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A Study of the Interplay between the Conventions Governing International Contracts of Sale

Analysis of the 1955 Hague Convention on the Law Applicable to Contracts of International Sales of Movable Goods; the 1980 Rome Convention on the Law Applicable to Contractual Obligations; and the 1980 United Nations Convention on Contracts for the International Sale of Goods

Carolina Saf
Queen Mary and Westfield College
September 1999


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1. Introduction

1.1 Introduction

"We know that the law applicable to contracts and to the obligations arising from them is not always that of the country where the problems of interpretation or enforcement are in issue. There are situations in which this law is not regarded by the legislature or by the case law as the best suited to govern the contract and the obligations resulting from it."[1]

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]

2. Interrelation of the Conventions

2.1 The General Character of the Conventions

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


PRIVATE INTERNATIONAL LAW


Jurisdiction Rules


Conflict Rules in Contract

Vienna Convention Article 1(1)(a)

Hague Convention

Rome Convention


SUBSTANTIVE NATIONAL LAW


Contract Law

DOMESTIC SALES INTERNATIONAL SALES
Contracts Act Vienna Convention
Sales of Goods Act (including any Reservations)

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

Article 2 (paragraph 1)

La vente est régie par la loi interne du pays désigné par les parties contractantes.

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

Article 15 - Exclusion of renvoi

The application of the law of any country specified by this Convention means the application of the rules of law in force of that country other than its rules of private international law.

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.

"More generally, the exclusion of renvoi is justified in international conventions regarding conflict of laws. If the Convention attempts as far as possible to localize the legal situation and to determine the country with which it is most closely connected, the law specified by the conflicts rule in the Convention should not be allowed to question this determination of place."[41]

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]

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Go to entire text of Saf thesis


FOOTNOTES

1. The Report, p 10.

2. Infra, section 2.3.2.

3. Prop. 1964:149; SvJT 1955 p. 81; Bogdan; Gihl; and Philip DIPP.

4. La Sixième Session de la Conférence de la Haye de Droit International Privé.

5. Prop. 1964:149, pp. 4 - 5.

6. Philip DIPP, p. 322.

7. Belgium, Denmark, Finland, France, Italy, Luxembourg, the Netherlands, Niger, Norway, Spain, Sweden and Switzerland, of which Niger, Norway and Switzerland are not parties to the Rome Convention.

8. The Report, p. 38; Prop. 1997/98:14; Cheshire & North; Plender; and Philip, EU-IP.

9. The Report, p. 4; and Prop. 1997/98:14, p. 9.

10. Plender, p. 1.

11. Prop. 1986/87:128; Bianca & Bonell; Honnold; Bernstein; Ramberg; and Schlechtriem.

12. Prop. 1986/87:128, p. 81.

13. Bonell, in Bianca & Bonell, pp. 7 et seq.

14. Prop. 1964:149.

15. Prop. 1997/98:14.

16. North, Essays in Private International Law, pp. 186 - 187.

17. Prop. 1986/87:128.

18. Article 6 of the Vienna Convention.

19. Article 7 of the Vienna Convention; and infra, Chapter 3.

20. Article 1(1)(b) of the Vienna Convention, and infra, section 4.2.3.

21. Reczei, p. 516; Ferrari, para. III.1; Bernstein, p. 7; Herber, in Schlechtriem, Intro. to Arts. 1 - 6, paras. 25 et seq.; and Article 100 of the Vienna Convention.

22. Bogdan, p. 236; Ferrari, para. III.1; Herber, in Schlechtriem, Intro. to Arts. 1 - 6, para. 4; Mistelis, p. 202; and infra, section 4.2.3.

23. Philip EU-IP, p. 181; and infra, section 7.2.2.

24. Kropholler IEAL, pp. 190 et seq.; Schurig, pp. 232 et seq.; Kropholler, p. 85; Herber, in Schlechtriem, Intro. to Arts. 1 - 6, para. 2; and Mistelis, p. 202.

25. Kropholler IEAL, p. 190.

26. Bernstein, p. 138, f.n. 11.

27. Infra, section 4.3.3.

28. JT 1991/92 p. 1, p. 5; and infra section 2.3.2. However, this is a matter often misunderstood, ibid. p. 6, f.n. 18.

29. Infra, sections 3.1.3 and 4.3.

30. Infra, section 4.2.3; Reczei, p. 517; Jayme, in Bianca & Bonell, p. 31; and Herber, in Schlechtriem, Art. 1, para. 34. Note that under Article 95 a Contracting State can make a reservation against the application of Article 1(1)(b): the implications of such a reservation will be discussed infra, section 4.4.

31. JT 1991/92 p. 1, p. 6; Ferrari, para. VI.2; Bernstein, p. 12; and Herber, in Schlechtriem, Art. 1, para. 44.

32. Bernstein, p. 12.

33. Infra, section 2.3.

34. Jayme, in Bianca & Bonell, pp. 32 - 33, emphasis added.

35. Subject to Article 95 of the Vienna Convention.

36. Infra, Chapter 5.

37. Infra, section 5.4.

38. Prop. 1964:149, p. 17 et seq.; SvJT 1955 p. 81, pp.83 et seq.; Bogdan, pp. 53 et seq.; Philip DIPP, p. 331.

39. Prop. 1997/98:14, p. 52; and Philip EU-IP, p. 186.

40. The Report, p. 37.

41. The Report, p. 37.

42. Plender, p. 54.

43. Schlechtriem, JT 1991/92, p. 1, pp. 6 - 7, incl. f.n. 18; and Philip EU-IP, p. 186.

44. Bezirksgericht für Handelssachen Wien, February 20, 1992, RdW 239, i.e. prior to Austria becoming a Contracting State to the Rome Convention, (application of the Vienna Convention entirely precluded due to the reference back to Austrian substantive law); Jayme, in Bianca & Bonell; and Karollus, III.1

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Pace Law School Institute of International Commercial Law - Last updated January 18, 2000
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