Report of the United Nations Commission on International Trade Law on its thirty-fourth session

A/56/17

United Nations

Report of the United NationsCommission on InternationalTrade Law on itsthirty-fourth session25 June-13 July 2001

General AssemblyOfficial RecordsFifty-sixth sessionSupplement No. 17 (A/56/17)

Report of the United NationsCommission on InternationalTrade Law on itsthirty-fourth session

25 June-13 July 2001

General AssemblyOfficial RecordsFifty-sixth sessionSupplement No. 17 (A/56/17)

United Nations • New York, 2001

Note

Symbols of United Nations documents are composed of capital letterscombined with figures. Mention of such a symbol indicates a reference to a UnitedNations document.

ISSN 0251-9127

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[Original: English][27 July 2001]

ContentsChapter Paragraphs Page

I. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-2 1

II. Organization of the session . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-12 1

A. Opening of the session . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1

B. Membership and attendance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-8 1

C. Election of officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2

D. Agenda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2

E. Establishment of two Committees of the Whole . . . . . . . . . . . . . . . . . . . . . . . . . 11 3

F. Adoption of the report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3

III. Draft Convention on assignment of receivables in international trade. . . . . . . . . . . . 13-200 3

A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13-15 3

B. Consideration of draft articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16-194 3

C. Report of the drafting group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195-197 38

D. Procedure for the adoption of the draft Convention . . . . . . . . . . . . . . . . . . . . . . 198-199 38

E. Decision of the Commission and recommendation to theGeneral Assembly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 38

IV. Draft UNCITRAL Model Law on Electronic Signatures and draft Guide toEnactment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201-284 39

A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201-203 39

B. Consideration of comments from Governments and internationalorganizations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204-237 40

C. Consideration of the remainder of the draft articles . . . . . . . . . . . . . . . . . . . . . . 238-273 46

D. Consideration of the draft Guide to Enactment of the UNCITRAL ModelLaw on Electronic Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274-283 51

E. Adoption of the Model Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284 53

V. Possible future work on electronic commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285-295 54

VI. Insolvency law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296-308 56

VII. Settlement of commercial disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309-315 58

VIII. Monitoring the implementation of the 1958 New York Convention. . . . . . . . . . . . . . 316-318 60

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IX. Possible future work on transport law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319-345 60

X. Possible future work on security interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346-359 65

XI. Possible future work on privately financed infrastructure projects . . . . . . . . . . . . . . 360-369 67

XII. Enlargement of the membership of the Commission . . . . . . . . . . . . . . . . . . . . . . . . . . 370-375 69

XIII. Working methods of the Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376-383 71

XIV. Case law on UNCITRAL texts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384-385 72

XV. Digest of United Nations Sales Convention case law: interpretation of texts . . . . . . 386-395 73

XVI. Training and technical assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396-403 75

XVII. Status and promotion of UNCITRAL legal texts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404-407 76

XVIII. General Assembly resolution on the work of the Commission . . . . . . . . . . . . . . . . . . 408-417 77

XIX. Coordination and cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418-420 78

A. Asian-African Legal Consultative Organization . . . . . . . . . . . . . . . . . . . . . . . . . 418 78

B. Permanent Court of Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419 78

C. Southeast European Cooperative Initiative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420 79

XX. Other business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421-423 79

A. Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421 79

B. Willem C. Vis International Commercial Arbitration Moot . . . . . . . . . . . . . . . . 422-423 79

XXI. Date and place of future meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 424-425 80

A. Thirty-fifth session of the Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 424 80

B. Sessions of working groups. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 80

Annexes

I. Draft Convention on the Assignment of Receivables in International Trade. . . . . . . . . . . . . . . . 82

II. UNCITRAL Model Law on Electronic Signatures (2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

III. List of documents before the Commission at its thirty-fourth session . . . . . . . . . . . . . . . . . . . . . 103

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Chapter IIntroduction

1. The present report of the United NationsCommission on International Trade Law (UNCITRAL)covers the thirty-fourth session of the Commission,held in Vienna from 25 June to 13 July 2001.

2. Pursuant to General Assembly resolu-tion 2205 (XXI) of 17 December 1966, the presentreport is submitted to the Assembly and is alsosubmitted for comment to the United NationsConference on Trade and Development (UNCTAD).

Chapter IIOrganization of the session

A. Opening of the session

3. UNCITRAL commenced its thirty-fourth sessionon 25 June 2001. The session was opened by JeffreyChan Wah Teck (Singapore), immediate past Chairmanof the Commission.

B. Membership and attendance

4. In its resolution 2205 (XXI), the GeneralAssembly established the Commission with amembership of 29 States, elected by the Assembly. Inits resolution 3108 (XXVIII) of 12 December 1973, theAssembly increased the membership of theCommission from 29 to 36 States. The currentmembers of the Commission, elected on 24 November1997 and on 16 October 2000, are the following States,whose term of office expires on the last day prior to thebeginning of the annual session of the Commission inthe year indicated:1 Austria (2004), Benin (2007),Brazil (2007), Burkina Faso (2004), Cameroon (2007),Canada (2007), China (2007), Colombia (2004), Fiji(2004), France (2007), Germany (2007), Honduras(2004), Hungary (2004), India (2004), Iran (IslamicRepublic of) (2004), Italy (2004), Japan (2007), Kenya(2004), Lithuania (2004), Mexico (2007), Morocco(2007), Paraguay (2004), Romania (2004), RussianFederation (2007), Rwanda (2007), Sierra Leone(2007), Singapore (2007), Spain (2004), Sudan (2004),Sweden (2007), Thailand (2004), the former YugoslavRepublic of Macedonia (2007), Uganda (2004), United

States of America (2004), United Kingdom of GreatBritain and Northern Ireland (2007) and Uruguay(2004, alternating annually with Argentina).

5. With the exception of Benin, Paraguay andUganda, all the members of the Commission wererepresented at the session.

6. The session was attended by observers from thefollowing States: Argentina, Australia, Azerbaijan,Belgium, Bulgaria, Croatia, Cuba, Cyprus, CzechRepublic, Democratic People’s Republic of Korea,Ecuador, Egypt, Finland, Greece, Guatemala,Indonesia, Iraq, Ireland, Kuwait, Lebanon, LibyanArab Jamahiriya, Luxembourg, Malawi, Malaysia,Nigeria, Panama, Peru, Philippines, Poland, Portugal,Qatar, Republic of Korea, Saudi Arabia, Slovakia,Slovenia, Switzerland, Turkey, Ukraine, Venezuela,Viet Nam, Yugoslavia and Zimbabwe.

7. The session was also attended by observers fromthe following international organizations:

(a) United Nations system

International Monetary Fund

United Nations Conference on Trade andDevelopment

(b) Intergovernmental organizations

Asian-African Legal Consultative Organization

European Bank for Reconstruction andDevelopment

European Centre for Peace and Development

International Institute for the Unification ofPrivate Law

Organisation for Economic Cooperation andDevelopment

Organisation intergouvernementale pour lestransports internationaux ferroviaires

Permanent Court of Arbitration

Southeast European Cooperative Initiative

(c) International non-governmental organizationsinvited by the Commission

Association internationale des jeunes avocats

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Association of the Bar of the City of New York

Cairo Regional Centre for InternationalCommercial Arbitration

Chartered Institute of Arbitrators

Commercial Finance Association

European Banking Federation

European Federation of Factoring Associations

European Law Students Association

European Lawyers’ Union

Factors Chain International

Institute for International Legal Information

International Chamber of Commerce

International Law Association

International Maritime Committee

International Swaps and Derivatives Association

Moot Alumni Association

University of the West Indies

8. The Commission was appreciative of the fact thatinternational non-governmental organizations that hadexpertise regarding the major items on the agenda ofthe current session had accepted the invitation to takepart in the meetings. Aware that it was crucial for thequality of texts it formulated that relevant non-governmental organizations should participate in itssessions and in its working groups, the Commissionrequested the Secretariat to continue to invite suchorganizations to its sessions based on their particularqualifications.

C. Election of officers2

9. The Commission elected the following officers:

Chairman: Alejandro Ogarrio Ramirez-España(Mexico)

Vice-Chairmen: Louis-Paul Enouga (Cameroon)Xiaoyan Zhou (China)David Morán Bovio (Spain)

Rapporteur: Victoria Gavrilescu (Romania)

D. Agenda

10. The agenda of the session, as adopted by theCommission at its 711th meeting, on 25 June 2001, wasas follows:

1. Opening of the session.

2. Election of officers.

3. Adoption of the agenda.

4. Draft Convention on Assignment ofReceivables in International Trade.

5. Draft UNCITRAL Model Law on ElectronicSignatures and draft Guide to Enactment.

6. Possible future work on electroniccommerce.

7. Insolvency law.

8. Settlement of commercial disputes.

9. Monitoring implementation of the 1958New York Convention.

10. Possible future work on transport law.

11. Possible future work on security interests.

12. Possible future work on privately financedinfrastructure projects.

13. Enlargement of membership of theCommission.

14. Working methods of the Commission.

15. Case law on UNCITRAL texts (CLOUT).

16. Digest of United Nations Sales Conventioncase law: interpretation of texts.

17. Training and technical assistance.

18. Status and promotion of UNCITRAL legaltexts.

19. General Assembly resolutions on the workof the Commission.

20. Coordination and cooperation.

21. Other business.

22. Date and place of future meetings.

23. Adoption of the report of the Commission.

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E. Establishment of two Committees ofthe Whole

11. The Commission established two Committees ofthe Whole (Committee I and Committee II) andreferred to them for consideration agenda items 4and 5, respectively. The Commission elected LeonelPerez-Nieto Castro (Mexico) Chairman of Committee Iand José María Abascal Zamora (Mexico) Chairman ofCommittee II. Committee I met from 25 June to 2 Julyand held 12 meetings. Committee II met from 3 to6 July and held 8 meetings. On 2 July, David MoránBovio (Vice-Chairman of the Commission) substitutedfor the Chairman of Committee I.

F. Adoption of the report12. At its 722nd, 730th, 737th and 738th meetings, on2, 6 and 13 July 2001, the Commission adopted thepresent report by consensus.

Chapter IIIDraft Convention on assignment ofreceivables in international trade

A. Introduction

13. Pursuant to a decision taken by the Commissionat its twenty-eighth session in 1995,3 the WorkingGroup devoted its twenty-fourth to thirty-first sessionsto the preparation of a uniform law on assignment ofreceivables (for the reports of those sessions, seedocuments A/CN.9/420, A/CN.9/432, A/CN.9/434,A/CN.9/445, A/CN.9/447, A/CN.9/455, A/CN.9/456and A/CN.9/466). The work was carried out on thebasis of background papers prepared by the Secretariat.

14. At its thirty-first session, the Working Groupcompleted its work and submitted to the Commission,at its thirty-third session, a draft Convention onAssignment of Receivables in International Trade (forthe report of the Working Group, see A/CN.9/466).At that session, the Commission adopted draftarticles 1-17 of the draft Convention and referred theremaining draft articles back to the Working Group.4The Commission had before it:

(a) Text of the draft Convention as adopted bythe Working Group (A/CN.9/466, annex I);

(b) An analytical commentary on the draftConvention prepared by the Secretariat (A/CN.9/470);

(c) Comments by Governments and interna-tional organizations (A/CN.9/472 and Add.1-5).

The Working Group met in December 2000 andcompleted the task assigned to it by the Commission(for the report of the Working Group, see A/CN.9/486).

15. At its current session, the Commission had beforeit:

(a) Consolidated version of the draftConvention as adopted by the Working Group(A/CN.9/486, annex I);

(b) A revised version of the analyticalcommentary on the draft Convention prepared by theSecretariat (A/CN.9/489 and Add.1);

(c) Comments by Governments and inter-national organizations (A/CN.9/490 and Add.1-5);

(d) Report on pending and other issues preparedby the Secretariat (A/CN.9/491).

In view of the fact that the Commission had consideredand adopted draft articles 1-17 at its thirty-thirdsession, it decided to begin its considerations with draftarticle 18.

B. Consideration of draft articles

Article 18: Notification of the debtor

16. The text of draft article 18 as considered by theCommission was as follows:

“1. Notification of the assignment or apayment instruction is effective when received bythe debtor if it is in a language that is reasonablyexpected to inform the debtor about its contents.It is sufficient if notification of the assignment ora payment instruction is in the language of theoriginal contract.

“2. Notification of the assignment or apayment instruction may relate to receivablesarising after notification.

“3. Notification of a subsequent assign-ment constitutes notification of all prior assign-ments.”

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17. The suggestion was made that notification of theassignment should be exclusively in the language ofthe original contract. It was widely felt, however, thatthe more flexible formulation of paragraph 1, whichallowed for a notification to be given in any languagethat was “reasonably expected” to be understood by thedebtor, was preferable. After discussion, theCommission approved the substance of article 18unchanged and referred it to the drafting group.

Article 19: Debtor’s discharge by payment


“1. Until the debtor receives notificationof the assignment, the debtor is entitled to bedischarged by paying in accordance with theoriginal contract.

“2. After the debtor receives notificationof the assignment, subject to paragraphs 3 to 8 ofthis article, the debtor is discharged only bypaying the assignee or, if otherwise instructed inthe notification of the assignment or subsequentlyby the assignee in a writing received by thedebtor, in accordance with such paymentinstruction.

“3. If the debtor receives more than onepayment instruction relating to a singleassignment of the same receivable by the sameassignor, the debtor is discharged by paying inaccordance with the last payment instructionreceived from the assignee before payment.

“4. If the debtor receives notification ofmore than one assignment of the same receivablemade by the same assignor, the debtor isdischarged by paying in accordance with the firstnotification received.

“5. If the debtor receives notification ofone or more subsequent assignments, the debtoris discharged by paying in accordance with thenotification of the last of such subsequentassignments.

“6. If the debtor receives notification ofthe assignment of a part of or an undividedinterest in one or more receivables, the debtor isdischarged by paying in accordance with thenotification or in accordance with this article as if

the debtor had not received the notification. If thedebtor pays in accordance with the notification,the debtor is discharged only to the extent of thepart or undivided interest paid.

“7. If the debtor receives notification ofthe assignment from the assignee, the debtor isentitled to request the assignee to provide withina reasonable period of time adequate proof thatthe assignment from the initial assignor to theinitial assignee and any intermediate assignmenthave been made and, unless the assignee does so,the debtor is discharged by paying in accordancewith this article as if the notification from theassignee had not been received. Adequate proofof an assignment includes but is not limited toany writing emanating from the assignor andindicating that the assignment has taken place.

“8. This article does not affect any otherground on which payment by the debtor to theperson entitled to payment, to a competentjudicial or other authority, or to a public depositfund discharges the debtor.”

19. With respect to paragraph 2, the question wasraised whether the debtor would need to determinebefore paying that an assignment had actually beenmade and that that assignment was valid. In response,it was noted that the Working Group had approvedparagraph 2 on the understanding that that matter wasnot a problem in practice and thus did not need to beaddressed in the draft Convention (see A/CN.9/456,para. 192, and A/CN.9/466, paras. 128 and 131). It wasalso stated that a person with sufficient knowledgeabout a transaction to notify the debtor would in mostcases be a genuine assignee. In addition, it wasobserved that placing on the debtor the risk of theinvalidity of an assignment was appropriate and in linewith currently existing national law.

20. As to paragraph 6, the concern was expressed thatit could undermine practices involving partialassignments. In order to address that concern, thesuggestion was made that paragraph 6 should bedeleted. That suggestion was objected to. It was statedthat paragraph 6 did not invalidate partial assignments.It merely provided that, unless the debtor agreed tonotification of a partial assignment, the assignee wouldhave to obtain payment through other means (forexample, by structuring the financing transaction alongthe lines of draft art. 26, para. 2). It was also observed

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that, if paragraph 6 were to be deleted, the issue ofadditional cost to the debtor arising as a result of theneed to pay several assignees would need to beaddressed by giving the debtor the right to seekcompensation. In that context, it was recalled that theWorking Group had considered that alternative anddecided not to adopt it. Paragraph 6 was adoptedinstead in order to protect the debtor in a sufficient butflexible way, without creating liability and withoutprescribing in a regulatory manner what the assignor,the assignee or the debtor should do (see A/CN.9/491,para. 19).

21. As to paragraph 7, a number of concerns wereexpressed. One concern was that paragraph 7 did notadequately cover situations in which subsequentassignments were combined with duplicate assign-ments (where, for example, A assigned to B and Bassigned to D, while A assigned also to C andC assigned to E). It was widely felt, however, thatparagraph 7, in combination with paragraphs 4 and 5,was sufficient. Another concern was that paragraph 7failed to address the question whether the paymentobligation was suspended or the debtor was in breachand subject to paying interest, if payment became duewhile the debtor would wait to receive the adequateproof requested. In response, it was recalled that theWorking Group had decided not to address that matterexplicitly in the draft Convention, since statingexplicitly that the payment obligation was suspendedmight encourage abusive practices and, in any case,interest-related matters did not lend themselves tounification (see A/CN.9/466, paras. 126-128 andA/CN.9/456, para. 189). It was also observed that ifpayment became due before the debtor received theinformation requested and had time to act on it and thedebtor had no way to safely discharge its obligation, itwas implicit in paragraph 7 that the payment obligationwould be suspended. In addition, it was pointed outthat paragraph 7 was based on the assumption that insuch a case, under paragraph 8, the debtor coulddischarge its obligation in different ways (e.g. by wayof payment into court or a deposit fund). It was agreedthat that matter could usefully be clarified in thecommentary on the draft Convention.

22. Yet another concern was that paragraph 7 failedto protect the debtor in situations where the debtorwould misjudge the proof provided by the assignee.While that concern was met with some sympathy, itwas agreed that that problem could be resolved only by

requiring that notification be given by the assignor orby the assignee with the consent of the assignor. It wasstated that that would be a radical and unwelcomechange in the draft Convention, since the right of theassignee to notify the debtor independently of theassignor was one of the essential features of the draftConvention. After discussion, the Commissionapproved the substance of article 19 unchanged andreferred it to the drafting group.

Article 20: Defences and rights of set-off of thedebtor


“1. In a claim by the assignee against thedebtor for payment of the assigned receivables,the debtor may raise against the assignee alldefences and rights of set-off arising from theoriginal contract, or any other contract that waspart of the same transaction, of which the debtorcould avail itself if such claim were made by theassignor.

“2. The debtor may raise against theassignee any other right of set-off, provided thatit was available to the debtor at the timenotification of the assignment was received.

“3. Notwithstanding paragraphs 1 and 2 ofthis article, defences and rights of set-off that thedebtor may raise pursuant to article 11 against theassignor for breach of agreements limiting in anyway the assignor’s right to assign its receivablesare not available to the debtor against theassignee.”

24. It was noted that, in some jurisdictions, if theassignment was effective, the debtor could lose anyright of set-off. In order to avoid that result, it wasagreed that the words “as if the assignment had neverbeen made” should be inserted at the end ofparagraph 1.

25. The suggestion was made that the substance ofdraft article 30 should be included in draft article 20 toensure that it would not be subject to an opt-out byStates. In support, it was stated that it was essential forfinanciers to know what their rights and thecountervailing rights of debtors were or, at least, towhich law to look to determine what those rights were.That suggestion was objected to. It was observed that

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the rule in draft article 30 should remain subject to anopt-out, since it did not belong in a substantive lawtext. It was also stated that including in draft article 20a rule along the lines of draft article 30 would undulycomplicate draft article 20, since the public policy andmandatory law exceptions of draft articles 32 and 33would also need to be reproduced in draft article 20.

26. The view was expressed that paragraph 2 shouldbe aligned with draft article 19, paragraph 6, leavingthe effectiveness of a notification of a partial assign-ment for all relevant purposes to the discretion of thedebtor. Recalling the decision of the Working Group onthat matter (see A/CN.9/486, para. 19), theCommission felt that such an approach would unneces-sarily undermine existing practices. It was stated thatthe rule in draft article 19, paragraph 6, was justifiedby the need to protect the debtor from additional cost, aneed that did not arise in draft article 20, paragraph 2.

27. The suggestion was also made that in paragraph 3reference should be made to draft article 12, whichreproduced the rule contained in draft article 11,paragraph 1. Subject to that change and the changereferred to in paragraph 24 above, the Commissionapproved the substance of draft article 20 and referredit to the drafting group.

Article 21: Agreement not to raise defences or rightsof set-off


“1. Without prejudice to the lawgoverning the protection of the debtor in trans-actions made for personal, family or householdpurposes in the State in which the debtor islocated, the debtor may agree with the assignor ina writing signed by the debtor not to raise againstthe assignee the defences and rights of set-off thatit could raise pursuant to article 20. Such anagreement precludes the debtor from raisingagainst the assignee those defences and rights ofset-off.

“2. The debtor may not exclude:

“(a) Defences arising from fraudulent actson the part of the assignee; or

“(b) Defences based on the debtor’sincapacity.

“3. Such an agreement may be modifiedonly by an agreement in a writing signed by thedebtor. The effect of such a modification asagainst the assignee is determined by article 22,paragraph 2.”

29. The Commission approved the substance of draftarticle 21 unchanged and referred it to the draftinggroup (for a change decided later in the discussion, seepara. 186).

Article 22: Modification of the original contract


“1. An agreement concluded before notifi-cation of the assignment between the assignorand the debtor that affects the assignee’s rights iseffective as against the assignee and the assigneeacquires corresponding rights.

“2. After notification of the assignment,an agreement between the assignor and the debtorthat affects the assignee’s rights is ineffective asagainst the assignee unless:

“(a) The assignee consents to it; or

“(b) The receivable is not fully earned byperformance and either the modification isprovided for in the original contract or, in thecontext of the original contract, a reasonableassignee would consent to the modification.

“3. Paragraphs 1 and 2 of this article donot affect any right of the assignor or the assigneefor breach of an agreement between them.”

31. The Commission approved the substance of draftarticle 22 unchanged and referred it to the draftinggroup.

Article 23: Recovery of payments


“Without prejudice to the law governing theprotection of the debtor in transactions made forpersonal, family or household purposes in theState in which the debtor is located, failure of theassignor to perform the original contract does notentitle the debtor to recover from the assignee a

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sum paid by the debtor to the assignor or theassignee.”

33. The Commission approved the substance of draftarticle 23 unchanged and referred it to the draftinggroup (for a change decided later in the discussion, seepara. 186).

Section III: Other parties

Article 24: Law applicable to competing rights


“1. With the exception of matters that aresettled elsewhere in this Convention and subjectto articles 25 and 26:

“(a) With respect to the right of acompeting claimant, the law of the State in whichthe assignor is located governs:

“(i) The characteristics and priority of theright of an assignee in the assignedreceivable; and

“(ii) The characteristics and priority of theright of the assignee in proceeds that arereceivables whose assignment is governedby this Convention[;

“(b) With respect to the right of acompeting claimant, the characteristics andpriority of the right of the assignee in proceedsdescribed below are governed by:

“(i) In the case of money or negotiableinstruments not held in a bank account orthrough a securities intermediary, the law ofthe State in which such money or instru-ments are located;

“(ii) In the case of investment securitiesheld through a securities intermediary, thelaw of the State in which the securitiesintermediary is located;

“(iii) In the case of bank deposits, the lawof the State in which the bank is located[;and

“(iv) In the case of receivables whoseassignment is governed by this Convention,the law of the State in which the assignor islocated];

“[(c) The existence and characteristics ofthe right of a competing claimant in proceedsdescribed in paragraph 1 (b) of this article aregoverned by the law indicated in that paragraph]].

“2. For the purposes of this article andarticle 31, the characteristics of a right are:

“(a) Whether it is a personal or propertyright; and

“(b) Whether or not it is security forindebtedness or other obligation.”

35. It was noted that subparagraphs (b) and (c) ofparagraph 1 raised both a problem of substance and aproblem of procedure. The problem of substance aroseas a result of the lack of a universally acceptablesolution as to the law applicable to priority issues withrespect to deposit accounts. It also related to thedifficulty to reach consensus as to the location of abank (or an account). The problem of procedure relatedto the need to ensure that draft article 24 would beconsistent with the approach taken in the draftConvention on the law applicable to dispositions ofsecurities currently being prepared by the HagueConference on Private International Law. In thatregard, it was noted that the place of the relevantintermediary approach (PRIMA) appeared to emergefrom the Hague Conference as a generally acceptablesolution but that it would be very difficult for theCommission to reach agreement on a text that would beconsistent with the text of the Hague Conference whichhad not been finalized yet. It was also stated that, nomatter how important subparagraphs (b) and (c) mightbe, their finalization would take time and couldsignificantly delay the adoption of the draft Conventionby the Commission. It was, therefore, observed thatfinanciers would need to rely on draft article 26 inorder to ensure priority with respect to proceeds. As tothe priority rule with respect to proceeds in the form ofnegotiable instruments, it was agreed that, whileagreement could be reached on a rule along the lines ofparagraph 1 (b) (i), in the absence of a rule as to thelaw applicable to priority issues with respect to depositaccounts and securities, paragraph 1 (b) (i) would notbe sufficient in addressing the most typical proceeds ofreceivables. After discussion, it was agreed thatsubparagraphs (b) and (c) of paragraph 1 should bedeleted.

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36. As to paragraph 1 (a) (ii), differing views wereexpressed. One view was that it could be deleted since,in any case, it would not cover the most typicalproceeds of receivables, namely, deposit accounts,negotiable instruments and securities. Another viewwas that paragraph 1 (a) (ii) remained useful andshould be retained. After discussion, the Commissionagreed that paragraph 1 (a) (ii) could be removed fromdraft article 24 on the understanding that its placementin draft article 26 would be considered at a later stage(see para. 45).

37. With respect to paragraph 2, the concern wasexpressed that it might inappropriately refer mattersunrelated to priority to the law of the assignor’slocation. In order to address that concern, thesuggestion was made that paragraph 2 should bedeleted. That suggestion was objected to on the groundthat the matters addressed in paragraph 2 could arise inthe context of and be very relevant to a priorityconflict. In order to make that point sufficiently clear,the suggestion was made that the thrust of paragraph 2should be recast in the context of article 5,subparagraph (g) (definition of “priority”). There wassufficient support for that suggestion on the under-standing that it would make it abundantly clear that thematters addressed in paragraph 2 would be referred tothe law of the assignor’s location only to the extentthey were relevant for the purpose of determiningpriority. After discussion, subject to the deletion ofparagraphs 1 (a) (ii), (b) and (c) and 2, the considera-tion of the inclusion of paragraph 1 (a) (ii) in draftarticle 26 and the inclusion of the thrust of paragraph 2in draft article 5, subparagraph (g), the Commissionapproved the substance of draft article 24 and referredit and draft article 5, subparagraph (g), to the draftinggroup (for changes to draft article 5, subparagraph (g),decided later, see paras. 149 and 162).

Article 25: Public policy and preferential rights


“1. The application of a provision of thelaw of the State in which the assignor is locatedmay be refused by a court or other competentauthority only if that provision is manifestlycontrary to the public policy of the forum State.

“2. In an insolvency proceeding com-menced in a State other than the State in which

the assignor is located, any preferential right thatarises, by operation of law, under the law of theforum State and is given priority status over therights of an assignee in insolvency proceedingsunder the law of that State may be given prioritynotwithstanding article 24. A State may deposit atany time a declaration identifying any suchpreferential right.”

39. The concern was expressed that the word“manifestly” in paragraph 1 introduced an inappro-priate limitation to the ability of a court or othercompetent authority to refuse the application of aprovision of the applicable law that was contrary to thepublic policy of the forum State. In order to addressthat concern, the suggestion was made that that wordshould be deleted. That suggestion was objected to. Itwas widely felt that the word “manifestly” wasnecessary to ensure that public policy exceptionswould be interpreted restrictively and paragraph 1would be invoked only in exceptional circumstancesconcerning matters of fundamental importance for theforum State. It was also noted that the notion“manifestly contrary” was typically used in moderninternational texts, such as the UNCITRAL Model Lawon Cross-Border Insolvency (see art. 6).

40. The suggestion was also made that paragraph 1should make it clear that the application of a provisionof the applicable law and not the provision itselfneeded to be manifestly contrary to the public policy ofthe forum State. Furthermore, the suggestion was madethat paragraph 2 should state explicitly what wasimplied, namely, that, with the exception of the rulesreferred to in paragraph 2, the mandatory law rules ofthe forum or another State that were applicableirrespective of the law otherwise applicable could notdisplace the priority rules of the law of the assignor’slocation (see A/CN.9/489/Add.1, para. 40). Subject tothose changes, the Commission approved the substanceof draft article 25 and referred it to the drafting group.

Article 26: Special proceeds rules


“1. If proceeds are received by theassignee, the assignee is entitled to retain thoseproceeds to the extent that the assignee’s right inthe assigned receivable had priority over the right

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of a competing claimant in the assignedreceivable.

“2. If proceeds are received by theassignor, the right of the assignee in those pro-ceeds has priority over the right of a competingclaimant in those proceeds to the same extent asthe assignee’s right had priority over the right inthe assigned receivable of those claimants if:

“(a) The assignor has received the pro-ceeds under instructions from the assignee to holdthe proceeds for the benefit of the assignee; and

“(b) The proceeds are held by the assignorfor the benefit of the assignee separately and arereasonably identifiable from the assets of theassignor, such as in the case of a separate depositaccount containing only cash receipts fromreceivables assigned to the assignee.”

42. The concern was expressed that draft article 26would unduly interfere with currently existing nationallaw that treated payment in cash differently frompayment through other means and was not familiarwith the notion of proceeds or tracing of assets. It wasstated that, under such law, payments made to theassignor would be part of the assignor’s assets and theassignee could not assert a property right in suchpayments. In order to address that concern, thesuggestion was made that draft article 26 should bemade subject to a reservation. That suggestion wasobjected to. It was widely felt that draft article 26introduced a special rule applicable only where partieschose to structure their transactions in a certain way soas to take advantage of the protection afforded by draftarticle 26. It was stated that such a rule, which was notunlike special national legislation, could benefit partiesto securitization or confidential invoice discountingtransactions, which were common practice all over theworld and on the basis of which parties were able toobtain more credit and at a more affordable cost. It wasalso observed that drafting a rule so as to treat cashdifferently from other proceeds presupposed that aclear distinction could be drawn between cash and, forexample, cash in deposit or securities accounts andnegotiable instruments or securities, which was noteasy in today’s economy.

43. It was noted that, in the case of a conflict ofpriority between a securities intermediary with a rightin securities as original collateral and an assignee

under the draft Convention with a right in securities asproceeds, different results could be reached dependingon whether draft article 26 or the place of the relevantintermediary approach (PRIMA) applied. It was alsonoted that the same problem could arise in the case of apriority conflict between a depository institution with asecurity right in or a right of set-off against a depositaccount as original collateral and an assignee assertinga right in the deposit account as proceeds; and in thecase of a transferee of a deposit or securities account asoriginal collateral and an assignee with a right in suchaccount as proceeds of an assigned receivable. In orderto address that problem, it was suggested that languagealong the following lines should be added in draftarticle 26 as paragraph 3:

“Nothing in paragraph 2 of this articleaffects the priority of a right, not derived from thereceivable, of a person holding a right created byagreement or of a person holding a right of set-off.”

44. That suggestion received sufficient support. As analternative, language along the following lines wasproposed:

“Nothing in paragraph 2 affects the priorityas against the assignee, under law outside thisConvention, of a right, not derived from thereceivable, of (i) a person holding a consensualsecurity right in the proceeds, (ii) a consensualtransferee of the proceeds for value, or (iii) aperson holding a right of set-off against theproceeds.”

45. In response to a question as to the differencebetween the two proposals, it was stated that, while theunderlying policy of both proposals was the same, thesecond proposal was more precise. As a matter ofdrafting, the suggestion was also made that inparagraph 2 (b) indicative reference should be made tosecurities and securities accounts. Subject to thatchange in paragraph 2 (b) and to including in draftarticle 26 a new paragraph along the lines of theproposals mentioned above, the Commission approvedthe substance of draft article 26 and referred it to thedrafting group (the Commission, however, did notconsider the question of including language along thelines of draft article 24, paragraph 1 (a) (ii), in draftarticle 26).

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Article 27: Subordination


“An assignee entitled to priority may at anytime subordinate its priority unilaterally or byagreement in favour of any existing or futureassignees.”


Chapter VAutonomous conflict-of-laws rules

Article 28: Application of chapter V


“The provisions of this chapter apply tomatters that are:

“(a) Within the scope of this Convention asprovided in article 1, paragraph 4; and

“(b) Otherwise within the scope of thisConvention but not settled elsewhere in it.”


Article 29: Law applicable to the mutual rights andobligations of the assignor and the assignee


“1. The mutual rights and obligations ofthe assignor and the assignee arising from theiragreement are governed by the law chosen bythem.

“2. In the absence of a choice of law bythe assignor and the assignee, their mutual rightsand obligations arising from their agreement aregoverned by the law of the State with which thecontract of assignment is most closelyconnected.”

51. The Commission approved the substance of draftarticle 29 unchanged and referred it to the drafting

group. The Commission took note of a proposal toinclude in chapter V a provision on form and deferredits discussion until it had considered draft article 8 (seeparas. 163 and 164).

Article 30: Law applicable to the rights andobligations of the assignee and the debtor


“The law governing the original contractdetermines the effectiveness of contractual limi-tations on assignment as between the assigneeand the debtor, the relationship between theassignee and the debtor, the conditions underwhich the assignment can be invoked against thedebtor and any question whether the debtor’sobligations have been discharged.”


Article 31: Law applicable to competing rights ofother parties


“1. With the exception of matters that aresettled elsewhere in this Convention and subjectto articles 25 and 26:

“(a) With respect to the right of acompeting claimant, the law of the State in whichthe assignor is located governs:

“(i) The characteristics and priority of theright of an assignee in the assignedreceivable; and

“(ii) The characteristics and priority of theright of the assignee in proceeds that arereceivables whose assignment is governedby this Convention[;

“(b) With respect to the right of a com-peting claimant, the characteristics and priority ofthe right of the assignee in proceeds describedbelow are governed by:

“(i) In the case of money or negotiableinstruments not held in a bank account orthrough a securities intermediary, the law of

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the State in which such money or instru-ments are located;

“(ii) In the case of investment securitiesheld through a securities intermediary, thelaw of the State in which the securitiesintermediary is located;

“(iii) In the case of bank deposits, the lawof the State in which the bank is located[;and

“(iv) In the case of receivables whoseassignment is governed by this Convention,the law of the State in which the assignor islocated];

“[(c) The existence and characteristics ofthe right of a competing claimant in proceedsdescribed in paragraph 1 (b) of this article aregoverned by the law indicated in that paragraph]].

“2. In an insolvency proceeding com-menced in a State other than the State in whichthe assignor is located, any preferential right thatarises, by operation of law, under the law of theforum State and is given priority status over therights of an assignee in insolvency proceedingsunder the law of that State may be given prioritynotwithstanding paragraph 1 of this article.”

55. It was agreed that paragraph 1 should be alignedwith draft article 24. It was also agreed that theopening words of draft article 24, “with the exceptionof … 26,”, could be deleted on the understanding thatdraft article 28 was sufficient to deal with the hierarchybetween draft article 31 and other provisions of thedraft Convention outside chapter V and that thereference to draft article 25 was sufficiently covered bydraft articles 31, paragraph 2, 32 and 33. In particular,as to the hierarchy between draft articles 24-26 and 31,it was widely felt that, if the assignor was not locatedin a Contracting State, draft articles 24-26 could notapply (see draft art. 28, subpara. (a)), while, if theassignor was located in a Contracting State, draftarticle 31 would not apply, since the matter coveredtherein would be settled in draft articles 24-26 (seedraft art. 28, subpara. (b)). It was also agreed thatparagraph 2 could be retained in its currentformulation, since the matter addressed in the wordingadded to its equivalent draft article 25 (see para. 40)was sufficiently covered in draft article 32 (see,however, para. 196). Subject to the changes mentioned

above, the Commission approved the substance of draftarticle 31 and referred it to the drafting group.

Article 32: Mandatory rules


“1. Nothing in articles 29 and 30 restrictsthe application of the rules of the law of theforum State in a situation where they are manda-tory, irrespective of the law otherwise applicable.

“2. Nothing in articles 29 and 30 restrictsthe application of the mandatory rules of the lawof another State with which the matters settled inthose articles have a close connection if and in sofar as, under the law of that other State, thoserules must be applied irrespective of the lawotherwise applicable.”


Article 33: Public policy


“With regard to matters settled in thischapter, the application of a provision of the lawspecified in this chapter may be refused by acourt or other competent authority only if thatprovision is manifestly contrary to the publicpolicy of the forum State.”

59. Subject to the same changes made to draftarticle 25, paragraph 1 (see para. 40), the Commissionapproved the substance of draft article 33 and referredit to the drafting group.

Chapter VIFinal provisions

Article 34: Depositary


“The Secretary-General of the UnitedNations is the depositary of this Convention.”

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Article 35: Signature, ratification, acceptance,approval, accession


“1. This Convention is open for signatureby all States at the Headquarters of the UnitedNations in New York, until [...].

“2. This Convention is subject to ratifi-cation, acceptance or approval by the signatoryStates.

“3. This Convention is open to accessionby all States that are not signatory States as fromthe date it is open for signature.

“4. Instruments of ratification, acceptance,approval and accession are to be deposited withthe Secretary-General of the United Nations.”


Article 36: Application to territorial units


“1. If a State has two or more territorialunits in which different systems of law areapplicable in relation to the matters dealt with inthis Convention, it may, at any time, declare thatthis Convention is to extend to all its territorialunits or only one or more of them, and may at anytime substitute another declaration for its earlierdeclaration.

“2. Such declarations are to stateexpressly the territorial units to which thisConvention extends.

“3. If, by virtue of a declaration under thisarticle, this Convention does not extend to allterritorial units of a State and the assignor or thedebtor is located in a territorial unit to which thisConvention does not extend, this location isconsidered not to be in a Contracting State.

“4. If a State makes no declaration underparagraph 1 of this article, the Convention is toextend to all territorial units of that State.”

65. A number of concerns were expressed withrespect to draft article 36. One concern was thatparagraph 1 might introduce some uncertainty in that itallowed States to make a declaration “at any time”. Inorder to address that concern, it was suggested thatparagraph 1 be revised to provide that declarationsshould be made at the time of signature, ratification,acceptance, approval or accession. It was widely felt,however, that the flexibility provided to States inparagraph 1 as to the time a declaration could be madewas common practice in international conventions(including, for example, the United NationsConvention on Independent Guarantees and Stand-byLetters of Credit (General Assembly resolution 50/48,annex)) and did not raise any problems.

66. Another concern was that the term “territorialunit” might not fully encompass what was reflected bythe French term “collectivité territoriale” or by theterm “jurisdiction”. It was generally agreed, however,that the term “territorial unit” was sufficiently broadfor that purpose, a matter that could be usefullyclarified in the commentary on the draft Convention. Itwas stated in particular that the words in paragraph 1qualifying the term “territorial unit” by reference to adifferent “system of law” were sufficiently general toensure that different territorially defined jurisdictionswould be covered. It was also observed that federalstate clauses along the lines of draft article 36 werenormally included in international conventions and theapplication of such clauses had not raised anyproblems. Yet another concern was that paragraph 3might create uncertainty as to the application of thedraft Convention and should be deleted. Thatsuggestion was objected to. It was stated that, without arule along the lines of paragraph 3, federal States thathad no right to bind territorial units would not be ableto adopt international conventions. After discussion,the Commission approved the substance of draft article36 unchanged and referred it to the drafting group (fora later addition to draft art. 36, see para. 187).

