UNLAWS Update: Report from Working Group 1 (MSMEs)

Report of UNLAWS Attendance at the UNCITRAL Working Group 1 (MSMEs)

27TH Session (Vienna, 3-7 October 2016)

Written by: Catherine Qu

During the 3-7 October 2016, Kayleigh Smith, and I were given the opportunity to attend the Working Group 1 session in Vienna as delegates of LawAsia.  During this week, we were given an insight into the process of drafting recommendations aimed at developing and harmonizing international trade laws.

An interesting part of the experience was simply to witness the procedural workings of UNCITRAL working group in action.  The room is set in a parliamentary style, with the delegates from each country on the floor, and the elected chair, rapporteur and secretary seated at the bench. Each delegate raises their flags to speak, and the chair attempts to establish a general consensus.  It was also a great networking opportunity to meet distinguished lawyers and academics worldwide.

Working Group 1 (MSMEs[1]) is currently working on creating global legal guidelines for the regulation of micro, small, and medium sized enterprises.  This session was allocated to discussing the developments made to the Draft Legislative Guide on an UNCITRAL Limited Liability Organization.   The Secretary began by explaining the aims and main principles of the Recommendations to be discussed and then each recommendation was discussed chronologically.

We aimed to discuss the entirety of the 27 Recommendations, however due to the complexity of the issues in the brief time we had, we only managed to discuss Recommendations 1-13.  While some of the recommendations were easy to reach a compromise, others often resulted in a deadlock of positions.  After this experience, I appreciated the difficulties of creating neutral regulations which are innovative, yet could accommodate to existing national legal systems and traditions.

Part A: General Provisions

We discussed recommendations 1-6 from Monday morning until Tuesday afternoon.  There were several key issues that came out of this.

The most contentious and recurring issue was whether the recommendations should be ‘delinked’ to existing local legislation in the place where it would be implemented.  While the states from civil law countries emphasized the difficulties of implementing a law that was entirely disconnected from the existing legal system, others preferred to adopt a neutral, innovative document disconnected from existing legal traditions.

The second issue was whether the law should cover only entities engaged in commercial activities or also not-for-profit activities.  The consensus was that non-for-profit activities should be regulated by other principles as the main purpose of this was to encourage entrepreneurial growth.

There was also considerable debate about the inclusion of terms which derived from particular legal systems.  For example, civil law jurisdictions opposed the reference to ‘piercing the corporate veil’ as an exception to separate legal personality, as it is a common law concept.

Finally, the issue of whether there should be a minimum capital requirement divided the wealthier nations from the developing nations.  The developed nations argued that a minimum capital requirement would ensure better credit-worthiness and security to investors, whereas the developing nations were more concerned of encouraging those to move from the informal to formal economy, where a minimal capital would disincentive many from this.

Part B: Formation of the UNLLO

On Tuesday afternoon, we finished Part A and moved onto Part B, ‘Formation of the UNLLO’.

This part did not cause too much difficulty.  The first points related to terminology, as some delegates did not think it was clear enough, particularly for jurisdictions with underdeveloped legal systems.  To mitigate any uncertainty, a universally understandable drafting was revised.

A substantive issue was whether there should be a limitation on the maximum number of members, or if legal persons could not be a member of an UNLLO.  Many viewed it as unnecessary or a hindrance to the growth of the UNLLO for states to impose a maximum number of members.  After some debate, the chair established a consensus to delete this paragraph.  However, this issue was reopened the following day, and again during the revision of the minutes on Friday, as some objected to the reporting of where the consensus ended up.

The minimum information requirements for the formation of an UNLLO was another contentious issue.  The goal was to strike a balance between not placing too much of a burden on the MSMEs, yet provide enough protection for the government and third parties dealing with the UNLLO.  The delegations of the states of the Americas expressed concern that the requirements were still too burdensome for MSMEs. The term ‘formation information’ was also replaced by ‘formation document’, to ensure greater clarity of meaning for civil law traditions.

While some issues involved minute changes of wording, Recommendation 10[2]  was deleted entirely.  Many delegates expressed concern of this recommendation, as they believed that it should be the members not the managers that should be able to amend the formation document.  These delegates stated that it should be optional for the law to require this.

