as an acceptance of those claims, a principle that was virtually unknown in most other legal systems. Under the Bulgarian proposal, the lex venditori would be applied and a buyer would have no protection against that unfavourable solution, an injustice that would be prevented by the Italian proposal.
19. It had been objected that the formula "the national law of each of the parties" could be a source of difficulty because of the differences existing between the two national legislations concerned. In that type of situation, however, it was preferable -- in the interests of international co-operation -- that the solution should be drawn from both national laws involved, to the extent that there was common ground between them. Ultimately, the problem was always that of maintaining a proper balance of expectations as between the two parties to a contract of sale.
20. The CHAIRMAN said that many unification conventions made no mention of the gaps in their provisions since it was generally understood that national law should be applied to fill them, the answer to the question which national law was applicable being usually that designated by the rules of private international law.
21. In the case of uniform law on the international sale of goods, there were several possible solutions. At one extreme, there was article 17 of ULIS which laid down that questions not expressly settled therein were to be settled in conformity with the general principles on which the Convention was based. There was an echo of that idea in article 6 of the current draft Convention [became CISG article 7 ] but it did not specifically mention gaps. The Italian proposal (A/CONF.97/C.1/L.59) was intermediate between the ULIS article and article 6 [became CISG article 7 ], but it raised a number of questions. It was unclear whether the reference to taking account of the national law of each of the parties was intended to exclude the rules of private international law or to formulate a new rule of that law. Furthermore, it was by no means obvious how the term "national law" was to be interpreted and whether it was to be determined by the habitual place of residence or nationality of the parties concerned or according to their status under private international law. The Czechoslovak proposal (A/CONF.97/C.1/L.15) rendered more explicit the interpretation which underlay article 6 [became CISG article 7 ]. The Bulgarian proposal (A/CONF.97/C.1/L.16) sought to unify private international law by making the law of the seller's place of business prevail. In connection with that proposal, it should be borne in mind that the 1955 Hague Convention on the law applicable to international sales of goods was due to be revised.
22. Mr. SEVÓN (Finland) said that the aim of the Czechoslovak proposal was to rule out the idea underlying ULIS articles 2 and 17, an idea which was unacceptable to his delegation also. However, that purpose would be achieved merely by rejecting the Italian proposal. The Bulgarian proposal conflicted with the provisions of the 1955 Hague Convention, which did not provide for all questions to be settled according to the law of the seller's place of business. There was no need to add anything to the existing text of article 6 [became CISG article 7 ].
23. Mr. REISHOFER (Austria) said that the Bulgarian proposal had the merit of attempting to establish a definite rule, but experience had shown that it would not be appropriate in all cases. The Czechoslovak proposal was flexible but perhaps superfluous, since the same solution would be adopted under the existing text of article 6 [became CISG article 7 ]. It would be better not to include any rules on private international law in the draft Convention.
24. Mr. VISCHER (Switzerland) said that the Bulgarian proposal also referred to article 4(a). It would be difficult to find a rule that could appropriately be applied in all cases. He favoured the international spirit of the Italian proposal, but suggested that the last line should be changed to read "by taking into account the law designated by the conflict of law".
25. Mr. WAGNER (German Democratic Republic) thought it definitely advisable to indicate what was to be done if a question was not explicitly covered by the draft Convention.
26. He supported the Italian proposal in its reference to general principles, but thought that the last part of the proposal would cause problems in practice. The alternative to settlement in conformity with general principles should be the Czechoslovak proposal of settlement in conformity with the law applicable by virtue of the rules of private international law. As a compromise, his delegation could support the addition to the existing article 6 [became CISG article 7 ] of a new paragraph 2 consisting of the first part of the Italian proposal as far as "in the absence of such principles" and the second part of the Czechoslovak proposal, starting with the words "shall be settled . . .".
27. Mr. BOGGIANO (Argentina) said that the Bulgarian proposal indeed contained the most precise rule but that what was needed in a draft convention on such a delicate matter was rather a very general rule. Furthermore, it would be inadvisable to introduce a rule which prejudged the revision of the 1955 Hague Convention.
