Larry_A_DiMatteo_-_International_Sales_Law_A_Global_Challenge-Cambridge_University_Press_2014

subjects ample freedom in conducting their private transactions. Naturally, this autonomy is not unfettered, and thus some private transactions will be deemed devoid of legal effect or otherwise affected by domestic hard laws aimed at upholding certain public policies. An example of government intervention into the private sphere of contract law is laws prohibiting trade in human body parts, but hard law may also restrict such things as choice of law; for example, Brazilian law deems the lex loci contractus as the governing law, and this rule is widely construed as a prohibition on private choices of law.2

For international law, hard law qualities can be discerned, but often with less ease. International rules generally do “not work without the constant help, co-operation and support of national legal systems.”3 International laws become hard when they are incorporated into national law, or alternatively, take effect within each sovereign jurisdiction by virtue of that State’s constitutional machinery. In some cases, a “hard legal order” of institutional structures is established to ensure compliance, such as the International Court of Justice (ICJ) or WTO dispute panels and Appellate Body. However, unless an international adjudicatory mechanism has been created to enforce the law in question, international law depends completely on national legal systems for its implementation and enforcement. Thus, in a sense, even hard international law falls short of the “hardness” achieved by domestic law.4

Although international law often relies on the states for its effect, it is nonetheless hard5 because, provided states fulfil their treaty obligations, the law in question will bind the parties at which it is aimed. Increasingly, however, many rules at the international level are soft laws, described as “a body of standards, commitments, joint statements, or declarations of policy or intention”6 created by multilateral bodies, which then promote use of the rules. Antonio Cassesse describes soft law as the provenance of “international organizations or other collective bodies”; dealing with “new concerns . . . to which previously the international community was not sensitive or . . . alert”; and instituting nonlegally binding obligations on matters regarding which it is “hard for States to reach full convergence of views.”7 He concludes that soft law may gradually “turn into law proper,” or provide a catalyst for change, but emphasizes that soft law per se is “no real law at all.”8

There are, of course, many domestic nonbinding standards, codes of practice, and guidelines or soft law. The first two of Cassesse’s characteristics of soft law can also be equally true of hard law; it can also deal with new concerns, and is created by international organizations. It follows that the defining feature of soft law is the third characteristic,

2“Article 9 Lei de Introduc¸ao˜ ao Codigo´ Civil Brasileiro 1942,” in Introductory Law to the Brazilian Civil Code, Decreto-Lei No 4657/1942 (contracts not containing arbitration clauses).

3Antonio Cassesse, International Law, 2nd ed. (Oxford: Oxford University Press, 2005), 9.

4R. R. Baxter, “International Law in ‘Her Infinite Variety,’” 29 Int’l & Comparative L. Quarterly 549, 554 (1980); Kenneth W. Abbott and Duncan Snidal, “Hard and Soft Law in International Governance,” 54

Int’l Organization 421, 426 (2000).

5See Cassesse, International Law, 12 (describing “proper” international law as opposed to “soft laws”); Abbott and Snidal, “Hard and Soft Law,” 426. See generally Harold H. Koh, “Why Do Nations Obey International Law?,” 106 Yale L.J. 2599 (1997) (broad description of the processes and repeated interactions).

6Cassesse, International Law, 196.

7Id., 196.

8Id., 196, 507–8.

that is, its nonbinding nature, that, in and of itself, it has no legal effect.9 Charles Lipson argues this distinction is not traditional, but arises from the definition of treaties codified in Article 26 of the Vienna Convention on the Law of Treaties, which states every treaty is “binding upon the parties.”10

A far more accurate delineation between hard and soft law involves a sliding scale based on three characteristics: legally binding nature of obligations, precision, and delegation of authority for interpretation and implementation.11 The combination of the binding nature of the rules, the degree to which they fix consequences or allow them to be determined ex post, and the existence of centralized enforcement processes all indicate whether a law is hard or soft.12 Combinations of these qualities of binding obligations, precision, and delegation in varying strengths indicate relative hardness on a sliding scale rather than as a binary choice.13 Using these criteria, it is unclear where the CISG sits on this sliding scale – the CISG has a hard, legally binding nature, but lacks a central judicial structure. It involves a high degree of delegation to states regarding implementation and enforcement.

