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Wednesday, Jan 26th 2022

The ACP Legal Association

  • OHADAC and ACP Legal

    The partisans of this project, called OHADAC (Organisation for the Harmonisation of Business Law in the Caribbean), decided to meet within the framework of the association ACP Legal, to help interested Caribbean States to implement the project.

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  • OHADAC in brief

    This brochure has been published by the ACP Legal Association.

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OHADAC PRINCIPLES ON INTERNATIONAL COMMERCIAL CONTRACTS

I. The OHADAC Principles on International Commercial Contracts will be applied, in whole or in part, when the parties have so agreed.

II. Unless otherwise stated, the rules included in these Principles may be excluded or modified by the parties. Contractual clauses that are contrary to these Principles will prevail.

III. These Principles do not prevent the application of overriding mandatory rules or international public policy rules of national or international origin, which are applicable according to Private International Law rules.

IV. These Principles do not prevent the application of commercial usages in international trade.

V. These Principles will be uniformly interpreted in accordance with their international scope.

1. OHADAC Principles as the law applicable to contract

The main goal of the OHADAC Principles on International Commercial contracts is to provide traders, individuals and companies established in the Caribbean with a useful tool for regulating their international contracts that will facilitate legal certainty in their mutual contracts and in those with third parties.

Moreover, the OHADAC Principles seek to be easily applicable by arbitrators as well as by the domestic courts of the various Caribbean countries. In this sense, they provide solutions for the convergence between the national systems involved and based on a comparative analysis. They do not therefore incorporate any rule that directly distorts any legal culture represented in the Caribbean.

Therefore, the OHADAC Principles, unlike any other non-national contract legal systems, such as the UNIDROIT Principles on international commercial contracts (Preamble) or PECL (Article 1:101), do not intend to represent or entail a body of general principles of law and in no way be an expression of the presumed or hypothetical lex mercatoria. Application of the OHADAC Principles is therefore only suitable when parties have expressly submitted their contract to the OHADAC Principles or they have unequivocally incorporated them as the applicable law (paragraph I of the Preamble). In other case, judges and arbitrators should determine the applicable law to contract according to private international rules in force in their respective legal systems or arbitration rules applicable in the case.

Consequently, when parties have established an arbitral solution for possible controversies derived from the contract, a simple clause submitting the contract to the OHADAC Principles is advised, as follows:

“Parties agree to submit this contract to [or “This contract is governed by”] the OHADAC Principles on International Commercial Contracts”

The OHADAC Principles are, thus, a basically optional regulation. Such an option must derive from an unequivocal agreement of the parties. When such a choice exists, arbitrators sometimes can decide to apply the OHADAC Principles as the true applicable law to the merits, without consideration of any other national legal system. However, this is not available before courts. Indeed, the possibility of considering the OHADAC Principles as the applicable law to the merits could only be argued, and with serious doubts, before Mexican and Venezuelan courts, insofar as only these two States have ratified the Inter-American Convention on the law applicable to international contracts (CIDIP V), made in Mexico on 17 March 1994. In other Caribbean countries the old principle proclaimed in the decision in the French case “Messageries Maritimes”, upheld by the Cour de Cassation on 21 June 1950, remains in force, so that any contract must be referred or submitted to the applicable law of a State. The same criterion governs under English Law [Musawi v RE International (UK) Ltd. (2007), EWHC, 2981] and under the Regulation (EC) No. 593/2008, of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations.

In short, when controversies that may arise between the parties are submitted to national courts, it is advised to complete the choice of the OHADAC Principles clause with a subsidiary determination of the national law under which Principles must be integrated. In fact, the chosen national law does not only work as a set of default rules to make up for existing gaps, but will presumably play a restrictive function of the OHADAC Principles themselves, which due to their non-national character will not be considered strictly speaking as the applicable law of the contract, but rather as the result of substantive party autonomy incorporated by reference. Such a clause ought to be as follows:

“Parties agree to submit this contract to [or “This contract is governed by”] the OHADAC Principles on International Commercial Contracts. Failing these Principles, the contract will be submitted to [or ‘governed by'] the law of State X.”

2. Partial choice of the OHADAC Principles on International Commercial Contracts

Due to the optional nature of the OHADAC Principles and the fact that the Principles are considered as a non-national legal system, parties can agree to incorporate only a part of the Principles, exclude a chapter or some rules.

Dépeçage is a common practice in comparative private international law systems. The partial choice of the OHADAC Principles does not exactly comply with this concept of private international law. Although the OHADAC Principles may be partially incorporated in the contract as an integral part of the contracts agreed between parties, the parties must be aware, particularly in jurisdictional controversies, that to replace the portion of the Principles that have been excluded, they should provide for the direct and full application of contractual clauses and, especially, of the national applicable law in accordance with of rules of private international law. The clause offering a double choice is all the more recommended in this case.

3. Prevalence of contract clauses

On principle, the OHADAC Principles are not mandatory rules. Therefore, parties can exclude a part of the Principles as well as introduce into the contract exclusions and modifications of specific rules. These modifications and exclusions may be express or implied. In particular, rules in Principles that contradict contract clauses will be considered as void or modified, regardless of whether they have been individually negotiated or included in standard terms or forms incorporated to the contract.

