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United States: Conventions Proposed by U.N. Commission on International Trade Law Submitted to Senate for Ratification

(Feb. 14, 2017) On November 16, 2016, the U.S. State Department’s Advisory Committee on Private International Law held its annual meeting to discuss ongoing work involving the negotiation and drafting of instruments governing private cross-border transactions. The Committee announced that it had sent transmittal letters for each of several treaty documents to the Senate in hopes of receiving the Senate’s advice and consent to ratification of three conventions proposed by the United Nations Commission on International Trade Law (UNCITRAL).  (S. Treaty Doc. No. 114-5, 2016, CONGRESS.GOV; S. Treaty Doc. No. 114-7, 2016, CONGRESS.GOV; S. Treaty Doc. No. 114-9, 2016, CONGRESS.GOV.)  The United States has already signed two of the three conventions. (Status: United Nations Convention on the Use of Electronic Communications in International Contracts (New York, 2005), UNCITRAL website; Status: United Nations Convention on the Assignment of Receivables in International Trade (New York, 2001), UNCITRAL website; Status: United Nations Convention on Independent Guarantees and Stand-by Letters of Credit (New York, 1995), UNCITRAL website (all last visited Feb. 10, 2017).)

The Committee, after having read each Convention, referred them by the transmittal letters to the Senate Committee on Foreign Relations.  At present, none of the treaties has been reported on or heard for consideration in Congress.  (S. Treaty Doc. No. 114-5, supra; S. Treaty Doc. No. 114-7, supra; S. Treaty Doc. No. 114-9, supra.)

Convention on Independent Guarantees and Stand-by Letters of Credit

The first transmittal letter seeks advice and consent to ratification of the United Nations Convention on Independent Guarantees and Stand-by Letters of Credit, which was adopted on December 11, 1995. The purpose of the Convention is to minimize the uncertainty and inherent risks associated with international business transactions.  The United States signed the Convention on December 11, 1997.  (Status: United Nations Convention on Independent Guarantees and Stand-by Letters of Credit (New York, 1995), supra.)

This Convention’s provisions, with two minor exceptions, are substantively similar to article 5 of the Uniform Commercial Code, which all U.S. states, the District of Columbia, Puerto Rico, and the Virgin Islands have enacted. (S. Treaty Doc. No. 114-9, supra.)  As stated in the documents prepared by the State Department, “[r]atification of this Convention would ensure that global laws governing essential cross-border payment instruments would be similar to the commercial statutes and rules utilized in the United States.”  (Id.)

Convention on the Assignment of Receivables in International Trade

The second letter seeks advice and consent to ratification of the United Nations Convention on the Assignment of Receivables in International Trade, adopted on December 12, 2001, and signed by the United States on December 30, 2003. The purpose of this Convention is to promote the movement of goods across borders by facilitating access to lower-cost credit, particularly for small businesses.  (United Nations Convention on the Assignment of Receivables in International Trade (New York, 2001), UNCITRAL website (last visited Feb. 8, 2017) (click on hyperlinks to view Convention text and status).)

This Convention sets forth modern uniform rules for global receivables financing, to produce the same results as those under article 9 of the Uniform Commercial Code on secured transactions. (S. Treaty Doc. No. 114-7, supra.)  “Drawing on laws and best practices prevalent in the United States and other countries where receivables financing flourishes, the Convention would promote the availability of capital and credit at affordable rates and thus facilitate the development of international commerce.” (Id.)  It is expected that micro, small, and medium enterprises would receive the most benefit from the Convention, because they would be able to obtain often-needed financing to improve U.S. exports in a simplified way and thereby help create more jobs in the United States.  (Id.)

E-Commerce Convention

The third letter requests ratification of the United Nations Convention on the Use of Electronic Communications in International Contracts (E-Commerce Convention), which was adopted on November 23, 2005, and entered into force on March 1, 2013. The goal of the Convention is to facilitate the use of electronic communications by assuring that international commercial contracts concluded and other communications exchanged electronically are as valid as their paper-based equivalents.  (United Nations Convention on the Use of Electronic Communications in International Contracts (New York, 2005), UNCITRAL website (last visited Feb. 8, 2017).)  If ratified, the E-Commerce Convention would be consistent with the widely-adopted domestic Uniform Electronic Transactions Act (UETA), which has established similar requirements in the states where it has been enacted.  (Description: Electronic Transactions Act, UNIFORM LAW COMMISSION website (last visited Feb. 10, 2017).)

In addition to the Convention’s significance in facilitating international digital trade, it appears to further existing U.S. treaty commitments.  Article 20 of the E-Commerce Convention extends the scope of interpretation of past UNCITRAL treaties to which the United States is a Contracting Party.  (United Nations Convention on the Use of Electronic Communications in International Contracts, UN Doc. A/RES/60/515, art. 20, Dec. 11, 1995, U.N. website.)

Specifically, the E-Commerce Convention would eliminate the obstacles posed by certain formal requirements of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the United Nations Convention on Contracts for the International Sale of Goods. (Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), 7 ILM 1046 (1968); United Nations Convention on Contracts for the International Sale of Goods (CISG), 19 ILM 668 (1980); United Nations Convention on the Use of Electronic Communications in International Contracts (New York, 2005), supra.) Ratification of the E-Commerce Convention, it is argued, will be helpful in the interpretation of the New York Convention and the CISG, which are both silent as to the use of electronic communications.  (United Nations Convention on the Use of Electronic Communications in International Contracts (New York, 2005), supra.)

Prospects for Ratification

According to the transmittal documents, the proposed Conventions were endorsed by leading U.S. associations and organizations, particularly the American Bar Association, the Institute for International Banking Law and Practice, and the United States Council on International Business. (S. Treaty Doc. No. 114-5, 114-7, & 114-9, supra.)  Despite these endorsements, potential delays in the ratification process could arise, because two of the three Conventions are not self-executing and would require implementation legislation.  (Id.)

Furthermore, because U.S. practitioners have shown their strong preference for the Uniform Commercial Code over some existing U.S. treaty obligations otherwise applicable by default, even the slightest variations in the proposed treaties could create some opposition to their ratification. (Peter F. Fitzgerald, The International Contracting Practices Survey Project: An Empirical Study of the Value and Utility of the United Nation’s Convention on the International Sale of Goods (CISG) and the Unidroit Principles of International Commercial Contracts to Practitioners, Jurists, and Legal Academics in the United States, 27 JOURNAL OF LAW AND COMMERCE 1, at 1, 14-15 (2008).)

Prepared by Alexander Janvelian, Law Library Extern, under the supervision of Peter Roudik, Director of Legal Research.