The

Adoption of the CISG in Iran: Practical Difficulties in Implementing

the CISG

Mona Ahadi*

An adaptation of thesis submitted for the degree of Doctor of Philosophy in School of Law,
University of Durham

Abstract: The United Nations Convention on Contracts for the International Sale of
Goods (CISG) is a successful story of uniform law. It has been ratified by 84 states
representing all legal traditions and economic systems. Leading trading states
worldwide whose combined economies make up nearly two-thirds of all world trade
are parties to the CISG.
The CISG has been used as a model for regional and national contract law reform in
various parts of the world. The benefits of adoption of the CISG for traders in terms
of predictability of applicable law and ease of choice of law are undeniable;
nevertheless, Iran has not yet adopted the CISG.
Iran should seriously consider adoption of the CISG, given that the Iranian Civil Code,
the main source of sale of goods, is not suitable for international trade. Therefore,
the author’s fieldwork in Iran concerning the practical difficulties that may arise in
implementing the CISG in Iran can provide answers as to why Iran has not adhered
to the CISG and how to overcome those difficulties.


1. Introduction:
The United Nations Convention on Contracts for the International Sale of Goods has
been ratified by 84 states1 that account for a significant proportion of world trade.
Despite the declaration in the Preamble about contributing to the achievement of a
New International Economic Order (NIEO) and promoting the development of
international trade on the basis of equality and mutual benefit, a disproportionate
number of developing countries, including Iran, have not ratified it.

* Dr. Mona Ahadi is a graduate from the School of Law, University of Durham. This paper is
an adaptation of her thesis submitted for the degree of Doctor of Philosophy in School of
Law, University of Durham in September 2013 entitled ‘The United Nations Convention on
Contracts for the International Sale of Goods: Should Developing Nations Such As Iran Adopt
the CISG?’
1
As of 29 December 2015, UNCITRAL reported that 84 states have adopted the CISG.
‘CISG: Table of Contracting States’ <http://www.cisg.law.pace.edu/cisg/countries/cntries.html>
accessed 7 March 2017.
The Iranian Civil Code, the main source of the law of contract, was first prepared in
1928 and then completed in 1935–36.2 This code has remained untouched for 80
years. During that time the volume, complexity and international character of
commercial transactions have changed and the Iranian Civil Code is no longer
suitable for modern international trade. The language of the Code and its terms are
not suitable for international sales in the sense that there are elements of ambiguity
and uncertainty in the provisions of the Iranian Civil Code. On top of that, the fact
that it is not a well-established and well-known body of law might discourage Iran’s
trading partners from adhering to the Iranian Civil Code. This could put Iranian
commercial traders in a disadvantageous position at the time of choice of applicable
law during contract drafting. While each contractual party typically wishes to apply
its national law, this may lead to choosing the law of Iran’s trading partner (owing to
the unpopularity of the Iranian Civil Code and/or unfamiliarity with it). In that case, if
a dispute should arise, additional research at significant cost would be necessary to
ascertain the actual content of the law chosen.3 That is where the adoption of the
CISG might be beneficial to Iran. The CISG, which is a more modern document
developed in the light of the international character and complexity of current trade
practices, responds better to international commerce. Therefore, it could be used by
Iran to embark on updating its own domestic law of sale.

2. Fieldwork Summary in Iran
In 2011/2012, the writer conducted a survey in Iran. The aim of the fieldwork was to
conduct unstructured interviews with leading figures in business, law and
Government in Iran with regard to the area of international trade. The goal was to
determine: (i) whether they are familiar with the CISG; (ii) whether they
support/oppose its introduction, with reasons why; and (iii) whether there are any
other insights/observations on the potential difficulties of implementation.

