Essay: Evolution and history of CISG

A seemingly inconsequential agreement can become a major headache if another party’s terms and condition trump yours, and if your company does business in or with other states or countries, there are number of states, and international conventions that comes into play . The CISG came into being to allow a uniform and encompassing legal regime for International Contract sales. The aim with a uniform convention is to provide and promote the development of international trade and contribute to the removal of legal barriers . Goods comprises a broad range of products including grains, wheat, oil cotton chemicals etc. commodities are characterized as being sustainable goods that are produced in bulk quantities. In international sales, interaction between parties prior to a sale will vary depending on the type of goods being sold, the parties involved and the requirements of quality, description and quantity entailed in the market. For instance, an international contract for the sale of oil which happens to be in quantity and measured in barrels involves more of legal rudiments and understanding simply because most oil producing nations bank on it for survival. The contract of sale is the backbone of international trade in all countries, irrespective of their legal traditional or level of economic development. The CISG is therefore considered one of the core international trade law conventions whose universal adoption is desirable.
The most recent segment of the legislative history of the CISG is reported in the United Nations Conference on Contracts for the International Sale of Goods, held in Vienna, 10th march to 11th April 1980, official records, UN document no. a/ Conf. 97/19 CE. 81. IV.3, the current uniform rules are rooted in two earlier conventions sponsored by the International institute for the unification of private Law (UNDROIT). These conventions, one dealing with formation of contracts for International Sale (ULF), the other with Obligations for parties to such contracts (ULIS)- were developed over the course of three decades by leading Commercial Law experts of Western Europe and were finalized is 1964 by a diplomatic conference at the Hague. The 1964 Hague Convention centered into force among nine states but in spite of their fundamental importance, failed to receive substantial acceptance outside western Europe
The CISG thus resulted from a work instituted in 1968 by the United Nations Commission on International Law (UNCITRAL). Ten years of work in UNCITRAL produced the 1978 UNCITRAL Draft Convention. This draft was laid before the 1980 Conference with a commentary on it by the UNCITRAL Secretariat. The 1980 Vienna Conference, after weeks of intensive work, unanimously approved the current uniform rules .
According to Hannold, the convention for the International Sale of Goods can be described to have made in three stages which are
i. The UNCITRAL working group between the years (1970-1977). The group produced draft Conventions. The first draft of the group was referred to as ‘sales” while the second draft was referred to as ” formation”
ii. The third stage was the 1980 Vienna Diplomatic Conference. After the commission gave the draft convention a unanimous approval, the draft was recommended to the UN General Assembly to review the draft and finalize a convention . Sixty two nations participated in the Vienna conference which took place at the Neue Hofburg. The conference’s deliberations were for the most part free from political influence, the main concern behind deliberations and amendments were always to achieve overall best objective and not to force the domestic law or position of another country
” Bearing in mind the broad objectives in the resolution adopted by the sixth special of the general assembly of the United Nations on the establishment of a new international Economic Order, considering that the development of international trade on the basis of equality and mutual benefit is an important element in promoting friendly relations among states.
Being of the opinion that the adoption of uniform rules which govern contracts for the international sale of good and take into account the different social economic and legal systems would contribute the removal of legal barriers in international trade and promote the development of international trade
The preamble of the CISG is easily understandable and points straight to the overall objectives of the CISG it is a horkman like attempt to devise legal rules and practical procedures for international sale transactions “through language free of legal shorthand, free of complicated legal theory or jargons and easy for business men to understand”
1.2: RATIFICATION OVERVIEW OF CISG
It is important to state that as at the 26th of September 2014, UNCITRAL reports that Eighty three (83) states have adopted the CISG. Albania, Argentina, Australia, Bahrain, Belarus, Belgium, Benin , Bosnia- Herzegovina, Brazil, Bulgaria, Burundi, Canada, Chile, China, Colombia, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Dominican Republic, Ecuador, Egypt, El-savador, Estonia, Finland, France, Gabon, Georgia, Germany, Greece, Guinea, Guyana, Honduras, Hungary, Iceland, Iraq, Israel, Italy, Japan, South Korea, Kyrgystan, Latvia, Lebanon, Lesotho, Liberia, Lithuania, Luxemburg, Macedonia, Madagascar, Mauritania, Mexico, Moldova, Mongolia, Montenegro, Netherlands, new Zealand, Norway, Paraguay, Peru, Poland, Republic of Congo, Romania, Russian federation, Saint Vincent & Grenadines, fan Marino, Serbia, Singapore, Slovakia, Slovenia, Spain, Sweden, Switzerland, Syria, Turkey, Uganda, Ukraine, United States, Uruguay, Uzbekistan, Zambia
It is noticed that the United Kingdom has not ratified the CISG perhaps because of its long standing pride and believe in the common law or in its treasured believe and feeling of the superiority of English law to anything else that could even challenge it. United Kingdom has failed to ratify the CISG despite the fact that major economic players like United States and most European states are parties to it, although it has been said that does not mean that there have been no ruling on the CISG by English Courts or arbitral tribunals – particularly the latter unlike the in the United States international sales law proceedings, citations to ruling on the CISG by English jurists are not yet found “.
