Published in Galston & Smit ed., International Sales: The United Nations Convention on Contracts for the International Sale of Goods, Matthew Bender (1984), Ch. 4, pages 4-1 to 4-13. Reproduction authorized by Juris Publishing.
by Kazuaki Sono
§ 4.01 Introduction
Distinguished participants, it is my great honor to be invited to speak to you at this Conference which examines in detail the celebrated Vienna Sales Convention, an important legal text which emanated from the work of the United Nations Commission on International Trade Law (UNCITRAL). The United States is one of the most important and influential members of the Commission. Ever since the Commission was established in 1966, UNCITRAL and its Secretariat have constantly received warm support from the United States. It is indeed gratifying that the Parker School of Foreign and Comparative Law, and in particular Professor Hans Smit, has taken the leadership in organizing this International Conference with distinguished speakers who [page 4-1] are the established authorities in this field. The holding of this Conference is timely because the Vienna Sales Convention is expected to enter into force as early as 1984 and the President of the United States, upon the recommendation of the State Department, has recently transmitted the Convention to the Senate with a view to receiving consent to ratification. This development was preceded by the favorable view towards the Convention which prevailed at the symposium at Atlanta last August held in conjunction with the annual meeting of the ABA.
The mandate of UNCITRAL is the unification and harmonization of international trade law in order to eliminate legal obstacles to international trade and to ensure the orderly development of economic activities on a fair and equal basis. The Commission's role to coordinate the activities of other international organizations in this field has recently been emphasized. When the Commission was created in 1966, there existed already certain international organizations engaged in the unification of private law, but none of these organizations had a truly global representation. By creating UNCITRAL the General Assembly established an organization in which all geographical regions and the principal legal systems of the world are represented. [page 4-2]
§ 4.02 Legislative Work of UNCITRAL
Since its creation the Commission has accomplished concrete legislative work in several fields. It has produced three Conventions. The first is the Convention on the Limitation Period in the International Sale of Goods adopted in New York in 1974. This Convention establishes unified rules for the operation of the limitation or prescription period in the international sale of goods, in an effort to avoid the sharp contrast in approaches between common law countries and civil law countries -- that is, between the "statute of limitations" approach at the procedural law level in the former and the "prescription" approach at the substantive law level in the latter. Besides regulating the limitation period (four years as a general rule) for rights and claims arising from international sales contracts, the Convention also touches upon the interesting question of international res judicata or the international effect of prescription, a subject which is worthy of close examination in a study of the law of international civil procedure.
A protocol to the Prescription Convention was adopted in 1980 at the diplomatic conference which prepared the Vienna Sales Convention, to reconcile the contents of the two Conventions. Because of the adoption of the Vienna Sales Convention, and due to the increasing reputation of the work of the Commission in general, interest in the Prescription Convention will grow further. And it is my prediction that it will go into effect in the near future at almost the same time as the Vienna Sales Convention.
The second one is the United Nations Convention on the Carriage of Goods by Sea of 1978, known as the Hamburg Rules. This Convention is a revised version of the 1924 Brussels Convention and regulates the operation of international bills of lading. The third Convention is, of course, the United Nations Convention on Contracts for the International Sale of Goods adopted in Vienna in 1980.
Two more legal texts may emerge within a few years, both [page 4-3] in the field of negotiable instruments: one dealing with international bills of exchange and promissory notes and the other with international checks. These negotiable instruments would be created only for optional use in international payments and would provide a balanced solution to the conflicting approaches under the civil law system, represented by the Geneva Conventions of 1930 and 1931, and the common law system, represented by the British Bills of Exchange Act of 1882 and the Uniform Commercial Code of the United States. The Commission will probably decide at the next session on the form these legal texts should take after examining the key features and principles contained in the draft legal texts. [page 4-4]
§ 4.03 Settlement of Commercial Disputes
In addition to preparation of these texts, the activities of UNCITRAL in the field of settlement of international commercial disputes have been extensive. The Commission has repeatedly recommended, through the General Assembly of the United Nations, wider acceptance of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. It adopted the UNCITRAL Arbitration Rules in 1976 after extensive consultations with arbitral institutions and arbitral experts, and the General Assembly has recommended the use or the Rules in the context of international commercial relations. The UNCITRAL Arbitration Rules have become well known in a short span of time and are now used around the world. Many arbitral institutions have in a variety of ways accepted or adopted the Rules. It is well known that the "Optional Arbitration Clause for use in contracts in U.S.A.-U.S.S.R. Trade -- 1977 (prepared by the American Arbitration Association and the Moscow Chamber of Commerce and Industry," with the Stockholm Chamber of Commerce acting as an appointing authority, includes the UNCITRAL Arbitration Rules. You may perhaps be aware that thousands of cases are presently being tried in The Hague under the UNCITRAL Rules in accordance with the "Declaration of the Government of the Democratic and Popular Republic of Algeria concerning the Settlement of Claims by the Government of the United States and the Government of the Islamic Republic of Iran," an agreement concluded in connection with the release of hostages a few years ago.
