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International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
International business transactions.doc
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  • 1. THE CONTEXT FOR TRANSACTIONAL LEGAL HARMONIZATION IN THE AMERICAS A Background to the SLA/CIDA Project Nadia Bourély * I. Introduction ......................................................................................................7 II. Globalization & Legal Harmonization ........................................................10 A) ECONOMIC AND LEGAL INTEGRATION.....................................................................10 B) HARMONIZATION....................................................................................................11 C) MARKET DRIVEN HARMONIZATION ........................................................................12 1) Emergence of a Modern Lex Mercatoria.................................................................................12 2) Standardization in International Business Law........................................................................14 D) INSTITUTIONAL HARMONIZING PROGRAMS................................................................15 1) UNCITRAL 16 2) UNIDROIT 17 3) Hague Conference on Private International Law......................................................................19 4) European Union 20 5) Ohada 21 III. The Americas: Characteristics and Prospects ...........................................22 A) SIGNIFICANCE AND IMPACT OF THE FTAA NEGOTIATIONS .........................................22 B) COEXISTENCE OF TWO MAJOR LEGAL SYSTEMS........................................................23 C)ORGANIZATION OF AMERICAN STATES (OAS)...........................................................25 1) Evolution of the Inter-American Codification Process............................................................25 2) Exploring New Possibilities.....................................................................................................27 IV. Conclusion....................................................................................................27 I. Introduction The late 20th century has been characterized by an increased interdependence between the nations of the world. Unprecedented trade liberalization at the multilateral, regional and bilateral level accompanied by the exponential development of new information technologies have changed the way sovereign states, businesses and citizens interact among themselves and with one another. In the Americas, important developments have supplemented those global transformations: our Hemisphere is now well embarked on the road to democratic consolidation and a significant number of social indicators have improved. Remarkable trade liberalization and a switch from protectionist to open market economies have provided the basis for the growth of transnational business activity while democratic values and institutions have been progressively strengthened. However, the Americas are still facing great challenges such as social inequalities, economic instability, poor standards of living and lack of enforcement of human rights. * Ms. Nadia Bourély is a Canadian lawyer who worked as a legal consultant and coordinator of the SLA/CIDA Project at the Secretariat for Legal Affairs of the Organization of American States (OAS). -7-
  • 2. It is now well recognized that processes of globalization alone will not resolve such problems, and that there is a need for improved international cooperation mechanisms and development policies to effectively address those issues. Indeed, the last decade of free market reforms implemented throughout Latin America and the Caribbean brought a certain level of growth, but were not as successful in diminishing the gap between the rich and the poor. The slow results on the social front and the recent collapse of the Argentinean economy have caused many to wonder about the possibility that certain countries would move toward a more protectionist economy, shifting away from the open liberal policies enforced during the last ten years. We take the position that while economic growth provides no instant solution to inequality, further social development does require economic growth. Strengthened regionalism and further economic integration have been increasingly seen as fundamental steps towards both economic growth and social development in our Hemisphere, and the positive link between trade policy and poverty alleviation has been established1. Need for Legal Reform Efforts aiming to establish a free trade zone encompassing the Western Hemisphere, the so-called Free Trade Area of the Americas (FTAA), are currently underway. In addition to this hemispheric economic integration process, the creation or strengthening of other sub- regional trading arrangements (such as the North American Free Trade Agreement (NAFTA), the Common Market of the Southern Cone (MERCOSUR), the Central American Common Market (CACM), the Caribbean Common Market (CARICOM) and the Andean Nations Community (ANC) to name a few2), will support trade expansion. The market access provisions and rules of origin provisions contained in those agreements provide incentives for transnational commercial activities. In addition to the traditional advantages of market access and reduction of customs duties, those agreements now typically cover a much broader scope of topics, such as services and intellectual property rights. While this expanded coverage of areas that were previously within the exclusive competence of the sovereign nation-state raises complex new issues, it also provides a level playing field, assists countries in designing new legal and regulatory framework (and may also help certain countries to lock-in reforms otherwise politically risky), as well as increasing investors’ confidence. As economic integration progresses at the macro-level, the establishment of a legal and regulatory environment where private transnational exchanges can take place becomes paramount for developing countries to attract further investment as well as promote local private sector development. Legal and judicial reforms, aimed both at the domestic judicial institutions and at the law itself, are core issues to be addressed in order to support further economic development in the Americas. For instance, it might be necessary to harmonize law for internal or regional consistency, and to update existing provisions and adopt new 1 See Hoekman B., Michalopoulos C., Schiff M. & Tarr D., Trade Policy Reform and Poverty Alleviation, World Bank, Development Research Group, Policy Research Working Paper 2733, December 2001. 2 For a full description of the trade agreements in force within the Hemisphere, see generally the OAS Trade Unit Foreign Trade Information System at the following address: < http://www.sice.oas.org>. -8-
  • 3. legislation in order to modernize a certain legal regime or respond to new international business trends such as e-commerce and the multiplication of cross border exchanges. Such reforms should ultimately support economic growth by facilitating transnational business transactions, and may encompass everything from writing, or revising commercial codes, bankruptcy statutes and company laws, and updating the mandate of regulatory agencies. This process also permits the abolishment of uncertain provisions, promotes transparency, and improves competitiveness for domestic and international trade in addition to attracting more investment since transaction costs are reduced. As international trade within the region of the Americas is facing unprecedented growth, following extensive economic reforms, as well as a profound shift in trade policy and extensive market liberalization, there is a need for legal reform adapted to the inter- American context, particularly with the current regional economic integration efforts underway in the Hemisphere (FTAA, NAFTA, MERCOSUR, CACM, CARICOM, etc.). While economic integration cannot take place without a previous political process, both at the national and international level, it cannot subsist without a solid legal framework. Worldwide Legal Harmonization At the same time, international legal instruments developed in multilateral institutions and applicable to certain cross-border transactions have become increasingly important to the development of a substantive transnational law. We broadly use the term "transnational law" as referring to "all kinds of principles and rules of non-national character used in international business practice as an alternative to domestic law"3. Indeed, a supranational framework encompassing business customs and instruments such as the UNIDROIT Principles of International Commercial Contracts, and dealing with international trade and private international commercial law is slowly emerging. This international legal framework developed through different intergovernmental and business organizations or legal research centers, (such as UNIDROIT, UNCITRAL, The Hague and the International Chamber of Commerce) does reinforce the trend for seeking harmonized solutions to multi-jurisdictional issues. This "emerging pattern of harmonized international commercial law" will be strengthened in the future: transnational legislative and regulatory harmonization will be further pursued as the possibility of benefiting from a single and predictable set of rules becomes more attractive4. The rationale is that following a single set of rules, instead of having to consider various state laws, is more efficient, reduces transaction costs and thus facilitates the expansion of economic activities. For instance, one can note the remarkable trend towards denationalization of private law in Europe as it results from the impact of European Union (EU) legislation on national law. This supports the progressive development within the EU of a body of harmonized transnational commercial law. While recognizing that the economic integration scheme followed within the Western Hemisphere is very different from that of the EU, both in terms of level and scope 3 Bonnel, Michael J., "The UNIDROIT Principles and Transnational Law", Uniform Law Review, vol 5, 2000-2, 199. 4 Rosett, Arthur, "UNIDROIT Principles and Harmonization of International Commercial Law: Focus on Chapter 7", Uniform Law Review, vol. 2, 1997, 441. -9-