Article 37: Applicable law in territorial units


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“[If a State has two or more territorial unitswhose law may govern a matter referred to inchapters IV and V of this Convention, a referencein those chapters to the law of a State in which aperson or property is located means the lawapplicable in the territorial unit in which theperson or property is located, including rules thatrender applicable the law of another territorialunit of that State. Such a State may specify bydeclaration at any time how it will implement thisarticle.]”

68. The suggestion was made that language along thefollowing lines should be substituted for draftarticle 37:

“If a State has two or more territorial units,the location of a person within that State shall bethe territorial unit in which the central adminis-tration of the person is exercised or, if the personhas no place of business, its habitual residence,unless that State specifies by declaration otherrules for determining the location of a personwithin that State.”

69. The Commission took note of the proposed textand, in order to give delegates the opportunity to studyit, decided to defer discussion to a later point in time(see paras. 187 and 188).

Article 38: Conflicts with other internationalagreements


“1. This Convention does not prevail overany international agreement that has already beenor may be entered into and that contains provi-sions concerning the matters governed by thisConvention, provided that the assignor is locatedat the time of the conclusion of the contract ofassignment in a State party to such agreement or,with respect to the provisions of this Conventionthat deal with the rights and obligations of thedebtor, at the time of the conclusion of theoriginal contract, the debtor is located in a Stateparty to such agreement or the law governing theoriginal contract is the law of a State party tosuch agreement.

“2. Notwithstanding paragraph 1 of thisarticle, this Convention prevails over the Unidroit

Convention on International Factoring (“theOttawa Convention”). If, at the time of theconclusion of the original contract, the debtor islocated in a State party to the Ottawa Conventionor the law governing the original contract is thelaw of a State party to the Ottawa Convention andthat State is not a party to this Convention,nothing in this Convention precludes the applica-tion of the Ottawa Convention with respect to therights and obligations of the debtor.”

71. The concern was expressed that, in referring to“matters” governed by two international agreements,paragraph 1 might not be sufficiently clear. In order toaddress that concern, the suggestion was made that thewords “concerning the matters” should be replacedwith the words “specifically governing transactionsotherwise”. It was stated that the suggested wordingwould ensure that the draft Unidroit Convention onInternational Interests in Mobile Equipment (“the draftUnidroit Convention”) would prevail only where it wasspecifically applicable to a transaction. Some concernwas expressed as to the impact of that change on thedraft Unidroit Convention. However, the Commissionapproved that change on the understanding that thematter might need to be revisited in the context of laterdiscussions on the relationship between the draftConvention and the draft Unidroit Convention (seeparas. 190-194).

72. The concern was also expressed that the secondsentence of paragraph 2 might not achieve its purposeof ensuring that, if the draft Convention did not applyto the rights and obligations of a debtor, it would notpreclude the application of the Ottawa Convention withrespect to the rights and obligations of that debtor. Inorder to address that concern, the suggestion was madethat that sentence should be replaced by language alongthe following lines:

“To the extent that this Convention does notapply to the rights and obligations of a debtor, itdoes not preclude the application of the OttawaConvention with respect to the rights andobligations of that debtor.”

There was sufficient support for that suggestion.

73. In the discussion, the suggestion was made thatthe commentary should state that various regulationsand directives of regional organizations should betreated as international agreements for the purpose of

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draft article 38. That suggestion was objected to. It wasstated that such an approach would risk underminingthe effectiveness of the international legislative processin general and the draft Convention in particular. It wasalso observed that, for that reason, obligations betweenmembers to various regional organizations should notinterfere with obligations undertaken in multilaterallegislative texts. In addition, it was pointed out that thepurpose of the commentary was not to address a matterthat, in any case, would have to be left to the courts.Furthermore, it was said that, in view of the largenumber of regional regulations or directives, reviewingall those texts would be an impossible task.

74. Subject to the changes referred to above (seeparas. 71 and 72) and to its further deliberations onthe relationship between the draft Convention and thedraft Unidroit Convention (see paras. 190-194), theCommission approved the substance of draft article 38and referred it to the drafting group.

Article 39: Declaration on application of chapter V


“A State may declare at any time that it willnot be bound by chapter V.”


Article 40: Limitations relating to Governments andother public entities


“A State may declare at any time that it willnot be bound or the extent to which it will not bebound by articles 11 and 12 if the debtor or anyperson granting a personal or property rightsecuring payment of the assigned receivable islocated in that State at the time of the conclusionof the original contract and is a Government,central or local, any subdivision thereof, or anentity constituted for a public purpose. If a Statehas made such a declaration, articles 11 and 12 donot affect the rights and obligations of that debtoror person. A State may list in a declaration thetypes of entity that are the subject of adeclaration.”


Article 41: Other exclusions


“[1. A State may declare at any time that itwill not apply this Convention to types ofassignment or to the assignment of categories ofreceivables listed in a declaration. In such a case,this Convention does not apply to such types ofassignment or to the assignment of suchcategories of receivables if the assignor is locatedat the time of the conclusion of the contract ofassignment in such a State or, with respect to theprovisions of this Convention that deal with therights and obligations of the debtor, at the time ofthe conclusion of the original contract, the debtoris located in such a State or the law governing theoriginal contract is the law of such a State.

“2. After a declaration under paragraph 1of this article takes effect:

“(a) This Convention does not apply tosuch types of assignment or to the assignment ofsuch categories of receivables if the assignor islocated at the time of the conclusion of thecontract of assignment in such a State; and

“(b) The provisions of this Convention thataffect the rights and obligations of the debtor donot apply if, at the time of the conclusion of theoriginal contract, the debtor is located in such aState or the law governing the receivable is thelaw of such a State.]”

80. It was noted that both draft article 41, which setforth the effect of a declaration, and draft article 4,paragraph 4, which permitted a State to make such adeclaration, appeared within square brackets, since theWorking Group had not been able to reach agreementon those provisions.

81. Views that had been expressed at the last sessionof the Working Group both in favour and against theretention of draft article 41 were reiterated (seeA/CN.9/486, paras. 115-118). On the one hand, it wasargued that draft article 41 should be retained toprovide the necessary flexibility for States to adjust the

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scope of the draft Convention to their needs byexcluding present practices other than those excludedin draft article 4 and future practices for which thedraft Convention might not be suitable and whichcould not be predicted at the present time. It wasunderscored in particular that, even if draft article 4were to cover fully all present practices that should beexcluded, draft article 41 would still be needed so as toprovide flexibility with respect to future practices. Theexample of dematerialized securities was given toemphasize the need for such flexibility with respect tonew and rapidly developing practices. It was stated thatsuch an approach would increase the acceptability ofthe draft Convention to States. It was also observedthat the declaration mechanism was sufficientlytransparent and would not create problems in practice.The Commission was urged, however, to try to simplifydraft article 41. The view was also expressed that,while flexibility was welcome, it should be reflected inthe draft Convention in a balanced way. In order toachieve that result, it was suggested that the draftConvention should allow States to utilize thedeclaration mechanism not only to exclude but also toinclude further practices. In response, it was stated thatthat suggestion could also be considered on theunderstanding that it would relate to practices forwhich the draft Convention would be suitable. Non-contractual receivables were mentioned as an exampleof receivables for the assignment of which the draftConvention would not be suitable.

82. On the other hand, it was argued that an approachbased on exclusions by declaration would riskundermining the certainty and uniformity achieved bythe draft Convention. It was pointed out that, if Stateswere allowed to exclude any practice they wished, thescope of the draft Convention could differ from Stateto State, and parties would have to identify andinterpret the relevant declarations, which might notalways be easy. It was also observed that the revisionmechanism provided in draft article 47 was sufficientto meet the needs of future practices. In addition, it wasstated that, in view of the fact that such declarationswould exclude the application of the draft Convention,they would constitute reservations subject toreciprocity, a result that could complicate theapplication of the draft Convention. Furthermore, itwas pointed out that the advantage of creating aninternational uniform regime was the necessarycounterweight for States that would have to change

their own law to adopt the draft Convention. If thatadvantage was lost or minimized, those States might bereluctant to adopt the draft Convention. Moreover, itwas emphasized that an open-ended authorization forexclusions could inadvertently result in Statesexcluding assignments of trade receivables orassignments of receivables arising from contracts thatcontained an anti-assignment clause. It was pointed outthat the possibility for such exclusions would createuncertainty, since financiers of trade receivables wouldvirtually have to look over their shoulders fordeclarations by States. Such a result, it was said, couldsignificantly reduce the usefulness of the draftConvention. In order to avoid such a deleterious result,it was suggested that, at least, draft article 41 shouldmake it clear that practices relating to the assignmentof trade receivables could not be excluded bydeclaration.

83. The Commission generally recognized that draftarticle 41 might need to describe or list the practicesthat could be excluded by declaration. It was alsowidely felt that the content of such a list could not bedetermined before finalization of draft article 4. TheCommission, therefore, decided to defer furtherdiscussion on draft article 41 until it had completed itsconsideration of draft article 4 (see paras. 141-146). Anote of caution was struck, however, that discussionshould not be reopened with respect to draft article 4,since the Commission had approved that provision atits thirty-third session.

Article 42: Application of the annex


“1. A State may at any time declare that itwill be bound by:

“(a) The priority rules set forth in section Iof the annex and will participate in theinternational registration system establishedpursuant to section II of the annex;

“(b) The priority rules set forth in section Iof the annex and will effectuate such rules by useof a registration system that fulfils the purposesof such rules, in which case, for the purposes ofsection I of the annex, registration pursuant tosuch a system has the same effect as registrationpursuant to section II of the annex;

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“(c) The priority rules set forth insection III of the annex;

“(d) The priority rules set forth insection IV of the annex; or

“(e) The priority rules set forth in articles 7and 8 of the annex.

“2. For the purposes of article 24:

“(a) The law of a State that has made adeclaration pursuant to paragraph 1 (a) or (b) ofthis article is the set of rules set forth in section Iof the annex;

“(b) The law of a State that has made adeclaration pursuant to paragraph 1 (c) of thisarticle is the set of rules set forth in section III ofthe annex;

“(c) The law of a State that has made adeclaration pursuant to paragraph 1 (d) of thisarticle is the set of rules set forth in section IV ofthe annex; and

“(d) The law of a State that has made adeclaration pursuant to paragraph 1 (e) of thisarticle is the set of rules set forth in articles 7and 8 of the annex.

“3. A State that has made a declarationpursuant to paragraph 1 of this article mayestablish rules pursuant to which assignmentsmade before the declaration takes effect becomesubject to those rules within a reasonable time.

“4. A State that has not made adeclaration pursuant to paragraph 1 of this articlemay, in accordance with priority rules in force inthat State, utilize the registration systemestablished pursuant to section II of the annex.

“5. At the time a State makes adeclaration pursuant to paragraph 1 of this articleor thereafter, it may declare that it will not applythe priority rules chosen under paragraph 1 of thisarticle to certain types of assignment or to theassignment of certain categories of receivables.”

85. A number of suggestions were made. Onesuggestion was that, in order to clarify the relationshipbetween paragraphs 2 and 5, language along thefollowing lines should be added at the end ofsubparagraphs (a)-(d) of paragraph 2: “as effected by

any declaration made pursuant to paragraph 5 of thisarticle”. Another suggestion was that States should beallowed to adopt the provisions of the annex withmodifications to be specified in a declaration.Language along the following lines was proposed foraddition at the end of paragraph 5: “or that it will applythose priority provisions with modifications specifiedin that declaration”. Subject to those changes, theCommission approved the substance of draft article 42and referred it to the drafting group.

Article 43: Effect of declaration


“1. Declarations made under articles 36,paragraph 1, 37 or 39 to 42 at the time ofsignature are subject to confirmation uponratification, acceptance or approval.

“2. Declarations and confirmations ofdeclarations are to be in writing and to beformally notified to the depositary.

“3. A declaration takes effect simul-taneously with the entry into force of thisConvention in respect of the State concerned.However, a declaration of which the depositaryreceives formal notification after such entry intoforce takes effect on the first day of the monthfollowing the expiration of six months after thedate of its receipt by the depositary.

“4. A State that makes a declaration underarticles 36, paragraph 1, 37 or 39 to 42 maywithdraw it at any time by a formal notification inwriting addressed to the depositary. Suchwithdrawal takes effect on the first day of themonth following the expiration of six monthsafter the date of the receipt of the notification bythe depositary.

“5. In the case of a declaration underarticles 36, paragraph 1, 37 or 39 to 42 that takeseffect after the entry into force of this Conventionin respect of the State concerned or in the case ofa withdrawal of any such declaration, the effect ofwhich in either case is to cause a rule in thisConvention, including any annex, to becomeapplicable:

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“(a) Except as provided in paragraph 5 (b)of this article, that rule is applicable only toassignments for which the contract of assignmentis concluded on or after the date when thedeclaration or withdrawal takes effect in respectof the Contracting State referred to in article 1,paragraph 1 (a);

“(b) A rule that deals with the rights andobligations of the debtor applies only in respectof original contracts concluded on or after thedate when the declaration or withdrawal takeseffect in respect of the Contracting State referredto in article 1, paragraph 3.

“6. In the case of a declaration underarticles 36, paragraph 1, 37 or 39 to 42 that takeseffect after the entry into force of this Conventionin respect of the State concerned or in the case ofa withdrawal of any such declaration, the effect ofwhich in either case is to cause a rule in thisConvention, including any annex, to becomeinapplicable:

“(a) Except as provided in paragraph 6 (b)of this article, that rule is inapplicable toassignments for which the contract of assignmentis concluded on or after the date when thedeclaration or withdrawal takes effect in respectof the Contracting State referred to in article 1,paragraph 1 (a);

“(b) A rule that deals with the rights andobligations of the debtor is inapplicable in respectof original contracts concluded on or after thedate when the declaration or withdrawal takeseffect in respect of the Contracting State referredto in article 1, paragraph 3.

“7. If a rule rendered applicable orinapplicable as a result of a declaration orwithdrawal referred to in paragraph 5 or 6 of thisarticle is relevant to the determination of prioritywith respect to a receivable for which the contractof assignment is concluded before such declara-tion or withdrawal takes effect or with respect toits proceeds, the right of the assignee has priorityover the right of a competing claimant to theextent that, under the law that would determinepriority before such declaration or withdrawaltakes effect, the right of the assignee would havepriority.”


Article 44: Reservations


“No reservations are permitted except thoseexpressly authorized in this Convention.”

89. It was suggested that the commentary shouldclarify the application of draft article 44 by referenceto two possible drafting changes (i.e. adding the words“or declarations” after the word “reservations” ordeleting the words after the word “permitted”). TheCommission approved the substance of draft article 44unchanged and referred it to the drafting group.

Article 45: Entry into force


“1. This Convention enters into force onthe first day of the month following the expirationof six months from the date of deposit of the fifthinstrument of ratification, acceptance, approval oraccession with the depositary.

“2. For each State that becomes aContracting State to this Convention after thedate of deposit of the fifth instrument ofratification, acceptance, approval or accession,this Convention enters into force on the first dayof the month following the expiration of sixmonths after the date of deposit of the appropriateinstrument on behalf of that State.

“3. This Convention applies only toassignments if the contract of assignment is con-cluded on or after the date when this Conventionenters into force in respect of the ContractingState referred to in article 1, paragraph 1 (a),provided that the provisions of this Conventionthat deal with the rights and obligations of thedebtor apply only to assignments of receivablesarising from original contracts concluded on orafter the date when this Convention enters intoforce in respect of the Contracting State referredto in article 1, paragraph 3.

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“4. If a receivable is assigned pursuant toa contract of assignment concluded before thedate when this Convention enters into force inrespect of the Contracting State referred to inarticle 1, paragraph 1 (a), the right of the assigneehas priority over the right of a competingclaimant with respect to the receivable and itsproceeds to the extent that, under the law thatwould determine priority in the absence of thisConvention, the right of the assignee would havepriority.”

91. Subject to the deletion of the word “proceeds” inparagraph 4, which was the result of the deletion of theproceeds rules in draft article 24 (see para. 37), theCommission approved the substance of draft article 45and referred it to the drafting group.

Article 46: Denunciation


“1. A Contracting State may denouncethis Convention at any time by written notifica-tion addressed to the depositary.

“2. The denunciation takes effect on thefirst day of the month following the expirationof one year after the notification is receivedby the depositary. Where a longer period isspecified in the notification, the denunciationtakes effect upon the expiration of such longerperiod after the notification is received by thedepositary.

“3. This Convention remains applicable toassignments if the contract of assignment isconcluded before the date when the denunciationtakes effect in respect of the Contracting Statereferred to in article 1, paragraph 1 (a), providedthat the provisions of this Convention that dealwith the rights and obligations of the debtorremain applicable only to assignments ofreceivables arising from original contractsconcluded before the date when the denunciationtakes effect in respect of the Contracting Statereferred to in article 1, paragraph 3.

“4. If a receivable is assigned pursuant toa contract of assignment concluded before thedate when the denunciation takes effect in respectof the Contracting State referred to in article 1,

paragraph 1 (a), the right of the assignee haspriority over the right of a competing claimantwith respect to the receivable and its proceeds tothe extent that, under the law that woulddetermine priority under this Convention, theright of the assignee would have priority.”

93. Subject to the deletion of the term “proceeds” inparagraph 4, which was the result of the deletion of theproceeds rules in draft article 24 (see para. 37), theCommission approved the substance of draft article 46and referred it to the drafting group.

Article 47: Revision and amendment


“1. At the request of not less than onethird of the Contracting States to this Convention,the depositary shall convene a conference ofthe Contracting States for revising or amendingit.

“2. Any instrument of ratification, accept-ance, approval or accession deposited after theentry into force of an amendment to thisConvention is deemed to apply to the Conventionas amended.”

95. In view of the suggestion that the revisionmechanism provided in draft article 47 might be usedin adjusting the draft Convention to meet the needs offuture practices (see para. 82), the Commissionpostponed discussion of draft article 47 until it hadcompleted its discussion on draft articles 4,paragraph 4, and 41 (see para. 146).

Annex to the draft ConventionSection IPriority rules based on registration

Article 1: Priority among several assignees

96. The text of draft article 1 of the annex asconsidered by the Commission was as follows:

“As between assignees of the samereceivable from the same assignor, the priority ofthe right of an assignee in the assigned receivableand its proceeds is determined by the order inwhich data about the assignment are registered

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under section II of this annex, regardless of thetime of transfer of the receivable. If no such dataare registered, priority is determined by the orderof the conclusion of the respective contracts ofassignment.”

97. Subject to the deletion of the reference toproceeds (see para. 37), the Commission approved thesubstance of draft article 1 of the annex and referred itto the drafting group.

Article 2: Priority between the assignee and theinsolvency administrator or creditors of the assignor


“The right of an assignee in an assignedreceivable and its proceeds has priority over theright of an insolvency administrator and creditorswho obtain a right in the assigned receivable orits proceeds by attachment, judicial act or similaract of a competent authority that gives rise tosuch right, if the receivable was assigned, anddata about the assignment were registered undersection II of this annex, before the commence-ment of such insolvency proceeding, attachment,judicial act or similar act.”


Section IIRegistration

Article 3: Establishment of a registration system


“A registration system will be establishedfor the registration of data about assignments,even if the relevant assignment or receivable isnot international, pursuant to the regulations to bepromulgated by the registrar and the supervisingauthority. Regulations promulgated by theregistrar and the supervising authority under thisannex shall be consistent with this annex. Theregulations will prescribe in detail the manner inwhich the registration system will operate, as well

as the procedure for resolving disputes relating tothat operation.”

101. The concern was expressed that draft article 3 ofthe annex gave significant responsibilities to the super-vising authority and the registrar without specifying themethod of their appointment. In order to address thatconcern, a number of suggestions were made. Onesuggestion was that draft article 3 of the annex shouldbe reformulated to deal with the matter in more generalterms. That suggestion did not receive sufficientsupport. Another suggestion was that the method ofdesignating the supervising authority and the registrarshould be expressly settled in the draft Convention.Language along the following lines was proposed (seeA/CN.9/491, para. 26):

“At the request of not less than one third ofthe [Contracting] [Signatory] States to thisConvention, the depositary shall convene aconference of the [Contracting] [Signatory] Statesfor designating the supervising authority and thefirst registrar, and for preparing the firstregulations and for revising or amending them.”

102. There was sufficient support in the Commissionfor that proposal. It was agreed that both Contractingand Signatory States should be allowed to request andparticipate in a conference. After discussion, theCommission approved the substance of draft article 3of the annex, as well as of the proposed text mentionedabove (deleting the brackets), and referred bothprovisions to the drafting group.

Article 4: Registration


“1. Any person may register data withregard to an assignment at the registry inaccordance with this annex and the regulations.As provided in the regulations, the data registeredshall be the identification of the assignor and theassignee and a brief description of the assignedreceivables.

“2. A single registration may cover one ormore assignments by the assignor to the assigneeof one or more existing or future receivables,irrespective of whether the receivables exist at thetime of registration.

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“3. A registration may be made inadvance of the assignment to which it relates. Theregulations will establish the procedure for thecancellation of a registration in the event that theassignment is not made.

“4. Registration or its amendment iseffective from the time when the data set forth inparagraph 1 of this article are available tosearchers. The registering party may specify,from options set forth in the regulations, a periodof effectiveness for the registration. In theabsence of such a specification, a registration iseffective for a period of five years.

“5. Regulations will specify the manner inwhich registration may be renewed, amended orcancelled and regulate such other matters as arenecessary for the operation of the registrationsystem.

“6. Any defect, irregularity, omission orerror with regard to the identification of theassignor that would result in data registered notbeing found upon a search based on a properidentification of the assignor renders theregistration ineffective.”

104. The Commission approved the substance of draftarticle 4 of the annex unchanged and referred it to thedrafting group.

Article 5: Registry searches


“1. Any person may search the records ofthe registry according to identification of theassignor, as set forth in the regulations, andobtain a search result in writing.

“2. A search result in writing that purportsto be issued by the registry is admissible asevidence and is, in the absence of evidence to thecontrary, proof of the registration of the data towhich the search relates, including the date andhour of registration.”

106. The Commission approved the substance of draftarticle 5 of the annex unchanged and referred it to thedrafting group.

Section IIIPriority rules based on the time of the contract ofassignment



“As between assignees of the samereceivable from the same assignor, the priority ofthe right of an assignee in the assigned receivableand its proceeds is determined by the order of theconclusion of the contract of assignment.”


Article 7: Priority between the assignee andthe insolvency administrator or creditors ofthe assignor


“The right of an assignee in an assignedreceivable and its proceeds has priority over theright of an insolvency administrator and creditorswho obtain a right in the assigned receivable orits proceeds by attachment, judicial act or similaract of a competent authority that gives rise tosuch right, if the receivable was assigned beforethe commencement of such insolvency pro-ceeding, attachment, judicial act or similar act.”


Additional provision in section III

111. In order to address the issue of proof of the timeof conclusion of the contract of assignment, wordingalong the following lines was proposed:

“The time of conclusion of a contract ofassignment in respect of articles 6 and 7 may beproved by any means.”

There was broad support in the Commission for theproposed text. After discussion, the Commission

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approved the substance of the proposal and referred itto the drafting group.

Section IVPriority rules based on the time of notification ofassignment



“As between assignees of the samereceivable from the same assignor, the priority ofthe right of an assignee in the assigned receivableand its proceeds is determined by the order inwhich notification of the assignment is effected.”

113. The concern was expressed that a priority systembased on notification might not be as efficient as itshould be for it to be recommended to States. Inresponse, it was pointed out that such a system existedand was functioning well in many countries. It was alsostated that the purpose of the annex was not to ratedifferent priority systems but to present them in abalanced and comprehensive way.

114. In order to better reflect the relevant rule, it wassuggested that draft article 8 of the annex should besupplemented by language along the following lines:

“However, an assignee with knowledge of aprior assignment at the time of its assignmentmay not obtain priority over the priorassignment.”

It was also suggested that, for the same reason,reference should be made to the time notification of theassignment was received by the debtor rather than tothe time when notification of the assignment waseffected. Subject to those modifications and to thedeletion of the reference to proceeds (see para. 37), theCommission approved the substance of draft article 8of the annex and referred it to the drafting group.

Article 9: Priority between the assignee and theinsolvency administrator or creditors of the assignor


“The right of an assignee in an assignedreceivable and its proceeds has priority over theright of an insolvency administrator and creditors

who obtain a right in the assigned receivable orits proceeds by attachment, judicial act or similaract of a competent authority that gives rise tosuch right, if the receivable was assigned andnotification was effected before the commence-ment of such insolvency proceeding, attachment,judicial act or similar act.”


Title and preamble

117. The text of the title and the preamble of the draftConvention as considered by the Commission was asfollows:

“Draft Convention on Assignment ofReceivables in International Trade

“Preamble

“The Contracting States,

“Reaffirming their conviction that inter-national trade on the basis of equality and mutualbenefit is an important element in the promotionof friendly relations among States,

“Considering that problems created byuncertainties as to the content and the choice oflegal regime applicable to the assignment ofreceivables constitute an obstacle to internationaltrade,

“Desiring to establish principles and toadopt rules relating to the assignment ofreceivables that would create certainty andtransparency and promote the modernization ofthe law relating to assignments of receivables,while protecting existing assignment practicesand facilitating the development of new practices,

“Desiring also to ensure adequate protec-tion of the interests of debtors in assignments ofreceivables,

“Being of the opinion that the adoption ofuniform rules governing the assignment of

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receivables would promote the availability ofcapital and credit at more affordable rates andthus facilitate the development of internationaltrade,

“Have agreed as follows:”

118. The Commission agreed to include the definitearticle “the” before the word “assignment” in the titleof the draft Convention. Subject to that change, theCommission approved the substance of the title and thepreamble of the draft Convention and referred them tothe drafting group.

Chapter IScope of application

Article 1: Scope of application


“1. This Convention applies to:

“(a) Assignments of international receiv-ables and to international assignments ofreceivables as defined in this chapter, if, at thetime of the conclusion of the contract ofassignment, the assignor is located in aContracting State; and

“(b) Subsequent assignments, provided thatany prior assignment is governed by thisConvention.

“2. This Convention applies to subsequentassignments that satisfy the criteria set forth inparagraph 1 (a) of this article, even if it did notapply to any prior assignment of the samereceivable.

“3. This Convention does not affect therights and obligations of the debtor unless, at thetime of the conclusion of the original contract, thedebtor is located in a Contracting State or the lawgoverning the original contract is the law of aContracting State.

“4. The provisions of chapter V apply toassignments of international receivables and tointernational assignments of receivables asdefined in this chapter independently of

paragraphs 1 and 2 of this article. However, thoseprovisions do not apply if a State makes adeclaration under article 39.

“5. The provisions of the annex to thisConvention apply as provided in article 42.”

120. The Commission approved the substance of draftarticle 1 unchanged and referred it to the drafting group(for a change decided later, see para. 196).

Article 2: Assignment of receivables


“For the purposes of this Convention:

“(a) ‘Assignment’ means the transfer byagreement from one person (‘assignor’) toanother person (‘assignee’) of all or part of or anundivided interest in the assignor’s contractualright to payment of a monetary sum (‘receivable’)from a third person (‘debtor’). The creation ofrights in receivables as security for indebtednessor other obligation is deemed to be a transfer;

“(b) In the case of an assignment by theinitial or any other assignee (‘subsequent assign-ment’), the person who makes that assignment isthe assignor and the person to whom thatassignment is made is the assignee.”


Article 3: Internationality


“A receivable is international if, at the timeof the conclusion of the original contract, theassignor and the debtor are located in differentStates. An assignment is international if, at thetime of the conclusion of the contract of assign-ment, the assignor and the assignee are located indifferent States.”


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Article 4: Exclusions


“1. This Convention does not apply toassignments made:

“(a) To an individual for his or herpersonal, family or household purposes;

“(b) By the delivery of a negotiableinstrument, with an endorsement, if necessary;

“(c) As part of the sale or change in theownership or legal status of the business out ofwhich the assigned receivables arose.

“2. This Convention does not apply toassignments of receivables arising under or from:

“(a) Transactions on a regulated exchange;

“(b) Financial contracts governed bynetting agreements, except a receivable owed onthe termination of all outstanding transactions;

“(c) Bank deposits;

“(d) Inter-bank payment systems, inter-bank payment agreements or investment securi-ties settlement systems;

“(e) A letter of credit or independentguarantee;

“(f) The sale, loan or holding of oragreement to repurchase investment securities.

“3. This Convention does not:

“(a) Affect whether a property right in realestate confers a right in a receivable related tothat real estate or determine the priority of such aright in the receivable with respect to the com-peting right of an assignee of the receivable; or

“(b) Make lawful the acquisition of pro-perty rights in real estate not permitted under thelaw of the State where the real estate is located.

“[4. This Convention does not apply toassignments listed in a declaration made underarticle 41 by the State in which the assignor islocated, or with respect to the provisions of thisConvention that deal with the rights andobligations of the debtor, by the State in which

the debtor is located or the State whose law is thelaw governing the original contract.]”

Paragraph 1

126. It was noted that the Working Group had referredto the Commission the question whether transfers ofnegotiable instruments by delivery without a necessaryendorsement or by a book entry should be excluded orbe made subject to a priority rule other than that indraft article 24. In order to address that question, it wassuggested that paragraph 1 (b) be replaced withwording along the following lines: “This Conventiondoes not affect the rights and obligations of any personunder negotiable instrument law” (see A/CN.9/491,paras. 27 and 28).

127. Support was expressed for that suggestion. It wasstated that it appropriately focused on the transfer of aninstrument by negotiation rather than on the type of theinstrument. It was also observed that it was consistentwith the policy of paragraph 1 (b), as approved by theCommission at its thirty-third session, to preserve therights and obligations of parties obtaining a right bynegotiation, without excluding the assignment of theunderlying contractual receivable, if such assignmentwas permitted under law applicable outside the draftConvention (see A/CN.9/491, para. 28, andA/CN.9/489, para. 45).

128. However, a number of concerns were expressed.One concern was that the meaning of the term“negotiable instrument law” was not clear. In order toaddress that concern, the suggestion was made thatreference should be made to “the law governingnegotiable instruments”. It was also suggested that thecommentary could explain that the term “negotiableinstrument” encompassed bills of exchange,promissory notes and cheques. Another concern wasthat the words “does not affect”, the exact meaning ofwhich was not sufficiently clear, appeared to changethe effect of paragraph 1 (b). In response, it was notedthat the words were used in a number of provisions ofthe draft Convention (e.g. draft art. 4, para. 3 (a)) andwere intended to ensure that, while a particular type ofassignment was covered, rights of certain parties (e.g.priority rights) under law applicable outside the draftConvention would not be affected.

129. Yet another concern was that the proposedwording did not cover the rights and obligations of aperson acquiring rights in an instrument by mere

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delivery. In order to address that concern, thesuggestion was made that paragraph 1 (b) should bereplaced by wording along the following lines: “ThisConvention does not affect the rights of an assignee inpossession of an instrument under the law of the Statein which the instrument was situated.” While interestwas expressed in the proposed text, a number ofconcerns were also expressed. One concern was that itinappropriately expanded the scope of paragraph 1 (b)to cover instruments that were transferred by meansother than negotiation. Another concern was that, likethe text proposed above (see para. 126), the newlyproposed text changed the effect of paragraph 1 (b) inthat it did not exclude the transfer of an instrument bynegotiation. Another concern was that use of the term“assignee in possession of an instrument” might beconfusing, since it was not meant to refer to anassignee as defined in draft article 2, paragraph 1.

130. The Commission expressed its willingness toreplace paragraph 1 (b) with a text along the lines ofthe text mentioned in paragraph 126 above. However, itwas reiterated that that text would not address therights of a person in possession of an instrument underlaw other than negotiable instrument law (e.g. pledgelaw); the rights of a person in an instrument that wasnot technically a negotiable instrument but wastransferred by delivery; and the rights of a person in anelectronic instrument transferable by book entry orcontrol. In response, it was stated that there should beno exception for instruments other than negotiableinstruments and, in effect, priority disputes between anassignee and a pledgee or another person in possessionof an instrument should be referred to the law of theassignor’s location. Otherwise, it was said, in view ofthe difficulty in drawing a clear distinction betweennegotiable and other instruments, the proposedexception could encompass even trade receivables. Inan effort to bridge the gap between the differing viewsas to whether the exception in paragraph 1 (b) shouldencompass instruments transferable in a way similar tonegotiation, the suggestion was made that wordingalong the following lines could be added to the textproposed in paragraph 126 above: “The same ruleapplies to transfers made in the same manner asnegotiation”. It was stated that that text would coverthe pledge or delivery of a non-negotiable instrument,as well as the transfer of an electronic instrument.While some support was expressed for that text, it was

stated that it created an exception in cases where noexception should be made.

131. After discussion, the Commission reiterated itssupport for the text referred to in paragraph 126 aboveand expressed its willingness to explore the possibilityfor an amendment along the lines of the text proposedin paragraph 129 above. Discussion focused on arevised text that was as follows:

“Nothing in this Convention affects:

“(a) The rights of a person in possession ofa negotiable [or similarly transferable] instrumentunder the laws of the State in which theinstrument is situated; and

“(b) The obligations of a party to anegotiable [or similarly transferable] instrument.”

132. It was stated that the effect of that provisionwould be to preserve the rights (e.g. priority rights) ofan issuer or the holder of an instrument under the lawof the State in which the instrument was located. Whilesome support was expressed for that proposal, anumber of concerns were also expressed. One concernwas that the words “or similarly transferable” couldinadvertently create an exception for instruments forwhich no such an exception should be established (e.g.documents evidencing financial leases). Anotherconcern was that the reference to “possession” couldcover even rights not derived from the instrument. Inorder to address those concerns, a number of sugges-tions were made, including the suggestions to refer to“instruments transferable by mere delivery or bydelivery and endorsement” or to “instruments trans-ferable by negotiation”.

133. However, those suggestions too were objected to.It was widely felt that the text mentioned in para-graph 126 above would be preferable, slightly revisedto read along the following lines: “This Conventiondoes not affect the rights and obligations of a personunder the law governing negotiable instruments”. Itwas stated that “law governing negotiable instruments”was broader than “negotiable instrument law” andwould include the law of pledge of negotiableinstruments. Subject to the deletion of paragraph 1 (b)and the introduction of a new paragraph in draftarticle 4 along the lines of the text just mentioned, theCommission approved paragraph 1 and referred it tothe drafting group.

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Paragraph 2

134. It was stated that subparagraphs (a) and (b)appropriately excluded, inter alia, foreign exchangetransactions. However, the concern was expressed thatthey might not be sufficient to exclude all foreignexchange transactions since such transactions couldtake place outside a regulated exchange or withoutbeing governed by a netting agreement. In order toaddress that concern, the suggestion was made thatforeign exchange transactions should be specificallyexcluded from the scope of the draft Convention. Thatsuggestion received broad support.

135. As to subparagraph (d), a number of concernswere expressed. One concern was that the reference to“investment securities” was too limiting, with theresult that priority issues with respect to some types ofsecurities might not be subject to PRIMA, in favour ofwhich consensus was emerging, as the text beingprepared by the Hague Conference on PrivateInternational Law indicated. It was stated that such aresult could disrupt security markets and create anoverlap with the text being prepared by the HagueConference. In order to address that concern, expertsfrom the Hague Conference suggested that the focus ofthe exclusion should be on the indirect holding pattern.In the same vein, it was suggested that the exclusionshould be expanded to refer to “securities or otherfinancial assets or instruments” to the extent held withan intermediary. There was sufficient support in theCommission for that suggestion. Support was alsovoiced in the Commission for the suggestion tosupplement the reference to “settlement systems” byadding in subparagraph (d) a reference to “clearancesystems”.

136. It was also agreed that a reference to “securitiesand other financial assets or instruments held with anintermediary” should be added in subparagraph (f) aswell. Furthermore, it was agreed that transfers ofsecurity rights in securities should also be excluded insubparagraph (f). Subject to those changes (seeparas. 134-136), the Commission approved paragraph 2and referred it to the drafting group.

Paragraph 3

137. With respect to subparagraph (a), a number ofconcerns were expressed. One concern was thatsubparagraph (a) did not resolve a question that raisedgreat problems in some jurisdictions, namely, whether

rental payments constituted personal rather than realproperty. In order to address that concern, it wassuggested that subparagraph (a) be replaced withlanguage along the following lines: “The Conventiondoes not apply to the assignment of a receivable relatedto land that is situated in a State in which a propertyright in land confers a right to such a receivable.” Thatsuggestion was objected to. It was stated that, in viewof the fact that in most jurisdictions a right in realproperty conferred a right in its “fruits”, the result ofthat suggestion would be to exclude all land-relatedreceivables, which would be a significant change in thepolicy underlying paragraph 3. In response, it wasobserved that the suggestion was not intended tochange the policy of paragraph 3, which was to avoidundermining real estate markets. It was recognized,however, that the problem identified arose only insome jurisdictions and that those jurisdictions couldmake use of the declaration mechanism for an exclu-sion, which should be preserved.

138. Another concern was that, in its currentformulation, paragraph 3 might not be sufficiently clearand even raise questions of interpretation. In order toavoid that result, the suggestion was made that it bereplaced with language along the following lines:“Where an assignment of a receivable operates so as toconfer an interest in land on an assignee, nothing inthis Convention shall displace or override the applica-tion to that interest of the national law of the state inwhich the land is located.” That suggestion too wasobjected to. It was stated that the element that triggeredthe application of subparagraph (a) was reversed. Itwas also observed that it was not clear which lawwould apply to a priority conflict between an assigneeand the holder of an interest in real property extendingto the receivables arising from the sale or lease of thereal property. As a matter of drafting, it was suggestedthat the term “real estate” be replaced with the term“real property” or “land”, on the understanding thatboth the soil and any building thereon should becovered. It was also suggested that in subparagraph (b)reference should be made to legal effectiveness ratherthan to lawfulness.

139. In a final effort to clarify the meaning ofparagraph 3, while addressing the concerns expressedwith regard to its proposed reformulation, languagealong the following lines was proposed:

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“Nothing in this Convention:

“(a) Affects the application of the law of aState in which land is situated either:

“(i) To an interest in that land to the extentthat under that law the assignment of areceivable confers such an interest; or

“(ii) To determine the priority of a right ina receivable to the extent that under that lawan interest in the land confers such a right;or

“(b) Makes lawful the acquisition of aninterest in land not permitted under the law of theState in which the land is situated.”

140. Broad support was expressed in the Commissionfor that proposal. It was stated that the proposed textwas in line with the policy of paragraph 3 to avoidexcluding the assignment of land-related receivablesfrom the scope of the draft Convention, whilepreserving certain rights. Under subparagraph (a),priority with respect to rents or mortgages would besubject to the law of the State in which the realproperty was located, while under subparagraph (b) thedraft Convention would not override statutoryprohibitions on the acquisition of interests in realproperty. After discussion, the Commission approvedthe proposed text, which was to replace currentparagraph 3, and referred it to the drafting group. Itwas also agreed that the term “land” or “real property”could be used on the understanding that it includedboth the soil and any buildings on it, a matter thatcould be usefully clarified in the commentary.

