The United Nations Commission on International Trade Laws - Assignment Example

The United Nations Commission on International Trade Laws Introduction and Man UNCITRAL—The United Nations Commission on International Trade Laws (UNCITRAL) was conceptualised by the General Assembly of the United Nations in order to facilitate the international trade, remove hindrances, and facilitate trade relations between member states. Today UNCITRAL is the core legal body dealing in international trade of the United Nations. The view nurtured by a large part of international community that international trade helps in promotion of friendly ties, peace and security led to the formation of UNCITRAL. (Patnaik and Lala, 2006). According to Patnaik and Lala(2006) prior to the formation of UNCITRAL there existed no United Nations agency that was technically competent to handle the complex business issues and long term interests of harmonisation and unification of international trade. A prominent authority on international trade, Prof Clive M. Schmitthoff, in his Report submitted to the General Assembly, UN, stressed the importance of government and non-governmental organisations could play in harmonisation and unification of international trade (Patnaik and Lala). According to Patnaik and Lala (2006) the Schmitthoff Report had taken up extensively the aspects of law of international trade, legal issues necessary for conflict resolution. UNCITRAL was created as a result of this report. “ By preparing uniform laws that are aimed at removing or reducing obstacles in the flow of international trade created by disparities in national laws, the Commission plays an important role in the facilitation of international trade.” (Suy and Welens 1998, 312). According to the General Assembly Resolution 225 (XXI) of 1966, the mandate accorded to UNCRITAL is a) Coordinating the work of the organizations active in this field and encouraging cooperation among them. b) Promoting wider participation in existing international conventions and wider acceptance of existing model law and uniform laws. (uncitral.org) Importance and Structure of UNCRITAL The role of the Commission is also critical because it serves to increases stability and inter-dependence amongst the countries through trade (Ong, 2003). The more the people to people contact in form of trade, the more closer they come. Today the world has been integrated over trade and business like never before. The conventions and Model Laws of the UNCRITAL form the backbone of the governing structures of the new world. The Commission was established by the General Assembly on through a resolution passed on 17th December 1966. “The General Assembly gave the Commission the “mandate to further the progressive harmonization and unification of the law of international trade.” (Unitral.org). The Commission consists of 60 member states “representative of the world’s various geographic regions and its principal economic and legal systems (Uncitral.org).” The legal texts formulated by UNICRITAL are found in the form of model laws, legal guides, rules and notes. At the time of creation of the Commission the number of member states was fixed at 29 but changes were effected in 1973 and subsequently in 2004 to increase the membership to 2004. The tenure of membership is for six years. 30 member states retire every three years. Non-member states and international organizations can be present at the sessions of UNICTRAL as observers. UNCITRAL holds annual sessions alternatively, in summers, at the United Nations Headquarters in New York (US) or at Vienna International Centre at Vienna, Austria. . Since its inception UNCITRAL has prepared a wide range of conventions, model laws and other instruments. Its programme of work includes such issues of international trade as Procurement, International Arbitration and Conciliation, Transport Law, Electronic Commerce, Insolvency law, and Security Interests that are handled by separate working groups. The number of work programmes was expanded from three to six in 2003. Harmonisation: Definition and Importance The mandate of UNCITRAL uses the terms ‘harmonization’ and ‘unification’ of international trade. It is, however, important to note that they are not the same and their aims are different. (Schmitthoff, 1988). It defines Harmonisation as “the process through which domestic laws may be modified to enhance predictability in cross-border commercial transactions.”