FAQ International Sale of Goods
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Is there a uniform legal framework for the sale of goods across international borders?
Yes, namely the United Nations Convention on Contracts for the International Sale of Goods (CISG), also known as the UN Sale of Goods Convention or the Vienna Sale of Goods Convention. The CISG is a unifying international treaty for the sale of goods across international boundaries. It currently applies in 94 countries (as of 2022), including, for example, USA, Germany, Switzerland, Russia, China, France, Belgium, Italy, Austria, Spain, Brazil, Canada, Australia and Japan. However, it does not apply, inter alia, in Portugal, India, South Africa and the United Kingdom.
Geographically, the CISG applies to international contracts for the sale of goods if the parties have their establishment in different countries which are either both treaty countries or if at least the law of one treaty country applies to the transaction. The parties are free to exclude the applicability of the CISG wholly or in part or to modify its provisions.
To which contracts does the United Nations Convention on Contracts for the International Sale of Goods (CISG) apply?
The CISG applies only to sales contracts for movable goods. Therefore, it does not apply, for example, to the purchase of intellectual property rights, real estate, and company shares. The CISG only applies to cross-border purchases of goods between merchants. Purchases for personal use (consumer purchases) are therefore generally excluded from its scope of application.
What are Incoterms®?
Incoterms® (“international commercial terms”) are international standard clauses issued by the International Chamber of Commerce (ICC) in Paris. They may be used for international purchases of goods if the contracting parties agree on their applicability. In their current version published in the year 2020, there are eleven Incoterms®. Each Incoterm® contains various provisions, particularly those pertaining to the place of delivery, the distribution of risks between the parties in the event of damage or destruction of goods during transport, the bearing of costs between the parties (such as transport costs, transport insurance, delivery and import duties), documentary evidence of the dispatch or delivery of the goods, and inspection and packaging of the goods. The content of the individual Incoterms® is structured in such a way that the exporter is gradually subject to increasing obligations.
International Arbitration: What is an arbitral tribunal, and what is the difference between an arbitral tribunal and a public state court?
An arbitral tribunal is a private court that acts on the basis of an arbitration agreement between the parties and without state intervention. The parties are free to agree on the manner in which the proceeding is to be conducted or they can appoint an existing arbitration institution and its arbitration rules. In arbitration, the judgment is called an arbitral award. This award is binding on the parties and can only be reviewed by a public state court for a few reasons. Generally, the arbitral award concludes the proceedings, so that, in contrast to state jurisdiction, it cannot be reviewed in several instances.
What are the advantages and disadvantages of arbitration?
Advantages
– Enforceability: A major advantage of arbitration is that arbitral awards are generally easier to enforce internationally than state court rulings. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) has now been acceded to by 168 states (as of 2022), including the USA and Germany. The New York Convention provides for liberal rules in order to facilitate the recognition and enforcement of foreign arbitral awards among the contracting states.
– Acceleration of proceedings: An arbitral award generally concludes the legal dispute, whereas regular court proceedings may have to be conducted through several instances.
– Cost saving: Compared to regular court proceedings, arbitration may result in cost advantages. In proceedings before national courts, for example, documents often have to be translated into the national language first, whereas within the framework of arbitration, the parties can agree on the language in which the proceeding is to be conducted. Thus, costly translations can be avoided or reduced.
– Non-public: Unlike state court proceedings, arbitration proceedings are not held in public. This can particularly benefit companies or persons who fear damage to their reputation as a result of public proceedings.
– Expertise of the arbitrators: The parties may elect arbitrators who are particularly competent with regard to the substance of the matter because of their education, experience, and nationality.
Disadvantages
– Limited judicial review of the arbitral award: As already mentioned above, state courts cannot review arbitral awards in detail, but only to a very limited extent, for example as to whether there was an effective arbitration agreement at all or whether the arbitral tribunal was properly staffed.
– Depending on the individual case, the costs of arbitration can be even higher than in state court proceedings.
– Depending on the individual case, the impartiality of the elected arbitrators cannot always be guaranteed.
– No quick remedies: In particularly urgent cases, the party concerned may need a preliminary legal remedy quickly, such as where irreparable harm will likely occur to the one party if the other party continues his or her harmful actions. In such a case, a public state court may provide interim relief to stop the other party from continuing his or her harmful conduct. To this effect, the court decides under an expedited procedure in which the facts are not examined in great depth. Arbitral tribunals, on the other hand, are usually not in a position to provide legal protection in such a rapid manner.