Paragraph 4 and draft article 41

141. Recalling its earlier discussion of draft article 41(see paras. 79-83), the Commission focused on prac-tices that might need to be specifically excluded bydeclaration. In that connection, several practices werementioned, including practices relating to capitalmarkets, settlement systems between entities other thanfinancial institutions, land-related receivables andreceivables in the form of electronic instruments.While the arguments mentioned above (see paras. 81and 82) in favour of and against draft articles 4,paragraph 4, and 41 were reiterated, it was felt thatthose provisions could be retained if they provided forspecific and limited exclusions.

142. Language along the following lines was proposedto replace draft article 41:

“A State may declare at any time that it willnot apply this Convention to the following typesof assignments:

“(a) Assignments of receivables arising intransactions in securities or capital markets, inwhich case this Convention does not apply toassignments of such receivables if the assignor islocated in such State;

“(b) Assignments of receivables arisingfrom payment or clearance and settlementsystems, in which case this Convention does notapply to assignments of such receivables if therights of participants in such system are governedby the law of such State; and

“(c) Assignments of receivables arisingfrom the use or occupancy of buildings or landsituated in that State, in which case thisConvention does not apply to assignments of suchreceivables if the land or buildings are situated insuch State; and

“(d) Assignments of receivables evidencedby a writing that is transferred by book entry,control of electronic records, [or delivery], inwhich case this Convention does not apply toassignments of such receivables if (i) the debtoris located in such State, in the case of areceivable transferred by book entry, (ii) theperson by whom control is maintained is locatedin such State, in the case of a receivabletransferred by control of an electronic record, [or(iii) the writing is situated in such State, in thecase of a writing is transferred by delivery].”

143. It was stated that, further to the Commission’sdecision to revise paragraph 3 (see para. 140),subparagraph (c), of the proposed wording would nolonger be necessary. The Commission expressed itsappreciation for the effort to prepare that proposal.However, a number of concerns were expressed. Oneconcern was that the exclusions were formulated insuch a broad way that that could inadvertently result inexcluding the core subject of the draft Convention,namely the assignment of trade receivables. It wasstated that such a result would risk reducing the impactof the draft Convention and virtually turning it into amodel law with a scope that could differ from State to

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State. It was also observed that, in particular,subparagraph (d) could have the unintended effect ofexcluding factoring of trade receivables evidenced byelectronic records. It was also observed that thereference in subparagraph (a) to “capital markets”could have the same effect, since the term would coverall public markets in which capital was raised(including securitization of trade receivables). Anotherconcern was that the proposed text could bemisunderstood as a recommendation to exclude allpractices listed, a result that could undermine theeffectiveness of the draft Convention. Yet anotherconcern was that the proposed text inappropriatelylimited the ability of States to exclude further practicesand was not balanced in the sense that it did not permitStates to also include further practices within the scopeof the draft Convention. In response, it was stated thatthe prevailing view in the discussion was for specificexclusions and that the same specificity rule shouldapply to any possible inclusions that could beconsidered if a proposal was made.

144. In view of the difficulties identified with respectto the proposed text, the suggestion was made that draftarticle 41 should be deleted on the understanding thatthe revision mechanism foreseen in draft article 47 wassufficient to face the challenge posed by futuredevelopments. However, it was stated that, if retained,paragraph 1 should be revised to refer to “specific”exclusions “clearly described” in a declaration and anew paragraph 3 should be included to ensure thatassignments of trade receivables could not be thesubject of such a declaration. Support was expressedfor that proposal. Another proposal to make thedeclaration subject to prior consultation with allsignatory and contracting States was not supported,since it was felt that it would unduly restrict the abilityof a State to make a declaration. It was agreed,however, that the commentary could refer to thepossibility for consultation with States or theSecretariat. At the same time, a number of objectionswere raised to the proposed reformulation of draftarticle 41. One objection was that the proposed textfailed to take into account that, if a State did not wishto apply the draft Convention to trade receivables, itwould simply not adopt it. Another objection was thatthe proposed text failed to address concerns expressedwith regard to certain practices relating to tradereceivables that might need to be excluded in the future(e.g. receivables in electronic records). In order to

address that point, language along the following lineswas proposed as a new paragraph 4 in draft article 41:

“Following consultations with all signa-tories and contracting States, a State may declareat any time that this Convention will not affectthe rights of a transferee of receivables evidencedby writing whose rights are derived from thetransfer to the transferee of the writing by bookentry, control of electronic records or deliveryand whose rights under the law of the State inwhich the writing is located or the book entry orcontrol is maintained are superior to those of aperson who is not a transferee of the writing bybook entry, control of electronic records ordelivery. The declaration shall describe the natureof the writing and the types of assignment orcategories of receivables evidenced by the writingand the circumstances in which the rights of thetransferee will not be affected by thisConvention.”

145. While the Commission expressed its appreciationfor the proposal, it was widely felt that it failed toaddress the main concern expressed with regard to theprevious proposal (see paras. 142 and 143), namely,that it was overly broad. It was also stated that thenewly proposed text added to the level of complexityof the provision and raised new concerns. One concernwas that, under the proposed text, it would not beenough for a party to look at the law of the State of theassignor’s location to determine if a declaration hadbeen made. Parties would be exposed to the risk of adeclaration made by a State in which an instrument,about the existence of which parties might not even beaware, was located. Another concern was that it wouldnot be clear whether a declaration would be binding onall States or only on the State in which a dispute arose,provided that it had made a declaration and theinstrument at issue was located in that State. Inresponse, it was stated that missing the opportunity todeal with transfers by book entry or control ofelectronic records and by delivery of paper instrumentswould be regrettable. It was also observed that practicewould cope with custodians in the assignor’s State andwith other steps, but those steps would add to the costof certain financing transactions.

146. After discussion, subject to the changes referredto at the beginning of paragraph 144 above, theCommission approved the substance of draft article 41

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and referred it and paragraph 4 of draft article 4 to thedrafting group. Recalling its decision to defer dis-cussion on draft article 47 until it had considered draftarticles 4, paragraph 4, and 41 (see para. 95), theCommission approved the substance of draft article 47unchanged and referred it to the drafting group (for thediscussion of a new paragraph in draft article 4 todeal with consumer protection issues, see paras. 185and 186).

Article 5: Definitions and rules of interpretation


“For the purposes of this Convention:

“(a) ‘Original contract’ means the contractbetween the assignor and the debtor from whichthe assigned receivable arises;

“(b) ‘Existing receivable’ means a receiv-able that arises upon or before the conclusion ofthe contract of assignment and ‘future receivable’means a receivable that arises after the conclusionof the contract of assignment;

“(c) ‘Writing’ means any form of informa-tion that is accessible so as to be usable forsubsequent reference. Where this Conventionrequires a writing to be signed, that requirementis met if, by generally accepted means or a proce-dure agreed to by the person whose signature isrequired, the writing identifies that person andindicates that person’s approval of the informa-tion contained in the writing;

“(d) ‘Notification of the assignment’ meansa communication in writing that reasonablyidentifies the assigned receivables and theassignee;

“(e) ‘Insolvency administrator’ means aperson or body, including one appointed on aninterim basis, authorized in an insolvency pro-ceeding to administer the reorganization or liqui-dation of the assignor’s assets or affairs;

“(f) ‘Insolvency proceeding’ means acollective judicial or administrative proceeding,including an interim proceeding, in which theassets and affairs of the assignor are subject tocontrol or supervision by a court or other compe-

tent authority for the purpose of reorganization orliquidation;

“(g) ‘Priority’ means the right of a party inpreference to another party;

“(h) A person is located in the State inwhich it has its place of business. If the assignoror the assignee has a place of business in morethan one State, the place of business is that placewhere the central administration of the assignoror the assignee is exercised. If the debtor has aplace of business in more than one State, theplace of business is that which has the closestrelationship to the original contract. If a persondoes not have a place of business, reference is tobe made to the habitual residence of that person;

“(i) ‘Law’ means the law in force in aState other than its rules of private internationallaw;

“(j) ‘Proceeds’ means whatever is receivedin respect of an assigned receivable, whether intotal or partial payment or other satisfaction ofthe receivable. The term includes whatever isreceived in respect of proceeds. The term doesnot include returned goods;

“(k) ‘Financial contract’ means any spot,forward, future, option or swap transactioninvolving interest rates, commodities, currencies,equities, bonds, indices or any other financialinstrument, any repurchase or securities lendingtransaction and any other transaction similar toany transaction referred to above entered into infinancial markets and any combination of thetransactions mentioned above;

“(l) ‘Netting agreement’ means an agree-ment that provides for one or more of thefollowing:

“(i) The net settlement of payments due inthe same currency on the same date whetherby novation or otherwise;

“(ii) Upon the insolvency or other defaultby a party, the termination of all outstandingtransactions at their replacement or fairmarket values, conversion of such sums intoa single currency and netting into a singlepayment by one party to the other; or

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“(iii) The set-off of amounts calculated asset forth in subparagraph (l) (ii) of thisarticle under two or more nettingagreements;

“(m) ‘Competing claimant’ means:

“(i) Another assignee of the same receiv-able from the same assignor, including aperson who, by operation of law, claims aright in the assigned receivable as a resultof its right in other property of the assignor,even if that receivable is not an interna-tional receivable and the assignment to thatassignee is not an international assignment;

“(ii) A creditor of the assignor; or

“(iii) The insolvency administrator.”

Subparagraph (g) (“Priority”)

148. Recalling its earlier discussion of the definitionof “priority” (see para. 37), the Commission considereda new version of subparagraph (g) that read as follows:

“(g) ‘Priority’ means the right of a personin preference to the right of a competing claimantand, to the extent relevant for such purpose,includes the determination whether the right is aproperty right or not and whether it is a securityright for indebtedness or other obligation or not.”

149. It was noted that a new paragraph had been addedto draft article 26 to ensure that the draft Conventiondid not affect the priority of rights of persons otherthan those included in the definition of “competingclaimant”. It was, therefore, suggested that, for thatprovision to operate, reference should be made insubparagraph (g) to “a competing claimant or otherperson” (for a change to draft art. 5, subpara. (h),decided later, see para. 162).

Subparagraph (h) (“Location”)

150. It was agreed that the definition of “location” insubparagraph (h) would operate well in the vastmajority of cases. The view was expressed, however,that it might not be appropriate for banks and otherfinancial institutions, at least to the extent that it wouldrefer priority issues with respect to the dealings of abranch of a foreign bank in one State to the law of thecentral administration of the bank in another State. Itwas stated in particular that that result was problematic

in the case of financing transactions in which centralbanks provided financing to branches of foreign bankstaking receivables of those branches as security, as wellas in transactions in which commercial banks boughtloans from branches of foreign banks. In order toaddress that problem, it was suggested that branchoffices of banks and possibly of other financialinstitutions should be treated as independent legalentities. While the concern was raised that such a rulewould reduce the certainty achieved by sub-paragraph (h) and might negatively affect practicesbeyond those that it was intended to address, theCommission expressed its willingness to attempt todevelop a rule to address the specific problem iden-tified above. Language along the following lines wasproposed for addition at the end of subparagraph (h):“If the assignor or the assignee is engaged in thebusiness of banking by making loans and acceptingdeposits, a branch of that assignee or assignor is aseparate person.”

151. Support was expressed for that proposal. It wasrecalled that article 1, paragraph 3, of the UNCITRALModel Law on International Credit Transfers containeda similar rule. It was stated that, if branches weretreated as separate legal entities, priority issues withrespect to their dealings would be subject to the lawwith the closest connection to the assignmenttransaction. It was also pointed out that such a rulewould be appropriate since it would result in referringpriority issues to the State in which the branch of abank was deemed to be located for regulatory andtaxation purposes.

152. In order to improve the rule proposed, a numberof proposals were made. One proposal was that theproposed rule should be expanded to apply to otherfinancial institutions or even to other commercialentities operating through a branch-based structure.That proposal was objected to on the ground that itcould inappropriately expand the scope of the proposedrule and undermine the certainty achieved bysubparagraph (h). Another proposal was that the newrule should apply solely to cases where the bankingactivity had been authorized. That proposal too wasobjected to on the ground that merely referring to theauthorization to trigger the effect of the proposed rulewould inadvertently result in its application tosituations where no actual banking activity took place.It was also pointed out that it was not clear whether theauthorization would refer to the head office or to the

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branch (a matter that was said not to be clear even withrespect to the actual banking activity). Yet anotherproposal was to avoid any reference to “making loansand accepting deposits”, because some banks might notbe authorized to engage in both activities. While therewas support for that proposal, the concern wasexpressed that it might result in the rule applying toentities that were not banks. Yet another proposal wasto limit the application of that rule to priority issues.There was no support for that proposal. Yet anotherproposal was that the reference to the “assignee”should be deleted, since the assignee’s location wasrelevant neither for the applicability of the draftConvention nor for the purposes of priority. Thatproposal too was objected to on the ground that thelocation of the assignee was relevant for theinternationality of a transaction and thus for theapplication of the draft Convention.

153. Beyond the concerns expressed with regard to theformulation of the proposed rule, a number offundamental objections were raised. It was stated thatthe central administration rule contained insubparagraph (h) was appropriate in the vast majorityof cases and should not be compromised by exceptions.In addition, it was pointed out that priority issuesshould be referred not to the law of the State where thebranch of a bank was regulated or taxed but to that ofthe State in which the bank would be wound up,namely, the place of its central administration.Furthermore, it was observed that treating branches ofbanks as separate entities would create an artificialdistinction that could cause confusion in practice. Inparticular in jurisdictions where registration wasrequired in the place of central administration, such arule could cause uncertainty as to how to obtainpriority or even create a double registration require-ment. It was also stated that such a rule couldinadvertently apply to entities beyond those envisagedsince there was no uniform understanding as to what a“bank” was. In that connection, it was observed thatthe definition of “bank” in the UNCITRAL Model Lawon International Credit Transfers could not be usedsince it was structured around the subject of the ModelLaw, namely, payment orders.

Subparagraph (k) (“Financial contract”)

154. The suggestion was made that collateral andcredit support arrangements were part of financialcontracts and should thus also be excluded. It was

stated that such arrangements were documented underthe same industry standard master agreementsgoverning financial contracts. It was also observed thatexclusion of collateral and credit support arrangementsfrom the draft Convention would lead to furthercertainty and predictability with respect to set-off andnetting provisions of the standard market arrangementspursuant to which those important risk-managementarrangements operated. It was noted, however, that, atits thirty-third session, the Commission had agreed thatcollateral and credit support arrangements should bedeleted from the definition of “financial contracts” thatwas before it. The reasons given by the Commissionwere that such arrangements did not fit into a definitionof “financial contract” and, more importantly, that suchan approach could inadvertently result in excluding anassignment of receivables to secure a bank loan.5 TheCommission confirmed that decision. It was widely feltthat such exclusion could expand the scope of theexcluded practices excessively. It was stated that itwould be particularly inappropriate to exclude theassignment of receivables that secured rights arisingunder both financial and non-financial contracts.

Subparagraph (l) (“Netting”)

155. The suggestion was made that it should be madeclear that the definition of netting covered bothbilateral and multilateral netting. Language along thefollowing lines was proposed for insertion after theword “agreement”: “between two or more parties”.There was broad support in the Commission for thatsuggestion.

156. Subject to the changes referred to above (seeparas. 149 and 154), the Commission approved thesubstance of draft article 5 and referred it to thedrafting group.

Article 6: Party autonomy


“Subject to article 21, the assignor, theassignee and the debtor may derogate from orvary by agreement provisions of this Conventionrelating to their respective rights and obligations.Such an agreement does not affect the rights ofany person who is not a party to the agreement.”

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Article 7: Principles of interpretation


“1. In the interpretation of thisConvention, regard is to be had to its object andpurpose as set forth in the preamble, to itsinternational character and to the need to promoteuniformity in its application and the observanceof good faith in international trade.

“2. Questions concerning matters governedby this Convention that are not expressly settled init are to be settled in conformity with the generalprinciples on which it is based or, in the absence ofsuch principles, in conformity with the lawapplicable by virtue of the rules of privateinternational law.”


Chapter IIIEffects of assignmentArticle 8: Form of assignment


“An assignment is valid as to form if itmeets the form requirements, if any formrequirements exist, of either the law of the Statein which the assignor is located or any other lawapplicable by virtue of the rules of privateinternational law.”

162. The concern was expressed that draft article 8might inadvertently refer matters related to priority(e.g. notification as a condition for obtaining priority)to a law other than the law of the assignor’s location.In order to address that concern, a number ofsuggestions were made. One suggestion was to replacearticle 10 with a provision that would require no formfor the assignment as between the assignor and the

assignee and as against the debtor. That suggestion wasobjected to on the ground that it would validateassignments that were currently invalid under lawapplicable outside the draft Convention. Anothersuggestion was to refer in draft article 8 only to the lawof the assignor’s location. That suggestion too wasobjected to on the ground that it might run counter togenerally acceptable private international law doctrineas to the law applicable to the form of the contract ofassignment. Yet another suggestion was to revise thedefinition of priority so as to include steps to be takenfor the purpose of obtaining priority (see A/CN.9/491,para. 18). That suggestion received broad support. Itwas widely felt that to the extent any formrequirements needed to be satisfied for a person toobtain priority they should be referred to the lawgoverning priority under draft article 24, namely, thelaw of the assignor’s location. Subject to revising thedefinition of “priority” in draft article 5, subpara-graph (g), to cover that matter, the Commissiondecided to delete draft article 8 (for the earlierdiscussion of draft art. 5, subpara. (g), see paras. 37and 149).

New provision on form in chapter V

163. The Commission recalled its earlier decision toconsider, in the context of its discussion of draftarticle 8, the question of including a new provision onform in chapter V (see para. 51). The Commissionconsidered the matter on the basis of a provision alongthe lines of article 11 of the Convention on the LawApplicable to Contracts for the International Sale ofGoods (1986) that read as follows:

“1. A contract of assignment concludedbetween persons who are in the same State isformally valid if it satisfies the requirementseither of the law which governs it or of the Statein which it is concluded.

“2. A contract of assignment concludedbetween persons who are in different States isformally valid if it satisfies the requirementseither of the law which governs it or of the law ofone of those States.”

164. After discussion, the Commission approved thesubstance of the proposed text unchanged and referredit to the drafting group.

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Article 9: Effectiveness of assignments, bulkassignments, assignments of future receivables andpartial assignments


“1. An assignment of one or more existingor future receivables and parts of or undividedinterests in receivables is effective as between theassignor and the assignee, as well as against thedebtor, whether the receivables are described:

“(a) Individually as receivables to whichthe assignment relates; or

“(b) In any other manner, provided thatthey can, at the time of the assignment or, in thecase of future receivables, at the time of theconclusion of the original contract, be identifiedas receivables to which the assignment relates.

“2. Unless otherwise agreed, an assign-ment of one or more future receivables iseffective without a new act of transfer beingrequired to assign each receivable.

“3. Except as provided in paragraph 1 ofthis article and in articles 11 and 12, paragraphs 2and 3, this Convention does not affect anylimitations on assignments arising from law.

“4. An assignment of a receivable is notineffective against, and the right of an assigneemay not be denied priority with respect to theright of, a competing claimant, solely because lawother than this Convention does not generallyrecognize an assignment described in paragraph 1of this article.”

166. It was noted that, in its current formulation,paragraph 1 might inadvertently result in the validationof an assignment of any future receivable, includingpensions and wages, even if the assignment of suchreceivables was prohibited by law. In order to avoidthat result, which would be inconsistent withparagraph 3, the suggestion was made that paragraph 1should be revised along the following lines: “Anassignment of one or more existing or futurereceivables and parts of or undivided interest inreceivables is not ineffective …”. There was broadsupport for that suggestion on the understanding that,subject to that change, all the elements of paragraph 1would be included in the new version of paragraph 1.

167. The concern was expressed that the term“undivided interest” was not sufficiently clear. It wasstated that, depending on how that notion wasunderstood in the different legal systems, the assigneecould claim from the debtor the whole or a percentage ofthe amount of the receivable. It was also observed that itwas not clear in the draft Convention how a conflictbetween assignees of undivided interests would beresolved. It was also stated that a distinction should bedrawn in draft article 12 also between the assignment ofa receivable and an assignment of an undivided interestin a receivable, since in the latter case the assigneemight not have the right to claim rights securingpayment of the assigned undivided interest. In order toaddress that concern, the suggestion was made that thenotion “undivided interest” should be defined in thedraft Convention. That suggestion did not attract suf-ficient support. It was widely felt that it was sufficientlyclear that, in the case of an assignment of an undividedinterest in a receivable, each assignee could claim fromthe debtor and that payment to any of the assignees of anundivided interest would discharge the debtor.

168. Subject to the change referred to above (seepara. 166), the Commission approved the substance ofdraft article 9 and referred it to the drafting group.

Article 10: Time of assignment


“Without prejudice to the right of acompeting claimant, an existing receivable istransferred and a future receivable is deemed tobe transferred at the time of the conclusion of thecontract of assignment, unless the assignor andthe assignee have specified a later time.”

170. It was noted that the opening words of draftarticle 10 deprived it of any meaning (i.e. determiningthe time of assignment for priority purposes). On thatunderstanding, the Commission agreed to delete draftarticle 10.

Article 11: Contractual limitations on assignments


“1. An assignment of a receivable iseffective notwithstanding any agreement betweenthe initial or any subsequent assignor and the

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debtor or any subsequent assignee limiting in anyway the assignor’s right to assign its receivables.

“2. Nothing in this article affects anyobligation or liability of the assignor for breachof such an agreement, but the other party to suchagreement may not avoid the original contract orthe assignment contract on the sole ground of thatbreach. A person who is not party to such anagreement is not liable on the sole ground that ithad knowledge of the agreement.

“3. This article applies only to assign-ments of receivables:

“(a) Arising from an original contract forthe supply or lease of [goods,] construction orservices other than financial services or for thesale or lease of real estate;

“(b) Arising from an original contract forthe sale, lease or licence of industrial or otherintellectual property or other information;

“(c) Representing the payment obligationfor a credit card transaction; or

“(d) Owed to the assignor upon netsettlement of payments due pursuant to a nettingagreement involving more than two parties.”

172. It was recalled that the policy underlyingparagraph 3 was to ensure that the assignment offinancial service receivables not excluded from thescope of the draft Convention as a whole would beexcluded from the scope of draft article 11. In order toreflect that policy more clearly, several suggestionswere made, including the suggestions to reformulateparagraph 3 along the following lines: “Article 11 doesnot apply to assignments of receivables arising fromfinancial service contracts”; or “Article 11 does notapply to assignments of receivables arising from loanagreements or insurance policies”; or “Article 11 doesnot apply to the assignment of a single, existingreceivable”. There was no support in the Commissionfor those suggestions.

173. The concern was expressed that the term “goods”,which appeared within square brackets in para-graph 3 (a), was too narrow and could result inexcluding intangible assets. It was also stated thatparagraph 3 (b) might not be sufficiently broad tocover all intangible assets and in particular customerlists, trade names and commercial secrets. In order to

address that concern, it was suggested that, at the endof paragraph 3 (b), language along the following linesshould be added: “or other intangible assets”. Thatsuggestion was objected to on the ground that it couldinadvertently result in including within article 11 theassignment of receivables such as insurance or loanreceivables. It was widely felt, however, that assets,such as customer lists, trade names and proprietaryinformation, were covered in paragraph 3 (b). Subjectto the removal of the brackets around the word“goods”, the Commission approved draft article 11 andreferred it to the drafting group.

Article 12: Transfer of security rights


“1. A personal or property right securingpayment of the assigned receivable is transferredto the assignee without a new act of transfer. Ifsuch a right, under the law governing it, istransferable only with a new act of transfer, theassignor is obliged to transfer such right and anyproceeds to the assignee.

“2. A right securing payment of theassigned receivable is transferred under para-graph 1 of this article notwithstanding any agree-ment between the assignor and the debtor or otherperson granting that right, limiting in any way theassignor’s right to assign the receivable or theright securing payment of the assigned receivable.

“3. Nothing in this article affects anyobligation or liability of the assignor for breachof any agreement under paragraph 2 of thisarticle, but the other party to that agreement maynot avoid the original contract or the assignmentcontract on the sole ground of that breach. Aperson who is not a party to such an agreement isnot liable on the sole ground that it hadknowledge of the agreement.

“4. Paragraphs 2 and 3 of this articleapply only to assignments of receivable:

“(a) Arising from an original contract forthe supply or lease of [goods,] construction orservices other than financial services or for thesale or lease of real estate;

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“(b) Arising from an original contract forthe sale, lease or licence of industrial or otherintellectual property or other information;

“(c) Representing the payment obligationfor a credit card transaction; or

“(d) Owed to the assignor upon netsettlement of payments due pursuant to a nettingagreement involving more than two parties.

“5. The transfer of a possessory propertyright under paragraph 1 of this article does notaffect any obligations of the assignor to thedebtor or the person granting the property rightwith respect to the property transferred existingunder the law governing that property right.

“6. Paragraph 1 of this article does notaffect any requirement under rules of law otherthan this Convention relating to the form orregistration of the transfer of any rights securingpayment of the assigned receivable.”

175. The concern was expressed that paragraph 1could affect special types of mortgages that were nottransferable under the law governing them. It wasstated that draft article 9, paragraph 3, might not besufficient to preserve such statutory limitations since itreferred to statutory limitations on transfers ofreceivables not of rights securing receivables. In orderto address that concern, it was suggested that, at theend of paragraph 1, language along the following linesshould be added: “if such right is transferable under thelaw governing it”. There was no support for thatsuggestion (see, however, new draft art. 4, para. 3, inparas. 139 and 140). Subject to the removal of thebrackets around the word “goods” in paragraph 4 (a),the Commission approved the substance of draftarticle 12 and referred it to the drafting group.

Chapter IVRights, obligations and defences

Section IAssignor and assignee

Article 13: Rights and obligations of the assignor andthe assignee


“1. The mutual rights and obligations ofthe assignor and the assignee arising from theiragreement are determined by the terms andconditions set forth in that agreement, includingany rules or general conditions referred totherein.

“2. The assignor and the assignee arebound by any usage to which they have agreedand, unless otherwise agreed, by any practicesthey have established between themselves.

“3. In an international assignment, theassignor and the assignee are considered, unlessotherwise agreed, to have implicitly madeapplicable to the assignment a usage that ininternational trade is widely known to, andregularly observed by, parties to the particulartype of assignment or the assignment of theparticular category of receivables.”


Article 14: Representations of the assignor


“1. Unless otherwise agreed between theassignor and the assignee, the assignor representsat the time of the conclusion of the contract ofassignment that:

“(a) The assignor has the right to assignthe receivable;

“(b) The assignor has not previouslyassigned the receivable to another assignee; and

“(c) The debtor does not and will not haveany defences or rights of set-off.

“2. Unless otherwise agreed between theassignor and the assignee, the assignor does notrepresent that the debtor has, or will have, theability to pay.”


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Article 15: Right to notify the debtor


“1. Unless otherwise agreed between theassignor and the assignee, the assignor or theassignee or both may send the debtor notificationof the assignment and payment instructions, butafter notification has been sent only the assigneemay send such an instruction.

“2. Notification of the assignment orpayment instructions sent in breach of anyagreement referred to in paragraph 1 of thisarticle are not ineffective for the purposes ofarticle 19 by reason of such breach. However,nothing in this article affects any obligation orliability of the party in breach of such anagreement for any damages arising as a result ofthe breach.”


Article 16: Right to payment


“1. As between the assignor and theassignee, unless otherwise agreed and whether ornot notification of the assignment has been sent:

“(a) If payment in respect of the assignedreceivable is made to the assignee, the assignee isentitled to retain the proceeds and goods returnedin respect of the assigned receivable;

“(b) If payment in respect of the assignedreceivable is made to the assignor, the assignee isentitled to payment of the proceeds and also togoods returned to the assignor in respect of theassigned receivable; and

“(c) If payment in respect of the assignedreceivable is made to another person over whomthe assignee has priority, the assignee is entitledto payment of the proceeds and also to goodsreturned to such person in respect of the assignedreceivable.

“2. The assignee may not retain more thanthe value of its right in the receivable.”


Section IIDebtor

Article 17: Principle of debtor protection


“1. Except as otherwise provided in thisConvention, an assignment does not, without theconsent of the debtor, affect the rights andobligations of the debtor, including the paymentterms contained in the original contract.

“2. A payment instruction may change theperson, address or account to which the debtor isrequired to make payment, but may not:

“(a) Change the currency of paymentspecified in the original contract; or

“(b) Change the State specified in theoriginal contract in which payment is to be madeto a State other than that in which the debtor islocated.”

185. The Commission considered several proposals fora new paragraph in draft article 17 to deal with theprotection of consumers, including language along thefollowing lines: “This Convention does not overridelaw governing the protection of parties in transactionsmade for personal, family or household purposes” (seeA/CN.9/491, para. 40); or “This Convention does notauthorize a debtor who is a consumer to enter into ormodify an original contract than as authorized by thelaw of the location of the debtor”; or “Nothing in thisConvention affects the rights and obligations of theassignor and the debtor under the [special] lawsgoverning the protection of [parties to] [persons in]transactions made for personal, family or householdpurposes.”

186. While some doubt was expressed as to whethersuch a rule was necessary, the Commission agreed thatthe principle that the draft Convention was notintended to affect rights and obligations arising underconsumer protection law should be reflected in thedraft Convention. It was also widely felt that the matterwent beyond debtor protection and should be addressedin draft article 4 or 6. As a matter of drafting, the

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suggestion was made that reference could be made tothe habitual residence of a consumer. It was noted,however, that draft article 5, subparagraph (h), mightbe sufficient in that respect. On the understanding thatthe matter of consumer protection would be addressedin draft article 4, the Commission approved the sub-stance of draft article 17 and referred it to the draftinggroup. The Commission also decided that the referencein draft articles 21 and 23 to consumer protectionwould no longer be necessary and could be deleted.

Article 37: Applicable law in territorial units

187. Recalling its decision to defer discussion of draftarticle 37 to a later point in time (see para. 69), theCommission resumed its discussion on the basis of anew proposal that was as follows:

“Article 36“Application to territorial units

“...

“3 bis. If, by virtue of a declaration underthis article, this Convention does not extend to allterritorial units of a State and the law governingthe original contract is the law in force in aterritorial unit to which this Convention does notextend, the law governing the original contract isconsidered not to be the law of a ContractingState.

“Article 37“Location in a territorial unit

“If a person is located in a State that hastwo or more territorial units, that person islocated in the territorial unit in which it has itsplace of business. If the assignor or the assigneehas a place of business in more than oneterritorial unit, the place of business is that placewhere the central administration of the assignoror the assignee is exercised. If the debtor has aplace of business in more than one territorial unit,the place of business is that which has the closestrelationship to the original contract. If a persondoes not have a place of business, reference is tobe made to the habitual residence of that person.A State with two or more territorial units mayspecify by declaration at any time other rules fordetermining the location of a person within thatState.

“Article 37 bis“Applicable law in territorial units

“Any reference in this Convention to thelaw of a State means, in the case of a State thathas two or more territorial units, the law in forcein the territorial unit. Such a State may specify bydeclaration at any time other rules fordetermining the applicable law, including rulesthat render applicable the law of anotherterritorial unit of that State.”

188. It was stated that the proposed provisions werenecessary to ensure transparency and consistency in theapplication of the draft Convention in the case of aState with two or more territorial units. It wasexplained that the proposed paragraph 3 bis of draftarticle 36, which tracked the language of paragraph 3,was intended to deal with the application of the draftConvention in the case of a declaration under draftarticle 36. New draft article 37, which tracked thedefinition of location in draft article 5, subpara-graph (h), and the language of draft article 37, wasaimed at addressing location of a person in a State withtwo or more territorial units. New draft article 37 biswas designed to address the meaning of law in the caseof a State with two or more territorial units.

189. While support was expressed in favour of theproposed provisions, a number of questions wereraised. One question was whether the reference toterritorial units was sufficient to indicate that unitswith different systems of law were involved. Inresponse, it was stated that no reference should beadded to different systems of law, since the proposedprovisions needed to be applied to territorial systemswith the same system of law. It was noted, however,that while the reference to territorial units withdifferent systems of law in draft article 36, para-graph 1, would cover also the proposed provisions, thereference to different systems of law should beunderstood in a broad way and cover uniform lawenacted in several territorial units as a distinct body oflaw by a legislative or other authority in each territorialunit. Another question was whether a State couldspecify that a branch of an entity, such as a bank, in aterritorial unit should be treated as a separate entity. Inresponse, it was observed that, under the rule in the lastsentence of new draft article 37, a State had the right tospecify in a declaration the rules it wished to applywith respect to location of persons in its territorial

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units. After discussion, the Commission approved draftarticles 36, paragraph 3 bis, 37 and 37 bis and referredthem to the drafting group.

Article 38: Conflicts with other internationalagreements

190. Recalling its decision to approve draft article 38on the understanding that the relationship between thedraft Convention and the draft Unidroit Conventionmight need to be revisited (see para. 74), theCommission considered several proposals for anamendment of draft article 38 to deal with the matter.One proposal read as follows:

“Variant A

“This Convention does not apply to theassignment of receivables taken as security infinancing mobile equipment to the extent thatthese assignments are governed by an inter-national convention [on international interests].

“Variant B

“This Convention does not apply to theassignment of receivables that become associatedrights in connection with the financing ofcategories of mobile equipment, such as aircraftequipment, railway rolling stock and spaceproperty, encompassed by an internationalconvention [on international interests].”

191. While some support was expressed for thatproposal, discussion focused on another proposal,which read as follows:

“1. This Convention does not apply toassignments of receivables taken as security inthe financing of mobile equipment, but onlywhere such receivables are within the scope ofthe Unidroit Convention on International Interestsin Mobile Equipment.

“2. This Convention supersedes theUnidroit Convention on International Factoring(the “Ottawa Convention”) except, as relates tothe rights and obligations of the debtor, where thedebtor is located in a State party to the OttawaConvention that is not a party to thisConvention.”

192. In support of the proposed text, it was stated thatthe matter should not be left to the classical rules on

conflicts between international agreements. It was alsosaid that the common objective of both texts toincrease access to lower-cost credit could best beserved by a clear and innovative solution, such as theone proposed, and such solution could enhance thecertainty and predictability required in practice. Inaddition, it was observed that paragraph 1 of theproposed text introduced the appropriate rule, inparticular with respect to financing transactionsrelating to aircraft in which receivables wereinextricably linked with the aircraft. In addition, it waspointed out that, in view of the fact that the Unidroittext relating to aircraft covered both payment and otherperformance rights, an approach other than the oneproposed would result in subjecting aircraft-relatedreceivables to a legal regime other than the regimegoverning other aircraft-related performance rights.Moreover, it was pointed out that, in view of the factthat traditionally rights in aircraft were filed with anational aviation authority, the law of the place ofregistration was more appropriate to govern priorityissues than the law of the assignor’s location. It wasalso said that an exception of aircraft-relatedreceivables along the lines of paragraph 1 of theproposed text would have the beneficial effect ofavoiding any tension that might affect the ratificationprocess of either convention.

193. While some support was expressed for thatproposal, it was widely felt that draft article 38, asamended by the Commission (see para. 74), wassufficient. It was stated that the approach proposed wasexcessive and could create legal gaps, since the draftConvention would not apply even if the draft UnidroitConvention did not apply to a particular transactionand even if the latter had not entered into force. It wasalso observed that the proposed exception couldseriously undermine the usefulness of the draftConvention since it was open-ended. In addition, it wassaid that nothing precluded the drafters of the draftUnidroit Convention from providing that it supersededthe draft Convention, a possibility alluded to by theInternational Civil Aviation Organization in its officialcomments (see A/CN.9/490, p. 10). Moreover, it wasobserved that it was very difficult to refer in draftarticle 38 to a convention that had not yet beenconcluded.

194. The suggestion was also made that, further to theamendment of draft article 38, agreed upon by theCommission at its current session, the proviso in

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paragraph 1 of draft article 38 was not necessary andcould be deleted. There was wide support for thatproposal. However, to reflect the decision of theCommission that another convention should prevailonly if it specifically governed a transaction thatwould otherwise be governed by the draft Convention,it was agreed that the words “contains provisionsspecifically governing” should be replaced with wordsalong the lines “specifically governs”. Subject tothose changes, the Commission reiterated its approvalof draft article 38 and referred it to the draftinggroup.

C. Report of the drafting group

195. The Commission requested a drafting groupestablished by the Secretariat to review the draftConvention and the annex to the draft Convention, witha view to ensuring consistency between the variouslanguage versions. At the close of its deliberations onthe draft Convention, the Commission considered thereport of the drafting group and adopted the draftConvention and the annex to the draft Convention as awhole. The Commission also requested the Secretariatto prepare a revised version of the commentary on thedraft Convention.

196. It was agreed that, in draft article 1, paragraph 4,reference should be made to paragraphs 1-3 of draftarticle 1. It was also agreed that, in the Chinese versionof draft article 24, after paragraph 2 (a), the word“and” should be added. In addition, it was agreed thatdraft article 25, paragraph 2, should be reproduced indraft article 31 in order to avoid any uncertainty as towhether it was covered by draft article 32.Furthermore, it was agreed that, in draft article 35 (newdraft art. 34), a reference should be added withinsquare brackets to the time during which the draftConvention should be opened for signature (i.e. twoyears after the date of adoption of the draft Conventionby the General Assembly).

197. Moreover, it was agreed that in the Frenchversion of draft article 38, paragraph 1, the word“régie” should be replaced with the word “couverte”. Itwas also agreed that, for reasons of consistency, draftarticle 8 of the annex to the draft Convention shouldrefer to “the time of conclusion of the contract ofassignment”.

D. Procedure for the adoption of the draftConvention

198. After completing its work on the draftConvention, the Commission considered theprocedures to be followed for the adoption of the textas a United Nations convention. The Commissionsupported a proposal to recommend that the GeneralAssembly adopt the draft Convention in its currentform and open it for signature by States. It was widelyfelt that the draft Convention had received sufficientconsideration, had reached the level of maturity for itto be generally acceptable to States and formed abalanced text that the Assembly could concludewithout reconsidering its provisions. It was alsogenerally felt that the draft Convention couldsignificantly facilitate receivables financing and thusincrease the availability of credit at a more affordablecost, which would enhance international trade andbenefit producers, wholesalers, retailers and consumersof goods and services.

199. A suggestion was also made that therecommendation to the General Assembly could alsomake some reference to a diplomatic conference on thecondition that, until consideration of the draftConvention by the Sixth Committee of the Assembly, aState would offer to host a diplomatic conference andwould be able to host it early in 2002. However, it wasagreed that the recommendation to the Assemblyshould be clear and unequivocal in order to avoidinadvertently casting any doubt as to the maturity andthe acceptability of the text. It was stated that no Statewas precluded from making an offer to host adiplomatic conference and that the matter would beduly considered by the Sixth Committee.