(uncitral.org). Unification is defined as “the adoption of common legal standard governing particular aspects of international business transactions. (uncitral.org).” ‘Harmonization’ and ‘unification’ in the uncitral.org trade help us to distinguish between conventions and model laws. Model laws are set forth by UNCITRAL as guidelines for member states to legislate laws to bring it in harmony with prevailing international regulation; convention on the other hand is an instrument that is adopted by member states to attain unification at the international level. It is worthwhile to mention that states can exercise their sovereignty and refuse to ratify a convention. It is also to be noted that states do not adopt these conventions readily and at times they may adopt them with some modifications in the clauses. (Patnaik and Lala, 2006). Thus the effort of ‘harmonization’ that works through making legislative changes at the national level to bring the laws of a particular state in harmony with international regulation is more effective than unification that intends to universalise the trade environment by suggesting conventions at the international level. It discounts the existence of national divergences. (Schmitthoff, 1988 ) However, harmonisation can also be impeded by cultural and economic distinctions of the states. The stance of developed and developing countries is also different towards ‘harmonisations’. More often the cultural, economic and political interests of nations are differing due to their geo-political status and thus ‘harmonization’ stands for stages in socio-economic development. (Schmitthoff, 1988). Achievements and Harmonisation The central objective of UNICTRAL is to increase international investment by removing obstacles in exchange of goods, capital and, services. (Giappecheli cited by Patnaik and Lala, 2006). The convergence of developments in international transactions provides further stimulus to the efforts of the Commission to create new opportunities. It was entrusted with the task of bringing transparency, encouragement and unification of the international trade climate (Patnaik and Lala, 2006). UNCITRAL played a special role in bringing the developing countries into the international trade ambit. One metric to evaluate the efficacy of UNCITRAL in international trade is to make a comparative analysis of the international business in the past and present. But such a suggestion is fraught with other implications. Like increase in trade can be attributed to efforts of organisations like the WTO, movements like globalisation, break up of Soviet Union, increase in communication and transport activity. In fact, the world order established on north-south, east-west divide entered a critical phase in 1990 after the collapse of Soviet Union (Mistelis, 2004). As the new states emerged out of the former Soviet Union, they needed to be brought into the ambit of UNCITRAL. The Commission played a critical role in integrating these states into the fold of pre-existing laws and regulations. On the other hand, the achievements of UNCITRAL in extending international cooperation are obscured because they do not find a prominent mention in day to day news. However, when ships sail across the oceans carrying merchandise, and goods get traded, under a uniform regime of protecting the interests of the buyers and sellers, it is due to the United Nations Sales Convention created by UNCITRAL (Correl, 2003). Thus we have to read between the lines, in terms of ever growing international trade, cooperation, movement of people and flow of goods across the national boundaries to evaluate the achievements of UNICTRAL. Marshall and Mann (2006) use the criteria of assess the achievements of UNICTRAL by indicating the number of increase in bilateral investment treaties from 1097 in 1995 to 2392 in 2004. The increase in number of arbitrations in investor-state relationships accompanying increase of number of law firms dealing in such arbitrations. There is a definite change from court-based litigation model to alternative arbitration methods. UNCITRAL has played a key role in development of alternative dispute resolution. (Griffith and Mitchell, 2002). International arbitration has become the preferred method of dispute resolution the world over. (Mistelis, 2001)Besides the UNCITRAL Model Law on International Commercial Arbitration provides a template that can be adopted by nations. UNCITRAL The adaptation of the template in diverse political and legal environments provides hospitable climate for international commercial arbitration. (Griffith and Mitchell, 2002). Incorporating the best features of civil and common law, they help states to standardise their domestic laws. It is not only the countries who are fresh entrants to international trade arbitration that gain from the Model Law of UNCITRAL. The Model Law on commercial arbitration plays the important role of cross-pollination and helps evaluation and change. Introduction of new systems brings novelty to the domestic systems. (Griffith and Mitchell, 2002). The inertia for change is perhaps the most fundamental achievement of the international laws for commercial arbitration. Correl (2003) emphasizes that the trade laws enacted by UNICTRAL have become all the more relevant in the era of globalization. It is felt that effective legal systems and common rules can increase economic