Federal Report on Private International Law 1996

UNCITRAL

The United Nations Commission on International Trade Law is the "core legal body within the United Nations system in the field of international trade law" whose mandate is to further the progressive harmonization and unification of the law of international trade. The instruments chosen for fulfilling this mandate include conventions, model laws, uniform rules and legal guides.

The membership of UNCITRAL is limited at present to thirty-six States, structured so as to be representative of the various geographic regions and the principal economic and legal systems of the world. Members are elected for six-year terms by the United Nations General Assembly. Observers from States and international governmental and non-governmental organizations are welcome to participate at meetings of UNCITRAL and of its working groups which operate by consensus. Canada was a member of UNCITRAL from 1989 to 1995. Our term ended with the opening of the 28th session of the Commission in May, 1995, but Canada still participates in UNCITRAL as an observer.

The Commission currently has three working groups: the Working Group on International Contract Practices (ICP); the Working Group on Insolvency Law (formerly the Working Group on the New International Economic Order (NIEO)); and the Working Group on Electronic Commerce (formerly the Working Group on Electronic Data Interchange). Documents relating to Working Group projects and to the work of the UNCITRAL Secretariat and the Commission itself may be found at UNCITRAL=s website at http:\\www.un.or.at\uncitral\.

UNCITRAL's Work in Progress

Working Group on International Contract Practices: Assignment in Receivables Financing

The Working Group on International Contract Practices is continuing to work on uniform rules in the area of assignment in receivables financing. The draft rules will be intended to facilitate such financing by removing uncertainty encountered in various legal systems as to recognition and effects of assignments in which the assignor, the assignee and the debtor are not in the same country. It has not yet been decided whether the result will take the form of a convention or model legislative provisions.

The project to develop uniform rules in the area of assignment in receivables financing arose from a suggestion made at the 1992 UNCITRAL Congress. Prior to the Commission's deciding to have a working group undertake work in the area, the Secretariat prepared background material in collaboration with Unidroit and other international bodies. The project touches on areas which arise in Unidroit's Factoring Convention and in the work Unidroit is currently doing on secured interests in mobile equipment, particularly with respect to establishing an international registry of such interests. At its 28th session last year, the Commission mandated the Working Group on International Contract Practices to undertake the preparation of uniform rules on the subject.

To date, the Working Group has held two sessions, in November 1995 and July 1996. At its most recent session, the Working Group discussed many issues including: the question of the international assignment of domestic receivables, the extent to which private international law rules can be replaced with substantive law solutions, the feasibility of reliance on an approach which involves a registry or registries, coverage of "conditional" and "possible" receivables, and compatibility of the draft rules with national laws.

At the 29th session of the Commission (May 28 - June 14, 1996), it was not anticipated that the draft uniform rules on assignment in receivables financing would be completed in time for consideration at the 30th session of the Commission in May 1997. There will then likely be further sessions of the Working Group on the subject. The next one will be held in Vienna from November 11-22, 1996.

Working Group on Insolvency Law: Cross-border Insolvency

Trans- or cross-border insolvencies are those where the debtor has assets in more than one jurisdiction. In many cases, administrators are not able to deal effectively with the assets because of the great differences in insolvency legislation from one State to another and because of a lack of procedures to allow cross-border co-ordination of insolvency proceedings.

The Commission has determined that UNCITRAL should attempt to propose solutions to the practical problems caused by the lack of harmony among national laws on cross-border insolvency notwithstanding the failure of other international organizations to achieve results. In collaboration with INSOL, the Working Group on Insolvency Law has been preparing a legislative framework for judicial co-operation and for access and recognition in cross-border insolvencies. It is anticipated that the Model Legislative Provisions will be finished by the spring of 1997.

Working Group on Electronic Commerce: Digital Signatures and Certification Authorities

At its recent 29th session, the Commission renamed the Working Group on EDI after adopting the Working Group's draft Model Law. It is now the Working Group on Electronic Commerce, in keeping with the new Model Law on Electronic Commerce. Following discussion of several proposals for work in the area of EDI and electronic commerce, the Commission agreed that the Working Group should begin considering uniform rules in the area of digital signatures and certification authorities.

The issues to be examined at the next meeting of the Working Group, in February 1997, include: the legal basis supporting certification processes, including emerging digital authentication and certification technology; the applicability of the certification process; the allocation of risk and liabilities of users, providers and third parties in the context of the use of certification techniques; the specific issues of certification through the use of registries; and incorporation by reference.

