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This article aims to clarify the duo-role of CISG: a source of applicable substantive laws in International Business Law and the applicable substantive law for contracts for the international sale of goods in the case of Vietnam as a contracting state of this convention.
CELEBRATE VIET NAM TEACHERS’ DAY 20/11/2018 ECONOMICS – SOCIAL SCIENCE THE ROLE OF THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (CISG 1980) IN INTERNATIONAL BUSINESS LAW AND VIETNAM NGUYEN THANH LE, NGUYEN DINH THUY HUONG Faculty of Navigation, Vietnam Maritime University Abstract Vietnam has become the 84th contracting state of the United Nations Convention on Contracts for the International Sale of Goods (CISG), the convention became into force in 1988 From the 1stJanuary 2017 this convention has come into force in the whole territory of Vietnam It is necessary to analyze the role of CISG in International Business Law and its entry into force in the context of Vietnam This article aims to clarify the duo-role of CISG: a source of applicable substantive laws in International Business Law and the applicable substantive law for contracts for the international sale of goods in the case of Vietnam as a contracting state of this convention Keywords: CISG, application Law, contracts for the international sale of goods, contracting state, entry into force of CISG in Vietnam Tóm tắt Việt Nam trở thành quốc gia thành viên thứ 84 Công ước Liên hiệp quốc hợp đồng mua bán hàng hóa quốc tế (CISG - Cơng ước Viên 1980), Cơng ước có hiệu lực năm 1988, kể từ ngày 01/01/2017, Cơng ước có hiệu lực ràng buộc toàn lãnh thổ Việt Nam Sự gia nhập nói cần thiết phải phân tích góc độ vai trò Cơng ước Viên 1980 pháp luật thương mại quốc tế nói chung hiệu lực Công ước bối cảnh Việt Nam Bài viết thực với mục đích làm rõ vai trò Cơng ước Viên nguồn pháp luật áp dụng luật Thương mại quốc tế pháp luật áp dụng cho hợp đồng mua bán hàng hóa quốc tế trường hợp Việt Nam, quốc gia thành viên Công ước Từ khóa: CISG, luật áp dụng, hợp đồng mua bán hàng hóa quốc tế, quốc gia thành viên, hiệu lực Công ước Viên Introduction In the international sale of goods, the United Nations Convention on Contracts for the International Sale of Goods (CISG 1980) is known as one of the most popular conventions with its 89contracting states Signed on April 11th 1980, the CISG came into force officially on the1st January 1988, after being ratified by 11 contracting states The structure of CISG is divided in 04 parts: Part I - Sphere of Application and General Provisions; Part II - Formation of the Contract; Part III - Sale of Goods; Part IV - Final Provisions The sphere of application of CISG does not apply to: the sale of goods bought for personal, family or household use; the sale by auction; the sale on execution or otherwise by authority of law; the sale of stocks, shares, investment securities, negotiable instruments or money; the sale of ships, vessels, hovercraft or aircraft and sale of electricity (article of CISG) This article limited the category of goods applied under CISG provision The CISG is only applied for the international business sale of visible (physically with a fixed form) and determinate goods The goods, the consideration of the sale contract must not be listed in the 2nd article of CISG The role of CISG in international business law is undiscussed because of the globalization of this Convention Moreover, it’s considered as the first substantive international convention that regulates directly the obligation of the seller and the buyer in a sale contract instead of resolving the conflict of law as many precedent conventions The legal basis in international business law will clarify the role of CISG in the context of Vietnam, especially, from January 1st 2017, the CISG has come into force in the whole territory of Vietnam Role of CISG in International Business Law The international business law’s existence is explained, at the beginning, to determine the law applicable for foreign trade, stricto sensu, and international exchanges, lato sensu This particular role has origin of the absence of a unique and unified legal basis to regulate international business exchanges In effect, the question about applicable law takes the central place in international business law It’s the consequence of lacking a legal harmonization; therefore, many disputes in international business law are resolved by the conflict of law This method will Journal of Marine Science and Technology No 56 – November 2018 43 CELEBRATE VIET NAM TEACHERS’ DAY 20/11/2018 determinate the law applicable of the country in which one party in the contract is domiciled (in case of individual human being), regardless of his/her nationality (in such case of a non human being entity a company, a lucrative organization, etc).By giving a direct solution to regulate the right and the obligation of the buyer and the seller in a contract for the sale of goods, the CISG contributes an important legal source to international business law (2.1), furthermore, this convention marks a pioneering role for the unification tendance in international business law at the end of the 20th century (2.2) 2.1 CISG 1980 - legal source of international business law To come into force in the whole sovereign territory of a state, an international convention must be ratified by the state, contracting state, according the rules of the Vienna convention on the Law of Treaties 1969 After the process of ratification, the convention will be executed, applied as the in the contracting state This is the classic manner for an international convention to come into force in the whole sovereign territory of a state that is also followed by the CISG When being ratified by a state-member, the CISG will come into force in the whole sovereign territory of a state The CISG will be appllied automatically for all international contracts for sale of goods, according to its sphere of application (in particular article - Basic Rules of applicability; internationality; relation to Contracting State and article - Exclusions from the Convention) if the parties of the sale contract don’t have any other agreement about law applicable (choice of usage or choice the commercial law of another