Survey of International Commercial Law Developments: 1999-2000
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International community continues to collaborate on legal mechanisms
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The international community continues to collaborate on legal mechanisms that will benefit private commercial entities by facilitating execution of commercial transactions, improving efficiency, reducing cost and increasing transparency. The United States participates actively in the United Nations Commission on International Trade Law (UNCITRAL), the International Institute for the Unification of Private Law (UNIDROIT), the Organization of American States (OAS) and the Hague Conference on Private International Law. Each of these four inter-governmental organizations made noteworthy contributions to evolving international commercial law doctrine in 1999 and 2000, as discussed in turn below.
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UNCITRAL currently focuses on international trade law relating to (i) international sales of goods and related transactions
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The Working Group on International Contract Practices has been working for several years on its proposed Convention on Assignment of Receivables in International Trade. Arguably, given the Convention’s potential impact on international trade, it is the most important UNCITRAL project thus far. In December 2000, the Working Group completed discussion of the draft Convention, distributed it for comment to States and to international organizations attending the session as observers, and submitted the draft Convention to UNCITRAL for final adoption at the Vienna sessions that took place from June 25, 2001 to July 13, 2001.(2) One significant change reflected in the final draft (prompted, in part, by a variety of comments from industry and other groups) is the narrowing of its coverage to exclude a variety of transactions and relationships such as deposit accounts, payment and securities settlement systems, letters of credit and independent guaranties, financial contracts governed by a netting agreement (other than amounts owed on termination of all outstanding transactions), and many transactions involving securities.(3) The Convention will next be submitted to the United Nations General Assembly for approval.
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Commercial actors increasingly demand that the information exchanged to effect a transaction be computer-based and utilized in a technologically sophisticated manner,(4) but technological advances also give rise to security, authenticity and integrity concerns(5) that can hamper the growth of online commerce.(6) Responding to these concerns, many jurisdictions are creating laws to govern electronic commerce and online contractual relations in general, to identify individuals sending messages and to confirm their approval of messages. One important instance is the European Union’s Directive on Electronic Signatures, adopted in 1999, which must be transposed into the national laws of each member state by July 19, 2003.(7) Another, in the United States, is the Electronic Signatures in Global and National Commerce Act (the “E-Sign Act”), which became federal law on October 1, 2000. The E-Sign Act clarifies the legal status of electronic signatures, electronic contracts, and electronic records in the context of writing and signing requirements imposed by U.S. federal and state laws.(8) The consumer consent provisions of the Act have been controversial, and one of its provisions requires the Federal Trade Commission and the Department of Commerce to investigate the burdens and benefits of those provisions and report to Congress.(9)
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UNCITRAL adopted the Model Law on Electronic Commerce in 1996 to assist States in enhancing legislation governing the use of “alternatives to paper-based methods of communication and storage of information” and in formulating such legislation where none already exists.(10) This Model Law provides that where the law requires a person to sign a document, that requirement is met if (i) a method is used to identify the person and indicate his or her approval of the document, and (ii) that method is as reliable as appropriate in the circumstances.(11) Nonetheless, people signing documents electronically need assurance at the time of signing that the signed document will be legally effective
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INTERNATIONAL INSOLVENCY LAW
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Many nations are examining insolvency systems, with a focus on reorganization, because of the role reorganization may play in the context of a recession or financial crisis.(16) In 2000, UNCITRAL reviewed the recommendations of the Working Group on Insolvency Law and gave the Working Group a mandate to prepare (i) a comprehensive statement of key objectives and core features for a strong insolvency/debtor-creditor regime and (ii) a legislative guide containing flexible approaches to the implementation of such objectives and features.(17) The Working Group planned to monitor the work of organizations such as the World Bank, the International Monetary Fund (IMF), the Asian Development Bank (ADB), INSOL International and Committee J of the Section of Business Law of the International Bar Association (IBA).(18)
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The Secretariat organized a December 2000 colloquium, in cooperation with INSOL and the IBA,(19) that was attended by approximately 150 individuals from forty countries with significant experience in insolvency law and law reform initiatives.(20) A Note published after the colloquium summarizes the proceedings and insolvency-related issues recommended for future analysis by UNCITRAL, which will likely include (i) the key components of the reports of international organizations, such as the World Bank, the IMF, and the ADB, that consider core elements of an effective insolvency regime and alternative policy approaches to identified issues
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UNCITRAL’s Model Law on Cross-Border Insolvency, which was approved by the General Assembly in 1997, is currently under consideration by several States, and legislation based on this Model Law has been adopted in Eritrea, Mexico, and South Africa.(24) The proposed bankruptcy legislation currently pending in the United States includes amendments based on the Model Law to substantially expand provisions relating to foreign insolvency proceedings, including guidelines for the recognition of foreign insolvency proceedings and the management of cross-border insolvency proceedings, providing greater access for foreign representatives to the U.S. courts and for communication between domestic and foreign insolvency proceedings.