Judges and arbitrators will give priority to contract clauses if they imply nullity or modification of the rules included in the OHADAC Principles, regardless of whether the parties have stated this in these terms. Commentaries to these Principles occasionally offer examples of contract clauses to modify the proposed rule in the Principles. The contents of the Principles are often restricted to minimum or common rules, than can be amended and adapted through clauses closer to national idiosyncrasies or to specific needs of the parties. In short, the general principle included in paragraph II of the Preamble [also in Articles 6 CISG; 1.5 U.P.; 1:102 (2) PECL; II-1:102 (2) DCFR; and 1.2 CESL] means that a generic submission to the OHADAC Principles cannot be interpreted in such a manner as to void the contract clauses established by the parties.

The only exception to this rule is when the Principles exceptionally and mandatorily set out rules declared either expressly or implicitly because it is considered inherent to the rule. For example, the reserve concerning the application of national, international and supranational rules on contract illegality (Article 3.3.1) is inherently mandatory, which means that they cannot be excluded by the parties. For international public policy reasons, these rules can be excluded neither by the parties nor by the Principles. Furthermore, some rules that guarantee a free contractual will, such as those that govern the nullity of the contract for reasons of fraud, duress or undue influence (Articles 3.4.6, 3.4.7, 3.4.8 and 3.4.9) or as those limiting abusive exemption clauses, liquidated damages or modification of limitation periods [Articles 7.1.7, 7.4.7 (2), 9.2 (2) and (3), 9.4 (2) and 9.6 (3)], would contradict most basic arguments in favour of contract morality and international public policy. For these reasons, such rules cannot be excluded from the application of the OHADAC Principles and contract clauses contrary to these rules will be considered as void or unenforceable.

The mandatory nature of some rules does not prevent parties from excluding them expressly, even en bloc, by virtue of clauses of governance by the OHADAC Principles. Then, parties may choose the OHADAC Principles and exclude Section 4 of Chapter 3 relating to defects of consent, which is largely mandatory. In this case, a partial choice of the OHADAC Principles is effective and defects of consent will be governed by the applicable law determined by private international law rules

However, when the parties are generally bound to the OHADAC Principles, it implies that parties accept the exceptional and mandatory nature of certain rules, so that clauses contrary to those rules will be deemed to be void. On this point, submission of parties to the OHADAC Principles must be interpreted as resulting from precautions taken by the parties or the advantages derived from subjecting their contract to a self-supervision by excluding contract clauses that could be contrary to the mandatory rules of the OHADAC Principles, the reasonableness and comparative acceptance is beyond all doubt.

4. Compatibility of the OHADAC Principles with international mandatory rules

Closely related to the principle set out in paragraph II of the Preamble, paragraph III states the compatibility of the OHADAC Principles with the need (or relevance) to apply and take into account national and international overriding mandatory rules (including those of supranational scope) or international public policy rules.

It is very commonplace in international contract law that parties are unable to prevent the application of overriding mandatory rules of national, international or supranational origin, in force in the country of the forum (lex fori) or even in a third-party State with a close connection to the contract, especially in the State where agreed obligations must be performed. This principle of private international law, well known in comparative law and more and more usual in the arbitration field (apart from the lex fori in some cases), is set out in Article 9 of Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations, in force in the United Kingdom, France and the Netherlands, as well as in Article 11 of the Mexico Convention in force in Mexico and Venezuela.

A choice of the OHADAC Principles cannot lead to or prevent the application by the judge or arbitrator of the above-mentioned rules if they deem that they are applicable in the case in point. A similar rule is found in Article 1.4 U.P. and in Article 1:103 PECL.

5. Prevalence of trade usages

The OHADAC Principles are a generic regulation of international commercial contracts that aims to provide legal certainty and uniformity to the legal regime of international contracts concluded in the Caribbean region. In the same way that the specific rules contained in contract clauses have prevalence over these Principles, Paragraph IV of the Preamble specifies the prevalence of international trade usages. This notion is not confined to general international trade usages, but also includes, particularly, specific usages generally accepted in a given branch of international trade, and specific usages established by the parties in their commercial relationships.

