53. U.S. position paper re convention on formation of contracts in e-commerce in the UNCITRAL Working Group on Electronic Commerce (October 2004)
UNCITRAL WORKING GROUP ON INTERNATIONAL ELECTRONIC COMMERCE – VIENNA OCTOBER 2004
Attached are USG positions/notes on various articles; where not changed they will be starting points for the October 2004 Vienna Working Group meeting. Positions will be restated as needed at the WG meeting and thereafter. General guidance is set out at the end on timing, etc.
Revised Statement of USG goals (reflecting positions at last UN meetings; these goals as modified should inform our positions both now and at the WG):
(A) Expand the footprint of basic e-commerce enabling laws across more of the globe, consistent with prior initiatives including the Unictral Model Law on Electronic Commerce, with an emphasis on developing and emerging countries who have not yet adopted basic rules that validate electronic conduct of contractual relations.
(B) Support a basic enabling law approach, such as MLEC, UETA, etc., which enhance predictability but minimize displacement of applicable substantive law, rather than the more regulatory approach of some countries. Continue to support market-based practice rules to the extent sufficiently wide in application or otherwise consistent with commercial sector requirements.
(C) Focus on commercial predictability ex-ante, with lesser required due diligence to the extent possible, in order to promote entry into the e-market and encourage commercial credit, rather than emphasizing post-contract dispute resolution (the latter, while also important, raises a number of e-jurisdiction questions for which resolutions are not in sight and which are not intended to be dealt with in this treaty).
(D) Continue to factor in existing US federal and uniform state law, as well as other state laws, as economic guidance and so that variances are fully explainable, taking into account that while the US does not need the Convention for domestic purposes, without countries such as the US taking a lead, many developing countries may not agree to extend the baseline of enabling law.
(E) Support broad application of the treaty, while retaining flexibility both in black letter provisions and ability to further modify by declaration or exclusion, so as to be adjustable as needs of particular sectors require over a reasonable period of time. While achieving less uniformity at the outset, it lessens the risk of provisions that cannot meet the test of adaptability to developing practices and economics of e-commerce.
(F) Emphasis on primary USG goals for developing countries such as capacity building as well as growth of a more stable base for democratic institutions, by promoting and deepening private sector commerce, including expansion of contracts for distant marketing, sales and services. Capacity building requires special focus on medium and smaller enterprises as well as larger crossborder companies, and attention to regional as well as national development.
Positions / comments on articles:
We will work with a four-part list: (a) key issues on which support for the treaty system can fail; (b) important issues that go to effectiveness, but are not as critical; (c) issues for which further clarification is useful, and (d) technical changes that are not policy problems, which can be raised on the floor as necessary if not adjusted otherwise. A cross-issue check list for UETA, Federal E-Sign and others as needed will also be applied.
Position criteria: at this point a legislative litmus should be applied, i.e. provisions that are likely to be adoptable by a large enough group of States, consistent with our objectives of promoting e-commerce across all regions and emphasizing countries without basic enabling laws in place. We also need to avoid results, however supportable they may be from a technology or wish-list point of view, that lead to significant controversy. This also calls for workable positions that cover a sufficient number of paradigm transactions, and build in enough variation by a combination of party autonomy, exclusions and declarations which can modify certain provisions, so as to be able to be adjustable for future developments. Our positions need to factor carefully in existing law such as UETA and E-Sign, and consider issues resolved by other law such as EU Directives as well as non-statutory texts such as ICC’s E-terms, the draft Inter-American Rules on electronic signatures and documents, and others.
Positions should be adopted on all provisions, including bracketed language and questions posed in footnotes. Language recommendations below are indicative only. Where no comment is made, that reflects support or at least non-objection based on prior positions or recent group discussions. At this stage, problems raised should in all cases be accompanied by a proposed fix, either black letter or commentary clarification (see below). All positions are malleable but unless changed these are USG positions.
Preamble (new) 5th para (“Being of…) delete or modify ref to interchangeability, which is not correct in some types of transactions or applications. Add at the end of the last clause, “…systems rules or other requirements”?
Article 1, Para (1): “Parties” as such are not defined, and if intended to apply to messages that do not ripen into contracts, additional language may be necessary.
We have expressed concern that “in connection with” may create problems if read to extend to certain 3d party or regulatory actions, such as filings(as drafted it is not clear that it is limited to communications between parties as such, and even if so, does not exclude cases where one party is a public authority, for example, with filng requirements; definition 4(a) could affect this). Note that third party and public participants’ communications can be excluded under Art.18(5). Do we need to fix this?
“Performance”: concern has been expressed that it could go beyond what we seek to cover. One fix: add an explicit statement of “formation plus”, a term we used previously, i.e. contract formation plus amendments, notices, requests, terminations, etc. (limited to privity cases?).
