Digital Law Asia

Author(s):

Dr. Benjamin Hayward

The research project To Boldly Go: The CISG and International Data Trade was presented at the 2021 Online Research Workshop on Digital Trade Law Governance in the Asia-Pacific on November 19, 2021. The Research Workshop was hosted by National Yang Ming Chiao Tung University School of Law, Center for Digital Governance and Legal Innovation, Center for Trans-Pacific Partnership and Transnational Trade Laws, and Center for Enterprise & Entrepreneurship. The Research Workshop is a continuation of the fruitful academic collaboration between Monash University and the National Yang Ming Chiao Tung University in recent years. The Research Workshop was composed of three sessions: (1) Multilateral, Plurilateral and Regional Governance in Digital Trade; (2) Digital Sovereignty and Cross-Border Data Transfer; and (3) The Impact of Technology on the Development of Rules of International Trade. This project was presented in session 3.

The United Nations Convention on Contracts for the International Sale of Goods (the 'CISG') is an international sales law treaty concluded in 1980.  Its aim is to harmonise the laws governing the international sale of goods, so that the costs of doing cross-border business are lowered, trade is promoted, and the world’s overall economic wellbeing is thereby improved.  Given its vintage, the CISG was drafted with traditional (physical) goods trade in mind.  A significant body of scholarship has addressed the CISG's capacity to govern electronic software transactions, as an exception to its uncontroversial application to physical goods trade.  However, only limited commentary has explored its digital application beyond software per se.

My research project has recently been published in the University of New South Wales Law Journal.  Part I of my paper is titled 'To Boldly Go, Part I: Developing a Specific Legal Framework for Assessing the Regulation of International Data Trade Under the CISG'.  Here, I developed a specific legal framework for assessing the CISG's capacity to regulate international trade in non-software data: a framework so far missing from existing scholarship.  This framework addresses Art. 1(1) CISG's 'goods' criterion, Art. 1(1) CISG's 'sale' criterion, and Art. 3 CISG's rules on mixed contracts (that is, contracts having both goods and services elements).  The first of these determines the CISG’s capacity to regulate non-software data trade as a matter of principle.  The second and third elements determine whether particular non-software data contracts fall within the CISG’s scope.  The application of these second and third elements depend upon the facts in any given case.

While there is nothing particularly new in analysing these framework elements when determining the CISG’s application, what is new is their application in the specific non-software data context.  The limited existing scholarship addressing digital trade outside of the software context has tended to assume that the CISG applies to that trade because it already applies to software.  However, that is not necessarily the case.

For an item to constitute ‘goods’ pursuant to CISG article 1(1), an analysis of the suitability of the CISG’s rules for that kind of trade must be undertaken.  Since non-software data (which I define to include media files, apps, and raw data by way of example) is qualitatively different from software (ie. executable computer programs) – such data is not executable, and may not be functional in and of itself – an independent analysis of this question is required.  Such analysis demonstrates that non-software data falls within the CISG’s scope as a matter of principle, and this separate question is the focus of Part II of my article.

Returning to my Part I article, CISG article 1(1)’s sale criterion and CISG article 3’s rules on mixed contracts are essential additional considerations.  They determine whether particular non-software data contracts fall to be regulated by the CISG, even though this kind of trade falls within the CISG’s scope as a matter of principle.  They therefore place essential limitations on the CISG’s capacity to govern non-software data trade.  This is a matter of significant practical importance, as data contracts take many forms, not all of which resemble the sale of goods.  For example, delivering a media file constitutes delivering ‘goods’ according to my analysis.  However, if that media file contains the results of a marketing research study, it may be that services are the real gist of the contract, making the CISG’s application inappropriate.  CISG article 3 would ensure this result.  Together, the three criteria that make up my framework ensure that the CISG only applies to transactions for which it (as a sales law) is genuinely suited.  They therefore strike a balance between over-inclusiveness and under-inclusiveness in the CISG’s digital operation, a challenge often encountered in applying the law to new circumstances.

Part II of my research project, 'To Boldly Go, Part II: Data as the CISG's Next (But Probably Not Final) Frontier', applied the framework developed in the previous article.  This second article demonstrated that the CISG does in fact stand ready, willing, and able to govern international data trade, as its provisions can be applied and adapted to that kind of trade.  In my presentation, I discussed the way in which the CISG's conformity rules can apply in the data context.  To take just one example, market practices of distributing free apps (with limited functionality) and full (paid) apps correspond to traditional practices of distributing models or samples in order to induce customers to buy a more complete set of physical goods.  In these circumstances, CISG article 35(2)(c) will require that the app’s full version conform with the free version ‘sample’.

I further addressed the CISG's capacity to regulate cryptocurrency trade. As cryptocurrency is a type of non-software data, it constitutes ‘goods’ according to my analysis.  As a result, trading cryptocurrency against traditional state-issued money falls within the CISG’s scope as a matter of principle.  A proper interpretation of CISG article 2(d)’s ‘money’ exclusion also confirms that these transactions are not placed beyond the CISG’s reach as a result of that exclusion, contrary to much existing opinion.

Concluding that non-software data trade can be governed by the CISG may sound ‘revolutionary’, but despite the importance of this conclusion, my analysis is actually an incremental advance on existing CISG software scholarship.  It is therefore an appropriate interpretation of the Convention from the perspective of both commercial parties and Contracting States.

My research project demonstrated that the CISG is capable of ‘boldly’ going where no existing case law (but where much international trade) has gone before.  Following widespread acceptance of the CISG’s capacity to regulate software sales, trade in non-software data is the CISG’s next frontier.  It is probably not the CISG’s final frontier, however, given that the CISG has enjoyed a history of successful adaptation to the many commercial and technological changes that have occurred between 1980 and today: including e-commerce in general, and the advent of smart contracts.

The COVID-19 pandemic, and its associated acceleration of the business digitalisation phenomenon, neatly illustrates the value of my research project.  Since non-software data trade is becoming increasingly economically important, the analytical framework developed in my research project and my conclusions regarding the applicability of the CISG will benefit data traders, as well as the practitioners advising them.

Part I of my article is available to download here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3944406.

Part II of my article is available to download here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3971916.

Suggested Citation:

Benjamin Hayward, To Boldly Go: The CISG and International Data Trade, Digital Law Asia (Dec. 6, 2021), https://digital.law.nycu.edu.tw/blog-post/7b6bvu/.

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