UNITED NATIONS CONVENTION ON THE USE OF ELECTRONIC COMMUNICATIONS IN INTERNATIONAL CONTRACTS — A NEW GLOBAL STANDARD

Citation(2006) 18 SAcLJ 116
Date01 December 2006
Published date01 December 2006

The recently adopted United Nations Convention on the Use of Electronic Communications in International Contracts is a landmark legal instrument that sets a new global standard for electronic commerce legislation. In Part I, the article discusses the key features of this landmark Convention, and the significance of the Convention which extends beyond the strict ambit of the Convention itself. In Part II, the article broadly compares the Convention provisions with those of the UNCITRAL Model Law on Electronic Commerce and the UNCITRAL Model Law on Electronic Signatures, and highlights some provisions from the UNCITRAL Model Law on Electronic Commerce that were omitted from the Convention. In Part III, the article discusses legal issues that are raised by the implementation of the Convention in Singapore, focusing on the necessary amendments to the Electronic Transactions Act (Cap 283A, 1996 Rev Ed). [Editorial note: For a brief overview of the Convention, refer to the note at p 234 of this issue of the Academy Journal.]

I. The United Nations Convention on the Use of Electronic Communications in International Contracts
A. Development of the United Nations Convention on the Use of Electronic Communications in International Contracts

1 On 23 November 2005, the United Nations (“UN”) General Assembly adopted1 the new UN Convention on the Use of Electronic Communications in International Contracts (“the Convention”).2 The Convention is the latest legal instrument developed by the UN Commission on International Trade Law (“UNCITRAL”) in the area of electronic commerce.

2 UNCITRAL is the core legal body of the UN system in the field of international trade law. Its mandate is to remove legal obstacles to international trade by progressively modernising and harmonising trade law.

3 In the field of electronic commerce, UNCITRAL had previously developed the UNCITRAL Model Law on Electronic Commerce in 1996 and the UNCITRAL Model Law on Electronic Signatures in 2001. The Model Law on Electronic Commerce has been widely implemented in many countries around the world, including the US, Canada, Australia and Singapore.3 However, different countries implemented the Model Law on Electronic Commerce differently, resulting in significant variations in electronic commerce legislation even amongst countries that had adopted the Model Law on Electronic Commerce. In 2000, the European Union (“EU”) promulgated the Directive 2000/31/EC on Certain Legal Aspects of Information Society Services, in Particular Electronic Commerce, in the Internal Market4 (“EU Directive on

Electronic Commerce”) which differed significantly in scope and content from the UNICTRAL Model Law on Electronic Commerce. There was therefore a lack of uniformity and harmonisation amongst national electronic commerce legislation around the world. This lack of uniformity and harmonisation was perceived as a barrier to international trade by electronic means.

4 In 2001, UNCITRAL tasked its Working Group IV on Electronic Commerce (“the Working Group”) with the preparation of an international instrument dealing with issues of electronic contracting. The Working Group was also asked to consider ways of removing possible legal barriers to electronic commerce contained in existing international instruments relating to international trade. The Working Group began its deliberations at its 39th session in March 2002, and finally completed work on a draft Convention on the Use of Electronic Communications in International Contracts at its 44th session in October 2004.

5 During the 38th annual UNCITRAL plenary session held in Vienna, Austria, from 4 to 15 July 2005, UNCITRAL adopted the finalised text of the new draft Convention on the Use of Electronic Communications in International Contracts, and recommended its adoption by the UN General Assembly.5

6 The Convention was adopted by the UN General Assembly on 23 November 2005, and is open for signature by all States at the UN Headquarters in New York from 16 January 2006 to 16 January 2008.6 It is subject to ratification, acceptance or approval by the signatory States, and open for accession by all States that are not signatory States. In accordance with Art 23 of the Convention, the Convention will enter into force on the first day of the month following the expiration of six months after the date of deposit of the third instrument of ratification, acceptance, approval or accession.7

7 Singapore played an important and central role in the development of the Convention. Mr Jeffrey Chan Wah Teck8 of the Attorney-General’s Chambers of Singapore took a leading role in the deliberations on the Convention as the Chairman of Working Group IV on Electronic Commerce from March 2002 to October 2004, and also as the Vice-Chairman chairing the deliberations on the Convention at the 38th UNCITRAL plenary session. Members of the Singapore delegation also made important contributions to the deliberations that led to the adoption of the draft Convention, including the drafting of key provisions in the draft Convention.

