The Harmonious Dance of Trade: Ghana's Urgent Call to Embrace the CISG and Unify the Rhythms of Commerce

Source: Joel Telfer Jnr

Over four decades ago, Ghana signed the United Nations Convention on Contracts for the International Sale of Goods (CISG), a pivotal treaty that provides a standardized legal framework for cross-border transactions between parties from different nations. The treaty is yet to be ratified by Ghana’s Parliament.

More recently, the African Continental Free Trade Area (AfCFTA) - a trade pact involving 54 of the 55 African Union (AU) member states which aims to bolster economic integration and invigorate intra-African commerce was entered into by Ghana. This regional trade arrangement can be instrumental in strengthening Ghana's position in the global marketplace and attracting entrepreneurs who wish to establish their principal place of business within the country. However, the AfCFTA's full potential cannot be harnessed without an encompassing international sales of goods instrument like the CISG The postponement of Ghana's ratification of the CISG presents a considerable obstacle for participants in the sales of goods value chain.

What is the CISG and why is important?

The CISG is an important treaty that endeavors to establish a uniform legal framework for international transactions involving the sale of goods between parties from different nations. Adopted in 1980 in Vienna, Austria, the CISG went into effect on January 1, 1988. A contract for the sale of goods is usually one that involves a legal agreement between a buyer and a seller and specifies the terms and conditions of the transfer of ownership of goods from the seller to the buyer in exchange for a specified sum of money or other agreed-upon consideration. Examples of goods that can be the subject of a sale of goods contract include movable property of any description such as vehicles, raw materials, clothing, electronic appliances etc.

In the growing system of international trade, parties in different jurisdictions may have need to engage in a contract of sale. A tomato farmer in Ghana may need to sell his produce to an interested buyer in South Africa. What law should govern the transaction? When a dispute arises between the parties, which court may exercise jurisdiction over the dispute? What remedies are available to either party when a breach has occurred? These are often questions that may arise in an international sale of goods contract negotiation. Sometimes, parties in exercise of their freedom of contract and party autonomy, may have an express choice of law clause that dictates the particular jurisdiction that should superintend over the contract. The parties may also fail to make an express choice of law in which instance the rules of private international law may be activated to determine ‘the proper law of the contract’. In such contracts, the absence of an express choice of law can be problematic, as it can lead to uncertainty and disputes over which law should regulate the transaction. It may thus be necessary to apply the rules of private international law to determine the applicable law of the contract. Nonetheless, this procedure can be difficult and time-consuming, as it frequently entails analyzing various connecting factors, such as the domicile of the parties, the place of performance, or the location of the goods. In addition, the application of various national laws can result in inconsistent interpretation and application, impeding the efficient resolution of disputes and creating an unpredictable legal environment for businesses engaged in cross-border trade. Further, even in the presence of an express choice of law clause, the parties to the sale of goods contract may still face challenges in dealing with the complexities and uncertainties associated with resolving disputes, determining jurisdiction, and identifying available remedies. Despite agreeing upon a governing law, other factors can still complicate the transaction, such as differing interpretations of the chosen law, public policy exceptions, mandatory rules, and conflicting provisions.

Party autonomy, in its essence, is the bedrock of private international law. It is the concept that upholds the freedom of parties to determine the applicable law and jurisdiction over their contractual relationship. However, the beauty of this principle often hides its frailty, as it presumes an equal bargaining power between the parties, which is not always the case. Indeed, in the vast tapestry of international trade, it is not uncommon for smaller entities or businesses from less developed countries to find themselves in a position of relative weakness. They might lack the leverage to negotiate the terms of the contract, including the choice of law clause. This imbalance can lead to contracts being governed by laws unfamiliar to the weaker party, thereby increasing their vulnerability to unforeseen legal challenges and potentially compromising their interests.

The CISG, however, provides an antidote to this issue. By offering a neutral and universally recognized legal framework for international sales contracts, the Convention serves to level the playing field. The CISG's substantive rules are designed to be fair and balanced, ensuring that neither party's domestic law dominates the contract. This results in a more equitable distribution of rights and obligations and reduces the significance of the choice of law clause in determining the contract's outcome.

Again, by adopting the CISG, parties can reduce the uncertainties associated with choosing and applying different national laws, and instead rely on a consistent and harmonized set of regulations to govern their contractual relationship. It is apparent that a uniform legal framework that reduces uncertainties and inconsistencies resulting from the application of various national laws will invariably promote predictability and the smooth facilitation of dispute resolution. Finally, the widespread adoption of the CISG improves legal certainty and promotes international commerce, as parties from different jurisdictions can rely on a common set of rules when entering into and performing contracts for the sale of goods.