  • 4. of integration and of geo-political purposes, the socio-economic development of the Americas is related to the dynamism of the private sector and the development of appropriate tools to benefit from the commercial prospects offered by international trade. Therefore, even though the Americas are not currently seeking a deeper level of economic integration than that of a hemispheric free trade zone (FTAA) and increased cooperation (Summit of the Americas, Organization of American States), a certain level of legal harmonization is still desirable in order to benefit from the advantages of free trade agreements (macro-level convergence), in addition to facilitating transnational activities, attracting further investment and contributing to the development of the local private sector. Objectives of this Background Paper Taking into consideration both the need for domestic legal reform in commercial matters and the importance of promoting harmonized commercial solutions for the Americas, we briefly review the concept of legal harmonization as well as current worldwide and market-driven efforts to establish harmonized legal frameworks. We then provide an overview of some characteristics of the region of the Americas: the impact of the FTAA negotiations, the co-existence of civil and common law regimes, and the evolution of the inter-American codification process under the auspices of the Organization of American States (OAS). We conclude by affirming the interest of further exploring the opportunities offered by increased harmonization/standardization of certain transactions in areas such as corporate law, finance and energy, and advocating for the development of new inter- American “soft law” instruments that would encourage legal convergence. II. Globalization & Legal Harmonization A) Economic and Legal Integration The globalization phenomenon that is currently reshaping our world and way of life is a multifaceted concept. While it encompasses a wide range of human activities such as employment, technology, finance, business, politics, environment, culture and entertainment, it primarily refers to an economic process related to a world-wide integration of markets. Economic integration is basically the process of eliminating discrimination, through the mechanism of free trade, among the economies of a group a countries. The effort was first initiated after World War II with the creation of the Bretton Woods institutions and the General Agreement on Tariffs and Trade (GATT), which has fostered unprecedented trade liberalization at the global scale through eight rounds of multilateral trade negotiations. The end of the Cold War and the collapse of the communist system then contributed to the consolidation of the global economic regime. Indeed, the conclusion of the Uruguay Round represented an enormous step along in the path of worldwide trade liberalization and a consecration of multilateralism that materialized in the creation of the World Trade Organization (WTO) in 1995, the first post-Cold War global institution5. Liberal economic policies, international trade and new technologies of 5 See generally Trebilcock, Michael J. and Howse, Robert, The Regulation of International Trade, 2nd ed., 1999, Routledge, 612 p. See also the World Trade Organization's website at: - 10 -
  • 5. communication have progressively converged towards the establishment of a multi-level integrated world system. Multilateral economic integration is regulated through the GATT-WTO framework that constitutes the basic set of rules regulating the global trading order, its core principles being non-discrimination, reciprocity and transparency. However, numerous states are also members of regional trading agreements, i.e. geographically discriminatory arrangements among a subset of countries, which in fact discriminate trade of non-members. A special provision was made with GATT Article XXIV to allow for the existence of these agreements inconsistent with the non-discrimination principle. Those regional trading agreements are varied in structure, level of integration and significance, as are the motives for creating such groupings. However, they have been multiplying and nearly all of the WTO’s members have now concluded such arrangements with other countries. Most notably, the countries of the Americas have been particularly active in establishing a multitude of bilateral and regional trade agreements amongst them6. A form of macro-level regulatory convergence among a subset of countries will happen through the implementation of commitments undertaken through negotiations aiming at the closure of a multilateral trade round or at the establishment of a regional free trade or other preferential agreements. But as processes of economic integration go deeper among a subset of countries, a certain degree of concrete “bottom-level” legal harmonization also becomes highly desirable or even necessary in order to benefit from the commercial advantages spurred by such integration. Any integrated system requires a certain co- ordination and legal uniformity at the domestic level in order to function effectively, and this facilitates exchanges between private parties located in different jurisdictions and other transnational business activities. In other words, a certain level of legal integration should follow economic integration. B) Harmonization Harmonization processes are varied and can take many forms, at the domestic, international, or multilateral level. For instance, such a process can be embodied in (a) the revision of a national code (e.g. Mexico modernizing and harmonizing the Código Comercial and related statutes, or the National Commissioners on Uniform State Laws and the American Law Institute working on revisions of the Uniform Commercial Code (UCC)), (b) the creation of an international code such as the Convention on the International Sales of Goods (CISG by UNICTRAL), (c) an international restatement such as the UNIDROIT Principles of International Commercial Contracts, (d) the adoption of regional choice of law conventions such as the Rome Convention (1980 European Convention on the Law Applicable to Contractual Obligations) or the Mexico City Convention (1994 Inter- American Convention on the Law Applicable to International Contracts), (e) the adoption of uniform private rules such as the Uniform Customs and Practices on Documentary Credits (UCP),and (f) the universal adoption of arbitral regimes in commercial disputes7. <www.wto.org>. 6 See Devlin, R. and Estevadeordal, A, "What's New in the New Regionalism in the Americas", Inter-American Development Bank (INTAL/ITD/STA), Working Paper 6 (2001). 7 See Rosset, Arthur, "UNIDROIT Principles and Harmonization of International Commercial Law: Focus on Chapter 7", Uniform Law Review, vol. 2, 1997, 441. - 11 -