2
Hamid Bahrami-Ahmadi, ‘A Historical Overview on the Development of Civil Code.’
(Available in Persian.)
<http://www.isu.ac.ir/publication/research-quarterly/research-quarterly_24/Research-
Quarterly_2402.htm> accessed 7 March 2017.
‘CISG-Brazil interview with UNCITRAL Legal Officer Luca Castellani’ (April 2010).
3
The writer issued 60 documents and received only nine responses. The small number
of responses means it is important to be cautious in interpreting results. However,
three tentative conclusions can be drawn:

I. Lack of Awareness
Although it is arguable that the low level of response might reflect the technical
nature of the subject, the lack of awareness of and familiarity with the CISG could be
considered as one of the major factors potentially hindering accession. The
implications of this lack of awareness are discussed below.

This is supported by interviews/questionnaires. One example is the ‘Mega Motor
Company,’ whose managing director admitted his unfamiliarity with the CISG. It is
worth mentioning that, with the exception of three that came from academia or the
legal community, other endorsements for accession came from organisations whose
level of familiarity with the CISG was either low or non-existent. In other words,
despite unfamiliarity, they were not opposing accession to the CISG.

II. Direct Opposition

With the exception of one vote against, the majority were in favour of adoption.
However, the opposition is significant because, although it did not focus on trade
issues, for instance on the fact that it is not yet evident whether the CISG would
promote trade or reduce legal business (as in the UK), it focused instead on the
secular nature of the CISG. A highly influential organisation that was against
ratification was the Trade Promotion Organisation of Iran, which is a subset of the
Iran Chamber of Commerce, Industries and Mines. Their main objection was the
incompatibility of the CISG with Islamic jurisprudence.

From this point of view it is not incorrect to oppose adoption of the CISG, on the
grounds that the Convention specifies provisions with regard to interest that seem
to be incompatible with Islamic and Iranian law.4 For example, Article 84 of the CISG
states that in the event that the seller is bound to refund the price, he must pay
interest on it from the date the price was paid. Also, under CISG Article 78, it is clear
that interest must be paid to the aggrieved party.

But this does not in fact introduce a radical change, since Iranian law recognises late
payment compensation (Articles 515(2) and 522 of the Iranian Civil Procedure Code
1379 (2000)), which is very similar to the notion of interest.5 Moreover, when an
action is brought outside Iran, Iranian authorities do request interest in their
dealings and litigation arbitration proceedings with foreign corporations.6

Hence it could be very difficult politically to promote access to the CISG in Iran.
Those who prefer secular law may feel that it is unwise to promote the Convention,
as it may invite closer scrutiny of the Civil Code. It is only speculation, but it may
explain the low rate of return of the questionnaires.

III. There Is Some Support for the CISG

Several respondents stated their willingness to adhere to the CISG, but one went a
step further and explained that Iran’s accession to the New York Convention (1958
United Nations Convention on the Recognition and Enforcement of Foreign Arbitral
Awards) on 15 October 20017 implies that accession to the CISG is feasible. Those
respondents who were very familiar with the CISG and in favour of accession put
forward their arguments as follows:

4
‘LEGISLATIVE HISTORY 1980 Vienna Diplomatic Conference, Report of the First Committee.’
<http://cisgw3.1aw.pace.edu/cisg/1stcommittee/summaries78,84.html> accessed 7 March 2017.
Egyptian Delegate proposed ‘it would be advisable to provide for reservations which would permit
any country, particularly those where the concept of interest was incompatible with their religion, to
apply the relevant clauses in a different manner.’
‘LEGISLATIVE HISTORY 1980 Vienna Diplomatic Conference, Summary Records of Meetings of the First
th
Committee, 34 meeting.’
<http://cisgw3.1aw.pace.edu/cisg/firstcommittee/Meeting34.html> accessed 7 March 2017.
5
H Safai, M Adel, M Kazemi, and A Mirzanejad, The Law of International Sale of Goods – A
Comparative Study (2nd edn, University of Tehran Press 2008) 446.
(Available in Persian.)
6
Sayed Hassan Amin, ‘Banking and Finance Based On Islamic Principles – Law and Practice in Modern
Iran’ (1989) 9 Islamic and Comparative Law Quarterly 1.
The New York Convention came into force on 13 January 2002.
7

