It’s a Bird… It’s a Plane… It’s CISG 2.0?

On 10 July 2012, UN Information Services released a press release reporting about UN Commission on International Trade Law’s 45th annual session, which took place in New York from 25 June to 6 July 2012. While UNCITRAL finalized and adopted important new texts pertaining to public procurement and arbitration rules during this session, the much-anticipated issue beyond all others – at least within our little circle – was UNICITRAL’s response to Switzerland’s proposal for future work in the area of international contract law.

According to the press release, the Commission “agreed that a meeting or symposium should be held on the topic of general contract law with a view to determining the desirability of future work in that field.” If the Commission is to follow the scope of Switzerland’s proposal, this future “meeting or symposium” will likely focus on the Vienna Sales Convention (“CISG”) and to a lesser extent, other subsequent unification measures. This assumption is based on Switzerland’s statement that although CISG has enjoyed success in “bringing about unification of sales law,” as it is, “CISG cannot satisfy all the needs of the international commercial community in relation to contract law.”

The areas in which the CISG is grossly inadequate, according to Switzerland – or anyone else who has bothered to read the convention – are on issues such as agency, assignments, and mistakes where the text leaves the appropriate answers to domestic legislation. Moreover, in areas such as battle of the forms and specific performance, CISG is frustratingly open-ended, leaving gaps in the contract. This void creates the need for supplemental measures to the CISG, which defeats the whole purpose of having a “unifying law of contracts” in the first place.

It is the hopes of those with vested interest in the development of CISG that the upcoming “meeting or symposium” – which is suspiciously singular and not plural – will address these flaws so as to increase the value and utility of these unification rules. In considering ways to improve CISG or any of its subsequent offshoots tasked with a similar aim, we hope that UNCITRAL will take into consideration variety of voices. In other words, we hope that UNCITRAL will listen not only to member states, legislatures and lobbyists, but to truly listen and digest the opinions of academics, practitioners and most importantly, the end users of the new rule.

On a related but slightly different note (and I apologize for the forthcoming brazen self-promotion in advance), MEPLI recently hosted a conference, which brought together prominent academics, practitioners, and representatives from esteemed institutions including the Secretary of UNCITRAL, Renaud Sorieul. The conference, which was titled “Competition in International Sales Law–Perspectives on Choice”, provided a platform for these experts to exchange their opinions regarding the multitude of international contract/sales laws available and what it means to choose one over the other. The forthcoming conference report will provide a more detailed description of the items discussed during this conference, but suffice to say here, there is an alarming disconnect between how the academics perceive this availability of choice and how the practitioners see it.

In the mean time, proponents of CISG or other unification measures must hold their collective breathes and keep their fingers tightly coiled and crossed that this “meeting and symposium” will eventually lead to a new and improved CISG to usher in the new era of what some people have coined as “CISG 2.0”.

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CESL v CISG

On 11-12 May, the Max Planck Institute for Comparative and International Private Law held a so-called ‘CISG Conference’ where experts on the international sale of goods came together to review the Vienna Convention in the light of similar structures such as its latest contender, the Common European Sales Law, or the UCC. Accompanied by William Bull and Mark Kawakami, my hopes were high as we were eager to hear what world renowned speakers made of fresh European private law developments (and why not, draw inspiration from that).

Who were these speakers and what did they cover? For a very structural feedback of the program, it is worth saying that the organizers, led by Ulrich Magnus (Hamburg) covered no less than four continents: Harry Fletchner (Pittsburgh) and Larry DiMatteo (Florida, Gainesville) covered the USA, Bruno Zeller (Victoria) brought the Australian perspective, Franco Ferrari (NYU) gave insights into the African experience and Ulrich Magnus himself, joined by Robert Koch (Hamburg), went straight to one of the most sensitive debates of the event, referring to Europe and its CESL.

