Thai Law Insights

Re-examining the Application of the UN Convention on Contracts for the International Sale of Goods (CISG) from a Thai Legal Practitioner's Perspective

Chatchawarl (Charles) Sornsurarsdr

Thai and non-Thai lawyers may question if the 1980 UN Convention on Contracts for the International Sale of Goods or, the Vienna Convention on Contracts for the International Sale of Goods, known by its acronym “CISG”(see the convention text at resource site: www.uncitral.org)  should be chosen as the governing law to an international sale contract as they would be asked to consider whether the chosen governing law would be valid under  Thai law as Thailand is not a contracting state to CISG. 

One of Thailand’s concerns as a consequence of future accession to CISG is that CISG, as a treaty under international law, would influence or prevail over international sale of goods principles under relevant present Thai law. Additionally, in this author’s opinion, CISG has not been studied in depth to the extent that the Thai Government and House members can decide whether Thailand should become a contracting state to CISG. 

Another main concern in Thailand, as in other non-contracting countries is whether CISG can be indirectly applied by the Thai Courts even though Thailand is not a contracting state to CISG. “Indirect applicability” under Article 1 (1) (b), states that “when the rules of private international law lead to the application of the [substantive] law of any contracting state” (even by governing law selection or conflict of laws methodological application-author added), CISG shall be applicable instead by a court or arbitrator in the jurisdiction of the country where the dispute is tried, regardless whether said country is a party to CISG.  This provision of CISG creates a significant concern in many countries in terms of CISG’s application due to CISG’s universalist approach as pointed out above. 

Some scholars in favor of CISG proclaim that CISG’s indirect application in this respect would become a part of governing law to sale contracts, in which a court or arbitrator could freely apply CSIG as a by-product of the unification of international sale substantive law concepts.

For Thailand, Thai Courts may take into consideration, by following strict application of international law transformation set out in the Thai Constitution, whereby all international treaties signed or ratified by the Thai Ministry of Foreign Affairs would require the Thai Parliament’s subsequent re-confirmation before becoming part of Thai law.

In this respect, the applicability of Article 1 (1) (b) may not be possible for Thai Courts to accept, in view of previous court decisions (except in cases in which  the parties chose CISG as a governing law to the sale contract). It has been noted that if an arbitrator, having the place of arbitration in Thailand, is appointed to decide a dispute arising out of a sale contract, it is questionable whether such arbitrator should indirectly apply CISG in terms of Article 1 (1) (b) of CISG.

Recognition of CISG by the parties to a sale contract as the agreed governing law may not be familiar among businesspeople in Southeast Asia, except perhaps in Singapore, which has been a contracting state to CISG since 11 April 1980. 

It is recognized that even though CISG has not yet been incorporated into any national legal system, the parties in modern international sale of goods may directly select CISG as an instrumental body of substantive law governing the said transaction by virtue of the parties’ autonomy principle.

CISG may be introduced to Thai legal counsels to evaluate at the time of need for contract review.  Assuming the counter party’s legal counsel is from a European jurisdiction, he or she should be familiar with CISG’s provisions because renowned European legal scholars played significant roles in tailoring the CISG provisions from the outset.  Thai legal counsels should not be at any disadvantage and should be able to adapt to CISG easily because European legal systems significantly influenced the codification of Thai law.

The question may arise when Thai legal counsel would be asked to review sale contracts having CISG as the governing law: Whether CISG as the governing law is valid in view of Thai law? The answer is: Yes. CISG as the governing law should be recognized, when read in conjunction with the Thai Conflict of Laws Act, in which the parties’ autonomy in terms of “choice of substantive law” is respected.

An additional question may arise:  If Thai legal counsels are uncomfortable to  use CISG as the governing law due to lack of familiarity with its fundamental provisions, what may the parties do to exclude CISG provisions, in light of CISG’s universalist approach that CISG would be applicable directly and indirectly under Article 1 (1) of CISG?

The candid answer is that the parties should specify clearly in the underlining sale contract that CISG shall not be applicable to the sale contract. This is reconfirmed by reference to Article 6 of CISG which recognizes that the parties have the freedom to opt out any part or all of the CISG provisions.