1. Iran’s accession to the Convention would appear to have benefits for Iran at an
international level. It is believed that it would promote Iran’s international trade
and be beneficial for its economic growth and development. Iran’s trading
partners would be able to predict the governing law of the contract. This
governing law, which is familiar to them and derived from international customs
and trade usages, would enable them to enter into contracts with Iran with a
higher degree of certainty, which would in turn lead to the building of stronger
relations.
2. Accession to the Convention would not mean that our own national law would
be neglected or abandoned. Since the Convention governs only international
sales contracts between parties whose places of business are in two different
countries, the Iranian Civil Code would still govern contracts of sales made
nationally.
3. A comparative study of the CISG and the Iranian Civil Code does not suggest any
radical departure from our Civil Code.

3. Future Action
The three points made above suggest the following areas of action:

I. Awareness
There is clearly a great need for further awareness. The outcome of this survey
shows that there is a lack of familiarity with and awareness of the CISG within the
business community in particular. The problems this brings include not only a lack of
support for the CISG but also the likelihood that the transition to the CISG would be
more difficult. Although the writer in her thesis submitted for the degree of Doctor
of Philosophy in 2013/148 has discussed that the CISG is preferable in many ways to
the Civil Code, and that there are not that many incompatibilities between the two
legal systems, many of the benefits would not be obtained if the legal and business

8
Mona Ahadi, ‘The United Nations Convention on Contracts for the International Sale of Goods:
Should Developing Nations Such As Iran Adopt the CISG?’ (PhD thesis, University of Durham 2013).
<http://etheses.dur.ac.uk/16/1/Completed_Thesis.MA.pdf?DDD19+> accessed 7 March 2017.
community lacked the knowledge to take advantage of the CISG. Moreover, there is
a risk that their lack of knowledge might increase the cost of doing business rather
than reduce it, as the CISG is intended to do.

The CISG allows contracting parties to opt out of its provisions and choose the
application of a different body of law. The source of this autonomy is contained in
Article 6 of the Convention, which permits signatories to ‘opt out’ of the Convention
in its entirety or to derogate from or vary the effect of any of its principles. The
reasoning behind this was that parties could always opt out of the provisions they
wanted to avoid, and this is very useful, in particular for persuading sceptics to adopt
the CISG. For example, in Iran those contracting parties that did not wish to apply
the provisions on interest could declare that such provisions did not apply to their
contract. However, anecdotal evidence suggests that, in taking advantage of Article
6, the legal profession fails to apply the CISG in cases where it could be very useful.9
The statistics show that the rate of opt-out by lawyers in the US stands somewhere
in the region of 55% to 71%. The figures for Germany, Switzerland, Austria and China
are 45%, 41%, 55% and around 37% respectively.10 But the question is, why do the
lawyers opt out of the CISG? But, though the answer to this could be much
extended, one of the main reasons is, again, lack of awareness and knowledge of the
CISG. For instance, in the US, although it is a signatory state to the CISG, some 44%
of lawyers are not at all familiar with the Convention.11

So how does one compensate for this lack of awareness? It seems that the most
important resources through which one can raise awareness are law schools and the
publication of scholarly writings, commentaries and court decisions in specialised
and general law reviews. Time, cost and effort are indeed required at the start to
become familiar with the CISG, but, given the position of Iran in the international
community, such expenditure would seem to be of vital importance. It is then up to

Bruno Zeller, ‘The CISG – Getting off the Fence’ (2000) 74(9) The Law Institute Journal 73.
9
10
Lisa Spagnolo, ‘A Glimpse through the Kaleidoscope: Choices of Law and the CISG (Kaleidoscope
Part I)’ (2009) Vindobona Journal of International Commercial Law and Arbitration 135, 140.
ibid.
11
the legal and business communities to make their desire to ratify the CISG clear to
the Government.