Attending a Max Planck Institute event was in my case a premiere. It so goes without saying that I was impressed with the quality of information disseminated there, whether I’m talking about the speaker panels or the audience in general (even Reinhard Zimmermann himself joined some of the sessions). However, the tone of the discussion was somewhat predictable. Assemble a room full of CISG-friendly high-profile researchers, and no matter how neutral they strive to be in their analysis of all non-CISG regional sales law, the end result will always bear an echo of ‘if only more universities taught CISG courses, this would be a better commercial and legal world’. Being less familiar with Australian or African sales law, I will focus on depicting the sessions covering the USA and Europe (Although truth be told, I cornered Bruno Zeller in one of the coffee breaks before his talk – who by the way, finished his PhD in two years part-time; Intimidating. – to ask him about how the application of the CISG in Australia can be described overall and he instantaneously replied ‘poor’.)

The USA experience portrayed by Harry Fletchner and Larry DiMatteo was focused on comparative perspectives between the CISG and the UCC. The discourse was fluid and narrative, emphasis was placed on the drafting procedures, generous references to Karl Llewellyn were made, together with some comments on the desirability of provision reviews, interesting differences were underlined (e.g. Statute of frauds – CISG less formal) and then the conclusion followed naturally: practitioners are not rejecting the CISG, it is just a matter of the latter being applied where it is eligible to be applied. End of story. A very descriptive example of two sales regimes competing for jurisdiction, with an overall constructive message.

But then, the acronym CESL was pronounced (very chameleonic set of letters, I don’t think there were two speakers pronouncing it in the same way) and the audience caught fire. Ulrich Magnus and Robert Koch did a wonderful job trying to have a neutral researcher’s take on the CESL, and while the first approach was rather anatomical, focusing on specific provisions, the second was more case-study oriented, as Robert Koch actually adapted a case to understand the sequences of conflict of laws. The message resulting from both presentations: the CESL is trying to replace the CISG, and wrongfully so, since the CISG has all instruments necessary to cover situations arising from contracts of sale, while the CESL is a mere theoretical tool that should stay theoretical. The issues touched upon were extensive and covered, amongst others, procedural aspects, like jurisdictional issues (e.g. if a contract is covered by the CISG by virtue of its opt-out nature, what happens if the parties actually opt into the CESL?), substantive aspects, like the scope of the CESL on contract actors and its specific category of SMEs (to quote DiMatteo “What is a shmee? Maybe something like a shinook.”), but the exciting part if I may say so, was that even political aspects were addressed. This was very much reflected by a discussion on how the Commission has a plan to take over contract law, and it is doing so gradually. There was even intense speculation on how the CESL will enter into force in no time and when the Commission will make a point by showing that legislative efforts creating an optional instrument do not support the internal market, a creeping mandatory instrument on European private law will take CESL’s place.

So in the end I was rather confused. Was it a CISG conference, was it an anti-CESL conference, probably the answer lies in the eye of the beholder. One thing is for sure: I am getting really interested in this topic and am looking forward to episode 2 of the Cecil/Sezl/Ceezil/Sesl debate, here, at M-EPLI, on June 15.

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The Harmonization of European Law: An Ignorant American’s Perspective

There is much emphasis in the European legal discourse about the importance of harmonization and whether it is attainable, sustainable, and/or desirable. The irony in all of this – at least from my rather uninformed, American perspective – is that in continuously proposing new instruments and “better methods” to harmonize European law (see e.g. DCFR, CESL, etc.), the average consumer is left with more choices, but not necessarily with tangible benefits.

As the merits of these new, allegedly harmonizing proposals continue to be discussed amongst the academics, the European Commission appears to lean on the side of caution. In other words, rather than promulgating any measure via a directive or a regulation, the EC opts to appease all parties by making the instruments optional or voluntary in nature (a subject I learned a great deal from a lecture given by my colleague, William Bull, who specializes in this particular area). By increasing the number of choices available via these optional instruments, what the EC is essentially doing is giving businesses and consumers alike a bigger buffet of rules to choose from.