The rate of soft law creation is on the rise for a number of reasons. Unlike hard law, soft law is cheaper to create due to its informal status.14 It has no requirement of participation by state officials and carries no lengthy ratification process. The informal nature of the process lends the development of soft law much flexibility, which is highly advantageous in terms of ease and speed of negotiation and drafting of such instruments.15 The political environment of hard law negotiations often results in instruments of limited scope to ensure agreement, and leads to compromise on substantive content by the use of vague provisions.16 By contrast, soft law can focus on “elegant solutions rather than forced

9See also Anthony Aust, “The Theory and Practice of Informal International Instruments,” 35 Int’l & Comparative L. Quarterly 784, 794 (1986); Chris Brummer, “Why Soft Law Dominates International Finance – And Not Trade?,” 13 J. of Int’l Economic L. 623, 623, 628 (2011); Janet Koven Levit, “A Bottom-Up Approach to International Lawmaking: The Tale of Three Trade Finance Instruments,” 30 Yale J. of Int’l L. 125, 190 (2005).

10And further “must be performed by them in good faith.” Charles Lipson, “Why Are Some International Agreements Informal?,” 45 International Organization 495, 502 (1991). See also Baxter, “International Law in ‘Her Infinite Variety,’” 556; Article 26 Vienna Convention on the Law of Treaties, opened for signature on May 23, 1969, UN Doc. A/CONF. 39/27, 115 UNTS 331 (entered into force on January 27, 1980).

11Abbott and Snidal, “Hard and Soft Law,” 421 (citing earlier work by Abbott, Keohane, Moravcsik, Slaughter, and Snidal).

12Id., at 427. See similarly Lipson, “Why Are Some International Agreements Informal?,” 498–9 (referring to the level of “informality” of international agreements as determined by the governmental level at which the agreement is made; the visibility of agreement by the head of state as opposed to bureaucratic delegate, and by its form (written, oral)).

13Cassesse, International Law, at 194; Abbott and Snidal, “Hard and Soft Law,” 421–4.

14Abbott and Snidal, “Hard and Soft Law,” 434; Brummer, “Why Soft Law Dominates International Finance,” 631.

15Aust, “The Theory and Practice of Informal International Instruments,” 789 (referring to the advantages of speed, flexibility and confidentiality collectively as “convenience”); Lipson, “Why Are Some International Agreements Informal?,” 500; Brummer, “Why Soft Law Dominates International Finance,” 631; Abbott and Snidal, “Hard and Soft Law,” 434.

16Clayton P. Gillette and Robert E. Scott, “The Political Economy of International Sales Law,” 25 Int’l Rev. L. & Economics 446, 458–9, 448–9, 457, 462, 465–6, 468–9, 473–5 (2005); Steven Walt, “The CISG’s Expansion Bias: A Comment on Franco Ferrari,” 25 Int’l Rev. L. & Economics 342, 347 (2005). See generally Alan Schwartz and Robert E. Scott, “Contract Theory and the Limits of Contract Law,”

consensus.”17 Their nonbinding nature makes soft laws an attractive alternative. Essentially, participants are able to learn the consequences of the new rules over time, thus avoiding unpleasant surprises, and can work to resolve originally unforseen problems.18 For hard law, the involvement of state negotiators naturally introduces concerns regarding intrusion on national sovereignty,19 a problem unlikely to prevent agreement on soft law by nongovernment representatives.

The flexibility afforded by the soft law process also makes it easier to adopt amendments after promulgation.20 By contrast, changes to hard law are, at best, extremely difficult to achieve. Future amending protocol is rarely adopted by all state parties to the original treaty, resulting in a degree of fragmentation.21 Ease of amendment allows soft law to be more dynamic and to keep pace with developments, whereas hard law is more likely to fall behind current practice.22 Soft law can foster norms within skilled collegial “networks,”23 and those norms may then eventually “percolate” to become recognized formal law.24

The positive features of soft law are also the bases of its disadvantages. Chief among them is something that derives from its flexibility and nonbinding quality; it affords parties “a cheap exit from commitments.”25 It thus lacks, in a game theory sense, the “assurance” value of a credible commitment to hard law by which states signal their cooperation with other states in reaching the same mutually beneficial coordination point.26 Hard law has an independent legitimacy that creates a stronger “compliance

113 Yale Law J. 541 (2003). Contra Abbott and Snidal, “Hard and Soft Law,” passim (noting “precision” as one of the defining characteristics of “hard law”).