[“negotiation” or “formation”] ? See ftnt 5, and comment about “formation plus” above; once decided, conforming changes should be made in other Articles where this choice appears unless decided otherwise.
“places of business” – qualify by “relevant to the contract or negotiation” at issue? That has been proposed to narrow the criteria. The contra argument is that avoiding any qualification may expand coverage. Without additional language or prescriptive commentary however, some countries may import the nexus requirement.
Draft or clarify in commentary to assure that any two places in different states qualifies, and that all such places of business do not have to be so separated?
Article 1, Para (1) (a): See Ftnt 6. Can accept as is or as restated to make the present Art.18 declaration the general rule (i.e. no requirement that both states be contracting states) as long as a declaration out is retained, so that states that want to limit the application can do so. This is one of several provisions that, with the declaration out, can expand coverage without posing a risk to possible US application.
Article 1, Para 1(b): Support (b) but also Art.18(3) permitting declaration out for that provision. We will still have to weigh the benefits of greater certainty vs. greater coverage of transactions on this point, as we did for the CISG, where the US has excluded conflicts rules as a basis for applying the treaty, to the extent that a US jurisdiction or US law is involved.
Article 1, Para 1(c): Support. While its effect may not be substantial, it will underscore in some jurisdictions validity of party autonomy and a no-nexus rule.
Article 1 Paras 2&3: Support. Para 2 is compatible with new Arts.6 and 7, and the old Art.11 on disclosure has been eliminated. Any changes to Art.6 or relevant definitions need to rechecked with this para.
Article 1 Para (4) Variants A & B: Prefer B as the starting point, adding the possibility of exclusion by category or period of adoption, such as future instruments. Without this addition, it is possible that the US, for example, would by declaration exclude this provision en toto. Variant A, for which the same addition should be proposed, would be acceptable as a backup and could theoretically could lead to the same result as B, but is much more likely to restrict application in practice. (Note: a more restrictive proposal than Var.A was rejected by a wide margin at the last WG).
Compare and resolve interaction with Article 19; recommend recombining this with Art.19? 19(2) and (3) with some modifications perform essentially the same function, which would group the treaty provisions in one place.
Important open issue: Resolve meaning of “governed by”, or possible alternatives such as “subject to”. Cf Article 19(2). There is no established meaning in international practice to these terms. It could be given a broader meaning, or another term used if wider application were intended. Arguably, many trade agreements may be said to “govern” a particular transaction, for example by opening a trade market, prohibiting discriminatory practices or tariffs, etc. On the other hand, “governed by” has been used in the recent Cape Town treaty to cover transactions where the contract provisions were actually and substantially subject to its rules. That result, regardless of the terms employed, might confine the scope of application to a relatively smaller number of treaties, such as PIL treaties, which are likely to be construed as regulating transactional aspects.
The policy established here then needs to be conformed within Article 19. 19(2) leaves open the use of “commercial law matters” vs. “pertaining to international trade”. Support the latter.
The term “commercial law” is a more restricted term in a number of civil law states; see e.g. MLEC footnote (1) which was intended to counter that and give a broad meaning to the term, consistent with usage in common law. Commentary language of this sort for a treaty provision however is much less likely to be effective. An alternative might be “commercial, business and related economic activity”. Neither is as broad as the reference to trade. Given that Uncitral’s mandate runs to unification of “international trade law”, we should, consistent with the statement of goals, support the broader application.
Article 2, Para (1): Support; resist any effort to reopen the flat exclusion issue, i.e. reinstating the “unless” clause drawn from the CISG. The error article and absence of a robust consent requirement under Art. 8, plus other issues, will otherwise bring us into likely conflict with consumer issues.
Article 2, Para (2)(a): continue to strongly support blanket exclusion of financial markets transactions that are regulated or subject to systems rules or uniform practices (any additions necessary?) Note that piecemeal exclusions on a country by country basis under Art.18 would be the opposite of progress for existing well-functioning financial markets, whether regulated or operating under industry standards or systems rules, and which would potentially disadvantage countries for whom benefits are sought under this treaty.
Article 2, Paras (2)(b),(c)and (e): Recommend deletion. Individual States can exclude these and similar matters under Art.18(5); these are not inherently crossborder, and states should cover these categories by declarations applicable only to their territories if they so choose. For civil law countries, the last clause of (c) could, depending on its application by a given state, exclude all contractual matters requiring a notarization. Such a sweeping exclusion could significantly reduce the application of the convention and should therefore be state by state, not across the board. Note that, for example, uniform state law in the near future in the US may now possibly support e-recordation and title transfer, a more recent development since this project began, indicating likely change in the realty market vis-à-vis e-documents that would have led to an opposite conclusion only two years ago.
