U.n. Sale of Goods Convention: Finally Coming of Age?

• Publication year: 2003
• Pages: 11
• Citation: Vol. 32 No. 2 Pg. 11

32 Colo.Law. 11 Colorado Lawyer 2003.

2003, February, Pg. 11. U.N. Sale of Goods Convention: Finally Coming of Age?

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Vol. 32, No. 2, Pg. 11

The Colorado Lawyer
February 2003
Vol. 32, No. 2 [Page 11]

Articles

U.N. Sale of Goods Convention: Finally Coming of Age?
by Tom McNamara

The United Nations Convention on Contracts for the International Sale of Goods has been ratified in sixty-two nations (including the U.S.) and is the international functional equivalent of Article 2 of the Uniform Commercial Code. This article provides an overview of the Convention contrasts the Convention with domestic sales law, and offers a series of practice pointers

LEGAL DISCLAIMER: This article is designed to provide general information concerning the United Nations Convention on Contracts for the International Sale of Goods. It is provided with the understanding that the author is not giving legal advice. This article should not be used as a substitute for professional legal advice in specific situations. If legal advice is required, a legal professional should be engaged to render such advice. Although this article is designed to provide accurate information as of December 2002, the rules and laws described herein may change. Attorneys dealing with specific legal problems should conduct independent legal research

Tom McNamara is a partner with Davis Graham & Stubbs LLP - (303) 892-9400 - and current president of the Colorado Bar Association International Law Section. His practice focuses on international litigation and dispute resolution.

Fifteen years ago, the United Nations Convention on Contracts for the International Sale of Goods ("CISG" or "Convention")1 "entered into force" (became effective) between the United States and ten other nations. The CISG, a multilateral treaty that governs the rights and obligations of parties to international sales contracts, is the international functional equivalent of Article 2 of the Uniform Commercial Code ("UCC").2 The Convention was designed to foster foreign trade by making it easier and more economical to buy and sell raw materials, commodities, and manufactured goods through a unified legal approach.

At its inception, diplomats, scholars, and even some practitioners hailed the Convention as a monumental achievement and notable example of international legal cooperation. The original expectation was that the CISG would achieve rapid acceptance and essentially supplant domestic sales laws that were not specifically tailored to international transactions.3

The actual experience during the CISG's first decade was quite different as the optimism and promise of the early years eroded. By and large, most American lawyers were completely oblivious to the Convention's very existence. Traders continued to use pre-printed forms with typical domestic American choice-of-law provisions. Those attorneys who actually knew about the CISG almost uniformly tried to avoid it by "opting-out." The Convention "suffer[ed] from neglect, as well as ignorance and even fear."4 More charitably, the CISG's adolescent years were characterized, at least in the United States, by only small, incremental steps toward grudging acceptance.

However, at the fifteen-year mark, the Convention is finally starting to come of age. Growing from an original group of eleven countries in 1988, the Convention is now the law in more than sixty-two nations. CISG-signatory countries account for a staggering two-thirds of all goods moving in international trade5 and encompass a majority of the world's population. In just the last two years, U.S. courts have issued as many published opinions concerning the CISG as in the previous thirteen years combined. The trend is worldwide. During the same two-year
period, the United Nations' database of Convention case abstracts doubled.6 Scholarly literature on the CISG is now quite comprehensive. The leading American Internet resource for CISG materials has reported explosive growth in the number of Internet "hits" - from 100,000 hits per month during early 1999 to 330,000 hits per month by late 2000.7

Now, more than ever, Colorado practitioners should become familiar with the CISG. A better understanding of the Convention is important for both Colorado transactional and litigation professionals. Business lawyers need to be aware of the CISG and its nuances to properly counsel the increasing number of Colorado clients engaged in international commerce. Litigators should be aware that transnational commercial disputes may be governed by an entirely unfamiliar legal regime, which may affect the substantive outcome. Further, at least rudimentary knowledge is necessary, if for no other reason than to satisfy professional responsibility and to avoid the Convention "traps for the unwary."8