17Robert A. Pate, “The Future of Harmonization: Soft Law Instruments and the Principled Advance of International Lawmaking,” 13 (August 2009), available at http://works.bepress.com/robert pate/1.

18Lipson, “Why Are Some International Agreements Informal?,” 500; Abbott and Snidal, “Hard and Soft Law,” 423, 441; Brummer, “Why Soft Law Dominates International Finance,” 633.

19Aust, “The Theory and Practice of Informal International Instruments,” 789; Pate, “The Future of Harmonization,” 11–12 (describing the reason for the United States making a declaration pursuant to Article 95 CISG as a desire to preserve the operation of the UCC so far as possible); Brummer, “Why Soft Law Dominates International Finance,” 631; Abbott and Snidal, “Hard and Soft Law,” 423, 436, 441.

20Aust, “The Theory and Practice of Informal International Instruments,” 791; Lipson, “Why Are Some International Agreements Informal?,” 500; Brummer, “Why Soft Law Dominates International Finance,” 631; Abbott and Snidal, “Hard and Soft Law,” 423, 436.

21See, e.g., UNCITRAL Model Law on International Commercial Arbitration 1985, GA Res. 40/72, UN Doc. A/40/17, annex I, December 11, 1985, which was adopted by legislation in many nations. The Model Law was subsequently amended in 2006: GA Res. 61/33, December 4, 2006. At the time of writing, the amended Model Law had been enacted in only twelve of the member states to the original 1985 version (or provinces thereof). See UN Status Page, available at http://www.uncitral.org/uncitral/en/uncitral texts/ arbitration/1985Model arbitration status.html.

22See also Levit, “A Bottom-Up Approach,” 171; Brummer, “Why Soft Law Dominates International Finance,” 631.

23Anne-Marie Slaughter, “Governing the Global Economy through Government Networks,” in The Role of Law in International Politics: Essays in International Relations and International Law (ed. M. Byers) (Oxford: Oxford University Press, 2000), 202; Charles K. Whitehead, “What’s Your Sign? International Norms, Signals, and Compliance,” 27 Michigan J. of Int’l L. 695, 703 (2006); Brummer, “Why Soft Law Dominates International Finance,” 634.

24Levit, “A Bottom-Up Approach,” 172, 180–2 (noting that the process of norm generation can be either top-down percolation or bottom-up).

25Brummer, “Why Soft Law Dominates International Finance,” 630. See also Lipson, “Why Are Some International Agreements Informal?,” 501, 518.

26Whitehead, “What’s Your Sign?,” 712; Abbott and Snidal, “Hard and Soft Law,” 426. See also Baxter, “International Law in ‘Her Infinite Variety,’” 555, passim (perception of mutual advantage); Lipson, “Why

pull.”27 Political or economic forces motivate the creation of soft rather than hard law,28 and these same forces determine whether it will have practical effect in the absence of any legally binding quality. In some instances, avoidance of negative reputational effects can provide informal law with similar or greater coercive effect in practice as hard law.29 There are numerous international examples of soft law in the area of contracts, such as the Principles of European Contract Law (PECL) and the UNIDROIT Principles of International Commercial Contracts (UNIDROIT Principles).30 Other, more targeted soft laws, such as the International Chamber of Commerce’s (ICC) Uniform Customs and Practices for Documentary Credit Transactions (UCP) and Incoterms, have been universally recognized as international customary law.31 There are also a host of international arbitral rules that are applied to the resolution of contractual disputes, including ICC Arbitration Rules and UNCITRAL Arbitration Rules.32 A more abstract example of soft law is the traditional notion of the lex mercatoria.33 In each case, broadly speaking, the soft law in question has no binding legal effect, unless the parties themselves have validly agreed to apply the rules, or alternatively, the forum court or arbitral tribunal uses such soft law in resolving the dispute.34 On the basis of the sliding scale definition

Are Some International Agreements Informal?,” 508–11 (referring to the “shadow of the future” as an influence on the strength of the signal of commitment), and 513.

27Abbott and Snidal, “Hard and Soft Law,” 428 (citing Thomas Franck 1990).

