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THE PERSONAL AND TERRITORIAL SCOPE OF THE VIENNA CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (ARTICLE 1)

Christophe Bernasconi '

1. 2. 2.1 2.1.1 2.1.2 2.1.3 2.2 3. 3.1 3.2 3.2.1 3.2.1.1 3.2.1.2 3.2.2 3.2.2.1 3.2.2.2 3.2.2.3 3.2.3 3.3 3.3.1 3.3.2 3.3.2.1 3.3.2.2 3.3.3 3.3.3.1

Introduction: a glance back The international character of the transaction The basic criterion: the parties' places of business A sufficient criterion? What is meant by place of business? Multiple places of business The necessity of awareness The transaction's relation to a contracting state Preliminary remarks The autonomous requirements of the Convention's applicability: Article 1(1 Xa The nature of Article 1 (1 Xa) The pursued goal Article l(lXa) and the Hague PIL Conventions Contracting state The case of the former German Democratic Republic The former USSR The former Yugoslavia Which courts are addressed by Article 1 (1 Xa)? The conflictual method of defining the Convention's scope: Article The scheme of Article l(lXb): an easy example The history of Article l(l)(b) The deliberations of the First Committee A last-minute decision taken at the Plenary Conference: Article 95 The expediency of Article l(lXb) An enlargement of the Convention's scope

1. Dr. iur. ulr. (Fribourg), LLM. (McGill), Secretary at the Permanent Bureau of the Hague Conference on Private International Law. The opinions expressed are personal to the author and are not to be attributed to the Hague Conference on Private International Law or to its Permanent Bureau. Netherlands International Law Review, XLYl: 137-170,1999 1999 T.M.C. Asser Instituut and Contributors

138 3.3.3.2 3.3.3.3 3.3.3.4 3.3.3.5 3.3.4 3.3.4.1 3.3.4.2 3.3.4.3 4.

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Internationally harmonized judgments? The CISG as an unwelcome surprise? The position of the United States The possibility of making a reservation under Article 95: a general critique Article 1(1 Kb) and Article 95: how do the different choices interfere? An analysis of some intricate permutations The judge sitting in a reservation state The judge sitting in a contracting state whose conflicts rules point to the law of a country that has filed a reservation under Article 95 The judge sitting in a non-contracting state Conclusion

1.

INTRODUCTION: A GLANCE BACK

On April 1999, the United Nations Convention on Contracts for the International Sale of Goods (hereinafter: the Vienna Convention, CISG or the Convention)2 celebrated its 19th anniversary. The Convention has been praised throughout the world as a skillful and effective tool for governing international sales transactions. Hence, after more than fifty years of arduous work, the efforts undertaken to unify the law for international sales at a global scale seem, at last, to have reached success. As frequent referrals to former efforts undertaken will be made, it seems appropriate to set forth, at least summarily, the history of the Vienna Convention. The effort to achieve a uniform law on the international sale of goods has spanned nearly 70 years.3 The adoption of the Vienna Convention was the culmination of a long process which began in April 1930. Under the auspices of the League of Nations, the International Institute for the Unification of Private Law (UNI-

2. 'Final Act of the UN Conference on Contracts for the International Sale of Goods', A/CONF.97/18, in 34 Yearbook of the United Nations (1980) Part 3, ch. I., section A. An unofficial version of the text of the Convention is reproduced in 19 /LA/(1980) pp. 668-699. 3. See, e.g., R. Loewe, 'Anwendungsgebiet, Auslegung, Lucken, Handelsbrauche', in The 1980 Vienna Convention on the International Sale of Goods, Lausanne Colloquium of November 19-20, 1984 (Zurich, Schulthess 1985) p. 11 at pp. 12-13; M. Ndulo, 'The Vienna Sales Convention 1980 and the Hague Uniform Laws on International Sale of Goods 1964: A Comparative Analysis', 38 ICLQ (1989) p. 1 at pp. 2 et seq.; K. Sono, 'The Vienna Convention: History and Perspective', in P. Sarcevic and P. Volken, eds., International Sale of Goods, Dubrovnik Lectures (New York, Oceana Publications 1986) pp. 1 et seq.; P. Winship, 'The Scope of the Vienna Convention on International Sales of Contracts', in N. Galston and H. Smit, eds., International Sales: The United Nations Convention on Contracts for the International Sale of Goods (New York, Matthew Bender 1984) p. 1-1 at pp. 1-3 et seq., with further references.

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DROIT) decided to proceed with the preparation of a uniform law in this area.4 The work of UNIDROIT had largely been facilitated by the comprehensive preliminary works of Ernst Rabel, the first to suggest both the desirability and feasibility of a unification of substantive sales law.5 A first draft was completed in 1935 and submitted for comments to the member states of the League of Nations. Based on their comments, a second UNIDROIT draft was presented in 1939 (the Rome draft). However, these initial efforts were interrupted in 1939 due to the outbreak of the Second World War. The efforts were resumed in 1951, when the government of the Netherlands organized a diplomatic conference to consider means by which the UNIDROIT draft could be brought to a successful conclusion. The direct outcome of the reopening of discussion was the 1964 adoption of two Uniform Laws: one on the International Sale of Goods (ULIS), and one on the Formation of Contracts of Sale (ULF).6 These two Conventions, however, entered into force among few states and therefore never have achieved the expected success.7 Essentially, they are considered complex Western European civil laws that do not sufficiently take into consideration common law principles or the interests of developing and socialist countries that had not participated in the 1964 Conference. Furthermore, strong criticism has been directed at the excessive sphere of application of the uniform

4. This decision was certainly affected by the confidence gained following the adoption of the Geneva Conventions of 1930 and 1931 on negotiable instruments, both of which had also been elaborated under the auspices of the League of Nations. 5. Ernst Rabel, then Director of the Kaiser-Wilhelm-Institut fur auslandisches und internationales Privatrecht in Berlin, had submitted a report to UNIDROIT: 'Observations sur futility d'une unification du droit de la vente au point de vue des besoins du commerce international', (1929); reprinted in 22 RabelsZ( 1957) p. 117. These observations were accompanied by a comparative study that Rabel had prepared in collaboration with the members of his institute. This latter study formed the basis of Rebel's classic comparative analysis of the law of sales: Das Recht des Warenkaufes, published in 1936 (Vol. I) and in 1958 (Vol. II) (Berlin, W. de Gruyter). 6. The ULIS and the ULF are reprinted in 3 IIM (1964) p. 855 respectively p. 864. For more details on the history of the 1964 uniform sales law, see P. Winship, 'Private International Law and the U.N. Sales Convention', 21 Cornell IU (1988) p. 487 at pp- 491-500; see also J.O. Honnold, 'The Draft Convention on Contracts for the International Sale of Goods: An Overview', 27 AJIL (1979) p. 223 at p. 224. 7. Only Belgium, the Federal Republic of Germany, Gambia, Italy, Luxembourg, the Netherlands, San Marino, and the United Kingdom have ratified, or acceded to, both the ULIS and the ULF; Israel ratified only the ULIS. The ULIS had some important practical impacts in Germany and Italy in particular (some 180 court decisions of the five original Member States of the EEC have been reported). There is, however, not one single reported case of English or Scottish courts involving the Hague Uniform Laws, see B. Nicholas, 'The Vienna Convention on International Sales Law', 105 LQR (1989) p. 201 at p. 202. Overall, it seems fair to state that the 1964 Conventions did not have the expected impact on the practical conduct of international trade.

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laws.8 As a result, at the end of the 1960s, the newly established United Nations Commission on International Trade Law (UNCITRAL) revisited the issue. Following extensive preliminary works,9 the Commission presented the results of its undertaking at a Diplomatic Conference held at the Neue Hofburg in Vienna from 10 March to 11 April 1980. This Conference was attended by more than 200 delegates from sixty-two nations, representing all sectors of the world community.10 After five weeks of intensive work, the Conference unanimously approved the current uniform rules." The CISG came into force on 1 January 1988 for an initial group of eleven contracting states. Today more than 50 countries, accounting for over two-thirds of all world trade, are party to the Convention.12

8. The uniform laws are intended to be applied by a court of a contracting state to international sales transactions even when the parties involved are from non-contracting states and the transaction had little or no connection either with the forum or another contracting state. Despite the possibility for a state to make one or more reservations (and in particular limit the Convention's application to parties whose places of business are in different contracting states), it soon became apparent that the ULIS and the ULF would not be widely adopted; for more details, see Winship, loc. cit. n. 6, at pp. 491-503, and, idem, op. cit. n. 3, at p. 1-11, ft. 20 and accompanying text. 9. In fact, the UNCITRAL Working Group submitted two draft Conventions. The first was the 1976 Draft Convention on Sales; a second Draft Convention on Formation of the Sales Contract was completed in 1977. Later on, the Commission decided to consolidate these two texts into a single Convention, the 1978 Draft Convention on Contracts for the International Sale of Goods (referred to as the 1978 Draft). For more details, see, e.g., J.O. Honnold, 'The Draft Convention on Contracts for the International Sale of Goods: An Overview', 27 AJCL (1979) p. 223 at p. 226. 10. The Diplomatic Conference in Vienna was attended by 22 European and other developed Western states, 11 Socialist, 11 South American, 7 African, and 11 Asian countries, see G. Eorsi, 'A propos the 1980 Vienna Convention on Contracts for the International Sale of Goods', 31 AJCL (1983) p. 333 at p. 335 (ft. 5). Furthermore, several international organizations took part as observers, among them the World Bank, the European Community, the Hague Conference on Private International Law, and the International Chamber of Commerce. 11. See generally J.O. Honnold, Documentary History of the Uniform Law for International Sales: The Studies, Deliberations and Decisions that Led to the 1980 United Nations Convention with Introductions and Explanations (Deventer, Kluwer 1989) pp. 1 et seq., 381 et seq. (Part C). 12. As of January 1999, the following 54 states were party to the CISG: Argentina (one of the eleven initial contracting states (i)), Australia, Austria, Belarus, Belgium, Bosnia-Herzegovina, Bulgaria, Burundi (effective as of 1 October 1999), Canada, Chile, China (PRC; (i)), Croatia, Cuba, Czech Republic, Denmark, Ecuador, Egypt (i), Estonia, Finland, France (i), Georgia, Germany, Greece, Guinea, Hungary (i), Iraq, Italy (i), Latvia, Lesotho (i), Lithuania, Luxembourg, Mexico, Moldova, Mongolia, Netherlands, New Zealand, Norway, Poland, Romania, Russian Federation, Singapore, Slovakia, Slovenia, Spain, Sweden, Switzerland, Syria (i), Uganda, Ukraine, United States of America (i), Uruguay (1 February 2000), Uzbekistan, Yugoslavia (i), and Zambia (i). It is worthy to note that Norm America is the only major trade block whose member states have all subscribed to die CISG. As far as the European Union is concerned, the countries not parties are Portugal and die United Kingdom. Regarding the Middle and South American continent, countries such as Brazil, Columbia, Peru, and Venezuela have not joined the CISG. Concerning the APEC-region, it should be emphasized that neither Japan, Indonesia, nor Taiwan has yet become a party to the CISG. Finally, with some notable exceptions (principally Egypt), the very large majority of the African