Case Law on UNCITRAL Texts (CLOUT)

UNCITRAL has set up a system for collecting and disseminating information on abstracts of court decisions and arbitral awards relating to its conventions or model laws. Since the Commission's 28th session in May 1995, three additional sets of abstracts have been produced (document no. A/CN.9/SER.C/ABSTRACTS/7,8 and 9). The Commission has also prepared a thesaurus of the United Nations Convention on Contracts for the International Sale of Goods, that is, an analytical list of issues arising in the context of the convention. The Secretariat is preparing a thesaurus on the Model Law on International Commercial Arbitration.

Monitoring Implementation of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards

In 1995, the Commission approved a project to monitor the legislative implementation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, in conjunction with Committee D of the International Bar Association. To that end, the Secretariat has distributed to States a questionnaire relating to the legal regime governing the recognition and enforcement of foreign arbitral awards. Canada will be preparing its reply in collaboration with provincial authorities.

Recently Completed Projects of the Commission

Convention on Independent Guarantees and Stand-by Letters of Credit

The Convention on Independent Guarantees and Stand-by Letters of Credit was prepared by the Working Group on International Contract Practices and adopted by the Commission at its 28th session in May, 1995. The UN General Assembly then adopted the text and opened the Convention for signature by way of a resolution in December 1995. Canada must now consider whether to sign and ratify the Convention.

Model Law on Electronic Commerce

The Working Group on Electronic Data Interchange completed its draft rules on EDI in the form of a Model Law for submission to the Commission's 28th session in May, 1995. The Commission completed its review of the Model Law at its 29th session this year and renamed the text the Model Law on Electronic Commerce.

The Model Law aims to provide a legal framework for electronic commercial practices. We will begin broad consultations in the fall to determine if and how aspects of the Model Law should be implemented in Canada.

UNCITRAL Notes on Organizing Arbitral Proceedings

In 1993, the United Nations Commission on International Trade Law (UNCITRAL) decided to undertake work on matters relating to arbitral proceedings. The UNCITRAL Secretariat prepared draft "Guidelines for Preparatory Conferences in Arbitral Proceedings" which the Commission discussed and revised at its 27th session in 1994. Since then the Commission has considered the draft, now called Notes on Organizing Arbitral Proceedings at its sessions in 1995 and, most recently, in June 1996. The Commission endorsed the Notes with some revisions at this latter session and the final revised version should be available shortly. The Commission intends to distribute the Notes widely, including to arbitral institutions, chambers of commerce and relevant national and international professional associations.

The Notes have no legal effect and are not intended to impose any legal or other requirement. They simply aim to provide the actors in an arbitral proceeding with information to help avoid potential difficulties in the arbitration process. The Notes list and describe questions "on which appropriately timed decisions on organizing arbitral proceedings may be useful." Among the subjects covered are the arbitration rules to be used, the language of the proceedings, administrative considerations, communications, evidence and hearings.

Other Work of the Commission of Interest to Canada

United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980)

The Convention provides a uniform system of rules for the international sale of goods and applies automatically to those contracts subject to it, although parties may choose to exclude its application by expressly stating so. While the Convention applies to contracts for the sale of goods, it excludes the sale of goods for personal use, sale by auction, judicial sales, and the sale of stocks, ships, aircraft or electricity. The provisions of the Convention deal with the formation of the contract and the rights and obligations of the seller and buyer. The Convention does not govern the validity of the contract or its terms, nor does it otherwise deal with the seller's liability.

The Convention came into force for Canada on May 1, 1992. At that time the Convention extended to all Canadian jurisdictions with the exception of the Yukon, which adopted implementing legislation in June, 1992. A declaration extending the Convention to the Yukon was deposited and took effect on January 1, 1993. Since British Columbia then amended its implementing legislation to repeal the provision

rendering Article 1(1)(b) of the Convention inapplicable there, a declaration withdrawing the declaration concerning Article 1(1)(b), made at the time of Canada's accession to the Convention, was deposited and took effect on February 1, 1993. The Convention now applies uniformly across Canada and as of May 1996 had 45 States party.

Convention on the Limitation Period in the International Sale of Goods (New York, 1974)

The United Nations Convention on the Limitation Period in the International Sale of Goods grew out of the work of UNCITRAL to unify international sales law. The resulting Convention, as amended by the 1980 Protocol, was intended to dovetail with the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980). There is substantial similarity between the Conventions, in particular the Articles setting out the sphere of application, declarations and reservations, the federal State clause, and the final clauses.

