Larry_A_DiMatteo_-_International_Sales_Law_A_Global_Challenge-Cambridge_University_Press_2014

examination of the wording of the statute. Interpretation based on ordinary meaning is captured by the common law’s “plain meaning rule.”30 However, some consideration is given to the context in which an ambiguous term was written or applied.31 Ultimately, the literal rule combines the grammatical and the systemic interpretative methodologies found in civil law countries.32 Beginning in the middle of the last century, the purposive approach gained more weight among English judges.33 Even though the plain meaning rule is still the most commonly used interpretative tool, English courts now attach more importance to the purpose of a term or statute. The purposive approach is similar to the continental method of teleological interpretation. For many years, consideration of the travaux preparatoires´ in the interpretation of statutes was largely ignored in English common law. Recourse to legislative history was forbidden by the “exclusionary rule.”34 However, this changed in 1993 with the House of Lords decision in Pepper v. Hart.35 In principle, England now accepts the possibility of an historical interpretation of statutes. In some respects, an opposite development, especially with regard to the use of legislative history and purposive interpretation, can be observed in the United States. Both methods have been allowed and used for more than one hundred years by American judges,36 though, since the late 1980s, both have been applied with more reluctance due to the rise of “new textualism,” an approach that focuses on the text of the statute and ignores evidence based on a study of legislative history or legislative purpose.37 Therefore, one methodological difference between common and civil laws is that civil law countries rely much more on historical and teleological interpretation than common law courts, which still remain loyal to plain meaning interpretation.38

The differences between national methodologies are also reflected in the use of different terminology (such as teleological, dynamic, or purposive interpretation). Often, the differences in terminology mask the similarities between the two systems. Most of the traditional methodologies exist in some form in both systems. In practice, the differences are often found in the relative weight given to the different methodologies. However, the four interpretative elements – wording, system, history, and purpose or teleos – can be observed in every national methodology.39 It is a rational extension to use these methodologies to interpret the CISG.

30Hager, “Zur Auslegung 323; Lundmark and Suelmann, “Der Umgang mit Gesetzen,” 188.

31See Hager, “Zur Auslegung,” 323; Ingman, The English Legal Process, 13th ed. (Oxford: Oxford University Press, 2010), 8.10.2.4. (“The statute must be read as a whole.”)

32Hager, “Zur Auslegung,” 323.

33See Lundmark and Suelmann, “Der Umgang mit Gesetzen,” 189.

34Hager, “Zur Auslegung,” 323; Lundmark and Suelmann, “Der Umgang mit Gesetzen,” 189.

35Pepper v. Hart [1993] A.C. 593. See also Gruber, “Legislative Intention,” in Janssen and Meyer, CISG Methodology, 93. (“Therefore, the previously assumed gap between the Civil Law methods of interpretation and the methods used in England seems to have somewhat decreased or even, as some say, almost diminished.”)

36Gruber, “Legislative Intention,” 94; Manning, “Textualism as a Nondelegation Doctrine,” 97 Colum. L. Rev. 673, 674 (1997).

37Gruber, “Legislative Intention,” 94; A. Scalia, A Matter of Interpretation: Federal Courts and the Law

(Princeton: Princeton University Press, 1997).

38See also S. Eiselen, “Literal Interpretation,” in Janssen and Meyer, CISG Methodology, 63; Magnus, “Tracing Methodology,” 53.

39See Vogenauer, “Statutory Interpretation,” 683 (“such differences [between civil and common law systems] exist but that they primarily concern the terminology and the classifications used in scholarly writings, rather than the substance of statutory interpretation”).

The starting point for interpreting the CISG and rendering autonomous interpretations would be some sort of blend of these traditional methodologies.40 Subsequent sections of this chapter will take a closer look at each of these methodologies before suggesting the right mixture of the four different methods in the quest for the appropriate interpretative blend to apply to the CISG. The last part of the chapter will explore more controversial or nontraditional interpretive methodologies that may be appropriate to add to the interpretive menu.

