Brunei and the International Sale of Goods UNCITRAL – SINGAPORE SEMINAR ON : 35 YEARS OF THE CISG : Achievements and Perspectives Brunei and the International Sale of Goods by Dr. Colin Y.C. Ong Senior Partner, Dr. Colin Ong Legal Services (Brunei) President, Arbitration Association Brunei Darussalam Email: contacts@onglegal.com (All views expressed in this paper are strictly personal and forms the private view of the author only)

General Introduction The ASEAN Economic Community is fast approaching. Commercial laws such as contract law need to be harmonised at some point in time. Contracting parties from different countries come with different legal traditions They can have very different approaches and expectations in international trade transactions. Dr Colin Ong Legal Services

  General Introduction The CISG is the perfect instrument that can be used to kick start such harmonisation. CISG only applies to agreements for sale and supply of goods where both parties have their place of business in contracting States to the CISG, or when the rules of private international law lead to the application of the law of a State that is a party to the CISG, so long as it has not been modified or excluded by the parties. Dr Colin Ong Legal Services

Introduction to the Brunei Legal System and Brunei Law Two parallel systems of law operate in Brunei Darussalam. Statutory laws regulating civil and mercantile activities and disputes are based upon the common law system. Primarily are based on English Statutes and codified laws. For civil matters, parties to a dispute can agree to have the Judicial Committee of the Privy Council in the UK as the court of final appeal. Dr Colin Ong Legal Services

Introduction to the Brunei Legal System and Brunei Law Criminal cases now subject to both Penal Code (Cap 22) and the Sharia Penal Code Order 2013 (as of April 2014. ) Sharia Penal Code expanded jurisdiction of sharia courts (to include offences such as murder, rape and theft.) Such offences were previously under civil criminal courts. Dr Colin Ong Legal Services

Brunei Civil & Commercial Law Brunei has a Contracts Act (Cap 106) and a Specific Relief Act (Cap 109) that applies to civil cases. Both Acts embody a codified system of contract law and laws of equity based on English common law. Dr Colin Ong Legal Services

Brunei Civil & Commercial Law The Application of Laws Act (Cap 2). This statute essentially stipulates that the common law of England and the doctrine of equity, together with statutes of general application, as administered or in force in England prior to 25 April 1951, shall be in force in the Sultanate. The important proviso to this is that the said common law, doctrine of equity and statutes of general application shall only be in force so far as circumstances permit. They are also subject to be qualified by local circumstances and customs. Dr Colin Ong Legal Services

Brunei Civil & Commercial Law: Sale of Goods Act The Sale of Goods Act (Cap 170) applies to all matters concerning the sale of goods. Modeled after the UK Sale of Goods Act. Bruneian courts will look to decisions of the English courts dealing with corresponding provisions. Brunei has not ratified the CISG yet. Dr Colin Ong Legal Services

  Possible Pragmatic Reasons why Brunei has not yet signed up to the CISG Brunei is blessed with rich natural resources and its economy is dependent on the hydrocarbon industry. It is not a trading nation like Singapore. No coordinated effort by any public or private sector interests to join the CISG. Dr Colin Ong Legal Services

  Possible Pragmatic Reasons why Brunei has not yet signed up to the CISG MOFAT Ministry needs compelling reasons to consider the benefits that may be had by signing up to the CISG. UNCITRAL itself does not appear to have ever organised any seminar in Brunei to promote the CISG. Need to generate interest to ratify the CISG. Dr Colin Ong Legal Services

Possible Perception of Clash of Legal Culture Officials are more naturally familiar and comfortable with English law and English statutes. A majority of Civil law countries had input into the CISG. Some provisions veer towards Civil Law. Civil law methodology is applied when it comes to reading general principles within the CISG. some of the key areas that may be of concern to certain quarters in implementing the CISG. Dr Colin Ong Legal Services

Possible Perception of Clash of Legal Culture Concerns that the CISG is less suitable to commodity sales (including crude oil) than the Brunei Sale of Goods Act. CISG has stricter provisions on contract avoidance in case of non-conforming goods and documents. Articles 25 and 49 of CISG provide that a fundamental breach is a precondition for avoidance of a contract, Under the Brunei SOGA, any non-conformity would be considered as a breach of condition will in itself be a ground for termination of the contract. Dr Colin Ong Legal Services

Possible Perception or Clashes of Legal Culture Brunei courts and lawyers will have to deal with issues of statutory interpretation and the principle of good faith with respect to Article 7 of the CISG. Article 7 (1) of the CISG provides that "In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade." [My Emphasis] Dr Colin Ong Legal Services

Possible Perception of Clash of Legal Culture Good Faith is a fundamental Civil Law concept not easily reconcilable under the Common law. Unless there are lawyers that are trained or experienced in both Civil and Common law handling such matters, there can be a clash of legal cultures. Valid point also for Singapore and Malaysia, which share similar English Common law traditions Dr Colin Ong Legal Services

Possible Perception of Clash of Legal Culture The traditional approach of statutory interpretation applied by Brunei courts is almost identical to those of English courts. The Judicial Committee of the Privy Council is still the Brunei Court of Final Appeal in Civil matters. Common law approach of statutory interpretation is different from approach used in civil law jurisdictions. Dr Colin Ong Legal Services

