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Article Excerpt
Australian lawyers and courts have tried long and hard to ignore the CISG. However, this article argues that widespread exclusion of the CISG and its misapplication in Australian courts has had serious consequences." clients have been disadvantaged, professional obligations have been heavily glossed over, the administration of justice has been compromised, and client costs and judicial resources wasted. This article points out that CISG cases are disseminated and analysed throughout the world, and Australian misapplication of the CISG has not gone unnoticed. This reflects upon the reputation of the Australian legal profession, Australian courts, and Australia's viability as a location for international dispute resolution. It is argued that, while other jurisdictions are improving their track records, Australia still lags behind. This article explains why Australian lawyers should not routinely exclude the CISG. It outlines its advantages and provisions. The article provides arguments that barristers could run in future, references numerous freely available resources, and gives courts and lawyers guidance on the CISG's unique interpretive methodology and its effect in displacing local laws, both key elements in its proper application. It is argued that if Australian lawyers and courts do not rise to the challenge, Australia will be left behind as an outpost of CISG ignorance.
CONTENTS I Introduction II When Does the CISG Apply? III Aim of the CISG and Why Australian Lawyers Should Understand It A Aim of the CISG and Its Impact in Our Region B Reasons Why Australian Lawyers Need to Better Understand the CISG. 1 Competitiveness of Australian Lawyers 2 Systemic and Strategic Advantages of the CISG for Clients 3 Substantive Advantages and Disadvantages of the CISG for Clients IV The Culture of Opting Out and Why Opt Outs Should Never Be Automatic V Requirements for Proper Application of the CISG VI The Australian Track Record VII Turning the Comer: An Example of World's Best Practice VIII Conclusion: The Way Ahead--More Continental Drift or Return to the Community of CISG Jurisprudence?
I INTRODUCTION
The Vienna Convention on Contracts for the International Sale of Goods (1) ('CISG') is still in the Australian legal outback. To their clients' detriment, Australian lawyers have paid it inadequate attention. (2) While certainly not yet alone, Australia risks becoming increasingly isolated in this stance. Some jurisdictions with similarly poor track records have shown they are now starting to come to grips with the CISG's unique nature as autonomous uniform law. Despite continued misapplications, they have at least begun to turn the corner. Unfortunately, this has not yet happened in Australia.
But how far behind is Australia, and why should practitioners and courts care? This article attempts to answer those questions by looking at the culture of automatically opting out of the CISG and by reviewing Australian court decisions. It argues that there is an ongoing failure to consider these advantages in choice of law advice, an absence of effective utilisation of the CISG in argument and a misapplication of the CISG by the Australian judiciary. This article suggests that not only are these trends detrimental to the best interests of clients and the proper administration of justice, but that taken together they could conceivably harm the competitiveness of the Australian legal profession, especially given the CISG's growing importance in the Asia-Pacific region.
If Australia is not to be left behind as one of the last outposts of misunderstanding of the CISG, much less aspire to become a hub of regional dispute resolution, then our track record needs improvement in the eyes of the international legal community. This article aims to assist in that process as something of a roadmap: to identify resources on the CISG; to explain its advantages, features, proper application and effect in displacing domestic law; and to point out arguments available under the CISG. An Italian CISG case is then used to illustrate the manner in which Australian courts can in future approach the CISG as a truly international uniform law, and thus signal our jurisdiction's capacity to appropriately deal with international commercial matters. After all, legal insularity is no longer an option we can afford.
II WHEN DOES THE CISG APPLY?
