Citation(2013) 25 SAcLJ 379
Published date01 December 2013
Date01 December 2013

International Convergence and Regional Implications

In July 2012, the Australian Attorney-General's Department began soliciting comment regarding the best way to reform Australian contract law to render it more suitable for the demands of 21st century commerce. The effort marks an appreciation of the changing commercial environment and challenges the traditional common law preference for piecemeal, organic reform through case law. The proposed effort has implications for the global convergence of legal systems and further poses practical questions as to what form any such contractual reform should take. Codification in the European, civil law sense is a possible but unlikely outcome. A persuasive but non-binding restatement of law offers flexibility, but may add to confusion where the dominant doctrinal trend is not evident, thereby leading to the question of “what” to restate. Accordingly, there are clear obstacles to the process. This commentary suggests, however, that these obstacles should not be allowed to undermine the effort. With the growing scope and intensity of cross-border trade, parties from disparate legal systems are interacting with each other in ever-closer commercial proximity. Exercises aimed at rendering the common law less opaque and easier to navigate can contribute to the development of the common grammar necessary to facilitate this interaction. The end point of Australia's reform process may not be clear, but an exercise aimed at “rationalising” certain aspects of common law doctrine through a process of organised reform may be an idea whose time has come. This commentary sketches out some of the key considerations from a comparative, practical and global perspective, highlighting in the process the relevance of such reform efforts to the region.

I. Introduction

1 In July 2012, the Australian Attorney-General's Department began soliciting comment regarding the best way to reform Australian contract law to render it more suitable and adaptable to the demands of 21st century commerce.1 As significant as any future recommendations may be, it is the advent of this exercise in and of itself that signals the new international legal reality. It marks an appreciation of the demands of the global economy in one of the jurisdictions ideally poised to take advantage of the world's most dynamic regions, lying as it does on the periphery of the Asia Pacific region and benefiting from a common law heritage steeped in the development of flexible commercial relations.

2 The Australian government's request for comment marks a concrete manifestation of the growing convergence in commercial relations. It constitutes a recognition that for contracting processes to be effective in this new age, they must be both transparent and accessible to parties from diverse legal systems, thereby offering commercial certainty derived from a type of common grammar.2 This may always have been true, but these criteria have assumed greater urgency and importance as the modern market place increasingly reflects a market place for legal rules3 and a greater reliance on cross-border trade, stemming from complex supply chains, better communications technology and globalised trade flows.

3 With choice of law clauses being given broad scope and recognition, parties have a myriad of options from which to choose. Moreover, the governing law of the contract can now be calibrated to complement the curial law selected for arbitration procedures and the related selection of the appropriate forum. A flexible, transparent and accessible contract law and related doctrine can spur commerce, while making Australia a suitable forum for dispute resolution. Such initiatives have also been promoted with great success by other key trading hubs in the region, such as Singapore, whose modern arbitration law and flexible and transparent contract law are gaining adherents throughout the region.4 Crafting, or rather consolidating, a package of doctrine appears

to be a laudable endeavour at this critical juncture in the development of the world economy, paying due regard to relevant trade flows, and the ongoing emergence of the Asia Pacific region as perhaps the new centre of commercial gravity.

4 With regard to the Australian government's request for notice and comment, this commentary will focus on three issues:

(a) the significance of the exercise for global legal convergence and the need to look at comparative approaches;

(b) the available modalities beyond codification for reforming Australian contract law; and

(c) some specific thoughts regarding the utility of the exercise from a regional perspective, including its relationship to fostering commercial comity with major trading partners throughout the region, including Singapore, China, Korea, Japan and New Zealand.

II. Global convergence — Comparative issues

5 The cross-border dimension of the Australian government's recent solicitation of notice and comment on its contract law dovetails with other reform efforts of a more transnational nature. Australia is examining its law from the inside out with the other initiatives looking or having looked at the situation from the outside in, the denationalised focus having been at the heart of these efforts. The UNIDROIT Principles5 aimed at facilitating international trade, the Principles of European Contract law6 and the broader UN Convention on the International Sale of Goods (“CISG”)7 provide concrete examples of such laudable endeavours. With this plethora, some might say surplus, of instruments, the question arises as to whether, and if so, how the Australian government's request should be taken up. There appears to be a desire to develop doctrine that can “bridge” the differences between

various systems and their approaches to certain key issues.8 As noted, a similar aspiration is already reflected in a number of instruments on the international level. If the scope is limited to international sales transactions, the CISG offers a practical compromise regarding offer and acceptance between the civil and common law systems and other operational issues regarding contract formation,9 the UNIDROIT norms have addressed the role of “good faith,”10 a core concept of civil law countries but one which continues to inspire healthy, albeit diminishing, skepticism among the members of the common law world. Moreover, the Principles of European Contract Law appear to have tackled the issue of the reliance on extrinsic evidence for contractual interpretation,11 another issue which has historically separated the common law and civil law worlds. This issue is also addressed to a broader geographical group in Art 8 of the CISG.12

6 With all of this existing, rigorous and sophisticated analysis from which to choose, one wonders what, if anything, can be added to the available solutions. It is here that the Australian exercise distinguishes itself and where it might serve as a useful precedent or template for other jurisdictions currently contemplating the reform of their contract law. The Australian government's request manifests a recognition that reform will not take place on a blank slate. As a loyal heir to the English common law tradition, with its abundant case law and established doctrine, Australia cannot undertake a wholesale reform of domestic contract law without due reference to its existing structure and content.

The quasi-adoption of the CISG as Australia's domestic law for sales contracts, as was essentially done in China,13 is therefore not an option.

7 The Australian exercise does not seek a transnational solution per se, culminating in a set of harmonised principles, but rather a domestic solution aimed at making the law more transparent and consistent with the evolving transnational legal environment. Australia does not seek to transplant from without but to adapt from within. Accordingly, the overriding focus is on how domestic law can better relate to the external reality and not the reverse. Something to which Australia and other jurisdictions who are adherents to the common law tradition can therefore aspire is to render their guiding contract law and principles less opaque and more accessible. In a competition for legal rules, Australia can offer a basket of doctrine and procedures that allows a contracting party to make an informed choice as to the governing law of the contract and the preferred venue for dispute resolution.

8 As outlined in the Australian government's briefing paper, the current legal landscape includes an amalgam of cases and statutes, each of which can impact the parties' expectations in new and unforeseen ways. For instance, relatively recent consumer protection statutes14 can suddenly intervene to condition contractual interpretation and thereby upset the previously agreed contractual dynamic. The briefing paper suggests that contracting efficiently under Australian contract law is a question of not just what, that is what it is, but also of where, that is where to find it.15 Such issues are compounded when non-Australian or foreign parties from alien jurisdictions are involved.

III. Convergence and codification

9 Simplifying an uneven landscape of cases, doctrine, and statutes calls forth a threshold question of legal convergence and comparative law. Should Australian contract law be codified? Codification remains the cornerstone of most civil law systems, even as case law encroaches to assume the status of a crypto or quasi-source of law. As commerce becomes more complicated and multifaceted, the question then arises as to whether a general codification of contractual doctrine and principle could render Australia and other common law jurisdictions more hospitable for international transactions.

10 It is unlikely that Australia could opt for the “straight-jacketing” codification nominally present in civil law jurisdictions, given its common law heritage of judge-made law and judicial...

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