Introduction
Relatively few US court cases deal with the United Nations Convention on Contracts for the International Sale of Goods (hereinafter CISG). Indeed, parties to contract usually agree to exclude its application, probably due to the reluctance of lawyers to familiarize themselves with it[1]. Even more disconcerting is the fact that US judges are also unfamiliar with the CISG and tend to misapply it, often looking to the Uniform Commercial Code for guidance[2], and ignore[3] that the CISG’s provisions are subject to an autonomous and non-nationalistic interpretation, seeking guidance from foreign decision, pursuant to Article 7(1) of the CISG[4]. Foreign cases have persuasive value[5], and only this approach will fulfil the objective of the Convention; to establish uniform rules on the formation and performance of international commercial contracts for the sale of goods.
In Rienzi & Sons, Inc. v. N. Puglisi & F. Industria Paste Alientari[6] (hereinafter Rienzi), the Court of Appeals followed the District Court’s nationalistic approach stating that there was no controlling case on the issue[7]. Rienzi is a case where all applicability conditions of the CISG were met, but through-out the litigation the parties only pleaded national law. Three years after the submission of the initial complaint, the plaintiff, Rienzi, asserted for the first time that the CISG applied. Had the Court just taken a look at foreign cases, it would have noticed that case law on the application of the CISG addressing the parties conduct in litigation exist and is sufficiently prevalent[8].
These foreign courts, including leading CISG scholars, have commonly accepted, although not always expressly, that the CISG is applicable ex officio[9], and that the only escape from it is when parties exercise their rights under Article 6 of the Treaty and exclude its application[10]. Moreover, their prevailing position is that arguing solely on the basis of domestic law does not lead to the exclusion of the CISG[11]. However, with Rienzi, the Court of Appeals departed from these assertions.
While it stated that the CISG was “mandatory unless the parties expressly opt out”, it still concluded that Rienzi had excluded the CISG by “consent[ing] to the application of New York law”, and “untimely invoking the CISG”. It is unclear whether the judges’ ruling was based on the consent of the parties to opt out of the CISG following Article 6, as the Court ignored Article 6 in its decision (I), or if the untimely invocation of the CISG informed the decision (II).
I) Sufficient express consent to opt out of the CISG
First, the main critique relates to the wording of the judges’ ruling that consent to the application of New York law formed the intent of the parties to opt out of the CISG as the CISG is part of federal law. The selection of the law of New York cannot form an exclusion as the CISG, being part of the law of a Contracting State, is by extension the law of its territorial units[12]. A choice of New York law should therefore be intended as “both making the CISG applicable (as part of the chosen law) and as determining the law applicable to the issues not governed by the CISG (…) thus avoiding to have to resort to the complex rules of private international law in order to determine the law applicable to the issues not governed by the CISG”[13]. US Courts have diverged on this point; while some view selection of the law of a State as an exclusion[14], other follow the majority opinion that it is insufficient[15]. Such differences undermine uniformity and a consistent approach should be favored.
Second, it is questionable whether consent through conduct in litigation appropriately qualifies as the exercise of the Article 6 exclusion. There is nothing in Article 6 concerning the form of an effective exclusion. Article 8 provides that parties consent can be inferred[16] and that “all relevant circumstances of the case including (…) any subsequent conduct by the parties”[17] should be considered in discerning intent. Some scholars support the opinion that this conduct must be clearly manifested[18], others say that Article 8(2) CISG points to a lower threshold; that the intent is the one that would be inferred by a reasonable person[19]. Either way, courts should be careful to consider alternative explanations for the failure to plead or argue the CISG during the proceedings, as parties cannot intend to exclude it unless they are aware of it[20]. Therefore the reasoning of the District Court in finding that since the CISG is mandatory “Rienzi had notice to the potential applicability of the CISG at the time it filed the Complaint”[21] is unsatisfactory. The mandatory application of the CISG, renders Rienzi’s lawyer, and not Rienzi himself, under the obligation to be aware of the Convention[22]. Even for those who argue that lawyers are agents of the parties, proof must still be found that they knew the CSIG was applicable and consciously excluded it. Should that be the case, this might constitute professional malpractice by the lawyer that has violated his client’s interest by excluding the CISG when the CISG would have been favorable to the latter[23].