Article 2, Para (2)(d): unclear. What is the purpose of the flat exclusion? Protection of non-specialists against binding undertakings in e-format?
Article 2, Para (2)(f): Tentatively retain, subject to conclusion of Art.9 (new paras 4&5). If appropriate limiting language is inserted in Art.9, can support deletion of (f) [Atlanta discussion]
Article 2, Para (2)(g): same position as (f), except that guidance on retention and any necessary language here or in Article 9 should come from WG III on transport law. It is expected that a joint experts group may meet on this following WG’s November-early December meeting. Leave in brackets for now.
Article 3 (old Art.4): Support bracketed language if OK with term “impliedly”; as qualified by the last clause, it has been seen by some as not inviting too wide a post facto review.
Add “or recognized business practice in a given sector”? We had initially included that in informal draft proposals prior to the last WG. Some did not support that, citing concern that it could open the door to bring in other factors and lessen certainty.
Note that the “except” clause has been deleted, since no recommendations were made to retain it or fill it in.
Article 4 (old Art.5) paras (a)&(b): New language, intended to be benign. Ftnt 17 is on point that “e-record” should not be used because it is not amenable to translation (and because it could import uncertainty in practice from our law).
Para (b): substitute “that a party makes” for “parties”?
Article 4 para (c): Note “purports to” was dropped, which is another of the useful changes form the prior text; see Ftnt 19 and US position notes for the last WG. The definition of “e-signature” was also dropped, removing our concern about “approval”.
Article 4 para (f): Optimum position: drop effort to define “info system”, noting that various formulations have been tried and none so far work over any range of cases. Commercial law often leaves undefined a variety of terms where consensus is lacking for any particular formulation. That can work except where the omission creates too much uncertainty in finance or performance, neither of which have been demonstrated here, nor has the term as currently minimally defined in MLEC caused significant problems so far in practice. If a revised and truncated receipt rule is agreed to (see comments below), this should be less of a problem.
That said, we need to be prepared to consider alternative formulations if that discussion proceeds in the WG. Suggestions?
Article 4 para (h): Tentatively support; as drafted goes to one issue only. Clarify whether “party” means participant in communications, or is limited to a party to an eventually concluded contract? Clarify whether the term covers agents? (not all legal systems would so conclude, unless actual authority, narrowly construed, was evidenced).
Review together with Articles 1(2), 6 (old Art.7), and the 10 (3) & (4) deeming rule as to place of despatch; see Ftnts 22 and 29.
Either option under para (h) excludes “virtual locations” to some extent. That sector is as of yet not a major slice of e-commerce, and getting support to cover it at this point is likely to be difficult. Since implementation will require governments to adopt this via treaty or legislation, the potential for opposition is probably greater that the likelihood of wide acceptance of virtual locations or places of operation. Compare legislative trends in the US and other states.
Article 4 para (i): See Ftnt 25 and Ftnt 28 of the prior draft treaty text; one purpose is to exclude automated systems (some earlier commentators saw the term as a basis for invalidating non-human supervised messages, a result we agreed that that was in the wrong direction).
Note: do we need to propose additional definitions? If so, that should be done now.
Article 5 para (2): support deletion of bracketed words (we proposed this change), or alternatively clear commentary to avoid the result reflected in Ftnt 26.
Article 6 (old Art.7), para (1): Open position? The last US position was to retain the first bracketed language, which would need to be read with Art.4(h) limitations, but delete the second bracketed language (“and such indication…”). Our last position was that structuring a transaction so as to fall within a particular legal system, whether for substantive, jurisdictional or regulatory reasons is a legitimate part of cross-border contracting and trade. Misrepresentation is an entirely separate animal, and should be dealt with by other law. That possibility is preserved by the new Art.7 (old Art.7Bis). Some have suggested that retaining both makes application of the “unless” clause more difficult, since a double test has to be met, which in turn would lead to the presumption prevailing in more cases. What is the preferred policy?
It is not clear that the policy suggested in Ftnt 27 on parties’ ability to choose the treaty would be effected by the above language. It has also been informally suggested that we consider placing on the table an alternate approach taken by the recent Hague Convention on securities intermediaries, where the issue of “location” of an account was a key factor because large increased uses of computer data representing accounts made location problematic if tested against brick and glass age standards. That convention adopted the UCC Art.8 approach, i.e. party agreements on governing law, subject to existence of a place of business as defined, determined location. That convention had the benefit of focus of closely related industries and supervisory authorities. Whether that could get enough support as a possible solution for general e-commerce purposes should continue to be explored.
Article 6, para (2) Line 1: Open position on the bracketed language (see Ftnt 28).