Part C: Organisation of the UNLLO

This part was by far the most difficult part of the recommendations.  Recommendation 12[3] was one of the most contested recommendations, along with recommendation 13.  Certain delegates voiced their concerns of having a default member-managed MSME, as this could create later problems if the entity grows from a single member entity to a multi member entity, and it would not be practical for managerial duties to be shared across members.  It was suggested that the default should be a manger-managed entity.

The opposing view emphasized the ‘think small first’ approach of the Working Group, and that in this context, the recommendation should remain as it is stated, that the default rule is that all members of the UNLLO should share equally the management.  The minutes documented that the prevailing view was to retain the current recommendation, as there was insufficient support for the change.  The issue was raised again multiple times during the discussion of recommendation 13, the following day.  However, the chair was firm to state that the discussion was closed.

Recommendation 13[4] was the most time-consuming, as it commenced on the Wednesday afternoon and carried over the entire Thursday.  This discussion followed from the debate regarding the previous recommendation, on whether the default rule should be that the UNLLO would be manager managed, or member managed.

One innovative proposal was to separate the concepts of management and control, included in the recommendation into two distinct recommendations.  It was further proposed to shift recommendation 12, to Section D ‘Managers’ and leave that section to deal with all rules regarding the daily management of the company, and to rename Section C to ‘Organisation and Control of the UNLLO’.

Additional issues were raised which were listed in the records, however these were further debated on Friday afternoon during the revision of the minutes of the session.

 

Footnotes

[1] Micro, small and medium sized enterprises

[2] The law should provide that the formation information may be amended by any manager, unless otherwise agreed by the members.

[3] The law should provide that the UNLLO is member-managed by all members, unless otherwise agreed.

[4] The law should provide that, unless otherwise agreed:

(a) The members of the UNLLO have equal rights to manage the UNLLO;

(b) Any difference arising between members as to matters in the ordinary course of the activities and affairs of the UNLLO shall be decided by simple majority; and

(c) Any difference arising between members as to matters outside of the ordinary course of the activities and affairs of the UNLLO shall require unanimous consent.

 

2016 UNCITRAL Asia Pacific Day

From the Regional Centre:

The United Nations Commission on International Trade Law (UNCITRAL) was established by the United Nations General Assembly Resolution 2205 (XXI) of 17 December 1966 with the mandate to remove legal obstacles to international trade by progressively modernizing and harmonizing trade law. The Commission has since come to be the core legal body of the United Nations system in the field of international trade law. To celebrate this historical resolution, the UNCITRAL Regional Centre for Asia and the Pacific (UNCITRAL-RCAP) established the UNCITRAL Asia Pacific Day in 2014.

This year, six reputable universities across the region will join us in celebrating UNCITRAL’s 50th anniversary and exploring new directions in cross-border commerce. The programme for the 2016 UNCITRAL Asia Pacific Day has been attached for your reference.

Proposals for the 2017 UNCITRAL Asia Pacific Day can be emailed to uncitral.rcap@uncitral.org.

Program: asiapac-day

 

UNCCA hosts Secretary-General of the Hague Conference on Private International Law

On 29 November, UNCCA directors and fellows met with Dr Christophe Bernasconi, Secretary-General of the Hague Conference on Private International Law (HCCH), at the Union, University & Schools Club in Sydney.

The purpose of the HCCH is to work for the progressive unification of the rules of private international law. Accordingly, its work overlaps with that of UNCITRAL, which works towards the modernisation and harmonisation of rules on international business. UNICTRAL and the HCCH maintain a complementary relationship. Recently, UNCITRAL endorsed the HCCH’s Principles on Choice of Law at its 48th session.

Dr Bernasconi spoke on the HCCH’s current work, while UNCCA representatives spoke on recent activities promoting the work of UNCITRAL in Australia. Given the overlap between the work of UNCITRAL  and the HCCH in the area of commercial law, UNCCA Chair Tim Castle said that UNCCA would be happy to liaise with Australian lawyers and academics interested in the work of HCCH on an ongoing basis. Any further developments on this issue will be promoted through the UNCCA website.

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Members of UNCCA with Dr Christophe Bernasconi in Sydney on 29 September 2016. L-R: Diane Chapman, Ashna Taneja, Don Robertson, The Hon. Roger Gyles AO QC, Michael Green SC, Dr Christophe Bernasconi (Secretary-General), Suzanne Howarth, Mark Sheller, Tim Castle (Chair, UNCCA), Dominique Hogan-Doran SC, Prishika Raj and Michael Douglas.

