In international sales of good contracts (“ISGC”), the provisions of the contract and the applicable sources of law play an important role in resolving disputes. The sources of law applied in resolving disputes related to this type of contract are very diverse. In this article, TNTP will clarify the sources of law that can be applied in resolving disputes related to ISGC.
1. Definition of International sales of goods contract and source of law
1.1. International sales of goods contract
• Vietnamese law does not directly specify the concept of ISGC. Clause 1, Article 27 of Commercial Law 2005 only lists activities treated as international sale of goods such as: export; import; temporary import for re-export; temporary export for re-import and border-gate transfer.
• According to Clause 8, Article 3 of the Commercial Law 2005, the sale and purchase of goods is defined as a commercial activity, in which the seller is obliged to deliver goods, transfer ownership of goods to the buyer and receive payment; the buyer is obliged to pay the seller, receive goods and ownership of goods according to the agreement.
• Clause 2, Article 663 of the 2015 Civil Code defines a civil relationship with foreign elements as a civil relationship if at least one of the following conditions are met: (i) At least one of the participating parties is a foreign individual or legal entity; (ii) The participating parties are all Vietnamese citizens or Vietnamese legal entities, but the establishment, change, implementation or termination of that relationship occurs abroad; (iii) The participating parties are all Vietnamese citizens or Vietnamese legal entities, but the subject of that civil relationship is abroad.
Based on the indirect approach, it could be seen that, ISGC is a contract signed between merchants whose commercial headquarters (business locations) are located in the territories of different countries, or the conclusion and performance of obligations take place in two or more countries or the subject of the contract is in another country.
1.2. Concept of source of law
Sources of law, in general theory of state and law, can be understood as elements that contain or provide legal bases for subjects to be able to perform their acts in practice. In the law applying activity, sources of law are understood as forms that containing legal norms that dispute resolution bodies can use to resolve disputes in practice.
2. Sources of law appicable in resolving disputes over international sales of goods contracts
In general, the sources of law that can be applied in resolving ISGC are quite diverse, based on both the agreement of the parties and the viewpoint of the dispute settlement bodies. Based on the practice of the dispute settlement body, they can use the following sources of law to resolve the dispute of ISGC:
• International treaties: International treaties relating to the international sale of goods to which a country is a member allow the dispute settlement body of that country to apply as a tool to clarify the rights and obligations of the parties in the international sale of goods relationship, if the conditions for applying the international treaty are met. The most typical example is the Vienna Convention on Contracts for the International Sale of Goods (known as CISG), which allows dispute settlement bodies to cite provisions if the conditions are met (disputes between two parties whose nationalities are both members of the convention; international private law rules refer to the law of a country that is a member of the convention).
• International trade practices: International trade practices and usages are habits and practices in international commercial that are widely recognized in international commercial activities in a commercial field, recognized and applied regularly by many entities participating in trade relations with explicit expression which the parties can determine their rights and obligations in international commercial transactions. In the process of dispute resolution, the dispute settlement body may rely on the trade customs that the parties agree to apply in the ISGC to resolve the dispute.
• National law: National law is a system of regulations issued or recognized by a country to regulate legal relations between legal entities arising within the territory or jurisdiction of that country. When concluding an international commercial contract, the entities can choose national law as the law applicable to the contract (which can be the national law of one of the two parties or the country where the contract is performed or it can be the law of a country unrelated to the contract) or the dispute settlement bodies chooses national law to resolve the dispute based on the provisions on choice of law and private international rules. National law includes laws, international treaties to which the country is a member, legal principles of that country, etc.
• Case law: Case law is also an important source for dispute settlement bodies in resolving disputes over international commercial contracts. Through precedents, dispute settlement bodies can explain the terms, rights and obligations of the parties to the provisions of international treaties and provisions of national law, and at the same time help resolve disputes faster when case law can be applied for cases of a similar nature to the content of that case law. Case law can be from national law, or related to international treaties, interpretations of international treaties, etc.
• Soft law: Soft law is a set of rules that are not legally binding, but have high reference value. In case the parties to a dispute choose soft law is the gorverning law in their contract, the dispute settlement bodies will still apply the principles of soft law to resolve the dispute. Soft law can be the principles of reputable trade organizations (for example, the Principles of International Commercial Contracts of the International Trade Commission of the United Nations, etc.). Besides, scholar researchs, although not containing legal norms, can be used by the dispute settlement body (usually the arbitrator) as a basis for arguments, although not commonly used.
Learning about the sources of law that can be applied in the dispute resolution process will help the parties know which sources of law the dispute settlement bodies can use in the resolution process, thereby helping the parties agree on the applicable law as well as make necessary preparations before the dispute resolution stage.
Above is the article “Sources of law applicable in resolving disputes over international sales of goods contracts“. TNTP hopes that the article is helpful to readers.
Sincerely.