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On a related front, in 2000, final approval was given to the American Law Institute’s (ALI’s) Transnational Insolvency Project (Principles of Cooperation in Transnational Insolvency Cases Among the Members of the North American Free Trade Agreement), which involves Canada, the United States, and Mexico.(25) Nonetheless, the ALI believes that the project requires more work before it is published in final form. The ALI 2001 annual report explains that the ALI has been slowed by the adoption of a new Bankruptcy Code in Mexico (a positive development because it eases implementation of the ALI recommendations), by the need to incorporate recent developments in Canada, and by the need to wait as the United States Congress considers significant changes in the American law.(26)
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In 1999, UNCITRAL assessed national enactments of the 1985 UNCITRAL Model Law on International Commercial Arbitration, as well as the use of the UNCITRAL Arbitration Rules and the UNCITRAL Coalition Rules, and it considered proposals for the improvement of arbitration laws, rules, and practices.(27) The Working Group on Arbitration will cooperate with the Working Group on Electronic Commerce in a project relating to “on-line” arbitrations,(28) and it has asked the Secretariat to prepare preliminary studies and proposals on the following: (i) court-ordered interim measures of protection in support of arbitration
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MOBILE EQUIPMENT CONVENTION
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In order to provide for the creation and enforceability of international security interests in mobile equipment, UNIDROIT took the approach of drafting a base convention and separately-negotiated protocols pertaining to specific mobile equipment-related industries. The base convention and a particular protocol would together regulate the relevant industry.(30) A preliminary draft Convention on International Interests in Mobile Equipment(31) and preliminary draft Protocol on Matters Specific to Aircraft Equipment (Aircraft Protocol)(32) were submitted to governmental experts in 1999, and the sponsors met again in August 1999 to review and modify both drafts. These drafts are expected to be finalized at the diplomatic conference in Cape Town from October 29, 2001 through November 16, 2001.(33) The Convention includes provisions on (i) secured financing priorities recognized by the Convention
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UNIDROIT is also reviewing provisions for rail, space, and satellite equipment in connection with the base convention.(35) The Rail Working Group drafted provisions regarding rail equipment financing that were reviewed at the March 2001 UNIDROIT/Intergovernmental Organization for International Carriage by Rail meeting,(36) and the Space Working Group prepared a draft space protocol.(37)
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PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS
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During February 1999 and January 2000, a UNIDROIT Working Group reviewed draft chapters on agency, limitation of actions, assignment of rights and duties, third party beneficiaries, waivers, and set-off for its Principles of International Commercial Contracts.(38) In conjunction with the Centre for Comparative and Foreign Law Studies, UNIDROIT is compiling case law from various national courts and arbitral tribunals that references the UNIDROIT Principles.(39)
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ORGANIZATION OF AMERICAN STATES
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The Inter-American Conference on Private International Law (CIDIP) meets every four years to discuss matters pertaining to cooperative private international law initiatives. In 1999, the Permanent Council of the OAS approved the agenda for the sixth specialized conference on private international law (CIDIP-VI),(40) and in February 2000, government experts met at OAS headquarters to prepare for CIDIP-VI, producing a Report of the Meeting of Government Experts to Prepare for CIDIP-VI. Participants discussed three subjects: (i) the uniformity and harmonization of secured transactions law
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HAGUE CONFERENCE ON PRIVATE INTERNATIONAL LAW
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In May of 2000, the Special Commission on General Affairs and Policy of the Hague Conference on Private International Law recommended that a working group be convened (without waiting for a Diplomatic Conference) to address the question of what law should apply to the taking of securities as collateral. The true scope of the project is actually somewhat different, as reflected more fully in a report prepared by Christophe Bernasconi, First Secretary at the Permanent Bureau, entitled The Law Applicable to Dispositions of Securities Held Through Indirect Holding Systems.(42) In January of 2001, the Conference held a working group meeting at The Hague to discuss the Draft Working Document presented by its Permanent Bureau entitled Determining the Location of the Relevant Intermediary. The document addresses the issue of determining where the relevant intermediary is located for purposes of determining the law applicable to the transfer of interests in securities held through securities accounts.