Certain countries have adopted the CISG subject to authorized declarations. There are also instances of states accompanying their acceptances with interpretative comments which are not authorized by the CISG
Nigeria and other countries of Africa (with the exception of 10 countries) have failed to ratify the CISG and in fact, the status of uniform international trade law in Africa in general is not satisfactory. In fact, the rate of adoption of the most fundamental texts on uniform international trade in Africa is very reticent Castellani suggests this is because of political instability, legislative priorities being set in other fields and a failure of political and economic integration this impaired the openness and warmth reception of a uniform commercial law. Moreover, Africa’s major trading and partners focused on legal reforms in the field of good governance and human rights, ignoring the trade sector and even the little cognizance given to the trade sector was badly melted with corruption and lack of adequate and requisite understanding. Most multi- national Oil Companies negotiated long term licensees which placed a country like Nigeria on a big losing side despite the fact that the country owns the oil being explorated. The CISG despite the fact that African countries are always on the losing side of negotiations has only been ratified by just ten (10) African states excluding Nigeria.
The CISG has not been ratified in more than 130 countries of the world . Different countries with different reasons for non ratification. Some countries seem to favour regional approach them the convention’s global approach . In Africa for instance, there is preference for regional unification in the area of sales law. This is enunciated in the Organization Pour l’harmonization en Afrique du Droit des Affaires (OHADA) Uniform Act relating to General commercial law, out of Sixteen countries that are parties to OHADA, only three are signatories to the CISG . The OHADA’s attempt at unification is commendable but it has uphill challenges making it unsuitable especially for a country like Nigeria. It is suggested that unification of trade law at a global level is to be preferred. This is to ensure the elimination of obstacles arising from differences in the world’s legal system. For instance, many OHADA member states have strong commercial relations with Ghana and Nigeria, two common law countries that have no business with OHADA. The ratification of the CISG which is a global trade law text would ensure trade and economic exchange is carried out effectively amongst these state
Uche Anyamele’s thesis on the United Nations Convention on Contracts for the International Sale of Goods’ a proposal for Nigeria, submitted to the University of Durham, references made to countries that have failed to ratify and for reasons are of important reference at this point. In the former Soviet Regions, countries such as Azerbaijan and Kazakhstan have not acceded to the CISG, others such as Georgia, Kyrgyzstan and Uzbekistan have. It has been said that it is not a result of systematic or ideological resistance but just sheer neglect. This is evident in steps taken by some of these countries towards membership. In Azerbaijan, the convention is still with the ministry of Economic Development. In Kazakhstan, the Ministry of Industry and Trade and the Ministry of Justice are presently working on the matter and have approved it as representations of the governments it can thus be said that the accession to the CISG will provides stability where the legislative frame for doing business is still quite volatile and subject to frequent and sometimes erratic changes.
Despite the fact that the United Kingdom played an active role in the drafting of the CISG, the country has not ratified it, although steps have been taken the couple of times yet, till date, accession has not been made. Ratification has not been seen as a legislative priority. Some concerns also raised include; the preference for English law over the CISG with respect to commodity sales, the vagueness of the provisions of the CISG, the danger that London will lose its edge in international arbitration and litigation, the fear that implementation would involve a greater number of disputes and the fear that many commercial traders would simply opt out of the application of the convention, thus negating the effect of the CISG these fears are unfounded because the convention not only aims to preserve contracts in the face of breach but fills in the gap to facilitate commerce. Instead of London losing its edge in arbitration, ratification will positively impact the number of parties who want to have their dispute there at the expense of litigating in unfamiliar territory will also be avoided. Additionally, there are similarities between the CISG and Statute of General Application (SOGA) . It is suggested that the UK ratify the convention because most states belonging to the European union as well as leading world traders have ratified it. It is inevitable that the English courts will apply the convention even without ratification because most parties in commercial transactions opt for the CISG as the applicable law. By the UK’s ratification, the convention stands to benefit from the expertise of English lawyers and commercial courts, this promoting certainty and consistency in interpretation. This would enhance globalization and consequently improve international trade law.