E. Decision of the Commission andrecommendation to the GeneralAssembly

200. At its 722nd meeting, on 2 July 2001, theCommission adopted by consensus the following deci-sion and recommendation to the General Assembly:

“The United Nations Commission onInternational Trade Law,

“Recalling that at its twenty-eighth session,in 1995, it decided to prepare uniform legislation

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on assignment in receivables financing andentrusted the Working Group on InternationalContract Practices with the preparation of a draft,

“Noting that the Working Group devotednine sessions, held from 1995 to 2000, to thepreparation of the draft convention on theassignment of receivables in international trade,

“Having considered the draft Convention atits thirty-third session, in 2000, and at its thirty-fourth session, in 2001,

“Drawing attention to the fact that all Statesand interested international organizations wereinvited to participate in the preparation of thedraft convention at all the sessions of theWorking Group and at the thirty-third and thirty-fourth sessions of the Commission, either asmember or as observer, with a full opportunity tospeak and make proposals,

“Also drawing attention to the fact that thetext of the draft convention was circulated forcomments once before the thirty-third session ofthe Commission and a second time in its revisedversion before the thirty-fourth session of theCommission to all Governments and internationalorganizations invited to attend the meetings of theCommission and the Working Group as observersand that such comments were before theCommission at its thirty-third and thirty-fourthsessions,6

“Considering that the draft convention hasreceived sufficient consideration and has reachedthe level of maturity for it to be generally acceptableto States,

“1. Submits to the General Assembly thedraft convention on the assignment of receivablesin international trade, as set forth in annex I to thereport of the United Nations Commission onInternational Trade Law on its thirty-fourthsession;7

“2. Recommends that the GeneralAssembly consider the draft convention with aview to concluding at its fifty-sixth session, onthe basis of the draft convention approved by theCommission, a United Nations convention on theassignment of receivables in international trade.”

Chapter IVDraft UNCITRAL Model Law onElectronic Signatures and draftGuide to Enactment

A. Introduction

201. Pursuant to decisions taken by the Commission atits twenty-ninth session, in 1996,8 and thirtieth session,in 1997,9 the Working Group on Electronic Commercedevoted its thirty-first to thirty-seventh sessions to thepreparation of the draft UNCITRAL Model Law onElectronic Signatures (hereinafter referred to also as“the draft Model Law” or “the new Model Law”).Reports of those sessions are found in documentsA/CN.9/437, 446, 454, 457, 465, 467 and 483. At itsthirty-seventh session, held in Vienna inSeptember 2000, the Working Group adopted thesubstance of the draft Model Law, the text of whichwas annexed to the report of that session(A/CN.9/483). It was noted that the draft Model Lawwould be submitted to the Commission for review andadoption at the current session (A/CN.9/483, para. 23).

202. The text of the draft Model Law as approved bythe Working Group was circulated to all Governmentsand to interested international organizations forcomment. At the current session, the Commission hadbefore it the comments received from Governments andinternational organizations (A/CN.9/492 and Add.1-3).

203. In preparing the Model Law, the Working Groupnoted that it would be useful to provide in a commen-tary additional information concerning the Model Law.Following the approach taken in the preparation of theUNCITRAL Model Law on Electronic Commerce,there was general support for a suggestion that the newModel Law should be accompanied by a guide to assistStates in enacting and applying that Model Law. Theguide, much of which could be drawn from the travauxpréparatoires of the Model Law, would also be helpfulto other users of the Model Law. At its thirty-eighthsession, held in New York in March 2001, the WorkingGroup reviewed the draft Guide to Enactment of theUNCITRAL Model Law on Electronic Signatures,based on a revised draft prepared by the Secretariat(A/CN.9/WG.IV/WP.88). The deliberations and deci-sions of the Working Group with respect to the draftGuide are reflected in the report of that session

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(A/CN.9/484). The Secretariat was requested to pre-pare a revised version of the Guide, based on thosedeliberations and decisions. At the current session, theCommission had before it the revised text of the draftGuide (A/CN.9/493, hereinafter referred to as “thedraft Guide” or “the Guide”).

B. Consideration of comments fromGovernments and internationalorganizations

204. At the outset of the discussion, the Commissionconsidered the comments received from Governmentsand international organizations (A/CN.9/492 andAdd.1-3).

Article 2

Subparagraph (b)

205. A proposal was made (see A/CN.9/492/Add.1) toamend draft article 2, subparagraph (b), to read:

“‘Certificate’ means a data message or otherrecord confirming:

“(i) In a case where a private and a publiccryptographic key are used respectively tocreate and verify an electronic signature, thelink between the signatory and the publiccryptographic key; and

“(ii) In any case, the link between thesignatory and the signature creation data.”

206. It was stated that the intention behind theproposed amendment was not to promote public keysas a preferred technological method but merely toalign the text of the draft Model Law withimprovements made to the draft Guide at the thirty-eighth session of the Working Group. The amendment,in line with the draft Guide (A/CN.9/493, annex,para. 97), was described as being necessary to clarifythat, where a dual-key “digital signature” and a relatedcertificate were being used, an important function ofthe certificate was to certify that it was the “publickey” that belonged to the signatory (seeA/CN.9/492/Add.1).

207. In response to the proposal, concern wasexpressed that the express reference to “cryptographickey” would introduce a technology-specific element tothe definition of “certificate”, which would not be

consistent with the paramount principle of techno-logical neutrality underlying the draft Model Law. Itwas pointed out that the text as currently drafted dealtsufficiently with public-key cryptography. Afterdiscussion, the Commission agreed to retain thesubstance of draft article 2, subparagraph (b),unchanged.

Article 5

208. A proposal was made (see A/CN.9/492/Add.2) toamend draft article 5 by deleting the words “unless thatagreement would not be valid or effective under appli-cable law”. As possible alternatives to such deletion, itwas also suggested that the words “applicable law”could be replaced with the words “mandatory prin-ciples of public policy” or “mandatory provisions ofapplicable law”. The amendment of draft article 5according to one of those alternatives was presented asnecessary in order to reduce confusion in theapplication and interpretation of article 5 by nationalcourts, as well as to clarify that any limitation on partyautonomy was intended to result only from mandatoryrules. It was also stated that referring in the draftModel Law to limitations to party autonomy wassuperfluous, since in most legal systems mandatoryrules of public policy or ordre public would overrideparty autonomy in all cases, whether or not they werementioned in the text. In addition, it was stated thatdraft article 5 as currently drafted could create themistaken impression that the draft Model Law wasintended to limit party autonomy more than wasabsolutely necessary.

209. Although some support was expressed in favourof the various alternative proposals, the widelyprevailing view was that the text of draft article 5should be retained as currently drafted. It was widelyfelt that, while both restatements of the well-knownprinciple of party autonomy in commercialrelationships and of the traditional limitations to thatprinciple might be regarded as equally superfluous, thetext served a useful purpose in clarifying the regime ofparty autonomy in the context of the draft Model Law.It was generally agreed that altering the balancecurrently reflected in draft article 5 might result in thedraft Model Law unduly interfering with thedetermination by domestic law as to the mandatory ornon-mandatory nature of statutory provisions.

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Article 7

210. A proposal was made (see A/CN.9/492) to amenddraft article 7, paragraph 1, to read:

“Any person, organ or authority, whetherpublic or private, specified by the enacting Stateas competent may determine which electronicsignatures satisfy the provisions of article 6,without prejudice to the possibility for the partiesto agree on the use of any method for creating anelectronic signature.”

211. It was stated that the intention behind theproposed amendment was to ensure that draft article 7did not limit the freedom given to parties by draftarticle 3, as combined with draft article 5, to assignlegal validity to particular methods of creatingelectronic signatures that could be different from thosedetermined by a relevant person, organ or authorityunder draft article 7, paragraph 1 (see A/CN.9/492).Notwithstanding general support for the principleunderlying the proposed amendment, namely, thatparties should retain autonomy in respect ofdetermining the facts for reliability of an electronicsignature, it was widely felt that the matter wasadequately addressed in draft article 6, paragraph 1,which referred to “any relevant agreement”. In thatrespect, attention was drawn to paragraphs 127 and 133of the draft Guide, which appeared to indicate clearlythat draft article 7 respected the principle of partyautonomy. Recognizing that draft article 7 did notimpinge upon the principle of party autonomy, theCommission decided to retain the substance of draftarticle 7 as currently drafted and referred it to thedrafting group.

Article 8

Paragraph 1 (a)

212. A proposal was made (see A/CN.9/492/Add.2) toamend draft article 8, paragraph 1 (a), by inserting thewords “in accordance with accepted commercialpractices” before the words “reasonable care”. Insupport of the proposal, it was stated that draft article 8(and draft articles 9-11) should be subject to a generallimitation that the criteria and rules therein should beapplied as was reasonable under the circumstances ofthe type of transaction and the nature of the parties. Itwas also stated that the imposition of strict obligationswould be inappropriate if applied to a wide variety of

transactions that had developed in electroniccommerce. It was further stated that a reference to“accepted commercial practices” might assist thesignatories in determining what might constitute“reasonable care” in a given situation, for examplewhere a signatory was faced with the overall obligationto maintain the confidentiality of a cryptographic keyunder draft article 8 but that key was stored as part ofthe software (possibly the Internet browser) loaded onthe signatory’s computer. In such a situation, thesignatory (who would not necessarily know where andhow the key was stored) might need to receiveguidance as to the nature of the signature data and theproper rules of conduct to be observed to avoidimproper use of the cryptographic key. A concern wasexpressed that, in the absence of any such guidance,prospective users might be discouraged from usingelectronic signature techniques, a result that would runcounter to the objectives of the draft Model Law. Witha view to accommodating that concern, it was sug-gested that language might be inserted in the text ofdraft article 8 along the following lines: “in determin-ing reasonable care, regard may be had to a relevantcommercial practice, if any”. A related suggestion wasthe insertion of the words “in determining reasonablecare, regard is to be had to well-established and widelyrecognized international practices, if any”.

213. There was general agreement in the Commissionas to the importance of providing guidance, educationand protection to prospective users of electronic signa-ture techniques in general and prospective signatoriesin particular. However, the proposed amendment todraft article 8, paragraph 1 (a), was strongly opposedon the grounds that a reference to “accepted”,“habitual” or “relevant” commercial practices mightresult in increased confusion for users, since therecurrently existed no established commercial practicewith respect to electronic signatures. It was pointed outthat adding a reference to commercial practices wouldnot increase the level of protection afforded to theprospective user of electronic signature techniques.Such a reference would rather place a heavier burdenon the signatory, who might end up being faced withthe obligation to prove compliance with non-existingor unknown practices in addition to the initialobligation to prove that it had exercised “reasonablecare” in protecting its signature creation data. It wasgenerally agreed that the standard of reasonable careset forth in the current text of draft article 8,

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paragraph 1 (a), together with the general reference tothe observance of good faith under draft article 4,provided a well-understood concept, which offeredsufficient guidance to users and to courts to facilitatethe emergence of trust in the use of electronic signaturetechniques. At the same time, the standard ofreasonable care was sufficiently broad and flexible toinclude a reference to relevant practices, if any.

214. After discussion, the Commission decided tomaintain the substance of draft article 8, para-graph 1 (a), unchanged. It was agreed that the Guide toEnactment should reflect that, when interpreting thenotion of “reasonable care”, relevant practices, if any,might need to be taken into account. “Reasonable care”under the draft Model Law should also be interpretedwith due regard being given to its international origin,as indicated in draft article 4.

Paragraph 1 (b)

215. A proposal was made (see A/CN.9/492/Add.2) toamend the opening words of draft article 8, paragraph 1(b), to read “without undue delay, use reasonableefforts to initiate any procedures made available to thesignatory to notify relying parties if:”.

216. Wide support was expressed in support of theproposal to replace the strict obligation to notify setforth in draft article 8, paragraph 1 (b), by a moreflexible requirement to use “reasonable efforts” tonotify any person who might be expected to rely on theelectronic signature in cases where the electronicsignature appeared to have been compromised. In viewof the fact that it might be impossible for the signatoryto track down every person that might rely on theelectronic signature, it was generally felt that, wherethe electronic signature appeared to have beencompromised, it would be excessively burdensome tocharge the signatory with the obligation to achieve theresult of actually notifying every person that mightconceivably rely on the signature. It was also agreedthat it would be more appropriate to express the rule inthe form of an obligation for the signatory to use allreasonable means at its disposal to notify the relyingparties. In the context of that discussion, it was pointedout that paragraph 139 of the Guide should make itclear that the notion of “reasonable efforts” or“reasonable diligence” should be interpreted in thelight of the general principle of good faith expressed indraft article 4, paragraph 1.

217. As to the proposed addition of a reference to“procedures made available to the signatory to notifyrelying parties”, it was pointed out that, in manypractical instances, procedures would be placed at thedisposal of signatories by certification serviceproviders to be followed in cases where it appearedthat the electronic signature had been compromised.Such procedures could generally not be varied by thesignatory. It was stated that, in practice, suchprocedures were increasingly provided by relyingparties. It was explained that it was essential to providethe signatory with a “safe harbour” provision to theeffect of enabling a signatory to demonstrate that it hadbeen sufficiently diligent in attempting to notifypotentially relying parties if the signatory had followedsuch procedures. While support was expressed infavour of the reasoning underlying the proposal, it wasgenerally felt that the words “reasonable efforts toinitiate any procedures” were too vague and might beread as diluting the obligation of the signatory toundertake a good faith attempt to notify relying parties.

218. After discussion, the Commission decided thatthe opening words of article 8, paragraph 1 (b), shouldread along the lines of “without undue delay, usereasonable efforts to notify, such as by using meansmade available by the certification service providerpursuant to article 9, to any person that may bereasonable be expected by the signatory to rely on or toprovide services in support of the electronic signatureif: ...”. After review by the drafting group, theCommission agreed that the text should read asfollows: “Without undue delay, utilize means madeavailable by the certification service provider pursuantto article 9, or otherwise use reasonable efforts, tonotify any person that may reasonably be expected bythe signatory to rely on or to provide services insupport of the electronic signature if: ...”.

Paragraph 2

219. A proposal was made (see A/CN.9/492/Add.2) toamend draft article 8, paragraph 2, to read “A signatoryshall bear the legal consequences of its failure tosatisfy the requirements of paragraph 1”. Among thereasons given in support of that proposal, it was statedthat the text of draft article 8, paragraph 2 (and of draftarticle 9, paragraph 2), might lend itself to themistaken interpretation that a purpose of the ModelLaw was to establish a rule of strict liability binding onboth the signatory and the certification service

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provider. It was pointed out that determining such strictliability rules for certain parties would be an excep-tional position to take within an instrument geared tothe harmonization of certain rules of commercial law,with a need to balance the obligations of all the partiesinvolved, and to facilitating the use of electroniccommerce. A concern was expressed that, unless theproposed amendment was made, the Model Law couldresult in inhibiting the development of electroniccommerce, in particular in countries that had not yetimplemented legislation in that area. The aim of theproposal was thus to revise draft article 8, paragraph 2,to reflect the language used in draft article 11 withrespect to the conduct of the relying party.

220. While it was generally agreed that the Model Lawwas not intended to create grounds for imposing a strictliability regime on either the signatory or thecertification service provider, doubts were expressed asto whether the proposed language would sufficientlyreflect the distinction to be made between the situationof the signatory and the certification service provider,on the one hand (both of whom should be faced withobligations regarding their conduct in the context ofthe electronic signature process), and the relying party,on the other (for whom the Model Law might appro-priately establish rules of conduct but who should notbe faced with the same level of obligations as the othertwo parties). With a view to maintaining in the ModelLaw a distinction in the treatment of the relying partyas opposed to the other two parties, it was suggestedthat the text of draft article 8, paragraph 2, should readas follows: “A signatory shall be exposed to liability orto any other applicable legal consequence for its failureto satisfy the requirements of paragraph 1.” A similaradjustment was suggested for draft article 9, para-graph 2. It was explained that the proposed languagewould eliminate the risk of any mistaken interpretationthat the Model Law was intended to interfere with thelegal consequences that might flow from the lawapplicable outside the Model Law. At the same time,the proposed language would appropriately draw theattention to the fact that the legal consequences offailure to comply with the requirements of paragraph 1would not necessarily involve only liability. Otherlegal consequences might include, for example, thefaulty party being stopped from denying the bindingeffect of the electronic signature.

221. While support was expressed in favour of thelatter proposal, the prevailing view was that the entire

issue of the legal consequences to be drawn from thefailure to comply with the requirements of paragraph 1,as well as the issue of a possible distinction betweenthe legal position of the signatory and the certificationservice provider, on the one hand, and the legalposition of the relying party, on the other hand, shouldbe left to the law applicable outside the Model Law.After discussion, the Commission decided that thesubstance of paragraph 2 should read along the lines of“A signatory shall bear the legal consequences of itsfailure to satisfy the requirements of paragraph 1”. Thematter was referred to the drafting group.

Proposed new paragraph

222. A proposal was made (see A/CN.9/492) to add aparagraph to draft article 8 along the following lines:

“It shall provide to the certification serviceprovider for any party relying on the certificatereasonably accessible means to ascertain, whererelevant, from the certificate referred to inarticle 9 or otherwise, any limitation on itsresponsibility.”

It was explained that the aim of the proposed languagewas to make it clear that the signatory should informthe relying parties (through the certification serviceprovider) of any limitation on the maximum value ofthe transactions for which the signatory’s electronicsignature might be used. While general support wasexpressed in favour of the explanation underlying theproposal, it was generally felt that the proposedwording was unclear and probably unnecessary, inview of the fact that the certification service provider,under draft article 9, paragraph 1 (d) (ii) and (iv), wasunder an obligation to provide accessible means bywhich a relying party might ascertain “any limitationon the purpose or value for which the signaturecreation data or the certificate may be used” and “anylimitation on the scope or extent of liability stipulatedby the certification service provider”. While an alter-native proposal to add the words “or by the signatory”at the end of draft article 9, paragraph 1 (d) (iv),received some support, the prevailing view was that theissue was sufficiently taken care of by draft article 9,paragraph 1 (d) (ii), as currently drafted. As to draftarticle 8, it was agreed that no change in the substanceof the provision was necessary, since it would be in theinterest of the signatory to inform the relying partiesabout any limitation that might affect the maximum

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value of the transactions for which the signatory’selectronic signature might be used. Creating anadditional obligation of the signatory in that respectwould thus be superfluous.

Draft article 9

Paragraph 1 (d) (iv)

223. A proposal was made (see A/CN.9/492) to amendthe end of the sentence in draft article 9, para-graph 1 (d) (iv), to read “any limitation on the scope orextent of its liability stipulated by it”. It was generallyagreed that the proposal was merely of a draftingnature and, on that basis, the issue was referred by theCommission to the drafting group.

Paragraph 1 (f)

224. A proposal was made (based upon a proposal setforth in A/CN.9/492/Add.2) to amend draft article 9,paragraph 1 (f), by changing the substance of theprovision from an obligation upon the certificationservice provider to “utilize trustworthy systems,procedures and human resources in performing itsservices” to an obligation on the certification serviceprovider to disclose the systems, procedures andhuman resources it used in performing its services. Itwas stated that the effect of the proposed languagewould be simply to enable the relying party todetermine whether the systems, procedures and humanresources used by the certification service providerwere trustworthy or not. The view was expressed that itwas necessary to narrow the obligation of thecertification service provider, which was too broad andmight be inappropriate if applied to a wide range ofelectronic commerce functions. It was stated that thestandard of trustworthiness set forth in the article wastoo high for many electronic signatures and services,for example, the many businesses that providedcertification services in the course of their business,such as services provided by an employer to itsemployees. The proposal was to delete existingparagraph 1 (f) and add, as a new item (vii) to draftarticle 9, paragraph 1 (d), words along the lines of “thesystems, procedures and human resources utilized inperforming its services”.

225. Although some support was expressed in favourof the proposal, provided that the connection toarticle 10 was retained, the prevailing view was thatthe proposal was not acceptable. Concern was

expressed that, by removing the obligation upon thecertification service provider to utilize trustworthysystems and imposing a new obligation upon therelying party to satisfy itself that the systems, proce-dures and human resources used by the certificationservice provider were in fact trustworthy, the proposalwould alter the balance of duties and obligationsbetween the parties, a balance that had already beendiscussed and established by the Working Group. Afurther concern was that the proposal appeared to dilutethe importance of article 10, which was viewed as animportant provision of the draft Model Law.

226. As a compromise, a further proposal was made tomaintain the provision as article 9, paragraph 1 (f), butto amend the drafting to read “utilize systems,procedures and human resources that are suitablytrustworthy for the purposes for which the certificatewas intended to be used”. Although that proposalreceived some support, the prevailing view was that itwas not acceptable. A principal ground of objectionwas that the intention of article 9 was to ensure that,where an electronic signature that might be used forlegal effect was supported by a certification serviceprovider, the certification service provider should meetcertain standards and satisfy certain obligations,including using trustworthy systems, procedures andhuman resources. In referring to the possible use of thecertificate, the compromise proposal removed thegeneral obligation for the certification service providerto use trustworthy systems, procedures and humanresources and, in doing so, moved the focus away fromthe standards that should be met in order to support theelectronic signature process properly.

227. After discussion, the Commission decided toretain the substance of draft article 9, paragraph 1 (f),unchanged.

Paragraph 2

228. A proposal was made (based upon a proposal setforth in A/CN.9/492/Add.2) that draft article 9,paragraph 2, should be amended to be made consistentwith changes already agreed to with respect to draftarticle 8, paragraph 2, and that a chapeau should beadded to draft article 9, paragraph 2, to recognize thelimitations to liability set forth in draft article 9,paragraph 1 (d) (ii) and (iv). The following words wereproposed for paragraph 2: “Subject to any limitationsascertainable under paragraph 1 (d), the certification

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service provider shall bear the legal consequences ofits failure to comply with paragraph 1.”

229. The basis of the proposal to add a chapeau toarticle 9, paragraph 2, was the concern that had beenexpressed as to whether, under the language of thedraft article, it was clear that the limitations referred toin paragraph 1 (d) (ii) and (iv) would operate to modifyliability pursuant to draft article 9, paragraph 2.

230. In respect of the first issue, the widely prevailingview was that draft article 9, paragraph 2, should adoptthe same formulation that had been agreed in respect ofdraft article 8, paragraph 2, that is, that the certificationservice provider should bear the legal consequences ofits failure to comply with the requirements of para-graph 1. As to the proposal to add a chapeau to draftarticle 9, paragraph 2, it was widely agreed that theproposed words were not necessary. It was stated that,since the limitations set forth in paragraph 1 (d) (ii)and (iv) would be implemented into the national law ofany State adopting the Model Law, they wouldtherefore be a part of the legal regime that determinedthe consequences of the failure of the certificationservice provider to satisfy paragraph 1. On that basisand on the basis of the general formulation of theagreed amendment to draft article 9, paragraph 2, itwas felt that the limitations referred to in para-graph 1 (d) were sufficiently taken into account and theadditional words were therefore unnecessary. It wasproposed that, to facilitate understanding of thoseprovisions of the Model Law, the Guide to Enactmentshould clearly state that the intention of paragraph 2 ofarticles 8 and 9 was for the legal consequences of thefailure to comply with the obligations set forth in thosearticles to be determined by applicable national law.The Commission decided to adopt that part of theproposal that would align the language of draftarticle 9, paragraph 2, with draft article 8, paragraph 2,and referred it to the drafting group (for the discus-sion regarding article 8, paragraph 2, see above,paras. 219-221).

Draft article 10

231. A proposal was made (see A/CN.9/492/Add.2) toamend the opening words of draft article 10 to read:

“For the purposes of article 9, para-graph 1 (f), in determining whether, or to whatextent, any systems, procedures and humanresources utilized by a certification service pro-

vider are trustworthy, regard may be had to thefollowing factors, if and to the extent generallyapplied in commercial practice for the level ofservice provided, and if relied on by a relyingparty”.

The reason stated for the proposal was that thestandards currently set forth in draft article 10considerably exceeded actual practices for servicesgenerally provided today.

232. While some support was expressed in favour ofthe proposal, the widely prevailing view was that thepurpose of draft article 10 was not to impose anexhaustive list of strict standards to be satisfied bycertification service providers in all circumstances butmerely to set forth a list of illustrative factors thatcould be taken into account in assessing whether thecertification service provider had utilized “trustworthysystems, procedures and human resources inperforming its services”. It was generally felt that theillustrative and non-mandatory nature of draftarticle 10 was sufficiently reflected by the words“regard may be had to the following factors”. Afterdiscussion, the Commission decided to retain theopening words of draft article 10 as currently draftedand referred it to the drafting group.

Subparagraph (f)

233. A proposal was made (see A/CN.9/492) to amenddraft article 10, subparagraph (f), to read “the existenceof a declaration by the State, an accreditation body oran independent auditing body regarding compliancewith or existence of the foregoing”.

234. It was stated by its proponents that the proposedamendment was appropriate, in particular in the case ofdeveloping countries, which might have fewerresources for the establishment of accreditation bodiessuch as certification service providers, so as to allowsuch a function to be performed by an independentauditing body. Strong opposition was expressed to theproposed deletion of the reference to situations where adeclaration regarding compliance with the factors listedin draft article 10 would be made by the certificationprovider itself, for example by way of a certificationpractice statement. It was pointed out that in manycountries such declarations by the certification serviceproviders themselves were essential in the developmentof electronic commerce practice. No objection wasmade to the possible addition of a reference to

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situations where a declaration under draft article 10,subparagraph (f), would be made by independentauditing bodies. After discussion, however, it wasgenerally felt that such an addition was unnecessary inview of the fact that the possible intervention of anindependent auditing body was sufficiently covered bythe reference to “an accreditation body” in the currenttext of draft article 10, subparagraph (f), and by themention of “any other relevant factor” under draftarticle 10, subparagraph (g). The Commission decidedto retain the substance of draft article 10, subparagraph(f), as currently drafted and referred it to the draftinggroup.

Draft article 11

235. A proposal made (see A/CN.9/492/Add.2) toamend draft article 11 so as to provide, in accordancewith commercial and transactional practices whereapplicable, that relying parties should assume a greaterresponsibility for ascertaining the reliability of asignature than was reflected in the current text, waswithdrawn. That withdrawal was made in recognitionthat amendments made to the draft text had adequatelyevened out the relative position of the parties.

Subparagraph (b)

236. A proposal was made (see A/CN.9/492) to amenddraft article 11, subparagraph (b), by replacing thewords “where an electronic signature is supported by”with the words “where a signature is based on”.Opposition to that amendment was voiced on the basisthat it could narrow down the scope of draft article 11,subparagraph (b). After discussion, the Commissiondecided to retain the substance of draft article 11,subparagraph (b), as currently drafted and referred it tothe drafting group.

Draft article 12

237. Clarification was sought as to what theCommission understood the expression used inarticle 12 of “substantially equivalent level ofreliability” to mean. Referring to paragraph 152 of thedraft Guide, the Commission agreed that the textsought to take account of the variations in levels ofreliability found within and outside national borders. Itwas accepted that it was not the level of security beingevaluated but rather the security or administrativerequirements that could be set up differently and the

use of the expression sought, following the functionalapproach, to establish comparability on those issues. Itwas considered that an explanation along those lines,as set out in paragraph 5 of the draft Guide, couldusefully be referred to in the section of the Guidedealing with article 12.

C. Consideration of the remainder of thedraft articles

238. Having completed its consideration of the propo-sals that were raised by delegations on the basis of thecomments submitted by Governments and interestedinternational organizations with respect to the text ofthe draft Model Law (A/CN.9/492 and Add.1-3), theCommission proceeded with a systematic review of thedraft articles.

Title

239. The title of the draft model law as considered bythe Commission was as follows: “UNCITRAL MODELLAW ON ELECTRONIC SIGNATURES (2001)”.

240. The Commission approved the substance of thetitle of the draft Model Law and referred it to thedrafting group.

Article 1: Sphere of application


“This Law applies where electronic signa-tures are used in the context* of commercial**

* The Commission suggests the following text for States

that might wish to extend the applicability of this Law:“This Law applies where electronic signatures are used,except in the following situations: [...].”

** The term “commercial” should be given a wideinterpretation so as to cover matters arising from allrelationships of a commercial nature, whethercontractual or not. Relationships of a commercial natureinclude, but are not limited to, the followingtransactions: any trade transaction for the supply orexchange of goods or services; distribution agreement;commercial representation or agency; factoring; leasing;construction of works; consulting; engineering;licensing; investment; financing; banking; insurance;exploitation agreement or concession; joint venture andother forms of industrial or business cooperation;carriage of goods or passengers by air, sea, rail or road.”

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activities. It does not override any rule of lawintended for the protection of consumers.”

242. The Commission approved the substance of draftarticle 1 and referred it to the drafting group.

Article 2: Definitions


“For the purposes of this Law:

“(a) ‘Electronic signature’ means data inelectronic form in, affixed to, or logically asso-ciated with, a data message, which may be usedto identify the signatory in relation to the datamessage and indicate the signatory’s approval ofthe information contained in the data message;

“(b) ‘Certificate’ means a data message orother record confirming the link between asignatory and signature creation data;

“(c) ‘Data message’ means informationgenerated, sent, received or stored by electronic,optical or similar means including, but not limitedto, electronic data interchange (EDI), electronicmail, telegram, telex or telecopy;

“(d) ‘Signatory’ means a person that holdssignature creation data and acts either on its ownbehalf or on behalf of the person it represents;

“(e) ‘Certification service provider’ meansa person that issues certificates and may provideother services related to electronic signatures;

“(f) ‘Relying party’ means a person thatmay act on the basis of a certificate or anelectronic signature.”

Subparagraph (a) (“Electronic signature”)

244. A suggestion was made that the words “may beused” in subparagraph (a) should be replaced withwords such as “is technically capable”. That suggestionwas opposed on the basis that such language was notappropriate for use in a legislative text and also on thebasis that the proposed amendment was less flexiblethan the text as currently drafted and that it couldintroduce a rigid requirement into the definition ofelectronic signature. Despite rejecting that proposedamendment, the Commission agreed that the issuecould be referred to in the Guide to Enactment.

245. A broader concern was raised that the aspect ofthe definition of electronic signature in paragraph 2 (a),which referred to the signatory’s approval of theinformation contained in the data message, wasproblematic and that it was not imperative for asignature to indicate the approval of a message. It wassuggested that the word “may” should be includedbefore the word “indicate” to clarify that thesignatory’s approval of the contents of the datamessage was to have no higher status than the elementof the definition stating that the electronic signatorymay identify the signatory. The Commission rejectedany amendment to the text on the basis that thedefinition had been extensively debated and that thetext had been crafted so as to dovetail with the text ofthe UNCITRAL Model Law on Electronic Commerce,which listed the functions of an electronic signature. Itwas noted that the matter could be further clarified inthe draft Guide. In response to a question raised, theCommission noted that the consent of a signatory tothe information contained in the data message shouldbe gauged at the time when the signature was affixed tothe document rather than at the time when the signaturewas created.

246. After discussion, the proposal to amend thedefinition was withdrawn.

Subparagraph (d) (“Signatory”)

247. As a matter of drafting, it was suggested that thetexts should be aligned in the different languages withrespect to the use of the expression “acts on its ownbehalf or on behalf of the person it represents”. Thematter was referred to the drafting group for itsconsideration.

248. In reply to a question that was raised as to thesubstance of the definition, it was recalled that, asindicated in the draft Guide, the notion of “signatory”could not be severed from the person or entity thatactually generated the electronic signature, since anumber of specific obligations of the signatory underthe Model Law were logically linked to actual controlover the signature creation data. However, in order tocover situations where the signatory would be acting inrepresentation of another person, the phrase “or onbehalf of the person it represents” had been retained inthe definition of “signatory”. The extent to which, inaddition to the person actually applying an electronicsignature, a person would be bound by an electronic

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signature generated “on its behalf”, for example, byone of its employees, was a matter to be settled inaccordance with the law governing, as appropriate, thelegal relationship between the signatory and the personon whose behalf the electronic signature wasgenerated, on the one hand, and the relying party, onthe other (A/CN.9/493, para. 103).

Subparagraph (e) (“Certification service provider”)

249. A concern was raised that it was not clear if thedefinition of “certification service provider” wasconsistent with draft article 8, paragraph 1 (b), whichreferred to “any person … expected … to provideservices in support of electronic signatures” and withdraft article 12, paragraph 1 (b), which referred to the“issuer”. In response, it was generally agreed that bothprovisions could be understood, where appropriate, asreferring to the certification service provider. As towhether the text of draft article 8, paragraph 1 (b),would need to be aligned more closely with thewording of the definition of “certification serviceprovider” in draft article 2, subparagraph (e), thematter was referred to the drafting group.

Subparagraph (f) (“Relying party”)

250. A concern was raised that it was not clearwhether a person falling within the definition of“certification service provider” could also be coveredby the definition of “relying party”. In response,attention was drawn to paragraphs 139 and 150 of thedraft Guide, which made it clear that, in certaincircumstances, the notion of “relying party” mightcover not only a third party but also the signatory or acertification service provider.

251. After discussion, the Commission approved thesubstance of draft article 2 and referred it to thedrafting group.

Article 3: Equal treatment of signature technologies


“Nothing in this Law, except article 5, shallbe applied so as to exclude, restrict or deprive oflegal effect any method of creating an electronicsignature that satisfies the requirements referredto in article 6 (1) or otherwise meets the require-ments of applicable law.”


Article 4: Interpretation


“(1) In the interpretation of this Law,regard is to be had to its international origin andto the need to promote uniformity in its applica-tion and the observance of good faith.

“(2) Questions concerning mattersgoverned by this Law which are not expresslysettled in it are to be settled in conformity withthe general principles on which this Law isbased.”


Article 5: Variation by agreement


“The provisions of this Law may bederogated from or their effect may be varied byagreement, unless that agreement would not bevalid or effective under applicable law.”


Article 6: Compliance with a requirement for asignature


“(1) Where the law requires a signature ofa person, that requirement is met in relation to adata message if an electronic signature is usedwhich is as reliable as was appropriate for thepurpose for which the data message wasgenerated or communicated, in the light of allthe circumstances, including any relevant agree-ment.

“(2) Paragraph (1) applies whether therequirement referred to therein is in the form ofan obligation or whether the law simply providesconsequences for the absence of a signature.

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“(3) An electronic signature is consideredto be reliable for the purpose of satisfying therequirement referred to in paragraph (1) if:

“(a) The signature creation data are, withinthe context in which they are used, linked to thesignatory and to no other person;

“(b) The signature creation data were, atthe time of signing, under the control of thesignatory and of no other person;

“(c) Any alteration to the electronicsignature, made after the time of signing, isdetectable; and

“(d) Where a purpose of the legalrequirement for a signature is to provideassurance as to the integrity of the information towhich it relates, any alteration made to thatinformation after the time of signing isdetectable.

“(4) Paragraph (3) does not limit the abilityof any person:

“(a) To establish in any other way, for thepurpose of satisfying the requirement referred toin paragraph (1), the reliability of an electronicsignature; or

“(b) To adduce evidence of the non-reliability of an electronic signature.

“(5) The provisions of this article do notapply to the following: [...]”


Article 7: Satisfaction of article 6


“(1) [Any person, organ or authority,whether public or private, specified by theenacting State as competent] may determinewhich electronic signatures satisfy the provisionsof article 6.

“(2) Any determination made under para-graph (1) shall be consistent with recognizedinternational standards.

“(3) Nothing in this article affects theoperation of the rules of private internationallaw.”


Article 8: Conduct of the signatory


“(1) Where signature creation data can beused to create a signature that has legal effect,each signatory shall:

“(a) Exercise reasonable care to avoidunauthorized use of its signature creation data;

“(b) Without undue delay, notify anyperson that may reasonably be expected by thesignatory to rely on or to provide services insupport of the electronic signature if:

“(i) The signatory knows that the signaturecreation data have been compromised; or

“(ii) The circumstances known to thesignatory give rise to a substantial risk thatthe signature creation data may have beencompromised;

“(c) Where a certificate is used to supportthe electronic signature, exercise reasonable careto ensure the accuracy and completeness of allmaterial representations made by the signatorywhich are relevant to the certificate throughout itslife-cycle, or which are to be included in thecertificate.

“(2) A signatory shall be liable for itsfailure to satisfy the requirements of para-graph (1).”

263. Subject to its earlier deliberations with respect todraft article 8 (see above, paras. 212-222), theCommission approved the substance of the draft articleand referred it to the drafting group.

Article 9: Conduct of the certification serviceprovider


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“(1) Where a certification service providerprovides services to support an electronicsignature that may be used for legal effect as asignature, that certification service provider shall:

“(a) Act in accordance with representationsmade by it with respect to its policies andpractices;

“(b) Exercise reasonable care to ensure theaccuracy and completeness of all materialrepresentations made by it that are relevant to thecertificate throughout its life-cycle, or which areincluded in the certificate;

“(c) Provide reasonably accessible meanswhich enable a relying party to ascertain from thecertificate:

“(i) The identity of the certification serviceprovider;

“(ii) That the signatory that is identified inthe certificate had control of the signaturecreation data at the time when the certificatewas issued;

“(iii) That signature creation data were validat or before the time when the certificatewas issued;

“(d) Provide reasonably accessible meanswhich enable a relying party to ascertain, whererelevant, from the certificate or otherwise:

“(i) The method used to identify thesignatory;

“(ii) Any limitation on the purpose or valuefor which the signature creation data or thecertificate may be used;

“(iii) That the signature creation data arevalid and have not been compromised;

“(iv) Any limitation on the scope or extentof liability stipulated by the certificationservice provider;

“(v) Whether means exist for the signatoryto give notice pursuant to article 8 (1) (b);

“(vi) Whether a timely revocation service isoffered;

“(e) Where services under subpara-graph (d) (v) are offered, provide a means for

a signatory to give notice pursuant toarticle 8 (1) (b) and, where services under sub-paragraph (d) (vi) are offered, ensure theavailability of a timely revocation service;

“(f) Utilize trustworthy systems, proce-dures and human resources in performing itsservices.

“(2) A certification service provider shallbe liable for its failure to satisfy the requirementsof paragraph (1).”

265. Subject to its earlier deliberations with respect todraft article 9 (see above, paras. 223-230), theCommission approved the substance of the draft articleand referred it to the drafting group.

Article 10: Trustworthiness


“For the purposes of article 9 (1) (f), indetermining whether, or to what extent, anysystems, procedures and human resources utilizedby a certification service provider are trustworthy,regard may be had to the following factors:

“(a) Financial and human resources,including existence of assets;

“(b) Quality of hardware and softwaresystems;

“(c) Procedures for processing of certi-ficates and applications for certificates andretention of records;

“(d) Availability of information to signa-tories identified in certificates and to potentialrelying parties;

“(e) Regularity and extent of audit by anindependent body;

“(f) The existence of a declaration by theState, an accreditation body or the certificationservice provider regarding compliance with orexistence of the foregoing; or

“(g) Any other relevant factor.”


Article 11: Conduct of the relying party

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“A relying party shall bear the legalconsequences of its failure to:

“(a) Take reasonable steps to verify thereliability of an electronic signature; or

“(b) Where an electronic signature is sup-ported by a certificate, take reasonable steps to:

“(i) Verify the validity, suspension orrevocation of the certificate; and

“(ii) Observe any limitation with respect tothe certificate.”