Report from WGII

Report to LawAsia about UNCITRAL WG II 65th Session, Vienna, 19-23 September 2016

By Marina Kofman

It was a privilege to attend the UNCITRAL Working Group II 65th session in Vienna as part of the LawAsia delegation. This experience enriched my understanding of international multilateral negotiation and allowed me to network with lawyers of different backgrounds from all over the world in a wonderfully collegiate environment.

The detailed technical discussion about the draft instrument on the enforcement of international mediated commercial settlement agreements was exceptionally interesting. Overall, States’ delegations tried genuinely to bridge the divide between the requirements of common law and civil law legal systems in proposing and responding to new draft text for provisions. The spirit of compromise was strong to work to achieve an instrument that will be effective and broadly adopted.

One major issue that will need to be overcome in subsequent sessions is in relation to defences to enforcement. In this regard the dissimilarities between arbitral and mediation processes and the roles of arbitrator and mediator respectively were noted. Another prominent issue that is yet to be resolved is the simultaneous need to avoid ‘gaps,’ in coverage i.e. situations in which international mediated settlement agreements might not fall within the scope of the new instrument, while also avoiding overlap with the Hague Conference Judgments Convention that is currently being negotiated. What, for example, will be the status of a mediated settlement agreement that is subsequently entered as a judicial consent order?

Besides the formal session, there was much networking, which was a highlight for me. Networking happened during all of the consultation breaks throughout the day, as well as at a special side event held one evening at the Vienna International Arbitration Centre. It was a truly enjoyable experience to talk in depth with delegates from Israel, Canada, Switzerland and Spain and to have lunch with the delegates of Singapore and Sri Lanka.

Marina Kofman

5 October 2016

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Law Students: Apply to attend UNCITRAL Working Groups in New York or Vienna

The UNCCA Law-Student Attendance Working-Group Scheme (UNLAWS) is an opportunity for a select number of law students to accompany Australian academics attending UNCITRAL Working Group meetings in Vienna or New York in 2017 and 2018. UNLAWS is an initiative of the UNCITRAL National Coordination Committee for Australia (UNCCA).

The selection process for 2016 is complete. The 2016 participating students came from the Law Schools of:

  • Curtin University (see the blog post by LLB student Tracy Albin)
  • University of Canberra
  • University of Newcastle
  • University of Queensland
  • University of Sydney
  • University of Wollongong

About the UNCITRAL Working Groups

UNCITRAL is the United Nations Commission on International Trade Law. A legal body with universal membership specialising in commercial law reform worldwide for over 40 years, UNCITRAL’s business is the modernisation and harmonisation of rules on international business.

The Commission has established six working groups to perform the substantive preparatory work on topics within the Commission’s programme of work. Each of the Working Groups is composed of all member States of the Commission. The Working Groups’ preparatory work includes, for example, preparing draft international conventions, model laws and uniform laws that relate to international business.

Eligibility

Participation in UNLAWS is open to all students enrolled in a Bachelor of Laws (or associated dual program), Master of Laws or postgraduate law program at an Australian law school.

Students who are offered participation in the Scheme must fund all of their own costs (including airfares, accommodation, meals, travel insurance and incidentals).

Application Procedure – 2017/2018

Applications must be in writing and directed to the Convenor of the Scheme, Dr Alan Davidson of the University of Queensland. Please see below for further details of application requirements.

Students may indicate their preferences for up to three working groups. Decisions and offers of participation will be made by the UNCCA Board.

Application Deadline for 2017 New York Working Groups: 18 November 2016.

 Application dates for the Vienna Working Groups in 2017 will be released in early 2017.

UNCITRAL Working Group Dates

Working Group I: Micro, Small and Medium-sized Enterprises
1-9 May 2017, New York
Tentative dates: 2-6 October 2017, Vienna

Working Group II: Arbitration and Conciliation
6-10 February 2017, New York
Tentative dates: 11-15 September 2017, Vienna

Working Group IV: Electronic Commerce
24-28 April 2017, New York
Tentative dates: 16-20 October 2017, Vienna

Working Group V: Insolvency Law
10-19 May 2017, New York
Tentative dates: 20-24 November 2017, Vienna

Working Group VI: Security Interests
13-17 February 2017, New York
Tentative dates: 11-15 December 2017, Vienna

Welfare and Safety

The welfare and safety of students involved is the responsibility of the individual participants. The success of the Scheme will depend upon a high standard of behaviour and courtesy being exhibited by participants.