28Lipson, “Why Are Some International Agreements Informal?,” 518 (arguing that soft law allows governments to enter international agreements “quickly and quietly”); id., 630.

29Whitehead, “What’s Your Sign?,” 707–12; Koh, “Why Do Nations Obey International Law?,” 2642.

30Commission on European Contract Law, Principles of European Contract Law, Parts I & II (1999) & Part III (2003), available at http://www.cisg.law.pace.edu/cisg/text/textef.html (PECL); International Institute for the Unification of Private Law (UNIDROIT), UNIDROIT Principles of International Commercial Contracts 2004 (Rome: UNIDROIT, 2004). The DCFR could also be utilized in this manner. See

Principles, Definitions and Model Rules of European Private Law: Draft Common Frame of Reference (DCFR) (ed. Christian von Bar and Eric Clive) (Munich: Sellier, 2009).

31International Chamber of Commerce (ICC), Incoterms 2010 (Paris: ICC, 2010); ICC, Uniform Customs and Practice for Documentary Credits (UCP) 600 (Paris: ICC, 2007). See also, Levit, “A Bottom-Up Approach,” 172–4 (noting their impact and the fact that they do not fit within technical definitions of laws, but are considered soft law nonetheless). Thus it seems surprising that a recent survey found Incoterms and UCP to have been used at least “sometimes” by only 62% and 57% of 67 corporate counsel respondents surveyed; see School of International Arbitration at Queen Mary, University of London, International Arbitration Survey: Choices in International Arbitration (2010), available at http://www.arbitrationonline

.org/docs/2010_InternationalArbitrationSurveyReport.pdf, at 15.

32ICC, ICC Rules of Arbitration (Paris: ICC, 2011), available at http://www.iccwbo.org/uploadedFiles/ Court/Arbitration/other/2012 Arbitration%20and%20ADR%20Rules%20ENGLISH.pdf; UNCITRAL, UNCITRAL Arbitration Rules (Vienna: UNCITRAL, 2011), available at http://www.uncitral.org/pdf/ english/texts/arbitration/arb-rules-revised/arb-rules-revised-2010-e.pdf.

33See Berthold Goldman, “The Applicable Law: General Principles of Law – The Lex Mercatoria” in Contemporary Problems in International Arbitration (ed. J.D.M. Lew) (Dordrecht: Martinus Nijhoff, 1986), 113, 116 (“lex mercatoria is, at the least, a set of general principles and customary rules spontaneously referred to or elaborated in the framework of international trade, without reference to a particular national system of law”); Harold J. Berman and Colin Kaufman, “The Law of International Commercial Transactions (Lex Mercatoria),” 19 Harvard Int’l L.J. 221, 272–3 (1978) (describing lex mercatoria as “an international body of law, founded on commercial understandings and contract practices of an international community composed principally of mercantile, shipping, insurance and banking enterprises of all countries”); Levit, “A Bottom-Up Approach,” 186; Ole Lando, “The Lex Mercatoria in International Commercial Arbitration,” 34 Int’l & Comparative L. Quarterly 747 (1985).

34See also Christopher Kee and Edgardo Munoz,˜ “In Defence of the CISG,” 14 Deakin L. Rev. 99, 118 (2009).

adopted earlier, they remain soft law, despite the fact that their pervasive use in practice may mean that individual parties have little choice but to use them.35

Harder to categorize is supranational religious law. For example, since it finds its source in the Quran, the Sunna, and other religious texts, Islamic law can be described as supranational rather than international law.36 The extent to which the forum applies a contractual law reflecting Islamic principles essentially determines whether or not Islamic law has legal effect in the particular case. Nonetheless, the binding legal effect derives from the fact that a state law has been influenced by Islamic law, in much the same way as state laws might have been influenced by other soft law, such as the influence of UNIDROIT Principles on Chinese contract law. The parties could choose to apply Islamic law to govern the contract, subject to restrictions on choice of anational law,37 but this in effect is the same as a choice of soft law. Ultimately, it seems Islamic law should therefore arguably be seen as international soft law.

In the examples considered here, soft law provides a set of contractual terms from which the parties may choose. Parties may prefer to simply incorporate preexisting terms rather than expend time to negotiate and draft their own custom terms. Soft law operates in much the same way as “boilerplate” contractual terms. It provides an efficient and convenient shortcut for contracting. Yet, one might ask, if the CISG provides parties with a set of default rules, is the CISG, in effect, really all that different from the types of soft law mentioned above?