activity. Their absence can de-motivate parties to business. (Patnaik and Lala) The UNICTRAL Model Law on Procurement of Goods, Construction and Services is aims to bring more transparency and curb corruption in government contracting. (Correl, 2003). The relevance of Procurement law covers a variety of public policy concerns ranging from governance, accountability to international trade (Linarelli, 2008). UNCITRAL keeps on changing its programmes with increase in use of technologies and newer methods used in the international change. For example, UNICITRAL adopted the Model Law on Electronic signatures in 1996. In fact, it was chosen as the global organisation that to take initiative in formulating the legal principles of for international e-commerce. UNCITRAL has recognized the responsibility for harmonization in its work on Model Law on Electronic Commerce. Similarly UNICITRAL has also adopted the draft convention on the use of electronic communications in contractual obligations. These instruments have served as guideposts for enactment of laws on cyber technology in different countries. Not far back in 2003 at the 36th Report of the United Nations Commission on International Trade Law on the Work of Its 36th Session, 6 October 2003, Delegate Ms. Sharon Ong had expressed her optimism thus: “The proposed convention on electronic contracting would be invaluable in promoting trade carried out through electronic means by infusing certainty and uniformity through the formulation of clear rules on electronic contracts. We look forward to the timely completion of the work of this Working Group” (Ong, 2003, Statement to the 58th UNGA on Agenda Item 151) The proliferation of information technology and has made businesses speedier and efficient. The paperless world of information technology adds sustainability to business making it more cost-effective. Thus we find UNCITRAL far from being a platform to mere deliberations and exchange of ideas is source of inspiration and enlightenment for national governments. In its year 2000 session, a UNCRITAL set up Working Group to make recommendations for secured credit law. There exist disparities in lower-cost credit between parties of different countries. The Working Group has been set up to remove these disparities and provide an equitable climate for transaction laws stretching across international boundaries. The Working Group has been asked to expedite its activity in this regard. In 2007, at Vienna Session of UNCRITAL, a Legislative Guide for secured transactions was adopted. The Guide covers security interests in an array of assets such as goods, equipment, and bank accounts. (un.org, 2007, Press) The Model Law for Commercial Conciliation of 2003 is a landmark document for amicable dispute resolution. UNICITRAL coordinated with Comite Maritime International (CMI) in considering the traditional issues confronting sea-transport in a symposium held in 2000. CMI and UNCITRAL thus have gone forth in redressing these issues and harmonising the transport laws. Similarly UNCITRAL produced the text of the Model Law on Insolvency in 1997. Amongst other features the model law on insolvency includes rules for access by representing of foreign insolvency proceedings and harmonisation the foreign procedures in domestic laws of the states. The UNCITRAL Working Group on Transport Law has now adopted the draft convention on contracts for the international carriage of goods wholly or partly by sea. This will be soon circulated in the governments for their comments. (unvienna.org, pressrels). This draft will lead to a modern Model Law that will take the conventional port to port transit of goods to door-to-door container transport. This will give impetus to the world trade as today the supply chains are integrated to deliver goods door to door. Critical Evaluation No matter to what extent UNCITRAL has gone in removing hindrances in international trade, the vestiges of earlier north-south, east-west divide do remain, and are at times main stumbling blocks in the progress of Uncitral. For example, Kusuma-Atmadja quoted by Keong (2005) points out that countries deeply rooted in the ideas of national sovereignty show aversion to UNCITRAL texts of harmonization. But such scepticism is more of political nature than economic, more based on evocation of parochial and national sentiment than that of a thought of world encompassing free trade movement. Understanding this perceived threat to national identity UNCITRAL is always tries to avoid confronting legislation. Rather it believes in making such legislation that is acceptable to all. “While national identity is important, an effort is also made to the effect that internationally recognised standards or harmonised law forms the bulk of this modern legislation.” (Mistelis, 2001, Home). For long today developing world suffered from exploitation during centuries of imperialism. Any text that