The reasoning of the Court of Appeals in finding that invocation of a New York statute incompatible with the CISG constitutes an effective derogation[24] is also unsatisfactory as the Court should again be more careful in guessing the intent of parties. This approach is doubly problematic for US judges as it entails being familiar with the CISG; evidence will only exist when the state law that is relied on is found incompatible with the Convention. Indeed, this ruling suggests that reference to a domestic statute compatible with the CISG would not constitute intent to opt out under the Court’s reasoning. Another uncertainty that this holding brings is whether Rienzi’s assertion of the statute of frauds is sufficient to amount to consent to opt out as the Court of Appeals merely states that it “supports the conclusion”. Indeed, the Court then goes on to point to other factors that prove consent of Rienzi to opt out and it is unclear whether each factor taken separately would amount to consent or whether it is the accumulation of these factors that culminate in Rienzi’s consent.
II) Domestic procedural law should not be used to exclude the CISG
Procedural law has been used by some courts in order not to apply the CISG[25]. It is very probable that in Rienzi, the district court was expressing its holding in terms of equity estoppel[26]. Equity estoppel prevents one party from taking a different position at trial than it did at an earlier time if the other party would be harmed by the change. The district court’s refusal to apply the CISG was based on its concern for the defendant’s reliance on earlier pleadings[27] as well as a concern that the plaintiff may be trying to achieve a strategical delay to the detriment of the defendant[28].
Although the Court of Appeals’ reasoning was centered on proving that Rienzi has consented to the application of New York law, it expressed concerns about timeliness in its conclusion that “the district court did not err, much less abuse its discretion, in finding that Rienzi had consented to application of New York law to the contract claims at issue before its untimely 2011 invocation of the CISG”, suggesting that the procedural doctrine of untimeliness supported its conclusion, as it did in the GPL Treatment case[29].
Some commentators have argued that as the provisions of the CISG do not displace local procedures, courts may use procedural domestic law in these cases as they involve not only the interpretation of Article 6, but also the expenditure of judicial resources[30] . However, the majority argue that the CISG exclusively provides the conditions for its own applicability[31], and notwithstanding procedural domestic law judges must apply the CISG in Contracting State as it is the corollary of the ex officio application of the CISG[32]. If judges each apply their own procedural rules this undermines the uniform and predictable interpretation of Article 6, which has to be interpreted non-nationalistically, and this would lead to an increase in adjudication costs in the long run. Asking the parties early in the proceedings if they are aware that the CISG applies and if they have agreed to exclude it would be a better way to prevent strategic behavior of lawyers in a time and cost-effective manner[33].
The Court of Appeals’ failure to apply the CISG when it is applicable amounts to a breach of international obligations[34], and an untimely pleading of the CISG does not relieve courts from their duty to apply international conventions. The court in Rienzi should therefore have decided the case under the CISG sua sponte or requested additional briefs[35].
Conclusion
In any international contract for the sale of goods, the drafters must be vigilantly aware of the inclination of US courts to hold as they have in Rienzi. Although the CISG is applicable ex officio, it is recommended to explicitly include the CISG in the choice of law clause of the contract.
In the future, it is hoped that lawyers and judges will become more CISG-friendly, paving the way towards uniformity, legal certainty and the development of international trade, reasons why the CISG was enacted. The position has already significantly improved over the past five years[36]. The success of the Willem Vis International Moot Competitions in Vienna, which focuses on the application of the CISG and in which law students from more than forty US Universities participate each year[37] can be expected to significantly enhance acknowledgement and interest of the CISG amongst future US lawyers.
Louise Malécot
The author is a Class of 2017 LL.M. student in the International Business Regulation, Litigation and Arbitration program at the New York University School of Law. She is a graduate of the English and French Law LL.B./Maîtrise Dual Degree Program from the Leicester Law School and the University of Strasbourg.
[1]P.L. Fitzgerald, The International Contracting Practices Survey Project, https://jlc.law.pitt.edu/ojs/index.php/jlc/article/viewFile/15/15 at pages14 and 23; L. Spagnolo, A Glimpse through the Kaleidoscope: Choices of Law and the CISG, http://www.cisg.law.pace.edu/cisg/biblio/spagnolo3.html at pages 135 to 139.