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During the meeting, many working documents containing proposals by the drafting group were circulated and discussed, including a very preliminary draft convention for participants to discuss with appropriate government and business constituencies.(43) Participants included the various country delegations (from North America, most of Europe, Latin America, the Asia Pacific region, and elsewhere) and various private and non-governmental organizations (including, among others, UNCITRAL, UNIDROIT, the European Union, European Central Bank, European Bank for Reconstruction and Development, International Organization of Securities Commissions, International Monetary Fund, International Swaps & Derivatives Association, International Bankers Association, Financial Markets Lawyers Group, and the Emerging Markets Traders Association).
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One of the biggest issues facing the Conference was how to reconcile the lex rei sitae approach favored (and used) by many countries with current securities holding practices and with the approach favored (and used) by other countries that is based on the law governing the securities account relationship itself (for example, section 8-110(e) of the Uniform Commercial Code). The participants were apparently unanimous in their support for the “place of the relevant intermediary” (or PRIMA) approach, as opposed to approaches that depend on factors such as an issuer’s jurisdiction, the jurisdiction where the underlying physical security certificate is held, or the jurisdiction where the register is maintained.
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In June 2001 the Hague Conference held Part I of its nineteenth Diplomatic Session, during which a Commission on General Affairs and Policy decided to proceed with this project.(44) A Special Commission will meet in January 2002 to prepare a preliminary draft convention, with a view toward formal adoption of a final convention later that year.
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INSTITUTIONAL DEVELOPMENTS
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In 2000, the Assembly elected seventeen members of UNCITRAL to six-year terms that begin June 25, 2001.(45)
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Gerold Herrmann retired at the end of January, 2001, having been a member of the UNCITRAL Secretariat since 1975 and having served as Secretary of UNCITRAL and Chief of the International Trade Law Branch since 1991. Jernej Sekolec succeeded him as Secretary of UNCITRAL and Chief of the International Trade Law Branch of the United Nations Office of Legal Affairs.
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In April, 2001, the International Law and Practice Section of the American Bar Association awarded Harold (“Hal”) Burman, Executive Director of the Advisory Committee on Private International Law of the Office of the Secretary of State, its Theberge Award for lifetime service to the development of private international law.
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(1.) See Training and Technical Assistance: Note by the Secretariat, United Nations Commission on International Trade Law, 33d Sess., at 2, U.N. Doc. A/CN.9/473 (2000).
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(2.) See Report of the Working Group on International Contract Practices on the work of its twenty-third session, United Nations Commission on International Trade Law, 34th Sess., at 3, 5, U.N. Doc. A/CN.9/486 (2001)
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(3.) See Report of the Working Group on International Contract Practices on the work of its twenty-third session, at 16.
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(4.) See Margaret Johnston, Digital Signatures Take Effect in U.S., IDG News Service, October 2, 2000. “In Asia, the move toward digital signatures is being spearheaded by the commercial sector, which is eager to cut out a lot of the paperwork that now dogs intraregional trade.” Id.
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(5.) See Paul McCarthy, Digital Signatures on the Move, Telecommunications Online,July 2000, available at <http://www.telecoms-mag.com/issues/200007/tci/digital.html>. “[I]t is necessary to establish legal security for the performed transactions…. Only by using a legally effective digital signature will it be possible to perform business via electronic channels in a secure and understandable form.” Id.
