UNCITRAL Model for International Payments

UNITED NATIONS CONVENTIONS ON INTENATIONAL BILLS OF EXCHANGE & INTERNATIONAL

PROMISSARY NOTES

This convention provides a comprehensive code of legal rules governing new international
instruments for optional use by parties to international commercial transactions.

Features of the convention:

1. Scope of application & form of the instrument: This applies only to international bills of
exchange & international promissory notes when they comply with certain requisites of
form. The use of instrument governed by conventions is entirely optional.
2. The convention provides its own definitions of the terms “ bill of exchange ” and “
promissory Notes” & explicitly states the conditions on which a bill of exchange or
promissory note is considered to be international.

Definition of Bill of Exchange: A bill of exchange is a written instrument-

Contains an unconditional order whereby the drawer directs the drawee to pay a definite sum of
money to the payee or his order.

Is payable on demand or at a definite time.

Is dated

Is signed by the drawer.

Definition of Promissory Note:

 Contains an unconditional promise whereby the maker undertakes to pay a definite sum of
money to the payee or to its order.

Is payable on demand or at a definite time

Is dated

Is signed by the maker.

1. In order to qualify as an international bill under this convention a bill of exchange must
specify at least 2 of the places listed in the convention and any 2 so specified places must be
situated in different states.
2. The place listed are- the place where the bill is drawn, the place indicated next to the
signature of the drawer, the place indicated next to the name of the drawee, the place
indicated next to the name of the payee and the place of the payment.
3. Same is the case with International promissory note. It should also specify at least 2 of
spaces listed in article 2(2) of the convention where by any 2 so specified places must be
situated in different states.
4. The legal rules provided by the convention will apply even where there has been an
incorrect or false statement in respect of a place indicated in the instrument.
5. The convention leaves to the domestic laws the question of sanctions that may be imposed
where such a false or incorrect statement has been made in an instrument.
6. The convention does not allow negotiable instrument to be drawn on 2 or more drawees or
to be issued payable to bearer because multiple drawee instrument have proved to be quite
rare and a source of confusion when they occur.
7. This convention does not apply to International cheque. Cheques have been considered the
subject of main project of UNCITRAL the latest result of which is the draft convention. Th
work of this draft suspended in 1984 because the fact is cheques were taken as less
important role in international payments.

Interpretation of the convention:

1. Unification of a certain field of law can fulfill its ultimate purpose only of its interpreted in a
sensible manner by all legal system applying it.
2. This convention requires courts that interpret it to have regard for its international character
and for the need to promote uniformity in its application & the observance of good faith in
international transaction.

Concept of “Holder” & “protected holder” :

To have commercial acceptance this convention mainly focuses on the principle of

negotiability. While dealing in rights of the holder of an instrument & limitation of those
right the drafters of the convention has to make a selection between the radically distinct &
yet justifiable approach of the civil & common law. So there are 2 types –

Holder & protected holder- The rights of the protected holder are freed from( release from) the
claims & defenses of other persons to a greater extent than are the rights given to ordinary
Holder. One of the noticeable thing of this convention is a person who is in possession of an
instrument as an endorsee or on which the last endorsement is blank he/she can be
awarded the status of “ protected holder” even though the endorsement appearing on the
instrument was forged by an agent without authority.
Transfer Warranties- This rule says that a person who transfers an instrument, by endorsement &
delivery or by mere delivery makes certain assumption regarding the quality of the
instrument. The quality of the instrument consist of warranty that the instrument does not
bear any forged or unauthorized signature & has not been materially altered.

Guarantees- This convention talks about that payment of any instrument is guaranteed either or
before acceptance of that instrument by other party for whole or part of its amount. A
guarantee may be given by any person who may or may not already a party.

UNCITRAL model for Electronic Commerce(1996):

The UNCITRAL rules on time of sending & receiving are:

1. Unless agreed between originator & addressee, the dispatch of a data message occurs when
it enters an information system outside the control of the originator or on behalf of an
originator.
2. Unless agreed between the originator and addressee the time of receipt of data is
determined as follows:
If the addressee has designated an information system for the purpose of receiving data
message, receipt occurs-
1. At a time when the data message enters the designated information system
2. If the data message is sent to an information system of the addressee which is not the
designated information system at that time when the data message is retrieved by the
addressee.

If the addressee has not designated an information system receipt occurs when the data
message enters an information system of the addressee.

1985 Recommendation- UNCITRAL adopted a recommendation to Government &

international obligation suggesting that they should review the rules related to automated
Data processing with regard to eliminate unnecessary obstacles in international trade.

1998 Additional article adopted- The Model law is intended to facilitate the use of modern
means of communication and storage of information. With the standards with which legal
value of electronic message can be assessed the model law should play a significant role in
enhancing adoption of paperless communication.

