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57. Remarks on U.S. involvement on private international law negotiations at Brooklyn Law School (November 19, 2002)


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[Presentation by Mary Helen Carlson, Attorney Adviser, Office of the Legal Adviser for Private International Law, Nov. 19, 2002 at the Brooklyn Law School's Center for the Study of International Business Law]

UNITED STATES PARTICIPATION IN PRIVATE INTERNATIONAL LAW, WITH THE UNCITRAL CARRIAGE OF GOODS NEGOTIATION AS AN EXAMPLE

I. Introduction.

Thank you, Chet. And Thank you, Roberta and Neil, for the invitation from the Brooklyn Law School's Center for the Study of International Business Law to join you for a discussion of one of today's "hot" topics in international business, namely the increasing realization of the important role that harmonization or unification of legal systems plays in the global economy.
I'm honored to be here - and after reading the background material Roberta sent me that lists some of the previous speakers who have addressed this group, I'm a little awed to be included in their ranks. Robert Pitofsky was my antitrust teacher in law school when he taught the course at Georgetown while chairman of the FTC. My perspective may be a little different from the high-level appointed officials who have participated in these discussions. I am a career government lawyer, and I work "in the trenches," so to speak, to address some of the specific problems that are faced by people - like Chet and many others of you - who are out there every day trying to make the global economy grow.
I'd like to share with you this morning a few thoughts on private international law in general, the U.S. role in PIL, and current PIL projects, in particular the United Nations Commission on International Trade Law's work on a modern, wide-ranging carriage of goods convention. I'll close with a few comments on issues I see emerging as important in the PIL field in the next few years. I'm aware that there are a number of students in the audience who may be unfamiliar with this subject. Therefore, I hope that those of you who are experts in the field will forgive me for telling you some things you already know.