A. When Soft Is Not So Soft

As indicated by the sliding scale approach, the soft–hard law divide is not a crisp one. Some soft laws are in reality “harder” than they might first appear. For example, international financial law is, on an institutional assessment of the manner in which it is

35An example of this is the use of SWIFT standard protocols for electronic interbank transfers, which are invariably required by transferring banks. See Society for Worldwide Financial Telecommunication, available at http://www.swift.com. See also Whitehead, “What’s Your Sign?,” 707–12.

36Gary F. Bell, “New Challenges for the Uniformisation of Laws: How the CISG is Challenged by ‘Asian Values’ and Islamic Law,” in Towards Uniformity: The 2nd Annual MAA Schlechtriem CISG Conference

(ed. I. Schwenzer and L. Spagnolo) (The Hague: Eleven International Publishing, 2011), 11, 22.

37Indeed, English courts have rejected a choice of Shari’a law on the basis that it was not a valid choice of law pursuant to Article 3(1) Rome Convention on the Law Applicable to Contractual Obligations, 1980 OJ (L 266), June 19, 1980, 19 ILM. 1492 (1980): Shamil Bank of Bahrain v. Beximco Pharm. Ltd [2004] EWCA Civ. 19 (Court of Appeal); Gary B. Born, International Commercial Arbitration (Kluwer: Dordrecht 2009) 2227, n. 559. By contrast, French law now specifically allows arbitrators of international disputes to apply anational “rules of law” chosen by parties to govern their contract: Article 1496 Code de Procedure´ Civile (New French Code of Civil Procedure) (October 1, 2011). As a matter of choice of law rules, the Rome I Regulation permits only choices of “law” (national law), but allows anational rules to be incorporated as contractual terms: Regulation (EC) No 593/2008 of the European Parliament and of the Council of June 17, 2008, on the Law Applicable to Contractual Obligations [2008] OJ L 177/6, Recital [13], Article 3. See also Symeon C. Symeonides, “Party Autonomy in Rome I and II from a Comparative Perspective,” in Convergence and Divergence in Private International Law – Liber Amicorum Kurt Siehr (ed. Katharina Boele-Woelki et al.) (The Hague: Eleven International Publishing, 2010), 513, 539–40; Helmut Heiss, “Party Autonomy,” in Rome I Regulation: The Law Applicable to Contractual Obligations in Europe (ed. F. Ferrari and S. Leible) (Munich: Sellier, 2009), 1, 2. See Tribunale di Padova-Sez. Este, Italy, January 11, 2005, available at http://cisgw3.law.pace.edu/cases/050111i3.html (CISG was incorporated into the contractual terms rather than a valid choice of law).

enforced, harder than its soft-law quality suggests.38 Soft law commitments are in some cases commonly observed and can have a strong “compliance pull.”39

So too, it must be acknowledged that soft law takes on a harder edge for contractual relations. The “cheap exit” disadvantage of soft law mentioned earlier is really only relevant to states, not individual persons or entities. Provided the parties have agreed to apply the soft law to their contractual relations, then absent any prohibition on such a choice of law,40 most legal regimes will effectively enforce that choice due to the primacy of party autonomy in contract law. Thus, despite the fact that it is soft law, the rules in question will legally bind the parties.

Despite lacking legal force, soft law can have greater operational effect than hard law due to political or economic forces. Institutional and behavioral influences can step into the legal void. For example, if a soft law provides a cheap, accessible, and desirable set of default rules that can therefore be used conveniently and efficiently, it may become a habitual choice for contractual parties. Major market players (such as banks) may incorporate references to soft law in their standardized contract forms. Once a certain level of popularity is reached, such a choice may no longer in truth be a choice at all, as it would be highly inefficient, or perhaps commercially unacceptable to make an alternative choice in most transactions. Market forces may increase the economic value and popularity of soft law by virtue of “network effects.”41

The ICC’s Incoterms and UCP exemplify the economic value and network effects of soft law, because they overwhelmingly dominate choice of terms of each type in international trade.42 The impact of soft law is often dependent on the political and economic power of the institutions that create and support its use, such as the international financial rules created by the Financial Stability Board, the Basel Committee on Banking Supervision, and the International Organization of Securities Commissions, bodies dominated by powerful central banks, regulatory agencies, and finance ministries.43 Market forces have shaped the disciplinary effect of these technically nonbinding rules. For example, a bank’s failure to adopt the Basel Committee’s capital standards acts as a reputational signal to the market regarding its solvency and capitalization.44 Clearly, soft laws can be ubiquitous, and can rival or surpass hard law in importance and practical impact.

