| United Nations | A/53/17 |
General Assembly
Distr. GENERAL
1-12 June 1998
ORIGINAL:
ENGLISH
Supplement No. 17 (A/53/17)
Official Records
Fifty-third Session
Commission on International Trade Law on the work
of its thirty-first session
Note
Symbols of United Nations documents are composed of capital letters combined
with figures. Mention of such a symbol indicates a reference to a United
Nations document.
Contents
Chapter Paragraphs Page
Introduction . . . . . . . . . . . . . . . . . . . . . . . . 1-2 1
I. Organization of the session . . . . . . . . . . 3-11 1
A. Opening of the session . . . . . . . . . . . .3 1
B. Membership and attendance . . . . . . . . . 4-8 1
C. Election of officers . . . . . . . . . . . 9 2
D. Agenda . . . . . . . . . . . . . . . . . . . 10 2
E. Adoption of the report . . . . . . . . . . . 11 2
II. Privately financed infrastructure projects . . . 12-206 2
A. Background. . . . . . . . . . . . . . . . . 12-15 2
B. General remarks . . . . . . . . . . . . . . 16-17 3
C. Structure of the draft legislative guide
and issues to be covered . . . . . . . . . 18-22 3
D. Consideration of draft chapters . . . . . . 23-201 4
E. Considerations on the finalization of
the draft chapters. . . . . . . . . . . . 202-206 21
III. Electronic commerce . . . . . . . . . . . . . 207-221 22
A. Draft uniform rules on electronic
signatures. . . . . . . . . . . . . .. . 207-211 22
B. Incorporation by reference . . . . . . . .212-221 23
IV. Assignment in receivables financing. . . . . . . 222-231 24
V. Monitoring the implementation of the 1958
New York Convention. . . . . . . . . .. . . . . . 232-235 26
VI. Case law on UNCITRAL texts . . . . . . . . . . . 236-238 26
VII. Training and technical assistance. . . . . . . . 239-245 27
VIII. Status and promotion of UNCITRAL texts . . . . 246-249 27
IX. General Assembly resolutions on the work of
the Commission . . . . . . . . . . . . . . . . . 250-256 28
X. New York Convention Day and Uniform Commercial
Law Information Colloquium . . . . . . . . . . 257-259 29
XI. Coordination and cooperation . . . . . . . . . . 260-271 30
A. Transport law . . . . . . . . . . . . . . 260-267 30
B. Trade and development . . . . . . . . . . . 268 31
C. Private international law in the area
of receivables financing. . . . . . . . . .269-270 31
D. International Association of Lawyers. . . . 271 32
XII. Other business . . . . . . . . . . . . . . . . 272-277 32
A. Bibliography. . . . . . . . . . . . . . 272-273 32
B. Willem C. Vis International Commercial
Arbitration Moot . . . . . . . . . . . . . 274-275 32
C. Date and place of the thirty-second
session of the Commission . . . . . . . . . 276 32
D. Sessions of working groups. . . . . . . . . 277 32
Annex. List of documents before the Commission at its
thirty-first session . . . . . . . . . . . . . . . 34
Introduction
1. The present report of the United Nations Commission
on International Trade Law covers the Commission's thirty-first session, held
in New York from 1 to 12 June 1998.
2. Pursuant to General Assembly resolution 2205 (XXI)
of 17 December 1966, this report is submitted to the
Assembly and is also submitted for comments to the United
Nations Conference on Trade and Development.
Chapter I
Organization of the session
A. Opening of the session
3. The United Nations Commission on International
Trade Law (UNCITRAL) commenced its thirty-first session
on 1 June 1998. The session was opened by the Under-Secretary-General for
Legal Affairs, the Legal Counsel.
B. Membership and attendance
4. The General Assembly, by its resolution 2205 (XXI),
established the Commission with a membership of 29 States,
elected by the Assembly. By its resolution 3108 (XXVIII)
of 12 December 1973, the Assembly increased the
membership of the Commission from 29 to 36 States. The
present members of the Commission, elected on
28 November 1994 and on 24 November 1997, are the
following States, whose term of office expires on the last
day prior to the beginning of the annual session of the
Commission in the year indicated. 1/
Algeria (2001), Argentina (2004 alternating
annually with Uruguay, starting 1998), Australia
(2001), Austria (2004), Botswana (2001), Brazil
(2001), Bulgaria (2001), Burkina Faso (2004),
Cameroon (2001), China (2001), Colombia (2004),
Egypt (2001), Fiji (2004), Finland (2001), France
(2001), Germany (2001), Honduras (2004), Hungary
(2004), India (2004), Iran (Islamic Republic of)
(2004), Italy (2004), Japan (2001), Kenya (2004),
Lithuania (2004), Mexico (2001), Nigeria (2001),
Paraguay (2004), Romania (2004), Russian
Federation (2001), Singapore (2001), Spain (2004),
Sudan (2004), Thailand (2004), Uganda (2004),
United Kingdom of Great Britain and Northern
Ireland (2001), United States of America (2004) and
Uruguay (2004 alternating annually with Argentina,
starting 1999).
5. With the exception of Brazil, Burkina Faso, Fiji,
theSudan and Uganda, all members of the Commission were
represented at the session.
6. The session was attended by observers from the
following States: Belarus, Benin, Bolivia, Canada, C“te
d'Ivoire, Croatia, Czech Republic, Democratic Republic of
the Congo, El Salvador, Gabon, Guinea, Indonesia, Iraq,
Kuwait, Mongolia, Morocco, Myanmar, Poland, Republic
of Korea, Republic of Moldova, Saudi Arabia, Slovakia,
Sweden, Switzerland, Syrian Arab Republic, Tunisia,
Turkey and Venezuela.
7. The session was also attended by observers from the
following international organizations:
(a) United Nations system
United Nations Conference on Trade and
Development
World Bank
International Monetary Fund
(b) Intergovernmental organizations
Hague Conference on Private International Law
(c) International non-governmental organiza-
tions invited by the Commission
Cairo Regional Centre for International Commercial
Arbitration
Caribbean Law Institute Centre
Ibero-American Institute of International Economic
Law
International Association of Lawyers
International Association of Ports and Harbours
International Bar Association
International Maritime Committee
Latin American Group of Lawyers for International
Trade Law
University of the West Indies
World Association of Former United Nations Interns
and Fellows
8. The Commission was appreciative of the fact that
international non-governmental organizations that had
expertise regarding the major items on the agenda of the
current session had accepted the invitation to take part in
the meetings. Being aware that it was crucial for the quality
of texts formulated by the Commission that relevant non-governmental
organizations should participate in the
sessions of the Commission and its Working Groups, the
Commission requested the Secretariat to continue to invite
such organizations to its sessions based on their particular
qualifications.
C. Election of officers 2/
9. The Commission elected the following officers:
Chairman:
Mr. Dumitru Mazilu (Romania)
Vice-Chairmen:
Mr. Louis-Paul Enouga (Cameroon)
Mr. Reinhard G. Renger (Germany)
Ms. Shahnaz Nikanjam (Islamic Republic of Iran)
Rapporteur:
Mr. Esteban Restrepo-Uribe (Colombia)
D. Agenda
10. The agenda of the session, as adopted by the
Commission at its 632nd meeting, on 1 June 1998, was as
follows:
1. Opening of the session.
2. Election of officers.
3. Adoption of the agenda.
4. Privately financed infrastructure projects.
5. Electronic commerce.
6. Receivables financing: assignment of receiv-
ables.
7. Monitoring implementation of the 1958 New
York Convention.
8. Case law on UNCITRAL texts (CLOUT).
9. Training and technical assistance.
10. Status and promotion of UNCITRAL legal texts.
11. General Assembly resolutions on the work of
the Commission.
12. New York Convention Day and Uniform
Commercial Law Information Colloquium.
13. Coordination and cooperation.
14. Other business.
15. Date and place of future meetings.
16. Adoption of the report of the United Nations
Commission on International Trade Law.
E. Adoption of the report
11. At its 650th meeting, on 12 June 1998, the
Commission adopted the present report by consensus.
Chapter II
Privately financed infrastructure
projects
A. Background
12. At its twenty-ninth session, in 1996, the Commission
decided to prepare a legislative guide on build-operate-transfer and related
types of project. 3/ The Commission
reached that decision after recommendations by many States
and consideration of a report prepared by the Secretary-General (A/CN.9/424),
which contained information on
work then being undertaken by other organizations in that
field, as well as an outline of issues covered by relevant
national laws. The Commission considered that it would be
useful to provide legislative guidance to States preparing
or modernizing legislation relevant to those projects. The
Commission requested the Secretariat to review issues
suitable for treatment in a legislative guide and to prepare
draft materials for its consideration.
13. At its thirtieth session, in 1997, the Commission had
before it a table of contents setting out the topics proposed
to be covered by the legislative guide, which were followed
by annotations concerning the issues suggested for
discussion therein (A/CN.9/438). The Commission also had
before it initial drafts of chapter I, "Scope, purpose and
terminology of the guide" (A/CN.9/438/Add.1), chapter II,
"Parties and phases of privately financed infrastructure
projects" (A/CN.9/438/Add.2), and chapter V, "Preparatory
measures" (A/CN.9/438/Add.3).
14. The Commission exchanged views on the nature of the
issues to be discussed in the draft legislative guide and
possible methods for addressing them and considered a
number of specific suggestions. 4/ The Commission generally
approved the line of work proposed by the Secretariat, as
contained in documents A/CN.9/438 and Add.1-3. The
Commission requested the Secretariat to seek the assistance
of outside experts, as required, in the preparation of future
chapters. The Commission invited Governments to identify
experts who could be of assistance to the Secretariat in that
task.
15. At the current session, the Commission had before it
drafts of the introductory chapter, entitled "Introduction and
background information on privately financed infrastructure
projects", and of chapters I, "General legislative con-
siderations", II, "Sector structure and regulation", III,
"Selection of the concessionaire", and IV, "Conclusion and
general terms of the project agreement" (A/CN.9/444/
Add.1-5, respectively), which had been prepared by the
Secretariat with the assistance of outside experts and in
consultation with other international organizations. The
Commission was informed that initial drafts of chapters V
to XI were being prepared by the Secretariat for con-
sideration by the Commission at its thirty-second session,
in 1999.
B. General remarks
16. It was pointed out that the annotated table of contents
(A/CN.9/444) had been prepared by the Secretariat for the
purpose of enabling the Commission to make an informed
decision on the proposed structure of the draft legislative
guide and its contents. For the purpose of distinguishing the
advice provided by the legislative guide from the
background discussion contained therein, each substantive
chapter was preceded by the legislative recommendations
pertaining to the matters dealt with in the chapter.
17. The Commission expressed its satisfaction at the
commencement of the work of preparation of a legislative
guide on privately financed infrastructure projects. It was
observed that many Governments, and also international
organizations and private entities, had expressed keen
interest in the work of the Commission concerning such
projects. The Commission was reminded of the importance
of bearing in mind the need to keep the appropriate balance
between the objective of attracting private investment for
infrastructure projects and the protection of the interests of
the host Government and the users of the infrastructure
facility.
C. Structure of the draft legislative guide and
issues to be covered
18. The Commission noted and generally approved the
proposed structure of the draft legislative guide and the
selection of issues suggested for discussion therein, as set
out in document A/CN.9/444. It was observed that topics
it was currently proposed to deal with separately in future
chapters of the legislative guide might at a later stage be
combined so as to simplify the structure of the guide
(e.g. construction phase, operational phase) (see below,
para. 201).
19. The Commission engaged in a general discussion
concerning the presentation of the guide and the desirability
of formulating legislative recommendations in the form of
sample provisions for the purpose of illustrating possible
legislative solutions for the issues dealt with in the
legislative guide, as had been suggested at its thirtieth
session. 5/ It was noted that the legislative guide would, upon
completion, constitute a useful tool for Governments in
reviewing and modernizing their legislation pertaining to
privately financed infrastructure projects, in particular in
countries lacking experience in the execution of such
projects. Support was expressed for the suggestion that the
usefulness of the legislative guide might be enhanced by
providing the reader, where appropriate, with model
legislative provisions on issues discussed within the guide.
20. However, various speakers pointed out the potential
difficulty and undesirability of formulating model legis-
lative provisions on privately financed infrastructure
projects in view of the complexity of the legal issues
typically raised by those projects, some of which concerned
matters of public policy, as well as the diversity of national
legal traditions and administrative practices. It was also
pointed out that, as currently formulated, the draft chapters
of the legislative guide offered the necessary flexibility for
national legislators, regulators and other authorities to take
into account the local reality when implementing, as
appropriate, the legislative recommendations contained
therein. The suggestion was made that, from a practical
perspective, the provision of model contractual clauses for
project agreements might be a more useful alternative than
the formulation of model legislative provisions.
21. Having noted the various views expressed, members
felt that the Commission should keep under consideration
the desirability of formulating model legislative provisions
when discussing the legislative recommendations contained
in the draft chapters and in that connection identify any
issues for which the formulation of model legislative
provisions would increase the value of the guide (for further
discussion concerning the question of model legislative
provisions and the presentation of the recommendations in
general, see below, paras. 202-204).
22. The Commission exchanged views on the nature of the
issues to be discussed in the draft legislative guide and
possible methods of addressing them. It was noted that, in
dealing with individual topics, the draft legislative guide
should distinguish between the following categories of
issues: general legal issues under the laws of the host
country; issues relating to legislation specific to privately
financed infrastructure projects; issues that might be dealt
with at the regulatory level; and issues of a contractual
nature. Although a clear distinction might not always be
feasible, it was considered that the draft legislative guide
should focus primarily on issues relating to legislation
specific to, or of particular importance for, privately
financed infrastructure projects.
D. Consideration of draft chapters
Introduction and background information on
privately financed infrastructure projects
(A/CN.9/444/Add.1)
23. At its thirtieth session, the Commission had con-
sidered an initial draft of chapter I, "Scope, purpose and
terminology of the guide" (A/CN.9/438/Add.1), which had
contained information on the projects covered by, and on
the purpose of, the legislative guide, as well as an expla-
nation of terms frequently used therein. The Commission
had also considered an initial draft of chapter II, "Parties
and phases of privately financed infrastructure projects"
(A/CN.9/438/Add.2), which had contained general back-
ground information on the concept of project finance, the
parties to a privately financed infrastructure project and the
phases of their implementation.
24. At its thirty-first session, the Commission was
informed that, in the consultations that had been conducted
by the Secretariat with outside experts and international
organizations since the Commission's thirtieth session, it
had been suggested that the usefulness of the legislative
guide might be enhanced by distinguishing more clearly
between the introductory portions and those remaining
chapters of the legislative guide, which were intended to
contain substantive discussion and legislative advice. For
that purpose, the former draft chapters I and II had been
combined into a single introduction, which took into
account, as appropriate, the suggestions that had been made
at the thirtieth session of the Commission as regards
documents A/CN.9/438/Add.1 and 2. 6/
Section A. Introduction
1. Purpose and scope of the guide
25. A question was asked concerning the statement made
in paragraph 5 that the legislative guide did not cover
"privatization" transactions that did not relate to infra-
structure development and operation, and the reason for
such an exclusion. It was stated that the distinction made in
the guide between privately financed infrastructure projects
and other transactions for the "privatization" of state
functions or property might not be justified in certain cases
and that it was preferable not to exclude privatization
transactions from the scope of the guide. In response to that
suggestion, it was pointed out that, at its thirtieth session,
the Commission had decided that the guide should not deal
with transactions for the "privatization" of state property
by means of the sale of state property or shares of state-owned entities to
the private sector, because privatization
gave rise to legislative issues that were different from
legislative issues pertaining to privately financed infra-
structure projects.