[2]See for e.g. US Southern District Court of New York, Eldesouky v. Aziz (2015) where the Court went as far as holding that “as a practical matter whether the UCC or the CISG governs is likely immaterial”.
[3]F. Ferrari, Homeward Trend and Lex Forism Despite Uniform Sales Law, http://www.cisg.law.pace.edu/cisg/biblio/ferrari17.html at page 26; S. Salama, Pragmatic Responses to Interpretive Impediments: Article 7 of the CISG, An Inter-American Application, http://www.cisg.law.pace.edu/cisg/biblio/salama.html at page 231.
[4]F. Ferrari, Have the Dragons of Uniform Sales Law Been Tame? Ruminations on the CISG’s Autonomous Interpretation by Courts, http://www.cisg.law.pace.edu/cisg/biblio/ferrari18.html at page 139.
[5]Supra note 4 at page 164.
[6]US Court of Appeals for the Second Circuit, Rienzi & Sons, Inc. v. N. Puglisi & F. Industria Paste Alientari (2016).
[7]US District Court for the Eastern District Court of New York, Rienzi & Sons, Inc. v. N. Puglisi & F. Industria Paste Alientari (2014), reconsideration of its previous 2013 decision (“there is little case law interpreting the CISG, and the Court is not aware of any controlling case considering application of the CISG that addresses post-contract actions, particularly, the parties’ actions during the course of litigation”).
[8]See for e.g. Slovak Republic Supreme Court, 3 Obo 247/2005 (2006); Germany Naumburg Court of Appeal, 12 U 153/12 (2013); Austria Linz Court of Appeal, GZ 3 R 46/08t-49 (2008); Mexico Federal Court of Appeals (Fifteenth Circuit Court), Georgia Pacific Resins, Inc. v. Grupo Bajaplay, S.A. de C.V (2007); Germany Rostock Court of Appeal, 6 U 126/00 (2001); Germany Hamm Court of Appeal, 11 U 191/94 (1995); Netherlands Rotterdam District Court, Eyroflam SA v. PCC Rotterdam BV (2008); Italy Tribunale di Padova, SO. M. AGRI s.a.s di Ardina Alessandro & C. v. Erzeugerorganisation Marchfeldgemüse GmbH & Co. KG (2004); Germany Saarbrücken District Court, 8 O 49/02 (2002); Italy Tribunale di Vigevano, Rheinland Versicherungen v. S.r.l. Atlarex and Allianz Subalpina S.p.A. (2000).
[9]G.M. Grant, The CISG Should Apply Ex Officio in the U.S., https://www.peacepalacelibrary.nl/ebooks/files/398263361.pdf at page 5; C. Witz, Harmonization in the European Union, http://www.cisgbasel2015.com/index_htm_files/21_paper_Claude%20Witz_Harmonization%20in%20the%20European%20Union.pdf at ¶ 34; L. Spagnolo, Iura Novit Curia and the CISG: Resolution of the Faux Procedural Black Hole http://www.cisg.law.pace.edu/cisg/biblio/spagnolo1.pdf at page 195; France Cour de Cassation, Société Muller Ecole et Bureau v. Société Federal Trait (2001); Austria Supreme Court, 4 Ob 179/05 k (2005).
[10]F. Ferrari, Remarks on the UNCITRAL Digest’s Comments on Article 6 CISG, http://www.cisg.law.pace.edu/cisg/biblio/ferrari13.html#92.
[11]See cases supra note 8.
[12]L. Spagnolo, supra note 9 at pages 195 to 196.
[13]F. Ferrari, Specific Topics of the CISG in the Light of Judicial Application and Scholarly Writing, http://www.cisg.law.pace.edu/cisg/text/franco6.html.
[14]See for e.g. US Southern District Court of New York, Ho Myung Moolsan, Co. Ltd. v. Manitou Mineral Water, Inc. (2010); US District Court of Rhode Island, American Biophysics v. Dubois Marine Specialties (2006).
