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UNCITRAL Model Law on Electronic Commerce (1996) with additional article 5 bis as adopted in 1998 and Guide to Enactment

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Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce (1996)

   149

III. HISTORY AND BACKGROUND OF THE MODEL LAW

   492

[History and Background]

 
<< ~/. >>

[History and Background]

123. The UNCITRAL Model Law on Electronic Commerce was adopted by the United Nations Commission on International Trade Law (UNCITRAL) in 1996 in furtherance of its mandate to promote the harmonization and unification of international trade law, so as to remove unnecessary obstacles to international trade caused by inadequacies and divergences in the law affecting trade. Over the past quarter of a century, UNCITRAL, whose membership consists of States from all regions and of all levels of economic development, has implemented its mandate by formulating international conventions (the United Nations Conventions on Contracts for the International Sale of Goods, on the Limitation Period in the International Sale of Goods, on the Carriage of Goods by Sea, 1978 ("Hamburg Rules"), on the Liability of Operators of Transport Terminals in International Trade, on International Bills of Exchange and International Promissory Notes, and on Independent Guarantees and Stand-by Letters of Credit), model laws (the UNCITRAL Model Laws on International Commercial Arbitration, on International Credit Transfers and on Procurement of Goods, Construction and Services), the UNCITRAL Arbitration Rules, the UNCITRAL Conciliation Rules, and legal guides (on construction contracts, countertrade transactions and electronic funds transfers).

  493

124. The Model Law was prepared in response to a major change in the means by which communications are made between parties using computerized or other modern techniques in doing business (sometimes referred to as "trading partners"). The Model Law is intended to serve as a model to countries for the evaluation and modernization of certain aspects of their laws and practices in the field of commercial relationships involving the use of computerized or other modern communication techniques, and for the establishment of relevant legislation where none presently exists. The text of the Model Law, as reproduced above, is set forth in annex I to the report of UNCITRAL on the work of its twenty-ninth session.

  494

125. The Commission, at its seventeenth session (1984), considered a report of the Secretary-General entitled "Legal aspects of automatic data processing" (A/CN.9/254), which identified several legal issues relating to the legal value of computer records, the requirement of a "writing", authentication, general conditions, liability and bills of lading. The Commission took note of a report of the Working Party on Facilitation of International Trade Procedures (WP.4), which is jointly sponsored by the Economic Commission for Europe and the United Nations Conference on Trade and Development, and is responsible for the development of UN/EDIFACT standard messages. That report suggested that, since the legal problems arising in this field were essentially those of international trade law, the Commission as the core legal body in the field of international trade law appeared to be the appropriate central forum to undertake and coordinate the necessary action. The Commission decided to place the subject of the legal implications of automatic data processing to the flow of international trade on its programme of work as a priority item.

  495

126. At its eighteenth session (1985), the Commission had before it a report by the Secretariat entitled "Legal value of computer records" (A/CN.9/265). That report came to the conclusion that, on a global level, there were fewer problems in the use of data stored in computers as evidence in litigation than might have been expected. It noted that a more serious legal obstacle to the use of computers and computer-to-computer telecommunications in international trade arose out of requirements that documents had to be signed or be in paper form. After discussion of the report, the Commission adopted the following recommendation, which expresses some of the principles on which the Model Law is based:

  496


"The United Nations Commission on International Trade Law,

 
  497

"Noting that the use of automatic data processing (ADP) is about to become firmly established throughout the world in many phases of domestic and international trade as well as in administrative services,

  498

"Noting also that legal rules based upon pre-ADP paper-based means of documenting international trade may create an obstacle to such use of ADP in that they lead to legal insecurity or impede the efficient use of ADP where its use is otherwise justified,

  499

"Noting further with appreciation the efforts of the Council of Europe, the Customs Co-operation Council and the United Nations Economic Commission for Europe to overcome obstacles to the use of ADP in international trade arising out of these legal rules,

  500

"Considering at the same time that there is no need for a unification of the rules of evidence regarding the use of computer records in international trade, in view of the experience showing that substantial differences in the rules of evidence as they apply to the paper-based system of documentation have caused so far no noticeable harm to the development of international trade,

  501

"Considering also that the developments in the use of ADP are creating a desirability in a number of legal systems for an adaptation of existing legal rules to these developments, having due regard, however, to the need to encourage the employment of such ADP means that would provide the same or greater reliability as paper-based documentation,

