Strategies for the Enforcement of International Conventions

Transcription

1 International Academy of Comparative Law Académie internationale de droit comparé Thematic Congress of Comparative Law Enforcement and Effectiveness of the Law Montevideo, November 2016 Strategies for the Enforcement of International Conventions José Angelo Estrella Faria Secretary-General UNIDROIT

2 Strategies for the Enforcement of International Conventions Introduction Understanding enforcement and assessing effectiveness of international conventions Treaty-making process and implementation weakness Reliance on voluntary State compliance Strategies for enforcement: promoting ratification Acknowledging the obstacles to ratification Raising political interest for international conventions Strategies for enforcement: alternatives to conventions Conventions still seen as best instrument for unification The supporting role of soft law methods of harmonization

3 Introduction: UNIDROIT and its work Originally set up in 1926 as an auxiliary organ of the League of Nations, and re-established in 1940 as an independent organisation on the basis of a multilateral treaty (UNIDROIT Statute) Governing Council and General Assembly Appointed by member States Take policy decisions Study Groups and Committees of governmental experts Composed of experts Takes substantive Operate by consensus Secretariat

4 Introduction: UNIDROIT and its work Currently 63 member States Egypt, Nigeria, South Africa and Tunisia Argentina, Bolivia, Brazil, Canada, Chile, Colombia, Cuba, Mexico, Nicaragua, Paraguay, the United States of America, Uruguay and Venezuela Australia, China, India, the Islamic Republic of Iran, Iraq, Japan, Pakistan, the Republic of Korea and Saudi Arabia Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, the Holy See, Hungary, Ireland, Israel, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Norway, Poland, Portugal, Romania, the Russian Federation, San Marino, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey and the United Kingdom In all regions Africa The Americas Asia-Pacific Europe

5 Introduction: main achievements Since 1964 eleven Conventions adopted under the auspices of UNIDROIT itself or other intergovernmental Organisations (UNCITRAL, UN/ECE, Hague Conference on Private International Law, Council of Europe), including: Convention Providing a Uniform Law on the Form of an International Will Washington, D.C. 1973) UNIDROIT Convention on International Financial Leasing UNIDROIT Convention on International Financial Factoring (Ottawa, 1988) Convention on Stolen or Illegally Exported Cultural Objects (Rome, 1995) Convention on International Interests in Mobile Equipment (Cape Town, 2001), with Aircraft (2001), Rail (2007) and Space (2012) Protocols Convention on Substantive Rules for Intermediated Securities (Geneva, 2009)

6 Introduction: UNIDROIT and its work UNIDROIT Principles of International Commercial Contracts (1994, 2004 and 2010) UNIDROIT Guide to International Master Franchise Arrangements (1998) ALI/UNIDROIT Principles of Transnational Civil Procedure (2004) UNIDROIT Model Franchise Disclosure Law (2002) UNIDROIT Model Law on Leasing (2008) UNESCO-UNIDROIT Model Legislative Provisions on State ownership of undiscovered cultural objects (2011) UNIDROIT Principles on the Operation of Close-Out Netting Provisions (2012) UNIDROIT/FAO/IFAD Legal Guide on Contract Farming (2015)

7 Introduction: main international conventions on substantive private law Sale of goods UN Convention on Contracts for the International Sale of Goods (Vienna, 1980): 85 States International commercial arbitration UN Convention on Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958): 156 States Secured transactions Convention on International Interests in Mobile Equipment (Cape Town, 2001): 72 States Aircraft (2001): 65 States; Rail (2007) and Space (2012) Protocols (not yet in force)

8 Introduction: main international conventions on substantive private law Carriage of Goods by Sea: International Convention for the Unification of Certain Rules of Law Relating to Bills Of Lading ( Hague Rules, 1924 ): 86 States; 1968 Protocol ( Hague-Visby ): 24 States; 1979 Protocol ( SDR Protocol ): 19 States United Nations Convention on the Carriage of Goods by Sea ( Hamburg Rules, 1978): 34 States United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea ( Rotterdam Rules, 2008): 3 States Carriage of Goods by Air: Convention for the Unification of certain rules relating to international carriage by air ( Warsaw Convention, 1929): 152 States; Hague Protocol (1955): 137 States; Montreal Convention (1999): 114 States

9 Introduction: main international conventions on substantive private law Carriage of Goods by Rail: Convention concerning International Carriage by Rail (COTIF, 1980): 50 States Carriage of Goods by Road: Convention on the Contract for the International Carriage of Goods by Road (CMR 1956): 55 States