Australia acceded to the CISG on 17 March 1988. (3) The CISG was legislatively implemented across Australia effective 1 April 1989. (4) In Australia, the CISG automatically applies whenever the CISG's own internal rules of application are satisfied and a contract falls within its sphere of application. (5) This is confined to contracts predominantly involving goods, (6) and it does not of its own accord apply to contracts (inter alia) for electricity, goods bought for household use, or contracts that result from auctions. (7)
The internal rules of application greatly simplify the uncertainty of conflict of laws rules that might otherwise apply to resolve the governing law of the contract. Their effect is that the CISG will apply in the following four scenarios:
(a) Direct application by virtue of art l(1)(a)
The CISG applies where parties have their places of business in different member states, described in the CISG as Contracting States. (8) Thus it will govern contracts of sale between parties from the United States and Australia, if this fact is apparent before conclusion of the contract. (9)
(b) Indirect application through art l(1)(b)
The CISG might also apply if the forum's conflict of laws rules result in application of the law of a Contracting State. (10) Thus if the forum's conflict of laws rules result in Australian law as the proper law of an international sales contract, the CISG will apply as part of Australian law. (11) By art 95, a Contracting State can declare it is not bound by this second, indirect means of application. Thus, it is less than certain whether the CISG would govern a contract between US and United Kingdom traders, even if the forum finds US law applicable, since the US is one of the few to have declared such a reservation. (12) The UK was not a Contracting State at the time of writing. (13)
(c) By agreement between the Parties
Party autonomy is widely accepted in conflict rules, (14) and therefore an agreed choice of the law of a Contracting State will normally result in the CISG's application as part of that Contracting State's law through art l(1)(b). (15) By contrast, the CISG can apply where neither party is from a Contracting State, but parties have specifically agreed to apply the CISG (as opposed to an agreed choice of the law of a Contracting State). Specific CISG opt-ins are subject to mandatory domestic laws, as they effectively
achieve application by the CISG's incorporation into contractual terms. (16) This method of application can prove problematic in some jurisdictions. (17)
(d) Appropriate law determined by Arbitral Tribunal Absent a choice of law clause, even if the CISG would not automatically apply due to arts l(1)(a) or (b), arbitral procedural rules may allow a tribunal to deem that the CISG applies as the appropriate law, or as evidence of international usages. (18)
Thus the CISG can become governing law of the contract either by default or by agreement. Parties can opt out of its application through a suitable choice of law, as the CISG allows parties to derogate from its provisions in whole or in part. (19) This also gives parties the flexibility to mould the CISG to their own requirements.
III AIM OF THE CISG AND WHY AUSTRALIAN LAWYERS SHOULD UNDERSTAND IT
A Aim of the CISG and Its Impact in Our Region
The aim of the CISG is to provide a neutral, uniform, harmonised sales law around the world to reduce the uncertainty and costs of transacting across multiple jurisdictions. (20) It has been ratified by some 74 nations, including South Korea in 2005, and Japan in 2008. (21) Another of Australia's most important trading partners, China, has not only acceded to the CISG, (22) but has become the country from which CISG cases are emerging more quickly than any other in the world. The accession of South Korea and Japan has sparked renewed interest towards the CISG in a number of Association of Southeast Asian Nations countries, such as the Philippines, Thailand and Vietnam. Further, following academic proposals, there are also growing demands to adopt the CISG as the regional law of sales. This would unify sales law at both the global and at the regional level. (23) Thus, the CISG is significant law for international sales globally, and has become increasingly important for the Asia-Pacific region in particular.
B Reasons Why Australian Lawyers Need to Better Understand the CISG
Why should Australian lawyers care about the CISG? Australian lawyers certainly appreciate the importance of standardisation of trade and investment laws, (24) but have simply not translated this into a good working knowledge of harmonised sales law in practice. The escalating significance of the CISG in our region underlines the importance of a better understanding of the CISG amongst Australian courts and lawyers in order to:
1 Ensure that the Australian legal profession remains competitive;
2 Provide clients with proper advice and representation;
3 Avoid actions for professional negligence; (25)
4 Aid the proper administration of justice in Australia;
5 Improve the way in which Australia is viewed by the international legal community; and
6 Help Australia actively engage in creation of international CISG jurisprudence. (26)
It is argued that whether the matter is viewed from the individual or broader industry level, there are strong incentives for Australian lawyers to understand the CISG. The growing importance of the CISG in the Asia-Pacific means that increasingly, there will be occasions in which a counterparty to a deal prefers or insists on the CISG as a choice of law. It also means that there will be many more disputes in which the CISG applies by default, or is deemed applicable by an arbitral panel. (27) Whenever these situations arise, Australian lawyers and courts need a good grounding in the CISG. If a basic understanding of its provisions is lacking, the CISG will be incorrectly interpreted and applied. This will have adverse consequences for the quality of advice received by clients, the representation of clients by counsel in dispute resolution, the proper administration of justice in Australian courts, (28) and within the bigger picture, will fray the fabric of the international uniformity of the CISG itself.