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No treaty has likely been discussed by legal scholars as extensively as the CISG subsequent to the end of the Second World War.13 Similar to most international treaties, the scope provisions have been of particular interest to the commentators in the first years following the adoption of the Vienna Convention.14 Many of these questions continue to be debated today, more than nineteen years later.15 As indicated in its title, the Vienna Convention deals with contracts for the international sale of goods. The CISG does not, however, apply to all international sales of goods. As it is the case for all international treaties, its sphere of application must be examined with regard to four different aspects: the Vienna Convention applies only to contracts concluded between a given group of persons; within a particular territorial sphere; and within a given period of time. Furthermore, the Convention covers only a specific category of sales.16 As a result, a contract of sale will be governed by the Convention only if it falls within the CISG's personal, territorial, temporal, and material sphere of application. The principal rules delimiting the Convention's scope are contained in Articles 1 to 6.17 Among the scope provisions of the CISG, Article 1 is certainly one of the most important. This provision fixes the personal and territorial scope of the Vienna Convention. Its complex structure has produced a tremendous volume of writings and commentaries, making this Article one of the most discussed provisions of the Convention. This essay presents a synthesis of different problems caused by

states has also still not ratified die Vienna Convention. Finally, one should note that the ULIS and ULF have not been totally abandoned. They may still be applied between contracting states if the CISG does not apply. For an example, see the decision of the Oberlandesgericht Munchen dated 9 August 1995 [7 U 7143/92]: as the CISG did not apply by virtue of Art 100 (the contract was drawn up before the entry into force of the Convention in Italy or Germany), the Court applied the ULIS to a contract between an Italian buyer and a German seller. According to Art 99(3) CISG, a state which is party to either or both the ULIS and the ULF and which wants to ratify, accept, approve or accede to the Vienna Convention shall at the same time denounce either or both the ULIS and the ULF. 13. K. Randall and J. Norris, 'A New Paradigm for International Business Transactions', 71 Wash. ULQ (1993) p. 599 at p. 613. 14. Both ULIS and ULF raised the same questions in die first years of their applicability. 15. In this context, an analogy may be made with the Brussels Convention of 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters and, consequently, with the Lugano Convention which was adopted in 1988 and which extends the rules and principles embodied in the Brussels Convention to the Member States of the European Free Trade Association: more than thirty years after the adoption of the Brussels Convention, European scholars and judges are still debating the personal and territorial scope of application of the treaty. See, e.g., C. Bernasconi and A. Gerber, 'Der raumlich-personliche Anwendungsbereich des Lugano-Ubereinkommens', 3 SZIER/ RSDIE (1993) pp. 39 et seq., with many references. 16. See, e.g., P. Volken, 'The Vienna Convention: Scope, Interpretation, and Gap-Filling', in P. Sarcevic and P. Volken, eds., International Sale of Goods. Dubrovnik Lectures (New York, Oceana Publications 1986) p. 19 at p. 23. 17. The temporal scope of the Convention is regulated in the Arts. 99-101. The basic principle is that the Convention does not apply retroactively (Art 100); see also n. 12 in fine.

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Article 1 and sketches the - occasionally divergent - solutions the abundant writing has brought out. Analysis of the Convention's personal and territorial scope follows the two central questions that are embodied in Article 1: when is a transaction international, and when does the transaction bear a prescribed relation to one or more contracting states?18 These two questions are examined separately in the following comments.

2. 2.1

THE INTERNATIONAL CHARACTER OF THE TRANSACTION The basic criterion: the parties' places of business

The Vienna Convention applies only to international contracts. Hence, the Convention has to provide a basic criterion that distinguishes international contracts from merely domestic ones. The latter continue to be regulated by domestic laws. The draftsmen of the Vienna Convention utilized the same criterion already rooted in the ULIS: the parties' places of business. According to Article 1(1), the CISG applies to contracts of sale of goods between parties whose places of business are in different states. Contrary to the ULIS, the Vienna Convention does not ask for additional characteristics.19 Therefore, in order for the Vienna Convention to apply, it is not necessary that borders be crossed, that the goods be carried from the territory of one state to the territory of another state, that offer and acceptance be accomplished in different states or that the goods be delivered in a state other than that within whose territory offer and acceptance have been effected.20 The application of the

18. See especially J.O. Honnold, Uniform Law for the International Sales under the 1980 United Nations Convention, 2nd edn. (Deventer, KJuwer 1991) para. 39. 19. See F. Ferrari, 'CISG Article 1(1XB) and Related Matters: Brief Remarks on the Occasion of a Recent Dutch Court Decision', 13 Nederlands Internationaal Privaatrecht (1995) p. 317 at pp. 31920, with further references. 20. See, e.g., E. Jayme, 'Article 1', in CM. Bianca and MJ. Bonell, eds., Commentary on the International Sales Law: The 1980 Vienna Sales Convention (Milan, Giuflre 1987) p. 27 at p. 28; P. Schlechtriem,' Anwendungsvoraussetzungen und Anwendungsbereich des UN-Ubereinkommens fiber Vertragefiberden intematkmalen Warenkauf (CISG)', 1 Aktuelle Juristische Praxis /Pratique Juridique Actuelle (1992) p. 339 at p. 342; L. V6kas, 'Zum personlkhen und raumlichen Anwendungsbereich des UN-Einheitskaufrechts', 7 IPRax (1987) p. 342; Volken, op. ciL n. 16, at pp. 26-28; Winship, op. cit n. 3, at pp. 1-20 et seq. According to its Art 1, the ULIS is applicable to contracts of sale of goods entered into by parties whose places of business are in the territories of different states, in each of die following cases: '(a) where the contract involves the sale of goods which are at the time of conclusion of the contract in the course of carriage or will be carried from the territory of one State to the territory of another; (b) where the acts of constituting the offer and the acceptance haven been effected in the territories of different States; (c) where delivery of goods is to be made in the territory of a State other than that within whose territory the acts constituting the offer and the acceptance have been effected.'

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Vienna Convention requires only that the parties' places of business be located in different states; formation and execution may occur within a single state, even if that state is not a contracting state.21 2.1.1 A sufficient criterion?

According to the Secretariat Commentary on Article 1 of the 1978 Draft, the basic criterion adopted by the CISG serves three major purposes: (1) to reduce the search for a forum with the most favourable law; (2) to reduce the necessity of resorting the rules of private international law; (3) to provide a modern law of sales appropriate for transactions of an international character.22 However, the lack of additional characteristics (e.g., an international carriage of goods) may lead to results which, at first glance, may seam inappropriate. Consider the following example: Bombardier (Canada) owns prefabricated mass-transport components stored in Germany. Bombardier sells these elements to a French company which builds a new mass-transport system in Hamburg. The parties have their places in different states (Canada and France), thus the Convention applies. In other words, the Convention's applicability must be examined without taking into consideration the place where the contract has been concluded (e.g., Hamburg) or where the goods were located at the time the parties agreed on the terms of their contract (remember that in our example the components have never left Germany). Would it not be appropriate to apply the German BGB (Biirgerliches Gesetzbuch) in this case? On the other hand, when the Bombardier plant in Valcour (Canada) sells goods located in its factory near New York to another Canadian corporation which needs that type of goods in Mexico, the CISG does not apply. Given the obvious international implications of this transaction, would it not be a sustainable solution to apply the CISG? In defining the international character of sales transactions, the Vienna Convention refers only to the contracting parties. The Convention does not make any reference to the purchased goods or to their location at the time of the contract's

21. P. Schlechtriem, Uniform Sales Law: The UN-Convention on Contracts for the International Sale of Goods (Vienna, Manzsche Verlags- und Universitatsbuchhandlung 1986) p. 27. 22. 'Commentary on the Draft Convention on Contracts for the International Sale of Goods, prepared by the Secretariat', UN Doc. A/CONF.97/5, reprinted in J.O. Honnold, Documentary History, op. cit n. 11, at p. 405, para. 4 (hereinafter Secretariat Commentary). CISG Art 1 and 1978 Draft Art 1 are identical except for the phrase 'in determining the application of this Convention' mat has been added to para. (3) of CISG Art. 1. Consequently, the Secretariat Commentary on 1978 Draft Art 1 can legitimately be regarded as relevant to the interpretation of CISG Art. 1. In fact, the Secretariat Commentary is the closest available equivalent of an Official Commentary on the Convention.

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conclusion. The solution adopted by the draftsmen of the Vienna Convention must be regarded as a response to the irritating problems associated with Article 1 of ULIS.23 Although the Vienna Convention's definition of the international character of a sales transaction may be narrower than that adopted in the ULIS, it adeptly avoids complicated interpretation problems. The comprehensible solution adopted by the Vienna Convention has been criticized by some authors.24 Critics assert that the system adopted by the CISG creates two categories of international sales transactions: so-called 'first-class' transactions regulated by the Vienna Convention, and 'second-class' transactions that continue to be governed by domestic private international law principles. Compared to the punctilious solution that the ULIS had adopted for its definition of the international character of sales transactions, the CISG indeed looks 'simplistic'. 25 Nevertheless, the uncomplicated solution embodied in the Vienna Convention is of inestimable practical advantage and largely preferable to the uncertainties caused by the approach chosen in the ULIS. Furthermore, it must be underscored that according to Article 6 of the CISG (the so-called 'opting-out provision'), the parties have the possibility to exclude the applicability of the uniform rules. Therefore, if Bombardier and its French partner did not want their contract to be governed by the Vienna Convention, they could, for example, refer to German domestic law. For individuals and corporations that have attained a certain experience in international sales transactions, the CISG has become an invaluable tool so that they are generally aware of its conditions and consequences of applicability. With respect to the second example, it must be emphasized that the parties are located in the same country; the application of their common domestic law to the transaction would therefore be a sustainable solution - at least preferable to the intricate interpretation difficulties that inevitably would arise if the CISG were to adopt a similar provision to Article 1(1) of the ULIS. In addition to the positive criterion of place of business, the Convention also refers to two negative criteria designed to settle its personal sphere of applicability.26 First, paragraph 3 of Article 1 states that the nationality of the parties to the contract has no relevance to the application of the Convention. Therefore, the Convention also applies, for example, to nationals of non-contracting states who have their

23. See die references in Winship, op. cit n. 3, at p. 1-11, fh. 19. 24. Volken, op. cit n. 16, at p. 28; idem, 'Champ d'application, interpretation, lacunes, usages', in The 1980 Vienna Convention on the International Sale of Goods, Lausanne Colloquium of November 19-20, 1984, Vol. 3 (Zurich, Schulthess 1985) p. 21 at pp. 29-30; see also Nicholas, be. citn. 7, at p. 205. 25. Volken (1985), op. cit n. 24, at p 30, where he proposes that the applicability of the CISG should at least request an international carriage; see also P. Jen-Huong Wang, 'Das Wiener Ubereinkommen fiber Internationale Warenkaufvertrage vom 11. April 1980', 87 Zeitschrift fur vergleichende Rechtswissenschqft (198%) p. 184 at p. 187. 26. Volken, op. cit n. 16, at pp. 23-24.

