Contractual implications of Brazilian imperfect adoption of CISG - Problems with China, inter alia

Two years ago, I wrote two brief posts about the adoption of the United Nations Convention on International Sale of Good (CISG) by Brazil (here and here).

Basically, I mentioned that Brazil needed only issue a presidential decree and CISG would become law.  I said:

 Presidential sanction in Brazil sometimes takes more than 20 years to be achieved. NY Convention on international arbitration took 50 years to be completely approved in Brazil, for instance.  Let's hope  CISG set a record the other way around.


Well, there has been much celebration lately regarding CISG in Brazil. But the hard fact is that the presidential decree is still missing.

I take this absence as a strong symbol of lack of political interest in the matter.

This kind of presidential decree is very simple. It is hard to understand how the Presidential Office would have overlooked such an important convention, when in the last two years dozens of international conventions of far less importance have been ratified.

Nevertheless, the Convention Secretariat lists Brazil as a member (check the list here).

This situation is potentially problematic because it may lead merchants to deduct that CISG is the applicable law for sale agreements with Brazil when, in practical terms, Brazilian courts will probably adopt the Brazilian civil code (or at least Brazilian conflict of law rules).

The situation is even more problematic when  it comes to Brazilian (arguably) major trade partner: China.

In my research about contracts within BRIC countries, (which I recommend you to read) I mentioned that:


3.1.1 Application of the CISG in China

China ratified the CISG in December, 1986. However, it has adopted a significant reservation to the text: it compromised to apply the CISG only if the other country involved in the transaction has also adopted the convention. (...) 

In consequence, in contracts between Brazil and China and between India and China that are brought upon Chinese courts there is a strong possibility that the applicable law will be deemed to be the Chinese internal legislation, especially the "Law on Contracts of the People's Republic of China of 1999" and the “General Principles of Civil Law of People's Republic of China’’. If this is not the wish of the parties, they must study the conflict of law rules applicable to the case and adopt preventive measures. 

Therefore, contracts between China and Brazil, at this moment, might fall in one of three categories: 

i) CISG is applicable (if courts in both countries rule that CISG is valid in Brazil, in spite of the lack of a presidential decree);

ii) CISG is deemed not applicable in Brazil, and thus CISG will also not be applicable in China, resulting in that conflict of law rules must be applied in order to verify the applicable law;

iii) Brazil rules CISG as part of the Brazilian law and China rules CISG as not part of the Brazilian law and, because of that, CISG would not be applicable according to Chinese law. Therefore, a serious and irreconcilable conflict of laws would be put in place.

I consider the situation as being too uncertain. Major trade partners could use a little more certainty in their contractual relationships. 

The same problem goes for any country that, like China, has adopted the safeguard of  Subparagraph (1)(b) of Article 1 of the CISG. 

Brazil, always making simple things complicated.

ADDITIONAL READING: 

International agreements between the BRIC countries