Individually, Australian lawyers might care little for this bigger picture of international uniformity. However, unlike cases dealing with local laws, CISG decisions from all countries are collected, disseminated and analysed at the international level. (29) Our less-than-glowing track record in applying the CISG properly is clearly visible to the rest of the world and affects the way in which the Australian profession is viewed internationally. Whether we like it or not, Australians will be parties to contracts to which the CISG applies. Consequently, Australian lawyers and courts will be (and are being) called upon to respectively advise on and apply the CISG with gradually mounting frequency, but are perhaps unaware that the quality of our efforts is being viewed and assessed by lawyers, courts and arbitral panels from around the globe.
Encounters with the CISG as part of dispute settlement are in a sense involuntary. By then, application of the CISG is a fait accompli. However, at the drafting stage, a choice does exist. Should Australian lawyers utilise the CISG at the front end of transactions when they have a choice? The question can be answered on both macro- and micro-levels.
1 Competitiveness of Australian Lawyers
A broader, macro policy perspective is the prospect of developing Australia as a 'regional hub' for international commercial dispute resolution. Support for this initiative was recently indicated by the Federal Attorney-General. (30) While reform of laws governing arbitration are the main focus of attention for such developments, the quality of Australia's lawyers and courts in handling international trade disputes will obviously be an important ingredient for the success of such a policy. The ability to interpret and apply the CISG properly is indicative of the local profession's capabilities. If lawyers elsewhere in the Asia-Pacific deal with the CISG more frequently, we will have comparatively less experience and expertise in this field, and consequently a diminished overall ability to compete in the provision of international dispute resolution services and ancillary legal advice. (31) The impact of international law firms also needs to be considered, since such firms undoubtedly have CISG skill bases upon which to draw. (32) Australians are often involved in CISG disputes in other jurisdictions. (33) Competitive pressures will force Australian-based firms purporting to have international transaction expertise to acquire such skills eventually. In the meantime, the quality of Australian cases does not yet signal that Australian courts or lawyers have such expertise. One international observer has noted that better quality cases have been produced just across the Tasman than in Australia. (34)
By breaking the habit of automatically opting out, (35) and instead choosing the law of a Contracting State without exclusion of the CISG in cases where it is appropriate for the transaction, any Australian lawyer or firm can break the vicious circle of unfamiliarity by inevitably exposing other Australian lawyers to the CISG.
However, Australian lawyers and firms would need to be convinced that there is an advantage in negotiating such a choice of law--that the CISG is appropriate and in their client's best interest in a particular transaction. (36) The advantages of the CISG need to be understood at the micro-level before any macro snowballs can develop. Interestingly, the advantages of the CISG at the individual client level are themselves often systemic and strategic in nature rather than substantive.
2 Systemic and Strategic Advantages of the CISG for Clients
For most lawyers, the question of whether to use the CISG is a much narrower one: is the CISG a suitable choice of law for the transaction in question? The answer will be the same as for any law: sometimes. In many circumstances the CISG can be the best choice, but no law is ideal in every situation. Like any law, it has its shortcomings, some of which are mentioned below. Yet its benefits derive from the determination of its drafters (37) to replace the multitude of anachronistic, idiosyncratic localised sales laws around the world with one, relatively simple, pragmatic set of uniform laws designed specifically for international transactions. This affords the CISG three huge advantages over competing choices of law: uniformity, neutrality and simplicity.
These advantages pay off in various ways. First, they give a client the ability to standardise its preferred position on choice of law. As a neutral choice, the CISG might be more readily agreed upon by counterparties as a 'level playing field'. This reduces negotiation costs and delays. (38) As neither side need familiarise themselves with foreign domestic sales and ancillary laws, conclusion of the contract should in theory be quicker and cheaper. Over time, however, the real benefit is likely to be in reduced compliance costs. While standardisation of a client's suite of contracts can presently occur with other choices of law, in a trading zone that is increasingly pro-CISG, recommending a preference for the CISG whenever appropriate should ramp up the proportion of contracts under a single law for each client, and in turn maximise the benefits of reduced uncertainty in performance obligations and compliance costs. This advantage will be further heightened for multinational clients.
