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The United Nations Commission on International Trade Law (UNCITRAL) was established by the General Assembly in 1966 (Resolution 2205(XXI) of 17 December 1966). In establishing the Commission, the General Assembly recognized that disparities in national laws governing international trade created obstacles to the flow of trade, and it regarded the Commission as the vehicle by which the United Nations could play a more active role in reducing or removing these obstacles.
UNCITRAL is a subsidiary body of the General Assembly of the United Nations with the general mandate to further the progressive harmonization and unification of the law of international trade. UNCITRAL has since prepared a wide range of conventions, model laws and other instruments dealing with the substantive law that governs trade transactions or other aspects of business law which have an impact on international trade. UNCITRAL meets once a year, typically in summer, alternatively in New York and in Vienna.
It is important here to brief the difference between UNCITRAL and WTO since some peoples are confused of their difference and take one as part of the other, which in fact is not. UNCITRAL is a subsidiary body of the General Assembly of the United Nations. The Secretariat of UNCITRAL is the International Trade Law Division of the Office of Legal Affairs of the United Nations Secretariat. In contrast, the World Trade Organization (WTO) is an intergovernmental organization independent from the United Nations.
Moreover, the issues dealt with by the WTO and UNCITRAL are different. The WTO deals with trade policy issues, such as trade liberalization, abolition of trade barriers, unfair trade practices or other similar issues usually related to public law, whereas UNCITRAL deals with the laws applicable to private parties in international transactions. As a consequence, UNCITRAL is not involved with "state-to-state" issues such as anti-dumping, countervailing duties, or import quotas.
UNCITRAL plays an important role in improving the legal framework for international trade by preparing international legislative texts for use by States in modernizing the law of international trade and non-legislative texts for use by commercial parties in negotiating transactions. UNCITRAL legislative texts address international sale of goods; international commercial dispute resolution, including both arbitration and conciliation; electronic commerce; insolvency, including cross-border insolvency; international transport of goods; international payments; procurement and infrastructure development; and security interests. Non-legislative texts include rules for conduct of arbitration and conciliation proceedings; notes on organizing and conducting arbitral proceedings; and legal guides on industrial construction contracts and counter trade.
When we look at the mandate or the objectives of its establishment the General Assembly gave the Commission the general mandate to further the progressive harmonization and unification of the law of international trade. The Commission has since come to be the core legal body of the United Nations system in the field of international trade law.
"Harmonization" and "unification" of the law of international trade refers to the process through which the law facilitating international commerce is created and adopted. International commerce may be hindered by factors such as the lack of a predictable governing law or out-of-date laws unsuited to commercial practice. The United Nations Commission on International Trade Law identifies such problems and then carefully crafts solutions which are acceptable to States having different legal systems and levels of economic and social development.
"Harmonization" may conceptually be thought of as the process through which domestic laws may be modified to enhance predictability in cross-border commercial transactions. "Unification" may be seen as the adoption by States of a common legal standard governing particular aspect of international business transactions. A model law or a legislative guide is an example of a text which is drafted to harmonize domestic law, while a convention is an international instrument which is adopted by States for the unification of the law at an international level. Texts resulting from the work of UNCITRAL include conventions, model laws, legal guides, legislative guides, rules, and practice notes. In practice, the two concepts are closely related.
As is the case with most subsidiary bodies of the General Assembly, which is composed of all States members of the United Nations, membership in UNCITRAL is limited to a smaller number of States, so as to facilitate the deliberations. The General Assembly elects states to be a member of the Commission from UN member states. UNCITRAL was originally composed of 29 States; its membership was expanded in 1973 to 36 States and again in 2004 to 60 States. The membership is representative of the various geographic regions and the principal economic and legal systems of the world. Members of the Commission are elected for terms of six years, the terms of half the members expiring every three years.
In addition, there are five regional groups represented within the Commission: African States; Asian States; Eastern European States; Latin American and Caribbean States; Western European and Other States.
