HL Deb 24 April 1967 vol 282 cc404-18

5.15 p.m.

Order of the Day for the Second Reading read.


My Lords, I beg to move that the Bill now be read a second time. The purpose of the Bill is to incorporate into the law of the United Kingdom two measures intended to govern the relations between seller and buyer in different countries. One of them, the Uniform Law on the International Sale of Goods, is concerned with the relations arising under the contract of sale; the other, the Uniform Law on the Formation of Contracts for the International Sale of Goods, with the formation of the contract. Both form the subject of Conventions which were drawn up at The Hague in 1964 and which have been signed by the United Kingdom. The Conventions were printed in a White Paper, copies of which have been made available to noble Lords.

The Conventions require each Contracting State to incorporate the Uniform Laws into its own legislation, and the passing of this Bill will enable the United Kingdom to ratify the Conventions. The Conventions come into force six months after the deposit of the fifth instrument of ratification. The Bill, subject to its passage through both Houses of Parliament, will be brought into operation by Order in Council at the same time. Ratification of the Conventions means acceptance of the Uniform Laws as they stand. We cannot amend the individual provisions. It would therefore be a waste of your Lordships' time to go into the Laws themselves in detail. For those of your Lordships who are interested, I have placed in the Library a commentary on the Uniform Laws by Professor Andre Tunc, Professor in the Faculty of Law and Economic Science at Paris, so there is ample opportunity for any noble Lord who has not already done so to study this in considerable depth.

The first draft of the Uniform Law governing International Sale of Goods was prepared between 1931 and 1934 by a Special Commission of the International Institute for the Unification of Private Law. The final version was drawn up and formed the subject of the Convention at a Diplomatic Conference in The Hague in 1964. The Uniform Law on the Formation of Contracts was also drawn up at The Hague in 1964. Both of these Conventions have been signed by the United Kingdom. Lawyers of the United Kingdom have played a prominent part in the formulation of these conventions; in particular Professor Wortley of the University of Manchester and Mr. John Donaldson (now Mr. Justice Donaldson) and his colleagues on the Committee, Mr. Gimson and Mr. Pearson.

The great majority of the amendments proposed by the Donaldson Committee were accepted. Moreover, the Conference accepted proposals made by the United Kingdom delegation which enable Contracting States on ratifying the Convention on Sales to declare that the Uniform Law will apply only in cases where the parties have expressly adopted the Law as the law of their contract. It is proposed that we should take advantage of this provision, which means that our ratification of the Convention will in no way compel our traders to adopt the Uniform Laws ratification will mean, however, that the United Kingdom will have a voice when amendments to the Laws are being considered. This will be of great importance if general acceptance of the Laws abroad, or at least in other countries in Europe, means that in practice our traders are compelled to contract subject to their terms.

The Uniform Law applies to contracts of sale of goods entered into by parties whose places of business or, if they have no place of business, their habitual residences, are in different States, if the contract involves carriage of the goods sold from one State to another or if the offer and acceptance have been effected in different States, or if delivery of the goods sold is to be made in a different State from that in which the offer and acceptance were effected. However, the Convention relating to the Uniform Law on Sales enables reservations to be made which would have the effect of limiting the field of application of the Law. It is intended that the United Kingdom should take advantage of reservations which would exclude the application of the Uniform Law where: (a) one party had his place of business in a country whose legal system was similar to that of the United Kingdom; or alternatively (b) where one or both of the parties had their place of business in a State which was not a contracting party; or (c) where the parties have not expressly adopted the Uniform Law as the law of their contract. In any case, Article III of the Uniform Law makes it clear that parties are free to contract out of all or any of its terms if they wish to do so. I think your Lordships will agree that that is a very important provision. The Uniform Law governs the obligations of seller and buyer under a contract of sale and the remedies available to each in the event of breach by the other of rules relating to the passing of risk in the goods sold.