  502


"1. Recommends to Governments:

 
  503

"(a) to review the legal rules affecting the use of computer records as evidence in litigation in order to eliminate unnecessary obstacles to their admission, to be assured that the rules are consistent with developments in technology, and to provide appropriate means for a court to evaluate the credibility of the data contained in those records;

  504

"(b) to review legal requirements that certain trade transactions or trade related documents be in writing, whether the written form is a condition to the enforceability or to the validity of the transaction or document, with a view to permitting, where appropriate, the transaction or document to be recorded and transmitted in computer-readable form;

  505

"(c) to review legal requirements of a handwritten signature or other paper-based method of authentication on trade related documents with a view to permitting, where appropriate, the use of electronic means of authentication;

  506

"(d) to review legal requirements that documents for submission to governments be in writing and manually signed with a view to permitting, where appropriate, such documents to be submitted in computer-readable form to those administrative services which have acquired the necessary equipment and established the necessary procedures;

  507

"2. Recommends to international organizations elaborating legal texts related to trade to take account of the present Recommendation in adopting such texts and, where appropriate, to consider modifying existing legal texts in line with the present Recommendation."

  508

127. That recommendation (hereinafter referred to as the "1985 UNCITRAL Recommendation") was endorsed by the General Assembly in resolution 40/71, paragraph 5(b), of 11 December 1985 as follows:

  509


"The General Assembly,

 
  510

"... Calls upon Governments and international organizations to take action, where appropriate, in conformity with the Commission's recommendation so as to ensure legal security in the context of the widest possible use of automated data processing in international trade; ...".

  511

128. As was pointed out in several documents and meetings involving the international electronic commerce community, e.g. in meetings of WP. 4, there was a general feeling that, in spite of the efforts made through the 1985 UNCITRAL Recommendation, little progress had been made to achieve the removal of the mandatory requirements in national legislation regarding the use of paper and handwritten signatures. It has been suggested by the Norwegian Committee on Trade Procedures (NORPRO) in a letter to the Secretariat that "one reason for this could be that the 1985 UNCITRAL Recommendation advises on the need for legal update, but does not give any indication of how it could be done". In this vein, the Commission considered what follow-up action to the 1985 UNCITRAL Recommendation could usefully be taken so as to enhance the needed modernization of legislation. The decision by UNCITRAL to formulate model legislation on legal issues of electronic data interchange and related means of communication may be regarded as a consequence of the process that led to the adoption by the Commission of the 1985 UNCITRAL Recommendation.

  512

129. At its twenty-first session (1988), the Commission considered a proposal to examine the need to provide for the legal principles that would apply to the formation of international commercial contracts by electronic means. It was noted that there existed no refined legal structure for the important and rapidly growing field of formation of contracts by electronic means and that future work in that area could help to fill a legal vacuum and to reduce uncertainties and difficulties encountered in practice. The Commission requested the Secretariat to prepare a preliminary study on the topic.

  513

130. At its twenty-third session (1990), the Commission had before it a report entitled "Preliminary study of legal issues related to the formation of contracts by electronic means" (A/CN.9/333). The report summarized work that had been undertaken in the European Communities and in the United States of America on the requirement of a "writing" as well as other issues that had been identified as arising in the formation of contracts by electronic means. The efforts to overcome some of those problems by the use of model communication agreements were also discussed.

  514

131. At its twenty-fourth session (1991), the Commission had before it a report entitled "Electronic Data Interchange" (A/CN.9/350). The report described the current activities in the various organizations involved in the legal issues of electronic data interchange (EDI) and analysed the contents of a number of standard interchange agreements already developed or then being developed. It pointed out that such documents varied considerably according to the various needs of the different categories of users they were intended to serve and that the variety of contractual arrangements had sometimes been described as hindering the development of a satisfactory legal framework for the business use of electronic commerce. It suggested that there was a need for a general framework that would identify the issues and provide a set of legal principles and basic legal rules governing communication through electronic commerce. It concluded that such a basic framework could, to a certain extent, be created by contractual arrangements between parties to an electronic commerce relationship and that the existing contractual frameworks that were proposed to the community of users of electronic commerce were often incomplete, mutually incompatible, and inappropriate for international use since they relied to a large extent upon the structures of local law.