2001 Concept of electronic signature: This law aims to bring additional legal certainty to the
use of electronic signature. Whenever we are proposed to introduce to electronic signature
there should be equivalence in between electronic and hand-written signature. This law
follows the tech-neutral approach which avoid a very technical rigid approach.

2005 Use of electronic communication in International contract – It talks about

determination about a party’s location in electronic environment, the time and place of
dispatch & receipt of electronic communication, the use of automated system in contract
formation and how to maintain the balance between the E- document & Paper document.

Comparison Basis:
 1. Functional Equivalence- First we have to analyze the basic function of Paper based
contracts. Considering the same function how we can replicate that in E-contract this
was the main concern.
2. Media & Technology Neutrality – Giving equal treatment to paper based contract & E-
contract. Consent of the parties on whether and how to use E-commerce techniques &
parties can choose security level as per their appropriateness.

International convention on Bill of Lading

In different countries there are different system for Bill of lading.

Contract of carriage/ transportation is applicable to the places where the laws are different from
those where the contract was made. It means that International convention on bill of lading
is again a Uniform Document for transporting the goods from one country to another
country.

Different laws in different create obstacle in world trade. So there was a need of Uniform law. To
avoid such conflicts there are 2 methods-

Choice of law rules-

Here only the rules of law
which can create a conflict
is changed. & not the whole
law

Progressive unification of
law
Here there is an attempt to
harmonise & unify the
substantive law itself of
different contries in the form
of international convention.

Brussels convention:
Set of rules to solve disputes of civil & commercial nature between 2 residents of different countries
of European Union & European Free trade association.

Commercial dispute-

Civil Dispute-

Brussels regime includes-1. Brussels convention, Lugano convention

This was agreed in 1968 by the Member states of EU. The aim was to increase economic efficiency &
promoting the single market by harmonizing the rules on Jurisdiction & avoid parallel
litigation.
Lugano convention made in 1988 on jurisdiction & enforcement of judgement on civil & commercial
matters was agreed upon by 6 members of EFTA. Also open for non-member states of EU &
EFTA but no one accepted it & it is ratified (accepted) by the EC( European community ),
Denmark, Iceland, Norway & Switzerland.

The Hague Rules ( provision for the Brussels Convention) 1924:

At the conference which was held in Hegue for traders & ship owners held in new York certain
uniform ( common) rules have been implemented & no country has passed them into law. As
it was not a law so there was pressure from shippers, bankers, underwriters to make it a law
they drafted a set of rules in 1921. After lots of discussion these are approved in brussels in
1924.

The reason to name it Hague rules because it was first adopted in Hague. Provision of the hague
rules listed below-

Carrier: It means the owner who enters into the contract of carriage.

Contract of carriage : This applies to only contract of carriage covered by bill of lading so far as the
such document relates to carriage of goods by sea.

Goods: This includes Goods, wares, merchandise & articles of every kind whatsoever except Live
animals & cargo which is being carried on the deck.

Ship: It means any vessel used to carriage of

goods by sea.

Carrige by deck
Carriage of Goods: It includes the period from the time when the goods are loaded on to the ship the
time they are discharged from the ship.

Carriage of Goods

Applicability of Law: Every contract of carriage of goods by sea with activities such as loading,
handling, storage, carriage, custody, care and discharge of such goods shall be subject to the
provisions of this law.

The carrier shall be bound by the following duties:

a) Make the ship seaworthy

b) Properly man, equip,& supply the ship
c) Check the safety of the ship

Carrier shall properly & carefully load, handle, store, carry,& discharge the goods carried.

The carrier after receiving the goods in his custody whenever demanded by the shipper issue the bill
of lading to the shipper.

Such a bill od lading will be the prima facie ( it seems to be/ first time ) evidence of the receipt for
carrier.

The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment
regarding the marks, number, weight & quantity as informed by the carrier in the bill of lading &
shipper will inform the carrier for any loss, damage, & expenses Arising from any accident.

Notice of such loss must be given to the carrier in writing at the port of discharge before unloading
the goods. If the loss is not appearing within 3 days the unloading of goods will be the prima facie
( it seems to be/ first time ) evidence for delivery of goods.

UNCITRAL CONVENTION

UNCITRAL has chosen the bill of lading for closer consideration when it comes to international
shipping. The working group of UNCITRAL was invited to take the brussels convention into
consideration and wad mainly focused on to remove of such uncertainties & ambiguities as exist &
for establishing balanced risk between the cargo owner & the carrier.

Following are the areas which need revision which was discussed in the UNCITRAL convention-

1. Responsibility of cargo for the entire period is in control of carrier

2. The scheme of responsibilities & liabilities of the carrier.
3. Burden of proof.
4. Jurisdiction
5. Responsibility for the deck cargo, live animals