Article 6, para (2) Line 3: “closest relationship” test - delete “and its performance”. Conflicts law experience is that combining that with performance leads usually to inability to predict in any but simple crossborder cases, and applying “performance” (which can relate to both or multiple parties at the same time) is much less certain than relation to the contract. The latter can be improved by adding “place of contract”, which in an ecom context can sometimes be challenging. Or choose another test, such as chief administrative office relevant to the contract. While the chosen standard should not require a degree of due diligence that defeats the efficiency of ecom, none of these formulations will work for all paradigms.
Article 6, para (3): Clarify the relationship between Art.1(1) on scope, Art.4(h) definition, and Art.6(3).
Article 6, para (4): open position on two sets of bracketed language. Both are intended in part to deal with some issues relating to virtual locations, which would need to be coordinated with the policy and language of Article 4(h). See Ftnts. 22 and 29.
Article 6, para (5): possibly add language (see Ftnt 30 and the Secretariat’s suggestion) allowing a rebuttable presumption where a given jurisdiction’s law requires standards to be met as to actuality of location in that jurisdiction. This was discussed in our group but no position taken yet, and raised at the WG without decision.
Article 7: support. Eliminating the disclosure obligation was done at the Nov.03 WG. This does not preclude other law or regulation from so requiring.
Article 8 para 2: retain bracketed language. The reformulation reflects the US proposal to delete the term “consent”.
Article 9: Support in principle, including new paras 4 and 5, subject to necessary revisions. Schedule conf. call on this, building on discussions at Atlanta.
Article 9 para 1: support bracketed language (an advance at the Nov 03 WG)
Article 9 paras 2-4: The need for definition of “law”, suggested in Ftnt 33, is now important in view of possible broad application of new paras. 4&5. For example, to protect the L/C, S/LC and possibly other financial instrument markets, “law” would need to be confined to black letter law and regulations, not rules incorporated by common practice such as UCP (reversing our earlier position on this). The possibility of a bifurcated definition could be explored, but it would be a difficult sell.
Article 9 para 3: support (another advance made at the Nov. 03 WG)
Article 9 paras 4 and 5 (new): generally support in principle, subject however to necessary changes. This should be viewed as against two different areas of application.
(a) application to the New York Convention on foreign arbitral awards, as indicated in Ftnt.35, the stated reason for inclusion, and other treaties or presumably other laws that require an “original” where the document or instrument does not carry or transfer value, but serves as an upgraded notice or other procedural purpose. This provision, if retained, could be limited to those cases.
The US position on that will be guided by our delegation on arbitration law, which tentatively is inclined to support it, rather than seek to amend the NY Convention. The WG will likely be guided by Working Group I on arbitration, which will consider this issue at its upcoming meeting in September, and is prepared to review it again at its Spring WG meeting. See also Art. 19 Ftnts. 58 and 59.
(b) Application to documents or instruments that carry or transfer value or create financial undertakings.
The outcome of discussions at Atlanta was to tentatively consider this, but only if qualified by limiting it to accepted standards in particular types of transactions or financial undertakings, and possibly requiring a course of dealing test or other protections, so that an e-instrument could not be imposed outside of accepted financial sector practices. Language to assure that local financial sector standards prevail so that incoming e-instruments do not gain special treaty status should be considered.
This needs to be separately tested as to payment orders, negotiable instruments, letters of credit, standbys, European counterparts such as direct demand guarantees, warehouse receipts, bills of lading, etc., to see whether additional constraints are needed or whether we would anticipate further exclusions under Art.18. A substantially qualified provision, and/or broad Art.18 exclusions which can be modified to accommodate sector changes, may be preferable to having no basis in the treaty to support those changes at a later time.
Draft language is needed, and our support for retention as to value-carrying instruments conditioned on that.
Article 10: Still an open Article. The primary problem, and one that increasingly raises questions of support for the treaty, remains the para (2) deemed receipt rule, at least as to non-designated cases.
Article 10, para (1): Working with the current draft, suggestions are: drop “info system under”, and retain “under control of”. There is as of now no commanding support for one or the other of the two alternative formulations, i.e. left the control of vs. entered a system under the control of. The Secretariat suggests the former; see Ftnt.37. Our position?
We suggest no more wrestling with new definitions of “info system”, either for Art.10 or Art.11 (see comments above on Art.4(f)), except to point out why the several suggestions on that are likely to be unworkable in the context of this product. That said, we may need to engage that issue, and new alternative formulations should be worked on. If Art.10(1) adopts the “left the control of” standard, and Art.10(2) is limited as suggested below, the definition of information system should become much less of a concern .
Article 10, para (2): Significantly qualify this rule and limit the deeming or presumption effect?
