Symposium Paper: Afterthoughts: International Commercial Contracts and Arbitration

By Nottage, Luke | Australian International Law Journal, Annual 2010 | Go to article overview

Symposium Paper: Afterthoughts: International Commercial Contracts and Arbitration


Nottage, Luke, Australian International Law Journal


ABSTRACT

This article mainly responds to Professor Bonell's three proposals (on page 177 of this volume) to expand usage of the UNIDROIT Principles of International Commercial Contracts (UPICC). As UPICC are primarily opt-in rules, they can be more ambitious than the United Nations Sales Convention (CISG). They also needed to be, being designed for all commercial contracts--including many more relational contracts. This imparts a somewhat different 'vibe' to UPICC, creating one impediment to the proposal for a UN Declaration urging interpretation of CISG in light of UPICC. As a formal reasoning based legal system, particularly in contract law, Australia also still struggles with such soft law initiatives. More promising will be law reform clarifying that courts, not just arbitrators in proceedings with the seat in Australia governed by the UNCITRAL Model Law on International Commercial Arbitration, are free to apply 'rules of law'--including UPICC--as the governing law. Elevating UPICC into a Model Law for International Commercial Contracts would also be useful. Australia could then adopt or adapt provisions as the basis for more comprehensive reform of its contract law. This would better mesh with burgeoning relational transactions, and many norms (such as good faith) could also extend to domestic dealings.

Introduction

From their first edition in 1994, the UNIDROIT Principles of International Commercial Contracts ('UPICC') covered more topics than the United Nations Convention on Contracts for the International Sale of Goods 1980 ('CISG'), in force from 1988 and incorporated into Australian law the following year). Especially during the final stages of negotiating CISG, several topics had to be omitted (e.g., arguably, pre-contractual liability) or watered down (e.g., direct and non-derogable obligations on contracting parties). (1) This was mainly to secure general acceptability, particularly on the part of Anglo-Commonwealth states. Even when states had acceded to CISG, prima facie binding their firms selling goods to counterparts in other CISG member states (pursuant to Art 1(1)(a)), firms were permitted to opt out of CISG in whole or in part (Art 6). Anglo-Commonwealth courts and lawyers have not applied CISG as frequently or consistently as counterparts particularly from major civil law tradition jurisdictions. Yet CISG did establish a common language for addressing core issues of contract formation and performance. (2)

The first edition of UPICC heralded a new round of harmonisation in this field, often reproducing wording from CISG. But the Principles added new or more specific obligations (e.g. Art 1.8 on good faith and Art 2.1.15 on pre-contractual liability). UPICC needed to be more ambitious because the provisions were not limited to international sales of goods. They could afford to be so because generally applied on only an opt-in basis--unlike CISG, which applies pursuant to Art 1 unless parties exclude it through CISG Art 6. The second edition of UPICC (2004) further expanded coverage, into areas such as third parties, assignment, and limitation periods. (3) A Working Group completed a third edition draft in mid-2010, expected to be formalised for public release by 2011. (4) The Working Group considered adding possible provisions on 'termination for just cause', but eventually decided not to include them in the third edition of UPICC. The proposed provisions were aimed at covering situations not amounting to excusable force Majeure. (Art 7.1.7, like CISG Art 79) or even 'hardship' (Arts 6.1.2-3) or 'fundamental non-performance' (i.e. serious or material breach justifying termination: Art 7.3.1, more detailed than CISG Art 25). (5) Such topics are particularly important in long-term 'relational contracts', especially cross-border service transactions like distributorships or licensing contracts(6) UPICC has thus moved with the times in developing new norms to govern trading in services, not just in goods, rather like in 1994 when the World Trade Organization added the Central General Agreement on Trade in Services (and a treaty on Trade Related Aspects of Intellectual Property Rights) to the long-standing Central Agreement on Tariffs and Trade. …

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