The CISG embraces the modern trend in the legal interpretation of contracts by adopting liberal evidentiary rules. It borrows from the interpretive methodologies of the civil and common law systems. However, in vital ways, the CISG interpretive methodology is more akin to the one found in the civil law system. The CISG’s liberal evidence rules, along with its recognition of the subjective theory of contracts and the importance of contextual evidence, is similar to the civil law’s “agreement-in-fact” model. This model of contract interpretation seeks to discover the true understanding of the parties as opposed to a purely objective meaning. The agreement-in-fact model of the CISG is aligned with civil law and, to a lesser extent, the American Uniform Commercial Code (UCC). In this model, the external manifestations of the promising party are only a part of the interpretive process. The external manifestations of the parties need to be placed in their proper contexts in order to determine the agreement-in-fact. This model logically leads to the conclusion that, to understand the written words of a contract, an analysis of the contextual background of the contract is required. The same can be said of statutory interpretation. Thus, under the CISG interpretive methodology, the plain meaning of the statutory language is only the starting point and invites the use of other interpretive methodologies.

III. Textual Interpretation

Interpretation always begins at the level of text – by determining the “ordinary meaning” of words.41 However, ordinary meaning is not identical to the dictionary or plain meaning approach found in the common law. An ordinary meaning can be defined as the meaning that is normally used and understood in the “CISG Community.”42 For example, does the meaning of “writing” in CISG Article 13 also include electronic communication or is this a gap under Article 7(2) CISG?43 As is true with all international treaties, the text of the CISG is an “outcome of extended discussions and often a well-balanced compromise where each single word counts”44 and attaching meaning to each word is

40See Hager, “Zur Auslegung,” 323; Hager, Rechtsmethoden, 84; Huber and Mullis, The CISG 9 (Munich: Sellier, 2007) (“the following matters may be relevant when interpreting the Convention: the wording of the provision; the drafting and negotiating history, in particular the ‘Travaux Preparatoires’;´ the purpose of the provision and the underlying policy; the position of the provision within the framework of the Convention [systemic approach]”); Perales Viscasillas, “Article 7 CISG,” (“scholars are in agreement as to the way [method] in which interpretation is to be done: a wide interpretation of the CISG that is to be complemented by a literal, teleological, systemic and historical interpretations”); Schwenzer and Hachem, “Article 7.”

41See Eiselen, “Literal Interpretation,” 61.

42See Magnus, “Tracing Methodology,” 53.

43See Perales Viscasillas, “Article 13,” supra note 1; Schlechtriem and Schmidt-Kessel, “Article 13,” in Schwenzer, UN Convention.

44Magnus, “Tracing Methodology,” 53.

the challenge of the interpretive undertaking.45 The literal interpretation of the CISG is complicated due to the fact that there are six different official language versions of the CISG (English, French, Russian, Arabic, Spanish, and Chinese). Each version is to be given the same weight in the interpretation of the CISG. In practice, it is not plausible to think a national judge could or would consider all the language versions. There has evolved an implicit recognition of English as the “official” language of interpretation, given that English was the main working language of the drafting committee. Therefore, when there are discrepancies between the different language versions, it is reasonable to defer to the English text in determining the meaning of the CISG.46 Another problem is the common use of nonofficial language translations, such as German or Dutch. So, in Germany, for example, the nonbinding language version (German) is regarded as a “de facto official language.” This is regrettable, as divergences can arise between the nonbinding and the official versions of the CISG. This could be avoided by comparing the nonbinding language interpretation with an interpretation given using an official language version.47 However, a translation problem persists that is best approached by researching the variant meanings caused by translation and using other interpretive methodologies to determine the most appropriate CISG interpretation.

IV. Systemic Interpretation: Intraconventional and Interconventional

The primary textual method of interpretation is generally coupled with systemic interpretation.48 The value of the systemic method varies depending on the context.49 There are two kinds of systemic interpretation applicable to the CISG. The traditional or “intraconventional” systemic interpretation deduces meaning from the positioning of a provision within a statute.50 For example, the positioning of Article 78 in a separate section of its own shows that the exemption provision of Article 79 does not apply to Article 78.51 The other, albeit less frequently discussed, version of systemic interpretation considers the particularities of the CISG being a part of a growing international body of uniform law.52 “Interconventional” systemic interpretation recognizes that uniform

45Ferrari, “Article 7,” in Schlechtreim and Schwenzer, UN-Kaufrecht; Magnus, “Tracing Methodology,” 53; Perales Viscasillas, “Article 7” (“primary method for the interpretation of the CISG”).