Therefore, the CISG, like a wise old shepherd, guides the lambs of international trade through the thicket of cross-border transactions, ensuring their safety from the wolves of legal uncertainty and imbalance of bargaining power. It is not just a set of rules, but a beacon of fairness in the tumultuous seas of international commerce.

Why Ghana must take the important step of Ratification

You may recall that at the beginning of this article, it was noted that Ghana had signed the CISG treaty. Signing does not conclude the process of treaty execution however. Ratification is a crucial step in making a treaty legally binding for a country. In Ghana, the process of ratification involves the President executing a treaty, agreement, or convention in the name of the country, after which it must be ratified by an Act of Parliament or a parliamentary resolution supported by a majority of members, as stipulated in Article 75 of the 1992 Constitution. Ratification is important because it signals a country's commitment to uphold the provisions of a treaty and incorporate it into its domestic legal system. Ghana's ratification of the CISG treaty would bring numerous benefits to the country. A few of them are examined herein.

To begin with, the domestic law on the sale of goods, the Sale of Goods Act (1962) Act 137, is insufficient to govern contracts involving international sales. The Act's primary emphasis on domestic transactions and its inadequacy in addressing the complexities of cross-border trade has a significant effect: many contracts involving international sales, including those concluded by Ghanaians or those with a principal place of business in Ghana, do not select Ghanaian law as the governing law of their contract. This preference for other legal systems originates from the fact that, parties involved in international sales frequently seek a more predictable and unified legal framework that addresses the unique challenges of international trade. Arthur Rosett, a notable critic of the CISG, suggests that parties should consider excluding the CISG unless the alternative, typically a legal system from a less developed country, is even less appealing. Given Ghana's status, its contract laws may be viewed with skepticism by international business entities, creating a challenging environment for Ghanaian traders to persuade their foreign counterparts to select Ghanaian law in international sales contracts' choice of law clauses.

Given this, wouldn't it be judicious for Ghana to adopt the CISG, thereby shielding Ghanaian traders from the unpredictability of unfamiliar foreign laws? Aligning with the CISG appears to be a sensible strategy for boosting the confidence of Ghana's Western trading partners, especially if there is an underlying lack of confidence in Ghanaian contractual law. This action would not only safeguard the interests of Ghanaian merchants but also enhance Ghana's standing in the international trade arena. The ratification of the CISG would therefore not only improve the legal environment for international trade in Ghana, but also promote the country's legal system as a more desirable option for regulating cross-border transactions.

It is important to acknowledge that the principle of party autonomy allows a Ghanaian entity to execute an international sale of goods contract under the governance of the CISG. This requires selecting the law of a CISG contracting state as the 'governing law of the contract'. However, with several major contracting states, such as the United States, invoking a reservation to Article 1(1)(b) — an action that impacts the practical application of this provision — a Ghanaian business may still find itself unable to fully harness the protective measures offered by the CISG. The act of aligning oneself with the CISG, although seemingly straightforward, is embedded within a larger, more intricate network of legal norms and reservations that can limit its benefits. Thus, the decision to adhere to the CISG isn't just about adopting a new set of rules; it's about strategic positioning within the international trade sphere to ensure maximum protection and advantage.

In addition, Ghana played an important role in the creation and adoption of the CISG. Ambassador Emmanuel Kodjoe Dadzie and Justice S.K. Date-Bah formerly of the Supreme Court of Ghana, were instrumental in its establishment. Ghana's commitment to the harmonization and consolidation of international trade law would be strengthened by ratification of the treaty, which would recognize Ghana's historical commitment.

Finally, the ratification of the CISG would considerably enhance Ghana's reputation for ease of doing business, as it would demonstrate the country's commitment to establishing a more stable and predictable legal environment for international trade. As a result, Ghanaian investors and businesses will be in a more advantageous position when engaging in cross-border transactions, as they will be operating within a legal framework that is widely recognized and acknowledged. The CISG with all of its attendant benefits, would enable businesses to approach the global market with greater confidence. Further, foreign and domestic investors would feel more confident conducting business in Ghana. This increased confidence attracts foreign investments, which are essential for Ghana's economic growth and innovation. The enhanced ease of doing business would encourage local businesses to expand into international markets, thereby contributing to the economic growth of the nation.

The CISG and AfCFTA unlikely bedfellows?

Critics of the CISG frequently cite its Western origins to argue that its principles may not be compatible with the distinctive legal and cultural contexts of various regions, including Africa. In addition, critics highlight potential complexities and ambiguities in the CISG's provisions, which could result in legal ambiguity and disputes. In addition, there is a school of thought that advocates for African-made laws to address African issues. As a product of global consensus, they argue that the CISG may not adequately address the distinctive socioeconomic realities of Africa. The primary concern is whether the CISG can be adapted to the distinctive commercial practices, legal traditions, and socioeconomic challenges of the African context. This concern is especially pertinent in the context of the AfCFTA, which seeks to promote intra-African trade and economic integration via rules and standards devised by Africans. Critics argue that the adoption of the CISG could undermine this objective, potentially diluting the African character of the AfCFTA and rendering it less responsive to the specific requirements and aspirations of African nations. These concerns are certainly legitimate and warrant thoughtful consideration. However, it is important to remember that the CISG is a product of decades of negotiation and collaboration among nations from diverse cultural, legal, and economic backgrounds, including African nations. The essence of the CISG is not inherently Western, but rather an amalgamation of various legal traditions aiming to create a common language for international trade.