[15]See for e.g. US 5th Circuit Court of Appeals, BP International, Ltd. v. Empressa Estatal Petroleos de Ecuador (2003); US Middle District Court of Pennsylvania, It’s Intoxicating, Inc. v. Maritim Hotelgesellschaft GmbH and Daniela Zimmer (2013); US District Court of Minnesota, Travelers Property Casualty Company of America v. Saint-Gobain Technical Fabrics Canada Ltd (2007); US District Court of Michigan, Easom Automation Systems, Inc. v. Thyssenkrupp Fabco (2007); US Western District Court of Washington, Beltappo Inc. v. Rich Xiberta, SA (2006); US District Court of Maryland, American Mint LLC v. GOSoftware Inc. (2006); US District Court of New Jersey, Valero Marketing &Supply Co. v. Greeni Oy (2005); US District Court of North Dakota, Ajax Tool Works, Inc. v. Can-Eng Manufacturing Ltd. (2003); US Southern District Court of New York, St Paul Guardian Insurance Company and Travelers Insurance Company v. Neuromed Medical Systems & Support, GmbH (2002).
[16]Article 8(2) CISG.
[17]Article 8(3) CISG.
[18]F. Ferrari, supra note 10 at page 23; F. Enderlein and D. Maskow, International Sales Law
http://www.cisg.law.pace.edu/cisg/biblio/enderlein.html at page 48.
[19]C.P. Gillette and S.D. Walt, Judicial Refusal to Apply Treaty Law: Domestic Law Limitations on the CISG’s Application, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2841055 at page 15: “nothing in Article 8’s rules for interpreting intent provide a presumption one way or the other with respect to application of the CISG”.
[20]F. Ferrari, supra note 10 at pages 30 to 31; Schlechtriem & Schwenzer, Commentary on the UN Convention on the International Sale of Goods (CISG), 3rd ed., Oxford 2010 at page 113 ¶ 21.
[21]US Eastern District Court of New York, Rienzi & Sons, Inc. v. N. Puglisi & F. Industria Paste Alientari (2013).
[22]U.G. Schroeter, To Exclude, to Ignore, or to Use? Empirical Evidence on Courts’, Parties’ and Counsels’ Approach to the CISG, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1981742 at page 27: “Blessed ignorance of the Sales Convention is accordingly not an option for counsel, since it constitutes a violation of her or his legal obligation to know the law”.
[23]Id. at pages 24-30.
[24]Supra note 6, consent to opt out can be inferred from “Rienzi’(s) assert(ion of) a statute of frauds defence inconsistent with application of the CISG but cognizable under NY law”.
[25]See for e.g. US Oregon Court of Appeals, GPL Treatment v. Louisiana-Pacific Corp. (1995); US Southern District Court of New York, Eldesouky v. Aziz (2015); US Southern District Court of New York, Ho Myung Moolsan, Co. Ltd. v. Manitou Mineral Water, Inc (2010).
[26]C.P. Gillette and S.D. Walt, supra note 19 at page 6.
[27]Supra note 22, “it was far too late to withdraw that consent without undue prejudice to defendant…it would be unduly prejudicial to hold otherwise”.
[28]Supra note 22, “governing law upon which plaintiff proceeds is not an ace of spades to be held in counsel’s hand until discovery has closed and then sprung on an unsuspecting adversary”.
[29]US Oregon Court of Appeals, GPL Treatment v. Louisiana-Pacific Corp. (1995).
[30]C.P. Gillette and S.D. Walt, supra note 19.
[31]CISG Advisory Council Opinion No 16, Exclusion of the CISG under Article 6, http://www.cisg.law.pace.edu/cisg/CISG-AC-op16.html#156, at ¶ 6.3.
[32]L. Spagnolo, supra note 9 at page 196.
[33]J.M. Grant, supra note 9 at page 39.
[34]L. Spagnolo supra note 9 at page 192.
[35]J.M. Grant, supra note 9 at pages 35 to 38.
[36]J. Ziegel, The Scope of the Convention: Reaching Out to Article One and Beyond, http://www.cisg.law.pace.edu/cisg/biblio/ziegel7.html at page 69.
[37]http://www.cisg.law.pace.edu/cisg/moot/mootlist.html, the country the most represented each year at the Vismoot is the US.