Collected Courses of The Xiamen Academy of International Law

COLLECTED COURSES
2009 – 2
The Xiamen Academy of International Law

L’Academie de droit international de Xiamen
442 South Suiming Road, Xiamen City
Fujian Province, 361005, P.R.C.
THE XIAMEN ACADEMY OF INTERNATIONAL LAW
Founded in July 2005
COLLECTED COURSES
of the Xiamen Academy of International Law
Volume 2
2009
Leiden • Boston
2009
Library of Congress Cataloging-in-Publication Data
Collected courses.
p. cm. -- (Collected courses of the Xiamen Academy of international law ;
v. 2)
ISBN 978-90-04-18093-2 (hardback : alk. paper) 1. International law. 2.
International Court of Justice. 3. Pacific settlement of international disputes.
I. Martinus Nijhoff Publishers.
KZ3410.C65 2008
341--dc22
2008007036
ISBN 978 90 04 18093 2
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The Composition of the Curatorium of
the Xiamen Academy of International Law
President
H.E. Jiuyong SHI, Judge at the International Court of Justice; former President of
the International Court of Justice
Members
R.P. ANAND, Professor Emeritus of Public International Law at Jawaharlal Nehru
University, New Delhi
An CHEN, Professor of International Economic Law at Xiamen University
Bin CHENG, Professor Emeritus of Air Law at University of London
Chia-Jui CHENG, Professor of International Law at Soochow University School of
Law; Visiting Professor of International Law, Faculty of Law, Xiamen University
Pierre Michel EISEMANN, Professor of Public International Law at University of
Paris 1-Sorbonne
Herbert KRONKE, Secretary-General, UNIDROIT, Rome
Yixin LIAO, Dean, Faculty of Law, Xiamen University
Vaughan LOWE, Chichele Professor of Public International Law at Oxford
University
Andreas F. LOWENFELD, Professor of International Law at New York University
H.E. Hisashi OWADA, Judge at the International Court of Justice; Former Deputy
Ministry of Foreign Affairs, Japan
H.E. Choon Ho PARK, Judge at the International Tribunal for the Law of the Sea
Jernej SEKOLEC, Secretary, United Nations Commission on International Trade
Law (UNCITRAL), Vienna
Malcolm N. SHAW, Sir Robert Jennings Professor of International Law at
University of Leicester
Nicolas Jan SCHRIJVER, Professor of Public International Law at Leiden
University
H.E. A.A. CANÇADO TRINDADE, Judge and Former President of the Inter-
American Court of Human Rights
H.E.Wilfrido V. VILLACORTA, Former Deputy Secretary-General, ASEAN
Huaqun ZENG, Director, Institute of International Economic Law, Xiamen
University
Chongshi ZHU, President, Xiamen University
Secretary-General
Chia-Jui CHENG, Professor of International Law at Soochow University School of
Law; Visiting Professor of International Law, Faculty of Law, Xiamen University
Table of Contents
Aspects de la question des sources du droit international 1

Yves Daudet
The Paradigms of Universalism and Particularism in the Age of

Globalisation: Western Perspectives on the Premises and Finality of
International Law 45
Armin von Bogdandy and Sergio Dellavalle
Legal Aspects of Electronic Commerce: Rules of Evidence, Contract

Formation and Online Performance 129
Jose Angelo Estrella Faria
The Elusive Pro-Arbitration Priority in Contemporary Court Scrutiny

of Arbitral Awards 341
Tibor Várady
Aspects de la question des sources
du droit international
par
Yves Daudet
Contents
Notice biographique 4
Principales publications 5
I. Introduction 8
II. Sources écrites 11
A. Le rôle de l’Etat 11
1. Le rôle direct de l’Etat 11
2. Rôle indirect de l’Etat 15
3. Modulation de l’engagement 16
B. Le rôle de l’organisation internationale 18
1. En matière de traités 18
2. En matière d’actes unilatéraux 19
III. Coutume 22
A. Création 22
B. Codification 23
IV. Soft Law 34
V. Controle et suivi 39
VI. Conclusion 42
The Xiamen Academy of International Law, Collected Courses 2009, Volume 2, 3–43
©2009 Koninklijke Brill NV. ISBN 978 90 04 18093 2. Printed in the Netherlands.
Collected Courses 2009, Volume 2
Notice biographique
Né le 22 juin 1940 à Bordeaux ;

Professeur à l’Université Paris I (Panthéon Sorbonne) ;
Secrétaire général de l’Académie de droit international de La Haye ;
Ancien vice-président de l’Université Paris 1 (Panthéon-Sorbonne) ;
Etudes à la Faculté de droit de Paris Docteur en droit (Prix de thèse de la Faculté,
Prix Georges Scelle) – Paris 1967 Lauréat de la Faculté de droit de Paris ;
Agrégé des Facultés de droit – 1968 ;
Assistant à la Faculté de droit de Paris (1964) ;
Professeur aux universités de Rabat, Antilles-Guyane, Abidjan, Ile Maurice,
Aix Marseille ;
Directeur du DEA de droit international de l’Université d’Aix-Marseille III de
1992 à 1996 ;
Directeur du DEA de droit international et organisations internationales de
l’Université Paris I de 1999 à 2006 ;
Membre de la délégation française au Groupe d’experts, puis à la Conférence des
Nations Unies sur le transfert international de technologie (1978-1980) ;
Membre du Jury du concours d’agrégation de droit public 1993 ;
Membre du groupe de travail du Conseil d’Etat sur « l’influence internationale
du droit français » (2001) ;
Membre du Comité de rédaction de l’Annuaire français de droit international ;
Membre de la Société française pour le droit international ;
Membre de la branche française de l’International Law Association.
4
Aspects de la question des sources du droit international
Principales publications
Les Conférences des Nations Unies pour la codification du droit international (LGDJ,
1968)
« Méthode et procédure de la conférence de Vienne sur le droit des traités », in Annuaire
français de droit international (1969)
« Travaux de la Commission du droit international des Nations Unies », in Annuaire
français du droit international (1970 à 1983 et 1994 à 1999)
« Techniques de codification » in L’élaboration du droit international (SFDI, Pedone,
1975)
« La question du Timor oriental », Ann. des pays de l’Océan indien (1975)
« La codification de la coutume », Juris-cl. internat. (1974, refondu en 1991)
« La situation internationale de l’Etat en période de crise », Rev. Pouvoirs (1979)
Un code de conduite pour les transferts de technologie (Dir.) (Economica, 1980)
« Droit international et droit comparé », Ann. Sté de législ. comp (1982)
« Les représentations de l’ONUDI chargées de la promotion des investissements »,
in Mél. Colliard (1984)
« Les comités d’experts », in Les Agents internationaux (SFDI, Pedone, 1985)
« Commentaire de l’art. 13 § 1,a de la Charte des Nations Unies », in J.P. Cot et A.
Pellet, l’ONU, la Charte (Economica, 1985; 2° edn, 1990)
« Le juge et les droits mixtes, le cas de Maurice », in n° spécial d’Afrique contemporaine
La justice en Afrique (Documentation française, 1991)
« L’incorporation du droit international dans le droit français » in Essays in honour
of Neville Brown (Birmingham, 1992)
« Le droit international tire-t-il profit du droit communautaire? » in Mél. offerts à
Jean Boulouis (Dalloz, 1991)
« Transferts de technologie et développement social et culturel », in A. Pellet (Dir.),
Le droit international du développement social et culturel (Coll. 1991, l’Hermès
1997)
« Régionalisme maritime comparé » in Graf Vitzthum (Dir.), La protection régionale
de l’environnement marin, approche européenne (Economica, 1992)
Aspects du système des Nations Unies dans le cadre de l’idée d’un « nouvel ordre mondial »
(Dir.) (Pedone, 1992)
« The United Nations and the New World Order » (publications de Manchester
Metropolitan University)
5
« L’ONU et l’OEA en Haïti et le droit international », in Annuaire français de droit

international (1992)
Actualités des conflits internationaux (Dir.) (Pedone, 1993)
Les Nations Unies et le développement, le cas de l’Afrique (Dir.) (Pedone, 1994)
« La Méditerranée, espace de coopération, le rôle des Nations Unies » en coll. avec
Geneviève Burdeau, in Mél. Maurice Flory (Economica, 1994)
Travaux de la Commission du droit international des Nations Unies (A.F.D.I., 1994)
« Rapport introductif  » aux rencontres internationales de l’IEP d’Aix en Provence
1994 organisées avec le concours du Centre d’information des Nations Unies à
Paris Les Nations Unies et la reconstruction de l’Etat (Pedone, 1995)
La crise d’Haïti, (Dir.) (CEDIN Domat Montchrestien, 1996)
Le développement social international (Dir.) (Pedone, 1996)
« International action against State terrorism », in M. Flory et Rosalyn Higgins (eds),
Terrorism and International Law (Routledge, LSE, 1996)
« Aspects juridiques et financiers des conceptions françaises des Opérations de
maintien de la paix », in B. Stern (Dir.), Les conceptions françaises des Opérations
de maintien de la paix (CEDIN, Domat Montchrestien, 1997)
« Maintien de la paix », Répertoire de droit international (Dalloz)
« Les Opérations de maintien de la paix sont elles toujours viables ? (Observations
sur les conflits en ex-Yougoslavie) », Mélanges Thierry (Pedone, 1998)
« La codification du droit international », Rev. fse d’adm. pub. 82 (1997)
« Le droit international est il un droit de la liberté ? », Mélanges J. Mourgeon Bruylant
(1998)
« Le cadre juridique des interventions extérieures », Colloque Droit des conflits armés
et défense (Ministère de la Défense 1998)
« La France et le financement des opérations de maintien de la paix », L’observateur
des Nations Unies (1998)
Les Nations Unies et l’ex-Yougoslavie (Dir.) (Pedone, 1998)
« Méthodes et pratiques de la codification du droit international », in La codification
du droit international Colloque de la Société française de droit international
(Pedone, 1999)
« A l’occasion d’un cinquantenaire, quelques questions sur la codification du droit
international », Revue générale de droit international Public 3 (1998)
« La question de l’île de Tromelin », Annuaire du droit de la mer (1998)
« Le droit au développement politique », Mélanges Mohammed Bedjaoui (Kluwer,
1999)
« L’administration des territoires par les Nations Unies », Cursos Euromediterraneos
Bancaja de derecho Internacional (2002)
6
« L’Organisation des Nations Unies », in Répertoire de droit international 2004

(Dalloz)
« La responsabilité des Nations Unies », in La responsabilité en droit public. Aspects
contemporains (Bruylant, Bruxelles, 2005) 249-260
« Les réactions aux nouvelles menaces à la paix et à la sécurité dans le cadre de la
Charte des Nations Unies », Hague Academy Coalition (2006)
« La responsabilité de protéger et reconstruction de l’Etat », in Colloque de la SFDI
« La responsabilité de protéger » (Pedone, Paris, 2007)
« Le droit relatif aux collectivités territoriales de l’ancien outre-mer français dans le
contentieux frontalier récent devant la Cour internationale de Justice. », Mél.
Y. Jégouzo (Dalloz, 2009)
« Le tribunal spécial pour le Liban », Mél. J.P. Cot (a paraître)
7
Aspects de la question des sources

du droit international
Yves Daudet
I. Introduction
La question de sources du droit international est un sujet classique, figurant
certainement parmi ceux qui ont été le plus largement explorés. Mais c’est aussi
un sujet qui ne cesse de retenir l’attention pour la simple raison qu’il se situe au
cœur même du droit international et dont il organise ou reflète les évolutions. En
sorte que s’interroger sur ce que sont les sources du droit international revient
à se poser des questions sur le droit international lui-même, sur son périmètre
comme sur sa juridicité, donc son existence en tant que droit.
Jusqu’à quel point les Etats – maîtres du jeu- entendent-ils être liés (c’est-
à-dire acceptent-ils de se lier eux-mêmes) par des règles de droit international
qu’ils ont établies ou bien jusqu’à quel point les Etats sont-ils obligés (à leur
corps défendant) par des règles de droit international qui existeraient hors de
leur volonté propre? Ainsi, la nature même des sources du droit international
détermine-t-elle la physionomie de la société internationale elle-même : selon
que les rapports entre Etats sont soumis aux strictes règles du volontarisme ou
que ces rapports obéissent aussi à des règles de nature objective, la nature de
la société internationale, société de juxtaposition ou société d’intégration, s’en
trouve directement affectée.
A cet égard, la société internationale et son droit ne présentent pas un aspect
bien particulier par rapport à la société interne et son droit. Chacun sait, par
exemple, que le caractère démocratique ou non d’un régime est loin de se mesurer
exclusivement aux modalités des consultations électorales mais nécessite de
prendre en compte l’ensemble de la réglementation qui encadre la vie quotidienne
des individus, le degré de la protection par le juge dont ils disposent, l’accès
aux libertés fondamentales qui leur est consenti, etc. La nature et la portée des
règles de droit définissent ainsi la société (libérale, autoritaire, dictatoriale, etc.)
dans laquelle ils vivent. Mesurer l’analyse de la démocratie à l’aune des normes
constitutionnelles ou fondamentales relatives à la désignation des organes de
l’Etat serait parfaitement insuffisant.
8
La même démarche peut être transposée dans l’ordre international dont la

nature dépend des règles qui le régissent. Or, sur ce point, il est clair que les don-
nées ont considérablement évolué depuis que, sur la base de l’ordre westphalien,
l’article 38 du Statut de la Cour permanente de Justice internationale a donné
une liste des sources sur la base de laquelle la Cour pourrait juger les différends
qui lui seraient soumis, liste reprise en 1945 au profit de la Cour internationale
de Justice. Limiter l’analyse des sources du droit international à l’énoncé formel
de l’article 38 serait ainsi parfaitement réducteur.
S’il est vrai que, déjà avant 1945 avaient commencé d’apparaître les impor-
tants « concurrents » de la souveraineté étatique qu’étaient les Organisations
internationales intergouvernementales, le temps n’était pas encore venu de
s’attacher aux actes de droit dérivé qui en étaient issus. En effet, ou bien une
opposition claire se manifestait à l’encontre de la reconnaissance à leur profit
de fonctions et attributions égales ou à tout le moins comparables à celles des
Etats, ou bien la nature de tels actes n’était pas encore clairement définie et
établie. La question de savoir si les organisations internationales pouvaient être
parties à des engagements internationaux ou être créatrices de règles de droit
international ne se posait donc pas encore. L’attitude d’opposition perdurera
fort longtemps de la part de certains Etats tels que l’Union soviétique et les pays
du groupe socialiste, traditionnellement hostiles à toute réduction ou partage
du rôle de l’Etat. Quant à l’incertitude relative à la nature des actes, elle ne sera
en réalité levée qu’avec l’avis consultatif de la Cour internationale de Justice sur
les dommages subis au service des Nations Unies en 1949 avant que ne suivent
les travaux de la Commission du droit international sur les traités et sur la
responsabilité des organisations internationales puis l’adoption de la deuxième
convention de Vienne du 21 mars 1986.
Depuis longtemps par conséquent on a pu observer un décalage entre le
texte indiquant les bases précises sur lesquelles la Cour internationale de Justice
peut trancher un différend et l’existence de normes beaucoup plus nombreuses
et diversifiées mais qui ne bénéficient pas d’une sorte de « statut privilégié » ou
d’un « brevet d’authenticité » résultant de leur inscription au sein de l’article
38 du Statut.
La multiplication ultérieure des organisations internationales non-gouverne-
mentales et l’introduction de la « société civile » au nombre des acteurs de la vie
internationale va venir ajouter des éléments de complication supplémentaires
tenant au fait que la personnalité juridique ne leur est pas (encore) reconnue
et qu’à la différence des précédentes, ces groupements ne sont pas composés
d’Etats. Au fond, avec les organisations internationales intergouvernementales,
il s’agissait de savoir si des Etats, en se regroupant, pouvaient constituer un être
juridique doté, comme eux-mêmes, de la personnalité juridique internationale.
Cette question est totalement différente de celle de savoir si des ONG et la société
civile pourraient avoir une personnalité juridique et sécréter des règles de droit
9
international. Dans le premier cas, on est en présence d’une simple évolution

de technique juridique, dans le second, on est confronté à une revendication de
transformation de la structure juridico-politique de la société internationale,
ce qui est une autre affaire. Pour autant, on ne peut nier l’existence des ONG
ni passer sous silence le rôle majeur et l’importance considérable acquise par
certaines d’entre elles dans des domaines tels que la défense des droits de l’homme
ou l’environnement. Devrait-on cependant admettre que leurs actes, qui ne
relèvent pas de la sphère du droit international tel qu’il est aujourd’hui entendu,
ont une incidence sur l’ordonnancement juridique international ?
A l’actuelle hétérogénéité des acteurs vient ensuite s’ajouter une diversification
des fondements doctrinaux et idéologiques d’un droit international bien qu’il
persiste à être voulu universel. Le droit international moderne est issu du système
des Traités de Westphalie et d’une conception morale chrétienne. Longtemps
confondu avec la « courtoisie internationale » la comitas gentium, ensemble des
« règles sociales sur le plan international »1, le droit international est d’inspiration
européenne, donc chrétienne. L’extension au-delà de l’Europe se fera d’abord vers
les Amériques mais où se retrouvent les mêmes fondements éthiques et religieux.
Les pénétrations d’autres religions ou d’autres cultures (Empire ottoman, Perse,
Japon, Chine) ne se feront que lentement et avec parcimonie, jusqu’à ce que le
Pacte de le Société des Nations se proclame, à l’article 1 paragraphe 2 ouvert
« à tout Etat, Dominion ou Colonie qui se gouverne librement ». La marche vers
l’universalisme est alors entamée, rendant plus sensible encore le décalage entre
les fondements du droit international et la personnalité de ses bénéficiaires.
Des « crises » du droit international pourront en résulter. Ainsi dans les années
soixante-dix du siècle dernier lorsque les pays fraîchement décolonisés se sont
opposés à ce que leur soient appliquées des règles coutumières à l’élaboration
desquelles ils n’avaient pas participé.
Aujourd’hui, l’émergence de nouvelles puissances asiatiques (Chine, Inde) a
pour effet que le « modèle » européen n’est plus considéré comme tel et sa « mise
à mal » ou à tout le moins sa remise en question marque le début du XXI° siècle.
Si le « modèle européen » ne séduit plus et si d’autres systèmes suscitent une
curiosité nouvelle, le système juridique international devra en tenir compte.
Néanmoins, une éventuelle modification du contenu des règles ne signifie pas
qu’elle s’accompagnera d’un changement des modes de leur élaboration. Autre-
ment dit, la question qui nous intéresse ici est moins de savoir si les fondements
philosophiques, éthiques et religieux et les modifications qu’ils connaîtront ont
à voir avec l’identification des sources du droit international, que celle de savoir
si, sur la base de fondements éventuellement différents ce seront toujours les
mêmes types d’acteurs qui interviendront dans le jeu international ou si, au

1
A. Truyol y Serra, « Théorie du droit international public », Cours général, Recueil des
cours de l’Académie de droit international 173 (1981), 92.
10
contraire, de nouveaux sujets de droit international seront parties prenantes à

l’élaboration du droit international. En un mot, la question des sources du droit
international sera ainsi classiquement prise dans son sens formel et organique,
la perspective matérielle et la question du contenu de la norme et de son effet
possible sur ce qui serait regardé comme « source » du droit international relevant
d’une démarche différente2.
II. Sources écrites

En adoptant cette vision organique de la question, on sera conduit à apprécier le
rôle des deux sujets de droit international que sont les Etats et les organisations
internationales.
A. Le rôle de l’Etat
Selon les schémas classiques du droit international, le rôle des Etats en la matière
a été longtemps exclusif, il est aujourd’hui partagé et, le plus souvent, prééminent.
Ce qui se traduit, en dehors des hypothèses qui seront examinées plus loin où l’on
verra les organisations internationales jouer un rôle qui leur est propre ou des
éléments de la société civile accomplir certains types d’actions, par l’établissement
d’une distinction selon que le rôle de l’Etat est direct ou indirect.
1. Le rôle direct de l’Etat

Le rôle direct est le plus simple et le mieux établi. Il correspond à la situation
traditionnelle que reflète la Convention de Vienne sur le droit des traités de 1969
dont l’article 2 dispose que le « traité s’entend d’un accord international … entre
Etats » et dont l’article 6 stipule que « tout Etat a la capacité de conclure des
traités », tout en laissant ouverte à l’article 3 la possibilité qu’existent d’autres
catégories d’engagements internationaux.
La règle de l’article 6 constitue l’archétype de la codification d’une norme
coutumière, les Etats, en quelque sorte « par nature » ayant toujours eu la capacité
de conclure des traités, instrument des relations diplomatiques par excellence.
Naturellement, encore faudra-t-il s’assurer de la réalité de l’engagement juridique.
Cette démarche peut conduire à une recherche complexe des intentions.
On sait que des traités, dont on pourrait penser que la finalité est d’obliger
l’Etat, ne comportent pas d’engagement assez précis pour être contraignants, ainsi
que l’a rappelé la Cour internationale de Justice dans l’affaire des Plateformes
2
Pour une vision radicalement différente, v. A. Cançado-Trindade, « International Law for
Humankind : Towards a new Jus Gentium. General Course on Public International Law »,
Recueil des Cours de l’Académie de droit international 316 (2005) 177-179.
11
pétrolières3. D’autres encore, en dépit de leur intitulé, ne sont pas voulus véritable-
ment contraignants. L’exemple le plus célèbre est celui des « accords » d’Helsinki
de 1975 dont l’Acte final n’a pas été conçu comme devant être contraignant mais
s’est par la suite révélé être une étape essentielle dans un processus traduisant
une grande prescience de la part de ses auteurs. En réalité, ainsi que la Cour a
eu à le souligner par la suite, tout est affaire d’intention des auteurs de l’acte4.
Ces éléments de subjectivité se retrouvent avec la bonne foi qui doit présider à
l’exécution du traité. Ce principe est bien établi par une jurisprudence constante.
Des précisions intéressantes ont été apportées par la Cour internationale de
Justice dans l’affaire Gabčikovo-Nagymaros5 où elle souligne :
« Ce que la règle pacta sunt servanda, telle que reflétée à l’article 26 de la
convention de Vienne de 1969 sur le droit des traités, exige en l’espèce
des Parties, c’est de trouver d’un commun accord une solution dans
le cadre de coopération que prévoit le traité. L’article 26 associe deux
éléments, qui sont d’égale importance. II dispose que: « Tout traité en
vigueur lie les parties et doit être exécuté par elles de bonne foi. » De l’avis
de la Cour, ce dernier élément implique qu’au cas particulier c’est le but
du traité, et l’intention dans laquelle les parties ont conclu celui-ci, qui
doivent prévaloir sur son application littérale. Le principe de bonne foi
oblige les Parties à l’appliquer de façon raisonnable et de telle sorte que
son but puisse être atteint ».6
Mais il faut bien reconnaître qu’il n’est pas toujours facile de scruter les inten-
tions des auteurs de l’acte. C’est ainsi, par exemple qu’on peut hésiter sur la
nature juridique à reconnaître à un « communiqué signé » à la suite de la visite
d’un Chef d’Etat étranger. On connait la valeur simplement informative d’un
communiqué ordinairement publié à l’issue d’une telle visite. Si, comme cela
arrive parfois, ce communiqué est signé, cela signifie-t-il que leurs auteurs ont
entendu lui conférer une force juridique particulière. On est là en présence d’une
3
Exceptions préliminaires, 12 décembre 1996.
4
CIJ, Délimitation maritime et questions territoriales entre Qatar et Bahreïn, 1er juillet 1994
(Compétence et recevabilité).
5
Affaire relative au projet Gabčikovo-Nagymaros (Hongrie/Slovaquie), arrêt du 25 septembre
1997.
6
Ibid. par. 142. Par ailleurs, « bien qu’elle ait constaté que tant la Hongrie que la Tchécos-
lovaquie avaient manqué à leurs obligations découlant du traité de 1977, la Cour estime
que ces comportements illicites réciproques n’ont pas mis fin au traité ni justifié qu’il y
fût mis fin. La Cour établirait un précédent aux effets perturbateurs pour les relations
conventionnelles et l’intégrité de la règle pacta sunt servanda si elle devait conclure qu’il
peut être unilatéralement mis fin, au motif de manquements réciproques à un traité en
vigueur entre Etats » (par. 114).
12
situation que les services juridiques des Ministères des affaires étrangères des Etats
concernés ne manqueront pas de juger délicate … C’est donc une considération
de fond qui domine ici, la Convention de Vienne n’exprimant que des exigences
très minimales en matière de forme d’expression du consentement ainsi que
dispose l’article 11.
On peut ensuite s’interroger sur l’éventuelle incidence de la structure consti-
tutionnelle de l’Etat, s’agissant notamment du fédéralisme. La Commission du
droit international avait tenu à souligner que les Etats membres pouvaient avoir
la capacité de conclure des traités dans les limites prévues par la Constitution
fédérale, aucune règle de droit international n’y faisant obstacle. La Commission
ajoutait que la question pouvait se poser de savoir si l’Etat membre agissait en
tant qu’organe de l’Etat fédéral ou pour son propre compte. Mais à vrai dire cette
interrogation est un peu étrange dans la mesure où il est clair que si l’Etat membre
agit en tant qu’organe de la fédération, en réalité, la forme fédérale importe peu.
C’est un organe de l’Etat qui agit et qu’importe en définitive qu’il agisse en tant
qu’organe de l’Etat unitaire ou en tant qu’organe de l’Etat fédéral. En revanche,
la vraie question qui se pose consiste à évaluer la part possible d’autonomie de
l’Etat membre par rapport à la fédération. Ce n’est là qu’un aspect particulier
d’une question générale dont les incidences sont clairement apparues à l’occasion
des épisodes de l’affaire Avena, portée devant la Cour internationale de Justice
et dans laquelle sont clairement apparues les contraintes et limites des possibi-
lités d’action de la fédération sur les autorités fédérées aux Etats-Unis, quand
bien même s’agirait-il de la conformité ou non conformité d’un acte interne
(condamnation à mort par une juridiction du Texas, donc d’un Etat membre
de la fédération) par rapport à un engagement international de l’Etat fédéral
(l’article 36 de la convention de Vienne sur les relations consulaires relatif au
traitement des étrangers placés en détention.)
Derrière l’apparente simplicité de la règle de l’article 6 peuvent donc se cacher
des situations délicates qui supposeront des aménagements. L’exemple type est le
cas des territoires coloniaux bénéficiant d’un statut particulier d’autonomie ou
en voie d’accès à l’indépendance. Par application stricte du principe de l’article 6,
n’étant pas des Etats au sens plein du terme, la capacité de conclure des traités ne
devrait pas leur être reconnue. Mais les justifications – ou contraintes – politiques
ont pu conduire à des solutions différentes. Tel fut le cas, au lendemain de la Pre-
mière Guerre Mondiale de plusieurs territoires de l’Empire colonial britannique
(Australie, Canada, Nouvelle Zélande, Inde, Afrique du sud) invités à participer
à la Conférence de la paix de 1919 et à signer le traité de Versailles, ce qui leur a
permis d’être membres originaires de la SDN. Dans le cadre de la décolonisation
française, un cas intéressant est celui des « accords d’Evian », conclus le 9 mars
1962 entre le Gouvernement français et le Front de libération nationale algé-
rien (FLN), destinés à organiser l’indépendance de l’Algérie. Toutefois, le FLN
n’étant ni un Etat ni son représentant, ces accords ne pouvaient être considérés
13
comme des traités au sens du droit international. De surcroît, selon les règles
constitutionnelles françaises, une consultation populaire par referendum devait
se tenir pour décider de l’indépendance. Après approbation des accords d’Evian
par referendum, l’Algérie est devenue un Etat indépendant dont le FLN était le
ferment. Plus tard et, pour des raisons pratiques, avec effet rétroactif, les accords
d’Evian se sont vus reconnaître la qualité de traité international.
Selon le système du protectorat colonial, on sait qu’une répartition des
compétences est opérée entre la puissance protectrice et l’Etat sous protectorat.
La puissance protectrice exerçant les compétences internationales, c’est elle qui
conclut les traités pour le compte de l’Etat protégé, lequel, en vertu de la théorie
du mandat, se trouve alors obligé par le traité conclu en son nom7. Dans le cas
de l’Empire chérifien, ce montage juridique a conduit le Sultan à protester contre
la conclusion par la France d’un accord en forme simplifiée avec les Etats-Unis
au sujet de l’établissement d’une base américaine. Cette opposition a perduré
jusqu’aux accords de la Celle St Cloud de 1956 marquant l’indépendance du
Maroc, accompagnés d’une déclaration de non-succession à l’accord ainsi conclu.
Jusqu’à une époque relativement récente, ces aménagements, on le voit, ont
surtout concerné, pour des raisons essentiellement pratiques ou politiques, des
entités en passe de devenir des Etats : un Dominion se gouvernant librement et
anticipant sa qualité d’Etat indépendant à venir, un mouvement de libération
nationale qui est le germe de l’Etat nouveau qui va être créé. Ils ne constituent
donc pas des bouleversements d’importance.
Les transformations actuelles de la société internationale qui s’accompagnent
de la montée en puissance de nouveaux acteurs sur la scène internationale conduit
à examiner la question sous un jour différent. Sans qu’il s’agisse encore soit des
nouveaux sujets de droit international que sont les organisations internationales
soit des acteurs de la société civile, tous éléments qui seront examinés plus loin,
on se consacrera maintenant au phénomène de l’internationalisation croissante
des activités de l’Etat, entrainant un retentissement direct sur la question des
sources du droit international. Cette internationalisation des activités, consécu-
tive à l’interdépendance croissante et à la mondialisation, a pour conséquence
qu’aujourd’hui peu d’activités de l’Etat échappent à une dimension internationale.
La plupart des administrations, établissements publics et divers démembrements
de l’Etat disposent d’une structure en charge des actions internationales. Cela
peut naturellement entraîner un développement quantitatif des traités conclus
par l’Etat mais cela peut aussi avoir pour effet d’engendrer une activité interna-
tionale propre aux entités en cause. Le rôle de l’Etat n’est plus alors qu’indirect,
l’action directe étant, quant à elle, prise en charge par un autre organe.

7
CIJ, Droits des ressortissants des Etats-Unis d’Amérique au Maroc, 27 août 1952, Temple de
Préah-Vihéar, 15 juin 1952.
14
2. Rôle indirect de l’Etat

L’action, de plus en plus fréquente, des établissements publics et d’autres démem-
brements de l’Etat est très révélatrice à cet égard. Il en est ainsi, par exemple,
de l’action des Universités et des organismes de recherche. Les programmes
d’échanges interuniversitaires internationaux se sont multipliés au cours des
dernières décennies, entraînant toutes les universités à développer des collabo-
rations avec des universités étrangères, elles-mêmes de plus en plus nombreuses
pour répondre à une demande accrue. Ces rapports s’inscrivent dans des actes
juridiques prenant la forme d’accords, engagements, échanges de lettres, de nature
diverses, mais ayant pour point commun de n’être pas des traités puisque non
conclus par des Etats. Ces actes juridiques définissent une politique internationale
en matière éducative, culturelle ou de recherche, exprimant dans de nombreux
cas l’autonomie qui est reconnue dans ces matières à leurs auteurs.
Cependant, il faut bien voir qu’on se trouve en présence d’une situation
différente de celle que l’on verra plus loin où de nouveaux acteurs de la vie in-
ternationale vont se voir reconnaître la capacité de conclure des traités « à côté »
des Etats. Ici, il s’agit d’institutions et d’organismes qui ont un lien avec l’Etat,
qu’ils en soient un démembrement ou une composante. Dans ces conditions,
leur action peut-elle se concevoir d’une manière indépendante de celle de l’Etat
et leur capacité de conclure des accords, reflets de leur politique propre, est-elle
complète ou bien nécessite-t-elle des coordinations, des collaborations, voire des
autorisations de la part de l’Etat ?
Ainsi les régions d’un Etat peuvent-elles développer une politique internationale,
surtout lorsqu’elles sont limitrophes d’un Etat étranger, ce qui peut conduire à
la mise en œuvre d’actions adaptées à la situation. Une telle politique est même
parfois encouragée, par exemple « l’Europe des régions » dans le cadre de l’Union
européenne. Il en va de même d’établissements publics tels que des Universités ou
des organismes de recherche qui définissent des axes d’une politique extérieure.
Dans ces diverses hypothèses, des cohérences avec la politique de l’Etat doivent
être recherchées, ne serait-ce que parce qu’elles en sont souvent l’instrument.
Si l’Etat développe une politique culturelle avec tel Etat étranger, il est évident
que les relations interuniversitaires peuvent en être une pièce essentielle. Cela
explique que des procédures d’autorisation, ou de non-objection dans un certain
délai, soient généralement mises en place. Tel est le cas en France pour les accords
conclus par les Universités ou les régions. Formellement, de tels accords ne lient
en principe pas les Etats mais on peut néanmoins se poser la question lorsque
l’Etat a donné son agrément à un tel accord international. En cas de difficultés
d’application, par exemple d’ordre financier, il serait envisageable que l’Etat
doive intervenir.
La matière est donc très mouvante et se prête à des interprétations diffé-
rentes, ce qui n’est pas surprenant dans la mesure où elle constitue le cadre à
15
l’intérieur duquel s’inscrit la politique juridique des Etats, ce qui suppose donc
des adaptations à des situations diverses et variées.
3. Modulation de l’engagement
La question des réserves vient encore apporter de l’eau au moulin de la sub-
jectivité et du volontarisme, en laissant aux Etats la possibilité de déterminer
eux-mêmes l’étendue de leurs obligations. Bien entendu, le jeu de la réciprocité
ne rend pas l’opération sans risques pour celui qui formule la réserve et lui
confère en quelque sorte un « coût » qu’il devra évaluer au regard des avantages
que lui procure l’émission de la réserve, mais en dernière analyse, c’est à lui que
revient la décision8. Encore faut-il que les réserves ne soient pas interdites, mais
une telle interdiction est le produit de la volonté des auteurs du traité, elles sont
de simples restrictions conventionnelles, parfois d’ailleurs contournées par la
pratique des déclarations interprétatives9. Quant à l’exigence de conformité à
l’objet et au but du traité, elle ne révèle aucun élément d’objectivité. Sans doute
pourra-t-il y avoir une divergence de vues en matière d’interprétation mais il ne
reste pas moins que l’objet et le but du traité fait référence à ce que les parties
ont voulu (ou cru vouloir).
C’est finalement la question du jus cogens qui introduit l’élément de trouble
le plus fondamental. Certes, les effets « objectifs » des traités ont été depuis long-
temps identifiés comme s’imposant en dehors d’une manifestation de volonté
particulière. Mais à vrai dire leur justification est essentiellement d’ordre pratique
en vue d’assurer la stabilité des situations territoriales ou frontalières ou le ré-
gime protecteur de certains espaces (le statut de neutralité des îles d’Aaland par
exemple), selon un principe de stabilité des situations juridiques auquel les Etats
manifestent un fort attachement. Dire que de tels régimes objectifs correspondent
à la volonté globale des Etats n’est donc pas abusif.
Avec le jus cogens, la perspective est différente puisqu’il s’agit de normes,
éventuellement nouvelles, qui viendraient rendre nuls des engagements existants
qui devraient alors prendre fin, en dehors de toute manifestation de volonté des
Etats. On ne reprendra pas ici le détail d’une question surabondamment analysée,

8
On sait toutefois que le Comité des droits de l’homme des Nations Unies, établi par les
pactes de 1966 a considéré que le régime des réserves établi par la Convention de Vienne
était inapproprié au cas des conventions relatives aux droits de l’homme au motif que
le ressort de ces conventions n’est pas un principe de réciprocité de droits et obligations
des Etats mais le bénéfice de droits reconnus aux individus. Ce point de vue n’a pas été
partagé par le rapporteur spécial de la Commission du droit international qui a considéré
que le régime établi par la convention de Vienne était bien approprié à ces cas. La question
demeure donc discutée.

9
Sur ce point, v. Aff. Belilos, Cour Européenne des droits de l’Homme, 20 avril 1988, Sér.
A, vol. 132.
16
critiquée ou exaltée dans une littérature juridique considérable. A vrai dire, il est
un peu étrange que ce soit à propos du droit des traités et plus particulièrement
de la nullité de ceux-ci (Convention de Vienne, article 53) ou de leur extinction et
suspension de leur application (article 64) que le jus cogens ait fait son apparition.
C’est en effet un domaine dans lequel il est finalement peu utile en pratique, la
théorie des nullités pour incompétence, vice de forme et vices du consentement
permettant de faire face à la plupart des situations. En dehors d’elles, pourquoi,
de bonne foi, un Etat voudrait-il obtenir l’annulation d’un traité, sauf à supposer
qu’il ignorait l’existence de la norme de jus cogens lors de la conclusion du traité,
ce qui semble peu vraisemblable10? La seule hypothèse qui fait difficulté et qui
constitue la difficulté même du jus cogens étant la survenance d’une nouvelle
norme de jus cogens de l’article 64. Mais finalement, le risque est-il réel ? On
comprend les interrogations en 1969 et les craintes de la France, refusant, à
cause de l’article 64, de signer la convention de Vienne. Quarante ans se sont
écoulés depuis sans que l’hypothèse se réalise.
Il existe enfin le mécanisme de la « normativité renforcée »11 de l’article 60
prévoyant qu’ « une violation substantielle d’un traité bilatéral par l’une des
Parties autorise l’autre partie à invoquer la violation comme motif pour mettre
fin au traité ou suspendre son application en totalité ou en partie ».
Mais il est vrai qu’à l’image du droit interne, on peut souhaiter prendre
aussi en compte l’hypothèse d’une illicéité de l’objet du traité, comme le droit
interne prend en compte l’illicéité de l’objet d’un contrat qui contreviendrait
à l’ordre public12. A la différence près que l’ordre interne fait alors référence à
un « ordre public » qui est le signe d’une société constituée et intégrée, ce qui
n’est pas le cas de l’ordre international d’aujourd’hui. D’où la controverse sur
la notion de jus cogens, sans doute assez largement apaisée désormais. Si de légi-
times hésitations subsistent quant à l’utilisation de la notion, notamment pour
remettre en cause des traités en vigueur, on ne peut nier l’intérêt de la notion
dans la perspective d’un certain ordonnancement de la société internationale
et de la référence à des expressions communes d’une volonté exprimée par la
« communauté internationale » dont l’existence juridique est douteuse mais la
présence politique évidente.
Enfin, il ne faut pas oublier que le jus cogens ne saurait se confondre avec
un quelconque « droit naturel » dont il est totalement distinct dès lors que les
auteurs de la Convention de vienne ont bien pris soin à l’article 53 de préciser
10
On rappellera ici qu’un tiers ne pourrait obtenir, en l’absence d’actio popularis en droit
international (Cour internationale de Justice, Affaire du Sud-Ouest africain, 18 juillet
1966).
11
V. Prosper Weil, « Le droit international en quête de son identité. Cours général de droit
international », Recueil des Cours de l’Académie de droit international 237 (1992), 279.
12
Ibid., p. 263.
17
qu’une telle norme était « acceptée et reconnue comme telle par la communauté
internationale des Etats ». Même si le caractère singulièrement vague et flou des
termes employés laissent dubitatif quant aux moyens d’identifier de telles normes,
son existence potentielle n’est pas à négliger. On connaît la célèbre formule de
Brierly : « The vehicle does not often leave the garage » citée par Prosper Weil,
qui l’imagine sous la forme « d’une Rolls que l’on astique et que l’on entretient
amoureusement, mais qu’on ne fait jamais rouler »13.
Si l’on entreprend de filer ainsi la métaphore, le jus cogens devient objet de
rêve, comme la Rolls qui reste au garage mais qui pourrait rouler. Rêve d’une
société mieux structurée, mieux agencée et mieux réglementée. Dans un monde
interdépendant et globalisé, ce rêve n’est pas absurde et mériterait de devenir au
moins partiellement une réalité. Dans cette perspective, le jus cogens se rappro-
cherait alors de ce qu’est l’ordre public en droit interne, un ensemble de normes
supérieures, voulues comme telles par le législateur et devant lesquelles plie la
liberté contractuelle. Les sceptiques désenchantés et les ultra-positivistes ne
peuvent adhérer à ce discours. D’autres, plus optimistes, prêts à mieux accom-
pagner certaines évolutions ou aspirations accepteront d’y réfléchir. Ici comme
ailleurs, l’important est de ne pas confondre la lex lata avec la lex ferenda et ne
pas prendre des espérances pour des réalités.
B. Le rôle de l’organisation internationale
1. En matière de traités
En leur qualité de sujets secondaires du droit international, les organisations
internationales peuvent conclure des traités. Perçue au départ comme une
conséquence logique de la reconnaissance de la personnalité juridique des Nations
Unies par la Cour internationale de Justice14, cette capacité coutumière sera
codifiée par la deuxième Convention de Vienne du 21 mars 1986 (Convention sur
le droit des traités entre Etats et organisations internationales ou entre organisations
internationales), ce qui permet d’étendre cet effet de la personnalité juridique à
l’ensemble des organisations internationales plus sûrement que par l’extrapolation
souvent pratiquée à partir de l’Avis de la Cour. On sait que, pour des raisons de
commodité et pour des motifs tenant aux différences parfois sensibles de situations
des Etats et des organisations internationales, le droit des traités a été scindé en
deux conventions qui présentent une grande proximité d’ensemble.
Ibid., p. 274.
13
Réparation des dommages subis au service des Nations Unies. Avis consultatif du 11 avril
14
1949.
18
2. En matière d’actes unilatéraux

Néanmoins, c’est davantage dans le domaine de l’acte unilatéral que la place
et le rôle des organisations internationales mérite d’être mentionné. Il soit
être examiné en corrélation avec la structure et la physionomie de la société
internationale. En effet, l’acte unilatéral est le signe d’une société de droit qui
n’est pas simplement juxtaposée. Dans l’ordre interne, le système du contrat
est corrélé avec l’égalité juridique des partenaires, tandis que l’acte unilatéral,
porteur d’obligation est le signe d’une hiérarchie, d’une position éminente
d’un acteur par rapport aux autres et de la capacité du premier à obliger le
second : dans la société interne, les organes de l’Etat disposent de cette capacité
à l’égard des individus. La reconnaître aux organisations internationales dans
l’ordre international pourrait-elle fonder leur aptitude à obliger les Etats ? On
laissera ici de côté les questions relatives aux actes de l’organisation à caractère
interne qui relèvent simplement du pouvoir d’auto-organisation de n’importe
quelle institution en vue d’assurer son bon fonctionnement et qui ne pose pas
de problème juridique particulier.
Est en revanche plus complexe la question du « droit dérivé » des organisa-
tions internationales15 en tant que possibilité qui leur serait donnée d’imposer
des normes et des règles de conduite aux Etats. G. Bastid-Burdeau observe que,
hormis le cas assez particulier de la Communauté européenne, cette situation
n’est pas extrêmement fréquente. Elle existe certainement dans l’hypothèse
d’organisations internationales supranationales (mais avec la disparition de
la CECA, on manque d’exemples) et, de manière ponctuelle ou fragmentaire,
s’agissant des autres organisations internationales, par exemple les résolutions
du Conseil de sécurité des Nations Unies fondée sur le Chapitre VII. Cependant,
à juste titre, G. Bastid-Burdeau souligne que « le droit dérivé ne résulte pas de la
personnalité juridique mais seulement de l’existence d’une charte constitutive
qui le rend possible »16. Elle montre d’ailleurs que le droit dérivé n’est pas l’apa-
nage des organisations internationales mais peut également résulter de certains
mécanismes conventionnels, par exemple en matière d’environnement. Elle en
conclut qu’il n’y a donc pas de stricte coïncidence entre le phénomène du droit
dérivé et celui des organisations internationales.
Par quel mécanisme juridique les organisations internationales peuvent-elles
imposer aux Etats qui les ont créées des obligations légales ? Pendant longtemps,
l’idée a prévalu que les organisations internationales étant créées par les Etats,
seuls véritables titulaires de la personnalité juridique internationale, qui ont
donné un certain contenu à l’acte constitutif, les effets qui en découlent sont
15
G. Bastid Burdeau, « Quelques remarques sur la notion de droit dérivé en droit interna-
tional » in Droit du pouvoir, pouvoir du droit. Mélanges offerts à Jean Salmon, 161-175.
16
Ibid., p. 167.
19
en définitive la continuation de la volonté des Etats. Dans son étude, Geneviève

Bastid Burdeau montre bien qu’à la suite de travaux plus récents sur les or-
ganisations internationales, il apparaît que celles-ci se sont autonomisées en
sorte que « les actes de celles-ci ne peuvent (plus)17 être assimilées à des accords
entre Etats indépendants, mais s’inscrivent au contraire dans un ordre juridique
particulier »18. Cette thèse se trouve renforcée par d’autres analyses doctrinales,
récentes venant en appui à cette idée d’un ordre juridique particulier dont il faut
bien dire qu’il est aujourd’hui bien davantage en harmonie avec la physionomie
de la société internationale et le rôle proéminent qu’y jouent les organisations
internationales. Dès lors qu’une situation touchant à la paix et à la sécurité, au
développement, à l’aide humanitaire ou à la santé se pose dans le monde, c’est assez
naturellement vers l’organisation internationale compétente que l’on se tourne
et c’est d’elle dont on attend la solution. Ce n’est guère que dans les domaines
où il n’existe pas (pas encore) d’organisations internationales que, par la force
des choses, il en va différemment. C’est le cas en matière d’environnement mais
encore faut-il ici observer qu’il existe des mécanismes conventionnels renforcés
venant pallier la déficience organique.
Parmi les analyses récentes, celles de Dan Sarooshi19 sont intéressantes en
ce qu’elles partent du postulat qu’il existe bien deux sujets de droit distincts l’un
de l’autre : les Etats d’une part et les organisations internationales d’autre part.
Cette séparation des sujets de droit rend possible des constructions juridiques
venant expliquer les rapports entre eux. Il peut s’agir de délégations de pouvoirs
consenties aux organisations internationales, par nature révocables à tout
moment20, ou de transferts de pouvoirs, irrévocables si le traité n’a pas prévu
les conditions dans lesquelles les Etats pourraient y mettre fin21. Dans l’un et
l’autre cas, l’organisation internationale reçoit la capacité de prendre des actes
unilatéraux juridiquement contraignants envers les Etats.
Les actes juridiques ainsi adoptés sont bien ceux de l’organisation internatio-
nale elle-même. Si, sur le plan politique, les prises de position des Etats membres
du Conseil de sécurité considérés individuellement permettent de tirer certaines
conséquences, sur le plan juridique en revanche, il ne fait évidemment pas de
doute qu’une décision du Conseil de sécurité est imputable à l’organe et non aux
membres qui le composent22. C’est ce qui permet de rendre la décision du Conseil
de sécurité obligatoire pour tous, y compris, ainsi que l’a formellement déclaré
C’est nous qui ajoutons.

17
Ibid., p. 169.
18
Dan Sarooshi, International Organizations and their Exercise of Sovereign Powers (Oxford
19
Monographs in International Law, Oxford University Press, 2005).