26. The Commission was reminded of the reasons why the
guide did not cover projects for the exploitation of natural
resources under "concessions", "permissions" or "licences"
issued by the State. In that connection, it was suggested that
the focus of the guide on infrastructure projects was
sufficiently clear and that there was no need to elaborate on
that point to the extent that the draft paper currently did.
2. Terminology used in the guide
27. As regards the presentation of the subsection, it
was suggested that, for ease of reading, the terminology should
be presented in a chart, rather than as part of the text.
However, it was observed that the subsection on termi-
nology contained not only definitions, but also explanations
of the use of certain expressions that appeared frequently
in the guide.
28. It was suggested that the use of expressions such as
"private entity" or "private operator" in subsection 2 and
throughout the guide might generate the erroneous impres-
sion that the legislative guide did not cover infrastructure
projects that were carried out by public entities. It was
proposed that the guide should instead use more neutral
expressions and that the expressions currently used to refer
to national authorities of the host country (e.g.
"Government", "State" and "regulatory agency") should be
reviewed in all language versions so as to ensure con-
sistency and avoid ambiguities.
29. It was suggested that the notion of "project manage-
ment contract" should be added to the portion of the text
dealing with the definition of "turnkey" contract, and that
the definition should mention the elements of fixed price
and fixed time for the performance of the contract.
30. It was also suggested that the appropriateness, in
some language versions, of the use of the expression "project
consortium" should be reviewed, since that expression
might be understood in a narrow sense in some legal
systems (e.g. as a particular contractual arrangement).
Furthermore, it was suggested that the use of the expressions
"project company" and "shareholders of the project
company" should also be reviewed, since in some language
versions they might convey the erroneous impression that
the guide only referred to a particular type of legal entity.
Section B. Background information on
infrastructure projects
General comments
31. It was pointed out that the section discussed basic
issues of privately financed infrastructure projects, such as
private sector participation in public infrastructure and the
concept of project finance. It also identified the main parties
involved in those projects and their respective interests and
briefly described the evolution of a privately financed
infrastructure project.
32. As a general comment, it was stated that some
portions of section B were lengthy and could be usefully reduced.
It was noted that the section was conceived as general back-
ground information on matters that were examined from a
legislative perspective in the subsequent chapters of the
guide. Once all chapters of the guide were available, some
of the information contained in the section might be
restructured or presented in a more concise way.
33. It was suggested that the sections should elaborate
on the financial arrangements used in connection with privately
financed infrastructure projects and should emphasize the
use and essential characteristics of "non-recourse" and
"limited-recourse" finance. It was also suggested that the
draft legislative guide should stress the role that capital
market financing, including financing obtained in the local
market, might play in the development of infrastructure
projects. Once such changes had been made, the section
might need to be restructured.
1. Private sector and public infrastructure
34. The view was expressed that the portions of the
sections dealing with historical aspects of private parti-
cipation in infrastructure were not needed and should be
deleted or moved to earlier parts of the text. In reply, it was
said that paragraphs 31 to 34 of the draft chapter had a
useful informative function, in particular in the light of the
experience of those countries which had a tradition of
awarding concessions for the construction and operation of
infrastructure.
2. Forms of private sector participation
35. The paragraphs dealing with the forms of private
sector participation did not elicit comment.
3. Financing infrastructure projects
36. The view was expressed that the guide should
emphasize the importance of pledging shares of the project
company for the purpose of obtaining finance to the project.
However, it was suggested that the penultimate sentence of
paragraph 48, which mentioned the shares of the project
company among the collaterals provided by the borrowers,
should be redrafted, since it seemed to imply that the project
company would offer its own shares to guarantee the
repayment of loans. Furthermore, it was noted that the laws
of certain countries posed obstacles to the pledge, as a
collateral to commercial loans, of certain categories of
assets held by the project company but owned by the public
entity that awarded the concession. Therefore, for purposes
of clarity, it was suggested that the words "to the extent
permitted by the laws of the host country" should be added
at the end of the penultimate sentence of paragraph 48.
37. In connection with the distinction between
"unsubordinated" and "subordinated" loans, in para-
graphs 48 to 50, it was suggested that the guide should
discuss possible implications of the laws of the host country
for contractual arrangements establishing precedence of
payment of certain categories of loan over the payment of
any other of the borrower's liabilities.
38. With respect to paragraph 50, it was observed that
companies wishing to have access to loans provided by
investment funds and other so-called "institutional
investors", such as insurance companies, collective invest-
ment schemes (e.g. mutual funds) or pension funds,
typically had to fulfil certain requirements, such as having
a positive credit rating. For purposes of clarity, it was
suggested that those "institutional investors" should be
dealt with separately from other sources of subordinated
loans.
39. It was suggested that the guide should also mention
the sale of shares in capital markets among the financing
sources mentioned in paragraph 51.
40. It was suggested that the last sentence of paragraph
53 might not be needed, since all financial institutions, and not
only Islamic financial institutions, would ordinarily review
economic and financial assumptions of projects for which
financing was sought and would follow closely all phases
of its implementation.
41. It was suggested that export credit agencies and
bilateral aid and financing agencies should be mentioned
among the financing institutions referred to in paragraphs 54
to 56. In connection with paragraph 56, it was also
suggested that mention should be made of the limited scope
of the guarantees provided by international financial
institutions and of the requirement typically imposed by
them that counter-guarantees should be provided by the host
Government.
4. Parties involved in infrastructure projects
42. In connection with paragraph 66, it was suggested
that the guide should clarify that some countries might be
precluded from favouring the employment of local
personnel pursuant to international obligations on trade
facilitation or regional economic integration.
43. It was suggested that a reference should be included
in paragraph 77 to completion guarantees, which the project
company might be required to provide so as to protect the
lenders against pre-completion risks.
44. With regard to the methods of remuneration of the
operating company, it was pointed out that, in the practice
of some countries, other methods might be used, in addition
to those referred to in paragraph 87. Those methods might
include availability charges, whereby the operating
company was paid for the services made available,
regardless of actual usage; service charges relating to
satisfactory maintenance and operation; and volume-related
payments, whereby payments related to the intensity of
usage, which might be calculated with the aid of
sophisticated methods for measuring performance, and
functioned as a bonus paid to the operator for intensive
usage of the infrastructure.
45. With regard to the insurance arrangements for
privately financed infrastructure projects, it was suggested
that mention should be made in paragraph 89 that, in some
countries, insurance underwriters structured comprehensive
insurance packages aimed at avoiding certain risks being
left uncovered owing to gaps between individual insurance
policies. It was also suggested that a reference to re-insurance arrangements
should be included in the same
paragraph.
46. It was suggested that reference should be made, in
paragraph 90, to the role of independent advisers in advising
the lenders to the project.
5. Phases of execution
47. As a general comment, it was stated that, while con-
taining useful information, paragraphs 93 to 110 anticipated
to some extent issues that would be discussed in more detail
in the substantive chapters of the legislative guide. It was
therefore suggested that those paragraphs might need to be
revised and restructured once the remaining draft chapters
of the legislative guide had been prepared.
48. The suggestion was made that paragraph 98 should be
clarified to the effect that competitive selection procedures
were not only used for projects involving the construction
of new infrastructure. At the same time, it was suggested
that mention should be made in that paragraph that there
might be instances where the host Government did not resort
to competitive proposals for the award of infrastructure
projects. In that regard, the Commission was informed of
the particular connotation given in some legal systems to
expressions such as "procurement" and "project award",
which were not used in those legal systems in connection
with the selection of public service providers. The
Commission took note of that information and decided to
revert to the issue when considering the draft chapter on the
selection of the concessionaire (A/CN.9/444/Add.4).
49. In view of the fact that the financial arrangements
in some privately financed infrastructure projects might con-
template direct payments by the Government to the project
company (see A/CN.9/444/Add.1, para. 60), it was sug-
gested that the words "is the sole source of funds" in the
first sentence of paragraph 107 should be replaced with
words such as "is the main source of funds" before "for
repaying its debts".
Chapter I. General legislative considerations
(A/CN.9/444/Add.2)
50. It was noted that the opening section of draft
chapter I (previously numbered chap. III) discussed two issues
concerning the general legal framework for privately
financed infrastructure projects, namely, the legislative
authorization for the host Government to undertake such
projects and the legal regime to which they were subject.
The second section of draft chapter I considered the
possible impact of other areas of legislation on the
successful implementation of those projects. The concluding
section of draft chapter I discussed the possible relevance
of international agreements entered into by the host country
for domestic legislation governing privately financed
infrastructure projects.
51. The Commission was reminded that, at its thirtieth
session, it had been suggested that the chapter dealing with
general legislative considerations should elaborate on the
different legal regimes governing the infrastructure in
question, as well as on the services provided by the project
company, issues concerning which there were significant
differences among legal systems. It had also been suggested
that attention should be given to constitutional issues
relating to privately financed infrastructure projects. 7/ It
was noted that draft chapter I reflected those suggestions
and included some of the contents of former draft chapter V,
"Preparatory measures" (A/CN.9/438/Add.3).
52. By way of a general comment, it was suggested that
stronger language should be used in formulating legislative
recommendations. The emphasis should be on the major
objectives of legislation governing privately financed infra-
structure projects; those objectives were to establish
sufficient authority for the host Government to enter into
transactions for the construction of infrastructure projects
with private financing, to reduce the need for governmental
approvals to a reasonable minimum and to foster co-
ordination between different levels of government and
among different governmental departments. It was agreed
that the legislative guide should be drafted in such a way
that it would not appear to promote the use of private
financing for infrastructure projects, but would draw the
attention of those Governments which opted for such
transactions to the underlying legislative issues.
Constitutional issues (legislative recommendation 1
and paras. 1-4)
53. It was generally agreed that it was necessary not only
to review constitutional restrictions to private sector partici-
pation in infrastructure development and operation, but also
to address restrictions established by legislation and regu-
lations subordinate to the constitution.
54. It was suggested that, since recommendation 1 was
restricted to advice for a review of legislation, the advice
could be expressed in stronger terms. However, a more
reserved approach was advisable in discussing possible
changes in constitutions and other legislation.
Legislative approaches (legislative recommendation 2
and paras. 5-8)
55. It was pointed out that, if the recommendations in the
chapter were to be reformulated to emphasize the need for
the host Government to have the authority to enter into
transactions relating to privately financed infrastructure
projects (see above, para. 52), recommendation 2 could be
merged with recommendation 1. It was also observed that,
in addition to sector-specific laws, some States had adopted
laws governing individual privately financed infrastructure
projects; it was suggested that that legislative approach
might also need to be reflected in the guide. However, the
view was expressed that such a legislative approach might
not constitute a wise practice.
Legislative authority to grant concessions (legislative
recommendations 3 and 4 and paras. 10 and 11)
56. It was suggested that legislative recommendations 1,
2, 3, 4 and possibly 5 and 6 should be combined. It was also
suggested that attention should be drawn, in the context of
the legislative recommendations referred to, or at another
appropriate place, to the following: the ability of the host
Government to conclude and carry out commitments
relating to privately financed infrastructure projects; the
ability of the Government to provide the site for such
projects; the authority to initiate or carry out any necessary
expropriations; the ability of the Government to convey
property interests to private investors; the ability of the
Government to agree to the encumbrance of state-owned
property in order to create security interests; freedom of the
Government to agree to arbitration and other methods of
non-judicial settlement of disputes; the ability of the
Government to give guarantees for the protection of
investors' rights; and to allow linking of prices of services
or goods generated by the privately operated infrastructure
to price indices.
57. It was observed that paragraph 11 discussed methods
of calculating and adjusting prices and that that discussion
should not appear under the current title "Legislative
authority to grant concessions".
Legal regime of privately financed infrastructure
projects (legislative recommendation 5 and
paras. 12-15)
58. It was suggested that the second sentence of legislative
recommendation 5 should be reformulated so that it would,
in a positive fashion, advise the establishment of rules and
mechanisms that would facilitate the execution of privately
financed infrastructure projects.
Ownership and use of infrastructure (legislative
recommendation 6 and paras. 16-19)
59. No comments were made on legislative recommen-
dation 6.
Legal status of public service providers (legislative
recommendation 7 and paras. 20 and 21)
60. Apart from terminological suggestions relating to
some language versions of the document, no substantive
comments were made on recommendation 7.
Administrative coordination (legislative
recommendations 8-11 and paras. 22-27)
61. It was suggested that the desirability of centralizing
the issuance of licences should not be overemphasized,
since the reasons for the distribution of administrative
authority among various levels of government (e.g. local,
regional and central) were typically not overridden by the
existence of a privately financed infrastructure project; any
possibility of delay that might result from such distribution
of administrative authority should be countered, in
particular, by making the process of obtaining licences more
transparent and efficient.
62. It was suggested that, in the annotations accompanying
the legislative recommendations, it should be indicated that,
in addition to coordination among various levels of govern-
ment and various governmental departments, there was a
need for consistency in the application of criteria for the
issuance of licences and for the transparency of the
administrative process.
Other relevant areas of legislation (legislative
recommendation 12 and paras. 28-62)
63. It was suggested that legislative recommendation 12
should be reformulated in order to avoid an unintended
implication that some of the areas of law mentioned therein
(e.g. security law, company law and investment protection)
were not immediately relevant to privately financed infra-
structure projects.
64. It was also suggested that reference should be made
wherever appropriate to laws on consumer protection or that
issues relating to consumer protection should be discussed
as a separate issue. Furthermore, it was requested that
reference be made to the need to protect, wherever relevant,
groups of indigenous people who might be adversely
affected by privately financed infrastructure projects.
Investment protection (paras. 29-32)
65. It was suggested that the title of the subsection should
be changed to "Investment promotion and protection".
66. As to paragraph 31, it was suggested that reference
should be made to the need expressly to allow the transfer
of foreign exchange in order to repay loans.
Property law (paras. 33-35)
67. It was observed that the title of the subsection did not
refer to security interests.
68. It was suggested that the expression "reasonable
proof" in paragraph 34 should be replaced by a stronger
expression, such as "clear proof".
Rules and procedures on expropriation (paras. 36
and 37)
69. It was suggested that paragraph 36 should not imply
that providing the land should always be the responsibility
of the host Government. As a matter of terminology, it was
suggested that the term "expropriation" might not be
appropriate in some legal systems (see below, para. 183).
70. It was considered, with respect to the third sentence
of paragraph 37, that it was inappropriate to refer to court
proceedings as a source of delay without at the same time
clarifying the benefits of, and public policy objectives
sought to be achieved by, entrusting expropriation pro-
ceedings to courts. It was also suggested that the statement
made in the last sentence of paragraph 37 should be
qualified with words such as "to the extent permitted by
law".
Intellectual property law (paras. 38 and 39)
71. It was proposed to refer in the subsection to the
desirability of strengthening the protection of intellectual
property rights in line with international instruments
governing that area of law. With respect to the italicized text
in paragraph 39, support was expressed for listing in the
guide international instruments regarding intellectual
property rights in discussing the benefits of establishing a
legal framework for the protection of intellectual property
rights.
72. It was suggested that paragraph 38 should reflect the
fact that protection of patents was limited to the jurisdiction
in which the patent was registered and that that protection
did not automatically extend beyond that jurisdiction.
Security law (paras. 40-45)
73. It was stressed that reliable security offered to lenders
was crucial for the success of privately financed infra-
structure projects and that therefore the discussion of the
law of security interests should be further developed either
in the subsection on security law or elsewhere in the guide.