46Hager, “Zur Auslegung,” 324; Hager, Rechtsmethoden, 84; Magnus, “Tracing Methodology,” 53; Melis, “Article 7,” in Kommentar zu UN-Kaufrecht, 2nd ed. (ed. Honsell) (Heidelberg: Springer, 2010). See also Swiss Supreme Court, November 13, 2003, CISG-online 840 (considering primarily the English version and secondly the French text in regard to the German nonbinding translation of the CISG). Contra, Perales Viscasillas, “Article 7” (“no prima facie preference for the English version”).

47See, e.g., Switzerland, Swiss Supreme Court, November 13, 2003, CISG-online 840 or from Germany, Appellate Court Cologne, August 26, 1994, CISG-online 132.

48Ferrari, “Article 7,” in Schlechtreim and Schwenzer, UN-Kaufrecht; Hager, “Zur Auslegung,” 324; Hager, Rechtsmethoden, 84; Melis in Honsell, Kommentar; Perales Viscasillas, “Article 7.”

49Hager, “Zur Auslegung,” 324; Hager, Rechtsmethoden, 84.

50Magnus, “Tracing Methodology,” 54.

51Id. (the debtor cannot rely on Article 79 CISG in order to claim an exemption from the obligation to pay interest); Bacher, “Article 78,” in Schlechtreim and Schwenzer, UN-Kaufrecht. For further examples of a systemic interpretation, see Hager, “Zur Auslegung,” 324; Hager, Rechtsmethoden, 84 (use of Article 36(2) for the interpretation of Article 66).

52See, e.g., the Limitation Convention, the Convention on the Contract for the International Carriage of Goods by Road (CMR), the Montreal Convention, the Ottawa Conventions on International Financial Leasing and International Factoring.

law conventions often share many common terms and underlying general principles.53 Therefore, a settled meaning under one convention may provide guidance in interpreting another convention. The rationale for interconventional interpretation is that basic terms of uniform law, such as “contract,” “breach of contract,” or “damages,” should have the same meaning across uniform law conventions.54 It is important to note that there is a difference between conventions and soft law. The use of soft law as an interpretive methodology for the CISG will be discussed later in this chapter.

V. Historic Interpretation

It is widely accepted that a historic interpretation on the basis of the legal history of the CISG is a viable interpretive methodology.55 However, the historic interpretative methodology generally is utilized only after the textual and systemic methodologies fail to provide a clear meaning.56 The common reasons for the reluctance to apply historic interpretation are that draftsmen cannot foresee future fact scenarios and developments, legal history is not always clear and is subject to multiple interpretations, and the longer the CISG is interpreted, the less relevant becomes the legislative history.57

Despite the foregoing, historic interpretation remains an accepted method of interpretation in the field of international sales law. While countries of the German legal tradition recognize an obligation to research legislative history, others countries refer to legislative history in various degrees or not at all.58 Historic interpretation is especially useful in cases where the wording of the provision is in question and the system in which it is situated does not give enough guidance to reach a final conclusion. For instance, the travaux preparatoires´ are used frequently when interpreting open terms, such as the terms of “short period” and “reasonable time” in CISG Articles 38(1) and 39(1). It follows from the drafting history of both articles that these provisions were intended as a compromise between two views.59 In particular, the drafters sought to avoid the strict requirements found in countries of the German legal tradition. Thus, it was primarily their aim “to convince the German courts to abandon their rigid time limits and slowly move towards the other legal systems that had not previously stipulated any [fixed] notice

53Ferrari, “Article 7”; Magnus, “Konventionsubergreifende¨ Interpretation internationaler Staatsvertrage¨ privatrechtlichen Inhalts,” in Aufbruch nach Europa: 75 Jahre Max-Planck-Institut (ed. Basedow et al.) (Tubingen: Mohr Siebeck, 2001), 571.