Ibid., p. 54 et seq.
20
Ibid., p. 65 et seq.
21
La composition de l’organe est d’ailleurs elle-même changeante …

22
20
la Cour internationale de Justice23, les Etats ayant voté contre ou les Etats non
membres du Conseil car raisonner autrement serait « priver cet organe principal
des fonctions et pouvoirs essentiels qu’il tient de la Charte »24
Dan Sarooshi inclut dans la catégorie des délégations les règlementations
contraignantes adoptées par l’OMS ou l’OACI à la suite d’un vote majoritaire. Il
souligne que les Etats ont néanmoins la possibilité de refuser qu’une règlementation
spécifique leur soit appliquée, ou de faire une réserve à leur encontre, d’ordinaire
avant leur entrée en vigueur. Dans la mesure où le caractère contraignant ne
dépend pas de l’exercice d’une compétence en lui-même, mais de l’acceptation
subséquente (ou du non refus) des Etats, on est en présence d’une délégation
de pouvoirs et non d’un transfert, tel qu’on le rencontre dans le système de la
Communauté européenne25.
Cette catégorie d’actes échappe à la typologie de l’article 38 du Statut de la
Cour internationale de Justice, ce qui n’est pas surprenant compte tenu de la
structure de la société internationale lorsque ce texte a été établi au profit de la
Cour Permanente. Il y a fort à parier que, si l’article 38 était rédigé aujourd’hui,
cette catégorie d’actes y trouverait sa place. L’importance prise par les organi-
sations internationales est devenue telle, leur poids, ne serait-ce que par leur
nombre et par la variété des sujets couverts est devenu si considérable que, par
un effet quasiment mécanique, elles sont devenues des pourvoyeurs de règles
dans les domaines de leur spécialité. Spécialité qui peut être large jusqu’à perdre
sa signification lorsqu’il s’agit d’organisations politiques telles que les Nations
Unies, l’Organisation des Etats Américains ou l’Union Africaine qui ont vocation
à aborder toutes les questions, sauf à rencontrer la limite de la compétence
nationale des Etats. Il en résulte nécessairement un certain enchevêtrement et
de grandes incertitudes sur la valeur juridique des normes ainsi apparues. D’où
la nécessité de procéder à un examen prudent, au cas par cas, non seulement à
partir des prescriptions de l’acte constitutif qui peut donner des indications sur
la valeur juridique de l’acte de tel organe, mais à partir des termes employés, des
circonstances dans lesquelles l’acte a été pris et, de manière générale, de tous
les éléments pertinents qui permettent de dégager les intentions. Dans son avis
consultatif sur la Namibie, la Cour internationale de Justice a clairement exposé
cette méthode d’analyse26.
23
« Conséquences juridiques pour les Etats de la présence continue de l’Afrique du Sud en Namibie
(Sud-ouest africain) nonobstant la résolution 276 (1970) du Conseil de sécurité », Avis
consultatif, CIJ, Recueil (1971), 16.
24
Ibid. par. 116.
25
Pour une analyse déraillée de cette question et la jurisprudence de la CJCE et des juridictions
des Etats membres ainsi que sur la distinction entre les transferts complets et les transferts
partiels (par exemple des Etats Unis à l’OMC), v. Sarooshi, op. cit., pp. 66 et seq.
26
Déjà cité, v. notamment les paragraphes 114 et seq.
21
Pour le reste, les organisations internationales vont aussi élaborer des actes
à la valeur juridique plus incertaine et qui relèvent de la catégorie des actes de
« droit mou » dont il sera question plus loin.
III. Coutume
A. Création
Il n’est pas nécessaire de longuement insister sur les deux éléments constitutifs
de la coutume, à savoir la répétition des actes constitutifs d’une pratique et
l’intention d’agir alors en droit, l’opinio juris sinon pour observer leur étroite
imbrication, selon un dosage de l’un ou de l’autre variable selon les situations
et les interprétations qu’on en donne. Il faut en tout cas que les deux éléments se
combinent, quelles que soient les proportions, bien que certains auteurs estiment
devoir prendre en compte le seul élément intentionnel, la répétition signalant
exclusivement la pratique des Etats. Mais peut-on considérer qu’il y a intention
sans répétition et peut-on imaginer fonder une règle de droit à partir d’un évé-
nement unique ? L’exemple parfois donné de cette situation est la résolution de
l’Assemblée générale des Nations Unies. On parle d’ailleurs parfois en ce cas de
« coutume instantanée »27, selon une expression, il faut bien le dire, parfaitement
contradictoire dans les termes. En toute hypothèse, il est peu vraisemblable
qu’une telle résolution de l’Assemblée générale émerge subitement et apparaisse
avec un contenu totalement de novo. Plus raisonnablement, la résolution n’est
pas un acte unique ou isolé mais la marque d’une étape ou l’aboutissement
d’un processus intégrant des conceptions, des aspirations, voire des réalisations
auxquelles les Etats sont parvenus, s’exprimant dans la résolution qui en marque
plus précisément le périmètre.
A vrai dire, cette coutume dite « instantanée », (aussi appelée « sauvage »
par René-Jean Dupuy qui l’opposait ainsi à la coutume « sage », coutume au
sens classique dont élaboration était traditionnellement lente, élaborée au pas
du Sénateur dans l’assemblée des sages) semble être aujourd’hui passée de
mode. Elle est très datée de la période des années soixante dix du siècle dernier,
de l’époque du nouvel ordre économique international (1974) et des beaux
jours du droit international du développement, porteur d’espérance pour les
pays d’un tiers monde présentant alors une certaine unité de façade et dont
l’aile marchante était constituée par quelques pays du « groupe des 77 ».
27
Selon l’expression imagée inventée par Bin Cheng et critiquée par une partie de la doctrine.
V. Bin Cheng, « Custom: The Future of General State Practice In a Divided World », in R.
St.J. Macdonald & Douglas M. Johnston (eds), The Structure and Process of International
Law: Essays in Legal Philosophy Doctrine and Theory (1983) 513, 532.
22
L’Assemblée générale des Nations Unies de 1974, présidée par A. Bouteflika,

alors ministre algérien des Affaires étrangères, est emblématique à cet égard.
Le dépérissement du nouvel ordre économique international et son oubli total
lors de la quatrième décennie du développement en 199028 explicable par les
nouveaux centres d’intérêt géopolitiques consécutifs à la chute du mur de Berlin
et au « retournement du monde »29 sonnera le glas du mouvement. Avec la
fin du « militantisme tiers-mondiste » l’idée qu’une résolution de l’Assemblée
générale, compte tenu de ses termes et des conditions de son adoption (ce qui
allait dans le sens des Etats en développement) puisse constituer une nouvelle
norme issue d’une « coutume instantanée » marque le pas et ne semble pas avoir
été réellement reprise depuis.
S’agissant de l’élément intentionnel, le caractère circulaire de la définition de
la coutume a souvent été dénoncé. « La coutume internationale, comme preuve
d’une pratique acceptée comme étant le droit » dit l’article 38 du Statut de la
Cour internationale de Justice. Serait donc du droit coutumier celui qui serait déjà
considéré comme étant du droit. Une telle approche nécessite bien entendu des
précisions et des clarifications. Celles-ci ont été données par la jurisprudence de la
Cour internationale de Justice afin de distinguer les règles de droit ainsi créées des
règles de courtoisie, des considérations d’opportunité ou de la simple tradition30.
La Cour a également montré comment une règle purement conventionnelle et
à ce titre applicable aux seuls Etats parties pouvait, par le jeu de l’opinio juris,
être étendue à tous les Etats, y compris les tiers au traité en question, la règle
ayant été incorporée dans le droit international coutumier. La Cour ajoute que
cette situation « se présente de temps à autre : c’est même une des méthodes
par lesquelles des règles nouvelles de droit international coutumier peuvent se
former. Mais on ne considère pas facilement ce résultat comme atteint »31. Comme
on va le voir, c’est cette même idée qui légitime le processus de codification. La
jurisprudence a aussi permis de mettre en exergue la notion d’Etat « particuliè-
rement intéressé »32, ce qui introduit un élément de variabilité.
B. Codification
Les incertitudes de la coutume conduisant nécessairement à se poser l’inévitable
question de savoir si on se trouve ou non en présence d’une règle de caractère
28
Rés. 45/199, Stratégie internationale du développement pour la quatrième Décennie des
Nations Unies pour le développement (21 déc. 1990).
29
B. Badie et M.C. Smouts, Le Retournement du monde. Sociologie de la scène internationale,
(Presses de Sciences Po/Dalloz (Amphithéâtre), Paris, 1992; 3e édn, 1999).
30
Plateau continental de la Mer du Nord, CIJ, 20 février 1969, par. 77.
31
Ibid., par. 70.
32
Ibid., par. 73.
23
coutumier sans savoir y répondre avant que le juge n’ait donné sa réponse ou
que les Etats se soient éventuellement prononcés de manière claire à ce sujet, a
conduit aux procédures de codification. A partir du moment où la règle coutu-
mière est inscrite dans une convention entrée en vigueur, son caractère de règle
de droit ne fait plus de doute. Ni en tant que règle de droit écrit ni, finalement
en tant que règle coutumière, l’incorporation dans un texte écrit lui ayant en
quelle que sorte conféré l’onction de la positivité. L’inscrire dans une convention
de codification c’est la faire rétroagir à coup sûr en tant que règle coutumière si
on éprouvait antérieurement des hésitations à son sujet ou, à tout le moins, lui
conférer ce statut au cas où elle serait issue de l’opération de « développement
progressif  » du droit international.
C’est pourquoi la Société des Nations comme les Nations Unies vont entre-
prendre des actions de codification. Les Nations Unies donneront à cette activité
un cadre précis et approprié sur la base de l’article 13 al 1, a de la Charte en
créant la Commission du droit international.
Selon l’article 1 de son statut la Commission du droit international a pour
but de « promouvoir le développement du droit international et sa codification »
jusqu’à ce que la résolution 36/39 du 18 novembre 1981 portant élargissement
de sa composition la désigne comme « principal organe subsidiaire permanent
de l’Assemblée Générale chargé d’encourager le développement progressif du
droit international et sa codification »
La Commission du droit international organe de « droit commun » en ma-
tière de codification, n’a pas le monopole de celle-ci. D’autres organes peuvent
également concourir à la mise en œuvre de l’article 13 paragraphe 1 (a) de la
Charte, à moins que l’Assemblée Générale ne se charge elle-même de l’opération,
ce qui est advenu.
La Commission du droit international comprend à l’origine 15 membres. Elle
est élargie à 21 membres en 1956 puis à 25 en 1961 et en compte 34 depuis 1981
élus pour 5 ans par l’Assemblée Générale sur une liste de candidats présentés
par les Etats, pour une durée de 5 ans et rééligibles. Une clé de répartition fixe le
nombre des sièges à 8 pour l’Afrique, 7 pour l’Asie, 6 pour l’Amérique latine, 3
pour l’Europe orientale, 8 pour l’Europe occidentale et d’autres Etats. S’y ajoutent
un ressortissant d’un Etat d’Afrique ou d’Europe orientale à tour de rôle et un
ressortissant d’un Etat d’Asie ou d’Amérique latine (à tour de rôle).
Selon l’article 8 du statut, il convient de veiller lors de l’élection à ce que « dans
l’ensemble, la représentation des grandes formes de civilisation et des principaux
systèmes juridiques du monde soient assurés. ». Cette référence à la représen-
tation des « grandes formes de civilisation » traduit un souci de réalisme qui est
très certainement de nature à favoriser l’aspect de « développement progressif  »
du droit international par l’introduction dans celui-ci d’éléments reflétant les
besoins inhérents aux différents éléments qui la composent.
24
La même variété ne peut guère s’appliquer aux systèmes juridiques dans la

mesure où il n’en existe véritablement et fondamentalement que deux : le système
de common law et le système de civil law en tant que systèmes globaux d’appréhen-
sion du droit. Les autres systèmes de droit existant ne touchant qu’à des aspects
plus parcellaires (par exemple le droit musulman concernant principalement les
questions relatives au statut personnel ou certains droits coutumiers africains
portant également le plus souvent sur ces mêmes questions).
Les membres de la Commission du droit international sont choisis à titre
individuel parce qu’ils possèdent « une compétence reconnue en matière de
droit international »33. De fait, pour ne parler que des disparus, comment ne pas
évoquer de « grands noms du droit international » dont beaucoup deviendront
juges à la Cour, avec Roberto Ago (Italie), Gilberto Amado (Brésil) Herbert Briggs
(Etats Unis), Sir Gerald Fitzmaurice (Royaume Uni), Edward Hambro (Norvège),
Manley O. Hudson (Etats Unis), Eduardo Jimenez de Arechaga (Uruguay), Serguei
Krylov (URSS), Manfred Lachs (Pologne), Sir Hersh Lauterpacht (Royaume Uni),
Paul Reuter (France), Georges Scelle (France), Jose Sette Camara (Brésil), Grigory
Tunkin (URSS), sir Francis Vallat (Royaume Uni), Alfred Verdross (Autriche),
Stephen Verosta (Autriche), Sir Humphrey Waldock (Royaume Uni) et d’autres
encore …34
Quelle est la nature de l’œuvre qu’ont accomplie ces grands juristes et que
poursuivent leurs successeurs ? Longtemps a été privilégié le résultat conven-
tionnel, et l’impossibilité d’y parvenir vécue comme un échec. L’exemple type
est le modèle de règles sur la procédure arbitrale, adopté en tant que tel sur la
base des rapports de Georges Scelle et des travaux de la Commission du droit
international, faute d’avoir réussi à convaincre les Etats qu’une convention devait
être élaborée sur ce sujet. Les règles de Georges Scelle sont donc maintenues à
l’état de « modèle », mis au service des Etats qui voudraient s’en saisir. Ce sont
donc des règles de caractère « dispositif  », ce qui est à cette époque un moyen
courtois et détourné de les écarter : le droit est positif ou il n’est pas.
Seront en revanche vécues comme de légitimes succès les adoptions de gran-
des conventions de codification telles que le droit de la mer des conventions de
Genève de 1958 avant celui de Montego Bay, codification autrement réalisée, les
conventions de Vienne sur les relations diplomatiques et les relations consulaires,
le droit des traités etc. On a vu, dans ces codifications préparées par des juristes
prestigieux qui se sont ainsi attelés à de grands sujets conduisant à des résultats
d’envergure, une période souvent qualifiée « d’âge d’or de la codification ». Face
à la Commission du droit international de cette période passée ainsi magnifiée,
la Commission actuelle et ses travaux pourraient sembler ternes. Nul doute que
33
Articles 2 et 8 du statut de la Commission du droit international.
34
V. Y. Daudet, « Actualités de la codification du droit international », RCADI 303 (2003),
75.
25
les « grands sujets » ont été traités. La responsabilité de l’Etat est probablement
le dernier. De plus, de « beaux sujets » comme le droit de la mer profondément
révisé à la suite du développement des techniques et de l’émergence de nouveaux
concepts, ou la juridiction pénale internationale et le développement du droit
international pénal ont échappé à la Commission du droit international dont le
rôle peut sembler amoindri et certains de ses membres parfois moins profondément
impliqués dans les travaux. Mais à vrai dire tout se tient : si les sujets sont moins
fondamentaux, les membres se sentent-ils moins mobilisés autour d’enjeux moins
intéressants ? Et se trouvant moins mobilisés, le travail accompli est-il alors de
moindre qualité ? Il est naturellement difficile – et délicat – de répondre à cette
question pourtant parfois soulevée. Mais il faut probablement l’analyser avec un
regard différent en replaçant la question dans le contexte d’aujourd’hui. Certes
de nombreux juristes, en France notamment, restent très attachés à la doctrine
positiviste stricte en dehors de laquelle ils ne voient point de salut. Au risque
d’ailleurs d’enfermer le droit international dans l’immobilisme si la doctrine ne
joue pas son rôle d’aiguillon inventif. D’autres cependant adoptent des positions
plus souples et plus nuancées, qui, sans tourner le dos au positivisme, ouvrent
la porte à des visions moins conservatrices et plus innovantes35.
C’est ainsi que les positions à l’égard de ce à quoi doit conduire une codification
ont évolué en sorte qu’une forme non conventionnelle autrefois très négativement
connotée peut aujourd’hui être considérée comme une solution plus appropriée.
Les vues sont donc aujourd’hui beaucoup plus nuancées et la convention n’est
plus nécessairement perçue comme une panacée. Peut-être même ne l’est-elle
plus assez, si l’on ose dire. A force de souligner les mérites, réels, de la soft law,
on laisse le balancier aller aux extrêmes en oubliant que la règle de droit positif
résulte de la convention et non de la déclaration. Sans doute faut-il se garder des
excès qui après le « tout conventionnel » tendraient vers le « tout déclaratoire ».
L’important est de mettre ici de la mesure et de profiter de ce que les voies de
la codification étant diversifiées elles sont susceptibles d’être finalement mieux
adaptées aux différents sujets traités par la Commission. La convention conserve
ses avantages de règle de droit positif mais aussi ses inconvénients et ses insuffi-
sances consécutives notamment aux aléas des ratifications et des réserves qui,
l’accompagnant, peuvent l’affaiblir. La situation de la déclaration est inverse
: puisqu’elles relèvent du « métajuridique » ou du « parajuridique » selon les
expressions de Michel Virally, elles en ont la plasticité et dispensent de se soucier
de la ratification comme des réserves. Mais en définitive on peut parfaitement
imaginer d’utiliser la déclaration ou la convention, peut-être même l’une puis
l’autre, une déclaration pouvant précéder la convention en préparant et traçant
le chemin qui y conduit. C’est là un effet possible de la déclaration qui fut en
Le cours général de Pierre-Marie Dupuy à l’Académie de droit international (RCADI 297

35
(2002)) déjà cité est une illustration de ce « positivisme raisonnable ».
26
son temps utilisé aux origines du droit de l’espace par exemple et qui peut fort
bien être une technique plus répandue à partir de visions novatrices du droit
international. Certes, la tendance naturelle est d’en apprécier la nature, l’autorité
et la juridicité à la mesure de celle du droit interne et de rechercher les règles de
droit positif et les procédures de contrainte qui ressemblent au plus près à la loi.
Pourtant, le droit international ne pourrait-il avoir une autre nature et la société
internationale ne pourrait-elle être appréciée autrement qu’en comparaison avec
la société interne?36 Le rapporteur spécial sur les réserves aux traités, M. Alain
Pellet a déclaré lorsque, au début des travaux de la Commission sur ce sujet, la
discussion a porté sur la forme à donner à l’instrument « qu’il n’envisageait pas
le droit international comme une succession d’obligations et d’interdictions ; des
directives, des orientations, pour autant qu’elles fussent bien conçues, pouvaient
avoir un effet sur la conduite des États. Si par conséquent les membres de la
Commission se mettaient d’accord, dans le cadre d’un consensus ou d’un quasi
consensus, sur des précisions importantes, celles-ci pourraient avoir une grande
autorité auprès des États ».37
C’est une logique comparable qui a été suivie dans le cas des travaux de la
Commission du droit international sur la responsabilité des Etats où, ainsi que
l’a rappelé le rapporteur spécial le professeur James Crawford : « la Commission
du droit international recommanda une approche en deux temps. Dans un pre-
mier temps, l’Assemblée générale prendrait note des articles et les ferait figurer
en annexe à une résolution, en employant les termes adéquats pour mettre
l’accent sur l’importance du sujet. Le deuxième temps pourrait impliquer le
réexamen de la question lors d’une autre session de l’Assemblée générale, après
une période convenable de réflexion, en exigeant la conversion des articles en
une convention au cas où cela serait considéré comme approprié et faisable »38.
Au-delà du compromis circonstanciel que constitue ce choix, cette procédure
est incontestablement de nature à favoriser la « maturité » du sujet. Alors que
l’échec d’une convention vers laquelle on se serait trop vite orienté risque d’en-
traîner la « décodification » de la matière, une méthode plus souple prépare les
esprits, c’est-à-dire permet la maturité du sujet et, finalement, son insertion
dans le droit positif par le biais d’une convention dont le principe n’aura pas
présenté de difficultés et dont on peut espérer qu’à l’issue de son adoption, elle
sera largement ratifiée.
36
On rappellera ici les pages magistrales de Prosper Weil sur « le fétichisme judiciaire et la
« primitivité » du droit international », in « Le droit international en quête de son identité.
Cours général de droit international » (déjà cité), p. 54 et seq.
37
Rapport de la CDI sur les travaux de sa 49° session, Ch. V, les réserves aux traités, par.
123.
38
J. Crawford, op. cit., p. 70.
27
On notera par ailleurs que la Cour internationale de Justice comme d’autres

instances se réfère parfois à des conventions non ratifiées ou à de simples projets
de la Commission du droit international comme expression de tendances lourdes
et d’orientations vers un droit en situation de « préformation » ou, parfois d’ex-
pression coutumière. Ce n’est en effet pas par un autre procédé que celui de la
« maturation » des idées que se réalise, selon le modus operandi le plus classique,
la formation de la coutume. A cet égard, la soft law est un maillon de la chaine
de création du droit positif … (V. infra)
Le droit international, dans ce domaine comme dans d’autres, manifeste ici
ses faiblesses et ses imperfections par rapport au droit interne. Une codification
interne, qui s’inscrit dans la loi revêt un caractère juridiquement contraignant à
l’égard de tous. La règle nouvelle s’impose en se substituant à la règle ancienne
qui disparaît. Il y a donc un effet intégral et « absolu » de la codification du
droit interne qui, à cet égard, se distingue radicalement de la codification en
droit international dont l’effet est au contraire seulement « relatif  » et limité,
selon un effet inhérent aux caractères mêmes de l’ordre international, ordre
imparfait. En particulier, dans la mesure où le caractère obligatoire de la norme
a une base conventionnelle et non pas unilatérale comme dans l’ordre interne,
en raison de l’effet relatif des traités, la codification comporte le risque que la
règle codifiée conventionnellement ne s’applique plus qu’au cercle retreint des
Etats ayant ratifié le traité. La règle qui était d’effet universel lorsqu’elle était
coutumière, deviendrait d’effet relatif par suite de sa codification. Un tel effet
de la codification serait évidemment inacceptable puisqu’il irait directement à
l’encontre du but recherché par celle-ci. La seule solution possible est donc que
la règle coutumière codifiée ne disparaisse pas en tant que règle coutumière et
puisse continuer à s’appliquer universellement39. A l’effet de substitution d’une
règle à une autre que connait le droit interne s’oppose en droit international un
effet de coexistence entre les deux règles.
Cependant, pour imparfaite qu’elle soit (mais, après tout, en cohérence avec
cet ordre lui-même imparfait auquel elle est donc adaptée) la codification reste
un moyen privilégié d’élaboration du droit. Les Etats nouveaux ne s’y sont pas
trompés qui ont pu y trouver avantage, pour tenter d’infléchir dans un sens plus
conforme à leurs vues, des règles élaborées par d’autres alors qu’ils n’étaient pas
encore membres de la communauté internationale. Cette élaboration se réalise
selon trois niveaux possibles. A minima, elle ne fait que « reconnaître » les cou-
tumes existantes et les écrire. Au passage, elle peut aller plus loin et pratiquer
du développement progressif. Au maximum de son effet, elle peut conduire à
V. infra.
39
28
l’élaboration de novo du droit international. Théoriquement bien distinctes, ces

différentes phases ne sont pas toujours clairement séparées dans la pratique40.
Dans une première phase, la codification entendue au sens strict consiste, et
consiste seulement, en une « écriture » du droit international se faisant à partir
d’un donné, d’un existant car il est bien évident qu’aucune codification ne peut
intervenir sans que se rencontre un minimum d’assise sur laquelle elle repose :
on ne peut codifier à partir de rien. Toute l’action de codification consiste donc
bien à prendre ce qui existe et à l’organiser, pour aboutir à une règle jugée
meilleure par son contenu comme par la stabilité et la certitude qu’elle engendre.
La base est avant tout coutumière : la codification est généralement comprise
comme étant la codification de la coutume. Mais celle-ci n’est certainement
pas le seul support de la codification : rien n’exclut que les principes généraux
de droit puissent tout autant faire l’objet d’une codification, de même que la
jurisprudence. Ainsi, les règles relatives à la capacité juridique des organisa-
tions internationales, ou celles qui concernent le régime juridique des réserves
aux traités sont-elles directement issues (via les travaux de la Commission du
droit international) des avis de la Cour internationale de justice de 1949 et
1951. Enfin, le codificateur peut parfaitement s’appuyer sur des conventions
préexistantes qui, par l’incorporation dont elles sont l’objet dans le nouveau
texte, sont l’un des ingrédients de la règle codifiée. Il n’est pour autant pas aisé
de faire le partage entre l’origine coutumière ou conventionnelle de la nouvelle
règle codifiée. Ainsi, de la convention de Montego Bay du 10 décembre 1982,
n’est-il pas toujours facile d’apprécier si elle codifie des coutumes, si elle codifie
aussi des règles déjà écrites des conventions de Genève de 1958, ou si, enfin, elle
procède au développement progressif du droit international. Pour autant, les
conventions de Genève de 1958 ne sont pas abrogées et continuent d’ailleurs
de lier certains Etats (les Etats Unis notamment).
La deuxième phase est celle du développement progressif qui va plus loin que
la simple codification. La distinction entre la codification et le développement
progressif est une question classique. Intellectuellement concevable et posée dans
certaines règles telles que le statut de la Commission du droit international elle
ne résiste cependant ni à un examen plus approfondi ni, surtout, aux réalités
et aux exigences de la pratique. En effet, ainsi qu’il a été dit plus haut, toute
codification consiste tout à la fois et indistinctement à prendre en compte, d’une
part l’existence d’un droit (coutumier ou conventionnel) dont la codification est
réalisée par l’opération purement matérielle de son inscription sans changement
dans un texte et, d’autre part, à partir d’un simple embryon coutumier existant, le
compléter, le préciser, l’améliorer, ainsi que le terme même de « développement »
dans l’expression « développement progressif  » le signifie. Tel est l’esprit reflété
40
Les développements qui suivent sur les « trois phases » sont tirés de RCADI 303 (2003),
déjà cité, pp. 37-43.
29
par certaines dispositions inscrites à l’article 15 du statut de la Commission du

droit international selon lesquelles le développement progressif vise les hypo-
thèses dans lesquelles « le droit n’est pas encore suffisamment développé dans la
pratique des Etats », faisant implicitement référence à un embryon encore peu
formé et que la codification lato sensu amplifiera.
Au total, cette distinction entre codification et développement progressif
n’a guère de sens, sinon pour observer que dans la codification stricto sensu la
coutume serait pleine et identifiée et il s’agirait seulement de la transcrire telle
quelle, alors que dans le développement progressif la coutume serait plus chétive
ou moins certaine et il s’agirait d’y ajouter, ce qui serait susceptible d’entraîner des
différences du point de vue de la méthode et de la pratique. Auquel cas la distinc-
tion mériterait d’être posée. Ainsi, la démarche conservatrice se doublerait-elle
d’une démarche progressiste. En effet, le développement progressif permettrait
une transformation et un développement des coutumes existantes en vue de
les adapter à des conditions politiques, économiques ou sociales nouvelles. Ces
observations demeurent cependant parfaitement théoriques et de peu d’intérêt
dans la mesure où elles ne sont nullement opératoires, ni ne correspondent à
aucune réalité concrète. La Commission du droit international elle-même en a fait
la constatation et a très rapidement considéré qu’elle devait renoncer à distinguer
entre la codification et le développement progressif en dépit des dispositions
formelles de son statut à cet égard. En réalité, ces aspects ne sont pas très neufs
et s’il est vrai que l’expression précise de « développement progressif  » semble
ne faire son apparition qu’avec l’article 13, paragraphe 1 (a) de la Charte (qui
d’ailleurs énonce le développement progressif avant la codification) il convient
de rappeler que la SDN employait l’expression de « codification progressive ». Les
membres du Comité d’experts pour la codification progressive du droit international
lors de leur première session à Genève du 1er au 8 avril 1925 ont souligné que
cette expression signifiait que leur rôle ne se bornait pas à enregistrer les résultats
déjà obtenus en droit international coutumier mais qu’il leur appartenait de
contribuer du mieux possible au développement du droit international.41
Il est clair que, dans toute opération de codification se trouve un élément
de développement progressif au delà de la coutume existante, (ce qui est assez
évident), et dans toute opération de développement progressif un élément de
codification à partir de l’embryon de coutume, (ce qui l’est peut être moins). Les
deux notions s’enchevêtrent à partir de cet élément commun qu’est la coutume
existante.
Sans doute est-ce la raison pour laquelle la codification a jusqu’à présent
essentiellement porté sur le droit international dit « classique », c’est à dire
Minutes of the first session, 1 April 1925, SH. Rosenne (ed.) League of Nations, Committee
41
of Experts for the Progressive Codification of International Law, vol. I (Oceana Pub., 1972)
3 et seq.
30
sur des pans de droit qui existent déjà sous les formes que l’on a dites et pour
lesquels une systématisation ordonnée apparaît nécessaire. En revanche, la
codification est plus difficile à réaliser s’agissant de chapitres nouveaux pour
lesquels les mêmes « pré-requis » n’existent pas – ou pas encore -. Tel est le cas du
droit international économique ou du droit international de l’environnement,
par exemple, disciplines neuves dont on constate que la codification est difficile
à opérer. Elle échappe d’ailleurs au « codificateur de droit commun » qu’est la
Commission du droit international et l’élaboration (et non la codification) en est
confiée à des représentants d’Etats, munis d’instructions de leurs gouvernements,
qui établissent un droit nouveau qui ne puise pas ses racines dans des éléments
préexistants, notamment coutumiers. Ultérieurement, ce droit ainsi élaboré
pourra éventuellement faire à son tour l’objet d’une codification. Un tel travail
d’élaboration peut d’ailleurs passer par des formes intermédiaires constituées par
des éléments de soft law : ici une déclaration, là un code de conduite, ailleurs une
recommandation, de nature à permettre l’émergence d’une opinio juris à partir
de laquelle une consolidation de la règle peut se réaliser et, ainsi, ultérieurement
le cas échéant, une véritable codification de coutumes, désormais existantes,
peut intervenir.
Des voies nombreuses et variées sont donc ouvertes à la codification et rien
ne permet donc d’affirmer, comme il est fait parfois, que la Commission du droit
international a connu un « âge d’or » aujourd’hui révolu. On observera que ces
éléments de soft law, en tant qu’éventuelles bases d’une coutume, présentent
l’intérêt d’être des documents écrits, présentant donc, comme tels, des éléments
de certitude susceptibles d’asseoir les coutumes sur des fondements plus aisément
identifiés et de nature à raccourcir le « processus social »42 de formation de la
coutume. Mais à l’inverse, règne une grande incertitude quant à savoir a partir de
quel moment il pourra être considéré qu’un instrument de soft law, resté comme
tel à un certain stade d’une procédure d’élaboration normative (par exemple
dans le cadre d’une conférence internationale), aura généré une coutume43 et
donc marqué le point d’ancrage d’un processus de codification.
Peut-on envisager enfin une troisième phase mettant en rapport la codification
et l’élaboration du droit international ? Si toute codification ou développement
progressif participe de l’élaboration du droit international, toute élaboration
du droit international ne constitue évidemment pas de la codification ou du
développement progressif. Or, la distinction entre codification et élaboration du
droit international est rarement faite. C’est ainsi que lors d’un colloque de la
Société française pour le droit international et consacré à la Codification du droit
42
P.M. Dupuy, op. cit., p. 158.
43
Ibid., p. 199.
31
international44, il a été parlé indifféremment de l’un et de l’autre. Sans doute

peut-on retenir ici l’image d’un curseur assurant le passage de la codification à
la législation en partant de la lex lata (quelle qu’en soit la forme) qui peut faire
l’objet d’une codification ou d’un développement progressif jusqu’à l’élaboration
d’un droit totalement nouveau, qui n’est plus ni codification ni développement
progressif. Au sein de l’opération d’élaboration du droit international, il convient
donc de bien distinguer la pure et simple confection d’un droit au fur et à mesure
que les besoins se font sentir dans tel ou tel domaine nouveau, de la codification
qui est, elle aussi, une forme d’élaboration du droit (ou plutôt de « réélabora-
tion » car elle repose sur un minimum d’acquis) mais conduite selon une vue
méthodique. La codification du droit ne se sépare pas d’une réflexion sur le droit
lui-même, le système auquel il appartient et le tissu social dans lequel il déploie
ses effets. La codification poursuit un but d’aménagement d’ensemble : il s’agit
de consolider un droit existant, tout en l’adaptant aux nécessités nouvelles de
manière à bâtir un ensemble cohérent, harmonieux, donnant une vue de toute
la matière sous ses différents angles mais cela, toujours à partir d’un donné
minimum. En revanche ce donné n’existe pas dès lors qu’il s’agit d’une pure et
simple élaboration du droit. On doit cependant relever ici la confusion introduite
par un passage de l’article 15 du statut de la Commission du droit international
qui laisse perplexe en ce qu’il voit dans « les cas où il s’agit de rédiger des conven-
tions sur des sujets qui ne sont pas encore réglés par le droit international » une
hypothèse de développement progressif alors qu’il s’agit manifestement d’une
hypothèse d’extension des compétences de la Commission du droit international
à la préparation de l’élaboration d’un droit de novo par une conférence interna-
tionale. Ainsi, le curseur s’est il déplacé jusqu’à l’extrême, au point, finalement,
de sortir du champ d’application de la codification.
Les exemples du droit de la mer et du droit de l’espace extra atmosphérique
illustrent bien ce qui vient d’être dit. Le droit de la mer fait l’objet d’une codifica-
tion parce que la convention de Montego Bay du 10 décembre 1982 – et avant
elle celles de Genève du 29 avril 1958 d’une autre manière – vise à traiter de
l’ensemble du droit de la mer tant du point de vue des aspects de souveraineté
et de fixation des limites que des modalités d’exercice des droits, des aspects
d’utilisation économique ou des considérations relatives à la protection du
milieu marin. Le droit de la mer ainsi élaboré est bien un code en ce qu’il fait
masse de règles coutumières ou de principes anciens et établis qui sont simple-
ment réaffirmés pour parvenir finalement à un régime d’ensemble (tels que la
liberté de la haute mer, le passage innocent en mer territoriale ou le régime du
navire dans un port étranger) et de règles nouvelles (ainsi la zone économique
exclusive ou le régime des fonds marins mais dont on ne peut cependant oublier
44
SFDI Colloque d’Aix-en-Provence, La codification du droit international (Pedone, Paris, 2001)
344.
32
qu’ils puisent leur origine et leur inspiration dans ceux de la mer territoriale
ou du plateau continental et dans la conférence de 1960, ordinairement tenue
pour un échec, mais qui avait pourtant dégagé le concept de zone de pêche).
Ce régime d’ensemble du droit de la mer résulte donc d’une sorte de mixage de
notions existantes, coutumières ou conventionnelles, qui viennent s’ajouter à
des concepts nouveaux. A ce titre, on les range dans le développement progressif.
L’ensemble aboutissant à couvrir les différents aspects d’une manière qui se veut
organisée et systématique.45
On notera cependant que si les conventions de Genève qui restent somme toute
marquées par des conceptions assez classiques du droit de la mer (à l’exception
éventuellement de la double définition du régime du plateau continental, mais
encore faut-il observer que la notion de plateau continental, remontant à 1945 et
à la proclamation Truman est relativement récente lorsque se tient la conférence
de Genève, au point même que l’existence d’une coutume à cet égard a pu être
mise en doute) ont été préparées par la Commission du droit international, il
n’en a pas été de même de la Convention de Montego Bay. Il a en effet été argué
à l’époque que la Commission du droit international ne constituerait pas un
organe approprié pour la préparation de la convention. Parmi les arguments
avancés figurait (outre celui de la lenteur des travaux de la Commission du droit
international) celui de la nouveauté de certains aspects de la matière conduisant
à douter de la capacité d’innovation de la Commission du droit international,
organe habitué à des codifications « classiques », de les prendre en charge. Ce
qui était certainement un mauvais procès fait à la Commission mais confirme
la résistance à la codification de matières nouvelles et la tendance à les faire
échapper au « codificateur de droit commun ». Parce que l’on se pose la question
de savoir si leur nouveauté même ne les fait pas sortir du champ de la codification
pour les faire entrer dans celui de l’élaboration sans base juridique (en principe
coutumière) préexistante.
Le droit de l’espace extra atmosphérique inscrit dans le traité du 27 janvier
1967 ne rassemble pas des coutumes qui n’existent pas (encore) et vise plutôt,
dans la ligne du régime en quelque sorte « conservatoire » établi par la résolution
1962 (XVIII) du 13 décembre 1963 à répondre à un besoin pratique et immédiat :
préciser d’abord à l’intention des deux utilisateurs de l’espace que sont alors les
Etats Unis et l’URSS un certain nombre de règles (non appropriation, utilisation
pacifique etc.) Il n’existe pas ici de véritable entreprise de codification au sens
d’un rassemblement organisé et d’ensemble de règles existantes et révisées.
Au total, il convient de souligner la perspective politique de la codification,
ainsi que l’avait observé Jeremy Bentham à propos de la codification du droit
interne. En droit international, le fait que la compétence en la matière soit dévolue
45
Sur l’ensemble de la question de la codification du droit de la mer, v. Tullio Treves « Codi-
fication et pratique dans le droit de la mer » RCADI 223 (1990) 9-302.
33
par la Charte des Nations Unies à l’Assemblée générale est significatif d’une
conception qui demeure largement attachée à l’idée de l’époque de la SDN où le
droit est conçu comme un instrument de paix et où le développement organisé
de celui-ci selon un schéma d’ensemble est perçu comme de nature à servir les
objectifs politiques de l’Organisation. On trouve donc à la base de l’entreprise
de codification une volonté, un animus, sous la forme d’une action de mise en
place d’un dispositif au service d’une fin. Cette démarche volontaire consistant à
mettre en œuvre un plan d’ensemble (tel que, par exemple, le programme à long
terme des travaux de la Commission du droit international, celui qui avait été
dressé comme un corpus systématique lors de la mise en place de la Commission
ou comme ceux qui sont régulièrement élaborés pour les années à venir) répond
à une conception d’ordre idéologique d’un droit international universel dont
tous les éléments font l’objet d’une réflexion et d’une réélaboration systématique.
Cela caractérise la codification et lui donne son caractère particulier au sein des
divers procédés d’élaboration du droit. Ainsi peut-on affirmer que codifier le droit
international, c’est vouloir un système et c’est appliquer une méthode.
IV. Soft Law

Habituellement, la soft law est opposée à la hard law, simplement pour observer
l’appartenance de cette dernière au droit positif tandis que la première n’est qu’un
droit du possible, sans valeur juridique contraignante exprimant simplement un
point de vue politique ou moral. Cette vision, qui est celle du positivisme, s’appuie
sur un droit volontariste et classique qui s’est développé au cours d’une période
qui s’étend approximativement de 1648 à 1945. C’est à dire à des époques où
les organisations internationales n’existent pas encore ou ne connaissent pas le
développement qui est le leur aujourd’hui. Ce sont donc des périodes où l’Etat n’est
concurrencé par aucun autre sujet du droit international et où par conséquent,
la seule règle de droit qui lui soit applicable est celle, de nature coutumière ou
conventionnelle à laquelle il a volontairement adhéré parce qu’il l’a lui même
élaborée. Or, depuis plus d’un demi-siècle, les règles objectives du droit interna-
tional se sont développées, des principes nouveaux sont apparus et une certaine
hiérarchie normative conduisant à faire une place à des normes à la juridicité plus
incertaine s’est établie. Par ailleurs, les organisations internationales ont connu
une expansion considérable. Elles ont œuvré, souvent avec grande pertinence,
dans leurs différents domaines de spécialité et ont adopté un certain nombre
d’instruments, fruit de leur travail et de la réflexion conduite, avec les Etats, ou
par les Etats sous leurs auspices, dont l’intérêt et l’importance ne se démentent
pas. La norme de droit commun des organisations internationales, compte tenu
de la structure horizontale de la société internationale et des rapports entre-
tenus avec les Etats (en dehors des constructions supranationales qui restent
exceptionnelles), est la recommandation de caractère facultatif, toujours selon
34
l’orthodoxie juridique. Et il est vrai que, à strictement parler, un Etat n’est pas
juridiquement contraint par de tels textes, quand bien même aurait-il contribué
par son vote à les faire adopter, puisqu’il pourra toujours faire valoir que, s’il
a voté en faveur du texte, c’est parce qu’il ne s’agissait pas d’adopter un texte
juridiquement contraignant mais une simple recommandation. L’exemple-type
en est la recommandation de l’Assemblée générale des Nations Unies.
La question est cependant moins simple que cela et sans doute faut-il se garder
de visions trop tranchées et manichéennes. Il a déjà près d’une quarantaine
d’années que le professeur Michel VIRALLY montrait à propos de la résolution
2626 (XXV) de l’Assemblée générale des Nations Unies du 24 octobre 1970
« Stratégie internationale pour le développement pour la deuxième décennie
des Nations Unies pour le développement »46 que, sans relever à proprement
parler de l’engagement juridique, les obligations morales et politiques qu’elle
contenait et qu’en conséquence les gouvernements ne pouvaient pas facilement
négliger, relevaient d’une nature « pré-juridique » ou « para-juridique ». On sait
que, dans la même ligne, dans sa sentence du 19 janvier 1977 rendue dans
l’affaire opposant le gouvernement libyen et les sociétés California Asiatic Oil
Company et Texaco Overseas Petroleum Company, l’arbitre a déclaré : « le refus
de reconnaître toute valeur juridique aux résolutions des Nations Unies doit être
cependant nuancé en fonction des différents textes émis … Dans l’évaluation
de la valeur juridique s’attachant aux résolutions précitées, le tribunal tiendra
compte des critères habituellement retenus, à savoir l’examen des conditions de
vote et l’analyse des dispositions énoncées » (paragraphe 83)47.
Ces analyses sont aujourd’hui assez largement admises et plutôt qu’une rupture
entre ce qui est obligatoire et ce qui ne l’est pas, on peut plutôt voir un curseur ou
une règle graduée allant du purement facultatif au strictement obligatoire mais
comportant des échelles intermédiaires. Au cas par cas il importe donc d’examiner
les conditions de vote, les termes employés, la qualité des participants.
La présentation classique opposant hard law à soft law est naturellement
justifiée au nom du désir de définir à coup sûr le terrain sur lequel on se trouve
en termes de droits et d’obligations et de ne pas confondre ce qui est avec ce qui
est espéré en introduisant des confusions entre la lex lata et la lex ferenda dont
les Etats se gardent d’ailleurs fort bien. Pourtant, comme on l’a dit plus haut, la
soft law, par sa capacité mobilisatrice en vue de la maturation des conceptions
et des règles qui les exprimeront le temps venu, participe clairement à la forma-
tion de la règle coutumière ou prépare l’avènement de la règle conventionnelle
devenue acceptable par les Etats.
Sans néanmoins perdre de vue cette distinction entre hard law et soft law
dont on ne doit pas s’affranchir, au risque par exemple de n’être pas suivi par
46
Annuaire français de droit international (1970) 9 et seq.
47
Journal du droit international (Clunet) (1977) 376.
35
un juge, il ne faut pas pour autant écarter une démarche différente consistant
à souligner au contraire les complémentarités entre ces normes dans la mesure
où le traitement de certaines matières a pu sembler être mieux assuré par un
recours conjoint à ces deux types de sources qui s’appuient l’une sur l’autre pour
permettre une approche globale d’un sujet. La manière dont l’UNESCO traite
de la question du droit à l’éducation est un très bon exemple de cette démarche
croisée, consistant à élaborer des textes de natures juridiques différentes dont
l’addition a rendu possible l’élaboration d’un système plus complet que ne l’aurait
permis le recours à une seule catégorie de sources. En effet, inscrire ce droit
exclusivement dans des normes de nature conventionnelle lui permet d’être doté
d’une juridicité certaine et de revêtir un caractère contraignant. Y adjoindre des
normes de soft law, permet d’étendre le champ des participants à un cercle plus
large que celui des seuls Etats ou organisations intergouvernementales, seuls
habilités à élaborer du droit dur, pour inclure aussi les acteurs de la société civile,
ONG, associations et autres auteurs de droit mou, dont l’importance est réelle
dans ce secteur : il suffit d’observer le rôle joué par des associations de parents
d’élèves de l’enseignement primaire ou secondaire pour s’en convaincre. Ce que
le droit perd en force juridique, il le gagne en nombre d’entités impliquées dans
son élaboration et en ouverture vers des champs plus larges.
Le droit à l’éducation tel que l’UNESCO le comprend, est inscrit dans des
conventions, des déclarations, de cadres d’action, des chartes etc. qui, avec une
juridicité à géométrie variable, visent à assurer la promotion et le développement
d’un droit à l’éducation accessible à tous sans discrimination. Le phénomène de
convergence réalisée par ces textes ne permet pas de considérer que seuls ceux
dont la valeur juridique obligatoire ne fait pas de doute doivent être respectés
tandis que les autres pourraient être aisément négligés. La part de droit positif
incluse dans les conventions ayant réuni un nombre suffisant de ratifications
se trouve dans des conventions telles que la Convention concernant la lutte contre
la discrimination dans le domaine de l’enseignement du 14 décembre 1960. Cette
part de droit positif est importante mais pas considérable si on prend en compte
l’immensité des questions éducatives. Pour tenter de les couvrir plus largement,
il va donc être fait recours à des textes d’une nature juridique plus incertaine. On
rencontre dans cette catégorie diverses recommandations, déclarations, chartes
ou encore des « cadres d’action » adoptés par des conférences de représentants
d’Etats, auxquels se sont parfois ajoutés des membres de la « société civiles » tels
que des délégués d’O.N.G. tenues dans le cadre de l’UNESCO ou sous ses auspices.
On peut citer, parmi les textes principaux, la Déclaration mondiale sur l’éducation
pour tous et le Cadre d’action pour répondre aux besoins éducatifs fondamentaux
adoptés par la Conférence mondiale sur l’éducation pour tous réunie à Jomtien
(Thaïlande) du 5 au 9 mars 1990. Le Cadre d’action de Dakar l’éducation pour tous :
tenir nos engagements collectifs adopté par le Forum mondial sur l’éducation réuni
à Dakar (Sénégal) du 26 au 28 avril 2000. La Recommandation révisée concernant
36
l’enseignement technique et professionnel, adoptée par la Conférence générale de

l’UNESCO à sa dix-huitième session à Paris le 19 novembre 1974.
D’autres textes juridiquement non contraignants traitent de questions très
spécifiques. La déclaration de Hambourg adoptée à l’issue de la 5ème conférence
internationale des adultes tenue du 14 au 18 juillet 1997, la Charte internationale
de l’éducation physique et du sport, Paris, 21 novembre 1978 révisée en 1991, la
Déclaration adoptée à Genève en octobre 1994 à l’issue de la quarante quatrième
session de la Conférence internationale de l’éducation, concernant l’éducation
pour la paix, les droits de l’homme et la démocratie, complétée par un Cadre d’ac-
tion intégré, la Recommandation concernant la condition du personnel enseignant
de l’enseignement supérieur du 11 novembre 1997, la Déclaration mondiale sur
l’enseignement supérieur pour le XXIème siècle et le Cadre d’action prioritaire pour
le changement et le développement de l’enseignement supérieur adoptés le 9 octobre
1998 par la Conférence mondiale sur l’enseignement supérieur
Il est notable à cet égard que les formules employées dans le Cadre d’action de
Dakar (texte non conventionnel et donc au sens strict non contraignant) sont
des formules fortes (par exemple, au paragraphe 10 : « nous l’affirmons aucun
pays … ne verra ses efforts contrariés par le manque de ressources », au para-
graphe 12 : « nous renforcerons les mécanismes régionaux et internationaux
… ») par lesquelles, en marquant leur résolution, les participants déclarent à
plusieurs reprises « s’engager » (ainsi, au paragraphe 7 : « nous nous engageons
collectivement à assurer la réalisation des objectifs suivants » au paragraphe 8 :
« nous nous engageons à … », mieux même, au paragraphe 11, les participants
vont jusqu’à engager la communauté internationale elle-même en déclarant :
« la communauté internationale honorera cet engagement collectif  ».) Dans
la Déclaration de Jomtien, le présent est plus souvent employé que le condition-
nel et un certain nombre d’affirmations fortes sont inscrites dans le texte qui
« réaffirme » le « droit à l’éducation ». Généralement de surcroît adoptées par
acclamation, ces « déclarations », « recommandations » « chartes » (au sens de
texte non juridiquement contraignant) traduisent des volontés non équivoques.
Sont-elles pour autant des engagements susceptibles d’être juridiquement
sanctionnés ? Certainement pas. Leur force politique et morale qui ne fait pas de
doute contraste en effet avec leur faiblesse juridique. Celle-ci tient en particulier,
outre les réserves qu’expriment les positions ci-dessus rappelées, au caractère
extrêmement composite des participants. Une chose est l’adoption, dans le ca-
dre d’une organisation internationale, d’une résolution par des représentants
d’Etats agissant individuellement et collectivement, autre chose est l’adoption
d’un texte par un « forum » réunissant dans une déclaration commune des
représentants de gouvernements (ministres de l’éducation par exemple) et
d’organisations internationales et en particulier de l’UNESCO dans le cadre du
principe de spécialité, mais aussi des représentants d’ONG, de groupes divers,
de membres de la société civile, bref d’un ensemble d’entités dont aucune ne
37
dispose de la personnalité juridique en droit international et qui, comme telles,

ne peuvent évidemment concourir à l’adoption de textes qui feraient ainsi peser
des obligations juridiquement sanctionnées en droit international sur des Etats
souverains. On ne peut donc trouver le droit international là où il n’est pas et
force est de constater que toutes les Déclarations, recommandations ou cadres d’ac-
tion adoptés dans le domaine du droit à l’éducation sont investies d’une grande
portée politique et morale mais sont dépourvues de toute valeur juridique en
tant que telles et prises isolément.
Pour autant on ne peut les tenir pour quantité négligeable car ce serait faire
fi de positions souvent sans équivoque prises, parmi d’autres participants, par
des représentants d’Etats qui ont donc parlé au nom de leurs gouvernements.
Ce serait surtout négliger le rôle de l’UNESCO ou réduire à de simples affir-
mations politico-morales la masse considérable de travaux accomplis jusqu’à
présent dans son domaine de spécialité premier. En sorte que le propos sur la
valeur juridique des actes doit encore être nuancé. La tendance naturelle est de
comparer la société internationale à la société interne avec ses lois, ses juges et
son droit sanctionné et de transposer ce modèle au plan international. Mais la
société internationale ne pourrait-elle être conçue autrement qu’en comparaison
avec la société interne? Et le droit international, au lieu d’être exclusivement
constitué par un ensemble d’obligations juridiquement sanctionnées, ne doit-il
pas inclure, en leur reconnaissant une certaine valeur juridique, des directives et
recommandations qui peuvent déterminer le comportement des Etats ? Surtout
lorsque ces actes sont élaborés sous les auspices ou émanent d’une organisation
internationale spécialisée ce qui constitue un véritable « label de qualité » qui
peut naturellement sans hésitation être attribué à cet ensemble de textes à la
normativité graduée issus du cadre de l’UNESCO dans de domaine qui est le sien
du droit à l’éducation.
A l’inverse, si le procédé conventionnel reste dans une large mesure la voie
royale par la certitude qu’il engendre quant à la portée des engagements qu’il
contient, il n’est cependant pas toujours sans inconvénients ni insuffisances,
consécutives notamment aux délais souvent très longs et aux aléas des ratifi-
cations et des réserves qui, l’accompagnant, peuvent l’affaiblir. (Il est vrai que
cette observation est peu pertinente s’agissant de la Convention concernant la lutte
contre la discrimination dans le domaine de l’enseignement du 14 décembre 1960
car elle est entrée en vigueur dès le 22 mai 1962, donc très rapidement – mais
seulement 3 instruments de ratification ou adhésion suffisaient – et qu’elle
interdit les réserves). Cependant, si elle a été largement ratifiée, la Convention
sur l’enseignement technique et professionnel du 10 novembre 1989 quant à elle
ne recueille que peu d’instruments de ratification ou d’adhésion. On doit alors
se poser la question de savoir s’il est préférable de disposer de textes réunissant
peu d’Etats par un lien juridique fort ou de textes votés à l’unanimité mais dont
la valeur juridique est plus incertaine. C’est très exactement en ces termes que la
38
question a été soulevée par certains Etats devant la Commission du droit inter-
national où il a été dit qu’en certaines matières (en l’occurrence la nationalité
en matière de succession d’Etats, la responsabilité ou les réserves aux traités) une
déclaration, plus souple qu’une convention et comportant un plus large éventail
de questions pourrait, si elle était adoptée par consensus, avoir plus d’autorité
qu’une convention ratifiée par un petit nombre d’Etats. Il n’y a donc pas de
réponse générale et tranchée à cette question. S’agissant du respect de certains
droits, on peut seulement observer qu’il résultera certainement davantage de
la conviction des gouvernements selon laquelle une politique donnée doit être
développée que du souci de respecter une obligation juridique dont la sanction
est en toute hypothèse parfaitement aléatoire.
En sorte que, au total, comme on l’a dit en commençant, la question se pose
moins en termes d’opposition entre les instruments contraignants et ceux qui
ne le sont pas qu’en termes de complémentarités entre eux, permettant d’utiliser
toute la panoplie disponible. Une certaine préférence peut parfois être donnée
au procédé recommandatoire de la déclaration ou résolution, au nom d’une
forme de réalisme qui a aussi conduit au développement de procédures qui furent
longtemps originales puis qui se sont généralisées, sous la forme de mécanismes
de contrôle et de suivi.
V. Controle et suivi
Les mécanismes de contrôle et de suivi se sont aujourd’hui beaucoup développés
en vue d’assurer l’application effective des obligations. Elles visent à pallier les
insuffisances d’un système international reposant sur une société de juxtaposition
dans laquelle l’Etat est l’auteur de la norme et s’autocontrôle dans l’application
de celle-ci, compte tenu de l’inexistence d’une juridiction dotée d’une compétence
générale et, à l’image de l’ordre interne, offrant une garantie contre le déni
de justice. Petit à petit, des systèmes de contrôle objectifs, confiés à des tiers et
rompant avec la situation d’identité du contrôleur et du contrôlé48. Ce développe-
ment du contrôle, parfois par le biais de la simple évaluation, a particulièrement
concerné certaines secteurs ayant fait l’objet de normes de droit international
ou a été mis en place par certaines organisations internationales. Le commerce
international, les droits de l’homme, le désarmement, le droit de l’environnement
en sont des illustrations caractéristiques et sont marquées par des mécanismes de
contrôle variés, sous la forme de l’intervention du juge avec l’OMC, de remise de
48
Sandrine Maljean Dubois (Dir.), Changements climatiques. Les enjeux du contrôle internatio-
nal (CERIC, la Documentation française, 2007) 378. V. spéc. Sandrine Maljean Dubois,
« L’enjeu du contrôle dans le droit international de l’environnement et le protocole de
Kyoto en particulier », p. 18.
39
rapports examinés par des organes internationaux comme en matière de droits

de l’homme et de droit de l’environnement. Dans ce dernier cas, prévues en 1992
dans le cadre du protocole de Montréal, les procédures de « non-respect » vont
se développer avec de nombreuses conventions subséquentes.49
Les organisations internationales ont depuis longtemps déjà mis en place des
procédures de contrôle et de suivi. Depuis plus d’un demi-siècle existe le système
des normes et pratiques recommandées de l’OACI et le système selon lequel, en
cas de non-conformité, une notification au Conseil est obligatoire aux termes
de l’article 38 de la Convention de Montréal. A l’OIT, l’application des normes
internationales du travail est régulièrement examinée par les organes de contrôle
de l’OIT que sont la Commission d’experts pour l’application des conventions
et recommandations et la Commission de l’application des normes de la Confé-
rence. L’UNESCO de son côté a développé un ensemble de mécanismes propres
à permettre une application plus effective des dispositions adoptées et à rendre
l’exécution des obligations souscrites mieux assurées. Les rapports périodiques
que les Etats sont invités à remettre ont pour effet de faire connaître à l’UNESCO,
et donc aux Etats dans leur ensemble au sein de la communauté internationale
les mesures qu’ils ont prises dans leur ordre interne en vue de mettre en œuvre
les obligations souscrites conventionnellement. Ainsi, par exemple, pour rester
dans le domaine du droit à l’éducation précédemment évoqué, il est prévu, afin
d’en renforcer l’efficacité, que les Etats parties à la Convention concernant la lutte
contre la discrimination dans le domaine de l’enseignement devront indiquer, dans
des rapports périodiques présentés à la conférence générale de l’UNESCO, les
dispositions législatives et réglementaires et les autres mesures internes qu’ils
auront adoptées pour l’application de la convention.
S’il ne s’agit pas d’obligations conventionnelles parce que les principes et les
normes en matière éducative sont formulés dans de simples recommandations,
déclarations ou cadres d’action, le rapport ne permet pas de vérifier qu’une
obligation juridique est bien remplie mais permet de désigner l’Etat qui a volon-
tairement décidé de mettre en œuvre les principes adoptés dans des textes de
valeur recommandatoire. Un tel comportement peut avoir valeur d’exemple et à
l’inverse l’abstention d’un Etat peut le mettre dans une situation politiquement
difficile. La procédure du rapport est donc constitutive d’un certain moyen de
pression. Celui-ci est d’ailleurs juridiquement organisé sous la forme d’une
obligation plus générale inscrite à l’article VIII de l’acte constitutif de l’UNESCO
qui prévoit que chaque Etat membre doit adresser à l’Organisation un rapport
sur la suite qu’il a donnée aux recommandations et conventions adoptées par
la Conférence générale. On voit donc que la production du rapport résulte bien
d’une obligation dont le contenu varie en fonction de l’acte (conventionnel ou
non) auquel elle se rapporte. Dans la mesure où le contenu du rapport rendra
Ibid., pp. 20-21.

