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Liu & Partners at the 2016 UNCITRAL Vietnam Workshop - Vietnam's Accession to CISG

On November 24, 2016, Liu & Partners attended the 2016 UNCITRAL Vietnam Workshop on harmonization of trade law and outlook for practitioners in ASEAN held at the Foreign Trade University in Hanoi, Vietnam. Over 150 lawyers, judges, academics and students from Australia, Brazil, Singapore, Hong Kong, Fiji and Sri Lanka attended the event to discuss Vietnam’s accession to the CISG coming into force on January 1, 2017. Professor João Ribeiro, the Head of UNCITRAL-RCAP opened the session highlighting the benefits of Vietnam’s accession to the CISG including predictability; expansion of trade; reduction of transactional costs; trust building; leveled bargaining; efficient dispute mechanism and more. The workshop raised crucial issues regarding the need for further education and increased awareness for both legal professionals and businesses to understand how the CISG may affect their interests, as well as the role of judges in applying the new law and to uphold the duty of uniform interpretation.

As noted by Professor Ingeborg Schwenzer (Chair of CISG Advisory Council) in the keynote address, the CISG today has 85 member states serving as a model in both the international and domestic spheres as the lingua franca of sales law. The CISG is thought to bridge the differences between common law and civil law traditions, as well as to balance the interests of the sellers and buyers. Furthermore, its lucid structure is easily understandable, and has even been used in parts of Africa as a teaching model for small businesses.

Professor Locknie Hsu from the Singapore Management University also highlighted the use of the CISG as a commercial harmonization tool and a common contractual language to increase the wealth for all. In fact, business in ASEAN may be challenging with uncertainties over which laws to apply due to the diversity of commercial laws with different traditions and systems. However, lawyers still ought to be wary about the use and drafting of opting in and opting out clauses under the CISG, as well as ensuring a heightened familiarity with all the provisions to avoid any choice of law dilemmas.

The CISG scope of application covers moveable and tangible items, software and software controlled goods, as well as manufactured goods. It is decisive for goods under the sale of goods context to be flexible and open to embrace new technological developments, as traditionally tangible items like books and music are now widely downloaded without using any tangible media.

An important feature of the CISG is the freedom of contract. Parties are free to shape their contract as the CISG does not contain any mandatory rules, they can also decide to opt in or opt out per Article 6. However, this should not be easily assumed as parties’ exclusion of the CISG may not be valid when it is part of the domestic law of the member state, and thus requires careful deliberation and drafting language. Furthermore, the chosen law is typically designed for domestic contracts that render it unsuitable for international contracts, thus outcomes deriving from domestic law can be unpredictable for the parties.

The CISG also plays an important role in arbitration serving as a chosen law, which can be done explicitly or by way of choosing the law of the contracting state. In practice, arbitral tribunals are often called to apply the most appropriate law, which can be the CISG making it a preferential choice in international commercial arbitration.

An export-oriented Vietnam means the contract of international sale of goods accounts for a large share of the total commercial contracts in the country. While it has witnessed positive growth year on year in an open economy, it is still at a trade deficit as the internal demands for international goods and imports remain strong. Since many Vietnamese businesses are small to medium enterprises with little bargaining power, the CISG would save negotiation costs and offer a second layer of protection to these businesses when they fail to state clear provisions in their contracts.

As an important trading partner and a crucial member of the ASEAN, it is vital for interested Taiwanese investors, businesses and government agencies to gain a comprehensive understanding of Vietnam under Taiwan’s “New Southward Policy”. The “Policy” aims to strengthen relations and establish mechanisms to help Taiwanese investors develop markets in the ASEAN and South Asia, which includes exchanges covering trade, investment, culture, education, research, and more. As the 7th member to join the ASEAN, Vietnam has evolved into an important stakeholder in the Southeast Asian community by taking on a more central role in the Association. It is also catching up to other “Tier 1” ASEAN economies (the original founding members) due to its rapid economic development. Furthermore, Taiwan-Vietnam bilateral trade between January and September 2016 has exceeded USD 9.8 billion with a 2% increase in the month of September compared to the previous year. Vietnam as a growth engine offers plenty of opportunities, which needs to be watched and observed carefully by interested businesses to benefit from it.

The Taiwanese government has emphasized that the "Policy" acts as one of the solutions to help alleviate challenges felt by Taiwanese industries at home, but it must also actively cooperate with China’s “One Belt, One Road Initiative” (OBOR) to expand the pie. As the "Policy" does not seek to work against OBOR, but rather serves as a model for constructive cooperation, cross-strait enterprises should establish more exchanges with Vietnam to test the model and to benefit from its internal market. However, businesses must always remain alert to any domestic legal changes in those nations that may potentially impede their interests (such as the CISG’s entry into force in Vietnam in January 2017), as well as the importance of legally protecting their overseas investments and nationals.

Liu & Partners as the only Taiwanese law firm representative at the 2016 UNCITRAL Vietnam Workshop is uniquely qualified to serve our cross-strait and international clients’ needs in complex transactions and international dispute resolution in the Southeast Asia. We are dedicated to helping cross-strait enterprises to create and enhance their businesses under the “New Southward Policy” by working closely with reputable local firms in Vietnam and other parts of Southeast Asia. We continue to ensure our clients are provided the most comprehensive solutions and best practices across multiple jurisdictions by working closely with our worldwide alliance law firms. Please contact us for further information.

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