On the other hand, where a soft law is not widely accepted by major institutional players or by most parties in the market, then the difference in impact between soft and hard law becomes apparent. For example, the CISG enjoys a good degree of operational effectiveness in part because it applies as a default law. Conversely, the UNIDROIT Principles and PECL only become applicable when chosen by the parties as governing

38Levit, “A Bottom-Up Approach,” 189; Brummer, “Why Soft Law Dominates International Finance,” 624.

39Brummer, “Why Soft Law Dominates International Finance,” 624.

40See supra note 37.

41See also Lisa Spagnolo, “Green Eggs and Ham: The CISG, Path Dependence, and the Behavioural Economics of Lawyers’ Choices of Law in International Sales Contracts,” 6 J. of Private Int’l L. 417 (2010) (behavioral economics and psychological influences on choice of law).

42Sir Roy Goode, Herbert Kronke, Ewan McKendrick, and Jeffrey Wool, Transnational Commercial Law: Text, Cases and Materials (Oxford: Oxford University Press, 2007), 358 (discussing the “[n]ear universal adoption” of the UCP). But see evidence on UCP usage, School of International Arbitration at Queen Mary, International Arbitration Survey (finding UCP to have been used at least “sometimes” by only 57% of 67 corporate counsel respondents surveyed).

43Brummer, “Why Soft Law Dominates International Finance,” 627.

44Id., at 638.

law.45 Consequently, the UNIDROIT Principles and PECL are far less utilized than the CISG,46 despite their “broader and less compromising” nature.47 In sum, it can be observed that, while hardness certainly assures some degree of impact, often its ultimate impact depends not so much upon its hard or soft characterization, but on its acceptance, perceived utility, and frequent use by those with economic influence in the relevant market for law. These observations hold important implications for the CISG, as discussed in the following sections.

B. When Hard Is Not So Hard

The list of treaties or conventions that never entered into force is a long one. The list is also long for conventions that entered into force, but made little impact. This can be due to a number of factors, including a low number of adopting nations or numerous reservations to the convention, which was the case for the Uniform Law on the International Sale of Goods (ULIS).48 Other factors relate to applicability and enforceability. In the former case, courts may narrowly construe a convention to limit its applicability. In the latter case, there may be no effective enforcement mechanism to ensure compliance to treaty obligations. These factors reduce the effectiveness and thwart the purposes of hard law conventions. Another quality may likewise reduce the impact of hard law, but in a manner entirely consistent with its original purpose. A case in point is the CISG. One of

45An exception to the nonparty choice model of soft laws is when the forum allows their application as a guide to international contractual principles or evidence of international commercial usages (international customary law). See infra note 59.

46Institute of European and Comparative Law, Oxford University, and Clifford Chance LLP, Civil Justice and Choice of Contract Law: A Business Survey (2008) (reporting that 10% of respondent businesses occasionally or almost never used PECL; 17% of respondent businesses often or occasionally using UNIDROIT Principles; yet more than 31% had had the CISG apply; 29% were in contracting states and never or only occasionally opted out; a further 2% were in noncontracting states but usually or occasionally opted in; and, additionally, presumably a small fraction of the 46% who indicated they usually opt out and the 20% who “don’t know” would sometimes be subject to the CISG) (Questions 25–27 spread sheet on file with the author; email correspondence with author October 2009). See summary, Stefan Vogenauer, “Oxford Civil Justice Survey – Civil Justice Systems in Europe: Implications for Choice of Forum and Choice of Contract Law A Business Survey,” Final Results, available at http://denning.law.ox.ac.uk/iecl/ pdfs/Oxford%20Civil%20Justice%20Survey%20-%20Summary%20of%20Results,%20Final.pdf, and subsequent publication: Civil Justice Systems in Europe: Implications for Choice of Forum and Choice of Contract Law, Studies of the Oxford Institute of European and Comparative Law (ed. Stefan Vogenauer and Chris Hodges) (Oxford: Hart Publishing, 2014 (forthcoming)). Contra School of International Arbitration at Queen Mary, International Arbitration Survey, at 15 (reporting that 53% of corporate counsel surveyed indicated they had “sometimes” used the CISG compared with 62% stating they had “sometimes” used UNIDROIT Principles/Incoterms). However, this surprising result can probably be explained by the inclusion within a single category of both UNIDROIT Principles and the very widely used Incoterms. Indeed, respondents indicated that Incoterms were used more frequently than UNIDROIT Principles: at 15.