For example, it was pointed out that it would be desirable
to discuss the different types of security interest and the
different types of asset that might be encumbered for the
purpose of providing security and that in some legal systems
the inalienability of public assets might constitute an
obstacle to creating security interests in the context of
privately financed infrastructure projects. It was, however,
observed in a general way that, because of the significant
differences between legal systems regarding the law of
security interests, it would be difficult and probably
inadvisable to discuss in more detail the technicalities of
legislation in that area.
74. It was suggested that the second sentence of para-
graph 40 should be reviewed so as to rearrange the different
types of security interest according to their practical
importance, and that reference should be made to the
assignment of intangible assets other than receivables. It
was also suggested that the penultimate sentence of
paragraph 40 and its link with the last sentence of the
paragraph should be reviewed.
75. It was proposed to address "step-in" rights in favour
of creditors, which would allow them to take over the
concession or the operation of the infrastructure project if
the project company was in default of its obligations
towards the creditors.
76. Another suggestion was to mention the work of the
International Institute for the Unification of Private Law
regarding security interests in mobile equipment, which
might be relevant also in the context of privately financed
infrastructure projects.
77. It was considered that the discussion in paragraph 41
should appropriately reflect the fact that in many countries
no central registers of title existed.
Company law (paras. 46-49)
78. It was proposed that mention be made in the
legislative recommendation and the annotations on company
law of the fact that some national laws established an
obligation for the project company to be incorporated as a
particular type of commercial entity that was best suited to
the various interests involved in the project and that some
laws also contained mandatory rules regarding the definition
of the registered activity of the project company.
79. It was proposed that paragraph 49 also mention
directors of the project company as possible parties to
agreements concerning the management of the project
company.
80. It was observed that the legislative guide in many
instances referred to project consortia and that those
references were too narrow, in that a single entity might
seek to obtain a concession, establish a project company and
assume the responsibilities that in other cases were assumed
by a consortium. It was observed that the legislative guide,
in referring to the project company, often used terms that
indicated a particular form of company; it was suggested
that such terminology should be avoided, because various
corporate forms were used for incorporating project
operators, the common characteristic of which was that the
liability of the company owners for the obligations of the
company was limited to their stake in the company.
81. It was suggested that, in the section regarding
company law, references should be made to the settlement
of disagreements among owners of the project company,
responsibility of directors and administrators, including
criminal responsibility, and the protection of interested third
persons.
Accounting practices (para. 50)
82. It was observed that the emphasis of paragraph 50 was
on accounting practices and that, in line with the purpose
of the guide, the discussion should be recast so as to focus
on legislation.
Contract law (paras. 51 and 52)
83. It was considered that section 8 should indicate more
clearly the types of contract envisaged in the section and,
in particular, should distinguish between contracts between
the project company and its suppliers or customers and the
agreement between the host Government and the con-
cessionaire, which was in some legal systems subject to
administrative law, rather than contract law. It was
suggested that reference should also be made to private
international law, in the context of the discussion on law on
commercial contracts.
Insolvency law (paras. 53 and 54)
84. It was suggested that the following should be
addressed: the question of the ranking of creditors, the
priority between the insolvency administrator and creditors,
legal mechanisms for reorganization of the insolvent debtor,
special rules designed to ensure the continuity of the public
service in case of insolvency of the project company and
provisions on avoidance of transactions entered into by the
debtor shortly before the opening of the insolvency
proceedings.
Tax law (paras. 55-57)
85. It was stated that the stability of the tax regime was
crucial for the success of privately financed infrastructure
projects. The suggestion was made to mention the
possibility of agreements between the host Government and
the investors or the project company establishing the
stability of the tax regime applicable to the concession. It
was noted that the authority to establish or increase taxes
or enforce tax legislation might be decentralized, a
circumstance that should be reflected in the section. The
guide might also mention various forms of tax incentives
granted to private investors (e.g. permanent incentives or
incentives that were limited in time).
Environmental protection (paras. 58-60)
86. It was observed that environmental matters played an
important role in privately financed infrastructure projects
and that such matters were among the most frequent causes
of dispute. It was suggested that the list of examples in the
second sentence of paragraph 58 should be expanded by
adding, for example, the coal-fired power sector, power
transmission, roads and railways. It was also suggested that
the section should refer to the desirability of adhering to
treaties relating to the protection of the environment.
87. It was considered that the guide should avoid the
impression of suggesting that laws designed to protect the
environment were an obstacle to be removed in order to
facilitate privately financed infrastructure projects. The
same applied to the possibility for any individual person to
initiate proceedings to review the compliance of the project
with environmental laws, a possibility that had been
provided for by a number of national laws and was being
discussed in international forums.
Settlement of disputes (paras. 61 and 62)
88. It was suggested that the section should address the
different types of dispute that might arise in the context of
a privately financed infrastructure, namely, disputes arising
in relation to the selection of the concessionaire, disputes
between the private companies involved in the construction
and operation of the project and disputes between the host
Government or the regulatory agency and the project
company during the operational phase of the project. It was
also suggested that reference should be made in the section
to choice-of-law issues.
89. In response to a question, it was pointed out that the
International Centre for Settlement of Investment Disputes
had already been involved in the settlement of disputes
arising from privately financed infrastructure projects and
that cases considered by the Centre might provide valuable
information that might usefully be reflected in the guide. It
was suggested that other institutions administering
arbitration proceedings, such as the International Chamber
of Commerce, might also be referred to in the guide.
90. The view was expressed that, to the extent relevant to
legislation, alternative methods of dispute settlement such
as conciliation or mediation should be mentioned in the
guide.
91. The view was also expressed that the guide should call
upon States to make judicial proceedings more efficient and
thereby make referral of disputes to state courts a more
attractive option. A contrary view was that, in the context
of privately financed infrastructure projects, the prospect
of judicial settlement of disputes was frequently seen by
international investors as an obstacle in negotiating such
projects and that, therefore, that method of dispute
settlement should not be promoted. It was added, however,
that, even if arbitration was chosen as a method of settling
disputes, efficient judicial protection of rights of interested
parties remained crucial for the success of privately
financed infrastructure projects. It was suggested that, in
addition to the recognition and enforcement of foreign
arbitral awards, the regime for the recognition and
enforcement of foreign judgements should be mentioned in
paragraph 61.
92. The view was expressed that the guide should refer
to the UNCITRAL Model Law on International Commercial
Arbitration as one of the examples of texts the adoption of
which might provide a hospitable legal climate for the
settlement of disputes.
National legislation and international agreements
(legislative recommendation 13 and paras. 63-67)
93. It was suggested that the title of the recommendation
(in particular the phrase "national legislation") should be
reviewed in view of the fact that the recommendation and
the annotation were directed primarily towards international
treaties.
94. It was suggested that reference should be made in the
guide to international instruments designed to eliminate
corruption. The guide should also refer to environmental
protection and it should be made clear that regional
economic integration treaties were the source of certain
national legislative provisions.
95. The view was expressed that it would be useful to
refer to the World Trade Organization's Agreement on
Government Procurement. That Agreement currently had
some 25 contracting parties and efforts were under way to
make it universally accepted.
Chapter II. Sector structure and regulation
(A/CN.9/444/Add.3)
General remarks
96. The Commission was reminded of its deliberations
during its thirtieth session, when it had been noted that
issues pertaining to privately financed infrastructure
projects also involved issues of market structure and market
regulation and that consideration of those issues was
important for the treatment of a number of individual topics
proposed to be covered by the legislative guide. 8/
97. The Commission noted that, for the purpose of dealing
with issues of competition, sector structure and regulation
at the level of detail that had been envisaged by the
Commission, a separate chapter had been prepared by the
Secretariat. The Commission expressed its appreciation to
the Private Sector Development Department of the World
Bank for having contributed the substance of the draft
chapter.
98. The Commission engaged in a general exchange of
views regarding the scope and purpose of the chapter.
99. According to one view, the issues raised by privately
financed infrastructure projects were not exclusively legal
in nature, as they were closely related to considerations of
economic and industrial policy as well. The inclusion of a
discussion on competition in the legislative guide was
welcome in view of the difficulties some countries had
encountered in the aftermath of privatization processes in
which private monopolies had succeeded state monopolies.
In that connection, it was stated that the draft chapter
contained useful background information that might assist
national legislators to consider the various options
available.
100. In another view, the discussion of policy issues
contained in the draft chapter was excessively detailed and
might convey the impression that the guide advocated
certain specific policies. It was stated that the issue of sector
structure, as well as the options available for achieving the
desired structure, were essentially matters of national
economic policy, which should not figure prominently in
the guide. It was also pointed out that in various legal
systems a distinction was made between regulated sectors,
such as electricity and telecommunications, in which the
operators were authorized to provide services under a
licence issued by the competent authorities, and other
sectors in which the operators were awarded concessions
through contractual arrangements entered into with the
competent public entity. The Commission was urged to
revise the draft chapter with a view to ensuring that it
adequately reflected those distinctions. Concern was also
expressed that the wording and character of the discussion
contained in the draft chapter appeared to be excessively
prescriptive and not in harmony with the nature and style
of the remaining chapters.
101. The Commission considered possible ways to address
the concerns that had been expressed. One proposal was to
move the substance of the discussion on competition and
sector structure, currently contained in sections A, "Market
structure and competition", and B, "Legislative measures
to implement sector reform", to the introductory part of the
guide or simply to refer to a treatment of those issues
elsewhere in the guide. It was also proposed to move the
substance of the discussion on regulatory issues, currently
contained in section C, "Regulation of infrastructure
services", to a future chapter dealing with the operational
phase. It was pointed out, in that connection, that further
redrafting might subsequently be required so as to
harmonize those portions with the remaining text of the
guide. An alternative proposal was to combine sections A
and B of the draft chapter in a separate part of the guide,
possibly in the form of an annex, while moving most of
section C to the future chapter dealing with the operational
phase.
102. After deliberation, the Commission requested the
Secretariat to rearrange the substance of the draft chapter
as suggested in the first proposal referred to above in
paragraph 101, taking into account the views expressed
during the discussion. Without prejudice to that decision,
the Commission proceeded to exchange views on the
substance of the draft chapter.
Market structure and competition (legislative
recommendation 1 and paras. 1-13)
103. It was suggested that the corresponding notes to legis-
lative recommendation 1 should make clear that the review
of the assumptions under which state monopolies had been
established involved a review of the historical circum-
stances and political conditions that had led to the creation
of such monopolies.
104. The view was expressed that it was important to refer
in the corresponding notes to competition laws and other
similar rules that protected the market from abusive or
restrictive practices.
Abolition of legal barriers and obstacles (legislative
recommendation 2 and paras. 15 and 16)
105. It was suggested that the draft chapter should take into
account the fact that certain countries, in particular
developing countries, might have a legitimate interest in
promoting the development of certain sectors of national
industry and might thus choose not to open certain infra-
structure sectors to competition.
106. The view was expressed that the phrase "other legal
impediments to competition" in recommendation 2 could
be understood in an excessively broad sense, encompassing
public policy rules, such as environmental or consumer
protection rules. It was therefore suggested that the phrase
should be qualified by adding words such as "that cannot
be justified by reasons of public interest".
Restructuring infrastructure sectors (legislative
recommendation 3 and paras. 18-21)
107. It was pointed out that the manner in which a country
decided to organize a particular infrastructure sector con-
stituted a matter of national economic policy. Accordingly,
the inclusion in the legislative guide of a description of
measures that had been taken in some countries to
restructure various infrastructure sectors should be done in
such a fashion as to avoid the impression that the guide
advocated any particular model. It was also suggested that
the guide should take into account the varying levels of
economic and technological development of countries.
Transitional measures (legislative recommendations 4
and 5 and paras. 33-35)
108. It was pointed out that the restructuring of infra-
structure sectors was a particularly complex exercise that
not only involved transitional measures of a technical or
legal nature, but required the consideration of a variety of
political, economic and social interests. The draft chapter
should also mention those other factors, as appropriate.
Controlling residual monopolies (legislative
recommendations 6 and 7 and paras. 37-40)
109. In connection with the reference, in paragraphs 37
to 39 of the notes, to the use of competitive procedures for
the choice of the operator, it was observed that, in some
countries, concessions of public services had traditionally
been regarded as involving a delegation of state functions
and, as such, the delegating authority was not bound to
follow the same procedures that governed the award of
public contracts. In those countries, concessions might be
awarded after direct negotiations between the delegating
authority and a concessionaire of its choice, subject to
certain requirements, such as the previous publication of a
notice to interested parties who wished to be invited to those
negotiations. That reality, it was stated, was not adequately
reflected in the above-mentioned paragraphs, which should
be redrafted so as to avoid the impression that they
prescribed the use of tendering or other competitive
selection procedures as the only acceptable ones for the
award of infrastructure projects. In reply it was stated that
the guide should stress the need for competitive selection
procedures.
110. As regards paragraph 40 of the notes, it was stated that
in some cases the retention of geographical monopolies
might be warranted for a transitional period only, a
circumstance that should be mentioned in the guide.
Conditions for the award of licences and concessions
(legislative recommendation 8 and para. 50)
111. The view was expressed that paragraph 50 of the notes
might need to be revised so as to ensure its consistency with
the advice provided in chapter III, "Selection of the con-
cessionaire".
Interconnection and access regulation (legislative
recommendation 9 and paras. 51-54)
112. It was observed that the text of the legislative recom-
mendation and the corresponding notes did not distinguish
adequately between obligations imposed on an operator
pursuant to the applicable regulatory regime and contractual
rights or obligations that might be provided in a bilateral
concession agreement. Since the distinctions had various
important implications in some legal systems, the legislative
recommendation and the notes should be revised.
Price and profit regulation (legislative recommenda-
tions 10 and 11 and paras. 55-57);
Subsidies and universal service (legislative recom-
mendation 12 and para. 62);
Performance standards (legislative recommenda-
tion 13 and para. 63)
113. Comments were made to the effect that the regulatory
issues dealt with in recommendations 10 to 13 typically
arose during the operational phase of the infrastructure and
that it would therefore be more appropriate to address those
issues in a future chapter concerning the operational phase,
rather than in the second chapter of the legislative guide
(see also above, paras. 100 and 101).
114. It was suggested that issues relating to consumer
protection were not limited to the need to ensure universal
access to the services provided by infrastructure operators
and that the guide should include a discussion, as appro-
priate, of consumer protection.
Independence and autonomy of regulatory bodies
(legislative recommendations 14 and 15 and
paras. 67-71)
115. In response to questions as to the need for a discussion
of the functions of regulatory bodies in the legislative guide,
it was stated that it was of crucial importance for potential
investors to be able to ascertain whether the regulatory
regime would be fair and stable and would take appropriate
account of the public interest and the interests of the project
company. The notions of independence and autonomy of
regulatory bodies encompassed two important elements that
merited further elaboration in the notes corresponding to
recommendations 14 and 15, namely, the functional
autonomy of the regulatory body within the administrative
structure of the host Government and its independence from
the regulated industry.
116. It was pointed out that the reference in recom-
mendation 15 to decisions made by the regulatory body on
"technical" grounds might be interpreted in some legal
systems as implying the strict application of a rule without
consideration of the particular context in which the rule was
being applied. It was suggested that it would be preferable
to refer to "substantive" or "objective" grounds.
Sectoral attributions of regulatory bodies (legislative
recommendation 16 and paras. 72 and 73)
117. It was observed that the attributions of regulatory
bodies were not always limited to individual sectors, since
in some countries they might also extend to several sectors
within a given region.