The balance of this article briefly: (1) describes the history and development of the CISG; (2) identifies the principal signatory nations; (3) provides an overview of the Convention; (4) presents a substantive comparison of certain important differences between the CISG and the Colorado UCC; (5) explains the application of a companion treaty governing the limitations period for international sales of goods; and (6) offers some practical pointers and resources for CISG issues. The article's purpose is not to provide comprehensive information on all aspects of the CISG, but rather to highlight (at least superficially) the emerging importance of the Convention in keeping with the theme, "Learn the CISG, Whether You Like It or Not."9

HISTORY AND DEVELOPMENT OF THE CISG

The CISG is an extraordinary example of international legal cooperation that represents the culmination of more than fifty years of work to construct a codified lex mercatoria for transnational sales. The Convention's origins may be traced to the late 1920s when scholars, lawyers, and traders (primarily from western Europe) began to explore the possibility of creating a uniform law to govern international trade.10 Draft uniform sales laws were presented and debated from 1926 through 1939 under the auspices of the Hague Conference on Private International Law ("Hague Conference") and the International Institute for the Unification of Private Law ("UNIDROIT"). Interrupted at various intervals by world events (including World War II), these efforts continued in the 1950s and 1960s.

The Hague Conference eventually adopted three conventions governing international sales: Convention on the Law Applicable to International Sales of Goods (June 15, 1955); Convention on the Jurisdiction of the Selected Forum in the Case of International Sales of Goods (April 15, 1958); and Convention on the Law Governing Transfer of Title in International Sales of Goods (April 15, 1958).11 Only one of these treaties (the Convention on the Law Applicable to International Sales of Goods) ever actually entered into force (and then only among one African and eight European nations).

Although the Hague Conference efforts had been partially successful, the resulting treaties were criticized for their primarily Eurocentric approach and failure to address the needs of the United States, the developing countries, and Eastern Europe.12 In 1965, the United Nations General Assembly created the United Nations Commission on International Trade Law ("UNCITRAL") to address important trade law issues on a more global basis. The development of an international sales law was at the forefront. The drafting and negotiation process, for what ultimately became the CISG, was quite inclusive. The United States and more than sixty-one other nations representing quite different legal systems (common law, civil law, and other types of legal systems) participated in the working groups and provided their input. Academics, corporations, traders, diplomats, and lawyers all played a role.

UNCITRAL unanimously approved the draft CISG and referred it to the United Nations General Assembly. The Convention was finalized at a diplomatic conference in Vienna in 1980, where it was again unanimously approved.13 The CISG is officially plurilingual in six languages: Arabic, Chinese, English, French, Russian, and Spanish.

PRINCIPAL SIGNATORY NATIONS

Since its finalization in 1980, the Convention has received ever-widening acceptance in the international community. Nineteen nations, including the United States, originally signed the Convention in 1980 and 1981. The United States ratified the treaty on December 11, 1986. All but two of the original signatory countries subsequently ratified the CISG.14 Pursuant to Article 99(1) of the CISG (which required ratification by at least ten nations prior to its effectiveness), the Convention "entered into force" and became effective on January 1, 1988, among a diverse group of eleven nations on five continents: Argentina, the People's Republic of China, Egypt, France, Hungary, Italy, Lesotho, Syrian Arab Republic, United States, Yugoslavia, and Zambia. As of December 3, 2002, sixty-two countries (including the United States) had signed and ratified the CISG ("Contracting States"). The CISG is in force with respect to most (but not all) of the United States' principal trading partners.

Regionally, the CISG has been universally adopted in North America (the United States, Canada, and Mexico). The Convention regime has achieved acceptance in most of Western and Eastern Europe (including the Russian Federation). The United Kingdom and Ireland are notable European exceptions and have not ratified the CISG. Latin America is split Although Argentina, Chile, Columbia, Ecuador, and Peru have ratified the treaty, Latin America's largest economy, Brazil, has not. In the Middle East, the...