The law applicable to international contracts

Transcription

1 The applicable to international contracts Patrick Wautelet General Problems of Transnational Law Intensive Programme September 2007 transnational.deusto.es/ip2007 Overview I. The case of AirCo S.A. and Filters Inc. II. The of international contracts III. Uniform rules IV. Selecting the Applicable 1

2 The case of AirCo v. Filters Inc AirCo is established in France, sells sophisticated air conditioning systems. Filters, Inc. established in Massachusetts, sells filter products. Executives of the two companies meet at a trade fair in Berlin Discussions at commercial / technical level Both companies enter into a contract The case of AirCo v. Filters Law of international contracts If something goes wrong, two questions: First question : who decides? Second question : what are the rules of the game? Rules of the game: first focus = the contract (pacta sunt servanda) Parties decide to invest time and money and draft a contract (the 'deal') Or both parties rely on their general trade conditions (obvious risk : what if both parties have their own tc's?) 2

3 Law of international contracts In the second case, contract will be formed in various steps (price quotation, discussions, pro forma invoice, purchase order, confirmation / acknowledgment) What if the contract has not provided a solution for a specific problem? e.g. when and how should AirCo complain about defects in the filters? e.g. which interest rate applies to late payment by buyer? (France : X %, US : Y %) Law of international contracts What if the contract has not provided a solution for a specific problem? Contract supplemented by legal rules Rules can be excluded / modified by parties ('dispositive' rules) 'Gap filling' rules are necessary because contract can never deal with all isues (even 'US style contracts') Some gap filling rules are precise, some openended (e.g. good faith principle) 3

4 Law of international contracts Contract supplemented by default legal rules Problem : default rules are not the same in all national s E.g. when should buyer complain about defects in the goods? French : 2 years (Art Civ. C.) Italian : 8 days (Art C. civ.) German : 'unverzüglich' ( 377 HGB) Law of international contracts How to tackle the diversity of 'default' rules? States agree on uniform rules e.g. CISG One national is selected to govern the contract Two different methods, which call for a detailed review 4

5 Law of international contracts : uniform rules Prime example : European directives (e.g. on agency contract, time sharing contract, etc.) Difficulties: Uniform rules only exist for certain matters (concern consumer transactions or specific commercial transactions, no European 'Civil Code') Most of the time, limited regional ambit (EU or other regional group such as OHADA) Law of international contracts : uniform rules Prime example outside EU framework : CISG 1980 CISG: Long history of application (see Only sales transactions (excluded : consumer sales, sale of various items such as electricity, etc.) Only applicable if the contract has a link with one or two CISG state : both parties are established in a CISG country (art. 1(1)(a) CISG), or contract is governed by the of a CISG country (art. 1(1)(b) CISG) 5

6 Law of international contracts : uniform rules CISG : Modern and balanced rules on sales contracts fundamental breach (art. 25 CISG) possibility for party to avoid contract without waiting for court to do so (art. 49 and 64 CISG) anticipatory breach : suspension and avoidance (art CISG) Not covered : complex sale operations (art. 3 CISG) issues of validity + transfer of ownership (art. 4 CISG) applicable interest rate (art. 78 CISG) Law of international contracts : uniform rules Prime example outside EU framework : CISG Uniformity in practice? Probably not entirely (e.g. reasonable time in Art. 39 CISG : diverging national case ) CISG is not mandatory, can be excluded (art. 6) Why exclude / opt out of the CISG? provides a modern set of default rules (compared to rules applicable in certain countries on anticipated breach, etc.) only applicable by default fear of the unkown? 6

7 Law of international contracts : selecting the applicable What if no uniform rules? Contract is silent / non-existent, no uniform rule (majority of cases), only solution = fall back on a national Which national? Two generally recognized principles (enshrined in 1980 Rome Convention) First principle : selection of one applicable national by the parties Default principle : if no choice by parties, selection of applicable by default rule Law of international contracts : selecting the applicable 1980 Rome Convention EU instrument, in force in 25 Member States Uniform rules determining the applicable to contracts (civil and commercial) Rules may be applied even to non European cases (art. 2) Rules of the Convention reflect generally accepted principles Rome Convention is scheduled to become a Regulation in near future (substantial changes to rules) 7

8 Law of international contracts : selecting the applicable First principle : choice by parties (art. 3 Rome Convention What may parties to a contract do? Select the of any country (no need for a link between chosen and contract; choice for neutral or given national for substantive reasons - sophisticated ) Select the applicable at any time What if parties have not explicitly selected applicable, but implicit choice appears from circumstances (e.g. choice for courts of France or references to French )? Law of international contracts : selecting the applicable What may parties not do? Versteinerung Select a non-national (e.g. the merchant or the Unidroit Principles)? See Article 3(2) Draft Rome Regulation (choice for the principle and rules of the substantive of contract recognised internationally or in the Community ) 8

9 Law of international contracts : selecting the applicable Choice by parties : limitations No possibility or limited possibility of choice of for some categories of contracts (such as employment contracts, insurance contracts and consumer contracts Article 5/6 Rome Convention) Law chosen by parties may be set aside or trumped by other rules (mandatory rules) Law of international contracts : selecting the applicable Second principle : what applies in the absence of a choice by parties? Selection of applicable national by default rules Which? Law of the place where contract was concluded? Or performed? Difficulties Article 4 Rome Convention : concept of characteristic performance (e.g. in sales contract, the performance of the seller, who is required to transfer the ownership of the goods) Applicable : the country where the party who effects the characteristic performance is located 9

10 Law of international contracts : selecting the applicable Draft Rome Regulation : change to the selection of the applicable in absence of a choice of by parties New system : for certain categories of contracts, direct rule (e.g. sales contract : of the seller; services contract : of the service provider; contract of carriage : of the carrier, etc.) For other contracts : the of the country in which the party who is required to perform the service characterising the contract has his habitual residence 10