Transcript Title slide with an image

Law
The CISG as a Tool for Improving
Market Efficiency
24 April 2015
Dr. Lisa Spagnolo
Faculty of Law,
Monash University
[email protected]
1. Overview
• WHEN do countries adopt the CISG?
• What do we know about its rate of adoption?
• WHAT effect does CISG have?
• IS CISG efficient?
• Can we measure this?
• WHY do countries adopt CISG & do parties use it?
• Any further POTENTIAL?
• Is the CISG underutilized?
Lisa Spagnolo
2
1. WHEN do countries tend to adopt the CISG?
What do we know about its RATE of adoption?
– from 2013 KLRI Report
Lisa Spagnolo
3
Presentation title
40
20
2013
60
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
Total ratifications
Figure 1: Total CISG Ratifications
Total CISG ratifications
90
80
70
50
Europe
World
Asia
America
30
Africa
10
0
4
What we know about rates of CISG
adoption
 Seems like slight “domino effect” - countries more likely to adopt
the CISG when other countries in their region adopt it
 However this may be accelerated by the extent to which other
legal/economic integration has already taken place
 Prediction: Now Japan & South Korea have adopted CISG, we may
see accelerated adoption rates remainder of the Asia Pacific
 AEC of ASEAN, TPP may accelerate this process
Presentation title
5
2. WHAT effect does CISG actually have?
• IS CISG Efficient?
Hypothetically.....
Framework: Ex Ante Costs, Ex Post Costs, Penalty Default Rules, Information
Asymmetry, Least-Cost Avoiders, Positive Externalities, Network Effects
Substantive Efficiency: Stand Alone Assessment of CISG Features
•
•
•
•
•
•
•
•
•
Designed for international sales – Favor Contractus
Formation & Formalities
Need for Notice
Timing of Acceptance
Warranties & Notice
Type of Damages
Foreseeability Rule
Price Reduction
Limited Scope of Coverage, Ambiguity & Uncertainty
Lisa Spagnolo
6
Substantive Efficiency: Relative to Competing Law in Market for Law
•‘In Writing’ Requirement, Parol Evidence Rule
•Foreseeability of Damages, Measure of Damages
•Formation: Missing Terms, Battle of Forms
•Favor Contractus and Notice
•Preservation
•Certainty
•Quality
Non-Substantive Efficiency: Learning & Network Effects in the
Market for Law
•Information Costs
•Negotiation and Drafting Costs
•Market Access: Neutrality
•Performance Costs
•Choice of Law (Conflicts) Risk
•Legal/Forum Risk
•Litigation Costs
•Competitiveness
7
•Measurable Economic Impact?
Design: Study of countries in which CISG adopted:
comparing indicators (Trade v GDP) before and after
adoption. Compare for same period with World/Region.
- From KLRI Report
Lisa Spagnolo
8
Figure 2: National Trade vs GDP before & after CISG
compared with World Trade vs GDP
Overall trade
160
140
Australia
Trade (% of GDP)
120
China
100
Japan
80
Korea, Rep.
60
Mongolia
40
New Zealand
20
World
0
Presentation title
9
Figure 3: National Trade vs GDP before & after CISG
compared with Regional Trade vs GDP
Overall trade
160
140
Trade (% of GDP)
120
100
Japan
Australia
China
80
Korea, Rep.
60
Mongolia
40
New Zealand
20
0
East Asia and Pacific
South Asia
Presentation title
10
Figure 4: Singapore Trade vs GDP before & after CISG
compared with World & Regional Trade vs GDP
Singapore's trade
500
450
400
Trade (% of GDP)
350
Singapore
300
World
250
200
East Asia and Pacific
150
South Asia
100
50
0
1975197719791981198319851987198919911993199519971999200120032005200720092011
Presentation title
11
Results: Overall improvement in most countries.
Qualifications:
• Many other economic variables can cause the
observed effect & cannot hold all constant
•
“World” not good control baseline. Even if
CISG has economic impact on a country,
“World” not isolated from same impact. And as
the number of CISG States rises, expect less
stark contrast between adopting nation & World
•
There can be economic effect without adoption
of CISG, and conversely, adoption without
economic effect....
Lisa Spagnolo
12
Economic effect without adoption?
• Non-adopting countries can benefit from CISG
– it can apply to contracts entered by
businesses within them (opt in or default)
• CISG as model for domestic law reform
Adoption without economic effect?
• Opt outs Art. 6 - Reasons
• How it is applied
Presentation title
13
What we know about the efficiency
of the CISG
•For business, the CISG IS an efficient choice of law, especially once
ALL types of efficiencies are taken into account (substantive & nonsubstantive).
•Critics often fail to address many efficiencies (especially nonsubstantive), rely on incorrect or outdated facts (eg lack of cases).
Rarely conduct comparative basis – bypassing the real question
facing business – what is the best choice?
•Efficiency of choices of law does not explain (most) opt-outs.
•There is a rise in trade in sample CISG countries after adoption, but
we cannot attribute this to CISG
•The economic impact of CISG cannot be measured in terms of
comparative change to GDP.
Lisa Spagnolo
14
3. WHY do countries adopt CISG & do parties use it?
• Still new Contracting States
• Used for domestic law reform
• CISG being used by business: Usage rates vs
Opt Outs
4. Any further POTENTIAL?
•
•
•
•
Is the CISG underutilized?
Familiarity
More adoptions & use
Network effects
Lisa Spagnolo
15
What we know of CISG adoption, how
often it is used & untapped potential
•
Countries still signing up. It is one way they can signal their legal
structure is suitable and predictable for global trade. They believe it
improves efficiency.
•
CISG seen as gold standard for domestic reform.
•
Exclusion rates are declining. Latest global survey 13% “always”
exclude; 32% sometimes exclude; 55% RARELY OR NEVER exclude.
•
Usage rates can be estimated from opt out rates-globally this could be as
high as 60%.
•
To the extent exclusions are not based on rational substantive
evaluations, CISG underutilized.
•
Increased familiarity is discernible
•
Network effects from increased use will improve efficiency
• further adoption by States
• from slowly rising usage rates
Presentation title
16
Thank you!
Please feel free to contact me:
Faculty of Law,
Monash University
[email protected]
Acknowledgement: Korea
Legislation Research Institute
(Report, Spagnolo 2013)
Lisa Spagnolo
17