Green Eggs and Ham : The CISG, Path Dependence, and the Behavioural Economics of Lawyers’ Choices of Law in International Sales Contracts

Why do lawyers in some jurisdictions continue to ‘automatically’ exclude the 1980 UN Convention on Contracts for the International Sale of Goods (CISG) in their choices of law for international sales contracts? Why do lawyers in other jurisdictions approach the decision very differently? Why do standardized commodity contracts universally opt out of the CISG? This article identifies the key reasons for opting in or out of the CISG across jurisdictions and markets, and then turns to economics and psychology in order to expose the underlying causes for choices of law for international sales contracts. A number of perspectives are utilized within this analysis: neoclassical economics, including agency costs, information costs, moral hazard and market distortion; rational decision making within game theory frameworks under different jurisdictional background conditions; behavioural economics, including notions of path dependence and satisficing; psychological and behavioural perspectives including heuristics and group polarization; and finally, the forces behind institutionalization of choices of law and network effects. The breadth of this approach provides new insight into the reasons for choices of law, and enables a thorough analysis of current and future trends in exclusion of the CISG. The author concludes that choices of law in jurisdictions that presently overwhelmingly favour ‘automatic’ exclusion of the CISG will inevitably change. This paper is an extended version of an earlier paper published in the Vindobona Journal of International Commercial Law & Arbitration. It contains extended analysis of the psychological & economic aspects, and new sections dealing with the commodities trade sector