II. PIL In General
Private international law, of course, deals with international transactions between private parties, in contrast with public international law, which is concerned with relations between governments. My office is responsible for USG participation in international efforts to unify, harmonize or create private law. Think of the Uniform Commercial Code and other uniform laws developed by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in the U.S. That is what we do on an international level.
The international process of private law unification has been underway for over a century in Europe and Latin America. But in the United States, there was for a long time little interest in international private law unification. The subject matter of private law is, after all, for the most part a matter of individual state law in the U.S. It was thought that federalism concerns would make acceptance of private international law conventions politically if not constitutionally difficult for the U.S. Law established by treaty would become the law of the land, preempting inconsistent state law. So it was not until the mid-1960s that the U.S. government began to participate in private international law efforts. My office, joined by academic and private sector experts in particular fields, frequently represents the United States at international meetings on the unification of private law.
The main international fora for work on private international law are the Hague Conference on Private International Law, the United Nations Commission on International Trade Law (UNCITRAL), the International Institute for the Unification of Private International Law (UNIDROIT) and the Organization of American States. Work in this field generally avoids projects where there are high-level governmental policy concerns, and focuses instead on projects where development of uniform law will solve real problems that have made particular international transactions difficult and uncertain. Work in this field has traditionally been at an unhurried pace. The UN Convention on Contracts for the International Sale of Goods, for example, was negotiated over the course of 23 weeks that spanned 10 years from 1968-78! Let me hasten to add that some international private law instruments have been negotiated much more quickly, especially in recent years.
The codification of private international law can result in several different kinds of work products, dealing with several different subject matters, and using several different formats.
The work product can range from a convention (i.e., treaty), which is the most formal and binding example of international law, and which truly unifies the law, to a model law, a model contract, general rules or guidelines - all of which are non-binding efforts to harmonize the law. These non-binding efforts may be precursors to eventual conventions. The UN Convention on Contracts for the International Sale of Goods, the UNCITRAL Model Law on Electronic Commerce, the OAS Truck Bill of Lading, the UNCITRAL Arbitration Rules, and the UNCITRAL Legal Guide on International Countertrade Transactions provide an example of each type of work product.
The three main subjects of private law work are commercial law (such as the instruments I've mentioned thus far), family/property law (such as conventions on international adoption, parental child abduction and estates) and judicial assistance (such as conventions on service of process abroad, taking of evidence abroad, and legalization).
So what do these work products on these various subject matters do? Depending on the approach, they either unify substantive law, they unify procedure, they determine the applicable law, or they combine some or all of these approaches.
The Hague, Hague-Visby and Hamburg Rules concerning carriage of goods by sea are all examples of substantive conventions, as is the draft UNCITRAL carriage of goods convention. These all set forth the basic substantive provisions that apply to covered transactions.
The Hague Convention on Service Abroad of Judicial Documents in Civil or Commercial Matters and the Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents are widely used procedural conventions. The Service Convention sets out agreed procedures for service of process upon a defendant located in another party country. The Legalization Convention replaces the legalization of documents by the diplomatic or consular officers of the country of their intended use - so U.S. consular officials in Madrid would have to certify the authenticity of Spanish legal documents to be used in a U.S. court -- by a certificate issued by designated officials in the country of the document's origin - so Spanish officials now can certify Spanish documents for use in a U.S. court.
Choice of law conventions are the original - and for a long time the only - type of private international law convention. They were for decades very popular in civil law regions such as Europe and Latin America. They determine which country's law will apply to a legal transaction or relationship involving more than one country. One example is the Hague Convention on the Law Applicable to Trusts and on Their Recognition. This Convention provides that when certain conditions are met, the law of the country establishing the trust will apply. This is important because the common-law trust is not used in civil law countries, and without the convention the courts of non-trust countries that are faced with disputes involving a trustee or assets located in a non-trust jurisdiction, would often be unable analytically to approach these disputes. While the Trusts Convention addresses a unique situation and clearly benefits common-law jurisdictions, applicable law conventions have a serious drawback which has affected their acceptability. They often provide for the applicability of law other than the law of the forum. Neither lawyers nor judges are happy about having to prove, argue or base decisions on unfamiliar law.
More and more what we are seeing are private international law conventions that combine substantive law, agreed procedures, and choice of law (or at least choice of forum) provisions. The Hague adoption and child abduction conventions are examples. They impose substantive obligations on the parties to establish certain standards for adoptions, in the first case, and to return a child who has been wrongfully removed or retained, in the latter case. But much of the conventions are devoted to developing procedural mechanisms for cooperation and requirements for the recognition and enforcement of decisions that meet the conventions' standards.
The great benefits of private international law are predictability and efficiency. Often it's less important what the rules are, so long as you know what they are and everybody plays by them.
The problems with private international law are the "other side of the coin": inconsistent interpretation by different country's courts and even by different courts within a single country; and lack of reciprocity, i.e., failure of some countries that become parties to conventions to do what it takes - from enacting implementing legislation, to training judges, to setting up a banking system or securities system that meets the conventions' standards -- to see that they live up to their obligations. The first problem is being addressed in some cases by the development of databases of case law interpreting the texts from courts all over the world - for example the CLOUT system, which stands for Case Law On Uncitral Texts. The second problem is becoming of more and more concern: a convention can build in a monitoring process, by which parties' compliance is periodically reviewed and report. But what do you do when the monitoring process reveals non-compliance? The cause is either lack of political will, or lack of resources -two very difficult issues to address.

III. What is the USG Approach to Private International Law Projects? It's a uniquely American approach, perhaps described by two words: participatory and pragmatic.

