Does Choice of Dispute Resolution Method Affect the Application of the Law?

An Open Question in Australia, Regarding the CISG

The ADRRN Blog encompasses the diverse methods of ADR, arbitration being one of them. This week my colleague Ben Hayward has kindly contributed an article in relation to a significant multilateral treaty utilised in international commercial arbitration known as the CISG. The article is a timely one as we celebrate the 40th year of the CISG. Thank you Ben.

Dr Ben Hayward is a Senior Lecturer in the Department of Business Law and Taxation at the Monash Business School, and completed his PhD at the Monash Law Faculty in 2015. He has previously worked at the Deakin Law School, and in private practice at Arnold Bloch Leibler Lawyers & Advisers. I thank Ben for his contribution to this week’s blog.

This image has an empty alt attribute; its file name is light-bulb-image-for-bens-article.docx.jpg
Photo: Nroose/ Public domain

Author: Ben Hayward

Substantive law doesn’t feature regularly on the Australian Dispute Resolution Research Network blog.  Nevertheless, in today’s post, I’d like to look at one instance where substantive law and choice of dispute resolution method may collide.  This concerns the United Nations Convention on Contracts for the International Sale of Goods: commonly referred to as the CISG.

The CISG is a substantive law treaty developed by the United Nations Commission on International Trade Law. It seeks to harmonise international sales law, around the globe.  Differences in national sales laws are thought to create barriers to trade, increasing merchants’ costs of doing business.  If merchants deal with the same sales law across national borders, their costs of doing business are reduced, and trade is encouraged.

What does this have to do with choosing between dispute resolution methods? There might be a difference in the way the CISG is applied: though at present, we don’t know.

Because the CISG is intended to apply the same way in all jurisdictions where it is adopted – currently 94 States – its interpretation requires sensitivity to that international context.  According to Art. 7(1) CISG:

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.

This provision sets out a rule of autonomous interpretation.  The CISG is to be given its own meaning, rather than being read in light of any particular State’s regular domestic law.  In Australia, therefore, we shouldn’t treat the CISG as if it replicates the rules in the Goods Act 1958 (Vic): even though this might be tempting, where this is the law we’re most familiar with.

Does the choice between dispute resolution methods impact the extent to which such internationally-minded interpretations are achieved?  This is an open question in Australia, and one that I hope to explore in my future research.

Litigation and international commercial arbitration are two different dispute resolution processes that both involve the application of substantive law.  Judges and arbitrators both interpret the CISG, where it applies in the cases they decide.

While the CISG came into force in Australia in 1989 – over 30 years ago – we still don’t have many Australian court cases concerning the Convention.  One of the most highly regarded international databases, the Albert H Kritzer CISG Database, records 28 Australian decisions.  In research I recently conducted for a forthcoming Melbourne University Law Review article, I identified an additional 5 cases via Lexis Advance: bringing the total to 33.  Even still, some of these are appeal decisions, some involve parties opting out of the CISG’s operation, and still others only mention the CISG in passing.  As I address in my forthcoming article and also in prior scholarship, Australian court cases directly applying the CISG tend to take a parochial approach to its interpretation.  It’s not uncommon for judges to equate the Convention’s operation to that of Australia’s ordinary Sale of Goods Acts: even though this is inconsistent with Art. 7(1) CISG’s interpretative rule.

What about the situation in arbitration?  Nearly 20 years ago, Jacobs, Cutbush-Sabine and Bambagiotti suggested that the CISG’s ‘modest treatment’ in Australian case law might be attributed to ‘the prevalence of arbitration, and particularly international arbitration, as a means of resolving dispute[s], although there is no empirical evidence of this’.

If CISG cases involving Australian businesses are being arbitrated rather than litigated, are those arbitral proceedings approaching the Convention in a more internationalist spirit?

At present, this remains an open question.  There is still no empirical evidence concerning the CISG’s use in arbitration involving Australian parties.  Since international arbitration is private/confidential, arbitral awards are not on the public record in the same way that court judgments are.  International evidence does suggest that arbitration is the primary forum for resolving international trade disputes, in a quantitative sense.  Since arbitrators may be chosen for their particular expertise, we might hypothesise that they would be more likely to take the CISG’s international context into account in their decision-making.  Nevertheless, one international study addressing the ‘quality’ of CISG analysis in arbitral awards (compared to court judgments) concluded that the relationship between the Convention and arbitration was ‘a picture of disinterest and neglect … rather than a fruitful marriage’. [1]

The CISG is intended to benefit merchants and their international trading activities.  In future research, I hope to assess the extent to which choices made by Australian businesses between dispute resolution methods impact the Convention’s achievement of this goal.

[1] Petra Butler, ‘CISG and International Arbitration – A Fruitful Marriage?’ (2014) XVII International Trade and Business Law Review 322, 323, 356.

This entry was posted in Dispute resolution and tagged , , , by Oz Susler. Bookmark the permalink.

About Oz Susler

I'm the Director of Post-graduate (Coursework) Programs, lecturing in the JD and LLM Programmes at La Trobe University Law School. I have qualifications in arts, education and law from the University of Melbourne and La Trobe University. I completed my doctorate at La Trobe University on international arbitration. I am a graduate member of the Chartered Institute of Arbitrators and an accredited mediator under the NMAS. My research has been primarily focused on international commercial arbitration. I am passionate about coaching tomorrow's lawyers in developing ADR skills through both my teaching and my coaching practice of students in arbitration and mediation. I realised the significance of offering alternatives to litigation when I was in practice as a commercial lawyer. This interest led me to conduct research in international arbitration. My DR research interest has been on how state courts approach jurisdictional issues relating to the arbitrators' jurisdiction in international commercial arbitration. I have also published on investor state dispute settlement systems and received awards for teaching, including services in teaching ADR. Currently, I am involved with a research project in Online Dispute Resolution, which I hope to share the findings of on the ADRRN Blog in the future.

2 thoughts on “

  1. Thanks for the question Oz! Our relatively recent cases tend to treat the CISG as if it were the same as our ordinary sale of goods Acts. This isn’t optimal – the CISG can’t apply this way if it is to apply in the same way across all 94 adopting countries (as is its intention). Some other countries have similar patterns in their case law, while others are much more internationalist. Some of the civil law countries in particular really embrace reference to international scholarship, consistent with their legal tradition, which helps approach the CISG in a much more internationalist spirit. We have a bit of work to do to improve this – but as to how much work is needed, it would be great to know whether this also reflects the approach in arbitration!

    Like

Post your comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.