A second pay-off for the client is the reduced risk that the forum seized of a dispute arising from the contract will misapply the law chosen. If a court from country X determines it has jurisdiction and proceeds to apply the law of country Y, will the outcome be as expected by a client choosing law Y? This is of particular concern if X is a nation with a less developed or different legal system. Costs of litigation are amplified by the need for expert witnesses to prove foreign law, not to mention the attendant risk that, even then, it might not be applied correctly by a foreign court. However, if the CISG governs the contract, then the obligation of courts in X, Y and Z is the same: (39) to apply the CISG as uniform international law, having reference to cases decided on the CISG around the world and CISG scholarship. (40) Arbitral tribunals have little difficulty in applying the CISG. (41) It is not proposed that outcomes under the CISG are utopian or perfectly predictable. But more than any alternative choice of law, irrespective of the location or nature of the forum, the CISG stands a much better chance of being uniformly applied. In this sense, the CISG has relatively more stable, predictable outcomes for international sales than any choice of domestic sales law. Moreover, since no choice of forum clause is completely airtight, this is an important consideration. In light of quite different and sometimes unexpected interpretations of choice of forum clauses in some jurisdictions, (42) the CISG at least delivers a greater degree of certainty regarding substantive outcomes, regardless of forum. Additional stability is derived from the fact that the CISG is most likely to apply if the 'battle of the forms' results in neither parties' choice of law prevailing. (43)
A third advantage is the simplicity and accessibility of the CISG. Not only is its text available in six official languages, (44) but it is simple to comprehend and therefore attractive to clients. Materials on the CISG are easily accessible around the world on internet sites dedicated to the dissemination of CISG cases and scholarship. (45) To a great extent, this means lawyers, clients, courts and tribunals around the world are effectively 'working from the same page'. Compare this ease of accessibility to the problems facing anyone wishing to access the intricacies of specific points of any foreign law. Different legal cultures, languages and even writing systems makes proper access to multiple foreign laws impracticable for busy practicing lawyers.
The fourth reason for seriously considering the CISG as a choice of law is that it is designed specifically for international sales. Most domestic sales laws need to be carbon-dated in order to determine their exact age, but many are derived from earlier laws and principles that arose in the wake of the industrial revolution. (46) They were drafted with domestic sales in mind, and therefore incorporate principles unsuited to international trade, with its own special circumstances of distance, delays and interaction between different legal cultures. An American Bar Association address warned that outdated laws 'not based on harmonized or transparent standards ... increase commercial risks and transaction costs and may seriously hamper the activities of commercial entities'. (47) The CISG, by contrast, is a flexible, harmonised uniform international sales law, in many cases better suited to the needs of clients transacting internationally.
The final reason why Australian lawyers should consider the use of the CISG is because it is increasingly viewed by our regional neighbours as a key choice of law, which is neutral and can be expected to be uniformly applied anywhere in the world. (48) Clients that insist on a choice of non-CISG domestic law might increasingly be made to pay a price for the privilege, (49) and need to be aware of this.
The better question seems to be: why would Australian lawyers not seriously consider the CISG as a potentially advantageous choice of law?
3 Substantive Advantages and Disadvantages of the CISG for Clients
Some might reject the CISG on substantive grounds. It is true that, like all international treaties, there were compromises made to ensure its passage, which left certain provisions ambiguous and its scope incomplete. (50) One example is the treatment of interest, whereby the obligation to pay interest on damages is located within art 78, but the rate of interest is not specified. (51) Another example is the issue of set-offs, which is not directly covered by the CISG. (52) A classic ambiguity in the CISG is the notion of 'good faith'. (53) However, there are three important points to be noted about these types of shortcomings.
First, a great deal of supporting material is now available. There are now numerous CISG cases to draw upon, and plentiful scholarship. The bare bones of the CISG are now fleshed out by much in the way of guidance, although naturally there are still some areas of disagreement. Australian lawyers are becoming increasingly comfortable with the notion of good faith, and within the CISG the meaning and practical effect of CISG good faith is debated and explained in numerous cases and articles. (54)
Second, the CISG allows parties to modify most of its rules. (55) Parties concerned about a certain issue can agree on the solution. The CISG also has an internal interpretive method that guides resolution of ambiguities within it. (56) For matters falling outside the CISG, the usual conflict rules determine the law applicable to the issue. (57)
The content of the CISG is no worse--and in fact often very much better -suited to international sales than an outmoded sales law oriented toward domestic trade. (58) Consideration is not required under the CISG. Contrary to domestic law in some jurisdictions, contracts need not be evidenced in writing. The CISG also removes the parol evidence rule. (59) In terms of formation, the CISG is relatively traditional, with slight modifications. (60) It requires a matching of offer and acceptance before a contract exists, yet a non-identical acceptance can result in a contract, provided that any changes are non-material, and no prompt objection to the discrepancies is forthcoming. (61) However, most key terms are classified as material, including dispute resolution clauses. (62) Communication of acceptance is effective once it reaches the offeror, unless practices between the parties, usages or the offer itself indicate otherwise. (63) This differs somewhat from the domestic common law rule, which generally requires communication of acceptance subject to certain exceptions (including the postal rule exception). (64) There appears no substantive cause for concern in the difference of approach.