Mandate of regulatory bodies (legislative
recommendation 17 and para. 74)
118. The view was expressed that recommendation 17
might conflict with recommendation 15. It was noted that
recommendation 15 (see above, para. 116) required that the
regulatory bodies be given autonomy to take decisions on
technical rather than political grounds. However, the
general objectives that should guide the actions of regula-
tory bodies pursuant to recommendation 17 (e.g. the promo-
tion of competition, the protection of users' interests, the
satisfaction of demand, the efficiency of the sector, the
financial viability of the public service providers, the safe-
guarding of the public interest or of public service obliga-
tions and the protection of investors' rights) were not of a
strictly "technical" nature. It was suggested that the notes
should clarify the interplay between the two recommenda-
tions.
Powers of regulatory bodies (legislative
recommendation 18 and paras. 75-78)
119. Except for editorial or linguistic comments, or the
reiteration of general comments made earlier during the
debate, such as a suggestion to include a reference to
consumer protection, no specific comments were made in
connection with recommendation 18 and the accompanying
notes.
Composition of the regulatory body (legislative
recommendations 19 and 20 and paras. 80 and 81)
120. The view was expressed that the guide should
establish a clearer distinction between legislative advice and
practical advice on the regulatory function. It was suggested
that the substance of recommendation 19, which related to
the ideal number of members in regulatory bodies that took
the form of a commission, was not a matter for legislation.
Similar examples could be found in other recommendations
made in the draft chapter. In reply it was stated that in order
to implement some of the practical advice given in the guide
(e.g. as to the membership of the regulatory body)
legislative provisions might be needed and that therefore
it would be useful to discuss practical advice in the guide.
Disclosure requirements (legislative recommenda-
tion 21 and paras. 84-86)
121. The view was expressed that the disclosure require-
ments imposed on the operator under recommendation 21
(e.g. the obligation to provide the regulatory body with
information on the operation of the company) might cause
practical difficulties in connection with recommenda-
tions 22 and 23, which contemplated, inter alia, the
accessibility by interested parties to regulatory decisions.
The guide should address the legitimate concern of the
regulated industry as to the confidentiality of proprietary
information.
Sanctions (legislative recommendation 24 and
para. 94);
Appeals (legislative recommendation 25 and
para. 95)
122. Except for editorial or linguistic comments, or the
reiteration of general comments made earlier during the
debate, no specific comments were made in connection
with recommendations 24 and 25 and the accompanying
notes.
Chapter III. Selection of the concessionaire
(A/CN.9/444/Add.4)
General remarks
123. It was noted that draft chapter III (previously
chapter IV), which dealt with methods and procedures
recommended for use in the award of privately financed
infrastructure projects, also discussed issues raised by
unsolicited proposals, as had been suggested at the thirtieth
session of the Commission. 9/
124. It was felt that the overall purpose of the legislative
guide was to assist host countries to stimulate the flow of
investment in infrastructure projects by providing advice
on essential elements of a favourable legal framework. One
of those elements was the existence of appropriate selection
procedures. One significant practical obstacle to the
execution of privately financed infrastructure projects was
the considerable length of time invested in negotiations
between the public authorities of the host country and
potential investors. By devising appropriate procedures for
the award of privately financed infrastructure projects that
were aimed at achieving efficiency and economy, while
ensuring transparency and fairness in the selection
procedures, the guide might become a helpful tool for the
public authorities of host countries.
125. It was noted that no international legislative model
had been devised specifically for competitive selection
procedures in privately financed infrastructure projects. In
that connection, it was suggested that the usefulness of the
chapter might be enhanced by focusing the recommen-
dations on issues of a legislative nature and formulating
them as much as possible in language that lent itself to being
incorporated into national legislation.
126. With regard to the preference expressed in the chapter
for the use of competitive methods to select the conces-
sionaire, comments were made to the effect that the guide
should recognize more clearly that other methods might also
be used, according to the legal tradition of the country
concerned. It was observed that, in the legal tradition of
certain countries, privately financed infrastructure projects
involved the delegation, by the appropriate public entity,
of the right and authority to provide a public service. As
such, they were subject to a special legal regime that
differed in many respects from the regime that applied
generally to the award of public contracts for the purchase
of goods, construction or services.
127. In those countries, for the award of public contracts
for the purchase of goods or services, the Government had
the choice of a number of procedures, which, as a general
rule, involved publicity requirements, competition and the
strict application of pre-established award criteria. The most
common procedure was the tendering method
(adjudication), in which the contract was awarded to the
tenderer offering the lowest price. While there also existed
less rigid procedures, such as the request for proposals
(appel d'offres), which allowed for consideration of other
elements in addition to price (e.g. operating cost, technical
merit and proposed completion time), negotiations were
only resorted to under exceptional circumstances. However,
those countries applied different procedures for the award
of privately financed infrastructure projects. Given the very
particular nature of the services required (e.g. complexity,
amount of investment and completion time), the procedures
used placed the accent on the delegating body's freedom to
choose the operator who best suited its need, in terms of
professional qualification, financial strength, ability to
ensure the continuity of the service, equal treatment of the
users and quality of the proposal. However, freedom of
negotiation did not mean arbitrary choice and the laws of
those countries provided procedures to ensure transparency
and fairness in the conduct of the selection process.
128. In addition to the special procedures used in those
countries for selecting the infrastructure operator, another
notable difference had to do with the method of payment of
the infrastructure operator, as distinct from the payment of
a supplier or a work contractor. In practically every case,
the payment for the performance of a public contract in
those countries was made in the form of a price paid by the
governmental agency to the supplier or contractor. In the
case of privately financed infrastructure projects, however,
the remuneration was spread out over a number of years and
usually derived from the operation of the infrastructure,
generally in the form of fees charged to the user. The
duration of the project was calculated in such a way as to
enable the operator to recoup the investment and ensure a
return in the amount freely set in the project agreement.
129. In view of those considerations, it was suggested that
the chapter should elaborate further on the fact that
competitive procedures typically used for the procurement
of goods, construction or services were not entirely suitable
for privately financed infrastructure projects. It was noted
that, while the selection procedures described in the chapter
differed from the procurement methods provided in the
UNCITRAL Model Law on Procurement of Goods,
Construction and Services, further adjustments might still
be required. Particular attention should be given to the need
to avoid the use of terminology that in some legal systems
was normally used in connection with procurement methods
for the acquisition of goods, construction and services.
130. Support was expressed for the thrust of the chapter,
which offered a structured and transparent framework for
the exercise of administrative discretion in the selection of
the concessionaire. However, when expressing a preference
for competitive selection procedures, particular care should
be taken to avoid the impression that the guide excluded the
use of any other procedures.
Selection procedures covered by the guide
(paras. 3-5)
131. In connection with paragraph 3 (a) of the notes, it was
suggested that the text should make mention of the fact that,
in many countries, the sale of shares of public utility
enterprises required prior legislative authorization. It was
also suggested that the offering of shares on stock markets
should be mentioned among the disposition methods.
General objectives of selection procedures
(paras. 6-14)
132. Support was expressed for including in the chapter a
discussion of the objectives of economy, efficiency,
integrity and transparency. It was observed that those
objectives fostered the interests not only of the host
Government, but also of the parties wishing to invest in
infrastructure projects in the country. An important
corollary of those objectives was the availability of
administrative and judicial procedures for the review of
decisions made by the authorities involved in the selection
procedure, and it was suggested that the chapter should, at
an appropriate place, include a discussion on that subject.
133. It was observed that the main purpose of privately
financed infrastructure projects was for the host
Government to obtain a higher quality of public services.
It was therefore suggested that paragraph 8 should give
more emphasis to the potential benefits of participation by
foreign companies in selection proceedings.
134. It was pointed out that transparency required not only
clarity of the rules and procedures for the selection of the
concessionaire, but also that decisions were not improperly
made. The chapter should therefore also include a
discussion on appropriate measures to fight corrupt or
abusive practices in the selection process. One of the
measures it might be worthwhile mentioning in the guide
was the so-called "integrity agreement" ("acuerdo de
integridad"), whereby all companies invited to participate
in the selection process undertook neither to seek to
influence unduly the decisions of the public officials
involved in the selection process nor otherwise to distort the
competition by means of collusive or other illicit practices.
135. Various comments were made to the effect that ade-
quate provisions to protect the confidentiality of proprietary
information constituted one of the essential elements for
fostering the confidence of investors in the selection
procedures. It was therefore suggested that the issue should
be mentioned in paragraph 10 and concrete recom-
mendations included at appropriate places in the guide for
the purpose of ensuring the confidentiality of proprietary
information.
136. It was suggested that the text should mention the
objectives of ensuring the continuous provision of public
services and the universal access to public services among
the objectives that governed the award of privately financed
infrastructure projects.
Appropriate selection method (legislative
recommendations 1 and 2 and paras. 15-25)
137. In connection with the discussion on the range of
proponents to be invited, it was pointed out that the
procurement guidelines of some multilateral financial insti-
tutions prohibited the use of pre-qualification proceedings
for the purpose of limiting the number of bidders to a pre-
determined number.
138. It was suggested that paragraph 22 should mention
that awarding authorities typically required that the bidders
submit sufficient evidence that the technical solutions
proposed had been previously tested and satisfactorily met
internationally acceptable safety and other standards.
139. It was suggested that paragraph 24 should elaborate
on the distinction between qualification and evaluation
criteria.
140. It was suggested that paragraph 25 should caution
against unrestricted negotiations between the awarding
authority and the selected project consortium.
Preparations for selection proceedings (paras. 26-32)
141. It was suggested that paragraph 27 should include a
reference to the role of independent advisers and the need
to appoint them at the early stages of the project.
142. It was suggested that the expression "pre-feasibility
studies", rather than "feasibility studies", should be used in
the context of paragraphs 28 and 29. It was also suggested
that it might be useful to refer in those paragraphs to the fact
that, in some countries, it was found useful to provide for
some public participation in the preliminary assessment of
the environmental impact of a project and the various
options available to minimize that impact. The suggestion
was made that the text should reflect that an environmental
impact assessment should ordinarily be carried out by the
host Government as part of its feasibility studies.
143. The availability of standard documentation prepared
in sufficiently precise terms was said to be an important
element to facilitate the negotiations between project
consortia and prospective lenders and investors. It was
suggested that appropriate references to those circumstances
should be included in paragraph 31.
Pre-qualification of project consortia (legislative
recommendations 3-7 and paras. 33-46)
144. As a general comment, it was noted that preferred
selection procedures described in the chapter consisted of
relatively elaborate pre-qualification and final selection
phases and a relatively short phase for the final negotiation
of the project agreement. In the practice of some countries,
however, there was more scope for negotiating the final
agreement after the project consortium had been selected,
in view of the complexity and scale of infrastructure
projects. In that connection, the view was expressed that the
preferred selection procedures described in the chapter,
which were in many aspects inspired by the procurement
methods provided for in the UNCITRAL Model Law on
Procurement of Goods, Construction and Services, might
require further adjustments so as to address the particular
needs of privately financed infrastructure projects in an
adequate manner.
145. It was noted that, beginning with paragraph 34, the
reader was referred, in various instances, to provisions of
the Model Law. It was suggested that, for ease of reading,
it might be preferable to incorporate in the text, as
appropriate, the substance of the relevant provisions of the
Model Law. Eliminating the cross-references between the
two texts might also serve to underscore the particular
nature of the selection procedure described in the chapter.
146. It was observed that the nature of the proceedings
described in paragraphs 33 to 36 differed in many respects
from traditional pre-qualification proceedings, as applied
in connection with the procurement of goods and services.
In order to avoid the connotation of automatic qualification
(or disqualification) that was inherent in those traditional
pre-qualification proceedings, it was suggested that it would
be more appropriate to use the phase "pre-selection
proceedings" in the draft chapter.
147. It was proposed to include among the criteria
mentioned in paragraph 36 additional criteria that might be
particularly relevant for privately financed infrastructure
projects, such as the ability to manage the financial aspects
of the project and previous experience in operating public
infrastructure or in providing services under regulatory
oversight.
148. In connection with the last sentence of paragraph 37,
the view was expressed that the requirements of a minimum
percentage of equity investment might not be in line with
multilateral agreements governing trade in services.
149. It was suggested that paragraphs 39 and 40 should
distinguish between subsidies or incentives available under
national laws to certain industries and regions and prefer-
ences given to domestic companies over foreign competitors
bidding for the same project. The text should make clear
that the issue of domestic preferences only arose in cases
where the awarding authority invited proposals from both
national and foreign companies. However, it was also
suggested that paragraphs 39 and 40 should mention the fact
that the use of domestic preferences was not permitted under
the guidelines of some international financial institutions
and might be inconsistent with international obligations
entered into by many States pursuant to agreements on
regional economic integration or trade facilitation.
150. Comments were made in support of the reference in
paragraph 42 to the practice of some countries of
authorizing the awarding authority to consider arrangements
for compensating pre-qualified proponents, if the project
could not proceed for reasons outside their control, or for
contributing to the costs incurred by them after the pre-qualification phase.
151. The view was expressed that paragraph 45 should be
redrafted so as to avoid the undesirable impression that it
advocated the use of an automatic rating system that might
unnecessarily limit the awarding authority's discretion in
assessing the qualifications of project consortia.
Procedures for requesting proposals (legislative
recommendations 8-19 and paras. 47-80)
152. The question was asked whether the two-stage pro-
cedure described in paragraphs 47 to 52 implied that, after
discussions with the project consortia, the awarding
authority had to issue a set of specifications that indicated
the expected input. It was suggested, in that connection, that
even at the final stage of the procedure the awarding
authority might wish to formulate its specifications only in
terms of the expected output.
153. For purposes of clarity, it was suggested that the word
"negotiations" in paragraphs 51 and 52 should be replaced
with the word "discussions".
154. The proposal was made to emphasize in paragraph 60
the fact that evaluation criteria should give special impor-
tance to aspects related to the operation of the infrastructure
and should not be focused on the construction phase.
155. In connection with the possibility of rejecting
proposals on grounds such as the governmental policy for
the sector concerned referred to in paragraph 62, it was
suggested that any such grounds should be invoked only if
they had been included by the awarding authority among the
pre-qualification criteria.
156. It was proposed to include among the elements of the
financial proposals mentioned in paragraph 67 the require-
ment that the project consortia submit letters of intent issued
by the prospective lenders or other satisfactory evidence of
their commitment to provide the financing to the project.
157. Questions were asked as to the purpose of requiring
that the financial viability studies referred to in para-
graph 68 (a) indicate the expected financial internal rate
of return in relation to the effective cost of capital
corresponding to the financing arrangements proposed. It
was suggested that, from the perspective of the host
Government, the key factors in evaluating proposals should
be the quality of the services and the overall viability of the
financial arrangements, rather than the net profit expected
by the operator.
158. It was suggested that paragraph 70 should clearly
recommend the submission of tender securities by project
consortia.
159. In connection with the last sentence of paragraph 72,
it was observed that, while the criteria used for pre-qualifying consortia
should not be weighted again at the
evaluation phase, it was appropriate for the awarding
authority to require, at any stage of the selection process,
that the participants again demonstrate their qualifications
in accordance with the same criteria used to pre-qualify
them.
160. In response to a question concerning the need for
providing in paragraph 75 that the proposals be opened at
a time previously specified in the request for proposals, it
was observed that such a requirement helped to minimize
the risk that the proposals might be altered or otherwise
tampered with and represented an important guarantee of
the integrity of the proceedings.
161. It was suggested that, where a two-stage procedure
had been used to request proposals, the awarding authority
should also have the right to reject proposals that were
found to deviate grossly from the first request for proposals.