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places of business within two different contracting states.27 Second, the same provision states that the Convention applies regardless of the 'civil or commercial character of the parties or of the contract'.28 Hence, it does not matter whether a party is a merchant in the eyes of the law of a particular country in which commercial contracts are governed by specific rules that are different from the general rules on sales. This provision allows the Convention to avoid conflicts that could arise between dualistic systems (e.g., France and Germany) and monistic systems (e.g., Italy and Switzerland) in which the distinction between the civil and commercial character of the parties is unknown.29 2.1.2 What is meant by place of business?

Even though the Convention refers several times to the concept of 'place of business',30 it does not provide a definition of what is meant by that term. According to a widely accepted opinion, place of business means a permanent and regular (stable) place for the transacting of general business. There has to be a real connection of the party with the place in question; a fictitious registration is not sufficient. The term place ofbusiness does not include, however, a temporary place of sojourn during, for example, ad hoc negotiations, or the place where only preparations for the conclusion of the single contract have been made.31 Professor Honnold accurately notes that the meaning of place of business as a site of stable business activity is supported by the references to this concept in other

27. See, e.g., Jayme, op. cit n. 20, at p. 32; see also Secretariat Commentary, supra n. 22, at p. 405, para. 11. In fact, the question whether nationality should be introduced as an (additional) prerequisite for the application of the Convention was raised during the negotiations. However, the idea was not pursued given the difficulties in determining the 'nationality' of legal persons. See Schlechtriem, op. cit n. 21, at p. 27 (with further references in fh. 59); this seems to be overlooked by Randall and Norris, loc. cit. n. 13, at p. 614 (fh. 56). See also infra n. 36 and accompanying text. 28. Both negative criteria were already rooted in ULIS, see its Arts. 1(3) and 7. 29. See, e.g., E. Jayme, op. cit n. 20, at p. 32; Schlechtriem, op. cit n. 21, at p. 27. However, Art 2 excludes from the Convention's scope certain contracts which are likely to be classified as civil contracts by some legal system, such as sales 'of goods bought for personal, family or household use.' This step enormously simplified drafting by avoiding fears of collision between the Convention and various domestic legislations designed to protect consumers, see Honnold, loc, cit. n. 9, at p. 227. Furthermore, the civil or commercial character of the transaction can be taken into consideration for the purposes of determining matters such as the reasonable period of time provided for in Arts. 39(1), 43(1) or 63(1), see Secretariat Commentary, supra n. 22, at p. 405, para. 14. 30. Arts. 1(1), 10, 12, 24, 31(c), 42(l)(b), 57(lXa), 57(2), 69(2), 90, 93(3), 94(1), 94(2) and 96. 31. See, e.g., Neumayer and Ming, Convention de Vienne sur les controls de vente internationale de merchandises: Commentaire (Lausanne, CEDIDAC 1993) pp. 41 and 42.

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parts of the Convention, such as in Articles 24,3 l(c), 42(b) and 69(2).32 Article 31 seems particularly pertinent in this context. This provision states that if the contract does not involve a carriage of the goods (para, a), and the goods are not located at a place known by the parties (para, b), the seller must place the goods 'at the buyer's disposal at the place where the seller had his place of business at the time of the conclusion of the contract' (para. c). Obviously, this kind of delivery is only appropriate if the seller's place of business is, at least, of a continuing character. On the other hand, it must be emphasized that the Convention's concept of the place ofbusiness is not to be considered as equivalent to the head place of business; the CISG also embraces subsidiary places such as a branch, an agency or another establishment of a party.33 Hence, the head establishment is not of primary importance but rather the place from which the obligation is to be performed. Finally, the idea that the term place ofbusiness implies a certain permanency is additionally supported by the fact that the French text of the Convention uses the expression etablissement, which suggests an even stronger connotation of a branch office.34 2.1.3 Multiple places of business

If a party has more than one place of business, the location which has 'the closest relationship to the contract and its performance' prevails, 'having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract' (Art. 10(a)).35 Let us suppose, for example, that a seller has places of business in both Canada and the United States and that the buyer has his only place ofbusiness in Canada. Which of the following conclusions prevails in this case: the fact that the parties have places of business in different states (Canada, USA), or the fact that they have their places of business in one and the same country (Canada)? Article 10(a) establishes the principle that the selection of the decisive place of business must be based upon an analysis of its individual relationship to the sales contract. It is important to note that the Vienna Convention does not refer to any of the different theories developed by private international law

32. Honnold, op. cit. n. 18, at para. 43. See also, e.g., Jayme, op. cit n. 20, at p. 30; K. Siehr, 'Der intemationale Anwendungsbereich des UN-Kaufrechts', 52 RabelsZ (1988) p. 587 at p. 590, fe. 10. 33. See, e.g., Ferrari, loc. cit n. 19, at pp. 323-324; W. Stoffel, 'Le droit applicable aux contents de vente intemationale de marchandises', in F. Dessemontet, ed., Les controls de vente intemationale de marchandises (Lausanne, CEDIDAC 1991) p. 15 at p. 26. 34. Winship, op. cit n. 3, at p. 1-22. The same observation can be made with regard to the (unofficial) German text which uses the term Niederlassung. 35. For the following, see, e.g., Honnold, op. cit n. 18, at para. 42. A German court had already adopted this position under the ULIS, although the latter had no provision like Art 10(a) of the CISG, ibid., &. 3. See also Secretariat Commentary, supra note 22 at p. 409, paras. 6 et seq.

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doctrine for determining a corporation's location or 'nationality'.36 If, in our example, the making of the contract and its performance are more closely linked to Canada, the Convention would not apply since Canada would be considered as the seller's relevant place of business; consequently, the parties' places of business would not be located in different states as required by Article 1(1). The same conclusion would have to be reached if a company is incorporated in Canada but fully owned by an American parent and the sales contract is executed between the Canadian corporation and a Canadian seller. If the Canadian representative is merely entitled to prepare the conclusion of the contract, while the final contract itself is accepted and signed by a member of the American headquarters, the Convention only applies when the Canadian seller knows (or should know) of the real partner to the contract.37 The balancing test that is often necessary in order to ascertain the determinant place of business can involve difficulties and uncertainties - not really what international business is looking for. Therefore, the parties would be well advised to settle the point in their contract and to include an express provision on whether the CISG or a specified domestic law applies. This is particularly true with regard to international consortia whose determinant place ofbusiness is often very difficult to ascertain. For the cases where one party has no business place at all, the Convention refers to the habitual residence of that party (Art. 10(b)).38 2.2 The necessity of awareness

According to Article 1(2), the fact that the parties have their places ofbusiness in different states holds no relevance if this fact does not appear either from the contract orfromany dealings between, orfrominformation disclosed by, theparties at any time before or at the conclusion of the contract. In other words, the parties must have entered into an international contract consciously; if there is a lack of awareness with regard to the international character of the contract, the Convention does not apply and the contract is governed by

36. There are two different concepts applied in PIL in order to determine the corporation's 'nationality': the Place of Incorporation Theory and the Seat Theory, see, e.g., P. Reymond, 'Les personnes morales et les societes dans le nouveau droit international priv6 suisse', in F. Dessemontet, ed., Le nouveau droit international prive suisse (Lausanne, CEDIDAC 1988) p. 143; D. Tzouganatos, 'Private International Law as a Means to Control the Multinational Enterprise', 19 Vand. J TransnatlL(m6)p.471. 37. See the subsequent comments under 2.2. 38. See also Secretariat Commentary, supra n. 22, at pp. 409-410, para. 9.

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domestic rules.39 The criterion that has to be applied in order to determine whether the international character of the transaction has been dissimulated or not is an objective one: one must refer to what a party knew or ought to have known by observing the required attention in the concrete circumstances (i.e., if a payment has to be effected abroad or if authorizations for foreign exchange are necessary).40 The fact that the other party's place of business is in a different state must be recognizable no later than at the time of the formation of the contract.41 Article 1 (2) addresses in particular the case of an undisclosed foreign principal. If, for example, a Swiss agent does not inform a buyer, whose place of business is also in Switzerland, that he represents a seller having its place of business in Canada, the sale will not be governed by the Convention but rather by the Swiss Code of Obligations.42

3. 3.1

THE TRANSACTION'S RELATION TO A CONTRACTING STATE Preliminary remarks

Thus far, we have seen that the CISG applies to sales contracts if the parties have their places of business in different states. However, the Vienna Convention adds two alternative restrictions to this basic criterion. These restrictions are aimed at rendering the Vienna Convention applicable only if there is a substantial relation between a sales transaction and a state that has ratified or acceded to the Convention. These restrictions constitute another substantial difference to the 1964 Hague Conventions' territorial applicability; since neither the ULIS nor the ULF have asked for a substantial link with a member state, they have been almost universally applicable. Article 1 ofboth the ULIS and the ULF simply provides that the uniform law 'shall apply' to transactions between parties whose places of business are in two 'different states', regardless whether these states have ratified (or adhered to) the Convention. Therefore, for example, the ULIS directed Germany as a ratifying state, to apply ULIS to a sale between parties who had their places of business in Canada and the US, despite the fact that neither of these two countries had ratified the 1964 Hague Conventions and the transaction had no contact with Germany or

39. See, e.g., B. Audit, La vente Internationale de marchandise: Convention des Nations-Unies du 11 avril 1980 (Paris, LGDJ 1990) pp. 19-20; Schlechtriem, loc. cit. n. 20, at p. 342; Volken, op. cit. n. 16, at p. 24. 40. Neumayer and Ming, op. cit. n. 31, at pp. 49-50 (with further references). 41. Schlechtriem, op. cit. n. 21, at p. 27. 42. Honnold, op. cit n. 18, at para. 41; Jayme, op. cit. n. 20, at p. 31; Schlechtriem, op. cit. n. 21, at p. 27 (fn. 57); see also Secretariat Commentary, supra n. 22, at p. 405, para. 9.