As for the alleged complexities and ambiguities in the CISG's provisions, they are no more prevalent than in any other comprehensive legal framework. Interpretation challenges exist in all laws, and the CISG is not an exception. It is important to understand that the CISG was designed to be flexible and adaptable to accommodate diverse commercial practices and legal traditions. This flexibility, combined with a thorough understanding and application of the CISG, can help resolve ambiguities and ensure that its provisions are interpreted in a manner that is consistent with the particularities of different legal contexts, including those in Africa.

In response to the notion that African issues should be addressed by African laws, it is essential to emphasize that the CISG does not supplant domestic laws, but rather supplements them in the area of international commerce. The Convention does not disrupt domestic law for transactions that are solely domestic or for areas that it does not cover. It merely provides a unified legal framework for international sales transactions, reducing the complexities and uncertainties associated with the application of various national laws.

Moreover, the ratification of the CISG does not conflict with the AfCFTA's objectives. In fact, it can support the objectives of the AfCFTA by providing a solid and universally recognized legal foundation for intra-African trade. Adopting the CISG would not dilute the African character of the AfCFTA; rather, it would strengthen it by creating a more favorable environment for trade and economic integration among African nations. Harmonization of trade laws, facilitated by the CISG, is essential for the AfCFTA to reach its full potential. It facilitates intra-African commerce and economic integration by facilitating cross-border transactions, reducing legal risks, and increasing predictability. In this regard, the CISG and AfCFTA are not only compatible but may also be synergistic, with the CISG functioning as an effective instrument for the realization of the AfCFTA's vision.

A key point to emphasize here is that the CISG, due to its comprehensive nature and wide acceptance, can serve as a robust foundation for regulating the sale of goods, not only within the African continent but also beyond its borders. The CISG has been ratified by many nations across the globe, including several of Africa's significant trading partners. It is a well-established and well-respected legal framework, the provisions of which have been thoroughly scrutinized, interpreted, and applied over many years.

In this regard, the AfCFTA need not "reinvent the wheel" by creating a new treaty to govern the sale of goods. Instead, it can leverage the CISG, exploiting its benefits and adapting its provisions to the specific needs and aspirations of the African context. This approach would not only save valuable resources and effort but also ensure that the legal framework for the sale of goods within the AfCFTA is compatible with a widely accepted international standard, thereby enhancing the credibility and attractiveness of the AfCFTA to both internal and external investors.

Concluding Reflections

Ghana stands poised to weave its strand with greater vibrancy and impact through the swift ratification of the CISG. The manifold benefits, ranging from harmonizing with key trading partners to enhancing the ease of doing business, all point towards the adoption of the CISG as a judicious move, steeped in both practicality and foresight.

As the heart of AfCFTA, Ghana occupies a unique position to illuminate the path for other African nations. By adopting a uniform trade law such as the CISG, it can catalyze the potentialities of regional free trade, turning the latent promise of AfCFTA into a tangible reality that benefits all member nations. Moreover, the wisdom of embracing the CISG extends beyond the bounds of Africa. As the continent continues to engage in the global dance of trade, the CISG can serve as a harmonizing rhythm, guiding the steps of African nations in their interactions with countries outside the continent. This would pave the way for a more predictable and stable environment, encouraging foreign investments and fostering economic growth.

In light of the compelling arguments and the boundless possibilities for Ghana's economy and international trade relations, it is incumbent upon all stakeholders, particularly the Ghanaian Legislature, to rise to this historical occasion. Let the ratification of the CISG be a defining moment, etching Ghana's commitment to economic growth and prosperity in the annals of international trade law

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The author Joel Telfer Jnr, whose intellectual pursuits reside primarily in the realms of Corporate and Commercial law, expresses gratitude to Mr. Clement Kojo Akapame, Senior Lecturer at the Faculty of Law, GIMPA, for providing the inspiration that kindled the flame of this article. Additionally, the unwavering advocacy of Dr. Obiri-Korang from the University of Ghana Faculty of Law, a staunch proponent of the CISG, has played a pivotal role in nurturing the author's interest and understanding of the subject matter. Finally, credit is due to Dennis Adjei-Dwomoh Esq. who edited this article and made substantial contributions that shaped the original manuscript.