The Uniform Law on Sales differs from the Sale of Goods Act 1893 in many respects, but when we consider the difference it must be remembered that the rules laid down in the Sale of Goods Act apply only where the parties have not agreed otherwise. Therefore the fact that a provision of the Uniform Law differs from a corresponding provision in the Sale of Goods Act does not necessarily mean that it differs from current commercial practice. It must also be remembered that even if the parties to an international contract of sale adopted some of the provisions of the Uniform Law. They would be free to contract out of others, which means that they would be able to adopt, if they wished, the rules laid down in the Sale of Goods Act or any other rules which may be agreed between them.

The Uniform Law on Formation of Contracts represents something of a compromise between Continental and English Law—and I may say that Scots law in this field is closer to Continental than to English law. It applies to the formation of contracts of sale which, if they were concluded, would be governed by the Uniform Law on Sale. It lays down rules governing the offer to enter into a contract of sale and the acceptance of such an offer.

My Lords, to my mind one of the most important provisions of the Convention is in Article XIV. This allows for a revision conference to be held if a quarter of the contracting States request one. The recommendations annexed to the Final Act of The Hague Conference require the International Institute for the Unification of Private Law to collect and circulate particulars of judicial and arbitral decisions in contracting States relating to the interpretation and application of the Uniform Laws and to review the application of the Uniform Law on Sales and to prepare recommendations for any revision conference which may be called.

The Uniform Laws are set out in Schedules 1 and 2 to the Bill and they are given the force of law by Clauses 1 and 2. Clause 1 also includes provisions which would enable effect to be given to the reservations to which I have already referred. The most important, from the practical point of view, is Article V of the Convention on Sales which enables provision to be made that the Uniform Law shall apply only where the parties have expressly adopted it as the law of the contract. The Government intend to take advantage of this right, so that the Uniform Law will apply under the Bill only where the parties have expressly adopted it as the law of the contract. I hope that some businessmen will adopt the law as the law of their contracts, by way of experiment. If it proves satisfactory and comes to be generally used, the United Kingdom may be able, in due course, to withdraw the reservation, so that the Uniform Law will apply to international contracts unless the parties otherwise agree. But in the initial stages, at any rate, so far as this Bill is concerned that will not be so.

I should point out that this Bill cannot, of course, affect the law in other countries and that many, if not all, of them will ratify the Uniform Law on Sales without the Article V reservation. This means that if a contract is subject to litigation in another country, or even if it is subject to litigation in this country and the British court holds that the proper law of the contract is that of another country, then the Uniform Law may apply to the contract even though the parties have not expressly adopted it as the law of the contract. If businessmen want to be absolutely certain that in no circumstances will the Uniform Law apply to their contracts, they would be well advised expressly to contract out of the Law, even while the Article V reservation is in force as regards the United Kingdom.

Apart from this, the Bill will at the outset affect the relations of parties to contracts only where they have expressly agreed that their relations should be governed by the Uniform Law on Sales. They will be free to adopt some terms and to exclude others. They will be free to adopt entirely different terms if they wish to do so. Therefore those trades, such as the timber trade, which have devised standard forms of contract applicable to their transactions can carry on using them. Moreover, the adoption of the Uniform Laws will not jeopardise the degree of uniformity which already exists between Common Law countries.

Another reservation which we are entitled and intend to make allows for relations between the United Kingdom and the Common Law countries to be excluded from the scope of application of the Law. Therefore British businessmen will not find that their contracts with their opposite numbers in, for example, Canada, the United States or Australia, are governed by the Uniform Laws. However, the Uniform Laws will be available for those who wish to use them. If experience shows that they are unsuitable, or that there is no real need for them, the business community has its own remedy—it will not adopt them. If, however, they do come into general use, the United Kingdom, having ratified the Conventions, will be able to play an active part in any revision which may be necessary. If we were not to do this we should be unable to take part in any revising activities.