54Magnus, “Tracing Methodology,” 54.

55There is a general agreement that the legislative history can and should be used for the interpretation of the CISG. See, e.g., Ferrari, “Article 7”; Gruber, “Legislative Intention,” 91; Hager, Rechtsmethoden, 85; Magnus, “Tracing Methodology,” 56; van Alstine, “Dynamic Treaty Interpretation,” 146 U. Pa. L. Rev. 687 (1998).

56Magnus, “Tracing Methodology,” 56; Perales Viscasillas, “Article 7”; Schwenzer and Hachem, “Article 7.”

57Perales Viscasillas, “Article 7”; Schwenzer and Hachem, “Article 7.”

58See Janssen, Die Untersuchungsund Rugepflichten¨ im deutschen, niederlandischen¨ und internationalen Kaufrecht: Eine rechtsvergleichende Darstellung der Gemeinsamkeiten und Unterschiede (Baden Baden: Nomos, 2001) (comparative analysis).

59See Kroll,¨ “Article 38” and “Article 39,” in Kroll¨ et al., UN Convention; Reitz, “A History of Cutoff Rules as a Form of Caveat Emptor: Part I – The 1980 U.N. Convention on the International Sale of Goods,” 36

Am. J. Comp. L. 437 (1988).

requirements.”60 The goal was achieved because the German courts looked to CISG legislative history, leading to significantly different interpretations of the requirements found in Articles 38 and 39 as compared with the corresponding German provisions in the German Commercial Code.61

VI. Teleological Interpretation

The final “traditional” method is referred to as the teleological, dynamic, or purposive interpretation.62 Even though this method of interpretation is generally accepted in common and civil law countries to interpret their domestic statutes, it is the most “obscure” of the interpretive tools. On the one hand, teleological interpretation is indispensable for the development of the CISG.63 As in all commercial and civil codes, the drafters of the CISG could not foresee every future legal and technical development. Thus, some issues fall within the scope of the CISG but textual analysis, supplemented by systemic and historical analyses, does not provide a conclusive answer. Under such conditions, the teleological or purposive method seeks an answer through an analysis of the spirit and purpose of the CISG. This approach provides the flexibility needed to address novel cases produced by transactional or technical changes. The clarity of thought possessed by lawmakers is unlikely to be fully captured by the statutory text. Statutes and codes will inevitably have gaps, yet the applicable statute, in the civil law tradition, is seen as providing answers to every issue that comes within its scope.

Teleological interpretation is the vaguest “canon” of the traditional interpretative methods and provides considerable discretion to judges. In an international law instrument a particular danger emerges – that the teleological method could lead to homeward trend interpretations.64 More specifically, national courts may assume that the purposes of CISG rules are similar to the purposes of the rules found in their domestic laws. This increases the chances of divergent interpretations. The teleological interpretation is indispensable in finding a solution to some interpretive problems, however, when applied to international sales law it should be used with caution.65 Judges using the teleological approach must focus on the general goals and purposes of the CISG, especially those enunciated in Article 7(1).66 For example, one of the underlying goals of the CISG is to minimize transaction costs and to allocate the remaining costs to the most efficient avoider.67 Such transaction costs are generally higher in international than in domestic transactions. The fundamental breach rule, found in Article 25, is a reflection of the goal

60See Schwenzer, “The Noble Month (Articles 38, 39 CISG) The Story behind the Scenery,” 8 European J. L. Reform 353, 358 (2006).

61See §377 Handelsgesetzbuch (HGB); Gruber, “Legislative Intention,” 106. See also Hager, Rechtsmethoden, 85 (Article 68 CISG) (historic interpretation); Magnus, “Tracing Methodology,” 56 (Article 28) (same).

62See Barak, Purposive Interpretation in Law (Princeton: Princeton University Press, 2005).

63Melis in Honsell, Kommentar; Perales Viscasillas, “Article 7”; Piltz, Internationales Kaufrecht, 2nd ed. (Munich: C.H. Beck, 2008), §2–185.

64See Ferrari, “Homeward Trend: What, Why and Why Not,” in Janssen and Meyer, CISG Methodology, 171.