With regard to the assessment of the responsiveness of
proposals, which was referred to in paragraph 76, it was
suggested that paragraph 76 should make clear that
"unresponsive" proposals were not only incomplete or
partial proposals, but all proposals that deviated from the
request for proposals.
162. Differing views were expressed regarding the relative
importance of the proposed unit price for the expected
output as an evaluation criterion. In one view, in order to
foster objectiveness and transparency, the unit price should
be regarded, wherever possible, as a decisive factor for
choosing between equally responsive proposals. According
to another view, the notion of "price" could not have the
same value for the award of privately financed infrastructure
projects as it had in the procurement of goods and services.
The remuneration of the concessionaire was often the
combined result of charges paid by the users, ancillary
revenue sources and direct subsidies or payments made by
the public entity awarding the contract. Furthermore, non-price criteria, such
as the quality of services, including the
guarantees offered for ensuring its continuity and
universality, needed to be taken fully into account. In that
context, while the unit price for the expected output retained
its role as an important element of comparison of proposals,
it could not be regarded as the most important factor. It was
felt that the guide should elaborate on those issues, as
suggested in the note following paragraph 77.
163. It was suggested that the text of the legislative
recommendations did not cover the entirety of the subject
matter discussed in the corresponding notes. It was therefore
suggested that additional recommendations should be
formulated to reflect, in particular, the issues covered in
paragraph 77.
164. With regard to the final negotiations referred to in
paragraphs 78 and 79, the view was expressed that the
legislative guide should distinguish more clearly between
the negotiation of the final contract, after the project has
been awarded, and the procedure to request proposals. It
was suggested that the reference in paragraph 53 to the
invitation of proposals with respect to the revised
specifications and contractual terms might imply that the
terms of the contract were open to negotiation even prior
to the final award. Such a situation was considered
inadvisable, since the proposals should address technical
and financial aspects of the project, but not the terms of the
contract. In response, it was stated that knowledge of certain
contractual terms, such as the risk allocation envisaged by
the awarding authority, were important in order for the
participating consortia to formulate their proposals and
discuss the "bankability" of the project with potential
lenders. It was therefore advisable to provide the partici-
pating consortia with a draft of the contract as early as
possible.
165. It was proposed to add the words "or the consumers"
after the words "to the detriment of the host Government"
in paragraph 78.
Direct negotiations (legislative recommendations
20-24 and paras. 81-93)
166. Support was expressed for the inclusion, in para-
graphs 81 to 84, of a discussion on possible advantages and
disadvantages of direct negotiations for the award of
privately financed infrastructure projects.
167. It was suggested that paragraphs 81 to 84 should
elaborate on possible methods for ensuring transparency and
introducing elements of competition in direct negotiations.
168. It was noted that the list of exceptional circumstances
authorizing the use of direct negotiations contained in
paragraph 85 was not exhaustive and that other circum-
stances might exist that justified the use of direct
negotiations. They included, for instance, the following:
reasons of national defence; cases where there was only one
source capable of providing the required service (e.g.
because it involved the use of patented technology or
special know-how); lack of experienced personnel or of
an adequate administrative structure to conduct com-
petitive selection procedures; or cases where a higher
administrative authority of the host country had autho-
rized such an exception for reasons of public interest. It
was suggested that paragraph 85 should make clear that
the list provided therein was for illustrative purposes
only.
169. The question was asked as to how likely would there
be an urgent need for ensuring immediate provision of the
service that justified the recourse to direct negotiations
rather than to competitive selection procedures. In response,
it was noted that such an exceptional authorization was
needed, for instance, in cases of interruption in the
provision of a given service or where an incumbent
concessionaire failed to provide the service at acceptable
standards, when engaging in a competitive selection
procedure would be impractical in view of the urgent need
to ensure the continuity of the service. Questions were
raised, however, as to the appropriateness of using the
technique of private financing in case of urgency.
170. In response to a question concerning the reasons for
limiting the application of paragraph 85 (a) to cases where
the circumstances giving rise to the urgency were neither
foreseeable by the awarding authority nor the result of
dilatory conduct on its part, it was observed that such a
limitation was intended to ensure the accountability of the
awarding authority.
171. Support was also expressed for the consideration
given in paragraphs 87 to 93 to the issues raised by
unsolicited proposals. It was observed that unsolicited
proposals had been used in a number of countries and that
it was desirable to formulate concrete recommendations as
to how to deal with such proposals. In that connection, it
was suggested that the entity submitting an unsolicited
proposal should generally be required to meet essentially
the same qualification criteria as would be required of the
proponents participating in the competitive selection
procedure described in the chapter. It was also suggested
that unsolicited proposals should meet acceptable technical
and quality standards in order to be considered by the
awarding authority.
172. It was suggested that the word "Government" in
paragraph 88 might be interpreted in a narrow meaning and
exclude local or municipal authorities. It was proposed to
replace it with words such as "public entities" or "public
enterprises" so as to take into account that other entities of
the host country might have the power to negotiate
unsolicited proposals.
173. The view was expressed that the legislative recom-
mendations concerning unsolicited proposals were in fact
not of a legislative nature and should therefore be kept
only in the notes.
Review procedures (para. 94)
174. It was noted that the availability of administrative or
judicial remedies was an essential element in ensuring the
transparency and fairness of a selection procedure. It was
therefore suggested that the guide should elaborate on the
issue of review procedures, mentioning procedures and
remedies typically available under national laws, and that
it might be useful to formulate appropriate legislative
recommendations.
Record of selection proceedings (legislative recom-
mendation 25 and paras. 95-99)
175. The need to protect the confidentiality of privileged
and proprietary information, as referred to in paragraphs 95
and 96, was noted. It was suggested that a discussion should
be included of what kind of information should be available
to the public and what information should be reserved for
the host Government and the proponents.
Chapter IV. Conclusion and general terms of
the project agreement (A/CN.9/444/Add.5)
176. The Commission noted that the opening section of
draft chapter IV (previously chapter VI) dealt with general
considerations concerning the project agreement, dis-
cussing, in particular, the different approaches taken by
national legislations to the project agreement (from those
which scarcely referred to the project agreement to those
which contained extensive mandatory provisions concerning
clauses to be included in the agreement). The remaining
sections dealt with rights and obligations of the project
company that, in addition to being dealt with in the project
agreement, might be usefully addressed in the legislation,
as they might affect the interests of third parties.
Section A. General considerations (legislative
recommendations 1 and 2 and paras. 1-6)
177. The suggestion was made to indicate in paragraph 2
advantages and disadvantages of the legislative approaches
discussed.
178. It was considered that the guide should stress the need
for clarity as to the persons or governmental agencies that
had the authority to enter into commitments on behalf of the
Government at different stages of negotiation and to sign
the project agreement. In that discussion, due regard should
be given to the fact that different levels of government (e.g.
federal, provincial or municipal) might be involved in a
given privately financed infrastructure project.
179. The view was expressed that the guide should point
out the disadvantages of subjecting the entry into force of
the project agreement to prior approval through an ad hoc
act of parliament. It was noted in reply that, in some cases
or in some States, good reasons existed for providing for
legislative approval of individual privately financed
infrastructure projects. There was general agreement that
legislative approval did not mean that parliament would be
called upon to modify individual provisions in the project
agreement.
180. It was observed that what the guide defined as the
"project agreement" in practice often consisted of more than
one separate agreement between the host Government and
the project company.
Section B. General terms of the project
agreement
1. The project site (legislative recommendation 3
and paras. 8-12)
181. It was suggested that the second sentence of para-
graph 10, which appeared to discourage the Government
unduly from providing the project company with the land
needed for privately financed infrastructure projects, should
be reviewed.
182. It was proposed to replace the reference in para-
graph 11 to "the more expeditious" expropriation procedure
by "the more efficient" procedure in order to avoid creating
an unintended impression that the protection of interests of
the affected owners could be overridden by the desirability
of rapid expropriation proceedings.
183. The view was expressed that the term "expropriation"
in the English version should be replaced, because in some
legal systems it carried a negative connotation and might
suggest confiscation without prompt and adequate com-
pensation. Alternative expressions suggested included
"eminent domain", "compulsory acquisition" and "expro-
priation against just compensation". It was agreed that the
language to be used should avoid the negative connotation
referred to and that it should be readily understood in
different legal systems.
2. Easements (legislative recommendation 4 and
paras. 13-16)
184. It was suggested that paragraph 14 should refer to the
public interest and other conditions for obtaining an
easement through expropriation.
3. Exclusivity (legislative recommendation 5 and
paras. 17-21)
185. As regards the second sentence of paragraph 21, the
view was expressed that the advice therein might be
understood as suggesting that the parties should leave the
question of subsequent changes in the host Government's
policies to general clauses in the project agreement dealing
with changes of circumstance. It was suggested that such an
understanding should be avoided and that the guide should
instead promote certainty and predictability with respect to
the consequences of changes in the host Government's
policies.
186. It was suggested that the question of exclusivity dealt
with in recommendation 5 gave rise to important policy
issues and involved interests of consumers and other public
interests and that, therefore, the question should not be left
entirely to the negotiation between the parties in the context
of a given project. Legislation on the question of exclusivity
might, for example, deal with the length of periods for
which the host Government might commit itself to
respecting the project company's exclusive rights in
providing the public service.
187. The suggestion was made that the discussion relating
to exclusivity (e.g. para. 17, first sentence, and para. 19,
first sentence) should be reviewed to make it explicit who
was the beneficiary of exclusivity and who might be the
potential competitors.
188. It was proposed that paragraph 18 should not use the
phrase "general enabling legislation", since many States did
not have legislation that could be categorized as general
enabling legislation.
4. Legal status of the concessionaire (legislative
recommendations 6-8 and paras. 20-34)
189. With respect to the first sentence of paragraph 22, it
was considered necessary to clarify the phrase "legal status"
of the concessionaire so as to coordinate the treatment of
that matter with paragraphs 20 and 21 of draft chapter I,
"General legislative considerations" (A/CN.9/444/Add.2),
and to make clear to what extent the project agreement
might deal with the question of whether the concessionaire
was to be established as an independent entity. It was noted
that, in practice, project companies were typically
incorporated as legal entities separate from the project
sponsors, but that, from the viewpoint of legislation, that
did not always need to be the case.
190. In connection with the last sentence of paragraph 32,
the suggestion was made that some co-owners of the project
company might be concerned about the risks arising from
the involvement of the company in other projects awarded
to it in a separate selection process.
191. As regards the third sentence of paragraph 33, the
question was raised whether the legislative guide should
endorse the requirement of a positive vote by the host
Government and whether some of the objectives underly-
ing the requirement could be achieved by less intrusive
means.
192. It was suggested that some original members of the
project consortium and shareholders in the project company
might have a legitimate interest in being replaced by other
entities as shareholders and that there was no need to give
the host Government an unqualified prerogative to approve
such replacements.
5. Assignment of the concession (legislative recom-
mendations 9 and 10 and paras. 35-38)
193. It was considered desirable for legislation to allow the
parties to agree on "step-in" rights, that is, the right to have
the concession transferred to the lenders or to another
entity appointed by them if the project company is in default
of its obligations. In that context, it was stated that, where
the Government was to be given the right to withhold
approval of the assignment of a concession, that right should
be subject to the reservation that consent must not be
unreasonably withheld. A similar restriction should exist as
regards the right of the host Government to approve the
granting of a subconcession by the concessionaire
(para. 37).
194. It was pointed out, however, that the requirement of
prior governmental approval for the assignment of the
concession existed in many legal systems and was found to
be justified by reasons of public interest. The public entities
concerned had a legitimate interest in preventing the
transfer of the responsibility to provide public services to
entities that had not been selected by them.
195. The suggestion was made that the words "Except for
assignment as security to lenders," should be inserted at the
beginning of recommendation 9.
6. Security interests (legislative recommenda-
tions 11-13 and paras. 39-45)
196. Statements were made to the effect that, in practice,
lenders expected to obtain the widest possible security over
the assets of the project company, including the intangible
assets. The availability of such security was considered
crucial for the availability of financing for privately
financed infrastructure projects. In view of that, the
legislative guide should advise that legal obstacles to giving
such security should be eliminated from legislation.
197. It was observed, however, that in many instances the
assets managed by the project company remained in the
ownership of the State, that such ownership was inalienable
and that it was therefore not possible to use those assets as
security.
198. As to the possibility of establishing security interests
in the ownership shares of the project company, it was noted
that in some legal systems the pledge of shares was either
prohibited or restricted; moreover, it was likely that the
circumstances under which the creditors would be prompted
to invoke the security interest in the shares would also cause
the value of the shares to drop sharply, which made that type
of security uncertain and potentially illusory. It was
observed, however, that the creditors' objective in obtaining
shares as security was not to sell them in case of the project
company's default, but to take over the control of the project
company. The possibility of using shares in the project
company as security was crucial for the "bankability" of
privately financed infrastructure projects and States would
be well advised to adopt special legislation on the matter
in order to facilitate such projects. It was noted, however,
that the pledge of shares of the project company raised
essentially the same concerns as arose where the project
company itself or the concession was assigned to another
entity or consortium.
199. To the extent it was possible to create a security
interest in the shares of the project company and for the
creditors to take over the project company in case of
default, it was noted that it was desirable to clarify whether,
in the case of a "step-in" by creditors, the obligations of the
host Government and of the previous project sponsors were
in any way affected.
7. Duration (legislative recommendation 14 and
paras. 46 and 47)
200. It was considered that legislation should not establish
a maximum number of years for which concessions might
be granted. Such mandatory provisions were in practice
found to be an obstacle to agreeing to commercially
reasonable solutions. Such maximum limits also could not
take into account the possibility of changed circumstances
that would require an extension of the concession. It was
observed that the right of the host Government to purchase
the concession from the concessionaire presented another
possibility for dealing in a flexible manner with the duration
of the concession.
Section C. Specific terms (para. 48)
201. With respect to paragraph 48, which indicated issues
to be dealt with in the latter chapters of the guide, general
suggestions were made to the effect that the anticipated
chapters might be usefully combined and that care should
be taken to distinguish clearly between the issues that were
to be dealt with by legislation and those which were to be
negotiated by the parties.
E. Considerations on the finalization of the
draft chapters
202. It was suggested that the legislative recommendations
to be included in the various chapters of the legislative
guide should be supplemented, where appropriate, with
sample model legislative provisions, possibly with alterna-
tive solutions. It was considered that such model provisions
would make the legislative guide more practical and more
readily usable. The suggestion, it was explained, was not
to prepare a model law, but to facilitate as much as possible
the task of legislators in countries wishing to set up a
favourable legal framework for privately financed infra-
structure projects.
203. The countervailing view was that the subject matter
dealt with in the guide touched upon a number of public law
and policy issues and that it would therefore be difficult to
attempt to formulate model provisions that adequately took
into account the differences between legal systems and the
variety of policy options. The importance of affording
sufficient flexibility to legislators in countries wishing to
promote private investment in infrastructure was stressed.
For that purpose, a clear set of legislative recommendations
followed by an explanatory discussion of the pertinent
issues and the possible options available might be a more
useful tool than a set of model provisions that certain
legislators might regard as being difficult to adjust to
domestic conditions.
204. After considering the different views expressed, the
Commission requested the Secretariat to draft the legislative
recommendations in the form of concise legislative
principles, thereby reducing the number of recommen-
dations, and, where deemed feasible and appropriate, to
formulate sample provisions for illustrative purposes for
consideration by the Commission.
