The Future of Commercial Law

Ways Forward for Change and Reform

Orkun Akseli, John Linarelli, Orkun Akseli, John Linarelli

• Publisher: Hart Publishing
• Year: 2020
• Print ISBN: 9781509914692
• eBook ISBN: 9781509914715
• Edition: 1
• Topic: Diritto
• Subtopic: Diritto commerciale

The reform of commercial law through harmonisation, unification, codification and other means remains one of the most important projects in developing the institutional architecture for the global economy. This edited collection engages with the challenges and contributes to a greater understanding of the problems faced by states, international organisations, and private sector actors in this ongoing reform project for commercial law. The volume takes stock of the project to date and looks towards a restructuring of the agenda to deal with new challenges. The primary aim of the collection is to understand the future of commercial law reform in a way that offers ideas and strategies for innovation as well as in methodologies for project selection and evaluation. In so doing, the collection informs the debate on the global reform of commercial law and will be of interest not only to academics, but also to those involved in the reform of commercial law around the world. The volume collects papers presented at the UK Society of Legal Scholars Annual Seminar 2017.

PART I

Foundations and Fundamentals of Commercial Law Reform

1

UNCITRAL’s Role in Commercial Law Reform: History and Future Prospects

CAROLINE NICHOLAS^*

UNCITRAL (the United Nations Commission on International Trade Law) has held three ‘Congresses’ in its 50 years of existence, celebrating its 25th, 40th and 50th anniversaries respectively. It has also celebrated milestones, such as the 1998 New York Convention Day,¹ on the 40th anniversary of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958),² and a High Level Panel in 2015 on ‘Thirty-five Years of Uniform Sales Law: Trends and Perspectives’.³ Each of these events has looked at topical aspects of the law of international commerce and United Nations activities, as well as what have been termed the ‘recurring themes’ arising in harmonisation and unification of international trade law.⁴ While each of these events has welcomed the pivotal role that UNCITRAL has played in reform of the law of international trade, the discussions have considered lessons learned and challenges in meeting its objectives. These issues will be the focus of this chapter, and considering them indicates that those involved in setting up UNCITRAL were remarkably prescient as regards both the likely successes of and challenges for UNCITRAL.

I.The Establishment of UNCITRAL

A.Mandate

UNCITRAL’s mandate is based on ‘the promotion of the progressive harmonisation and unification of the law of international trade’, and was designed to address concerns that ‘conflicts and divergences arising from the laws of different States in matters relating to international trade constitute an obstacle to the development of world trade’.⁵ Hungary, in 1964, had proposed that the General Assembly consider steps to be taken for progressive development of the law of international trade.

It is worth pausing briefly to consider what the drafters of the mandate intended: what did they mean by ‘progressive’, ‘harmonisation’, ‘unification’ and the ‘law of international trade’?

UNCITRAL does not handle the state-to-state relationships the World Trade Organization does, but addresses cross-border transactions (sales, transport, financing investment), and disputes arising from those transactions. UNCITRAL parties are two commercial entities (eg buyers and sellers, transport companies, e-commerce operators, secured lenders and borrowers, and claimants and insolvent companies), or a commercial entity and a government (eg in public procurement transactions and in investor-state disputes).

UNCITRAL has adopted flexible and functional techniques in fulfilment of its mandate, issuing legislative, contractual and explanatory texts.⁶ These techniques involve different types of compromise. There are two main types of text: first, ‘unification’ texts, which are legislative texts involving ‘the adoption by States of a common legal standard governing particular aspects of international business transactions’.⁷ A common example is an international Convention, such as the United Nations Convention on Contracts for the International Sale of Goods (CISG). Another form of unification is a text that states enact domestically in the form in which it was issued (the only UNCITRAL example is the Uniform Rules on Contract Clauses for an Agreed Sum Due upon Failure of Performance (1983) – though it should be noted that this text is not treated as one of UNCITRAL’s major works). As the Chinese representative to the General Assembly’s Legal Committee observed, the effect of a uniform law is to ‘replace the municipal laws that would otherwise apply with a universally-accepted regulation of a particular transaction’.⁸

Secondly, ‘harmonisation’ texts such as Model Laws, legislative guides and non-legislative texts, seek to limit divergence in the rules that apply in different states: as the United Nations Legal Counsel has observed, they are designed to ‘alleviate the challenges of confronting dense and unfamiliar regimes that otherwise contrive to keep businesses out of international markets’.⁹ Harmonisation has been described as ‘a process whereby the effects of a type of transaction in one legal system are brought as close as possible to the effects of similar transactions under the laws of other countries’.¹⁰ Harmonisation texts are designed to allow states to adopt an UNCITRAL norm in their domestic legal framework, adapted to local circumstances as the state sees fit. Consequently, these norms are texts ‘through which domestic laws may be modified to enhance predictability in cross-border commercial transactions.’ In addition, the incoming commercial legal environment must be certain and predictable – business-friendly and investor-ready – as a lack of predictability and quality in the domestic regime could raise barriers to international commerce.¹¹ From this perspective, and as was explained at the 2017 UNCITRAL Congress, the scope of UNCITRAL’s activities run through establishment of a corporation, financing of the business, international sales (online as well as traditional person-to-person), disputes and – in some cases – the winding up of the business.¹²

Both unification and harmonisation approaches have been described as ‘preventive’, meaning that they avoid conflicts-of-law issues by providing single solutions to replace the different substantive rules that would otherwise apply to a transaction, though the extent of flexibility and so degree of convergence therefore varies. In consequence, all UNCITRAL texts require domestic implementation, such as ratification of a Convention, domestic enactment based on a Model Law or Legislative Guide or use in practice of a non-legislative text.