269. The Commission approved the substance of draftarticle 11, noting a suggestion that the title of thearticle should be aligned in all languages. The matterwas referred to the drafting group.

Article 12: Recognition of foreign certificates andelectronic signatures


“(1) In determining whether, or to whatextent, a certificate or an electronic signature islegally effective, no regard shall be had to:

“(a) The geographic location where thecertificate is issued or the electronic signaturecreated or used; or

“(b) The geographic location of the placeof business of the issuer or signatory.

“(2) A certificate issued outside [theenacting State] shall have the same legal effect in[the enacting State] as a certificate issued in [theenacting State] if it offers a substantiallyequivalent level of reliability.

“(3) An electronic signature created or usedoutside [the enacting State] shall have the samelegal effect in [the enacting State] as anelectronic signature created or used in [theenacting State] if it offers a substantiallyequivalent level of reliability.

“(4) In determining whether a certificate oran electronic signature offers a substantiallyequivalent level of reliability for the purposes of

paragraph (2) or (3), regard shall be had torecognized international standards and to anyother relevant factors.

“(5) Where, notwithstanding para-graphs (2), (3) and (4), parties agree, as betweenthemselves, to the use of certain types of elect-ronic signatures or certificates, that agreementshall be recognized as sufficient for the purposesof cross-border recognition, unless that agreementwould not be valid or effective under applicablelaw.”

271. A proposal was made to delete the word “types”from article 12, paragraph 5, so that it would refer to“certain electronic signatures or certificates”. Thatproposal was opposed on the basis that the WorkingGroup had after extensive discussion specificallychosen to include this word and its removal could infact narrow the scope of the paragraph.

272. Another proposal was made to delete article 12,paragraph 3. While some support was expressed, theCommission, after discussion, did not adopt thatproposal.

273. After discussion, the Commission approved thesubstance of draft article 12 and referred it to thedrafting group.

D. Consideration of the draft Guide toEnactment of the UNCITRAL ModelLaw on Electronic Signatures

274. Having completed its deliberations with respectto the text of the draft Model Law, the Commissionproceeded with a review of the draft Guide toEnactment prepared by the Secretariat (A/CN.9/493).

Paragraphs 135 and 159

275. A proposal was made (see A/CN.9/492/Add.2) toamend paragraphs 135 and 159 to reflect changes madeto paragraph 69 as a result of the thirty-eighth sessionof the Working Group to limit the risk that insufficientattention might be given to industry-led voluntarystandards processes.

276. The following text was proposed as a substitutefor the second sentence of paragraph 135:

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“The word ‘standards’ should be interpretedin a broad sense, which would include voluntaryindustry practices and trade usages, which mayassure the flexibility upon which commercialpractice relies, promote open standards with aview to facilitating interoperability, and supportthe objective of cross-border recognition (as des-cribed in art. 12). Example texts include thoseemanating from such international organizationsas the International Chamber of Commerce, theregional accreditation bodies operating under theaegis of the International Organization forStandardization (see A/CN.9/484, para. 66), theWorld Wide Web Consortium (W3C), as well asthe work of UNCITRAL itself (including thisModel Law and the UNCITRAL Model Law onElectronic Commerce).”

While some support was expressed in favour of theproposed amendment, it was generally felt that theexisting text expressed adequate recognition of the roleof voluntary standards. After discussion, it was agreedthat inserting the words “voluntary standards (asdescribed in para. 69 above)” after the words “industrypractices and trade usages” in the second sentence ofparagraph 135 would constitute an appropriatereference to such voluntary standards.

277. In the context of that discussion, another proposalwas made that paragraph 135 should make reference tothe European Electronic Signature StandardizationInitiative (EESSI) as an example of a regionalstandardization initiative that should be taken intoaccount when examining the standards applicable inthe field of electronic signatures. While support wasexpressed for that proposal, it was pointed out thatother such initiatives existed within other regionalinternational organizations and that the Guide shouldnot single out any such regional initiative. Afterdiscussion, it was agreed that paragraph 135 shouldrefer in general terms to “regional standardizationinitiatives”.

278. As to paragraph 159, a proposal was made toreplace the current text by the following:

“The notion of ‘recognized internationalstandard’ should be interpreted broadly to covervoluntary international technical and commercialstandards (i.e. market-driven standards) andstandards and norms adopted by governmental orintergovernmental bodies (ibid., para. 49).

‘Recognized international standard’ may bestatements of accepted technical, legal orcommercial practices, whether developed by thepublic or private sector (or both), of a normativeor interpretative nature, which are generallyaccepted as applicable internationally. Suchstandards may be in the form of requirements,recommendations, guidelines, codes of conduct,or statements of either best practices or norms(ibid., paras. 101-104). Voluntary internationaltechnical and commercial standards may form thebasis of product specifications of engineering anddesign criteria and of consensus for research anddevelopment of future products. To assure theflexibility upon which such commercial practicerelies, to promote open standards with a view tofacilitating interoperability and to support theobjective of cross-border recognition (asdescribed in art. 12), States may wish to give dueregard to the relationship between anyspecifications incorporated in or authorized bynational regulations, and the voluntary technicalstandards process (see A/CN.9/484, para. 46).”

For the same reasons expressed in the context of theabove discussion of paragraph 135 (see above,para. 43), it was agreed that inserting a reference to“voluntary standards (as described in para. 69 above)”at the end of the first sentence of paragraph 159 wouldconstitute a sufficient reference to the practice ofdeveloping voluntary standards.

Paragraph 54

279. In addition to the mention currently found inparagraph 54 that “the issuing certification serviceprovider’s digital signature on the certificate can beverified by using the public key of the certificationservice provider listed in another certificate by anothercertification service provider”, it was proposed that thefollowing should be added after the second sentence ofparagraph 54:

“Among other possible ways of verifyingthe digital signature of the certification serviceprovider, that digital signature can also berecorded in a certificate issued by that certifica-tion service provider itself, and sometimesreferred to as a ‘root certificate’”.

Along the same lines, it was proposed that the end ofthe last sentence should read as follows: “to publish the

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public key of the certification service provider (seeA/CN.9/484, para. 41) or certain data pertaining to theroot certificate (such as a ‘digital fingerprint’) in anofficial bulletin”. While support was expressed infavour of the proposal, objections were made, based onthe view that, in certain countries, there existed strongobjections to implementations of root certificates in thecommercial sphere, for reasons linked to the costsassociated with the establishment of the structuresnecessary for such implementations and to a perceptionthat such implementations might result in an overlyregulated regime. Accordingly, it was proposed thatthose objections should also be mentioned in para-graph 54. After discussion, the Commission agreed thatthose various proposals should be reflected inparagraph 54.

Paragraph 62

280. With respect to subparagraph (3), it was proposedthat the words “unique to both the signed message anda given private key” should be replaced with the words“unique to the signed message”. The Commissionadopted that proposal.

Paragraph 93

281. A proposal was made to replace the words “theidentification of the signatory and the intent to sign”with wording based on the language used in para-graph 29 to describe the basic functions of a signature,namely, “to identify a person; and to associate thatperson with the content of a document”. TheCommission adopted that proposal.

Paragraph 153

282. A proposal was made to quote more extensivelyin paragraph 153 from the text of paragraph 31 of thereport of the Working Group on the work of its thirty-seventh session (A/CN.9/483). In particular, it waspointed out that the indication that “the purpose ofparagraph 2 was not to place foreign suppliers ofcertification services in a better position than domesticones” should be reflected in the Guide. That proposalwas adopted by the Commission.

283. Subject to any amendment that might benecessary to reflect the deliberations and decisions ofthe Commission at its current session with respect toboth the text of the Model Law and the draft Guideitself and subject to any editorial changes that might be

necessary to ensure consistency in terminology, theCommission found that the text of the draft Guideadequately implemented the Commission’s intent toassist States in enacting and applying the Model Lawand to provide guidance to other users of the ModelLaw. The Secretariat was requested to prepare thedefinitive version of the Guide and to publish ittogether with the text of the Model Law.

E. Adoption of the Model Law

284. The Commission, after consideration of the textof the draft Model Law as revised by the drafting groupand the draft Guide to Enactment prepared by theSecretariat (A/CN.9/493), adopted the followingdecision at its 727th meeting, on 5 July 2001:


“Recalling its mandate under GeneralAssembly resolution 2205 (XXI) of 17 December1966 to further the progressive harmonization andunification of the law of international trade and inthat respect to bear in mind the interests of allpeoples, and particularly those of developingcountries, in the extensive development ofinternational trade,

“Noting that an increasing number of trans-actions in international trade are carried out bymeans of communication commonly referred toas ‘electronic commerce’, which involve the useof alternatives to paper-based forms of communi-cation, storage and authentication of information,

“Recalling the recommendation on the legalvalue of computer records adopted by theCommission at its eighteenth session, in 1985,and paragraph 5 (b) of General Assemblyresolution 40/71 of 11 December 1985, in whichthe Assembly called upon Governments andinternational organizations to take action, whereappropriate, in conformity with the recommen-dation of the Commission so as to ensure legalsecurity in the context of the widest possible useof automated data processing in internationaltrade,

“Recalling also the UNCITRAL Model Lawon Electronic Commerce adopted by the

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Commission at its twenty-ninth session, in 1996,and complemented by an additional article 5 bisadopted by the Commission at its thirty-firstsession, in 1998,

“Convinced that the UNCITRAL ModelLaw on Electronic Commerce is of significantassistance to States in enabling or facilitating theuse of electronic commerce through theenhancement of their legislation governing theuse of alternatives to paper-based forms ofcommunication and storage of information andthrough the formulation of such legislation wherenone currently exists,

“Mindful of the great utility of newtechnologies used for personal identification inelectronic commerce and commonly referred to as‘electronic signatures’,

“Desirous of building on the fundamentalprinciples underlying article 7 of the UNCITRALModel Law on Electronic Commerce with respectto the fulfilment of the signature function in anelectronic environment,

“Convinced that legal certainty in electroniccommerce will be enhanced by the harmonizationof certain rules on the legal recognition ofelectronic signatures on a technologically neutralbasis,

“Believing that the UNCITRAL Model Lawon Electronic Signatures will significantly assistStates in enhancing their legislation governing theuse of modern authentication techniques and informulating such legislation where none currentlyexists,

“Being of the opinion that the establishmentof model legislation to facilitate the use ofelectronic signatures in a manner acceptable toStates with different legal, social and economicsystems could contribute to the development ofharmonious international economic relations,

“1. Adopts the UNCITRAL Model Law onElectronic Signatures as it appears in annex II tothe report of the United Nations Commission onInternational Trade Law on its thirty-fourthsession,7 together with the Guide to Enactment ofthe Model Law;

“2. Requests the Secretary-General totransmit the text of the UNCITRAL Model Lawon Electronic Signatures, together with the Guideto Enactment of the Model Law, to Governmentsand other interested bodies;

“3. Recommends that all States givefavourable consideration to the newly adoptedUNCITRAL Model Law on ElectronicSignatures, together with the UNCITRAL ModelLaw on Electronic Commerce adopted in 1996and complemented in 1998, when they enact orrevise their laws, in view of the need foruniformity of the law applicable to alternatives topaper-based forms of communication, storage andauthentication of information.”

Chapter VPossible future work on electroniccommerce

285. At the thirty-second session of the Commission,in 1999, various suggestions were made with respect tofuture work in the field of electronic commerce aftercompletion of the Model Law on Electronic Signatures.It was recalled that, at the close of the thirty-secondsession of the Working Group, it had been proposedthat the Working Group might wish to give preliminaryconsideration to undertaking the preparation of aninternational convention based on relevant provisionsof the UNCITRAL Model Law on ElectronicCommerce and of the draft model law on electronicsignatures (A/CN.9/446, para. 212). The Commissionwas informed that interest had been expressed in anumber of countries in the preparation of such aninstrument.10

286. The attention of the Commission was drawn to arecommendation adopted on 15 March 1999 by theCentre for the Facilitation of Procedures and Practicesfor Administration, Commerce and Transport(CEFACT) of the Economic Commission for Europe(ECE).11 That text recommended that UNCITRALconsider the actions necessary to ensure that referencesto “writing”, “signature” and “document” in conven-tions and agreements relating to international tradeallowed for electronic equivalents. Support wasexpressed for the preparation of an omnibus protocol to

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amend multilateral treaty regimes to facilitate theincreased use of electronic commerce.

287. Other items suggested for future work included:electronic transactional and contract law; electronictransfer of rights in tangible goods; electronic transferof intangible rights; rights in electronic data andsoftware (possibly in cooperation with the WorldIntellectual Property Organization (WIPO)); standardterms for electronic contracting (possibly in co-operation with the International Chamber of Commerce(ICC) and the Internet Law and Policy Forum);applicable law and jurisdiction (possibly in cooperationwith the Hague Conference on Private InternationalLaw); and online dispute settlement systems.12

288. At its thirty-third session, in 2000, theCommission held a preliminary exchange of viewsregarding future work in the field of electroniccommerce. The Commission focused its attention onthree of the topics mentioned above. The first dealtwith electronic contracting considered from theperspective of the United Nations Convention onContracts for the International Sale of Goods(hereinafter referred to as “the United Nations SalesConvention” or “the Convention”). The second topicwas online dispute settlement. The third topic wasdematerialization of documents of title, in particular inthe transport industry.

289. The Commission welcomed the proposal toconsider further the possibility of undertaking futurework on those topics. While no decision as to the scopeof future work could be made until further discussionhad taken place in the Working Group, the Commissiongenerally agreed that, upon completing its current task,namely, the preparation of the draft Model Law onElectronic Signatures, the Working Group would beexpected to examine, at its first meeting in 2001, someor all of the above-mentioned topics, as well as anyadditional topic, with a view to making more specificproposals for future work by the Commission. It wasagreed that work to be carried out by the WorkingGroup could involve consideration of several topics inparallel as well as preliminary discussion of thecontents of possible uniform rules on certain aspects ofthe above-mentioned topics.13

290. The Working Group considered those proposals atits thirty-eighth session, in 2001, on the basis of a setof notes dealing with a possible convention to removeobstacles to electronic commerce in existing

international conventions (A/CN.9/WG.IV/WP.89);dematerialization of documents of title(A/CN.9/WG.IV/WP.90); and electronic contracting(A/CN.9/WG.IV/WP.91).

291. The Working Group concluded its deliberationson future work by recommending to the Commissionthat work towards the preparation of an internationalinstrument dealing with certain issues in electroniccontracting be started on a priority basis. At the sametime, it was agreed to recommend to the Commissionthat the Secretariat be entrusted with the preparation ofthe necessary studies concerning three other topicsconsidered by the Working Group, namely: (a) acomprehensive survey of possible legal barriers to thedevelopment of electronic commerce in internationalinstruments, including, but not limited to, thoseinstruments already mentioned in the CEFACT survey;(b) a further study of the issues related to transfer ofrights, in particular rights in tangible goods, byelectronic means and mechanisms for publicizing andkeeping a record of acts of transfer or the creation ofsecurity interests in such goods; and (c) a studydiscussing the UNCITRAL Model Law onInternational Commercial Arbitration, as well as theUNCITRAL Arbitration Rules, to assess theirappropriateness for meeting the specific needs ofonline arbitration (A/CN.9/484, paras. 94-127).

292. There was wide support for the recommendationsmade by the Working Group, which were found toconstitute a sound basis for future work by theCommission. The views varied, however, as regardsthe relative priority to be assigned to the topics. Oneline of thought was that a project aimed at removingobstacles to electronic commerce in existinginstruments should have priority over the other topics,in particular over the preparation of a new internationalinstrument dealing with electronic contracting. It wassaid that references to “writing”, “signature”,“document” and other similar provisions in existinguniform law conventions and trade agreements alreadycreated legal obstacles and generated uncertainty ininternational transactions conducted by electronicmeans. Efforts to remove those obstacles should not bedelayed or neglected by attaching higher priority toissues of electronic contracting.

293. The prevailing view, however, was in favour ofthe order of priority that had been recommended by theWorking Group (see para. 291). It was pointed out, in

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that connection, that the preparation of an internationalinstrument dealing with issues of electronic contractingand the consideration of appropriate ways for removingobstacles to electronic commerce in existing uniformlaw conventions and trade agreements were notmutually exclusive. The Commission was reminded ofthe common understanding reached at its thirty-thirdsession that work to be carried out by the WorkingGroup could involve consideration of several topics inparallel as well as preliminary discussion of thecontents of possible uniform rules on certain aspects ofthe above-mentioned topics.14

294. There were also differing views regarding thescope of future work on electronic contracting, as wellas the appropriate moment to begin such work.Pursuant to one view, the work should be limited tocontracts for the sale of tangible goods. The oppositeview, which prevailed in the course of theCommission’s deliberations, was that the WorkingGroup on Electronic Commerce should be given abroad mandate to deal with issues of electroniccontracting, without narrowing the scope of the workfrom the outset. It was understood, however, thatconsumer transactions and contracts granting limiteduse of intellectual property rights would not be dealtwith by the Working Group. The Commission tooknote of one of several preliminary workingassumptions made by the Working Group that the formof the instrument to be prepared could be that of astand-alone convention (although it was not possiblefor a final decision to be taken as to form). The futureinstrument should deal broadly with the issues ofcontract formation in electronic commerce(A/CN.9/484, para. 124), without creating any negativeinterference with the well-established regime of theUnited Nations Convention on Contracts for theInternational Sale of Goods (A/CN.9/484, para. 95),and without unduly interfering with the law of contractformation in general. In that connection, it was statedthat the focus of the work should be restricted tointernational transactions. Broad support was given tothe idea expressed in the context of the thirty-eighthsession of the Working Group that, to the extentpossible, the treatment of Internet-based salestransactions should not differ from the treatment givento sales transactions conducted by more traditionalmeans (A/CN.9/484, para. 102).

295. As regards the timing of the work to beundertaken by the Working Group, there was support

for commencing consideration of future work withoutdelay during the third quarter of 2001. However, strongviews were expressed that it would be preferable forthe Working Group to await until the first quarter of2002, so as to afford States sufficient time to holdinternal consultations. The Commission took note ofthat suggestion and decided to revert to the issue in thecourse of its deliberations on its overall workprogramme and the proposed schedule of meetings ofits Working Groups (see para. 425).

Chapter VIInsolvency law

296. The Commission, at its thirty-second session in1999, had before it a proposal by Australia(A/CN.9/462/Add.1) on possible future work in thearea of insolvency law. That proposal had recommen-ded that, in view of its universal membership, itsprevious successful work on cross-border insolvencyand its established working relations with internationalorganizations that have expertise and interest in the lawof insolvency, the Commission was an appropriateforum for the discussion of insolvency law issues. Theproposal urged that the Commission considerentrusting a working group with the development of amodel law on corporate insolvency to foster andencourage the adoption of effective national corporateinsolvency regimes.

297. Recognition was expressed in the Commission forthe importance to all countries of strong insolvencyregimes. The view was expressed that the type ofinsolvency regime that a country had adopted hadbecome a “front-line” factor in international creditratings. Concern was expressed, however, about thedifficulties associated with work on an internationallevel on insolvency legislation, which involvedsensitive and potentially diverging socio-politicalchoices. In view of those difficulties, the fear wasexpressed that the work might not be brought to asuccessful conclusion. It was said that a universallyacceptable model law was in all likelihood not feasibleand that any work needed to take a flexible approachthat would leave options and policy choices open toStates. While the Commission heard expressions ofsupport for such flexibility, it was generally agreed thatthe Commission could not take a final decision oncommitting itself to establishing a working group to

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develop model legislation or another text withoutfurther study of the work already being undertaken byother organizations and consideration of the relevantissues.

298. To facilitate that further study, the Commissiondecided to convene an exploratory session of a workinggroup to prepare a feasibility proposal forconsideration by the Commission at its thirty-thirdsession. That session of the Working Group was held inVienna from 6 to 17 December 1999.

299. At its thirty-third session, in 2000, theCommission noted the recommendation that theWorking Group had made in its report (A/CN.9/469,para. 140) and gave the Working Group the mandate toprepare a comprehensive statement of key objectivesand core features for a strong insolvency, debtor-creditor regime, including consideration of out-of-courtrestructuring, and a legislative guide containingflexible approaches to the implementation of suchobjectives and features, including a discussion of thealternative approaches possible and the perceivedbenefits and detriments of such approaches.

300. It was agreed that, in carrying out its task, theWorking Group should be mindful of the work underway or already completed by other organizations,including the World Bank, the International MonetaryFund, the Asian Development Bank, the InternationalFederation of Insolvency Professionals (INSOLInternational) and Committee J of the Section onBusiness Law of the International Bar Association(IBA). In order to obtain the views and benefitfrom the expertise of those organizations, theSecretariat, in cooperation with INSOL and IBA,organized the UNCITRAL/INSOL/IBA GlobalInsolvency Colloquium at Vienna, from 4 to6 December 2000.

301. At its current session, the Commission had beforeit the report of the Colloquium (A/CN.9/495).

302. The Commission took note of the report withsatisfaction and commended the work accomplished sofar, in particular the holding of the Global InsolvencyColloquium and the efforts of coordination with thework carried out by other international organizations inthe area of insolvency law. The Commission discussedthe recommendations of the Colloquium, in particularwith respect to the form that the future work might take

and interpretation of the mandate given to the WorkingGroup by the Commission at its thirty-third session.

303. In terms of the mandate given to the WorkingGroup, the Commission was generally of the view thatit should be interpreted broadly to enable the WorkingGroup to develop a work product that could reflect theelements mentioned in the mandate for inclusion (seepara. 299 above and A/CN.9/495, para. 13). As to thepossible form of future work, it was reaffirmed that amodel law on substantive features of an insolvencyregime would be neither desirable nor feasible, giventhe complexity and variety of issues involved ininsolvency law and the disparity of approaches takenwithin the various legal systems. The view was widelyshared that the work should ensure as much flexibilityas possible, while at the same time maximizing utility.Concern was expressed that while a legislative guidecould provide the necessary flexibility, it might resultin a product that was too general and too abstract toprovide the required guidance. Accordingly, it wassuggested that the Working Group should bear in mindthe need to be as specific as possible in developing itswork and in that connection it was suggested thatmodel legislative provisions, even if only addressingsome of the issues to be included in the guide, shouldbe included as far as possible.

304. The view was widely expressed that the workshould take the form of a legislative guide. It waspointed out that a product issued in that form mightprove very useful not only for countries that did nothave efficient and effective insolvency regimes andneeded to develop such a regime, but also for countriesthat had undertaken or were to undertake the process ofmodernizing and reviewing their national systems. Theview was expressed that, in developing the guide, theWorking Group should be mindful of the goal offurthering trade and promoting commerce, not just ofthe goal of harmonization of existing laws.

305. It was suggested that the three key areas fororganizing the material to be included in the guide, asoutlined in the report of the Colloquium (A/CN.9/495,paras. 30-33), provided an appropriate format for theessential elements and that work should proceed onthat basis. As to the substantive contents of the guide, anumber of suggestions were made, including that, indeveloping the legislative guide, the Working Groupshould bear in mind a number of key principles andobjectives such as respecting issues of public policy;

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enhancing the coordination role of courts; establishinga special regime for public claims; recognizing thepriority of reorganization over liquidation; preservingthe operation of the business and employment;guaranteeing salaries; respecting the role of courts incontrolling the insolvency representatives; providingfor equal treatment of creditors and ensuringtransparency of collective proceedings. It was observedthat those principles should not be interpreted aslimiting the mandate given to the Working Group, butmight usefully be taken into account by the WorkingGroup for purposes of guidance and to avoid thelegislative guide being overly general. It was suggestedthat either banks and financial institutions shouldremain outside the scope of the work or that a specialregime should be maintained for those entities.

306. Other suggestions that received some supportincluded the need to take account of a number of issuesthat had proved to be problems in internationalinsolvency, such as the difficulty of collecting anddisseminating information on companies that were thesubject of insolvency proceedings, providing access forforeign creditors to make claims, equal treatment offoreign creditors and the treatment of late claims,especially where they might be made by foreigncreditors. A further issue noted was problemsassociated with the granting of credit and the fact thatcases were often encountered where insufficient care indecisions to grant credit proved, though apparentlyremote, to be one of the causes of insolvency. It wasrecalled that the UNCITRAL Model Law on Cross-Border Insolvency already addressed a number of thoseproblems. It was noted that while some of those issuesmight also be relevant in the context of the currentproject to develop a legislative guide, there was nointention that the current project should change oramend the Model Law in any way.

307. The Commission noted the importance of trainingof insolvency professionals and the judiciary to theefficient and orderly functioning of an insolvencyregime and heard of the work being undertaken tofurther that important objective by other internationalorganizations.

308. After discussion, the Commission confirmed thatthe mandate given to the Working Group at the thirty-third session of the Commission should be widelyinterpreted to ensure an appropriately flexible work

product, which should take the form of a legislativeguide.

Chapter VIISettlement of commercial disputes

309. At its thirty-second session, in 1999, theCommission had before it a note entitled “Possiblefuture work in the area of international commercialarbitration” (A/CN.9/460).15 Welcoming the oppor-tunity to discuss the desirability and feasibility offurther development of the law of internationalcommercial arbitration, the Commission generallyconsidered that the time had come to assess theextensive and favourable experience with nationalenactments of the UNCITRAL Model Law onInternational Commercial Arbitration (1985), as wellas the use of the UNCITRAL Arbitration Rules and theUNCITRAL Conciliation Rules, and to evaluate in theuniversal forum of the Commission the acceptability ofideas and proposals for improvement of arbitrationlaws, rules and practices.16

310. The Commission entrusted the work to one of itsworking groups, which it named the Working Group onArbitration, and decided that the priority items for theWorking Group should be conciliation,17 requirementof written form for the arbitration agreement,18

enforceability of interim measures of protection19 andpossible enforceability of an award that had been setaside in the State of origin.20

311. At its thirty-third session, in 2000, theCommission had before it the report of the WorkingGroup on Arbitration on the work of its thirty-secondsession (A/CN.9/468). The Commission took note ofthe report with satisfaction and reaffirmed the mandateof the Working Group to decide on the time andmanner of dealing with the topics identified for futurework. Several statements were made to the effect that,in general, the Working Group, in deciding thepriorities of the future items on its agenda, should payparticular attention to what was feasible and practicaland to issues where court decisions left the legalsituation uncertain or unsatisfactory. Topics that werementioned in the Commission as potentially worthy ofconsideration, in addition to those which the WorkingGroup might identify as such, were the meaning andeffect of the more-favourable-right provision ofarticle VII of the 1958 Convention on the Recognition

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and Enforcement of Foreign Arbitral Awards(hereinafter referred to as “the New York Convention”)(A/CN.9/468, para. 109 (k)); raising claims in arbitralproceedings for the purpose of set-off and thejurisdiction of the arbitral tribunal with respect to suchclaims (para. 107 (g)); freedom of parties to berepresented in arbitral proceedings by persons of theirchoice (para. 108 (c)); residual discretionary power togrant enforcement of an award notwithstanding theexistence of a ground for refusal listed in article V ofthe 1958 New York Convention (para. 109 (i)); and thepower by the arbitral tribunal to award interest(para. 107 (j)). It was noted with approval that, withrespect to “online” arbitrations (i.e. arbitrations inwhich significant parts or even all of arbitralproceedings were conducted by using electronic meansof communication) (para. 113), the Working Group onArbitration would cooperate with the Working Groupon Electronic Commerce. With respect to the possibleenforceability of awards that had been set aside in theState of origin (para. 107 (m)), the view was expressedthat the issue was not expected to raise many problemsand that the case law that gave rise to the issue shouldnot be regarded as a trend.21

312. At its current session, the Commission took notewith appreciation of the reports of the Working Groupon the work of its thirty-third and thirty-fourth sessions(A/CN.9/485 and A/CN.9/487, respectively). TheCommission commended the Working Group for theprogress accomplished so far regarding the three mainissues under discussion, namely, the requirement of thewritten form for the arbitration agreement, the issues ofinterim measures of protection and the preparation of amodel law on conciliation.

313. With regard to the requirement of written formfor the arbitration agreement, the Commission notedthat the Working Group had considered the draft modellegislative provision revising article 7, paragraph 2, ofthe UNCITRAL Model Law on InternationalCommercial Arbitration (see A/CN.9/WG.II/WP.113,paras. 13 and 14) and a draft interpretative instrumentregarding article II, paragraph 2, of the New YorkConvention (para. 16). Consistent with a viewexpressed in the context of the thirty-fourth session ofthe Working Group (A/CN.9/487, para. 30), concernwas expressed as to whether a mere reference toarbitration terms and conditions or to a standard set ofarbitration rules available in written form could satisfythe written form requirement. It was stated that such a

reference should not be taken as satisfying the formrequirement since the written text being referred to wasnot the actual agreement to arbitrate but rather a set ofprocedural rules for carrying out the arbitration (i.e. atext that would most often exist prior to the agreementand result from the action of persons that were notparties to the actual agreement to arbitrate). It waspointed out that, in most practical circumstances, it wasthe agreement of the parties to arbitrate that should berequired to be made in a form that was apt to facilitatesubsequent evidence of the intent of the parties. Inresponse to that concern, it was generally felt that,while the Working Group should not lose sight of theimportance of providing certainty as to the intent of theparties to arbitrate, it was also important to worktowards facilitating a more flexible interpretation ofthe strict form requirement contained in the New YorkConvention, so as not to frustrate the expectations ofthe parties when they agreed to arbitrate. In thatrespect, the Commission took note of the possibilitythat the Working Group examine further the meaningand effect of the more-favourable-right provision ofarticle VII of the New York Convention.

314. With regard to the issues of interim measures ofprotection, the Commission noted that the WorkingGroup had considered a draft text for a revision ofarticle 17 of the UNCITRAL Model Law onInternational Commercial Arbitration and the text ofparagraph 1 (a) (i) of a draft new article prepared bythe Secretariat for addition to that Model Law(A/CN.9/WG.II/WP.113, para. 18). The Working Groupwas requested to continue its work on the basis ofrevised draft provisions to be prepared by theSecretariat.

315. With regard to conciliation, the Commissionnoted that the Working Group had consideredarticles 1-16 of the draft model legislative provisions(A/CN.9/WG.II/WP.113/Add.1). It was generally feltthat work on those draft model legislative provisionscould be expected to be completed by the WorkingGroup at its next session. The Commission requestedthe Working Group to proceed with the examination ofthose provisions on a priority basis, with a view to theinstrument being presented in the form of a draft modellaw for review and adoption by the Commission at itsthirty-fifth session, in 2002.

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Chapter VIIIMonitoring the implementation ofthe 1958 New York Convention

316. It was recalled that the Commission, at itstwenty-eighth session, in 1995, had approved theproject, undertaken jointly with Committee D of IBA,aimed at monitoring the legislative implementation ofthe New York Convention.22 It was stressed that thepurpose of the project, as approved by theCommission, was limited to that aim and, in particular,that its purpose was not to monitor individual courtdecisions applying the Convention. In order to be ableto prepare a report on the subject, the Secretariat hadsent to the States parties to the Convention aquestionnaire relating to the legal regime in thoseStates governing the recognition and enforcement offoreign awards.

317. It was noted that, as at the beginning of thecurrent session of the Commission, the Secretariat hadreceived 59 replies to the questionnaire (of a currenttotal of 125 States parties).

318. The Commission repeated its appeal to Statesparties to the Convention that had not yet replied to thequestionnaire to do so as soon as possible or, to theextent necessary, to inform the Secretariat about anynew developments since their previous replies to thequestionnaire. The Secretariat was requested toprepare, for a future session of the Commission, a notepresenting the findings based on the analysis of theinformation gathered.

Chapter IXPossible future work on transportlaw

319. When considering future work in the area ofelectronic commerce, following the adoption of theUNCITRAL Model Law on Electronic Commerce at itstwenty-ninth session, in 1996,23 the Commissionconsidered a proposal to include in its workprogramme a review of current practices and laws inthe area of the international carriage of goods by sea,with a view to establishing the need for uniform ruleswhere no such rules existed and with a view toachieving greater uniformity of laws.24

320. At that session, the Commission had beeninformed that existing national laws and internationalconventions had left significant gaps regarding issuessuch as the functioning of bills of lading and seawaybills, the relation of those transport documents to therights and obligations between the seller and the buyerof the goods and the legal position of the entities thatprovided financing to a party to the contract ofcarriage. Some States had provisions on those issues,but the fact that those provisions were disparate andthat many States lacked them constituted an obstacle tothe free flow of goods and increased the cost oftransactions. The growing use of electronic means ofcommunication in the carriage of goods furtheraggravated the consequences of those fragmentary anddisparate laws and also created the need for uniformprovisions addressing the issues particular to the use ofnew technologies.24

321. It was then suggested that the Secretariat shouldbe requested to solicit views and suggestions on thosedifficulties not only from Governments but inparticular from the relevant intergovernmental andnon-governmental organizations representing thevarious interests in the international carriage of goodsby sea.25 It was stated that an analysis of those viewsand suggestions would enable the Secretariat topresent, at a future session, a report that would allowthe Commission to take an informed decision as to thedesirable course of action.25

322. Several reservations were expressed with regardto that suggestion.26 One reservation was that theissues to be covered were numerous and complex,which would strain the limited resources of theSecretariat. Priority should instead be given to othertopics that were, or were about to be, put on the agendaof the Commission. Furthermore, it was said that thecontinued coexistence of different treaties governingthe liability in the carriage of goods by sea and theslow process of adherence to the United NationsConvention on the Carriage of Goods by Sea, 1978(Hamburg Rules), made it unlikely that adding a newtreaty to the existing ones would lead to greaterharmony of laws. Indeed, there was some danger thatthe disharmony of laws would increase.27

323. In addition, it was said that any work that wouldinclude the reconsideration of the liability regime waslikely to discourage States from adhering to theHamburg Rules, which would be an unfortunate result.

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It was stressed that, if an investigation were to becarried out, it should not cover the liability regime. Itwas, however, stated in reply that the review of theliability regime was not the main objective of thesuggested work; rather, what was necessary was toprovide modern solutions to the issues that either werenot adequately dealt with or were not dealt with at allin treaties.27

324. Having regard to those differing views, theCommission did not include the consideration of thesuggested issues on its agenda at that stage.Nevertheless, it decided that the Secretariat should bethe focal point for gathering information, ideas andopinions as to the problems that arose in practice andpossible solutions to those problems. It was also agreedthat such information-gathering should be broadlybased and should include, in addition to Governments,the international organizations representing thecommercial sectors involved in the carriage of goodsby sea, such as the International Maritime Committee(CMI), ICC, the International Union of MarineInsurance (IUMI), the International Federation ofFreight Forwarders Associations (FIATA), theInternational Chamber of Shipping (ICS) and theInternational Association of Ports and Harbors.28

325. At its thirty-first session, in 1998, theCommission heard a statement on behalf of CMI to theeffect that it welcomed the invitation to cooperate withthe Secretariat in soliciting views of the sectorsinvolved in the international carriage of goods and inpreparing an analysis of that information. It was statedthat that analysis would allow the Commission to takean informed decision as to the desirable course ofaction.29 Strong support was expressed at that sessionfor the exploratory work being undertaken by CMI andthe Secretariat. The Commission expressed itsappreciation to CMI for its willingness to embark onthat important and far-reaching project, for which fewor no precedents existed at the international level.30

326. At the thirty-second session of the Commission,in 1999, it was reported on behalf of CMI that a CMIworking group had been instructed to prepare a studyon a broad range of issues in international transport lawwith the aim of identifying the areas where unificationor harmonization was needed by the industriesinvolved.31 In undertaking the study, it had beenrealized that the industries involved were extremelyinterested in pursuing the project and had offered their

technical and legal knowledge to assist in thatendeavour. Based on that favourable reaction and thepreliminary findings of the CMI working group, itappeared that further harmonization in the field oftransport law would greatly benefit international trade.The CMI working group had found a number of issuesthat had not been covered by the current unifyinginstruments. Some of those issues were regulated bynational laws that were not internationally harmonized.Evaluated in the context of electronic commerce, thatlack of harmonization became even more significant. Itwas reported that the CMI working group hadidentified numerous interfaces between the differenttypes of contracts involved in international trade andtransport of goods (such as sales contracts, contracts ofcarriage, insurance contracts, letters of credit, freightforwarding contracts and a number of other ancillarycontracts). The CMI working group intended to clarifythe nature and function of those interfaces and tocollect and analyse the rules currently governing them.That exercise would at a later stage include a re-evaluation of principles of liability to determine theircompatibility with a broader area of rules on thecarriage of goods.31

327. At that session, it was also reported that the CMIworking group had sent a questionnaire to all CMImember organizations covering a large number of legalsystems. The intention of CMI was, once the replies tothe questionnaire had been received, to create aninternational subcommittee to analyse the data and finda basis for further work towards harmonizing the lawin the area of international transport of goods. TheCommission had been assured that CMI would provideit with assistance in preparing a universally acceptableharmonizing instrument.32

328. Also at that session, the Commission expressedits appreciation to CMI for having acted upon itsrequest for cooperation and requested the Secretariat tocontinue to cooperate with CMI in gathering andanalysing information. The Commission was lookingforward to receiving a report at a future sessionpresenting the results of the study with proposals forfuture work.33

329. At its thirty-third session, in 2000, theCommission had had before it a report of theSecretary-General on possible future work in transportlaw (A/CN.9/476), which described the progress of thework carried out by CMI in cooperation with the

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Secretariat. It had also heard an oral report on behalf ofCMI. In cooperation with the Secretariat, the CMIworking group had launched an investigation based ona questionnaire covering different legal systemsaddressed to the CMI member organizations. It wasalso noted that, at the same time, a number of round-table meetings had been held in order to discussfeatures of the future work with internationalorganizations representing various industries. Thosemeetings showed the continued support for and interestof the industry in the project.

330. It was reported that, pursuant to the receipt ofreplies to the questionnaire, CMI had created aninternational subcommittee with a view to analysingthe information and finding a basis for further worktowards harmonizing the law in the area ofinternational transport of goods. It was also reportedthat the enthusiasm encountered so far in the industryand the provisional findings about the areas of law thatneeded further harmonization made it likely that theproject would be eventually transformed into auniversally acceptable harmonizing instrument.

331. In the course of the discussions in the CMIsubcommittee, it had been noted that although bills oflading were still used, especially where a negotiabledocument was required, the actual carriage of goods bysea sometimes represented only a relatively short leg ofan international transport of goods. In the containertrade, even a port-to-port bill of lading would involvereceipt and delivery at some point not directlyconnected with the loading onto, or discharge from, theocean vessel. Moreover, in most situations it was notpossible to take delivery alongside the vessel.Furthermore, where different modes of transport wereused, there were often gaps between mandatoryregimes applying to the various transport modesinvolved. It had been proposed, therefore, that indeveloping an internationally harmonized regimecovering the relationships between the parties to thecontract of carriage for the full duration of the carrier’scustody of the cargo, issues that arose in connectionwith activities that were integral to the carriage agreedto by the parties and that took place before loading andafter discharge should also be considered, as well asissues that arose under shipments where more than onemode of transport was contemplated. It was noted thatthe emphasis of the work, as originally conceived, hadbeen on the review of areas of law governing thetransport of goods that had not previously been covered

by international agreements. However, it had beenincreasingly felt that the current broad-based projectshould be extended to include an updated liabilityregime that would complement the terms of theproposed harmonizing instrument.