205. It was also suggested that the guide should not stray
from legislative advice on privately financed infrastructure
projects and that it should not attempt to give negotiating
and contractual advice. The discussion on negotiating and
contractual issues should be presented only to the extent
necessary to explain the need for a particular legislative
solution. It was suggested that the guide should, where
appropriate, refer to other publications containing con-
tractual advice, such as the United Nations Industrial
Development Organization Guidelines for Infrastructure
Development through Build-Operate-Transfer (BOT)
Projects and publications of the World Bank.
206. The Commission considered the method that should
be followed in the finalization of the legislative guide,
including the question whether the preparation of future
chapters should be entrusted to a working group. After
deliberation, it was agreed that the possible need for a
working group should be considered at the thirty-second
session of the Commission. It was also agreed that, at the
present stage, it was desirable to allow the Secretariat to
proceed in the preparation of future chapters for submission
to the next session of the Commission. Such preparation,
as well as the revision of existing drafts, should be carried
out with the assistance of outside experts, as had been done
thus far. The Secretariat was requested to make all
reasonable efforts to obtain the advice of experts from both
the public and the private sectors and to consult with experts
from developing and developed countries as well as from
countries with economies in transition.
Chapter III
Electronic commerce
A. Draft uniform rules on electronic
signatures
207. It was recalled that the Commission, at its thirtieth
session, in May 1997, had entrusted the Working Group on
Electronic Commerce with the preparation of uniform rules
on the legal issues of digital signatures and certification
authorities. With respect to the exact scope and form of such
uniform rules, it was generally agreed at that session that
no decision could be made at such an early stage of the
process. In addition, it was felt that, while the Working
Group might appropriately focus its attention on issues of
digital signatures in view of the apparently predominant role
played by public-key cryptography in the emerging
electronic-commerce practice, the uniform rules to be
prepared should be consistent with the media-neutral
approach taken in the UNCITRAL Model Law on Electronic
Commerce. Thus, the uniform rules should not discourage
the use of other authentication techniques. Moreover, in
dealing with public-key cryptography, those uniform rules
might need to accommodate various levels of security and
to recognize the various legal effects and levels of liability
corresponding to the various types of services being
provided in the context of digital signatures. With respect
to certification authorities, while the value of market-driven
standards was recognized by the Commission, it was widely
felt that the Working Group might appropriately envisage
the establishment of a minimum set of standards to be met
by certification authorities, in particular where cross-border
certification was sought. 10/
208. At the current session, the Commission had before it
the report of the Working Group on the work of its thirty-second session
(A/CN.9/446). The Commission expressed
its appreciation of the efforts accomplished by the Working
Group in its preparation of draft uniform rules on electronic
signatures. It was noted that the Working Group, throughout
its thirty-first and thirty-second sessions, had experienced
manifest difficulties in reaching a common understanding
of the new legal issues arising from the increased use of
digital and other electronic signatures. It was also noted that
a consensus was still to be found as to how those issues
might be addressed in an internationally acceptable legal
framework. However, it was generally felt by the
Commission that the progress achieved so far indicated that
the draft uiform rules on electronic signatures were
progressively being shaped into a workable structure. The
Commission reaffirmed the decision made at its thirty-first
session as to the feasibility of preparing such uniform rules 11/
and expressed its confidence that more progress could be
accomplished by the Working Group at its thirty-third
session (New York, 29 June-10 July 1998) on the basis of
the revised draft prepared by the Secretariat
(A/CN.9/WG.IV/WP.76). In the context of that discussion,
the Commission noted with satisfaction that the Working
Group had become generally recognized as a particularly
important international forum for the exchange of views
regarding the legal issues of electronic commerce and for
the preparation of solutions to those issues.
209. The Commission noted that, at the close of the thirty-second session
of the Working Group, a proposal had been
made that the Working Group might wish to give prelimi-
nary consideration to undertaking the preparation of an
international convention based on provisions of the Model
Law on Electronic Commerce and of the draft uniform rules.
The Working Group had agreed that the topic might need
to be taken up as an item on the agenda of its thirty-third
session on the basis of more detailed proposals possibly to
be made by interested delegations. However, the
preliminary conclusion of the Working Group had been that
the preparation of a convention should in any event be
regarded as a project separate from both the preparation of
the uniform rules and any other possible addition to the
Model Law. Pending a final decision as to the form of the
uniform rules, the suggestion to prepare a convention at a
later stage should not distract the Working Group from its
current task, which was to focus on the preparation of draft
uniform rules on digital and other electronic signatures, and
from its current working assumption that the uniform rules
would be in the form of draft legislative provisions. It had
been generally understood in the Working Group that the
possible preparation of a draft convention should not be
used as a means of reopening the issues settled in the Model
Law, which might have a negative effect on the increased
use of that already successful instrument (A/CN.9/446, para.
212).
210. The Commission noted that a specific and detailed
proposal for the preparation of a convention had been
submitted by a delegation to the Working Group for
consideration at a future session (A/CN.9/WG.IV/WP.77).
Diverging views were expressed in that connection. One
view held that a convention based on the provisions of the
Model Law was necessary, since the latter might not
suffice to establish a universal legal framework for
electronic commerce. Owing to the nature of the instrument,
the provisions of the Model Law were subject to variation
by any national legislation that enacted them, thus
detracting from the desired harmonization of the legal rules
applicable to electronic commerce. The opposite view was
that, owing to the rapidly changing technical background
of electronic commerce, the matter did not easily lend itself
to the rigid approach suggested by an international
convention. It was pointed out that the Model Law was of
particular value as a collection of principles, which could
be enacted in domestic legislation through various
formulations to accommodate the increased use of
electronic commerce.
211. The prevailing view was that it would be premature
to undertake the preparation of the suggested convention.
Delegations of various countries indicated that law reform
projects based on the provisions of the Model Law were
currently under way in their countries. Concern was
expressed that the preparation of an international con-
vention based on the Model Law might adversely affect the
widespread enactment of the Model Law itself, which, only
two years after its adoption by the Commission, was already
being implemented in a significant number of countries.
Moreover, it was generally felt that the Working Group
should not be distracted from its current task, namely, the
preparation of draft uniform rules on electronic signatures,
as agreed by the Commission. Upon concluding that task,
the Working Group would be welcome, in the context of its
general advisory function with respect to the issues of
electronic commerce, to make proposals to the Commission
for future work in that area. It was suggested by the
proponents of a convention that the matter might need to be
further discussed at a future session of the Commission and
in the context of the Working Group, possibly through
informal consultations. It was recalled that, while possible
future work might include the preparation of a convention,
other topics had also been proposed, such as the issues of
jurisdiction, applicable law and dispute settlement on the
Internet. 12/
B. Incorporation by reference
212. At various stages in the preparation of the Model Law,
it had been suggested that the text should contain a
provision aimed at 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. That effect was
generally referred to as "incorporation by reference". 13/
213. At its thirtieth session, in May 1997, the Commission
endorsed the conclusion reached by the Working Group at
its thirty-first session that many aspects of battle-of-forms
and adhesion contracts would need to be left to applicable
national laws for reasons involving, for example, consumer
protection and other public policy considerations (see
A/CN.9/437, para. 155). 14/
214. At its thirty-second session, the Working Group
discussed the issue of incorporation by reference on the
basis of various texts that were proposed as possible
additions to the Model Law. That discussion was recorded
in the report of the Working Group on the work of its thirty-second session
(A/CN.9/446, paras. 14-23), together with
the text of the various proposals that were considered by the
Working Group. At the close of that discussion, the
Working Group adopted the text of the following draft
provision:
"Information shall not be denied legal effect, validity
or enforceability solely on the grounds that it is incor-
porated by reference in a data message."
The Working Group decided that it should be presented to
the Commission for review and possible insertion as a new
article 5 bis of the Model Law, and requested the Secretariat
to prepare an explanatory note to be added to the guide to
enactment of the Model Law (A/CN.9/446, para. 24). A
draft text prepared pursuant to that decision for possible
insertion in the guide to enactment of the Model Law is set
forth in annex II to the note prepared by the Secretariat
(A/CN.9/450).
215. At the current session, the Commission noted that
the text adopted by the Working Group embodied a
minimalist approach to the issue of incorporation by
reference. Consistent with the earlier deliberations of the
Working Group (A/CN.9/437, para. 155, and A/CN.9/446,
paras. 14-23), it did not attempt to achieve any substantial
unification of the existing rules of domestic law regarding
that issue. Instead, it restated in the context of incorporation
by reference the general principle of non-discrimination
embodied in article 5 of the Model Law. The text adopted
by the Working Group was aimed at facilitating incor-
poration by reference in electronic commerce by removing
the uncertainty that might prevail in certain jurisdictions as
to whether the rules applicable to traditional paper-based
incorporation by reference also applied in an electronic
environment. Another aim of the provision was to make it
clear that consumer-protection or other national or inter-
national law of a mandatory nature (e.g. rules protecting
weaker parties in the context of contracts of adhesion)
should not be interfered with.
216. It was widely felt in the Commission that, as currently
drafted, the text presupposed a certain degree of familiarity
of enacting States with the concept of incorporation by
reference. However, although the expression "incorporation
by reference" had been used consistently by the Working
Group as a concise way of referring to a complex range of
legal and factual situations, it might not convey the same
meaning in all enacting States. With a view to reducing the
difficulties that might arise in the interpretation of the text,
it was suggested that a more descriptive language might be
used along the following lines, consistent with the formu-
lation adopted by the Working Group:
"Information shall not be denied legal effect, validity
or enforceability solely on the grounds that it is not
contained in the data message purported to give rise
to such legal effect, but is merely referred to in that
data message."
217. Various alternative texts were proposed, based on a
more positive formulation of effects to be given to incor-
poration by reference. However, it was generally felt that
any attempt to establish a positive rule on issues of
incorporation by reference might result in interfering with
existing rules by which domestic legislation dealt with the
issue of incorporation by reference. The Commission
generally agreed that such interference should be avoided
and that the minimalist approach adopted by the Working
Group should be maintained. In the context of that
discussion, the view was expressed, however, that a
provision dealing with incorporation by reference based on
such an approach was unnecessary altogether.
218. After discussion, the Commission found the substance
of the proposed text (see above, para. 216) to be generally
acceptable. As a matter of drafting, it was suggested that the
provision might need to indicate more clearly that
incorporation by reference should be distinguished from a
mere reference. The following text was proposed:
"Information shall not be denied legal effect, validity
or enforceability solely on the grounds that it is not
contained in the data message purporting to give rise
to such legal effect, but is referred to within that data
message as forming part of that message."
219. After discussion, the Commission decided to retain
the original proposal (see above, para. 216), subject to the
substitution of the word "purporting" for the word
"purported".
220. As to the placement of the additional provision, while
it was suggested that the text should be added as a new
part III of the Model Law, it was generally agreed that the
insertion of the text as a new article 5 bis, as suggested by
the Working Group, was more appropriate.
221. With respect to the draft additional section prepared
by the Secretariat for insertion in the guide to enactment of
the Model Law (see A/CN.9/450, annex II), the Secretariat
was requested to ensure that the text indicated clearly that
the newly adopted article 5 bis was not to be interpreted as
creating a specific legal regime for incorporation by
reference in an electronic environment. Rather, by estab-
lishing a principle of non-discrimination, it was to be
construed as making the domestic rules applicable to
incorporation by reference in a paper-based environment
equally applicable to incorporation by reference for the
purposes of electronic commerce.
Chapter IV
Assignment in receivables financing
222. It was recalled that the Commission had considered
legal problems in the area of assignment at its twenty-sixth
to twenty-eighth sessions (1993-1995) 15/ and had entrusted,
at its twenty-eighth session, in 1995, the Working Group on
International Contract Practices with the task of preparing
a uniform law on assignment in receivables financing. 16/
223. The Working Group commenced its work at its
twenty-fourth session (Vienna, 13-24 November 1995) and
continued it at its twenty-fifth and twenty-sixth sessions
(New York, 8-19 July, and Vienna, 11-22 November 1996,
respectively). It was noted that, at its twenty-fourth session,
the Working Group had been urged to strive for a legal text
aimed at increasing the availability of lower-cost credit
(A/CN.9/420, para. 16). In addition, it was noted that, at its
twenty-fifth and twenty-sixth sessions, the Working Group
had decided to proceed with its work on the assumption that
the text being prepared would take the form of a convention
(A/CN.9/432, para. 28) and would include private inter-
national law provisions (A/CN.9/434, para. 262).
224. At its thirty-first session, the Commission had before
it the reports of the twenty-seventh and twenty-eighth
sessions of the Working Group (A/CN.9/445 and
A/CN.9/447). At the outset, the Commission noted that its
work on receivables financing had attracted the interest of
the international trade and finance community, since it had
the potential of increasing access to lower-cost credit. In
addition, the Commission noted that the Working Group had
made substantial progress on a number of other matters,
including the validity of assignments of future receivables
and of receivables not identified individually (i.e. bulk
assignments), as well as of assignments concluded despite
an anti-assignment clause contained in the contract under
which the assigned receivables arose, and the debtor-protection issues. In
particular, the Commission noted that,
at its twenty-eighth session, the Working Group had adopted
the substance of the provisions dealing with the relationship
between the assignor and the assignee, as well as the
provisions dealing with the debtor's protection (draft articles
14-16 and 18-22, respectively) and requested the Secretariat
to revise the provision dealing with the right of the assignee
to payment and with proceeds-related issues (draft article
17; see A/CN.9/447, paras. 161-164 and 68, respectively).
225. At the same time, it was noted that a number of issues
remained to be resolved, including those relating to the
scope of the draft convention, public policy issues arising
in the context of the protection of the debtor, conflicts of
priority among several claimants and private international
law issues.
226. As to the scope of application, the view was widely
shared that it was too wide and that it should be limited to
contractual receivables assigned for the purpose of
obtaining financing. It was observed that such an approach
would be in line with the overall purpose of the project to
facilitate receivables financing and thus to increase the
availability of lower-cost credit. In addition, it was stated
that, under such an approach, the draft convention would
be more acceptable to a number of States, which were
prepared to introduce specific legislation to address the
needs of modern financing transactions but not to make a
general overhaul of their assignment law. Moreover, under
such an approach, practices that were already functioning
well on the basis of well-established rules would not be
interfered with. With respect to the territorial scope of
application of the draft convention, it was observed that a
solution based on a choice-of-law approach similar to that
followed in the United Nations Convention on Contracts for
the International Sale of Goods would not be appropriate.
227. With regard to public policy concerns, it was observed
that it would be preferable for the draft convention to
introduce such a high threshold for the protection of the
debtor that it would meet the concerns of all States and
would make it unnecessary for them to have to fall back on
a general public policy reservation, which could jeopardize
the certainty achieved by the convention and thus have an
adverse impact on the cost and the availability of credit.
228. As to prior conflicts, wide support was expressed for
the approach taken in the draft convention combining
substantive and private international law priority rules. It
was stated that allowing States to choose, by way of a
declaration, between a priority rule based on the time of
assignment and a rule based on the time of registration,
which would take effect only upon establishment of a
suitable registration system, would increase the accept-
ability of the draft convention.
229. With regard to the private international law provisions
contained in the draft convention, the Commission
welcomed the holding of a meeting of experts by the Hague
Conference on Private International Law in cooperation
with the Secretariat of the Commission. The Commission
noted that, at that meeting, it had been confirmed that the
private international law priority provisions contained in the
draft convention would be appropriate, provided that their
application was limited to the transactions falling under the
scope of the draft convention. In addition, it was noted that
the Permanent Bureau of the Conference would prepare and
submit to the Working Group a report of that meeting (see
also below, paras. 269 and 270).