  515

132. With a view to achieving the harmonization of basic rules for the promotion of electronic commerce in international trade, the report suggested that the Commission might wish to consider the desirability of preparing a standard communication agreement for use in international trade. It pointed out that work by the Commission in this field would be of particular importance since it would involve participation of all legal systems, including those of developing countries that were already or would soon be confronted with the issues of electronic commerce.

  516

133. The Commission was agreed that the legal issues of electronic commerce would become increasingly important as the use of electronic commerce developed and that it should undertake work in that field. There was wide support for the suggestion that the Commission should undertake the preparation of a set of legal principles and basic legal rules governing communication through electronic commerce. The Commission came to the conclusion that it would be premature to engage immediately in the preparation of a standard communication agreement and that it might be preferable to monitor developments in other organizations, particularly the Commission of the European Communities and the Economic Commission for Europe. It was pointed out that high-speed electronic commerce required a new examination of basic contract issues such as offer and acceptance, and that consideration should be given to legal implications of the role of central data managers in international commercial law.

  517

134. After deliberation, the Commission decided that a session of the Working Group on International Payments would be devoted to identifying the legal issues involved and to considering possible statutory provisions, and that the Working Group would report to the Commission on the desirability and feasibility of undertaking further work such as the preparation of a standard communication agreement.

  518

135. The Working Group on International Payments, at its twenty-fourth session, recommended that the Commission should undertake work towards establishing uniform legal rules on electronic commerce. It was agreed that the goals of such work should be to facilitate the increased use of electronic commerce and to meet the need for statutory provisions to be developed in the field of electronic commerce, particularly with respect to such issues as formation of contracts; risk and liability of commercial partners and third-party service providers involved in electronic commerce relationships; extended definitions of "writing" and "original" to be used in an electronic commerce environment; and issues of negotiability and documents of title (A/CN.9/360).

  519

136. While it was generally felt that it was desirable to seek the high degree of legal certainty and harmonization provided by the detailed provisions of a uniform law, it was also felt that care should be taken to preserve a flexible approach to some issues where legislative action might be premature or inappropriate. As an example of such an issue, it was stated that it might be fruitless to attempt to provide legislative unification of the rules on evidence that may apply to electronic commerce massaging (ibid., para. 130). It was agreed that no decision should be taken at that early stage as to the final form or the final content of the legal rules to be prepared. In line with the flexible approach to be taken, it was noted that situations might arise where the preparation of model contractual clauses would be regarded as an appropriate way of addressing specific issues (ibid., para. 132).

  520

137. The Commission, at its twenty-fifth session (1992), endorsed the recommendation contained in the report of the Working Group (ibid., paras. 129-133) and entrusted the preparation of legal rules on electronic commerce (which was then referred to as "electronic data interchange" or "EDI") to the Working Group on International Payments, which it renamed the Working Group on Electronic Data Interchange.

  521

138. The Working Group devoted its twenty-fifth to twenty-eighth sessions to the preparation of legal rules applicable to "electronic data interchange (EDI) and other modern means of communication" (reports of those sessions are found in documents A/CN.9/373, 387, 390 and 406).

  522

139. The Working Group carried out its task on the basis of background working papers prepared by the Secretariat on possible issues to be included in the Model Law. Those background papers included A/CN.9/WG.IV/WP.53 (Possible issues to be included in the programme of future work on the legal aspects of EDI) and A/CN.9/WG.IV/WP.55 (Outline of possible uniform rules on the legal aspects of electronic data interchange). The draft articles of the Model Law were submitted by the Secretariat in documents A/CN.9/WG.IV/WP.57, 60 and 62. The Working Group also had before it a proposal by the United Kingdom of Great Britain and Northern Ireland relating to the possible contents of the draft Model Law (A/CN.9/WG.IV/WP.58).

  523

140. The Working Group noted that, while practical solutions to the legal difficulties raised by the use of electronic commerce were often sought within contracts (A/CN.9/WG.IV/WP.53, paras. 35-36), the contractual approach to electronic commerce was developed not only because of its intrinsic advantages such as its flexibility, but also for lack of specific provisions of statutory or case law. The contractual approach was found to be limited in that it could not overcome any of the legal obstacles to the use of electronic commerce that might result from mandatory provisions of applicable statutory or case law. In that respect, one difficulty inherent in the use of communication agree- ments resulted from uncertainty as to the weight that would be carried by some contractual stipulations in case of litigation. Another limitation to the contractual approach resulted from the fact that parties to a contract could not effectively regulate the rights and obligations of third parties. At least for those parties not participating in the contractual arrangement, statutory law based on a model law or an international convention seemed to be needed (see A/CN.9/350, para. 107).