First, participatory:
The Secretary of State's Advisory Committee on Private International Law is the forum by which the State Department, which is the action office for private international law within the U.S. Government, obtains the requisite expertise and guidance on both the general direction the U.S. should take in its efforts, and specific positions the U.S. should pursue in specific pending projects. The Advisory Committee's membership includes representatives from all national legal organizations that have an interest in private international law, including the ABA's sections of International Law, Business Law, and Family Law, the National Conference of Commissioners on Uniform State Laws, the National Association of Attorneys General, the Judicial Conference of the U.S., the MLA and many others. [Neil Cohen and Michael Marks Cohen, e.g., are members of the Advisory Committee.] For specific pending projects, we turn to groups of experts who make up informal study groups, subgroups of the Advisory Committee. Chet Hooper, for example, is a member of the Study Group on Transport Law, as well as a member of the U.S. delegation to the UNCITRAL transport negotiation.
The goal of my office, the Office of the Legal Adviser for Private International Law at the State Department, is that every interest group is included in the process of developing the U.S. position on the various legal and policy issues that arise in each international project. It is of paramount importance to us that no one is left out, that every interested party has an opportunity to be heard. Our process is highly participatory. My office is staffed by three lawyers. While we each hope to be knowledgeable generalists on a broad range of private international law issues, none of us is as expert on any of the subjects we work on as are the practitioners who deal with these issues every day, the academics who build a career on studying them, the business officials who have hand-on practical experience in what works and what doesn't work in the industry.
In private international law, unless there are public or foreign policy interests that are inconsistent with the interests of the affected private sector groups, which does not happen often, the U.S. government seeks to carry out the goals of those groups. This is at the heart of the difference between U.S. participation in private international law negotiations and that of many other countries. Other countries may prefer to send only government officials to these negotiations; and sometimes these officials express positions that the U.S. private sector advisors know is not the position of the industry representatives in those countries. There often seems to us to be a serious disconnection between a country's delegation in intergovernmental meetings and the elements of their private sector that are supposed to benefit from the convention or model law.
The 2nd characteristic of our approach to PIL is pragmatism: we start by focusing on real problems and looking for practical solutions. These may or may not involve the traditional legal theories that have been applied to a particular issue in the past, and they may or may not result in an elegantly constructed and drafted text.

IV. Current Projects
The world of private international law is currently a very busy one. There is an ongoing negotiation of a convention on the recognition and enforcement of foreign commercial judgments, and on the reciprocal enforcement of child support obligations, for example. The U.S is in the lead on numerous projects involving commercial finance reform. We are firm believers in the efficiency and wealth creation of asset-based secured financing, such as is provided for in the UCC. And of course, we are very much involved in the UNCITRAL negotiation of a new carriage of goods convention.

