The Convention on Contracts for the International Sale of Goods: Slow ratification by African countries

Blog

The Convention on Contracts for the International Sale of Goods: Slow ratification by African countries

The Convention on Contracts for the International Sale of Goods: Slow ratification by African countries

The legal systems of African countries reflect their history, colonial heritages, customary and other norms. The differences are also evident in the area of international contracts of sale. For example, South Africa’s law of contract is Roman-Dutch, whereas Kenya’s is English law. Each legal system has a distinct way of law-making and dispute settlement. Multiplicity and disparities in legal systems can make international commercial contracts complex and uncertain. This can impact businesses, as they increasingly seek opportunities outside their national markets.

Businesses have to comply to many business procedures, laws, and regulations. This may constitute a non-tariff barrier to trade, increasing transaction costs of doing business. Domestic laws regulate domestic commercial transactions and may not be adequate to deal with international commercial contracts.

Most legal systems allow parties to select the law that will govern a contract. However, a choice of legal provision in a contract is not always a feasible solution to the current challenges in African intra-regional and international trade. Contracts sometimes do not specify which law will govern the transaction in case of a dispute, this is due to a dilemma over this sensitive topic or because it is neglected in the desire for speed in finalizing the transaction. In such situations, a seller or buyer from separate legal systems will be unable to establish which rule of law applies until they complete a comprehensive analysis of conflicts of law to establish the law which is most closely related to the contract; this is time consuming and the same time costs a lot of money.

Harmonisation of laws and the ratification and implementation of United Nations Convention on Contracts for the International Sale of Goods (CISG) does address problems of multiple and distinct legal regimes.[1] This Blog provides the status of ratification of the CISG by African countries and its implications.

The CISG was adopted under the auspices of the United Nations Commission for International Trade Law (UNCITRAL) in 1980. It entered into force on 1 January 1988 upon ratification by 11 countries.[2] As of 26 November 2020, 94 countries have ratified or acceded to the Convention. The CISG mainly seeks to establish a uniform law to govern international contracts of sale of goods.

The CISG is the only international legal instrument addressing legal diversity in contracts of international sale of goods. The CISG can contribute to reducing legal barriers to trade. The ratification of and implementation of the CISG will increase legal certainty in global trade through its codified structure; the availability of sources; the elimination of foreign law; exclusion of the complexity of conflicts of laws; and the simplicity of their formulation. This in turn will assist in lowering the transaction costs.

The CISG applies to international business (not consumer) contracts on the sales of most goods. Exceptions are personal or household goods, stocks, shares, investment securities, negotiable instruments, money, ships, vessels, hovercrafts or aircraft, and electricity (Arts. 2). Transactions covered include the sale of movable and tangible goods. Services, except those part of a mixed contract[3] (not the preponderant part of the performance (Art 3 (2)) are not covered. It also covers every other kind of raw material or product in any transaction (Art 3 (1)).

Status of Ratification of the CISG in Africa

As of 26 November 2020, 13 African countries have ratified the CISG: Benin, Burundi, Cameroon, Congo, Egypt, Gabon, Guinea, Lesotho, Liberia, Madagascar, Mauritania, Uganda and Zambia.

Why are more African countries not ratifying the CISG? One likely reason is that African countries might not see uniform laws drafted by international bodies as tailored towards their particular interests and needs.

Another reason is the lack of political will. The RECs in Africa agree to the concept of economic harmonisation and integration, the laws governing global trade tends not to be a priority area of work for them because of the prevalence of other, more demanding issues, also a particular “isolation from international legal developments and limited appreciation for the economic benefits arising from a modern commercial law framework”.[4]

The RECs in Africa do not urge their member states to ratify the CISG. COMESA is the first to have encouraged its member states to accede to the CISG. The Organization for the Harmonisation of Business Law in Africa (OHADA) is thus far the only illustration of a thorough regional unification and legal harmonisation of commercial laws in African. It applied the CISG as the basis for a regional uniform sales law relevant to its member states. Out of the 17 member states of the OHADA, five (Benin, Cameroon, Congo, Gabon and Guinea) of them have ratified the CISG.

There are some challenges implementing the CISG. For instance, parties can agree to opt out of the CISG at the time of or after the conclusion of the contract (Art 6). In addition, since the Convention is accessible in different languages, lacks clear definitions and the vagueness of its terms will make it very difficult for arbitral tribunals and courts with very diverse interpretation cultures and styles to develop and interpret the Convention uniformly.

Regardless of these challenges, in practice the strengths far outweigh the shortcomings.[5] Some of the strengths of the CISG as set out above include: creation of legal certainty, reduction of transaction costs, ease access of the law, unifying the law of sales among others.

The CISG is not a threat in any way to regional harmonisation and unification efforts. Furthermore, it leaves space for regional harmonisation exercises due to its limited scope and application. There are particular CISG provisions that promote its co-existence with uniform regional sales laws, they are: Article 6, Article 90, Article 94 and Article 9(1). The RECs should therefore not hesitate from being part of universal harmonisation efforts due to concerns that the universal and regional harmonisation efforts could conflict.

Recommendations

Nguru underscores that “disparities in national laws are likely to result in uncertainty which, in turn, creates obstacles to international commerce. It is acknowledged that strong investment flows cannot be achieved without a secure legal and commercial environment”. The implementation of the CISG in Africa can reduce legal barriers or complexity in international commerce. This can encourage trade through uniformity and certainty in international commercial law and transactions. This can facilitate regional and international trade for Africa. Countries in their RECs should equally harmonise their diverse contract legal systems on issues not covered by the CISG. Harmonised regional legislation can complement harmonised international sales law where required.[6]


[1] United Nations Convention on Contracts for the International Sale of Goods (CISG) does address problems of multiple and distinct legal regimes

[2] Argentina, the People’s Republic of China, Egypt, France, Hungary, Italy, Lesotho, Syrian Arab Republic, United States, Yugoslavia, and Zambia.

[3] https://legal.un.org/avl/pdf/ls/Flechtner_outline1.pdf

[4] LG. Castellani, “Ensuring harmonisation of contract law at regional and global level: The United Nations Convention on Contracts for the International Sale of Goods and the Role of UNCITRAL” (2008) Uniform Law Review 1/2 115, 117

[5] http://www.saflii.org/za/journals/SPECJU/2015/9.pdf

[6] J. Coetzee ”CISG and Regional sales Law: Friends or foes?” (2015) Vol 2, No. 1 Journal of Law, Society and Development 29, 44.

About the Author(s)

Martin Gitau (intern)

Martin Gitau (intern)

Martin Gitau holds a Bachelor of Laws (Hons) from Catholic University of Eastern Africa. He recently graduated with an LLM in International Trade Law from the University of Stellenbosch, South Africa. His interests include legal aspects of world and regional trade, sustainable development law, international tax law, carriage of goods by sea and international sales law. His research interests revolve around international and intra-regional trade, regional integration, specifically the United Nations Convention on Contracts for the International Sale of Goods (CISG), its non-ratification as a non-tariff barrier to trade in Africa.

Leave a comment

The Trade Law Centre (tralac) encourages relevant, topic-related discussion and intelligent debate. By posting comments on our website, you’ll be contributing to ongoing conversations about important trade-related issues for African countries. Before submitting your comment, please take note of our comments policy.

Read more...