talks of suggests dismantling of obstacles sends alarm bells ringing. Patnaik and Lala too point out that howsoever relevant and useful a convent might be states do not become immediately become parties to the agenda. The states also have to introduce legal reforms in order to make their legal systems more responsive to the efforts of UNCITRAL (Patnaik and Lala, 2006). According to them the process of legal reform at the national level should be a reflection of global spate of liberalisation, privatisation and globalisation. But the task is not as simple. It is like achieving homogenising in a heterogeneous circumstance. (Patnaik and Lala, 2006). For example, the business community has devised quality and packaging standards that are intrinsic to their trade. Without doubt conformance to standards is of paramount importance in conducting of trade. This too is harmonisation that is often overlooked by the legal community. (Mistelis, 2001). Then there is the emergence of trade groupings and regional economic groups. The rules of regional economic groups could be working at cross purposes to each other. Then there are parties that survive on trumpeting the nationalistic agenda. However, with times as the wounds heal and the harvest of globalised economy reaches the masses, there will arise a sense of urgency in implementation of new trade laws that are more and more flexible. On the other hand total legal conformance to UNCRITAL rules and regulations puts a lot of financial burden on the organisation. Kusuma-Atmadja (quoted by Keong, 2005) rightly stresses the opening of law schools in the Pacific Basin countries that teach international trade laws. He suggested that all Pacific Basin law schools should teach UNCITRAL law courses so that law graduates who might eventually become political leaders would have no difficulty in accepting UNCITRAL texts. Then there is the viewpoint of scholars like Carr who see question the type and liability of the Uncrital legislation. It holds very little liability in practice. The states have the option of adopting and not adopting them. But any attempt from the international forums like UNCITRAL tries to force an agenda, be it of trade, may easily be construed as interference in their internal environment. It is the national governments who have to realise the importance of free-trade and free-flow of goods and people across the world and take steps to implement the clauses of UNCITRAL texts. The example of China asking for early removal of obstacles in international trade is portentous of events to come. As the Asian countries and the developing world countries realise the economic importance of UNCITRAL there will be realisation of its importance. Some others like Mistelis raise the question of “what is the best law?” and “Who is to decide it?” “Although globalisation of markets is a process, which appears to be unstoppable, as seen for example in the recent increase in mergers and acquisitions, there are a number of good reasons why globalisation of law (i.e. an introduction of a legal system binding all over the world) is problematic. The main question linked with such a potential development is who will dictate authoritatively what "best law" is?” (Mistelis, 2001, Pace. Edu, Home). In this context, the law that works to bring most benefits to largest number of states is best. The General Assembly having representatives from all member states is the right forum to raise a voice against an Uncitral rule. Any rule that is not a popular choice has the chances of being voted out in the General Assembly. Patnaik and Lala (2006) raise the issue of overlapping between various global and regional organisations. Patnaik and Lala (2006) suggest that this overlapping is affecting traditional areas like arbitration, transport laws as well as modern areas like electronic commerce. Thus it becomes one of the core challenges for UNCITRAL should adopt viable measures to overcome this hurdle. Conclusion “The establishment of Uncrital is likely to be a milestone on the road to unification of law of the international trade. It marks the opening of a new phase. The United Nations, highly successful in technical matters but with a less satisfactory record in politics has now taken under their wing, the integration and harmonization of the new merchant law.”