  • 6. The more radical form of legal integration is uniformization, which is the legal technique seeking to erase the differences between the national provisions by replacing them with a unique and identical text for all the states involved in the legal integration process. Two possibilities then follow: the text is submitted to national parliaments who may adopt it as is, modify it or even reject it, or the adopted text contains the principle of supra- nationality, by which the uniform norm is directly integrated into the domestic legal order8. Harmonization is a less radical technique than pure uniformization. It basically consists of modifying domestic provisions from various countries that are not similar in order to make them all coherent, or update them with a reform. Therefore, while respecting the particularities of various national legal regimes, harmonization permits to reduce their differences in specific areas, or to promote increased legal cooperation between the countries9. Generally, such a result is obtained through the directives or recommendations adopted by an international organization who then directs them to its member states for implementation. Member states remain free to choose the form of adoption of the new instruments, as long as the result is the incorporation of the new harmonized norm (of course, provided that there is sufficient incentive to do so), thus leaving much more flexibility. Since the advent of modern international trade, efforts towards the international unification of law have essentially taken the form of binding instruments, such as supranational legislation or binding international conventions. However, despite some successes, the majority of bilateral or multilateral treaties of unification or harmonization have generally not been very effective, as demonstrated by their subsequent limited use. It seems that the development of a truly successful harmonized solution does not fit with the rigidity of the traditional treaty-making process, where unification cannot go beyond the terms of the treaty and amendments are difficult to adopt. But calls have been increasingly made for recourse to non-legislative or non-binding means of unification or harmonization of law, for example, through model laws or model clauses and contracts formulated on the basis of current trade practices, or even through international restatement of general principles of some particular legal domain, such as the UNIDROIT Principles of International Commercial Contracts for contract law, which have been very successful. As levels of integration deepen, increased legal convergence would become useful for the Americas, specifically through processes of informal harmonization. Informal harmonization may consists merely in a new awareness among the participants to a new initiative, but generally refers to the development of new soft law, i.e. non-binding instruments such as model laws, codes of conduct, guiding principles, etc., which presents the advantage of flexibility. C) Market Driven Harmonization 1) Emergence of a Modern Lex Mercatoria 8 See Issa-Sayeh, Joseph, "Quelques aspects techniques de l'intégration juridique: l'exemple des actes uniformes de l'OHADA", Uniform Law Review, vol. 4, 1999, 5. 9 Ibid. - 12 -
  • 7. Between the ninth and sixteenth century, a transnational uniform body of customary mercantile law was formed in medieval Europe. This lex mercatoria constituted a legal system with codified principles that would be applied in commercial disputes by merchants courts throughout Europe. More recently, the possibility of having binding transnational norms not embodied into contracts, statutes or conventions, but that would be applicable to an international contract, became reality again with the resurgence of a "modern" lex mercatoria. Indeed, some instruments have recently brought significant developments in the area of international transactions, and a form of modern lex mercatoria based upon common principles, rules and standards of international commercial law reconciling civil and common law traditions has progressively emerged10. As mentioned before, this resurgence of non-domestic transnational law is explained by a multifaceted phenomenon which "lies in the changing structures of commercial markets and business practice as increased trade and rapid communication have created large regional and global markets. Change in commercial law is inevitable because it is driven by powerful economic forces visible throughout the world. New legal regimes are a response to the changes in transactions and relationships that mark the new economic and social situation"11. For instance, the 1994 UNIDROIT Principles of International Commercial Contracts (UPICC) established the fundamental concepts and modern transnational rules applicable to international commercial contracts. The UPICC basically represents a synthesis of the law of international trade, and were drafted by experts from civil law, common law, and even “socialist” legal systems. It is a “mixed” instrument seeking to establish a modern compromise and to offer solutions for international parties located not only in different jurisdictions, but also within different legal systems. Another international instrument that can be viewed as providing a basis to the claims of a modern lex mercatoria is the UNICTRAL 1980 Convention on the International Sale of Goods, often referred to as the Vienna Convention or CISG, which brought a certain level of uniformization of the substantive law relating to the international sale of goods. Other international instruments have had tremendous impact and are now widely used throughout the global market. Some of the most famous examples were published by the International Chamber of Commerce (ICC) and include the 1993 Uniform Customs and Practice for Documentary Credits (UCP 500), which established modern banking practices now implicitly incorporated into the various documentary credit contracts, and the 2000 INCOTERMS, a transnational set of conditions on price and delivery applied uniformly in international sale of goods contracts. The ICC proclaims that it possesses unrivalled authority in making voluntary rules that govern the conduct of business across borders, and also provides for the ICC International Court of Arbitration, the world's leading arbitral institution. The area of international commercial arbitration is also remarkable, with an increasing number of arbitral awards rendered each year, and a great number of jurisdictions that have adopted national legislation based on the 1985 UNCITRAL Model Law on International Commercial Arbitration, which followed the 1958 United Nations Convention 10 See Tetley, Q.C., William, "Mixed Jurisdictions: Common Law vs Civil Law (codified and uncodified)", Part II, Uniform Law Review, vol. 4, 1999, 877. 11 Rosset, Arthur, "UNIDROIT Principles and Harmonization of International Commercial Law: Focus on Chapter 7", Uniform Law Review, vol. 2, 1997, 441. - 13 -
  • 8. on the Recognition and Enforcement of Foreign Arbitral Awards. The ultimate result is that a body of world law on the procedure and regulation of commercial arbitration is progressively being developed. This emergence of transnational law, at the outset perceived as non-binding soft law, is therefore now reinforced as its norms are recognized as mandatory when the parties have accepted it or are participating in an activity governed by it. Substantive norms become applicable through the form of the above-mentioned international instruments or through custom, practice, usage and principles, and basically aim to establish a fair and equitable “best practice” standard. Therefore, while the whole concept of a modern lex mercatoria remains disputable, some supranational norms which often reconcile differences between distinct legal traditions are undoubtedly gaining in importance. Basically, as economic activities become increasingly global, there is a strong incentive for the law to do the same. The appeal of transnational legal solutions lies in the potential reduction in complexity, more widely dispersed expertise, and resulting increased transaction efficiency. Supranational and transnational legal norms and rules related to international trade and commerce will gain in importance in the future, provided that they promote flexibility, best practice standard as well as bringing together common law and civil law principles. The authority of those instruments also tends to get more widely acknowledged when they deal with specialized fields of law and when they incorporate both practical and academic perspective. 2) Standardization in International Business Law In a strict definition, business law generally refers to commercial law. However, if taken in a broader context, business law includes many other areas relating to the regulations applicable to all economic activities (production, distribution, consumption), such as its legal framework (antitrust and competition, credit), its actors (businessman, companies, agents) and the corresponding goods and services. Therefore, under the general term business law could be included legal areas such as commercial law, law of sales, company laws, labor law, competition law, securities, bankruptcy law, debt collection, enforcement law, accounting, arbitration, etc., in short, all the legislation relating to the economic environment. International business transactions are complex operations that involve identifying and coordinating many issues such as the corporate, antitrust/competition, tax, and regulatory requirements in different countries and multinational jurisdictions. A broad range of legal sub-topics can arise in the course of closing such a transaction. For instance, the determination of the structure of the proposed investment (asset vs. share investment, setting up branches or foreign subsidiary, franchising or joint venturing, mergers and acquisitions, international project financing and cross-border lending), the selection of international representation (international agency and distributorship law), taking into account foreign domestic considerations such as securities regulations, protection of intellectual property rights, regulations applicable to consumer contracts, international technology transfers, etc. Other concerns relate to choosing the applicable law and jurisdiction, and international commercial arbitration. - 14 -