different state that the parties can make profit from - phenomena tax dodge of forum shopping) Applied in 89 contracting states, the CISG 1980 has become a true source of law to reference In the end of the 20 th century, while the globalization was seeded and got many remarkable points (the formation of World Trade Organization; the rise in the number of multilateral trade conventions), the CISG, with a limited and determinated sphere of application (only for the contract for sale of goods), is appreciated as a great success of the United Nations Commission on International Trade Law (UNCITRAL) The CISG, in particular, is considered as a special source of law in International business law In fact, due to the absence of a legal unification, the most important issue of international business law is to determine the law applicable and the competence court within the judicial system of a state when a dispute exists However, the conflict of law solution is not proposed in CISG 1980 The jurists, when drafting CISG, had a different solution that could be considered better than the conflict of law: Drafting a substantive law applicable; within 101 articles regulated in detail the formation of an international contract for sale of goods In fact, the CISG does not give us a solution like the conflict of law that will lead to the application of the law of a determinated state The CISG, a substantive law, regulates directly the formation of the contract (included offer; acceptance; fundamental breach); the obligations of the seller (included conformity of the goods and third-party claims; delivery of the goods and handing over of documents; remedies for breach of contract by the seller); the obligations of the buyer (included payment of the price; taking delivery; remedies for breach of contract by buyer; passing of risk); the provisions common to the obligations of the seller and of the buyer (included anticipatory breach and installment contracts; damages; interest; exemptions; effects of avoidance; preservation of the goods) Moreover, the contracting states of CISG have the reservation right to apply this convention This is the reason why the parties in the sale contract whose nationality of the parties or whose the civil or whose commercial character of the parties or of the contract “is to be taken into consideration in determining the application of this Convention”, are not depend on the application of this convention The parties can agree not to apply the CISG in their contract; or apply the CISG in adding the other international condition terms (Incoterms); or apply the CISG and another commercial usage concerning particularly the contracted goods On the subject of a contracting state, the CISG has its territorial sphere of application when being applied for the international contract for sale of goods when the parties whose places of business are in parties whose places of business are in contracting state In case of “more than one place of business, the place of business is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract” (article 10 - Definition of "place of business) If the contracted parties have their place of business in different states that are not contracting states of CISG, the CISG will still be applied “when the rules of private international law lead to the application of the law of a Contracting State” (article 1, paragraph 1, subparagraph b) Finally, there is no requirement neither from nationality, nor the civil or commercial character of the parties for the parties to use the CISG in their contract (article 1, paragraph 3) That means using 44 Journal of Marine Science and Technology No 56 – November 2018 CELEBRATE VIET NAM TEACHERS’ DAY 20/11/2018 the CISG depends directly on the vonlunteer of the parties despite of their nationality or their place of business 2.2 CISG 1980 - pioneering role for the unification tendance in international business law Before the existence of CISG, there were many conventions rarely applicable to international sale of goods such as: Convention on the Law Applicable to International Sales of Goods (The Hague, 1955); Convention on the Limitation Period in the International Sale of Goods (New York, 1974); Convention on the Law Applicable to International Sales of Goods Convention on Agency in the International Sale of Goods (Geneva, 1983) The CISG brings about an adequate solution concerning the absence of legal unification for international contract for sale of goods that had never been resolved before Certainly, to have a common solution for the international contract for sale of goods gave such a limited sphere of application, according to the 1stfive articles of CISG concerning Basic Rules of applicability; internationality; relation to Contracting State (artcle1); Exclusions from the Convention (article 2); Goods to be manufactured; services (article 3); Issues covered and excluded; validity and the effect on property interest in the goods sold (article 4) and Exclusion of liability for death or personal injury (article 5) Therefore, theses limits of the sphere of application are not highly appreciated by many jurists Nevertheless, the pioneering role of CISG 1982, in the effort to harmonize and unificate the unified international business law is undiscussed Following the success of CISG 1980, the Unidroit principles were drawn up by Unidroit, the International Institute for the Unification of Private Law in Roma, Italy Moreover, the principles on European Contract Law drawn up by the Commission on European Contract Law (also known as the “Lando Commission”), were inspired by CISG 1980 and the Unidroit Principles In effect, the European Union always takes a pioneering place in the legal unification tendance Therefore, it’s not evidence that the CISG 1980 was signed in Vienna, the capital of Austria, a member state of European Union, the “cradle” of the legal unification tendance Furthermore, the European Union is considered as an intergovernmental organization that has the most unified legal system in the world Grossomodo, there is a duo-role of CISG in international business law: CISG 1980 is not only the pioneer of unified legal tendance but also a substantive law that has a reference value For its 89 contracting states