INTERNATIONAL COMMERCIAL TRANSACTION.

UNCITRAL MODEL

CHAP.I. GENERAL CONSIDERATION ON INTERNATIONAL COMMERCE AND

UNCITRAL MODEL LAW

I.1. DEFINITIONS AND NOTIONS

I.1.1. COMMERCE

Commerce is the whole system of an economy that constitutes an environment for

business 1 . The system includes legal, economic, political, social, cultural, and
technological systems that are in operation in any country. Thus, commerce is a system
or an environment that affects the business prospects of an economy or a nation-state.
We can also define it as a second component of business which includes all activities,
functions and institutions involved in transferring goods from producers to consumer 2.
(Business / Commerce) the activity embracing all forms of the purchase and sale of
goods and services3. The buying and selling of goods, especially on a large scale, as
between cities or nation4

I.1.2. TRANSACTION

In commerce Transaction or transactional may refer to:

Financial transaction, an agreement, communication, or movement carried out between

a buyer and a seller to exchange an asset for payment

1
WATSON, PETER (2005). Ideas : A History of Thought and Invention from Fire to Freud. HarperCollins. ISBN 0-06-
621064-X. Introduction......./
2
Gold served especially commonly as a form of early money, as described in "Origins of Money and of Banking"
DAVIES, GLYN (2002). Ideas : A history of money from ancient times to the present day. University of Wales Press.
ISBN 0-7083-1717-0.
3
http://www.thefreedictionary.com/commerce, accesed on 20th November 2012.
4
http://www.thefreedictionary.com/commerce, accesed on 20th November 2012.
Electronic funds transfer, the electronic exchange or transfer of money from one
account to another, Real estate transaction, the process whereby rights in a unit of
property is transferred between two or more parties Transaction cost, a cost incurred in
making an economic exchange5.

transaction (plural transactions) means

1. The act of conducting or carrying out (business, negotiations, plans).

2. A deal or business agreement.
3. An exchange or trade, as of ideas, money, goods, etc.
4. (finance) The transfer of funds into, out of, or from an account.
5. (computing) An atomic operation; a message, data modification, or other
procedure that is guaranteed to perform completely or not at all (e.g. a database
transaction).
6. (especially in plural) A record of the proceedings of a learned society6.

I.1.3. INTERNATIONAL COMMERCE

It is technically different from international trade, only in that commerce generally refers
to buying and selling goods and services, as opposed to exchanging them. With
businesses becoming increasingly more global, international trade and commerce has
grown more and more popular, and has allowed companies in smaller geographical
areas to compete against those based in more densely populated regions 7.

The buying and selling of goods between sovereign nations. International commerce
allows countries to take advantage of competitive advantages in certain areas, while
diminishing disadvantages in other areas8. To help facilitate international buying and

5
http://www.thefreedictionary.com/commerce, accesed on 20th November 2012.
6
http://en.wiktionary.org/wiki/transaction, accesed on 20th November 2012.
7
http://www.investopedia.com/terms/i/international-commerce.asp#ixzz2CqDoFAWq
8
http://www.investopedia.com/terms/i/international-commerce.asp#ixzz2CqBzbRUT, accesed on 20th November
2012.
selling among countries, a variety of national and local government agencies have been
set up, including the International Chamber of Commerce (ICC).9

I.1.4. INTERNATIONAL COMMERCE LAW

I.4.1. DEFINITION AND BACKGROUND

Since World War II international trade has grown extensively, seeing the increasing
importance of international commercial law. It plays a vital role in world development,
particularly through the integration of world markets10.

Lex mercatoria refers to that part of international commercial law which is unwritten,
including customary commercial law; customary rules of evidence and procedure; and
general principles of commercial law11.

The United Nations Convention on Contracts for the International Sale of Goods (CISG)
is the main convention for international sale of goods. Established by UNCITRAL, the
Convention governs the conclusion of the sale contract; and buyer and seller
obligations, including respective remedies. It is not concerned with the validity or
provisions of the contract nor its effect on the property sold12.