49
40
compte précisément des législations, réglementations et pratiques adoptées et

que l’on sait que cet ensemble d’indications fera l’objet d’un examen attentif de
la part de l’UNESCO, il est clair que les Etats seront conduits à donner tout l’effet
possible aux recommandations en cause. A cela s’ajoute l’intérêt que présente
toujours une diffusion d’informations par l’utilité d’une comparaison entre des
systèmes dont il sera éventuellement possible de s’inspirer ou qui apportent
des réponses aux questions qui se posent. Enfin, cette procédure permet d’avoir
connaissance des difficultés éventuelles que les Etats peuvent rencontrer dans
la mise en œuvre des mesures. Sous ces angles d’ailleurs, il n’y a pas lieu de dis-
tinguer entre le rapport sur l’application d’une convention et celui qui porte sur
une recommandation, la vertu informative étant la même dans les deux cas.
Afin d’assurer le bon fonctionnement de cette procédure, l’UNESCO a mis
en place des organes subsidiaires chargés d’examiner les rapports des Etats
membres. Tel est le rôle du Comité sur les conventions et recommandations pour
les rapports qui lui ont été expressément confiés par le Conseil exécutif. C’est
ainsi par exemple que le comité a examiné les rapports relatifs à la Convention
concernant la lutte contre la discrimination dans le domaine de l’enseignement ou ceux
du comité conjoint OIT/UNESCO d’experts sur l’application de la Recommanda-
tion concernant la condition du personnel enseignant de l’enseignement supérieur de
1997. La Conférence générale reçoit ensuite le rapport du Comité accompagné
des commentaires du Comité exécutif et les rapports des Etats membres. En
pratique, malheureusement, les Etats sont trop peu nombreux à répondre aux
consolations organisées, ainsi que l’a déploré le Conseil exécutif.
La procédure se déroule selon plusieurs phases : la Conférence générale
décide de demander aux Etats membres de présenter des rapports (article VIII
de l’acte constitutif et article 7 de la Convention concernant la non discrimination
dans le domaine de l’enseignement ou article 7 de la Convention sur l’enseignement
technique et professionnel), les questionnaires sont préparés et expédiés aux Etats
membres avec un délai de réponse. Ces dernières sont analysées et synthétisées
par le secrétariat. Ces documents sont examinés par le Comité sur les conventions
et recommandations qui établit son propre rapport et le transmet au Conseil
exécutif. Celui-ci examine et transmet l’ensemble du dossier à la Conférence
générale en l’assortissant de ses propres commentaires. La Conférence générale
formule ses observations, recommandations et décisions dans une résolution et,
éventuellement un rapport général (article 18 du règlement relatif aux conven-
tions et recommandations). Les Nations Unies, les commissions nationales et les
autres autorités désignées par la conférence générale sont alors destinataires
du rapport de la conférence générale et, éventuellement, de celui du Comité des
conventions et recommandations, voire de ceux des Etats.
41
VI. Conclusion
L’analyse des sources du droit international constitue un bon observatoire des
évolutions de la structure de la société internationale. Le caractère aujourd’hui
incomplet de l’énumération de l’article 38 du Statut de la Cour internationale
de Justice est la conséquence de l’apparition des organisations internationales
et de la nature de sujets de droit international qui leur est reconnue. Il en résulte
qu’en tant que sujets de droit international elles peuvent tout d’abord participer
au mouvement conventionnel en étant parties à des conventions conclues entre
elles ou avec des Etats auprès desquels elles se trouvent placées sur un pied d’éga-
lité, la deuxième convention de Vienne du 21 mars 1986 venant précisément
encadrer cette faculté. Cette qualité permet ensuite l’élaboration par ces mêmes
organisations internationales d’un droit dérivé issu de leurs organes propres
pouvant dans certains cas donner naissance à un ordre juridique d’ensemble
tel que celui des Nations Unies, aujourd’hui reconnu comme « droit des Nations
Unies » posant la question des rapports établis avec le droit international et des
interactions réciproques entretenues entre ces deux ordre juridiques.50
Certes, les normes de droit mou ne trouveraient pas leur place au sein
de l’article 38. Cependant, la place prise par la soft law, ou, de manière plus
générale, les nombreuses voies empruntées par les acteurs non sujets de droit
international pour devenir parties prenantes à l’élaboration ou à application du
droit international sont un autre révélateur des bouleversements de la société
internationale. On a vu par quels moyens – notamment de pression – des ONG
pouvaient peser sur la négociation conduite par les Etats et donc influer en
définitive sur le contenu des normes. On a évoqué la place prise par les normes
de soft law dans l’ordre juridique international, place souvent complémentaire
des règles de droit positif, mais place aussi dans la perspective d’un droit positif
en devenir dont elles préparent l’avènement par leur contribution à la matu-
ration de sujets susceptibles de faire un jour l’objet de normes coutumières ou
conventionnelles. Il convient enfin de rappeler le rôle que peuvent jouer ces
mêmes ONG dans le respect des engagements internationaux, souvent en lieu
et place des Etats eux-mêmes. Ainsi, en matière d’environnement lorsqu’elles
dénoncent un Etat ne respectant pas une convention internationale dont elles
assurent ainsi l’intégrité à la place d’un autre Etat partie qui s’abstient de le faire
pour éviter des actions en retour de l’Etat en cause.
Pour terminer, une réflexion sur les sources du droit en relation avec les évo-
lutions de la société internationale devrait certainement prendre en compte un
mouvement qui s’est amorcé il y a déjà longtemps avec la lex mercatoria mais qui
s’est considérablement développé dans les années récentes, en particulier dans
v. A.T. Norodom, L’influence du droit des Nations Unies sur le developpement du droit interna-
50
tional (Thèse, Paris 1, 2009, miméogr. 677p. + annexes).
42
le champ du droit international économique et du commerce. Le développement

du libéralisme, peut être remis en cause ou au moins reformulé et réaménagé
pour répondre à la crise financière et économique, explique une certaine confu-
sion entre les normes applicables par les acteurs privés et par les Etats dans ces
domaines spécifiques où l’initiative des acteurs privés les plus puissants exerce
un rôle déterminant, soit qu’ils se confondent avec les Etats forts dont ils sont
des partenaires plus ou moins égaux, soit qu’ils écrasent les faibles, les tentatives
d’organisation des marchés au plan international n’ayant finalement pas donné
les résultats escomptés. Il est vrai de dire que, tout en étant attachée aux règles
fondamentales du libéralisme, l’OMC, notamment par le biais de son mécanisme
de contrôle, atténue ces effets.
La matière des sources du droit international est ainsi fort riche d’évolutions
et d’enseignements quant à la nature de la société internationale et à ses règles
majeures de fonctionnement.
43
The Paradigms of Universalism and
Particularism in the Age of Globalisation:
Western Perspectives on the Premises and
Finality of International Law
by
Armin von Bogdandy and

Sergio Dellavalle
Contents
Biographical Note 49
Representative Publications 50
I. Objectives of the Course and its Place in Legal Scholarship 53

1. Three Main Objectives 53
2. International Legal Scholarship: Tasks, Methods, and the Role of
Theory 56
a. Practical Legal Scholarship and Conceptual Thought 56
b. Theoretical Legal Scholarship 60
II. Universalism, Particularism and the Legitimacy of Public
International Law 62
1. Defining the Problem 63
a. The Growing “Publicness” of Public International Law and its
Non-Parliamentary Nature 63
b. Globalisation 66
c. Legitimacy, in Particular Democratic Legitimacy 69
2. Effects of Globalisation on States and Their Resources of Legitimacy 71
a. Globalisation as a Threat to National Self-Determination 71
b. Globalisation as an Instrument of Democratisation 74
3. Strategies to Respond to the Challenge 76
a. The Particularist Response: State Sovereignty as the Leading
Principle 77
b. The Universalist Responses: Cosmopolitan Law versus State-
Centred Integration 80
4. New Approaches 86
III. Particularism: The Impossibility of Global Order 88
1. The Core of the Paradigm 88
2. Three Variants of the Paradigm 88
3. The American Neocons 92
a. The Critique of International Order through Public International
Law 92
b. Hegemonic Order 96
IV. Universalism: The Possibility of Global Order 99

1. Two Strands 100
a. The Metaphysical Tradition: The Legacy of Christianity and the
Theory of the Natural and Universal Sociability of Humans 100
b. Contract Theory 104
2. Constitutionalism as the Most Visible Contemporary Offspring 106
a. International Law as a Common Law of Humankind 108
b. A Revolutionised Understanding of the Institutional Order 110
c. The Substratum and Legitimacy of International Law 116
3. A More Cosmopolitan Vision of Global Order 120
V. Summing up, Situating this Contribution, Looking Forward 123
48
The Paradigms of Universalism and Particularism in the Age of Globalisation
Biographical Note
Professor Armin von Bogdandy is Director at the Max Planck Institute for Com-
parative Public Law and International Law, Heidelberg and Professor of Public
Law at the Goethe-Universität, Frankfurt/Main. He is President of the OECD
Nuclear Energy Tribunal. He was member of the German Science Council (Wis-
senschaftsrat). In June 2008 Prof. Bogdandy received the Berlin-Brandenburgian
Academy of Sciences Prize for outstanding scientific achievements in the field
of foundations of law and economics, sponsored by the Commerzbank Founda-
tion. Member of the Scientific Committee of the European Union Agency for
Fundamental Rights (2008-2013). He was invited to be the Inaugural Fellow at
the Straus Institute for Advanced Study of Law and Justice, New York University,
Academic Year 2009/2010. Global Law Professor at New York University School
of Law in 2005 and 2009.
Sergio Dellavalle is Senior Research Fellow at the Max Planck Institute for
Comparative Public Law and International Law in Heidelberg and Co-director,
at the same Institute, of the Research Project “Paradigms of Order”. He has been
Marie-Curie-Fellow of the European Commission (2005–2007). He is Professor of
State Theory at the Faculty of Law of the University of Turin as well as Professor
of EU Law at the Faculty of Political Sciences of the University of Alessandria
(Italy). Among the most recent publications: Between Citizens and Peoples: Reflec-
tions on the New European Constitutionalism, in: Russell A. Miller, Peer Zumbansen
(eds.), “Annual of German & European Law”, Vol. II/III, 2004/2005, 171–215;
Universalism Renewed. Habermas’ Theory of International Order in Light of Competing
Paradigms, in: “German Law Journal”, Vol. 10 (2009)/1, 5–29 (together with
Armin von Bogdandy); The Necessity of International Law Against the A-normativity
of Neo-Conservative Thought, in: Russell Miller, Rebecca Bratspies (eds.), Progress
in International Law, Martinus Nijhoff, Leiden/Boston 2008, 95–118.
49
Representative Publications
I. Legal Philosophy and Theory

“The European constitution and European identity: Text and subtext of the Treaty
establishing a Constitution”, 3:2&3 Europe in International Journal of Constitutional
Law (2005) 295-315.
“The Prospect of a European Republic: What European citizens are voting on”, 42
Common Market Law Review (2005) 913-941.
“Demokratisch, demokratischer, am demokratischsten? Zur Steigerungsfähigkeit eines
Verfassungsprinzips am Beispiel einer Neugestaltung der Verordnungsgebung”, in
Chr. Gramm, U. Kindhäuser u.a. J. Bohnert (eds.), Verfassung, Philosophie, Kirche;
Festschrift für Alexander Hollerbach zum 70. Geburtstag (2001) 363-384.
“Hegel und der Nationalstaat”, 30 Der Staat (1991) 513-535.
Hegels Theorie des Gesetzes (Freiburg-München, Alber Verlag, 1989).
II. European Union Law

“Die Informationsbeziehungen im europäischen Verwaltungsverbund”, in E.
Schmidt-Aßmann, A. Voßkuhle, W. Hoffmann-Riem, (eds.), Grundlagen des
Verwaltungsrechts, Band II, Informationsordnung, Verwaltungsverfahren, Hand-
lungsformen (2008) 347-403.
“Principles of European Constitutional Law. Modern Studies in European Law”,
(together with Jürgen Bast, ed.) (Oxford, Hart Publishing Ltd., 2006) <http://
www.hart.oxi.net/pdf/1841134643.pdf>.
“Legal Instruments in European Union Law and their Reform: A Systematic Approach
on an Empirical Basis”, 23 Yearbook of European Law (2004) 91-136.
“Doctrine of Principles”, in J.H.H. Weiler, A. von Bogdandy (eds.), European Integra-
tion – The New German Scholarship, 9 Jean Monnet Working Paper Series 03.1. 1-50
(2003) <http://www.jeanmonnetprogram.org/papers/03/030901.html>.
“A Bird’s Eye View on the Science of European Law. Structures, Debates and Develop-
ment Prospects of Basic Research on the Law of the European Union in a German
Perspective”, 3 European Law Journal (2000) 208-238.
“The European Union as a Supranational Federation: A conceptual attempt in the
light of the Asterdam Treaty”, 6 The Columbia Journal of European Law (2000)
27-54.
50
“The European Union as a Human Rights Organization? Human Rights and the Core
of the European Union”, 37 Common Market Law Review (2000) 1307-1338.
“The legal case for unity: The European Union as a single organization with a single
legal system”, 36 Common Market Law Review (1999) 887-910.
“A Unified and Simplified Model of the European Communities Treaties and the
Treaty on European Union in Just One Treaty”, Legal Affairs Series W-9, European
Parlament (1996).
III. International Law

“The European Union as Situation, Executive, and Promoter of the International
Law of Cultural Diversity – Elements of a Beautiful Friendship”, 19 The European
Journal of International Law (2008) 241-275.
“Constitutionalism in International Law: Comment on a Proposal from Germany”,
47 Harvard International Law Journal (2006) 223-242.
“Legal Effects of World Trade Organization Decisions Within European Union Law:
A Contribution to the Theory of the Legal Acts of International Organizations
and the Action for Damages Under Article 288(2) EC”, 39 Journal of World Trade
(2005) 54-66.
“Globalization and Europe: How to Square Democracy, Globalization, and International
Law”, 15 The European Journal of International Law (2004) 885-906.
“Legal Equality, Legal Certainty and Subsidiarity in Transnational Economic Law
– Decentralized Application of Art. 81.3 EC and WTO Law: why and why not”,
in P.C. Mavroidis, Y. Mény, A. von Bogdandy, (eds.), European Integration and
International Co-ordination, Studies in Transnational Economic Law in Honour of
Claus Dieter Ehlermann (2002) 13-37.
“Law and Politics in the WTO – Strategies to Cope with a Deficient Relationship”, 5
Max Planck Yearbook of United Nations Law (2001) 609-674 <http://www.mpil.
de/shared/data/pdf/pdfmpunyb/von_bogdandy_5.pdf>.
IV. German and Comparative Public Law

“Wissenschaft vom Verfassungsrecht: Vergleich”, in P. Cruz Villalón, P.M. Huber,
A. von Bogdandy, (eds.), Handbuch Ius Publicum Europaeum, Band II, Offene
Staatlichkeit – Wissenschaft vom Verfassungsrecht (2008) 807-842.
Handbuch Ius Publicum Europaeum. I, Grundlagen und Grundzüge staatlichen Verfas-
sungsrechts, together with P. Cruz Villalón, P.M. Huber, (eds.) (Heidelberg, C.F.
Müller Verlag, 2007).
“Parlamentarismus in Europa: eine Verfalls- oder Erfolgsgeschichte?”, 130 Archiv
des öffentlichen Rechts (2005) 445-464.
51
“Europäische und nationale Identität: Integration durch Verfassungsrecht?”, Ver-

öffentlichungen der Vereinigung der Deutschen Staatsrechtslehrer (2003) 156-193.
Gubernative Rechtsetzung. Eine Neubestimmung des Regierungssystems und der Recht-
setzung unter dem Grundgesetz in gemeineuropäischer Perspektive (Tübingen, Mohr
Verlag, 2000).
For further publications see: <http://www.mpil.de/ww/de/pub/organisation/

leitung/direktoren/bogdandy.cfm>.
52
The Paradigms of Universalism and

Particularism in the Age of Globalisation:
Western Perspectives on the Premises and
Finality of International Law
Armin von Bogdandy and Sergio Dellavalle
I. Objectives of the Course and its Place in Legal Scholarship
1. Three Main Objectives

This course has three main objectives. The first is to acquaint an overwhelmingly
non-Occidental audience with the two main paradigms of Western theories
about the nature and finality of international law: the opposing paradigms of
particularism and universalism.1 This should provide a better understanding of,
and a more critical eye on, the diverse and contrasting positions within Western
international legal scholarship. The second objective is to support intercultural
dialogue on international law, which might well be easier when the paradigms
that underlie predominant thinking in different parts of the world are clearly
set out. International legal scholarship should not be limited to a debate on the
best interpretation of a given norm in a given situation. It should rather extend
to a discourse on ideas of order developed in the various cultural traditions. The
third objective is to help students in finding a reasoned position on the course’s
topic. An international lawyer, when publishing, making decisions or advising,
should be cognizant of the possible theoretical foundations of his or her position
as well as of those supporting opposing views, not least because such cognizance
can help in constructing legal solutions all parties can live with.
Parsimony is an essential element of a good dissertation. That is why we
ascribe the impressive variety of visions of international law during its long
1
Our paradigms echo the old dichotomy of realism and idealism. However, for reasons
developed in this course we consider the terms realism and idealism and the respective
conceptual reconstruction as unfortunate; see in detail III 2.
53
history to two competing paradigms. A paradigm consists of the fundamental

concepts on the basis of which theories are developed.2 By theory we understand
a conceptual construction that explains phenomena and provides orientation.
In a nutshell, the paradigm of particularism forms the basis of all theories of
international law which assert that true public order is only possible within the
framework of a state. Following this assertion, the order that international law
can provide is substantially different from the order that can be accomplished
within a state. In fact, from the particularistic point of view international order
is better described as a containment of disorder. In contrast, the paradigm of
universalism underlies all positions which assert that a truly public order on a
global scale is possible.
By truly public order we understand a situation in which common rules make
sure that the interaction of humans is in principle peaceful. There will always
be conflict, but conflicts are channelled by procedures which succeed in sup-
pressing unilateral violence. It is important to stress that the concept of public
order does not imply the absence of conflict. Banning conflict, in fact, is hardly
attainable and even undesirable because it would eliminate an important tool for
adapting institutions and policies to social change. Rather, order is understood
as a situation in which a society succeeds in resolving conflicts through peaceful
methods. Moreover, in times in which international collective action is necessary
to maintain peace and improve human well-being, the concept of public order
denotes institutions, procedures and instruments for the fulfilment of collective
aims also at the international level.
Such order can today only be based on a developed form of international
law with features known from domestic public law. In other words, such order
requires a public international law with an emphasis on the public component.
It builds on the Ius Publicum of the continental European tradition.3 This Ius
Publicum implies that there is a legal framework for the exercise of any kind
of power. For that reason public law is more than just an administrative law
which serves politics as an instrument. At the same time, Ius Publicum is more
than a framework for politics. It also provides the instruments for the realiza-
tion of common interests. This truly public international law has an important
administrative dimension. As a framework and instrument for the realization
of public goods and interests such a public international law is more than a
law of coexistence, coordination, and even cooperation. However, such a public
international order and international law do not need to encompass international
institutions for coercive action, such as a police force or military personnel. The
2
This definition of paradigm is closely related to, although not identical with, the definition
proposed by T. Kuhn, The Structure of Scientific Revolutions (1963).
3
M. Stolleis, Nationalität und Internationalität. Rechtsvergleichung im öffentlichen Recht des
19. Jahrhunderts (1998).
54
example of the European Union proves that international public law and public
order are feasible even without granting transnational institutions the compe-
tence to use means of coercion. In the global context, the advancement of this
project of a truly public international order and law currently hinges to a large
extent on the fate of international criminal law. If the regulatory project of the
Rome Statute of the International Criminal Court4 succeeds, a most important
element of such an order will be in place without creating any institution that
resembles a global state.
Universalism and particularism have been the dominant paradigms of inter-
national scholarship for centuries and remain to date powerful conceptual tools
for those working theoretically or practically in the field. Embracing one or the
other paradigm gives rise to greatly varying understandings and interpretations
of international rules and principles. Current relevant practical issues include
the construction of Article 2, para. 4, of the United Nations Charter (UNC) or
Article 51 of the UNC, the understanding of the UN Security Council as to its
competences and responsibilities, the limits put on its actions as well as the
instruments of its accountability and the direction of its reform. Moreover, they
include the interpretation of international human rights instruments and of
the competences of international courts and tribunals.
Nevertheless, our reduction of the conceptual premises of international law
to only two paradigms has to be qualified in two ways. First, particularism and
universalism focus on the possible range of a truly public order. They respond to
the question of how far truly public order can reach. Is it confined to the borders
of the homogeneous political community (particularism) or does it potentially
include all societies and human beings (universalism)? The two paradigms can
succeed in mapping the theories of international law because at their core they
contain a conceptual element, a more or less explicit statement on the feasible
extension of public order. However, if we go beyond the question of the range
of order and also include the issue of its structure, the general paradigms of
particularism and universalism might need further specificity. These will remain
marginal in the present analysis but could become more central in a further
inquiry centred on the conceptual foundations of a general theory of public
law and order. Second, although we claim that particularistic or universalistic
approaches are until now important to explain preferences of international
lawyers, both in theory and practice, there have been some indications that
this traditionally rigid opposition should rather be overcome. Once we have
specified the reasons speaking in favour of our preference for the universalistic
paradigm we will suggest that its future lies probably in a version that includes
some justified claims of its counterpart.
4
Rome Statute of the International Criminal Court, July 17, 1998, 2187 U.N.T.S. 38544.
55
This course develops as follows: the first lesson is dedicated to the role of
theory for international legal scholarship. In many countries legal scholarship
is overwhelmingly understood as being practical, sometimes not even as being
a science; accordingly theory has no obvious role to play. In order to justify the
approach of this course, but also in order to acquaint students with the diverse
dimension of legal scholarship, the first lesson will give an account in the tradi-
tion of German legal thinking (I.2). The second lesson turns to the debate on the
legitimacy of today’s international law given its deep encroachments on political
self-determination; it develops the two paradigms in this specific context (II). The
idea is that students will find the study of the two paradigms more interesting if
they see their relevance for an important current debate. The third lesson will
then present in more detail the paradigm of particularism (III), the fourth lesson
the paradigm of universalism (IV). In conclusion, we will suggest how these
paradigms inform concrete interpretations; we will take a position in favour of
universalism, but also indicate how legal scholarship as a practical science can
overcome theoretical cleavages (V).
2. International Legal Scholarship: Tasks, Methods, and the Role of Theory

The role of theory in legal scholarship is disputed. Some scholars question the
usefulness of theories for legal scholarship and portray theories as abstract, little
connected with the positive law and of little use, if not detrimental, to the tasks
of the legal scholar. In order to show the place of theories in legal scholarship
and to demonstrate their usefulness, first an understanding of legal scholarship
in the German tradition shall be presented.5
a. Practical Legal Scholarship and Conceptual Thought

A first dimension of legal scholarship is the description and teaching of interna-
tional law. This practical dimension has played a crucial role since the inception
of legal scholarship in the High Middle Ages as a core element of the European
university. A university was usually composed of four faculties: theology, law,
medicine and philosophy, the latter including all sciences from astronomy and
philosophy to physics. Legal scholarship was institutionalized in the process of
the formation of the territorial organisations, which later became the European
states. From the High Middle Ages law held a high place in Europe as an ever
more important “infrastructure“ on which social life increasingly rests while
other normative orders of general application weaken. A society ordered by law
is a high ideal; it is said that here lies a difference with some Asian cultures.

5
For a US-American approach see A.M. Slaughter, “International law and international
relations”, 285 Recueil des Cours (2000) 13-249.
56
What is then the role of scholarship? A first task is to describe and tell the
law as well as to record and teach it. In perhaps no other academic activity
are research and education so closely connected as they are in legal science.
In this respect, the establishment of public law as a separate discipline in the
17th century Germany is telling: it consisted of the identification of a scientific
object within the set of positive norms, the identification of a specific scientific
purpose in the formulation of structures and leading principles, and, on this
basis, an orientation towards academic instruction, institutionally anchored in
the universities.6 These have been and remain the standard bases on which the
scientific nature of the discipline rests. Thanks to this orientation, the develop-
ment of adequate material for instruction and documentation constitutes one
of the central tasks of research in legal science: across Europe, practice-oriented
genres of scientific literature – the leading treatises and textbooks, both the
academic and the practitioner’s handbooks or encyclopaedias, or the com-
mentaries tailored to practice – receive significantly more scholarly attention
than in most of the other sciences. International public law is an integral part
of this, in particular within the Holy Roman Empire: its public law was a body
of law assembled from diverse components, in particular the law of the German
Empire, the rights of the Territories, and a set of legal rules that would now be
conceived of as international norms.7
Such documentary activity remains an important element of international
legal scholarship, not least because it provides for the memory of the social system
in general and the legal system in particular. Accordingly, a good description of an
international treaty is and remains a worthwhile and difficult scholarly aim. One
cannot simply list the provisions; the scholar needs to give them a different order,
to provide some context, to explain what was controversial in the negotiations
and why certain solutions have been adopted. A similar scholarly exercise might
be to bring all relevant statements on the legality of an international incident,
such as the Kosovo war or the Iraq war, into a meaningful whole in order to
describe the pertinent opinio iuris. Another object of reporting are the decisions
of important courts and tribunals. To present a decision by the International
Court of Justice (ICJ) as a meaningful and coherent text is a challenging task,
not least because of its internal procedure which requires every judge to write
an opinion without knowing the position of the other judges, but also because
they often hold differing ideas about the nature of international order. Already
in this type of research, theories can play a role: opinions and ideas are easier to
grasp if they are linked to theories, in our case, general conceptual constructions
about the proper role of international law.
6
W. Pauly, “Wissenschaft vom Verfassungsrecht”, in von Bogdandy/Villalón/Huber (eds.),
II Handbuch Ius Publicum Europaeum, §27 Deutschland, pp. 436-491. Rn 1.
7
For more detail, see Stolleis, supra note 3, at 20 f.
57
Certainly, the role of the legal scholar in most academic systems goes today
beyond documentation. A further important activity is to make suggestions for
resolving disputes. For many lawyers, law acquires its full reality only once it
is applied to a conflict. Here Western cultures and Asian cultures again might
differ. Conflict is not seen as something necessarily bad in the West. Rather, many
ascribe progress to conflict, and there are even theories which explain social
order through the existence of conflict and its successful resolution.8 Conflict
is not seen as something to avoid, but something to be processed in search of a
constructive solution. That is where the role of law comes in, and legal scholar-
ship has its role to play. Lawyers translate divergent interests into legal positions
thereby preparing them to be used in a legal process. Moreover, the norms which
govern a conflict are often not very clear on who is right or wrong, or what is
legal or illegal. Vagueness is particularly a problem in international law for
many reasons, such as multilingualism, different legal traditions, the lack of a
compulsory jurisprudence, and decision-making at diplomatic conferences or
governmental bodies in contrast to domestic parliamentary processes. Article 2,
para. 4 and Article 51 of the UNC provide excellent examples:9 to what extend
should one interpret the provisions on the use of force in international relations
in a way that its unilateral use is constrained? What was legal and illegal in the
Kosovo war against Yugoslavia? Here, the role of legal scholarship as a practical
science is to submit proposals for interpreting a norm for a specific conflict, or
to evaluate a given interpretation, given for example, by a government or the
ICJ. Yet, if the law is vague, who decides? Certainly, any interpretation has to
operate according to the standards laid down in Articles 31 and 32 of the Vienna
Convention on the Law of Treaties (VCLT). But they hardly ever provide a clear
result. So fundamental ideas about the nature and the finality of the international
order often play an important, informing role when it comes to interpreting the
law, and theories develop these understandings and show more clearly what are
their bases and their implications. Note, however, that in most cases, a theory
cannot provide the “right solution” in a case. But it helps to clarify premises and
the force of arguments, as well as to check their consistency.
Legal scholarship as a practical science has a further role to play with respect
to law as a policy instrument. This is an aspect often little developed in legal edu-
cation. If addressed, it is usually presented as part of a teleological or purposive

8
R. Dahrendorf, Der moderne soziale Konflikt (1992) 50 et seq., 282 et seq.; G. Frankenberg,
“Tocquevilles Frage. Zur Rolle der Verfassung im Prozeß der Integration”, in Schuppert/
Bumke (eds.), Bundesverfassungsgericht und gesellschaftlicher Grundkonsens (2000) 31, 44
et seq.

9
See, e.g., Military and Paramilitary Activities in and against Nicaragua (Nicar. v. U.S.),
Merits, June 27, 1986, ICJ Reports 11, §§191-5; Oil Platforms (Iran v. U.S.), Nov. 6, 2003,
ICJ Reports 161, §§46-64.
58
interpretation. It requires a norm to be interpreted in a way that its objectives

be realized. Articles 2, para. 4 and 51 of the UNC may serve as an example.
The objective is international peace. What kind of interpretation best serves
this objective? An interpretation within the universalist paradigm will strive to
curtail any unilateral form of military action and to strengthen international
bodies, of which an interpretation within the particularist paradigm will be
rather sceptical. When it comes to teleological interpretation, theories on the
conceptual premises of the international order, the role of hegemony, and the
potential of international courts and tribunals play a role as they flesh out the
various possibilities. Consequentialist reasoning, which is an important aspect
of teleological or purposive interpretation, is more convincing if it is founded on
sound theory. Legal scholarship which proposes or evaluates such interpretation
is more convincing if it takes relevant theories into account.
The policy function of legal scholarship is not limited to interpretation. The
legal scholar is often called upon to give advice within the legislative process.
In many international treaty negotiations legal scholars play an important role
and the UN’s International Law Commission, which helps the General Assembly
in the progressive development of international law under Article 13 of the
UNC, counts many academics among its members. The policy advice function
is important for legal scholarship’s public role and recognition. In our complex
world, good legal advice within the political process should be able to explain
itself in more conceptual, i.e. theoretical terms. Any legal scholar who advises on
important issues of international law should be able to situate his or her advice
in an overall account on what international order is about.
So far, the legal scholar deals with the issue of legality, i.e. the question
whether certain behaviour or an act conforms to the law – whether they are
legal or illegal. Next to the question of legality, and in an uneasy relationship
with it, sits the question of legitimacy, which discusses whether there are “good
grounds” or “good reasons” for certain behaviour or an act – whether they
are “acceptable”. Certainly, the thrust of modern European development is to
achieve a situation where the legality of certain behaviour or an act also settles
the issue of legitimacy; this is one of the main points of liberal and democratic
constitutions. Yet, the issue of legitimacy continues to have a life of its own, in
particular with respect to international law. The war against Yugoslavia, for
example, with its purpose of counteracting human rights violations, might have
been illegal but legitimate. With respect to the war of the U.S. against Iraq, all
conceivable positions have been held: that it has been legal and legitimate, illegal
but legitimate, legal but illegitimate and that it has been illegal and illegitimate.
Today many legal scholars see the issue of legitimacy as much in their field as
that of legality,10 and public institutions usually expect legal scholars to have
10
See Wolfrum, Röben (eds.), Legitimacy in International Law (2008).
59
an informed standpoint in this respect. Yet, any convincing argument on “ac-

ceptability” requires some conceptual premises which lie outside the law, and
when it comes to international issues it is likely that such conceptual premises
coincide either with the fundamental notions of the universalistic paradigm, or
with those of particularism.
b. Theoretical Legal Scholarship

So far, it has been argued that theoretical, conceptual thought is important
for legal scholarship as a practical science. In that respect, legal scholarship is
not so much a producer of theory but rather a consumer. However, conceptual
construction is an important part of legal scholarship. The relevant production
can be divided into two fields: doctrinal constructions which are conceived to
be “inherent” in the law, providing arguments to be immediately used in legal
discourse, and other conceptual constructions which are “external”, being of
a sociological, politological or philosophical nature.
In continental Europe, conceptual thinking in legal scholarship is mostly
of a doctrinal form which is conceived to be “internal” to the legal order; this
understanding also informs Article 38, para. 1 lit. c of the ICJ Statute.11 This
stream of scholarship is often termed as “positivist”, but a better denomination
is “doctrinal constructivism”. Conceptual thinking in the form of doctrinal
constructivism goes beyond the production of oversight of the body of positive
law and guidance for interpreting a norm in case of conflict. Its agenda aims
primarily at a structuring of the law using autonomous concepts, concepts de-
veloped by legal scholars, following the legal-conceptual (begriffsjuristisch) stream
of the historical school of law. In order to accomplish such a structuring, law is
detached from social reality and tied to legal instruments that flow from sources
of law. From this foundation, the positive material is transcended, not by way
of political, historical, or philosophical reflection, but through structure-giving
concepts such as state, sovereignty, treaty, peremptory norms, or monism and dualism.
Even though many of these concepts, in retrospect, clearly have connotations
in natural law12 they are conceived of as specifically legal and, thus, autonomous.
As a consequence they fall under the exclusive competence of legal science. The
highest scientific goal is to present, or rather to reconstruct and represent law as
complexes of systematically coordinated concepts. The key scientific competencies
thus become abstraction, the development of concepts, and the corresponding
A. Pellet, “Art. 38”, in Zimmermann,Tomuschat, Oellers-Frahm (eds.), The Statute of the

11
International Court of Justice. A Commentary (2006), 677-792, paras 245-264.

On the philosophical background of this scholarly agenda, see J. Rückert, Idealismus,
12
Jurisprudenz und Politik bei Friedrich Carl von Savigny (1984), 232 et seq.
60
arrangement of the legal material.13 In crafting such concepts, legal scholarship

creates for itself an autonomous area of discourse and argumentation, a sort
of middle level between natural law, which is primarily within the competence
of philosophy and theology, and the concrete provisions of positive law, which
are in the direct grasp of politics and the courts. The functional legitimisation
of the discipline flows from its specific competence over these concepts and
the consequent structuring of the legal material. Such activity might provide
legitimisation under the premise that only a conceptually permeated body of
law represents a rationalized and thereby rational body of law.14 Without doubt,
the way a “legal system” is understood has changed over the last century. At its
beginning, a system tended to be crypto-idealistically understood as inherent
in the law, whereas today systems are more often seen as a conceptual instru-
ment for the ordering and managing of the law. Similarly, the understanding
of what a system can accomplish in the law has changed; scholars are usually
more sceptical today than they were one hundred years ago. Yet, this does not
diminish the system-orientation of scholarship as such, at least on the European
continent.15 The autonomy of such doctrinal constructions is, however, not total.
In particular the founding concepts and thereby the differing constructions can
be better grasped if they are fitted within our leading paradigms. A doctrinal
construction centred on “sovereignty” or “non-intervention” sits squarely on the
particularist paradigm, whereas one centred on “universal human rights” and
an “emergent international constitutional order enshrined in the UN Charter”
sits on the universalist one.
While doctrinal constructivism is an important element of theoretical legal
scholarship it does not exhaust its theoretical aspirations. Of particular importance
is the scholarly attempt to “integrate reality” and to reflect on its foundations.
This brings legal scholarship into exchange and competition with other disciplines
which also strive to analyze and interpret social reality. In contrast to the suc-
cess of the agenda of the “positivist legal method,” “integration of reality” and
theoretical reflection fail to conjoin into a common disciplinary platform: here, as
opposed to the doctrinal sphere, the relevant insights are often incommensurate.
The discipline not only encompasses contributions that can only be understood
13
Not every scholarly contribution presents a great doctrinal design. Much more common
is a type of scholarship that – as a sort of “upkeep” and “tending” of international law
– systematizes new legal developments within the established scholarly schemes, that is,
doctrine, and in doing so, contributes to the preservation of the systemic nature of the
law and the legal relevance of the great “teachings.”
14
For a classic on this topic, see M. Weber, Wirtschaft und Gesellschaft (5th edn, 1972), 825
et seq.
15
Cf.: D. Kennedy, “The Disciplines of International Law and Policy”, 12 Leiden Journal of
International Law (1999) 9-133; A.M. Slaughter, supra note 5; M. Koskenniemi, The Gentle
Civilizer of Nations (2001).
61
as essayistic speculation, but also contributions that draw on established humani-

ties and social science theories that adapt to legal discourse, and empirical social
science quantitative methods. Legal scholarship shares many interests with other
sciences: for instance, how to understand sovereignty, and how to conceive the
legitimacy of international order. Other such questions include is international
law a system based on universal values shared by everyone or an instrument
of American or Western hegemony; a common law of mankind or of a global
civil society; a managerial instrument for functional elites or an instrument for
the co-ordination of state interests? Above all, is a lasting international order
of peace feasible and if so, how can it be achieved?
Often, it is this sort of scholarly output that is best received in the other sciences
and even in the wider public. The fact that such works are well-received shows
the resilience and persistence of the Western tradition in comprehending both
the political and social spheres in legal categories; notwithstanding powerful
competition especially from the economic, social, and historical sciences. Certain
theories which have expanded legal scholarship and its interpretive arsenal have
experienced broad resonance in the process of societal self-comprehension; this
will be discussed later in this course. Our claim is that our two paradigms lead
to a better grasp of this theoretical landscape.
Summing up, we have seen that legal scholarship comes in different vari-
ants with distinct theoretical baggage. Each mode has its function and specific
rationality; the importance of the various modes varies considerably between the
different scientific communities. For all modes, so our claim goes, it is useful to
search for theoretical foundations, not in order to find the solution for a practical
problem, but rather to proceed in a reflective, i.e. scientific mode.
II. Universalism, Particularism and the Legitimacy of Public

International Law
The two main strands of Occidental thinking about international law and their
opposing outlooks become apparent in the current debate on the legitimacy
of international law within the process of globalisation. From a non-Western
perspective, the most serious deficit of the legitimacy of international law might
be its Western origin and perhaps its Western bias.16 This, however, is not the
main legitimacy issue discussed among Western scholars. Here, the main chal-
lenge comes from those who argue, mainly under the particularist paradigm,
that the growth of international law in the era of globalisation threatens one
Cf.: B. S. Chimni, “The Past, Present and Future of International Law. A Critical Third
16
World Approach”, 8 Melbourne Journal of International Law (2007) 499-515; M. Mutua,

Human Rights: A Political and Cultural Critique (2002).
62
of the main achievements of Western civilisation, i.e. liberal democracy. They

are opposed by those who claim, mostly under the universalist paradigm, that
international law leads to new and promising achievements. Before exploring
the two paradigms of universalism and particularism in more detail in Parts III
and IV, this Part will present them in the context of this debate.
This lecture will accordingly present a taking stock of influential scholarly
positions according to categorised diagnoses and proposals with a view to their
conceptions of the further development of international law. This agenda is
carried out in three steps. The first step will better define the problem and core
concepts, such as globalisation, legitimacy and democracy (1.). The second step
presents important conceptions relating to the impact of globalisation on the
reality of democracy in a world organised around statehood (2.). The third step
submits conceptions for the protection and development of democracy in the
process of globalisation and relates them to conceptions on the future develop-
ment of international law (3.).
1. Defining the Problem
a. The Growing “Publicness” of Public International Law and its Non-Parliamentary

Nature
The legitimacy problem of international law is – in the Western perspective
– first closely linked to its growing “publicness”. The term public carries many
meanings. In this context, the most important one is that international law
consists of increasingly more norms which bind a state irrespective of its consent.
Important examples include Security Council resolutions under Chapter VII of
the UNC except for the permanent members of the Council; the development
of international treaties through independent international bodies such as the
dispute settlement institutions of the WTO or the human rights bodies; other
activities of international institutions which often succeed in framing important
policy fields, such as the OECD Pisa policy with respect to primary and secondary
education; or the development of international customary law irrespective of
the concrete consent of a concerned state.
One can even understand the ever denser layer of international treaties as
a danger for the democratic principle. With respect to the democratic principle,
legislation through international treaties is problematic from a static perspective,
and even more so in a dynamic one. From the static perspective, the drawback
can be found in the fact that, although national (and consequently often demo-
cratic17) sovereignty is formally respected, the content of the rules is determined
17
The argument applies to the extent that states’ internal structures can be considered
democratic. The problem with respect to citizens living under autocratic rule needs a
separate investigation.
63
in intergovernmental negotiations according to traditional diplomatic procedures.

An open public discourse that can influence the rules, an essential element for
democratic legitimacy according to most theories, is severely limited. The au-
tonomy of the bureaucratic-governmental élites is far greater than in the national
political process. While this is a general feature of international relations it is
particularly so in international trade relations: the GATT 1947 and WTO have
so far been one of the most secretive in the world. And this secrecy is considered
as an instrument to strengthen national negotiators who are in favour of trade
liberalisation.18 Furthermore, with the possible exception of the US Congress,
national parliaments show a far greater deference to governmental proposals if
they concern international treaties rather than autonomous domestic legislation.
As the discussion on the role of national parliaments in the EU legislative process
has clearly revealed, there is also little hope of improving the input of national
parliaments into transnational rule-making during negotiations.19
The democratic problem grows even worse in a dynamic perspective. In
modern times, law means positive law.20 The main feature of the positivity of law
is the legislature’s grasp of and responsibility for the law:21 the law is posited
by a legislature or is at least – in case of the common law or other judge-made
law – under its responsibility, due to the legislature’s competence to intervene
at any given moment, amending or derogating a rule which an autonomous
adjudicative process has developed.22 This positivity of the law is an important
aspect of the democratic sovereignty of a polity: in democratic societies, the
majority, usually conceived as a unitary subject organized through the elected
government, can at any moment intervene in the body of law and change it.23
Under all constitutional systems, most social issues are subject to rules that can
be enacted by a simple majority or through delegated legislation: the possibility
18
J. Goldstein and L. Martin, “Legalization, Trade Liberalization, and Domestic Politics“, 54
International Organizations (2000) 603, 612.
19
P. Norton, “National Parliaments and the European Union: where to from here”, in Craig/
Harlow (eds.), Lawmaking in the European Union (1998) 209; D. Judge, “The Failure of
National Parliaments?”, 18 West European Politics (1995) 79.
20
G. W. F. Hegel, Grundlinien der Philosophie des Rechts (1970 [1821]) § 3.
21
E. W. Böckenförde, “Demokratie als Verfassungsprinzip”, in idem (ed.), Staat, Verfassung,
Demokratie (1991), 289, 322.
22
For the specific situation in Common Law countries see P. Atiyah and R. Summers, Form
and Substance in Anglo-American Law (1991) 141 et seq.
23
A. v. Bogdandy, Gubernative Rechtsetzung (2000) 35 et seq. The guarantee of an efficient
legislature is a leitmotiv of many constitutional developments in the last fifty years.
64
of fast intervention is a leading principle in framing the respective rule-making

competence.24
International law undermines the positivity of law in this sense. Once a
treaty is set up, the political grasp on its rules is severely restricted – not norma-
tively, but in all practical terms. Although international legislation respects the
democratic principle insofar as treaties are negotiated and concluded by mostly
democratically elected governments, usually even with parliamentary assent, it
modifies the relationship between law and politics. By ratifying an international
treaty a current majority in a polity puts its decision largely outside the reach
of any new majority.25 This restriction is particularly important in cases such
as the WTO or bilateral investment treaties since there “corrective” political
influence, i.e., noncompliance, becomes difficult because of obligatory WTO or
ICSID adjudication. Certainly, the democratic autonomy of the new majority is
preserved to some extent through the right of withdrawal, for example Article XV
of the WTO. However, this right supports the democratic legitimacy of the WTO
as much as the individual’s right to emigrate does the democratic legitimacy of
a State.26 It can hardly be considered sufficient as it is not a realistic option.
One might say that this limitation of democratic self-governance inevitably
comes with the need for treaty-based international cooperation. This argument
can also take the form that this kind of limitation has been generally accepted as
intrinsic to international law. Yet, necessity and inevitability are bad normative
grounds since they collide with the principle of freedom. Moreover, it has to be
borne in mind that much of contemporary international law does not only govern
international relations, but rather might set up a “comprehensive blueprint for
social life”27 and therefore has an impact on democratic self-government far
beyond traditional international rules.
24
In detail M. Hilf und M. Reuß, “Verfassungsfragen lebensmittelrechtlicher Normierung”,
Zeitschrift für das gesamte Lebensmittelrecht (1997) 289, 290 et seq.; R. Schmidt, “Staatliche
Verantwortung für die Wirtschaft”, in Isensee/Kirchhof (eds.), III Handbuch des Staatsrechts
der Bundesrepublik Deutschland (1988) § 83; on the economic constitution in Germany
and the European Union see D. Gerber, Law and Competition in Twentieth Century Europe
(1998) 232 et seq.
25
K. Abbott and D. Snidal, “Hard and Soft Law in International Governance”, 54 International
Organization (2000) 421, 439; J. Goldstein et al. “Introduction: Legalization and World
Politics”, 54 International Organization (2000) 385, consider this a common political
strategy.
26
See Article 13 para. 2 Universal Declaration of Human Rights (1948), Article 12 para.
2 International Covenant on Civil and Political Rights (1966), Article 2 para. 2 Protocol
No. 4 of the European Convention on Human Rights; see P. Weis and A. Zimmermann,
“Emigration”, in Bernhardt (ed.), II Encyclopedia of Public International Law (1995) 74.
27
C. Tomuschat, “International Law: Ensuring the Survival of Mankind on the Eve of a
New Century”, 281 Recueil des Cours (2001) 13-438, 63.
65
For a long time, this impact of international law has been little studied. Since
the 18th century international law, including international customary law, has
been built on private law concepts, in particular the will of an individual and the
contract, i.e., the treaty. As the PCIJ puts famously in its Lotus decision: “Interna-
tional law governs the relations between independent States. The rules binding
upon States emanate from their own free will as expressed in conventions or by
usages … [they exist ] in order to regulate the relations between these co-existing
independent communities or with a view to the achievement of common aims.
Restrictions upon the independence of States cannot therefore be presumed.”28
Since states are conceived by classical international law as individuals, the will
of a government was equated with the will of all citizens. In this light there is
no legitimacy problem in international law, according to the Roman dictum:
Volenti non fit iniuria. But today these premises crumble; therefore, the issue of
legitimacy comes to the forefront.
Summing up, many international norms severely impose on the freedom
of a political community to organize itself. Why should such limitations be ac-
cepted? Formerly, this issue has been debated as the morality of international
law.29 Then the debate turned more sociological, and legitimacy became the core
notion. Legitimacy refers to all good grounds for accepting the curtailment of
freedom in a specific historic setting. Our contemporary setting is defined for
many by globalisation.
b. Globalisation
The term globalisation comprises – similarly to the related terms “international
integration” or “de-bordering”30 – a number of highly disparate observations whose
regular common denominator is to acknowledge a profound transformation of
the traditional nation-state, at least in its European variant. This transformation
affects the legitimacy of the law because the nation-state has so far formed the
only framework for democracy’s successful realisation.
The traditional European understanding of the nation-state is mostly based
on the particularist paradigm, in particular on the assumption of a fundamental
congruence between a people integrated by strong economic, cultural and historic
The S.S. “Lotus” (Fr. v. Tur.), 1927 P.C.I.J., (ser. A) No. 10, 18.
28
As used, for example, in E.H. Carr, The Twenty Years’ Crisis. An Introduction to the Study of
29
International Relations (1940).

M. Albert, “On Boundaries, Territory and Postmodernity”, 3 Geopolitics (1998) 53;
30
K.D. Wolf, “Die Grenzen der Entgrenzung”, in Kohler-Koch (ed.), Regieren in entgrenzten

Räumen (1998) 77, at 81 et seq.; T. Cottier, “A Theory of Direct Effect in Global Law?”,
in von Bogdandy et al. (eds), Liber Amicorum Claus-Dieter Ehlermann (2002) 99; E. Stein,
“International Integration and Democracy: No Love at First Sight”, 95 AJIL (2001)
489.
66
bonds and its State whose main task is to organise and develop this nation. The
nation-state, visualised through borders, coloured areas on maps, symbols,
buildings and persons, provides the all-encompassing unity in which human
life finds its place and sense.31 In the traditional understanding the nation-state
is seen as the highest form of realisation of a people bound in solidarity. It is the
source of all law and the foundation and framework of the national economy.
Only through the nation-state can the national language, the national literature,
the national system of science and arts, the national culture in general realise
their full potential. The space in which most human activity occurs is thought
to be defined by a nation-state’s borders. A further constitutive element is the
supremacy of State politics over all other societal spheres. All of these spheres
are subject to political intervention.
This understanding of the nation-state finds its legal basis in the traditional
concept of sovereignty. Under international law sovereignty protects the State
against foreign interference.32 Under municipal law sovereignty expresses
the State’s supreme power and therefore its supremacy over all other societal
spheres.33 Under a democratic constitution, popular sovereignty is nothing but
the realisation of democracy on which the legitimacy of all public power rests.34
On this basis the symbiosis of the nation-state and democracy was formed; it
determines most theories of democracy until this day.35
The term globalisation indicates developments which might undermine
this symbiosis.36 The common ground between the different understandings
31
F. Meinecke, Weltbürgertum und Nationalstaat (2nd edn., 1911) 7.
32
Most visible in the PCIJ’s Lotus decision, supra note 28.
33
A. Randelzhofer, “Staatsgewalt und Souveränität”, in Isensee/Kirchhof (eds.), 1 Handbuch
des Staatsrechts (1995) § 15, para. 25 et seq., 35 et seq.; C. Möllers, Staat als Argument
(2001) 291 et seq.
34
H. Heller, “Die Souveränität. Ein Beitrag zur Theorie des Staats- und Völkerrechts, 1927”,
in Heller, 2 Gesammelte Schriften (1971) 31 et seq.
35
U. Volkmann, “Setzt Demokratie den Staat voraus?”, 127 Archiv für öffentliches Recht
(2002) 575, 577, 582; M.G. Schmidt, Demokratietheorien (1995) 13.
36
For more detail see the report of the German federal parliament’s (Bundestag) committee
on “Globalisation of the World Economy – Challenges and Strategies”, Enquête Commis-
sion, Globalisierung der Weltwirtschaft – Herausforderungen und Antworten, Final Report,
BT-Drucks. 14/9200, 49 et seq.; see id. Summary of the Final Report (Jun. 24 2002), at
<http://www.bundestag.de/gremien/welt/sb_glob_kurz.pdf>. M. Ferrarese, Le istituzioni
della globalizzazione (2000) 11 et seq.; S. Hobe, “Die Zukunft des Völkerrechts im Zeitalter
der Globalisierung”, 37 Archiv für Völkerrecht (2000) 253; K. Dicke, “Erscheinungsformen
und Wirkungen von Globalisierung in Struktur und Recht des internationalen Systems”,
39 Berichte der Deutschen Gesellschaft für Völkerrecht (2000) 13; most influential are
numerous books published in U. Beck’s series “Edition Zweite Moderne” from 1997, in
particular U. Beck, Was ist Globalisierung? (3rd edn., 1999) 48 et seq.
67
of globalisation is the observation of a massive global increase of interaction

between the same spheres of different nations, especially since the beginning of
the 1990s. Globalisation goes beyond the phenomenon of the interdependence
of States because it is said to lead to a partial fusion of once separate national
realms, in particular the fusion of national economies into a single world economy.
However, hardly anyone argues that globalisation in its present form entails a
development towards a fully borderless world.37 If state borders become less
important or easier to overcome in some respects and for some individuals,
there is little evidence to suggest that they will ultimately become obsolete for
everybody, as billion dollar profits in migrant smuggling show.
The term globalisation was first used mostly by authors who critically observed
the enhanced possibilities for economic actors and the emergence of global
markets. However, the term made its way into the parlance of free-traders and
gained favour in business circles for describing diverse forms of global contraction
and the phenomenon of ”de-bordering”.
Global contraction and the decrease of the importance of borders are often
ascribed to the revolution in communications and transport technologies; a
development already identified by Karl Marx and Friedrich Engels.38 The multi-
faceted developments brought together under the term globalisation are not,
however, simply the result of a quasi-natural evolution of technical inventions and
applications alone. They are also the fruit of conscious political decisions which
have contributed to the dismantling of various borders. The recent opening of
China is an excellent example for a political decision to embrace globalisation.
Strengthened transnational bonds and partial fusions have led to a “de-
nationalisation”, which is manifest in multiple phenomena.39 An increasing
number of persons have daily contact with individuals outside their nation;
numerous persons even migrate outside of their original cultural spheres in
search of a better life; national economies are increasingly becoming bound to a
global economy; national cultures are placed in a context of a globally operating
entertainment industry; and in numerous academic fields a career depends on
being published in a handful of international journals. Even the Xiamen Academy
of International Law can be understood as a fruit of globalisation. At the same
time the term globalisation indicates new dangers which are not confined to a
distinct territory. Such dangers extend from climate-change to financial crises
to globally operating criminal and terrorist groups.
C. Möllers, “Globalisierte Jurisprudenz”, 79 Archiv für Rechts- und Sozialphilosophie Beiheft

37
[ARSP] (2001) 41, 46 et seq.

K. Marx and F. Engels, “Das Kommunistische Manifest (1848)”, in: Marx/Engels, Das
38
Manifest der kommunistischen Partei (2nd edn., 1980) 40, at 47.

M. Zürn, Regieren jenseits des Nationalstaats (1998) 65 et seq.: “De-nationalisation”.
39
68
Last but not least, the term globalisation stands for the proliferation of interna-
tional organisations and the expansion of international law, which, depending
on the conception, promote globalisation, simply institutionalise it or rather try
to shape a globalised world for the benefit of the public welfare. The increasing
autonomy of international law and international organisations from the political
preferences of individual States is viewed by some as a prerequisite of a system
of international law that meets the challenges of globalisation.40 National law,
once considered the expression of the will of a people, accordingly implements
ever more international rules resulting from an international process that is
necessarily different from processes under domestic constitutions.41 National
law is hereby de-nationalised. Summing up, national politics are now found
to be bound by a multiplicity of legal and factual constraints originating from
outside the nation-state. To the extent that national politics reflect democratic
processes, globalisation and democracy clash.
c. Legitimacy, in Particular Democratic Legitimacy

Legitimacy refers to the grounds for accepting the law, in our case for accepting
and obeying international law.42 Many different grounds can be adduced. Many
base the legitimacy of international law on the effective protection of common
goods and interests. In the international sphere, the maintenance of peace or
the protection of the environment is of particular importance in this respect.43
When public law provides for order, individual security, economic growth, and
individual well-being, it builds up a form of legitimacy which today is often
termed as output legitimacy. A second category is that public law respects and
protects the fundamental interests of the individual, in particular those expressed
in human rights and due process of law. The third category is democratic
40
Cf.: C. Tietje, “Die Staatsrechtslehre und die Veränderung ihres Gegenstandes”, 118
Deutsches Verwaltungsblatt (2003) at 1081, 1087.
41
D. Thürer, “Völkerrecht und Landesrecht – Thesen zu einer theoretischen Problemum-
schreibung”, 9 Schweizerische Zeitschrift für Int. und Europäisches Recht (1999) 217; Tietje
supra note 40, 1093, sees “domestic and international law as a functional unity”.
42
Regarding this general discussion see Wolfrum/Röben, supra note 10; D. Bodansky,
“The Legitimacy of International Governance: A Coming Challenge for International
Environmental Law”, 93 AJIL (1999) 596; P.-T. Stoll, Globalisierung und Legitimation (Göt-
tinger inaugural lecture), at <http://www.cege.wiso.uni-goettingen.de/Veranstaltungen/
antrittsvorlstoll.pdf>; cf. also S. Kadelbach, Zwingendes Völkerrecht (1992) 130 et seq.
43
S. Cassese, “Lo spazio giuridico globale”, 52 Rivista trimestrale di diritto pubblico (2002)
323, 331 et seq.; in detail M. Kumm, “The Legitimacy of International Law”, 15 Eur. J.
Int’l L. (2004), 907; The issue of the legitimacy of international law addresses the rational
grounds why international law may merit obedience, D. Bodansky, “The Legitimacy of
International Governance: A Coming Challenge for International Environmental Law”,
93 AJIL (1999) 596 et seq.
69
legitimacy, also called input-legitimacy; this is the most complex issue because
of deep theoretical divisions.
That may come as a surprise. Upon first glance it appears as if the fall of the
Berlin Wall and the dissolution of the Soviet bloc settled all fundamental issues
over the core contents of the principle of democracy with respect to the organisa-
tion of public power.44 Western scholars assume that there is an almost universal
and increasingly legally based consensus regarding the necessary requirements
of a State to qualify as democratic. International law,45 comparative law46 as
well as political and constitutional theory47 all agree upon the elements deemed
necessary: governmental personnel must ultimately derive their power from
citizen-based elections that are general, equal, free and periodic. Moreover, all
public power has to be exercised in accordance with the rule of law and has to
be restricted through a guaranteed possibility of a change in power.48
This consensus with respect to the requirements of democracy has not,
however, led to a consensus on theory and premises. One still has to distinguish
between an understanding of democracy which takes as its starting point the
people as a macro-subject (the holistic concept of democracy, often linked to
particularism) and one which designates affected individuals as its point of
reference (the individual, civil or fundamental rights concept of democracy,
including the deliberative theory of democracy, often linked to universalism). It is
likewise not decided whether democracy is concerned with the self-determination
of a people or of affected individuals (the emphatic or emancipatory conception
of democracy) or whether it simply requires effective control over those who
The most visible expression of this belief is F. Fukuyama, The End of History and the Last
44
Man (1992) 133 et seq.

Groundbreaking T. Franck, “The Emerging Right to Democratic Governance”, 86 AJIL
45
(1992) 46; G. Dahm, J. Delbrück and R. Wolfrum, Völkerrecht (2002) 14 et seq.; J.A. Fro-
wein, “Konstitutionalisierung des Völkerrechts”, 39 Berichte der Deutschen Gesellschaft für
Völkerrecht (2000) 427, 431 et seq.; see also M. Nowak, U.N. Covenant on Civil and Political
Rights – CCPR Commentary (1993) 435 et seq.; for a critique see M. Koskenniemi, “Whose
Intolerance, Which Democracy?”, and B. Roth, “Evaluating Democratic Progress”, both
in Fox/Roth (eds.), Democratic Governance and International Law (2000) 436, 493.
N. Dorsen et al., Comparative Constitutionalism (2003) 1267 et seq.; C. Grewe and H. Ruiz
46
Fabri, Droits constitutionnels européens (1995) 223 et seq.

