News: Model Law on Electronic Transferable Records

In July 2017 the UN Commission on International Trade Law (UNCITRAL) released for implementation the Model Law on Electronic Transferable Records (ML-ETR).  The ML-ETR legally enables the use of electronic transferable records that are functionally equivalent to transferable instruments including bills of lading, bills of exchange, promissory notes and warehouse receipts.

Dr Alan Davidson has participated and contributed as a delegate to all sessions of Working Group IV sessions held at the UN in New York and Vienna since 2014. The final ML-ETR includes text and concepts introduced by Dr Davidson. Over four sessions Dr Davidson supervised 12 students from the University of Queensland Law School, 10 of whom research financial assistance from an Endeavour Grant.

The use of electronic transferable records is expected to bring about benefits to electronic commerce including efficiencies and security of transmission. Electronic transferable records are relevant for business areas such as transport and logistics and finance. The ML-ETR sets forth the requirements for the use and defines control as the functional equivalent of possession of a transferable instrument. The ML-ETR also provides guidance on the assessment of the reliability of the method used to manage the electronic transferable record, on change of medium and on cross-border aspects.

The adoption of the principle of functional equivalence allows the ML-ETR to operate without affecting the substantive law. The adoption of the principle of technology neutrality allows to accommodate the use of all methods and technologies, including blockchain distributed ledgers).

UN Commission on International Trade Law adopts the UNCITRAL Model Law on Electronic Transferable Records

From UNIS:

VIENNA, 17 July (UN Information Service) -, The United Nations Commission on International Trade Law (UNCITRAL) adopted the UNCITRAL Model Law on Electronic Transferable Records (the “MLETR”) on 13 July at its fiftieth session in Vienna.

The MLETR legally enables the use of electronic transferable records that are functionally equivalent to transferable documents and instruments including bills of lading, bills of exchange, promissory notes and warehouse receipts.

The use of electronic transferable records may bring a number of benefits to electronic commerce including speed and security of transmission as well as the possibility of reusing the information contained therein. Electronic transferable records may be particularly relevant for certain business areas such as transport and logistics and finance (fintech). Moreover, their use allows for the establishment a fully paperless trade environment.

The MLETR sets forth the requirements for the use of an electronic transferable record. In particular, it defines control as the functional equivalent of possession of a transferable document or instrument. The MLETR also provides guidance on the assessment of the reliability of the method used to manage the electronic transferable record, on change of medium (electronic to paper and the reverse), and on cross-border aspects, among other items.

The MLETR builds upon fundamental principles underlying existing UNCITRAL texts in the area of electronic commerce. In particular, the adoption of the principle of functional equivalence allows the MLETR to operate without affecting the substantive law applicable to transferable documents and instruments, and the adoption of the principle of technology neutrality allows to accommodate the use of all methods and technologies, including distributed ledgers (blockchain).

The MLETR is accompanied by an Explanatory Note that provides background information to assist States in enacting its provisions and to offer guidance to other users of the text.

The work on the preparation of the MLETR was undertaken by UNCITRAL Working Group IV (Electronic Commerce) from its 45th session in 2011 until its 54th session in 2016. The final version of the MLETR will be made available at http://www.uncitral.org/uncitral/en/uncitral_texts/electronic_commerce.html.

***

See http://www.unis.unvienna.org/unis/en/pressrels/2017/unisl251.html

 

Working Group III mandated with ISDS Reform

On 14 July 2017, following its fiftieth annual session, the United Nations Commission on International Trade Law (UNCITRAL) announced that Working Group III (WGIII) has been entrusted with a broad mandate to identify concerns regarding Investor-State dispute settlement (ISDS) and explore whether reform is desirable.[1] The Commission has tempered this broad discretion by permitting States to choose the extent to which they will adopt any recommended solutions.[2]

The decision follows growing criticism of the current ISDS regime by both States and their constituencies, including concerns regarding the appointment of arbitrators (in particular, that arbitrators are being drawn from a limited pool of specialised lawyers), impartiality and independence of tribunals, a lack of cohesion in decisions resulting from ad hoc tribunals, a lack of review mechanisms, the cost of proceedings and lack of transparency.[3]  The net effect of these complaints “in essence reflect concerns about the democratic accountability and legitimacy of the regime as a whole”[4] regardless of the legitimacy of the ISDS regime under international law.   

Against that backdrop, and in response to proposals for reform from a number of organisations, the UNCITRAL Secretariat conducted a study in conjunction with the Centre for International Dispute Settlement of the University of Geneva and the Graduate Institute of International Development Studies  (CIDS Report) which sets out a roadmap of the issues and possible solutions that should considered if true multilateral reform is to be achieved.[5]

The CIDS Report identified two key reforms: the design of a single International Tribunal for Investments, or alternatively, the design of a universal appeal mechanism for investor-State arbitral awards to a permanent appeal body, as well as the establishment of multilateral instruments allowing States to opt-in to the reforms in existing international investment agreements without the cost and hassle of making numerous amendments pursuant to the procedures set out in existing international arbitration agreements.[6]  It was concluded that this last proposal might be achieved in a similar manner to the Mauritius Convention on Transparency effectively extending new dispute settlement options to existing international arbitration agreements.