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any other contracting state.43 The underlying principle of avoiding any reference to private international law was designed to give the world the greatest possible benefits of the new international regime. This overly optimistic view, however, failed to satisfy the conflict of laws experts and the representatives of many states.44 The Vienna Convention follows therefore a more conservative path. The first qualification embodied in the CISG requires that the parties' business places are located in contracting states (Art. l(l)(a)); this is the so-called 'substantive or autonomous' definition of the Convention's territorial applicability. The second qualification expressly refers to private international law. The Convention's applicability may be directed by conflict of law rules when - although the parties have their places of business in different states - the requirement that these are contracting states is not fulfilled; it is then sufficient that the forum's private international law rules lead to the application of the law of a contracting state. This second conception is known as the conflictual method of defining the Convention's territorial scope (Art. l(l)(b)). 45 These two concepts are examined below. 3.2 The autonomous requirements of the Convention's applicability: Article l(l)(a)

According to Article 1(1 )(a), the Convention applies when the places of business of the seller and the buyer are located in different contracting states. At first glance, this principle does not appear to engender any serious difficulties. This observation seems to be confirmed by the fact that the Conference in Vienna reached prompt agreement on this particular provision.46 Nevertheless, three major questions of significant practical impact are to be heeded under the title of the Convention's autonomous applicability. The notion of contracting state, and of the courts that are addressed by this provision must be examined. However, before turning to the analysis of these two particular issues, an explanation of the basic nature of Article 1(1 )(a) is required.

43. For the content of Art. 1 of the ULIS, see supra n. 20. During the Conference at The Hague, this 'universalist' approach had been criticized by many delegations, who characterized this technique as legal imperialism. However, a motion to reject this approach failed on a closely-divided vote. Finally, the Conference adopted a compromise that allowed the contracting states to amend, by reservation, the universalist definition. According to this more restrictive approach, the Convention is applicable to transactions between parties 'whose places of business are in different Contracting States'. See, e.g., Honnold, loc. cit. n. 9, at p. 227; idem, op. cit n. 18, at para. 45.1 (with additional references). See also Winship, op. cit n. 3, at p. 1-17 (with additional references in fn. 33). 44. See, e.g., Honnold, loc. cit n. 9, at p. 227, who refers to 'similar justifications for a slightly less greedy rule' in the 1952 draft of the UCC. 45. Volken, op. cit n. 16, at p. 24. 46. Honnold, op. cit. n. 18, at para. 45.1.

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3.2.1.1 The pursued goal Article l(l)(a) embraces the Convention's central objective which is to smooth out legal uncertainty.47 The goals of certainty and predictability as to which set of rules governs an international sale transaction may not always be best served by the traditional conflicts of law approach. According to this latter approach, the applicable law is determined by a specific nexus that the transaction has with a particular legal order. The contract's final attachment to a specific legal order may be grounded either on the parties' choice (subjective allocation) or, for example, on the concept of the so-called specific performance (objective allocation).48 However, in the latter case, the final outcome is often unpredictable.49 Moreover, the applicable domestic law may be unknown to at least one of the parties. In Article l(l)(a), the Vienna Convention responds to this primary concern of certainty and predictability. The basic purpose of this provision is to by-pass the difficulties inherent to conflict of laws principles. Applicability based on Article 1(1 )(a) directly results from the fact that the countries, in which the parties to the contract have their business places, have ratified (or acceded to) the Vienna Convention. The Convention dictates this result even if the forum's private international law (PIL) would normally designate the law of a non-contracting state.so Again, under Article 1(1 )(a) there is no need to perform a conflicts analysis to determine whether the Convention applies; the forum's PIL is eluded. At this point, one could easily imagine that further explanations on Article 1 (1 )(a) are unnecessary. The ghosts of private international law, however, continue to haunt this provision for all countries that have also ratified the Hague Convention of 15 June 1955 on the Law Applicable to the International Sale of Goods (Hague PIL Convention).

47. See, e.g., Honnold, op. cit. n. 18, at para. 45.1. 48. These principles have been enacted, for example, in the Arts. 3111-3113 of the Civil Code of Quebec and in the Arts. 116 and 117 of the Swiss Statute on Private International Law. They are also embodied in the European Convention on the law applicable to contracts (the 1980 Rome Convention). 49. Which is, in general, the characteristic performance in a barter-deal, in a joint-venture's basic contractual agreement or in a foreign exchange deal that two banking computers have concluded automatically without the intervention of any human being? For the latter example, see B. Kleiner, 'Ein vernachlassigtes "Detail"', 60 Schweizerische Aktiengesellschafl (1988) p. 70 at p. 71. 50. Winship, loc. cit. n. 6, at pp. 518-520.

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Article 1 (1 )(a) and the Hague PIL Conventions

With an increased number of adopted conventions, comes an increased overlapping of their respective fields of application. Such a collision of conventions seems to exist, at first sight, between the Vienna Convention and the Hague Convention of 1955 on the Law Applicable to the International Sale of Goods.51 Formally, these two Conventions clash each time the forum is located in a state that has ratified both of them.52 Which rules should the forum apply in these cases: the uniform law of the Vienna Convention or the conflict of laws principles embodied in the Hague Convention?53 In analyzing this problem, one must remember that both uniform law treaties of 1964 (ULIS and ULF) allow a state that is also party to the 1955 PIL Convention to ratify (or to accede to) the uniform law treaties with a reservation.54 This reservation renders ULIS and ULF applicable only when the conflict of laws rules of the 1955 Convention lead to a state that has adopted the uniform laws. Interestingly enough, both countries that had ratified the 1955 Convention as well as the uniform laws (Belgium and Italy) made this particular reservation. However, contrary to the uniform laws of 1964, the Vienna Convention neither provides for an analogous reservation nor calls for an explicit denouncement of the PIL Convention. Professor Winship attempts to resolve this dilemma through Article 90 of the Vienna Convention.55 This provision, indeed, addresses the problem of collision of conventions. Article 90, which was not contested at the Conference in Vienna, states that the Convention 'does not prevail over any international agreement which has already been or may be entered into and which contains provisions concerning the matters governed by this Convention, provided that the parties have their places of business in States parties to such agreement.'56 However, such open-handed formulated provisions do not resolve the intricate problem of collision of conventions. According to Article 90, ifboth states involved have ratified the Vienna Convention as well as the Hague PIL Convention, the latter

51. Belgium, Denmark, Finland, France, Italy, Niger, Norway, Sweden and Switzerland have ratified (or have acceded to) this Convention. 52. All states that have ratified the 1955 Hague Convention (see supra n. 51) have also ratified the Vienna Convention, with the exception of Niger. 53. For the following, see the developments in Honnold, op. cit. n. 18, at para. 45.2; Velcas, loc. cit n. 20, at p. 343; Winship, op. cit n. 3, at pp. 1-42 and 1-43. 54. In both cases Art. IV of the Convention. 55. Winship, op. cit. n. 3, at p. 1-43; idem, loc. cit. n. 6, at pp. 515-517 and 530-532. 56. Art. 90 does not cover the case of the relationship between the Vienna Convention and the 1964 uniform law treaties; that specific relationship is covered by Art. 99, see also supra n. 17.

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prevails. This, however, leads to an unnecessary and confusing application of the puzzling conflict of laws' principles, although the autonomous requirements of the Vienna Convention's applicability are fulfilled. There is a simpler and more appropriate way of looking at this problem. At the very core of this alternative lies the belief that the Vienna Convention has established a uniformed legal entity among parties to an international sales contract who have their places of business in different contracting states. However, where different legal orders have - at least partially unified their substantive law (as is the case for two contracting states of the Vienna Convention), any conflict of laws has become impossible. In other words, as far as their 'bilateral' relationship is concerned, these countries have rendered private international law superfluous. This, of course, is true only with respect to the questions falling within scope of the Vienna Convention. As a result, the alleged collision between the Vienna Convention and the 1955 Hague Convention is unfounded; the opposite assertion does not sufficiently consider the purpose and the effects of Article l(l)(a) of the CISC 5758 This opinion is confirmed by the Hague Convention of 22 December 1986 on the Law Applicable to Contracts for the International Sale of Goods (the new Hague

57. See especially Vekas, loc. cit. n. 20, at p. 343, and M. Pelichet, 'La vente Internationale de marchandises et le conflit de lois', 201 Recueil des Cours (1987) p. 9 at p. 37: 'A la lettre a) [de 1'Article premier], la Convention de Vienne fixe directement son champ d'application, rendant superflu le recours a la regie de conflit' Pelichet accurately criticizes a statement in the first edition of Honnold's Uniform Law, according to which Art. l(lX a ) lays down a unified and authoritative rule of private international law on the applicability of the Convention (see ibid., at pp. 34 et seq.). This, in fact, would make no sense. Firstly, it would be quite a strange legislative technique to set down, in letter (a), the autonomous conditions of the Convention's applicability by adopting a rule on conflict of laws and then, in letter (b), to expressly refer to the rules on conflict of laws: which rules would letter (b) refer to? The ones that are contained in letter (a)? This would be a circulus vitiosus. Secondly, when a provision dealing with conflict of laws designates the applicable law, it refers to the legal order in general, not to a specific rule of substantive law (the determination of the applicable substantive rule within the lex causae is generally known as the secondary characterization). This, however, is not the effect of Art. 1(1 X a ) of the Convention. Pelichet, ibid., at p. 36, rightly states: 'lorsque les conditions de la lettre a) sont remplies, les dispositions de la Convention de Vienne vont s' appliquer independamment d'un ordre juridique national donne. (...) Ainsi, nous sommes de 1 'opinion que la lettre a) (. . .) ne saurait etre regardee comme une regie de conflit, mais se presente comme une simple norme, objective et autolimitative, d'application de la convention.' In the second edition of his book, Honnold has taken this critique into consideration and has corrected the relevant passage, which now makes clear that para. (lXa) does not state a general rule on PIL, see op. cit. n. 18, at para. 45.2, text accompanying fn. 9. 58. These developments are applicable - mutatis mutandis - to the relationship between the Vienna Convention and the European Convention of 1980 on the Law Applicable to Contractual Obligations (Rome Convention).