47Lars Meyer, “Soft Law for Solid Contracts? A Comparative Analysis of the Value of the UNIDROIT Principles of International Commercial Contracts and the Principle of European Contract Law to the Process of Contract Law Harmonization,” 34 Denver J of Law & Policy 119, 132 (2006).

48See, e.g., Convention Relating to a Uniform Law on the International Sale of Goods, opened for signature July 1, 1964, 834 UNTS 107 (entered into force August 18, 1972) (“ULIS”) http://www.unidroit.org/ english/implement/i-main.htm. ULIS contained a number of reservations. For example, pursuant to the reservation permitted by ULIS Article V, contracting states could ensure the convention had little effect as there would be no obligation to apply it unless parties agreed to opt in.

its central tenets is party autonomy. Hence, CISG Article 6 allows the parties to agree to modifications of CISG provisions or to partially or entirely exclude its application. Thus, the impact of the CISG to a large extent depends on the preferences of parties engaged in international trade.

Contracting parties may select the law of a member state to apply to their contract, resulting in the application of the CISG as governing law of the contract, or, more problematically, may directly choose the CISG, provided this can be validly done under forum choice of law rules.49 Presumably, parties might prefer to select the CISG rather than expend time and effort negotiating and then drafting terms, or selecting a law unfamiliar to one or both parties.50 It may also serve as a neutral law ideal for situations where the parties are unable to easily agree on a choice of law.51 The very fact that parties may voluntarily make their contract subject to the CISG in circumstances where it would not otherwise apply demonstrates one way in which a hard law such as the CISG can actually be used as soft law.52 Just like soft law, the CISG can provide an efficient and convenient shortcut for contracting.

III. CISG in Adjudication as Hard and Soft Law

As was stated at the outset of this chapter, the CISG is undoubtedly hard law. The rights and obligations created by its provisions legally bind the buyer and seller when it is applied to the contract. It applies automatically to contracts where the prerequisites for its application are satisfied and the parties have not agreed to opt out. Yet, in the context of its application by a court or tribunal, there are a number of ways in which its respective hardness or softness can be considered. The extent to which the CISG is binding will vary depending on the adjudicatory setting and the circumstances underpinning its relevance to the proceedings.

A. When the CISG Is Hard Law

Although the CISG creates obligations for the parties, its impact upon adjudicators is a different matter. The crucial question in relation to the hard–soft characterization is whether the adjudicator must apply the CISG, or whether, instead, the adjudicator has discretion to apply it. However, in the case of the CISG, the binding duty to apply it as hard law derives from the nature of the CISG as a treaty, creating an obligation in international law to apply it within member states where its applicability

49See discussion regarding choice of law in the various authorities referred to supra note 37.

50See School of International Arbitration at Queen Mary, International Arbitration Survey, infra note 80.

51Larry A. DiMatteo et al., International Sales Law: A Critical Analysis of CISG Jurisprudence (New York: Cambridge University Press, 2005), 14, n. 48 (referring to the CISG’s potential as a “compromise choice of law for parties from different national legal systems”); C. Widmer and P. Hachem, “Switzerland,” in The CISG and Its Impact on National Legal Systems (ed. F. Ferrari) (Munich: Sellier, 2008), 281, 286 (from a survey of 153 Swiss lawyers in 2008, finding that 26% thought the CISG made choice-of-law negotiations easier).

52DiMatteo et al., International Sales Law, 13–14. See also Tribunale di Padova-Sez. Este, Italy, January 11, 2005 (CISG incorporated into contractual terms rather than a valid choice of law).