  524

141. The Working Group considered preparing uniform rules with the aim of eliminating the legal obstacles to, and uncertainties in, the use of modern communication techniques, where effective removal of such obstacles and uncertainties could only be achieved by statutory provisions. One purpose of the uniform rules was to enable potential electronic commerce users to establish a legally secure electronic commerce relationship by way of a communication agreement within a closed network. The second purpose of the uniform rules was to support the use of electronic commerce outside such a closed network, i.e., in an open environment. However, the aim of the uniform rules was to enable, and not to impose, the use of EDI and related means of communication. Moreover, the aim of the uniform rules was not to deal with electronic commerce relationships from a technical perspective but rather to create a legal environment that would be as secure as possible, so as to facilitate the use of electronic commerce between communicating parties.

  525

142. As to the form of the uniform rules, the Working Group was agreed that it should proceed with its work on the assumption that the uniform rules should be prepared in the form of statutory provisions. While it was agreed that the form of the text should be that of a "model law", it was felt, at first, that, owing to the special nature of the legal text being prepared, a more flexible term than "model law" needed to be found. It was observed that the title should reflect that the text contained a variety of provisions relating to existing rules scattered throughout various parts of the national laws in an enacting State. It was thus a possibility that enacting States would not incorporate the text as a whole and that the provisions of such a "model law" might not appear together in any one particular place in the national law. The text could be described, in the parlance of one legal system, as a "miscellaneous statute amendment act". The Working Group agreed that this special nature of the text would be better reflected by the use of the term "model statutory provisions". The view was also expressed that the nature and purpose of the "model statutory provisions" could be explained in an introduction or guidelines accompanying the text.

  526

143. At its twenty-eighth session, however, the Working Group reviewed its earlier decision to formulate a legal text in the form of "model statutory provisions" (A/CN.9/390, para. 16). It was widely felt that the use of the term "model statutory provisions" might raise uncertainties as to the legal nature of the instrument. While some support was expressed for the retention of the term "model statutory provisions", the widely prevailing view was that the term "model law" should be preferred. It was widely felt that, as a result of the course taken by the Working Group as its work progressed towards the completion of the text, the model statutory provisions could be regarded as a balanced and discrete set of rules, which could also be implemented as a whole in a single instrument (A/CN.9/406, para. 75). Depending on the situation in each enacting State, however, the Model Law could be implemented in various ways, either as a single statute or in various pieces of legislation.

  527

144. The text of the draft Model Law as approved by the Working Group at its twenty-eighth session was sent to all Governments and to interested international organizations for comment. The comments received were reproduced in document A/CN.9/409 and Add.1-4. The text of the draft articles of the Model Law as presented to the Commission by the Working Group was contained in the annex to document A/CN.9/406.

  528

145. At its twenty-eighth session (1995), the Commission adopted the text of articles 1 and 3 to 11 of the draft Model Law and, for lack of sufficient time, did not complete its review of the draft Model Law, which was placed on the agenda of the twenty-ninth session of the Commission.

  529

146. The Commission, at its twenty-eighth session, recalled that, at its twenty-seventh session (1994), general support had been expressed in favour of a recommendation made by the Working Group that preliminary work should be undertaken on the issue of negotiability and transferability of rights in goods in a computer-based environment as soon as the preparation of the Model Law had been completed. It was noted that, on that basis, a preliminary debate with respect to future work to be undertaken in the field of electronic data interchange had been held in the context of the twenty-ninth session of the Working Group (for the report on that debate, see A/CN.9/407, paras. 106-118). At that session, the Working Group also considered proposals by the International Chamber of Commerce (A/CN.9/WG.IV/WP.65) and the United Kingdom of Great Britain and Northern Ireland (A/CN.9/WG.IV/WP.66) relating to the possible inclusion in the draft Model Law of additional provisions to the effect of ensuring that certain terms and conditions that might be incorporated in a data message by means of a mere reference would be recognized as having the same degree of legal effectiveness as if they had been fully stated in the text of the data message (for the report on the discussion, see A/CN.9/407, paras. 100-105). It was agreed that the issue of incorporation by reference might need to be considered in the context of future work on negotiability and transferability of rights in goods (A/CN.9/407, para. 103). The Commission endorsed the recommendation made by the Working Group that the Secretariat should be entrusted with the preparation of a background study on negotiability and transferability of EDI transport documents, with particular emphasis on EDI maritime transport documents, taking into account the views expressed and the suggestions made at the twenty-ninth session of the Working Group.