Recent developments have surfaced growing concern about any presumptions on receipt, including the “capable of being retrieved” standard, in view of increased cases of interference, whether external or internal, with “receipt” as it would be understood under the current deeming language. The results of contemporary concerns about virus issues, spam or other incursions, and countermeasures including firewalls, filters, etc, and multiple e-addresses, is likely to be considerable opposition to any presumptions, making a receipt rule problematic, if tested by the likelihood of whether it would generate opposition to adoption. This is a change from earlier indications and our prior position.
Possible options? return to earlier drafts which focused on designation and limit its application to e-addresses designated for that purpose (we would need to reexamine “designation” to see if further clarification, possibly in commentary, is feasible). Another is to protect grounds that may otherwise exist to establish implied receipt. A rule covering the above two limited cases, or others that could be added, may be preferable to having no receipt rule at all, since its total absence might be seen as a large hole through the expected level of ground rule coverage.
Article 10, paras (3)&(4): support.
Article 11: support; reflects revisions from the Nov.03 WG.
Our prior position was to reject resolution of the footnote 38 issue, i.e. consider special rules for or possibly exclude auction-type transactions, at least from this Article. It is arguable that the Ftnt solution, by seeking to resolve differences in treatment of certain types of contract formation cases, is entering the substantive zone which is not within our scope. The same concern was raised in our group when the effect of exclusions from CISG, which include auctions, electricity, etc., were raised. Is the Art.18 country exclusion, if needed for US practice, sufficient and more appropriate? Support for inclusion in Art.2 is unlikely, especially in the absence of generally accepted practices on a crossborder basis.
Article 12: support; reflects revisions we approved at the Nov.03 WG.
See Ftnt 40 - is there support or practice need for an attribution rule here? UCC 4A for robots?
Article 13: Support Variant A, which was a partial turn around at the Nov.03 WG, as a non-regulatory approach, which preserves disclosure issues for determination under other applicable law.
If Variant A does not prevail, what are the dislocations if any that result from the EC Directive-inspired Variant B? (recall that opposition to B tends to be seen as overreaching). Would dropping the second bracketed clause reduce that problem?
Article 14: tentatively support, subject to changes as indicated below and retention of the clean hands paras. This issue can amplify negative issues about e-commerce that we should work to avoid.
The current formulation drops the invalidity provision and contains no affirmative obligation to provide for error correction. This is a substantial improvement over prior versions. While some in the WG have recommended against any provision that borders on restating law on error and mistake (primarily on the basis of the earlier drafts of this Article), others have stated that having such a provision is one of their main objectives in this effort, which would make complete deletion unlikely, and that in any event, law of error and mistake is not well developed in many countries. Others need to carefully factor in existing standards, as in our case the UETA, if we are to stay in the adoptable zone.
Article 14 para (1): tentatively support with some or all of the following changes.
First, insert “that portion of” before “the electronic communication”, so that other parts of a message remain unaffected. It has also been suggested that a further qualification be added that withdrawal must be effected immediately after transmission or without delay after knowledge, and that a cap be added to knowledge, such as, “in any event, within a reasonably short time period following transmission”.
Secondly, and critically, qualify para (1) altogether by adding “unless contrary to established practice with regard to the type of contract, goods or services, applicable systems or other sector rules [,or course of dealing between the parties].
Thirdly, consider adding at the end of para 1(C), “and the party providing the goods or services does not suffer material loss” (cf.UCC 2-305).
Some have suggested commentary language to amplify “opportunity to correct”. That raises issues such as whether double-click qualifies. Should we propose such an exercise? Is it better to leave that without guidance in view of the number of jurisdictions with no track-record on this?
Article 14 para (2): It was suggested that para (2) become para (1) with appropriate changes, to emphasize the limited scope of the Article..
If necessary, we can revert to the alternative of drafting a safeharbour presumption as to non-invalidity of a particular message or action if error correction was available, with carveouts for course of dealing, systems rules, recognized sector practices, etc., coupled with a statement that matters not covered (i.e. no error correction available) are not affected as to validity or otherwise, deferring to applicable law for that.
Other substantive provisions?: if any other provisions are needed, they should be placed on the table at the October meeting. So far, we have not identified any, but this should be specifically reviewed.
See Ftnt. 44, suggesting as have some delegations that additional provisions could include consequences for failure to comply with Arts. 11,15 and 16. We have recommended against this previously as intrusive into substantive contract law and beyond our scope. Confirm whether this remains our position.
Chapter IV Final Provisions:
Note: on some matters, proposals made by the Secretariat now follow a format approved by the UN’s Office of Legal Affairs. They do not bind delegates to those solutions.
Article 15: support; standard practice for UN-prepared conventions is to have the UN’s treaty office act as Depositary.