  • 9. Basically, issues arising can be grouped into three different sections: transactional issues, litigation issues, and regulatory issues. Transactional issues to take into account will include, for instance, those related to agency and distributorship law, sale of goods and services and letters of credit, international contract problems, regulation of international trade including customs law, cross-border mergers and acquisitions, project financing and structure of the foreign investment. Litigation matters will arise in connection to choice of law and forum issues, force majeure events or expropriatory conduct, foreign domestic rules of procedure and evidence, enforcement of judgements, sovereign immunity and international commercial arbitration. Regulatory issues facing international business are also very important since they relate to the wide scope of regulations in connection with trade transactions and financing (bank, securities, etc.), tax regimes, bankruptcy and competition or antitrust law in an international economy. International instruments seeking to harmonize some of the aspects of cross-border transaction issues may then cover a wide range of topics, establishing new substantive and/or procedural norms for international transactional, litigation or regulatory issues. D) Institutional Harmonizing Programs Many issues arise with respect to the preparation and implementation of harmonizing legal instruments: the substantive scope of harmonization, the technical procedure, its formulation, the scope of application of the international instrument in the domestic legislative order and its monitoring12. The substantive scope of the area to be harmonized is determined not only by the choice of the international organization. The choice will also be affected by the mandate of the organization promoting the harmonization, by the fact that other international organizations are working on similar issues (importance of avoiding duplication) and by the technical constraints that are part of the domestic legal order (public policy exception, domestic procedural issues). On the technical front, the procedures used to elaborate and create a new instrument vary widely and depend on the institutional structure of the organization. Generally, and to simplify the process, the permanent secretary or a committee of experts or working group mandated by the decision-making body will present a draft or submit recommendations, member states then present their comments and proposed modifications after internal consultations, and the decision-making body adopts the final draft. Issues to take into consideration in the formulation of the instruments are the official working languages of the organization and the style and wording that will be used. Determining the scope of application of the new instrument is often problematic and again varies according to the type of organization and its mandate. For instance, are member states automatically bound by the instrument once it is adopted by the organization or must they first sign and ratify it? When are the provisions of the international instrument considered in force and enforceable in domestic law? Another issue is the application of the instrument. Is there a supranational tribunal charged with overseeing the uniformity of application or the conformity of the national provisions implementing the instrument? Is 12 See generally Issa-Sayeh, Joseph, "Quelques aspects techniques de l'intégration juridique: l'exemple des actes uniformes de l'OHADA", Uniform Law Review, vol. 4, 1999, 5. - 15 -
  • 10. there a consultative body charged with giving recommendations regarding the application of the instrument? Are the member states bound by those recommendations? This merely serves to outline some of the main issues that must be answered to determine the substance, scope and concrete applicability of a new legal instrument designed to harmonize different provisions. We briefly review some of those processes of legal harmonization leading to the unification of legal practice through regulation or otherwise, including international conventions on private law, model laws and regional instruments. 1) UNCITRAL The United Nations Commission on International Trade Law (UNCITRAL)13 was established by the General Assembly in 1966 with the mandate to further the progressive harmonization and unification of the law of international trade. The Commission is composed of thirty-six member States elected by the General Assembly for terms of six years. The current UNCITRAL members from the Americas are Argentina, Brazil, Colombia, Honduras, Mexico, Paraguay, United States of America, and Uruguay. The Secretariat of UNCITRAL is the International Trade Law Branch of the United Nations Office of Legal Affairs located in Vienna. The Commission has established three working groups to perform the substantive preparatory work on topics within the Commission's program of work and carries out its work at annual sessions UNCITRAL has been particularly active in the following areas: international sale of goods, international transport of goods, international commercial arbitration and conciliation, international payment, cross-border insolvency, construction and more recently e-commerce and procurement. Among the most recognized UNCITRAL instruments in these areas are the following: • The United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980). This Convention establishes a comprehensive code of legal rules governing the formation of contracts for the international sale of goods, the obligations of the buyer and seller, remedies for breach of contract and other aspects of the contract. The Convention entered into force on 1 January 1988. • The United Nations Convention on the Carriage of Goods by Sea, 1978 (the "Hamburg Rules"). This Convention establishes a uniform legal regime governing the rights and obligations of shippers, carriers and consignees under a contract of carriage of goods by sea, and was prepared at the request of developing countries and entered into force on 1 November 1992. • The UNCITRAL Arbitration Rules. Adopted in 1976, the UNCITRAL Arbitration Rules provide a comprehensive set of procedural rules upon which parties may agree for the conduct of arbitral proceedings arising out of their commercial relationship. • The UNCITRAL Model Law on International Commercial Arbitration (1985) is designed to assist States in reforming and modernizing their laws on arbitral procedure so as to take into account the particular features and needs of international commercial arbitration. It has been enacted into law by a large number of jurisdictions from both developed and developing countries. 13 See generally UNCITRAL's website at: <www.uncitral.org>. - 16 -
  • 11. • Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958). • United Nations Convention on International Bills of Exchange and International Promissory Notes (New York, 1988). • UNCITRAL Model Law on International Credit Transfers (1992). • United Nations Convention on Independent Guarantees and Stand-by Letters of Credit (New York, 1995), will enter into force upon the deposit of 5 instruments of ratification, acceptance, approval or accession. • The UNCITRAL Model Law on Electronic Commerce (1996), is intended to facilitate the use of modern means of communications and storage of information, such as electronic data interchange (EDI), electronic mail and telecopy, with or without the use of such support as the Internet. It is based on the establishment of a functional equivalent for paper-based concepts such as "writing", "signature" and "original". • The UNCITRAL Model Law on Cross-Border Insolvency (1997) is to promote modern and fair legislation for cases where the insolvent debtor has assets in more than one State. The text deals with conditions under which the person administering a foreign insolvency proceeding has access to the courts of the State that has enacted the Model Law, determines conditions for recognition of a foreign insolvency proceeding and for granting relief to the representative of such foreign proceeding, permits courts and insolvency administrators from different countries to cooperate more effectively, and contains provisions on coordination of insolvency proceedings that take place concurrently in different States. During the thirty-fourth session of the Commission held at Vienna from June 25th to July 13th 2001, the Commission worked on a Draft Convention on Assignment of Receivables in International Trade and also adopted its 2001 Model Law on Electronic Signatures. Preparing for the agenda of the thirty-fifth UNICITRAL session to be held in New York form June 17-28 2002, the working groups are currently preparing the following topics: privately-financed infrastructure projects, arbitration, transport law, electronic commerce, arbitration, insolvency and security interests. 2) UNIDROIT The International Institute for the Unification of Private Law (UNIDROIT) 14, established in 1940 on the basis of a multilateral agreement, is an independent intergovernmental organization located in Rome. Its purpose is to examine ways of harmonizing and coordinating the private law of States and of groups of States, and to prepare gradually for the adoption by States of uniform rules of private law. Membership is restricted to States acceding to the UNIDROIT Statute and member states from the Americas include Argentina, Bolivia, Brazil, Canada, Chile, Colombia, Cuba, Mexico, Nicaragua, Paraguay, United States of America, Uruguay and Venezuela. UNIDROIT essentially has a three-tiered structure, made up of a Secretariat (executive organ), a Governing Council (supervises the policy aspects and draws the Work Program) and a General Assembly (ultimate decision-making organ with representative from 14 See generally UNIDROIT's website at: <www.unidroit.org>. - 17 -