  530

147. On the basis of the study prepared by the Secretariat (A/CN.9/WG.IV/WP.69), the Working Group, at its thirtieth session, discussed the issues of transferability of rights in the context of transport documents and approved the text of draft statutory provisions dealing with the specific issues of contracts of carriage of goods involving the use of data messages (for the report on that session, see A/CN.9/421). The text of those draft provisions as presented to the Commission by the Working Group for final review and possible addition as part II of the Model Law was contained in the annex to document A/CN.9/421.

  531

148. In preparing the Model Law, the Working Group noted that it would be useful to provide in a commentary additional information concerning the Model Law. In particular, at the twenty-eighth session of the Working Group, during which the text of the draft Model Law was finalized for submission to the Commission, there was general support for a suggestion that the draft Model Law should be accompanied by a guide to assist States in enacting and applying the draft Model Law. The guide, much of which could be drawn from the travaux préparatoires of the draft Model Law, would also be helpful to users of electronic means of communication as well as to scholars in that area. The Working Group noted that, during its deliberations at that session, it had proceeded on the assumption that the draft Model Law would be accompanied by a guide. For example, the Working Group had decided in respect of a number of issues not to settle them in the draft Model Law but to address them in the guide so as to provide guidance to States enacting the draft Model Law. The Secretariat was requested to prepare a draft and submit it to the Working Group for consideration at its twenty-ninth session (A/CN.9/406, para. 177).

  532

149. At its twenty-ninth session, the Working Group discussed the draft Guide to Enactment of the Model Law (hereinafter referred to as "the draft Guide") as set forth in a note prepared by the Secretariat (A/CN.9/WG.IV/WP.64). The Secretariat was requested to prepare a revised version of the draft Guide reflecting the decisions made by the Working Group and taking into account the various views, suggestions and concerns that had been expressed at that session. At its twenty-eighth session, the Commission placed the draft Guide to Enactment of the Model Law on the agenda of its twenty-ninth session.

  533

150. At its twenty-ninth session (1996), the Commission, after consideration of the text of the draft Model Law as revised by the drafting group, adopted the following decision at its 605th meeting, on 12 June 1996:

  534


"The United Nations Commission on International Trade Law,

 
  535

"Recalling its mandate under General Assembly resolution 2205 (XXI) of 17 December 1966 to further the progressive harmonization and unification of the law of international trade, and in that respect to bear in mind the interests of all peoples, and in particular those of developing countries, in the extensive development of international trade,

  536

"Noting that an increasing number of transactions in international trade are carried out by means of electronic data interchange and other means of communication commonly referred to as 'electronic commerce', which involve the use of alternatives to paper-based forms of communication and storage of information,

  537

"Recalling the recommendation on the legal value of computer records adopted by the Commission at its eighteenth session, in 1985, and paragraph 5(b) of General Assembly resolution 40/71 of 11 December 1985 calling upon Governments and international organizations to take action, where appropriate, in conformity with the recommendation of the Commission so as to ensure legal security in the context of the widest possible use of automated data processing in international trade,

  538

"Being of the opinion that the establishment of a model law facilitating the use of electronic commerce, and acceptable to States with different legal, social and economic systems, contributes to the development of harmonious international economic relations,

  539

"Being convinced that the UNCITRAL Model Law on Electronic Commerce will significantly assist all States in enhancing their legislation governing the use of alternatives to paper-based forms of communication and storage of information, and in formulating such legislation where none currently exists,

  540

"1. Adopts the UNCITRAL Model Law on Electronic Commerce as it appears in annex I to the report on the current session;

  541

"2. Requests the Secretary-General to transmit the text of the UNCITRAL Model Law on Electronic Commerce, together with the Guide to Enactment of the Model Law prepared by the Secretariat, to Governments and other interested bodies;

  542

"3. Recommends that all States give favourable consideration to the UNCITRAL Model Law on Electronic Commerce when they enact or revise their laws, in view of the need for uniformity of the law applicable to alternatives to paper-based forms of communication and storage of information."

  543



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