Schmidt, supra note 24, 17; G. Sartori, Demokratietheorie (1992) 33, 40.
47
“Democratic government is based on the will of the people, expressed regularly through
48
free and fair elections. Democracy has at its foundation respect for the human person and
the rule of law. Democracy is the best safeguard of freedom of expression, tolerance of
all groups of society, and equality of opportunity for each person.
Democracy, with its representative pluralist character, entails accountability to the
electorate, the obligation of public authorities to comply with the law and justice admin-
istered impartially. No one will be above the law.“ Charter of Paris for a New Europe, 30
ILM (1991) 190, 194.
70
govern (the sceptical understanding of democracy).49 Democracy remains an

essentially contested concept.
The different conceptions of democracy still lead to different results on some
issues in the municipal realm, such as granting electoral rights to resident for-
eigners, allowing citizen participation in administrative procedures or employee
involvement in public or private organisations’ decision-making. These divergences
do not, however, affect or endanger the solid consensus on the institutions and
procedures required for the realisation of democracy within a State.
Such a consensus does not extend to the issue of how globalisation affects
the realisation of democracy and how it can be maintained in the process of
globalisation. In both regards the differing conceptions of democracy result in
conflicting diagnoses or proposals, none of which command any larger support.
Thus the theoretical discussion of democracy acquires its greatest relevance on
the transnational level.50
2. Effects of Globalisation on States and Their Resources of Legitimacy
a. Globalisation as a Threat to National Self-Determination

Most academic treatments of the relationship between globalisation and
democracy have a diagnostic character. More often than not they come to the
conclusion that globalisation endangers democracy in its current form. That
endangerment is usually considered to arise “behind the scenes”; unlike the
danger to democracy by an authoritarian government, globalisation does not
intervene directly in the democratic decision-making process. More specifically,
three theoretical positions appear to be of particular importance.51
The first position considers the developments subsumed under the term
globalisation as an expansion of US-American interests and lifestyles. Accord-
ingly, globalisation is little more than a byword for American hegemony.52 In this
49
For a convincing reconstruction from the perspective of German constitutional scholar-
ship see Volkmann, supra note 35, 582 et seq.; other reconstructions by P. Mastronardi,
“Demokratietheoretische Modelle – praktisch genutzt”, 7 Aktuelle Juristische Praxis (1998)
383; Schmidt, supra note 35, 115 et seq.
50
The debate in the European Union shows that such a discussion can lead to convincing
results. Following an intensive and sharp, and sometimes apparently uncompromising
debate, the model of dual legitimation has become a widely agreed-upon solution. The
main focal point is a dual form of representation, through representatives of the peoples as
macro-subjects (Council, European Council) on the one hand, and through representatives
of the individual Union citizens (European Parliament) on the other.
51
For an overview see E. Altvater and B. Mahnkopf, Grenzen der Globalisierung. Ökonomie,
Ökologie und Politik in der Weltgesellschaft (4th edn., 1999), 542 et seq.
52
U. Mattei, “A Theory of Imperial Law”, 10 Indiana Journal of Global Legal Studies (2003),
383; S. Sur, “The State between Fragmentation and Globalisation”, 8 EJIL (1997) 421,
71
version, globalisation means the economic triumph of American neoliberalism,

which primarily benefits American enterprises, the cultural dominance of the
American entertainment industry, which transforms social patterns in other
nations, or the leading academic role of American universities. All of this is seen
to occur in a framework of historically unprecedented American political and
military supremacy. Central international institutions, especially the International
Monetary Fund, the World Bank and the WTO – to a lesser extent the United
Nations – are considered agents of this development.53
This threatening scenario is based mainly on understandings of democracy
that view self-determination as the be-all and end-all of democracy, whether they
rest on a holistic tradition concerned with the self-determination of a people, or
on a fundamental rights tradition concerned with the self-determination and
self-realisation of individuals. Accordingly, globalisation endangers democracy
because it builds up pressure to assimilate and leads to heteronomy, as a result of
which the national democratic process is no longer free to shape the nation’s life.
This criticism of globalisation is found in various – otherwise contrasting – theo-
retical and ideological camps. It is present within both the conservative criticism
of mass culture (Kulturkritik) and the emancipatory conceptions of democracy.
It is important to stress that according to this understanding, globalisation does
not necessarily lead to a weakening of State institutions. Few proponents of this
position doubt that globalisation is driven by the political power of the US.
A second critical position views globalisation as capitalism’s attempt to increase
profits, to conquer markets, and – in particular in the Western welfare States – to
reduce profit-restricting social achievements.54 The danger for democracy lies,
with regard to the Western democracies, above all in the undermining of the
democratic balance attained between the opposing class interests. This position
is mainly based on an emancipatory understanding of democracy, which is
most prominent in European social democratic parties,55 but it can also be of
a Marxist-Leninist provenance. Representatives from developing nations often
consider globalisation as an extension of colonial economic dependency for the
433.
53
N. Krisch, “Weak as a Constraint, Strong as a Tool? The Place of International Law in U.S.
Foreign Policy”, in Malone/Khong (eds.), Unilateralism and U.S. Foreign Policy (2003), at
41; R. Rilling, “‘American Empire’ als Wille und Vorstellung. Die neue große Strategie
der Regierung Bush”, 5 R.L.S.-Standpunkte (2003) 1.
54
Altvater & Mahnkopf, supra note 51, 562 et seq.; Beck, supra note 36, 14; H.-P. Martin and
H. Schumann, Die Globalisierungsfalle. Der Angriff auf Demokratie und Wohlstand (1996)
193 et seq.
55
In more detail see Schmidt, supra note 24, 159 et seq.
72
benefit of Western businesses and States.56 This version by no means proclaims

the decline of the State, which it considers instead as the most important agent
for the implementation of particular interests.
The third position lacks the immediate critical impetus of the former two. It
focuses rather on the fundamental weakening of the power of national institutions
to shape a nation’s life. This results from the increased strength of transnationally
operating groups of individuals and organisations, in particular, economic actors,
but also criminal organisations. These groups are seen to have moved from the
national into the international realm and as having emancipated themselves – at
least partially – from the political supremacy of State institutions.57 This position
views globalisation much more as a spontaneous evolutionary development
than do the first two.58
Political attempts by state institutions to counter the negative aspects of
globalisation are judged ambivalently in this understanding. Accordingly, as
opposed to the first two versions, international law and in particular international
economic law are not construed as the driving forces of globalisation; rather they
are seen as capable of promoting global welfare. Nevertheless, the international
mechanisms which aim to legally order the spontaneous process of globalisa-
tion, including those of global governance,59 are critically assessed under this
position due to their detrimental effect on democracy. It criticises the frailty of
their democratic control, their lack of transparency and responsiveness, their
technocratic character, and the difficulty of changing their once-established
rules.60
56
A. Anghie, “Time Present and Time Past: Globalization, International Financial Institutions,
and the Third World”, 32 N.Y.U. Journal of International Law and Politics (1999-2000) 243,
particularly 246 et seq., 275 et seq.; a helpful overview of the multi-layered discussion is
provided by B. S. Chimni, “Towards a Radical Third World Approach to Contemporary
International Law”, 5 International Center for Comparative Law & Politics Review (2002)
16, 21 et seq.
57
J.T. Mathews, “Power Shift”, 76 Foreign Affairs (1997) 50 et seq.; N. Luhmann, “Der Staat
des politischen Systems”, in Beck (ed.), Perspektiven der Weltgesellschaft (1998), at 375;
Zumbansen, “Die vergangene Zukunft des Völkerrechts”, 34 Kritische Justiz (2001) 46,
59 et seq.
58
Enquête Commission, supra note 36, 56.
59
On Global Governance, Commission on Global Governance, Our Global Neighbourhood. The
Report of the Commission on Global Governance (1995) 253 et seq.; D. Messner and F. Nuscheler,
“Global Governance. Organisationselemente und Säulen einer Weltordnungspolitik”,
in Messner/Nuscheler (eds.), Weltkonferenzen und Weltberichte. Ein Wegweiser durch die
internationale Diskussion (1996) 12, at 21.
60
Considerations of this kind focus on the WTO, S. Charnovitz, “WTO Cosmopolitics”, 34
N.Y.U. Journal of International Law & Politics (2002) 299 et seq.; M. Krajewski, Verfassungs-
perspektiven und Legitimation des Rechts der Welthandelsorganisation (2001) 217 et seq.; M. Hilf
and B. Eggers, “Der WTO-Panelbericht im EG/USA-Hormonstreit”, 8 Europäische Zeitschrift
73
This understanding is further developed by various theoretical schools.61 The

system theory, as elaborated by Niklas Luhmann, is particularly influential in
Germany; it acuminates the understanding dramatically. According to this theory
the most important sectors of national societies have already been fully globalised
and a global society with a global political system (the “international community”)
has been formed. However, neither the global nor the national political systems,
which subsist as partial systems, are considered to enjoy supremacy over other
societal spheres.62 The demise of the supremacy of politics is a key assertion of
this theoretical camp, with profound consequences for democracy.
Such a dramatic diagnosis of the fundamental weakening of traditional
democratic institutions is by no means limited to this theory. Some theoreticians
of International Relations also assert the existence of an integrated (or “de-
bordered”) world in which the nation-state becomes increasingly irrelevant.63
On the basis of a number of sociological studies, the majority opinion of the
German Parliament’s Enquête Commission on globalisation similarly concludes
that globalisation causes a substantial erosion of democratic decision-making
in national institutions.64
b. Globalisation as an Instrument of Democratisation

These bleak visions contrast with optimistic accounts. There is by no means a
consensus that globalisation weakens the realisation of the democratic principle.
Rather, some see a close interaction between globalisation and democratisation,
thereby increasing the resources of legitimacy of states. In this respect, it is helpful
to distinguish between a school of thought focused on economic development
and one based on the further development of international law.
The first school of thought, to which the periodical The Economist and the
minority of the German Parliament’s Enquête Commission belong, emphasises
für Wirtschaftsrecht (1997) 559; generally J. Crawford, “Democracy and International

Law”, 64 BYIL (1994) 113 et seq.
61
The powerful and influential C. Schmitt, Der Begriff des Politischen (2nd edn., 1963), at 10
of the foreword writes “Die Epoche der Staatlichkeit geht nun zu Ende” (“The era of statehood
is coming to an end”).
62
N. Luhmann, “Die Weltgesellschaft”, 57 ARSP (1971) 27 et seq.; id., Die Gesellschaft der
Gesellschaft (1997) 145 et seq.; id., “Der Staat des politischen Systems”, in Beck (ed.),
Perspektiven der Weltgesellschaft (1998) 376 et seq.; G. Teubner, “Globale Bukowina: Zur
Emergenz eines transnationalen Rechtspluralismus”, 15 Rechtshistorisches Journal (1996)
255 et seq.
63
Forschungsgruppe Weltgesellschaft, “Weltgesellschaft: Identifizierung eines ‘Phantoms’”,
37 Politische Vierteljahresschrift (1996) 5, 12.
64
Enquête Commission, supra note 36, 56.
74
the positive democratic effects of free trade and communicative freedoms.65 It

focuses on the link between global free trade and prosperity on the one hand
and the ensuing link between prosperity and democracy on the other.66 Clearly,
this conception is less concerned with political self-determination; in the liberal
tradition of the democratic theory, democracy is predominantly seen as a set
of institutions for ensuring the control and responsiveness of politicians and
bureaucrats.
Against this background, a limitation on the reach of national political activity
due to the pressures of globalisation is not considered as fundamentally negative
or hostile to democracy. Rather, these pressures are seen as tending to limit the
scope for unreasonable decisions of the political classes which damage the interests
of the majority of consumers.67 Moreover, democracy and fundamental rights
are found to be stabilised through global publicity and media, which loosen the
grasp of authoritarian regimes on individuals.
Similar conclusions are attained by a school of thought that asserts the advent
of a “constitutionalisation of international law”; this school is deeply embedded
within the universalist paradigm. It focuses on an increasingly stringent and
dense set of international rules which bind national governments.68 Three
observations form the core of this school: the deepening of the ethical dimension
of international law, its expansion and more effective enforcement, and its partial
65
Enquête Commission, supra note 36, 461 et seq. (minority vote).
66
Regarding the correlation between trade and wealth see: P. Chow, “Causality between
Export Growth and Industrial Development”, 26 Journal of Development Economics
(1987) 55 et seq.; A. Harrison, “Openness and Growth: A Time-Series, Cross Country
Analysis for Developing Countries”, 48 Journal of Development Economics (1996) 419 et
seq.; A.J. Frankel & D. Romer, “Does Trade Cause Growth?”, 89 American Economic Review
(1999) 379 et seq.; A.D. Irwin & M. Tervio, “Does Trade Raise Income? Evidence from the
Twentieth Century”, Journal of International Economics (2002) 1 et seq.; Regarding the
correlation between wealth and democracy J. Helliwell, “Empirical Linkages between
Democracy and Economic Growth”, 24 British Journal of Political Science (1994) 225 et
seq.; R.J. Barro, “Determinants of Democracy”, 107 The Journal of Political Economy (1999)
158 et seq.; D. Acemoglu & J.A. Robinson, “Why did the West extend the Franchise?
Democracy, Inequality and Growth in Historical Perspective”, 115 Quarterly Journal of
Economics (2000) 1167 et seq.
67
W. Meng, “Gedanken zur Frage unmittelbarer Anwendung von WTO-Recht in der EG”,
in U. Beyerlin et al. (eds.), Festschrift für Rudolf Bernhardt (1995) 1063, 1080 et seq.
68
This school of thought is particularly strong in the German speaking scholarship, Frowein,
supra note 17, 440 et seq.; C. Tomuschat, “International Law as the Constitution of
Mankind”, in UN (ed.), International Law on the Eve of the Twenty-first Century (1997) 37 et
seq.; R. Uerpmann, “Internationales Verfassungsrecht”, 56 Juristenzeitung (2001) 565,
566 et seq.; T. Cottier & M. Hertig, “The Prospects of 21st Century Constitutionalism”, 7
Max Planck U.N.Y.B. (2003) 261; see also P.-M. Dupuy, “The Constitutional Dimension
of the Charter of the United Nations Revisited”, 1 Max Planck U.N.Y.B. (1997) 1 et seq.
75
emancipation from the will of the individual State.69 All these developments are
considered, in principle, as adequate responses to the challenges of a globalised
world. The core institutions of international law are seen as increasingly effective
instruments vis-à-vis dictatorial regimes and even promoters for democratic
forms of government.70 Globalisation is, in principle, considered as a chance
for a stronger international law to further democratic domestic institutions.71
3. Strategies to Respond to the Challenge

There are various strategies to strengthen the legitimacy of international law.
A first strategy aims at improving the problem solving capacity of international
law in general and international institutions in particular: more efficiency and
effectiveness shall improve output legitimacy. A second strategy is centred on
human rights: by imposing such rights against states, but also rights endanger-
ing institutions such as the Security Council with its listings or the World Bank
through its funding of certain projects, international law gains legitimacy by
protecting fundamental human interests and universal values. Conceptually
the most difficult issue remains how to uphold democratic legitimacy in this
context: in this respect, the difference between particularists and universalists
map most positions.72
69
H. Mosler, “The International Society as a Legal Community”, 140 Rd.C. (1974) 1, 31 et
seq.; Tomuschat supra note 27, 72 et seq.; B. Fassbender, “Der Schutz der Menschenrechte
als zentraler Inhalt des völkerrechtlichen Gemeinwohls”, 30 Europäische Grundrechte-
Zeitschrift (2003) 1, 2 et seq.
70
Franck, “The Emerging Right to Democratic Governance”, 86 AJIL (1992) 46, 47 et seq.;
Stein, supra note 2, 533 et seq.; M. Beutz, “Functional Democracy: Responding to Failures
of Accountability”, 44 Harv. J.I.L. (2003) 387, 391 et seq.
71
For an early discussion of globalization culminating in the right to intervention: O.
Schachter, “The Legality of Pro-Democratic Invasion”, 78 AJIL (1984) 645, 649 et seq.;
M. Halberstam, “The Copenhagen Document: Intervention in Support of Democracy”,
34 Harv. J.I.L. (1993) 163, 175; F. Tesón, A Philosophy of International Law (1998) 55,
57; critical M. Koskenniemi, “Die Polizei im Tempel”, in H. Brunkhorst (ed.), Einmischung
erwünscht? Menschenrechte und bewaffnete Intervention (1998) 63, 64 et seq. For the position
that international law is strengthened through the process of globalisation see M. List, B.
Zangl, “Verrechtlichung internationaler Politik”, in G. Hellmann, K. Wolf, M. Zürn (eds.),
Die neuen Internationalen Beziehungen (2003) 387 et seq.
72
Most academic contributions regarding the protection and development of democracy in
the process of globalisation have not yet been developed into detailed models. Rather, they
exist in a preliminary stage involving the testing of ideas on a new and by no means fully
understood phenomenon. In particular, international legal scholarship in continental
Europe does not yet focus on the democratic legitimacy of international law and inter-
national organisations. The close connection between US international legal scholarship
and the discipline of international relations leads to a more intensive perception, for a
useful compilation see G. Fox/B. Roth (eds.), Democratic Governance and International Law
76
The principle of democracy is, generally speaking, mostly dealt with in two
respects: first, as an international legal requirement regarding a national system
of government and, second, in connection with parliamentary control of foreign
policy.73 Further debate, on which this article focuses, is not yet concerned with
the design of appropriate practical institutional arrangements, but rather with
their conceptual foundations; in these foundations, the paradigm of particularism
and that of universalism play a leading role.
a. The Particularist Response: State Sovereignty as the Leading Principle

One approach for safeguarding democracy within the process of globalisation
is mostly based on the particularist paradigm claiming that democracy can
only be successfully realised within a nation-state.74 The primary concern is the
protection of and the return to the political supremacy of national democratic
institutions, i.e. the protection of State sovereignty in its traditional meaning.
As a result, this approach resists the transnationalisation of societal spheres and
the autonomisation of international political decision-making and international
law-making.75
(2000); and the contributions in the 10:1 Indiana Journal of Global Legal Issues (2003).
Yet, the subject is also considered by American scholars to be in an embryonic phase,
C. Ku & H. Jacobson, “Broaching the Issues”, in C. Ku & H. Jacobson (eds.), Democratic
Accountability and the Use of Force in International Law (2003) 3, 8. In continental Euro-
pean journals there have been relatively few contributions that have recently focused on
this subject. The United Kingdom is situated, like most, halfway between the European
and American positions. The European Journal of International Law does not differ in
this respect, with contributions from S. Wheatley, “Democracy in International Law: A
European Perspective”, 51 International Comparative Law Quarterly (2002) 225, 227 et
seq.; id., “Deliberative Democracy and Minorities”, 14 EJIL (2003) 507; Sur, ‘The State
between Fragmentation and Globalisation’, 8 EJIL (1997) 421; S. Marks, “The End of
History? Reflections on some International Legal Theses”, 8 EJIL (1997) 449.
73
A. Randelzhofer, “Zum behaupteten Demokratiedefizit der Europäischen Gemeinschaft”,
in P. Hommelhoff & P. Kirchhof (eds.), Der Staatenverbund der Europäischen Union (1994)
39, 40 et seq.; it is difficult to find more detailed discussions in general textbooks, cf. K.
Doehring, Völkerrecht (1999) paras. 117, 239 and 990; K. Ipsen, Völkerrecht (4th edn.,
1999) 374 et seq.; P. Kunig, “Völkerrecht und staatliches Recht”, in W. Graf Vitzthum
(ed.), Völkerrecht (2nd edn., 2001) 87, 93 et seq.; M. Shaw, International Law (4th edn.,
1997) 177 et seq.; P. Daillier & A. Pellet, Droit International Public (6th edn., 1999) 427 et
seq.; B. Conforti, Diritto Internazionale (5th edn., 1997) 191 et seq.; J. González Campos et
al., Curso de Derecho Internacional Público (2002) 432 et seq.
74
J. Isensee, “Abschied der Demokratie vom Demos”, in D. Schwab et al. (eds.), Festschrift für
Paul Mikat (1989) 705.
75
E.-W. Böckenförde, “Die Zukunft politischer Autonomie”, in E.-W. Böckenförde, Staat,
Nation, Europa (1999) 103, 124 et seq.; similar to Hillgruber, “Souveränität – Verteidigung
eines Rechtsbegriffs”, 57 Juristenzeitung (2002) 1072; J. Isensee, “Die alte Frage nach der
77
To protect the State as an institution of political self-determination, this

conception can lead to the demand to slow down or even reject developments
which contribute to a globalisation that endangers democracy. As Ernst-Wolfgang
Böckenförde, perhaps the most eminent living German Staatsrechtslehrer, puts it:
“If statehood [and therefore democracy] is to be preserved, then a counter-thrust
against the globalisation process appears necessary in the form of a struggle for
the re-establishment of the supremacy of politics in a governable space”.76 In
order to counter transnational interdependence detrimental to democracy, the
development of international law must, in this view, also be slowed down or
even rejected. This is especially so insofar as it supports such interdependence or
affects spheres where law-making and political decision-making require maxi-
mum legitimation, particularly with regard to the redistribution of resources,
security or national identity. In light of growing transnational interdependence,
parliamentary control of foreign policy is not considered sufficient to uphold
democracy. Due to the lack of a global demos, this understanding rejects an
increase in the autonomy of international decision-making. Rather, it questions
globalisation as a path for increasing societal wealth and individual freedom,
and accords the principle of democracy fundamental primacy.
Translated into the categories of international law, this understanding
corresponds to a position that considers mere coordination77 – rather than
cooperation or even integration – as the appropriate task and Gestalt for inter-
national law.78 Accordingly, the concept of sovereignty, in the sense of a State’s
autonomy, forms the guiding paradigm for the development of international law.
The international system should therefore aim at sovereign equality and not at
its democratisation. In other words: the principle of democracy translates in the
international realm into the principle of sovereign equality.
Another approach that allows for State cooperation beyond mere coordination
on the basis of the above-mentioned premises advocates informality. This position
Rechtfertigung des Staates”, 54 Juristenzeitung (1999) 265 et seq.; P. Kahn, “American

Hegemony and International Law”, 1 Chicago J.I.L. (2000) 1, 3 et seq.; J. Rubenfeld, “The
Two World Orders”, in G. Nolte (ed.), American and European Constitutionalism (2005)
280-296.
Böckenförde, supra note 52, 123; also D. Schindler, “Völkerrecht und Demokratie”, in G.
76
Hafner et al. (eds.), Liber Amicorum Professor Seidl-Hohenveldern (1998) 611, 618, asserts
a tension impossible to overcome.
Similarly, W. Friedmann, The Changing Structure of International Law (1964) 60 et seq.
77
P. Weil, “Vers une normativité relative en droit international?”, 86 Revue générale de droit
78
international public (1980) 44 et seq.; this sceptical position can be confined to individual
areas, as the author’s proposal of a model of “co-ordinated interdependence” for the
interpretation and development of WTO law, A. von Bogdandy, “Law and Politics in the
WTO. Strategies to Cope With A Deficient Relationship”, Max Planck U.N.Y.B. (2002) 609,
612 and 653 et seq.
78
is not opposed to co-operation as such, but considers processes of international

legalisation and autonomous international legislation as problematic under the
democratic principle.79 It prefers that co-operation, which more substantially
affects democratic self-determination than coordination, operates outside the
legal framework. By staying outside the legal framework, cooperating national
politicians retain a firm grasp on all issues even after a decision has been taken.
No international norm will thus obstruct national democratic processes. This
understanding puts technocratic elites operating outside the legal framework
at the centre of the international political processes.80 Institutions that operate
without legally binding instruments but are informal cooperation between
national administrations, e.g., the G8 and OECD are usually eyed with suspi-
cion under the democratic principle. Here they are viewed as prime avenues
for international democracy, i.e. international cooperation responsive to the
democratic principle.81
A third option upholding the primacy of national sovereignty, which also
allows for enjoyment of the benefits of globalisation, is unilateralism.82 It is
mostly held by US-American authors, but also appears in European thinking.83
A democratic justification of unilateral policy can easily be given. According
to a widespread – though not uncontested – understanding, the principle of
democracy under a given constitution applies only to the relationship between
those to whom the constitution grants power and the citizenry of that State. The
79
J. Goldstein et al., “Introduction: Legalization and World Politics”, 54 International Organisa-
tion (2000) 385 et seq.
80
G. Junne, “Theorien über Konflikte und Kooperation zwischen kapitalistischen Industrie-
ländern”, in V. Rittberger (ed.), Theorien der internationalen Beziehungen (Supp. 21, 1990)
353, 364 et seq.; A.-M. Slaughter, “The Real New World Order”, 76 Foreign Affairs (1997)
183, 184 et seq.; also published as “Government Networks: The Heart of the Liberal
Democratic Order”, in Fox/Roth, supra note 45, 199; R. Stewart, “Administrative Law in
the Twenty-First Century”, 78 N.Y.U.L. Rev. (2003) 437, 455 et seq.
81
See the contributions in the collected volumes J. Kirton & G. von Furstenberg (eds.), New
Directions in Global Economic Governance (2001) and J. Kirton et al. (eds.), Guiding Global
Order (2001); P. Hajnal, The G7/G8 System – Evolution, Role and Documentation (1999).
82
For the basis of a singular American status in international law see M. Reisman, “Assessing
Claims to Revise the Laws of War”, 97 AJIL (2003) 82 et seq., 90; as an expression of
democratic constitutionality Kahn, supra note 52, 10 et seq., 18; Rubenfeld, supra note
75; an extensive account of the conceptional background by E. Afsah, “Creed, Cabal or
Conspiracy – The Origins of the Current Neo-Conservative Revolution in US Strategic
Thinking”, 4 German Law Journal (2003) 901 et seq.
83
R. Cooper, The Breaking of Nations. Order and Chaos in the Twenty-first Century (2003) 83
et seq.
79
effects of domestic law and policy on foreigners or other peoples consequently

lie outside of the ambit of this principle.84
In this understanding, if globalisation is considered desirable or inevitable, it
should be shaped, where possible, according to preferences and decisions found
in the national democratic process. The implementation of national interests vis-
à-vis the interests of other States and foreigners can accordingly be construed as
the realisation of the democratic principle of the legally relevant constitution, i.e.
the constitution that grants power to the national government in question. Seen
in this light and constitutionally speaking, only George W. Bush’s responsibility
towards the American people is legally relevant and enforcing national security
against Afghanistan or Iraq contains a democratic dimension.85
To be sure, not all scholars who construe democracy on this theoretical
basis advocate unilateralism. There is room for different approaches if further
considerations and principles are given more weight, such as peace,86 interna-
tional cooperation or respect for international law.87 It is, however, important
to see that international obligations almost by necessity lead to a constriction
of democracy under this understanding.
b. The Universalist Responses: Cosmopolitan Law versus State-Centred Integration

The starkest contrast to the above-mentioned approach is formulated by those
who advocate cosmopolitan law that they consider to be the ultimate normative
objective of modernity. Such law, they argue, should be the foundation and
expression of a democratic global federation or cosmopolitan democracy. Accord-
ingly, the nation-state is viewed as a mere intermediate stage in the institutional
evolution of public power. This understanding rests on a long tradition which
has left its marks on international law scholarship,88 as well as political thinking
84
Kahn, supra note 75, 8.
85
See the National Security Strategy of the USA: “In the war against global terrorism, we
will never forget that we are ultimately fighting for our democratic values and way of life.”
The National Security Strategy of the United States of America, White House, September
2002, III., at <http://usinfo.state.gov/topical/pol/terror/secstrat.htm#nss1>. In this
sense one can also point to the Reform Treaty amending the Treaty of the European Union
Article 2 to read in para. 5: “In its relations with the wider world the Union shall uphold
and promote its values and interests”.
86
L. Chieffi, Il valore costituzionale della pace (1990).
87
For example, the German Federal Constitutional Court (BVerfG), BVerfGE 89, 155, 185 et
seq.
88
G. Scelle, Le Pacte des Nations et sa liaison avec Le Traité de Paix (1919) 101 et seq., 105 et seq.;
id., 1 Précis de droit des gens (1st edn., 1932) 188 et seq.; W. Schücking, “Die Organisation
der Welt”, in W. van Calker (ed.), Festschrift für Paul Laband (1st edn., 1908) 533 et seq.;
whereas Kelsen, the most significant representative of monism in international law,
80
in general.89 Its main premise is that only a democratic world federation can lay
down law which shapes globalisation according to the needs of humanity. The
international political level must itself operate democratically in order to satisfy
the democratic principle.90 This proposition usually stems from a fundamental
rights understanding of democracy,91 which focuses mostly on self-determination.
Only such an emphatic understanding of democracy is capable of demanding a
world federation, something that many consider to be utopian.92
Yet, the demand for a democratic world federation can legally be construed
from the principle of democracy set out in national constitutions. If the principle
is understood as requiring individual self-determination, a structural democratic
deficit in the age of globalisation arises. Many State measures impact individuals
in other States. However, these persons, as non-citizens, have almost no possibility
for asserting their interests and preferences within the democratic process of the
regulating State. Against this background, participation in and the opening up
to global democratic institutions may overcome democratic deficits in national
decision-making processes. Thus, the principle of democracy in the constitu-
tions of many States can be construed as aiming towards an almost Hegelian
superseding (Aufhebung) of traditional statehood.
Most recent publications on international law which envisage a world federation
devote little space to the democratic principle.93 Research in other disciplines has
remains cautious, to some extent even sceptical; see H. Kelsen, Peace Through Law (1944)
9 et seq.
89
See, e. g., E. Jünger, Der Weltstaat. Organismus und Organisation (1960).
90
D. Archibugi, “Principi di democrazia cosmopolita”, in D. Archibugi & D. Bettham (eds.),
Diritti umani e democrazia cosmopolita (1998) 66, 90 et seq. Some scholars consider national
elections as hardly capable of legitimising important governmental decisions on the
international plane, cf. H. Brunkhorst, Solidarität. Von der Bürgerfreundschaft zur globalen
Rechtsgenossenschaft (2002) 20.
91
F. Müller, Demokratie zwischen Staatsrecht und Weltrecht, (2003) 11 et seq.; J. Habermas,
Faktizität und Geltung (1992) 532 et seq. and passim; C. Offe & U. K. Preuß, “Democratic
Institutions and Moral Resources”, in D. Held (ed.), Political Theory Today (1991) 143 et
seq.
92
Presented as an outright ethical obligation by O. Höffe, Demokratie im Zeitalter der Glo-
balisierung (2nd edn., 2002) 267.
93
Cf. B. Fassbender, “The U.N. Charter as a Constitution”, 36 Colum. J.T.L. (1998) 574 et
seq.; id., UN Security Council Reform and the Right of Veto. A Constitutional Perspective (1998)
301 et seq.; S. Hobe, supra note 36, 281; J. Delbrück, “Wirksameres Völkerrecht oder neues
‘Weltinnenrecht’”, in J. Delbrück, Die Konstitution des Friedens als Rechtsordnung (1996)
318 et seq.; but see also his more recent piece “Exercising Public Authority Beyond the
State”, 10 Indiana Journal of Global Legal Studies (2003)1, 29, 37 et seq.
81
been much more prolific in this regard.94 The key for democratisation of the
international realm is often considered to be a global institution of a parliamentar-
ian nature. Such an institution would catalyze global democratic processes and
the formation of a global public.95 It is not uncommon for the European Union
to be viewed as an example.96 The constitutions of the established democratic
nation-states are sometimes also conceived as guiding lights of a global order,
albeit not as blueprints. Some authors, however, advocate new but little-defined
sets of institutions in order to anchor democracy on the world plane.97 Within
the latter models, representative organs are only accorded a subordinate role.
Be that as it may, law-making under contemporary international law is
considered unsatisfactory and in need of a far more solid democratic basis. Many
scholars place much emphasis on transnationally operating non-governmental
organisations, which they construe as the nucleus of a future democratic global
public capable of animating global democratic institutions.98
The other strand of thinking under the universalist paradigm advocates
intense cooperation among democratic nation-states and focuses accordingly
on the international law of co-operation. The key belief is that the democratic
nation-state is and remains the essential framework for the realisation of the
democratic principle as well as the pivotal point of the international system.
The nation-state is considered capable of thoroughly mastering the challenge of
globalisation in close cooperation (including partial integration) with other States
and with the aid of international organisations.99 In the course of globalisation,
the nation- state has been weakened and fragmented. Nevertheless, the two core
premises of a well-functioning democracy within a nation-state are considered
to remain intact:100 national elections and parliamentary institutions continue
94
The theoretical breadth of approaches is evident when comparing O. Höffe’s Kantian book
Demokratie im Zeitalter der Globalisierung, supra note 92, with the Hegelian approach taken
by H. Brunkhorst, Solidarität, supra note 90, 110 and 184.
95
With concrete proposals Archibugi, supra note 90, 98 et seq., 109; also D. Held, Democracy
and the Global Order (1995) 278 et seq.; id., “Kosmopolitische Demokratie und Weltordnung.
Eine neue Tagesordnung”, in M. Lutz-Bachmann & J. Bohman (eds.), Frieden durch Recht
(1996) 220 et seq., 232.
96
For an early discussion, see J. Monnet, Memoires (1976) 617; also E.U. Petersmann, “The
Transformation of the World Trading System through the 1994 Agreement Establishing
the World Trade Organization”, 6 EJIL (1995) 161, 221.
97
Müller, supra note 91, 143.
98
Brunkhorst, supra note 71, 209 et seq.; Müller, supra note 91, 139.
99
As a form of “global governance”, cf. Enquête Commission, Summary, supra note 36,
76 et seq.; K. König, “Governance als Steuerungskonzept”, in K. König et al., Governance
als entwicklungs- und transformationspolitisches Konzept (2002) 9 et seq.
100
C. Walter, “Constitutionalizing (Inter)national Governance”, 44 GYIL (2001) 170 et
seq.
82
to convey a sufficient amount of democratic legitimacy and the State retains the
capacity to enforce its will throughout the national society.
Under German constitutional law, the “openness” of Germany towards
international legal regimes of a cooperative nature is constitutionally required.101
The same is true for the European Union.102 Such openness can be deduced
from the constitutional principle of democracy. The argument runs similar to
the one already presented with respect to cosmopolitan democracy. The deduc-
tion is based on a fundamental rights understanding of democracy which not
only includes citizens, but requires – in order to minimize heteronomy – that
the preferences and interests of affected foreigners be taken into account.103
Thus, international law acquires its own and specific democratic significance,
unavailable to domestic law, since international law is the standard instrument
for giving foreigners a voice in national law-making.104
This school of thought distinguishes itself from that focussed on State
sovereignty because it does not understand openness towards international
law and international policy as a disadvantage for democracy. On the contrary,
according to this vision, such openness realises a democratic potential that the
closed or hegemonic State cannot attain. Loss of national self-determination is
compensated through greater transnational participation.
The fundamental differentiation to the cosmopolitan school of thought lies
in the fact that global democratic institutions are considered in practice futile
and – as legal and political projects – normatively problematic. Following a
certain interpretation of Kant’s essay “Perpetual Peace”, a world federation is
understood as potentially despotic.105 This school of thought attracts the support
101
According to the preamble, the Basic Law is: “… moved by the purpose to serve world
peace as an equal part of a unified Europe“; for a detailed discussion see H. Mosler,
“Die Übertragung von Hoheitsgewalt”, in J. Isensee & P. Kirchhof (eds.), 7 Handbuch des
Staatsrechts der Bundesrepublik Deutschland (1992) § 175, para. 14; Tietje, supra note 40,
1087.
102
Article 11 EU Treaty; even more forcefully, the Lisbon Reform Treaty inserting the new
Article 10a on the Union’s external action.
103
S. Langer, Grundlagen einer internationalen Wirtschaftsverfassung (1995) 23 et seq., 51; for an
appropriate understanding of the concept of sovereignty see Dahm, Delbrück & Wolfrum,
supra note 45, 218 et seq.; R. Wahl, Verfassungsstaat, Europäisierung, Internationalisierung
(2003) 17. This notion is also expressed in BVerfGE 83, 37, 52.
104
Some reports of the WTO’s Appellate Body seem to be inspired by this understanding, WTO
Appellate Body Report, Standards for Reformulated and Conventional Gasoline, AB-1996-1,
WT/DS2/AB/R (Apr. 29, 1996); United States – Import Prohibition of certain Shrimp and
Shrimp Products, Recourse to Article 21.5 of the DSU by Malaysia AB-2001-4, WT/DS58/
AB/R (Nov. 21, 2001).
105
I. Kant, “Zum ewigen Frieden”, in I. Kant (K. Vorländer (ed.)), Kleinere Schriften zur
Geschichtsphilosophie, Ethik und Politik (1964) 115, 147.
83
of most international legal scholars. Within it, two positions for determining the
appropriate forum for cooperation can be distinguished: the unitarian model of
legitimation and the pluralist model of legitimation.
Under the first position, the democratic principle is institutionally realised
only through the choices of the electorate. All public acts achieve a democratic
quality only when they are either enacted (exceptionally) by the citizenry as
such (through referenda) or can be traced back to the decisions of elected bodies
(the “chain of democratic legitimation”).106 According to this understanding,
the democratic legitimacy of international law can be improved by better
parliamentary control of the executive,107 the establishment of international
institutions of a parliamentary nature108 or referenda.
The involvement of those affected or other civil actors in decision-making
processes is not attributed any positive relevance for democracy by the unitarian
model. Rather, it sees the democratic principle as shedding negative light on
such participatory procedures, because they represent a potential threat to the
democratic “chain of legitimation”. It is this point which distinguishes this position
from the pluralist one described below: civil participation, in particular that of
non-governmental organisations, cannot strengthen the democratic credentials
of international law or international politics. No procedures developed so far are
seen as complying with core requirements of the democratic principle, above all
the requirement of democratic equality.109
Consequently, the democratic openness to the interests of citizens of other States
is carried out procedurally via governmental cooperation as well as international
106
The “chain of legitimation” is a core concept of German constitutional law; see E.-W.
Böckenförde, “Mittelbare/repräsentative Demokratie als eigentliche Form der Demokratie”,
in G. Müller (ed.), Festschrift für Kurt Eichenberger (1982) 301 et seq., 315; this has been
important in numerous decisions of the Federal Constitutional Court, see most recently
BVerfG, Az.: 2 BvL 5/98 5. Dec. 2002, at <http://www.bundesverfassungsgericht.de/
cgi- bin/link.pl?entscheidungen>, n. 156 with further references concerning earlier
decisions.
107
Cf. R. Wolfrum, “Kontrolle der auswärtigen Gewalt”, 56 Veröffentlichungen der Vereinigung
der Deutschen Staatsrechtslehrer (1997) 38 et seq., 45 et seq., 61 et seq.; furthermore,
K. Hailbronner, “Kontrolle der auswärtigen Gewalt”, 56 Veröffentlichungen der Vereinigung
der Deutschen Staatsrechtslehrer (1997) 7 et seq.
108
S. Kadelbach, “Die parlamentarische Kontrolle des Regierungshandelns bei der Be-
schlußfassung in internationalen Organisationen”, in R. Geiger (ed.), Neue Probleme der
parlamentarischen Legitimation im Bereich der auswärtigen Gewalt (2003) 41, 53, 56 et seq.;
for an overview of the relevant international practice, see H. Schermers & N. Blokker,
International Institutional Law (3rd. edn., 1995) § 558 et seq.; H. Lindemann, “Parliamentary
Assemblies, International”, in R. Bernhardt (ed.), 3 Encyclopedia of Public International
Law (1997) 892-898; C. Walter, “Parliamentary Assemblies, International, Addendum”,
id., (1996) 898-904.
109
Stoll, supra note 42, V A 4 b, VII.
84
bodies that are essentially controlled by national governments. Thus, the execu-
tive and technocratic character of international political processes is not viewed
within this framework as problematic under the democratic principle. Moreover,
further international legalisation and a cautious development of international
organisations towards more autonomy (“constitutionalisation of international
law”110) do not raise concerns. The basic premise of this position is that additional
international legalisation and more autonomous international law-making are
required in order to cope with the challenge of globalisation. Accordingly, limita-
tions on national democracy do not constitute the main legitimatory problem
of international law. This understanding can be summarized as follows: there
cannot be a democratic world federation, but there can be a world of closely and
successfully cooperating democracies; it is the task of contemporary scholarship
to contribute to realising this objective.111
By contrast, the second pluralist position holds that the international law
of co-operation can substantially increase the democratic legitimacy of inter-
national law if new forms of civic participation are adopted. Such forms, going
beyond elections and referenda, are possible avenues for the realisation of the
democratic principle and adequate responses to the detachment of international
processes from national parliamentary control.112 The underlying premise is
that enabling the participation of non-governmental organisations (NGOs), as
exponents of the international civil society, represents a prime strategy to further
the democratic principle on the international plane.113 At its heart usually lies
a fundamental rights understanding of democracy focussed on the opportunity
110
Uerpmann, supra note 68, 565 et seq.
111
This also appears as the vision of J. Habermas, “Hat die Konstitutionalisierung des
Völkerrechts noch eine Chance”, in J. Habermas, Der gespaltene Westen (2004) 113, 134
et seq., 137 et seq.; J. Habermas, The Divided West (2006), at 115 et seq.
112
Of particular interest in recent years has been the access of civil actors to the WTO Dispute
Settlement mechanism, P. Mavroidis, “Amicus Curiae Briefs before the WTO: Much Ado
about Nothing”, in Liber Amicorum Claus-Dieter Ehlermann, supra note 30, 317 et seq., and
D. Steger, “Amicus Curiae: Participant or Friend? The WTO and NAFTA Experience”, id.,
419 et seq.; H. Ascensio, “L’amicus curiae devant les juridictions internationales”, 105
Revue générale de droit international public (2001) 897 et seq.
113
Enquête Commission, supra note 36, 439 et seq.; B.-O. Bryde, “Konstitutionalisierung des
Völkerrechts und Internationalisierung des Verfassungsrechts”, 42 Der Staat (2003)1, 8
et seq. ; R. Khan, “The Anti-Globalization Protests: Side-show of Global Governance, or
Law-making on the Streets?”, 61 Zeitschrift für ausländisches öffentliches Recht und Völkerrecht
(Heidelberg Journal of International Law) (2001) 323; Charnovitz, supra note 60, 299; I.
B. Boutros-Ghali, An Agenda for Democratization (United Nations, New York 1997), Sales
No. E.97.1.3, 29, 34 et seq.
85
for participation of the individual, but sometimes also neo-corporative theories

of democracy.114
The central institutional issue for the pluralist approach concerns the develop-
ment of decision-making systems in such a way that civil actors can participate in
international procedures and ultimately in international law-making, conveying
social interests, preferences and values. This position emphasises the need for
transparency of international politics, seeing it as indispensable for effective
democratic involvement of the nascent transnational civil society.
4. New Approaches
Particularism and universalism remain the most important paradigms in Western
international scholarship. The preceding understandings rest on the premise
of the supremacy of politics over other societal spheres. However, numerous
scholars diagnose a loss of this supremacy, finding instead new disorder because
of overwhelming differentiation and fragmentation. Some even go so far as
claiming that the world is relapsing into a situation akin to the Middle Ages.115
The supremacy of the nation-state over other societal spheres is said to have
become substantially eroded, leading to the inability of the State to organise
society effectively. Any conception which envisages the realisation of democracy
through the supremacy of politics is, consequently, futile and hopeless in the
era of globalisation.
With reference to the future of democracy, most representatives of this vision
agree that democracy organised through state procedures has lost much of its
meaning. Accordingly, the political apathy of many citizens appears intuitively
comprehensible. Some even diagnose – by no means joyously – the end of de-
mocracy.116 Public law scholarship cannot shrug off such a diagnosis. Should it
prove convincing, a fundamental reorientation of constitutional scholarship and
practice would be advisable, requiring for example the horizontal application of
fundamental rights as an instrument for protecting individuals from infringe-
ments by other private actors.117 Furthermore, in order for constitutional law to
114
This latter understanding informs the EU Commission’s White Paper on European Govern-
ance, see COM (2001) 428 final, at <http://europa.eu.int/eur- lex/en/com/cnc/2001/
com2001_0428en01.pdf>.
115
Cf. supra, III. 1.
116
J.-M. Guéhenno, Das Ende der Demokratie (1994) 13 et seq., 162 and passim; similarly
Böckenförde, supra note 75, 116; R. Dahl, “Can International Organizations be Demo-
cratic?”, in I. Shapiro & C. Hacker-Cordón (eds.), Democracy’s Edges (1999) 19 et seq.
117
D. Thürer, “Modernes Völkerrecht: Ein System im Wandel und Wachstum – Gerechtigkeits-
gedanke als Kraft der Veränderung?”, 60 Zeitschrift für ausländisches öffentliches Recht und
Völkerrecht (2000) 557, 587 et seq.; G. Teubner, “Globale Zivilverfassungen: Alternativen
86
realise its basic principles throughout an entire society,118 new legal institutions
would have to be conceived and established.
Notwithstanding the diagnosed demise of the supremacy of politics, there
are also proposals for maintaining democracy in this new setting. They can best
be described as aiming at the control of any powerful actor. Gunther Teubner
asserts the formation of a new system of the separation of powers provided
by separate and competing social systems. These systems in turn are seen as
responding to the democratic principle through the formation of “dualistic social
constitutions”. Any such system is divided into a spontaneous sphere which allows
for participation of individuals and an organisational sphere which checks the
other systems.119 It is also argued that democracy might be maintained through
another radically innovative avenue, i.e. by basing new law less on decisions of
public bodies, but rather on spontaneous emergence from within international
society. The prime example of this is the alleged emergence of legal norms that
result from international society outrage in response to specific situations.120
Positions in the “governance” debate arrive at similar conclusions to the extent
that consensual forms for the development and implementation of policy are
considered to be appropriate responses to the challenges of globalisation. Given
the largely fragmented international system, the consensus of large businesses,
NGOs and further important actors is deemed necessary and adequate.121 Such
approaches are mostly based on models of associative democracy,122 whereby
democracy is realised through consultation between the representatives of
collective interests.
Interesting as many of these new approaches are, they have not yet succeeded
in forming new paradigms able to inform Western international scholarship
zur staatszentrierten Verfassungstheorie”, 63 Zeitschrift für ausländisches öffentliches Recht

und Völkerrecht (2003) 1, 4 et seq.; Guéhenno, supra note 116, 14.
118
This is a core concern of European public law scholarship.
119
G. Teubner, “Privatregimes: Neo-spontanes Recht und duale Sozialverfassung in der
Weltgesellschaft”, in D. Simon (ed.), Festschrift für Spiros Simitis (2000) 437, 447 et seq.;
id., “Globale Zivilverfassungen”, supra note 117, 25 et seq.
120
Teubner, supra note 62, 255; A. Fischer-Lescano, “Globalverfassung: Verfassung der
Weltgesellschaft”, 88 ARSP (2002) 349, 356 et seq.; see also M. Reisman, “A Critique of
International Treaty Making”, in R. Wolfrum (ed.), The Development of International Law
in Treaty Making (2004).
121
Issues in Global Governance/Our Global Neighborhood (Commission on Global Governance
ed., 1995) 253 et seq.
122
P. Schmitter, “Interest, Association, and Intermediation in a Reformed Post-Liberal De-
mocracy”, in W. Streeck (ed.), Staat und Verbände (1994) 161; A. Martinelli, “Governance
globale e responsabilità democratica”, in F. Bruni & N. Ronzitti (eds.), L’Italia e la politica
internazionale (2001) 47, 51 et seq.
87
as a collective exercise.123 Particularism and universalism still build the main

conceptual framework of international lawyers. They will now be presented in
more detail.
III. Particularism: The Impossibility of Global Order
1. The Core of the Paradigm

Particularism is the paradigm which is at once the most ancient, embedded in
common sense, and vociferous at the outset of the 21st century. It embraces a
stream of theories reaching from the Greek roots of Occidental political thinking
to today’s US-American Neocons. Particularism rests on two basic assumptions
shared by all theories within this paradigm. The first sees order as possible only
within the particular polity; it cannot extend to humankind as a whole. The second
assumption asserts that a polity is only viable if particular: its internal cohesion
depends upon something that is exclusively shared by all members. Consequently,
the polities are conceived as competing, even conflicting, and the denial of the
possibility of a common comprehensive public order entails that external conflicts
can easily escalate. The competition for scarce resources in a world without any
universally shared public order has, as a general consequence, the strengthening
of the polity’s internal ties. This second dimension of particularism leads many
particularistic theories to be also holistic. The qualification as holistic depends
on the assumption that the theory’s basic unit is a whole of humans, be it a
demos, a nation or a state, but not the individual as such. The theories which
elaborate this paradigm tend towards the firm defence of the polity’s interests.
This is seen as an ontological datum on which any responsible understanding
of international order and law needs to be built.
Accordingly, international law is best understood as an instrument of
coexistence or perhaps of hegemonic power. As a consequence, Articles 2
para. 4 and 51 of the UNC should be interpreted in a way accommodating the
interests of those states who are capable of projecting their power globally. Any
other interpretation would miss the very point of international law and would
probably damage it by overstretching its normativity. Also human rights should
be interpreted and applied cautiously.
2. Three Variants of the Paradigm

The paradigm of holistic particularism has found expression in widely differing
theories in the last two-and-a-half thousand years by which it responded to
evolving theoretical discourse and social evolution. Just imagine how different
For more detail, see D. Kennedy, supra note 15.

123
88
the intellectual, social, technological world of Thukydides’ Peloponnesian War

is from that of the Neocons’ Iraq war. In particular, three variants have emerged,
mostly as a reaction to deep transformations which undermined the paradigms’
persuasiveness: realism, nationalism, and hegemonism.
Usually many of the positions that we subsume under the term particularism are
conceived of as realist. We see this term as unfortunate. Firstly, realism indicates
two different issues. One is simply that any scholar and any theory needs to take
reality into account. This, however, is a truism, and there is no serious theory
that purports what it conceives as unrealistic positions. Therefore, this broad
understanding is of no use for mapping the theoretical landscape. The second
understanding of realism is far more narrow and only relates to a subgroup of
the particularist theories. Its basic tenet is that all politics is a struggle. In that
guise realism is the oldest variant of the paradigm holistic particularism, as its core
assumptions were developed in ancient Greece. Reduced to a simple formula, its
main assertion is that all politics is nothing but struggle for power. After having
been elaborated with laconic mastery by the Greek historian Thucydides (460
– 400 b. Chr.) in his report on the Peloponnesian War,124 the “realistic” view of
politics was re-proposed, substantially unchanged, by Machiavelli (1469-1527)
in the early modern era.125
However, as convincing as it may appear at first sight, a severe flaw afflicts
this paradigm from the outset. Neither Thucydides and Machiavelli, nor their
numerous successors or epigones, manage to overcome a serious deficit of
realist thought, namely, its inability to explain the evident difference between
internal and external policies. Whereas there is some evidence that the rule of
law is not always a top priority in foreign policy, a general claim of lawlessness
is not persuasive if applied to the political struggle within a polity. The latter is
manifestly ruled by laws which mostly succeed in establishing a certain degree
of responsibility of rulers towards fellow members of the polity. The failure to
explain the whole realm of politics (inside and outside the polity) as a quest for
power might be the most significant reason (at least conceptually), why roughly
half a century ago, classic realism gave way to the so-called “structural realism”
or “neo-realism” of the new discipline of international relations. Only through
this limitation to the international sphere can its basic assumption gather suf-
ficient evidence for being a meaningful proposition.126
This problem becomes most evident in Hans J. Morgenthau, one of the founders
of the new discipline of International Relations in the U.S.127 He maintains the
124
Thucydides, The Peloponnesian War (1959), at V, 86.
125
Niccolò Machiavelli, Il Principe (1513); Discorsi sopra la prima deca di Tito Livio (1513-
1519).
126
Slaughter, supra note 5, at 30.
127
Hans J. Morgenthau, Politics Among Nations. The Struggle for Power and Peace (1948).
89
pretence of explaining all politics as a struggle in defence of self-interests. But,

he concedes the fundamental difference between domestic and international
politics in this respect,128 focusing his “realistic” analysis exclusively on the lat-
ter. The scholarship that grew under the umbrella of his new interpretation of
realism eventually gave up the closer examination of the foundations of domestic
policies. Founding the “neo-realistic” approach to international relations, it
came to focus exclusively on the way states, as the sole (or at least as the main)
actors in the international arena, organize their mostly hostile interactions.129
Trying to explain why there is a rule of law in domestic politics, Morgenthau
resorted to the concept of the nation as the consolidating factor within the poli-
ty.130 He thereby turned – while abandoning the variant of “classic” realism – to
the central theoretical tool of the second variant of the particularistic-holistic
paradigm, namely to the idea of the nation as a community of a particular history,
destiny, culture or ethnos.
Nationalism as a theory asserts that the individual’s belonging to a nation
founded on a particular history, destiny, culture or ethnos allows for the polity’s
internal cohesion. This idea also justifies the quest for solidarity and inclusion
inside as well as collision and exclusion outside. Although less ancient than
realism, nationalism has as well a quite long history, dating from the time
of political Romanticism, when conservative political writers, especially in
Germany, borrowed the nation-concept from the progressive lexicon of the
French Revolution and adapted it to the needs of a re-founded social and political
conservatism.131 Founding the cohesion of the polity on the nation, a powerful
idea was created.
For the next century and a half, this paradigm inspired the vision of the
nation and boosted internal cohesion in a way that far exceeded the antiquated
Aristotelian vision of the society as an enlarged family.132 It allowed broader
social classes to be involved in the polity that no longer could be excluded from
political process. This development corresponded historically with and is perhaps
connected to aggressive foreign policy, colonialism and imperialism. However, it
also coincided with the creation of a body of treaties and doctrines today often
referred to as “classical international law”. This body provides a legal framework
for the expansion of the nation-state, but also for peaceful coexistence and even
Id., at 31, 35.

128
For perhaps the most eminent historic exponent within the very voluminous literature,
129
see Kenneth N. Waltz, Theory of International Politics (1979).

Morgenthau, supra note 127, at 118, 244, 471.
130
Adam H. Müller, Die Elemente der Staatskunst (1809).