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PIL Convention). In its Article 23, the 1986 Convention expressly states that it does not prejudice the application of the Vienna Convention.59 3.2.2 Contracting state

The meaning of the term 'contracting state' used in Article 1(1 )(a) seems to be obvious: a contracting state is a state that has eitherratified,approved or accepted or acceded to the Convention.60 However, the profound changes in Eastern Europe occurring in recent years have given rise to various problems.61 3.2.2.1 The case of the former German Democratic Republic The notion of contracting state embodied in the Vienna Convention has been challenged for the first time by the disappearance of the former German Democratic Republic (GDR). The GDR had signed the CISG on 23 February 1989; the Convention had become effective on 1 March 1990. However, nearly all the laws and regulations of the former GDR have been annulled by the reunification treaty in effect from 3 October 1990 and have been replaced by the laws of the Federal Republic of Germany (FRG). In the FRG, the Vienna Convention entered into force only on 1 January 1991. With regard to the international treaties signed and ratified by the GDR, the reunification treaty provided in Article 12 that the FRG would 'reconsider [the treaties] together with the former partners of the GDR, in order to endorse their continuance, their revising or their expiration.' Hereby, the 'principle of good faith, the interests of all the involved parties and the international obligations of the FRG were to be taken into account.'62 A considerable debate among lawyers and politicians ensued as to whether the Vienna Convention (as well as the Convention on the limitation period) had expired or not with the disappearance of the GDR. The controversial debate is beyond the scope of this note.63 However, according to the dominant opinion, the Vienna Convention has ceased to be applicable in the former GDR as of 3 October 1990. Therefore, from

59. The 1986 Hague PIL Convention also expressly refers to the Vienna Convention in its Preamble and in Art. 8(5). Furthermore, in Art. 23, the 1986 Hague Convention also concedes priority to the New York Convention of 1974 on the Limitation Period in the International Sale of Goods and to the Protocol amending that Convention and which has been adopted in Vienna on 11 April 1980. 60. Note, however, that according to Art. 99(2), the Convention enters into force only twelve months after a state has ratified, accepted, approved or acceded to the CISG. The CISG also specifies that a contracting state with different territorial units may declare that the Convention is to extend to all its territorial units or only to one or more of them (Art. 93 (1)). 61. The following developments are based on Schlechtriem, loc. cit. n. 20, at p. 343, and on the country reports on the CISG database of Pace University. 62. For the original German text of this provision, see Schlechtriem, loc. cit. n. 20, at p. 343. 63. See the references in Schlechtriem, loc. cit n. 20, at p. 343 (in fh. 15 and accompanying text).

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3 October to 31 December 1990, the Hague Uniform Laws that were still applicable in the FRG at that time were also applicable in the former territory of the GDR. It is only since 1 January 1991, that the Vienna Convention is applied to the whole German territory. 3.2.2.2 The former USSR The case of the former USSR is even more complex. The CISG was intended to become effective in the USSR on 1 September 1991. However, given the tremendous legal and political problems following the August 1991 coup attempt, it is doubtful whether international treaties of the USSR could continue to apply to the whole territory. The intricate public international law problem of state successions is beyond the scope of this note.64 However, a brief discussion follows as to the present legal status of countries formerly part of the USSR with regard to their subscription to the CISG. The newly established Russian Federation has officially succeeded the USSR as a member state of the United Nations on 24 December 1991. It took on, therefore, all duties and rights of the former USSR ensuing from the UN Charter and all the multilateral treaties deposited with the General Secretary. Consequently, the Russian Federation is also regarded as the rightful successor to the CISG obligation. In the Belorussian and in the Ukrainian SSR, the CISG had already become effective on respectively 1 November 1990 and 1 February 1991. Currently, Belarus and Ukraine are regarded as the legitimate successors to Byelorussian and Ukrainian treaty obligations. On the other hand, the succession principle does not apply to the other states of the former USSR. For each individual state, the Legal Officer in charge of the UN Depository function requires a further treaty formality prior to making the Vienna Convention applicable for the purposes of Article l(l)(a). The required notices of accession to the CISG have been filed by Estonia, Georgia, Latvia, Lithuania, Moldova and Uzbekistan.65 The remaining states (Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan, Tjikistan and Turkmenistan) have not, at this time, filed notice of accession or succession to the CISG.

64. For a discussion of this problem, see, e.g., J.P. Muller and L. Wildhaber, Praxis des Volkerrechts, 2nd edn. (Bern, Stampfli 1982) pp. 173 et seq. 65. The CISG had been in force in the former Soviet Republics of Estonia, Georgia, Latvia, Lithuania, Moldova and Uzbekistan since 1 September 1991. However, when these Republics became independent states, they all preferred to adopt the Convention by way of accession rather than by succession. The CISG became effective in Estonia on 1 October 1994, in Georgia on 1 September 1995, in Latvia on 1 August 1998, in Lithuania on 1 February 1996, in Moldova on 1 November 1995, and in Uzbekistan on 1 December 1997.

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The former Yugoslavia

On 1 January 1988, the CISG became effective for the Socialist Republic of Yugoslavia. The Legal Officer in charge of the UN Depositary function regards the Federal Republic of Yugoslavia (i.e., the states of Montenegro and Serbia) as successor to this treaty obligation. The former Yugoslav states Slovenia and BosniaHerzegovina filed their notices of succession with the UN in January 1994, Croatia inJunel998. 6 6 With respect to the practical impact of these issues, each businessperson wanting to conclude a contract for an international sale of goods with a partner who has his place of business in one of the newly independent Republics of both the former USSR and the former Yugoslavia would be well advised not to rely on the autonomous requirements of the Convention's applicability. He or she would be better off by implementing into the contract a clear and unequivocal choice of law rule, either in favour of the CISG or in favour of one particular national legal order.67 A clear choice of law rule could also overcome the differences national courts may hold on the issue of state succession. 3.2.3 Which courts are addressed by Article l(l)(a)?

It should be noted that the autonomous applicability of any international treaty is an immediate and direct result ofthe treaty's binding nature. Hence, Article l(l)(a) is only mandatory for a court sitting in a state that has ratified the CISG.68 The conditions ofan autonomous applicability ofthe Convention are fulfilled even if one (or both) ofthe contracting states has (have) made a reservation according to Article 95.69 Article 95 becomes, in fact, irrelevant as soon as both (all) parties to the contract have their places of business in different contracting states. In other words, Article 95 has only to be regarded within the conflictual method of defining the Convention's personal and territorial scope, that is when the parties have their places of business in different states, but the requirement that these are contracting states is not fulfilled. The fact that the forum state itself (also) made such a

66. Slovenia became a state on 25 June 1991; on 7 January 1994, Slovenia filed a declaration of succession making the CISG retroactively applicable to it effective the date mentioned. BosniaHerzegovina became a state on 6 March 1992; on 12 January 1994, Bosnia-Herzegovina filed a declaration making the CISG retroactively applicable to it effective the date mentioned. Croatia became a state in 1991; on 8 June 1998, Croatia filed a declaration of succession making the CISG retroactively applicable to it effective the date mentioned. 67. See also Schlechtriem, loc. cit. n. 20, at p. 344. 68. Vek&s, loc. cit. n. 20, at p. 342. See also Ferrari, loc. cit. n. 19, at p. 321; Honnold, op. cit. n. 18, at para. 45. 69. The possibility of this reservation will be discussed at length in section 3.3.

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reservation does not constitute an obstacle to the autonomous applicability of the CISG. What position should a court of a non-contracting state adopt, when it has to sit in judgment on a contract concluded among two parties with places of business in different states, each having ratified the Vienna Convention? The answer, of course, depends on what private international law principles the forum has adopted.70 It has to be presumed, however, that the judge of the forum will be inclined to apply the Vienna Convention only if his private international law leads him to the law of a country that has ratified the CISG. The circuitous route of private international law is necessary because public international law does not impose any obligation on the forum to apply the CISG in this case. That is exactly the reason why the CISG proposes in its Article l(l)(b) a conflictual method to determine its application.71 3.3 The conflictual method of defining the Convention's scope: Article l(l)(b)

The conditions of an autonomous applicability of the Vienna Convention are not fulfilled when the parties to the contract have their places of business in different states but one or both of the states have not ratified the Convention. In other words: the autonomous applicability of the CISG presupposes reciprocity.72 As a matter of fact, the reciprocity principle has the advantage of being unequivocal. On the other hand, this rule restrains the Convention's applicability. The draftsmen of the Vienna Convention were aware of this dilemma, and adopted Article l(l)(b) as a remedy. According to Article 1(1 )(b), the Convention applies to contracts between parties whose places of business are in different states when the rules of private international law lead to the application of the law of a contracting state. 3.3.1 The scheme of Article l(l)(b): an easy example

The purpose of Article 1(1 )(b) can be illustrated with the help of the following example: A company in Quebec sells goods to a buyer whose place of business is in Japan. The buyer files a suit in Quebec against the seller.

70. For the following comments, see Audit, op. cit. n. 39, at p. 22. 71. See, e.g., Vekas, loc. cit. n. 20, at pp. 343-344; Volken, op. cit. n. 16, at pp. 28-29; Honnold, op. cit. n. 18, at para. 47.3. 72. Audit, op. cit. n. 39, at p. 22.

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The jurisdiction of the courts of Quebec being assumed, the judge has to determine the law applicable to the transaction. Since Japan has not ratified the Vienna Convention, the conditions of an autonomous applicability of the CISG are not fulfilled. The judge in Quebec must therefore apply his private international law provisions. According to Article 3114 of the Civil Code of Quebec (CCQ),73 if no law is designated by the parties, the sale of a corporeal movable is governed by the law of the country where the seller had his residence (establishment) at the time of formation of the contract.74 Thus, it is the law of Quebec that is designated as lex causae in our example. Since the CISG is applicable in Quebec and Quebec has not filed an Article 95 declaration, the provisions of the Vienna Convention govern the transaction at issue.75 At first glance, the application of Article l(l)(b) does not seem to raise very difficult problems. However, almost twenty years after its adoption, the conflicts of law-based technique of determining the Convention's personal and territorial sphere of application continues to be debated. The uncertainty surrounding this approach is generated by a reservation clause - Article 95 - allowing contracting states 'not to be bound' by subparagraph (l)(b) of Article 1 when ratifying the Convention.76 Before analyzing the different problems related to the effects of a reservation filed under Article 95, it is useful to retrace the history of Article 3.3.3 The history of Article l(l)(b)

Whereas the draftsmen of the CISG reached prompt agreement on the autonomous applicability of the CISG, the conflictual method of defining the Convention's applicability has been largely debated and remained controversial throughout the Diplomatic Conference in Vienna. The opposition to Article 1 (1 )(b) eventually led to the last-minute reservation clause of Article 95.

73. Of course, the relevant conflicts rule could also be embodied in a treaty. It is presumed that no such treaty has to be applied in Canada in this specific case. 74. The example presumes that the negotiations have taken place in Quebec, that the contract does not provide expressly that delivery has to be made in Japan, and finally, that there was no call for tenders (see Art. 3114 CCQ). 75. See, for example, Oberlandesgericht Hamburg, 1. Zivilabteilung, Decision of 28 February 1997, case no. 1 U 167/95, EWiR 1997,791, also available on the Pace Database. 76. Another issue worth to be mentioned here is the puzzling renvoi question, see Neumayer and Ming, op. cit. n. 31, at pp. 44-45, with many additional references pro and contra. 77. For the following, see Winship, loc. cit. n. 6, at pp. 503-508, who also retraces the history of the work done by the UNCITRAL Working Group established in 1969.

