On 13 Feb. 2025, the Shanghai International Commercial Court—which had been established less than two months earlier—concluded a dispute over an international contract for the sale of goods. In resolving the issue of what interest rate to be applied when the breaching party fails to pay on time under the United Nations Convention on Contracts for the International Sale of Goods (CISG), the court, for the first time in China, referenced and applied the CISG Advisory Council Opinion No. 14.
This marks the first case in which a Chinese court has referred to and applied a CISG Advisory Council opinion.
The dispute arose between a German company and a Chinese trading company over an international sale of goods contract, where the German company sold industrial components to the Chinese company. However, despite repeated requests for payment after delivery by the German company, no payment was received. The German company then sued the Chinese company for overdue payment and interest on the late payment.
A key issue in the lawsuit was determining the date from which interest should begin to accrue and the interest rate to be applied once the buyer was in default. Because both China and Germany are contracting states to the CISG and neither party excluded the application of CISG, the CISG shall be applicable in the dispute.
Although the CISG requires buyers to pay interest for late payments (Article 78), it does not specify interest standards. The Shanghai International Commercial Court, referring to the CISG Advisory Committee Opinion No. 14, directly applied the law of the creditor’s place of business (Germany) to determine the interest rate, rather than following the conflict of laws rules of the forum. This case provides a reference example for global judicial practice and maintains the uniform application of international sales law rules.
Photo by Mark de Jong on Unsplash
Contributors: CJO Staff Contributors Team