The passing of this Bill will enable the United Kingdom to ratify both Conventions. There are three main reasons why we should do this. First, differences between international systems of law, especially the law of sale, are undoubtedly obstacles to international trade. They can, and do, lead to mutual misunderstandings, bad feeling and even serious losses to the parties concerned. The Uniform Laws are designed to facilitate international trade by reducing these differences and their incorporation into the law of the United Kingdom would be a step, albeit a modest step, in the right direction. Secondly, all countries of the Common Market have already signed the Convention and are likely to ratify it before long. It has also been signed by Greece, Israel, San Marino, the Vatican City and Hungary; other countries among the 28 present at the 1964 Conference, including some more from Eastern Europe, will almost certainly sign before very long. United Kingdom traders may find therefore a growing tendency on the part of their trading partners, particularly in other European countries, to insist on their contracts being governed by the Uniform Laws. It is therefore important that the United Kingdom should be in a position to influence the development of the Laws at any conference which may be called to review them.

Thirdly, until the 1964 Conference it was widely thought on the Continent that our Common Law was so different from that of other European countries, and that our attitude to it was so insular and inflexible, that any degree of unification of the two systems would be impossible. Our participation at the Conference and our ability to reach a considerable measure of agreement there have shown that this is not so and that the differences between the two systems are nowhere near so irreconcilable as had been thought. This has created considerable good will towards the United Kingdom which would be lost if we failed to ratify the Conventions. Indeed, in view of the concessions made to us, failure on our part to ratify might quite conceivably prove most unfortunate at a time when co-operation with Europe is of such great importance to us.

For these reasons, my Lords, without suggesting that this is a matter of enormous commercial or international importance, I commend this Bill to you as being a very realistic step in the direction in which I think we all wish to go, and one that will be of considerable benefit to our individual traders and to the trade of the whole country. I beg to move.

Moved, That the Bill be now read 2a.—(Lord Walston.)

5.20 p.m.


My Lords, the noble Lord's exposition of this Bill has been exceedingly clear, and we are grateful to him for that. Until his last few words, I could not help feeling that his support of the Bill was, to use his own description, a tiny bit modest. But he has characterised it as a first step, and, personally, I think it is a good one. Since the Convention was signed by the previous Government and the Bill was introduced by the present Government there is unlikely to be much Party controversy about it, and Her Majesty's Opposition can certainly promise, in so far as it is within our power, a speedy passage for the Bill. We cannot, in any case, amend the Schedules, so we must either pass the Bill with them as they are or reject the Bill. I am certain that noble Lords on this side of the House would not wish to reject it.

On this occasion, we certainly cannot reproach the Government on the score of delay, since I understand that if this Bill goes through reasonably quickly Great Britain will be the first to ratify the Convention. That, in itself, may be a good answer to our friends on the Continent who have perhaps criticised this country for not being sufficiently cooperative because they think our law is irreconcilable with their own. If we are the first to ratify, then I think they will be pleased.

No doubt, also, the Government reason for speeding the Bill is to encourage the other 28 signatories to ratify before the date on which it appears that the signatories themselves intended that the Convention should come into force. The date mentioned in the document as the target date is, I think, May 1, 1968, but, as the noble Lord said, it will be six months after the time when five ratifications have been received. I do not know whether it will be the intention of the Government to defer ratification should the necessary ratifications not have been received before that date, but I gather from what the noble Lord has said that the Government will not introduce a pew Order into the House until six months after the five ratifications have been received, or, at any rate, in time for it to come into force at the same time as the Convention.

On this particular point, before passing to the Bill itself I should like to ask two questions. First, will Her Majesty's Government be ratifying on behalf of the Isle of Man and the Channel Islands? It is not entirely clear from Clause 4 of the Bill whether that is so or not. Secondly, will they ratify on behalf of Great Britain's dependent territories? It seems that subsection (5) of Clause 1 has some bearing on this matter, but it is not entirely clear.