The wide acceptance of the UNCITRAL Arbitration Rules demonstrates a unique approach to the global unification of the procedural aspects of arbitration, since it accomplishes this unification without resort to the traditional convention approach, which would require parliamentary action. This is a unification through agreements of parties and arbitral institutions, based upon their confidence in the UNCITRAL Rules and without any need for imposition by [page 4-5] law, that is, not the "top to the bottom" approach, but "from the bottom to the top" approach.
Encouraged by the success of the UNCITRAL Arbitration Rules, the Commission is now engaged in the preparation of a model arbitration law and it is expected that the Commission will adopt the model law in 1985. This model law will provide a model for the adaptation of national laws in order to meet the increasingly important role played by commercial arbitration in the settlement of international disputes. One of the aims of the project is to free international commercial arbitration from old and unnecessarily complicated and strict national procedural laws in order to respect the parties' autonomy in the arbitral process and to smooth the enforcement of international arbitral awards under the 1958 New York Convention. The model arbitration will be a compilation of philosophies which national legislatures should reflect upon. [page 4-6]
§ 4.04 Other Projects
Having completed many of its undertakings on traditional subjects, the Commission is now engaging in yet another ambitious project. This work is in the field of industrialization. Developing countries suffer from a lack of expertise in negotiating and drafting contracts in this area, particularly due to the complexity of the subject. Confusion exists in this field not only because of divergencies among legal systems, resulting in difficulties in comprehending the various and often conflicting legal implications of contracting techniques, but also because of sometimes contradictory approaches which are promoted by various international organizations already engaged in the field. The Commission believed that as the core legal body in the field of international trade law, and pursuant to its coordinating function, it can promote unification and harmonization in approaches both vertical and horizontal so as to eliminate existing conflicts and thus promote the establishment of a better order and foster a healthier industrialization process.
Thus, the Commission is now preparing a legal guide on contracts for the construction of large industrial works. In this task the Commission enjoys the full cooperation of other international organizations including the World Bank. Our expectation is that a concrete and detailed legal guide could promote greater trust between developed and developing countries with respect to the question of industrialization as a whole. The preparation of the legal guide, which consists of more than forty chapters, is progressing rapidly. My expectation is that the Commission will be able to adopt the legal guide in 1986. This, again, is a unification approach from the bottom to the top.