The importance of CISG is its interpretation. International context, uniformity and

observance of good faith must be regarded when interpreting the Convention. Matters
not expressly settled by CISG are to be determined according to the general principles
of CISG; or in such absence, according to rules of private international law. The
UNIDROIT Principles on International Commercial Contracts also provide a ‘gap-filling’

9
http://www.investopedia.com/terms/i/international-commerce.asp#axzz2CqA6sBDe, accesed on 20th November
2012.
10
http://en.wikipedia.org/wiki/International_commercial_law, accesed on 20th November 2012.
11
Ziegel, Jacob S. and Lerner, Shalom (eds), New Developments in International Commercial and Consumer Law
(1998) 5.
12
Todd, Paul; Cases and Materials on International Trade Law (1st ed, 2003)
role to supplement CISG, so long as it supports a principle deduced from the
Convention13.

I.3.2. Harmonisation of international commercial law

This predominantly occurs through legal instruments governing commercial contracts is

limited in its scope since it depends upon incorporation into contracts. For any
pragmatic effect there must be a degree of uniformity in commercial practice between
the contracting parties14.

Model Laws promote the unification of international commercial law15. Some examples
are the UNCITRAL Model Laws on:

• International Commercial Arbitration.

• International Credit Transfers 1992 (largely adopted by the EU).
• Procurement of Goods, Construction and Services 1994.
• Electronic Signatures.
• Electronic Commerce 1996.

International organisations that attempt to harmonise international commercial law

include:

• UNCITRAL: Important in the areas of international carriage of goods,

international bills of exchange and promissory notes, and international arbitration.
• UNIDROIT: Important in the area of international financial leasing and sale of
goods. Notably UNIDROIT has created the ‘Principles of International
Commercial Contracts’ which in the future could provide the source of lex
mercatoria.
• Hague Conference on Private International Law: The organisation drafts
conventions in the field of private international law.

13
Moens, Gabriel and Gillies, Peter; International Trade and Business: Law, Policy and Ethics (2nd ed, 2006)
14
Mo, John S.; International Commercial Law (2003) 1.
15
Moens, Gabriel and Gillies, Peter; International Trade and Business: Law, Policy and Ethics (2nd ed, 2006)
 • ICC: Influential in harmonising international contract terms and global arbitration
practices.

International Conventions relevant to international sale of goods include:

• UN Convention on the Limitation Period in the International Sale of Goods 1974

• UNIDROIT Convention on Agency in the International Sale of Goods 1983
• UN Convention on International Bills of Exchange and International Promissory
Notes 1988
• UN Convention on Independent Guarantees and Stand-By Letters of Credit
199516

I.1.5. UNICTRAL MODEL LAW17

The UNCITRAL Model Law on International Commercial Arbitration was adopted in

1985 and amended in 2006. More than 65 countries have since revised their laws on
international commercial arbitration by reference to the Model Law. The goal of the
Model Law - coupled with the New York Convention of 1958 on the recognition and the
enforcement of foreign arbitral awards - was to contribute to the establishment of a
unified legal framework for the fair and efficient settlement of disputes arising in
international commercial relations.

16
DAVIES, IWAN; (ed), Issues in International Commercial Law (1st ed, 2005)
17
Howard M. Holtzmann, Joseph E. Neuhaus, United Nations Commission on International Trade Law,
http://books.google.rw/books/about/A_guide_to_the_UNCITRAL_Model_Law_on_Int.html?id=8VEqAQAAMAA
J&redir_esc=y, , accesed on 20th November 2012.
Chap. II. : INTERNATIONAL COMMERCIAL TRANCSACTION : UNCITRAL MODEL

The ICC has enunciated several rules, practices, standard contracts, & clauses for the
facilitation of international trade. Although guidance exists for commercial practice in
many different sectors--such as sale of goods, agency, insurance, documentary credits,
guarantees, & transport--merchants & legal practitioners face a difficult task in trying to
understand the interrelation of the various rules & practices within the vast area of
international trade.

International Commercial transnational trade transactions. The bases for its analysis
include generally accepted principles, as laid down in international conventions, & rules
& practices elaborated under the auspices of governmental & non-governmental bodies,
such as UNIDROIT, UNCTAD, UNCITRAL & ICC, CMI, FIATA & BIMCO. The appendix
provides the most commonly used rules, conditions, & documents. 18

II.1. About UNCITRAL

The core legal body of the United Nations system in the field of international trade law.
A legal body with universal membership specializing in commercial law reform
worldwide for over 40 years. UNCITRAL's business is the modernization and
harmonization of rules on international business19.