  • 12. each member Government). The official languages of UNIDROIT are English, French, German, Italian and Spanish; its working languages are English and French. Many conventions have been drawn up by UNIDROIT and adopted at diplomatic Conferences convened by member States, such as the Convention relating to a Uniform Law on the International Sale of Goods (The Hague, 1964), the Convention on Agency in the International Sale of Goods (Geneva, 1983) and the UNIDROIT Convention on Stolen or Illegally Exported Cultural Objects (Rome, 1995). More recently, UNIDROIT has also taken the path towards informal harmonization, by preparing soft law instruments such as the UNIDROIT Guide to International Master Franchising (1998), which offers a comprehensive examination of the whole life of master franchise arrangements, from the negotiation and drafting of the master franchise agreement and other associated agreements, to the end of the relationship and its effects. However, the most successful UNIDROIT instruments is undoubtedly the UPICC, or Principles of International Commercial Contracts, published in 1994, which were the result of years of intensive comparative research and deliberations by a special Working Group composed of representatives of all the major legal systems of the world. The objective of the UNIDROIT Principles was to establish a balanced set of rules designed for use throughout the world irrespective of the legal traditions and the economic and political conditions of the countries in which they are to be applied. They are not a binding instrument because they lack governmental authority but reflect concepts to be found in the major legal systems while avoiding the use of terminology peculiar to any given legal system, and are specifically designed for the needs of international trade with characteristics such as fairness and flexibility. The UPICC find concrete application only if parties agree to incorporate them into their contract, and only in so far as they do not affect the rules of the applicable law from which the parties may not derogate, however, their influence has progressively expanded as they provide parties belonging to different legal systems or who speak different languages with a guide for drafting their contract, and the states courts and arbitrators with additional assistance when called upon to decide according to undefined “usages and customs of international trade” or to the enigmatic lex mercatoria15. The UPICC are proving to be extremely successful and UNIDROIT is currently preparing a new edition that will include new sections devoted to topics not yet addressed in the first edition. Other recent developments within UNIDROIT include the adoption of the Convention on International Interests in Mobile Equipment and the Protocol thereto on Matters specific to Aircraft Equipment, both adopted during a diplomatic Conference held in Cape Town from 29 October to 16 November 2001. The Working Group for the preparation of Principles and Rules of Transnational Civil Procedure, set up jointly by UNIDROIT and the American Law Institute, will hold its next meeting in May 2002 in Rome, and work is being pursued on the topic of International Interests in Mobile Equipment. 15 See generally Bonnel, Michael J., "The UNIDROIT Principles and Transnational Law", Uniform Law Review, vol 5, 2000-2, 199 and Rosett, Arthur, "UNIDROIT Principles and Harmonization of International Commercial Law: Focus on Chapter 7", Uniform Law Review, vol. 2, 1997, 441. - 18 -
  • 13. 3) Hague Conference on Private International Law The Hague Conference16 is an intergovernmental organization, whose purpose is “to work for the progressive unification of the rules of private international law”. The principal method used to achieve this objective consists in the negotiation and drafting of multilateral treaties (conventions) in the different fields of private international law (e.g. international judicial and administrative co-operation; conflict of laws for contracts, torts, maintenance obligations, status and protection of children, relations between spouses, wills and estates or trusts; jurisdiction and enforcement of foreign judgments). From 1951 to 1999 the Conference adopted 34 international Conventions. The institutional structure is composed of a secretariat - the Permanent Bureau, which prepares the Plenary Sessions and the Special Commissions and carries out the basic research required for any subject that the Conference takes up, a Council of Diplomatic Representatives of Member States that approves the budget of the Permanent Bureau, and the Plenary Sessions where each Member State has one vote (discuss and adopt the draft Conventions and decide on the subjects to be included in the agenda). There are currently 49 member States to the Hague Conference, and the members of the Americas are Argentina, Brazil, Canada, Chile, Mexico, Peru, United States of America, Uruguay, Venezuela. Among those Conventions that have been the most widely ratified, the following topics should be mentioned: civil procedure, service of process, taking of evidence abroad, conflicts of laws relating to testamentary dispositions, maintenance obligations, recognition of divorces, protection of minors, international child abduction and inter-country adoption. Some of the Hague Conventions deal with the determination of the applicable law, some with the conflict of jurisdictions, some with the recognition and enforcement of foreign judgments and some with administrative and judicial co-operation between authorities. The Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters is supposed to be adopted during 2002, and the current work agenda of the Hague Conference includes the future Convention on jurisdiction and foreign judgements in civil and commercial matters and the topic of collateral securities. Among the subjects identified in the agenda for the future work program of the Conference are the following: conflict of jurisdictions, applicable law and international judicial and administrative co-operation in respect of civil liability for environmental damage; problems of private international law raised by electronic data interchange; and maintenance (support) obligations. 16 See generally the Hague Conference's website at: <www.hcch.net/e/index.html>. - 19 -
  • 14. 4) European Union The main bodies of the European Union (EU)17 are the Council of Europe, which is the main decision-making body where each national government is represented, and has legislative and budgetary authority, the Commission, which is the executive body concerned with the interests of the EU as a whole, and which drafts and implements legislation, and the Parliament with elected representatives from member states that does the political supervision of all institutions and overviews the Commission. The EU Court of Justice has jurisdiction under community law over members, individuals, institutions and businesses, and the Court of Auditors oversees the management of the EU budget. European legislation is composed of directives, regulations and decisions18. In the area of law relating to undertakings, the legislation in force covers the following topics: company law (for instance, Directive 78/855/EEC concerning mergers of public limited liability companies, Directive 89/666/EEC concerning disclosure requirements in respect of international branches, Directive 90/434/EEC on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different member states), intellectual property law (e.g. Directive 91/250/EEC on the legal protection of computer programs, Directive 93/83/EEC on the coordination of certain rules concerning copyrights and rights related to copyright applicable to satellite broadcasting and cable retransmission) and business procedures (e.g. Directive 2000/35/EC on combating late payment in commercial transactions). In particular, it is noted that the company law directives in harmonizing and unifying aspects of member states law have been very successful, on issues such as disclosure, shareholder protection, standards for statutory auditors and accounting. The harmonization of company law has long been a goal of the European union, mandated by Article 220 of the Treaty of Rome. Recently, the Commission also succeeded in creating a supranational form of company, a “Societas Europea” (SE), with the objective of promoting the formation of larger companies with greater economies of scale, allowing them to compete more efficiently on global markets19. Again, the rationale is that following a single set of rules, instead of having to establish each foreign subsidiaries under individual member state law, is more efficient and thus facilitate expansion of economic activities. . But going beyond these efforts, the EU must also address the challenge of achieving greater harmonization of its various legal systems, especially in the area of contract law, the legal basis for cross border transactions being one of the main catalysts of trade. With the 1980 Rome Convention on the Law Applicable to Contractual Obligations, a uniform conflict of laws approach was provided; however, harmonized private international law does not ensure that the same case will receive the same judgement anywhere in the EU. The necessity of developing a body of uniform contract law became more apparent. Instruments 17 See generally the European Union's website at: <www.europa.eu.int>. 