131
Aristotle, The Politics (1988), at I, 2, 1252a and following; Jean Bodin, Six livres de la répu-
132
blique (1576), at I, I, 1; Robert Filmer, Patriarcha, Or the Natural Power of Kings (1680).
90
constructive co-ordination. Being constitutively without a spine it worked as a

“gentle civilizer of nations.”133
The national variant of holistic particularism has found a contender within
the paradigm due to its difficulties to respond to the challenges of the ongoing
transition to an ever-more-closely interlinked world. An idea mainly concentrated
on the flowering and protection of a self-sufficient nation does not provide the
best conceptual precondition for developing responses to a world where states
are ever more intertwined and ever less self-sufficient. Since a universal perspec-
tive with a truly public international order is beyond the particularistic-holistic
paradigm, the quest for order beyond the borders of the nation found its answer
in the turn to hegemonism as the third variant.
Through the hegemonic variant the particularistic-holistic paradigm incor-
porates a global perspective without becoming universal, that is, confirming the
premise of the non-universality of order. An early elaboration was given by Carl
Schmitt with his theory of “large-range-order” (Großraumordnung).134 Moving
from the diagnosis that the traditional concept of the European nation-state
would be inadequate to manage the challenges of a new era,135 he proposed a
Großraumordnung as an idea of global (yet not universal) order based on a few
great powers. Under this new vision, those powers would be allowed to enlarge
both the range and meaning of order as well as the resources needed to achieve
it.
The hegemons should guarantee the order within their respective spheres of
influence, which would be in the hand of an ethnically and ideologically homo-
geneous group organized within a nation-state as the heart of the Großraum.
Between the spheres of influence the principle of non-intervention should rule,
and the international law between these powers should maintain its “classical”
form. In Schmitt’s conception, the particular community assumes continental
proportions due to a more comprehensive definition of the possible reasons for
the cohesion. No universal law or order is recognized by Schmitt to be more than
a mere deceit. For some decades Schmitt’s theory of Großraumordnung enjoyed
little interest and even less appreciation.
However, the influence of his thought remains quite strong: his hegemonic
reinterpretation of the particularistic-holistic paradigm, in general, and of
international relations in particular, outlined the comprehensive definition
133
Koskenniemi, supra note 15.
134
Carl Schmitt, Völkerrechtliche Großraumordnung mit Interventionsverbot für raumfremde
Mächte (1939). This concept was later redefined and the theory substantially restated,
in Carl Schmitt, Der Nomos der Erde im Völkerrecht des Jus Publicum Europeum (1950).
135
Carl Schmitt, “Das Zeitalter der Neutralisierung und Entpolitisierung” (1929), in Carl
Schmitt, Der Begriff des Politischen. Text von 1932 mit einem Vorwort und drei Corollarien
(1963), at 87.
91
of political communities as actors of international relations as well as of the

existential dimension of conflicts. This reinterpretation reappeared recently in
Huntington’s influential idea of the “clash of civilisations.”136
3. The American Neocons

Among the variants of the particularistic-holistic paradigm, hegemonism appears
to be most in tune with the challenges of globalisation: it seeks to extend the
reach of the polity beyond the nation for pursuing globally its interests or even
values without ending in the impasse of colonialism or in a web of international
governance. Recently, a new and politically powerful version of hegemonism
has been developed by the US-American neoconservative movement. Since this
stream of thinking still lacks its defining work, the following discussion combines
various authors in order to work out what can be considered as the most recent
Gestalt of the paradigm.
Sketching tradition and innovation in a nutshell, one can state that as always
under this paradigm – the assumption reigns that social, political and juridical
order based on public law can only be realized within the single polities, whereas
beyond them, in the realm of the relations between the polities, a truly public
order is impossible; institutions which claim to be a step in that direction are to
be regarded with deep suspicion. Innovation can be found in two aspects shared
by most neocons. First, the realists’ prudential restraint on using power gets
lost in the neoconservative vision. Second, the democratic principle assumes a
founding role within the paradigm: it is used as justification for the aggressive
pursuit of the national interest, for intervention into non-democratic states and
for scepticism of international law.
a. The Critique of International Order through Public International Law

The scepticism of a public international order based on public international
law is a shibboleth of the Neocons. A telling example is provided by Jeremy A.
Rabkin. In Rabkin’s view, international law is an instrument for restraining
the well-motivated and legitimate national interests of the United States, as the
paladin of the free world, and of all other liberal and democratic nation-states.
As it was still called “law of nations” – Rabkin argues – international law was
largely about war and commerce, and therefore limited in reach and range.137
Moreover, it was fundamentally bilateral, and pre-existed international institu-
tions. There was no room for a nebulous international community. He criticises
what he sees as international law’s development into a much more ambitious
Samuel P. Huntington, The Clash of Civilizations (1996).

136
Jeremy A. Rabkin, Why Sovereignty Matters (1998), at 24.

137
92
and invasive enterprise pretending to give effect to the alleged will of nothing
less than humankind itself.
The consequence, according to Rabkin, has been not only a loss of efficiency
but also a shift in the political meaning of international law. By building institu-
tions which pretend to be binding on sovereign nation-states, contemporary
international law is becoming “a sheer monument to collectivist ideology.”138
That change, Rabkin claims, should pose in itself a problem for liberalism. Yet,
an even more serious challenge arises from it: in a world which is characterized
by a large number of non-democratic states, binding international institutions
can represent a handicap for liberal states and for their actions taken in defence
of liberty. In this light, international law is often an ideological weapon of
indecent positions.
Not every thinker in this movement is totally set against international law
and institutions, not least because of their possible usefulness. As such, this is
presented by Robert Kagan. He shares Rabkin’s position so far as he considers
the idea of a legalisation of international relations as based on “legitimacy
myths.”139 The United Nations is far from being “the place where international
rules and legitimacy are founded.”140 However, the United Nations and the
Security Council as its main organ are useful instruments serving the interests
of the nation-states. Kagan points out that this judgment holds for the foreign
policy of the super-power. This is shown in cases like the intervention in Haiti in
1994 or the Iraq bombing in 1998.141 At the same time, international law is not
able to constrain powerful states. As evidence Kagan refers to the Kosovo war in
1999, which, although waged while circumscribing or even flouting the will of the
United Nations, had been considered as legitimate by France and Germany. This
serves as evidence for the limits of a legalisation of the international order.
This scepticism is elaborated in Jack L. Goldsmith’s and Eric A. Posner’s book
on The Limits of International Law. It sets out to show that international law is
constitutively incapable of providing for a truly public international order.142
Using rational choice theory, they claim to prove that international law has little
normative influence on the behaviour of states because states, irrespective of
the law, always follow their peculiar interests, none of which is the international
rule of law.
The limits to international law are not just factual, they are also normative,
due to democracy. Here, they upset the Kantian theory which asserts that
138
Id., at 95.
139
Robert Kagan, “America’s Crisis of Legitimacy”, 83 Foreign Affairs (2004) 65, 73.
140
Id., at 73.
141
Id., at 74.
142
Jack L. Goldsmith, Eric A. Posner, The Limits of International Law (2005).
93
representative democracies are far more prone to subscribe to international law

and a peaceful public international law.143 Posner and Goldsmith claim that one
of the most important reasons why democratic states do not submit themselves
to international rules and international institutions consists in their specific form
of domestic legitimacy, namely the power of the people. Insofar as governments
are accountable to the citizens in democracies, and the citizens are not prone to
prefer altruistic policies, liberal democracies would be precluded from pursuing
cosmopolitan projects.144 Moreover, international law is scorned as it limits the
possibility of democratic self-government.
In Goldsmith and Posner’s view, the more liberal and democratic the polity,
the less willing it will be to submit itself to international rules not immediately
supporting their interests. Yet, the respective discrepancy with Western European
states needs to be explained. Goldsmith and Posner join Kagan in ascribing this
difference to the difference in power: “Powerful states do not join institutions that
do not serve their interests.”145 Following the interpretation of democracy and
compliance with international rules as inversely related, therefore, a democratic
state will always prefer to rely on its own resources and interests, unless it is not
strong enough to take full responsibility for its actions.
An extensive analysis of the epistemological deficits of Goldsmith and Posner’s
theory would go far beyond the purposes of the present contribution,146 but some
points need to be discussed in light of the objective of this course. As a presup-
position of their research, Goldsmith and Posner assume some far-reaching
axioms,147 like the definition of the state as the unique significant actor in the arena
of international relations, as well as the assumption of a merely instrumental
concept of rationality according to which the only rational behaviour would
Kant, supra note 105; cf.: A. Moravcsik, “Taking Preferences Seriously: A Liberal Theory
143
of International Politics”, 51 International Organization (1997) 513-553.

Goldsmith and Posner, supra note 142, at 212.
144
Id., at 223. This is precisely one of the most important arguments articulated by Kagan
145
in his successful book On Paradise and Power (2003) in order to explain the differences
in foreign policy between the United States and Europe. For an analysis of content and
the background of Kagan’s bestseller as well as for a critique of his approach, see the
special issue of the German Law Journal (September, 2003), available at <http://www.
germanlawjournal.com/past_issues_archive.php? show=9 &volume=4>.
See, e.g., Paul Schiff Berman, “Seeing Beyond the Limits of International Law”, 84 Tex. L.
146
Rev. (2006) 1265; Andrew T. Guzman, “The Promise of International Law”, 92 Va. L. Rev.
(2006) 533; Oona A. Hathaway and Ariel N. Lavinbuk, “Rationalism and Revisionism
in International Law”, 119 Harv. L. Rev. (2006) 1404; Detlev F. Vagts, “International
Relations Looks at Customary International Law: A Traditionalist’s Defense”, 15 Eur.
J. Int’l. L. (2004) 1031; Anne van Aaken, “To Do Away with International Law? Some
Limits to the ‘Limits of International Law’”, 17 Eur. J. Int’l L. (2006) 289.
Goldsmith and Posner, supra note 142, at 4.
147
94
consist in pursuing short-termed and particular payoffs. However, these assump-

tions are far from self-evident. In fact, some questions arise from Goldsmith and
Posner’s axioms: is it correct, first, to treat collective actors (states) in the same
way as single actors (individuals)? And, second, does not a purely instrumental
understanding of rationality lead to an unconvincing view of human praxis? In
fact, game theory was conceived to explain the actions of concrete individuals,
not of complex social, political and administrative structures, which are difficult
to conceptualize as single players. Goldsmith and Posner assert that the assump-
tion is nonetheless justified by the particular shape of the international arena,
where states are normally perceived as acting as a unitary whole, and because
the “billiard ball” approach, considering every single state as a unity, albeit
“far from perfect”, would be simply “parsimonious.”148 This is in the sense that
it would reduce the number and complexity of analyzed phenomena in order
to concentrate on the most significant among them. This argument, however,
has little content in the face of one of the most relevant trends of our times: the
de-structuring of state unity and the progressive development of private and
public networks.149 Ignoring these new developments would not provide for a
healthy reductionism in scientific analysis, but rather for a misunderstanding
of the present reality. Furthermore, either rationality should be understood in
a more than purely instrumental sense150 or, even if it is conceived as a mere
instrument for the achievement of particular goals, it does not necessarily find
its highest self-fulfilment in the immediate maximisation of short-sighted payoffs.
From a more far-reaching point of view, it also might be argued that the creation
of norms, rules and solid international institutions to secure their compliance
is, already in itself, a better achievement of instrumental reason insofar as it
guarantees higher benefits in the long term.151
148
Id., at 6.
149
Anne-Marie Slaughter, A New World Order (2004).
150
Jürgen Habermas, Theorie des kommunikativen Handelns (1981); Andrew Linklater, The
Transformation of Political Community (1998); Thomas Risse, “‘Let’s Argue!’: Communi-
cative Action in World Politics”, 54 International Organization (2000) 1; Harald Müller,
“Arguing, Bargaining and All That: Communicative Action, Rationalist Theory and the
Logic of Appropriateness in International Relations”, 10 European Journal of International
Relations (2004) 395.
151
The most famous example of a non-short-sighted use of strategic rationality was delivered
at the very beginning of modern times by Thomas Hobbes, concerning the motivation
of the transition from the state of nature to civil society. See Thomas Hobbes, Leviathan
(1651), Chapt. XIII and following. For a different – and more recent – proposal to enlarge
the horizon of instrumental rationality, see Robert O. Keohane, After Hegemony (1984),
at 65.
95
b. Hegemonic Order
Public order is always particular according to Neoconservative thinking and it is
always holistic. Neoconservative thought shares with all variants of the paradigm
its two main characteristics, namely the idea that social, political and legal order
can only be possible within a well integrated polity as well as the notion that this
compactness relies largely on a fact (factum brutum) upon which to build public
order. This holds true even for those who use the individualistic methodology of
rational choice, such as Goldsmith and Posner, because they choose the state as
their basic unit and follow a communitarian theory of democracy. To understand
the state as an individual is rather a typical feature of holistic theory.
Rejecting the idea of a public international order based on public international
law, Neocons need to propose a substitute if they want to provide an answer for
the challenges of the 21st century. At this point, two further important aspects
of their conception have to be pointed out, the first collocating them within the
hegemonic variant of the paradigm; the second showing which novelty they
represent even compared to the hegemonic tradition. Indeed, Neocons have an
outstanding characteristic in common with the post-nationalistic hegemonic
thought of the 20th century, which distinguishes them from both the other vari-
ants of historical particularism. Albeit thoroughly sceptical about the possibility
of world order, realists and nationalists were willing to admit to the necessity
of a certain constraint as regards the goals pursued by the single political com-
munity in its international actions as well as the means deployed to achieve
them. On the one hand, realists like Thucydides, Machiavelli and, more recently,
Morgenthau152 admonish restraint in international relations, in order not to
overstretch the particular community’s capacities. This attitude can be traced
back directly to the power-based idea of politics peculiar to the “realist” school,
in which the claim for self-limitation is not a question of normative principles
but only of prudential behaviour grounded on a strategic understanding of
practical reason. By contrast, for the exponents of hegemonism as well as for
the Neocons, politics is the conveyer of aspirations held by communities kept
together not eminently by common interests, but rather by shared principles
in order to mobilize all available material and spiritual resources. On the other
hand, nation-states have been able, just in the golden age of the Weltanschauung
on which they were based, to develop an important body of international law.
Certainly, the agreements signed in that “foundational” time did not result in
enduring supranational institutions that could prevent the drive to war. They
were proven impotent in the face of the aggressive tendencies deeply rooted in
nationalistic thought and politics. This notwithstanding, the presence of a certain
openness to international agreements testifies to how nation-states could be able,
Morgenthau, supra note 127, at 10.

152
96
under favourable circumstances, to recognize the fundamental importance of

the normative element of law, though only in a transitional way. This element is
absent both in the hegemonic variant of the paradigm and in neoconservative
thought. Facing a vital fight for survival or decline, a worldwide battle for life
or death, no normative or prudential constraint can be accepted anymore: the
community’s security requires the imposition of the rules of the community on
a scale as large as possible.
Neocons share with hegemonic thought the rejection of a prudential vision
of international politics that aims at the pursuit of strategic interests as well as
the normativity of international law. Nevertheless, they go beyond the main
features of the variant of the particularistic paradigm to which they, at a first
glance, belong. The “classic” hegemonic approach from Schmitt to Huntington
never bore really global aspirations: rather it extended the range of the homo-
geneous community, aiming to create a hegemonic system in distinct spheres
of influence in order to gather more assets for global competition. It did not
aspire to impose everywhere in the world a coherent set of values. Therefore,
hegemony as conceived for example by Carl Schmitt, was limited to a large but
not worldwide scale, and thus there was no global order per se, but only competi-
tion among enlarged hegemonic communities. Not surprisingly, we find both in
Schmitt153 and in Huntington154 warnings against the tendency to overestimate
the community’s values and the ambition to impose them universally. In this
perspective values are fundamental in order to compact society and make it fit
for competition; yet they are always relative, not universal. To the contrary, the
neoconservatives acknowledge no limitation on hegemonic expansion. The
values they claim are supposed to be globally valid.
Consequently, the concept of “empire,” which seemed to belong to an old-
fashioned political vocabulary, has re-emerged in the contemporary debate. The
concept is used by the critics of hegemonism to outline the features of a system
which pretends to guarantee a global order, while oppressing, in reality, cultural
pluralism and the just interests of the weak.155 However, the idea of “empire”
as a globalized political and legal regime is also revitalized, here with a positive
connotation, by neoconservatives like Deepak Lal. In Lal’s view, empires can
perform much better than nation-states in realizing the main goals of social life,
namely maintaining peace and securing prosperity.156 Furthermore, empires
can achieve these goals on a significantly larger scale. The rehabilitation of the
153
Carl Schmitt, Positionen und Begriffe (1994), at 151, 309.
154
Huntington, supra note 43, at Chapt. V, 12.
155
Michael Hardt, Antonio Negri, Empire (2001); Detlev F. Vagts, “Hegemonic International
Law”, 95 AJIL (2001) 843; Nico Krisch, Imperial International Law (2004) (Global Law
Working Papers 01/04).
156
Deepak Lal, In Defense of Empires (2004), at 2.
97
historic function of empires is then enlarged to comprehend also the role played
at present time by the United States. Tearing the “million strings” of international
law which aim at tying down the super-power, impeding its free movement as
the Lilliputians did with the overwhelming Gulliver, the United States should
accept its imperial role along with the duties arising from that role. This consists
first, in securing global order, and second, in expanding modernisation. While
global order guarantees peace on a large scale, modernisation is the condition for
prosperity.157 Extending the regime imposed by the U.S.-superpower throughout
the world, Lal’s imperial conception globalizes hegemony in a way unknown to
the tradition prior to the neoconservative turn.
In Lal, we find no reference to the universality of the values carried forth by
the “empire.” The sense of the empire’s rule has to be found, Lal argues, in the
security and wealth it can deliver all over the world, not in the global validity of
its principles. To the contrary, precisely such a global validity of Western values,
as defended in particular by the United States, is asserted by Robert Kagan, and
here lies the radical novelty of neoconservative thought. Far from being analogous
to the despotic superpowers of the past, Kagan argues, the United States:
“is a behemoth with a conscience. It is not Louis xiv’s France or George iii’s
England. Americans do not argue, even to themselves, that their actions
may be justified by raison d’état. The United States is a liberal, progressive
society through and through, and to the extent that Americans believe
in power, they believe it must be a means of advancing the principles of
a liberal civilization and a liberal world order.”158
Liberty being a value shared, in principle, by all humans, the United States can
reasonably claim to act globally. Furthermore, its intervention in the name of
freedom is not a violation of the principle of equal sovereignty but a defence of a
fundamental right. Kagan argues that, faced as we are with an existential threat
to liberal values, it is worth thinking of a new kind of legitimacy in international
relations. The protection of fundamental human rights all over the world should
be recognized as superior to the principle of the equal sovereignty of states, with
the consequence that actions have to be considered legitimate if they coerce
dictators and autocrats to show greater respect for civil and political rights.159
From the global validity of liberty Kagan ultimately draws the legitimacy of the
worldwide American predominance:
“modern liberalism cherishes the rights and liberties of the individual
and defines progress as the greater protection of these rights and
Id., at 35.
157
Robert Kagan, “Power and Weakness”, 113 Policy Review (2002) 1.

158
Id., at 78.
159
98
liberties across the globe. In the absence of a sudden democratic and

liberal transformation, that goal can be achieved only by compelling
tyrannical or barbarous regimes to behave more humanely, sometimes
through force.”160
Hence, as a consequence of the neoconservative turn, particularly in its more

radical expression, hegemonism has reached worldwide extension and is based
on imposing universal principles that find their truest interpretation in the
hegemon’s constitution. Hereby neoconservatives seek to legitimize the global
rule of the superpower and its right to intervention. They insist that “the United
States can neither appear to be acting, nor in fact act, as if only its self-interest
mattered.”161
IV. Universalism: The Possibility of Global Order

The second paradigm of international law starts from the assumption that
order can in principle be extended all over the world. This is to all humans and
polities not only in their internal relations – as contended by supporters of the
particularistic paradigm – but also in their interaction beyond the borders of
the single polities. In this understanding there are rights and values which
are universal because they are shared by all individuals and peoples. They are
enshrined in the set of rules which build the core of international public law.
Following this understanding, international law is more than a mere law of
coexistence and coordination between states.
Universalism has developed two strands: the first founding universal principles
on metaphysical assumptions such as religious beliefs or ontological postulations
about the “true” nature of human beings and their innate and spontaneous
sociability; the second interpreting universal order as the construct of individu-
als – as the original bearers of rights and values – and as the consequence of
their correct use of reason. In the first case universalism is rooted in society,
although society embraces here the whole world; in the second it is traced back
to the faculties of individuals, particularly their reason.
160
Robert Kagan, “America’s Crisis of Legitimacy”, 83 Foreign Affairs (2004) 65, 78.
161
Id., at 85.
99
1. Two Strands
a. The Metaphysical Tradition: The Legacy of Christianity and the Theory of the
Natural and Universal Sociability of Humans
It took many thousand years before humans, although already living in complex
societies expressing a high level of culture, could conceive of being part of a
common humanity. At the beginning of Western philosophical thought, in
ancient Greece and Rome, the only laws thought to be universal were the laws of
nature. In contrast, the laws of humans – i.e. those laws, called nomoi in ancient
Greek political philosophy, which humans give to themselves in order to rule
their societies – were conceived to be specific for every political community. No
nomos was assumed to be shared by all societies and all human beings.
The idea of the universal validity of a general law for human society appeared
for the first time at a mature stadium of antiquity. It was to Stoicism’s credit to
develop a radically new idea in Western philosophy: in their view the whole
world – the physical as well as the social – is ruled by only one fundamental
law, the logos.162 Such a perspective, which represented a true “revolution” in
the way Western thought conceived social, political and legal order, had two
consequences: first, the social world was also now thought to be ruled by a law
valid, in its essence, for all humans and applicable, even if not without cautious
arrangement, in principle to all communities. This was a kind of “universal
nomos” directly derived from the everything-ruling logos. Second, the nomoi of
the different polities had to be, if they wanted to be valid, in accordance with
the “universal nomos” which had been placed above them.
Doubtlessly, the Stoics introduced a turn in the question how order can be
understood. Nevertheless, their view remained largely speculative, with little
impact on politics. In the best case their political philosophy could be seen as a
vision for a scholarship moving freely within the Hellenistic society or the Roman
Empire, both cultural and political entities firmly convinced of encompassing
the whole civilized world. In order to become a paradigm of how international
relations and international law can be understood, universalism had to abandon
being realized by indefinitely expanding the boundaries of a single political
community, and accept the burden of creating universality within the complex
context of political diversity. Yet, this was not the historical task of Stoicism but
of Christianity.
Many elements of Stoic philosophy became part of Christian doctrine. Among
these were the ideas of a universal logos and of all humans encompassing
community. Stoicism, however, never attained the status of an “official state
philosophy”, thus maintaining the possibility of avoiding the prosaic dimension
Johannes von Arnim, Stoicorum veterum fragmenta (Teubneri, Lipsiae, 1905).

162
100
of concrete politics. In contrast, Christendom achieved in a few centuries such

a prominent political position that the question of how to translate the com-
mandment of universality into a realistic political and legal program could not
be ignored. At the border of antiquity and the Middle Ages the Western world
had become a Christian world: since the principle of universality was enveloped
in Christian doctrine, a Christian world had to demonstrate universalism also
within the realms of law and politics.163
At first, Christian scholars tried to make this vision concrete by suggesting
the idea of a universal political system. As the Christian Gospel was thought
to be a message of love for the whole of humanity and the papacy claimed to
embody the spiritual leadership of the entire world, so a Christian universal
monarchy had the right and duty to rule over all peoples worldwide. Yet the
principle of the “universal monarchy” was impossible to realize, and this fact
became evident even before its most impressive conceptual formulation.164 On
the one hand, Christianity could never really spread globally: even in the period
of its most powerful expansion and despite the often merciless methods of its
triumphal spread, its allegedly universal message could never reach more than
a minority of humans. On the other hand, the growing differentiation of the
territorial – and then national – states after the decline of the Holy Roman Empire
within the Christian world, undermined the very idea of unity.
The response of Christian philosophy to increasing political diversity even
within the range of the Christian community was the conception of a “jus inter
gentes”, i.e. of an international law conceived as a set of rules governing the
interactions between peoples on the basis of shared principles.165 These principles
were still to be derived from the core commandments of Christian religion but
the political frame, in which they had to be realized, changed significantly from
the unrealistic vision of a universal monarchy to the concrete program of an
unprecedented international law. In fact, this is the moment of the foundation,
in the Western world, of a modern law of nations. The specific contribution in
the works of Francisco Suarez consists in accepting the plurality of polities, each
of them governed by specific rules, however, within an all encompassing legal
163
In the early centuries of Christianity, when Christendom was still distant from political
power or persecution, the perceived need to formulate a concrete political program based
on Christian principles was not as great as later. This is the time of the distinction between
the civitas dei and the civitas diaboli, where the latter – the City of the Devil – corresponds
to the political situation on earth, and the former – the City of God – is projected, along
with its universalistic aim, into a purely spiritual dimension. See Augustinus (413-426),
De civitate Dei, Moretus, Antverpiae 1600.
164
Dante Alighieri, “De Monarchia” (1310–1314), in Dante, Opere minori, Vol. II (Utet, Torino
1986).
165
Francisco Suarez, “De legibus, ac Deo legislatore” (1612), in Suarez, Selections from three
Works (Clarendon Press, Oxford, 1944).
101
framework as a guarantee of minimal standards of interaction. Therefore, the

vision grounding the first formulations of modern Western international law
can be interpreted as anticipation of a multilevel legal system, going beyond the
global state as well as the inter-state lawlessness of particularism. Herein lies
its ongoing topicality.
Despite its significant contribution to the groundbreaking foundation of
modern international law, the Christian vision of the relations between peoples
was biased. In fact, although the message of Christian love claimed to reach
potentially every human on earth it has always been linked to the belonging to
a specific religion. And belonging to a religious group or faith is such an intimate
question that global homogeneity and an all encompassing unity can neither
be reached nor demanded. As a consequence of the link to a peculiar religious
community, the Christian law of nations was one-sided. Only Christians were
allowed to be full members of the order of peace, security and cooperation based
on the commandments of the divine law. Other peoples were treated as enemies
or, in the best case, as marginal components of the system of international law,
curtailed in their rights and dignity.166 Even an author like Francisco Vitoria, who
was sincerely keen to overcome the most outrageous injustices that characterized
the treatment of non-Christians at the dawn of the era of colonisation, pleaded
for a consideration of the respective claims of European and non-European
peoples which, if seen from the point of view of our sensibility, reveals the signs
of open discrimination.167
The growing ascertainment of the bias embodied from the outset in Western
international law led some authors to the conviction that even its core concept
would be characterized by structural discrimination.168 Following this interpreta-
tion, since Western international law is deeply Christian, its universalism would
be rather a masquerade than a honest political program. Considering the dark
sides of Western history, this criticism has to be taken seriously. The first step to
overcome bias in Western international law would therefore lie in affranchising
it from Christian presuppositions. Curiously, the conditions for undertaking
this step were first laid down within a doctrinal dispute concerning the correct
Christian interpretation of the relation between the law of humans and the law
Jörg Fisch, Die europäische Expansion und das Völkerrecht. Die Auseinandersetzungen um den
166
Status der überseeischen Gebiete vom 15. Jahrhundert bis zur Gegenwart (Steiner, Stuttgart,
1984).
Francisco de Vitoria, “Relectio prior de Indis recenter inventis” (1538–1539), in Vitoria,
167
De Indis recenter inventis et de jure belli Hispanorum in Barbaros (Walter Schätzel ed., Mohr
Siebeck, Tübingen, 1952).
Ram Prakash Anand, Studies in International Law and History (Nijhoff, Leiden, 2004);
168
Antony Anghie, Imperialism, Sovereignty and the Making of International Law (Cambridge
University Press, 2005).
102
of God. In the theology of the Middle Ages and then in Catholic doctrine, the
universality of the most general law made by humans, i.e. international law, is
deduced directly from the universality of the divine law of the Christian God. As
has been argued, here lies the root of a deep discrimination. However, at the very
beginning of the modern era, the Reformation introduced a new understanding
of the relation between human and divine law, which also delivered the basic
elements of a non-religious philosophy of international law. Since the law of
God, from the Protestant point of view, is inscrutable and international lawyers
influenced by the theology of Reformation did not want to forsake the universalist
claim of their newborn doctrinal system, they had to search for a new foundation
which had to be independent from direct reference to the Christian God. This
was the task accomplished by the third founder, along with Vitoria and Suarez,
of modern international law, Hugo Grotius.
The new, non-religious foundation of the universalism of international law
was located by Grotius in an ontological postulation on human nature, concerning
an alleged natural and universal disposition of human beings to sociability.169
Insofar as humans naturally tend to build a society and this tendency is not – as
Aristotle thought –170 limited to the boundaries of each people and country but is
extended globally, international law can be seen as the common law of humankind,
containing the general rules defending universal sociability. This interpretation
of Western universalism refrains from any reference to the Christian God and
grounds the law of nations on a view of natural reason considered to belong
to every human being and to bind him, irrespective of his cultural or religious
background. Certainly, universal sociability is less “thick” than its counterpart
within the borders of single polities; nevertheless, it is strong enough to bear the
responsibility of a set of general, ”thin” norms as the guarantee of the interaction
of peoples and individuals beyond the borders of their countries.
The idea of international law as the common law of a naturally sociable
humankind has been extremely powerful in shaping its universalistic understand-
ing. It builds to date the core philosophical concept of one of the most important
theories about the meaning and scope of international law, namely the theory
of the international community, even among Catholic scholars. In the narrative
of progress developed by the supporters of universalism the international com-
munity rests on a set of values shared by all humans. On that basis international
law is a legal system protecting the principles of a universal interaction based
upon the assumption of a naturally reasonable human sociability.
Notwithstanding its great significance, the ontological variant of the univer-
salistic approach to international law shows at least one unresolved shortfall.
169
Hugo Grotius, De Jure Belli ac Pacis (1646), (William S. Hein & Co., Buffalo (New York),
1995), Prolegomena, 6.
170
Aristotle, The Politics I, at 2, 1252 et seq.
103
The existence of a global community including all individuals and states and
sharing fundamental values seems in fact to be more a profession of faith than
a proposition that can be proven or an evident axiom on which everyone must
agree. To be clear about what little evidence such an argument has we should
simply imagine the case that the “realistic” counterpart would introduce. Indeed,
historic experience speaks for caution in supposing a worldwide brotherhood and
sisterhood of humans. What we can experience is the capacity of all humans to
interact with each other; from this matter of fact solidarity can grow, but also
deathly competition. Given the open possibilities of human interaction, the case
for a worldwide community of humans turns on a metaphysical principle derived
from the old-fashioned argument about the “true” nature of humankind. But a
metaphysical assertion on the “natural” goodness of our fellow humans is hardly
a solid basement for a system of law binding everyone and everywhere.
b. Contract Theory
Moving from this deficit affecting the metaphysically grounded idea of universal-
ism, a second strand was developed. The preconditions were created by a real
“revolution” in political thinking which occurred at the beginning of Western
modernity. Until that time individuals were thought to be part of the society
in which they lived. The community as the totality, the “holon”, was seen in
any sense as superior to its members: individuals had to serve the community,
not vice versa. At the border between the Middle Ages and modernity these
close community ties were broken. The consequence was a demand for a new
philosophy of social and political life. This new vision was delivered by Thomas
Hobbes, the first political philosopher who overturned the hierarchy between
individual and community. In his eyes, the centre stage of political life was held
by individuals: they are the bearers of fundamental rights and the starting point
of any legitimation of authority.171 As Copernicus reversed the position between
the earth and the sun, giving for the first time centrality to the second, so turned
the “Copernican revolution in political thought”172 the order of society upside
down. In Hobbes’ view, in fact, the Commonwealth is not the highest entity in
the ethical world anymore but rather a tool that humans give to themselves to
guarantee a better safeguard of life, security and property.
Following this understanding, political institutions are the product of a contract
among individuals. Concerning the consequences for the theory of international
law the central question is how far society built on such institutions can reach.
Thomas Hobbes, De Cive (1642) (Royston, London, 1651); Hobbes, Leviathan, Or, the
171
Matter, Form, and Power of a Commonwealth Ecclesiastical and Civil (1651) (Crooke, London,
1651).
Norberto Bobbio, Michelangelo Bovero, Società e stato nella filosofia politica moderna (Il
172
Saggiatore, Milano, 1979).
104
In other words: can this society only be a national one, construed to serve the
interests of a limited, albeit large, number of individuals? Or can we imagine that
the society based upon the contract expands itself to comprehend all humans?
For one and a half centuries after its first formulation, contract theory showed
little interest in international law and, insofar as the question of international
order was mentioned, the most important exponents of contractualism were
rather sceptical about the possibility of guaranteeing a peaceful interaction on
a global scale.173 On the other hand, no conceptual reason stood against the
possibility of applying contractualism to a system of global peace and security:
if the central moment of any society are single individuals and all individuals
are endowed with essential rights and faculties, in particular the capacity to
reason, then no insurmountable obstacle – stands between our condition and
a world order based on a general agreement among fellow humans.
Such a consequence of contractualism, which was already implicit in the
very core of its conception, was first drawn by Immanuel Kant.174 In his political
philosophy, the passage from the state of nature to the civic condition is not
only, like in Hobbes, the practical output of a reasoning based on expediency but
the fulfilment of a higher moral duty. In fact, in Kant’s view only the civilized
human is a morally accomplished human, and, insofar as the perfect moral ac-
complishment can only be reached if every interaction is civilized, the creation
of an international order can be seen as the most difficult, but also the noblest
duty we can pursue.
Summing up, the contractualistic version of universalism global order
depends on:
(a) the centrality of individuals;
(b) some essential assumptions about the equality of humans;
(c) the cognisance of mutual interdependence;
(d) the awareness that the individual’s long term self-interest is in building
a common society;
(e) the conviction that we can pursue self-fulfilment only in peace and in a
global interaction based on freedom and justice;
173
Hobbes, Leviathan, supra at note 171, at XXX; Baruch de Spinoza, “Tractatus politicus”
(1677), in Spinoza, Opera (Winters, Heidelberg, 1924), Vol. 3, at III; Spinoza, “Tractatus
theologico-politicus” (1670), in Spinoza, Opera, Vol. 3, at XVI; John Locke, Two Treatises
of Government (1690) (Awnsham-Churchill, London, 1698), at II, 2, 12, 16.
174
Immanuel Kant, “Zum ewigen Frieden. Ein philosophischer Entwurf ” (1795), in Kant,
Werkausgabe (Suhrkamp, Frankfurt/M.), XI, at 191; Kant, “Die Metaphysik der Sitten”
(1797), in Kant, Werkausgabe, VIII, at 309.
105
(f) the principle that the definition of the rules binding all members of any
society has to be based on inclusive procedures; and
(g) the commitment to create institutions and procedures in order to put the
previous cognitive tenets into practice.
It was precisely on this last issue – the traditional rupture between theory and
praxis – that Immanuel Kant as the father of contractualistic universalism, had
to tackle the most tenacious problems, also thus revealing a significant uncer-
tainty. We find in fact in Kant’s work two different solutions for the institution
accomplishing world order: on the one hand the “world republic” (Weltrepublik)
as a kind of global super-state; on the other hand the rather unpretentious idea
of a “league of nations” (Völkerbund).
Considering the strengths and weaknesses of the philosophical approaches to
universalism, we can transitively conclude that a universalist international law
should resolve two problems: first its conceptual foundation should not resort to
religious or metaphysical assumptions; second it should search for institutional
solutions capable of reconciling the need for global values and rules with the
respect for the equal sovereignty of all peoples. In the following we will analyse
some proposals going in this direction.
2. Constitutionalism as the Most Visible Contemporary Offspring

Constitutionalism is the latest offspring of the universalist scholarly tradition
that strives for a global legal community that frames and directs political power
in light of common values and a common good.175 It is often associated with
international scholarship in Germany, but international constitutionalism is most
assuredly also taught in other countries.176 The idea of current international
law as a building block of a global legal community has been a constant thread
among many German international law scholars. In 1974, Hermann Mosler
held the General Course under the title “The international society as a legal
175
It has deep roots in pre-war projects ; see Hans Kelsen, Reine Rechtslehre (Deuticke 1934)
115 et seq., 328; Georges Scelle, Le Pacte des Nations et sa liaison avec Le Traité de Paix
(Sirey 1919) 101 et seq., 105 et seq.; id., 1 Précis de droit des gens, (Sirey 1932) 188 et seq.;
Walther Schücking, “Die Organisation der Welt”, in Wilhelm van Calker (ed.), Festschrift für
Paul Laband (Mohr 1908) 533; Alfred Verdross, Die Verfassung der Völkerrechtsgemeinschaft
(Springer 1926).
176
See, e.g., Pierre-Marie Dupuy, “The Constitutional Dimension of the Charter of the United
Nations Revisited”, 1 Max Planck U.N.Y.B. (1997) 1. In 2004 Amsterdam University in
the Netherlands even created a chair for international constitutional law, whose first and
current incumbent is Erika de Wet, see Erika de Wet, “The International Constitutional
Order”, inaugural speech 2005, on file with the author; see also id., “The Prohibition of
Torture as an International Norm of Jus Cogens and its Implications for National and
Customary Law”, 15 EJIL (2004) 97.
106
community”.177 Since it was given during the Cold War, it provides a dampened
version of constitutionalism. Yet, it echoes the core concept of Walter Hallstein,
his former superior in the nascent German Foreign Service and first president
of the European Economic Community. Hallstein had devised the term legal
community in order to conceive and direct the embryonic European integration
project.178 It succeeded in inspiring the “constitutionalisation” jurisprudence of
the ECJ,179 laying the conceptual basis for the enormous power the Commission’s
Legal Service wielded for decades as well as for generally framing the political
discourse.
After the fall of the Iron Curtain, Christian Tomuschat taught in 1999 a much
bolder course titled: “Ensuring the Survival of Mankind on the Eve of a New
Century”.180 In order to present constitutionalist thought this present course shall
focus on certain elements of his teleological reconstruction of core concepts of
current international law, rather than presenting a “night of the proms” from
various authors.181 This choice is based on The Hague Academy’s consideration
177
Hermann Mosler, “The International Society as a Legal Community”, 140 Recueil des cours
(1974) 1; id., The International Society as Legal Community (Sijthoff/Noordhoff, 1980).
Concerning this course see Robert Kolb, Les cours généraux de droit international public de
l’Académie de La Haye (Bruylant 2003) 541 et seq.
178
Walter Hallstein, Der unvollendete Bundesstaat (Econ Verlag 1969) 39, 252-255.
179
Concerning this see Joseph Weiler, “The Transformation of Europe”, in The Constitution
of Europe (Cambridge U. Press, 1999) 10.
180
Tomuschat, supra note 27, at 1999. Concerning this course see Kolb, Les cours généraux
de droit international public de l’Académie de La Haye at 1057 et seq.
181
There is an enormous variety of ideas, cf.: Bruno Simma, “From Bilateralism to Community
Interest in International Law”, 250 Recueil des cours (1994) 6, 221; Bardo Fassbender,
“The U.N. Charter as a Constitution”, 36 Columbia J.T.L. (1998) 574; Michael Cottier,
“Die Anwendbarkeit von völkerrechtlichen Normen im innerstaatlichen Bereich als
Ausprägung der Konstitutionalisierung des Völkerrechts”, 9 SZIER 4/5, (1999) 403;
Jochen Frowein, “Konstitutionalisierung des Völkerrechts”, 39 Berichte der Deutschen
Gesellschaft für Völkerrecht (2000) 427, 431; Giovanni Biaggini, “Die Idee der Verfassung”,
119 ZSR I (2000) 445; Jost Delbrück, “Structural Changes in the International Legal
Order and its Legal Order”, 11 SZIER (2001) 1; Robert Uerpmann, “Internationales Ver-
fassungsrecht”, 56:11 Juristenzeitung (2001) 565; Christian Walter, “Constitutionalizing
(Inter)national Governance”, 44 GYIL (2001) 170; Hauke Brunkhorst, Solidarität: von
der Bürgerfreundschaft zur Globalen Rechtsgenossenschaft (Suhrkamp, 2002) 20; Otfried
Höffe, Demokratie im Zeitalter der Globalisierung (2d edn., Beck, 2002); Brun-Otto Bryde,
“Konstitutionalisierung des Völkerrechts und Internationalisierung des Verfassungsrechts”,
42 Der Staat (Berlin) (2003) 61; Thomas Cottier & Maya Hertig, “The Prospects of 21st
Century Constitutionalism”, 7 Max Planck U.N.Y.B. (2003) 261; Stefan Kadelbach, “Ethik
des Völkerrechts unter Bedingungen der Globalisierung”, 64 ZaöRV/HJIL (2004) 1;
Matthias Ruffert, Die Globalisierung als Herausforderung an das Öffentliche Recht (Boorberg,
2004) 38. Ernst-Ulrich Petersmann’s constitutional approach to international trade law
has been much debated; among his writing cfr. Constitutional Functions and Constitutional
107
of Tomuschat as particularly representative and important; perhaps one day

the Xiamen Academy’s consideration will be just as important. The strengths of
this thinking, as well as inherent tensions, will be addressed. Tomuschat’s ideas
about the roles and the normativity of international law will be presented first.
Among the various roles of international law, of particular importance is its
constitutional function through legitimating, limiting and guiding politics. As a
consequence, Tomuschat turns the dominant understanding of the relationship
between international law and municipal constitutional law “upside-down”,
whereby the state becomes an agent of the international community. The third
step looks at the organisation of the international community and discusses
Tomuschat’s understanding of international institutions. Since he attributes to
such institutions a substantial and autonomous role, the issue of international
federalism is addressed. Yet, Tomuschat does not use this term for his model.
This reticence may be explained by his view that international law possesses
merely derivative democratic credentials and by an uncertainty about its “social
substratum” in the “international community”.
a. International Law as a Common Law of Humankind

Tomuschat’s construct attributes new prominence to international law, which
he sees as having become paramount to all other law in many respects. This
importance largely results from the challenge of globalisation: “[T]he concept [of
globalisation] captures in a nutshell the current state of increased transnationalism
which constitutes the background against which the adequacy and effectiveness
of international law and its institutions must be carefully tested. It is part and
parcel of the empirical context from which international law receives its major
impulses. To the extent that the State forgoes or is compelled to relinquish its
role as guarantor of the common interest of its citizens, common institutions
should be established at regional levels or the universal level to compensate for
the losses incurred”.182
In his view, some rules of international law fulfil a constitutional function
with respect to the international realm and the municipal realm, “namely to
safeguard international peace, security and justice in relations between States,
and human rights as well as the rule of law domestically inside States for the
benefit of human beings, who, in substance, are the ultimate addressees of
Problems of International Economic Law (Fribourg, Switzerland: Univ. Press [u.a.], 1991);
id., “The WTO Constitution and Human Rights”, 3 JIEL (2000) 19-25; id., “Constitutional
Economics, Human Rights and the Future of the WTO”, 58 Aussenwirtschaft (2003) 49.
Tomuschat, supra note 27, at 42.
182
108
international law”.183 The core principles of international law address and limit
all forms of political power: this is the essence of the constitutional argument.
He sees the traditional function of international law – to regulate interstate
relations – as not only being supplemented with a constitutional function, but also
with a further function similar to that of municipal administrative and private
law: the new international law presents a “comprehensive blueprint for social
life”.184 International law is seen as a multi-faceted body of law that permeates
all fields of life, wherever governments act for promoting a public purpose;
accordingly international law now is “a common legal order for mankind as a
whole”.185 The traditional understanding of international law and municipal law
as respectively dealing mostly with different issues is replaced by one in which
fundamentally the same issues are addressed and regulated. Tomuschat’s vision
is not one of separate spheres, but rather of an integrated, multilayered system.
His understanding of an integrated international system is not a defence of the
“ancien régime” of international law with the ICJ at its pinnacle. The ICJ actually
plays quite a limited role in Tomuschat’s construction. Rather, the integration
is provided by scholarly effort and practical reason.
Tomuschat’s understanding rests on the premise that international law can
direct and control social reality and (in particular) political power similarly to
municipal constitutional or administrative law – an assumption not generally
held. Its rejection by the New Haven School (similar in this respect to the Criti-
cal Legal Studies approach) is so important to Tomuschat that he even starts
his General Course with its rebuttal. The New Haven School does not consider
international law, particularly its fundamental principles, as being able to direct
political behaviour similarly to municipal public law. From this perspective,
international law is deemed to lack municipal law’s determinacy and normativity
(contra-facticity); rather, it is understood as usually following the practice of
the most powerful states.
Tomuschat’s defence of international law does not deny that its norms are often
vague and contested. Nor does he ignore the permanence of state sovereignty
and the lack of strong global institutions, which do not allow international law
and municipal law to be regarded in fully parallel terms. Despite these limits, he
advocates a “positivist” legal discourse on international law, and assumes that
it can operate similar to municipal public law. This assumption rests above all
on a moral imperative:
“[D]iscourse on issues of international law must … be couched in lan-
guage that allows everyone affected by its operation to make its voice
183
Id., at 23.
184
Id., at 63.
185
Id., at 28 and passim.
109
heard, fully to grasp arguments invoked by others and thus to engage

in meaningful dialogue permitting to highlight on a common basis of
understanding any controversial issues. … Discourse on what is right
or wrong must be crystal-clear and should not fall into the hands of a
few magicians who invariably are able to prove that law and justice are
on their side.”186
Tomuschat is an enlightened positivist. He knows the shortcomings of international

law as an instrument of social order as well as the rational limits of established
legal reasoning. Nevertheless, he sees this established form of legal reasoning
as the best way so far for lawyers to live up to undisputed postulates on how to
carry out their profession. Moreover, social theory and political philosophy, in
particular, have never proved able to lead the debate on “right or wrong” better
than the established paths of legal reasoning.187 The 20th century Kantian
pragmatic response to relativism – the philosophy of the “als-ob”188 – can sup-
port this methodological and constructive approach, the foundation of which
(not of the law as such!) is an ethical premise. This explains why this position is
sometimes termed as idealistic.
b. A Revolutionised Understanding of the Institutional Order

One of Tomuschat’s conceptual innovations that has become part of common
scholarly discourse is the qualification of some important international treaties
as “völkerrechtliche Nebenverfassungen”, i.e. as international law having a sup-
plementary function for municipal constitutional law.189 He radicalizes his former
concept now in his General Course: here, the core principles of international
law assume a foundational, rather than a merely supplementary, function for
the state and its constitution.
In the history of international scholarship, one finds several attempts to
turn “upside-down” the relationship between municipal law and international
186
Id.
187
This is confirmed by authors who earlier on paid little heed to, or even criticized ”legal
formalism”, see Habermas, supra note 111, at 182, 187; Koskenniemi, supra note 15, at
502 et seq.
188
Hans Vaihinger, Die Philosophie des Als Ob (Meiner, 1920).
189
Christian Tomuschat, “Der Verfassungsstaat im Geflecht der internationalen Beziehungen”,
36 Veröffentlichungen der Vereinigung der deutschen Staatsrechtslehrer (de Gruyter, 1978) 7,
51 et seq.; Robert Uerpmann-Wittzack, “The Constitutional Role of Multilateral Treaty
Systems”, in von Bogdandy & Bast (eds.), Principles of European Constitutional Law (2006)
145.
110
law, between the state and the international community.190 Developments in

international law after 1990, a point in time when the law formulated in 1945
appeared to have acquired substantial normativity (mainly, though by no means
exclusively, through the Security Council’s activities), allowed for a fresh attempt
to redefine this relationship. The foundational role of international law is not
conceived in formal terms as a relationship of delegated competences (Kelsen)
or according to the doctrine of dédoublement fonctionnel (Scelle). Tomuschat’s
construction is based rather on substance, in particular on international hu-
man rights, a conception only possible after World War II: “The fact that the
international community is progressively moving from a sovereignty-centred to
a value-oriented or individual-oriented system has left deep marks on its scope
and meaning”.191
Even for Tomuschat, the state remains the most important actor on the
international plane; this corresponds to the universalist position of state-centred
integration.192 However, the state assumes a role – and herein lies the innovation
– in a play written and directed by the international community. “[P]rotection is
afforded by the international community to certain basic values even without
or against the will of individual States. All of these values are derived from the
notion that States are no more than instruments whose inherent function it is to
serve the interests of their citizens as legally expressed in human rights”.193 “The
international community … views the State as a unit at the service of the human
beings for whom it is responsible. Not only is it expected that no disturbances for
other States originate from the territory of the State, it is moreover incumbent
upon every State to perform specific services for the benefit of its citizens”.194
This understanding of statehood as an instrument of the international com-
munity to implement its core legal values does not correspond to the general
understanding in legal scholarship, political science or the media. Tomuschat
himself concedes that “the transformation from international law as a State-
centred system to an individual-centred system has not yet found a definitive
new equilibrium”195 and that it is, moreover, by no means clear which one of the
two rivalling understandings, sovereign equality or protection of basic values by
the international community, prevails in case of conflict. This “weakness” does
not necessarily diminish the value and usefulness of Tomuschat’s construction.
Rather, it may be proof of the potential for normative legal evolution within legal
190
In particular, Hans Kelsen: Reine Rechtslehre (Deuticke, 1934) 150; Hans Kelsen, “Die
Einheit von Völkerrecht und staatlichem Recht”, 19 ZaöRV/HJIL (1958) 234.
191
192
Supra II 3 b.
193
Tomuschat, supra note 27, at 161 f.
194
Id., at 95.
195
Id., at 162.
111
texts through innovative legal scholarship – or as Hegel put it: once the ideas
have been revolutionized, reality will not resist.
According to Tomuschat, fundamental rights codified in a municipal
constitution form the basis of all municipal public power, and these rights are
in turn based on universal values, which are now enshrined via international
human rights. Although this vision has to struggle with some of the problems
of natural law thinking, it is supported by the fact that most documents (mu-
nicipal as well as international) referring to fundamental rights do not “enact”,
but rather “recognize” such rights. This suggests that these rights, although
formally elaborated and ratified by states, are considered to exist independently
of the municipal legal order.196 Accordingly, comparative constitutionalism
acquires a substantial function for constitutional adjudication within the various
municipal legal orders. As Tomuschat demonstrates throughout his course, his
construction of the state as an agent of the international community provides
a coherent explicative framework for many elements of current international
law as well as a helpful indication on which meaning should be attributed to a
norm in case of its legal indeterminacy.
International law, as construed in this line of thinking, supports a system
of international governance. In current discussions, the institutional features
of this system are hazy and disputed. Tomuschat enriches the pertinent debate
by linking the notion of “international governance” with public-law thinking
on state government as developed over the last 300 years. This is a thoroughly
legal approach: it looks (at least with one eye) to the past in order to meet a
new challenge, which is the analogical nature of legal thinking.197 His argu-
ment is based on the premise that the international community – as with any
community – needs “a sufficiently broad set of legal norms in order to be able
to deal efficiently with the many challenges arising in the course of history”:198
ubi societas, ibi ius. Satisfying this need requires institutions with the following
traditional governmental functions: a “legislative function” for enacting a “broad
set of legal norms” and particularly for making basic political decisions; an
“executive function”, i.e. a “machinery mandated to translate into concrete facts
the law produced”; and a function concerning the “settlement of disputes”, i.e.
the “application of these rules in disputes”. Thus, at least the functions of the
196
See, e.g., La Déclaration des droits de l’homme et du citoyen (adopted 1789): “l’Assemblée
nationale reconnaît et déclare, en présence et sous les auspices de l’Être suprême, les
droits suivants de l’homme et du citoyen”; in detail Maria Zanichelli, Il discorso sui diritti
(CEDAM, 2004) 101 et seq.
197
Ulrich Schroth, “Hermeneutik, Norminterpretation und richterliche Normanwendung”,
in Arthur Kaufmann et al. (eds.), Einführung in Rechtsphilosophie und Rechtstheorie der
Gegenwart (7th edn., C.F. Müller, 2004) 270, 278.
198
112
global institutions are fixed, something which gives direction for interpretation,
further research and political proposals.
For Tomuschat, municipal constitutional law can only inform, it cannot
determine future developments. The international system cannot adopt a blueprint
provided by comparative (municipal) constitutional law particularly for one
specific reason: the continuing significance of state sovereignty. Although state
sovereignty undergoes a substantial transformation in Tomuschat’s thinking,
he nevertheless acknowledges state sovereignty as normative and factual reality
which for the foreseeable future will profoundly shape the international sphere.
He writes, “it may be said that the different elements of the executive function in
the international community have never been established more geometrico like
under a national constitution, which seeks to organize the system of governance
in a transparent way, taking as its point of departure the principle of separation
of powers. The international system still rests on national sovereignty”.199
If a convincing form of global governance needs international legislative,
executive and judicial institutions, the question arises whether this governance
requires the creation of a global federation. Tomuschat uses the terms federal
and federation most carefully. They do not figure prominently in his text. One
might assume that he has learned a lesson from the hostile reactions these terms
encounter when used with respect to the European Union.
It is possible to qualify his vision as a federal one, for the basic understanding
of federalism deems as “federal” any multi-level system of governance.200 The
international system as proposed by Tomuschat is such a multi-level system,
in which the state “must accept to live in a symbiotic relationship with the
institutions of the international community at regional and universal levels”.201
Moreover, the overall system features further integrative elements. First of all, it
is the constitutional character of the international system which is understood
as enshrining and securing (though not always successfully) the fundamental
legal values. The principles of Article 2 UNC and the core of international human
rights enshrine those values “which humankind must uphold in order to be able
to continue to live under peaceful conditions which permit individuals real enjoy-
ment of human rights”.202 Hence, some international obligations are fundamental
for municipal legal orders and, may therefore be considered as performing a
199
Id., at 389.
200
Mauro Cappelletti, Monica Seccombe & Joseph Weiler, “Integration Through Law: Europe
and the American Federal Experience. A General Introduction”, in id. vol. 1 (Methods,
Tools and Institutions) (de Gruyter, 1985) 3, 7-8, 12 et seq.
201
202
Id., at 85; in more detail Christian Tomuschat, “Die internationale Gemeinschaft”, 33
Archiv des Völkerechts (1995) 1, 7; C. Tomuschat, “Human Rights: Between Idealism and
Realism”. 13 Collected Courses of the Academy of European Law (2003).
113
constitutional function for the entire world. Secondly, Tomuschat proposes an

international political system with a considerable degree of autonomy vis-à-vis
the constituent states. This is particularly true for the legislative function:
The international system cannot rely any more solely on treaty-making,
where the sovereign State holds an unrestricted power of unilateral determina-
tion. In principle, treaties are instruments of self-commitment. No State can be
forced to adhere to a given conventional régime, no matter how important that
régime may be with a view to furthering community interests. To the extent
that in international society other values are recognized, values that deserve
protection irrespective of consent given by an individual State, treaties must lose
their primary role as instruments for the creation of legal norms.203
In addition, he finds that the autonomy of the international executive branch
should also be increased: “It stands to reason that it would be much to be preferred
to have a centralized agency which would itself take sanctions against a State
remiss of its obligations, or which would at least co-ordinate the measures taken
by individual States. Such a hierarchically organized superstructure does not
yet exist, however, except in certain fields”.204
Tomuschat’s vision of international governance partially resembles the specific
form of federalism realised in Germany and the European Union. In both systems,
legislation that is enacted by the institutions at the higher level is executed by
lower-level bodies. At the same time he holds that “it would be an erroneous
assumption … that the most promising way of facing up to the challenges of
the future would be to centralize ever more functions in the hands of a world
bureaucracy as the nucleus of a world government. International supervision and
monitoring play an essential role …. But there can be no genuinely sustainable
international legal order if national systems of governance disintegrate”.205
Tomuschat does not conceive or propose the creation of a global federal state
in any traditional sense, as can be deduced from the importance he attributes
to sovereign states as constituent elements of the envisaged global system. Yet,
as Kant206 and the discussion on the “nature” of the European Union prove, it
might be useful to refer to transnational non-state entities as being federal.207
Whenever an organisation within a multi-level political system is vested with
Tomuschat, supra note 27, at 306 f. This understanding is elaborated in Christian

203
Tomuschat, “Obligations Arising for States without or against their Will”, 241 Recueil
des cours (1993) 199.
204
Id., at 435.
205
Kant, supra note 105, at 115, 133.