in particular, the CISG is applied for the international contract for the sales of goods Role of CISG in the context of Vietnam The ratification and accession to CISG of Vietnam mark a clear difference between two legislative processes in Vietnam: Before the CISG accession and after the CISG accession 3.1 Role of CISG before the accession of Vietnam The CISG accession plan is classified in a long term project of the Vietnamese National Assembly and the Government of Vietnam in the goal of promoting the internal economic growth and accessing to global market This accession plan is prepared by the participating of Vietnam as a member of World Trade Organization - WTO, in 2007 During the accession procedure, the Vietnamese legal system had been reviewed generally and amended totally in multi-domains This would help our legal system to have a closer vision in comparison with global standard rules Corresponding to the economic integration, the legislative procedure in Vietnam is highly appreciated Before 2015, when Vietnam had not been a contracting state of CISG, in many legal codes, there are certain provisions that are similar with the global standard provisions in business law The Arbitration Law 2010, the Commercial Law 2005 (chapter II - sale of goods) that are similar partially with the modal laws drawn up by UNCITRAL, can be listed as the result of this harmonization tendance The legislative efforts helped our legal system to harmonize with the international legal standards, however, at that moment, in Vietnam, CISG was only considered as a source of law with the reference value in international business law The CISG was applied on the territory of Vietnam in such would be the case only if “(…) the rules of private international law lead to the application of the law of a Contracting State” (article 1(1) (b) of CISG) It’s the classic application method by conflict of law In any way, it cannot be denied that the legislative harmonization, in Vietnam, in international business law and in the sale of goods, is a necessary stage toward the highest legal integration: the legal unification Journal of Marine Science and Technology No 56 – November 2018 45 CELEBRATE VIET NAM TEACHERS’ DAY 20/11/2018 3.2 Role of CISG after the accession phrase of Vietnam Being a contracting state of CISG is a proof for the favorite of Vietnam to the legal unification process At the beginning, the Vietnamese legislators had a strategic vision that did not stop at the legal harmonization Accessing to the legal unification is the most valuable goal of legislative project on the subject of CISG The legal unification helps us to have the transparency in legal system and in business that will make many positive economic results On the 24th November 2015, the President of Vietnam promulgated the Decision n° 2588/2015/QĐ-CTN, concerning the accession of Vietnam to the CISG This convention came into force in the whole territory of Vietnam from January 1st 2017 After Singapore, Vietnam is the 2nd country in ASEAN becoming a contracting state of CISG Due to the status of Vietnam as a contracting member of CISG, the CISG is used officially for the international contract for the sale of goods between the parties whose places of business are in Vietnam and in 88 others contracting states if the parties in the contract don’t have any another agreement about the substantive law applicable Additionally, the provisions concerning the choice of law applicable for the international contract for sale of goods don’t have any effect between the parties whose places of business are in different contracting states Vietnam and in 88 others contracting states if the parties in the contract don’t have any another agreement about the substantive law applicable If the parties whose places of business are Vietnam and in 88 others contracting states of CISG don’t determinate the law applicable for the contract, nor have any another agreement about the substantive law applicable, the CISG will be applied automatically for the contract Furthermore, if the rules of private international law lead to the application of the law of Vietnam, the CISG will be applied for the contract It is important to remind that “neither the nationality of the parties nor the civil or commercial character of the parties or of the contract is to be taken into consideration in determining the application of this Convention” (article 1(3)) However, when the parties in the contract don’t have any another agreement about the substantive law applicable, the criteria to determinate the application of CISG is the element of “place of business”, instead of the nationality of the parties The CISG accession is classified in a long-term project of Vietnam in order to promote economic growth and to access to international trade Conclusion In conclusion, in international business law, the CISG is an important substantive source of law for the sale of goods The CISG is not only a reference source of law but also a substantive law applicable as the result of the conflict of law Furthermore, the CISG is applied for the sale contract of goods in the contracting states if the parties in the contract for sale of goods not have any another agreement about the substantive law applicable REFERENCES [1] CISG for Vietnamese practitioners accessed at https://cisgvn.wordpress.com [2] UNCITRAL, Thirty-five Years of Uniform Sales Law: Trends and Perspectives, 2015 [3] CISG Database of Pace Law School accessed at: https://www.cisg.law.pace.edu/cisg/text/cisgtoc.html Received: Revised: Accepted: 46 11 January 2018 14 March 2018 08 Apirl 2018 Journal of Marine Science and Technology No 56 – November 2018 ... to international sale of goods such as: Convention on the Law Applicable to International Sales of Goods (The Hague, 1955); Convention on the Limitation Period in the International Sale of Goods. .. Convention on the Law Applicable to International Sales of Goods Convention on Agency in the International Sale of Goods (Geneva, 1983) The CISG brings about an adequate solution concerning the. .. as the result of the conflict of law Furthermore, the CISG is applied for the sale contract of goods in the contracting states if the parties in the contract for sale of goods not have any another