This Bill is the first with which I personally have been concerned that was discussed on Second Reading in Committee in the Commons. This is a new procedure there. It has been the practice for a long time in regard to purely Scottish Bills, as noble Lords who have been in another place will know, but it is of some interest that this practice, which has been found of great advantage so far as Scottish Bills are concerned, is now being extended to United Kingdom Bills, and in this case to what appears to be an international Bill. The reason for the Bill's being taken in this way was, I think, stated to be that it was "lawyers' law ". I prefer to think that it was because it was a non-controversial matter, for it is of considerable significance and importance, at least potentially, for the future. I would not deny that what is "lawyers' law" may be of considerable importance, but this Bill is, I think of great commercial importance for the future.

We in Great Britain ought to welcome any steps taken to make trade easier for the traders. We can no longer expect that a large proportion of trade transactions, or as many as in the past, in which traders in this country are involved will be governed by English law, except so far as Scotland is concerned. The next best thing would be if they were governed by a single code in international trade, to he applied by the courts throughout the United Kingdom. Of course, we are a long way from that in this Bill. The Uniform Laws are to have the force of law in the United Kingdom, but, as the noble Lord has said, only if the British trader agrees in a particular transaction that they shall. Even if our adoption of Article V of the Convention is revoked—that is, the Article under which we arc indicating that the universal laws shall apply only if the British trader contracts in—it will still be possible for any deal to be taken outside the scope of the laws, either wholly or in part, by agreement between the parties. The noble Lord commented on this as a good thing which will make the proposal easier of acceptance in this country. I have no doubt that in the initial stages it does make it easier to accept, but I look forward to the time when the universal law becomes more truly universal in international dealings abroad.

In practice, the contracting-in clause contains a pitfall, which the noble Lord mentioned. If a British trader contracts with a trader in a signatory country which has not invoked Article V, any proceedings in Great Britain would be under English or Scottish law, but the proceedings in the other country would be under the universal laws. It follows, I imagine, that the trader will have to watch the Board of Trade Journal very carefully and keep his list of countries which have ratified on a contracting-out basis up to date; and certainly, as the noble Lord has said, he will be wise to specify quite clearly in the contract if he does not intend that that contract shall be governed by the universal laws.

I do not know whether the noble Lord will be able to tell us how he intends to bring to the attention of trade and industry in this country the merits and the difficulties involved in universal laws. He said that he had been good enough to place in the Library a commentary or treatise on the subject. I, for one, shall be interested to look at that, but I doubt whether many of the traders in this country will do so.

There are three other aspects of interest that I should like to mention. First the Convention recognises that, quite inevitably, different countries will interpret universal laws in different ways. For one thing, although the authetic copies of the laws are made in English and French, it is inevitable that the laws will be translated into the various languages of the signatory countries, and in the translation there may be some slight differences of meaning. The preliminary Annex (if I may call it that) to the Convention contains two recommendations. The first recommends that contracting States are to file with the International Institute each year a list of judicial and arbitral decisions—and I quote— of major importance relating to the interpretation and application of the Uniform Laws". It goes on to indicate that a report will be sent out each year, as I think the noble Lord mentioned, by the International Institute. I wonder whether the noble Lord can say whether any other steps will be taken to harmonise such interpretations, other than by sending out that annual report. It does not seem to me that that alone will be sufficient to keep the interpretation of the international law in line.

Then he mentioned the provision for revision of the law. Clause 3 of the Bill also refers to this periodic revision of the law, and it enables Her Majesty, by Order in Council, subject to approval of each House of Parliament, to amend the two laws which appear as Schedules 1 and 2 to the Bill.

Article XIV of the Convention provides that any Contracting State, after the Convention has been in force for three years, may request that a conference be convened to revise the universal laws, and that such a conference shall be held if at least a quarter of the Contracting States agree. I gather from the noble Lord that the International Institute itself will be preparing, as it were, the ground work on which such a conference could work. But nothing is said about the procedure at any such conference. Am I right in supposing that changes at such conferences can be made only by unanimous consent? If not, a very odd situation could arise. It would be difficult for Her Majesty's Government to recommend to Parliament an amendment which the Government themselves had strongly opposed, and still objected to, but which had been carried against them by a majority. The clause is, of course, permissive. It says that Her Majesty "may" by Order in Council introduce these amendments. But, while the Government would not be obliged to make such an Order, if they did not the universal law would cease to be universal: it would be different for different countries. There would be reservations, which would completely alter the universality of the law.