As from 25 June 2007, the members of UNCITRAL, and the years when their memberships expire, are listed bellow.
Thirty states whose membership expire in the year 2010 are Algeria, Australia, Austria, Belarus, Colombia, Czech Republic, Ecuador, Fiji, Gabon, Guatemala, India, Iran (Islamic Republic of), Israel, Italy, Kenya, Lebanon, Madagascar, Mongolia, Nigeria , Pakistan, Paraguay, Poland, Serbia, Spain, Switzerland, Thailand, Uganda, United States of America, Venezuela (Bolivarian Republic of), and Zimbabwe.
Where as the remaining thirty states whose membership expire in the year 2013 are Armenia, Bahrain, Benin, Bolivia, Bulgaria, Cameroon, Canada, Chile, China, Egypt, El Salvador , France, Germany , Greece, Honduras, Japan, Latvia, Malaysia, Malta, Mexico, Morocco, Namibia, Norway , Republic of Korea, Russian Federation, Senegal, Singapore, South Africa, Sri Lanka, and United Kingdom of Great Britain and Northern Ireland.
The degree of participation of developing nation is maintained to the possible extent. In accordance with its mandate, (Para. 9 of General Assembly resolution 2205 (XXI) of 17 December 1966), UNCITRAL takes into account in its work “the interests of all peoples, and particularly those of the developing countries, in the extensive development of international trade". Members of the Commission represent different geographic areas, and are elected by the General Assembly "having due regard to the adequate representation of the principal economic and legal systems of the world, and of developed and developing countries." (Id., para. 1).
Developing countries play an active role in both drafting and adoption UNCITRAL texts. The commitment of the Commission and the Secretariat to providing training and technical assistance to those countries is also long-standing and constant. Similarly, the General Assembly has expressed strong support for this work. For example, General Assembly resolution 55/151 of 12 December 2000 entitled "Report of the United Nations Commission on International Trade Law" "… reaffirms the importance, in particular for developing countries, of the work of the Commission concerned 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".
Though UNCITRAL texts are initiated, drafted, and adopted substantially by a body made up of 60 elected member States representing different geographic regions, participants in the drafting process include the member States of the Commission and other States (referred to as "observer States"), as well as interested international inter-governmental organizations ("IGO's") and non-governmental organizations ("NGO's").
C. Documents adopted by UNCITRAL
So far since its establishment by the decision of the General Assembly of the UN, UNCITRAL has adopted four documents for the purpose of "Harmonization" and "unification" of the law of international trade. These are the 1976 UNCITRAL Arbitration Rules, the 1980 UNCITRAL Conciliation Rules, the UNCITRAL Model Law on International Commercial Arbitration of 1985 which is later amended in 2006, and the UNCITRAL Model Law on International Commercial Conciliation of 2002 which is also amended in 2004.
The following facts necessitated the adoption of the Arbitration Rules 1976;
- Recognizing the value of arbitration as a method of settling disputes arising in the context of international commercial relations,
- Being convinced that the establishment of rules for ad hoc arbitration that are acceptable in countries with different legal, social and economic systems would significantly contribute to the development of harmonious international economic relations,
- Bearing in mind that the Arbitration Rules of the United Nations Commission on International Trade Law have been prepared after extensive consultation with arbitral institutions and centres of international commercial arbitration,
- Noting that the Arbitration Rules were adopted by the United Nations Commission on International Trade Law at its ninth session after due deliberation,
This rule has 41 Article under IV different Sections. Section I deals about “Introductory Rules” including the scope of application of the rule, the second about “the composition of the arbitral tribunal”, then about the “arbitral proceeding” and the lastly one about the nature of “the award” including the costs there under.