For some countries, the arguments against ratification have not been clearly made out. For instance, the Brazilian Ministry of Foreign Affairs has stated that there are no substantial reasons to justify Brazil’s non adhesion to the CISG . Scholars suggest reason for south-Africa’s reluctance are the immutability of the convention and the adaptation of south Africa to the reigning customs of International trade that have already taken place. However, the case for ratification supersedes the case. For Venezuela domestic law it is obvious that with time countries will get around to ratify the CISG with parties insistence on implementation and usage of the CISG.
The Arab world ahs not been left out in the ratification of the CISG Syria ratified on the 1st of January 1988, Iraq on the 1st of April 1999 Mauritania on the 1st of September 2000 and Lebanon on the 1st of December 2009. normally, courts usually apply the conflict of law rules in setting international commercial contracts so as to determine the applicable law. In disputes arising from agreements contracts for the international sale of goods, however, the court not only in the contracting state, but also in non contracting state . Anywhere that the CISG is applicable, it supersedes any other applicable natural law it is important at this juncture to street the autonomous application of the CISG is postulated by Article 1 (1)(a) of the CISG which enunciates the international nature the sale of goods must carry which means the places of business of the contracting parties must be located in different states and the states must be contracting.
The focus country of this theses is Iraq at it is important to state that Iraq is in a serious economic, infrastructural and legal negative dulf and movement .on the 22nd of May 2003, the UN security council effectively lifted all non military sanctions against Iraq. Foreign companies are likely to play a significant role in the reconstruction of the Iraq infrastructure destroyed by the trade embargo and the war, in essence, foreign countries and parties are to enter into various international agreement and sales to revive the infrastructural decay and decadence prevalent as a result of the war. The war stalled the oil market in Iraq. According to wikipedia. Iraq was the largest oil producer in 2009 and has the World’s fifth largest proven petroleum reserves after Venezuela, Saudi- Arabia, Canada and Iran. Just a fraction of Iraq’s known fields are in development. Iraq’s energy sector is heavily based upon oil with approximately of percent of its energy needs met with petroleum. Also, about two third of the country’s GDP was made up of oil in 2009. It is expedient to stress that Iraq’s oil sector suffered massively as a result of international sanctions and wars and presently, the country is in dire need of infrastructural development in its oil and gas sector, there is urgent cry for investment and modernization. Different multinational institutions and companies are to partake in the infrastructural development that is to happen to the Iraq’s oil and gas field which according to reports is to cost. Over a hundred billion dollar it is important to state that, international disputes involving Iraq war, Hilastrus Miel S.L. (” Hilaturas”), a Spanish company, agreed to sell yarn to the Republic of Iraq (“Iraq”) under the U.N. oil for food program (OFFP). The OFFP provided letters of credit to the beneficiaries (sellers), but required independent inspection of goods when received on the ground in Iraq. So when the war broke out, the approved United Nations Independent Inspectors left the country and as such, inspection on the Hilaturas yarn couldn’t take place. Shortly thereafter, the government of Iraq ceased to function, later, letter of credit for the Hilaturas yarn expired. Hilaturas at a big loss and sued for damages. The Southern district of New York ( Sweet, J.) decided the case, Hilaturas having brought suit under the Foreign Sovereign Immunities Act. The court thereby granted Iraq’s Nation for summary judgment. Applying Article 9 of the CISG, it was concluded that since inspection was required and necessary, subsequent withdrawal of the inspectors cannot allow for performance, which means that payment for the yarn under the letter of credit could only be made after presentation of the required documents, including the inspector’s report garned from the inspection . What is evident at this point is the obvious fact that the CISG is effective and on a working footing in Iraq before the War. Therefore, if the contracting parties decides on being bound by the Iraq law or the law of another CISG member state, Article 1 (1) of the CISG stipulates that the provisions of this convention are to be applied as a part of national law, except where the parties so expressly expunge application of the CISG. Dispute mechanism system stated in specific contracts also decides.
If the CISG to be applied. If it is stated in an agreement that disputes arising are to be settled by the International Arbitral Tribunal which is very familiar with the CISG, a resolution based on the CISG may be move efficient then a decision pursuant to the provision of a legal system in which not all arbitrators feel at home . If however, a foreign party accepts a dispute to be resolved by an Iraq state court, it boils down to the question of if the state court understands or is experienced in the application and interpretation of the CISG, this applies, in particular that in present day Iraq, as a result of sanctions, International legal relations too have largely come to a standstill.