206
Eric Stein, “Lawyers, Judges and the Making of a Transnational Constitution”, 75 AJIL
207
(1981) 1; Ulrich Everling, “Zur föderalen Struktur der Europäischen Gemeinschaft”,

in FS Doehring (1989) 179; Koen Lenaerts, “Constitutionalism and the Many Faces of
114
the competence to enact unilaterally binding decisions, the issues of legitimacy

and delimitation of competences arise. These are precisely the issues which
beset federal states. Thus, conceptualizing transnational entities in multilevel
systems as federal entities allows reference to experiences accumulated in the
municipal context.
The importance that Tomuschat attributes to international law and the
autonomy with which public functions binding upon the states should be
exercised at the international level conceivably qualifies his vision as “federal”.
Yet, (again), he is reticent to use this qualification. The same is true with respect
to the question whether the European Union provides an example of how to
shape and develop a global system of governance. Some authors believe the
EU indicates the direction the international system should take,208 whereas
Tomuschat presents European integration as exemplary for the global level far
more cautiously. At the same time, nowhere does he assert that the experience
of integration within the EU is limited to its specific regional setting or that such
developments cannot be replicated in a broader international context.
Tomuschat’s hesitance to draw parallels between his understanding and vision
of international law on the one hand and the evolution of European integration
on the other, is also evident in his narrative on the evolution of international law.
Under the heading “The growing complexity of the international legal order”,
he divides this evolution into the following four successive stages: (1) a law of
coexistence; (2) a law of co-operation; (3) international law as a comprehensive
blueprint for social life; and (4) international law of the international com-
munity.209 The conceptualisation of stages three and four are peculiar, as one
would expect co-operation (second stage) to lead to integration. According to
most understandings, it is precisely this feature of law – being directly important
to social life (i.e. the “blueprint” in the third stage) – which should mark the law
Federalism”, 38 AJCL (1990) 205; Kalypso Nicolaidis & Robert Howse (eds.), The Federal
Vision (Oxford U. Press, 2002).
208
For a more outspoken view, see Daniel Thürer: “From the point of view of world global
order the EU seems to me to represent the most promising way of creating some structure
capable of checking the abuse of economic and social power, and of directing social
activities towards overriding common ends. The EU seems to be making the most suc-
cessful effort so far to cope with the problematic effects of globalisation and, perhaps
it offers a model for new legal institutions to be created on a world-wide basis”, Daniel
Thürer, “Discussion”, in Rainer Hofmann et al. (eds.), Non-State Actors as New Subjects of
International Law (Duncker & Humblot, 1999) 92; from a sociological point of view see
Klaus Friedrich Röhl, “Das Recht im Zeichen der Globalisierung der Medien”, in Rüdiger
Voigt (ed.), Globalisierung des Rechts (Nomos, 2000) 103.
209
Tomuschat, supra note 27, at 56 et seq.
115
of integration and distinguish it from the law of co-operation.210 Yet, the term
“integration” hardly appears in Tomuschat’s text.
Accordingly, one might suspect that Tomuschat is attempting to further
international federalism “by stealth”. This assumption may, however, miss an
important aspect of his thinking. In fact, he poses the last stage of his narrative
(on the evolution of international law) as a question: “Is there an international
community?”. This question points out the major difficulty in designating the
international order as federal.
c. The Substratum and Legitimacy of International Law

A “thick” federal system requires not just an overarching organisation of
government, but also a genuine “social substratum”, i.e. a people or citizenry
which provide that organisation with original (not just derived) legitimacy.211
Municipal law rests on and refers to a people, a citizenry. Municipal public
institutions (parliaments, governments and courts) are institutions of that
group; the municipal institutional actors (politicians, lobbyists and officials)
are – in one way or another – representatives of interests or values of that people.
The concept people represents the focal point of reference for all political and
legal processes. If international law increasingly assumes functions previously
exercised by municipal law, a question arises concerning its point of reference.
As long as this issue has not been settled, caution with respect to application of
the term federal has good reasons.
Under the traditional doctrine of international law, the focal point of reference
is “the states”. Whereas municipal law originates from the people, international
law originates from the states. States are usually understood as unitary actors
who animate and control the international political and legal processes. Thus,
“China” presents a position in the UN Security Council; “Germany” is concerned
about the human rights situation in Congo; “Thailand” ratifies an international
agreement. However, in international discourse “the states” are being increasingly
replaced by a new term: the international community. In a growing number of
discourses, the notion of international community plays a role for international
law and international politics similar to that played by the concept of the people
in the municipal realm. The increasing significance of the term international
community in discourses on international law and politics might indicate a con-
ceptual shift which could result in the basic transformation of these disciplines.
Should the view become generally accepted that international law and politics
refer to a social group called the international community, to which all human
Hans Peter Ipsen, Europäisches Gemeinschaftsrecht (Mohr, 1972) 66 et seq.

210
Stefan Oeter, “Federalism and Democracy”, in von Bogdandy & Bast, (eds.), Principles of
211
European Constitutional Law (2006) 53.
116
beings belong, the realisation of Tomuschat’s vision and construction will be

much facilitated.
The term international community has different functions and carries
diverse meanings in Tomuschat’s text. Tomuschat uses the term mostly as
an underlying premise for his construction and sometimes even as a straight
normative argument.212 At times, he uses the term international community as
the term people would be used in a municipal context – meaning a self-aware
and organized group of human beings, i.e. a collective subject. This is indicated
by the following passages: “As any other human community, the international
community requires a sufficiently broad set of legal norms in order to be able
to deal effectively with the many challenges arising in the course of history”,
“the international community has realized in the last decade of the twentieth
century that national efforts of combating crime must be complemented by
international machinery”.213
The international community is presented above all as a community of values,
enshrined above all in the international obligations erga omnes and of jus cogens.214
The role attributed by Tomuschat to states fits nicely into this understanding
of the international community. States have legitimacy only to the extent that
they respect and implement those fundamental obligations. The international
community is even considered as having some institutions of its own. Thus,
according to Tomuschat, “the Secretary-General should always promote the
interest of the international community with resolute determination”; he is “an
agent of the international community”.215 Even the Security Council is seen as
an embryonic “community” institution.216
Yet, he recognises that many differences remain between the international
community and the national community. International community institutions
are far less developed than their national counterparts. Possibly for this reason
Tomuschat only asserts the existence of a law-making process in the interna-
tional community” but not of the international community. The reification of
the international community does not go as far as has occurred with municipal
212
See e.g. Tomuschat, supra note 27, at 346: the idea that “the international community
has an overriding interest” is the decisive argument why a unilateral act is irrevocable.
213
Id., at 305, 431; a much more outspoken view is presented by the Russian judge Veresh-
chetin at the ICJ: “Mankind as a whole … tries to manifest itself in the international arena
as an actor, as an entity”, Vladlen Vereshchetin, “Discussion”, in Hofmann et al., supra
note 208, at 136.
214
Tomuschat, supra note 27, at 75 et seq.
215
Id., at 399.
216
Id., at 89; this understanding sits uneasily with the assertion that “international organiza-
tions … possess no social substratum of their own, but operate essentially as common
agencies of their members”, id., at 91.
117
communities. Thus, Tomuschat capitalizes the word “State”, but never does so
for the term “international community”.
Among the various differences between the international community and
the national communities, the one which appears fundamental to Tomuschat’s
thinking concerns the aforementioned concept of the people. As stated, the people
is the fundamental point of reference in municipal law, because it is seen as the
source of democratic legitimacy, which in turn serves as the foremost source
of governmental legitimacy. In other words, the concept of the people gives an
ultimate point of reference to the legitimacy discussion. With respect to interna-
tional law, Tomuschat sees the international community as providing a source of
legitimacy through (common) values, but it is not a source of democratic input.
He concedes that international law “as a blueprint for social life” is problematic
when examined under the democratic principle since “the quantity and quality
of international obligations has reached a level that puts in jeopardy the right
of framing independently the internal constitutional order”.217 In Tomuschat’s
thinking, there is no substitute at the international level for the municipal
source of democratic legitimacy that lies with the people.218 Accordingly, the
term international community does not appear in his construction as a substitute
for the people.
Some scholars consider non-governmental organisations as the embryo of
an international community that provides democratic legitimacy.219 Tomuschat
rejects this approach: “Since they [i.e., the NGOs] are products of societal freedom,
they lack the kind of formal legitimacy which a government emerging from free
democratic elections may normally boast of. Apart from their membership, there
is no one to whom they are institutionally accountable. Therefore, NGOs have
never been regarded as the true voices of the peoples they are representing”.220
It is a defining feature of Tomuschat’s construction that international law has
no source of democratic legitimacy on its own: its democratic credentials rest
on the democratic processes within the states, and he sees no way to overcome
this dependency. Tomuschat’s reticence with respect to federalism is due to
an understanding that the upper level of a federal system requires its own
democratic base. His scepticism in this respect distinguishes his approach from
cosmopolitan federalism.221
Id. at 184.
217
See above, II 3 b.
218
Daniel Thürer, “The Emergence of Non-Governmental Organizations and Transnational

219
Enterprises in International Law and the Changing Role of the State”, in Hofmann et al.,
supra note 208, at 37, 46.
220
For a taxonomy of the various positions, see Armin von Bogdandy, “Globalization and
221
Europe: How to Square Democracy, Globalization, and International Law”, 15 EJIL (2004)
118
In many instances, Tomuschat presents the international community as a

group of human beings which serves as the “social substratum” (though not
as a source of democratic legitimacy) of international law and a possible point
of reference similar to the people in the municipal context. On the other hand,
sometimes his usage is far more restricted and only succinctly indicates a number
of legal developments without reference outside the law. He even defines the term
international community “as an ensemble of rules, procedures and mechanisms
designed to protect collective interests of humankind, based on a perception of
commonly shared values”.222 This is far less than asserting the existence of a
social group which might form a reference point for international law similar
to that held in municipal law by the concept of the “people”. This definitional
uncertainty may be explained by the novelty of the phenomenon. A global
community of values can only be asserted in a world that is fundamentally at
peace with itself:
As long as international society consisted of three different ideological blocs
pursuing different and even contradictory objectives, each side could have the
suspicion that general principles were the opening gate for attempts to introduce
political bias into the international legal order. Controversy has not disappeared
altogether from the international stage. On many issues, Western States, Russia,
China and developing countries continue to hold different views, with many
intermediate shades. But the sharp ideological divide has disappeared. No group
of countries is opposed in principle to the recognition of human rights as an
important element of the international legal order, almost no group rejects
democracy as a guiding principle for the internal systems of governance of
States. Given this rapprochement towards the emergence of a true international
community, objections to general principles of law are progressively losing the
weight which they carried 25 years ago.223
Tomuschat shows that current international law contains many features
that allow for its evolution into a “common law of humankind” – a law through
which humankind might address its pressing problems. Yet, this evolution will
only happen if most human beings acquire a global perception of themselves as
being part of a common group. There are hints that such a shift in self-perception
is under way, but the new perception has not yet established itself to the extent
where it substantially informs many decisions on the international plane. However,
Tomuschat’s construction of international law in his General Course may well
contribute to driving forward such a perception for future decision-makers.
885. For example, Gráinne de Burca’s and Oliver Gerstenberg’s contribution in this issue
derives/deduces a democratic value (out) of international law from its empowerment
function.
222
223
Id., 339.
119
3. A More Cosmopolitan Vision of Global Order

Tomuschat’s understanding of contemporary international law is universalist,
but denies the possibility of an international democratic process and puts almost
all his faith in national governments reconstructed as agents of the international
community. A more cosmopolitan approach in the tradition of Kantian thinking is
presented by Jürgen Habermas. The title of Habermas’s piece “Is there still a chance
for the Constitutionalization of Public International Law?”224 demonstrates that
there is a broad consonance with Tomuschat’s core assumption: international
law plays a constitutional role in any exercise of public authority. Habermas
considers this understanding of international law and international relations
to be in competition with three other approaches: first, the traditional approach
under the particularist paradigm in its realist or national variant, which sees the
plurality of diverse states as the ultimate horizon of international law; second,
the approach which advocates a world order based on liberal values, but subject
to American hegemony rather than international law and common international
institutions – the particularist paradigm in its hegemonic variant; third, the
approach that asserts a waning of public power undermining the premises of
any constitutional rule.225 From Habermas’ perspective, the universalist telos is
conceptually and normatively most convincing.
For him, practical reason mandates that the telos of all law be the assur-
ance of peace and freedom under the rule of law, rather than mere security,
as in a Hobbesian perspective, via brute force (or American hegemony).226 The
theoretical centrepiece of the Habermasian text consists of a reconstruction of
Kant’s thought meant to overcome a conceptual problem which afflicts many
“Kantian” approaches. In 1793, Kant indicated that the effective and enduring
legal assurance of peace and freedom requires transnational institutions vested
with public power over the constituent states.227 Only two years later, however,
he dismissed this idea, proposing only a “free federalism” without common
institutions to enforce international law against wrongful state behaviour. Kant’s
reversal is not due to empirical insights, i.e. a recognition of the unwillingness
of the states of his epoch to accept entities with transnational power, but rather
to a conceptual inconsistency. In 1795, he considered international institutions
vested with power as incompatible with the idea of international law.228
Habermas, supra note 111.

224
See II 4.
225
Habermas, “Hat die Konstitutionalisierung des Völkerrechts noch eine Chance?”, supra
226
note 111, at 120.

Immanuel Kant, “Über den Gemeinspruch: Das mag in der Theorie richtig sein, taugt
227
aber nicht für die Praxis”, in Vorländer, supra note 105, at 67, 112 et seq.
Kant, supra note 105, at 131.
228
120
Habermas proves that this reversal results from an unnecessary conceptual

straightjacket: the understanding of sovereignty as indivisible.229 Under that
understanding, developed during the French revolution, there can be only one
political centre. As a consequence, global institutions would steer the world as
Paris has steered France since the 18th century. Such a centralized political order
would probably trample on the plurality of forms of life which many citizens
cherish, leading to a “seelenlosen Despotism” (soulless despotism) under which
freedom vanishes.230 However, as the US Constitution has shown since 1787,
sovereignty is indeed divisible. This allows for conceiving a federal system which
consists of different layers of public authority. Thus, international federalism
with operative international institutions is not conceptually inconsistent with
the organisation of political life in “thick” political communities, i.e. states.
The core issue is not an either/or question, but rather how to design a mul-
tilevel system in a way that each layer of authority exercises only those powers
matching its resources of legitimacy. Like Tomuschat, Habermas is well aware
of the limited resources of democratic legitimacy upon which global institutions
can rely; and like Tomuschat, he finds that such legitimacy can only be derived
from democratic states.231 Neither the participation of NGOs nor global parlia-
mentarian institutions appear as possible sources of proper legitimacy for global
institutions. Thus, true powers of international institutions should be confined
to fields which require little democratic legitimacy. According to Habermas, this
is the case both for the enforcement of peace and for the basic requirements of
human rights, but not of democratic government in the Western sense. These
principles enjoy broad legitimacy since serious infringements throughout the
world meet with the same moral indignation. This community of moral indigna-
tion could be seen as an agent of Tomuschat’s international community. As to
the question of determinacy, there exists a consistent number of possible and
relevant infringements which are clearly covered by these principles.
Habermas advocates two types of global regimes. One is centred in a reformed
UN Security Council, which, as a supranational institution, is vested with true
powers in order to enforce international peace and (the more) basic requirements
of human rights. The other regime, which must deal with all legislative issues,232
is not supranational, but rather transnational in nature:
229
note 111, at 125 et seq.
230
Kant, supra note 195, at 147.
231
note 111, at 140 et seq.
232
Habermas therefore also validates the contested (see D. Fiedler, “Discussion”, in Hofmann
et al., supra note 208 at 158-160) use of the separation of powers doctrine on the inter-
national level, id., at 173.
121
In the light of the Kantian idea, one can imagine a political constitution
of a decentralized global society, based on currently existing structures, as a
multi-level system that for good reasons lacks statal [staatlichen] character in
general. Under this conception, an appropriately reformed global organization
would effectively and non-selectively be able to fulfill vital, yet precisely specified,
peacekeeping and human rights functions on the supranational level without
having to assume the statal form of a global republic. On a middle, transnational
level, the large globally competent actors would deal with the difficult problems
not only of coordinating, but of configurating world domestic policy, particularly
problems of the global economy and of ecology, in the framework of standing
conferences and negotiating systems …. In the various regions of the world,
nation-states would have to band together as continental regimes in the form of
“foreign-policy-competent” EUs. On this middle level, international relations in
a modified form would continue – modified already because under an effective
United Nations security system the global players as well as others would be barred
from resorting to war as a legitimate means of conflict resolution.233
A constitutionalized international order is not as utopian as it might appear
at first glance. Alongside numerous empirical observations, Habermas places
a conceptual reminder. The international realm is not the Hobbesian state of
nature. At least some of the main actors are constitutional democracies whose
constitutional tenets direct their action on the international plane.234 Therefore,
less evolutionary effort is needed to proceed, from a largely horizontal interna-
tional system to one with global institutions that safeguard core constitutional
principles, than for leaving the Hobbesian state of nature between individuals
for international law. International constitutionalism, in this sense, is simply
a complement to municipal constitutionalism and a further step in a process
of civilisation. Thus, unlike the municipal constitutionalism situation with its
polarized “state of nature” versus “police state” context, international consti-
tutionalism is not one alternative in an either/or situation.
This position’s understanding of the democratic legitimacy of international
law can be best explained by the critique of the critique it received from Jed
Rubenfeld.235 The thrust of his argument is to present the respective European
openness as a democratic deficiency, whereas US-American resistance against
international law is praised as living up to the democratic ideal. This is certainly
233
Id., at 134-135 (footnotes omitted) (Steven Less trans.); see also reform proposals for the
Security Council, id., at 172 et seq.
234
US Supreme Court Decision, Rasul v. Bush, No. 03-334, Argued April 20th 2004 – Decided
June 28th 2004.
235
Jed Rubenfeld, “The Two World Orders”; von Bogdandy, “Comment on ‘The Two Orders’
from Jed Rubenfeld”, both in Nolte (ed.), European and US Constitutionalism (2005) 280,
297.
122
in line with particularist thinking: under this paradigm, any self-respecting

polity is normatively required to minimize the influence of international law on
itself. However, the issue looks totally different under the universalist paradigm,
in particular if the individual is put in the tradition of contract theory at the
heart of the construction. Here, democracy is not considered primarily as the
auto-determination of a macro-subject, but as a number of procedures which
give a voice to those affected. From this angle, a self-respecting democratic polity
is one which attempts to provide for the necessary avenues of participation of
affected individuals.
In an interdependent world many decisions of the authorities of one polity
substantially affect individuals living abroad. They do not have standing in
domestic procedures. This situation is one of the undemocratic features of
globalisation: increasingly, purely “domestic” decisions have a transnational
impact with ever greater significance. There is almost no remedy in the domestic
democratic process. It is the nature of the domestic political process that the
interests of the polity’s citizens enjoy a priority over those of foreigners. Even
when the process does not aim at hurting non-citizens, domestic interests tend
to be favoured and foreign interests relegated to the fringe. International law,
with all its deficiencies, is thus far the only instrument to provide a voice to
foreign persons affected by the adoption of measures of another polity. A state
open to international law is therefore not limiting its democratic life, but rather
realizing a new dimension of it.
The particularists’ argument is tainted by a further problem. Let us call it
the “Carl Schmitt fallacy”. Some representatives of the American intellectual
establishment are late disciples of “old” Europe, in particular of Carl Schmitt as an
advocate of a political order that Europe as it is today has – hopefully – overcome.
Carl Schmitt ridiculed the Weimar Republic by comparing and delegitimizing
the reality of the Weimar political process against an ideal of parliamentarian-
ism. In a similar vein, in Rubenfeld’s essay the reality of the international legal
process is pitted against an idealized US-American democracy. This idealisation
is reminiscent of Carl Schmitt in a further way. Schmitt’s basic understanding
of democracy is that of the identity of ruled and rulers, amalgamated in a
homogeneous “we”. “We” is a very important word in particularist thinking and
therefore in Rubenfeld’s piece in which all internal differences have disappeared.
And that “we” is forged above all – as with Schmitt – by enmity: anti-Americanism
is a crucial part in Rubenfeld’s argument; it is an essential argument in many
theories under the particularist paradigm.
V. Summing up, Situating this Contribution, Looking Forward

Summing up, we hope that the usefulness of our approach has become visible.
The paradigms of universalism and particularism help to map the theoretical
123
landscape and to explain the premises which inform interpretations and under-
standings of core issues of international law.236
Summing up the pros and cons of the two paradigms, we favour universal-
ism. We are convinced that in the era of globalisation the case can be made for
all humans to strive for an international public order that efficiently safeguards
universal principles and solves global problems.237 That order would build on
proper institutions which are public in the emphatic meaning, but remain at the
same time public international in nature. These are propelled by national govern-
ments (preferably democratically elected), which would be, however, no longer in
a position to individually block the enactment or enforcement of international
law. These international institutions would be in turn conscious of their largely
state-mediated (and thus limited) resources of democratic legitimacy and respect-
ful of the diversity of their constituent states. A democratic global federation
cannot exist, but there can be a better, more peaceful and more integrated world
of closely and successfully co-operating states by way of efficient international
institutions. It is incumbent upon the profession of international scholarship
to contribute to realising this objective. This vision provides a conceptually
coherent conception that builds on the history of American and European
constitutionalism. This scholarship has a sufficient basis in current law. Even
critics cannot deny that it has scholarly potential as a construction of the law
in force and not simply as a lofty discourse de lege ferenda.
Certainly, the theories under the universalist paradigm face some serious
problems. The term “international constitutionalism” for this approach is perhaps
not the most fortunate one. The terms “constitutionalism” and “constitutionalisa-
tion” (similar to the term “federal”) imply a (somewhat unrealistic) progression
towards global democratic institutions, something which only a few scholars
consider viable in our times. In this way, the arguments which contend against
conceiving the international order as “federal” are well-founded and do apply
accordingly. Sometimes the term “legalisation” is used,238 but it underrates the
political impact. Others address this approach as “institutionalism” or “new
236
It is important to stress that we do not argue that the paradigms of the corresponding
theories determine concrete interpretations in a given case. What we do argue is that the
paradigms and the theories inform the interpretation.
237
For a reconstruction of the relevant philosophical thought see Georg Cavallar, “Cosmopo-
lis. Supranationales und kosmopolitisches Denken von Vitoria bis Smith”, 53 Deutsche
Zeitschrift für Philosophie (2005) 49-68.
238
Judith Goldstein et al., “Legalization and World Politics”, 54 International Organization
(2000) 385 et seq.; Stefan Oeter, “Chancen und Defizite internationaler Verrechtlichung:
Was das Recht jenseits des Nationalstaats leisten kann”, in Michael Zürn & Bernhard
Zangel (eds.), Verrechtlichung – Bausteine für Global Governance? (Dietz-Verlag, 2004) 46.
124
institutionalism”.239 However, this approach embodies more than just the asser-
tion that “institutions matter”. Perhaps the term “supranationalism” as used
by Habermas may be a more convenient denomination, although it is tainted
by its technocratic overtones. The terminological difficulty might be indicative
of the need for further elaboration and clarification.
The advocates of this approach do not deny that the current law can be read
in different lights, nor that the thrust of current global developments do not
precisely follow their vision, given the resistance towards a strong international
public order by the governments of countries such as China, India, Russia or the
United States. At the same time, there is no reason to abandon a scientific project
only because it is politically difficult to realize. Koskenniemi accuses the project
of having a hegemonic nature.240 It is, however, difficult to see how this could
be so – except perhaps that by presenting itself as a meaningful construction for
all concerned it asserts itself as being universally acceptable.241 Perhaps more
substantial is the critique that there will remain a fundamental difference in
normativity between public law in developed liberal states and public interna-
tional law as long as there are no strong international institutions with a strong
international law ethos. As a legal project, international constitutionalism might
simply be a step too far and might lead to normative over-extension.242 As put
at the beginning of this course, much hinges on the success of international
criminal law as outlined in the Rome Statute of the International Criminal Court:
it might provide more normativity to the fundamental principles of international
law. Also the danger of establishing powerful (yet evasive and irresponsive)
bureaucratic regimes needs to be thoroughly addressed.243
Although there are some weaknesses, a final evaluation needs to look at the
alternatives. According to Koskenniemi, the alternative vision for the development
239
For a detailed analysis of the various approaches Andreas Paulus, Die internationale
Gemeinschaft im Völkerrecht (Beck, 2001) 97 et seq., 188 et seq.
240
See also Martti Koskenniemi, “International Law and Hegemony: A Reconfiguration”, 17
Cambridge Review of International Affairs (2004) 2, 197.
241
It must be conceded that the constitutionalist reconstruction needs to take into account
more closely the relationship between the principles of current international law and
the dramatic situation in the South. However, Koskenniemi’s critique that “the global
public order … is fully implicated in what can only be seen as a deeply unjust system of
distributing material and spiritual values” also necessitates further proof (id. at § 2 of
conclusion).
242
This argument has been elaborated for international trade law; see von Bogdandy, supra
note 78, at 615 et seq.; Robert Howse & Kalypso Nicolaidis, “Legitimacy and Global
Governance: Why Constitutionalizing the WTO is a Step Too Far”, <http://www.ksg.
harvard.edu/cbg/Conferences/trade/howse.htm>.
243
Joseph Weiler, “The Geology of International Law – Governance, Democracy and Legiti-
macy”, 64 ZaöRV/HJIL (2004) 547, 561-562.
125
of international law is empowering disenfranchised groups largely outside of

international institutions.244 Objectively seen, it is difficult to understand this as
the better alternative given global challenges such as sustainable development,
poverty, climate change and international crimes. This is particularly true if
one perceives legal scholarship above all as a practical science. In the current
world, the practical proposals by “constitutionalist” authors appear in many
instances preferable to those by others. Paraphrasing Kant: this vision might
be vulnerable in theory, but in the current state of international relations and
in view of the alternatives, it provides a convincing orientation for responsible
practice for a number of issues.
Whereas pleading the case of the historic paradigm of universalism, we do
not deny the scientific value of scholarship under the particularist paradigm,
nor do we hold that its claims are altogether untenable. Concerning the future
of the tension between universalism and particularism in international law, in
general, and of the universalist paradigm in specific, we think therefore that
scholars should be open for solutions capable of integrating the idea of a truly
universal order with some issues emerging from the tradition of particularism.
To be introduced into a renewed conception of universalism is, first, the assertion
that democratic legitimation arises eminently from participation within single
political communities, and second, the rejection of any strictly vertical structure
of law and political institutions, i.e. of a global hierarchy within the world order.
Far from advocating an up-to-date version of that “universal monarchy” seen by
Kant as the threatening vision of an all-comprehensive tyranny, the challenge
of a future universalism consists in defending universal rights and values within
a binding system of compelling rules that does not oppress horizontal diversity.
In any event scholars should try to find solutions for international problems
that are acceptable under both paradigms. It belongs to the pride of the lawyer
in general and the international scholar in particular to find solutions that
suit opposing interests and advance common interest. A famous example is
the Antarctic Treaty.245 As set out in its Article 4, the contrasting positions are
unaffected but this did not prevent the development of one of the most successful
international treaty regimes. In a similar line it should be possible to conceive of
the development of the international order on other issues as well. For example,
it might serve the legitimacy of international law under most theories of both
paradigms if a principle of subsidiarity was introduced into international law,246
if the domestic parliamentary procedure was rearranged in order to better
244
Martti Koskenniemi, “Global Governance and Public International Law”, 37 Kritische
Justiz (2004) 241, 253 et seq.
245
Antarctic Treaty, Dec. 1, 1959, 12 U.S.T. 794, 402 U.N.T.S. 71.
246
For a detailed discussion, see I. Feichtner, “Subsidiarity”, in Wolfrum (ed.), EPIL (forthcom-
ing 2008).
126
control the international activities of the government,247 or if the international

representation of weaker countries was improved.
This brings this course to the end. It had three main objectives: to acquaint
an overwhelmingly non-occidental audience with the two main strands of oc-
cidental theories about the nature and possibility of international order, to trigger
reflection on to what extent similar thinking is present in other cultures, and
to help students find a position on this issue. Last but not least, it should enable
participants to build with others, who think differently, but who are fellow lawyers
and humans, a common public international law for a common world.
247
Wolfrum, supra note 107.
127
Legal Aspects of Electronic Commerce:
Rules of Evidence, Contract Formation and
Online Performance
by
Jose Angelo Estrella Faria

Contents

List of Principal Publications 136
Introduction 139
International Trade and Electronic Commerce 142
Liability and Standards of Conduct for Information Service Providers 145
Unfair Competition, Deceptive Trade Practices and Consumer Protection 146
Privacy and Data Protection in Electronic Commerce 147
Protection of Intellectual Property Rights 148
Cybercrime 149
Jurisdiction and Applicable Law 150
Scope of this Study 155
Part One
Legal Value of Electronic Communications 157
Chapter I.
Rules of Evidence, Form Requirements and Electronic Communications 157
A. Traditional Recording and Authentication Methods and Their
Electronic Equivalents 157
1. Function and Nature of Rules of Evidence and Form Requirements 157
(a) Authentication and Attribution 158
(b) Practical Consequences of Form Requirements 163
2. Problems Posed by Electronic Communications 166
(a) Intangibility and Alterability 166
(b) Limitations in Retention and Retrievability 166
B. Conditions for Legal Equivalence between Electronic
Communications and Paper Records 169
1. Work of UNCITRAL in the Area of Electronic Commerce 170
(a) Recommended Legislative Principles for Electronic Commerce 172
(i) Functional Equivalence 173
(ii) Media and Technology Neutrality 173
(iii) Party Autonomy 174

(b) Legal Value of Electronic Communications 175
(i) Conditions for Meeting Form and Evidentiary Requirements 175
(ii) Conditions for the Use of Electronic Communications 177
2. Implementation and Application of Electronic Commerce Laws 177
(a) “Authentication” and Attribution of Electronic Records 179
(b) Ability to Meet Legal Signature Requirements 184
Chapter II.
Electronic Signature and Authentication Methods 188
A. Notion of Electronic “Authentication” and “Signature” 189
1. Functions of Electronic “Authentication” and Electronic “Signature” 190
2. Main Methods of Electronic Signature and Authentication 193
(a) Digital Signatures Relying on Public Key Cryptography 193
(i) Digital Signature Creation and Verification 194
(ii) Public Key Infrastructure and Certification Services Providers 195
(b) Practical Problems in Public Key Infrastructure Implementation 197
3. Biometrics 198
4. Passwords and Hybrid Methods 200
5. Scanned Signatures and Typed Names 200
B. Legal Treatment of Electronic Authentication and Signatures 201
1. Minimalist Approach 203
2. Technology-Specific Approach 205
3. Two-Tiered or Two-Pronged Approach 206
Part Two
Electronic Communications in Contract Formation and
Performance 208
Chapter I.
Contract Formation through Electronic Communications 208
A. Applicable Law in International Electronic Contracting 211
1. Elements to Determine the Applicable Law 212
(a) Location of Information Systems 213
(b) Domain Names and Electronic Addresses 217
(c) The Continued Usefulness of the Traditional Notion of “Place of
Business” 218
(d) A Duty to Disclose the Place of Business? 219
2. Substantive Applicable Law: Sales Law and “Virtual” Goods 220
(a) Computer Software under the UN Sales Convention 220
(b) A Special Legal Category for “Virtual Goods”? 225
132
Legal Aspects of Electronic Commerce: Rules of Evidence, Contract Formation and Online Performance
B. Contract Formation through Electronic Communications:

Substantive Issues 228
1. Qualification of Parties’ Intent: Offers and Invitations to Make Offers 229
(a) “Offers” and “Advertisements” in Electronic Commerce 229
(b) Special Cases: “Click-Wrap” Agreements and Internet Auctions 232
2. Time of Receipt and Dispatch of Electronic Communications and
Contract Formation 235
(a) Rules on Contract Formation 235
(b) Timing of Dispatch and Receipt of Electronic Communications 238
(i) The Rule in Article 15 of the MLEC 238
(ii) Electronic Communications in Domestic Enactments of the
MLEC 240
(iii) Electronic Communications in Other Domestic Laws 244
(iv) The Debate during the Negotiation of the EEC 248
3. Automated Information Systems 255
(a) Responsibility for Automated Information Systems 256
(b) Errors in Messages and Communications 257
(i) Human Errors 257
(ii) Errors Generated by Information Systems 259
4. Incorporation and Availability of Contract Terms 261
(a) Incorporation of Terms and Conflicting Contract Terms 261
(b) Availability of Contract Terms 263
Chapter II.
Particular Issues in Government Contracting 265
A. General Issues in Connection with the Use of Electronic
Communications in the Procurement Process 269
1. Publication of Procurement-Related Information 269
2. Use of Electronic Communications in the Procurement Process 271
(a) Electronic Qualification and Suppliers’ Lists 272
(b) Electronic Supply of Solicitations and Other Documents 275
(c) Form of Other Communications during the Procurement Process 275
(d) Electronic Submission of Tenders, Proposals and Quotations 276
(e) Procurement Contracts and Electronic Signatures 280
B. Legal Issues arising out of Specific Electronic Procurement Techniques 281
1. “Electronic Reverse Auctions” 281
(a) The Extent of Use of ERAs 282
(b) Procedural Aspects of ERAs 285
(i) Auction Stage 285
(ii) Bidding Requirements 286
(iii) Disclosure of Information during the Auction 287
(iv) Contract Award 288
(c) Benefits and Concerns 290
133
2. Dynamic Purchasing Systems 292

(a) Scope and Duration of Dynamic Purchasing Systems 293
(b) The Operation of Dynamic Purchasing Systems 294
(c) Benefits and Concerns 295
Chapter III.
Contract Performance through Electronic Means 298
A. Traditional Methods for Transfer and Perfection of Rights 298
1. Transfer of Rights in Tangible Goods and Other Rights 299
(a) Transfer by Consent 299
(b) Transfer by Registration 300
(c) Transfer by Delivery 301
(d) Transfer by Symbolic Delivery 301
2. Security Interests in Tangible Goods and in Intangible Property 302
(a) Perfection by Possession 303
(b) Perfection by Registration 303
(c) Other Methods 304
B. Transfer or Creation of Rights by Electronic Means of Communication 304
1. General Legal Obstacles 304
2. Electronic Equivalents of Negotiable Instruments and Documents of
Title 305
(a) Basic Conditions for Electronic Negotiability 305
(b) Practical Experience: Electronic Registry Systems 310
(i) Dematerialized Securities 310
(ii) Electronic Registries as a Replacement of Paper Bills of Lading 313
(iii) The International Registry of Security Interests on Mobile
Equipment 316
(c) Limitations and Problems of Registry Systems 317
(i) Liability for System Failure 318
(ii) Effectiveness of Electronic Communications for Transfer of
Rights 320
Conclusion 327
Bibliography 328
134
Biographical Note
José Angelo Estrella Faria is the Secretary-General of the International Institute

for the Unification of Private Law (Unidroit).
He worked at the secretariat of the United Nations Commission on Interna-
tional Trade Law (UNCITRAL), in Vienna, between February 1996 and October
2008. He was the Secretary of UNCITRAL Working Group I (Privately Financed
Infrastructure projects) during the preparation of the UNCITRAL Legislative
Guide and the UNCITRAL Model Legislative Provisions on Privately Financed
Infrastructure Projects, adopted in 2001 and 2003, respectively; he was also
the Secretary of and UNCITRAL Working Group IV (Electronic Commerce)
during the negotiation of the UN Convention on the Use of Electronic Com-
munications in International Contracts, adopted in 2005. As a Senior Legal
Officer, between October 2005 and October 2008, he supervised the secretariat
support to UNCITRAL Working Group III (Transport Law) during the final years
of negotiation of the UN Convention on Contracts for the International carriage
of Goods Wholly or Partly by Sea (“Rotterdam Rules”).
Prior to his work with UNCITRAL, Mr. Faria had served at the General Legal
Division of the UN Office of Legal Affairs, in New York, from 1992 to 1996.
Before joining the UN, Mr. Faria had worked as an attorney in Brazil, specialising
in commercial and trade law matters.
Mr. Faria graduated from the Federal University of Rio Grande do Sul (Porto
Alegre, Brazil) and holds a Master on European Law from the Europa Institut der
Universität des Saarlandes (Saarbrücken, Germany). He has published various
articles and books on legal harmonisation, commercial law and international
law.
135
List of Principal Publications
Estrella Faria, José Angelo. Selbstbeschränkungsabkommen im GATT und im EWG Wet-

tbewerbsrecht, Universität des Saarlandes, Saarbrücken, 1988 (206 pages);
Estrella Faria, José Angelo. “Integração econômica na América Latina: sairemos
do discurso?”, Revista de Direito Mercantil, ano XXIX (1990), No. 79 (July/
September) p. 64-83;
Estrella Faria, José Angelo. “Aplicação extraterritorial do direito da concorrrência,”
Revista de Informação Legislativa, Vol. 27, No. 105 (January/March 1990), pp.
19-46;
Estrella Faria, José Angelo. Princípios, Finalidade e Alcance do Tratado de Assunção,
Ministério das Relações Exteriores, Brasília, 1993 (193 pages);
Estrella Faria, José Angelo. “The work of the United Nations Commission on
International Trade Law in 1996”, Uniform Law Review, vol. 1 (New Series),
1996-3, pp. 476-493;
Estrella Faria, José Angelo. “UNCITRAL Legislative Guide on Privately Financed
Infrastructure Projects”, EBRD, Law in Transition, Spring 2001, pp. 29-31;
Estrella Faria, José Angelo. “Establishing a Legal Framework for Electronic Com-
merce: The work of the United Nations Commission on International Trade Law
(UNCITRAL)” (jointly with Renaud Sorieul and Jennifer R. Clift), The International
Lawyer, Vol. 35, No. 1 (Spring 2001), pp. 107-122;
Estrella Faria, José Angelo. “The UNCITRAL Legislative Guide on Privately Financed
Infrastructure Projects”, The Journal of World Investment, Vol. 3 No. 2 (April
2002), pp. 212-229;
Estrella Faria, José Angelo. “International Harmonization of e-Commerce Law: The
Way Ahead”, Treasury Management International, October 2002, p. 1;
Estrella Faria, José Angelo. “Perspectivas da Arbitragem Comercial no Mundo Con-
temporâneo”, I Seminário Internacional sobre Direito Arbitral, 2002 [proceedings],
Belo Horizonte, Câmara de Arbitragem de Minas Gerais, 2003, pp. 180-199;
Estrella Faria, José Angelo. “La CNUDCI et les autres organisations internationales”,
Petites affiches- Le quotidian juridique, No. 252, 18 December 2003, pp. 21-27;
Estrella Faria, José Angelo. “Electronic Commerce and International Legal Harmo-
nization: Time to Go beyond Functional Equivalence?”, South African Mercantile
Law Journal, v. 16(4), 2004, pp. 529-555;
Estrella Faria, José Angelo. “O Controle de concentrações de empresas estrangeiras e a
Lei no. 8.884: a extraterritorialidade revisitada”, Revista de Direito da Concorrência,
Brasilia, 2004 No. 2, pp. 11-65;
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Estrella Faria, José Angelo. “Legal Certainty for Electronic Transactions: The Role
of the Uncitral Model Law on Electronic Commerce (1996),” in Andrea Schulz
(ed.), Legal Aspects of an E-Commerce Transaction. International Conference in The
Hague, 26 and 27 October 2004, Sellier European Law Publishers GmbH, 2006,
pp. 159-169;
Estrella Faria, José Angelo. “Harmonizing the Law of International Electronic Con-
tracting: Adjust the Rules but Don’t Rewrite Them” Andrea Schulz (ed.), Legal
Aspects of an E-Commerce Transaction. International Conference in The Hague, 26 and
27 October 2004, Sellier European Law Publishers GmbH, 2006, pp. 74-98;
Estrella Faria, José Angelo. “Relationship between Formulating Agencies in Interna-
tional Legal Harmonization: Competition, Cooperation or Peaceful Coexistence?
A Few Remarks on the Experience of UNCITRAL”, Loyola Law Review, vol. 51
(Summer 2005), pp. 253-285;
Estrella Faria, José Angelo. “The United Nations Convention on the Use of Electronic
Communications in International Contracts. An Introductory Note”, International
and Comparative Law Quarterly, vol. 55 (July 2006), Part 3, p. 689-694;
Estrella Faria, José Angelo. “Convention des Nations Unies sur l’utilisation de com-
munications électroniques dans les contrats internationaux,” Journal du Droit
International, vol 133, issue 1 (2006), pp. 393 -403;
Estrella Faria, José Angelo. “Posibilidades y límites de la armonización del derecho en
materia de contratación electrónica”, DeCITA; Derecho del comercio internacional,
temas y actualidades (Buenos Aires) 5-6 (2006), pp. 225-260;
Estrella Faria, José Angelo. “Online Contracting: Legal Certainty for Global Busi-
ness - The New U.N. Convention on the Use of Electronic Communications in
International Contracts”, Uniform Commercial Code Law Journal, vol. 39 (2006),
No. 1 pp. 25-73;
Estrella Faria, José Angelo. “Problemas Jurídicos dos Métodos Eletrônicos de Criação
e Transferência de Direitos sobre Bens Corpóreos e Imateriais”, in Ricardo A.
L. Camargo (ed.) Títulos de Crédito Concorrência e Mercosul Estudos em Memória
do Professor Werter R. Faria, Porto Alegre, Sérgio Antônio Fabris, 2008, pp.
23-48;
Estrella Faria, José Angelo. “O Contrato de Compra e Venda Internacional no
Mercosul: Da Disparidade de Leis a um Regime Uniforme?” in Elisabeth Accioly
(org.), Panorama do Direito no Século XXI: Estudos em Homenagem a Werter R. Faria.
Curitiba, Juruá, 2007 (to be issued);
Estrella Faria, José Angelo. “Drafting and Negotiating History of the Electronic
Communications,” in Amelia Boss and Wolfgang Kilian (eds.), The United Nations
Convention on the Use of Electronic Communications in International Contracts: An
In-Depth Guide and Sourcebook, Austin Boston Chicago New York The Netherlands,
Wolters Kluwer: 2008, pp. 17-42.
Estrella Faria, José Angelo. “La responsabilidad del porteador en el proyecto de
convenio de la CNUDMI sobre el transporte de mercancías: breve comparación
137
con el Convenio de Bruselas y las Reglas de Hamburgo”, paper presented at 12th

Congress and XX th Anniversary of the Iberoamerican Maritime Law Institute,
Seville (Spain), 14 November 2007 (available as of 29 January 2008 at <http://
www.institutoiberoamericanodederechomaritimo.com/Conferencias/02.%20
JOSE%20ANGELO%20ESTRELLA%20FARIA.pdf,>);
Estrella Faria, José Angelo. “Uniform Law for International Transport at UNCITRAL:
New Times, New Players, and New Rules”, paper presented at the symposium
“Transport Law For The 21st Century: The New UNCITRAL Convention”
(Austin, 28 mars 2008) (to appear in Texas Journal of International Law; vol.
44 (2009);
Estrella Faria, José Angelo. “Legal Aspects of Electronic Commerce”, Collected Courses
of The Xiamen Academy of International Law, The Brill and Martinus Nijhoff,
The Hague/London/New York, 2009 (to be issued).
138
Legal Aspects of Electronic Commerce:

Rules of Evidence, Contract Formation and
Online Performance*
Jose Angelo Estrella Faria**
Introduction
A few decades ago, it was said that the world had entered a so-called “post-modern”
age. This was the dawn of a post-industrial era where intensive application and
* This article draws on years of research done at the secretariat of the United Nations Com-
mission on International Trade Law (UNCITRAL) in the area of electronic commerce – part
of which has been separately published – and reproduces materials from various notes
by the U.N. Secretariat, in particular from the following: Possible future work on electronic
commerce – Comprehensive reference document on elements required to establish a favorable legal
framework for electronic commerce: sample chapter on international use of electronic authentica-
tion and signature methods (U.N. document A/CN.9/630, of 25 April 2007 – and addenda
1-5); Possible revisions to the UNCITRAL Model Law on Procurement of Goods, Construction
and Services – the use of dynamic purchasing systems in public procurement (U.N. document
A/CN.9/WG.I/WP.44, of 21 February 2006, and addendum 1); Possible revisions to the
UNCITRAL Model Law on Procurement of Goods, Construction and Services – issues arising
from the use of suppliers’ lists (U.N. document A/CN.9/WG.I/WP.45, of 21 February 2006
and addendum 1); Possible revisions to the UNCITRAL Model Law on Procurement of Goods,
Construction and Services – issues arising from the use of electronic communications in public
procurement (U.N. document A/CN.9/WG.I/WP.34, of 13 December 2004, and addenda
1-2); Possible revisions to the UNCITRAL Model Law on Procurement of Goods, Construction
and Services – issues arising from the use of electronic communications in public procurement –
Comparative study of practical experience with the use of electronic (reverse) auctions in public
procurement (U.N. document A/CN.9/WG.I/WP.35, of 16 February 2005, and addendum
1); Legal aspects of electronic commerce – Electronic contracting: background information (U.N.
document A/CN.9/WG.IV/WP.104, of 8 September 2003, and addenda 1-5); Possible
future work on electronic commerce – Transfer of rights in tangible goods and other rights
(U.N. document A/CN.9/WG.IV/WP.90, of 20 December 2000). Nonetheless, the views
expressed in this article are those of the author and do not necessarily reflect the views
of the United Nations. The texts of domestic laws and regulations citied in this article and
for which no source is specifically indicated are on file with the UNCITRAL secretariat.
This article was submitted by the author on 13 December 2007.
139
wide use of information and communication technology (ICT) made of know-

how the principal force of production. In the “information society”1 in which we
now living, the majority of employees work in “information jobs”, which means
that they have to deal more with information, signals, symbols, and images than
with energy and matter. Knowledge itself becomes a commodity.
The dual function of information as means of production and commodity has
created a special “information economy,” that is, a wide range of economic activi-
ties involving trade in ICT goods and services and ICT application for economic
purposes, including the supporting infrastructure and hardware elements.2
“Electronic commerce” is both a narrower and broader concept, depending on
how it is defined. As used in this article, “electronic commerce” means transac-
tions for the sale of goods and provision of services where an order is placed
by the buyer or price and terms of sale are negotiated over electronic means,3
whether or not pay is made online.4 Where their objects relate to ICT, electronic
transactions are measurable as part of the “information economy”. In other
cases, however, electronic commerce is nothing more than “old economy” using
electronic means, as a manifestation of the broader “information society”.
Measuring electronic commerce is not always easy, and different results
may be arrived at depending on the way electronic is defined. As understood
in this article, “electronic commerce” is estimated by the U.S. Department of
Commerce to account for a total value of US$ 2.400 billion in shipments and
sales in 2005 or 12.25 % of total shipments, sales, and revenues.5 On a global
scale, electronic commerce has been estimated at some US$ 12.8 trillion of total
** LL.B. UFRGS (Brazil); LLM. Saarbrücken (Germany); Senior Legal Officer, International
Trade Law Division, U.N. Office of Legal Affairs; Secretary, UNCITRAL Working Group
IV (Electronic Commerce) and supervisor of the secretary, UNCITRAL Working Group
III (Transport Law).
1
Jean-François Lyotard, La Condition Post-Moderne (Paris, Éditions de Minuit, 1979).
2
See United Nations Conference on Trade and Development (UNCTAD), Information Economy
Report, 2006, New York Geneva, United Nations, 2006; OECD Working Party on Indica-
tors for the Information Society, Sector Definitions Based on the International Standard
Industry Classification (Isic 4) (OECD document DSTI/ICCP/IIS(2006)2/FINAL, 5 March
2007) <www.oecd.org> (29 November 2007).
3
For example, the Internet, an extranet, Electronic Data Interchange (EDI) network, or
other online system.
4
Definition adopted by OECD Working Party on Indicators for the Information Society
(Guide to Measuring the Information Society OECD document DSTI/ICCP/IIS(99)4/FINAL,
7 October1999) and the US Department of Commerce E-Stats <www.census.gov/eos/
www/2005/2005reportfinal.pdf> 19 November 2007)
5
US Department of Commerce, E-Stats, 25 May 2007 <www.census.gov/eos/
www/2005/2005reportfinal.pdf> (19 November 2007).
140
shipments in 2006.6 Admittedly, this is only a small part of the world’s output,7
but the bottom line is that electronic commerce keeps growing and is far from
reaching its potential.8
The advantages of enabling the use of ICT applications for business transac-
tions should be obvious. Besides the evident efficiency and productivity gains
offered by the speed and worldwide reach of electronic communications, the
potential savings of replacing paper-based trade documentation by electronic
means can be illustrated by data provided by the International Air Transport
Association (IATA), according to which the average cost of processing paper
airway bills is US$ 30 per bill, which, by an average of 35 million airway bills
being issued every year, amounts to a total cost of some US$ 1 billion every year
in this industry alone.9
As would be expected, a closer look at existing statistics shows that most
e-commerce happens in specific industries in a few economies of the world,
mainly in North America, Europe, and Japan.10 The concentration of electronic
commerce users and revenues is one of the aspects of the so-called “digital divide”
between industrialized countries and less developed ones.
This digital divide results from a combination of various factors that influ-
ence the development of information and communication technologies (ICT).
They include infrastructure factors, such as connectivity, access to information
technology, policy aspects, and telecommunications traffic levels.11 The digital
divide also means that countries have different priorities and policy concerns,
6
These are the figures arrived at by the well-known global research firm Forrester Research
<www.forrester.com> (12 November 2007).
7
Estimated by the World Bank to have been some US$ 48, 244 billion in 2006 (see World
Development Indicators Database, World Bank, 1 July 2007, <www.worldbank.org>
(under “Data and research”, “World development indicators”) (20 November 2007)).
8
There are, however, several conceptual and practical difficulties in measuring electronic
commerce, which may lead to widely diverging estimates depending on the methodology
used (see “Measuring Electronic Commerce” in UNCTAD, E-Commerce and Development
Report 2001, United Nations Publication Sales No. E.01.II.D.30, (New York and Geneva,
2001) <www.unctad.org> (29 November 2007), p. 3).
9
Cited by United Nations Economic Commission for Europe, Roadmap Towards Paperless
Trade (U.N. document ECE/TRADE/371) <www.unece.org/cefact/publica/publi_index.
htm> (29 November 2007).
10
Although no reliable statistics exist for electronic commerce worldwide, studies done by
UNCTAD suggest that the participation of developing countries in electronic commerce
revenues is marginal (UNCTAD, E-Commerce and Development Report 2004 (United Nations,
New York and Geneva, 2004), chapter I. <www.unctad.org> (29 November 2007).
11
UNCTAD has developed a basket of indices to assess the level of each country’s development
in the field of information and telecommunications technology (see UNCTAD, Informa-
tion and Communications Technology Development Indices (2003) <www.unctad.org> (29
November 2007).
141
depending on their level of ICT development. The less developed countries

are typically concerned with establishing the basic infrastructure for ICT use,
whereas developed countries,12 such as Australia, Canada, most of the members
of the European Union, Japan, New Zealand, and the United States, have long
passed that level of concern and focus on issues related to more sophisticated
business applications of ICT, such as electronic payments, privacy protection,
intellectual property rights.13
Laws dealing with electronic transactions, electronic signatures, cybercrime
and data protection are a constant component of most domestic strategies to
develop electronic commerce. This means that most countries that have passed
the initial stages of developing the basic infrastructure for electronic commerce
will sooner or later pay some attention to the interplay between ICT use and the
existing legal framework. The use of electronic communications for the negotia-
tion and performance of contracts has however highlighted the inadequacy of
existing laws to accommodate new technology or to address some of the issues
it raised. This applies both to public and private law, domestic and international.
The legal implications of electronic commerce extend to various areas of law
and may demand an extensive law reform effort.14 The main areas concerned
are briefly summarized below.
International Trade and Electronic Commerce