The Generally Assembly adopted the second rule of UNCITRAL, i.e. 1980 Conciliation rules, which regulate conciliation as an alternative means of dispute settlement. The rules are divided in to 20 Articles and a Model Conciliation Clause. It stipulated a specific rule about the scope of application of the rule; the nomination, role, ethical responsibilities of the conciliators; the rule of evidence before them; the effect and costs of the conciliation proceeding. The followings were the observations of the time that necessitated the adoption of this rules, in addition to the general purpose of the UNCITRAL;
- Recognizing the value of conciliation as a method of amicably settling disputes arising in the context of international commercial relations,
- Convinced that the establishment of conciliation rules that are acceptable in countries with different legal, social and economic systems would significantly contribute to the development of harmonious international economic relations,
- Noting that the Conciliation Rules of the United Nations Commission on International Trade Law were adopted by the Commission at its thirteenth session1 after consideration of the observations of Governments and interested organizations.
The recent two UNCITRAL documents which are model laws as the name it self indicates, are specifically meant to regulate arbitration and conciliation proceedings in the international commercial relations. A model law is a legislative text that is recommended to States for incorporation into their national law. Unlike an international convention, model legislation does not require the State enacting it to notify the United Nations or other States that may have also enacted it.
In incorporating the text of the model legislation into its legal system, a State may modify or leave out some of its provisions. In the case of a convention, the possibility of changes being made to the uniform text by the States parties (normally referred to as “reservations”) is much more restricted; in particular, trade law conventions usually either totally prohibit reservations or allow only very few, specified ones. The flexibility inherent in model legislation is particularly desirable in those cases where it is likely that the State would wish to make various modifications to the uniform text before it would be ready to enact it as national law. Some modifications may be expected in particular when the uniform text is closely related to the national court and procedural system. This, however, also means that the degree of, and certainty about, harmonization achieved through model legislation is likely to be lower than in the case of a convention. Because of the flexibility inherent in a model law, the number of States enacting model legislation is likely to be higher than the number of States adhering to a convention.
In order to achieve a satisfactory degree of harmonization and certainty, States should consider making as few changes as possible in incorporating the Model Law into their legal systems; however, if changes are made, they should remain within the basic principles of the Model Law. A significant reason for adhering as much as possible to the uniform text is to make the national law as transparent and familiar as possible for foreign parties, advisers and conciliators who participate in conciliations in the enacting State.
International trade and commerce have grown rapidly with cross border transactions being entered into by a growing number of entities, including small and medium-sized ones. With the increasing use of electronic commerce, where business is frequently conducted across national boundaries, the need for effective and efficient dispute resolution systems has become paramount. UNCITRAL has drafted the Model Law to assist States in designing dispute resolution processes that are intended to reduce costs of dispute settlement, foster maintaining a cooperative atmosphere between trading parties, prevent further disputes and inject certainty into international trade. By adopting the Model Law, and by educating parties engaged in international commerce about its purposes, the parties will be encouraged to seek non-adjudicative dispute settlement methods that will increase cost-effectiveness in the marketplace.
The objectives of the Model Law, which include encouraging the use of conciliation and providing greater predictability and certainty in its use, are important for fostering economy and efficiency in international trade.
The Model Law was developed in the context of recognition of the increasing use of Arbitration and conciliation as a method for settling commercial disputes. The Model Law was also designed to provide uniform rules in respect of the conciliation process. In many countries, the legal rules affecting conciliation are set out in various pieces of legislation and take differing approaches on issues such as confidentiality and evidentiary privilege and exceptions thereto. Uniformity on such topics helps to provide greater integrity and certainty in the conciliation process. The benefits of uniformity are magnified in cases involving conciliation via the Internet where the applicable law may not be self-evident.
UNCITRAL is a subordinate body in the UN which have the objective of harmonizing laws regulating international trade. So far it has adopted two arbitration and two more conciliation rules. The last two are model laws which can be used by the nations of the world in formulating their own domestic laws and treaties regulating arbitration and conciliation. This can be inferred from the latest optional laws of the PCA which have been made according to the UNCITRAL laws.