Further options for reform considered by the Commission as part of the mandate include: whether the adjustments may be made to the current ISDS regime (under the arbitration rules of UNCITRAL and ICSID) or whether a new permanent international investment court should be created, the viability of a stand alone appellate body, whether a code of conduct for arbitrators should be included in any regime, the desirability for a review mechanism, issues regarding enforcement of awards from a permanent international investment court and how such a court should be financed.[7]

Given the challenges involved in such reform, UNCITRAL has emphasised that deliberations will be government-led consistent with UNCITRAL’s processes saying while benefiting from the widest possible breadth of available expertise from all stakeholders, will be government-led with high-level input from all governments, consensus-based and be fully transparent.[8]

Dr Dalma Demeter observed the Commission deliberations about the mandate on 10 July. With two exceptions, delegates from most states were very supportive of the proposed mandate. The range of justifications for the mandate can be found in the Commission documents available online.[9]

One particular area of discussion was whether the mandate should be given to WGII or WGIII. WGII is currently working on the enforcement of settlement agreements, with both a convention and a model law being concurrently developed.[10] On the other hand, WGIII recently finalised its work on online dispute resolution (ODR),[11] leaving WGIII open and available for other work and this solution also avoided undue pressure being placed on WG II to complete its current mandate.

WGIII is set to convene in Vienna in Autumn 2017.

A copy of the CIDS Report can be found at the following link: http://www.uncitral.org/pdf/english/commissionsessions/unc/unc-49/CIDS_Research_Paper_-_Can_the_Mauritius_Convention_serve_as_a_model.pdf

 

Sara Rayment, Conjoint Associate Professor, University of Newcastle

Dr Dalma Demeter, University of Canberra

 

[1] http://www.unis.unvienna.org/unis/en/pressrels/2017/unisl250.html

[2] Ibid

[3] (A/CN.9/917) para 11

[4] (A/CN.9/917) para 12

[5] (A/CN.9/918), paras. 1-2

[6] (Official Records of the General Assembly, Seventy-first Session, Supplement No. 17 (A/71/17), para. 194

[7] (A/CN.9/917)

[8] http://www.unis.unvienna.org/unis/en/pressrels/2017/unisl250.html

[9] See series of Investor-State Dispute Settlement Framework – Compilations of comments, available at http://www.uncitral.org/uncitral/commission/sessions/50th.html

[10] See A/CV.9/896

[11] The Commission adopted the Technical Notes on Online Dispute Resolution at the 49th Session in 2016 (A/71/17) para 217.

Australia signs Mauritius Convention on Transparency

We are delighted to announce that on 18 July 2017, Australia became a signatory to the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (New York, 2014) (the “Mauritius Convention on Transparency”).

Australia is the 21st State to sign the Mauritius Convention on Transparency and it is the first signatory in the Asia-Pacific region. The Convention entered into force on 18 October 2017 after ratification/accession by 3 States, namely Canada, Mauritius and Switzerland. More information regarding status of implementation may be found here: http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/2014Transparency_Convention_status.html.

Student reports from Working Group I: Micro, Small to Medium-Sized Enterprises

By Heath Mitchell

Being a dedicated law student is a tough up-hill battle, there is no avoiding this reality. Yet, if you have the stamina to pull through the challenges, and get back up time and time again, opportunities and progress eventually open up for you. Being selected as a student delegate at the United Nations headquarters in New York is certainly not exemption!

The particular working group I attended was Working Group I: Micro, Small to Medium-Sized Enterprises, (MSME’s) falling within the mandate of United Nations Commission on International Trade Law (UNCITRAL).

While MSME’s have always been the greatest contributor to economic activity, in the age of innovation, technology, and micro-entrepreneurs, MSME’s are increasingly becoming the lifeblood of developed and underdeveloped economies alike. The continued prosperity of MSME’s also plays a crucial role is empowering certain members of society who have traditionally struggled in accessing the workforce.

Yet, for MSME’s worldwide, there remain significant legal barriers to market entry. In addition, stubborn legal hurdles exist, inhibiting a MSME’s evolution. One of the effects is that a significant portion of MSME’s remain in what is known as the ‘informal economy’ where tax obligations are not met, limited protections are afforded to stakeholders (including for example employees and creditors) and the business are otherwise unmonitored by the government. It is a well-settled fact that the benefits to society of more businesses transitioning towards the formal economy are enormous.

One of the barriers to entry is the act of business registration itself, which was discussed at length over the working group’s duration. It was during this agenda item that the realities of international law reform became apparent; it is an extremely time-consuming process; particularly so when contrasted against the Artificial Intelligence (AI) the UN is looking to recommend to speed up the business registration process! In fact, some of the UN’s conventions, model law’s and legislative guides have taken almost a decade to produce. Herein lies one of the primary criticisms of the UN; it is failing to respond effectively to the rapidly changing world.

Nonetheless, it was fascinating watching delegates and experts from around the world, ostensibly working together towards a common goal, yet still delicately balancing the interests of those they represent. Indeed, the art of diplomacy is no walk in the park, unless of course negotiation literally had taken place, outside of hours, over a walk around Central Park!

It also dawned on me that international law is not as complex as one may anticipate; people are often intimated by an impression of contradictory and confusing legal principles. In reality, legal principles stemming from competing jurisdictions are actually very similar, albeit phrased in a slightly nuanced form and with their own idiosyncrasies and cultural backdrops to consider. It is the positive and collaborative individuals who seek common ground, yet still appreciate these slight variances, that often make the best international lawyers.

My interest in international trade law developed progressively over my law degree, in large part due to my extensive study abroad. I first engaged with UNICITRAL’s work in 2014 through studying their Model Law on international commercial arbitration and the effect of the New York Convention. During that time, I was studying for two semesters on exchange at Copenhagen Business School. One year later, while on exchange at the Chinese University of Hong Kong, I extended my understanding of these legal instruments.

I would like to take this opportunity to thank my supervising delegate Anne Matthews and the Chairman of the UNCCA Alan Davidson for this opportunity and their continued support throughout the experience.

Heath