BP OIL INTERNATIONAL, LTD. V. EMPRESA ESTATAL PETROLEOS DE ECUADOR (PETROECUADOR)
UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT 332 F.3d 333 (2003)
1. [Choice of Law] [The parties] BP and PetroEcuador dispute whether the domestic law of Ecuador or the CISG applies … Paragraph 10, which states “Jurisdiction: Laws of the Republic of Ecuador,” purports to apply Ecuadorian law…
2. As incorporated federal law, the CISG governs the dispute so long as the parties have not elected to exclude its application. PetroEcuador argues that the choice of law provision demonstrates the parties’ intent to apply Ecuadorian domestic law instead of the CISG. We disagree.
3. A signatory’s assent to the CISG necessarily incorporates the treaty as part of that nation’s domestic law … Given that the CISG is Ecuadorian law, a choice of law provision designating Ecuadorian law merely confirms that the treaty governs the transaction.
4. Where parties seek to apply a signatory’s domestic law in lieu of the CISG, they must affirmatively opt out of the CISG … [B]ecause the CISG is the law of Ecuador, it governs this dispute. “[I]f the parties decide to exclude the Convention, it should be expressly excluded by language which states that it does not apply and also states what law shall govern the contract.” … An affirmative opt-out requirement promotes uniformity and the observance of good faith in international trade, two principles that guide interpretation of the CISG…
The CISG incorporates Incoterms through article 9(2), which provides:
The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned.
Even if the usage of Incoterms is not global, the fact that they are well known in trade means that they are incorporated through article 9(2)…