B. Key features of the Convention

8 The Convention is an interpretative legal instrument with minimum substantive provisions. It facilitates the use of electronic communications in international contracting by providing for the functional equivalence of electronic communications, while preserving the principle of technological neutrality. Taking the form of a convention, it is a landmark legal instrument that promises to harmonise basic electronic commerce legislation amongst Contracting States, hence removing legal barriers to cross-border electronic commerce. The Convention is also intended to remove obstacles to the use of electronic communications that might arise under existing international trade law instruments, most of which were negotiated long before the development of new technology, such as electronic mail, electronic data interchange (“EDI”) and the Internet.

9 The Convention builds upon the UNCITRAL Model Law on Electronic Commerce and the UNCITRAL Model Law on Electronic Signatures, but its provisions have been improved and updated to take into account technological developments since 1996, most notably, the growth of the Internet. The rules contained in the Convention are intended to supersede existing domestic electronic commerce legislation of the Contracting States covering the same areas, including domestic electronic commerce legislation based upon the UNCITRAL Model Law on Electronic Commerce and the UNCITRAL Model Law on Electronic Signatures.

10 In this section, we highlight and discuss the key features of the Convention, and include first-hand observations and insights on the rationale and ambit of the provisions from the deliberations at UNCITRAL.

(1) Scope of application

11 Under Art 1(1) of the Convention, the Convention applies to the use of electronic communications in connection with the formation or performance of a contract between parties whose places of business are in different States.9 The word “formation” includes negotiations and offers, even where such communications do not result in a concluded contract.10

12 The Convention does not have autonomous application, and applies only when the law of a Contracting State governs the transaction between the parties.11 The Convention will apply either if the law of a Contracting State is the applicable law chosen by the parties to govern their transaction, or, if the parties have not chosen the applicable law, the Convention will apply if the law of a Contracting State is determined to be the governing law in accordance with the rules of private international law of the forum State.12 Article 1(1) of the Convention only requires that the parties must be located in different States, but does not require that both the States must be Contracting States. The Convention therefore establishes the broadest possible scope of application as the starting point, while enabling Contracting States to make declarations under Art 19(1) narrowing the broad scope of application. Article 19(1) of the Convention provides that Contracting States may declare that they will apply the Convention only when the States referred to in Art 1(1) are Contracting States, or only when the parties to the transaction have agreed that it applies.

13 Article 20 of the Convention extends the scope of application of the Convention by making the Convention applicable to electronic communications used in connection with the formation or performance of a contract to which other international instruments apply. Through this method, the Convention removes legal obstacles to electronic

commerce conducted under these other international instruments without the need to amend each international instrument.13

14 Article 20(1) extends the application of the Convention to contracts which fall within the scope of listed UNCITRAL conventions (eg, the UN Convention on Contracts for the International Sale of Goods14 (“CISG”)) which the Contracting State is or may become party to. Article 20(2) of the Convention further extends the application of the Convention to contracts which fall within the scope of any other international instrument which the Contracting State is or may become party to, unless the Contracting State “opts out” of Art 20(2) by way of a declaration.15 In order to adopt the “opt-out” approach in Art 20(2), a Contracting State would need to vet all international instruments that it is party to, to ensure that there are no difficulties in applying the Convention to those international instruments, before adopting the Convention. Contracting States that prefer to take a more incremental approach (“opt-in” approach) to the extension of the scope of application of the Convention to cover other international instruments it may be party to, can “opt out” of Art 20(2) of the Convention by way of a declaration, and then incrementally extend the...

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