18 See the excellent European Union legal database available at the following: <www.europa.eu.int/ eur-lex/en/index.html>. 19 See Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company (SE) Official Journal L 294 , 10/11/2001 P. 0001 - 0021. - 20 -
  • 15. in particular fields such as products liability, late commercial payments, and cross-border credits transfers have been adopted. The Commission on European Contract Law created in 1976 finally presented the Principles of European Contract Law (PECL) in 1999, covering some fundamental principles of contract law and rules concerning performance, remedies in case of non- performance, formation, interpretation, validity of contracts and authority of agents. Most European Community legislation in the area of contract law had been so far dealing with consumer protection. However the PECL have remained completely in the shadow of the UPICC and the value of the PECL has been questioned, especially considering the fact that PECL and the UPICC could resemble two similar sets of rules for the same purpose. Still, the PECL address some specifics related to the Europeanisation of trade, deal with more issues than the UPICC (e.g. authority of agents), set forth general rules for contract law, unlike the UPICC that restrict their application to commercial contracts (excluding consumers), and offer the prospect of inclusion in a future codification. The Commission on European Contract Law has now determined four different approaches to the future development of contract law: (a) leaving solutions to the “market”, (b) developing “non- binding” common contract law principles” in Restatement-like form, (c) improving and refining existing European-level law, and (d) adopting a new code-like instrument at the European level20. 5) Ohada The Organization for Harmonization of African Business Laws (OHADA) 21 was established by a Treaty between African countries in the Franc zone, signed on October 7, 1993 and entered into force on July 1995. The objective is the implementation of a modern harmonized legal framework in the area of business laws in order to promote investment and develop economic growth. The Treaty calls for the elaboration of uniform acts to be directly applicable in member states notwithstanding any provision of domestic law. OHADA consists of a Council of Ministers assisted by a Permanent Secretary, and a Common Court of Justice and Arbitration (CCJA). To date, the Uniform Acts that were adopted deal with General Business Law, Company Laws and Pooling of Economic Interest, Organization of Securities, Bankruptcy law, Debt collection and Enforcement law, Accounting law and Arbitration. This legislation is affecting business operations, such as gas and oil activities that are of particular interest for foreign investors. This new legal framework also provides a mechanism for the settlement of disputes, one of the goals of the Treaty being to establish judicial security in the countries involved. The CCJA has jurisdiction over judicial (it rules on decisions rendered by the courts of appeal of the member states) and arbitration matters (supervisory role to the appointed arbitrators and granting enforceable status to the award), thus ensuring the harmonized interpretation of the Treaty, Uniform Acts and corresponding regulation and arbitration agreements22. 20 See "Communication from the Commission to the Council and the European Parliament on European Contract Law", Brussels, 11.07.01, COM 2001 398 Final, available at : <europa.eu.int/eur- lex/en/com/cnc/2001/com2001_0398en01.pdf>. 21 See generally OHADA's website at: <www.ohada.com>. - 21 -
  • 16. III. The Americas: Characteristics and Prospects A) Significance and Impact of the FTAA Negotiations The whole region of Latin American and the Caribbean has gone through incredible transformations during the last decade. While conflicts still persist in certain countries, democratically elected leaders and governments profoundly changed trade policies and renewed emphasis has been placed on growth and sound macroeconomic policies. Great inequality persists and poverty is still far from being eradicated, but current trends place international trade, supported by multilateral and regional trade agreements as well as the improvement of domestic private sector entities, at the center of development policy along with institutional reforms. The currently negotiated FTAA23, a free trade zone that would encompass all the Western Hemisphere, is consistent with the framework of promoting prosperity through economic integration and free trade. But FTAA negotiations have also been useful in providing a table for discussing various policies, related to trade but also to other issues such as democracy, cooperation and sustainable development, and in promoting good governance and transparent rule-making. In that sense those negotiations represent a fundamental undertaking, and a great opportunity to initiate a reflection on the need for legal modernization and facilitation of business transactions24. Since the prospects offered by the creation of the FTAA will, over a certain period of time, favor increased commercial ties throughout the Hemisphere, a harmonized common set of rules applicable to cross border transactions would allow to benefit even more from the advantages brought by the FTAA. Business facilitation measures have already been adopted25. Those deal with customs-related business facilitation measures and procedures, and transparency-related measures such as the creation of a Tariff Database, the foreign investment Report, visa requirements for business travelers and commercial arbitration. The FTAA also presents major challenges for the domestic legal systems of the participating countries, both at the substantive legal and judicial levels. First of all, the scope of the topics covered is even broader than at the WTO level, whose agenda after 1995 included not only tariff barriers and trade in goods as with the GATT, but also, for instance, services (GATS), intellectual property (TRIPS) and non-tariff barriers (NTBs). The WTO also adopted a new and improved mechanism for the settlement of disputes and other newly regulated sectors include agriculture and textile, and telecommunications and financial 22 Issa-Sayeh, Joseph, "Quelques aspects techniques de l'intégration juridique: l'exemple des actes uniformes de l'OHADA", Uniform Law Review, vol. 4, 1999, 5. 23 For detailed information on the Free Trade Area of the Americas, please consult the FTAA official website at: <www.ftaa-alca.org/>. 24 Salazar-Xirinachs, José M., and Parga, César, "El Area de Libre Comercio de las Américas (ALCA): Desafíos para los sistemas jurídicos y judiciales", paper presented at the conference "El Sistema Interamericano Frente al Nuevo Siglo", Colombia, March 2001, available at : <www.oas.org/ juridico/spanish/salazar.htm>. 25 See for instance custom-related measures adopted at the Toronto Ministerial meeting held November 4, 1999 and available at: <www.sice.oas.org/FTAA/Toronto/minis/minisA2e.asp>. - 22 -