230. In the discussion, broad support was expressed in
favour of the working assumption of the Working Group
that the text being prepared should take the form of a con-
vention. It was noted that, in view of the differences existing
in the various legal systems in the field of assignment, a
convention would provide the appropriate degree of unifi-
cation, introducing the certainty and predictability needed
for credit to be made available on the basis of receivables.
231. The Commission expressed appreciation for the work
accomplished and requested the Working Group to proceed
with its work expeditiously so as to complete it in 1999 and
to submit the draft convention for adoption by the
Commission at its thirty-third session (2000).
Chapter V
Monitoring the implementation of
the 1958 New York Convention
232. It was recalled that the Commission, at its twenty-eighth session in
1995, had approved the project, under-
taken jointly with Committee D of the International Bar
Association, aimed at monitoring the legislative imple-
mentation of the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (New York,
1958). 17/ It was stressed that the purpose of the project, as
approved by the Commission, was limited to that aim and,
in particular, its purpose was not to monitor individual court
decisions applying the Convention. In order to be able to
prepare a report on the subject, the Secretariat had sent to
the States parties to the Convention a questionnaire relating
to the legal regime in those States governing the recognition
and enforcement of foreign awards.
233. Up until the current session of the Commission, the
Secretariat had received 54 replies to the questionnaire. The
Commission called upon the States parties to the
Convention that had not yet replied to the questionnaire to
do so as soon as possible or, to the extent necessary, to
inform the Secretariat about any new developments since
their previous replies to the questionnaire. The Secretariat
was requested to prepare, for a future session of the
Commission, a note presenting the findings based on the
analysis of the information gathered.
234. In connection with that discussion, it was observed
that the Convention had become an essential factor in the
facilitation of international trade and that, besides the
legislative enactment of the Convention, it would be useful
for the Commission also to consider its interpretation. Such
consideration, together with information to be prepared by
the Secretariat for that purpose, would serve to promote the
Convention and facilitate its use by practitioners. It was
stressed that information on the interpretation of the
Convention was not available in all the official languages
of the United Nations and that, therefore, the Commission
was the appropriate body to prepare it. The Commission did
not take any decision regarding that suggestion.
235. It was noted that, later during the session, on 10 June
1998, the Commission would hold a special commemorative
New York Convention Day in order to celebrate the fortieth
anniversary of the Convention (see below, para. 257); on
that occasion, attention would also be paid to legal issues
that were not covered by the Convention and with respect
to which the Commission might wish to consider whether
any work by it would be desirable and feasible and, if so,
what form it should take. The Commission considered that
it would be useful to engage in such a consideration of
possible future work in the area of arbitration at its twenty-second session,
in 1999, and requested the Secretariat to
prepare, for that session, a note that would serve as a basis
for the considerations of the Commission. Considerations
at the New York Convention Day and at the Congress of the
International Council for Commercial Arbitration (Paris,
3-6 May 1998) might be taken into account in the
preparation of the note.
Chapter VI
Case law on UNCITRAL texts
236. The Commission noted with appreciation that, since
its thirtieth session in 1997, five additional sets of abstracts
with court decisions and arbitral awards relating to the
United Nations Convention on Contracts for the
International Sale of Goods and to the UNCITRAL Model
Law on International Commercial Arbitration had been
published (A/CN.9/SER.C/ABSTRACTS/13-17). The
Commission also noted with appreciation that a search
engine had been placed on the Web site of the UNCITRAL
secretariat on the Internet (http://www.un.or.at/uncitral) to
enable users of case law on UNCITRAL texts (CLOUT) to
carry out searches into CLOUT cases and other documents.
The Secretariat was encouraged to continue its efforts to
increase the availability of UNCITRAL documents through
the Internet in all six official United Nations languages.
237. The Commission also noted that the work of the
Secretariat in editing abstracts, storing decisions and awards
in their original form, translating abstracts into the other
five United Nations languages, publishing them in all six
United Nations languages, forwarding abstracts and full
texts of decisions and awards to interested parties upon
request and establishing and operating the CLOUT search
engine had substantially increased in tandem with the
number of decisions and awards covered by CLOUT. The
Commission therefore requested that adequate resources be
made available to the Secretariat for the effective operation
of CLOUT.
238. The Commission expressed its appreciation to the
national correspondents and to the Secretariat for their work
and urged States to cooperate with the Secretariat in the
operation of CLOUT and to facilitate the carrying out of the
tasks of the national correspondents. The Commission
emphasized the importance of CLOUT for the purpose of
promoting the uniform application of the legal texts that
resulted from its work. It was generally agreed that, by
being issued in all six United Nations languages, CLOUT
constituted an invaluable tool for practitioners, academics
and government officials. In order to ensure that CLOUT
became a system covering in a comprehensive way all case
law available on UNCITRAL texts, the Commission urged
the States that had not yet appointed a national corres-
pondent to do so. In addition, the Commission urged States
to ensure that CLOUT information was made available to
national judges, arbitrators, practitioners and academics.
Chapter VII
Training and technical assistance
239. The Commission had before it a note by the
Secretariat (A/CN.9/448) outlining the activities undertaken
since the previous session and indicating the direction of
future activities being planned. It was noted that
UNCITRAL seminars and briefing missions for government
officials were designed to explain the salient features and
utility of international trade law instruments of UNCITRAL.
240. It was reported that since the previous session the
following seminars and briefing missions had been held:
Stellenbosch, South Africa (11 March 1997); Cartagena and
Bogota' (14 and 15 and 17 and 18 April 1997, respectively);
Quito (21 and 22 April 1997); Lima (24-26 April 1997);
Thessaloniki, Greece (12 and 13 September 1997); Nicosia
(9 and 10 October 1997); Dubai (10 December 1997); and
Valletta (24 and 25 February 1998). The Secretariat
reported that for the remainder of 1998 and up to the next
session of the Commission, in May 1999, seminars and
briefing missions were being planned in Africa, Asia, Latin
America and eastern Europe.
241. The Commission expressed its appreciation to the
Secretariat for the activities undertaken since its past
session and emphasized the importance of the training and
technical assistance programme for promoting awareness
of its work and disseminating information on the legal texts
it had produced. It was pointed out that seminars and
briefing missions were particularly useful for developing
countries lacking expertise in the areas of trade and
commercial law covered by the work of UNCITRAL. The
Commission noted the relevance of uniform commercial
law, in particular legal texts prepared by UNCITRAL, in the
economic integration efforts being undertaken by many
countries and emphasized the important role that the
training and technical assistance activities of the Secretariat
might play in that context.
242. The Commission noted the various forms of technical
assistance that might be provided by the Secretariat, such
as review of preparatory drafts of legislation, assistance in
the preparation of drafts, comments on reports of law reform
commissions and briefings for legislators, judges,
arbitrators and other end-users of UNCITRAL legal texts
embodied in national legislation. The Commission
encouraged the Secretariat to devise ways to address the
continuing and significant increase in the importance being
attributed by Governments, by domestic and international
business communities and by multilateral and bilateral aid
agencies to improving the legal framework for international
trade and investment.
243. The Commission emphasized the importance of
cooperation and coordination between development assis-
tance agencies providing or financing legal technical
assistance with the Secretariat, with a view to avoiding
situations in which international assistance might lead to the
adoption of national laws that would not represent inter-
nationally agreed standards, including UNCITRAL con-
ventions and model laws.
244. The Commission took note with appreciation of the
contributions made by Greece and Switzerland towards the
seminar programme. The Commission also expressed its
appreciation to those other States and organizations which
had contributed to the Commission's programme of training
and assistance by hosting seminars. Stressing the
importance of extrabudgetary funding for carrying out
training and technical assistance activities, the Commission
appealed once more to all States, international organizations
and other interested entities to consider making
contributions to the UNCITRAL Trust Fund for Symposia
so as to facilitate planning and to enable the Secretariat to
meet the increasing demands in developing countries and
newly independent States for training and assistance.
245. Concern was expressed that the majority of the
participants in the internship programme of the Secretariat
were nationals of developed countries. An appeal was made
to all States to consider supporting programmes that spon-
sored the participation of nationals of developing countries
in the internship programme.
Chapter VIII
Status and promotion of
UNCITRAL texts
246. The Commission, on the basis of a note by the
Secretariat (A/CN.9/449), considered the status of the
conventions and model laws emanating from its work, as
well as the status of the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (New York, 1958).
The Commission noted with pleasure the new actions of
States after 30 May 1997 (date of the conclusion of the
thirtieth session of the Commission) regarding the following
instruments:
(a) Convention on the Limitation Period in the
International Sale of Goods, concluded at New York on
14 June 1974, as amended by the Protocol of 11 April 1980.
New action by the Republic of Moldova; number of States
parties: 17;
(b) [Unamended] Convention on the Limitation
Period in the International Sale of Goods (New York, 1974).
New action by the Republic of Moldova; number of States
parties: 23;
(c) United Nations Convention on the Carriage of
Goods by Sea, 1978 (Hamburg Rules). Number of States
parties: 25;
(d) United Nations Convention on Contracts for the
International Sale of Goods (Vienna, 1980). New actions
by Croatia, Greece, Latvia and Mongolia; number of States
parties: 52;
(e) United Nations Convention on International
Bills of Exchange and International Promissory Notes
(New York, 1988). The Convention has two States parties.
It requires eight more adherences for entry into force;
(f) United Nations Convention on the Liability of
Operators of Transport Terminals in International Trade
(Vienna, 1991). The Convention has one State party. It
requires four more adherences for entry into force;
(g) United Nations Convention on Independent
Guarantees and Stand-by Letters of Credit (New York,
1995). The Convention has two States parties. It requires
three more adherences for entry into force;
(h) UNCITRAL Model Law on International
Commercial Arbitration, 1985. New jurisdictions that have
enacted legislation based on the Model Law: Germany, Iran
(Islamic Republic of), Lithuania and Oman;
(i) UNCITRAL Model Law on International Credit
Transfers, 1992;
(j) UNCITRAL Model Law on Procurement of
Goods, Construction and Services, 1994. New jurisdictions
that have enacted legislation based on the Model Law:
Kyrgyzstan and Slovakia;
(k) UNCITRAL Model Law on Electronic
Commerce, 1996;
(l) UNCITRAL Model Law on Cross-Border
Insolvency, 1997;
(m) Convention on the Recognition and Enforcement
of Foreign Arbitral Awards (New York, 1958). New actions
by Armenia, El Salvador, Lebanon, Nepal and Paraguay;
number of States parties: 117.
247. Appreciation was expressed for those legislative
actions on the texts of the Commission. A request was
directed to States that had enacted or were about to enact
a model law prepared by the Commission, or were
considering legislative action regarding a convention
resulting from the work of the Commission, to inform the
secretariat of the Commission thereof. Such information
would be useful to other States in their consideration of
similar legislative actions. The UNCITRAL Model Law
on Cross-Border Insolvency and the United Nations
Convention on Independent Guarantees and Stand-by
Letters of Credit were mentioned as examples of texts with
respect to which such information was particularly
desirable.
248. Representatives and observers of a number of States
reported that official action was being considered with a
view to adherence to various conventions and to the
adoption of legislation based on various model laws
prepared by UNCITRAL.
249. It was noted that, despite the universal relevance and
usefulness of those texts, a great number of States had not
yet enacted any of them. In view of the broad support for
the legislative texts emanating from the work of the
Commission among practitioners and academics in countries
with different legal, social and economic systems, the pace
of adoption of those texts was slower than it needed to be.
An appeal was directed to the representatives and observers
participating in the meetings of the Commission and its
working groups to contribute, to the extent they in their
discretion deemed appropriate, to facilitating consideration
by legislative organs in their countries of texts of the
Commission.
Chapter IX
General Assembly resolutions on the
work of the Commission
250. The Commission took note with appreciation of
General Assembly resolution 52/158 of 15 December 1997,
in which the Assembly expressed its appreciation to the
Commission for completing and adopting the Model Law
on Cross-Border Insolvency. In paragraph 3 of the resolu-
tion, the Assembly recommended that all States review their
legislation on cross-border aspects of insolvency to
determine whether the legislation met the requirements of
a modern and efficient insolvency system and, in that
review, give favourable consideration to the Model Law,
bearing in mind the need for an internationally harmonized
legislation governing instances of cross-border insolvency.
251. In addition, the Commission took note with
appreciation of General Assembly resolution 52/157, also
of 15 December 1997, on the report of the Commission on
the work of its thirtieth session, held in 1997. In particular,
it was noted that, in paragraph 6, the Assembly reaffirmed
the mandate of the Commission, as the core legal body
within the United Nations system in the field of inter-
national trade law, to coordinate legal activities in that field,
and, in that connection, called upon all bodies of the United
Nations system and invited other international organizations
to bear in mind the mandate of the Commission and the need
to avoid duplication of effort and to promote efficiency,
consistency and coherence in the unification and
harmonization of international trade law, and recommended
that the Commission, through its secretariat, continue to
maintain close cooperation with the other international
organs and organizations, including regional organizations,
active in the field of international trade law.
252. The Commission also noted with appreciation the
decision of the General Assembly, in paragraph 7 of reso-
lution 52/157, to reaffirm the importance, in particular for
developing countries, of the work of the Commission con-
cerned with training and technical assistance in the field of
international trade law, such as assistance in the preparation
of national legislation based on legal texts of the
Commission, and that, in paragraph 8, the Assembly
expressed the desirability for increased efforts by the
Commission, in sponsoring seminars and symposia, to
provide such training and assistance.
253. The Commission also noted with appreciation the
appeal by the General Assembly, in paragraph 8 (b) of
resolution 52/157, to Governments, the relevant United
Nations organs, organizations, institutions and individuals
to make voluntary contributions to the UNCITRAL Trust
Fund for Symposia and, where appropriate, to the financing
of special projects. Furthermore, it was noted that the
Assembly appealed, in paragraph 9 of the resolution, to the
United Nations Development Programme and other bodies
responsible for development assistance, such as the World
Bank and the European Bank for Reconstruction and
Development, as well as to Governments in their bilateral
aid programmes, to support the training and technical assis-
tance programme of the Commission and to cooperate and
coordinate their activities with those of the Commission.
254. It was also appreciated that the Assembly appealed,
in paragraph 10 of resolution 52/157, to Governments, the
relevant United Nations organs, organizations, institutions
and individuals, in order to ensure full participation by all
Member States in the sessions of the Commission and its
working groups, to make voluntary contributions to the trust
fund for granting travel assistance to developing countries
that are members of the Commission, at their request and
in consultation with the Secretary-General. (That trust fund
had been established pursuant to General Assembly
resolution 48/32 of 9 December 1993.) The Commission
noted with appreciation the decision of the Assembly, in
paragraph 11, to continue, in the competent Main
Committee during the fifty-second session of the Assembly,
its consideration of granting travel assistance to the least
developed countries that were members of the Commission,
at their request and in consultation with the Secretary-General.
255. The Commission welcomed the request by the General
Assembly, in paragraph 12 of the resolution, to the
Secretary-General to ensure the effective implementation
of the programme of the Commission. The Commission, in
particular, hoped that the Secretariat would be allocated
sufficient resources to meet the increased demands for
training and assistance. The Commission noted with regret
that, despite the above-mentioned request of the Assembly,
the secretariat of the Commission was generally short of
funds for the publication of the UNCITRAL Yearbook and
brochures containing texts resulting from the work of the
Commission.
256. The Commission also noted with appreciation that the
General Assembly, in paragraph 13 of the resolution,
stressed the importance of bringing into effect the con-
ventions emanating from the work of the Commission, and
that, to that end, it urged States that had not yet done so to
consider signing, ratifying or acceding to those conventions.