28. He had some sympathy with the Italian proposal, but settlement in conformity with the general principles of the Convention might lead in practice to excessive freedom on the part of national courts in interpreting what those principles were and would be tantamount to handing questions over to the lex fori. Moreover, having regard to the national law of both parties, if their positions were irreconcilable, could lead to the adaptation of rules to meet the circumstances of particular cases and that would not be conducive to certainty at the international level.
29. His delegation had always assumed that gaps in a unification convention could be filled only by the traditional methods of private international law, but it now recognized that other possibilities did exist. The Czechoslovak proposal left undefined which private international law was to determine the applicable domestic law, though presumably that of a court or arbitration tribunal was meant. Apart from that doubt, his delegation was disposed to favour the Czechoslovak proposal.
30. Mr. HJERNER (Sweden) said that, in common with the other Scandinavian States, Sweden had adhered to the 1955 Hague Convention on the law applicable to international sales of goods. Its obligations under that Convention could not be reconciled with the current draft Convention if the Bulgarian proposal were adopted. The same objection applied to the latter part of the Italian proposal. There was, however, no such objection to the first part of that proposal or to the Czechoslovak proposal. His delegation was satisfied with the existing text of article 6 [became CISG article 7 ] but it would be able to accept the suggested combination of the Italian and Czechoslovak proposals.
31. Mr. HERBER (Federal Republic of Germany) said there were merits in all the proposals. In his delegation's view, it was clear from article 6 [became CISG article 7 ] that courts should not fall back on national law but should endeavour to solve questions not expressly dealt with in the draft Convention according to the general principles of that Convention, as prescribed by article 17 of ULIS. However, there were limits beyond which national law would have to be applied. It was then naturally desirable to specify, as the Bulgarian proposal did, which national law was applicable. Nevertheless, the Bulgarian proposal raised the problem of encroachment on the 1955 Hague Convention and also that of what limit should be placed on the principle of applying the law of the seller, which was defined in negative terms. His delegation could accept the compromise proposal put forward by the German Democratic Republic, but it felt that the same result could more easily be achieved by leaving the existing article 6 [became CISG article 7 ] as it stood.
32. Mr. FOKKEMA (Netherlands) said that he would prefer to retain the text of article 6 [became CISG article 7 ] unchanged, but could also support the proposal by the German Democratic Republic. The Bulgarian proposal was quite unacceptable.
33. The CHAIRMAN said that it appeared from the discussion that there was no support for the Bulgarian proposal or for the Italian proposal in its entirety. He therefore invited the Committee to vote on the original Czechoslovak proposal and on the combination of the Italian and Czechoslovak proposals suggested by the representative of the German Democratic Republic.
34. The Czechoslovak proposal (A/CONF.97/C.1/L.15) was rejected by 20 votes to 7.
35. The combination of the Italian and Czechoslovak proposals, suggested by the representative of the German Democratic Republic, was adopted by 17 votes to 14, with 11 abstentions.
36. The CHAIRMAN said that he took it that the Committee wished to send the amended text of article 6 [became CISG article 7 ] to the Drafting Committee.
37. It was so agreed.
38. The meeting was suspended at 4.45 p.m. and resumed at 5.05 p.m.
39. Mr. DE LA CAMARA (Spain), speaking in explanation of vote, said that his delegation had voted in favour of the combined Italian-Czechoslovak proposal. It was preferable to have a rule for guidance where there were gaps in the draft Convention, but it should not be of a rigid nature. The proposal adopted by the Committee directed the judge to endeavour first of all to settle questions in accordance with the general principles underlying the draft Convention and not to resort immediately to the rules of conflict. Such a position was helpful to the Convention. He hoped that the Drafting Committee would see to it that due weight was given to the relative importance of the two criteria and that they were not put forward as simple alternatives.