  • 17. services. As the GATT/WTO framework grew in scope and complexity, simply reducing and removing barriers to trade became insufficient to implement the result of binding multilateral commercial negotiations. Now, the agreements dealing with “new” subject matters such as services and intellectual property rights often require that the member states implement changes to their domestic legislation or even adopt new policies, practices or procedures in certain sectors. From purely negative integration, i.e. removing obstacles to commerce, we are progressively moving toward global positive integration, i.e. member states having to proactively implement new commercial rules following the prescriptions of a multilateral agreement. This will also be true in the case of the FTAA, an agreement that is foreseen to cover even more sectors than the WTO, such as investment, competition and procurement, and also go deeper in its coverage, which means further liberalizing market access, agriculture and subsidies, antidumping and countervailing duties and internet-related measures 26. FTAA members who already have had to update their legislation with multilateral prescriptions (WTO) and sub-regional ones (from NAFTA, MERCOSUR, CACM, ANC, CARICOM), will also have to implement a further set of regulations to comply with the hemispheric free trade agreement. In addition, the FTAA negotiations currently have to take into account the coexistence of two distinct legal systems, which somewhat complicates the goal of establishing general principles of universal application and easy to incorporate in the domestic framework. It has to be remembered that an eventual FTAA would encompass not only 34 member States, but also more than 130 private law jurisdictions. The FTAA will definitively influence legal and judicial developments in the Hemisphere27. And this highlights in turn the importance of also adapting to the changes and modernizing the law “from below”, i.e. developing new rules applicable to private parties at the transaction-level. And similarly to the FTAA rules developed “from above”, those will also have to take into account the issue of hemispheric bijuralism. B) Coexistence of Two Major Legal Systems While both common law and civil law systems share social objectives such as individualism, liberalism and personal rights, they are very distinctive in their origins, substance, approach, style, and interpretation. Civil law is highly systematized and structured and relies on declarations of broad, general principles, while common law is much more detailed in its prescriptions, since the principles are generally outlined in reported judgments in relation to specific facts; these differences are also reflected in the functions and style of doctrine, jurisprudence and statutes28. 26 For an overview of the distinctions between the FTAA and the WTO processes, see Salazar- Xirinachs, J.M., "The Trade Agenda in the Context of the Inter-American System", OAS Trade Unit, March 2000, article available at: <www.sice.oas.org/geograph/intdocs_e.asp>. 27 See generally Salazar-Xirinachs, José M., and Parga, César, "El Area de Libre Comercio de las Americas (ALCA): Desafios para los sistemas juridicos y judiciales", paper presented at the conference "El Sistema Interamericano Frente al Nuevo Siglo", Colombia, March 2001, available at : <www.oas.org/juridico/spanish/salazar.htm>. 28 Tetley, Q.C., William, "Mixed Jurisdictions: Common Law vs Civil Law (codified and uncodified)", Part I, Uniform Law Review, vol. 4, 1999, 591. - 23 -
  • 18. While any attempt to pursue a certain degree of harmonization between various countries presents challenges, the difficulty of the task increases when those two different legal systems are considered, such as in the region of the Americas. Civil law regimes, based on the romano-germanic legal tradition, place the law as the model of social organization, with a codification of the principles and norms that are to govern relations between private parties, based upon notions such as justice and equity. On the other hand, the common law derives from the jurisdiction of the English royal courts, which heavily emphasized the procedural aspect of the law rather than the substantive one, and rejected the codification process. Judgments are based mainly upon judicial precedents instead of codified rules: contrary to the civil law tradition, there are much less applicable general principles29. There are thus major conceptual gaps between the two major legal traditions and such fundamental differences are reflected in the way relations between private parties are foreseen. Typically, civil law rules will appear too brief and general to the common law lawyer; the civil law lawyer will use a language more similar to the concise style of the French inspired civil codes in contrast to the more detailed drafting style prevalent for common law rules. In addition, translating common law concepts in a Spanish or French contract when those rules have evolved in English does present a challenge. At the substantive level, the formation of the contract and related countervalue requirement, implied warranties, force majeure clause and remedy issues, are all examples where civil law and common law diverge 30. Other basic differences in contract are found in the award of damages and economic loss, pre-judgment interests, conflicts of law or private international law, forum non conveniens, arbitration, interpretation and construction of contracts. Other fields where the differences are substantial include equity, floating charges, assignment, trust and agency and land law and possession. Key international contracts may also be foreseen differently, such as international representation, where the legal relationship between foreign companies and local agents, distributors or licensees is much more regulated in civil law countries. However, it is interesting to note that civil and common law traditions have grown closer, not only with the development of harmonizing legislation in the European Union or through the creation of multilateral instruments reconciling both legal systems such as the UPICC, but also at the domestic level, for instance through the incorporation of civilian principles in the US Uniform Commercial Code (UCC). Other examples include the adoption of a California civil code and the fact that the number of statutes has greatly increased, and that statutes have even taken precedence over common law for most of commercial law. Therefore, in practice the divergences between civil and common law are far from presenting insurmountable problems and many can be resolved contractually. However, it is still necessary for the legal practitioners involved in a transaction between two parties located in jurisdictions governed by different legal systems to acknowledge and reconcile those differences. A truly efficient and useful inter-American instrument thus has to take into account hemispheric bijuralism. 29 Ibid. 30 Tetley, Q.C., William, "Mixed Jurisdictions: Common Law vs Civil Law (codified and uncodified)", Part II, Uniform Law Review, vol. 4, 1999, 877. - 24 -
  • 19. C) Organization of American States (OAS) 1) Evolution of the Inter-American Codification Process The OAS Inter-American Juridical Committee (IAJC) is charged with promoting the progressive development and the codification of international public and private law and to study juridical problems related to the integration of the countries of the Hemisphere and the possibility of attaining uniformity in their legislation. The IAJC has worked on a number a different issues and has elaborated many studies and draft conventions for the Inter American Specialized Conference on International Private International Law (CIDIP). (It is to be noted that the term “private international law” in civil law basically refers to “conflict of laws” in common law, which includes choice of law, choice of jurisdiction and recognition of foreign judgments). In the field of public international law, areas covered include diplomatic asylum, pacific resolution of disputes, hemispheric security, protection of the rights of women, extradition, and more particularly human rights, with the creation of an Inter-American System of Human Rights constituted by a Commission and a Court. More recently, emphasis was placed on the issue of corruption with the Inter-American Convention Against Corruption adopted in 1996. Current and future legal issues of concern to the OAS are the consolidation of democracy, economic integration and free trade, strengthening of the administration of justice, cybercrime, and combat against money laundering and drug trafficking. In the field of private international law, the countries of the Hemisphere have always placed great emphasis on the codification of conflict of laws rules. This codification basically went through two different phases: idealistic with global attempts at codification and then more pragmatic with a sectored and progressive approach to the codification process31. Following the Montevideo Treaties (1889), the Bustamante Code, adopted in 1928 during the Sixth Pan-American Conference, was the first code totally dedicated to this subject matter, and a good example of the first period, where global codification, i.e. creating a code containing all the areas related with conflict of laws, was perceived as the goal to attain. After several years of unsuccessful attempts, the General Assembly called for the first CIDIP, which renewed the OAS codification process: from now on, only certain areas would be examined. Since 1975, six CIPIDs took place during which twenty-four conventions were adopted and 4 additional protocols32. In addition to the General Rules of Private international Law, the various instruments basically relate to conflict of law rules in three categories: (1) international commercial law, covering topics such as bills of exchange, checks, promissory notes and invoices, international commercial arbitration, commercial companies, international carriage 31 Maekelt, T., "El Desarollo del Derecho Internacional Privado en las Américas: las Conferencias Especializadas Interamericanas en Derecho Internacional Privado (CIDIPs)", paper presented at the conference "El Sistema Interamericano Frente al Nuevo Siglo", Colombia, March 2001, available at: <www.oas.org/juridico/spanish/tatiana_maekelt.htm>. 32 To access all inter-American treaties, see the Inter-American System of Legal Information operated by the Department of Legal Cooperation and Information at: <www.oas.org/juridico/english>. - 25 -