There are also several other projects in which the Commission is presently engaged. One of these is the preparation of the UNCITRAL Guide for the Electronic Funds Transfers which are becoming an important means of international payment due to rapid technological progress in [page 4-7] electronics. In this context, the International Monetary Fund and the Bank for International Settlements as well as central banks of major countries, including the Federal Reserve Bank, are cooperating fully. A liaison with the Banking Committee of the ISO and OECD is also developing to coordinate activities in this new field. The recent UNCITRAL recom:mendation to use the SDR as the international unit of account for global conventions is an indication that UNCITRAL is also the effective body where East and West meet in a pragmatic manner. [page 4-8]
§ 4.05 Working Methods
Distinguished participants, I would now like to make a few remarks about the working methods of UNCITRAL in general. The efficiency of these working methods, and the successes and high reputation of the Commission, are due in large measure to the fact that political confrontation is minimized, enabling work to proceed in a constructive manner. The Commission has observed that the mere exchange of battle cries and political slogans which had taken place particularly since 1974 had not produced any tangible results. It believes that for a true implementation of a new and better economic order, each international organization concerned should undertake work in a pragmatic and practical manner within its own competence. In this context, it is worthwhile to mention that all decisions by the Commission and its Working Groups are taken by consensus. The majority rule is not followed. Decisions are not adopted until a consensus emerges either from a compromise or through the patient process of persuasion. The Commission consists of thirty-six member States, each elected for a term of six years by regional allocation. However, influence in decision-making by the Commission is not confined to Members, because our consensus approach accommodates the views of observers as well. It is the belief of the Commission that, for the unification and harmonization of international trade law, views from all corners of the world must be reflected and reconciled. All States and international organizations which have interests in the activities of the Commission are therefore always invited and are encouraged to participate as actively as member States. Progress under this unique consensus approach of the Commission may be slow but it is definitely steady, forward and more apt to produce results which are widely accepted. I might add in this regard that a tradition has been established in the Sixth (Legal) Committee of the General Assembly of the United Nations to consider the annual reports of the Commission as [page 4-9] the first agenda item, since this is a comfortable item with which to begin, and the United States is the first speaker commending UNCITRAL. [page 4-10]
§ 4.06 Vienna Convention
Now distinguished participants, let me add some more remarks on the Vienna Sales Convention which is the subject of the conference. As you know, the Convention has been praised throughout the world as a workmanlike attempt to devise legal rules and practical procedures for international sales transactions. No seriously critical comments have been heard. Unification in this field at a truly global level after the efforts of over half a century is finally in sight. It is noteworthy that this excitement is also shared by those States which first ratified the 1964 Hague Sales Conventions. Once the Convention enters into force, it will assist to smooth the process of international sales.
The Convention will enter into force one year after the tenth ratification or accession is received. Of course, additional time is often needed for the process of ratification even after the substantive decision has been made. As of today six States have already either ratified or acceded to the Convention: Argentina, Egypt, France, Hungary, Lesotho and Syria. Furthermore, at the recent annual session of UNCITRAL, we were informed that official steps toward the ratification of the Convention were being taken in several other States. At the recent session of the United Nations General Assembly, Bulgaria and Venezuela announced that they had begun the process of ratification. At the seminar of the Council of Mutual Economic Assistance (CMEA) held in Moscow in March this year, general approval was given to both the Vienna Sales Convention and Prescription Convention. The Asian-African Consultative Committee has recommended its member States to consider ratifying the Vienna Sales Convention. The LAWASIA at the Manila Conference held in September this year also adopted a resolution urging governments in the Asian-Pacific region to ratify the Convention within the shortest possible time. The German-speaking states -- Austria, Federal Republic of Germany, German Democratic Republic and Switzerland -- have already established a common [page 4-11] German text of the Vienna Sales Convention. The Scandinavian countries are known to be in the process of ratification. Many international meetings, including an Asian-Pacific Regional Trade Law Seminar next year organized by the Government of Australia, are also focusing on the Convention because of its importance. I was in Ottawa yesterday to attend an international trade law seminar organized by the Canadian Government and I was impressed by the enthusiasm shared by Canadian lawyers for the Convention. The International Chamber of Commerce also predicts that this important Convention will enter into force as early as 1984 and urges its national committees to approach their respective governments for ratification within the shortest possible time.
My very cautious count is that at least eighteen States will ratify or accede to the Convention by 1984. Of course, the recent transmittal of the Convention by the President of the United States to the Senate with a view to receiving its consent to ratification and the subsequent ratification will definitely accelerate the speed of approval by other States.
Since we are justifiably observing an optimistic future track, may I lastly refer to paragraph (1) of article 7 of the Vienna Sales Convention, which reads in part: "In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application... " This provision discourages any resort to domestic legal concepts and tries to free judges, particularly in countries of the common law tradition, from the iron chains of precedents, thus permitting them to examine foreign cases as well in order to attain uniformity in the application of the Convention. However, the objectives of this provision will not be accomplished unless court decisions interpreting the Convention are widely disseminated. Therefore, at its next session, the Commission will consider the means to accomplish this, including possible cooperation with UNIDROIT in this regard.
Distinguished participants, UNCITRAL will continue to [page 4-12] implement its mandate to harmonize and unify the law and the practices of international trade activities of other international organizations concerned to avoid duplication of work and to promote efficiency as the core legal body in the field of international trade law. I once again express gratitude and respect to this timely gathering of distinguished scholars and lawyers to consider the Vienna Sales Convention, an important test case for the success of the international attempt for the unification of the law of international trade. I thank you. [page 4-13]