Trade means faster growth, higher living standards, and new opportunities through
commerce. In order to increase these opportunities worldwide, UNCITRAL is
formulating modern, fair, and harmonized rules on commercial transactions. These
include:

• Conventions, model laws and rules which are acceptable worldwide

• Legal and legislative guides and recommendations of great practical value
• Updated information on case law and enactments of uniform commercial law

18
JAN RAMBERG, International Chamber of Commerce,ICC,200.
19
http://www.uncitral.org/uncitral/en/about_us.html
 • Technical assistance in law reform projects
• Regional and national seminars on uniform commercial law

The United Nations Commission on International Trade Law (UNCITRAL) was

established by the United Nations General Assembly by its Resolution 2205 (XXI) of 17
December 1966 "to promote the progressive harmonization and unification of
international trade law".UNCITRAL carries out its work at annual sessions held
alternately in New York City and Vienna20.

History

When world trade began to expand dramatically in the 1960s, national governments
began to realize the need for a global set of standards and rules to harmonize national
and regional regulations, which until then governed international trade21.

Membership

UNCITRAL's original membership comprised 29 states, and was expanded to 36 in

1973, and again to 60 in 2002. Member states of UNCITRAL are representing different
legal traditions and levels of economic development, as well as different geographic
regions. States includes 14 African states, 14 Asian states, 8 Eastern European states,
10 Latin American and Caribbean states, and 14 Western European states. The
Commission member States are elected by the General Assembly22.

Membership is structured so as to be representative of the world's various geographic

regions and its principal economic and legal systems. Members of the commission are
elected for terms of six years, the terms of half the members expiring every three

20
For an analysis of the travaux preparatoire which lead to this legislative guide see Andrea
Tosato, The UNCITRAL Annex on security rights in IP: a work in progress (2009) Journal of
intellectual property law and Practice 743
21
http://www.uncitral.org/
22
http://www.uncitral.org/
years23. As of 21 June 2010, the members of UNCITRAL, and the years when their
memberships expire, are:

The methods of work are organized at three levels. The first level is UNCITRAL itself
(The Commission), which holds an annual plenary session. The second level is the
intergovernmental working groups (which is developing the topics on UNCITRAL's work
program. Texts designed to simplify trade transactions and reduce associated costs are
developed by working groups comprising all member States of UNCITRAL, which meet
once or twice per year24.

Non-member States and interested international and regional organizations are also
invited and can actively contribute to the work since decisions are taken by consensus,
not by vote. Draft texts completed by these working groups are submitted to UNCITRAL
for finalization and adoption at its annual session. The International Trade Law Division
of the United Nations Office of Legal Affairs provides substantive secretariat services to
UNCITRAL, such as conducting research and preparing studies and drafts25.

UNCITRAL is:

• Coordinating the work of organizations active and encouraging cooperation

among them.
• Promoting wider participation in existing international conventions and wider
acceptance of existing model and uniform laws.
• Preparing or promoting the adoption of new international conventions, model
laws and uniform laws and promoting the codification and wider acceptance of
international trade terms, provisions, customs and practice, in collaboration,
where appropriate, with the organizations operating in this field.

23
JAN RAMBERG International Commercial Transactions, 4th edition

24
http://www.uncitral.org/
25
http://www.uncitral.org/
 • Promoting ways and means of ensuring a uniform interpretation and application
of international conventions and uniform laws in the field of the law of
international trade.
• Collecting and disseminating information on national legislation and modern legal
developments, including case law, in the field of the law of international trade.
• Establishing and maintaining a close collaboration with the UN Conference on
Trade and development.
• Maintaining liaison with other UN organs and specialized agencies concerned
with international trade26.

Conventions

The Convention is an agreement among participating states establishing obligations

binding upon those States that ratify or accede to it. A convention is designed to unify
law by establishing binding legal obligations. To become a party to a convention, States
are required formally to deposit a binding instrument of ratification or accession with the
depository. The entry into force of a convention is usually dependent upon the deposit
of a minimum number of instruments of ratification27.

