TO: Robert Lutz, Chair
FROM: Hal Burman
CURRENT DEVELOPMENTS IN INTERNATIONAL PRIVATE LAW
Listed below are selected developments in the PIL field relevant generally to the work of the Section, as well as globalization and goal VIII. Section members as always are invited to participate in these projects.
Hague Conference on Private International Law: Secured financing and new treaty developments: Transportation law: Electronic commerce: International Franchising: International Project Finance: Cross-Border Insolvency reform: Cross-border bar association initiatives:
Decisions on projects at the Hague were made at a recent April 22 meeting, and are summarized in the attached info paper. This includes the status of the judgments convention, securities intermediaries convention, international family law, and Hague conventions on service of process, taking of evidence, and legalization of documents. . . .
Final action was deferred on the judgments convention, and a new text with a more narrow scope will be prepared for consideration in the first half of 2003. The core provisions may include choice of court agreements, defendants forum, counter claims, branches, trusts and physical injury torts.
A diplomatic conference on the draft convention on law applicable to securities intermediaries was authorized for the fall of 2002, depending on progress made at regional meetings. Open issues include criteria to "locate" relevant intermediaries in an age of increasing use of dematerialized securities and accounts that can be managed from various countries by remote systems.
Major developments occurred since the last SILP Spring meeting in three international bodies, First, UNCITRAL completed in July 2001 the convention on accounts receivable financing, a
significant step forward in upgrading commercial finance standards for most countries. The UN General Assembly approved and opened the convention for signature and ratification in
December 2001. The convention applies to international assignments of domestic receivables,
and domestic assignments of international receivables, which would affect a wide area of
commercial transactions and would open the possibility of secondary finance markets in the
developing world. Some transactions are excluded, such as a number of financial transactions,
real estate transactions, etc; the Convention thus primarily covers "trade" receivables.
The convention does not resolve substantive rules on priority or insolvency, but instead adopted an applicable law approach on both) and an optional annex containing three different priority systems, one of which mirrors UCC Article 9 and would require an international registry system.
UNIDROIT and ICAO completed the "Cape Town" convention on mobile equipment finance, and the first protocol covering aircraft equipment in November 2001, the final text of which has just been completed in April 2002 after language adjustments and technical corrections. Stated to be the historic first commercial law convention negotiated in a major developing country (South Africa), it follows the same fundamentals as the receivables convention, but goes beyond that and has optional provisions on expedited remedies and insolvency, as well as requiring an a registry system. A Preparatory Commission is meeting this week at ICAO in Montreal to initiate the first international computerized notice filing system, which will be accessible in the six official UN languages. SILP support will be sought for a draft House of Delegates resolution endorsing the Convention approved in principle by the Business law Section at its early April midyear meeting in Boston.
The OAS at its Sixth Specialized Conference on Private International Law (CIDIP-VI), concluded its meetings in February 2002 by approving an Inter-American model law on secured financing, a development which can set the stage for important changes in the Americas. The model law also follows the precepts of modem commercial finance, taking into account the substantial differences that exist between Hispanic civil law traditions and current capital markets practice. An accompanying set of rules on related electronic commerce provisions, prepared through the National Law Center for Inter-American Free Trade (NLCIFT) at Tucson, while not adopted due to time , was widely supported by participating Latin American states and is expected to be separately circulated for adoption in the near future.
UNCITRAL, following completion of the receivables convention, was authorized by the Commission to initiate work on a UN model law on secured finance, which we anticipate may reflect results comparable to that reached at the OAS this February. Consensus on those results however will need to be arrived at with a wider group of countries and regions at the UN, as compared to the interests reflected at CIDIP-Vl of the 34 OAS member states. The first working group meeting on the UN project. following a colloqium in Vienna in March 2002, will begin May20 in New York. . . . .
The OAS at its February 2002 CIDIP-IV meeting adopted a uniform Inter-American bill of lading for overland transportation of commercial goods. This process included a comparison of practices in the Mercosur states and the Nafta states, the latter itself reflecting a wide divergency on some issues. Agreement was reached on a number of core provisions, although in some cases alternative provisions were adopted where consolidating existing practices would not have been appropriate. Precedents in the 1989 OAS Convention on road transport ware also considered. The Uniform OAS Bill of Lading reflects an upgrade based on current practices, and may be a basis on which other transportation law standards are also revised. Consideration may be given in the future to expanding this project to include inter-coastal shipping or possibly other multimodal issues for the next OAS Specialized Conference on PIL (CIDIP-VII).