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(6.) See A. Michael Froomkin, The Essential Role of Trusted Third Parties in Electronic Commerce, 75 OR. L. REV. 49, 50 (1996). “[T]he coming wave of faceless electronic commerce presents a number of challenges
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(7.) See European Directive on a Common Framework for Electronic Signatures of Dec. 13, 1999, 2000 O.J. (L 13) Art. 12.
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(8.) See Johnston, supra note 4. “[The E-Sign Act] is hailed by supporters as a major step that will spur the growth of business-to-business and business-to-consumer e-commerce, and it also brought the U.S. into step with many of its individual states and several other countries that have already implemented digital signature legislation…. E-Sign removes that impediment by setting up a legal framework that recognizes electronically created signatures on a range of documents, including mortgage applications, brokerage accounts and insurance policies.” Id.
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(9.) See Patrick Thibodeau, Businesses Seeking Changes to E-Sign Act: Say Strict Requirements May Irk Consumers, Computerworld, April 2, 2001, available at <http://www.computerworld.com/ cwi/story/0,1199,NAV47_STO59147,00.html>.
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(10.) UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW, UNCITRAL MODEL LAW ON ELECTRONIC COMMERCE WITH GUIDE TO ENACTMENT, available at <http://www.uncitral.org/english/texts/electcom/ml-ec.htm>.
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(12.) See Joan Remsu, UNCITRAL Working Group on Electronic Commerce: Report on the Meeting of September 2000, January 1, 2001, available at <http://canada.justice.gc.ca/en/ps/ec/ UN2000rep.html>.
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(16.) See Report on UNCITRAL-INSOL-IBA Global Insolvency Colloquium, United Nations Commission on International Trade Law, 34th Sess, at 3, U.N. Doc. A/CN.9/4951 (2001).
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(19.) See U.N. GAOR, 55th Sess., Supp. No. 17, at [paragraph] 408, U.N. Doc. A/55/17
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(20.) See UNCITRAL, Report on UNCITRAL-INSOL-IBA Global Insolvency Colloquium, supra note 16, at 2.
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(24.) See UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW, STATUS OF CONVENTIONS AND MODEL LAWS, available at <http://www.uncitral.org/english/status/ status-e.htm>.
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(25.) See The American Law Institute, INSTITUTE GIVES FINAL APPROVAL TO FAMILY DISSOLUTION AND TRANSNATIONAL INSOLVENCY PROJECTS, A.L.I. REP., Summer 2000.
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(26.) See THE AMERICAN LAW INSTITUTE, 2001 ANNUAL REPORTS: 78TH ANNUAL MEETING (2001), available at <http://www.ali.org/ali/AR2001_Contents.htm>.
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(27.) See Report of the Working Group on Arbitration on the work of its thirty-third session, United Nations Commission on International Trade Law, 34th Sess, at [paragraph] 235, U.N. Doc. A/C./ CN.9/48520 (2000)
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(28.) See UNCITRAL, Report of the Working Group on Arbitration on the work of its thirty-third session, supra note 27, at [paragraph] 8.
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(29.) See id. at [paragraph] 3.
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(30.) See Peter Winship, International Commercial Transactions: 1998, 54 BUS. LAw. 2001, 2002-03 (1999).
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(31.) INTERNATIONAL INSTITUTE FOR THE UNIFICATION OF PRIVATE LAW, PRELIMINARY DRAFt UNIDROIT CONVENTION ON INTERNATIONAL INTERESTS IN MOBILE EQUIPMENT, 3 UNIF. L. REV. 76 (1998) [hereinafter Draft UNIDROIT Convention].
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(32.) INTERNATIONAL INSTITUTE FOR THE UNIFICATION OF PRIVATE LAW, PRELIMINARY DRAFT PROTOCOL TO THE PRELIMINARY DRAFT UNIDROIT CONVENTION ON INTERNATIONAL INTERESTS IN MOBILE EQUIPMENT ON MATTERS SPECIFIC TO AIRCRAFT EQUIPMENT, UNIDROIT Doc. Study LXXIID-Doc.3 [hereinafter Draft Aviation Protocol], available at <http:// www.unidroit.org/ english/ internationalinterests/jointsession3/report/ 1-report.pdf>
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(33.) See INTERNATIONAL INSTITUTE FOR THE UNIFICATION OF PRIVATE LAW, UNIDROIT WORK PROGRAM FOR THE 1999-2001 TRIENNIUM, available at <http://www. unidroit. org/english/workprogramme/main.htm>.