My last point is, I suppose, really a Committee point, but as we are unlikely to have a Committee stage on a Bill of this character, perhaps I may be allowed to put it now. It arises out of subsection (5) of Clause 1, to which I have already referred. Article II of the Convention says: Two or more Contracting States may declare that they agree not to consider themselves as different States for the purpose of the requirements as to place of business or habitual residence laid down in paragraphs 1 and 2 "— that is, the contracts must be between persons resident in different States— or Article I of the Uniform Law, because they apply to sales which in the absence of such a declaration would be governed by the Uniform Law the same or closely related legal rules. Then Clause 1(5) enables Her Majesty to cover dependent territories—and this may be the answer to my previous question—but it goes on to refer to declarations under Article II of the Convention. I should like to ask the noble Lord whether this relates to countries which are not dependent territories; for example, Commonwealth countries with the same or closely related legal rules; or what does it mean? Perhaps the noble Lord can tell us.

In conclusion, may I say just this? It is noteworthy that the six countries of the Common Market are signatories; so are the seven other countries of EFTA, including Finland; so are the United States, Japan, Spain, Yugoslavia and (a queer combination) Israel and the U.A.R., and so is Ireland. But not one Commonwealth country, other than ourselves, is a signatory of this Convention. I wonder whether the noble Lord is in a position to tell us why this is so, and what effect he considers this will have. My Lords, with these comments, we give a welcome to this Bill and wish it a speedy passage.

5.36 p.m.


My Lords, I should like to say just a word of welcome to this Bill. It has a long history in one sense, with which to some extent I have been a little bound up, because the earliest attempt to do this kind of thing was made in connection with bills of exchange and negotiable instruments on which the Geneva Conventions go back to the time before the First World War. The first efforts made to secure a greater uniformity in connection with sales, which, after all, are the very basis of international trade—a bill of exchange is an adjunct to the commodities which since the beginning of time have been passing from country to country and overseas—were directed to getting a greater uniformity of the actual rules in relation to sales of goods between the Common Law countries and the countries whose codes were governed by the civil law.

I should like to pay tribute to the great contribution which was made at that time by my own predecessor in the Cassels Chair of Commercial Law in the University of London, the late Professor Gutteridge, a very great commercial lawyer and one of the leading builders of comparative law in this country and in the British Commonwealth of Nations. I well remember the tremendous amount of work which he put into this subject in conjunction with the great German-Jewish lawyer, the late Professor Rabel, who eventually became a victim of Hitlerism and had to take refuge in the United States of America, where he continued his splendid work in this connection. I am sure that they would have been enormously proud when this Convention, imperfect as it is in quite a number of ways which I do not propose to enter into at this stage, was finally ratified by so many Continental countries, and, of course, by this country.

That this Convention should have been secured is, I think, a great step forward in international trade. In between the Bills of Exchange Convention ratified at Geneva, of course we had The Hague Rules in relation to the carriage of goods by sea, in which this country certainly played the major part; and it was undoubtedly as a result of efforts made here that The Hague Rules—the Carriage of Goods by Sea Act 1924, as we know it—became the law here and in nearly every other maritime country.

The noble Lord, Lord Drumalbyn, who has drawn attention to the fact that British Commonwealth countries have not so far ratified this Convention, might possibly take heart from the fact that The Hague Rules were only slowly ratified throughout the British Commonwealth. I think Canada must have waited 12 years before she, with an important overseas mercantile fleet, ratified; and Australia was even later, I believe. So it is perhaps rather a habit in the British Commonwealth to wait to see what happens and to follow suit when it is seen how well it is working—and of course The Hague Rules have justified themselves in that way. Therefore, I think it is very likely that this Convention will eventually be ratified and accepted as the law in other parts of the Commonwealth. As the hour is fairly late I do not think it is necessary for me to say more. In any case, I am afraid that I am getting a little technical, and there fore I will content myself with saying how much I welcome this Bill.