40. Mr. BONELL (Italy), introducing his delegation's proposal for a new article 6 [became CISG article 7 ] ter (A/CONF.97/C.1/L.59), said that there had been an exhaustive discussion in the UNCITRAL Working Group as to whether a reference should be included in the Convention to the principle of good faith which, in the view of some delegations, was liable to misinterpretation in an international instrument. His delegation had therefore added a reference to international co-operation to make it clear that only those aspects of the principle of good faith which were internationally acceptable would apply. The exact wording was open to discussion and a formula such as that proposed by the Norwegian delegation (A/CONF.97/C.1/L.28), might serve the purpose. In any case, article 6 [became CISG article 7 ] was not the appropriate place for a reference to a principle of major importance in international trade relations. A separate article was required.
41. Mr. ROGNLIEN (Norway) said that his proposal A/CONF.97/C.1/L.28 was that the reference to the observance of good faith should be transferred from article 6 [became CISG article 7 ] to article 7 [became CISG article 8 ]. He was not opposed in principle to the inclusion of such a reference, but it was not clear from the existing text of article 6 [became CISG article 7 ]how good faith was to be interpreted in practice to general rules of law. It might possibly mean, for example, that if a court were to find that one of the provisions of the Convention ran counter to the observance of good faith in international trade, it need not require it to be applied. As he saw it, the observance of good faith related not to the interpretation of the provisions of the Convention but rather to the contract between the parties, and its proper place was therefore under article 7(3) [became CISG article 8(3) ], which concerned intent. His proposal was similar to that of Italy (A/CONF.97/C.1/L.59), which also proposed the transfer of the reference to good faith to a separate article, but he was opposed to the reference in that proposal to the principle of international co-operation. Parties to a contract were not bound to further international co-operation, at least in their contracts of sale.
42. The CHAIRMAN pointed out that there was a proposal by Sweden (A/CONF.97/C.1/L.52) that article 7 [became CISG article 8 ] should be deleted. He asked representatives who were in favour of the proposal by Italy and Norway to indicate their support, so that a long discussion could be avoided.
43. Mr. KIM (Republic of Korea) said that, as far as the principle of the observance of good faith in international trade was concerned, a distinction should be made between three possible areas of application. The first area was the interpretation and application of the provisions of the Convention, the second (as in the Italian proposal) was the relationship between the parties to a contract of sale, and the third was the determination of the intent of such parties. He believed that the application of the principle of good faith should be restricted to the second area, namely, the relationship between the parties to a contract.
44. Mr. SAMI (Iraq) said he supported the Norwegian proposal, since he shared the view that the principle of observance of good faith should be applied not to the interpretation of the Convention but rather to the contract between the parties.
45. Mr. HJERNER (Sweden) said that the problem of wording the provision dealing with the need to observe good faith had been under discussion in the UNCITRAL Working Group for some considerable time, and the present text represented a delicately-balanced compromise. He did not think that the proposals by Italy and Norway added very much to the original formulation. In his view it was not really necessary to have any provision on the subject of observance of good faith, but if it were decided to include it he would prefer the existing text.
46. Mr. BUHOARA (Romania) said he had substantial difficulties with the Norwegian proposal. Although he could see some merit in the Italian proposal, he would prefer to see the existing text retained.
47. Miss O'FLYNN (United Kingdom) said that, although it was desirable that parties to a contract of sale should act in good faith towards one another in the formation and performance of their contract, she did not think it appropriate to add to the Convention a new article of uncertain meaning such as that proposed by Italy. The principles of good faith which the parties were called upon to observe were not defined; were they to be understood to be principles operating in all Contracting States, or only in those States where the buyer and seller had their places of business? What would happen if the two sets of principles were found to be mutually conflicting? In addition, the legal effect of the Italian proposal was unclear; although it was couched in mandatory terms, there was no provision for the application of sanctions in the event of failure by one of the parties to observe good faith. It was true that article 6 [became CISG article 7 ] made no provision for sanctions, either, but that article was directed towards the courts in the interpretation of the Convention, and not towards the parties to a contract. She was unable, therefore to support the Italian proposal.
