The UN Convention on Contracts for the International Sale of Goods (CISG) is considered a combination of different legal systems. An “impediment” in article 79, which is in its nature a force majeure provision, can be employed to relieve a non-performing party from liability.
In the absence of an official interpretation to the CISG, a case reporting system has been established to assist relevant stakeholders by making decisions of courts and arbitral tribunals interpreting the CISG available on the UN Commission on International Trade Law (UNCITRAL) website. The available cases involving application of article 79 show a quite low acceptance rate from 1995 to 2018, with only six of the 39 vendor claims having been supported, and the number for the 20 buyer claims being five. The “impediment” is not applicable when:
No impediment exists. The following circumstances were considered as non-existence of impediment: The vendor was capable to perform despite the market fluctuations; the theft of a buyer’s payment that had been made; the imported food radiation level did not meet the buyer’s requirement; the raw material price increased due to the weather; a significant decrease of the market price after the contract signing; and a dramatic price increase in the international market impacted the equilibrium of the contract, yet the vendor was still possible to perform. Therefore, changes in any party’s financial capacity and market prices are generally not considered as an impediment.
Foreseeability of impediment. For instance, the vendor’s country forbade exports, which could be foreseen, or food that contained Sudan dyes, which was well acknowledged by the vendor.
It is possible for the non-performing party to control the impediment. For example, the buyer could not be exempted due to its partner’s problem; or the vendor negligently had the goods stolen.
On the other hand, claims were supported in the following circumstances: restrictions on exporting in the vendor’s country; the vendor’s plant was disabled due to fire; vendor unable to deliver as the port was shut down in extreme cold; delayed government tender; the producer controlled the raw materials; the carrier delayed; the payout disputes were pending in court; the Iraq War broke out; the buyer could not obtain a certificate due to high lead content in the food; the goods had quality problems.
Therefore, the applicable circumstances include weather conditions, unpredictable restrictions and third-party issues. In light of this, the following points are noteworthy:
(1) The courts and arbitral tribunals are not prone to exempt the non-performing party. Buyers’ claims were more supported than vendors, but nevertheless the general success rate is low.
(2) There were no claims involving diseases or epidemics. Covid-19 is well controlled in China, but other regions of the world are of concern, so one should be cautious when analyzing the impact of covid-19 in different cases. Non-performance directly caused by a government’s unpredictable actions may be favourably considered under the CISG.
(3) Impediment claims were mostly supported in civil law countries, since force majeure originates from the civil law system. To benefit from article 79, institutions and arbitrators with civil law backgrounds would be a preferable choice compared with ones with common law backgrounds.
Liao Ming is an arbitrator of Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC/BIAC) and a partner at Tahota Law Firm. BAC/BIAC case manager Jolie Guo also contributed to the article.
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