The CISG contemplates the inherent delays and difficulties in reversing international transactions. (65) To promote transactional efficiency in international trade, the CISG aims to keep transactions on foot, (66) and therefore favours the remedies of price reduction and damages over termination. (67) It contains innovations that assist in this process, such as a right to performance, and an additional right to set extra (reasonable) time periods for performance where performance is late or non-conforming. (68) The CISG also provides an opportunity for the seller to cure its own breach within reason. (69) Damages measured by reference to a substitute transaction and the right to restitution are limited to cases where the contract is avoided. (70) Avoidance or termination is, in turn, only permitted in two serious circumstances: if the breach is fundamental, in the sense that it forseeably and substantially deprives the innocent party of what they were entitled to expect under the contract; or alternatively, in cases of non-delivery, where the breaching party fails to deliver within an additional reasonable time period set by the innocent party, or declares that it will not do so within the additional time. (71) Unless timely delivery is an essential requirement of the contract, breaches might be precluded from characterisation as fundamental if the seller makes a serious offer to cure a defect which will not cause the buyer unreasonable delay or inconvenience. (72) However, by agreement, parties can specify that certain breaches will be fundamental in nature. (73) The right to remedies for non-conformity, and the more drastic right to avoid the contract require the giving of notices and declarations to the breaching party. (74)
In keeping with the CISG's design for international sales, the emphasis is on performance. (75) If goods are merely non-conforming, (76) but not so seriously as to constitute a fundamental breach, then, unless modified by agreement, the CISG will not allow them to be rejected. Instead, given the distances involved in international trade, the CISG sensibly requires delivery of non-conforming goods to be taken and paid for, with any non-conformity leading to either a self-help unilateral price reduction, subsequent claim for damages, or an additional time period to be set for the problem to be rectified. (77) If the contract is avoided, there is an obligation to preserve the goods pending restitution, and to sell them where potential rapid deterioration makes preservation impracticable. (78)
These features will sometimes be advantageous, and on other occasions disadvantageous for particular clients. One might argue that the requirement of notice of non-conformity specifying the nature of the defect within a reasonable time on pain of loss of remedies provides an advantage to the seller, who could escape liability for non-conformities if the transaction happens to be with a buyer who is lax in communication. The seller can also take comfort from the fact that under the CISG, the buyer cannot reject the goods and bring the contract to an end for minor non-conformities. (79) Of course a fundamental breach can trigger the end of the contract, but lesser non-conformities will simply result in a damages claim, price reduction, or a request to rectify the problem. The seller also benefits from a right to cure defects provided this does not cause unreasonable delay or inconvenience. Such a cure naturally does not remove the buyer's ability to seek damages. (80)
However, the buyer enjoys countervailing advantages. If the goods have still not arrived by the delivery date, the buyer can resolve the uncertainty as to when the failure becomes serious enough to warrant avoidance of the contract, by simply setting an additional reasonable time for delivery. (81) If the seller fails to comply, or declares that they will not, the buyer can then confidently declare the contract avoided. (82) The buyer is not left punting on whether time was 'of the essence'. The buyer is also given the advantage of unilateral price reduction for non-conformity. (83) This self-help remedy is available for both mere non-conformity and fundamental breach, although in practical terms, it will be of little comfort if a letter of credit has already been provided. (84)
Overall, the substantive balance achieved is reasonably even, (85) and provisions are geared more closely to the needs of international transactions than domestic laws. Additionally, parties can always modify any of the provisions that do not suit their circumstances by agreement. (86) It clearly offers overriding systemic and strategic advantages for many clients. The question therefore remains, why do Australian lawyers currently appear to routinely advise to opt out, when in many cases this could be contrary to their clients' interests?
