This is a case commentary on a matter in which the Supreme Court of South Korea held that the United Nations Convention on Contracts for the International Sale of Goods (CISG) governs goods sale contracts between South Korean and Dutch companies on a priority basis, that limitation periods fall entirely outside the CISG’s scope, and that South Korean courts are obliged to investigate the applicable governing law ex officio even when the parties remain silent on the issue (Supreme Court, 13 January 2022, Case 2021Da269388).
Case Overview
The plaintiff, a Dutch company, supplied wristwatches to the defendant, a South Korean company, from approximately 2007 to 2014, and brought a claim for the outstanding purchase price. At the appellate stage, the defendant raised a statute of limitations defense. The lower court accepted this defense on the assumption that Korean civil law applied as a matter of course and dismissed the claim. The Supreme Court reversed, finding that the lower court had misapplied the governing law framework, and remanded the case to the Seoul Southern District Court.
CISG Takes Priority Over Domestic Legislation
The Supreme Court confirmed that since both South Korea and the Netherlands are CISG contracting states, the CISG applies automatically to goods sale contracts between companies from these two countries under Article 1(1)(a) — taking precedence over the Korean Civil Act, the Commercial Act, and the Private International Law Act. This principle had previously been established in Supreme Court, 24 March 2016, Case 2013Da81514. The fact that neither party raised the governing law issue during the proceedings did not alter this conclusion.
Statute of Limitations Falls Outside the CISG’s Scope
The CISG governs the formation of sales contracts and the rights and obligations of sellers and buyers, but expressly excludes contractual validity, the effect of the contract on title to goods, and — as was at issue here — the statute of limitations (CISG Article 4). For matters outside the CISG’s scope, the governing law must be determined separately under the conflict-of-laws rules of the forum. Where the parties have not chosen a governing law, the law of the seller’s principal place of business is presumed to be most closely connected with the contract under Article 26(2)(i) of South Korea’s Private International Law Act — meaning Dutch law, not Korean law, could have governed the limitation period in this case.
Courts Must Investigate Governing Law Ex Officio
The Supreme Court reaffirmed that foreign law applicable as governing law is treated as law — not fact — and must therefore be investigated by the court on its own initiative (Supreme Court, 10 April 1990, Case 89DaKa20252; Supreme Court, 24 December 2019, Case 2016Da222712). Even where no party raises the governing law issue, the court is obliged to actively exercise its power of inquiry, afford the parties an opportunity to submit their views, and investigate the applicable governing law. The Court also clarified that silence on the governing law issue during proceedings is insufficient to establish a tacit choice of law under Article 25(1) of the Private International Law Act.
“Governed by Korean Law” Does Not Exclude the CISG
A governing law clause stating “this agreement shall be governed by the laws of the Republic of Korea” does not, by itself, exclude the CISG. As a ratified treaty, the CISG forms part of Korean law; designating “the laws of the Republic of Korea” therefore incorporates the CISG rather than displacing it. This position is consistent with the CISG Advisory Council’s Opinion No. 16 (Rapporteur: Professor Sieg Eiselen, 2014) and the decisions of courts in Germany and Austria. To exclude the CISG entirely, the contract must contain an express exclusion clause in accordance with Article 6 of the CISG.
Practical Implications for International Trade Contracts
This ruling underscores the importance of addressing CISG applicability explicitly in every international sales contract involving a South Korean counterparty. A governing law clause must not only specify which country’s law applies, but also (1) state clearly whether the CISG is excluded or retained under Article 6, and (2) designate which domestic law governs matters the CISG does not cover — including limitation periods, contractual validity, and the transfer of title. Atlas Legal advises on CISG applicability assessments, governing law clause drafting, and cross-border litigation and arbitration strategy involving South Korean parties.
Click here for the full case commentary
CISG Governs Korea-Netherlands Goods Contracts — Case 2021Da269388
This is a case commentary on a matter in which the Supreme Court of South Korea held that the United Nations Convention on Contracts for the International Sale of Goods (CISG) governs goods sale contracts between South Korean and Dutch companies on a priority basis, that limitation periods fall entirely outside the CISG’s scope, and that South Korean courts are obliged to investigate the applicable governing law ex officio even when the parties remain silent on the issue (Supreme Court, 13 January 2022, Case 2021Da269388).
Case Overview
The plaintiff, a Dutch company, supplied wristwatches to the defendant, a South Korean company, from approximately 2007 to 2014, and brought a claim for the outstanding purchase price. At the appellate stage, the defendant raised a statute of limitations defense. The lower court accepted this defense on the assumption that Korean civil law applied as a matter of course and dismissed the claim. The Supreme Court reversed, finding that the lower court had misapplied the governing law framework, and remanded the case to the Seoul Southern District Court.
CISG Takes Priority Over Domestic Legislation
The Supreme Court confirmed that since both South Korea and the Netherlands are CISG contracting states, the CISG applies automatically to goods sale contracts between companies from these two countries under Article 1(1)(a) — taking precedence over the Korean Civil Act, the Commercial Act, and the Private International Law Act. This principle had previously been established in Supreme Court, 24 March 2016, Case 2013Da81514. The fact that neither party raised the governing law issue during the proceedings did not alter this conclusion.
Statute of Limitations Falls Outside the CISG’s Scope
The CISG governs the formation of sales contracts and the rights and obligations of sellers and buyers, but expressly excludes contractual validity, the effect of the contract on title to goods, and — as was at issue here — the statute of limitations (CISG Article 4). For matters outside the CISG’s scope, the governing law must be determined separately under the conflict-of-laws rules of the forum. Where the parties have not chosen a governing law, the law of the seller’s principal place of business is presumed to be most closely connected with the contract under Article 26(2)(i) of South Korea’s Private International Law Act — meaning Dutch law, not Korean law, could have governed the limitation period in this case.
Courts Must Investigate Governing Law Ex Officio
The Supreme Court reaffirmed that foreign law applicable as governing law is treated as law — not fact — and must therefore be investigated by the court on its own initiative (Supreme Court, 10 April 1990, Case 89DaKa20252; Supreme Court, 24 December 2019, Case 2016Da222712). Even where no party raises the governing law issue, the court is obliged to actively exercise its power of inquiry, afford the parties an opportunity to submit their views, and investigate the applicable governing law. The Court also clarified that silence on the governing law issue during proceedings is insufficient to establish a tacit choice of law under Article 25(1) of the Private International Law Act.
“Governed by Korean Law” Does Not Exclude the CISG
A governing law clause stating “this agreement shall be governed by the laws of the Republic of Korea” does not, by itself, exclude the CISG. As a ratified treaty, the CISG forms part of Korean law; designating “the laws of the Republic of Korea” therefore incorporates the CISG rather than displacing it. This position is consistent with the CISG Advisory Council’s Opinion No. 16 (Rapporteur: Professor Sieg Eiselen, 2014) and the decisions of courts in Germany and Austria. To exclude the CISG entirely, the contract must contain an express exclusion clause in accordance with Article 6 of the CISG.
Practical Implications for International Trade Contracts
This ruling underscores the importance of addressing CISG applicability explicitly in every international sales contract involving a South Korean counterparty. A governing law clause must not only specify which country’s law applies, but also (1) state clearly whether the CISG is excluded or retained under Article 6, and (2) designate which domestic law governs matters the CISG does not cover — including limitation periods, contractual validity, and the transfer of title. Atlas Legal advises on CISG applicability assessments, governing law clause drafting, and cross-border litigation and arbitration strategy involving South Korean parties.
Click here for the full case commentary