332. Several statements were made in the Commissionto the effect that the time had come for active pursuitof harmonization in the area of the carriage of goods bysea, that increasing disharmony in the area ofinternational carriage of goods was a source of concernand that it was necessary to provide a certain legalbasis to modern contract and transport practices. It wasalso observed that the carriage of goods by sea wasincreasingly part of a warehouse-to-warehouse opera-tion and that factor should be borne in mind inconceiving future solutions. Approval was expressedfor a concept of work that would extend beyondliability issues and would deal with the contract ofcarriage so as to facilitate the export-import operation,which included the relationship between the seller andthe buyer (and possible subsequent buyers) as well asthe relationship between the parties to the commercialtransaction and providers of financing. It wasrecognized that such a broad approach would involvesome re-examination of the rules governing theliability for loss of or damage to goods.

333. In the context of the thirty-third session of theCommission, a transport law colloquium, organizedjointly by the Secretariat and CMI, was held in NewYork on 6 July 2000. The purpose of the colloquiumwas to gather ideas and expert opinions on problemsthat arose in the international carriage of goods, inparticular the carriage of goods by sea, identifyingissues in transport law on which the Commission mightwish to consider undertaking future work and, to theextent possible, suggesting possible solutions. Itallowed a broad range of interested organizations andrepresentatives of both carrier and shipper industrybodies to provide their views on possible areas wheretransport law was in need of reform.

334. A majority of speakers acknowledged thatexisting national laws and international conventionsleft significant gaps regarding issues such as thefunctioning of a bill of lading and a seaway bill, therelationship of those transport documents to the rightsand obligations between the seller and the buyer of thegoods and the legal position of the entities that providefinancing to a party to a contract of carriage. There was

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general consensus that, with the changes wrought bythe development of multimodalism and the use ofelectronic commerce, the transport law regime was inneed of reform to regulate all transport contracts,whether applying to one or more modes of transportand whether the contract was made electronically or inwriting. Some issues raised for consideration in anyreform process included formulating more exactdefinitions of the roles, responsibilities, duties andrights of all parties involved and clearer definitions ofwhen delivery was assumed to occur; rules for dealingwith cases where it was not clear at which leg of thecarriage cargo had been lost or damaged; identifyingthe terms or liability regime that should apply as wellas the financial limits of liability; and the inclusion ofprovisions designed to prevent the fraudulent use ofbills of lading.

335. At that session, the Commission welcomed thefruitful cooperation between CMI and the Secretariat.Several statements were made to the effect that it wasnecessary throughout the preparatory work to involveother interested organizations, including thoserepresenting the interests of cargo owners. TheCommission requested the Secretariat to continue tocooperate actively with CMI with a view to presenting,at the next session of the Commission, a reportidentifying issues in transport law on which theCommission might undertake future work.

336. It was noted with appreciation that a CMIInternational Subcommittee, in which all maritime lawassociation members of CMI were invited toparticipate, had met four times during 2000 to considerthe scope and possible substantive solutions for afuture instrument on transport law (27 and 28 January,6 and 7 April, 7 and 8 July and 12 and 13 October). Anumber of other non-governmental organizationsparticipated as observers in those meetings, includingFIATA, the Baltic and International Maritime Council(BIMCO), ICC, ICS, IUMI and the International Groupof P&I Clubs. The tasks of the Subcommittee, as laiddown by CMI in consultation with the Secretariat, hadbeen to consider in what areas of transport law thatwere not at present governed by international liabilityregimes greater international uniformity might beachieved; to prepare an outline of an instrumentdesigned to bring about uniformity of transport law andthen to draft provisions to be incorporated into theproposed instrument, including provisions relating toliability. In addition, the Subcommittee was to consider

how the instrument might accommodate other forms ofcarriage associated with carriage by sea. The draftoutline instrument and a paper on door-to-door issueswere discussed at the major CMI internationalconference held in Singapore from 12 to 16 February2001. It was reported that, pursuant to the discussion atthe conference, the Subcommittee would continue itswork with a view to identifying solutions that werelikely to attract agreement among the industriesinvolved in the international carriage of goods by sea.

337. At its thirty-fourth session, the Commission hadbefore it a report of the Secretary-General(A/CN.9/497) that had been prepared pursuant to thatrequest by the Commission.

338. The report that was before the Commissionsummarized the considerations and suggestions thathad resulted so far from the discussions in the CMIInternational Subcommittee. The details of possiblelegislative solutions were not presented because theywere currently being worked on by the Subcommittee.The purpose of the report was to enable theCommission to assess the thrust and scope of possiblesolutions and decide on how it wished to proceed. Theissues described in the report that would have to bedealt with in the future instrument included thefollowing: the scope of application of the instrument,period of responsibility of the carrier, obligations of thecarrier, liability of the carrier, obligations of theshipper, transport documents, freight, delivery to theconsignee, right of control of parties interested in thecargo during carriage, transfer of rights in goods, theparty that had the right to bring an action against thecarrier and time bar for actions against the carrier.

339. The report suggested that consultations that theSecretariat had been conducting pursuant to themandate it received from the Commission in 1996indicated that work could usefully commence towardsan international instrument, possibly having the natureof an international treaty, that would modernize the lawof carriage, take into account the latest developmentsin technology, including electronic commerce, andeliminate legal difficulties in the international transportof goods by sea that were identified by theCommission. Considerations of possible legislativesolutions by CMI were making good progress and itwas expected that a preliminary text containing draftsof possible solutions for a future legislative instrument,

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with alternatives and comments, would be prepared byDecember 2001.

340. It was suggested that the Commission shouldcommence consideration of the feasibility, scope andcontent of a future legislative instrument in 2002 byentrusting the work to a working group.

341. The Commission heard a report from arepresentative of CMI that the work of itsSubcommittee had received broad support from itsmembers. In consultations undertaken by CMI, theimportance of that project had been acknowledgedalong with the necessity of ensuring that its objectiveswere compatible with electronic commerce and theneed to clarify further the relationship between shipper,carrier and consignee even where such relationshipswere already covered by existing international regimes.The Commission expressed its gratitude to CMI for theintensive and productive consultations conducted sofar.

342. The view was expressed that it was important tofocus on issues that were not dealt with by existinginternational conventions. In particular, it wassuggested that it was not necessary to develop newrules relating to issues such as the liability of thecarrier already covered by international treaties, as itwould be uncertain whether States would accept a newregime. Furthermore, it was suggested that the regimeto be developed should cover only port-to-porttransport operations and that it should not extend tocover inland transport or attempt to deal with door-to-door transport operations. A contrary view expressedwas that existing international conventions often dealtwith issues in an inconsistent manner and that therewere gaps between the existing texts and problems thatarose because different States were parties to differentinstruments. A view was expressed that theCommission should not deal with door-to-door issueswithout undertaking a comprehensive analysis ofexisting national and international multimodal regimes.It was reported on behalf of UNCTAD that it hadrecently initiated studies on multimodal transportmatters that showed that, even though the UnitedNations Convention on Multimodal Transport of Goodshad not entered into force and was adhered to by asmall number of States, it had influenced national lawsand regional harmonization efforts on the subject.34 Itwas stated that, whilst the work proposed to be done byUNCITRAL was of interest to UNCTAD, it was also of

some concern in that it was considered that it would beinappropriate to extend the rules governing the carriageof goods by sea to inland transport.

343. An alternative view was that work should not belimited to issues that were not covered by existinginternational conventions and that the scope of work asoutlined in the report on possible future work intransport law (A/CN.9/497) was appropriate, as itincluded liability issues and contemplated, subject tofurther more detailed studies, the possibility of dealingwith issues that arose beyond the sea leg of a transportcontract in the context of door-to-door operations.Wide support was expressed for such a broad mandateto be given to a working group.

344. It was reported that the secretariat of ECE, incooperation with government experts and representa-tives of various industries involved in the internationalcarriage of goods, was studying possibilities forreconciliation and harmonization of civil liabilityregimes governing multimodal transport. Hearingsconvened by ECE had shown that so far there existedno consensus on the action to be taken at theinternational level in that field. Experts representingmainly maritime interests as well as freight forwardersand insurers generally did not favour the preparation ofan international mandatory legal regime on civilliability covering multimodal operations. However,experts representing road and rail transport industries,combined transport operators, transport customers andshippers felt that work towards harmonization of theexisting liability regimes governing various modes oftransport should be pursued urgently and that a singleinternational civil liability regime governing multi-modal transport operations was required. It was notedthat ECE continued its exploratory work on multimodaltransport and was ready to share its experience in thefield with the Commission. A view was expressed,however, that the Commission should, at that stage,avoid multimodal issues, given the difficulty ofmerging practices in the four modes of transportation.

345. After discussion, the Commission decided toestablish a working group to consider issues asoutlined in the report on possible future work(A/CN.9/497). It was expected that the Secretariatwould draft for the working group a preliminaryworking document containing drafts of possiblesolutions for a future legislative instrument, withalternatives and comments, which was under

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preparation by CMI. As to the scope of the work, thedecision was that it should include issues of liability.The Commission also decided that the considerationsin the working group should initially cover port-to-porttransport operations; however, the working groupwould be free to study the desirability and feasibility ofdealing also with door-to-door transport operations, orcertain aspects of those operations, and, depending onthe results of those studies, recommend to theCommission an appropriate extension of the workinggroup’s mandate. It was stated that solutions embracedin the United Nations Convention on the Liability ofTransport Terminals in International Trade (Vienna,1991) shall also be carefully taken into account. It wasalso agreed that the work would be carried out in closecooperation with interested intergovernmentalorganizations involved in work on transport law (suchas UNCTAD, ECE and other regional commissions ofthe United Nations and the Organization of AmericanStates (OAS)), as well as international non-governmental organizations.

Chapter XPossible future work on securityinterests

346. The Commission considered a note by theSecretariat on the issue of security interests(A/CN.9/496). It was recalled that, at its thirty-thirdsession in 2000, the Commission had considered areport on current activities in the field of securityinterests (A/CN.9/475). That report not only referred tothe Commission’s earlier interest and work on securityinterests, dating back to the late 1970s, and to thedevelopments that had occurred in that area during theprevious 25 years, but also contained suggestions as toareas for possible future work.

347. At the same session, it was agreed that securityinterests was an important subject and had beenbrought to the attention of the Commission at the righttime, in particular in view of the close link of securityinterests with the work of the Commission oninsolvency law. It was widely felt that modern securedcredit laws could have a significant impact on theavailability and the cost of credit and thus oninternational trade. It was also widely felt that modernsecured credit laws could alleviate the inequalities inthe access to lower-cost credit between parties in

developed countries and parties in developingcountries, and in the share such parties had in thebenefits of international trade. A note of caution wasstruck, however, in that regard to the effect that suchlaws needed to strike an appropriate balance in thetreatment of privileged, secured and unsecuredcreditors so as to become acceptable to States. Further-more, it was stated that, in view of the divergentpolicies of States, a flexible approach aimed at thepreparation of a set of principles with a guide, ratherthan a model law, would be advisable.35

348. Also at the same session, a number of suggestionswere made as to the scope of the work. One suggestionwas that a uniform law should be prepared to deal withsecurity interests in investment property (e.g. stocks,bonds, swaps and derivatives). It was stated that suchsecurities, which were held, as entries in a register, byan intermediary and, physically, by a depositoryinstitution, were important instruments on the basis ofwhich vast amounts of credit were extended not onlyby commercial banks to their clients but also by centralbanks to commercial banks. It was also observed that,in view of the globalization of financial markets, anumber of jurisdictions were normally involved whoselaws were often incompatible with each other or eveninadequate to address the relevant problems. As aresult, a great deal of uncertainty existed as to whetherinvestors owning securities and financiers extendingcredit and taking a pledge in the securities had a rightin rem and were protected, in particular, in the case ofthe insolvency of an intermediary. It was also pointedout that a great deal of uncertainty arose even as to thelaw applicable to security interests in investmentproperty held by an intermediary and that the fact thatthe Hague Conference on Private International Lawplanned to address that matter indicated both itsimportance and its urgency. In that regard, it wasobserved that work by UNCITRAL could be perfectlycompatible with and could usefully supplement anywork undertaken by the Hague Conference, inparticular in view of the inherent limitations of privateinternational law rules in matters of mandatory law andpublic policy.36

349. Also at that session, the Commission hadrequested the Secretariat to prepare a study that woulddiscuss in detail the relevant problems in the field ofsecured credit law and the possible solutions forconsideration by the Commission at its thirty-fourth

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session, in 2001, and decision as to possible futurework.

350. With reference to the study, a statement was madeon behalf of the secretariat of the International Institutefor the Unification of Private Law (Unidroit) in whichit was noted that, having spent resources on researchand drafting model provisions on secured transactionslaw, the Unidroit secretariat was sensitive to theimportance of that area of the law. It was further statedthat since the Unidroit secretariat had done work in thearea defined in the study as “security interests overinvestment securities”, and in view of the need to makeall possible efforts to avoid duplication of work, itappeared advisable for the Commission to avoidundertaking work on that topic. The hope wasexpressed that the omission of reporting on otherongoing developments in the same field of law wouldbe corrected in future documentation. In particular,reference was made to the draft Unidroit Conventionon International Interests in Mobile Equipment, whichdealt with many of the same issues and which wasexpected to be completed in November 2001, as well asa model national law on secured transactions, alsoexpected to be completed in November 2001 by OAS.

351. After expressing its appreciation for the studyprepared by the Secretariat, the Commissioncommenced its discussion. Diverging views wereexpressed as to the advisability of work on securityinterests being undertaken by the Commission.However the prevailing view was that such workshould be undertaken in view of the beneficialeconomic impact of a modern secured credit law. Itwas stated that experience had shown that deficienciesin that area could have major negative impacts on acountry’s economic and financial system. It was alsostated that an effective and predictable legal frameworkhad both short- and long-term macroeconomic benefits.In the short term, namely, when countries faced crisesin their financial sector, an effective and predictablelegal framework was necessary, in particular in termsof enforcement of financial claims, to assist the banksand other financial institutions in controlling thedeterioration of their claims through quick enforcementmechanisms and to facilitate corporate restructuring byproviding a vehicle that would create incentives forinterim financing. In the longer term, a flexible andeffective legal framework for security rights couldserve as a useful tool to increase economic growth.Indeed, without access to affordable credit, economic

growth, competitiveness and international trade couldnot be fostered, with enterprises being prevented fromexpanding to meet their full potential.

352. On the other hand, it was stated that the studyshowed that the topic of security interests was a verycomplex and complicated one to deal with. Theconcern was expressed that the study did not makeclear what impact the result of any efforts in that areaof the law would have on domestic law. It wasobserved that the study did not discuss how the workby UNCITRAL would be coordinated with otherorganizations dealing with related issues. It was,therefore, suggested to defer any decision on whetherwork should be undertaken in that field of law, as itwas too early to be able to take an informed decision,in particular since the study did not examine all therelevant issues in depth.

353. Those concerns were not shared on variousgrounds. On the one hand, it was stated that the studydid offer the basis for an informed decision to be takenduring the current session. On the other, it wasobserved that not taking any action with respect to thatarea of the law would mean wasting an opportunity tohelp promote the extension of lower-cost credit. It waswidely felt that several institutions had attested to theneed for the creation of a legal regime relating tosecurity interests. It was stated that a similar regimewould benefit not only those countries which wouldlike to participate in international commerce and didnot have rules on secured transactions, but also thosecountries which had outdated regimes. By way ofexample, several countries were mentioned that hadrecently adopted new rules on security interests and inwhich the flow of low-cost credit had increased. It was,therefore, suggested that a working group should beestablished to deal with security interests. Thatproposal gained wide support.

354. Noting that there was wide support for theestablishment of a working group, the Commissionfocused on the scope of the work to be undertaken bysuch a group. It was suggested that the working groupshould not deal with security interests over investmentsecurities since that was an area in which Unidroit hadan interest. The Commission agreed with thatsuggestion.

355. It was also suggested that the working groupshould not deal with security interests over intellectualproperty rights as there was less need for work in that

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area and that work in that area therefore should nothave priority. It was also stated that, at that time, theintersection of intellectual property law, contract lawand secured financing law had proved a difficultsubject in other forums and currently consensus waslacking on the matter. It was stated that, if at a laterstage it was decided that work be done in that area, anyefforts regarding the development of a regime onsecurity interests over intellectual property rightswould have to be coordinated with other organizations,such as WIPO, which had particular experience withintellectual property law. There was sufficient supportin the Commission for that suggestion too.

356. The suggestion was also made that the focus ofthe working group should be security interests in goodsinvolved in a commercial activity. The need for anefficient regime regarding security interests ininventory of goods used in manufacturing or destinedfor sale was stressed in particular. That suggestion wasobjected to on the grounds that that focus would be toorestricted. It was pointed out that the study alsosuggested a wider focus, as it focused in chapter IV on“security rights in general”. In response, it was statedthat chapter IV focused less on the objects that couldserve as collateral than on the issues to be addressedwhen dealing with security rights over objects otherthan those warranting a special regime, such asintellectual property rights and investment securities. Itwas further stated that the focus on the aforementionedgoods would allow a result to be achieved morequickly than if the focus were security rights ingeneral. Furthermore, it was stated that the decision torestrict the focus of the working group to goodsinvolved in a commercial activity, including inventoryof goods used in manufacturing or destined for sale,would not exclude the possibility of extending thescope of that work at a later stage.

357. Various statements were made concerning theform of the work to be undertaken. It was felt that amodel law might be too rigid and that the instrument tobe developed should be very flexible. The importantissue was to achieve the goals underlying the creationof a regime on security interests. It was stated thatthose goals could be achieved by resorting to variousforms to meet the different needs. It was thereforesuggested that the working group draft a set of coreprinciples for an efficient legal regime governingsecured transactions to be inserted into a legislativeguide (containing flexible approaches to the

implementation of such principles and a discussion ofalternative approaches possible and of the benefits anddetriments of such approaches). It was furthersuggested that the legislative guide should also contain,where feasible, model legislative provisions.

358. After discussion, the Commission decided toestablish a working group with the mandate to developan efficient legal regime for security rights in goodsinvolved in a commercial activity, including inventory,to identify the issues to be addressed, such as the formof the instrument, the exact scope of the assets that canserve as collateral, the perfection of security, thedegree of formalities to be complied with, the need foran efficient and well balanced enforcement regime, thescope of the debt that may be secured, means ofpublicizing the existence of security rights, limitations,if any, on the creditors entitled to the security right, theeffects of bankruptcy on the enforcement of securityright and the certainty and predictability of thecreditor’s priority over competing interests.

359. The Commission, aware of the financialimplications of holding a two- or three-day colloquiumon security interests, emphasized the importance of thatsubject matter and the need to consult withpractitioners and organizations having expertise in thearea. It therefore recommended that a colloquium beheld before the next session of the Working Group onSecurity Interests (see para. 425 (f)). It was anticipatedthat the costs of such a colloquium would be absorbedin the existing regular budget of the United Nations.

Chapter XIPossible future work on privatelyfinanced infrastructure projects

360. It was recalled that, at its thirty-third session, theCommission adopted the UNCITRAL LegislativeGuide on Privately Financed Infrastructure Projects,consisting of the legislative recommendations(A/CN.9/471/Add.9), with the amendments adopted bythe Commission at that session and the notes to thelegislative recommendations (A/CN.9/471/Add.1-8),which the Secretariat was authorized to finalize in thelight of the deliberations of the Commission.37 It wasnoted that the Guide had since been published in allofficial languages.

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361. It was also recalled that, at that session, theCommission also considered a proposal for future workin that area. It was suggested that, although theLegislative Guide would be a useful reference fordomestic legislators in establishing a legal frameworkfavourable to private investment in public infra-structure, it would nevertheless be desirable for theCommission to formulate more concrete guidance inthe form of model legislative provisions or even in theform of a model law dealing with specific issues.38

362. After consideration of that proposal, theCommission had decided that the question of thedesirability and feasibility of preparing a model law ormodel legislative provisions on selected issues coveredby the Legislative Guide should be considered by theCommission at its thirty-fourth session. In order toassist the Commission in making an informed decisionon the matter, the Secretariat was requested to organizea colloquium, in cooperation with other interestedinternational organizations or international financialinstitutions, to disseminate knowledge about theLegislative Guide. 39

363. The Colloquium on Privately FinancedInfrastructure: Legal Framework and TechnicalAssistance was organized with the co-sponsorship andorganizational assistance of the Public-PrivateInfrastructure Advisory Facility (PPIAF), a multi-donor technical assistance facility aimed at helpingdeveloping countries improve the quality of theirinfrastructure through private sector involvement. Itwas held in Vienna from 2 to 4 July 2001, during thesecond week of the thirty-fourth session of theCommission.

364. At its thirty-fourth session, the Commission tooknote with appreciation of the results of the Colloquiumas summarized in a note by the Secretariat(A/CN.9/488) and expressed its gratitude to the PPIAFfor its financial and organizational support. TheCommission also expressed its appreciation to thevarious international intergovernmental and non-governmental organizations represented and to thespeakers at the Colloquium. Finally, the Commissionagreed that the proceedings of the Colloquium shouldbe published by the United Nations.

365. The Commission endorsed the recommendationmade at the Colloquium that the Secretariat, incoordination with other organizations, undertake joint

initiatives to ensure widespread awareness of theGuide.

366. Various views were expressed as to thedesirability and feasibility of further work by theCommission in the field of privately financedinfrastructure projects.

367. There was wide support for the view that therewas a significant demand for model legislationproviding for more specific guidance, especially indeveloping countries and in countries with economiesin transition. In that connection, it was suggested thatthe Legislative Guide should be implemented by wayof drafting a set of core model provisions dealing withsome of the substantive issues identified and dealt within the Legislative Guide. It was pointed out that, whilethe Guide was in itself a valuable tool in assistingdomestic legislators in the process of enacting orreviewing legislation in that field, the effectiveness ofthat process would be significantly increased if modellegislative provisions were available. It was also notedthat the prompt undertaking of such further workwould take advantage of the vast and significantexpertise gathered throughout the process that had ledto the adoption of the Legislative Guide and wouldallow it to be easily and effectively achieved within areasonable amount of time. Finally, it was observedthat there was no inconsistency between undertakingsuch further work, on the one hand, and undertakingefforts to promote awareness and dissemination of theLegislative Guide, on the other.

368. A concern that appeared to be widely shared wasthat the excessive proximity between the time of theadoption of the Legislative Guide and the decision toundertake further work in the same field couldadversely affect the considerable and valuable workthat had led to the adoption of the Guide, ultimatelyreducing its impact. It was observed that the flexibleapproaches reflected in the Legislative Guide alreadyprovided sufficient guidance to legislators wishing touse it as a template while in the process of enacting orreviewing national laws. A further view was that nofurther significant guidance was to be expected fromthe drafting of a limited set of model legislativeprovisions, since the need to refer to therecommendations contained in the Guide would remainunaffected. Accordingly, it was suggested that con-sideration of the issue of desirability of further workshould be deferred to a later stage, in order to allow

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legislators to become more familiar with the existenceand the contents of the Guide and to test its utility inpractice. A further view was that such deferral mightalso prove useful since it would provide an opportunityfor accurately identifying the issues to whichharmonization efforts should actually be devoted.

369. After considering the different views that wereexpressed, the Commission agreed that a workinggroup should be entrusted with the task of drafting coremodel legislative provisions in the field of privatelyfinanced infrastructure projects. As to the possiblecontents of such model provisions, a proposal was thatthe project should focus on the phase of the selectionof the concessionaire. The Commission was of theview that, if further work in the field of privatelyfinanced infrastructure projects was to be accomplishedwithin a reasonable time, it was essential to carve out aspecific area from among the many issues dealt with inthe Legislative Guide. Accordingly, it was agreed thatthe first session of such a working group shouldidentify the specific issues on which model legislativeprovisions, possibly to become an addendum to theLegislative Guide, could be formulated.

Chapter XIIEnlargement of the membership ofthe Commission

370. The Commission noted that, in paragraph 13 ofits resolution 55/151 of 12 December 2000, the GeneralAssembly had requested the Secretary-General tosubmit to it at its fifty-sixth session a report on theimplications of increasing the membership of theCommission and had invited Member States to submittheir views. It was also noted that, pursuant to a noteverbale of 25 January 2001, some 30 States hadsubmitted comments. Furthermore, it was noted that, inorder to give States an opportunity to express theirviews and possibly to formulate a recommendation tothe General Assembly, the Secretariat had prepared anote on the subject (A/CN.9/500). Taking note withappreciation of the background information containedin the note, the Commission noted that as far asservicing of conferences was concerned there was littleimpact of an increase in the membership to quantify. Inparticular, it was noted that no impact was foreseen ininterpretation, translation of pre-session and post-session documentation and meetings servicing, since

cost was fixed irrespective of the number of membersof the Commission. It was also noted that, as far asreproduction of in-session documentation was con-cerned, the impact was not expected to be large enoughto have any financial implications. Furthermore, it wasnoted that all the States that had submitted commentswere in favour of the enlargement of the Commission.

371. It was generally agreed that the membership ofthe Commission should be enlarged. It was stated thatsuch an enlargement of the Commission would ensurethat the Commission remained representative of alllegal traditions and economic systems, in particular inview of the substantial increase in the membership ofthe Organization. In addition, it was observed that anenlargement of the Commission would assist theCommission in better implementing its mandate bydrawing on a pool of experts from an increased numberof countries and by enhancing the acceptability of itstexts. It was also stated that such an enlargement wouldadequately reflect the increased importance ofinternational trade law for economic development andthe preservation of peace and stability. Moreover, itwas said that such an enlargement of the Commissionwould foster participation of those States which couldnot justify the human and other resources necessary forthe preparation and attendance of the meetings of theCommission and its working groups unless they weremembers. It was also stated that an enlargement wouldfacilitate coordination with the work of otherorganizations active in the unification of private law tothe extent that the overlap between the membership ofthe Commission and the membership of thoseorganizations would be increased. It was also observedthat an enlargement of the Commission would notaffect its efficiency or its working methods or, inparticular, the participation as observers of non-member States and international organizations, whethergovernmental or non-governmental, active in the fieldof international trade law or the principle of reachingdecisions by consensus without a formal vote.

372. The concern was expressed, however, that actualparticipation might not increase substantially if thenecessary steps were not taken to provide assistance todelegates of developing countries. In order to addressthat concern, the suggestion was made that efforts toincrease the voluntary contributions to the Trust Fundset up to assist delegates of developing countries inparticipating in meetings of the Commission and its

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working groups should be stepped up. The Commissionendorsed that suggestion.

373. The Commission next considered the size of theincrease in its membership. Differing views wereexpressed, ranging from 48 to 72 member States. Theview was also expressed that the exact number to berecommended to the General Assembly should be leftto the Secretariat to determine on the understandingthat the Sixth Committee of the General Assemblywould have to make a final decision. A common themein all the views expressed was the need to make theCommission a more representative body of themembership of the Organization, without affecting itsefficiency or its working methods. The prevailing viewwas in favour of increasing the membership to 72, inparticular, since such an increase could result inmaintaining the current proportions between regionalgroups.

374. However, the concern was expressed that such anincrease might be excessive and, to the extent that notall members would be able to attend, might not lead toincreased attendance. One delegation expressed theview that, in making a decision regarding the size ofthe increase in membership, the possible impact ofsuch a decision on other organs of the United Nationsshould be taken into account. That delegation statedthat doubling the number of member States might set aprecedent that might be difficult to follow for otherorgans of the United Nations. The concern was alsoexpressed that, with the change in its working methodsdecided by the Commission at the current session, suchan increase might inadvertently result in reducing theefficiency of the Commission. In response to thoseviews and concerns, it was observed that at the currentsession 74 States were represented and that fact had notaffected the efficiency of the Commission, as theadoption of two major texts indicated. It was alsostated that efficiency would not necessarily be reducedmerely because the membership would be doubled. Itwas also widely felt that, in order to avoid raisingpolitical concerns about proportions of representationof regional groups, the current proportions should bepreserved. The Commission decided, therefore, torecommend to the General Assembly that theCommission’s membership be doubled and thatregional groups be given as many seats as theycurrently had. The Commission also decided torecommend to the Assembly that it elect the newmembers as soon as possible, determining the terms of

office of the new members in such a way as to preservethe practice of renewing the Commission’s membershipevery three years. Regional groups were encouraged toconduct consultations in advance of the fifty-sixthsession of the General Assembly and to agree oncandidates for the new seats. At the close of thediscussion, one delegation recalled its reservationsregarding the size of the increase (as recommended inpara. 375) and stated that the issue needed to bediscussed further in the context of the SixthCommittee.

375. At its 236th meeting on 11 July 2001, theCommission adopted the following recommendation tothe General Assembly:


“Having considered a note by theSecretariat,40 prepared with a view to assistingthe Commission in formulating a recommen-dation for the General Assembly on the possibleincrease of membership of the Commission,

“Recalling General Assembly resolu-tion 2205 (XXI) of 17 December 1966, by whichthe Assembly established the Commission and itsmandate of furthering the progressiveharmonization and unification of the law ofinternational trade and pursuant to which theCommission is to bear in mind the interests of allpeoples, and particularly those of developingcountries, in the extensive development of inter-national trade,

“Being satisfied with the practice of invitingStates not members of the Commission andrelevant intergovernmental and international non-governmental organizations to participate asobservers in sessions of the Commission and itsworking groups and to take part in theformulation of texts by the Commission, as wellas with the practice of reaching decisions byconsensus without a formal vote,

“Considering that the primary consequenceof membership in the Commission may be toencourage States to be represented at meetings ofthe Commission and its working groups, thatrepresentatives of States members of theCommission may be more likely to be drawnfrom among persons of eminence in the field of

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the law of international trade as called for by theGeneral Assembly in its resolution 2205 (XXI),and that membership in the Commission maystimulate interest in the work of the Commissionand better justify the dedication of human andother resources to preparation for and attendanceat meetings,

“Observing that the considerable number ofStates that have participated as observers andmade valuable contributions to the work of theCommission indicates that there exists an interestin active participation in the Commission beyondthe current thirty-six States that are members ofthe Commission,

` “Stressing the importance of the work of theCommission for developing countries andcountries with economies in transition, and beingconcerned about the inconsistent and less thanoptimal incidence of expert representation fromdeveloping countries at sessions of theCommission and its working groups during recentyears, owing in part to inadequate resources tofinance the travel of such experts,

“Reaffirming the importance of the TrustFund established to provide travel assistance todeveloping countries that are members of theCommission, at their request and in consultationwith the Secretary-General,

“Appealing to Governments, relevant bodiesof the United Nations system, organizations,institutions and individuals to consider takingmeasures to increase their voluntary contributionsto the Trust Fund in order to ensure fullparticipation by States members of theCommission in the sessions of the Commissionand its working groups,

“Being informed that the impact of anincrease in membership of the Commission on thesecretariat services required to facilitate the workof the Commission would not be material enoughto quantify and that therefore the increase wouldhave no financial implications,

“Recommends that the General Assemblyapprove an increase of the membership of theCommission from the current thirty-six States toseventy-two and, maintaining the currentproportion between the regional groups, approve

the following distribution of the additional seats:eighteen from the Group of African States,fourteen from the Group of Asian States, ten fromthe Group of Eastern European States, twelvefrom the Group of Latin American and CaribbeanStates and eighteen from the Group of WesternEuropean and Other States, and elect the newmembers as soon as possible.”

Chapter XIIIWorking methods of theCommission

376. In connection with its deliberations on theimplications of increasing its membership (seeparas. 370-375), the Commission decided to review itscurrent working methods with a view to exploringways to make the best possible use of the resourcesavailable to it. The Commission agreed to use as abasis for its deliberations a note that had been preparedby the Secretariat to that effect (A/CN.9/499).

377. That note contained an overview of topicscurrently under consideration by the Commission andtopics that had been proposed for future work by theCommission. The note also contained a summaryreview of the current working methods of theCommission and its working groups and suggestionsfor their review. In the note it was pointed out that,with a total entitlement of only six working groupsessions every year, an increase in the number ofprojects handled by the Commission would mean thatnormally only one annual session of a working groupcould be devoted to each project. Given the overalllimitation on the conference time to which eachsubsidiary body of the General Assembly was entitled,it was unlikely that more meeting time could beallocated to the Commission.

378. Against that background the Commissionconsidered the following proposals for review of itsworking methods: (a) increasing the number ofworking groups to a total of six, each of which wouldhold two annual sessions of one week only; or(b) entrusting each working group with two differenttopics during their sessions (i.e. one per week) orarranging for two working groups to share the sametwo-week meeting period, one session being held in the

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first week and the other during the second week (i.e.two sessions back-to-back).

379. The Commission welcomed the proposals forreviewing its working methods. Such a review wasconsidered necessary in view of the increasingworkload of the Commission and the possibility ofenlargement of its membership. However, severaldelegations also expressed the concern that memberStates might find it increasingly difficult to devoteresources to participating at the Commission’s work insix different projects at the same time. The concernwas expressed that the Commission’s work mightsuffer because working groups would have less timeavailable for deliberations, with the consequence thatresults might be achieved later. It was further said thatservicing six different working groups placed anadditional burden on the secretariat of the Commissionand that progress in the Commission’s work mightsuffer unless the resources available to its secretariatwere significantly increased. The Commission was,therefore, urged to establish clearly the relative priorityof each of its projects and to allow for them to becarried out at a varying pace.

380. As to the two basic options under consideration,the Commission expressed its preference for entrustingeach working group with two different topics duringtheir sessions (i.e. one per week) or arranging for twoworking groups to share the same two-week meetingperiod, one session being held in the first week and theother during the second week (i.e. two sessions back-to-back). The Commission did not favour the option ofall six topics being dealt with separately, by holdingtwo one-week sessions per year for each topic, sincethat would result in additional travel costs both fordelegations and the Secretariat, the latter as a result ofthe alternating pattern of meetings of the Commissionand its working groups.

381. In order to make the best possible use ofconference facilities available to the working groups,the Commission agreed that working groups could holdsubstantive deliberations during the first eight half-daymeetings (for example, from Monday to Thursday),with a draft report on the entire period being preparedby the Secretariat for adoption at the tenth and lastmeeting of a working group (on Friday afternoon). TheCommission acknowledged that, under that option, noextensive report could be prepared on deliberationsheld during the ninth meeting (Friday morning). Some

delegations were of the view that the last substantivediscussion could be left unreported on, or that theworking groups could adopt the remaining portions ofthe report at the beginning of its next session, as wasthe practice in some organizations, or it might bepublished later by the Secretariat as its own account ofthe proceedings. However, the prevailing view withinthe Commission was that it was important for theworking groups to adopt the entire report at the samesession. For that purpose, the Commission agreed thatthe main conclusions reached by a working group at itsninth meeting should be summarily read out for therecord by the Chairman at the tenth meeting andsubsequently incorporated into the report.

382. The Commission expressed its understanding thatthe new arrangements should be used in a flexiblemanner and that, depending on its relative priority, aworking group could devote an entire two-weeksession to the consideration of only one topic, whileother topics could be combined for consideration by aworking group within a two-week period of meeting. Inthat context, every effort should be made to choosegermane topics for successive consideration by aworking group. With a view to making optimal use ofconference time, the Commission invited delegations toresort to informal consultations prior to actualmeetings, thus reserving conference time only for thoseissues which required extensive deliberation, bothformal and informal, in the context of Commission andworking group meetings.

383. The Commission was hopeful that the newworking methods could address the increase in theCommission’s work programme without lowering thehigh standards of professional care that had dis-tinguished the work of the Commission and contributedso much to its high reputation. The Commissiondecided to review the practical application of the newworking methods at a future session.

Chapter XIVCase law on UNCITRAL texts

384. The Commission noted with appreciation theongoing work under the system that had beenestablished for the collection and dissemination of caselaw on UNCITRAL texts (CLOUT). In that regard, itwas pointed out that, up to the current session of theCommission, 34 issues of CLOUT had been published,

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dealing with 393 cases. It was noted that CLOUT was amost important means of promoting the uniforminterpretation and application of UNCITRAL texts byenabling interested persons, such as judges, arbitrators,lawyers or parties to commercial transactions, to takeinto account decisions and awards of other jurisdictionswhen rendering their own judgements or opinions oradjusting their actions to the prevailing interpretationof those texts.

385. The Commission expressed appreciation to thenational correspondents for their work in the collectionof relevant decisions and arbitral awards and theirpreparation of case abstracts. It also expressed itsappreciation to the Secretariat for compiling, editing,issuing and distributing the abstracts.

Chapter XVDigest of United Nations SalesConvention case law:interpretation of texts

386. The Commission had before it a note by theSecretariat containing a proposal as to how to furtherimplement the mandate to the Commission to promotethe progressive harmonization and unification of thelaw of international trade, namely, by developing waysand means of ensuring the uniform interpretation andapplication of international conventions and uniformlaws in that field (A/CN.9/498). It was recalled that,when the General Assembly gave the Commission itsmandate, the Commission was instructed to implementit, inter alia, by promoting ways and means of ensuringa uniform interpretation and application of inter-national conventions and uniform laws in the field ofthe law of international trade and by collecting anddisseminating information on national legislation andmodern developments, including case law, in the fieldof international trade.41

387. It was further recalled that, when the Commissiondecided in 1988 to establish the CLOUT system, it hadalso considered the desirability of establishing aneditorial board, which, amongst other things, couldundertake a comparative analysis of the collecteddecisions and report to the Commission on the state ofapplication of the legal texts. Those reports couldevidence the existence of uniformity or divergence inthe interpretation of individual provisions of the legal

texts, as well as gaps in the texts that might come tolight in actual court practice. The Commission decided,however, not to establish the board at that time, but toreconsider the proposal in the light of experiencegathered in the collection of decisions and the dissemi-nation of information under the CLOUT system.42

388. The document prepared by the Secretariat for thediscussion during the 34th session of the Commissionsubmitted that it would be appropriate for theCommission to reconsider the question of how itshould contribute to the uniform interpretation of thetexts resulting from its work. Such reconsideration wasconsidered to be timely, as evidenced by the fact that,since the establishment of the CLOUT system,393 cases had been reported, including more than 250on the United Nations Convention on Contracts for theInternational Sale of Goods. In the light of the fact thatdivergences in the interpretation of the Convention hadbeen noted, it had been repeatedly suggested by usersof that material that appropriate advice and guidancewould be useful to foster a more uniform interpretationof the Convention. The preparation of an analyticaldigest of court and arbitration cases, identifying trendsin interpretation, would be one way of providing suchadvice and guidance. In preparing the digest onepossible way might be simply to note diverging caselaw for information purposes; alternatively, guidanceas to the interpretation of the Convention might beprovided, based in particular on the legislative historyof the provision and the reasons underlying it(A/CN.9/498, para. 3).