IV THE CULTURE OF OPTING OUT AND WHY OPT OUTS SHOULD NEVER BE AUTOMATIC
To date, only 12 Australian cases mention the CISG. (87) The CISG was applicable law in only eight of those cases. (88) Although other reasons have been suggested, (89) the lack of CISG cases in Australia almost certainly reflects the prevalent practice in Australia of avoiding the CISG at the drafting stage by opting out within choice of law clauses, as indicated by anecdotal evidence. (90)
Australian lawyers are not alone. Similar opt out cultures exist elsewhere. Although empirical evidence varies, there is sufficient evidence (91) to support a conclusion that opting out is prevalent in the US, probably less common but still frequent in Germanic nations, and less common again in China. In the US, one study reported that 71 per cent of lawyers generally opt out, although a more recent study put this at 55 per cent of US lawyers. (92) A large study showed that opt outs were 'normal' practice for 55 per cent of Austrian, 41 per cent of Swiss, and 42 per cent of German lawyers. (93) In China, the rate of lawyers preferring to opt out could be 37 per cent or lower, although this evidence is from a small sample size. (94) So from the front end of the legal process, it seems there is a range of frequencies of opt outs. Judging by the largest samples, the US is probably at the higher and China at the lower ends of the scale, with Germanic nations somewhere in the middle. While, of course, other explanations are also plausible, it is possible to argue that comparisons of US studies demonstrate a reduction in opt outs over time, consistent with one anecdotal account of front-end trends in the US. (95) There have been other recent reports of some movement away from opting out in other nations where opt outs are prevalent. (96)
At the other end of the legal process, Chinese arbitral tribunals and courts are working under a burgeoning CISG case load. Many Chinese cases have emerged in the last few years, and an enormous 342 have been translated into English. (97) By contrast, the number of cases in the (highly litigious) US is small, with only 93 cases. (98) Yang observes that there are almost as many CISG cases involving US parties in China as there are in the US. (99) Likewise, at least 21 Chinese CISG cases involve Australian parties--almost double the number of Australian CISG cases! (100) The story in Germany is quite different, with German CISG cases being quite numerous, at around 444. (101) Austria has produced 77 cases, and there are 35 Swiss cases. Of course, case numbers vary due to the costs and speed of litigation, dispute resolution culture, recoverabilty of litigation costs and level of economic activity. (102) Further, not all cases in these jurisdictions are reported internationally. (103)
What is irrefutable is that, all other things being equal, more frequent opt outs necessarily reduce the pool of potential CISG cases and contribute to unfamiliarity in the jurisdiction concerned through lack of exposure to CISG dispute work. This unfamiliarity then seems to often feed back into choice of law options, resulting in a vicious cycle. (104)
Unfamiliarity is indeed often nominated as a reason for opt outs in surveys. (105) Conversely, in China, where instances of opt outs appear lower, unfamiliarity is less important in opt out decisions. (106) In 2004, unfamiliarity was found to be a significant reason for opt outs in the US, Switzerland and Germany. (107) Arguably, levels of unfamiliarity with the CISG significantly influence opt out levels. (108) Baseline levels of unfamiliarity are much higher in the US than they are in Germany, Switzerland or Austria. (109) It is probable that this also holds true for Australia, (110) where lack of coverage in compulsory law school courses is compounded by a paucity of cases (111) and a split of work between litigation and front-end (drafting) divisions within law firms, which ensures that most Australian lawyers have never once dealt with the CISG, unlike, by way of contrast, the vast majority of Germanic and Chinese lawyers. (112) This makes two things likely: that unfamiliarity with the CISG explains much of the opt out culture in Australia; and that opt out rates in Australia are probably equal to, or higher than, in the US, a conclusion which accords with anecdotal evidence of Australian practice. (113)
Are there any other reasons beside unfamiliarity for 'automatically' opting out of the CISG? As mentioned above, like every law, the CISG has certain substantive shortcomings. (114) At this stage, its substantive content probably plays a much less predominant role in determining opt out levels than does unfamiliarity. As discussed above, substantively the CISG presents a reasonably balanced law specifically designed for international transactions, combined with inherent flexibility to tailor the law to the parties' needs. Further, in practice there are both systemic and strategic practical advantages that flow from the CISG. It follows that for many but not all clients, the CISG will be the best choice. However, this can only be appreciated when the issues are understood and considered. A knee-jerk reaction based on unfamiliarity cannot ensure the best interests of the client are met.