UNCITRAL initiated in April 2002 its long-awaited project on a new convention on international carriage of goods. Working jointly with CMI (Comit� Maritime Internationale), the convention would at a minimum cover carriage of goods by sea port-to-port, and may also cover inland shipments once issues concerning the scope are further resolved This project can potentially replace with a uniform document the current differing international legal regimes that
now may apply to such shipments, and thus materially enhance the efficiency of transportation in trade matters.
UNCITRAL completed in July 2001 a model UN law on electronic signatures, after a contentious three year project involving the U.S. and like-minded countries who sought a minimalist, enabling set of rules which were technology neutral, and the EU and a number of other states who favored a more regulatory approach, which reflected a particular technology and related legal concepts. Sufficient changes were made at the July plenary session to allow the U.S., and many industry participants to support the conclusion of the final text, subject to future recommended changes on several provisions. It is hoped that, with appropriate changes, the UN model law will be used by those states who have not yet adopted legislation, and who are not inclined to follow the U.S. enabling law approach, rather than utilizing EU directives or comparable regulatory laws in some other countries as a model.
UNCITRAL has now begun work on two new treaty projects on electronic commerce. The first is to review existing multilateral, and possibly regional Treaty systems, and propose amending provisions or interpretations, possibly through an omnibus protocol, that would, between participating countries inter se, amend the existing texts in order to make them more functional for an age of computer based commerce. The second project, a draft convention on international rules for formation of E-contracts through computer based systems, was the subject of a working group in February 2002. While intended to provide rules limited to contract formation only for participating countries inter se, questions remain whether this goal can be achieved without necessarily affecting, or possibly calling for consideration of changes to, the Vienna Sales Convention (CISG). The recent difficult history of proposed amendments to UCC Article 2 (sales) and the intersection of electronic commerce may give pause to the feasibility of this approach, unless the intersection of traditional sales law and electronic commerce rules is further worked out.
UNIDROIT completed in March 2002 its Model provisions for uniform disclosure rules in international franchise arrangements, building on its earlier Guide to international franchise legal issues. It was agreed that the final text would include the caveat that completion of these rules was not intended to encourage the adoption of laws in this field, but that if deemed necessary, the carefully crafted rules would on a uniform basis promote reasonable disclosure while at the same time remain supportive of existing practices and the financial cost of undertakings that might be involved. The text is expected to be approved by the UNIDROIT Governing Council meeting this coming September.
UNCITRAL completed at its Plenary session July 2001 its multi-year project on a guide on 1PF legal issues, and initiated last September an on-going project to refine the principles into legislative guidance where feasible, starting with the critical selection process. Project finance has become an alternative means to obtain infrastructure, especially in many developing countries, drawing on private sector approaches and capital market funding, instead of direct
governmental budgeting and public sector project management, and has become an important
PIL front vis-a-vis the third world.
An UNCITRAL Working Group has since December 2001 undertaken the drafting of principles for modem commerce supportive bankruptcy. The Group is expected to move onto legislative guidance, which may include alternative approaches depending on the policy choices made by any given country. The IMF, World Bank, ADB and others have supported this work, which builds on studies by those bodies as well as the UNCITRAL 1997 Model Law on procedural aspects of cross-border insolvency. A consolidated approach will need to be worked out between this project and the parallel UNCITRAL project on secured finance, especially at the points of intersection between the effort to expand options for reorganization and refinance, and yet allow sufficient protection for secured creditors to attract investment, especially in developing countries.
The recent initiative by ABA leadership to explore the feasibility of law harmonization efforts between national bar associations was discussed at the ABA 2001 mid-year meeting at San Diego and at a more expanded program at Chicago in August 2001. Ongoing initiatives are being considered; it is assumed that harmonization work will take place through existing Section activities, which could include some overview functions for SILP. As one possible project, we have been requested to provide a short list of completed international PIL texts which might be proposed as starting points for work between interested bar associations.
Hague Conference on Private International Law:
Secured financing and new treaty developments:
International Project Finance:
Cross-Border Insolvency reform:
Cross-border bar association initiatives: