The U.N. convention on electronic contracting: Back from the dead?

• Author: Lambert, J. Benjamin

Abstract

In 2006 the United Nations Genetal Assembly opened the Convention on the Use of Electronic Communications in International Contracting (ECC/the Convention) for signature. The ECC was created to provide a mainly procedural framework that would allow for the global recognition of international contracts formed using electronic means. The Convention was, perhaps, the final product of many years work in the area which first gained attention in 1996 with the largely successful UNCITRAL Model Law on Electronic Commerce. The Convention was based in large part on Model Law and other influential national laws such as the American Uniform Electronic Transactions Act and the Canadian Uniform Electronic Commerce Act, which were also based on the Model Law, as well as principles of electronic contracting generally accepted in the West. Yet despite the substantially similar, if not virtually identical, language of the ECC and its predecessors in the field, and the fact that many of the drafters of the Model, Canadian, and American laws were also ECC drafters, the Convention has yet to gain wide acceptance.

However, it is possible that the convention has caught a second wind. While it is true that at the time of writing only eighteen countries have signed the convention, after four years of dormancy two of the required three ratifications were submitted in June and July 2010. Suddenly, and almost from nowhere, the Convention is now on the brink of coming into force--bringing to light the "under-the-radar" influence the ECC has had with developing nations during that time. These developments could have important ramifications, especially in the areas of oil, technology, manufacturing and arbitration, to name a few, as current signatories include Russia, South Korea, China and Singapore.

Given the history of the ECC and recent developments involving the Convention, this article aims to briefly review the principal similarities and any major differences between the ECC and the current electronic commerce laws of Canada, the United States and the European Union. This review will serve as a basis for a brief argument for the wider adoption of the ECC in the West. The article will then go on to explore how the Convention is influencing the laws of the ASEAN member states and how those states will benefit from adopting the convention as domestic law even if it never gains acceptance in the West

I Introduction

On 23 November 2005, the United Nations General Assembly adopted the Convention on the Use of Electronic Communications in International Contracting (the Convention/ECC). (1) The Convention was created to ensure the global recognition of international contracts formed using electronic means. It is the end product of over ten years of work in the electronic commerce area, which first gained widespread attention with the UNCITRAL Model Law on Electronic Commerce (Model Law) upon which the ECC was based. Yet despite the Convention being hailed as "one of the most important recent developments in international e-commerce law" (2) and in spite of the success of the Model Law, (3) it has yet to gain widespread acceptance. To date, only eighteen nations have signed the ECC; none of them a major "western" power. (4)

However, the Convention may have been successfully resuscitated. In June 2010, after almost five years of dormancy, Honduras submitted the first instrument of ratification. (5) Three weeks later, in July 2010, Singapore submitted the second. (6) Finally, in August 2012, with little warning within the legal field, the Dominican Republic submitted their accession (7) --the third required instrument to bring the Convention into force.

Since the Convention's entry into force on March 1, 2013, an additional four countries--Russia, Congo, Montenegro, Sri Lanka--have ratified, accepted or acceded to the ECC. (8) It appears that this once-dead Convention is not only alive, but beginning to thrive. In 2011 the Australian Parliament passed the Electronic Transactions Act 2011, (9) which was specifically drafted to comply with the ECC. The Australian government plans to "move to accede to the UN Convention" as soon as the "amendments have been enacted in all jurisdictions." (10) Furthermore, accession to the ECC is currently under consideration by the United States. (11)

This proverbial second coming of the Convention could have important ramifications in areas such as oil, shipping, technology, manufacturing and the financial sector as current signatories include Russia, China, Iran, Saudi Arabia, South Korea, Panama and Singapore. (12) Perhaps more important than these official developments, however, are those that are happening under the radar of many international practitioners. The ECC is having more of an impact than previously realized, as evidenced by developments in the Association of

Southeast Asian Nations (ASEAN). ASEAN is actively encouraging all member nations to amend their national electronic commerce laws to incorporate the Convention and "achieve harmonization... in" the region. (13) This is an important development as only two of the ten ASEAN member nations are ECC signatories and the additional eight countries routinely attract facilities outsourced from developed countries. (14)

This article will review the history of the ECC and its relationship to current electronic commerce laws in the United States, Canada and Europe. The review will demonstrate the vast similarities between these laws and their compatibility with the ECC and, with Australia as an example, will present an argument for wider adoption of the Convention in the West. The article will then go on to explore how the Convention is influencing the laws of ASEAN member states and how ASEAN is achieving regional harmonization with the ECC as its model. In addition to ASEAN, this paper will also explore the state of electronic commerce law in China, an ECC signatory, and India, a non-signatory, and how those states--and developing nations generally--can benefit from adopting the ECC as domestic law even if it never gains wide acceptance among developed countries. The final section will give a brief overview of important current signatories and the major global industries that could be affected, under the international law of treaties, by the Convention's rise from the dead.

II The ECC and The West

It is, perhaps, common knowledge that countries with a highly developed information and communications technology infrastructure, such as the United States, Canada and those of Western Europe, have been leading the way in the growth of electronic commerce. This has little to do with legal developments in these countries; it is simply a practical matter: 308 of the 500 largest companies in the world are headquartered in the United States, Canada or Western Europe. (15) With the increasing growth and availability of the Internet and advanced communications technology in countries around the world, it has become more cost efficient for large companies to conduct business via electronic means. Yet despite the growth of international electronic commerce and the need for a degree of legal certainty in international business dealings, none of these countries have adopted the Convention. This is an odd development, as the current domestic laws of the United States and Canada and parts of the European Union (16) have the same origins as the ECC and were even consulted during the drafting of the Convention.

It appears that the drafters of the ECC took pains to avoid creating any major conflicts with existing domestic e-commerce laws based on the Model Law, possibly in hopes that doing so would inspire a smooth ratification process and bring about international harmonization as quickly as possible. As a result the Convention, much like its predecessors in the field, takes a "facilitative--rather than regulatory--approach... [deferring] to domestic law" (17) on matters ranging from contract formation to party obligations. The minor differences in wording between the Model Law and the ECC, which do exist is some ECC provisions, were "not intended to produce a different practical result, but rather are aimed at facilitating the operation of the Convention in various legal systems." (18)

In one specific instance of differing language, the UNCITRAL Secretariat explains, "the definition of 'electronic communication' establishes a link between the purposes for which electronic communications may be used and the notion of 'data messages', which already appeared in the [Model Law]." (19) Furthermore, the ECC "is only concerned with international contracts so as not to interfere with domestic law" (20) and "does not apply... when it is not apparent... that [the parties] are located in two different States. In those cases, the Convention gives way to the application of domestic law." (21) Other ECC articles remind "the parties of the need to comply with possible... obligations that might exist under domestic law." (22)

The ECC is the result of many years of work, beginning as early as 1985, (23) dealing with the rapid development of electronic communications technology and the use of such technology to negotiate contracts in the international marketplace. Since then there have been a series of steps taken, and instruments created, to build a solid legal foundation for the formation of electronic contracts. The most widely successful instrument to date has been the 1996 Model Law. (24)

A. The United States and Canada

As early as 1998, the United States and Canada began enacting legislation that established a legal foundation for electronic commerce. Most jurisdictions within the United States (25) and Canada (26) have adopted uniform laws which closely follow the Model Law. These laws provide that "[information] shall not be denied legal effect, validity or enforceability solely on the grounds that it is in the form of a data message." (27) They...