UNCCA assumes no liability for any costs, expenses or liabilities arising from participation in the Scheme or attendance at a working group meeting. Successful participants will be required to have all appropriate passport, visa and travel insurance in place before leaving Australia.

Students receiving a position should make independent inquiries about the risks involved in overseas travel. This should include visiting Smartraveller for current information about risks overseas and how to prepare for overseas travel. Students should register with Smartraveller and subscribe to relevant travel advisories (http://smartraveller.gov.au/).

About UNCCA

UNCCA’s mission is to promote Australia’s participation in UNCITRAL’s working groups and Australia’s involvement in the harmonisation of laws, to minimise transaction costs in international trade, as well as supporting developing nations in our region to participate in the expanding global economy through the adoption of uniform trade law texts of the type developed by UNCITRAL.

In 2012 the UNCITRAL Regional Centre for Asia and the Pacific (RCAP) commissioned a report on strategic opportunities for increased participation by Australia in the work of UNCITRAL, in the development, adoption and implementation of uniform trade laws, both in Australia and in our region. UNCCA was established in 2014 as a result of consultations between Mr Tim Castle, the Law Council of Australia, the Australian Government and other stakeholders.

Expert members of UNCCA have been attending and contributing to the six Working Groups of UNCITRAL since 2013.

Applications

Applications should include the following:

  1. The applicant’s nomination of the working group or groups that the applicant wishes to attend (up to three preferences).
  2. Curriculum Vitae (1-5 pages).
  3. Statement of Interest (1-2 pages). Please clearly indicate any previous courses or experience which relate to the research area of the placement/s for which you are applying.
  4. No more than two references.
  5. Academic record.
  6. Letter of recommendation from a permanent member of the student’s law school, including other relevant details for consideration by UNCCA.

Applications should be directed to the Convenor of UNLAWS, Dr Alan Davidson of the TC Beirne School of Law at the University of Queensland. Dr Davidson may be contacted at: a.davidson@law.uq.edu.au, or on 07 3365 2294.

“The UNLAWS program was an amazing experience, and I highly recommend that anyone who has the opportunity to attend takes it up.” – Kayleigh Smith, LLB / BComm student, University of Canberra attended Working Group 1 (Micro, Small & Medium Enterprises) in October 2016

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UN2-2016

Perth Student Attends WGII in Vienna: UNLAWS Update

UNLAWS 2016: UNCITRAL Working Group II, Vienna, Austria

By Tracy Albin

The UNLAWS program for UNCITRAL Working Group II in Vienna, Austria was an inspiring and amazingly educational experience. The Working Group are currently pursuing their mandate to develop an instrument for the enforceability of settlement agreements arising from mediation and conciliation procedures, similar to the 1958 New York Convention. The meetings were attended by distinguished delegates from around the world, who aimed to achieve significant progress in coordination with the UNCITRAL Secretariat.

The Working Group addressed several issues in Vienna including the suggested form of the instrument, the scope of its application and the definition of several terms including “international”, “settlement agreement” and “conciliation”. Witnessing these discussions stimulated my understanding of the practical operation of these instruments and the way that terms can be interpreted differently by various jurisdictions as well as how the form of the document can have different ramifications, particularly between those States who have a working knowledge of conciliation and mediation processes and those who don’t.

It was also interesting to see the debate concerning what form the instrument should take. Given the mandate of the Working Group is to develop an instrument that will facilitate the harmonisation of laws, it seems peculiar that a Model Law might be more appealing to some States. This was a popular choice amongst States with less experience with mediation and conciliation so that they might have some time to experience the practical operations of the instrument and perhaps implement changes to their domestic legislation rather than adopt an international law.

The divergence of views, the professionalism of the delegates and the respect in the room amongst States, observers and guests provided an all-round enjoyable experience. I have made some professional contacts through this program, experienced Austria for the first time, improved my understanding of the workings of UNCITRAL and furthered my drive for a career in international alternative dispute resolution.

Tracy Albin is an LLB student at Curtin University, Perth

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