Chapter X
New York Convention Day and
Uniform Commercial Law
Information Colloquium
257. During its thirty-first session, on 10 June 1998, the
Commission held a special commemorative New York
Convention Day in order to celebrate the fortieth
anniversary of the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (New York,
10 June 1958). In addition to representatives of States
members of the Commission and observers, some
300 invited persons participated in the event. The opening
speech was made by the Secretary-General of the United
Nations. In addition to speeches by former participants in
the diplomatic conference that adopted the Convention,
leading arbitration experts gave reports on matters relating
to the significance of the Convention; its promotion,
enactment and application; the interplay between the
Convention and other international legal texts on inter-
national commercial arbitration (such as the UNCITRAL
Model Law on International Commercial Arbitration and
the European Convention on International Commercial
Arbitration, Geneva, 1961); and legal issues that were not
covered by the Convention. In the reports, various
suggestions were made for presenting to the Commission
some of the problems identified in practice so as to enable
it to consider whether any work by the Commission would
be desirable and feasible (see also above, para. 235).
258. On 11 June 1998, the Commission held the Uniform
Commercial Law Information Colloquium, in which repre-
sentatives of States members of the Commission and
observers and some 250 invited persons participated. At the
Colloquium, leading experts presented their insights and
assessment of legal issues relating to electronic commerce,
privately financed infrastructure projects, receivables
financing and cross-border insolvency. The Colloquium was
designed to provide condensed information on current
topics in those legal areas and exchange views that might
be useful in the consideration of those issues by the
Commission.
259. The Commission expressed the wish that the
Secretariat publish reports from the New York Convention
Day and the Colloquium as expeditiously as possible.
Chapter XI
Coordination and cooperation
A. Transport law
260. It was recalled that, at the thirtieth session (26
February-8 March 1996) of the Working Group on
Electronic Data Interchange (later renamed the Working
Group on Electronic Commerce), it had been observed in
various contexts that existing national laws and international
conventions left significant gaps regarding issues such as
the functioning of bills of lading and seaway bills, and the
relationship of those transport documents to the rights and
obligations between the seller and the buyer of the goods
and to the legal position of the entities that provided
financing to a party to the contract of carriage. Some States
had provisions on those issues, but the fact that those
provisions were disparate and that many States lacked them
constituted an obstacle to the free flow of goods and
increased the cost of transactions. The growing use of
electronic means of communication in the carriage of goods
further aggravated the consequences of those fragmentary
and disparate laws and created the need for uniform
provisions addressing the issues particular to the use of new
technologies. 18/
261. As a result of those considerations in the Working
Group, it had been proposed, at the twenty-ninth session of
the Commission, in 1996, that the Commission should
include in its work programme a review of current practices
and laws in the area of the international carriage of goods
by sea with a view to establishing the need for uniform rules
in the areas where no such rules existed, and with a view to
achieving greater uniformity of laws than had so far been
achieved. It had been suggested at that session that the
Secretariat should be requested to solicit views
and suggestions on those difficulties not only from
Governments but in particular also from the inter-
governmental and non-governmental organizations repre-
senting the various interests in the international carriage of
goods by sea. It was thought that an analysis of those views
and suggestions would enable the Secretariat to present, at
a future session, a report that would allow the Commission
to take an informed decision as to the desirable course of
action. Such an information-gathering exercise by the
Secretariat should encompass a broad range of issues in the
carriage of goods by sea and in related areas such as
terminal operations and multi-modal carriage.
262. Several reservations had been expressed at that
session with regard to the suggestion. One had been that the
issues to be covered were numerous and complex, which
would unduly strain the limited resources of the Secretariat.
Furthermore, the continued coexistence of different treaties
governing the liability in the carriage of goods by sea and
the slow process of adherence to the United Nations
Convention on the Carriage of Goods by Sea, 1978
(Hamburg Rules) made it unlikely that adding a new treaty
to the existing ones would lead to a greater harmony of
laws. In addition, it had been pointed out that any work that
included the reconsideration of the liability regime was
likely to discourage States from adhering to the Hamburg
Rules, which would be an unfortunate result. It had been
stressed that, if any investigation were to be carried out, it
should not cover the liability regime, since the Hamburg
Rules had already provided modern solutions. It had been
stated in reply, however, that, although some aspects of
liability might be involved, the review of the liability regime
was not the main objective of the suggested work; rather,
what was necessary was to provide modern solutions to the
issues that were not dealt with in treaties adequately, or at
all.
263. Given the differing views, the Commission had not
included the consideration of the suggested issues on its
current agenda. Nevertheless, it had decided that the
Secretariat should be the focal point for gathering
information, ideas and opinions as to the problems that
arose in practice and possible solutions to those problems.
Such information-gathering should be broadly based and
should include, in addition to Governments, the inter-
national organizations representing the commercial sectors
involved in the carriage of goods by sea, such as the
International Maritime Committee, the International
Chamber of Commerce, the International Union of Marine
Insurance, the International Federation of Freight
Forwarders' Associations, the International Chamber of
Shipping and the International Association of Ports and
Harbours.
264. At its thirty-first session, the Commission heard a
statement on behalf of the International Maritime
Committee to the effect that it welcomed the invitation to
cooperate with the Secretariat in soliciting views of the
sectors involved in the international carriage of goods and
in preparing an analysis of that information. That analysis
would allow the Commission to take an informed decision
as to the desirable course of action.
265. It was said that the exploratory work would not focus
on the liability regime but would rather be based on a broad
assessment of the current problems and needs arising from
modern trade practices relating to the international carriage
of goods and from the use of new transport and com-
munication methods. The Commission was informed that
the International Maritime Committee had already taken
steps, in consultation with the Secretariat, to organize the
collection and analysis of such information. The work would
from the outset involve a broad spectrum of international
organizations interested in the international carriage of
goods. Such a thorough and broadly based approach to the
issues was time-consuming but was considered
indispensable for obtaining complete and accurate
information about the current practices and problems and
for arriving at a balanced assessment of the desirability and
feasibility of work towards internationally harmonized legal
solutions.
266. Strong support was expressed by the Commission for
the exploratory work being undertaken by the International
Maritime Committee and the Secretariat. The Commission
expressed its appreciation to the Committee for its
willingness to embark on that important and far-reaching
project, for which few or no precedents existed at the
international level; the Commission was looking forward
to being apprised of the progress of the work and to
considering the opinions and suggestions resulting from it.
267. Subsequently, a statement was made on behalf of the
International Association of Ports and Harbours in support
of considering the impact of new transport techniques on
the law of carriage of goods and expressing willingness to
contribute to the work of searching for harmonized legal
solutions.
B. Trade and development
268. A representative of the United Nations Conference on
Trade and Development (UNCTAD) recalled several
instances of cooperation with the Commission. The
Commission was informed that UNCTAD was currently
interested in cooperating with the Commission with respect
to rules relating to electronic commerce. UNCTAD was
particularly interested in the question of how better to
integrate developing countries in international electronic
commerce. It was hoped that the secretariat of the
Commission would be able to participate in those activities
of UNCTAD; besides electronic commerce, the colla-
boration between the two organizations could extend to
areas such as the settlement of disputes in the fields of trade
and investment. The Commission expressed its appreciation
for the work of UNCTAD, reiterated its desire to cooperate
with it and endorsed plans of cooperation between the
secretariats of the two organizations.
C. Private international law in the area of
receivables financing
269. The Commission was informed that the Hague
Conference on Private International Law had organized, in
cooperation with the Secretariat, a meeting of experts at The
Hague in order to consider private international law issues
arising in the context of the draft convention on assignment
in receivables financing currently being prepared by the
Commission's Working Group on International Contract
Practices. At that meeting, experts had considered private
international law issues connected with the substantive law
provisions of the draft convention; the private international
law priority provisions supplementing the substantive law
priority provisions of the draft convention; and the private
international law provisions that were potentially aimed at
also covering transactions that fell outside the scope of the
draft convention. In addition, with a view to assisting the
UNCITRAL Working Group, the Bureau of the Conference
would prepare a report of the meeting and submit it to the
Working Group.
270. The Commission welcomed the cooperation with the
Hague Conference. It was felt that such cooperation was
necessary for the optimal utilization of the resources
available to the respective organizations to the benefit of
the process of law unification.
D. International Association of Lawyers
271. It was stated on behalf of the International Association
of Lawyers that the Association would continue to publicize
the work of the Commission through its committees and
through conferences and seminars it organized. In addition,
the Association was prepared to offer expert assistance to
the Commission in a number of areas in which the latter was
currently active, including the area of privately financed
infrastructure projects. The Commission was appreciative
of the statement and looked forward to strengthened co-
operation with the Association.
Chapter XII
Other business
A. Bibliography
272. The Commission noted with appreciation the
bibliography of recent writings related to the work of the
Commission (A/CN.9/452) and the guide to enactment of
the UNCITRAL Model Law on Cross-Border Insolvency
(A/CN.9/442).
273. The Commission stressed that it was important for it
to have as complete as possible information about
publications, including academic theses, commenting on the
results of its work. It therefore requested Governments,
academic institutions and other relevant organizations to
send copies of such publications to the Secretariat.
B. Willem C. Vis International Commercial
Arbitration Moot
274. It was reported to the Commission that the Institute
of International Commercial Law at Pace University School
of Law, New York, had organized the fifth Willem C. Vis
International Commercial Arbitration Moot (Vienna,
4-9 April 1998). Legal issues that the teams of students
participating in the Moot dealt with were based, inter alia,
on the United Nations Convention on Contracts for the
International Sale of Goods, the UNCITRAL Model Law
on International Commercial Arbitration and the
UNCITRAL Model Law on International Credit Transfers.
Some 58 teams from law schools in some 30 countries
participated in the 1998 Moot. The sixth Moot is to be held
in Vienna from 26 March to 1 April 1999.
275. The Commission heard the report with interest and
appreciation. It regarded the Moot, with its international
participation, as an excellent method of teaching inter-
national trade law and disseminating information about
current uniform texts.
C. Date and place of the thirty-second session
of the Commission
276. It was decided that the Commission would hold its
thirty-second session in Vienna from 17 May to 4 June
1999.
D. Sessions of working groups
277. The Commission approved the following schedule of
meetings for its working groups:
(a) The Working Group on International Contract
Practices is to hold its twenty-ninth session in Vienna from
5 to 16 October 1998 and its thirtieth session in New York
from 1 to 12 March 1999;
(b) The Working Group on Electronic Commerce
is to hold its thirty-third session in New York from 29 June
to 10 July 1998 and its thirty-fourth session in Vienna from
8 to 19 February 1999.
Notes
1/ Pursuant to General Assembly resolution 2205 (XXI), the members of the Commission
are elected for a term of six years. Of the current membership, 17 were elected by the General
Assembly at its forty-ninth session, on 28 November 1994 (decision 49/315), and 19 at its
fifty-second session, on 24 November 1997 (decision 52/314). Pursuant to resolution 31/99 of
15 December 1976, the term of those members elected by the Assembly at its forty-ninth session
will expire on the last day prior to the opening of the thirty-fourth session of the Commission,
in 2001, while the term of those members elected at the fifty-second session will expire on the
last day prior to the opening of the thirty-seventh session of the Commission, in 2004.
2/ The election of the Chairman took place at the 632nd meeting, on 1 June 1998, the
election of the Vice-Chairmen at the 639th meeting, on 4 June 1998, and the election of the
Rapporteur at the 636th meeting, on 3 June 1998. In accordance with a decision taken by the
Commission at its first session, the Commission has three Vice-Chairmen, so that, together with
the Chairman and the Rapporteur, each of the five groups of States listed in General Assembly
resolution 2205 (XXI), sect. II, para. 1, will be represented on the bureau of the Commission
(see the report of the United Nations Commission on International Trade Law on the work of
its first session, Official Records of the General Assembly, Twenty-third Session, Supplement
No. 16 (A/7216), para. 14 (Yearbook of the United Nations Commission on International Trade
Law, vol. I: 1968-1970 (United Nations publication, Sales No. E.71.V.1), part two, chap. I,
sect. A)).
3/ Official Records of the General Assembly, Fifty-first Session, Supplement No. 17
(A/51/17), paras. 225-230.
4/ Ibid., Fifty-second Session, Supplement No. 17 and corrigendum (A/52/17 and Corr.1),
paras. 231-246.
5/ Ibid., para. 235.
6/ Ibid., paras. 238-243.
7/ Ibid., para. 237 (a).
8/ Ibid., para. 236.
9/ Ibid., para. 237 (b).
10/ Ibid., para. 250.
Ibid., paras. 249 and 250.
12/ Ibid., para. 251.
13/ For earlier discussion of the issue of incorporation by reference by the Commission, by
the Working Group on Electronic Commerce, and in notes prepared by the Secretariat, see ibid.,
paras. 248-250; ibid., Fifty-first Session, Supplement No. 17 (A/51/17), paras. 222 and 223;
A/CN.9/450; A/CN.9/446, paras. 14-24; A/CN.9/437, paras. 151-155; A/CN.9/421, paras. 109
and 114; A/CN.9/407, paras. 100-105 and 117; A/CN.9/406, paras. 90, 178 and 179;
A/CN.9/360, paras. 90-95; A/CN.9/350, paras. 95 and 96; A/CN.9/333, paras. 66-68;
A/CN.9/WG.IV/WP.74; A/CN.9/WG.IV/WP.71, paras. 77-93; A/CN.9/WG.IV/WP.69, paras.
30, 53, 59, 60 and 91; A/CN.9/WG.IV/WP.66; A/CN.9/WG.IV/WP.65;
A/CN.9/WG.IV/WP.55, paras. 109-113; and
14/ Official Records of the General Assembly, Fifty-second Session, Supplement No. 17 and
corrigendum (A/52/17 and Corr.1), paras. 249-251.
15/ Ibid., Forty-eighth Session, Supplement No. 17 (A/48/17), paras. 297-301; ibid.,
Forty-ninth Session, Supplement No. 17 and corrigendum (A/49/17 and Corr.1), paras. 208-214;
and ibid., Fiftieth Session, Supplement No. 17 (A/50/17), paras. 374-381.
16/ Ibid., Fiftieth Session, Supplement No. 17 (A/50/17), paras. 374-381.
17/ Ibid., paras. 401-404, and ibid., Fifty-first Session, Supplement No. 17 (A/51/17), paras.
238-243.
18/ Ibid. para. 210, and A/CN.9/421, paras. 104-108.
Annex
List of documents before the Commission at its thirty-first session
A. General series
A/CN.9/443
Provisional agenda, annotations thereto and scheduling of meetings of the
thirty-first
session
A/CN.9/444 and Add.1-5
Draft chapters of a legislative guide on privately financed
infra-structure
projects
A/CN.9/445
Report of the Working Group on International Contract Practices on the work of
its twenty-seventh session
A/CN.9/446
Report of the Working Group on Electronic Commerce on the work of its
thirty-second session
A/CN.9/447
Report of the Working Group on International Contract Practices on the work of
its twenty-eighth session
A/CN.9/448
Training and technical assistance
A/CN.9/449
Status of conventions and model laws
A/CN.9/450
Possible addition to the UNCITRAL Model Law on Electronic Commerce: draft
provision on incorporation by reference
A/CN.9/452
Bibliography of recent writings related to the work of UNCITRAL
B. Restricted series
A/CN.9/XXXI/CRP.1and Add.1-19
Draft report of the United Nations Commission on International Trade Law on
the
work of its thirty-first session
A/CN.9/XXXI/CRP.2
Note by the delegation of France
A/CN.9/XXXI/CRP.3
Note by the delegation of France