Conducting business ‘neutrally’ with international purchase and other contracts

Company lawyers are not theoretical scholars. In contract negotiations, they will always focus on the company’s commercial interests, without getting lost in irrelevant details. The wording of the agreement, however, is considered critically from a legal perspective. As a result, the purport of the agreement may change if considered from the perspective of another legal system. Parties are largely free to decide on the law that governs the agreement. This is an important negotiating point, since each of the parties will prefer their own country’s legal system. In that case, corporate lawyers are able to assess the opportunities and risks for the company ‘intuitively’. That is not the case with the foreign contracting partner’s ‘unknown’ legal system, which means that either local advice must be sought or it must be accepted that the risks are not entirely clear. Both parties have to deal with this to the same extent. Sometimes, parties find a solution for this by opting for a ‘neutral’ legal system of a country that neither of the parties involved has any direct link with. This way, both parties renounce their ‘preferred position’. Quite often, non-Swiss and non-English parties declare the laws of Switzerland or England to be applicable and, to the joy of Dutch lawyers, non-Dutch parties often declare Dutch law to be applicable. Such a conscious choice for the unknown is understandable from the perspective of negotiations, but does affect clarity for the parties about the arrangements made. That is why another solution is also an option, i.e.: a body of non-state law. For the international purchase of goods, I would like to advocate the application of the Vienna Sales Convention (CISG). The convention applies in any case if both parties are established in a Member State. That will often be the case, since 80 countries are a party to the convention, including the Netherlands, many other EU Member States, the United States and Russia.However, parties in Member States may exclude the operation of the convention, which is done on a large scale. This often seems to be due to a lack of familiarity with the contents of the convention. However, when it comes to selecting a ‘neutral’ legal system, the convention could be of use. After all, it was developed from the need to apply internationally uniform rules. The convention forms its own legal order and national law is only considered as a last resort: it doesn’t get more ‘neutral’ than that! Incidentally, disputes are still resolved by the national courts, but in its assessment a national court must act within the boundaries of the convention where possible.The convention is available in several languages and there is ample case law available, as well as a series of authoritative handbooks. Admittedly, the Vienna Sales Convention works differently from our own system, but that is the case for every ‘neutral’ choice of law. That is why my conclusion is as follows: do you want your international purchase to be neutral? Then choose the CISG!