65See also Melis in Honsell, Kommentar; Piltz, Internationales Kaufrecht, §2–185.

66Magnus, “Tracing Methodology,” 57.

67See Cenini and Parisi, “An Economic Analysis of the CISG,” in Janssen and Meyer, CISG Methodology, 151 (economic analysis of the CISG).

sections will consider core methodologies at least implicitly acknowledged as legitimate pieces of CISG interpretive methodology.

A. Creative Interpretation: Self-Generation of Underlying Principles

Ronald Dworkin famously rejected the “argument from vagueness” that holds that the vagueness of legal or statutory language means that there cannot be one, true interpretation of a statutory provision. A more nihilistic view of the argument from vagueness is that statutory language is open to many equally plausible interpretations. Dworkin rejects this argument based upon the role of underlying principles. He states that:

[T]he impact of the statute on the law is determined by asking which interpretation, of the different interpretations admitted by the abstract meaning of the term, best advances the set of principles and policies that provide the best . . . justification for the statute at the time it was passed.71

Because of its use of neutral terminology, mandate of autonomous interpretations, and express embrace of traditional interpretive methodologies, CISG jurisprudence has moved to address the shortcomings stemming from the argument from vagueness. This interpretive challenge falls into two areas: (1) the recognition of underlying or implied principles to justify interpretations of the CISG, whether autonomous or not, and (2) the creation of implied default rules where an issue is within the scope of CISG coverage, but which the CISG fails to directly address.

An example of courts projecting general principles into the CISG or recognizing implicit default rules was demonstrated by a Finnish court’s implication of a principle of loyalty. The Helsinki Court of Appeals recognized the importance of continuation of contract within the principle of loyalty. It reasoned that the so-called principle of loyalty has been recognized in scholarly writings. According to the principle, the parties to a contract have to act in favour of the common goal; they have to reasonably consider the interests of the other party.72 In essence, each party owes a duty of loyalty to the other party to preserve the viability of the transaction. From such a duty, the court recognized an implied default rule of a duty to continue a sales relationship beyond the discrete individual sales transactions.

The case involved a buyer who purchased carpets for resale on an ad hoc basis. The seller abruptly ended its relationship with the buyer. The court held that on the basis of a two-year business transaction, the buyer’s operations cannot be made dependent on the risk of an abrupt ending of the contractual relationship.73 Therefore, the seller was restricted in its right to terminate its relationship with the buyer despite the fact that there was no agency or long-term supply contract in place. The court reasoned that the buyer had obtained de facto exclusive selling rights.74 Such implied rights, based on good faith and trade usage, make the seller of multiple discrete transactions susceptible to damage claims under Article 74.75 In essence, the court held that principles of reasonableness

71R. Dworkin, A Matter of Principal (Cambridge, MA: Harvard University Press, 1985), 129.

72Helsinki Court of Appeals (Finland 2000), available at cisgw3.law.pace.edu/cases/001026f5.html.

73Id., 12 of 14.

74Id.

75A party must pay damages “in the light of the facts and matters of which he knew or ought to have known, as a possible consequence of the breach of contract” (see Article 74 CISG).

and trade usage require an extended notice of termination where damages to a buyer are foreseeable, regardless of the fact that the discrete contract fails to require such notice.76 The need for creative interpretation is made a necessity due to the openended nature of CISG rules.77 Many of the CISG’s rules are open ended in order to allow their applications to numerous contextual situations. For example, the CISG makes repeated use of the “reasonableness standard” in its gap-filling provisions. Openended rules derive their content from post-hoc application to real world transactions and practices.78

B. Analogical Reasoning within the CISG

The use of analogical reasoning within the CISG and between its articles is not expressly recognized in the CISG. However, a number of rationales support the argument that such reasoning is implied in the CISG. First, the role of general principles, either express or implied, underlies all CISG articles. Article 7 states that interpretive issues “are to be settled in conformity with the general principles on which [they are] based.”79 The role of the general principles that underlie the CISG implies that individual articles should be interpreted to conform to the spirit of those principles. It is not an illogical step to acknowledge that the individual articles should be interpreted with reference to each other, especially when one of them has been more fully interpreted and can act as a guide to the application of underlying principles to the article being interpreted. The case for analogical reasoning has been made by numerous scholars, including John Honnold,80 Michael Bonell,81 Phanesh Koneru,82 and Mark Rosenberg.83 Their arguments are straightforward – reasoning by analogy is an extremely useful interpretive methodology, especially when an issue in one article or provision is analogous to an issue found in another.84