While giving people the freedom to choose is often seen as democratic – or as something inherently good – modern psychologists have suggested that an abundance of choice is not necessarily good, but at times, rather inhibiting and possibly harmful to the actual decision making process. (Iyengar and Lepper, 2000). The phenomenon called the Choice Overload Problem (or similarly the Paradox of Choice) essentially states that giving a consumer an abundance of choice freezes them from actually making an intelligent choice. Even when they do make a choice, there is instant regret (based on the idea of opportunity costs) about not having picked one of the myriad of other possible choices. (Schwartz, 2004). Given this hindrance, some psychologists claim that the more choices that a consumer has, the less likely that they will actually make the purchase. This phenomenon is often illustrated by a study conducted by Proctor & Gamble, which showed that after they reduced the number of Head and Shoulders shampoo available to customers from 26 to 15, Proctor & Gamble increased their sales by 10%. (Osnos, 1997).

I must quickly point out my own ridiculousness here, that yes, I am indeed comparing a business choosing a particular legal framework to a customer picking a particular brand of shampoo, but I posit that the comparison is not too ridiculous as to refute the studies conducted by Iyengar, Lepper, and Shwartz entirely. Following their logic, perhaps what ails the European legal system is not necessarily the debate over whether European harmonization is desirable or whether the European Commission is acting ultra vires when promulgating a particular directive/regulation, but it is the overabundance of these optional instruments, guidelines, and other measures that needlessly increase the number of legal authority that the legal consumer must consider before taking action.

Given this background, there are two major concerns that continue to bother me if this state of overabundance is to continue: 1) entities from non-European countries will be reluctant to do business with European companies relying on the “uncertain” European rules, thus decreasing the attractiveness of doing business with Europe; and 2) even an aspiring student of great intelligence will opt to study a more straightforward and concrete national law for the fear that studying European law is a senseless task, given the very real possibility that by the time they graduate, what they’ve learned is obsolete.

As a former practitioner and a newly self-proclaimed academic, I understand that studying the law is supposed to be a challenge – a worthy one at that. However, when there is an overabundance of legal authorities and a constantly changing scheme, I merely suggest that there ought to be a line drawn somewhere separating a difficult challenge from an absurdly senseless challenge where the goal keeps moving further and further away every time one draws near.

My concluding remark, for which I am soliciting criticism, is that from a rather ignorant American’s perspective, the cost of learning, debating, and trying to apply the continuously changing (or “harmonizing”) European law is so cumbersome that perhaps it is doing more harm than good to the European legal framework.

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!! If anyone is remotely interested in the subject discussed above, or the relationship between psychology and the law in general, I strongly recommend that you join us for MEPLI’s roundtable on 15 June 2012, where the infinitely awesome, Dr. Gary Low will be presenting “a psychology of choice of law.” I guarantee that it will be a more worthwhile endeavor than reading my post, not to mention that it will actually be educational.

For more information, please follow this link and RSVP by 8 June 2012:

Thanks for reading!

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The Global Challenge of International Sales Law

I just returned from a conference at the University of Florida devoted to Global Challenges of International Sales Law. The organiser of this conference was Larry DiMatteo from the UF Warrington College of Business Administration. He managed to bring together experts on the CISG from around the world, including many German and American colleagues. I enjoyed the conference very much, not only because of the excellent organisation and the great hospitality exposed to the participants, but also because of the substantive discussions. I am not an expert on the CISG, but my job was to talk about the ‘problems of uniforms laws.’ This meant that I could play the role of the contrarian. The feeling among most CISG experts is that the Convention is a huge success because of the 77 countries that ratified it. However, my own perspective for measuring success is the extent to which the CISG is in fact preferred by commercial parties over the applicability of some domestic law – and here I am skeptical.

There is one thing that struck me at the conference. This is that the circle of people writing about the CISG is usually not very much aware of the debate about European private law, and the other way around. This is a pity: in my view both discussions are about a similar question: do we need uniform laws and, if so, how should we put these into place? Perhaps the recent proposal of the European Commission for a Common European Sales law will bring both circles closer together. At the roundtable conference that MEPLI will organise on 9 December 2011, Nicole Kornet will in any event talk about the relationship netween the CISG and the proposed CESL.

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