Arguably, practitioners that 'automatically' opt out of the CISG are vulnerable to claims of professional negligence. Since the CISG is part of Australian law, ethical and competent Australian lawyers advising clients dealing in international trade should be familiar with it before they advise clients to opt in or out. (115) Advice should be based on a professional assessment of advantages and disadvantages of the CISG compared with alternative choices of law, not blind unfamiliarity. Like any other area, if the practitioner is unfamiliar with the CISG, expert help should be obtained or the client referred. Better still, lawyers should familiarise themselves with the CISG, which is, after all, Australian law. Although this involves an initial investment of time and effort, development of CISG expertise naturally gives the firm involved competitive advantages and ensures advice is based on a professional analysis case by case, (116) rather than a knee-jerk. It seems that this process of seriously considering not opting out, and investing in 'start up' costs to become familiar with the CISG has begun in the US, where market forces have forced lawyers to gain expertise in this area. (117) Those Australian firms that take this route earlier rather than waiting until they are compelled to do so could enjoy a head start over other local firms. (118)
While lawyers and law firms themselves must take responsibility for the quality of their professional advice, Australian lawyers and firms can also push for courses and seminars. The CISG needs to rate more than a mention in foundational law school courses, and should be specifically offered for Continuing Legal Education purposes. (119)
Likewise, Australian CISG cases reveal the current state of unfamiliarity of Australian lawyers through a dearth of argument on the CISG, even when both sides concede that the CISG governs the contract. Of course, there might be strategic reasons for this, but it is also possible that the omission is due to a reluctance to deal with the unfamiliar, including a disinclination to invest the time and effort to acquire enough knowledge of the CISG to argue its provisions, or to even determine whether there is any advantage in doing so. (120) It is hard to imagine this deplorable state of affairs being tolerated in relation to any other area of Australian law. Whatever the reason and consequences (or lack thereof) for the individuals involved, (121) the overall picture is that failure to engage with the CISG is prevalent in Australian litigation, and argument is predominantly modelled on the law that counsel would prefer to apply, rather than the applicable law. (122) A 'misuse of judicial resources' and decline in administration of justice has arisen (123) as increasingly, counsel's approach has diverted the judiciary from the task of proper application of the CISG in Australia. (124)
V REQUIREMENTS FOR PROPER APPLICATION OF THE CISG
Where the CISG is the governing law of the contract, it must be applied internationally and autonomously, in order to preserve its uniformity on a global scale. This requirement is imposed on courts by art 7(1) which demands that '[i]n the interpretation of [the CISG], regard is to be had to [its] international character and to the need to promote uniformity in its application'. (125) In essence, the CISG must be interpreted autonomously; that is, free from domestic preconceptions and in accordance with its own terms. Further, it must be applied with an internationalist perspective, that is, with reference to CISG sources from around the world. Therefore, for issues falling within the scope of the CISG, courts or tribunals should:
* avoid domestic legal terminology and concepts; (126)
* refrain from reference to non-CISG cases;
* avoid reference to inapplicable non-CISG provisions; (127)
* make reference to CISG cases from its own and other jurisdictions as persuasive authority; (128)
* refer to CISG Advisory Council Opinions, (129) CISG scholarship, and CISG legislative history; (130)
* abandon domestic interpretive techniques, and instead utilise the CISG's own interpretive method and contractual construction rules; (131) and
* apply the CISG as exclusive law, pre-emptive of overlapping domestic law, subject to art 7(2).
Failure to do this is known as viewing the CISG through 'domestic lenses' or the 'homeward trend,' (132) and amounts to improper application of the CISG. It raises a point of appeal, jeopardises the uniformity of the CISG worldwide, and undermines its aims of removing barriers to trade. It could also amount to a breach of treaty obligations undertaken by the Contracting State, (133) and certainly provides grounds for appeal. (134)
It is important to note that CISG cases (often fully translated), CISG scholarship and CISG Advisory Council Opinions are freely and readily available via the internet, (135) which makes the Australian trend even more puzzling.