UNCITRAL conventions:

• the Convention on the Limitation Period in the International Sale of Goods (1974)
(text)
• the United Nations Convention on the Carriage of Goods by Sea (1978)
• the United Nations Convention on Contracts for the International Sale of Goods
(1980)
• the United Nations Convention on International Bills of Exchange and
International Promissory Notes (1988)
• the United Nations Convention on the Liability of Operators of Transport
Terminals in International Trade (1991)

26
http://www.uncitral.org/
27
http://www.uncitral.org/
 • the United Nations Convention on Independent Guarantees and Stand-by Letters
of Credit (1995)
• the United Nations Convention on the Assignment of Receivables in International
Trade (2001)
• the United Nations Convention on the Use of Electronic Communications in
International Contracts (2005)
• the United Nations Convention on Contracts for the International Carriage of
Goods Wholly or Partly by Sea (2008)28

Model laws

A model law is a legislative text that is recommended to States for enactment as part of
their national law. Model laws are generally finalized and adapted by UNCITRAL, at its
annual session, while conventions requires the convening of a diplomatic conference 29.

• UNCITRAL Model Law on International Commercial Arbitration (1985) (text)

• Model Law on International Credit Transfers (1992)
• UNCITRAL Model Law on Procurement of Goods, Construction and Services
(1994)
• UNCITRAL Model Law on Electronic Commerce (1996)
• Model Law on Cross-border Insolvency (1997)
• UNCITRAL Model Law on Electronic Signatures (2001)
• UNCITRAL Model Law on International Commercial Conciliation (2002)
• Model Legislative Provisions on Privately Financed Infrastructure Projects
(2003)30

UNCITRAL also drafted the:

• UNCITRAL Arbitration Rules (1976) (text)—revised rules will be effective August

15, 2010; pre-released, July 12, 2010

28
http://www.uncitral.org/
29
http://store.internationaltradebooks.org/internationalcommercialtransactions.aspx
30
http://www.uncitral.org/
 • UNCITRAL Conciliation Rules (1980)
• UNCITRAL Arbitration Rules (1982)
• UNCITRAL Notes on Organizing Arbitral Proceedings (1996)31

CLOUT (Case Law on UNCITRAL Texts)

The Case Law on UNCITRAL Texts system is a collection of court decisions and arbitral
awards interpreting UNCITRAL texts32.

CLOUT includes case abstracts in the six United Nations languages on the United
Nations Convention on Contracts for the International Sale of Goods (CISG) (Vienna,
1980) and the UNCITRAL Model Law on International Commercial Arbitration (1985).33

Legislative Guides

A legislative guide aims to provide a detailed analysis of the legal issues in a specific
area of the law, proposing efficient approaches for their resolution in the national or
local context. Legislative guides do not contain articles or provisions, but rather
recommendations. Legislative Guides are developed by the UNICTRAL Working
Groups and subsequently finalized by the UNCITRAL Commission in its annual
session34.

UNCITRAL has adopted the following legislative guides:

• UNCITRAL Legislative Guide on Privately Financed Infrastructure Projects

(2000)
• UNCITRAL Legislative Guide on Insolvency Law (2004)
• UNCITRAL Legislative Guide on Secured Transactions (2007)

31
http://www.uncitral.org/
32
http://www.uncitral.org/
33
http://www.uncitral.org/
34
http://www.uncitral.org/
 • UNCITRAL Legislative Guide on Secured Transactions: Supplement on Security
Rights in Intellectual Property (2010) 35.

II.2. UNCITRAL Model Law on International Commercial Arbitration

The UNCITRAL Model Law on International Commercial Arbitration36 was prepared by

UNCITRAL, and adopted by the United Nations Commission on International Trade Law
on 21 June 1985. In 2006 the model law was amended, it now includes more detailed
provisions on interim measures.

The model law is not binding, but individual states may adopt the model law by
incorporating it into their domestic law37. The model law was published in English and in
French. Translations in all six United Nations languages now exist38.

Note that there is a distinct difference between the UNCITRAL Model Law on
International Commercial Arbitration (1985) and the UNCITRAL Arbitration Rules39. On
its website, UNCITRAL explains the difference as follows: "The UNCITRAL Model Law
provides a pattern that law-makers in national governments can adopt as part of their
domestic legislation on arbitration.

The UNCITRAL Arbitration Rules, on the other hand, are selected by parties either as
part of their contract, or after a dispute arises, to govern the conduct of an arbitration
intended to resolve a dispute or disputes between themselves. Put simply, the Model
Law is directed at States, while the Arbitration Rules are directed at potential (or actual)
parties to a dispute40."