The notion of ‘progressive’ legal reform has its roots in the development of the United Nations Charter. Debates on how to refer to the desired codification of international law raised objections to the use of the word ‘revision’, which was considered to place too much emphasis on change. Consequently, it was decided to refer to the ‘progressive development’ of international law in Article 13(1)(a) of the Charter, to balance stability and change in the law. This approach was followed in the statute of the International Law Commission and in the UNCITRAL mandate.

This ‘progressive’ approach is another feature of the UNCITRAL mandate that is not often discussed but provides a crucial explanation as to why the United Nations considered that harmonisation and unification of international trade law were desirable and feasible. The General Assembly noted three characteristics of international trade law that would support convergence (used in this context to refer to unification and/or harmonisation: (1) the notion of party autonomy (subject to any restrictions from domestic law, parties they could contract as they pleased); (2) the concept of pacta sunt servanda (the contract must be faithfully fulfilled), subject to force majeure or similar exceptions; and (3) the recognised use of arbitration rather than domestic dispute settlement, with decisions capable of international enforcement.¹³ As the General Assembly also heard, the law of international trade was consistent in practice, and it had its roots in the mediaeval lex mercatoria, whose own sources included trade usages and practices, international conventions and model laws, and, in the eyes of some, uniform rules, standard contract forms and clauses, codes of conduct and arbitral awards.¹⁴ Indeed, the lex mercatoria had been incorporated into domestic systems (such as the commercial codes in France and Germany), and its principles were applied not as a matter of external imposition, but freely at the national level.¹⁵ Combined with developed commercial custom and accepted trade terms (fob, cif, among others), the result was that there was already a high degree of unification in some aspects of international trade – chiefly, in transport, bankers’ commercial credits and in arbitration.¹⁶ In addition, the formulating agencies were furthering the use of standardised terms and practices in international trade, and countries had ‘found without difficulty that they [spoke] a common language’.¹⁷

Given these features of the law of international trade, it might be queried why the UNCITRAL mandate focused on the progressive unification and harmonisation of the law of international trade rather than on its codification. The answer may be that convergence was considered to be ‘more easily achieved in technical branches of the law than in subjects closely connected with national traditions and basic principles of domestic law’.¹⁸ In the General Assembly debate, ‘international trade terms, provisions, customs and practices’ were among the most technical of the items under discussion, and these are the areas specifically referenced in terms of codification in the mandate. (In fact, the private sector has taken the lead in codification of these standards – an example is the International Chamber of Commerce’s Incoterms – and UNCITRAL has consistently endorsed and promoted the wider acceptance of that work.¹⁹)

In other words, it was precisely because further harmonisation or unification of international trade rules and practices would involve ‘progressive’ development rather than the external imposition of major revisions, and bilateral commitment would not be required, that the General Assembly saw the potential for what became UNCITRAL.²⁰ The General Assembly concluded that international trade law as regards industrial property, transport (land, sea and air), international sale of goods, supply and erection of plant and machinery abroad, bills of exchange and bankers’ commercial credits and commercial arbitration were already subject to a high degree of convergence and thus could be reflected in uniform or harmonisation texts. It identified others in which convergence would be feasible: agency law, cross-border joint ventures, rules governing companies entering into ‘foreign trade relations’, and the general law of contract as it applied to international trade.²¹

It was recognised, however, that progressive development and codification were linked, and should take account of gaps and developments in the existing law. Consequently UNCITRAL, as the International Law Commission, should consider reform in fields ‘which have not yet been regulated by international law or in regard to which the law has not yet been sufficiently developed in the practice of States’.²² The General Assembly’s discussion of shortcomings in harmonisation and unification of international trade law, and steps to remedy those shortcomings, expressly included modernisation on a par with harmonisation and unification, especially where developing countries were concerned,²³ and modernisation is clearly implicit, though not directly stated, in the mandate. UNCITRAL’s website accurately describes its work, therefore, as the ‘the modernisation and harmonisation of rules on international business’.²⁴

The above, admittedly detailed, review of the rationale for providing UNCITRAL with a ‘rule-formulating’ mandate explains clearly that UNCITRAL was not intended to be what would now be called a disruptive body, but one that would unify or harmonise existing practice and supplemen...

Table of contents

• Cover
• Title Page
• Table of Contents
• List of Contributors
• Introduction
• PART I: FOUNDATIONS AND FUNDAMENTALS OF COMMERCIAL LAW REFORM
• PART II: NEW TECHNIQUES FOR CHOOSING AND EVALUATING COMMERCIAL LAW PROJECTS
• PART III: THE CHALLENGE OF THE DIGITAL ECONOMY
• PART IV: TENSIONS FOR SALE OF GOODS LAW
• PART V: LAW FOR ACCESS TO FINANCE
• PART VI: SECURED TRANSACTIONS: GLOBAL AND NATIONAL MOVEMENTS
• PART VII: PUBLIC–PRIVATE PARTNERSHIPS: AN AREA FOR FUTURE REFORM?
• Index
• Copyright Page