VI THE AUSTRALIAN TRACK RECORD
Although Swiss, Austrian and US lawyers share the Australian predilection for opt outs in drafting, the policy of ignoring the CISG is not always carried through to litigation. Germanic courts and tribunals have long shown awareness of the CISG. By contrast, US courts have looked at the CISG through 'domestic lenses'. (136) One court even stated that US Uniform Commercial Code ('UCC') case law could be used to interpret the CISG where the language of the CISG 'tracked' that of the UCC, an error still echoed today. (137) Despite the continued predominance of poor decisions, US courts have shown recurrent signs they are beginning to come to terms with the CISG's proper application as an autonomous and uniform law, either in relation to specific issues (138) or interpretative method. (139) The previously unremarkable track record of Italian courts (140) has now been graced by an 'enlightened minority' of cases that are excellent examples of multi-jurisdictional case citation. (141) On the other hand, there is little to celebrate in Australia.
Australian courts made a promising start, especially in Roder Zelt (142) and Perry (143) (discussed below), but things took a turn for the worse, as courts across Australia perpetuated the unfortunate tendency to cite non-applicable domestic legislation, case law or concepts in cases where the CISG was the governing law, often due to the reluctance of counsel to engage with the CISG. (144) Thus, the opt out culture has flowed through to litigation in Australia. After a hopeful beginning, we have for too long resorted to the blinkered notion that 'ignorance is bliss'.
(a) Renard Constructions (ME) Pty Ltd v Minister for Public Works (145)
The first mention of the CISG came in a widely discussed decision in the New South Wales Court of Appeal. The case came before the Court on appeal from an arbitral award on a question of law, in a dispute that centred on a 'show cause' notice and subsequent termination of the contract.
Priestley J concluded that 'reasonableness in performance' was implied in the contract concerned. (146) His Honour then likened this to notions of good faith in Europe and the US, and noted that, although such a concept was not yet fully accepted in Australia 'the time may be fast approaching'. (147) In the 16 years since those words, Australia has indeed moved down the path of an implied duty of good faith in performance, and although the issue has not yet been settled in the High Court, (148) the Australian position now seems closer to the US view than that in the UK, at least for commercial contracts. (149)
However, at the time, this was still groundbreaking territory for Australia. Therefore Priestley JA makes extensive use of scholarship, cases and statutes from a number of jurisdictions, the UNCITRAL Model Law on Arbitration, (150) and various provisions such as s 51A of the Trade Practices Act 1974 (Cth), (151) and art 7(1) of the CISG. (152) Thus the CISG was not directly relevant. (153) Nonetheless, it signalled a promising level of judicial cognisance of the CISG in Australia, and was overwhelmingly and widely hailed as such in international circles. (154)
(b) Roder Zelt- und Hallenkonstruktionen GmbH v Rosedown Park Pty Ltd (155)
By Australian standards, Roder Zelt was a relatively enlightened decision by von Doussa J in the Federal Court. It involved a retention of title clause in a contract for large tent marquees and accessories. The parties were a German seller and Australian buyer, to which an administrator was appointed after delivery. The parties agreed that the CISG was the governing law of the contract. (156) Despite this, '[c]ounsel made only passing reference to the [CISG] at trial', and the pleadings were all couched in 'the language and concepts of the common law, not in those of the [CISG]'. (157)
The Court correctly pointed out that interpretation of the CISG was not a matter for expert evidence, since it was part of domestic law and 'not to be treated as a foreign law which requires proof as a fact'. (158)
As the main issue was property in the goods, von Doussa J rightly referred to art 4(b) which excludes the CISG from concern with regard to 'the effect the contract may have on property in the goods sold'. (159) The parties accepted that the issue was therefore governed by the law applicable upon application of German conflict of law rules, since Germany was identified as the place in which the contract was concluded. Yet, as the analysis of von Doussa J demonstrates, identification of Germany as the place the contract was made was itself only determinable by reference to arts 18 and 24 of the CISG on the effect and timing of acceptance of an offer. (160)
German rules of private international law resulted in the applicability of Australian property law on the question of ownership once the goods were in Australia. But was there an agreed retention of title clause? This question was still a matter for the CISG and von Doussa J made extensive reference to the provision on contractual interpretation in art 8, to art 11 on formalities, arts 15 and 18 on effectiveness of offers and acceptance, and art 29 on modification. (161)
After finding that a retention of title clause formed part of the contract, von Doussa J turned to the fundamental breach and remedy provisions of the CISG. (162) His Honour held fast to CISG terminology and concepts, and found that both the appointment of an administrator to the buyer, and denial of the retention of title clause amounted to fundamental breaches because they 'substantially ... deprive[d] [the seller] of what it was entitled to expect under the contract'. (163) Under the CISG, a buyer's fundamental breach allows an innocent...
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