389. The document submitted to the current session ofthe Commission summarized case law on articles 6 and78 of the Convention and was intended to offer to theCommission an example of how court and arbitraldecisions might be presented with a view to fosteringuniform interpretation. In that paper it was suggestedthat the Commission should consider whether theSecretariat, in consultation with experts from thedifferent regions, should prepare a complete digest ofcases reported on the various articles of theConvention. If so, the Commission might wish toconsider whether the approach taken in preparing thesample digest in the document under review, includingthe style of presentation and the level of detail, wasappropriate (A/CN.9/498, para. 4).

390. In the note by the Secretariat it was suggestedthat the reasons for which the Commission might wish

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to take steps to foster uniform interpretation of theConvention on Contracts for the International Sale ofGoods applied similarly to the UNCITRAL Model Lawon International Commercial Arbitration (1985). Withrespect to the Model Law, some 135 cases had beenreported, with some unsettled or divergent trendsnoted. Against that background, it was suggested thatthe Commission might request the Secretariat toanalyse the cases interpreting uniform provisions of theModel Law and to submit a digest of those cases to theCommission at a future session or to its WorkingGroup on Arbitration so as to enable the Commissionto decide whether any action, similar to that suggestedabove with respect of the Convention on Contracts forthe International Sale of Goods, should be taken(A/CN.9/498, para. 5).

391. The Commission took note with appreciation ofthe document in general and, in particular, of theexamples given as to how court and arbitral decisionsmight be presented with a view to fostering uniforminterpretation. The Commission commended theSecretariat for its innovative approach towards theimplementation of the mandate the Commission hadreceived from the General Assembly to promote andensure a uniform interpretation and application ofinternational conventions. A widely shared view wasthat, given the amount of information gathered, thedecision taken in 1988 should be reconsidered and thatthe document constituted a good starting point fordiscussion in that respect. It was suggested that theSecretariat should also explore whether otherinitiatives could be undertaken to assist theCommission in carrying out its mandate.

392. As to the contents of the document, it wassuggested that the project should not only consider caselaw, but also existing legal writing. In respect of thedrafting procedure of the digest, it was suggested thatthe Secretariat should avail itself of the network ofnational correspondents, as they were personsknowledgeable about CLOUT and its context. It wasfurther suggested that the digest should not only havethe goal of evidencing divergences in the case law ofdifferent countries or giving guidance as to theinterpretation of uniform legal texts, but also toidentify gaps in those texts. It would then be the taskfor the Commission to decide on how to deal with suchgaps. It was further suggested that the project shouldbe an ongoing one, in that it should be updatedcontinually, as new cases emerged.

393. In response, some concerns were expressed. Itwas stated that it was not clear to whom the digestwould be addressed, as the natural addressees of anyUNCITRAL text were States. States, however, mightnot need a digest such as the one under consideration.As far as practitioners and judiciaries were concerned,it was felt that they did not need such a digest, as muchliterature existed that aimed at helping to understandthe Convention on Contracts for the International Saleof Goods. In respect of the contents, it was suggestedthat the digest could be merely a compilation ofdifferences in the interpretation of the Conventionrather than a guide. In support of that view it wasstated that if the digest to be drafted were to functionas a guide, it would necessarily have to indicatepreference for some views over others. It was felt thatsuch an expression of preference might be read as acriticism of decisions taken by national courts, whichwas felt to be an inappropriate result.

394. With a view to alleviating some of the above-mentioned concerns, it was stated, for instance, thatalthough it was true that much literature existed on theConvention on Contracts for the International Sale ofGoods in some countries, there were countries whereno such literature was available. It was also stated thatany work done by UNCITRAL would have theadvantage not only of being translated into the sixofficial languages of the United Nations (and thus havea very wide reach), but also of taking a moreinternational view than most existing commentariesand papers, which were drafted from a national point ofview.

395. As it was observed that any decision taken by theCommission with respect to the digest would besubject to reconsideration at any future session, it wasfelt that the Secretariat should be given the mandate tocontinue to draft that digest. It was again pointed outthat, in line with the sample provisions presented in thenote by the Secretariat (A/CN.9/498), the digest shouldnot criticize domestic case law. After discussion, theCommission requested the Secretariat to draft a digeston the entire Convention on Contracts for theInternational Sale of Goods. In doing so, theSecretariat should avail itself of the help of thenetwork of national correspondents and avoid criticismof the decisions of national courts.

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Chapter XVITraining and technical assistance

396. The Commission had before it a note by theSecretariat (A/CN.9/494) setting forth the activitiesundertaken since its thirty-third session and indicatingthe direction of future activities being planned, inparticular in view of the increase in the requestsreceived by the Secretariat. It was noted that trainingand technical assistance activities were typicallycarried out through seminars and briefing missions,which were designed to explain the salient features ofUNCITRAL texts and the benefits to be derived fromtheir adoption by States.

397. It was reported that, since the previous session,the following seminars and briefing missions had beenorganized in 2000: Havana (22-26 May); Tashkent(16-19 October); Seoul (6-9 November); Beijing (13-16 November); Cairo (20-23 November). In addition tothe participation of members of the Secretariat in anumber of meetings convened by other organizations, itwas also reported that a symposium had been held incooperation with the Organization for the Unificationof Business Law in Africa (OHADA) in Bologna, Italy(2 and 3 April 2001). The secretariat of theCommission reported that a number of requests hadhad to be turned down for lack of sufficient resourcesand that for the remainder of 2001 only some of therequests made by countries in Africa, Asia, LatinAmerica and Eastern Europe could be met.

398. The Commission expressed its appreciation to theSecretariat for the activities undertaken since itsprevious session and emphasized the importance of thetraining and technical assistance programme for pro-moting awareness and the wider adoption of the legaltexts it had produced. Training and technical assistancewere particularly useful for developing countrieslacking expertise in the areas of trade and commerciallaw covered by the work of UNCITRAL and the train-ing and technical assistance activities of the Secretariatcould play an important role in the economicintegration efforts being undertaken by many countries.

399. The Commission noted the various forms oftechnical assistance that might be provided to Statespreparing legislation based on UNCITRAL texts, suchas review of preparatory drafts of legislation from thepoint of view of UNCITRAL texts, preparation ofregulations implementing such legislation and

comments on reports of law reform commissions, aswell as briefings for legislators, judges, arbitrators,procurement officials and other users of UNCITRALtexts as embodied in national legislation. The upsurgein commercial law reform represented a crucialopportunity for the Commission to further significantlythe objectives of substantial coordination andacceleration of the process of harmonization andunification of international trade law, as envisaged bythe General Assembly in its resolution 2205 (XXI) of17 December 1966.

400. The Commission took note with appreciation ofthe contributions made by Canada, Cyprus, Finland,France, Greece, Mexico and Switzerland towards theseminar programme. It also expressed its appreciationto Austria, Cambodia, Cyprus, Kenya and Singaporefor their contributions to the trust fund for grantingtravel assistance to developing countries that aremembers of UNCITRAL since the trust fund wasestablished. The Commission furthermore expressed itsappreciation to those other States and organizationswhich had contributed to its programme of training andassistance by providing funds or staff or by hostingseminars.

401. Stressing the importance of extrabudgetary fund-ing for carrying out training and technical assistanceactivities, the Commission appealed once again to allStates, international organizations and other interestedentities to consider making contributions to theUNCITRAL trust funds so as to enable the secretariatof the Commission to meet the increasing demands indeveloping countries and newly independent States fortraining and assistance and to enable delegates fromdeveloping countries to attend UNCITRAL meetings.It was also suggested that the Secretariat should makeefforts to actively seek contributions from donor coun-tries and organizations, for instance by formulatingconcrete proposals for projects to support its trainingand technical assistance activities. It was noted that theTrust Fund for Symposia could not be used to financetechnical assistance to Governments, which wasregretted in view of the increasing need and demandson the Secretariat for such assistance. It was thereforesuggested, and the Commission agreed, that the termsof reference of the UNCITRAL Trust Fund forSymposia should be amended so as make it possible touse resources from the Trust Fund to finance technicalassistance activities undertaken by the Secretariat.

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402. In view of the limited resources available to theSecretariat, whether from budgetary or extrabudgetaryresources, strong concern was expressed that theCommission could not fully implement its mandatewith regard to training and technical assistance.Concern was also expressed that, without effectivecooperation and coordination between the Secretariatand development assistance agencies providing orfinancing technical assistance, international assistancemight lead to the adoption of national laws that did notrepresent internationally agreed standards, includingUNCITRAL conventions and model laws.

403. In order to ensure the effective implementation ofits training and assistance programme and the timelypublication and dissemination of its work, theCommission decided to recommend that the GeneralAssembly consider requesting the Secretary-General toincrease substantially both the human and the financialresources available to its secretariat.

Chapter XVIIStatus and promotion ofUNCITRAL texts

404. On the basis of a note by the Secretariat(A/CN.9/501), the Commission considered the status ofthe conventions and model laws emanating from itswork, as well as the status of the Convention on theRecognition and Enforcement of Foreign ArbitralAwards (New York, 1958). The Commission noted withpleasure the new action of States and jurisdictionssubsequent to 7 July 2000 (date of the conclusion ofthe thirty-third session of the Commission) regardingthe following instruments:

(a) Convention on the Limitation Period in theInternational Sale of Goods, concluded at New York on14 June 1974, as amended by the Protocol of 11 April1980. Number of States parties: 17;

(b) [Unamended] Convention on the LimitationPeriod in the International Sale of Goods (New York,1974). New action by Yugoslavia; number of Statesparties: 24;

(c) United Nations Convention on the Carriageof Goods by Sea, 1978 (Hamburg Rules). New actionsby Jordan and St. Vincent and the Grenadines; numberof States parties: 28;

(d) United Nations Convention on Contracts forthe International Sale of Goods (Vienna, 1980). Newactions by Iceland, St. Vincent and the Grenadines andYugoslavia; number of States parties: 59;

(e) United Nations Convention on InternationalBills of Exchange and International Promissory Notes(New York, 1988). The Convention has two Statesparties; it requires eight additional adherences for entryinto force;

(f) United Nations Convention on the Liabilityof Operators of Transport Terminals in InternationalTrade (Vienna, 1991). The Convention has two Statesparties; it requires three additional adherences for entryinto force;

(g) United Nations Convention on IndependentGuarantees and Stand-by Letters of Credit (New York,1995). The Convention has five States parties;

(h) Convention on the Recognition andEnforcement of Foreign Arbitral Awards (New York,1958). New actions by Albania, Honduras, St. Vincentand the Grenadines and Yugoslavia; number of Statesparties: 126;

(i) UNCITRAL Model Law on InternationalCommercial Arbitration, 1985. New jurisdictions thathave enacted legislation based on the Model Law:Belarus, Greece, Madagascar and Republic of Korea;

(j) UNCITRAL Model Law on InternationalCredit Transfers, 1992;

(k) UNCITRAL Model Law on Procurement ofGoods, Construction and Services, 1994;

(l) UNCITRAL Model Law on ElectronicCommerce, 1996. New jurisdictions that have enactedlegislation based on the Model Law: Ireland,Philippines, Slovenia and States of Jersey (CrownDependency of the United Kingdom of Great Britainand Northern Ireland);

(m) UNCITRAL Model Law on Cross-BorderInsolvency, 1997. New jurisdiction that has enactedlegislation based on the Model Law: South Africa.

405. Appreciation was expressed for those legislativeactions on the texts of the Commission. A request wasdirected to States that had enacted or were about toenact a model law prepared by the Commission, orwere considering legislative action regarding aconvention resulting from the work of the Commission,

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to inform the secretariat of the Commission thereof.Such information would be useful to other States intheir consideration of similar legislative action.

406. Representatives and observers of a number ofStates reported that official action was being con-sidered with a view to adherence to various conven-tions and to the adoption of legislation based onvarious model laws prepared by UNCITRAL, inparticular the UNCITRAL Model Law on Cross-BorderInsolvency.

407. It was noted that, despite the universal relevanceand usefulness of those texts, a number of States hadnot yet enacted any of them. An appeal was directed tothe representatives and observers who had beenparticipating in the meetings of the Commission and itsworking groups to contribute, to the extent that they intheir discretion deemed appropriate, to facilitatingconsideration by legislative organs in their countries oftexts of the Commission.

Chapter XVIIIGeneral Assembly resolution on thework of the Commission

408. The Commission took note with appreciation ofGeneral Assembly resolution 55/151 of 12 December2000 on the report of the Commission on the work ofits thirty-third session. In particular, the Commissionnoted with appreciation that, in paragraph 2 of theresolution, the Assembly had commended theCommission for the completion and adoption of theLegislative Guide on Privately Financed InfrastructureProjects, as well as for the important progress made inits work on receivables financing.

409. The Commission also noted with appreciationthat, in paragraph 3 of resolution 55/151, the GeneralAssembly had appealed to Governments that had notyet done so to reply to the questionnaire circulated bythe Secretariat in relation to the legal regime governingthe recognition and enforcement of foreign arbitralawards.

410. The Commission further noted with appreciationthat, in paragraph 5 of resolution 55/151, the Assemblyhad reaffirmed the mandate of the Commission, as thecore legal body within the United Nations system inthe field of international trade law, to coordinate legal

activities in that field, and in that connection had calledupon all bodies of the United Nations system andinvited other international organizations to bear inmind the mandate of the Commission and the need toavoid duplication of effort and to promote efficiency,consistency and coherence in the unification andharmonization of international trade law, and hadrecommended that the Commission, through itssecretariat, continue to maintain close cooperation withthe other international organs and organizations,including regional organizations, active in the field ofinternational trade law.

411. The Commission noted with appreciation thedecision of the General Assembly, in paragraph 6 ofresolution 55/151, to reaffirm the importance, inparticular for developing countries, of the work of theCommission concerned with training and technicalassistance in the field of international trade law, suchas assistance in the preparation of national legislationbased on legal texts of the Commission, and that, inparagraph 7, the Assembly had expressed thedesirability for increased efforts by the Commission, insponsoring seminars and symposia, to provide suchtraining and assistance.

412. The Commission also noted with appreciationthat, in paragraph 7 (b) of the resolution, the Assemblyhad appealed to Governments, the relevant bodies ofthe United Nations system, organizations, institutionsand individuals to make voluntary contributions to theUNCITRAL Trust Fund for Symposia and, whereappropriate, to the financing of special projects.Furthermore, it was noted that, in paragraph 8, theAssembly had appealed to the United NationsDevelopment Programme and other bodies responsiblefor development assistance, such as the InternationalBank for Reconstruction and Development and theEuropean Bank for Reconstruction and Development,as well as to Governments in their bilateral aidprogrammes, to support the training and technicalassistance programme of the Commission and tocooperate and coordinate their activities with those ofthe Commission (the Trust Fund was establishedpursuant to resolution 48/32 of 9 December 1993).

413. It was also appreciated that the GeneralAssembly, in paragraph 9 of the resolution, hadappealed to Governments, the relevant bodies of theUnited Nations systems, organizations, institutions andindividuals, in order to ensure full participation by all

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Member States in the sessions of the Commission andits working groups, to make voluntary contributions tothe trust fund for travel assistance to developingcountries that are members of the Commission, at theirrequest and in consultation with the Secretary-General(for a recommendation by the Commission that theAssembly adjust the terms of reference of the trustfund so that resources in the fund might be used fortechnical assistance projects, see para. 401).

414. The Commission further noted with appreciationthe decision of the General Assembly, in paragraph 10of resolution 55/151, to continue, in the competentMain Committee during the fifty-fifth session of theAssembly, its consideration of granting travelassistance to the least developed countries that weremembers of the Commission, at their request and inconsultation with the Secretary-General.

415. The Commission welcomed the request by theGeneral Assembly, in paragraph 11 of the resolution, tothe Secretary-General to strengthen the secretariat ofthe Commission within the bounds of the resourcesavailable so as to ensure and enhance the effectiveimplementation of the programme of the Commission.In that connection, the Commission noted withappreciation initial steps taken in the direction ofimplementation of the request of the Assembly.However, the Commission noted that its secretariat hadstill fewer Professional staff than it had had when theCommission was established. It therefore recom-mended to the Assembly that, in view of the substantialincrease in the workload of the Commission and itssecretariat and also in view of the importance of tradelaw unification for economic development andtherefore for peace and stability, it request theSecretary-General to intensify and expedite efforts tostrengthen the secretariat of the Commission within thebounds of the resources available to the Organization.

416. The Commission also noted with appreciationthat the General Assembly, in paragraph 12, hadstressed the importance of bringing into effect theconventions emanating from the work of theCommission and that to that end it had urged Statesthat had not yet done so to consider signing, ratifyingor acceding to those conventions.

417. The Commission also noted that, in paragraph 13,the General Assembly had requested the Secretary-General to submit to it at its fifty-sixth session a reporton the implications of increasing the membership of

the Commission, and had invited Member States tosubmit their views on that issue.

Chapter XIXCoordination and cooperation

A. Asian-African Legal ConsultativeOrganization

418. On behalf of the Asian-African LegalConsultative Organization (AALCO, formerlyAALCC), it was stated that, in view of the importanceAALCO attached to the Commission’s work, at itsfortieth annual session, it had considered the report ofthe Commission on the work of its thirty-thirdsession43 and had expressed its appreciation for theprogress achieved by the Commission. AALCOwelcomed the completion of the Legislative Guide onPrivately Financed Infrastructure Projects. AALCO hadtaken note with interest and appreciation of thesubstantive work accomplished towards the finalizationof a draft Convention on Assignment of Receivables inInternational Trade, which had the potential ofincreasing the availability of credit at more affordablerates. Furthermore, AALCO supported theCommission’s work towards a Model Law onElectronic Signatures, in particular in view of thegeneral acceptance with which the UNCITRAL ModelLaw on Electronic Commerce had been received.AALCO’s interest in the work of the Commission onarbitration had been enhanced by the success of theregional arbitration centres in Cairo, Kuala Lumpurand Lagos. It was announced that a fourth arbitrationcentre in Tehran would become operational in the nearfuture. Moreover, a number of members of AALCOhad expressed an interest in the increase of themembership of the Commission.

B. Permanent Court of Arbitration

419. On behalf of the Permanent Court of Arbitrationat The Hague, it was stated that the Court continued tofollow with great interest the Commission’s work andhad expanded its related activities. The Court hadrecently prepared new arbitration and conciliation rulesfor use by States, intergovernmental organizations andprivate parties, as well as Rules for the Settlement ofDisputes Relating to Natural Resources and the

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Environment, adopted on 19 June 2001. Those ruleswere based on the UNCITRAL Arbitration andConciliation Rules. Other new activities includedinternational law seminars on topics such as air andspace law, settlement of investment disputes andprotection of the environment and mass claims settle-ment tribunals. Those activities were supplemented bya publication programme, which included seminarpapers, in cooperation with Kluwer Law International,arbitration CD-ROMs and, in cooperation with theInternational Council for Commercial Arbitration(ICCA), the ICCA Yearbook Commercial Arbitration.In that connection, appreciation was expressed for thework of the secretariat of the Commission in makingUNCITRAL texts available in CD-ROM form. TheCourt and ICCA, in cooperation with the UNCITRALsecretariat, continued analysing answers to thequestionnaire sent to States in the context of theUNCITRAL/IBA project on the legislative implemen-tation of the 1958 New York Convention on theRecognition and Enforcement of Foreign ArbitralAwards. It was announced that a first paper would beready in the near future.

C. Southeast European CooperativeInitiative

420. On behalf of the Southeast European CooperativeInitiative (SECI), it was stated that SECI had beenestablished in 1996 on the basis of the Points ofCommon E.U.-U.S. Understanding to develop a viableeconomic strategy for the region. SECI focused oncross-border projects in the area of infrastructuredevelopment, trade and transport issues, security,energy, environment and private sector development.SECI had also done work, in particular, on bordercrossing facilitation, transport infrastructure, intercon-nection of natural gas networks and development ofinterconnection of electric power systems, cleaning ofrivers and lakes, combating cross-border crime,investment promotion and commercial arbitration andmediation. Furthermore, SECI projects were carriedout by experts from participating and supporting Stateswith technical support from ECE and other institutions,took into account in its activities texts elaborated byUNCITRAL and that it hoped to benefit from itstechnical assistance programme.

Chapter XXOther business

A. Bibliography

421. The Commission noted with appreciation thebibliography of recent writings related to the work ofthe Commission (A/CN.9/502). The Commissionstressed the importance for the bibliography to be ascomplete as possible and, for that reason, requestedGovernments, academic institutions, other relevantorganizations and individual authors to send copies ofsuch publications to the Secretariat.

B. Willem C. Vis InternationalCommercial Arbitration Moot

422. It was noted that the Institute of InternationalCommercial Law at Pace University School of Law,New York, had organized the eighth Willem C. VisInternational Commercial Arbitration Moot in Viennafrom 5 to 12 April 2001. In addition, it was noted thatlegal issues dealt with by the teams of studentsparticipating in the Moot had been based on the UnitedNations Convention on Contracts for the InternationalSale of Goods, the UNCITRAL Model Law onInternational Commercial Arbitration and theArbitration Rules of the International Chamber ofCommerce. Moreover, it was noted that, in the 2001Moot, some 94 teams had participated from lawschools in some 31 countries, involving about 550students and about 240 arbitrators. It was also notedthat the ninth Moot was to be held at Vienna from 22 to28 March 2002.

423. The Commission expressed its appreciation to theInstitute of International Commercial Law at PaceUniversity School of Law for organizing the Moot andto the Secretariat for sponsoring it. It was widely feltthat the Moot, with its broad international partici-pation, was an excellent method of disseminatinginformation about uniform law texts and teachinginternational trade law.

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Chapter XXIDate and place of future meetings

A. Thirty-fifth session of the Commission

424. It was decided that the Commission would holdits thirty-fifth session in New York from 10 to 28 June2002.

B. Sessions of working groups

425. The Commission approved the followingschedule of meetings for its working groups:

(a) Working Group I, scheduled to work onissues of privately financed infrastructure projects, isto hold its fourth session in Vienna for one week, from24 to 28 September 2001;

(b) Working Group II, currently working onarbitration, is to hold its thirty-fifth session in Viennafor two weeks, from 19 to 30 November 2001, and itsthirty-sixth session in New York for one week, from 4to 8 March 2002, immediately before the thirty-ninthsession of Working Group IV on electronic commerce(see subpara. (d) below);

(c) Working Group III, scheduled to work onissues of transport law, is to hold its ninth session inNew York for two weeks, from 15 to 26 April 2002;

(d) Working Group IV, currently working onelectronic commerce, is to hold its thirty-ninth sessionin New York for one week, from 11 to 15 March 2002,immediately after the thirty-sixth session of WorkingGroup II on arbitration (see subpara. (b) above);

(e) Working Group V, currently working oninsolvency, is to hold its twenty-fourth session in NewYork for two weeks, from 23 July to 3 August 2001, itstwenty-fifth session at Vienna for two weeks, from 3 to14 December 2001 and its twenty-sixth session in NewYork for one week, from 13 to 17 May 2002,immediately before the first session of WorkingGroup VI on security interests (see subpara. (f) below);

(f) Working Group VI, scheduled to work onissues of security interests, is to hold its first session inNew York for one week, from 20 to 24 May 2002,immediately after the twenty-sixth session ofWorking Group V on insolvency (see subpara. (e)above).

Notes

1 Pursuant to General Assembly resolution 2205 (XXI),the members of the Commission are elected for a term ofoffice of six years. Of the current membership, 19 wereelected by the General Assembly at its fifty-secondsession, on 24 November 1997 (decision 52/314) and 17at its fifty-fifth session, on 16 October 2000. Pursuant toresolution 31/99 of 15 December 1976, the term ofoffice of those members elected by the Assembly at itsfifty-second session will expire on the last day prior tothe opening of the thirty-seventh session of theCommission, in 2004, while the term of office of thosemembers elected at the fifty-fifth session will expire onthe last day prior to the opening of the fortieth session ofthe Commission, in 2007.

2 In accordance with a decision taken by the Commissionat its first session, the Commission has three Vice-Chairmen, so that, together with the Chairman and theRapporteur, each of the five groups of States listed inGeneral Assembly resolution 2205 (XXI), sect. II,para. 1, will be represented on the bureau of theCommission (see the report of the United NationsCommission on International Trade Law on the work ofits first session, Official Records of the GeneralAssembly, Twenty-third Session, Supplement No. 16(A/72/16), para. 14 (Yearbook of the United NationsCommission on International Trade Law, vol. I: 1968-1970 (United Nations publication, Sales No. E.71.V.1),part two, chap. I, sect. A)).

3 Official Records of the General Assembly, FiftiethSession, Supplement No. 17 (A/50/17), paras. 374-381.

4 Ibid., Fifty-fifth Session, Supplement No. 17 (A/55/17),paras. 186-192.

5 Ibid., paras. 50 and 74.

6 See documents A/CN.9/472 and Add.1-5 andA/CN.9/490 and Add.1-5.

7 Official Records of the General Assembly, Fifty-sixthSession, Supplement No. 17 (A/56/17).

8 Official Records of the General Assembly, Fifty-firstSession, Supplement No. 17 (A/51/17), paras. 223 and224.

9 Ibid., Fifty-second Session, Supplement No. 17(A/52/17), paras. 249-251.

10 Ibid., Fifty-third Session, Supplement No. 17 (A/53/17,para. 209.

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11 The text of the recommendation to UNCITRAL iscontained in document TRADE/CEFACT/1999/CRP.7.Its adoption by CEFACT is mentioned in the report ofCEFACT on the work of its fiftieth session(TRADE/CEFACT/1999/19, para. 60).

12 Official Records of the General Assembly, Fifty-fourthSession, Supplement No. 17 (A/54/17), paras. 315-318.

13 Ibid., Fifty-fifth Session, Supplement No. 17 (A/55/17),paras. 384-388.

14 Ibid., para. 387.

15 The note drew on ideas, suggestions and considerationsexpressed in different contexts, such as the New YorkConvention Day (Enforcing Arbitration Awards underthe New York Convention, op. cit.); the Congress of theInternational Council for Commercial Arbitration, Paris,3-6 May 1998 (Improving the Efficiency of ArbitrationAgreements and Awards: 40 Years of Application of theNew York Convention, International Council forCommercial Arbitration Congress Series No. 9, KluwerLaw International, 1999); and other internationalconferences and forums, such as the 1998 Freshfieldslecture by Gerold Herrmann, “Does the world needadditional uniform legislation on arbitration?”(Arbitration International, vol. 15, No. 3 (1999),p. 211).

16 Official Records of the General Assembly, Fifty-fourthSession, Supplement No. 17 (A/54/17), para. 337.

17 Ibid., paras. 340-343.

18 Ibid., paras. 344-350.

19 Ibid., paras. 371-373.

20 Ibid., paras. 374 and 375.

21 Ibid., Fifty-fifth Session, Supplement No. 17 (A/55/17),para. 396.

22 Ibid., Fiftieth Session, Supplement No. 17 (A/50/17),paras. 401-404, and ibid., Fifty-first Session, SupplementNo. 17 (A/51/17), paras. 238-243.

23 Ibid., Fifty-first Session, Supplement No. 17 (A/51/17).



26 Ibid., paras. 211-214.



29 Ibid., Fifty-third Session, Supplement No. 17 (A/53/17),para. 264.


31 Ibid., Fifty-fourth Session, Supplement No. 17 (A/54/17),para. 413.



34 Implementation of Multimodal Transport Rules, reportprepared by the UNCTAD Secretariat, UNCTAD15DTE/TLB/2, 25 June 2001.

35 Official Records of the General Assembly, Fifty-fifthSession, Supplement No. 17 (A/55/17), para. 459.


37 Ibid., paras. 195-368 and 372.



40 A/CN.9/500.

41 General Assembly resolution 2205 (XXI), part II,para. 8 (d) and (e); UNCITRAL Yearbook, Vol. I: 1968-1970, part one, II.E.

42 Official Records of the General Assembly, Fifty-fifthSession, Supplement No. 17 (A/55/17), paras. 107-109.

42 Official Records of the General Assembly, Fifty-fifthSession, Supplement No. 17).

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Annex IDraft Convention on the Assignment of Receivables inInternational Trade

Preamble

The Contracting States,

Reaffirming their conviction that internationaltrade on the basis of equality and mutual benefit is animportant element in the promotion of friendlyrelations among States,

Considering that problems created byuncertainties as to the content and the choice of legalregime applicable to the assignment of receivablesconstitute an obstacle to international trade,

Desiring to establish principles and to adopt rulesrelating to the assignment of receivables that wouldcreate certainty and transparency and promote themodernization of the law relating to assignments ofreceivables, while protecting existing assignmentpractices and facilitating the development of newpractices,

Desiring also to ensure adequate protection of theinterests of debtors in assignments of receivables,

Being of the opinion that the adoption of uniformrules governing the assignment of receivables wouldpromote the availability of capital and credit at moreaffordable rates and thus facilitate the development ofinternational trade,

Have agreed as follows:

Chapter IScope of application

Article 1Scope of application

1. This Convention applies to:

(a) Assignments of international receivablesand to international assignments of receivables asdefined in this chapter, if, at the time of conclusion ofthe contract of assignment, the assignor is located in aContracting State; and

(b) Subsequent assignments, provided that anyprior assignment is governed by this Convention.

2. This Convention applies to subsequentassignments that satisfy the criteria set forth inparagraph 1 (a) of this article, even if it did not applyto any prior assignment of the same receivable.

3. This Convention does not affect the rightsand obligations of the debtor unless, at the time ofconclusion of the original contract, the debtor islocated in a Contracting State or the law governing theoriginal contract is the law of a Contracting State.

4. The provisions of chapter V apply toassignments of international receivables and tointernational assignments of receivables as defined inthis chapter independently of paragraphs 1 to 3 of thisarticle. However, those provisions do not apply if aState makes a declaration under article 39.

5. The provisions of the annex to thisConvention apply as provided in article 42.

Article 2Assignment of receivables

For the purposes of this Convention:

(a) “Assignment” means the transfer byagreement from one person (“assignor”) to anotherperson (“assignee”) of all or part of or an undividedinterest in the assignor’s contractual right to paymentof a monetary sum (“receivable”) from a third person(“the debtor”). The creation of rights in receivables assecurity for indebtedness or other obligation is deemedto be a transfer;

(b) In the case of an assignment by the initial orany other assignee (“subsequent assignment”), theperson who makes that assignment is the assignor andthe person to whom that assignment is made is theassignee.

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Article 3Internationality

A receivable is international if, at the time ofconclusion of the original contract, the assignor and thedebtor are located in different States. An assignment isinternational if, at the time of conclusion of thecontract of assignment, the assignor and the assigneeare located in different States.

Article 4Exclusions

1. This Convention does not apply toassignments made:

(a) To an individual for his or her personal,family or household purposes;

(b) As part of the sale or change in theownership or legal status of the business out of whichthe assigned receivables arose.

2. This Convention does not apply toassignments of receivables arising under or from:

(a) Transactions on a regulated exchange;

(b) Financial contracts governed by nettingagreements, except a receivable owed on thetermination of all outstanding transactions;

(c) Foreign exchange transactions;

(d) Inter-bank payment systems, inter-bankpayment agreements or clearance and settlementsystems relating to securities or other financial assetsor instruments;

(e) The transfer of security rights in, sale, loanor holding of or agreement to repurchase securities orother financial assets or instruments held with anintermediary;

(f) Bank deposits;

(g) A letter of credit or independent guarantee.

3. Nothing in this Convention affects the rightsand obligations of any person under the law governingnegotiable instruments.

4. Nothing in this Convention affects the rightsand obligations of the assignor and the debtor underspecial laws governing the protection of parties totransactions made for personal, family or householdpurposes.

5. Nothing in this Convention:

(a) Affects the application of the law of a Statein which real property is situated to either:

(i) An interest in that real property to the extentthat under that law the assignment of a receivableconfers such an interest; or

(ii) The priority of a right in a receivable to theextent that under that law an interest in the realproperty confers such a right; or

(b) Makes lawful the acquisition of an interestin real property not permitted under the law of theState in which the real property is situated.

Chapter IIGeneral provisions

Article 5Definitions and rules of interpretation

For the purposes of this Convention:

(a) “Original contract” means the contractbetween the assignor and the debtor from which theassigned receivable arises;

(b) “Existing receivable” means a receivablethat arises upon or before conclusion of the contract ofassignment and “future receivable” means a receivablethat arises after conclusion of the contract ofassignment;

(c) “Writing” means any form of informationthat is accessible so as to be usable for subsequentreference. Where this Convention requires a writing tobe signed, that requirement is met if, by generallyaccepted means or a procedure agreed to by the personwhose signature is required, the writing identifies thatperson and indicates that person’s approval of theinformation contained in the writing;

(d) “Notification of the assignment” means acommunication in writing that reasonably identifies theassigned receivables and the assignee;

(e) “Insolvency administrator” means a personor body, including one appointed on an interim basis,authorized in an insolvency proceeding to administerthe reorganization or liquidation of the assignor’sassets or affairs;

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(f) “Insolvency proceeding” means a collectivejudicial or administrative proceeding, including aninterim proceeding, in which the assets and affairs ofthe assignor are subject to control or supervision by acourt or other competent authority for the purpose ofreorganization or liquidation;

(g) “Priority” means the right of a person inpreference to the right of another person and, to theextent relevant for such purpose, includes thedetermination whether the right is a personal or aproperty right, whether or not it is a security right forindebtedness or other obligation and whether anyrequirements necessary to render the right effectiveagainst a competing claimant have been satisfied;

(h) A person is located in the State in which ithas its place of business. If the assignor or the assigneehas a place of business in more than one State, theplace of business is that place where the centraladministration of the assignor or the assignee isexercised. If the debtor has a place of business in morethan one State, the place of business is that which hasthe closest relationship to the original contract. If aperson does not have a place of business, reference isto be made to the habitual residence of that person;

(i) “Law” means the law in force in a Stateother than its rules of private international law;

(j) “Proceeds” means whatever is received inrespect of an assigned receivable, whether in total orpartial payment or other satisfaction of the receivable.The term includes whatever is received in respect ofproceeds. The term does not include returned goods;

(k) “Financial contract” means any spot,forward, future, option or swap transaction involvinginterest rates, commodities, currencies, equities, bonds,indices or any other financial instrument, anyrepurchase or securities lending transaction, and anyother transaction similar to any transaction referred toabove entered into in financial markets and anycombination of the transactions mentioned above;

(l) “Netting agreement” means an agreementbetween two or more parties that provides for one ormore of the following:

(i) The net settlement of payments due in thesame currency on the same date whether bynovation or otherwise;

(ii) Upon the insolvency or other default by aparty, the termination of all outstandingtransactions at their replacement or fair marketvalues, conversion of such sums into a singlecurrency and netting into a single payment by oneparty to the other; or

(iii) The set-off of amounts calculated as setforth in subparagraph (l) (ii) of this article undertwo or more netting agreements;

(m) “Competing claimant” means:

(i) Another assignee of the same receivablefrom the same assignor, including a person who,by operation of law, claims a right in the assignedreceivable as a result of its right in other propertyof the assignor, even if that receivable is not aninternational receivable and the assignment tothat assignee is not an international assignment;

(ii) A creditor of the assignor; or

(iii) The insolvency administrator.

Article 6Party autonomy

Subject to article 19, the assignor, the assigneeand the debtor may derogate from or vary byagreement provisions of this Convention relating totheir respective rights and obligations. Such anagreement does not affect the rights of any person whois not a party to the agreement.

Article 7Principles of interpretation

1. In the interpretation of this Convention,regard is to be had to its object and purpose as set forthin the preamble, to its international character and to theneed to promote uniformity in its application and theobservance of good faith in international trade.

2. Questions concerning matters governed bythis Convention that are not expressly settled in it areto be settled in conformity with the general principleson which it is based or, in the absence of suchprinciples, in conformity with the law applicable byvirtue of the rules of private international law.

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Chapter IIIEffects of assignment

Article 8Effectiveness of assignments

1. An assignment is not ineffective as betweenthe assignor and the assignee or as against the debtor oras against a competing claimant, and the right of anassignee may not be denied priority, on the ground thatit is an assignment of more than one receivable, futurereceivables or parts of or undivided interests inreceivables, provided that the receivables are des-cribed:

(a) Individually as receivables to which theassignment relates; or

(b) In any other manner, provided that they can,at the time of the assignment or, in the case of futurereceivables, at the time of conclusion of the originalcontract, be identified as receivables to which theassignment relates.

2. Unless otherwise agreed, an assignment ofone or more future receivables is effective without anew act of transfer being required to assign eachreceivable.

3. Except as provided in paragraph 1 of thisarticle, article 9 and article 10, paragraphs 2 and 3, thisConvention does not affect any limitations onassignments arising from law.

Article 9Contractual limitations on assignments

1. An assignment of a receivable is effectivenotwithstanding any agreement between the initial orany subsequent assignor and the debtor or anysubsequent assignee limiting in any way the assignor’sright to assign its receivables.

2. Nothing in this article affects any obligationor liability of the assignor for breach of such anagreement, but the other party to such agreement maynot avoid the original contract or the assignmentcontract on the sole ground of that breach. A personwho is not party to such an agreement is not liable onthe sole ground that it had knowledge of the agreement.

3. This article applies only to assignments ofreceivables:

(a) Arising from an original contract that is acontract for the supply or lease of goods or servicesother than financial services, a construction contract ora contract for the sale or lease of real property;

(b) Arising from an original contract for thesale, lease or licence of industrial or other intellectualproperty or of proprietary information;

(c) Representing the payment obligation for acredit card transaction; or

(d) Owed to the assignor upon net settlement ofpayments due pursuant to a netting agreementinvolving more than two parties.

Article 10Transfer of security rights

1. A personal or property right securingpayment of the assigned receivable is transferred to theassignee without a new act of transfer. If such a right,under the law governing it, is transferable only with anew act of transfer, the assignor is obliged to transfersuch right and any proceeds to the assignee.

2. A right securing payment of the assignedreceivable is transferred under paragraph 1 of thisarticle notwithstanding any agreement between theassignor and the debtor or other person granting thatright, limiting in any way the assignor’s right to assignthe receivable or the right securing payment of theassigned receivable.

3. Nothing in this article affects any obligationor liability of the assignor for breach of any agreementunder paragraph 2 of this article, but the other party tothat agreement may not avoid the original contract orthe assignment contract on the sole ground of thatbreach. A person who is not a party to such anagreement is not liable on the sole ground that it hadknowledge of the agreement.

4. Paragraphs 2 and 3 of this article apply onlyto assignments of receivables:

(a) Arising from an original contract that is acontract for the supply or lease of goods or servicesother than financial services, a construction contract ora contract for the sale or lease of real property;

(b) Arising from an original contract for thesale, lease or licence of industrial or other intellectualproperty or of proprietary information;

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(c) Representing the payment obligation for acredit card transaction; or

(d) Owed to the assignor upon net settlement ofpayments due pursuant to a netting agreementinvolving more than two parties.

5. The transfer of a possessory property rightunder paragraph 1 of this article does not affect anyobligations of the assignor to the debtor or the persongranting the property right with respect to the propertytransferred existing under the law governing thatproperty right.

6. Paragraph 1 of this article does not affectany requirement under rules of law other than thisConvention relating to the form or registration of thetransfer of any rights securing payment of the assignedreceivable.