48. If the Committee should decide to delete or modify article 6 [became CISG article 7 ], she could support the Norwegian proposal, but would prefer to see the existing text retained.
49. Mr. MATHANJUKI (Kenya) said that he had serious doubts as to the possible effect of transferring the reference to the principle of good faith from article 6 [became CISG article 7 ] to article 7 [became CISG article 8 ]. There had already been a lengthy discussion on how the provision on that principle was to be formulated, and the wording of the existing article 6 [became CISG article 7 ] represented a compromise between various proposals. He did not think the Italian proposal expressed the concept as clearly as the original wording, and it referred only to the contract of sale, whereas article 6 [became CISG article 7 ] referred to the need to observe good faith in interpreting the Convention. He would prefer the original wording.
50. Mr. FARNSWORTH (United States of America) said he too preferred the existing text, which, while not perfect, represented a useful compromise. As had been pointed out, there was some degree of uncertainty as to how the concept of good faith was to be interpreted in an international context. In the discussion in the UNCITRAL Working Group, it had been found difficult to produce concrete examples of how the principle would be applied when proposals similar to the Italian one had been put forward. Although all would agree that, in theory, it was desirable to behave in good faith, he felt that a provision such as the one proposed would be uncertain and dangerous in practice.
51. Mr. EYZAGUIRRE (Chile) said he too preferred the existing compromise text. With regard to the Norwegian proposal, the interpretation of the Convention and the law of contract were two completely different issues, and with regard to the Italian proposal, the existing text of article 6 [became CISG article 7 ] already made explicit the general principles on which the Convention was based.
52. Mr. MASKOW (German Democratic Republic) said he agreed that article 6 [became CISG article 7 ] should remain unchanged. Some reference to the need to observe the principles of good faith should be included in the Convention, in order to allow some flexibility in interpreting its provisions in the interests of furthering international trade.
53. Mr. FRANCHINI-NETTO (Brazil) pointed out that good faith was already understood to be one of the underlying principles of law and was implicit in any legal transaction. He thought it unnecessary, therefore, to mention the principle in article 7 [became CISG article 8 ]. In view of the complexity of the two proposals that had been put forward, he would prefer to see the text of article 6 [became CISG article 7 ] remain unchanged.
54. The CHAIRMAN said that there appeared to be little support for the Norwegian proposal.
55. Mr. ROGNLIEN (Norway) said that, under those circumstances, he would withdraw his proposal.
56. The CHAIRMAN said that the Committee now had before it only the Italian proposal. In the absence of any objections, he would take it that there was a consensus, first, against the adoption of that proposal, and secondly, in favour of the retention of the existing reference to good faith in article 6 [became CISG article 7 ].
57. It was so agreed.
58. The CHAIRMAN invited comments on the Italian proposal for the insertion of a new article 6 bis (A./CONF.97/C.1/L.49).
59. Mr. MICCIO (Italy), introducing his proposal, said that the whole concept of interpretation of statements regarding the contract of sale dealt with under article 7 [became CISG article 8 ] was of great importance. That concept contained three distinct elements: first, the common will of the parties involved in the contract, second the actual conduct of those parties following upon the conclusion of the contract, and third (to cover cases where the first two elements were not sufficient) the understanding that a reasonable person would have had of statements on the conduct of the parties. He believed that the element of the common will of the parties was the one which should be most generally applied and which should thus be placed first.
60. Mr. PLANTARD (France) supported the Italian proposal. It would be useful to have a reference to the common will of the parties in the context of article 7 [became CISG article 8 ].
61. Mr. KHOO (Singapore) said he did not find the proposal acceptable. It implied that a court would be compelled to ascertain the state of mind of the parties to the contract, and that would introduce an element of uncertainty into the interpretation and application of the Convention. The court should rather direct its attention to the actual provisions of the contract which the parties had concluded. The conduct of the parties was already mentioned under article 7 [became CISG article 8 ].
62. The CHAIRMAN said he noted that there was little support for the Italian proposal. If there were no objection, he would therefore consider that proposal rejected.
63. It was so agreed.