  • 20. of goods by road and law applicable to international contracts, (2) international procedural civil law, dealing with issues like rogatory letters, taking of evidence abroad, legal regime of powers of attorney to be used abroad, extraterritorial validity of foreign judgments and arbitral awards, execution of preventive measures, proof and information on foreign law, jurisdiction in the international sphere for the extraterritorial validity of foreign judgments, and (3) international civil law, where the focus was placed on the domicile of natural persons and personality and capacity of juridical persons, but most of all the protection of children, with themes such as adoption of minors, return of children, support obligations, and international traffic in minors. With the re-emergence of the interest for private relations, due to the increased political stability in the OAS member states and the renewed importance of private sector development and international trade for economic development, CIDIP is increasingly focusing on the commercial field. This was reflected most notably in the agenda for CIDIP- VI, held at the OAS headquarters in Washington D.C. from February 4 to 8th, 2002, where the following three instruments were considered: (1) a model inter-American law on secured transactions (dealing with international loan contracts of a private nature, in particular the uniformity and harmonization of international laws governing transactions secured with movable property, commercial and financial guarantees), (2) a protocol on bills of lading – standardized commercial documentation for international transportation, and (3) conflicts of laws on extra-contractual liability, with emphasis on competency of jurisdiction and applicable law with respect to civil international liability for transboundary pollution33. While CIDIP had previously taken the path of codification, a radical way of pursuing harmonization, which did not succeed as expected when one considers the very low level of ratifications for the majority of the inter-American conventions produced by the CIDIP process. Significantly, Canada, Brazil and the United States have been very reluctant to adhere to CIDIP conventions. Many factors explain this, such as the emphasis on Latin- American legal tradition, the lack of preparatory working papers, work agendas too broad for the short period of time of the conference, lack of expertise in certain delegations, political factors, states preferring to focus on multilateral instruments, and the formalism of a ratification process34. However, CIDIP is now on the way of using more flexible methods of harmonization, such as drafting model laws, which is more in tune with recent international trends that point towards the elaboration of soft law instruments. Another recent addition to the CIDIP process is the new attention given to closing the gap between the differences resulting from the co-existence of civil law and common law in the Americas. While both major legal systems are represented in the Americas, for a long time it could be said that the common law perspective was not well integrated into the inter- American instruments. However, since Canada became an OAS member in 1990, new attention was paid to the issues raised by federalism and common law, in its American (US) version as well as the more British one represented by Canada (to the exception of the 33 The Final Act of the Sixth Inter-American Specialized Conference on Private international Law (CIDIP VI) is available at: < http://www.oas.org/juridico/english/cidip_vi.html>. 34 See Maekelt, T., "El Desarollo del derecho internacional privado en las Americas: las Conferencias Especializadas Interamericanas en Derecho Internacional Privado (CIDIPs)", paper presented at the conference "El Sistema Interamericano Frente al Nuevo Siglo", Colombia, March 2001, available at: <www.oas.org/juridico/spanish/tatiana_maekelt.htm>. - 26 -
  • 21. province of Quebec) and the Caribbean. It remains to be seen whether this new approach combined with the new emphasis on private relations and commercial undertakings, will return CIDIP to the forefront of international legal developments. 2) Exploring New Possibilities The great economic and social transformations caused by the multifaceted globalization process are also impelling changes at the legal level. International trade and related legal reforms have been identified as paramount to further economic and social development in the Americas. In addition, regional economic integration would benefit from the successful development of new inter-American soft law instruments in commercial matters since some of the obstacles to integration would be eliminated through commercial harmonization. Successful harmonization would also be conducive of further trade and investment in the region, additional business exchanges and strengthened trade facilitation mechanisms, and contribute to poverty reduction. While many types of harmonization processes are currently advancing in parallel, the OAS and its member states should explore new possibilities and alternatives,. taking into account past success and failures in the history of inter-American codification: The challenge is to develop harmonization tools that produce better law in relevant legal areas35. We have to acknowledge the need to pursue an in-depth reflection on those issues. As further evidence of their relevance, one can note that the Congress to be held in September 2002 in celebration of the 75th anniversary of the founding of UNIDROIT will focus on "Worldwide Harmonization of Private Law and Regional Economic Integration". An organization such as the OAS should be increasingly involved in the harmonized modernization of the law governing commercial transactions. IV. Conclusion With this project entitled "Legal Harmonization in the Americas: Business Transactions, Bijuralism and the OAS" and developed in collaboration with the Canadian International Development Agency (CIDA), the objective of the Secretariat for Legal Affairs is to assess the opportunities offered by legal harmonization and standardization for certain business transactions, and whether they would lead to the development of new instruments facilitating cross-border transactions and investment within the Hemisphere. As mentioned before, it seemed that this initiative was particularly relevant taking into account not only the current FTAA negotiations and CIDIP’s restructuring process, but also the current trend of other multilateral bodies working towards the creation of transnational legal norms in commercial areas. We discussed the fact that bottom-level legal integration within the Americas is, and should be, pursued through processes of informal harmonization. However, the need for more affirmative measures can be found when examining the current inter-American 35 Rosset, Arthur, "UNIDROIT Principles and Harmonization of International Commercial Law: Focus on Chapter 7", Uniform Law Review, vol. 2, 1997, 441. - 27 -
  • 22. context, with the growing importance of cross-border transactions and the FTAA negotiations, and the need to reconcile in some instances diverging common and civil law principles. The development of those new measures should follow the “informal” path, i.e. flexible soft law instruments, address the specific issues affecting inter-American business transactions, not duplicate topics already developed in other multilateral forums, and also take into account the opinion of the private commercial actors involved in the day to day practice of inter-American trade. Moreover, flexibility becomes highly desirable because changes in world economic structures are hardly complete and as international trade disciplines and practices continue to evolve, the legal structure for inter-American transactions must have the flexibility to grow and remain relevant. As mentioned previously, this publication may be considered as an "exploratory phase" of the commercial topics that could be further examined in the future. We invite you to consult the experts articles gathered for this publication and dealing with cross-border transactions in the Americas, bijuralism, and the opportunities for further legal harmonization in certain commercial areas. Our diverse group of experts also issued some recommendations and ideas for legal co-operation mechanisms which should positively contribute to the elaboration of future legal projects and action plans. Given the current inter-American context, we believe that flexible commercial harmonization mechanisms should be further examined and developed. - 28 -

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