Chapter IVRights, obligations and defences

Section IAssignor and assignee

Article 11Rights and obligations of the assignor

and the assignee

1. The mutual rights and obligations of theassignor and the assignee arising from their agreementare determined by the terms and conditions set forth inthat agreement, including any rules or generalconditions referred to therein.

2. The assignor and the assignee are bound byany usage to which they have agreed and, unlessotherwise agreed, by any practices they haveestablished between themselves.

3. In an international assignment, the assignorand the assignee are considered, unless otherwiseagreed, implicitly to have made applicable to theassignment a usage that in international trade is widelyknown to, and regularly observed by, parties to theparticular type of assignment or to the assignment ofthe particular category of receivables.

Article 12Representations of the assignor

1. Unless otherwise agreed between theassignor and the assignee, the assignor represents at thetime of conclusion of the contract of assignment that:

(a) The assignor has the right to assign thereceivable;

(b) The assignor has not previously assignedthe receivable to another assignee; and

(c) The debtor does not and will not have anydefences or rights of set-off.

2. Unless otherwise agreed between theassignor and the assignee, the assignor does not repre-sent that the debtor has, or will have, the ability to pay.

Article 13Right to notify the debtor

1. Unless otherwise agreed between theassignor and the assignee, the assignor or the assigneeor both may send the debtor notification of theassignment and a payment instruction, but afternotification has been sent only the assignee may sendsuch an instruction.

2. Notification of the assignment or a paymentinstruction sent in breach of any agreement referred toin paragraph 1 of this article is not ineffective for thepurposes of article 17 by reason of such breach.However, nothing in this article affects any obligationor liability of the party in breach of such an agreementfor any damages arising as a result of the breach.

Article 14Right to payment

1. As between the assignor and the assignee,unless otherwise agreed and whether or not notificationof the assignment has been sent:

(a) If payment in respect of the assignedreceivable is made to the assignee, the assignee isentitled to retain the proceeds and goods returned inrespect of the assigned receivable;

(b) If payment in respect of the assignedreceivable is made to the assignor, the assignee isentitled to payment of the proceeds and also to goodsreturned to the assignor in respect of the assignedreceivable; and

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(c) If payment in respect of the assignedreceivable is made to another person over whom theassignee has priority, the assignee is entitled topayment of the proceeds and also to goods returned tosuch person in respect of the assigned receivable.

2. The assignee may not retain more than thevalue of its right in the receivable.

Section IIDebtor

Article 15Principle of debtor protection

1. Except as otherwise provided in thisConvention, an assignment does not, without theconsent of the debtor, affect the rights and obligationsof the debtor, including the payment terms contained inthe original contract.

2. A payment instruction may change theperson, address or account to which the debtor isrequired to make payment, but may not change:

(a) The currency of payment specified in theoriginal contract; or

(b) The State specified in the original contractin which payment is to be made to a State other thanthat in which the debtor is located.

Article 16Notification of the debtor

1. Notification of the assignment or a paymentinstruction is effective when received by the debtor if itis in a language that is reasonably expected to informthe debtor about its contents. It is sufficient if notifica-tion of the assignment or a payment instruction is inthe language of the original contract.

2. Notification of the assignment or a paymentinstruction may relate to receivables arising afternotification.

3. Notification of a subsequent assignmentconstitutes notification of all prior assignments.

Article 17Debtor’s discharge by payment

1. Until the debtor receives notification of theassignment, the debtor is entitled to be discharged bypaying in accordance with the original contract.

2. After the debtor receives notification of theassignment, subject to paragraphs 3 to 8 of this article,the debtor is discharged only by paying the assignee or,if otherwise instructed in the notification of theassignment or subsequently by the assignee in a writingreceived by the debtor, in accordance with suchpayment instruction.

3. If the debtor receives more than onepayment instruction relating to a single assignment ofthe same receivable by the same assignor, the debtor isdischarged by paying in accordance with the lastpayment instruction received from the assignee beforepayment.

4. If the debtor receives notification of morethan one assignment of the same receivable made bythe same assignor, the debtor is discharged by payingin accordance with the first notification received.

5. If the debtor receives notification of one ormore subsequent assignments, the debtor is dischargedby paying in accordance with the notification of thelast of such subsequent assignments.

6. If the debtor receives notification of theassignment of a part of or an undivided interest in oneor more receivables, the debtor is discharged by payingin accordance with the notification or in accordancewith this article as if the debtor had not received thenotification. If the debtor pays in accordance with thenotification, the debtor is discharged only to the extentof the part or undivided interest paid.

7. If the debtor receives notification of theassignment from the assignee, the debtor is entitled torequest the assignee to provide within a reasonableperiod of time adequate proof that the assignment fromthe initial assignor to the initial assignee and anyintermediate assignment have been made and, unlessthe assignee does so, the debtor is discharged bypaying in accordance with this article as if thenotification from the assignee had not been received.Adequate proof of an assignment includes but is notlimited to any writing emanating from the assignor andindicating that the assignment has taken place.

8. This article does not affect any other groundon which payment by the debtor to the person entitledto payment, to a competent judicial or other authority,or to a public deposit fund discharges the debtor.

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Article 18Defences and rights of set-off of the debtor

1. In a claim by the assignee against the debtorfor payment of the assigned receivable, the debtor mayraise against the assignee all defences and rights of set-off arising from the original contract, or any othercontract that was part of the same transaction, of whichthe debtor could avail itself as if the assignment hadnot been made and such claim were made by theassignor.

2. The debtor may raise against the assigneeany other right of set-off, provided that it was availableto the debtor at the time notification of the assignmentwas received by the debtor.

3. Notwithstanding paragraphs 1 and 2 of thisarticle, defences and rights of set-off that the debtormay raise pursuant to article 9 or 10 against theassignor for breach of an agreement limiting in anyway the assignor’s right to make the assignment are notavailable to the debtor against the assignee.

Article 19Agreement not to raise defences or rights of set-off

1. The debtor may agree with the assignor in awriting signed by the debtor not to raise against theassignee the defences and rights of set-off that it couldraise pursuant to article 18. Such an agreementprecludes the debtor from raising against the assigneethose defences and rights of set-off.

2. The debtor may not waive defences:

(a) Arising from fraudulent acts on the part ofthe assignee; or

(b) Based on the debtor’s incapacity.

3. Such an agreement may be modified only byan agreement in a writing signed by the debtor. Theeffect of such a modification as against the assignee isdetermined by article 20, paragraph 2.

Article 20Modification of the original contract

1. An agreement concluded before notificationof the assignment between the assignor and the debtorthat affects the assignee’s rights is effective as againstthe assignee, and the assignee acquires correspondingrights.

2. An agreement concluded after notificationof the assignment between the assignor and the debtorthat affects the assignee’s rights is ineffective asagainst the assignee unless:

(a) The assignee consents to it; or

(b) The receivable is not fully earned byperformance and either the modification is provided forin the original contract or, in the context of the originalcontract, a reasonable assignee would consent to themodification.

3. Paragraphs 1 and 2 of this article do notaffect any right of the assignor or the assignee arisingfrom breach of an agreement between them.

Article 21Recovery of payments

Failure of the assignor to perform the originalcontract does not entitle the debtor to recover from theassignee a sum paid by the debtor to the assignor or theassignee.

Section IIIThird parties

Article 22Law applicable to competing rights

With the exception of matters that are settledelsewhere in this Convention and subject to articles 23and 24, the law of the State in which the assignor islocated governs the priority of the right of an assigneein the assigned receivable over the right of a competingclaimant.

Article 23Public policy and mandatory rules

1. The application of a provision of the law ofthe State in which the assignor is located may be refusedonly if the application of that provision is manifestlycontrary to the public policy of the forum State.

2. The rules of the law of either the forumState or any other State that are mandatory irrespectiveof the law otherwise applicable may not prevent theapplication of a provision of the law of the State inwhich the assignor is located.

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3. Notwithstanding paragraph 2 of this article,in an insolvency proceeding commenced in a Stateother than the State in which the assignor is located,any preferential right that arises, by operation of law,under the law of the forum State and is given priorityover the rights of an assignee in insolvency pro-ceedings under the law of that State may be givenpriority notwithstanding article 22. A State maydeposit at any time a declaration identifying any suchpreferential right.

Article 24Special rules on proceeds

1. If proceeds are received by the assignee, theassignee is entitled to retain those proceeds to theextent that the assignee’s right in the assignedreceivable had priority over the right of a competingclaimant in the assigned receivable.

2. If proceeds are received by the assignor, theright of the assignee in those proceeds has priorityover the right of a competing claimant in thoseproceeds to the same extent as the assignee’s right hadpriority over the right in the assigned receivable of thatclaimant if:

(a) The assignor has received the proceedsunder instructions from the assignee to hold theproceeds for the benefit of the assignee; and

(b) The proceeds are held by the assignor forthe benefit of the assignee separately and arereasonably identifiable from the assets of the assignor,such as in the case of a separate deposit or securitiesaccount containing only proceeds consisting of cash orsecurities.

3. Nothing in paragraph 2 of this article affectsthe priority of a person having against the proceeds aright of set-off or a right created by agreement and notderived from a right in the receivable.

Article 25Subordination

An assignee entitled to priority may at any timesubordinate its priority unilaterally or by agreement infavour of any existing or future assignees.

Chapter VAutonomous conflict-of-laws rules

Article 26Application of chapter V

The provisions of this chapter apply to mattersthat are:

(a) Within the scope of this Convention asprovided in article 1, paragraph 4; and

(b) Otherwise within the scope of thisConvention but not settled elsewhere in it.

Article 27Form of a contract of assignment

1. A contract of assignment concluded bet-ween persons who are located in the same State isformally valid as between them if it satisfies therequirements of either the law which governs it or thelaw of the State in which it is concluded.

2. A contract of assignment concluded bet-ween persons who are located in different States isformally valid as between them if it satisfies therequirements of either the law which governs it or thelaw of one of those States.

Article 28Law applicable to the mutual rights and obligations of

the assignor and the assignee

1. The mutual rights and obligations of theassignor and the assignee arising from their agreementare governed by the law chosen by them.

2. In the absence of a choice of law by theassignor and the assignee, their mutual rights andobligations arising from their agreement are governedby the law of the State with which the contract ofassignment is most closely connected.

Article 29Law applicable to the rights and obligations of the

assignee and the debtor

The law governing the original contractdetermines the effectiveness of contractual limitationson assignment as between the assignee and the debtor,the relationship between the assignee and the debtor,the conditions under which the assignment can be

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invoked against the debtor and whether the debtor’sobligations have been discharged.

Article 30Law applicable to priority

1. The law of the State in which the assignor islocated governs the priority of the right of an assigneein the assigned receivable over the right of a competingclaimant.

2. The rules of the law of either the forumState or any other State that are mandatory irrespectiveof the law otherwise applicable may not prevent theapplication of a provision of the law of the State inwhich the assignor is located.

3. Notwithstanding paragraph 2 of this article,in an insolvency proceeding commenced in a Stateother than the State in which the assignor is located,any preferential right that arises, by operation of law,under the law of the forum State and is given priorityover the rights of an assignee in insolvencyproceedings under the law of that State may begiven priority notwithstanding paragraph 1 of thisarticle.

Article 31Mandatory rules

1. Nothing in articles 28 and 29 restricts theapplication of the rules of the law of the forum State ina situation where they are mandatory irrespective of thelaw otherwise applicable.

2. Nothing in articles 28 and 29 restricts theapplication of the mandatory rules of the law ofanother State with which the matters settled in thosearticles have a close connection if and in so far as,under the law of that other State, those rules must beapplied irrespective of the law otherwise applicable.

Article 32Public policy

With regard to matters settled in this chapter, theapplication of a provision of the law specified in thischapter may be refused only if the application of thatprovision is manifestly contrary to the public policy ofthe forum State.

Chapter VIFinal provisions

Article 33Depositary

The Secretary-General of the United Nations isthe depositary of this Convention.

Article 34Signature, ratification, acceptance, approval, accession

1. This Convention is open for signature by allStates at the Headquarters of the United Nations inNew York until [...].*

2. This Convention is subject to ratification,acceptance or approval by the signatory States.

3. This Convention is open to accession by allStates that are not signatory States as from the date it isopen for signature.

4. Instruments of ratification, acceptance,approval and accession are to be deposited with theSecretary-General of the United Nations.

Article 35Application to territorial units

1. If a State has two or more territorial units inwhich different systems of law are applicable inrelation to the matters dealt with in this Convention, itmay at any time declare that this Convention is toextend to all its territorial units or only one or more ofthem, and may at any time substitute anotherdeclaration for its earlier declaration.

2. Such declarations are to state expressly theterritorial units to which this Convention extends.

3. If, by virtue of a declaration under thisarticle, this Convention does not extend to all territorialunits of a State and the assignor or the debtor is locatedin a territorial unit to which this Convention does notextend, this location is considered not to be in aContracting State.

4. If, by virtue of a declaration under thisarticle, this Convention does not extend to all territorialunits of a State and the law governing the original

* Two years after the date of the adoption of the

Convention by the General Assembly.

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contract is the law in force in a territorial unit to whichthis Convention does not extend, the law governing theoriginal contract is considered not to be the law of aContracting State.

5. If a State makes no declaration underparagraph 1 of this article, the Convention is to extendto all territorial units of that State.

Article 36Location in a territorial unit

If a person is located in a State which has two ormore territorial units, that person is located in theterritorial unit in which it has its place of business. Ifthe assignor or the assignee has a place of business inmore than one territorial unit, the place of business isthat place where the central administration of theassignor or the assignee is exercised. If the debtor has aplace of business in more than one territorial unit, theplace of business is that which has the closestrelationship to the original contract. If a person doesnot have a place of business, reference is to be made tothe habitual residence of that person. A State with twoor more territorial units may specify by declaration atany time other rules for determining the location of aperson within that State.

Article 37Applicable law in territorial units

Any reference in this Convention to the law of aState means, in the case of a State which has two ormore territorial units, the law in force in the territorialunit. Such a State may specify by declaration at anytime other rules for determining the applicable law,including rules that render applicable the law ofanother territorial unit of that State.

Article 38Conflicts with other international agreements

1. This Convention does not prevail over anyinternational agreement that has already been or maybe entered into and that specifically governs atransaction otherwise governed by this Convention.

2. Notwithstanding paragraph 1 of this article,this Convention prevails over the Unidroit Conventionon International Factoring (“the Ottawa Convention”).To the extent that this Convention does not apply to therights and obligations of a debtor, it does not preclude

the application of the Ottawa Convention with respectto the rights and obligations of that debtor.

Article 39Declaration on application of chapter V

A State may declare at any time that it will not bebound by chapter V.

Article 40Limitations relating to Governments and

other public entities

A State may declare at any time that it will not bebound or the extent to which it will not be bound byarticles 9 and 10 if the debtor or any person granting apersonal or property right securing payment of theassigned receivable is located in that State at the timeof conclusion of the original contract and is aGovernment, central or local, any subdivision thereof,or an entity constituted for a public purpose. If a Statehas made such a declaration, articles 9 and 10 do notaffect the rights and obligations of that debtor orperson. A State may list in a declaration the types ofentity that are the subject of a declaration.

Article 41Other exclusions

1. A State may declare at any time that it willnot apply this Convention to specific types ofassignment or to the assignment of specific categoriesof receivables clearly described in a declaration.

2. After a declaration under paragraph 1 of thisarticle takes effect:

(a) This Convention does not apply to suchtypes of assignment or to the assignment of suchcategories of receivables if the assignor is located atthe time of conclusion of the contract of assignment insuch a State; and

(b) The provisions of this Convention thataffect the rights and obligations of the debtor do notapply if, at the time of conclusion of the originalcontract, the debtor is located in such a State or the lawgoverning the original contract is the law of such aState.

3. This article does not apply to assignments ofreceivables listed in article 9, paragraph 3.

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Article 42Application of the annex

1. A State may at any time declare that it willbe bound by:

(a) The priority rules set forth in section I of theannex and will participate in the internationalregistration system established pursuant to section II ofthe annex;

(b) The priority rules set forth in section I of theannex and will effectuate such rules by use of aregistration system that fulfils the purposes of suchrules, in which case, for the purposes of section I of theannex, registration pursuant to such a system has thesame effect as registration pursuant to section II of theannex;

(c) The priority rules set forth in section III ofthe annex;

(d) The priority rules set forth in section IV ofthe annex; or

(e) The priority rules set forth in articles 7 and9 of the annex.

2. For the purposes of article 22:

(a) The law of a State that has made adeclaration pursuant to paragraph 1 (a) or (b) of thisarticle is the set of rules set forth in section I of theannex, as affected by any declaration made pursuant toparagraph 5 of this article;

(b) The law of a State that has made adeclaration pursuant to paragraph 1 (c) of this article isthe set of rules set forth in section III of the annex, asaffected by any declaration made pursuant toparagraph 5 of this article;

(c) The law of a State that has made adeclaration pursuant to paragraph 1 (d) of this article isthe set of rules set forth in section IV of the annex, asaffected by any declaration made pursuant toparagraph 5 of this article; and

(d) The law of a State that has made a declara-tion pursuant to paragraph 1 (e) of this article is the setof rules set forth in articles 7 and 9 of the annex, asaffected by any declaration made pursuant to paragraph5 of this article.

3. A State that has made a declaration pursuantto paragraph 1 of this article may establish rules

pursuant to which assignments made before thedeclaration takes effect become subject to those ruleswithin a reasonable time.

4. A State that has not made a declarationpursuant to paragraph 1 of this article may, in accor-dance with priority rules in force in that State, utilizethe registration system established pursuant to sectionII of the annex.

5. At the time a State makes a declarationpursuant to paragraph 1 of this article or thereafter, itmay declare that:

(a) It will not apply the priority rules chosenunder paragraph 1 of this article to certain types ofassignment or to the assignment of certain categories ofreceivables; or

(b) It will apply those priority rules withmodifications specified in that declaration.

6. At the request of Contracting or SignatoryStates to this Convention comprising not less than onethird of the Contracting and Signatory States, the depo-sitary shall convene a conference of the Contractingand Signatory States to designate the supervisingauthority and the first registrar and to prepare or revisethe regulations referred to in section II of the annex.

Article 43Effect of declaration

1. Declarations made under articles 35,paragraphs 1, 36, 37 or 39 to 42 at the time of signatureare subject to confirmation upon ratification, accep-tance or approval.

2. Declarations and confirmations of declara-tions are to be in writing and to be formally notified tothe depositary.

3. A declaration takes effect simultaneouslywith the entry into force of this Convention in respectof the State concerned. However, a declaration ofwhich the depositary receives formal notification aftersuch entry into force takes effect on the first day of themonth following the expiration of six months after thedate of its receipt by the depositary.

4. A State that makes a declaration underarticles 35, paragraphs 1, 36, 37 or 39 to 42 maywithdraw it at any time by a formal notification inwriting addressed to the depositary. Such withdrawal

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takes effect on the first day of the month following theexpiration of six months after the date of the receipt ofthe notification by the depositary.

5. In the case of a declaration underarticles 35, paragraphs 1, 36, 37 or 39 to 42 that takeseffect after the entry into force of this Convention inrespect of the State concerned or in the case of awithdrawal of any such declaration, the effect of whichin either case is to cause a rule in this Convention,including any annex, to become applicable:

(a) Except as provided in paragraph 5 (b) ofthis article, that rule is applicable only to assignmentsfor which the contract of assignment is concluded on orafter the date when the declaration or withdrawal takeseffect in respect of the Contracting State referred to inarticle 1, paragraph 1 (a);

(b) A rule that deals with the rights andobligations of the debtor applies only in respect oforiginal contracts concluded on or after the date whenthe declaration or withdrawal takes effect in respect ofthe Contracting State referred to in article 1,paragraph 3.

6. In the case of a declaration underarticles 35, paragraphs 1, 36, 37 or 39 to 42 that takeseffect after the entry into force of this Convention inrespect of the State concerned or in the case of awithdrawal of any such declaration, the effect of whichin either case is to cause a rule in this Convention,including any annex, to become inapplicable:

(a) Except as provided in paragraph 6 (b) ofthis article, that rule is inapplicable to assignments forwhich the contract of assignment is concluded on orafter the date when the declaration or withdrawal takeseffect in respect of the Contracting State referred to inarticle 1, paragraph 1 (a);

(b) A rule that deals with the rights andobligations of the debtor is inapplicable in respect oforiginal contracts concluded on or after the date whenthe declaration or withdrawal takes effect in respect ofthe Contracting State referred to in article 1,paragraph 3.

7. If a rule rendered applicable or inapplicableas a result of a declaration or withdrawal referred to inparagraph 5 or 6 of this article is relevant to thedetermination of priority with respect to a receivablefor which the contract of assignment is concluded

before such declaration or withdrawal takes effect orwith respect to its proceeds, the right of the assigneehas priority over the right of a competing claimant tothe extent that, under the law that would determinepriority before such declaration or withdrawal takeseffect, the right of the assignee would have priority.

Article 44Reservations

No reservations are permitted except thoseexpressly authorized in this Convention.

Article 45Entry into force

1. This Convention enters into force on thefirst day of the month following the expiration of sixmonths from the date of deposit of the fifth instrumentof ratification, acceptance, approval or accession withthe depositary.

2. For each State that becomes a ContractingState to this Convention after the date of deposit of thefifth instrument of ratification, acceptance, approval oraccession, this Convention enters into force on the firstday of the month following the expiration of sixmonths after the date of deposit of the appropriateinstrument on behalf of that State.

3. This Convention applies only toassignments if the contract of assignment is concludedon or after the date when this Convention enters intoforce in respect of the Contracting State referred to inarticle 1, paragraph 1 (a), provided that the provisionsof this Convention that deal with the rights andobligations of the debtor apply only to assignments ofreceivables arising from original contracts concludedon or after the date when this Convention enters intoforce in respect of the Contracting State referred to inarticle 1, paragraph 3.

4. If a receivable is assigned pursuant to acontract of assignment concluded before the date whenthis Convention enters into force in respect of theContracting State referred to in article 1, para-graph 1 (a), the right of the assignee has priority overthe right of a competing claimant with respect to thereceivable to the extent that, under the law that woulddetermine priority in the absence of this Convention,the right of the assignee would have priority.

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Article 46Denunciation

1. A Contracting State may denounce thisConvention at any time by written notificationaddressed to the depositary.

2. The denunciation takes effect on the firstday of the month following the expiration of one yearafter the notification is received by the depositary.Where a longer period is specified in the notification,the denunciation takes effect upon the expiration ofsuch longer period after the notification is received bythe depositary.

3. This Convention remains applicable toassignments if the contract of assignment is concludedbefore the date when the denunciation takes effect inrespect of the Contracting State referred to in article 1,paragraph 1 (a), provided that the provisions of thisConvention that deal with the rights and obligations ofthe debtor remain applicable only to assignments ofreceivables arising from original contracts concludedbefore the date when the denunciation takes effect inrespect of the Contracting State referred to in article 1,paragraph 3.

4. If a receivable is assigned pursuant to acontract of assignment concluded before the date whenthe denunciation takes effect in respect of theContracting State referred to in article 1, para-graph 1 (a), the right of the assignee has priority overthe right of a competing claimant with respect to thereceivable to the extent that, under the law that woulddetermine priority under this Convention, the right ofthe assignee would have priority.

Article 47Revision and amendment

1. At the request of not less than one third ofthe Contracting States to this Convention, thedepositary shall convene a conference of theContracting States to revise or amend it.

2. Any instrument of ratification, acceptance,approval or accession deposited after the entry intoforce of an amendment to this Convention is deemed toapply to the Convention as amended.

Annex to the draft Convention

Section IPriority rules based on registration

Article 1Priority among several assignees

As between assignees of the same receivablefrom the same assignor, the priority of the right of anassignee in the assigned receivable is determined bythe order in which data about the assignment areregistered under section II of this annex, regardless ofthe time of transfer of the receivable. If no such dataare registered, priority is determined by the order ofconclusion of the respective contracts of assignment.

Article 2Priority between the assignee and the insolvency

administrator or creditors of the assignor

The right of an assignee in an assigned receivablehas priority over the right of an insolvency adminis-trator and creditors who obtain a right in the assignedreceivable by attachment, judicial act or similar act of acompetent authority that gives rise to such right, if thereceivable was assigned, and data about the assignmentwere registered under section II of this annex, beforethe commencement of such insolvency proceeding,attachment, judicial act or similar act.

Section IIRegistration

Article 3Establishment of a registration system

A registration system will be established for theregistration of data about assignments, even if therelevant assignment or receivable is not international,pursuant to the regulations to be promulgated by theregistrar and the supervising authority. Regulationspromulgated by the registrar and the supervisingauthority under this annex shall be consistent with thisannex. The regulations will prescribe in detail themanner in which the registration system will operate,as well as the procedure for resolving disputes relatingto that operation.

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Article 4Registration

1. Any person may register data with regard toan assignment at the registry in accordance with thisannex and the regulations. As provided in theregulations, the data registered shall be theidentification of the assignor and the assignee and abrief description of the assigned receivables.

2. A single registration may cover one or moreassignments by the assignor to the assignee of one ormore existing or future receivables, irrespective ofwhether the receivables exist at the time of registration.

3. A registration may be made in advance ofthe assignment to which it relates. The regulations willestablish the procedure for the cancellation of aregistration in the event that the assignment is notmade.

4. Registration or its amendment is effectivefrom the time when the data set forth in paragraph 1 ofthis article are available to searchers. The registeringparty may specify, from options set forth in theregulations, a period of effectiveness for the registra-tion. In the absence of such a specification, a registra-tion is effective for a period of five years.

5. Regulations will specify the manner inwhich registration may be renewed, amended or can-celled and regulate such other matters as are necessaryfor the operation of the registration system.

6. Any defect, irregularity, omission or errorwith regard to the identification of the assignor thatwould result in data registered not being found upon asearch based on a proper identification of the assignorrenders the registration ineffective.

Article 5Registry searches

1. Any person may search the records of theregistry according to identification of the assignor, asset forth in the regulations, and obtain a search result inwriting.

2. A search result in writing that purports to beissued by the registry is admissible as evidence and is,in the absence of evidence to the contrary, proof of theregistration of the data to which the search relates,including the date and hour of registration.

Section IIIPriority rules based on the time of the contract ofassignment


As between assignees of the same receivablefrom the same assignor, the priority of the right of anassignee in the assigned receivable is determined bythe order of conclusion of the respective contracts ofassignment.



The right of an assignee in an assigned receivablehas priority over the right of an insolvency adminis-trator and creditors who obtain a right in the assignedreceivable by attachment, judicial act or similar act of acompetent authority that gives rise to such right, if thereceivable was assigned before the commencement ofsuch insolvency proceeding, attachment, judicial act orsimilar act.

Article 8Proof of time of contract of assignment

The time of conclusion of a contract of assign-ment in respect of articles 6 and 7 of this annex may beproved by any means, including witnesses.

Section IVPriority rules based on the time of notification ofassignment


As between assignees of the same receivablefrom the same assignor, the priority of the right of anassignee in the assigned receivable is determined bythe order in which notification of the respectiveassignments is received by the debtor. However, anassignee may not obtain priority over a prior assign-ment of which the assignee had knowledge at the timeof conclusion of the contract of assignment to thatassignee by notifying the debtor.

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The right of an assignee in an assigned receivablehas priority over the right of an insolvencyadministrator and creditors who obtain a right in theassigned receivable by attachment, judicial act orsimilar act of a competent authority that gives rise tosuch right, if the receivable was assigned andnotification was received by the debtor before thecommencement of such insolvency proceeding,attachment, judicial act or similar act.

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Appendix

Renumbering of articles

1. Draft Convention

Current article number (annex I to the presentdocument) Former article number (A/CN.9/486, annex I)

1 12 23 34 45 56 67 78 99 11

10 1211 1312 1413 1514 1615 1716 1817 1918 2019 2120 2221 2322 2423 2524 2625 2726 2827 New article28 2929 3030 3131 3232 3333 3434 3535 3636 3737 New article38 3839 3940 40

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41 4142 4243 4344 4445 4546 4647 47

2. Annex to the draft Convention


1 12 23 34 45 56 67 78 New article9 8

10 9

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Annex II

UNCITRAL Model Law on Electronic Signatures (2001)

Article 1Sphere of application

This Law applies where electronic signatures areused in the context∗ of commercial** activities. It doesnot override any rule of law intended for the protectionof consumers.

Article 2Definitions

For the purposes of this Law:

(a) “Electronic signature” means data inelectronic form in, affixed to or logically associatedwith, a data message, which may be used to identifythe signatory in relation to the data message and toindicate the signatory’s approval of the informationcontained in the data message;

(b) “Certificate” means a data message or otherrecord confirming the link between a signatory andsignature creation data;

(c) “Data message” means information gene-rated, sent, received or stored by electronic, optical orsimilar means including, but not limited to, electronicdata interchange (EDI), electronic mail, telegram, telexor telecopy;

∗ The Commission suggests the following text for States

that might wish to extend the applicability of this Law:“This Law applies where electronic signatures are

used, except in the following situations: [...].”** The term “commercial” should be given a wide

interpretation so as to cover matters arising from allrelationships of a commercial nature, whethercontractual or not. Relationships of a commercial natureinclude, but are not limited, to the followingtransactions: any trade transaction for the supply orexchange of goods or services; distribution agreement;commercial representation or agency; factoring; leasing;construction of works; consulting; engineering;licensing; investment; financing; banking; insurance;exploitation agreement or concession; joint venture andother forms of industrial or business cooperation;carriage of goods or passengers by air, sea, rail or road.

(d) “Signatory” means a person that holdssignature creation data and acts either on its own behalfor on behalf of the person it represents;

(e) “Certification service provider” means aperson that issues certificates and may provide otherservices related to electronic signatures;

(f) “Relying party” means a person that mayact on the basis of a certificate or an electronicsignature.

Article 3Equal treatment of signature technologies

Nothing in this Law, except article 5, shall beapplied so as to exclude, restrict or deprive of legaleffect any method of creating an electronic signaturethat satisfies the requirements referred to in article 6,paragraph 1, or otherwise meets the requirements ofapplicable law.

Article 4Interpretation

1. In the interpretation of this Law, regard is tobe had to its international origin and to the need topromote uniformity in its application and the obser-vance of good faith.

2. Questions concerning matters governed bythis Law which are not expressly settled in it are to besettled in conformity with the general principles onwhich this Law is based.

Article 5Variation by agreement

The provisions of this Law may be derogatedfrom or their effect may be varied by agreement, unlessthat agreement would not be valid or effective underapplicable law.

Article 6Compliance with a requirement for a signature

1. Where the law requires a signature of aperson, that requirement is met in relation to a data

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message if an electronic signature is used that is asreliable as was appropriate for the purpose for whichthe data message was generated or communicated, inthe light of all the circumstances, including anyrelevant agreement.

2. Paragraph 1 applies whether the require-ment referred to therein is in the form of an obligationor whether the law simply provides consequences forthe absence of a signature.

3. An electronic signature is considered to bereliable for the purpose of satisfying the requirementreferred to in paragraph 1 if:

(a) The signature creation data are, within thecontext in which they are used, linked to the signatoryand to no other person;

(b) The signature creation data were, at the timeof signing, under the control of the signatory and of noother person;

(c) Any alteration to the electronic signature,made after the time of signing, is detectable; and

(d) Where a purpose of the legal requirementfor a signature is to provide assurance as to theintegrity of the information to which it relates, anyalteration made to that information after the time ofsigning is detectable.

4. Paragraph 3 does not limit the ability of anyperson:

(a) To establish in any other way, for thepurpose of satisfying the requirement referred to inparagraph 1, the reliability of an electronic signature;or

(b) To adduce evidence of the non-reliability ofan electronic signature.

5. The provisions of this article do not apply tothe following: [...].

Article 7Satisfaction of article 6

1. [Any person, organ or authority, whetherpublic or private, specified by the enacting State ascompetent] may determine which electronic signaturessatisfy the provisions of article 6 of this Law.

2. Any determination made under paragraph 1shall be consistent with recognized internationalstandards.

3. Nothing in this article affects the operationof the rules of private international law.

Article 8Conduct of the signatory

1. Where signature creation data can be usedto create a signature that has legal effect, eachsignatory shall:

(a) Exercise reasonable care to avoidunauthorized use of its signature creation data;

(b) Without undue delay, utilize means madeavailable by the certification service provider pursuantto article 9 of this Law, or otherwise use reasonableefforts, to notify any person that may reasonably beexpected by the signatory to rely on or to provideservices in support of the electronic signature if:

(i) The signatory knows that the signaturecreation data have been compromised; or

(ii) The circumstances known to the signatorygive rise to a substantial risk that the signaturecreation data may have been compromised;

(c) Where a certificate is used to support theelectronic signature, exercise reasonable care to ensurethe accuracy and completeness of all materialrepresentations made by the signatory that are relevantto the certificate throughout its life cycle or that are tobe included in the certificate.

2. A signatory shall bear the legal consequences ofits failure to satisfy the requirements of paragraph 1.

Article 9Conduct of the certification service provider

1. Where a certification service providerprovides services to support an electronic signature thatmay be used for legal effect as a signature, thatcertification service provider shall:

(a) Act in accordance with representationsmade by it with respect to its policies and practices;

(b) Exercise reasonable care to ensure theaccuracy and completeness of all material representa-tions made by it that are relevant to the certificate

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throughout its life cycle or that are included in thecertificate;

(c) Provide reasonably accessible means thatenable a relying party to ascertain from the certificate:

(i) The identity of the certification serviceprovider;

(ii) That the signatory that is identified in thecertificate had control of the signature creationdata at the time when the certificate was issued;

(iii) That signature creation data were valid at orbefore the time when the certificate was issued;

(d) Provide reasonably accessible means thatenable a relying party to ascertain, where relevant,from the certificate or otherwise:

(i) The method used to identify the signatory;

(ii) Any limitation on the purpose or value forwhich the signature creation data or the certificatemay be used;

(iii) That the signature creation data are validand have not been compromised;

(iv) Any limitation on the scope or extent ofliability stipulated by the certification service provider;

(v) Whether means exist for the signatory togive notice pursuant to article 8, paragraph 1 (b),of this Law;

(vi) Whether a timely revocation service isoffered;

(e) Where services under subparagraph (d) (v)are offered, provide a means for a signatory to givenotice pursuant to article 8, paragraph 1 (b), of thisLaw and, where services under subparagraph (d) (vi)are offered, ensure the availability of a timelyrevocation service;

(f) Utilize trustworthy systems, procedures andhuman resources in performing its services.

2. A certification service provider shall bearthe legal consequences of its failure to satisfy therequirements of paragraph 1.

Article 10Trustworthiness

For the purposes of article 9, paragraph 1 (f), ofthis Law in determining whether, or to what extent, anysystems, procedures and human resources utilized by acertification service provider are trustworthy, regardmay be had to the following factors:

(a) Financial and human resources, includingexistence of assets;

(b) Quality of hardware and software systems;

(c) Procedures for processing of certificates andapplications for certificates and retention of records;

(d) Availability of information to signatoriesidentified in certificates and to potential relyingparties;

(e) Regularity and extent of audit by an inde-pendent body;

(f) The existence of a declaration by the State,an accreditation body or the certification serviceprovider regarding compliance with or existence of theforegoing; or

(g) Any other relevant factor.

Article 11Conduct of the relying party

A relying party shall bear the legal consequencesof its failure:

(a) To take reasonable steps to verify thereliability of an electronic signature; or

(b) Where an electronic signature is supportedby a certificate, to take reasonable steps:

(i) To verify the validity, suspension orrevocation of the certificate; and

(ii) To observe any limitation with respect to thecertificate.

Article 12Recognition of foreign certificates and electronic

signatures

1. In determining whether, or to what extent, acertificate or an electronic signature is legallyeffective, no regard shall be had:

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(a) To the geographic location where thecertificate is issued or the electronic signature createdor used; or

(b) To the geographic location of the place ofbusiness of the issuer or signatory.

2. A certificate issued outside [the enactingState] shall have the same legal effect in [the enactingState] as a certificate issued in [the enacting State] if itoffers a substantially equivalent level of reliability.

3. An electronic signature created or usedoutside [the enacting State] shall have the same legaleffect in [the enacting State] as an electronic signaturecreated or used in [the enacting State] if it offers asubstantially equivalent level of reliability.

4. In determining whether a certificate or anelectronic signature offers a substantially equivalentlevel of reliability for the purposes of paragraph 2 or 3,regard shall be had to recognized internationalstandards and to any other relevant factors.

5. Where, notwithstanding paragraphs 2, 3 and 4,parties agree, as between themselves, to the use ofcertain types of electronic signatures or certificates,that agreement shall be recognized as sufficient for thepurposes of cross-border recognition, unless thatagreement would not be valid or effective underapplicable law.

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Annex III

List of documents before the Commission at itsthirty-fourth session

Symbol Title or description

A/CN.9/482 and Corr.1 and 2 Provisional agenda, annotations thereto and scheduling ofmeetings of the thirty-fourth session

A/CN.9/483 Report of the Working Group on Electronic Commerce on itsthirty-seventh session

A/CN.9/484 Report of the Working Group on Electronic Commerce on itsthirty-eighth session

A/CN.9/485 and Corr.1 Report of the Working Group on Arbitration on its thirty-third session

A/CN.9/486 Report of the Working Group on International ContractPractices on its twenty-third session

A/CN.9/487 Report of the Working Group on Arbitration on its thirty-fourth session

A/CN.9/488 Note by the Secretariat on possible future work on privatelyfinanced infrastructure projects

A/CN.9/489 and Add. 1 Note by the Secretariat on receivables financing: analyticalcommentary on the draft Convention on Assignment ofReceivables in International Trade

A/CN.9/490 and Add.1-5 Draft Convention on Assignment of Receivables inInternational Trade: compilation of comments byGovernments and international organizations

A/CN.9/491 and Add.1 Receivables financing: draft Convention on Assignment ofReceivables in International Trade—comments on pendingand other issues

A/CN.9/492 and Add.1-3 Draft Model Law on Electronic Signatures: compilation ofcomments by Governments and international organizations

A/CN.9/493 Note by the Secretariat on electronic signatures: draft Guideto Enactment of the UNCITRAL Model Law on ElectronicSignatures

A/CN.9/494 Note by the Secretariat on training and technical assistanceA/CN.9/495 Report on the UNCITRAL/INSOL/IBA Global Insolvency

Colloquium (Vienna, 4-6 December 2000)A/CN.9/496 Note by the Secretariat on security interestsA/CN.9/497 Report of the Secretary-General on possible future work on

transport lawA/CN.9/498 Note by the Secretariat on uniform interpretation of

UNCITRAL texts: sample digest of case law on the UnitedNations Convention on Contracts for the International Saleof Goods (Vienna, 1980)

A/CN.9/499 Note by the Secretariat on working methods of theCommission

A/CN.9/500 Note by the Secretariat on increase of the membership of theCommission

A/CN.9/501 and Corr.1 Note by the Secretariat on the status of conventions andmodel laws

A/CN.9/502 and Corr.1 Note by the Secretariat on a bibliography of recent writingsrelated to the work of UNCITRAL

Report of the United Nations Commission on International Trade Law on its thirty-fourth session

Documents

Transcript of Report of the United Nations Commission on International Trade Law on its thirty-fourth session