The purpose of the Limitation Convention is to eliminate disparities in the national laws governing limitations on the initiation of legal proceedings; these disparities create uncertainty and can create hardship both in cases where meritorious claims are statute-barred by a very short limitation period, and also where parties are left open to liability for an inordinately long time in jurisdictions with very long limitation periods.

The Convention is divided into four Parts, of which Part One, containing the actual limitation provisions, is the most important; it contains a very detailed scheme of substantive law. Parts Two, Three and Four deal with implementation, declarations and reservations, and final clauses, respectively. The Limitation Convention sets a standard four-year limitation period for commercial litigation.

As of May, 1996, there were twenty ratifications, accessions and successions, including our North American trading partners, Mexico and the United States (in force December 1, 1994). The Limitation Convention entered into force August 1, 1988. Now that the Vienna Sales Convention is in force for Canada, we will be seeking approval for a Canadian accession to the Limitation Convention and, eventually, uniform implementing legislation.

Convention on International Bills of Exchange and International Promissory Notes

The United Nations Convention on International Bills of Exchange and International Promissory Notes was adopted by the General Assembly of the United Nations on December 9, 1988. Canada participated in drafting the Convention, which will establish a new international regime based on a viable compromise between the common law and the civil law systems. Canada was the first country to sign this Convention; the United States and the USSR (now succeeded by the Russian Federation) have also done so. Guinea and Mexico have acceded to it. The Convention will come into force after ten ratifications or accessions. In order to implement it in Canada, federal legislation would be required.

The Convention is the result of nearly 20 years of work by UNCITRAL to devise a unifying law for international bills and notes. It addresses and regulates a number of complex and difficult issues such as the rights of a holder of a bill or note; forged endorsements; fraud, theft; guarantors; presentment for payment and non-acceptance; notice of dishonour and discharge. Many of the issues regulated by the Convention were treated differently in the various legal systems. When the Convention comes into force, it will therefore introduce more predictability for financial institutions and businesses who use these methods of payment for international transactions.

Model Law on Procurement of Goods and Construction

This subject is considered important by developing States who often perceive their access to markets in developed States as being unnecessarily limited by governmental procurement practices, in particular. The Department of Justice participated very actively in the work on procurement and consulted with federal and provincial departments and with industry as the work progressed in the UNCITRAL Working Group on the NIEO. The Model Law was submitted to the Commission at its 26th session in Vienna in July, 1993, when it was reviewed, amended and adopted. The UN General Assembly has adopted a resolution urging States to adopt it.

The Model Law is intended to serve as a model law to countries for the evaluation and modernization of their procurement laws and practices and for the establishment of procurement legislation. Basically, it provides for all the essential procedures and principles for conducting procurement proceedings in a transparent and equitable manner. On Canada's initiative, the text was prepared keeping in mind the provisions of the GATT and Article 3 ensures paramountcy of the latter (as well as the WTO Agreement) over the Model Law.

From a practical point of view, the Model Law mandates the use of international tendering as a general rule although limited or domestic tendering can be used in some cases. In exceptional circumstances, it offers other methods. The procedures provided for in the Model Law are designed to maximize competition in accordance with fair treatment to suppliers and contractors bidding to do government work.

Model Law on the Procurement of Goods, Construction and Services

The Model Law on the Procurement of Goods and Construction does not apply to the procurement of services except insofar as they are incidental to the procurement contract. The Commission decided at its 26th session that its Working Group on the NIEO should prepare model provisions on procurement of services. The Working Group completed this project in the spring of 1994 in New York and the Commission finalized and adopted the new Model Law at its 27th session in New York from May 31 to June 17, 1994.

The new provisions are contained in a free-standing new Model Law which adds procurement of services to the existing provisions on goods and construction. Building upon the provisions prepared for the procurement of goods and construction, the text maintains Article 3 which ensures paramountcy of the GATT as well as the WTO Agreement over the Model Law. The General Assembly has adopted a resolution recommending that States enact it. States will thus have the option of adopting provisions which apply only to goods and construction, using the first Model Law, or adopting provisions which apply to goods, construction and services, using this new Model Law.

Legal Guide on International Countertrade Transactions

At its 25th session in May, 1992, the Commission reviewed and adopted a draft Legal Guide on International Countertrade, the draft chapters of which had been examined and revised by the Commission at its 23rd session in 1990 and by the Working Group on International Payments in September, 1991. It was published by UNCITRAL in 1993 (ISBN 92-1-133444-6).

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