Even though the CISG is not a comprehensive code in the civilian sense, it is code-like nonetheless. As such, analogical reasoning is intuitively needed to ensure that the articles

76DiMatteo et al., International Sales Law: A Critical Analysis of the CISG (New York: Cambridge University Press, 2005), 24–5 (French court held that the principle against abrupt discontinuance is applied through an inter-party business usage as permitted under Article 9 CISG); CLOUT Case No. 202 (Court of Appeal of Grenoble, France 1995).

77For an explanation of open-textured rules, see Collins, Regulating Contracts (Great Britain: Oxford University Press, 1999) 266–74.

78DiMatteo, Critical Analysis, 25–6. The cases reviewed were taken from abstracts, summaries, and

commentaries provided mainly in “CISG Case Presentations” in the Pace Law School Web site at cisgw3.law.pace.edu/cases, the UNILEX database at unilex.info/case, and CLOUT abstracts at A/CN.9/SER.C/ABSTRACTS or at the UNCITRAL Web site at www.un.or.at/uncitral. UNCITRAL regularly releases abstracts of CISG court and arbitral decisions under the name CLOUT.

79Article 7(2) CISG.

80J. Honnold, Uniform Law for International Sales (Cambridge, MA: Kluwer Law International, 1991), 3.

81Bonell, “Introduction to Convention,” in Commentary on the International Sales Law (ed. Bianca and Bonell) (Milan: Giuffre,` 1987), 79.

82Koneru, “The International Interpretation of the UN Convention on Contracts for the International Sale of Goods: An Approach Based on General Principles,” 6 Minnesota J. Global Trade L. 105 (1997).

83Rosenberg, “The Vienna Convention: Uniformity Interpretation for Gap-Filling – An Analysis and Application,” 20 Australian Bus. L. Rev. 442 (1992).

84DiMatteo, Critical Analysis, 21.

within the CISG do not conflict with one another, or, stated in Dworkinian terms, each part should be made to fit the whole.85 The use of analogical or systemic interpretation of code or statute provisions is not as well developed under common law. Common law statutes are filled with cross-references to other sections within the statute and courts will look at the referenced sections in determining the meaning of a statutory provision. However, common law lacks the tradition of a grand civil code. Civil law tradition centers on going directly to the relevant code – civil or commercial – to get the answer to the issue of law in dispute, whereas common law judges often seek guidance from existing case law relating to the provision in question. The body of easily acceptable case law relating to the UCC is immense. So, instead of personally conducting an analogical analysis of code provisions, judges will generally go directly to the case law to find an existing decision that relates to the legal issue being disputed. If the case law provides a consensus as to the proper interpretation or meaning of the statutory provision, then the search for meaning is often terminated without any first-hand analysis of the code as a whole. Such a truncated analysis preempts the use of analogical reasoning within the code to see if a “better” meaning can be found.

If case law fails to provide an answer to the issue in question, then a return to the code to perform analogical reasoning would be the next logical approach. The judicial arbiter would attempt to answer the following question: do other provisions of the code or the code as a whole provide insight or guidance to determine a reasonable interpretation of the meaning of the provision in question? However, due to a lack of training in statutory interpretation,86 lawyers and judges will often avoid such intracode analogical reasoning and determine the meaning through analogical reasoning from existing case law. It is possible that such intracode analogical reasoning was performed by the earlier case law. If so, it can be argued that even though the analogical reasoning was not performed first hand, it is found, covertly, in case law. This may be wishful thinking. In sum, despite the UCC being America’s greatest and most successful attempt at a unifying code, it should be recognized that it is still a code embedded in a common law system. As such, the unification of commercial law began to diminish soon after the enactment of the UCC. UCC law is rarely a direct application of a UCC provision to a case. It involves a search for cases of mandatory or persuasive precedent to provide an interpretation.87 The proof of this proposition is found in the variant meanings given by different state court systems to the same provisions of the CISG.

