Rethinking Choice of Law in Cross-Border Sales

Acknowledgments xiii
Introduction xv

1 Choice of Law in Practice – Empirical Studies 1
1.1 Efforts to Reveal Parties’ Preferences 1
1.1.1 Previous Studies on Choice of Law Decision-Making Processes 2
1.1.1.1 Pre-2008 Studies: Pioneering Initiatives 3
1.1.2 Post-2008 Studies: Innovative Works 13
1.1.2.1 Studies on Choice of Law 13
1.1.2.2 Studies on CISG Opt-Outs 25
1.1.3 Screening the Results or What Have We Learned from These Studies? 32
1.1.3.1 Overlaps and General Trends 32
1.1.3.2 The Foundations for a Global Study 33
1.2 A Global Empirical Survey 34
1.2.1 Survey Goals 35
1.2.2 Respondent Profile 37
1.2.3 Method 38
1.2.4 Survey Results 39
1.2.4.1 Legal Considerations 43
1.2.4.2 Economic Considerations 50
1.2.4.3 Most Desirable Substantive Law: Features 56
1.2.4.4 National Law 65
1.2.4.5 CISG 72
1.2.4.6 National Law or the CISG: What Is the Most Legally and Economically Advantageous Solution? 84
1.3 Comparative Analysis 89
1.3.1 Summary of the Findings 89
1.3.2 Weighting of Practical and Legal Considerations and the ‘Black Box’ 91

2 The Unexplored World of Contracting Parties’ Minds 93
2.1 Rational Choices 94
2.1.1 Compensatory Strategy and Maximization of Benefits 95
2.1.2 Deductive Logic and Cognitive Limitations 95
2.2 Intuition 97
2.2.1 Heuristics 98
2.2.2 Affect 100
2.2.3 The ‘Ice Cream Flavour’ Dilemma 102
2.3 Global Empirical Survey on Choice of Law 103
2.3.1 Highlights of the Survey Results 103
2.3.1.1 Rational Choices 103
2.3.1.2 Intuitive Responses 105

3 Market Distortions and Imperfections: The ‘Stage’ of the Art 117
3.1 Bounded Rationality 119
3.1.1 Market Players 120
3.1.2 Opportunistic Behaviour 122
3.1.3 Contractual Incompleteness 124
3.1.3.1 Why a Complete Contract Can Be Costly 124
3.1.3.2 When Less Is More? 125
3.2 Asymmetric Information 125
3.2.1 Contractual Gaps 125
3.2.1.1 Costs of Anticipating Events 126
3.2.1.2 Description Costs 127
3.2.1.3 Costs of Enforcing Provisions and the ‘Would Have Wanted’ Approach 127
3.2.2 Asymmetry Inter Partes 128
3.2.2.1 Particular Knowledge or Expertise of the Party Regarding the Goods 128
3.2.2.2 Counterparty’s Knowledge of the Potential Governing Contract Law 129
3.2.2.3 Strategic Informational Asymmetry 129
3.3 Bargaining Power 130
3.3.1 Playing ‘at Home’, Playing ‘at the Opponent’s Home’ or Playing at a ‘Neutral Field’: The So-Called ‘Arm-Wrestling’ 131
3.3.2 Substantial Relationship to the Parties or the Transaction 131
3.3.2.1 The Resort to a Third Jurisdiction’s Law – A Trojan Horse? 132
3.3.2.2 Uniform Contract Laws – A Way Out? 132
3.4 Transaction Costs 134
3.4.1 Unknown or Less Familiar Governing Contract Law 136
3.4.2 Cost of Learning 138

4 Choosing the Right Audience, or the Jurisdictional Conundrum 141
4.1 Studies on Choice of Forum 141
4.1.1 SIA International Arbitration Studies 142
4.1.2 Pace Law School CISG Database 145
4.1.3 The Global Empirical Survey on Choice of Law 147
4.2 Choice of Court Agreements 150
4.2.1 The Hurdles of Choosing a State Court Jurisdiction 151
4.2.1.1 Cost and Convenience 153
4.2.1.2 Risk of Bias or Partiality 153
4.2.1.3 Political and Economic Uncertainties 155
4.2.2 The Hague Convention on Choice of Court 155
4.2.2.1 Main Features 157
4.2.2.2 A Synergy with Choice of Law? 159
4.3 Arbitration Agreements 161
4.3.1 A ‘Go to’ Option in Cross-Border Sales 161
4.3.1.1 The Application of the Law on an ‘As Is’ Basis 162
4.3.1.2 The ‘Middle of the Road’ Archetype 164
4.3.2 Arbitration Agreements and Choice of Law: Potential Interplay 166

5 Parties’ Main Concerns and the Efficiency of Transnational Legal Standards 171
5.1 Legal and Economic Considerations: Choices – Who’s Who? 171
5.1.1 Predictability of Rules 172
5.1.1.1 Degree of Certainty 174
5.1.1.2 Accessibility 176
5.1.1.3 Intelligibility 177
5.1.1.4 Complexity of Structure 180
5.1.2 Legal Neutrality 180
5.1.2.1 Rules Not Identified or Associated with the Contracting Parties 181
5.1.2.2 Commercially-Focused ‘Physiology’ 183
5.1.3 Legal Flexibility 183
5.1.3.1 Commitment to Freedom of Contract 184
5.1.3.2 Degree of Flexibility: How Far Can We Go? 188
5.1.4 Mandatory Provisions: Unwelcome Surprises? 188
5.1.5 Legal Interpretation 189
5.1.5.1 Hermeneutic Tools 190
5.1.5.2 Conduct of the Parties and Trade Usages 195
5.1.6 Body of Case Law 200
5.1.6.1 To Be Settled or Not? 200
5.1.6.2 Interpretation of Legal Rules 200
5.1.7 Provisions on Performance 201
5.1.7.1 Delivery of Goods 201
5.1.7.2 Exemptions 204
5.1.8 Remedies Available: Gateways 204
5.1.9 Provisions on Damages 205
5.1.9.1 Setting out the Features of a Defaulting Scenario 206
5.1.9.2 Statements and Commands on Damages and Calculation 207
5.1.10 Statute of Limitations: A Time-Bar Conundrum? 207
5.1.11 Gap-Filling Mechanisms: Default Rules and Safeguards 208
5.2 Future Research 215

Conclusion 217
Bibliography 219
Index 241