Normative Gaps and Interpretative Challenges: Interest Rates Determination under Article 78 of CISG in Cases Of Delayed Payment

Abstract

Delays in payment in international commercial dealings, which may either be intentional or as a result of force majeure, raise important legal questions on how the financial rights of the other party to the contract, particularly the right to interest, can be determined. While Article 78 of the United Nations Convention on Contracts for the International Sale of Goods (CISG) imposes an obligation on the debtor to pay interest on sums in arrears, it notably fails to specify critical elements of interest rate determination, for instance, the applicable interest rate or the method of its calculation. This omission has led to diverse interpretations in the legal practice. Thus, courts, arbitral tribunals, and scholars across jurisdictions have tried to fill this gap in different ways, others apply domestic interest rates, while others referring to commercial practices, or using international benchmarks, or applying the law of the place of payment, however, these diverse approaches adopted by courts, and arbitral tribunal undermine the CISG’s core objectives of uniformity, legal certainty, and predictability in international commerce, hence, discourages parties from entering into cross-border commercial contracts, thereby weakening trust in the CISG regime. This study employs doctrinal and non-doctrinal methodology in data collection. It has been revealed that the diverse approaches adopted by courts, arbitral tribunals, and various scholars as gap-filling under Article 78 of CISG have led to jurisdictional inconsistencies, a lack of uniformity, and unpredictable cash flow, just to name a few. Thus, this article proposes a principled approach that reconciles CISG’s uniformity goals with practical commercial realities, thus promoting legal certainty in international trade.