SALE OF GOODS (UNITED NATIONS CONVENTION) BILL

Order for Second Reading read.

The Parliamentary Secretary to the Minister for Law (Assoc. Prof. Ho Peng Kee): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, in the Addendum to the President's Address in January 1994, the Ministry of Law announced that together with the Attorney-General's Chambers we would conduct a major review of our laws, so as to strengthen our legal infrastructure in support of Singapore's regional drive. This review was to include the adoption of international conventions and model laws which harmonise and facilitate international trade and dispute settlement. I am happy to report that progress has been made. For example, the International Arbitration Bill was passed by this House in October last year putting in place an international regime for settling disputes by arbitration. Sir, this Bill is another such law reform.

One aspect of our review was the situation of Singapore businessmen entering into contracts with foreign parties to buy and sell goods. Few difficulties are encountered if the other party is from a Commonwealth country such as Malaysia, India or Australia which share a common legal heritage and system based on English Contract Law. However, many of our major trading partners are not members of the Commonwealth.

For example, our ASEAN neighbours, China, Vietnam, Cambodia and further afield, the European Union (except for the UK), and the Latin American countries have little in common with our legal system. Our businessmen, in their forays abroad, will therefore face unfamiliar laws in foreign languages. They may not have the leverage to insist that the governing law of the contract should be Singapore Law, and therefore end up accepting a foreign law available only in an unfamiliar foreign language.

So what can be done to help our businessmen compete on a more even legal footing? One way is to plug ourselves into an international legal regime governing the international sale of goods. This regime is available in the United Nations Convention on Contracts for the International Sale of Goods which came into force on 1st January 1988 - the product of more than 10 years of work by the UN Commission on International Trade Law (UNCITRAL) in which eminent jurists from many legal systems of the world participated. The Convention contains rules governing the formation and performance of international commercial sales contracts including important matters such as the requirements of offer and acceptance, obligations of the buyer and seller, the passing of risk and remedies for breach of contract.

Sir, there is wide agreement to ratifying this Convention. The Law Reform Committee of the Singapore Academy of Law, chaired by a Justice of Appeal, first reviewed the Convention. The Committee has judges, senior practitioners, legal officers and academics as members. A sub-committee then consulted the business community. Their responses were all in favour of ratification.

Arising from the recommendations of the Law Reform Committee and the business community's favourable response, Singapore ratified the Convention on 16th February 1995. This Bill will make the Convention part of the laws of Singapore. Singapore will be bound by the terms of the Convention under its domestic laws 12 months from the date of ratification, ie, on 1st March 1996. This will give ample notice to lawyers and businessmen to familiarise themselves with this new regime in international sales law. I understand that the Academy of Law will be publishing its Report for sale to the public.

An important reason for ratifying the Convention is that many major trading nations have done so. As at 22nd February 1995, there were 44 parties to the Convention, including the US, China, Russia, Canada, Australia and New Zealand and six of the current 12 European Union countries. All the member countries of the North America Free Trade Area (NAFTA), ie, Canada, the US and Mexico and several APEC countries are also parties. So also five out of the seven members of the G7 Economic Summit.

Statistics show that countries which are parties to the Convention participate in approximately 34% of Singapore's external trade. The total trade of the Convention countries accounted for approximately 61% of the world's trade in 1992.

Sir, there are other benefits of ratifying the Convention. These include:

Firstly, where the parties do not make any provision on the applicable law, the Convention fills the gap. Hence, there will be certainty as difficult rules of private international law need not be applied to ascertain the law governing the contract.

Secondly, our current Sales Law set out in the English Sale of Goods Act 1979 is more than a century old. The Convention, on the other hand, is tailored to the needs of modern international trade and takes into account the realities of modern trade practices. For example, it encourages parties to preserve the contract by offering them less drastic solutions than outright rejection of goods and claim for damages. The Convention also contains useful solutions to practical problems such as requiring parties to preserve goods in their possession which may belong to the other party.

Thirdly, the Convention allows parties the flexibility to opt out entirely or vary the effects of any of its provisions. It recognises that the parties to international sales contracts may wish to exercise broad contractual autonomy. Article 6 enables them to exclude the application of the Convention and to derogate from or vary the effect of any of its provisions.

Fourthly, the Convention is drafted in simple and plain language for businessmen to understand. It has limited the use of technical legal terminology and concepts.

Sir, the Convention incorporates features from different legal systems. As such, it is not a perfect instrument. It is not free from difficulties of interpretation. Neither is it a complete and exhaustive code. However, the benefits outweigh the imperfections. Additionally, they can be overcome or ameliorated by variations or provisions in the sales contract itself. After all, the Convention is not meant to replace the need for a contract in the first place.

Sir, the Law Reform Committee proposed that a reservation be entered under Article 95 of the Convention to exclude the applicability of Article 1 (1)(b). Under Article 1 (1)(a), the Convention will apply to a sales contract if the parties have their places of business in different countries which are Contracting States. If Article 1 (1)(b) is adopted, the Convention will also apply to an international sales contract where the rules of private international law lead to the application of the law of a Convention country. This is despite the fact that the other party is not from a Convention country. As this may not give effect to the actual intention of the parties, it is proposed that we should not adopt this provision (Article 1 (1)(b)). Clause 3 (2) gives effect to the reservation in respect of Article 1 (1)(b). If the reservation is subsequently withdrawn, clause 3 (3) gives the Minister the flexibility to amend the provision on reservation by gazetting an order.

Sir, the passage of this Bill will underscore Government's commitment to creating a more predictable legal environment for our businessmen. In addition, the Bill will also help create a more level playing field for our businessmen in their ventures overseas.

Sir, I beg to move,

Question proposed.

Mr Chiam See Tong: Can I ask a question, Sir? I notice that this Convention was enacted in 1980. Why is there this long delay of nearly 15 years before Singapore accepts this Convention?

Assoc. Prof. Ho Peng Kee: Sir, the Convention became operational only on 1st January 1988. I think it was wise for Singapore to wait to see how the Convention works, whether it works effectively, and having waited for about seven years now, we are convinced that Singapore would benefit by acceding to the Convention.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Assoc. Prof. Ho Peng Kee].

Bill considered in Committee; reported without amendment; read a Third time and passed.