We should recommend that the Uncitral Secretariat take on, subject to availability of resources, a supplementary role in advising prospective ratifying states as to the format and effect of declarations made under the convention. That process has been recently taken on by the Secretariat at Unidroit to facilitate the implementation of the Cape Town Convention with considerable success.
Article 16 para (1): signature will most likely take place at the UN in NY, unless a signing conference is approved at another location. While a two-year period is more common, we should suggest at least three years to increase the potential political effect of gaining signatories. There is no time limit in these final provisions on accession for non-signatory states.
Article 17: support. This is standard language, known as the federal-state provision, for Uncitral treaty texts. It potentially can affect a variety of states, such as the US, Canada, China, the UK, etc. While we have in other negotiations looked at the possibility of amending the standard language, absent a compelling reason to do so in this case, I recommend that we not make this convention a battle ground on that. The U.S. has in the past made no declaration under this type of provision and US treaties have therefore applied to all US territories, possessions, etc. As drafted, if such a declaration is not made at the time of ratification, it cannot be made thereafter.
Note: the EU has not at this point recommended inclusion of an REIO provision that would allow the EU itself, or any other regional economic organization, to ratify as a state party. Such a provision has however been included in the recent Cape Town and Hague securities intermediaries Conventions. We should examine the implications of the EU becoming a state party, as well as the competency issues vis-à-vis the role that states member can play. We will be subject to Department guidance on these issues.
As to possible conflicts with internal law in regional bodies such as the EU, that organization can preserve its internal law as to transactions between their parties in those states, but can still apply this convention to other transactional relationships (a similar approach was taken in CISG Art. 94, allowing a group of states with related laws by declaration to not apply the convention to transactions involving parties in their states, although presumably this would not apply to contract relations involving an EU-based party and a party in a state outside the EU.
Article 18 (1) and (6): Support subject to necessary modifications of the public law boiler plate provisions to accommodate PIL treaty practice.
These are important treaty law issues for PIL practice. Declarations under PIL practice apply in the territory of the declaring state and to the extent that the law of that state is at issue in another contracting state. They are, unlike public law “reservations”, not subject to acceptance or rejection by another state party, nor do they authorize another state party to impose the same constraints on the basis of reciprocity. This has been PIL treaty practice at the Hague Conference and Unidroit and has been followed by Uncitral from the time of its first PIL Convention in the mid-1970’s. Sustaining that practice is critical to the declaration system under PIL conventions and the predictability required for commerce. It is for this reason that reservations as defined by the VCLT are normally not permitted under PIL conventions. (Corresponding changes to Article 20 would be to delete all reference to reservations).
Article 18 para (1): Period after “permitted” and delete the following language.
Article 18 para (6): Delete; alternatively restate as follows: “A state making a declaration … under paras 2,3,4 and 5 shall be bound by the matters specified in such declarations”.
Article 18 Paras (2), (3) and (4): restate to be able to be made at any time, and amended or withdrawn thereafter (see change proposed for Art.20(4) below). As now stated , these declarations can only be made at the time of ratification. An argument put forward for such a limited declaration capacity is permanent status, easily determined. That however works against flexibility and expansion of scope, and in a computer age the current status of declarations can be arranged so as to be easily tracked.
Article 18 Paras (2) and (3) relate to excluding the scope of application criteria under Article (1) as to requiring states to be contracting states and as to applying the convention by virtue of the effect of conflicts law. There would seem to be no need of limiting these choices to the moment of ratification.
Article 18 Para (4) there is an even stronger, and probably critical, argument to allow declarations under Article 1(4) at any time; some states (possibly including the US) will of course take a more conservative treaty approach at the outset, and it is important to allow reconsideration and opening up to a broader application of the convention at a later time if and when treaty or other national authorities are convinced that doing so is consistent with their economic interests.
Article 18 Para (5): A critical declaration on the ability to exclude by country; oppose the comment in Ftnt 54 that 18(5) could be seen as surplusage if Article 2 general exclusions stay in the text. Without the ability to exclude specific practices from time to time as to the ratifying state, there might for some countries be no way to join the convention if any particular important practice would not work under these provisions. Given the changes that occur in e-commerce as we speak, that is likely to be fatal.
Article 19 (old Art.Y) para (1): support generally; see discussion under Article 1(4).
Lines 2&3: first bracketed language option: prefer the 2d, which clarifies that the provisions apply in effect mutatis mutandis. The first formulation, if used, should substitute “states that” for “declares”. The explanation in Ftnt 55 could however be problematic if interpreted to mean that 19(1) was comparable to an EU Directive, i.e. an undertaking by a state to make the provisions applicable at some future time. Note that a more restrictive alternative, old Art.Y Variant B, was soundly rejected at an earlier WG, as was an earlier attempt to list the provisions of this convention that would apply to others.