35 http://www.uncitral.org/

36 http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html

37 as, for example, Australia did, in the International Arbitration Act 1974, as amended.
38 http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html
39 http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html
40http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html
II.2.1. Organization and methods of work

UNCITRAL’s work is organized and conducted at three levels. The first level is
UNCITRAL itself, often referred to as the Commission, which holds an annual plenary
session. The second level is the intergovernmental working groups, which to a large
extent undertake the development of the topics on UNCITRAL’s work programme, while
the third is the secretariat, which assists the Commission and its working groups in the
preparation and conduct of their work41.

41
See Official Records of the General Assembly, Twenty-third Session, Supplement No. 16 (A/7216),
para. 14, reproduced in UNCITRAL Yearbook, vol. I: 1968-1970, part two, chap. I, sect. A.
GENERAL CONCLUSION

Our work was divided into two chapters.Chapter handles the genral notions on
commerce, international commerc, UNCITRAL, and we have defined key words of our
topic.
Chapter two tackles the United Nations Commission on International Trade Law
(UNCITRAL) and its work towards the harmonization and unification of the law of
international commercial transactions. Its intended audience are persons with an
interest in international trade law who wish to learn about the background, 'organization
and functioning of UNCITRAL and about the activities of the Commission in this field, as
well as those seeking detailed information about particular texts emanating from the
work of the Commission.

Our work gives an account of the origin and mandate of the Commission and describes
its organization. It also discusses the Commission's work programme, its methods of
work, and its activities other than substantive work on topics within its work programme.

Persons with interests in the structure and functioning of international organizations and
in the role of such organizations in the international harmonization and unification of law
should also find it of value.
BIBLIOGRAPHY

I. UN DOCUMENTS
The General Assembly, Twenty-third Session, Supplement No. 16 (A/7216), para. 14,
reproduced in UNCITRAL Yearbook, vol. I: 1968-1970, part two, chap. I, sect. A.

II. BOOKS
WATSON, PETER (2005). Ideas : A History of Thought and Invention from Fire to
Freud. HarperCollins. ISBN 0-06-621064-X. Introduction......./

Gold served especially commonly as a form of early money, as described in "Origins of

Money and of Banking" DAVIES, GLYN (2002). Ideas : A history of money from ancient
times to the present day. University of Wales Press. ISBN 0-7083-1717-0.

JAN RAMBERG International Commercial Transactions, 4th edition

DAVIES, IWAN; (ed), Issues in International Commercial Law (1st ed, 2005)

Moens, Gabriel and Gillies, Peter; International Trade and Business: Law, Policy and
Ethics (2nd ed, 2006)
Mo, John S.; International Commercial Law (2003) 1.
Moens, Gabriel and Gillies, Peter; International Trade and Business: Law, Policy and
Ethics (2nd ed, 2006)
Ziegel, Jacob S. and Lerner, Shalom (eds), New Developments in International
Commercial and Consumer Law (1998) 5.
Todd, Paul; Cases and Materials on International Trade Law (1st ed, 2003)

III. ELECTRONIC REFERENCES

http://www.thefreedictionary.com/commerce, accesed on 20th November 2012.
http://www.thefreedictionary.com/commerce, accesed on 20th November 2012.

http://www.uncitral.org/

http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html

as, for example, Australia did, in the International Arbitration Act 1974, as amended.

http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html

http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html

http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html

http://store.internationaltradebooks.org/internationalcommercialtransactions.aspx

http://www.uncitral.org/

http://www.investopedia.com/terms/i/international-commerce.asp#axzz2CqA6sBDe,
accesed on 20th November 2012.
http://en.wikipedia.org/wiki/International_commercial_law, accesed on 20th November
2012.

http://www.thefreedictionary.com/commerce, accesed on 20th November 2012.

http://en.wiktionary.org/wiki/transaction, accesed on 20th November 2012.

http://www.investopedia.com/terms/i/international-commerce.asp#ixzz2CqDoFAWq

http://www.investopedia.com/terms/i/international-commerce.asp#ixzz2CqBzbRUT,
accesed on 20th November 2012.
HOWARD M. HOLTZMANN, JOSEPH E. NEUHAUS, United Nations Commission on
International Trade Law,
http://books.google.rw/books/about/A_guide_to_the_UNCITRAL_Model_Law_on_Int.ht
ml?id=8VEqAQAAMAAJ&redir_esc=y, , accesed on 20th November 2012.

IV. ARTICLES OF REVIEWS

ANDREA TOSATO, The UNCITRAL Annex on security rights in IP: a work in progress
(2009) Journal of intellectual property law and Practice 743.