On 17th October 2017, the United Nations Commission on International Trade Law (‘UNCITRAL’) Secretariat acknowledged at the 2nd UNITRAL Asia Pacific Judicial Summit that the Convention on Contracts for the International Sale of Goods (‘CISG’) does not apply to Hong Kong. However, given Hong Kong’s unique past and present, we must look at two points in time. It is evident that the CISG could not apply to Hong Kong when it was a British colony because the United Kingdom did not adopt the CISG and because Hong Kong could not adopt it in its own right. However, following the handover in 1997, and as Hong Kong fell under the “one country and two systems” principle, the CISG should in theory be automatically applicable to Hong Kong as China has itself been a member of the CISG since 1988. Nonetheless, various cases and scholars have supported contrary observations vis-à-vis the application of the CISG in Hong Kong. Nevertheless, it is only from a step-by-step analysis of this sort that we can ascertain the position of Hong Kong under the CISG and whether or not such position is satisfactory.
Step 1: How can a State adopt or be a party to the CISG?
Article 91(3) of the CISG provides for non-signatory States to become Contracting States via accession. Hong Kong has not acceded to the CISG.
Step 2: Can Hong Kong become a Contracting Party to the CISG?
Hong Kong cannot become a Contracting Party per se as Hong Kong is not a State.
Step 3: What then is Hong Kong’s current position in the context of the CISG?
Hong Kong is a territorial unit of China and thus has no independent status vis-à-vis the CISG.
Step 4: How can territories adopt or exclude the CISG?
A territory cannot accede to the CISG in its own right. It is for the State to whom that territory belongs to either extend the CISG to it or to exclude it from accession.
Express Declaration of Accession
Art 93(1) of the CISG provides that where a Contracting State has two or more territorial units, it may declare for the CISG to extend to all or some of its territorial units at the time of signature, ratification, acceptance, approval or accession. The written declaration needs to be formally notified with the depository, which refers to the UN Secretary-General, and should expressly state the territorial unites to which the CISG extends.
China had not made any declaration in respect of Hong Kong at the time of adopting the CISG, and indeed it could not have done so when Hong Kong was a British colony. However, the “may” has generally been classified as permissive rather than a mandatory obligation. Thus it could be argued that a Contracting State may make a declaration at any stage and not only upon accession. In 1997 at the handover, China had sent a written notification to the UN Secretary-General containing two lists of treaties. The first list, which is crucial, identifies those treaties to which China itself is a party and which would expressly apply to Hong Kong (for example, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards). Notably, the CISG was not on this list. It is for this reason that the various scholars and cases have concluded that the CISG cannot apply to Hong Kong.
Silence as to the Application of the CISG
On the other hand, the requirement under Art 6 of the CISG is that there must be an express intention that is “clear, unequivocal and affirmative’’ for the CISG not to apply. While Art 6 concerns parties of States – rather than the States themselves - having the right to exclude the CISG, and in that regard “the parties must expressly opt out”, the same rationale can be applied to States. Hence some cases have viewed China’s notification, or its failure to make a subsequent declaration concerning the CISG in 1997, as an affirmative declaration precluding the applicability of the CISG under Art 93(1). In other words, mere silence on the CISG does not exclude its application. Consequently, these cases rely Art 93(4) of the CISG, which refers to an automatic extension to a territorial unit of the State where no declaration has been made under Art 93(1), as support for the argument that the CISG applies to Hong Kong as it has not been expressly excluded by China.
There are many similarities between the CISG and common law but at the same time there are also many differences as the former is considered an international legal hybrid combining Common Law elements and Civil Law ideas from various jurisdictions (see A. Janssen and N. Ahuja, “Bridging the Gap: The CISG as a Successful Legal Hybrid between Common Law and Civil Law?” in Francisco de Elizalde (ed.). Uniform Rules for European Contract Law? – A Critical Assessment? (Hart) 2018). Given the diversity in thinking amongst cases and scholar views, both of which internationally carry similar weight, each court will have to decide the question as to whether or not the CISG does apply to Hong Kong on the basis of what is then argued before them. Ending with some food for thought: China can of course resolve this ambiguity by making a subsequent notification to either extend the CISG to or exclude it from application over Hong Kong.