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(34.) See INTERNATIONAL INSTITUTE FOR THE UNIFICATION OF PRIVATE LAW, UNIDROIT DIPLOMATIC CONFERENCE TO ADOPT A MOBILE CONVENTION AND AN AIRCRAFT PROTOCOL, DCME Doc. No. 4, June 4, 2001, available at <http://www.unidroit.org/english/ internationalinterests/ conference2001 /draftaircraftprotocol/draftaircraftprotocol.pdf>.
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(35.) See Department Of State, Proposed Convention Sponsored By UNIDROIT On International Equipment Finance And Draft Protocol On Space Equipment
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(36.) See Department Of State, Proposed Protocol On Rail Equipment To The Draft Convention Sponsored By UNIDROIT On International Mobile Equipment Finance, Public Notice No. 66 Fed. Reg. 38, February 26, 2001.
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(37.) INTERNATIONAL INSTITUTE FOR THE UNIFICATION OF PRIVATE LAW, CURRENT WORKING DRAFT OF A PRELIMINARY DRAFT PROTOCOL TO THE DRAFT UNIDROIT CONVENTION ON INTERNATIONAL INTERESTS IN MOBILE EQUIPMENT ON MATTERS SPECIFIC TO SPACE PROPERTY, Study LXXIIJ-Doc.4 (March 2001) available at <http://www.unidroit.org/english/ internationalinterests /conference2001/ draftspaceprotocol/draftspaceprotocol.pdf>.
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(38.) See INTERNATIONAL INSTITUTE FOR THE UNIFICATION OF PRIVATE LAW, UNIDROIT PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS (1994), reprinted in 34 I.L.M. 1067 (1995)
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(39.) See INTERNATIONAL INSTITUTE FOR THE UNIFICATION OF PRIVATE LAW, UNIDROIT WORK PROGRAM FOR THE 1999-2001 TRIENNIUM, supra note 33, at 2.
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(40.) See Sixth Inter-American Specialized Conference on Private International Law, Organization of American States General Assembly, AG/RES. 1699 (XXX-O/00) (2000).
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(41.) See PERMANENT MISSION OF CANADA TO THE ORGANIZATION OF AMERICAN STATES, OAS MISSION REPORT FOR JANUARY-MARCH 2000 (2000), available at <http://www.dfait-maeci.gc.ca/oas/quartrep2000janmar.htm>.
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(42.) Christophe Bernasconi, Report on the Law Applicable to Dispositions of Securities Held Through Indirect Holding Systems (Prel. Doc. No. 1 of November 2000 for the attention of the Working Group of January 2001).
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(43.) See HAGUE CONFERENCE ON PRIVATE INTERNATIONAL LAW, REPORT ON THE MEETING OF THE WORKING GROUP OF EXPERTS, Work. Doc. No. 16 (15-19 January, 2001), available at <http://www.hcch.net/e/workprog/securities.html>.
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(44.) See HAGUE CONFERENCE ON PRIVATE INTERNATIONAL LAW, NEWS AND EVENTS 2001: PRESS RELEASE, available at <http://www.hcch.net/e/events/events.html>.
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(45.) See UNITED NATIONS GENERAL ASSEMBLY, GENERAL ASSEMBLY ELECTS MEMBERS TO INTERNATIONAL TRADE LAW COMMISSION, COMMITTEE FOR PROGRAMME AND COORDINATION, General Assembly Plenary-2-Press Release GA/9787 34th Meeting (AM) October 16, 2000.
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(*) Sandra M. Rocks is special counsel and B. Shea Owens is an associate at Cleary, Gottlieb, Steen & Hamilton, New York, New York. For further information about the matters covered by this article, contact Shea Owens, Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, NY 10006 (tel. (212) 225-2000
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