10 Understanding enforcement and assessing effectiveness of international conventions Treaty-making process and implementation weakness No obligation to ratify international conventions Freedom of expressing consent to be bound by a convention Apart from EU, no organisation can compel ratification by States Absence of control mechanisms of treaty implementation Domestic effectiveness subject to constitutional requirements Uniform law conventions have not used review mechanisms

11 Understanding enforcement and assessing effectiveness of international conventions Reliance on voluntary State compliance No adequate sanctions mechanism for treaty violation Uniform law treaties contain no explicit sanctions regime No incentive for States to monitor compliance No monitoring of court application Governments not involved in court interpretation No international coordination of case law

12 Understanding enforcement and assessing effectiveness of international conventions If effectiveness is seen as a function of the number of ratifications, there has have very few effective international conventions in the area of substantive private law since the adoption of the CISG (i.e. in the last 35 years!) If effectiveness is seen as a function of the intrinsic quality of the instrument and its influence on subsequent legislation and legal thinking, many instruments may be seen as effective even if they were never applied by courts as binding law

13 Understanding enforcement and assessing effectiveness of international conventions If enforcement is understood as mandatory application by courts, the most widely enforced international conventions are the area of carriage of goods If enforcement is understood as uniformity in domestic legislative incorporation and judicial interpretation, the lowest level of enforcement is in the area of carriage by sea, even though this is the area wit the highest standardisation of contract practice (voluntary incorporation by reference)

14 Strategies for enforcement: promoting ratification Acknowledging the obstacles to ratification Uniform law instruments attract low political interest Complexity of ministerial structures and consultation process Low priority in parliamentary agendas Economic benefit is not easily if at all quantifiable Assessing the value of default law Lack of standard methodology Raising political interest for international conventions Need to demonstrate feasibility of new uniform law instruments Feasibility studies should extend beyond legal technicalities Need to identify and involve industry and practitioners Role of impact assessment of uniform law Need for systematic economic impact assessment of conventions Need to identify proper data and methodology, in particular for social (non economic) benefit

15 Strategies for enforcement: promoting ratification The Cape Town Convention: a case study Legal risks in equipment financing: Traditional approach (lex rei sitae) not suited for highly mobile assets (Blue Sky v. Mahan Air) Legal systems vary in their approach to recognition of security interests (e.g. title-retention and leasing agreements), the process for enforcement, and the remedies available Legal uncertainty = higher risk = higher costs General purpose of the Cape Town Convention: to encourage finance and reduce its cost by introducing a sound, internationally adopted legal regime for the creation and enforcement of security interests in highvalue mobile equipment

16 Strategies for enforcement: promoting ratification The Cape Town Convention: a case study Challenges: Diversity of deep-rooted legal theories characterising security interests Political sensitivity of property and insolvency law Solutions: Cape Town offers clear rules for establishing priority, including as against interests under domestic law and provides the creditor with a range of basic default and insolvency-related remedies and, in case of default, a means of obtaining speedy interim relief pending final determination of its claim on the merits Cape Town established an electronic international registry for the registration of international interests to give notice to third parties and enable the creditor to preserve its priority

17 Strategies for enforcement: promoting ratification The Cape Town Convention: a case study Flexible, evolving structure Convention establishes a common core of principles Equipment-specific protocols allow for adaptation to the needs of particular industries (aircraft, rail, space assets) System of declarations Contracting States are permitted to make declarations modifying the operation of some provisions Contracting States have taken different approaches in choosing which declarations to make Convention may apply in different ways to different Contracting States, according to declarations made

18 Strategies for enforcement: promoting ratification The Cape Town Convention: a case study (71 ratifications )

19 Strategies for enforcement: promoting ratification The Cape Town Convention: a case study International security interests registry operated by Aviareto, a private company, by appointment and under the supervision of International Civil Aviation Organisation (ICAO) Fully electronic registry accessible to 24/7 More than 600,000 entries since 2006

20 Strategies for enforcement: promoting ratification The Cape Town Convention: a case study OECD Aircraft Sector Understanding (ASU) negotiated as part of the OECD Arrangement on Officially Supported Export Credits negotiated to avoid unfair competition through subsidised export credit rates sets out the most favourable terms and conditions on which officially supported export credits may be provided. ASU authorizes participating agencies to grant a reduction of 10% off the minimum premium rate ( Cape Town Discount ) if the aircraft operator is based in a country that ratified the Cape Town Convention