5.41 p.m.


My Lords, I am grateful to both the noble Lords who have spoken and have welcomed this Bill. I am also grateful to them for sharing with us their considerable legal knowledge of these somewhat abstruse matters. In particular, I should like to associate myself with the remarks made by my noble friend Lord Chorley about the great work of Professor Gutteridge in all these problems. We certainly owe him, as well as those I have mentioned, a great debt for what they have done, not only for this country but in showing to other countries of the world what scholarship and knowledge of law we have here, and, as I said earlier, how our law is perhaps not quite so different from theirs as they sometimes think it is.

Perhaps I may deal briefly with the five questions asked by the noble Lord. Lord Drumalbyn. He asked, first of all, whether this applied to the Isle of Man and to the Channel Islands, and what is the position of the dependent territories. The authorities in the Isle of Man and in the Channel Islands and also in the dependent territories, will all make their own decision as to whether or not they wish to adhere to these Conventions, but in the case of the Isle of Man and the Channel Islands the Bill, if they so wish it, will be extended to them without any need for further legislation on their part. In the case of the dependent territories, if they so wish it they will have to enact their own legislation in order for it to be applicable.


My Lords, will they then ratify separately, or shall we ratify on their behalf?


My Lords, I am afraid that, offhand, I cannot tell the noble Lord the answer to that question. With regard to the Isle of Man and the Channel Islands we should undoubtedly ratify on their behalf. In the case of the dependent territories, I believe that where we are responsible for their overseas policies we shall have to ratify for them, but where they are empowered at the present time to conduct their own overseas negotiations I imagine that they will do it themselves. However, I will let the noble Lord know specifically in writing the answer to his question.

The noble Lord's second question was how traders will know which countries have ratified, and how they will be able to follow the complexities of all these matters. As the noble Lord suggested, I hope that they will read and study the Board of Trade Journal and that they will make use of their qualified legal advisers in all these matters. I do not think the noble Lord would suggest that it is up to Her Majesty's Government to usurp the duties of professional legal advisers, although naturally we shall do all we can to give such help as is proper in unravelling these complexities. But the onus of ascertaining the position undoubtedly lies with the traders themselves, and they will use their own legal advisers.

The noble Lord also asked what other steps might be taken to harmonise the interpretation that might be placed on these laws in different countries, other than those which I mentioned in my opening speech. In the first instance, of course, it is naturally up to the courts of the individual countries to make their own interpretations, and no other country or international body can usurp the privileges of the independent courts of the countries in question. However, it will be one of the functions of the Revision Conferences which have been mentioned, if there do appear to be discrepancies in the interpretation given by courts of different countries, to suggest revisions which will harmonise the differences which have appeared. That is probably the best way in which these potentially difficult matters could be dealt with.

The noble Lord asked whether we shall be bound by majority decisions when these revisions come along; and when a Revision Conference takes place, how will it work, and will the decisions be binding upon all the signatories or only upon those who wish to be bound? The actual working out of the Revision Conference will be up to the Conference itself; it will determine its own procedure, but clearly it would not be right for something that is not a universally accepted decision, and where there are some reservations or abstentions, to be binding in advance upon all those who at present have signed the Conventions. Clearly, each country will have the right to disagree, if it feels it must, with any revisions which may be passed by the majority. But I hope that, as time goes on, and as the advantages of a uniform system make themselves felt, there will not be any occasions on which there are differences of opinion and that, if it is felt that any revision is necessary, there will be a unanimous decision.

The noble Lord then asked whether any Commonwealth countries were there. No Commonwealth countries were present at The Hague, but, as my noble friend Lord Chorley pointed out, the fact that they have not been present at past conferences does not in any way mean that as times goes on they do not subscribe to the decisions which were taken there. I hope that, if they see that this works, as indeed we all hope it will, they will find there are some advantages in adhering and will sign at a later date. I thank noble Lords for their support, and their helpful words.

On Question, Bill read 2a, and committed to a Committee of the Whole House.