Application of the CISG according to Art. 1(1) further requires the sales contract to be international.
a. Places of Business in Different States
Hence, seller and buyer have to have their place of business in different states. A place of business is the location a party openly does business from for some duration and with some degree of independence. In case a party has multiple places of business, the relevant place of business is determined by Art. 10:
For the purposes of this Convention:
(a) if a party has more than one place of business, the place of business is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract;
(b) if a party does not have a place of business, reference is to be made to his habitual residence.
According to Art. 1(2), the international nature of the transaction has to be apparent:
(2) The fact that the parties have their places of business in different States is to be disregarded whenever this fact does not appear either from the contract or from any dealings between, or from information disclosed by, the parties at any time before or at the conclusion of the contract.
According to Art. 1(3), the nationality of the parties as well as their classification as civil or commercial are irrelevant in determining the international nature of the transaction:
(3) Neither the nationality of the parties nor the civil or commercial character of the parties or of the contract is to be taken into consideration in determining the application of this Convention.
b. Art. 1(1) lit. a
The standard scenario in which the CISG applies is described in Art. 1(1) lit. a:
(a) when the States are Contracting States; […]
Consequently, the CISG applies to international sales contracts if seller and buyer both have their place of business in states that ratified the CISG. In general it is easy to determine whether a state is a Contracting State of the CISG. A notable exception is Hong Kong. Hong Kong itself has never ratified the CISG. Yet, on 1.7.1997 Hong Kong was handed over to the People’s Republic of China where the CISG was in force since 1.1.1988 and now is an autonomous region of the PRC. While disputed, it seems preferable to treat Hong Kong as the territory of a Contracting State to the CISG within the meaning of Art. 1(1) lit. a.
Art. 1(1) lit. a is directed at the state courts in the CISG’s member states and creates a public international law duty to apply the CISG to sales contracts between parties having their respective places of business in different member states. Yet, Art. 1(1) lit. a can also be relevant in proceedings before state courts of non-member states. If the international private law of such court calls for the application of the law of a CISG member state, Art. 1(1) lit. a as part of the law of that member state mandates the application of the CISG. Similarly, arbitral tribunals are not state organs and therefore not subject to the public international law duty to apply the CISG even if seated in a CISG member state. Nevertheless, arbitral tribunals tend to apply the CISG if Art. 1(1) lit. a is fulfilled either via the arbitration rules chosen by the parties or via the lex arbitri.
c. Art. 1(1) lit. b
The CISG can also be applicable if one or both parties have their place of business in non-member states but the international private law of the competent state court calls for the application of the law of a CISG member state. This rule is laid down in Art. 1(1) lit. b:
(b) when the rules of private international law lead to the application of the law of a Contracting State.
Whether the private international law leads to the application of the law of a member state due to the parties’ choice of law or due to an objective test like the closest connection test is irrelevant. Notably, for Art. 1(1) lit. b to be fulfilled it is of no importance whether the choice of law in favor of a member state’s law includes or excludes the CISG specifically. The consequence is that the question whether such choice of law constitutes an exclusion of the CISG is answered by the CISG itself, particularly by Art. 6, and not by the otherwise applicable domestic law.
Art. 95 gives member states the possibility to make a reservation excluding the public international law duty to apply the CISG in case Art. 1(1) lit. b is fulfilled. Such reservation has been made e.g. by the USA and China. Difficulties arise in the rather specific situation in which a dispute between a party from a CISG member state and a party from a non-member state is decided by a court in a member state that has not made an Art. 95 reservation and the rules of private international law call for the application of a CISG member state that has made an Art. 95 reservation. The solution to this scenario is in dispute and mainly depends on the legal classification of Art. 1(1) lit. b.