Para (1) treaty list: Support; confining Para (1) at this stage to UN/Uncitral related conventions avoids issues about competence and the need to coordinate with and possibly have approval from other bodies as to inclusion of conventions prepared under their auspices.
Possible additional special provisions for any listed Convention: support leaving this Article open for inclusion of special provisions as to how certain provisions of the CISG, for example, are to be applied, if needed. Objections are likely to be raised by some that it is too late, and if there are problems they should be on the table in October. Assuming that not enough countries will be prepared to do that in October, we should lay the ground work for consideration of special issues as late as the spring WG meeting, if issues emerge requiring that action.
Article 19 Ftnt 58 and term “agreement”: if added here to accommodate the NY Convention, does it have other implications?
Article 19 paras (2)&(3): Support in principle; see discussion Article 1(4), Variants A and B, including preference for “trade” rather than “commercial”.
Allow these declarations to be made at any time.
Recombine Art.1(4) with 19(2)&(3)?
Additional notes on general treaty law issues: a number of issues raised here on treaty law fall in the US within the purview of the State Dept’s office of treaty affairs. The following may be useful guidance: As to the Vienna Convention on Law of Treaties (VCLT), the US is not a party, but applies many of its provisions as having now reached the status of “customary international law” under our standards for that. There is ample precedent in VCLT and otherwise for subsequent conventions modifying the effect of prior ones, at least inter se. The rules as to how conflicts between treaties are determined as to which prevails, absent language that resolves that in the instruments, generally involves assessment first of whether common issues are dealt with (sometimes referred to as the level of specificity); whether they can be read so as to avoid conflict between them; if not, generally the later in time prevails inter se.
Article 20: Delete “reservations” in the chapeau and in all four paras (see discussion on Art.18 (1)&(6) above.
Article 20 para 3: the length of time is usually based on what is assumed to be necessary to have transacting parties become aware of the provisions and adjust their practice accordingly. Six months tends to be a common standard. Given the rapidity of communications today and the ability to monitor changes by computer, this might be reconsidered and a shorter period (three months) be used.
Article 20 para 4: Add “may amend” prior declarations, along with right of withdrawal. This is an important change. The last clause of Article 17 (1) can then be removed.
Article 21 para (1): Tentatively support para (1) in concept, provided that para (2) is modified to assure that, as to existing contracting States, no amendment can apply unless accepted formally by that State (the US cannot accept the provision otherwise).
Note that there are other models, such as that used for the Cape Town Convention.
Propose that signatory states as well as contracting states can qualify; this can expand participation and the base of support for the treaty, even among non-contracting states.
Reference to a “conference” can implicate a formal and more costly process that would be unnecessary, and could entail new budgetary coverage that would likely not be feasible. Convening a meeting, such as a Working Group meeting, would be adequate, which could be preceded by experts meetings convened by the Secretariat. The language however should not mandate that the Secretariat undertake any meeting unless budget authority is available. Final action could be taken by the Commission meeting in Plenary session in the normal course and within existing budget resources.
Article 21 para (2): Modify to assure that, at least as to existing contracting States, no amendment can apply unless accepted formally by that State.
This model imports formal voting geared to other UN system bodies where formal voting is the method used for action to be taken, unlike the Commission and a number of other UN bodies. An appropriate alternative would be to refer to procedures of the Commission, and action taken at a Plenary session of the Commission under its normal methods for that.
Article 22: Support current draft six months, oppose lengthening it beyond that. Support three ratifications to bring into force.
Many PIL treaties come into force with three States (including the recent Cape Town Convention; its aircraft Protocol however requires eight states for entry into force, and the CISG required 10, which took eight years). Bringing the convention into force can amplify the interest in that for other states. Contra arguments that wider adoption should first be required are not appropriate here; there is no reason to deny the opportunity for any states that wish to enter into commercial law arrangements with other states through this treaty to do so
Article 23: Tentatively support this language and non-retroactivity in concept. However needs more discussion. Transition rules can in some cases be quite deceptive if viewed as easy language to provide for prospective application. These provisions became major areas of difficulty when details were worked out in both the Cape Town and Hague securities intermediaries conventions.
Article 24: Support as is. Twelve months is commonly used to discourage withdrawal.
US position formulation: since the final text will be presumptively in treaty form (there has been little support for a model law or statement of principles approach), we will need to alter our process somewhat at this stage, given that our positions will be US treaty positions. Broad consultation on an open basis will continue as needed; US positions however will be resolved by the US group, i.e. the US delegation in consultation with ABA reps and reps from US-based NGOs. These positions are not of course binding on the ABA or others outside the delegation, but maximum coordination will be sought.