There is also an issue with the transition from the Civil Code to the CISG, but this
should not create serious difficulties, as education would focus on ensuring that
lawyers and professionals were comfortable with the CISG and could see its
advantages. The writer acknowledges that there are some valid objections to the
CISG that are related not to its usefulness but to its compatibility with Islamic
principles. Therefore, this issue will need to be addressed separately.

II. Concern Over Anti-Islamic Elements

The one vote against ratification registered during the writer’s fieldwork came from
the Trade Promotion Organisation of Iran. This Governmental organisation appears
to reflect the Government’s view. However, the Government of Iran has never
published any statement to express its direct and/or indirect opposition to
ratification of the CISG.

The prohibition of interest by the Qur'an, which seems to be an impediment to
accession to the CISG for Islamic countries, has to a certain extent been avoided by
interpretation. Taking Egypt as an example, Article 226 of the Egyptian Civil Code
awards interest.12 Iraq also took a similar approach and applied award of interest to
its law.13 More importantly, as noted above, Articles 515(2) and 522 of the Iranian
Civil Procedure Code 1379 (2000) introduce compensation for late payment, which is
similar to the notion of interest.

12
Article 226 of Egyptian Civil Code reads:
‘When the object of an obligation is the payment of a sum of money of which the amount is known at
the time when the claim is made, the debtor shall be bound, in case of delay in payment, to pay the
claimant, as damages for the delay, interest . . . ’
13
Fatima Akaddaf, ‘Application of the United Nations Convention on Contracts for the International
Sale of Goods (CISG) to Arab Islamic Countries: Is the CISG Compatible with Islamic Law Principles?’
(2001) 13 Pace International Law Review 1.
Such interpretations perhaps explain why those Islamic countries that are party to
the CISG14 have not made reservations on Article 78, which deals with interest. One
could however argue that the reason these countries can apply interest is that the
Western legal structure has had a great impact on their legal systems, and the same
approach may not apply to other Islamic countries. Although this is true, there is still
Article 6 of the CISG, which formulates safety for Islamic countries, should they
decide to avoid application of Article 78 of the CISG. Article 6 of the CISG, which
provides that ‘the parties may exclude the application of this Convention or . . .
derogate from or vary the effect of any of its provisions,’ exemplifies the
fundamental principle of freedom of contracts given to the parties.

III. The Community That Would Probably Overcome (I) and (II)
It is the duty of this group – the community that is aware and in support of accession
– to further facilitate accession to the CISG. It could be achieved by raising greater
awareness and knowledge of the CISG through the use of the CISG database. ‘The
database is a collaborative effort between the Institute of International Commercial
Law and the Pace Law Library.’15 It accommodates over 2,900 cases and 1,600 full
texts of commentaries. Besides, one of the main functions of the CISG Advisory
Council, where a jurisdiction has not ratified it, is to encourage and help them to
adopt and implement it.16 More in-depth analysis and comparative study of the two
legal systems (the CISG and Iranian law) would also enable Iran to overcome any
apprehension over the anti-Islamic element of the CISG. An investigation into the
compatibility of the CISG with Iranian law has shown that the two legal systems are
by and large similar, and, where there are differences, sufficient principles can be
found within Iranian law to bridge the gap.

Bahrain, Egypt, Iraq, Syria and Mauritania are parties to the CISG.
14
15
See ‘CISG Database.’ <http://cisgw3.1aw.pace.edu/> accessed 7 March 2017.
16
Interview with Dr Loukas Mistelis, former Secretary of the CISG-AC between 2001 and 2007, (June
2004) in Joshua D H Karton and Lorraine de Germiny, ‘Has the CISG Advisory Council Come of Age?’
(2009) 27 Berkeley Journal of International Law 448, 451.
< http://ssrn.com/abstract=1509761> accessed 7 March 2017.