The international trade liberalization regime that developed in the course of the
20th century, initially under the auspices of the General Agreement on Tariffs
and Trade (GATT) and later under the umbrella of the World Trade Organization
(WTO), for exempla, was based on a strict distinction between trade in “goods”
and trade in “services”. Technological evolution made it possible, however, not
only to reach out for external markets with nearly unlimited accessibility, but
also to deliver some goods entirely online, without any supporting tangible
medium, which had thus far constituted an essential element of the legal notion
12
Of course, the labels of “developed” and “developing” countries are an oversimplification
of the world’s picture, as several developing countries rank higher than some developed
countries in several indicators of ICT development, and the level of internet penetration
and readiness for electronic commerce varies widely among developing countries (see
UNCTAD, Information and Communications Technology Development Indices (2003)).
13
Most of these topics have been the subject of extensive work at various international forums,
including global and regional, intergovernmental, and non-governmental organizations.
For a general overview, see Current work by other international organizations in the area of
electronic commerce – Note by the Secretariat (U.N. document A/CN.9/57 <www.uncitral.
org/uncitral/en/commission/ sessions/38th.html>).
14
For an overview of the wide range of issues affected by electronic commerce, see Ugo
Draetta, “Internet et commerce électronique en droit international des affaires”, 314
Recueil des Cours de l’Académie de Droit International de La Haye (2005) 99.
142
of “goods”. Recognizing that global electronic commerce is growing and creating

new opportunities for trade, trade ministers at the Second Ministerial Conference
of World Trade Organization (WTO), which took place in Geneva from 17 to 20
May 1998, adopted a declaration,15 to commence a work programme on the
subject in the General Council of the WTO, for making recommendations to the
following Ministerial Conference.
One of the first issues raised by WTO member States was the classification
of “virtual goods” for the purposes of the existing multilateral trade regime,
namely how electronic transmissions should be characterized, that is, as
goods, services or something else. This is a question of significant practical and
economic importance, as the types of commitments and extent of liberalization
vary greatly between trade in goods under the General Agreement on Tariffs
and Trade (GATT) and the regime established by General Agreement on Trade
in Services (GATS).
Although it appears that most countries within the WTO recognize that a
large majority of e-commerce activities correspond to services (such as financial
or professional services), there has been extensive argument about how to classify
certain specific electronic transmissions or deliveries, in particular the electronic
equivalents of goods such as CDs, photos, postcards, video tapes, software, video
games, and books.16
Most developing countries seem to be concerned that ensuring the openness of
electronic commerce will exacerbate the technological gap between them and
developed countries. There are also fears that they might become mere consum-
ers of e-commerce goods and services, rather than providers. Some countries
also oppose the idea of open e-commerce in order to preserve the prerogative to
regulate the flow of foreign goods, services, and culture within their boundaries.
Thus, developing countries are generally inclined to regard transactions involv-
ing “virtual goods” as trade in services. Some of them would even prefer to see
“virtual goods” treated as trade in intellectual property rights,17 a category that
would offer the least in terms of market access and trade liberalization.
While most developed countries want to ensure that there will be no future bar-
riers to electronic commerce, because they are often the providers of services that
are delivered electronically, their positions are not exactly uniform. The European
Union maintains the position that the fact that information and instructions can
15
WTO Document WT/MIN(98)/DEC/02 <www.wto.org/english/tratop_e/ecom_e/
mindec1_e.htm> (29 November 2007).
16
For an overview of the debate within the WTO, see Stewart A. Baker, Peter Lichtenbaum,
Maury D. Shenk and Matthew S. Yeo, “E-Products and the WTO”, 35 Int’l Law. (2001)
5.
17
See Communication of Indonesia and Singapore (WTO document WT/GC/W/247, 9 July
1999) <www.wto.org/english/tratop_e/ecom_e/ecom_e.htm> (29 November 2007)
143
be put and transmitted on a physical support does not transform them into goods
for the purpose of the WTO regimes. While the physical support itself (e.g. the
disk) is seen as a good, and is, therefore, subject to GATT rules, the provision of
the corresponding service should remain subject to the GATS.18 Other developed
countries such as Japan19 and the United States,20 seem to focus on the result of
maximum possible liberalization rather than on the classification of various types
of transactions. But at least at earlier stages of the WTO discussions, the United
States openly advocated the classification of e-commerce as trade in goods.21
The divergences among countries are significant, as are the economic interests
involved in the WTO discussions,22 which is why the participating countries do
not seem to be anywhere near reaching a workable consensus on the matter.
18
Thus, “there is no reason to artificially turn the electronic delivery of a service into a good
so as to bring it under the scope of the GATT 1994” (see Submission from the European
Communities (WTO document WT/GC/W/497, 9 May 2003) <www.wto.org/english/
tratop_e/ecom_e/ecom_e.htm> (29 November 2007)).
19
Japan “agrees that the GATS disciplines should be applied to the acts of supplying digital
contents by electronic means. However, as it is not entirely clear what disciplines should
be applied to the digital contents themselves, for example, software, further considera-
tion is needed. Such consideration should be directed so that the GATT principles of the
most-favoured-nation treatment, national treatment and the general elimination of
quantitative restrictions will apply to such digital contents” (Communication from Japan,
WTO document WT/GC/W/253, 14 July 1999 <www.wto.org/english/tratop_e/ecom_e/
ecom_e.htm> (29 November 2007)).
20
“… the means of delivery of such products may change but the downloadable products’
functional characteristics do not change merely by a difference in delivery. Trade rules
or commitments should not prejudice which business model is optimal for developing or
delivering these products. Thus, the focus should not be on how to classify these products,
but rather how to treat them for trade purposes with the goal being the most liberal treat-
ment irrespective of how such products are classified.” (Submission from the United States,
WTO document WT/GC/W/493/Rev.1, 8 July 2003 <www.wto.org/english/tratop_e/
ecom_e/ecom_e.htm> (29 November 2007).
21
See Contribution by the United Sates, WTO Document WT/GC/16, 12 February 1999
<www.wto.org/english/tratop_e/ecom_e/ecom_e.htm> (29 November 2007).
22
However divergent the views of States may be, at least the position of the world’s largest
software producer is clear: States should keep treating software embedded on a tangible
medium as “goods”; they should neither create a category of “virtual goods” for on-line
software transmissions, nor reclassify them as trade in “services”, but rather build upon
the TRIPs regime (see WTO and Electronic Commerce: Issues for World Trade, A Microsoft
White Paper, 8 September 1999 <www.microsoft.com/issues/essays/1999/11-15wto-b.
mspx>(29 November 2007)). The United States Council for International Business (USCIB)
is somewhat less emphatic, but points out that its members “do not support, at least at
this juncture, a determination that differentiates a physical delivery of a product as a
good and an electronic delivery of a product as a service” (USCIB Response to the European
Commission Questionnaire on the Services Aspects of the WTO Work Programme on Electronic
144
Liability and Standards of Conduct for Information Service Providers

Information service providers play an essential role in the functioning of the
Internet. Typically, they act as intermediaries who transmit or host third party
content but do not take part in the decision to disseminate particular material.
Liability may arise from theories of direct and indirect or contributory infringe-
ment in national tort law, criminal law, and intellectual property law. Most
cases arise from the fact that service providers take part in the technical process
of transmitting or storing information for third party content of any kind.
Responsibility for unlawful content or unlawful acts of their users is related
to the opportunity and extent of control that information service providers
are able to exert. The possibilities of storage and transmission of data files in
data networks have multiplied the opportunities of unlawful behaviour and
reduced chances of detection and control. Hence, imposing general liability
for service providers would amount to establishing duties to monitor and filter
all transmitted or stored content – a burdensome task for information service
providers for technical and economic reasons as well as unacceptable for other
reasons. As a result, many countries have perceived a need for limiting liability
of information services.
However, the interest in limiting liability of service providers has to be weighed
against the interests of injured parties in enforcing their rights and holding all
contributing parties responsible. It does not seem to be necessary that the ap-
proaches be identical: they may differ depending on the particular circumstances
and legal traditions in any given country. But they should be interoperable if
global networks and electronic commerce are to develop smoothly.
An additional set of legal issues relates to the possible liability of informa-
tion service providers for failures that occur during transmission of messages
(delivery delay or loss of information), or for malfunctioning of data storage
systems (loss of stored data or unauthorized access by third parties). Typically,
these matters would be dealt with at a contractual level, through general condi-
tions of contract of information service providers. However, the extent to which
information service providers may disclaim liability for loss or damage caused
by service failure, or may limit their liability in those cases, is likely to vary from
country to country.
Lack of appropriate rules, guidelines or voluntary codes of conduct, or even
the perception of insufficient legal protection, undermine confidence in electronic
commerce and constitute an obstacle to its development. Conflicting standards
across borders may also affect the offer of goods and services, as business entities
operating under a less developed or excessively tolerant framework may enjoy
Commerce, 30 June 1999 <www.uscib.org/index.asp?documentID=1318> (29 November

2007).
145
an unfair competitive advantage, as compared to companies required to comply

with more stringent requirements. In some cases, operations under a more leni-
ent legal framework may be favoured by business entities interested in shielding
themselves from liability that may arise under more stringent regimes.
Unfair Competition, Deceptive Trade Practices and Consumer Protection

Electronic communication permits new forms of advertising and marketing
that may affect the interests of consumers as well as the functioning of the
competition process. Unfair competition law will protect these interests but legal
evaluation of practices in conventional commerce cannot always be transferred
to the electronic environment.
Online advertising includes forms of banner advertising with remunera-
tion calculated on the basis of page impressions or ad clicks. Other forms of
advertisements include information that loads between two content pages,
either as small format pop-ups or full-page advertisements. Depending on the
manner they are used, such techniques may raise issues of the separation of
advertising from editorial parts of media, or may mislead customers and users
to purchase services not originally intended. Unfair practices may also involve
search engines, which have become the main service for users to cope with the
enormous amount of information present on the Internet, or use of hyperlinks
for misappropriation or deceptive comparative advertising.
Again, lack of appropriate rules, guidelines or voluntary codes of conduct,
or even the perception of insufficient legal protection, undermine confidence
in electronic commerce and constitute an obstacle to its development. Conflict-
ing standards may also distort international competition, as business entities
operating under a less developed or excessively tolerant framework may enjoy
an unfair competitive advantage, as compared to companies required to comply
with more stringent requirements.
Closely related to the issue of unfair competition and trade practices are rules
intended for consumer protection. Domestic rules on consumer protection are
typically based on concerns about information asymmetries as well as a lack of
negotiating power on the side of the consumer. While media such as the Internet
offer convenient alternatives to traditional purchase methods, one of the main
barriers to electronic commerce taking off has been the lack of consumer
confidence due to uncertainties in the use of electronic media for contracting.
Information asymmetries are exacerbated in electronic commerce, as consum-
ers lack vital information concerning the product, which the consumer cannot
inspect physically. Consumers also have virtually no information concerning
vendors and have little means to verify their identities and the standing of their
business. Moreover, the features of the technical means used for the transaction
may not be familiar to the consumer, resulting in unintended communications.
Also, there are fears that a vendor providing the technical system may be able to
146
construe key features in its favour leaving the consumer in a weaker position in the
transaction process. Legal uncertainties in cross-border transactions arise with
respect to the applicable law and efficient ways to assert consumer claims.
Various international and regional organizations have recognized the impor-
tance of improving the legal framework for consumer protection in electronic
commerce, including OECD,23 the European Union24 and APEC.25
Privacy and Data Protection in Electronic Commerce

Data protection and privacy are concepts that have been acknowledged in
most parts of the world, sometimes even on a constitutional law level. With the
advent of the computer there was a “first wave” of data protection initiatives in
the seventies. With the spreading use of the Internet and the increased techni-
cal potential for collecting and transmitting data in electronic commerce, the
protection of personal data has gained renewed attention. Practices like data
mining or data warehousing as well as the placement of “cookies” are widely
used in electronic commerce.
Data protection and privacy rules may serve the interests of user as well
as of business but also have to be weighed against conflicting interests. The
lack of consumer trust and confidence in the privacy and security of online
transactions and information networks is seen as an element possibly preventing
economies from gaining all of the benefits of electronic commerce. On the other
hand, regulatory systems restricting the flow of information can have adverse
implications for global business and economies.
The key elements in the international discussion on principles of data
protection are concerned with consent to data collection, adequate relation
to the purpose, time limitation of storage, adequate level of protection in third
countries to which transmission takes place, information and correction claims
for users, and enhanced protection for sensitive data. New issues and restrictions
on data protection arise from international security concerns, which have led
to legislative actions directed at data retention. With a growing stock of inter-
national rules these do not only become more heterogeneous but also make it
more difficult for companies to comply. As these standards consider conflicting
interests, the delineation of the field of application of these instruments as well
See the OECD Guidelines on Consumer Protection in the Context of Electronic Commerce of
23
9 December 1999 <www.oecd.org/document/51/0,3343,en_2649_37441_1824435

_1_1_1_37441,00.html> (27 November 2007).
Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on
24
the protection of consumers in respect of distance contracts (Official Journal No. 144, of
4 June 1997).
Voluntary Consumer Protection Guidelines for the On-line Environment (<www.apec.org>,
25
under “Documents and reports” (27 November 2007)).
147
as which of the interests protected will prevail in a specific case are of gaining
growing importance.
Important work in setting standards for privacy protection has been done
by international and regional organizations, including OECD,26 the European
Union,27 the Council of Europe,28 APEC29 and the Commonwealth.30
Protection of Intellectual Property Rights

Modern means of communication have had a significant impact in the way
some intellectual property rights are defined and have challenged traditional
enforcement mechanisms.
Copyright has been closely intertwined with the features of the production,
reproduction, and distribution of works from the outset. Hence, the advent of
a uniform digital format as well as digital networks poses a challenge for the
specific characteristics of copyright as to subject matter, scope of rights, and
enforcement as new technological possibilities and related innovative business
models develop. All kinds of protected materials are now distributed and traded
over digital networks. The first challenge for the legal framework is to adapt to
new technological and economic developments. This concerns the scope of
See OECD Guidelines on the Protection of Privacy and Transborder Flows of Personal Data,
26
adopted on 23 September 1980 <www.oecd.org/document/18/0,3343,en_2649_37

441_1815186_1_1_1_37441,00.html> (26 November 2007). See further the OECD
Privacy Policy Statement Generator <www.oecd.org/ document/39/0,3343,en_2649_3
7441_28863271_1_1_1_37441,00.html> (26 November 2007).
Beginning with Directive 95/46/EC of 24 October 1995 on the protection of individuals
27
with regard to the processing of personal data and on the free movement of such data
(Official Journal 1995 L 281/31, 23 November 1995). This work was supplemented by
Commission Decision 2001/497/EC of 15 June 2001 on standard contractual clauses for
the transfer of personal data to third countries under Directive 95/46/EC (Official Journal
J L 181/19 of 4 July 2001) and the Directive 2002/58/EC of the European Parliament
and of the Council of 12 July 2002 concerning the processing of personal data and the
protection of privacy in the electronic communications sector (Official Journal L 2001
201/37 of 31 July 2002).
See Council of Europe, Convention for the Protection of Individuals with regard to
28
Automatic Processing of Personal Data, done at Strasbourg on 28 January 1981, E.T.S.

108, <conventions.coe.int/> (29 November 2007).
The APEC Privacy Framework promotes a consistent approach to information privacy
29
protection across APEC member economies and also avoids the creation of unnecessary
barriers to information flows (see <www.apec.org>).
The Commonwealth Model Privacy Law deals with the collection, use, disclosure and
30
retention of personal information as well as establishing a Privacy Commissioner and a

system of investigation of complaints of breaches of privacy <www.thecommonwealth.org/
shared_asp_files/uploadedfiles/ {82BDA409-2C88-4AB5-9E32-797FE623DFB8}_protec-
tion%20of%20privacy.pdf> (27 November 2007).
148
rights with respect to digital distribution as well as the extent of limitations

to copyright. Also, certain kinds of information goods may obtain increased
importance in an electronic environment calling for increased protection. The
protection of databases can be seen as an example. Digital networks pose a
threat to traditional distribution channels and economic models as well as to
existing systems of collective management. Finally, moral rights that were not in
the focus of the earlier phases of computerization, which emphasized software
protection, are now increasingly gaining importance with respect to the creation
and distribution of works over the Internet.
Trademarks have an important function in commerce that is equally present
in electronic commerce. While there is consensus that trademark law should
apply to electronic commerce the same way as to traditional means of commu-
nication, problems arise from the fact that the provisions of trademark law and
protection of related signs are not tailored to the features of the new medium.
Further issues deriving more from “conventional” use of trademarks and related
to the issue of cross-border communication as opposed to the territorial nature of
trademark systems include the acquisition as well as infringement of trademark
rights through use of signs on the Internet.
Another illustration of the impact of electronic commerce on the traditional
system for protecting intellectual property rights concerns domain names. Do-
main names are a necessity of today’s user-friendly information retrieval in the
Internet. The economic value of a concise and characteristic domain cannot be
underestimated. Due to this, many conflicts over certain Internet-domains have
arisen. Patent law is another area affected by modern means of communication,
with software patents playing an increasing role in electronic commerce.
Countries interested in developing an appropriate legal framework for electronic
commerce would be well advised to consider carefully the intellectual property
implications of the use of modern information and communication technologies.
WIPO is the driving force in the international field for developing a framework
for the protection of intellectual property. Due to technical developments much
of the activity is now related to the electronic environment. WIPO has a com-
prehensive working agenda on all aspects of intellectual property in electronic
commerce. The organization’s expertise and universal membership ensures the
broad acceptability of the international standards set by WIPO.
Cybercrime
Use of modern information and communication technologies has provided new
means for criminal, fraudulent or indecent activities, such as embezzlement of
funds, slander, industrial espionage, violation of trade secrets or dissemination
of child pornography. At the same time, new types of criminal conduct have
emerged, such as identity theft, dissemination of computer viruses, or intentional
breakdown of computer and information services. Besides their criminal character,
149
all these activities may significantly affect international trade by causing physical
loss or moral damage to individuals and business entities and by undermining
business and consumer confidence in electronic commerce.
The establishment of an effective legal framework for preventing and pros-
ecuting computer crime and cybercrime, for example, as provided for in the
Convention on Cybercrime31 adopted by the Council of Europe for the purpose of
developing a common criminal policy aimed at the protection of society against
cybercrime, inter alia, by adopting appropriate criminal legislation and fostering
international cooperation is therefore an essential component of domestic and
international strategies to promote electronic commerce. The Commonwealth
has also formulated a model law on computer and computer-related crimes.32
Jurisdiction and Applicable Law

Cyberspace it has been said, is not some mystical incantation capable of warding
off the jurisdiction of courts built from bricks and mortar. Thus, just as traditional
notions of jurisdiction “have proven adaptable to other [economic changes], so
too are they adaptable to the transformations wrought by the Internet.”33 While
this conclusion is certainly true, as a general proposition, the Internet has given
rise to very intricate arguments over proper jurisdiction, which are far from being
entirely solved. A few examples should suffice to make this point.
In a famous case, two French associations fighting anti-Semitism and racism
sued an American citizen who had created an Internet auction platform to offer
Nazi memorabilia and Nazi products. The relevant web site could be accessed
from anywhere in the world, including France, where, however, the sale of Nazi
memorabilia is forbidden as “war crimes’ apology.” The French court affirmed its
competence over the publishers of offensive material pursuant to French criminal
31
Council of Europe, Convention on Cybercrime (Budapest, 23 November 2001), E.T.S.
185, <conventions.coe.int/>(29 November 2007).
32
The Commonwealth Model Law on Computer and Computer Related Crime establishes
offences in relation to certain computer crimes including illegal access, interfering with
data or with a computer system, the illegal interception of data, illegal devices and
child pornography <www.thecommonwealth.org/shared_asp_files/uploadedfiles/
{DA109CD2-5204-4FAB-AA77-86970A639B05}_Computer%20Crime.pdf> (29
November 2007).
33
Gorman v. Ameritrade Holding Corp., 293 F.3d 506, 510 (C.A.D.C. 2002). See also Metcalf v.
Lawson, 148 N. H. 35, 38 (2002): “It can be difficult to apply long-standing jurisdictional
principles in cases involving Internet contacts. Nevertheless, while the Internet undoubtedly
challenges the territorial-based concepts that courts have traditionally applied to problems
of personal jurisdiction, it is equally true that traditional constitutional requirements of
foreseeability, minimum contacts, purposeful availment, and fundamental fairness must
continue to be satisfied before any activity – including Internet activity – can support an
exercise of personal jurisdiction.
150
law, regardless of their nationality or domicile, to the extent that the offensive
materials are accessible from French territory, and despite the defendant’s allega-
tions that the publication or offer of such content was not illegal in the country
of origin, the United States.34 The court ordered the internet services provider
that hosted the web site in question (Yahoo!) to “render impossible” access by
persons in France to certain content on servers based in the United States.35
Anticipating a request by the French plaintiffs to enforce the French decision
in the United States, Yahoo! sought from a U.S. court a declaration that the order
of the French court was unenforceable in the United States because it contravened
the First Amendment to the constitution and other laws of the United States. The
French defendants subsequently moved to dismiss for lack of personal jurisdiction.
The district court denied the defendants’ motions to dismiss. The district court
proceeded to hear the case and entered summary judgment for Yahoo!, declaring
the order to be unenforceable in the United States as contrary to the guarantee
of free speech under the First Amendment to the U.S. constitution. The district
court noted that the French order’s “content and viewpoint-based regulation of
the web pages and auction site on Yahoo.com” was “entitled to great deference
as an articulation of French law”, but held that it would be “inconsistent with
the First Amendment if mandated by a court in the United States.”36 The court
added that, “[a]lthough France has the sovereign right to regulate what speech
is permissible in France, this Court may not enforce a foreign order that violates
34
Tribunal de Grande Instance de Paris, Ordonnence de réferé, 22 May 2000, Union des
Etudiants Juifs de France (UEJF) et La Ligue Contre le Racisme et l’Antisemitisme (LICRA) c/.
Yahoo! Inc. et Yahoo France <www.juriscom.net/txt/jurisfr/cti/tgiparis20000522.htm> (3
December 2007). The website was published at Yahoo.com, an American corporation,
who argued that the French tribunal had no jurisdiction to hear the case. The tribunal
decided however, that the crime was committed both in France and abroad because the
website could be accessed in any jurisdiction. French court issued an order requiring
Yahoo! to (1) disallow French citizens’ access to the offending offerings on Yahoo! Auctions;
(2) eliminate French citizens’ access to web pages on yahoo.com that contain offending
material; (3) post a warning on yahoo.fr stating that searches through yahoo.com may
lead to sites and material prohibited by R645-1 of the French Criminal Code and that
viewing such material may cause prosecution under the statute; and (4) eliminate from
search directories accessible in the French Republic links to “negationist” materials which
violate the criminal statute
35
Believing that the order imposed technologically impossible requirements, Yahoo! requested,
without success, the French court to modify the order. The French court gave Yahoo! three
months to come into compliance as originally set forth. Yahoo! took steps to prevent Nazi
propaganda from being accessible on www.yahoo.fr, but made no such effort on the U.S.
site.
36
Yahoo! Inc. v. La Ligue Contre le Racisme et l’Antisemitisme, 169 F. Supp. 2d 1181, 1192
(N.D. Calif. 2001).
151
the protections of the United States Constitution by chilling protected speech

that occurs simultaneously within [the United States].”37
The two French associations appealed to the U.S. Court of Appeals for the Ninth
Circuit, reasserting their claim that the U.S. court lacked personal jurisdiction
over them. The initial decision was eventually reversed, main on procedural
grounds. The Court of Appeals conceded that, had the French associations at-
tempted to enforce the order of the French court in the United States, jurisdiction
would be proper. As no such enforcement had yet been sought, and the French
associations’ contacts with California were not “continuous and systematic”,
U.S. courts lacked personal jurisdiction over them.38 This decision was later
confirmed, although not entirely on the same grounds, by a judgment en banc
of the Court of Appeals.39
This case generated much controversy and extensive debate – both in favour
and against the decisions taken by the various courts involved – from the point
of view of ensuring international harmonization and legal predictability for
what is essentially a borderless activity.40 Perhaps the most significant lesson
to be learned from it may sound like a truism: not all that is illegal at home is
forbidden abroad; neither is everything allowed abroad not forbidden at home.
In the absence of universal standards, the Internet emphasizes more than ever
then the need for mutual understanding of legal traditions and values.
The interest to protect nationals against criminal activity conducted by
electronic means seems to lead courts in various countries to assert jurisdiction
on the basis of the accessibility of the offensive content. Australian courts have
held that a defamation action could be brought wherever the information is
37
Id.
38
Yahoo! Inc. v. La Ligue Contre le Racisme et l’Antisemitisme, 379 F.3d 1120 (9th Cir.
2004).
39
Yahoo! Inc. v. La Ligue Contre le Racisme et l’Antisemitisme, 399 F.3d 1010 (9th Cir.
2005).
40
See Marc H. Greenberg, “A Return to Lilliput: The LICRA v. Yahoo! Case and the Regulation
of Online Content in the World Market”, 18 Berkeley Tech. L.J. (2003) 1191. For a view
of the later developments, see Robert T. Razzano, “Error 404 Jurisdiction Not Found:
The Ninth Circuit Frustrates The Efforts Of Yahoo! Inc. To Declare A Speech-Restrictive
Foreign Judgment Unenforceable”, 73 Cincinatti L. Rev. (2005) 1743. See also the views of
Michael Geist (“We are beginning to see courts moving toward an ‘effects based analysis
for Internet jurisdiction”); Joel R. Reidenberg (“Companies will have to comply with the
laws where they target business”); Pierre Trudel (“Les mesures de censure sont une mauvaise
façon de réguler les conflits engendrés par la circulation de l’information”) and Yves Poulet (“C’est
à l’aune de ses propres principes constitutionnels et du respect dû à la liberté d’expression dans
un pays démocratique que l’État ou le juge interviendra de manière exceptionnelle”) at < www.
juriscom.net/uni/doc/20010131.htm> (3 December 2007)
152
viewed.41 A similar conclusion was reached by the Italian Court of Cassation

in a slender case, which the court saw as falling within the jurisdiction of the
plaintiff ’s place of residence.42 Courts that opt for this broad understanding of
domestic jurisdiction seem to take the view that “the person who sets up the
website can be regarded as potentially committing a delict in any country where
the website can be seen, in other words in any country in the world.”43
The opposite view, however, advocates restraint the exercise of jurisdiction.
Thus, for example, noting that internet publications are accessible from virtually
anywhere, a French court expressed the view that it would be unreasonable to
expose the author to “all laws of the world”, which would lead to “total legal
uncertainty in the exercise of the freedom of thought”, which is also protected
by law. The court therefore advocated the use of objective criteria to exercise
jurisdiction, in particular to confer jurisdiction on the place where the web site
is located.44
Similarly, in the United States, courts have distinguished between various
types of Internet sites, according to their level of interactivity in order to assess
the reasonableness of exercising personal jurisdiction.45 When a defendant
41
Gutnick v. Dow Jones & Co Inc. [2001], Supreme Court of Victoria, VSC 305, 28 August
2001 <www.austlii.edu.au/au/cases/vic/VSC/2001/305.html> (30 November 2007).
42
Corte di Cassazione, Civil Third Section, Ordinance No. 659, 18 May 2002, V. Giustiniani,
President, A. Segreto, and Relator <www.infoius.it/sentenze/cass_2002/cassazione_
o6591_02.asp> (30 November 2007).
43
This case involved allegations of copyright infringement commited through a web site
maintained outside Scotland. Speaking for the Scottish Court of Session, Lord Drummond
Young took the view that “the critical question for present purposes is the location of a
wrong that is said to have been committed by way of the Internet. I do not think that
it is helpful to … adopt the defenders’ analysis … that a website is nothing more than
material stored on a particular computer, with the result that any delict could only be
committed where the computer containing the material was located. … [The Internet] is,
in essence, a system of communication that allows a verbal or graphic message to be set
up on a computer, which may be situated anywhere in the world, and conveyed to another
computer, which may likewise be situated anywhere in the world.… [W]hen a website is
set up, it is self-evident that the intention is that other persons should be able to obtain
access to it via the Internet. The person who creates the website is linking himself into a
process of communication, with the obvious intention that communication should take
place by way of that process” (Bonnier Media Ltd v. Greg Lloyd Smith and Kestrel Trading
Corporation, Scotland, Court of Session, Outer House, 2002 SCLR 977, 1 July 2002).
44
Presdok et Siline Gmbh D.J. v. F.C.O. fiduciaire SA, Court d’appel de Paris, 11th Chamber,
Section A, 10 November 1999, <www.juriscom.net/documents/caparis19991110.pdf>
(3 December 2007). In the particular case, however, the court asserted jurisdiction on
the basis of a provision in the French Penal Code (article 113-6) that grants French court
universal jurisdictions for offences committed by French citizens.
45
Machulsky v. Hall, 210 F. Supp. 2d 531(D.N.J. 2002).
153
merely posts information or advertisements on a website, personal jurisdiction

over such defendant is not found to be proper. Jurisdiction could only be exercised
if the acts were aimed at producing effects in the forum.46
Even regarding purely commercial transactions, which do not normally rise
to the same level of sensitivity as criminal cases, there is argument as to what
conditions justify the exercise of jurisdiction in Internet-related cases. Courts
in the United States have transposed the analysis of the level of interactivity of
web sites to the commercial environment. However, the dividing line between
one and the other category seems at times rather fluid.
Courts that have considered the issue of whether web presence creates personal
jurisdiction in a particular forum have categorized Internet use into three areas
for the purpose of determining whether the exercise of personal jurisdiction is
permitted. At one end of the spectrum are cases where individuals can directly
interact with a company over their Internet site, download, transmit or exchange
information, and enter into contracts with the company via computer. In such
cases, the exercise of jurisdiction is appropriate, particularly when combined
with evidence of sales from the forum state.47 Exercise of personal jurisdiction
is justified, for example, where the Internet presence of a company is clearly
more than passive, extending, for example to maintaining a website through
which its customers can engage in electronic transactions, open accounts online,
transmit funds to their accounts electronically and use those accounts to buy
and sell products.48
At the other end of the spectrum are cases where the defendant has only
advertised on the Internet, and where another medium such as the telephone or
mail is necessary to contact the seller; in the case of such “passive” sites, personal
jurisdiction usually does not lie.49 However, if a passive web site by itself is not
sufficient to confer personal jurisdiction, a passive website in conjunction with
Mere allegations that a plaintiff feels the effects of a defendant’s tortious conduct in the
46
forum, simply because plaintiff resides there, do not satisfy the “effects test” for purposes
of determining when a nonresident defendant’s publication of allegedly libelous material
can subject such defendant to personal jurisdiction” (Machulsky v. Hall, supra note 45,
540-541). See also Shamsuddin v. Vitamin Research Prods., 346 F. Supp. 2d 804 (D. Md.
2004).
Compuserve, Inc. v. Patterson, 89 F.3d 1257, 1261 (6th Cir. 1996).
47
Gorman v. Ameritrade Holding Corp., 293 F.3d 506, 5112-513,. (C.A.D.C. 2002).
48
Bensusan Restaurant Corp. v. King, 937 F. Supp. 295, (S.D.N.Y 1996) (holding that mere
49
uploading a web site onto a server located outside the forum that was accessible to forum
residents was insufficient, without more, to subject web masters to personal jurisdiction
where site not intended to sell product to forum residents.). See also Cybersell, Inc. v.
Cybersell Inc., 130 F. 3d 414, (9th Cir. 1997) (declining jurisdiction where a web site is
“passive” and the non-resident does not do “something more” to target the residents of
the forum).
154
“something more”, such as conduct directly targeting the forum, may well do
so.50 It is not clear what additional off-line activity would render the operation
of a passive web site capable of justifying the exercise of personal jurisdiction.
For instance, some courts have held that a company’s maintenance of a passive
web site accessible to forum residents and a toll-free telephone number justified
jurisdiction,51 while other countries have expressly denied it.52
The middle ground between the two extremes involves sites where parties
can interact with the defendant company, but may not be able to contract
with the company or make purchases over the Internet site; in such situations,
most courts determine whether jurisdiction is proper by “examining the level
of interactivity and commercial nature of the exchange of information that
occurs on the Web site.”53 In these cases, it is normally held that there must be
more than a fortuitous contact with the forum to justify personal jurisdiction.
For example, the mere offer of goods through a platform such as e-bay, is not
sufficient to subject a non-resident to the forum’s jurisdiction.54 Even for such
“middle ground” web sites, exercise of jurisdiction may be based on findings
that the contacts with the forum are continuous and intense.55 Interactivity
alone is not sufficient.56
Scope of this Study

Information technologies have introduced profound and lasting changes in the
way people, enterprises and governments communicate with each other and
conduct their business. The task of legislators and policy makers around the world
is therefore to ensure that existing laws, conceived against the background of other
means of communication and premised upon strictly territorial application, can
properly operate in the new environment created by the “information society.”
In doing so, legislators must ensure that the legal framework for domestic and
Rio Properties, Inc. v. Rio International Interlink, 284 F.3d 1007 (9th Cir. 2002).
50
Inset Systems Inc. v. Instruction Set, Inc., 937 F. Supp. 161 (D. Conn. 1996).
51
See Fix My PC, LLC d/b/a Fixx My PC v. N.F.N. Associates, Inc., (48 F. Supp. 2d 640 (N.D.
52
Tex. 1999); American Homecare Federation, Inc. v. Paragon Scientific Corp. et al., 27 F. Supp.
2d 109, (D. Conn. 1998); Edberg v. Neogen Corporation, 17 F. Supp. 2d 104 (D. Conn.
1998).
Zippo Manufacturing Company v. Zippo Dot Com, Inc., 952 F. Supp. 1119, (W.D. Pa. 1997).
53
See also Search Force v. Dataforce International, 112 F. Supp. 2d 771, (S.D. Ind. 2000).
Winfield Collection Ltd. v. Mccauley, 105 F. Supp. 2d 746, 751(E.D. Mich. 2000); see also
54
Metcalf v. Lawson, 148 N. H. 35, 39-40 (2002).

Mieczkowski v. Masco Corp., 997 F. Supp. 782, (E.D. Tex. 1998).
55
Millennium Enterprises, Inc. v. Millennium Music, LP, 33 F. Supp. 2d 907, (D. Ore. 1999).
56
See also On-Line Techs. v. Perkin Elmer Corp., 141 F. Supp. 2d 246, (D. Conn. 2001).
155
international trade does not hinder or diminish the gains promised by the use
of new technologies.
This brief introduction has shown the variety of legal issues raised by elec-
tronic commerce. Attempting to deal with all of them would by far exceed the
limits of this paper, which will, therefore, be limited to issues affecting electronic
contracting. For that purpose, Part One discusses the interplay between form
requirements and electronic communications. Part Two considers matters related
to contract formation and performance in an electronic environment.
156
Part One
Legal Value of Electronic Communications
Chapter I. Rules of Evidence, Form Requirements and

Electronic Communications
A. Traditional Recording and Authentication Methods and

Their Electronic Equivalents
The Internet presents many of the same issues as other transnational technologies,
but by facilitating the ability to communicate anywhere, any time, and reduc-
ing the importance of geographical and economic boundaries and locations, it
facilitates changes to the way companies do business.
One of the initial difficulties, however, results from the fact that paper docu-
ments have been the basis for rules on form and evidence of legal acts in most
countries. Indeed, most legal systems use concepts that – to a lesser or greater
extent – presuppose or even require that information of legal significance be
recorded in a tangible medium capable of being displayed and stored for subsequent
use. Notions such as “writing,” “document,” “instrument,” and other related
concepts such as “original” or “signature” have been traditionally associated with
hand-written or typed signs impressed by ink on a piece of paper. The medium of
electronic communications is by nature intangible, and this characteristic gave
rise to concerns that existing law may not support electronic communications
or may even be an obstacle to its use.
1. Function and Nature of Rules of Evidence and Form Requirements

At least in theory, the law is generally “medium neutral.” Contracts being the
result of human agreement, the law in principle does not require any formalities
for their validity. This is true both in civil and in common law countries.
In practice, however, there are numerous exceptions to the general principle
of freedom of form. The first type of exception is made of requirements of a
particular form (usually the “written” form) as a condition for the validity of
a contract. The second type of exception comprises rules of the admissibility
and hierarchy of evidence in judicial proceedings. Even if this rule may not per
157
se deprive a contract of its validity, it may seriously restrict its enforceability

whenever the required type of evidence (typically “documentary” evidence),
for whatever reason, is not available.
(a) Authentication and Attribution

Legal writing and signature requirements as a condition for the validity of certain
acts in common law jurisdictions are typically found in the British Statute of
Frauds57 and its versions in other countries.58 In its origins, the Statute of Frauds
had an essentially evidentiary function,59 and it is generally understood as merely
rendering a contract not complying therewith unenforceable, but not invalid.
The notions of “writing” or “document” have broader application than within
the narrow confines of form requirements, such as those set forth in the Statute
of Frauds. Indeed, those concepts are an essential element of rules on evidence,
both in civil and criminal proceedings. A “writing” or “document” generally
encompasses “anything in which information of any description is recorded”.60
This would include, for example, such things as photographs of tombstones
and houses,61 account books62 and drawings and plans.63 The relevancy of a
document as a piece of evidence is established by connecting it with a person,
57
The Statute of Frauds was originally passed in Great Britain in 1677. When it was originally
enacted, it covered five types of contract: (i) a contract by an executor or administrator to
accept personal liability; (ii) a contract in consideration of marriage; (iii) a contract for the
disposition of land; (iv) a contract where one promises to be a surety; and (v) a contract to
be performed more than one year after its formation. Most of its provisions were repealed
in the United Kingdom during the twentieth century. J.H. Baker, An Introduction to English
Legal History (London: Butterworths-LexisNexis, 2002) 350.
58
For example, section 2-201, subsection 1, of the Uniform Commercial Code of the United
States, which has expressed the Statute of Frauds as follows: “Except as otherwise provided
in this section, a contract for the sale of goods for a price of $500 or more is not enforce-
able by way of action or defense unless there is some writing sufficient to indicate that a
contract for sale has been made between the parties and signed by a party against whom
enforcement is sought or by his authorized agent or broker.”
59
The purpose of the Statute of Frauds is said to have been “[f]or the prevention of many
fraudulent practices which are commonly endeavoured to be upheld by perjury and
subordination of perjury.” Henry Reed, A Treatise on the Law of the Statute of Frauds and
of Other Like Enactments in Force in the United States of America and in the British Empire
(Philadelphia: Kay & Brother, 1884) 1-3.
60
United Kingdom, Civil Evidence Act 1995, chapter 38, section 13.
61
Lyell v. Kennedy (No. 3), UK, Court of Appeal [1881-1885] All ER Rep 814, 8 April
1884.
62
Hill v. Regem, UK, King’s Bench Division [1945] KB 329, 1 March 1945.
63
J. H. Tucker & Co., Ltd. v. Board of Trade, UK, Chancery Division [1955] 2 All ER 522, 19
May 1955.
158
place or thing, a process which in some common law jurisdictions is referred to

as “authentication”.64
Under the common law on civil evidence, a record or document is regarded as
“authentic” if there is evidence that the document or record “is what its proponent
claims”.65 Signing a document is a common – albeit not exclusive – means of
“authentication,” and, depending on the context, the terms “to sign” and “to
authenticate” may be used as synonyms.66 Thus, the purpose of statutes that
require a particular document to be signed by a particular person is to confirm
the genuineness of the document.67 The legal notion of “signature,” in turn,
is understood as “any name or symbol used by a party with the intention of
constituting it his signature”.68 The paradigm case of signature is the signatory’s
name, written in the signatory’s own hand, on a paper document (a “handwrit-
ten” or “manuscript” signature).69
However, the handwritten signature is not the only conceivable type of
signature in the common law tradition. Since courts regard signatures as “only
a mark,” where a statute merely requires that a document shall be signed, the
statute is satisfied by proof of the making of a mark upon the document by or
by the authority of the signatory.70 Thus, for example, the printed name of the
party who is required to sign the document may be enough, or the signature may
be impressed upon the document by a stamp engraved with a facsimile of the
ordinary signature of the person signing, and the courts do not require “evidence
of the giving of the authority pursuant to which the stamp was so impressed, any
more than it would do so if the signature were apparently handwritten.”71
Farm Credit Bank of St. Paul v. William G. Huether, 454 N.W.2d 710, 713 (N. Dak.
64
1990).
United States of America, Federal Rules of Evidence, rule 901, subdivision (a): “The
65
requirement of authentication or identification as a condition precedent to admissibility

is satisfied by evidence sufficient to support a finding that the matter in question is what
its proponent claims.”
In the context of the revised article 9 of the United States Uniform Commercial Code, for
66
example, “authenticate” is defined as “(A) to sign; or (B) to execute or otherwise adopt a

symbol, or encrypt or similarly process a record in whole or in part, with the present intent
of the authenticating person to identify the person and adopt or accept a record.”
Lobb v. Stanley, UK, Queen’s Bench, (1844) 5 Q.B. 574, 114 E.R. 1366.
67
Alfred E. Weber v. Dante De Cecco, 1 N.J. Super. 353, 358 (1948).

68
Lord Denning in Goodman v. Eban, Queen’s Bench Division, [1954] Q.B.D. 550 at 56: “In
69
modern English usage when a document is required to be signed by someone that means
that he must write his name with his own hand upon it.”
R. v. Moore: ex parte Myers (1884) 10 V.L.R. 322, 324 (cited in The Queen v. Joseph Mari-
70
jancevic, Supreme Court Of Victoria, Court Of Criminal Appeal, 1991 VIC LEXIS 452, 21
June 1991).
The Queen v. Joseph Marijancevic, 1991 VIC LEXIS 452.
71
159
With time, courts have tended to interpret form requirements, in particular

those set forth in the Statute of Frauds liberally, out of recognition that its
strict rules were conceived against a particular background72 and that their
unconditional enforcement unnecessarily deprives contracts of legal effect.73
Thus, since the 19th century, common law jurisdictions have seen an evolution
of the concept of “signature” from an original emphasis on form to a focus on
function.74 The admissibility of identification methods that could be assimilated
to the hand written-signatures, such as crosses75 initials,76 pseudonyms77 and
identifying phrases,78 printed names,79 signatures by third parties,80 and rub-
ber stamps,81 were admitted by English courts by drawing an analogy with a
manuscript signature. Thus, it could be said that against a background of some
72
“The Statute of Frauds was passed at a period when the legislature was somewhat inclined
to provide that cases should be decided according to fixed rules rather than to leave it
to the jury to consider the effect of the evidence in each case. This, no doubt, arose to a
certain extent from the fact that in those days the plaintiff and the defendant were not
competent witnesses.” (J. Roxborough in Leeman v. Stocks, UK, Chancery Division, [1951]
1 Ch 941, 17 April 1951,pp. 947-948) citing approval for the views of J. Cave in Evans
v. Hoare, UK Divisional Court [1892] 1 QB 593, 15 March 1892, p. 597).
73
As explained by Lord Bingham of Cornhill “It quickly became evident that if the seven-
teenth century solution addressed one mischief it was capable of giving rise to another:
that a party, making and acting on what was thought to be a binding oral agreement,
would find his commercial expectations defeated when the time for enforcement came
and the other party successfully relied on the lack of a written memorandum or note of
the agreement.” (Actionstrength Limited v. International Glass Engineering, UK, House of
Lords, 3 April 2003, [2003] UKHL 17).
74
Chris Reed, “What is a signature?”, 3 J. Infor. L. & Tech. (2000) 223, and reference to case
law therein <www2.warwick.ac.uk/fac/soc/law/elj/jilt/2000_3/reed/#fn6> (3 December
2007).
75
Baker v. Dening (1838) 8 A. & E. 94 (cited by Lord McDermott L.C.J. in Fulton v. Kee, Court
of Appeal (Civil Division), [1961] NI 1, 30 June 1960) United Kingdom, Adolphus and
Ellis’ Queen’s Bench Reports).
76
Hill v. Hill, Court of Appeal, [1947] Ch 231, 5 December 1946.
77
Redding, in re (1850) 14 Jur. 1052, 2 Rob. Ecc. 339 (cited in Chris Reed, supra note 74).
78
Cook, In the Estate of (Deceased) Murison v. Cook and Another [1960] 1 All ER 689 (id.,).
79
Brydges v. Dicks (1891) 7 T.L.R. 215 (cited in Brennan v. Kinjella Pty Ltd., Supreme Court of
New South Wales, 24 June 1993, 1993 NSW LEXIS 7543, 10). Typewriting has also been
considered in Newborne v. Sensolid (Great Britain), Ltd. [1954] 1 QB 45 (United Kingdom,
Law Reports, Queen’s Bench).
80
France v. Dutton, 24 April 1891 [1891] 2 QB 208 (cited by Parker L.J. in London County
Council v. Vitamins Ltd., Court of Appeal [1955] 2 QB 218, [1955] 2 All ER 229, 31March
1955).
81
Goodman v. J. Eban Ltd., [1954] 1 QB 550 (cited by Denning L.J. in Lazarus Estates, Ltd. v.
Beasley, Court of Appeal [1956] 1 QB 702, 24 January 1956).
160
rigid general form requirements, courts in common law jurisdictions have tended
to develop a broad understanding of what the notions of “authentication” and
“signature” mean, focusing on the intention of the parties, rather than on the
form of their acts.
The approach to form requirements and the understanding of terms such as
“authentication” and “signature” in civil law jurisdictions is not in all respects
identical to the common law approach.
Most civil law jurisdictions follow the rule of freedom of form for contractual
engagements in private law matters, either expressly82 or impliedly,83 subject,
however, to a more or less extensive catalogue of exceptions depending on the
jurisdiction concerned. This means that, as a general rule, contracts need not be in
“writing” or “signed” in order to be valid and enforceable. Nonetheless – and here
lies a significant difference as compared to the common law approach – statutory
form requirements in civil law countries are usually understood as a necessary
condition for the validity of a contract, and not only for its enforceability.
As regards the evidentiary aspects, there are civil law jurisdictions that gener-
ally require a writing to prove the contents of contracts, except in commercial
matters.84 In contrast to common law jurisdictions, civil law countries tend to
interpret evidentiary rules rather strictly. Typically, rules on civil evidence establish
a hierarchy of evidence for proving the content of civil and commercial contracts.
Highest in such ranking are documents issued by public authorities, followed by
authentic private documents. Often, such hierarchy is conceived in such a way
that the notions of “document” and “signature”, although formally distinct,
82
This is recognized, for instance, in article 11, paragraph 1, of the Code of Obligations of
Switzerland. Similarly, section 215 of the Civil Code of Germany provides that agreements
are only invalid where they failed to observe a form prescribed by law or agreed upon by
the parties. Except for such specific instances, it is generally understood that private law
contracts are not subject to specific form requirements. Where the law expressly prescribes
a particular form, that requirement is to be interpreted strictly.
83
In France, for instance, freedom of form is an implication within the basic rules on contract
formation under the Civil Code. According to article 1108 of the Civil Code of France,
the validity of a contract requires the consent of the promisor, his or her legal capacity,
a certain object and a licit cause; once these have been met, the contract is “law between
the parties” according to article 1134. This is also the rule in Spain under articles 1258
and 1278 of the Civil Code. Italy also follows the same rule, although less explicitly (see
Civil Code of Italy, articles 1326 and 1350).
84
Article 1341 of the Civil Code of France requires a writing for the proof of contracts
exceeding a certain value, but article 109 of the Commercial Code admits various types
of evidence, without a particular hierarchy. This led the Court of Cassation of France in
1892 to recognize the general principle of freedom of evidence in commercial matters
(Cass. civ. 17 mai 1892, DP 1892.1.604; cited in Luc Grynbaum, Preuve, Répertoire de
Droit Commercial Dalloz (June 2002), sections 6 and 11).
161
may become nearly inseparable.85 Some civil law jurisdictions positively link the
notion of “document” to the existence of a “signature.”86 This does not mean
that a document that has not been signed is necessarily deprived of any value
as evidence, but such a document would not enjoy any particular presumption
and is generally regarded as a “beginning of evidence”.87
“Authentication” in most civil law jurisdictions is a concept that is rather
narrowly understood to mean that the authenticity of a document has been
verified and certified by a competent public authority or a notary public. In
civil procedure it is common to refer instead to the notion of “originality” of
documents.
As is the case under the common law, the paradigm of a signature in civil law
countries is the handwritten one. As regards the signature itself, some jurisdic-
tions tend to admit various equivalents, including mechanical reproductions of
signatures, despite an otherwise formalist approach to evidence.88 Other jurisdic-
tions, however, admit mechanical signatures for commercial transactions,89 but
until the advent of computer technologies, continued to require a handwritten
signature for the proof of other types of contract.90
By way of conclusion, it could be said that against a general background of
freedom of form for the conclusion of business contracts, civil law countries tend
to apply strict standards to assess the evidentiary value of private documents
85
Thus, for instance, under German law a signature is not an essential element of the notion
of “document” (Urkunde) (Gerhard Lüke and Alfred Walchshöfer, Münchener Kommentar
zur Zivilprozessordnung (Munich, Beck, 1992), section 415, No. 6). Nevertheless, the
hierarchy of documentary evidence established by sections 415, 416 and 419 of the
Code of Civil Procedure of Germany clearly links the signature to the document. Indeed,
section 416, on the evidentiary value of private documents (Privaturkunden), provides
that private documents constitute “full proof ” for the information they contain as long
as they are signed by the author or by a notarized signature). As nothing is provided for
documents without a signature, it seems that they share the sort of defective documents
(i.e. garbled, damaged), whose evidentiary value is “freely established” by the courts (Code
of Civil Procedure of Germany, section 419).
86
Thus, in France, a signature is an “essential element” of private documents (“actes sous
sein privé ”) (see Recueil Dalloz, Preuve, no. 638).
87
This is the situation in France, for example (see Recueil Dalloz, Preuve, nos. 657-658).
88
Commentators of the Code of Civil Procedure of Germany point out that requiring a
handwritten signature would mean excluding all forms of mechanically made signs, a
result that would run counter to ordinary practice and technological progress. See Lüke
and Walchshöfer, Münchener Kommentar zur Zivilprozeßordnung 1. Auflage (1992 Verlag:
C.H. Beck), section 416, No. 5.
89
For example, France (see Recueil Dalloz, Preuve, no. 662).
90
In France, for instance, the signature could not be replaced with a cross or other signs,
by a seal or by fingerprints (see Recueil Dalloz, Preuve, no. 665).
162
and may be dismissive of documents whose authenticity is not immediately

recognizable on the basis of a signature.
(b) Practical Consequences of Form Requirements

The above discussion shows not only that the notions of signature and authen-
tication are not uniformly understood, but also that the functions they fulfil
vary across legal systems and even under the same legal system, depending on
the context of the particular form requirement. Despite these divergences, a few
general common elements can be found.
The notions of “authentication” and “authenticity” are generally understood
in law to refer to the genuineness of a document or record, that is, that the
document is the “original” support of the information it contains, in the form
it was recorded and without any alteration. Signatures, in turn, perform three
main functions in the paper-based environment: signatures serve to identify
the signatory (identification function); signatures provide certainty as to the
personal involvement of that person in the act of signing (evidentiary func-
tion); and signatures associate the signatory with the content of a document
(attribution function). Signatures can be said to perform various other functions
as well, depending on the nature of the document that was signed. For example,
a signature might attest to the intent of a party to be bound by the content of
a signed contract; the intent of a person to endorse authorship of a text (thus
displaying awareness of the fact that legal consequences might possibly flow
from the act of signing); the intent of a person to associate him or herself with
the content of a document written by someone else; and the fact that, and the
time when, a person has been at a given place.
It should be noted, however, that even though the authenticity is often presumed
by the existence of a signature, a signature alone does not “authenticate” a docu-
ment. The two elements may even be separable, depending on the circumstances.
A signature may retain its “authenticity” even though the document to which it
is affixed is subsequently altered. Likewise, a document may still be “authentic”
even though a signature it contains was forged.91 Furthermore, the authority
Some areas of the law recognize both the inherent insecurity of handwritten signatures
91
and the impracticability of insisting on strict form requirements for the validity of legal
acts, and admit that in some instances even the forgery of a signature would not deprive
a document of its legal effect. Thus, for example, article 7 of the Uniform Law on Bills of
Exchange and Promissory Notes annexed to the Convention Providing a Uniform Law
for Bills of Exchange and Promissory Notes (Geneva, 7 June 1930) provides that “if a bill
of exchange bears the signatures of persons incapable of binding themselves by a bill of
exchange, or forged signatures, or signatures of fictitious persons, or signatures which for
any other reason cannot bind the persons who signed the bill of exchange or on whose
behalf it was signed, the obligations of the other persons who signed it are none the less
valid” (League of Nations Treaty Series, vol. CXLIII, No. 3313).
163
to intervene in a transaction and the actual identity of the person in question,

while important elements to ensure the authenticity of a document or signature,
are neither fully demonstrated by the signature alone, nor are they sufficient
assurance of the authenticity of the documents or of the signature.
This observation leads to another aspect of the issue presently discussed.
Regardless of the particular legal tradition, a signature, with very few exceptions,
is not self-standing. Its legal effect will depend on the link between the signature
and the person to whom the signature is attributable. In practice, various steps
may be taken to verify the identity of the signatory. When the parties are all
present at the same place at the same time, they may simply recognize one
another by their faces; if they negotiate over the telephone, they may recognize
each other’s voices and so on. Much of this happens as a matter of course and
is not subject to specific legal rules. However, where the parties negotiate by
correspondence, or where signed documents are forwarded along a contracting
chain, there may be few means of establishing that the signs that appear on a
given document were indeed made by the person to whose name they appear to
be linked and whether indeed only the duly authorized person was the one who
produced the signature supposed to bind a particular person.
As has been indicated above, in many legal systems, commercial contracts
need not always to be contained in a document or evidenced by a writing to
be valid. Even where a writing exists, a signature is not necessarily mandatory
in order for the contract to be binding on the parties. Of course, where the
law requires contracts to be in writing or to be signed, failure to meet those
requirements would render the contract invalid or unenforceable. Perhaps
more significant than form requirements for purposes of validity of contracts,
are form requirements for evidentiary purposes. The difficulty of proving oral
agreements is one of the main reasons why commercial contracts are reflected
in written documents or documented by correspondence, even if an oral agree-
ment would be otherwise valid. Parties whose obligations are recorded in signed
documents are unlikely to succeed in attempts to negate the content of their
obligations. Strict rules on documentary evidence typically aim at affording a
high degree of reliability to the documents that meet them, which is generally
believed to raise legal certainty. At the same time, however, the more elaborate
the evidentiary requirements, the greater the opportunity a party has to invoke
formal defects with a view to invalidating or denying enforceability to obligations
they no longer intend to perform, for instance because the contract has become
commercially disadvantageous.
It should also be noted that although a manual signature is a familiar form
of “authentication” and serves well for transaction documents passing between
known parties, in many commercial and administrative situations a signature
is relatively insecure. The person relying on the document often has neither
the names of persons authorized to sign nor specimen signatures available for
164
comparison. This is particularly true of many documents relied upon in foreign

countries in international trade transactions. Even where a specimen of the
authorized signature is available for comparison, only an expert may be able
to detect a careful forgery. Where large numbers of documents are processed,
signatures are sometimes not even compared except for the most important
transactions. Trust is one of the basic foundations of international business
relations.
Therefore, most legal systems have special procedures or requirements
that are intended to enhance the reliability of handwritten signatures. Some
procedures may be mandatory in order for certain documents to produce legal
effects. They may also be optional and available to parties that wish to preclude
possible arguments concerning the authenticity of certain documents. Typical
examples include notarization,92 attestation;93 or seals.94
Apart from these special situations, however, handwritten signatures have
been used in commercial transactions, both domestic and international, for
centuries without any particularly designed legislative or operational framework.
The addressees or holders of the signed documents have assessed the reliability of
signatures on a case-by-case basis depending on the level of trust enjoyed by the
signatory. In fact, the vast majority of international written contracts – if there
is “writing” at all – are not necessarily accompanied by any special formality or
authentication procedure.
This commercial reality is often overlooked by legislators and scholars who
advocate the imposition of the highest technical standards for the recognition of
In certain circumstances, the act of signing has a particular formal significance due to
92
the reinforced trust associated with a special ceremony. This is the case, for instance,
with notarization, i.e. the certification by a notary public to establish the authenticity of
a signature on a legal document
Attestation is the act of watching someone sign a legal document and then signing one’s
93
name as a witness. The purpose of attestation is to preserve evidence of the signing. By

attesting, the witness states and confirms that the person whom he or she watched sign
the document in fact did so. Attesting does not extend to vouching for the accuracy or
truthfulness of the document. The witness can be called on to testify as to the circumstances
surrounding the signing (Adrian McCullagh, Peter Little and William Caelli, “Electronic
Signatures: Understand the Past to Develop the Future”, 21 New S. Wales L.J. (1998) 452
<www.austlii.edu.au/au/journals/UNSWLJ/1998/59.html> (28 November 2007), see
especially chapter III, section D, on the concept of witnessing).
Seals are used in several countries in eastern Asia, such as China and Japan. Signing or
94
sealing may, for example, provide evidence of the identity of the signatory; that the signatory
agreed to be bound by the agreement and did so voluntarily; that the document is final and
complete; or that the information has not been altered after signing. See Mark Sneddon,
“Legislating to Facilitate Electronic Signatures and Records: Exceptions, Standards and
the Impact of the Statute Book”, 21 New S. Wales L.J. (1998) 334 (see especially part 2,
chapter II, on policy objectives of writing and signature requirements).
165
electronic equivalents of handwritten signatures. The result has been legislation

that forces the use of particular applications that commercial parties would not
have freely chosen.
2. Problems Posed by Electronic Communications

As we have seen, notions such as “writing,” “document,” “instrument,” and
other related concepts such as “original” or “signature” have been traditionally
associated with hand-written or typed signs impressed by ink on a piece of paper.
These notions and the resulting requirements evolved over time as answers to
particular legal needs (to proof the content of contracts, to establish when a
right had been granted, etc.). New means of communication, however, do not
fit squarely within those notions.
(a) Intangibility and Alterability

Paper documents have been the basis for rules on form and evidence of legal
acts in most countries. Accordingly, concepts that support the operation of
form requirements and evidentiary rules presuppose – to a lesser or greater
extent – or even require that information of legal significance be recorded in a
tangible medium capable of being displayed and stored for subsequent use. The
medium of electronic communications however, is by nature intangible, that
is, its “original” form consists of a number of binary digits, or “bits” that make
up the computer file on which the information is recorded. The so-called “hard
copy”, or printout, as the name already suggests, is but a copy of the intangible
“original” computer file. Besides being intangible, electronic communications
are also easily alterable and in many cases the changes made to the original
information may be hardly, if at all, detectable.
These characteristics gave rise to concerns that existing law may not support
electronic communications or may even be an obstacle to its use. Those concerns
were based on recognition that requirements such as written form or the very
notion of “document” supposed the recording of information of a medium
capable of being displayed so as to allow for the information to be read, and
which offered some assurance as to the content of the information at the time it
was produced. While various technologies can be used to offer some assurance
of integrity to electronic records, not all techniques are necessarily comparable
so that it is not possible to accept all electronic records as legally equivalent to
paper documents. The legislative challenge consists in formulating reasonable
criteria for establishing such equivalence.
(b) Limitations in Retention and Retrievability

Closely related to the above discussion are concerns about the instability of com-
puter files and their relatively short lifecycle. Experience has shown that, in the
166
end, “all we can preserve in an electronic context are bits”, but “it is very difficult
to keep a set of bits indefinitely.”95 This circumstance, too, makes it difficult to
equate all electronic records with paper documents. Although the authentication
tools that were used in the past (such as handwritten signatures, seals, stamps,
fingerprints etc.) are also subject to reformatting (e.g. microfilming) because of
the obsolescence of the paper medium, they “never become completely useless
after reformatting”, since “[t]here is always at least a copy available that can be
compared with other original authentication tools.”96
The main difficulty results from the risk that the “original” electronic
records may become unreadable or unreliable over time, typically because of
the obsolescence of the software, the equipment or both. The rapid changes in
text processing software over the last twenty years – whether or not they always
qualify as an evolution – for example, give a clear indication of the problem.
Without periodic reformatting and conversion, most records produced even
less than a decade ago would be unreadable by today’s standard software. This
makes the long-term retention of electronic records generally problematic and
makes electronic records prima facie less reliable than paper documents.
Even if the software or hardware as such has not become obsolete, the security
devices and techniques used to ensure the integrity of records may become
insecure, for example, as a consequence of scientific advances in cryptanalysis.97
Sometimes, the very technique that is used to ensure integrity of electronic
records becomes the cause of the record’s unreliability over time.
Digital signatures,98 for example, were for some time believed to be essential for
archival purposes. However, they are not immune to long-term risks either. Since
every alteration to the record after the time when the signature was created will
cause the verification of the signature to fail, reformatting operations intended
to keep a record legible for the future (such as “migration” or “conversion”) may
affect the durability of the signature. Indeed, doubts about the usefulness of
digital signatures as a means to ensure data integrity over time appeared as soon
as it became clear that, when using digital signatures, “control of the integrity
is only possible if the electronic data remain completely unchanged at the bit
95
Jos Dumortier and Sofie Van den Eynde, “Electronic Signatures and Trusted Archival
Services”, <www.law.kuleuven.ac.be/icri/publications/172DLM2002.pdf?where> (25
November 2007), p. 5.
96
Id.
97
Jean-François Blanchette, “Defining Electronic Authenticity: An Interdisciplinary Journey”,
<polaris.gseis.ucla.edu/blanchette/papers/dsn.pdf> (26 November 2007) (paper published
in a supplemental volume of the 2004 International Conference on Dependable Systems
and Networks (DSN 2004), Florence, Italy, 28 June-1 July 2004), pp. 228-232.
98
See infra, chapter II.
167
level.”99 This raises a problem when archivists want to migrate electronic data to
new formats or software platforms in order to keep them accessible and legible.
Some experts therefore have concluded that digital signatures are therefore
not useful and hence not relevant for archival purposes. If a digital signature
secures a document before it enters the archive, the signature should be stripped
and translated into metadata. From a legal point of view, however, in order for
signed documents to keep their value over time, it is important that the original
electronic signature is still present.100 Moreover, digital signatures work well as
a means to verify signatures that are created during the period of validity of a
certificate. However, once the certificate expires or is revoked, the corresponding
public key loses its validity, even if the key pair was not compromised. Accord-
ingly, a digital signatures scheme would need a signature management system
to ensure the availability of the signature over time.
In fact, data security devices and methods, such as digital signatures, were
conceived more for providing security for the communication of information
than for the preservation of information over time.101 Initiatives to overcome
this problem have not yet resulted in a durable solution.102
Dumortier and Van den Eynde, supra note 95 at 3.