Resolution of issues at the Commission: the Commission follows what some label as the “substantial prevailing majority” rule, which means that strict unanimity-type consensus does not apply. In other words, a single or small group opposing view cannot ultimately block action. It is that standard that has made possible the progress so far achieved at Uncitral on a number of commercial law topics, since strict consensus would be unlikely to have been reachable in any of its work. This will be a factor at the October and Spring 05 meetings, where an effort will be made, consistent with the Commission’s mandate, to conclude this project by mid-2005; the tendency will be accept existing non-bracketed language unless there is a clear issue for change and some reasonable degree of support.
Commentary: despite regular references to a “commentary”, no decision as to its makeup has been made, and one should be proposed at the upcoming WG (final resolution of that would be done at the Plenary session).
Options: an official text approved line-by-line by the Plenary is not feasible, unless one accepts a delay of at least one year while a text is circulated by the Secretariat and then brought back to the next succeeding Plenary. A more common solution is to authorize the Secretariat after conclusion of the black letter treaty to prepare a commentary text, drawn from the official WG reports and amplified as necessary, submit it for comment by states and in some cases convene an experts group to review it, and then issue it as a Secretariat document. A decision upfront needs to be made as to whether it would be a “legislator’s guide”, indicating the purpose of a provision and clarifying its application as necessary. A second approach is to authorize a more voluminous history, drawing attention to changes through the course of the working group meetings, etc. It is recommended that our position be to support a Secretariat issued legislative guide.
Timing: US group positions should be largely resolved by end of September. Advance indications including open issues should be shared with others on an agreed list basis only. Depending on the lineup of issues, we may want a short statement ready for translation as a CRP at the meeting. The October meeting will effectively be 8 working days on substance, and a final day to be sure that the black letter and report are correct. The goal will be to refine the text as far as possible so that (assuming there is sufficient support for this at the conclusion of that meeting) the text can be circulated for comment either late in 2004 or early in 2005, so that there is ample time for consultation prior to its being considered for possible final action, i.e. Commission approval, at the 2005 July Plenary session.
A last one-week Working Group meeting is scheduled in New York for April 2005, which will hopefully narrow unresolved issues. Proposed changes in the text at that point can be reflected in a Secretariat document but the text as it emerges from the October
meeting will be on the table at the Plenary session. As to the Plenary session, advance indications are that this topic will have at least 7 or possibly 8 working days at the Plenary (it could be up to 10, depending on whether an arbitration topic is also on the table for action), with approval of the black letter text taking place later in the meeting. If there are significant issues that remain unresolved at the Plenary, the choice would be to reschedule final action for the Plenary in 2006, with a possible Working Group meeting in Spring 2006, or defer completion until some later time (the latter is unlikely).
Once completed by the Commission acting at a Plenary session, the text needs to be endorsed by the UN General Assembly, which usually would take place that fall, to be opened as a UN treaty available for ratification (for budget reasons and to avoid a two-year delay or more, we do not normally support any recommendation that “completion” be accomplished at a UN diplomatic conference). There may be an offer of a conference that could take place later for countries to sign the convention.
Consultations: following the October meeting, we will plan several public participation meetings in November and December to review the text as it emerges before formal comments are sent in, which should be by early February 2005 at the latest (volunteers to assist arranging meetings at various locations are welcome; we have an not yet binding offer from one unnamed West coast player). We will also request clearance from various federal agencies involved, since we will at that point have a text ready for full review and negotiation at the 2005 summer Plenary meeting. Consultations will continue with various associations, including ABA sections, NCCUSL, USCIB and others. Implementation issues vis-à-vis existing law will need to be closely factored in.
Treaty analysis: in order to assess the adequacy or Articles 1 and 19, we should initiate the treaty review process that we have discussed. Bill Luddy has offered to be the point person on that, given his existing work reviewing e-commerce issues arising under ICAO and WCO treaty texts. The scope of the review will of course be driven by the final wording of the two Articles, but we can initiate a review to test several formats which would give us an initial idea of how the Variants under Arts.1 or 19 would work.
Future work: as a reminder, the Commission can approve ongoing work for WG IV at its 05 Plenary session, but given the current absence of well-worked proposals on the table is unlikely to do so. We should continue to focus on possible topics for future work which can have sufficient value in a broad-membership international forum, and are ripe enough to develop a text and therefore merit a Secretariat study. While such a study is not a
requirement for Commission approval, its absence would likely result in no immediate authorization for the Working Group to continue (even if a project were approved at the July 05 Plenary, there would be no WG meeting in the fall 05, since that slot is being used for the upcoming October 04 meeting). None of this precludes the Secretariat from scheduling one or more expert group meetings, probably this Fall, to explore possible future work.