(Schmitthoff, 1988, 213) This was the vision of Professor Clive M. Schmitthoffs at the set up of Uncrital. The vision scores high when it is evaluated against the achievements of the UNCITRAL. In fact the work of UNCITRAL doesn’t interest the common man. It is the governments, inter-governmental organisations, and business corporations who actually appreciate the work of the Commission. For any trade barrier removed for them, or any homogenisation of trade atmosphere makes a difference to the way they conduct business. The common man enjoys the fruits of behind the scene activities. There is spurt in movement of goods, products, information, and people across the world. Increasingly we see perceive the ease of availability of goods on the shelves manufactured in some other part of the world. We feel the world is growing closer. The parcels get delivered and people are on the move. Little do we realise there are laws that govern trade, the movement of merchant goods and the people. The role of UNCITRAL, in this important change, is undeniable. The vision of people like Schmitthoff, who had envisaged such an organisation five decades back, is coming true. However, if the 20th century was the era of new beginnings, the 21st century will definitely go into history as an important era in transformation in relation. UNCITRAL aims at total harmonizing of international trade. It aims at making the trade laws more transparent. Definitely there are discordant voices over its decisions. States want earlier or late implementation of according to their own interests. There is a general convergence of opinion but a divergence about the timelines. However, all steps taken in the direction of harmonization of trade are important. But the sooner, obstacles are removed the better it is. On one hand UNCITRAL has the challenge of facing diverse political climates and on the other are changing technological and economic realities of the world. UNCITRAL has to take diverse opinion into its fold and play the harmonising notes by creating laws, guidelines, rules and conventions that integrate the people and states. It has to show an ever increasing responsiveness to changing world scenario and emerging world situation. Long ago, Schmitthoff (quoted by Mistelis, 2001) had expressed his view on the development of an international frame work thus: "When - and not if - this task is accomplished our time will have what it needs: a transnational code of international trade law of world-wide application.” References: Griffith, G., and Mitchell A, D. (2002): Contractual Dispute Resolution in International Trade: the Uncitral Arbitration Tules (1976) and the Uncitral conciliation rules (1980), Melbourne Journal of International Law, www. www.austlii.edu.au. “The Australasian Legal Information Institute. Retrieved April 13th, http://www.austlii.edu.au/au/journals/MelbJIL/2002/8.html Correl, Hans (2003) Speech on the occasion of the 36th session of UNCITRAL, www.un.org, The United Nations Website, Retrieved April 13th 2008, http://www.un.org/law/counsel/english/uncitral2003.htm www.uncitral.org, “The United Nations Commission on International Trade Law Website” Retrieved April 13th 2008, http://www.uncitral.org/uncitral/en/about/origin.html Mistelis, Loukas, (2001) Is Harmonisation a Necessary Evil? The Future of Harmonisation and New Sources of International Trade Law, Extract from Ian Fletcher, Loukas Mistelis, Marise Cremona eds., Foundations and Perspectives of International Trade Law, London: Sweet & Maxwell (2001) 3-27, Retrieved April 13th 2008, http://www.cisg.law.pace.edu/cisg/biblio/mistelis2.html Marshall, F, and Mann, H., ( 2006) Good Governance and Rule of Law: Express Rules For Investor-State Arbitrations Required, www.iisd.org, “The International Institute for Sustainable Development website, Retrieved April 13th 2008, http://www.iisd.org/pdf/2006/investment_uncitral_rules_rrevision.pdf Schmitthoff, Clive, M., (1988) ed. Chia-Jui Cheng, Clive M Schmitthoffs Select Essays on International Trade Law, Brill Publishers, Amsterdam NV. Patnaik, S, and Lala, Fabrizio, Issue of Harmonization of International Trade From the Perspective of Uncitral: The Past and the Current Work, Stefano D’orilla (ed.,) Participants View of International Trade Law Post Graduate Course (University Institute of European Studies and ITC ILO; Turin: 2006) Retrieved April 13th 2008, http://works.bepress.com/cgi/viewcontent.cgi?article=1009&context=sridhar Corell, Hans (2003) Speech on the occasion of the 36th session of UNCITRAL, “The United Nations Website” www.un.org, www.un.org/law/counsel/english/uncitral2003.htm Slate, William K II (2006) An UNCITRAL Success Story, Dispute Resolution Journal,www. 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(2006) Singapores Experience with the Work of UNCITRAL, “The Pace Law Institute Website,” www. cisg.law.pace.edu, Retrieved April 13th 2008, http://www.cisg.law.pace.edu/cisg/biblio/keong.html Ong, Sharon(2003), Delegate to the 58th UNGA on Agenda Item 151: Report of the United Nations Commission on International Trade Law on the Work of Its 36th Session, 6 October 2003, http://app.mfa.gov.sg, “The Singapore Government Website, Retrieved April 13th 2008, www http://app.mfa.gov.sg/pr/read_content.asp?View,3561 Lineralli, John(2008) United Nations Commission Invites Professor John Linarelli for Return Visit (Newsitem), www. www.reuters.com, “The Reuters Website” www. http://www.reuters.com/article/pressRelease/idUS186511+08-Apr-2008+PRN20080408 Read More