Monday, 24 June 2019

What is the role of "good faith" in the CISG?

The term “good faith” can be interpreted in several manner and it is important to understand precisely what is meant in an international business context to avoid confusion and uncertainty.

Article 7(1) of the Vienna Convention (the United National Convention on Contracts for the International Sale of Goods) incorporates the requirement of good faith as follows:

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 and the observance of good faith in international trade.

However, this above stipulation in Article 7(1) does not absolve uncertainty. Some have considered that the requirement of good faith only applies in relation to the interpretation of the Convention – an interpretation of such a requirement is understandable on first reading.[1] However, this is a very narrow interpretation and not one that some scholars say was intended by the drafters. It has been argued to this end that the requirement of good faith “cannot exist in a vacuum” and the related signatories must be required to adopt the requirement of good faith in a wider context in relation to their related actions.[2]

It has been argued that the requirement of good faith is an inherent and underlying principle of the Convention. Despite there being no express reference as to the requirement of good faith within some of the other conventions, the reading of Article 7(1) would suggest that it applies to many of the other Articles. However, some disagree with this interpretation and are against this subtle and slightly covert incorporation of the requirement of good faith a little perverse.[3]

To the contrary, iit has been argues that Article 7(1) introduced a general positive obligation of good faith to govern the conduct of parties within a contract. It has been argued by some (post-Convention) that the requirement of good faith is now a general requirement which has permeated into contracts governed by the Convention.[4] Equally, there is case law evidence that reliance has been placed on Article 7(1) beyond the application of good faith to merely interpret the Convention. The case of SARL BRI Production "Bonaventure" v. Société Pan African Export[5] is indicative of this. Here, the Court held that buyer in this particular case has conducted itself in a way that breaches its general obligation of good faith.

In summary, it would seem that there are conflicting interpretations of the role of good faith, some arguing for a wider, whilst others prefer a narrower interpretation. The courts, it would seem, have opted for the former.

[1] ICC Court of Arbitration Case No 8611 of 1997.
[2] Phanesh Koneru, ;The international interpretation of the UN Convention on Contracts for the International Sale of Goods: an approach based on general principles’ (1997) 6 Minnesota Journal of Global Trade 105.
[3] E Allen Farnsworth, “The Eason-Weinmann Colloquim on International and Comparative Law: Duties of good faith and fair dealing under the UNIDROIT Principles, relevant international conventions, and national laws” (1995) 3 Tul. J. Int'l & Comp. L. 47, 56.
[4] Bonell M.J. in Bianca CM & Bonell MJ et al, Commentary on the International Sales Law: The 1980 Vienna Sales Convention (Giuffré 1987), 87.
[5] Cour d'Appel Grenoble, 93/3275, 22 February 1995.

Thursday, 30 May 2019

Critically discuss the extent to which EU legislation and the case law of the Court of Justice ensure the free movement of goods in the internal market.

The free movement provisions, including those of the free movement of goods, were part of a larger scheme through which the European Union’s free market was established. The free market was a project that was envisaged as part of a way of strengthening a Europe that had been broken apart by reason of extreme warfare.[1] However, in a Europe no longer as threatened by internal wars as it once was, the matter is now of a pure economic basis.

Articles 28 and 34 Treaty on the Functioning of the European Union (TFEU) are the main governing articles which preside over the free movement of goods. Article 28 provides that:

“The Union shall comprise a customs union which shall cover all trade in goods and which shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect, and the adoption of a common customs tariff in their relations with third countries.”

Article 34 holds:

“Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States.”

As is often the case with legislation, what exactly constitutes a quantitative restriction or measure of equivalent effect has been left to be decided by the ECJ. The first case to consider in this respect is that of Cassis de Dijon,[2] a case involving the technical standards through which the German government would only recognise and allow certain alcohol if it was above 25% alcohol content. It was held in this case that even though the measure was not discriminatory as it applied to both domestic and international goods it was nonetheless prohibited. The case has been criticised on the grounds that there was no element of discrimination and a legitimate expectation to protect the domestic consumers from lower quality foreign products has been undermined by this overreaching approach.[3]

This criticism did not go unnoticed and, in the case of Keck,[4] the ECJ sought to distinguish matters that were not quantitative restrictions but instead measures of equivalent effect.  The case involved the selling of beer and coffee at prices lower than the purchase price, something the WTO would term “dumping” and hold as unlawful on the grounds that it harms domestic producers,[5] however, it was held in the case of Keck that these measures were in fact lawful as they were not quantitative restrictions but selling arrangements. This case too has received criticism. It has been argued that this is now too lenient in comparison to the overly invasive approach in Cassis de Dijon.[6]

The ECJ refrains from exercising Keck in modern cases and has instead chosen to make use of the market access formula – as established Mickelsson.[7] This formula considers whether a measure is discriminatory and whether it impedes access to the market.

[1] Mark Anthony Martinez, The myth of the free market: the role of the state in a capitalist economy, (Kumarian Press, 2009), 164.
[2] Case C-120/78 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein ECR 649.
[3] Simon Weatherill, ‘Recent Case Law Concerning the Free Movement of Goods: Mapping the Frontiers of Market Deregulation’, (1999) 36 C.M.L.Rev. 51, 52.
[4] Joined Cases C-267-268/91 Keck [1993] ECR I-6097.
[5] Konstantinos Adamantopoulos, and Diego De Notaris. ‘Future of the WTO and the Reform of the Anti-Dumping Agreement: A Legal Perspective, The.’ Fordham Int'l LJ 24 (2000): 30.
[6] Weatherill, S. (1999). Fn.3.
[7] Case C-110/05 Mickelsson [2009] ECR I-4273.