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3.3.3.1 The deliberations of the First Committee At the Diplomatic Conference, the task to examine Article 1 was assigned to the First Committee (which in fact prepared the major part of the Convention, i.e., Articles 1-88). The First Committee began consideration of Article 1 at its first meeting on 10 March 1980. The Delegation of the Federal Republic of Germany proposed to delete paragraph l(b) altogether.78 The German representative argued that this provision involved serious problems of interpretation and application and that it would, therefore, introduce an unwelcome element of complication.79 He noted, in particular, that domestic rules of private international law might point to the law of one state with respect to the formation of the contract and to the law of another state with respect to the substantive rules on sales. In such cases, only parts of the uniform law would be applicable whereas the Convention was designed as a unified whole.80 The German representative also stressed that it was most unusual in an instrument governed by international law to bind contracting states to apply the instrument to nationals of states not parties thereto.81 In addition, the delegation of the former Czechoslovakia pointed out that the introduction of paragraph (1 )(b) would create even more difficulties in countries where international trade contracts were governed by special legal rules.82 Other delegations (i.e., Bulgaria, Norway, France, Egypt, Hungary, Argentina, and Australia) expressly stated that paragraph (l)(b) should be retained.83 They

78. For the following, see Honnold, op. cit. n. 11, at pp. 457-458, paras. 9-12, and at p. 655, para. 3; Schlechtriem, loc. cit. n. 20, at p. 345. 79. The Swedish representative agreed with his German colleague, see Honnold, op. cit. n. 11, at p. 458, para. 16. 80. This argument does not seem convincing. Indeed, a partial application, limited to the rights and obligations arising from the contract already formed, would not have introduced insurmountable obstacles as the Convention was drafted in such a way that Part HI (substantive sales provisions) is at least compatible with domestic provisions on the formation of contracts, see Schlechtriem, op. cit. n. 21, at p. 26. In an alternative motion, the FRG tried to impose that Art. 1(1 Kb) be restricted to conflict of law norms that deal with rights and obligations arising from an already formed contract. This motion was also rejected, ibid., at p. 26 (m. 51); see also Honnold, op. cit. n. 11, at p. 655, para. 3. 81. This argument has also to be pondered. In fact, it is not unusual at all that PIL Conventions are designed to be applied to nationals of states which are not parties to the Convention, see, e.g., the Hague Convention of 1973 on the Law Applicable to Maintenance Obligations (Art. 3); the Hague Convention of 1955 on the Law Applicable to the International Sale of Goods; the Hague Convention of 1961 on the Conflicts of Laws Relating to the Form of Testamentary Dispositions. All these Conventions are of so-called hi uniforme-character. 82. Honnold, op. cit n. 11, at p. 458, paras. 13-14. The representative of the German Democratic Republic stressed that deletion of para. l(b) would avoid the same internal problems in his country, ibid., at pp. 458-459, para. 24; one has to know, however, that the International Commercial Contracts Act of the former GDR contained an express reservation in favour of international conventions (para. 1(2)). 83. Honnold, op. cit. n. 11, at pp. 458-459, paras. 17 et seq.

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stressed that the contracting states should regard the Vienna Convention as the general law to be applied to international sales of goods and not merely as a special law for sales between contracting states. From the point of view of a ratifying state, the Convention would constitute the law governing international sales and its sphere of application should therefore be as wide as possible. Furthermore, the delegations stressed that if paragraph l(b) was deleted, it would not be possible to apply the Convention to sales involving non-contracting states. The judges would have to apply the domestic legislation on internal sales instead of the Convention drafted specifically for international trade and hence more suitable for that purpose. Finally, the First Committee rejected the proposal to delete paragraph l(b), by a vote of 25 to 7, with 10 abstentions.84 As a result, the draft of the Convention submitted to the Plenary Conference on 4 April 1980 included the possibility to render the Convention applicable by the means of private international law.85 3.3.2.2 A last-minute decision taken at the Plenary Conference: Article 95

At the Plenary Conference, the Czechoslovakian delegation persisted and, again, raised the question of the appropriateness of Article l(l)(b). The representative's motion to vote separately on each paragraph of Article 1 was rejected, and Article 1 was adopted by 42 votes to none, with 1 abstention.86 Mister Kopac, from the Czechoslovakian delegation, still had a card up his sleeve, however. On 7 April 1980, he decided to put his last trump on the negotiation table; he proposed a new provision (at that time identified as Article C bis) that would allow any contracting state to declare that it will not be bound by Article 1(1 )(b). After an earlier rejection in the Second Committee, the undertaking finally succeeded. Article 95, providing the possibility for a contracting state to exclude Article l(l)(b), was adopted on 10 April 1980. The Article 95 reservation has been made, to date, by China, the Czech Republic, Slovakia, Singapore, and the United States. Canada had initially filed an Article 95 declaration providing that the province of British Columbia would not be bound by Article l(l)(b); this declaration was, however, withdrawn on 31 July 1992.87

84. Ibid., at p. 459, paras. 28-29. 85. Ibid, at p. 714. 86. Ibid., at p. 735, paras. 8-10. Note that eventually, the German delegation has voted in favour of Art. 1, see Schlechtriem, loc. cit. n. 20, at p. 345. 87. The question of the appropriateness of Art. 1 and the possibility of an Art. 95 reservation has also been discussed extensively during the consultation procedure launched by the Swiss government before ratifying the CISC The Swiss Bar Association in particular sustained that Switzerland should also make an Art 95 declaration. The government did not share this opinion and ratified the CISG without any reservation; basically, the government observed that an Art 95 declaration would render the application of the CISG much more complicated. See the official message of the Swiss government, published in the Feuille federate of 1989, but cited here according to the separate (number 89.002), 'Botschaft vom 11. Januar 1989 betreffend das Wiener Obereinkommen uber Vertrage fiber den

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One only needs to modify slightly the first example in order to explain the basic purpose of Article 95. A company in New York sells goods to a buyer whose place of business is in Japan. The buyer files a suit in New York against the seller. Japan has not yet ratified the CISG, thus the conditions of an autonomous applicability of the Convention (Art. l(l)(a)) are not fulfilled. Hence, the American judge must begin a conflicts analysis. If this analysis designates the US law as the proper law of the contract, the judge will apply the rules embodied in the Uniform Commercial Code (UCC) instead of the CISG. The effect of a reservation under Article 95 is to preserve the applicability of the domestic law of the forum in cases in which the parties do not have their places of business in different contracting states.88 3.3.3 The expediency ofArticle l(l)(b)

3.3.3.1 An enlargement of the Convention's scope The conflictual method of determining the CISG's applicability is based on the notion that it is not only justified and appropriate to apply the Convention when both parties have their places of business in different contracting states, but also when an analysis of the transaction on the grounds of private international law principles reveals that its center of gravity is located in a state that has ratified the Vienna Convention. Article l(l)(b) considerably enlarges the Convention's sphere of application.89 In order for the Convention to be applied, it will be sufficient if the transaction is international in character (i.e., places of business in different states), and the conflicts rules of the forum lead to the law of a State Party to the Convention. Since the Convention is well-suited to international transactions, the more it applies, the more legal certainty that may be achieved. Usually, decisions based on the modern (and 'neutral') law of the Convention are more acceptable to both parties than one party's domestic law, often unfamiliar to the other party.90

internationalen Warenkauf, at p. 11. 88. For the case, however, in which the conflicts analysis designates the law of a contracting state which has not made the reservation, see the comments below, section 3.3.4.1. 89. See, however, Randall and Norris, loc. cit n. 13, at pp. 614-615; according to these authors' opinion, the Convention does 'of course' never apply - even not under subsection (b) of Art. 1 if neither party has its place of business in a contracting state. This statement clearly looks too radical to me: yes indeed, the CISG may be applicable even though no party has its place of business in a contracting state; see the comments below under section 3.3.3.3. 90. Schlechtriem, op. cit. n. 21, at p. 25.

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Furthermore, it may be argued that it is often easier for the courts of a noncontracting state to apply the Convention than to try to determine, understand and apply the rules of a foreign domestic law; as there is a wealth of largely accessible information on the CISG, the judge sitting in a non-contracting state has an easier access to useful information on the CISG than on almost any foreign substantive law." On the whole, Article l(l)(b) may fairly be regarded as a logical development and ultimate achievement of the idea of a hi uniformed1 Indeed, as far as international sales transactions are concerned, it may be legitimately presumed that a state that has ratified the CISG has substituted its domestic rules on (internal) sales for the more suitable rules of the Convention. It seems, therefore, appropriate that the judge of a foreign forum honors the contracting state's decision.93 3.3.3.2 Internationally harmonized judgments?

However, the expansion of the Convention's scope by reference to the mechanisms of private international law is still not unanimously accepted.94 Opponents of Article 1 (1 )(b) assert that this provision does not assist in achieving internationally harmonized judgments and that the originated diversity may lead to forum shopping. If only one party to the contract has its place of business in a contracting state, the action is brought before a judge ofthat contracting state and private international law leads to the application of the law of the forum (or any other contracting state), the Convention applies. If, however, the same action is brought before the courts of the non-contracting state and private international law leads to the application of the law of this (or any other) non-contracting state, the Convention does not apply. As a result, the same contract could be governed by different laws depending on where the action is launched. This critique cannot be questioned in its result. It points, however, to the wrong source of the problem. Indeed, in cases like the previous example, the stumbling block is not Article l(l)(b), but rather the fact that the two fora apply different conflict of laws principles. Essentially, even if the contracting state excluded Article l(l)(b), the two countries would still apply divergent substantive laws.95 The purpose of Article l(l)(b) is not to ensure harmonized decisions, but simply to enlarge the Convention's sphere of applicability.96

91. Ibid. 92. Stoffel,op.cit.n.33,atp.27. 93. Ibid.; see, however, the following developments under section 3.3.3.3. 94. See the references in Schlechtriem, op. cit. n. 21, at p. 25 (fn. 46), and in Neumayer and Ming, op. cit. n. 31, at p. 44 (fh. 26). 95. Schlechtriem, loc. cit n. 20, at p. 345; Stoffel, op. cit. n. 33, at pp. 27-30. 96. Siehr, loc. cit. n. 32, at p. 599; Stoffel, op. cit. n. 33, at p. 30.