V. UNCITRAL Transport Convention

As many of you know, the U.S. rules on liability for damage or loss to goods carried by sea are based on the 1924 so-called Hague Rules, which were incorporated into the U.S. COGSA (Carriage of Goods by Sea Act). This is a very long time ago! Most of our trading partners have adopted the 1968 Hague-Visby Rules, and a few countries use the 1978 Hamburg Rules. It is widely recognized that the result is a liability regime that is inconsistent and out-of-date. The U.S. industry has until recently been unable to reach agreement on key issues for a new COGSA; the U.S. Congress has been unwilling to proceed with any legislation without support from all major segments of the industry. Our trading partners likewise have not wished to enter into the development of a new multilateral convention without some assurance that the U.S. will become a party.
Just over a year ago, a major step toward breaking this impasse was taken when the National Industrial Transportation League (which represents U.S. exporters and importers) and the World Shipping Council (which represents international liner shipping companies that serve U.S. foreign trade) announced a compromise agreement on cargo liability reform. As part of this agreement, NITL and the WSC made a commitment to support the international effort underway at the CMI and UNCITRAL. The CMI prepared for UNCITRAL and at its request a draft instrument on transport law. The U.S. MLA participated actively in the CMI process and much of the MLA-prepared draft which was presented to the U.S. Congress several years ago but not enacted was included in the CMI draft. This instrument has been the subject of three weeks of discussions at UNCITRAL thus far. Two more weeks are scheduled for the spring of 2003, and another one or two weeks for the fall of 2003. While the negotiation will not be concluded by the end of 2003, we should have a good idea by that time of how some of the major issues of concern to the U.S. will be handled in the convention.
My office has held several public meetings in preparation for this negotiation. Our next public meeting is scheduled for Dec. 13. We have reached out to every sector - the shippers, carriers, intermediaries, underwriters, terminal operators, stevedores, banks, trucks and railroads. I head the U.S. delegation, which also currently includes representatives from the Maritime Administration, the Bureau of Economic Affairs in the State Department, the MLA, the WSC and NITL, and our academic advisor, Prof. Michael Sturley who was the common-law drafter of the CMI text. If there is a need for representatives of other sectors of the industry to be part of the delegation for particular negotiating sessions, they will be included.
The first thing to understand about the UNCITRAL draft is that it is not limited to updating the liability rules of Hague, Hague-Visby and Hamburg. It is a comprehensive, ambitious text that also covers electronic communication, obligations of the carrier, liability of the carrier, obligations of the shipper, transport documents, freight, liens, delivery, right of control, negotiability, rights of suit, and last but definitely not least, multimodal liability.
It can be assumed that the final text will eliminate the error of navigation defense, and will increase the per package liability limitations. Beyond that, there are few safe assumptions.
I will mention just three of the most important unresolved issues:
Whom can you sue under the instrument? The draft instrument would allow suits against the "performing party" which is defined as the contracting carrier and certain intermediate parties who physically handle the goods. This is narrower than the MLA proposal, but broader than the NITL/WSC proposal which would prohibit all claims (either under the instrument or otherwise) for cargo damage except those against the contractual carrier. Obviously, the issue of who is liable under the instrument is critical, and interrelated to numerous other issues.
What is the scope of the instrument? Port-to-port, door-to-door or some other formulation? Every mode of transportation is in favor of a single legal convention that would govern all legs of a multimodal journey - so long as that convention incorporates its version of the rules. And the rules for each mode are very different. Given the reality of containerized shipments that go from factory to ultimate customer without ever being unloaded or unpacked, some type of a multimodal system is very important. And yet many European countries are parties to mandatory international rail and truck liability conventions, which they are not prepared to abandon; and it's not clear that the U.S. truck and rail industry, whose support would be needed in order for this convention to become law in the U.S., would support a multimodal convention.
Freedom of contract. The draft text would allow parties to increase, but not decrease the liability of any party covered by the instrument. The U.S. position is that the instrument should permit the parties to a true "negotiated" contract to derogate from the terms of the instrument by express agreement. There was some support for our proposal, but the critical issue of how to define the category of contracts that can derogate from the terms of the convention remains unresolved. The issue of who can opt out of the instrument is closely related to the issue of who is covered by the instrument in the first place. The current draft would exempt charter parties completely. The U.S. freedom of contract proposal, the exact wording of which is not yet final, does not propose to add an exemption for this category of negotiated contracts, but rather would apply the instrument unless the parties explicitly opted out of certain of its provisions.

What's the future of this negotiation?
-- The U.S. needs to come to a position on the multimodal and performing party issues. We have not yet taken firm positions, as there is no consensus on these issues within the U.S. industry. Thus far it has been appropriate for us to preserve our options, but the time is coming when we must forcefully present our positions and take a leadership role, or we run the risk of losing by default. We intend to submit written proposals on both these issues before the next session.
-- Similarly, we need to submit a written proposal on our freedom of contract issue - and it needs to address the concerns expressed by some that we not create a loophole which will be so big that virtually everything will end up outside of the coverage of the instrument.
-- Getting a new convention within a reasonable period of time is of great concern to the U.S. industry. The UNCITRAL working group has not even completed a first read-through of the text. At the end of 2003, we may need to take a hard look at this very ambitious instrument, and prioritize. It would be very desirable to conclude a comprehensive instrument, but it may be that conclusion of some of the non-liability chapters may have to be postponed. The electronic commerce provisions come to mind.



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