Possible Perception of Clash of Legal Culture Civil law courts and arbitrators interpret statutes taking into account literal meaning of the wording and grammatical structure of each sentence. Will look at the legislative history (travaux preparatoires) and scholarly writings of professors and the context of any legal rule. Dr Colin Ong Legal Services

Possible Perception of Clash of Legal Culture The intent of Brunei Parliament's intention has to appear directly from the text of the statutes, legal doctrines and legislative history (travaux preparatoires of the CISG) would not play an important part for statutory interpretation. Brunei/English law do not have obligations to negotiate in good faith in contracts. Dr Colin Ong Legal Services

Possible Perception of Clash of Legal Culture House of Lords decision of Walford v Miles [1992] 2 AC 128. Lord Ackner held [at 138] that "A duty to negotiate in good faith is as unworkable in practice as it is inherently inconsistent with the position of a negotiating party. It is here that the uncertainty lies.... while negotiations are in existence either party is entitled to withdraw from those negotiations, at any time and for any reason." Dr Colin Ong Legal Services

Possible Perception or Clashes of Legal Culture In short, the HoL did not allow a party to rely upon any good faith duty to negotiate in good faith. This was found to be incompatible with the nature of negotiations in which each party negotiates and looks after its own interests. Dr Colin Ong Legal Services

Possible Perception of Clash of Legal Culture Another good faith article is Article 16(2)(b) of the CISG, which deals with the irrevocability of an offer in situations where there is reasonable act of reliance on such irrevocability. Similarly, Article 40 of the CISG prevents the seller from relying on a failure of timely notice of non-conformity by the buyer if the seller himself knew of or could not have been unaware of the non-conformity. Dr Colin Ong Legal Services

  However Brunei was First Country in Asia-Pacific to adopt the 2006 Amendments to the Model Law on Arbitration Article 6 of the CISG provides that “The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.” Hopefully, Brunei would not make any reservations and may adopt the CISG without any reservations. In drafting its International Arbitration statute in 2009, Brunei became the first country in the Asia-Pacific to adopt the 2006 MAL Article 17 provisions. Dr Colin Ong Legal Services

  However Brunei was First Country in Asia-Pacific to adopt the 2006 Amendments to the Model Law on Arbitration There is nothing in the rules of the CISG that would offend public policy or mandatory principles of Brunei's civil or syariah laws; It is important that Brunei does take immediate steps forward to sign onto the CISG Convention before it finds itself as one of the few ASEAN countries that are left behind in this field. Dr Colin Ong Legal Services

  However Brunei was First Country in Asia-Pacific to adopt the 2006 Amendments to the Model Law on Arbitration There is nothing in the rules of the CISG that would offend public policy or mandatory principles of Brunei's civil or syariah laws; It is important that Brunei does take immediate steps forward to sign onto the CISG Convention before it finds itself as one of the few ASEAN countries that are left behind in this field. Dr Colin Ong Legal Services

Brunei Accession Process of Treaty No specific law governing treaty-making process in Brunei Darussalam. However, as Article 4(1) of the Constitution provides that the supreme executive authority of Brunei Darussalam is vested on His Majesty the Sultan and Yang Di-Pertuan, his consent would therefore be required before any steps are taken to negotiate and/or sign a treaty or similar documents. Dr Colin Ong Legal Services

Brunei Accession Process of Treaty This requirement would similarly apply to the ratification of any such treaty. Thus, it can be said that the treaty-making power in Brunei Darussalam is an executive function coming within the supreme executive power of His Majesty the Sultan and Yang Di-Pertuan. Dr Colin Ong Legal Services

Good for Brunei and all other ASEAN members to join CISG A harmonised international sale of goods law within ASEAN will increase legal predictability for international transactions, and this will translate into reduced transactional costs. It may also assist in maintaining strong economic, cultural ties, and prevents unnecessary tensions. Dr Colin Ong Legal Services

Good for Brunei and all other ASEAN members to join CISG Good if all ASEAN member states adopt the CISG without making reservations when adopting the Convention, as reservations will significantly limit the CISG's effect on the unification of Sales law within the ASEAN. ASEAN member states should not fear adopting the CISG as the CISG can assist ASEAN in harmonising a small portion of contract law. Article 1(1) of the CISG itself makes it clear that its application is limited to contracts for the international sale of goods. Dr Colin Ong Legal Services

Good for Brunei and all other ASEAN members to join CISG The CISG will also allow resolution of disputes by way of international arbitration. Experienced commercial arbitrators are likely to have a greater familiarity with the content of the CISG than domestic judges from the signatory countries. Where the counter party is located in a country which is a signatory to the New York Convention, the local courts will enforce arbitral awards from any other contracting states. Dr Colin Ong Legal Services

Brunei and the International Sale of Goods (All views expressed in this paper are strictly personal and forms the private view of the author only) UNCITRAL – SINGAPORE SEMINAR ON : 35 YEARS OF THE CISG : Achievements and Perspectives Brunei and the International Sale of Goods by Dr. Colin Y.C. Ong Senior Partner, Dr. Colin Ong Legal Services (Brunei) President, Arbitration Association Brunei Darussalam Email: contacts@onglegal.com (All views expressed in this paper are strictly personal and forms the private view of the author only)