Given the lead role of the civil law countries in interpreting CISG provisions, the use of analogical reasoning within the CISG should be a matter of standard practice. The fact is that the use of various CISG articles to help interpret other articles has been uneven in practice. For example, in some cases, courts have recognized the right to avoidance without adequately determining if there was a fundamental breach. The

85Dworkin, A Matter of Principal.

86Justice Scalia has noted that “there are few law-school courses on the subject.” Scalia, A Matter of Interpretation, 14.

87In the area of precedent, one state court has no obligation to follow the judicial decisions of another state’s courts. In practice, however, American courts often cite cases from other states as persuasive precedent to support their decisions. For an historical analysis of stare decisis, see Cross, Precedent in English Law, 3rd ed. (Oxford: Oxford University Press, 1977).

CISG provides that the buyer88 or seller89 is allowed to avoid a contract if the other party’s performance amounts to a fundamental breach.90 In Italdecor SAS v. Yiu Industries,91 the court determined there was a fundamental breach supporting the remedy of avoidance. Yet, the court never made reference to Article 25’s discussion of fundamental breach.92 To look directly at the avoidance provisions to determine fundamental breach based solely on the facts of the case is antithetical to analogical reasoning that would require reference to Article 25, which provides a definition and standards to be used in making the fundamental breach determination.93 The failure to use analogical reasoning within the CISG, such as in using Article 25 in making an avoidance decision, is an abdication of the need to apply CISG and traditional interpretive methodologies.

C. Analogical Reasoning Using CISG Case Law

The use of foreign case law by analogy to interpret the CISG has been mixed and mostly nation-specific. Despite the fact that the Pace Institute of International Commercial Law’s CISG Database provides easy access to more than 2,700 CISG cases, many national courts fail to use or cite foreign case law in interpreting the CISG. There are a number of plausible explanations, including the courts going “directly” to the CISG and applying CISG general principles in rendering an interpretation. In the alternative, the lack of foreign case law citation may be a reflection of the avoidance of CISG interpretive methodology in favor of nation-specific methods of legal reasoning.

It is not a controversial statement that the predominant force in shaping and interpreting the CISG has been the German court system. When other European national courts cite foreign case law, invariably at least one reference is to German case law. The problem is that the “international character” of the CISG can be questioned given the overwhelming amount of CISG jurisprudence that come from a half-dozen or so European civil law countries. Of the 2,718 reported cases, 1,364 came from eight European countries: Germany (477), the Netherlands (203), Switzerland (182), Belgium (142), Austria (128), France (100), Spain (83), and Italy (49). By contrast, common law countries yielded only 200 cases (United States, 151; Australia, 19; Canada, 16; New Zealand, 11; United Kingdom, 3).

The analogical use of foreign cases is a powerful interpretive device. Foreign case law on the whole often provides in-depth analysis of the issues before the court or arbitral panel. The application of foreign case law by analogy can provide a matrix of factors or rationales that may have gone unnoticed by the present court. It can provide evidence of consensus relating to the interpretation of CISG articles or it can offer a number of

88CISG, Article 49(1)(a).

89CISG, Article 64(1)(a). See also Article 72(1) (“prior to the date for performance it is clear that one of the parties will commit and fundamental breach”); Article 73(1) CISG (fundamental breach of installment); Article 73(2) (“in respect to any installment gives the other party good grounds to conclude that a fundamental breach will occur with respect to future installments, he may declare the [entire] contract avoided”).

90CISG, Article 46(2).

91Italdecor SAS v. Yiu Industries, CA Milano, March 20, 1998, available at cisgw3.law.pace.edu/cisg/wais/ db/cases2/980320i3.html1#ct.

92See Romito and Sant’ Elia, “Case Comment, CISG: Italian Court and Homeward Trend,” 14 Pace Int’l L. Rev. 179 (2002).

93CISG Article 25 provides a “substantial deprivation” standard with a limitation of lack of foreseeability.