Choosing that the contract is subject to the OHADAC Principles must not lead to the presumption of inapplicability or voidness of trade usages. Trade usages in civil law have an interpretative as well as a normative scope, as expressly stated in many laws [e.g. Articles 1.023 of the Costa Rican Civil Code and 436 of the Costa Rican Commercial Code; 1.135 and 1.160 of the Dominican and French Civil Code; 926 of the Haitian Civil Code; 6:248 (6.5.3.1.) of the Dutch and Surinam Civil Code; 546 of the Honduran Civil Code; 1.796 of the Mexican Civil Code; 2.480 of the Nicaraguan Civil Code; 1.109 of the Panamanian Civil Code; 1.210 of the Puerto Rican Civil Code; 1160 of the Venezuelan Civil Code], and confirmed in drafts such as the Draft Project of Reform of the Law on Obligations prepared by the French Ministry of Justice in 2013 (Article 103). Likewise, trade usages are recognised in English law by statutes (Sections 14 and 55.1 Sale of Goods Act of 1979; Section 55 Sale of Goods Act Ch 393 of Antigua y Barbuda; Section 55 Sale of Goods Act, Ch 15.18 of Montserrat; Section 55 Sale of Goods Act, Ch 337 of Bahamas; Section 55 Sale of Goods Act (Ch 83:30) of Trinidad and Tobago; Section 56 Sale of Goods Act (Ch 261) of Belize; Section 54 Sale of Goods Act of 1895 of Jamaica) and by common law, as well as in the USA [Sections 219-223 Restatement (Second) on Contracts and Sections 1.303 c) and 1.205 UCC]. English courts recognise the normative character of trade usages on the ground of the theory of implied terms, in particular by custom, to the extent to which they are clear and evident, even regardless of their consideration or factual predictability by the parties [Comptoir d'Achat et de Vente Belge SA v Luis de Ridder Ltd, 1949, AC, 293; Henry Kendall & Sons v Lillico & Sons Ltd, 1969, 2 AC 31 (HL)]. However, it is obvious that parties' practices and particular usages play a more modest role, insofar as subjective context has less significance than objective context in the interpretative tradition of common law.

Likewise, Article 9 CISG affirms the binding character of usages voluntarily established by the parties, as well as of normative and objective usages generally observed in the international trade involved. The same scope derives from Articles 1.9 U.P., 1:105 PECL, II-1:104 DCFR and 67 CESL.

The wording of Paragraph IV of the Preamble is deliberately open. Judges and arbitrators will consider in each case the existence of a trade usage between the parties, according to concurrent evidence. Likewise, they will consider signs and expert declarations to conclude the existence of a branch or general usage, the legal enforceability of which will depend on its regular accomplishment, the degree of its knowledge in international commerce and the particular situation of the parties.

In many cases, trade usages are collected by organisations such as the International Chamber of Commerce and reveal a uniform commercial practice in different branches, such as international sales, payments, letters of credit, demand guarantees, etc. This standardisation is also evident in the development of standard contracts and policies prepared, aside from the ICC, by organisations such as GADTA and FOSFA in the branch of commodities; FIDIC and ORGALIME in the branch of engineering; ISDA in financial contracts; BIMCO, GENCON, BALTIME, GENWAYBILL, MULTIDOC95, CONGENBILL and FIATA in transportation, etc.

6. Interpretation of the OHADAC Principles

The interpretation rule included in Paragraph V of the Preamble is deliberately much more modest than similar rules in other international texts (e.g. Articles 7 CISG; 1.6 UP; 1:106 PECL; I-1:102 DCFR; 4 CESL).

The various language versions of the Principles have been drafted using clear words and language that is as plain as possible. They aim at maintaining substantive comparative neutrality, as well as the greatest possible grammatical neutrality. Consequently, even if some expressions can be characteristic of a given legal family, they must be understood with the same neutrality that drives these Principles, in accordance with their objective of harmonisation.

In view of this, the Principles must be interpreted according to objective criteria, relying, in particular, on the commentaries to each Article or Section and without straying from objective of harmonisation of the Principles within a framework of legal cultural diversity, such as is found in the Caribbean.

In this sense, it is desirable that both judges and arbitrators be able to take into account the application of these Principles in cases issued by arbitral tribunals and national courts, for which purpose OHADAC will implement information and data bases on the application of Principles, including notes and commentaries to reported decisions.

However, the Principles should not be applied, over and above their rules, to issues that are not relevant unless there is a clear and obvious analogy or similarity. That is why parties are advised to identify, at any time, the domestic law that should fill in the gaps of these Principles. Some gaps cannot be filled because it is difficult to obtain a legal rule that reflects a lowest common denominator in the Caribbean region. Others are simply caused by the effect specific to the dynamics of international trade.

In any case, the proposal to integrate the gaps of these Principles on the basis of underlying general principles or extended rules of application by analogy has not been considered, because it does not contribute undeniably to legal certainty in Caribbean contracts, due to the diversity of legal methods for interpreting or integrating written legal sources. Indeed, one of the most characteristic differences between the legal families represented in the Caribbean area is the ability of the judge or arbitrator to interpret or develop written law. While such an interpretation easily tends to legal creation through analogy or judicial development in civil law systems, common law seems to favour an interpretation close to the written legal text that leaves the judge very little latitude. This methodological diversity implies that a rule on integration of a written text based on general principles would not pose the same problems to a judge in Guadeloupe or Cuba as to a judge in Jamaica or Antigua.

Consequently, the OHADAC Principles have considered it preferable that their gaps be filled through the application of domestic law and that mechanisms of integration or application by analogy are not imposed and can be examined more flexibly, depending on the jurisdictional or arbitral nature of the dispute and the methodological tendency of each court.

Commentary

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OHADAC principles on international commercial contracts.pdf