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3.3.3.3 The CISG as an unwelcome surprise? According to another argument that is quite often presented to condemn Article l(l)(b), the enlargement of the Convention's scope through the means of private international law may cause an unwelcome surprise to parties who have their places of business in different non-contracting states but who decide to bring their actions before a court sitting in a contracting state.97 The next example illustrates the problem: X has his place of business in London. He sells goods to a buyer Z, whose place of business is in Tokyo. According to an express choice embodied in their contract, the transaction is governed by 'the law of Switzerland' and any action has to be brought before the commercial court in Zurich.98 According to the strict wording of Article l(l)(b), the Swiss judge should apply the Vienna Convention to this transaction, although neither X nor Z have their places of business in member states of the CISG. According to the opponents of Article l(l)(b), it is inadequate to apply the CISG in such cases: to allow the parties' contract to be governed by the CISG would violate their prime intention.99 This apprehension is comprehensible; its practical impact, however, should not be overemphasized.100 If the parties made an express choice in favour of the law of a contracting state (in casu Switzerland) without having any links or previous attachments to that country, it is likely that the judge of the forum will also examine the conditions of Article 6 of the Vienna Convention which allows the parties to opt out of the CISG's application. The judge will first look at the precise wording of the parties' choice of law rule: does it refer, for example, to Swiss law in general or to the Swiss Code of Obligations? In the latter case, the judge will (likely) not apply the CISG but rather the Swiss domestic law on sales.101 In the absence of such indications, the judge will look at the general attitude that incited the parties

97. For the following comments, see generally Schlechtriem, loc. cit. n. 20, at p. 345; see also supra n. 89. 98. Such prorogation and choice-of-law clauses in favour of Swiss tribunals and Swiss law are very often used in commercial practice. In the example given, the validity of the prorogation of a Swiss tribunal ensues from Art 17(1) of the Lugano Convention: 'If the parties, one or more of whom is domiciled in a Contracting State, have agreed that a court or the courts of a Contracting State are to have jurisdiction to settle any disputes ( . . . ) , that court or those courts shall have exclusive jurisdiction.' Both the United Kingdom and Switzerland are party to the Lugano Convention. The validity of the choice of law provision in favour of Swiss law ensues from Art. 117 of the Swiss Statute on Private International Law which fixes the possibility for the parties to chose the law applicable to their contractual relation. 99. See generally Schlechtriem, loc. cit. n. 20, at p. 345. 100. For the following comments, see especially Stoffel, op. cit. n. 33, at pp. 31-32. 101. Schlechtriem, loc. cit. n. 20, at p. 345.

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to choose Swiss law. Even if the parties' incentive may vary, generally they decide in favour of one particular law either because of its relation with the contract (e.g., place of delivery) or because of its neutral character (no party imposes its law to the other). Stoffel formulates the following two presumptions when parties have decided that their contract be governed by Swiss law: if they have chosen Swiss law because a given link to Switzerland (of either one party or the contract in general), the presumption goes in favour of the Convention; if, on the other hand, the parties have chosen Swiss law because of its neutral character, it is likely that they have opted for the domestic rules of the Code of Obligations.102 Despite all sympathy one may have for the uniform law, I believe that in cases where two parties, who have their places of business in non-contracting states, choose the law of a contracting state to govern their contractual relationship, the question of the applicability of the CISG should be considered very carefully. In such cases, the parties' presumable intention seems to point to the domestic law rather then to the CISG, even if the latter may be better tailored to international sales transactions.103 As a matter of fact, parties wanting their contract to be governed by the Swiss Code of Obligations - or by any other domestic law - would be well advised to make the point clear and unequivocal in their contractual choice of law provision.

102. Stoffel,op.cit.n.33,atp. 32. 103. This is the opinion that Stoffel has presented in an article published one year previous to the article referred to so far, see W. Stoffel, 'Ein neues Recht des internationalen Warenkaufs in der Schweiz', 86 SJZ (1990) p. 169 at p. 174. This particular question was also largely debated at the Lausanne Colloquium in 1984, see supra n. 24, at pp. 35-37; Prof, von Overbeck, Prof. Farnsworth, Prof, von Hoffmann, Prof. Schlechtriem and Prof. Volken were in favour of the application of the CISG in such cases, whereas Prof. Neumayer was in favour of the application of the domestic law. Prof. Neumayer underpins his opinion by referring to the jurisprudence of the Federal Court or Germany which has adopted the same point of view. Even if one of the parties has his place of business in a contracting state and the parties choose the law of that particular state, it may still be possible to infer from the setting and the language of the contract that the parties intended the domestic law to govern the contract and not the Convention; see generally C. Witz, 'L'exclusion de la Convention des Nations Unies sur les contrats de vente internationale de marchandises par la volonte des parties (Convention de Vienne du 11 avril 1980)', Recueil Dalloz Sirey (1990) p. 107. See also Ferrari, loc. cit n. 19, at p. 325, fh. 79, critizing a decision dated 29 March 1993 of the Tribunale Civile di Monza (retrievable on the UNILEX database, CLOUT Nr. 540), where it was said that Art. l(lXb) would only operate 'in the absence of a choice of law of the parties.' This statement seems indeed to be erroneous and cannot be shared. Ferrari's critic, however, seems to be excessive: as mentioned above, the mere fact that the parties have chosen 'the law of [a contracting state]' does not necessarily mean that the CSIG applies.

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In addition to the arguments pleading in favour of certainty and international harmony, the US possessed a further reason for excluding Article l(l)(b). In Appendix B to the Legal Analysis of the Convention which accompanied the Letter of Submittal to the President (Ronald Reagan), the Secretary of State (George Shultz) stated that 'this provision would displace our own domestic law more frequently than foreign law. By its terms, subparagraph (1 Xb) would be relevant only in sales between parties in the United States (a Contracting State) and a non-Contracting State. (.. .) Under subparagraph (1 Xb), when private international law points to the law of a foreign nonContracting State the Convention will not displace that foreign law, since subparagraph (1Kb) makes the Convention applicable only when "the rules of private international law lead to the application of the law of a Contracting State." Consequently, when those rules point to United States law, subparagraph (1Kb) would normally operate to displace United States law (the Uniform Commercial Code) and would not displace the law of foreign non-Contracting States. If the United States law were seriously unsuited to international transactions, there might be an advantage in displacing our law in favour of the uniform international rules provided by the Convention. However, the sales law provided by the Uniform Commercial Code is relatively modern and includes provisions that address the special problems that arise in international trade.'104 The US made an Article 95 reservation because it desired to preserve as much as possible the applicability of its UCC, apparently preferring its own law to that embodied in the CISG.105 This conviction - largely supported by the American Bar Association - is legitimate; however, contrary to the express allegation of the US,106 such a position considerably reduces the frequency ofthe Convention's applicability to international sales transactions.107 The CISG's international rules do not supplant US domestic law in a transaction involving, for example, an American seller and a Japanese buyer - two of the principle trading blocks in the world. This clearly rebuts the CISG's goal of establishing an international sales code.108 The US attitude

104. Reprinted from N. Galston and H. Smit, eds., International Sales: The United Nations Convention on Contracts for the International Sale of Goods (New York, Matthew Bender 1984) App. 1-27 and 1-28; see also Nicholas, loc. cit. n. 7, at pp. 207-208, who adds that the reason set forth by the US would also apply to the United Kingdom. 105. Randall and Norris, loc. cit. n. 13, at p. 616, who state that the US may even view Art. 2 of the UCC as superior to the CISG as a sales law. 106. See the first reference in n. 104, at App. 1-28. 107. See, e.g., Audit, op. cit. n. 39, at p. 24; Honnold, op. cit. n. 18, at para. 47.1; Winship, op. cit. n. 3, at p. 1-32. 108. Randall and Norris, loc. cit. n. 13, at pp. 615-616.

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also illustrates the inherent tension between sovereignty and multilateral treaties embodying substantive rules.109 This leads to a generalized commentary on the possibility of making a reservation under Article 95 of the CISC 3.3.3.5 The possibility ofmaking a reservation under Article 95: a general critique

It is regrettable that the Convention allows a nation to make a reservation under Article 95 and thus not be bound by Article 1 (1 )(b). A reservation under Article 95 considerably reduces the reach of the CISG and constitutes a brake-block to the effective spreading of a modern, well-suited tool. There is no persuasive justification to the restriction of the Convention's sphere of application generated by Article 95. If private international law principles establish that an international sales transaction has its closest ties with a contracting state, the application of the well-suited, largely accepted CISG seems generally more appropriate than the domestic rules on internal sales (for the case of an express choice of law clause in favour of 'the law' of a contracting state, refer to proceeding discussion). Additionally, the belief that the Convention should only be applicable to sales transactions concluded between parties who have their places of business in different contracting states cannot be justified by referring to the principle of reciprocity rooted in public international law. Indeed, the CISG is not aimed at ensuring the exchange of two equivalent performances between contracting states; the CISG has rather been designed to make sure that international sales transactions be governed by suitable rules. Finally and most importantly, it must be emphasized that the interplay between Article 1(1 )(b) and Article 95 raises some difficult questions in determining the law applicable to an international sales transaction. Intricate instances are examined subsequently. 3.3.4 Article l(l)(b) and Article 95: how do the different choices interfere? An analysis of some intricate permutations

Given the great number of variables one must consider (where the forum sits; where each party has his place of business; which state's laws are applicable under the conflicts rules of the forum; which state has made a reservation under Article 95), there are many possible cases in which the question of the Convention's sphere of application might arise.110 Fortunately, in most of the cases, the answer is clear. There are, however, some particular situations that continue to cause considerable - and harmful - uncertainty.

109. Ibid., at p. 616. 110. See Winship, op. cit. n. 3, at p. 1-27, who systematically examines 54 permutations in which the Convention's applicability is at stake.