21 Strategies for enforcement: promoting ratification The Cape Town Convention: a case study Economic impact - savings though short aircraft repossession delay Upfront risk fee reduction (% of the loan principal) ranging from 0.26% for a AAA credit rating all the way up to 6.96% for CCC/C-rated debtors Assuming B8 average airline credit rating and US$4,728 billion aircraft orders in (Airline Monitor s forecast) and US$4,018 billion financing need (85% of total orders), US$161 billion total savings due to reducing the worldwide repossession delay from ten to two months

22 Strategies for enforcement: alternatives to conventions Conventions still seen as best instrument for unification Ensure greater uniformity, often rank higher than ordinary statutes Conventions (formally) preclude unilateral changes Conventions cannot be displaced by domestic law (in principle) Uniform treaty language offers basis for uniform interpretation However, need for consensus leads to exclusion of sensitive matters, and Takes longer to negotiate and implement and is more difficult to amend and update The supporting role of soft law methods of harmonization Model laws, principles and guides are flexible, leave room for adaptation and are easier to amend and update Soft law permits States to adjust language to domestic drafting standards International amendments to soft law instruments do not require lengthy negotiation process Soft law permits to address sensitive issues Flexibility of soft law can accommodate options for different legal families or policy choices Soft law allows domestic deviations on matters on which international consensus is not possible

23 Strategies for enforcement: alternatives to conventions The UNIDROIT Principles: a case study Result of an extensive work of comparative law launched in the 1980s Developed by a working group comprised of eminent experts on contract law and comparative law representing all continents and the most important legal systems of the World Like the CISG, the Principles represent an effort to harmonise the law of international contracts through rules that are Acceptable in different legal systems Drafted to address the special needs of international trade Unlike the CISG, the Principles Have no binding force Are not limited to one type of contract and cover a wide spectrum of subjects on the law of obligations (contract formation, conditions, validity, performance, breach of contract, agency, third party rights, set off, assignment, limitation periods, restitution, plurality of obligors and obligees)

24 Strategies for enforcement: alternatives to conventions The UNIDROIT Principles: a case study 27% as governing law, by party choice Arbitral awards : 90% (24% of total) Court judgments: 10% (3% of total) 25% invoked to corroborate the conformity of applicable law with the needs of international trade Arbitral awards: 57% (14% of total) Court judgments: 43% (11% of total) 33% as a supplement to the interpretation of national law Arbitral awards: 36% (12% of total) Court judgments: 64% (21% of total) 15% as a supplement to the interpretation of uniform law Arbitral awards: 57% (10% of total) Court judgments: 43% (5% of total) Source: Eleonora Finazzi Agrò, The Impact of the UNIDROIT Principles in International Dispute Resolution in Figures, Uniform Law Review, 2011,

25 Strategies for enforcement: alternatives to conventions The UNIDROIT Principles: a case study The UNIDROIT Principles and the CISG in transition economies The new Civil code of the Russian Federation The Estonian Law of Obligations The Civil Code of Lithuania The Law of Contracts of the People s Republic of China The UNIDROIT and the CISG in recent Western codifications The reform of the German law of obligations The draft new mercantile Code of Spain The new Civil Code of Argentina The reform of the Japanese Civil code The contract law reform in France

26 Strategies for enforcement: alternatives to conventions The UNIDROIT Principles: a case study The UNIDROIT Principles and domestic law A tool to interpret foreign applicable law The Principles and domestic law The UNIDROIT Principles and uniform law instruments Role for the Principle under CISG Art. 7 The principles and other uniform law instruments

27 Evaluation of Commercial Law Harmonisation Enforcement and effectiveness may not always be adequate parameters for assessing the value of conventions in the private law area, but international organisations must in any event recognise the limits of the instruments they produce and the possible shortcomings of their working methods Conventions are still the preferred instrument for unification, but if overused may lead to a low level of ratification or lack of interest by the major trading nations, thus risk discrediting the treaty-making process. Legal harmonisation efforts must consider carefully not only the legal feasibility but also the economic and social impact of a project and devise ways for securing political interest and involvement of industry and practitioners, for instance, by systematically conducting impact assessments Soft law instruments are useful complements to international conventions by offering a common language, supporting uniform interpretation and promoting the alignment of domestic law with international standards