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The considerable uncertainty caused by Article 95 is best evidenced by the fact that even the reservation's basic repercussions are still not unanimously fixed - not even for the reservation state itself. Article 95 eliminates the applicability of the Vienna Convention only in favour of the domestic law of the reservation state. If, for example, a New York court has to sit on a sales contract concluded between an American buyer and a Japanese seller, and the American conflicts rules point to the law of New York, the CISG will not apply. 1 " However, if the conflicts rules of the reservation state point to the law of a contracting state that has not made the reservation, the Vienna Convention does apply. Therefore, if in the example just presented, the American conflicts rules point, for instance, to Canada, the judge sitting in New York is required to apply the Vienna Convention regardless of the US reservation under Article 95.112 This conception of the interplay of Article l(l)(b) and Article 95 is supported by the legislative history of the latter. The goal of the promoters of Article 95 was to make sure that a judge sitting in a reservation state would not have to apply the Convention if private international law would lead to the application of the law of the forum."3 Unfortunately, this unequivocal purpose of Article 95 is sometimes misunderstood. According to Thieffry, for example, courts in the United States should not apply the Convention even in instances where their conflicts rules lead to the application of the law of a contracting state that has not filed a reservation under

111. See the proceeding example, section 3.3.1. 112. See Neumayer and Ming, op. cit. n. 31, at p. 46 (with additional references to writings supporting this view in fn. 35); are also supporting this view: I. Dore, 'Choice of Law under the International Sales Convention: A U.S. Perspective', 77 AJIL (1983) p. 521 at p. 535; Honnold, op. cit. n. 18, at para. 47.5 (example IF); Pelichet, loc. cit. n. 57, at pp. 40-43; H. Punder, 'Das Einheitliche UN-Kaufrecht - Anwendung kraft kollisionsrechtlicher Verweisung nach Art 1 Abs. 1 lit. b UN-Kaufrecht', 36 RIW (1990) p. 869 at p. 872; Vekas, loc. cit. n. 20, at p. 345; see also 'Rechtsprechung zum Wiener Kaufrecht', 3 SZIER/RSDIE (1993) p. 653 at p. 656. 113. Pelichet (a member of the committee in charge of drafting Art. 95), loc. cit. n. 57, at p. 43; see also ibid, text accompanying fh. 55 (where the author makes a parallel with the Geneva Convention on agency; this Convention contains the same reservation clause as the one embodied in Art. 95 of the CISG; the legislative history of the Geneva Convention also makes clear that the countries which called for this provision wanted the reservation only to be effective when the conflicts rules point to their own domestic laws). According to Pelichet, however, the domestic law of a reservation state may only prevail over the Convention if the forum is located in the actual reservation state with the judge applying his own private international law. I respectfully disagree on this qualification; see the explanations below under section 3.3.4.2.

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Article 95." 4 This opinion clearly contradicts both the legislative history and the basic purpose of Article 95. It is not supported by the official US statement justifying the reservation: US conflicts rules point to a foreign legal order, thus the problem of displacing US law (i.e., the UCC) is not an issue at all in this case. Furthermore, Thieffiy's opinion violates the foreign contracting state's will to apply the Convention in such an event. Finally, it might also provoke forum shopping since courts of different countries would adopt different positions. For these reasons, Thieffry's opinion must be rebutted. Hence, the effects of Article 95 on a court sitting in a reservation state - let us assume the US - may be summarized as follows: a sales contract to which at least one of the parties is from a noncontracting state and which, according to the forum's conflicts rules, is subject to the law of the forum (or the law of another reservation state) is not governed by the CISG but rather by the forum's domestic rules on sales, in this case presumably by the UCC. 3.3.4.2 The judge sitting in a contracting state whose conflicts rules point to the law of a country that has filed a reservation under Article 95

There is another much debated question that reveals the uncertainty surrounding a reservation filed under Article 95. The following example sets the puzzle: A has his place of business in New York. He contracts with B whose place of business is in Tokyo (Japan has not yet ratified the CISG). A files a suit in Switzerland. Its jurisdiction being assumed, the Swiss court concludes that according to Swiss conflicts rules, the contract is governed by US law. Does the CISG or the UCC apply? For both solutions, one will find eminent supporters." 5 In my opinion, the Swiss court should apply the UCC and not the Vienna Convention. Those in favour of

114. P. Thieffiy, 'Sale of Goods Between French and U.S. Merchants: Choice of Law Considerations Under the U.N. Convention on Contracts for the International Sale of Goods', 22 Int'l Lawyer (1988) p. 1017 at p. 1018 (fh. 3). For another opinion supporting this view, see the reference in Neumayer and Ming, op. cit. n. 31, at p. 46 (in fh. 35). 115. The application of the UCC in this case is supported by, for example, Neumayer and Ming, op. cit. n. 31, at p. 47 (with many additional references in fn. 37); Audit, op. cit. n. 39, at para. 23; Honnold, op. cit. n. 18, at para. 47.5 (example 1H); E. Erdem, La livraison des marchandises selon la Convention de Vienne: Convention des Nations Unies sur les controls de vente Internationale de marchandises du 11 avril 1980 (Fribourg, Editions Universitaires 1990) para. 153; Punder, loc. cit. n. 112, at pp. 871-872; Schlechtriem, op. cit. n. 21, at p. 27; idem, loc. cit. n. 20, at pp. 345-346; Vekas, loc. cit n. 20, at pp. 345-346; Volken, op. cit. 24, at p. 36; Winship, loc. cit n. 6, at pp. 524525, and idem, op. cit n. 3, at p. 1-53. On the other hand, the following authors would apply the CISG in this case: Siehr, loc. cit. n. 32, at pp. 601 et seq.; Stoffel, op. cit. n. 33, at pp. 28-29; idem, loc. cit. n. 103, at p. 173; additional references in Neumayer and Ming, op. cit. n. 31, at p. 47 (in fh. 37).

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the application of the CISG claim that a reservation filed by one contracting state could not have any effect whatsoever on the position to be adopted by other member states and that the intent and the underlying purpose of the Convention would be to guarantee its largest possible sphere of application. These arguments do not appear convincing. A state's decision to file a reservation under Article 95 cannot simply be ignored by other member states; such declarations must be respected within their true limits. The real effect of an Article 95 reservation is comparable to that of a switch-signal, indicating which set of substantive rules within the designated lex causae is applicable. The lex causae has not enacted the CISG for cases similar to this one, thus the Convention's rules are inapplicable. By refusing to consider the reservation filed under Article 95, the forum judge would fail to recognize the lex causae altogether.116 The solution advocated in this essay has also the advantage of respecting the harmony among international court decisions. In applying the domestic substantive rules of the lex causae rather than the CISG, the judge will indeed forestall forum shopping." 7 The opinion that the Swiss judge should apply the UCC and not the CISG in this particular instance is further supported by a corresponding explanation the Federal Republic of Germany filed in ratifying the Convention. Germany has not made a reservation under Article 95 and has therefore retained Article l(l)(b). It has, however, filed general remarks on the interpretation of Article l(l)(b). This explanation provides that if the conflicts rules of Germany point to the law of a country which has filed an Article 95 reservation, the applicable law is that country's domestic law and not the Vienna Convention.118 3.3.4.3 The judge sitting in a non-contracting state We have already seen that in a non-contracting state, the CISG cannot be applied autonomously.119 However, what about an application of the CISG through the means of the conflicts rules of the forum? Firstly, it seems to be unequivocal that when the conflicts rules of the forum point to the (domestic) rules of either a noncontracting state or a state that has filed a reservation under Article 95, the CISG does not apply.120 However, if the private international law of the forum points to

116. See, e.g., Neumayer and Ming, op. cit n. 31, at pp. 47-48 (with an additional supporting reference in m. 39). See also Schlechtriem, loc. cit n. 20, at pp. 345-346. 117. See, e.g., Honnold, op. cit n. 18, at para. 47.S. 118. Bundesgesetzblatt (BGB1) 1989 n at p. S86; Honnold, op. cit n. 18, at para. 47.5 (fii. 14); Punder, loc. cit n. 112, at p. 872; C. Witz, 'L'adhesion de la RFA a la Convention des Nations Unies sur les contrats de vente internationale de marchandises (Convention de Vienne du 11 avril 1980)', 6 RDAI/IBLJ (1990) p. 57. The German courts have to comply with mis authentic interpretation. 119. See above section 3.2. 120. See, e.g., Dore, op. cit n. 112, at p. 538; Punder, loc. cit n. 112, at p. 872 (with additional references in m. 47).

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the law of a contracting state, it is suitable to apply the CISG, since for international sales transactions, the directed state has substituted its domestic rules for the uniform law of the Vienna Convention. It must be emphasized, though, that in such instances, public international law does not impose any obligation on the judge of the forum to apply the Convention. Table 1, at the end of this article, is intended to summarize the most important and debated permutations of the Convention's applicability through the means of Article l(l)(b) and to give the reader a concise illustration of the applicability of the CISG.

4.

CONCLUSION

Undoubtedly, the Vienna Convention constitutes a very important codification and is a landmark in the evolution of the science of comparative law. It is also a welcome compensation for ceaseless efforts undertaken to harmonizetlifferent legal systems and cultures. The Vienna Convention is a major improvement on ULIS. The CISG is at the cross-roads of different traditions and constitutes an inestimable source of education and an effective means of rapprochement of all the 'families' characterizing the different legal systems that have participated in the elaboration of the CISG. The achieved unity should not be jeopardized without due cause. This duty to an effective application of the uniform law has been embodied in the Convention itself. Indeed, Article 7 of the Convention states that '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 request is particularly apropos with regard to the conditions of the Convention's applicability and the determination of its scope. In applying Article 1, one should always keep this request in mind. Ideally, the Convention's sphere of application should therefore be as wide as possible. Unfortunately, this goal of wide applicability has partly beenfrustratedby the enactment of Article 95. However, now that contracting states have the possibility to file a reservation and to declare that they will not be bound by the conflictual method of determining the Convention's scope, the other member states must respect those declarations. It is hoped, however, that the already impressive list of states that have ratified the Vienna Convention, will continue to grow, for with each new ratification, uncertainty surrounding Article l(l)(b) decreases. The issue of an increased transparency and effectiveness in international sales transactions would definitely be well served.

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C. BERNASCONI

NILR 1999

Table 1. The conflictual method of defining the CISG's personal and territorial scope of application (Art. 1(1) I,)): 121
Forum: Contract between parties having their place of business in:122 IfPILof the forum leads to the application of the law of a NCS: Convention does not apply IfPILof the forum leads to the application of the law of a CS: IfPILof the forum leads to the application of the law of a CSR:

F-CS

P,: CS / P2: NCS P,: CSR / P2: NCS P,: NCS / P2: NCS

Convention does apply. Very controversial. However, if the parties have chosen the law ap- In my opinion, the plicable to their contract ('the law of [CS]'), the CISG should not apply question of the applica(see section bility of the CISG D. 3.3.4.2). should be considered carefully, especially if the parties have their places of business in two NCS (see section 3.3.3.3). Debated. In my opinion, the CISG should apply (see section 3.3.4.1). The possible application of the CISG is merely optional in this case and does not ensue from an obligation under public international law (see section 3.3.4.3). Convention does not apply

F-CSR

P,: CS

/ P2: NCS

P,: CStf / P2: NCS

P,: NCS / P2: NCS F-NCS P,: CS / P2: NCS P,: CSR / P2: NCS P,: NCS / P2: NCS

Convention does not apply

Convention does not apply

Convention does not apply

121. The abbreviations used in the synopsis have the following meanings: F = forum; P, and P2 = party 1 and party 2 to the contract; CS = contracting state (e.g., Netherlands, Switzerland); NS = non-contracting state (e.g., Japan, United Kingdom); CSR = contracting state with reservation according to Art. 95 (China, the Czech Republic, Slovakia, Singapore, and the United States); PIL = private international law. 122. Note that in all the following permutations, at least one party does not have his place of business in a CS; if both parties have their places in a CS or in CSR, the CISG applies under its Art. l(lXa).