99
100
Id.
101
In 1999, archivists from various countries launched the International Research on
Permanent Authentic Records in Electronic Systems (InterPARES) project with the aim
of “developing the theoretical and methodological knowledge essential to the long-term
preservation of authentic records created and/or maintained in digital form” (see <www.
interpares.org>). The draft report issued on 28 October 2001 by the Authenticity Task
Force, which was part of the first phase of the project (InterPARES 1, concluded in 2001),
indicated that “digital signatures and public key infrastructures (PKI) are examples of
technologies that have been developed and implemented as a means of authentication
for electronic records that are transmitted across space. Although record-keepers and
information technology personnel place their trust in authentication technologies to
ensure the authenticity of records, these technologies were never intended to be, and are
not currently viable as, a means of ensuring the authenticity of electronic records over
time” (emphasis added) <www.interpares.org/documents/atf_draft_final_report.pdf>
(27 November 2007). (The final report of InterPARES 1 was available on 27 November
2007 at <www.interpares.org/book/index.htm>).
102
The European Electronic Signature Standardization Initiative (EESSI), for example, was
created in 1999 by the Information and Communications Technology Standards Board,
a collaborative group of organizations concerned with standardization and related
activities in information and communications technologies established to coordinate the
standardization activity in support to the implementation of European Union Directive
on electronic signatures (Official Journal of the European Communities, L 13/12). The
EESSI consortium (a standardization effort which seeks to translate the requirements
of the European directive on electronic signatures into European standards) has sought
to address the need for ensuring the long-term preservation of cryptographically signed
documents through its standard on Electronic Signature Formats (Electronic Signature
168
B. Conditions for Legal Equivalence between Electronic

Communications and Paper Records
The considerations above should not lead to pessimism as regards the ability
of electronic communications to fulfil essentially the same function as paper
records. After all, electronic communications are merely a medium for doing
business. By and large, the electronic medium has no impact on the nature of the
transactions being conducted. Thus a contract for the sale of goods by printed
purchase orders, phone conversation, or exchange of e-mails has essentially the
same nature and should not be treated differently. New technologies and the
emergence of electronic commerce have not rendered “old” law obsolete. All
that is needed is to ensure that concepts currently used in the law, by implying
the use of a certain medium (paper records), would not lead to the exclusion of
another (electronic records).
As legislators and policymakers around the world started to focus on
measures to adapt existing laws to accommodate modern means of com-
munication, it soon became clear that law reform intended to remove possible
legal barriers to electronic commerce under domestic law required adequate
international harmonization to avoid the creation of another set of barriers to
international electronic commerce through conflicting domestic standards. As
a global organization, the United Nations Commission on International Trade
Law (UNCITRAL)103 was chosen to propose uniform private law standards for
electronic commerce.
Formats ES 201 733, ETSI, 2000). The designers of these electronic signature formats
were concerned with the security threat to the validity of the signature that results from
decay in cryptographic strength. To guard against this threat of decay, EESSI signatures
are regularly time stamped afresh, with signing algorithms and key sizes appropriate
to state-of-the-art cryptanalytic methods. The problem of software longevity has been
addressed in a 2000 report by EESSI, which introduced “trusted archival services”, a
new type of commercial service that would be offered by yet to be specified competent
bodies and professions, in order to guarantee the long-term preservation of cryptographi-
cally signed documents. (see Blanchette, supra note 97). A follow-up study on the EESSI
recommendation on trusted archival services by the Interdisciplinary Centre for Law and
Information Technology of the Katholieke Universiteit Leuven (Catholic University of
Leuven), Belgium, entitled European Electronic Signature Standardization Initiative: Trusted
Archival Services (Phase 3, final report, 28 August 2000) is available at <www.law.kuleuven.
ac.be/icri/publications/91TAS-Report.pdf?where=> (12 April 2007). EESSI was closed in
October 2004. Systems to implement these recommendations do not seem to be currently
in operation (see Dumortier and Van den Eynde, Electronic Signatures, supra note 95 pp. 7
et seq.).
UNCITRAL was established by the U.N. General Assembly in 1966 with the general
103
mandate to promote harmonization and unification of international trade law. UNCITRAL

has 66 member states elected by the General Assembly for terms of six years, the terms
of half of the members expiring every three years. Membership is structured so as to be
169
1. Work of UNCITRAL in the Area of Electronic Commerce

The transnational nature of electronic commerce and its disregard for tradi-
tional jurisdictional borders, with markets “migrating from geographic space to
cyberspace,”104 clearly required international solutions rather than individual
state initiatives. International harmonization was the logical approach for dealing
with the legal implications of technological developments and to fill what was
perceived as a legal vacuum.
As a first step to that end, UNCITRAL adopted, in 1996, the UNCITRAL Model
Law on Electronic Commerce (hereafter “MLEC”).105 The MLEC was prepared by
the UNCITRAL Working Group on Electronic Commerce106 between 1992 and
1996. It was followed, five years later, by a more specific text, the UNCITRAL
Model Law on Electronic Signatures (hereafter “MLES”).107 Both instruments,
in particular the first MLEC, have been very successful and represent a broadly
accepted basis for international legal harmonization.
The negotiation of the second MLES proved to be more difficult, as member
States could not easily reach a common understanding of the legal issues relating
to various electronic signature techniques. While some of the signature legislation
representative of the world’s various geographic regions and its principal economic and
legal systems. Besides member states, all other states and invited international organiza-
tions may participate as observers in UNCITRAL’s work. UNCITRAL has implemented its
mandate by developing texts on a number of topics including sale of goods, arbitration
and conciliation, carriage of goods by sea, banking and finance law, procurement, cross-
border insolvency, and electronic commerce (for further information, see www.uncitral.
org).
104
Stephen J. Kobrin, “Economic Governance in an Electronically Networked Global Economy”,
in R. Hall and T. Biersteker (eds.), The Emergence Of Private Authority: Forms Of Private
Authority And Their Implications For Global Governance, <www-management.wharton.
upenn.edu/kobrin/Research/revision% 201.pdf> (30 November 2007), p. 11.
105
For the drafting history of the MLEC, see UNCITRAL Model Law on Electronic Commerce
with Guide to Enactment, New York, 1999, United Nations publication sales No. E.99.V4
<www.uncitral.org/uncitral/en/uncitral texts/electronic commerce.html> (30 November
2007), paras. 123-150 (hereafter Guide to Enactment of the MLEC).
106
UNCITRAL Working Groups are composed of representatives from member and observer
states who may be government officials, academics, practicing lawyers or other experts,
depending upon the subject matter. UNCITRAL also invites international, governmental,
and non-governmental organizations to participate in its meetings as observers (in electronic
commerce, this included organizations such as the United Nations Conference on Trade
and Development (UNCTAD), the World Intellectual Property Organization (WIPO), the
Organization for Economic Cooperation and Development (OECD), the European Union,
the Commonwealth Secretariat, the African Development Bank, the International
Chamber of Commerce (ICC), the International Bar Association (IBA), the Internet Law
and Policy Forum). Observer States and organizations traditionally take an active role in
the preparation of UNCITRAL instruments.
107
See Guide to Enactment of the MLEC, supra note 105, paras. 12-25.
170
around the world had initially focused upon digital signature techniques used in
the context of public key infrastructures (PKI),108 it became increasingly clear that
PKIs would be only one of several possible methods for electronic authentication.
However, PKI models had strong supporters in governments less concerned
with preserving party autonomy than with raising security levels. There were
also differing views between the United States and members of the European
Union (EU) and also between other countries as regards the adequate level of
regulation of electronic signatures. The resulting consensus was a flexible set of
rules to ensure the continuing usefulness and applicability of the MLES and not
to hinder the development of new techniques. The MLES affirms the principle
of party autonomy and allows private agreements to be taken into account in
assessing whether the nature of the authentication methods used is reasonable
or “appropriate for the purpose” of the particular transactions to which they
relate. The MLES also offers basic provisions on cross-border recognition that
aim at ensuring legal interoperability.
Even if the first two instruments took the form of model laws rather than a
treaty, it was clear that the work to be done by UNCITRAL had to aim at promoting
the enactment of new legislation. Early exploratory work had shown the need
for a set of principles that would provide a basic legal framework for electronic
commerce. Some legal issues associated with electronic communications could
be addressed by contractual arrangements between the parties to the electronic
commerce relationship. However, it was clear that contractual frameworks,
such as trading partner agreements,109 which were then being proposed for
users of electronic commerce, relied to a large extent upon the structures of
local law, which made them inadequate for international use.110 Moreover, a
purely contractual framework would not be sufficient to address mandatory
108
Such as the Utah Digital Signature Act 1995, 46 Utah Code Annotated §§ 3-101 to 46-3-
504; the German Digital Signatures Act 1997 (Gesetz zur Digitalen Signatur or Signaturgesetz,
enacted as article 3 of Gesetz zur Regelung der Rahmenbedingungen fur Informations-und
Kommunikationsdienste or Informations-und Kommunikationsdienste-Gesetz, 13 June 1997);
or the Malaysian Digital Signature Act 1997.
109
A trading partner agreement is an agreement used by parties that agree to exchange informa-
tion electronically which is used to “structure the electronic communications relationship”
by dealing with various issues that arise in the course of such communications, such as
business issues that need to be made in structuring the communications relationship and
a number of legal issues that are ordinarily addressed by the communications agreement
(see Amelia Boss, “Electronic Data Interchange Agreements: Private Contracting Toward
a Global Environment”, 13 Nw. U. L.J. Int’l. L. & Bus. 31, 37-38 and the discussion of
issues typically covered in trading partner agreements beginning at 45.
110
See the summary of early international e-commerce initiatives and contractual standards
in Eric A. Caprioli and Renaud Sorieul, “Le Commerce International Electronique: Vers
L’emergence De Regies Juridiques Transnationales”, 2 Journal Du Droit International (1997)
323.
171
requirements in national legislation relating to handwritten signatures or written

records or form of legal acts, or to effectively provide rules enforceable against
third parties.
The need for binding rules was even clearer in connection with international
contracts, in view of the divergences in domestic laws and the existence of form
requirements established in international conventions. These two circumstances
eventually led UNCITRAL to prepare an international treaty, the United Nations
Convention on the Use of Electronic Communications in International Contracts
(ECC),111 which was adopted by the General Assembly of the United Nations in
2005112 to offer uniform solutions for issues raised by electronic communications
in international contracting practice.
Despite this evolution, the work of UNCITRAL has maintained a clear and
consistent line of policy advice. Its fundamental principles and basic rules are
summarized below.
(a) Recommended Legislative Principles for Electronic Commerce

There is extensive literature regarding both the MLEC113 and its domestic
enactments.114 The following paragraphs therefore will not discuss in detail
the provisions of the MLEC but only highlight some of its main aspects as a
background for discussing UNCITRAL’s later work.
In line with the general mandate of UNCITRAL to promote legal harmoni-
zation of “international trade law,” the MLEC focuses on electronic messages
“used in the context of commercial activities.” This does not mean, however,
that an enacting state could not use the MLEC in other areas as well. The MLEC
is not conceived for an exclusively business-to-business environment. Consumer
transactions are not specifically excluded from the scope of the MLEC, since it was
felt that consumers might benefit from the enhanced legal certainty provided by
111
For the drafting history of the ECC, see United Nations Convention on the Use of Electronic
Communications in International Contracts, Explanatory Note by the UNCITRAL Secretariat
(U.N. sales publication No. E.07.V.)<www.uncitral.org/uncitral/en/uncitral_texts/elec-
tronic _commerce/ 2005Convention.html> (30 November 2007), paras. 21-43.
112
See General Assembly Resolution A/RES/60/21, Annex.
113
See, for instance, Renaud Sorieul, Jennifer R. Clift and José Angelo Estrella-Faria, “Establishing
a Legal framework for Electronic Commerce: The Work of the United Nations Commission
on International Trade Law”, 35 Int’l. Law. (2001); see also Amelia H. Boss, “Electronic
Commerce and the Symbiotic Relationship Between International and Domestic Law
Reform”, 72 Tulane L. Rev. (1998) 1931; A. Brooke Overby, “Model Law on Electronic
Commerce:Will Cyberlaw Be Uniform? An Introduction to the UNCITRAL Model Law on
Electronic Commerce”, 7 Tulane J. Int’l & Comp. L. (1999) 219.
114
For the United States, see, for instance, Amelia H. Boss, 37 Idaho L. Rev. (2001) 275; and
R. J. Robertson, Jr., “Electronic Commerce on the Internet and the Statute of Frauds”, 49
S.C. L. Rev. (1998) 787.
172
the MLEC. Nevertheless, the MLEC was drafted without special attention being
given to consumer protection issues.115 Therefore, article 1 of the MLEC includes
a footnote to the effect that the MLEC does not override any rule of law intended
for the protection of consumers.
(i) Functional Equivalence

The basic assumption of the work of UNCITRAL in the area of electronic
commerce is that traditional legal notions such as “document”, “writing”,
“signature”, “original form” and the like, need not be replaced by entirely new
ones. From a legislative perspective, all that may be necessary – and prudent – to
do is to identify the circumstances under which the same function envisaged by
the law, for example for a “written contract,” may be fulfilled by the exchange
of communications in electronic form. The approach taken by UNCITRAL has
been called a “functional equivalence approach.” It involves an analysis of basic
functions fulfilled by a “writing,” a “signature,” or an “original” in the world of
paper documents in order to determine how those functions could be transposed,
reproduced, or imitated in a dematerialized environment.
(ii) Media and Technology Neutrality

UNCITRAL advocates the adoption of “neutral” rules; that is, rules that do not
depend on or presuppose the use of particular types of technology and could be
applied to communication and storage of all types of information. Technological
neutrality is particularly important in view of speed of technological innova-
tion. It helps ensure that legislation remains capable of accommodating future
developments and would not become dated too soon. Accordingly, the various
instruments formulated by UNCITRAL carefully avoid any reference to particular
technical means of transmission or storage of information in electronic form.
The concern to promote media neutrality raises other important points. The
impossibility of guaranteeing absolute security against fraud and transmission
error is not limited to the world of electronic commerce; it applies to the world
of paper documents as well. When formulating rules for electronic commerce,
legislators are often inclined to aim at the highest level of security offered by
existing technology. The practical need for applying stringent security measures to
avoid unauthorized access to data, ensure the integrity of communications, and
protect computer and information systems cannot be questioned. However, from
the perspective of private business law, it may be more appropriate to graduate
security requirements in steps similar to the degrees of legal security encountered
115
Mainly in view of the difficulty of achieving a universally accepted definition of “consumer”
and the existence in some countries of special consumer protection laws that may govern
certain aspects of the use of information systems.
173
in the paper world. In the paper world, businessmen are, in most cases, free to
choose among a wide range of methods to achieve integrity and authenticity
of communications (for example, the different levels of handwritten signature
seen in documents of simple contracts and notarized acts). In other words, as a
general rule, it is the tradesman, and not the legislator that bears the risk that
the contents of a contract cannot be proved because the means chosen do not
provide a reliable record of the transaction.
Apart from legal form requirements, businessmen make their choices in the
light of various factors, including the level of confidence in their trade partners,
the type and value of the transactions, and the costs entailed by any particular
authentication method. There seems to be no compelling reason why, in purely
commercial transactions, that freedom should not exist in the electronic world
as well. Hence the flexible notion of reliability “appropriate for the purpose” for
which the electronic communication was generated,116 which UNCITRAL proposes
as a general parameter for assessing the quality of electronic communication.
(iii) Party Autonomy

UNCITRAL has consistently recognized the importance of contract and “party
autonomy.” The importance of allowing trade partners to choose the solutions
that best fit their needs should be clear when one considers that most electronic
commerce happens through business-to-business transactions.117 Accordingly,
the entire third chapter of the MLEC118 contains only default rules and leaves the
parties free to organize the use of electronic commerce among themselves. Even
some of the provisions in the MLEC that are intended for mandatory application
in an enacting country allow, for example, agreements concluded between the
parties to be taken into consideration in assessing whether the nature of the
methods used to ensure, for example, the security of messages, is reasonable or
“appropriate for the purpose.” The later ECC goes even further and allows the
parties to derogate from any of its provisions.119
As set out in article 7 of the MLEC; in article 6 of the MLES and article 9, paragraph 3 of
116
the ECC.
92.7% of total e-commerce in 2004 in the United States was B2B with manufacturers
117
leading all industry sectors and accounting for 23.4% of total shipments (US Department
of Commerce, E-Stats).
See article 11 (Formation and validity of contracts); article 12 (Recognition by parties of
118
data messages); article 13 (Attribution of data messages); article 14 (Acknowledgement

of receipt); and article 15 (Time and place of dispatch and receipt of data messages).
EEC, article 3.
119
174
(b) Legal Value of Electronic Communications

On the basis of those general principles, UNCITRAL offered various criteria
under which electronic communications and records may fulfil existing form
requirements for legal transactions. These provisions constitute the core of the
MLEC and are intended for mandatory application once implemented domesti-
cally. Provision for exceptions is made, however, so that formal requirements for
paper can be maintained in certain circumstances. A number of national laws
indeed set out transactions where paper is to be maintained. Common examples
include wills or other testamentary dispositions; negotiable instruments; trusts
and powers of attorney; contracts for disposition or acquisition of real or im-
movable property; documents of title; affidavits; and court process.120
(i) Conditions for Meeting Form and Evidentiary Requirements

UNCITRAL has defined the basic standard to be met by an electronic communica-
tion in order to satisfy a requirement that information be retained “in writing”
or that it be contained in a “document” or other paper-based instrument. While
a number of functions are traditionally performed by “writings,” UNCITRAL
focused upon the notion of information being stored in a stable and readable
format. These two notions are expressed by UNCITRAL as an objective test that
information in electronic form be “accessible so as to be usable for subsequent
reference.”121
The signature issue gave rise to lengthy discussions within UNCITRAL dur-
ing the preparation of the MLEC and eventually led to another specific MLEC:
the 2001 MLES. While signatures perform many functions, all legal systems
recognize that a signature serves, at the very least, to (a) identify a person and
provide certainty as to the personal involvement of that person in the act of sign-
ing; and (b) associate that person with the content of a document. UNCITRAL
concentrated upon these two basic functions.
In order to satisfy a legal requirement for a signature, UNCITRAL recom-
mends not only that a method must be used that both identifies the originator
and confirms the originator’s approval of the content of the message but also
that the method of identification to be used should be “as reliable as was ap-
propriate” for the purpose for which it was used.122 A number of legal, technical,
and commercial factors that might be relevant to determining appropriateness,
See a list of examples of such common exceptions in Legal Aspects of Electronic Commerce
120
– Electronic Contracting:Provisions for a Draft Convention (U.N. document A/CN.9/WG.IV/

WP.95, of 20 September 2001), Annex II <www.uncitral.org/uncitral/en/commission/
working_groups/4Electronic_Commerce.html> (30 November 2007).
MLEC, article 6; EEC, article 9, paragraph 2.
121
MLEC, article 7; MLES, article 6, paragraph 1; EEC, article 9, paragraph 3.

122
175
such as the nature of the trade activity being undertaken, the course of trading
between the parties, relevant trade customs and practice, and the importance
and value of the information contained in the message.123 The rules proposed
by UNCITRAL rely on the reasonableness of the parties and the need to strike
a balance between the chosen method of identification and the purpose of the
message, leaving it to national judges to apply a precise definition.
In adopting a flexible test for the way in which these functions should be
fulfilled, UNCITRAL deliberately refrained from identifying particular technolo-
gies that could be used to achieve functional equivalence. UNCITRAL was of the
view that it would be inappropriate to promote any specific technology, be it by
mandating its use or by giving it a more favourable treatment as compared to
other products or technologies.
What constitutes an electronic equivalent of an “original” document is a matter
that according to UNCITRAL should be assessed in the light of the integrity of
information and the ability to present it, when this is a requirement, as forming
the essence of the concept of originality. As with the notion of “writing,” here,
too, UNCITRAL advocates a flexible test of requiring that the method of assurance
as to integrity must be reliable. Reliability is assessed by reference to the purposes
for which the information was generated and to relevant circumstances. Factors
to be considered in determining reliability would include whether the recording
of the information was systematic, whether it was recorded without gaps or
errors, and how the information was protected against alteration.124
In order to ensure that, once such conditions are met, electronic records will
be truly equivalents of paper documents, UNCITRAL also recommends that in
any legal proceedings, nothing in the application of the rules of evidence shall
apply so as to deny the admissibility of an electronic communication on the
sole ground that it is not in its original form if it is the best evidence that the
person adducing it could reasonably be expected to obtain.125 For the purpose
of assessing the evidential weight of information in the form of electronic
communication, courts are invited to consider the reliability of the manner in
which the electronic communication was generated, stored or communicated,
to the reliability of the manner in which the integrity of the information was
maintained, to the manner in which its originator was identified, and to any
other relevant factor.126
UNCITRAL also proposed rules that allow current requirements relating
to storage of information (such as accounting or tax records) to be adapted to
See, Guide to Enactment of the MLEC, supra note 105, paragraph 61.
123
MLEC, article 8, subparagraphs 3(a) and 3(b); ECC, article 9, subparagraphs 4(a) and
124
4(b).
MLEC, article 9, paragraph 1.
125
MLEC, article 9, paragraph 2.

126
176
the needs of electronic commerce.127 Here, functional equivalence should be

recognized if the information contained in the electronic record (a) is accessible so
as to be usable for subsequent reference, (b) was retained in the format in which
it was generated, sent or received (or in a format which can be demonstrated
to represent accurately the information generated, sent or received, and such
information, if any) (c) information has been retained as enables the identification
of the origin and destination of an electronic communication and the date and
time when it was sent or received. However, an electronic communication does
not need to be retained unaltered as long as the information stored accurately
reflects the electronic communication as it was sent.128
(ii) Conditions for the Use of Electronic Communications

The general rules on functional equivalence are supplemented by a number of
rules concerning the actual exchange of electronic communications. The rules
formulated by UNCITRAL are to some extent drawn from, or inspired by, certain
rules contained in model contracts and interchange agreements. They deal with
formation and validity of contracts; recognition of electronic communications
by the parties; attribution of electronic communications; acknowledgement of
receipt of electronic communications; and time and place of dispatch and receipt
of electronic communications.129
2. Implementation and Application of Electronic Commerce Laws

One of the main objectives of the MLEC and the MLES was to pre‑empt dis-
harmony and possible over-regulation by offering general criteria to establish
the functional equivalence between electronic and paper-based signature and
authentication methods.
The MLEC has found widespread acceptance, and an increasing number of
countries have used it as a basis for their e-commerce legislation130 The MLEC
MLEC, article 10.

127
Guide to Enactment of the MLEC, supra note 105, para. 73.

128
The most significant of these rules are discussed in Part Two, chapter I.
129
As of November 2007, legislation implementing provisions of the MLEC had been

130
adopted in at least the following countries: Australia (Electronic Transactions Act 1999);
China (Electronic Signatures Law, 2004); Colombia (Ley de comercio electrónico, 1999);
Dominican Republic (Ley sobre comercio electrónico, documentos y firmas digitales, 2002);
Ecuador (Ley de comercio electrónico, firmas electrónicas y mensajes de datos, 2002); France
(Loi 2000-230 portant adaptation du droit de la preuve aux technologies de l’information et
relative à la signature électronique, 2000); India (Information Technology Act 2000); Ireland
(Electronic Commerce Act 2000); Jordan (Electronic Transactions Law 2001); Mauritius
(Electronic Transactions Act 2000); Mexico (Decreto por el que se reforman y adicionan
diversas disposiciones del código civil para. el distrito federal en materia federal, del Código federal
177
has also served as a basis for the domestic harmonization of e-commerce legisla-
tion in countries organized on a federal basis, such as Canada131 and the United
States of America.132
de procedimientos civilies, del Código de comercio y de la Ley federal de protección al consumidor,

2000); New Zealand (Electronic Transactions Act 2002); Pakistan (Electronic Transactions
Ordinance 2002); Panama (Ley de firma digital, 2001); Philippines (Electronic Commerce
Act 2000); Republic of Korea (Framework Act on Electronic Commerce 2001); Singapore
(Electronic Transactions Act 1998); Slovenia (Electronic Commerce and Electronic
Signature Act, 2000); South Africa (Electronic Communications and Transactions Act
2002); Sri Lanka (Electronic Transactions Act 2006); Thailand (Electronic Transactions
Act, 2001); United Arab Emirates (Dubai) (Electronic Transactions and Commerce Law,
2002); Venezuela (Ley sobre mensajes de datos y firmas electrónicas, 2001); and Viet Nam
(Law on Electronic Transactions, 2006). The MLEC has also been adopted in the British
crown dependencies of the Bailiwick of Guernsey (Electronic Transactions (Guernsey) Law
2000), the Bailiwick of Jersey (Electronic Communications (Jersey) Law 2000) and the
Isle of Man (Electronic Transactions Act 2000); in the overseas territories of the United
Kingdom of Great Britain and Northern Ireland of Bermuda (Electronic Transactions Act
1999), the Cayman Islands (Electronic Transactions Law 2000) and the Turks and Caicos
(Electronic Transactions Ordinance 2000); and in Hong Kong Special Administrative
Region (SAR) of China (Electronic Transactions Ordinance (2000)). Unless otherwise
indicated, references made hereafter to statutory provisions of any of these countries
refer to provisions contained in the statutes listed above.
131
The domestic enactment of the MLEC in Canada is the Uniform Electronic Commerce Act,
adopted by the Uniform Law Conference of Canada in 1999 <www.chlc.ca/en/poam2/
index.cfm?sec=1999&sub=1999ia> (30 November 2007). The Act has since been
enacted in a number of provinces and territories of Canada, including Alberta, British
Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario,
Prince Edward Island, Saskatchewan and Yukon. The Province of Quebec enacted specific
legislation (the Act to Establish a Legal Framework for Information Technology (2001)),
which, although being broader in scope and drafted very differently, achieves many of the
objectives of the Uniform Electronic Commerce Act and is generally consistent with the
MLEC. Updated information on the enactment of the UETA Act may be found at <www.
chlc.ca/en/us/> (30 November 2007).
132
In the United States of America, the National Conference of Commissioners on Uniform
State Law used the MLEC as a basis for preparing the Uniform Electronic Transactions
Act, which it adopted in 1999 (the text of the Act and the official commentary is available
at <www.law.upenn.edu/bll/ulc/uecicta/eta1299.htm> (30 November 2007)). The
Uniform Electronic Transactions Act has since been enacted in the District of Columbia
and in the following 46 states: Alabama, Alaska, Arizona, Arkansas, California, Colo-
rado, Connecticut, Delaware, Florida, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky,
Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri,
Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina,
North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina,
South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia, Wisconsin and
Wyoming. Other states are likely to adopt implementing legislation in the near future,
including the state of Illinois, which had already enacted the UNCITRAL MLEC through
178
Yet it cannot be assumed that the principles of the MLEC have achieved
universal application. The attitude taken by various jurisdictions in relation
to electronic signatures and authentication typically reflects the general ap-
proach of the jurisdiction to writing requirements and the evidentiary value
of electronic records.
(a) “Authentication” and Attribution of Electronic Records

The use of electronic methods of authentication involves two aspects that are
relevant for the present discussion. The first aspect relates to the general issue
of attribution of a message to its purported originator. The second relates to
the appropriateness of the identification method used by the parties for the
purpose of meeting specific form requirements, in particular legal signature
requirements.
The MLEC deals with attribution of electronic communications in its article
13. This provision is intended to apply where there is a question as to whether
an electronic communication was really sent by the person who is indicated as
being the originator. In the case of a paper-based communication, the problem
would arise as the result of an alleged forged signature of the purported origina-
tor. In an electronic environment, an unauthorized person may have sent the
message, but the authentication by code, encryption or similar means would be
accurate. The purpose of article 13 is not to attribute authorship of an electronic
communication or to establish the identity of the parties. Rather, it establishes the
conditions under which a party may rely on the assumption that an electronic
communication was actually from the purported originator.
Article 13, paragraph 1, of the MLEC recalls the principle that an originator
is bound by an electronic communication if it has effectively sent that message.
Paragraph 2 refers to a situation where the message was sent by a person other
than the originator who had the authority to act on behalf of the originator.
Paragraph 3 deals with two kinds of situations in which the addressee could rely
on an electronic communication as being that of the originator: first, situations
in which the addressee properly applied an authentication procedure previously
agreed to by the originator; and second, situations in which the electronic com-
munication resulted from the actions of a person who, by virtue of his or her
relationship with the originator, had access to the originator’s authentication
procedures.
the Electronic Commerce Security Act (1998). Updated information on the enactment
of the UETA Act may be found at <www.nccusl.org/nccusl/uniformact_factsheets/
uniformacts-fs-ueta.asp> (30 November 2007).
179
A number of countries have adopted the rule in article 13 of the MLEC, includ-
ing the presumption of attribution established in paragraph 3 of that article.133
Some countries expressly refer to the use of codes, passwords or other means of
identification as factors that create a presumption of authorship.134 There are
also more general versions of article 13, in which the presumption created by
proper verification through a previously agreed procedure is rephrased as an
indication of elements that may be used for attribution purposes.135
However, other countries have adopted only the general rules in article 13,
namely that an electronic communication is that of the originator if it was
sent by the originator him or herself, or by a person acting on the originator’s
behalf or by a system programmed by or on behalf of the originator to operate
automatically.136 In addition, several countries that have implemented the MLEC
have not included any specific provision based on article 13.137 The assumption
in those countries was that no specific rules were needed and that attribution
was better left to ordinary methods of proof, in the same way as attribution of
documents on paper.138
Other countries have preferred to take the provisions of the MLEC on attribu-
tion separately from provisions on electronic signatures. This approach is based
on the understanding that attribution in a documentary context serves the
133
Colombia (art. 17); Ecuador (art. 10); Jordan (art. 15); Mauritius (sect. 12, subsect. 2);
Philippines (sect. 18, para. 3); Republic of Korea (art. 7, para. 2); Singapore (sect. 13,
subsect. 3); Thailand (sect. 16); and Venezuela (Bolivarian Republic of) (art. 9). The same
rules are also contained in the laws of the British crown dependency of Jersey (art. 8)
and the British overseas territories of Bermuda (sect. 16, para. 2) and Turks and Caicos
(sect. 14).
134
Mexico art. 90, para. I.
135
For example, the Uniform Electronic Transactions Act of the United States provides in sec-
tion 9, subsection (a), that an electronic record or electronic signature “is attributable to a
person if it was the act of the person. The act of the person may be shown in any manner,
including a showing of the efficacy of any security procedure applied to determine the
person to which the electronic record or electronic signature was attributable”. Section
9, subsection (b), provides further that the effect of an electronic record or electronic
signature attributed to a person under subsection (a) “is determined from the context and
surrounding circumstances at the time of its creation, execution, or adoption, including
the parties’ agreement, if any, and otherwise as provided by law”.
136
Australia (sect. 15, para. 1); essentially in the same manner, India (sect. 11); Pakistan
(sect. 13, subsect. 2); Slovenia (art. 5); the British crown dependency of the Isle of Man
(sect. 2); and Hong Kong SAR of China (sect. 18).
137
For example, Canada, France, Ireland, New Zealand and South Africa.
138
It has been noted that a person who wishes to rely on any signature “takes the risk that
the signature is invalid, and this rule does not change for an electronic signature” (UECA,
Official Commentary <www.ulcc.ca/en/poam2/index.cfm?sec=1999&sub=1999ia#1>,
section 10).
180
primary purpose of providing a basis for reasonable reliance, and may include
broader means than those more narrowly used for identifying individuals. Some
laws, such as UETA in the United States, emphasize this principle by stating,
for example, that “an electronic record or electronic signature is attributable
to a person if it was the act of the person”, which “may be shown in any man-
ner, including a showing of the efficacy of any security procedure applied to
determine the person to which the electronic record or electronic signature
was attributable.”139 Such a general rule on attribution does not affect the use
of a signature as a device for attributing a record to a person, but is based on
the recognition that “a signature is not the only method for attribution.”140
According to the UETA commentary:
“Certain information may be present in an electronic environment that
does not appear to attribute but which clearly links a person to a particular
record. Numerical codes, personal identification numbers, public and
private key combinations all serve to establish the party to whom an
electronic record should be attributed. Of course security procedures
will be another piece of evidence available to establish attribution.
The inclusion of a specific reference to security procedures as a means
of proving attribution is salutary because of the unique importance of
security procedures in the electronic environment. In certain processes,
a technical and technological security procedure may be the best way to
convince a trier of fact that a particular electronic record or signature
United States, Uniform Electronic Transactions Act (1999), section 9. Paragraph 1 of

139
the official comments to section 9 offer the following examples where both the electronic
record and electronic signature would be attributable to a person: a person “types his/her
name as part of an e-mail purchase order”; a “person’s employee, pursuant to authority,
types the person’s name as part of an e-mail purchase order”; or a “person’s computer,
programmed to order goods upon receipt of inventory information within particular
parameters, issues a purchase order which includes the person’s name, or other identifying
information, as part of the order”.
Id. Paragraph 3 of the official comments to section 9 states: “The use of facsimile trans-
140
missions provides a number of examples of attribution using information other than a

signature. A facsimile may be attributed to a person because of the information printed
across the top of the page that indicates the machine from which it was sent. Similarly,
the transmission may contain a letterhead that identifies the sender. Some cases have held
that the letterhead actually constituted a signature because it was a symbol adopted by
the sender with intent to authenticate the facsimile. However, the signature determina-
tion resulted from the necessary finding of intention in that case. Other cases have found
facsimile letterheads NOT to be signatures because the requisite intention was not present.
The critical point is that with or without a signature, information within the electronic
record may well suffice to provide the facts resulting in attribution of an electronic record
to a particular party.”
181
was that of a particular person. In certain circumstances, the use of a

security procedure to establish that the record and related signature came
from the person’s business might be necessary to overcome a claim that
a hacker intervened. The reference to security procedures is not intended
to suggest that other forms of proof of attribution should be accorded less
persuasive effect. It is also important to recall that the particular strength
of a given procedure does not affect the procedure’s status as a security
procedure, but only affects the weight to be accorded the evidence of
the security procedure as tending to establish attribution.”141
It is also important to bear in mind that a presumption of attribution would not

of itself displace the application of rules of law on signatures, where a signature
is needed for the validity or proof of an act. Once it is established that a record or
signature is attributable to a particular party, “the effect of a record or signature
must be determined in light of the context and surrounding circumstances,
including the parties’ agreement, if any” and of “other legal requirements
considered in light of the context”.142
Against the background of this flexible understanding of attribution, the courts
in the United States seem to have taken a liberal approach to the admissibility of
electronic records, including e-mail, as evidence in civil proceedings.143 Courts in
the United States have dismissed arguments that e-mail messages were inadmis-
sible as evidence because they were unauthenticated and parol evidence.144 The
courts have found instead that e-mails obtained from the plaintiff during the
discovery process were self-authenticating, since “the production of documents
during discovery from the parties’ own files is sufficient to justify a finding of
self‑authentication”.145 The courts tend to take into account all available evidence
and do not reject electronic records as being prima facie inadmissible.
In countries that have not adopted the MLEC, there seem to be no specific
legislative provisions dealing with attribution in an analogous fashion. In those
countries, attribution is typically a function of the legal recognition of electronic
signatures and the presumptions attached to records authenticated with par-
ticular types of electronic signature. Concerns about the risk of manipulation
in electronic records have, for instance, led courts in some of those countries to
dismiss the value of e-mails as evidence in court proceedings, on the grounds
Id., official comments on section 9.

141
Id., paragraph 6 of the official comments on section 9.

142
Commonwealth Aluminum Corporation v. Stanley Metal Associates, 186 F. Supp. 2d 770

143
(W.D. Ky. 2001); and Central Illinois Light Company (CILCO) v. Consolidation Coal Company
(Consol), 235 F. Supp. 2d 916 (C.D. Ill. 2002).
Sea-Land Service, Inc. v. Lozen International, LLC, 285 F.3d 808 (9th Cir. 2002).
144
Superhighway Consulting, Inc. v. Techwave, Inc., (N.D. Ill. 1999 LEXIS 17910).
145
182
that e-mails do not offer adequate guarantees of integrity.146 Further examples

of a more restrictive approach to the evidentiary value of electronic records
and attribution can be found in cases involving Internet auctions in Germany,
in which courts have applied a high standard for attribution of electronic
communications.
Those cases have typically involved suits for breach of contract on the grounds
of lack of payment for goods allegedly purchased in Internet auctions. Claimants
maintained that the defendants were the buyer, as the highest bid for the goods
had been authenticated with the defendant’s password and had been sent from
the defendant’s e-mail address. German courts have found that those elements
were not sufficient to firmly conclude that it was in fact the defendant who had
participated in the auction and submitted the winning bid for the goods. The
courts have used various arguments to justify that position. For example, pass-
words were found not to be reliable because anyone who knew the defendant’s
password could have used its e-mail address from anywhere and participated
in the auction using the defendant’s name,147 a risk that some courts estimated
as “very high” on the basis of expert evidence regarding security threats to
Internet communications networks, in particular through the use of “trojan
horses” capable of “stealing” a person’s password.148
According to those courts, the risk of unauthorized use of a person’s iden-
tification device (password) should be borne by the party that offered goods or
services through a particular medium, as there was no legal presumption that
messages sent through an Internet website with recourse to a person’s access
password to such website were attributable to that person.149 German courts held
that such a presumption might conceivably be attached to an “advanced electronic
Germany, Amtsgericht (District Court) Bonn, Case No. 3 C 193/01, 25 October 2001,
146
JurPC Internet-Zeitschrift für Rechtsinformatik und Informationsrecht, JurPC Web-Dok. No.

332/2002 <www.jurpc.de/rechtspr/20020332.htm> (11 September 2003).
Germany, Amtsgericht (District Court) Erfurt, Case No. 28 C 2354/01, 14 September
147
2001, JurPC Internet-Zeitschrift für Rechtsinformatik und Informationsrecht, JurPC Web-

Dok. No. 71/2002 <www.jurpc.de/rechtspr/20020071.htm> (25 August 2003); see
also Landesgericht (Land Court) Bonn, Case No. 2 O 472/03, 19 December 2003, JurPC,
Internet-Zeitschrift für Rechtsinformatik und Informationsrecht, JurPC Web-Dok. No. 74/2004
<www.jurpc.de/rechtspr/20040074.htm> (2 February 2007).
Germany, Landesgericht (Land Court) Konstanz, Case No. 2 O 141/01 A, 19 April 2002,
148

291/2002 <www.jurpc.de/rechtspr/20020291.htm> (25 August 2003).
Germany, Landesgericht (Land Court) Bonn, Case No. 2 O 450/00, 7 August 2001,
149

136/2002 <www.jurpc.de/rechtspr/20020136.htm> (25 August 2003).
183
signature,” as defined by German law, but the holder of a simple “password”

should not bear the risk of it being misused by unauthorized persons.150
(b) Ability to Meet Legal Signature Requirements

In some countries, the courts have been inclined to interpret signature require-
ments liberally. As previously indicated this has been typically the case in some
common law jurisdictions in connection with Statute of Frauds requirements
that certain transactions must be in writing and bear a signature in order to
be valid.
Courts in the United States for instance, have also been receptive to legisla-
tive recognition of electronic signatures, and have been inclined to assess the
adequacy of the authentication in the light of the dealings between the parties,
rather than using a strict standard for all situations. Thus, where the parties had
regularly used e-mail in their negotiations, United States courts have found that
the originator’s typed name in an e-mail satisfied statutory signature require-
ments.151 A person’s “deliberate choice to type his name at the conclusion of all
e-mails” has been considered to be valid authentication.152 The readiness of the
United States courts to accept that e-mails and names typed therein are capable
of satisfying writing requirements153 follows a liberal interpretation of the notion
of “signature”, which is understood as encompassing “any symbol executed or
adopted by a party with present intention to authenticate a writing” so that, in
some instances, “a typed name or letterhead on a document is sufficient to satisfy
the signature requirement”.154 Where the parties do not deny having written
or received communications by e‑mail, statutory signature requirements would
be met, since courts have “long recognized that a binding signature may take
the form of any mark or designation thought proper by the party to be bound”,
provided that the author “intends to bind himself ”.155
Germany, Oberlandesgericht (Court of Appeal) Köln, Case No. 19 U 16/02, 6 September

150
2002, JurPC Internet-Zeitschrift für Rechtsinformatik und Informationsrecht, JurPC Web-Dok.

No. 364/2002 <www.jurpc.de/rechtspr/20020364.htm> (25 August 2003).
Cloud Corporation v. Hasbro, Inc., 314 F. 3d 296 (7th Cir. 2002).
151
Jonathan P. Shattuck v. David K. Klotzbach, 14 Mass. L. Rep. 360 (2001).

152
Central Illinois Light Company v. Consolidation Coal Company, 235 F. Supp. 2d 916 (C.D. Ill.
153
2002).
Id., at 919: “Internal documents, invoices and e-mails can be used to satisfy the Illinois
154
[Uniform Commercial Code] statute of frauds”. In the concrete case, however, the court
found that the alleged contract failed to satisfy the statute of frauds, not because the
e-mails as such could not validly record the terms of a contract, but because there was
no indication that the authors of the e-mails and the persons mentioned therein were
employees of the defendant.
Roger Edwards, LLC v. Fiddes & Son, Ltd., 245 F. Supp. 2d 245 (D. Me. 2003).
155
184
Courts in the United Kingdom have taken a similar approach, generally

considering the form of a signature to be less relevant than the function it serves.
Thus, courts would consider the fitness of the medium both to attribute a record
to a particular person, and to indicate the person’s intention with respect to the
record. E-mails may therefore constitute “documents”, and names typed on the
e-mails may be “signatures.”156 Some courts have declared that they “have no
doubt that if a party creates and sends an electronically created document then
he will be treated as having signed it to the same extent that he would in law
be treated as having signed a hard copy of the same document” and that “[t]
he fact that the document is created electronically as opposed to as a hard copy
can make no difference.”157
In Singapore, too, the courts are inclined to admit e-mails and names typed
therein as sufficient proof of identity for the purpose of meeting legal signature
requirements.158
On occasion, courts have rejected arguments that e-mails constituted signed
contracts for the purposes of the Statute of Frauds, mainly because the intent
to be bound by the signature was lacking. There seems to be no precedent,
however, where courts in common law jurisdictions would have denied a priori
the ability of e-mails and names typed therein to meet statutory writing and
signature requirements. In some cases, it was found that the requirements of
the Statute of Frauds were not met because the e-mails in question only reflected
ongoing negotiations and not a final agreement, for instance because during
the negotiations one of the parties had contemplated that a binding contract
would be entered into once a “deal memo” had been signed, and not before.159 In
other cases courts have suggested that they might have been inclined to admit
as a signature the originator’s “name or initials” at “the end of the e-mail” or
“anywhere else in the body of the e-mail”, but held that the “automatic insertion
of a person’s e-mail address after the document has been transmitted by either
the sending and/or receiving [Internet service provider]” was not “intended for
Hall v. Cognos Limited (Hull Industrial Tribunal, Case No. 1803325/97) (unreported).
156
Mehta v. J. Pereira Fernandes S.A., Chancery Division, [2006] EWHC 813 (Ch), [2006] 2
157
Lloyd’s Rep 244, 7 April 2006

“Given that no real distinction can be drawn between a typewritten form and a signature
158
that has been typed onto an e-mail and forwarded with the e-mail to the intended recipient
of that message, the signature requirement in this case was satisfied by the inscription of
the defendant’s representative’s name next to his e-mail address at the top of his e-mails”
(Sm Integrated Transware Pte Ltd v. Schenker Singapore (Pte) Ltd, High Court, [2005] SGHC
58, 30 March 2005).
Pretty Pictures Sarl v. Quixote Films Ltd., Queen’s Bench [2003] EWHC 311 (QB), 30
159
January 2003.
185
a signature”.160 Although British courts seem to interpret the writing require-

ments of the statute of frauds more strictly than their United States counterparts,
they are generally inclined to admit the use of any type of electronic signature
or authentication method, even outside any specific statutory authorization,
as long as the method in question serves the same functions as a handwritten
signature.161
Courts in civil law jurisdictions tend generally to follow a more restrictive ap-
proach, arguably because for many of those countries the notion of “document”
ordinarily implies the use of some form of authentication, thus becoming hardly
dissociable from a “signature” as seen above. Courts in France, for instance,
had been reluctant to accept electronic means of identification as equivalent to
handwritten signatures until the adoption of legislation expressly recognizing
the validity of electronic signatures.162 A slightly more liberal line is taken by
decisions that accept the electronic filing of administrative complaints for the
purpose of meeting a statutory deadline, at least as long as they are subsequently
confirmed by regular correspondence.163
In contrast to their restrictive approach to the attribution of electronic com-
munications in the formation of contracts, German courts seem to have been
liberal in the acceptance of identification methods as equivalent to handwritten
signatures in court proceedings. The debate in Germany has evolved around the
increasing use of scanned images of legal counsel’s signature to authenticate
computer facsimiles containing statements of appeals transmitted directly from
a computer station via modem to a court’s facsimile machine. In earlier cases,
160
Mehta v. J. Pereira Fernandes S.A. supra note 157
161
Mehta v. J. Pereira Fernandes S.A., supra note 157, No. 25: “It is noteworthy that the Law
Commission’s view in relation to [the European Union Directive on electronic commerce
(2000/31/EC)] is that no significant changes are necessary in relation to statutes that
require signatures because whether those requirements have been satisfied can be tested
in a functional way by asking whether the conduct of the would-be signatory indicates
an authenticating intention to a reasonable person. … Thus, as I have already said, if a
party or a party’s agent sending an e-mail types his or her or his or her principal’s name to
the extent required or permitted by existing case law in the body of an e-mail, then in my
view that would be a sufficient signature for the purposes of [the statute of frauds]”.
162
The Court of Cassation of France rejected the receivability of a statement of appeal signed
electronically, because there were doubts as to the identity of the person who created the
signature and the appeal had been signed electronically before entry into force of the law
of 13 March 2000, which recognized the legal effect of electronic signatures (Cour de
cassation, Deuxième chambre civile, 30 April 2003, Sté Chalets Boisson c/ M. X. <www.
juriscom.net/jpt/visu.php?ID=239> (29 November 2007).
163
France, Conseil d’État, 28 décembre 2001, No. 235784, Élections municipales d’Entre-
Deux-Monts <www.rajf.org/article.php3?id_article=467> (3 December 2007).
186
courts of appeal164 and the Federal Court (Bundesgerichtshof )165 had held that
a scanned image of a handwritten signature did not satisfy existing signature
requirements and offered no proof of a person’s identity. Identification might
conceivably be attached to an “advanced electronic signature”, as defined in
German law. Generally, however, it was for the legislator and not the courts to
establish the conditions for the equivalence between writings and intangible
communications transmitted by data transfers.166 That understanding was
eventually reversed in view of the unanimous opinion of the other high fed-
eral courts that accepted the delivery of certain procedural pleas by means of
electronic communication of an electronic communication accompanied by a
scanned image of a signature.167
It is interesting to note that even courts in some civil law jurisdictions that
have adopted legislation favouring the use of PKI-based digital signatures,
such as Colombia,168 have taken a similarly liberal approach and confirmed, for
example, the admissibility of judicial proceedings conducted entirely by electronic
communications. The submissions exchanged during such proceedings were
found to be valid, even if they were not signed with a digital signature, since
164
For instance, Oberlandesgericht (Court of Appeal) Karlsruhe, Case No. 14 U 202/96,
14 November 1997, JurPC Internet-Zeitschrift für Rechtsinformatik und Informationsrecht,
JurPC Web-Dok. No. 09/1998 <www.jurpc.de/rechtspr/19980009.htm> (29 November
2007).
165
Germany, Bundesgerichtshof (Federal Court of Justice), Case No. XI ZR 367/97, 29
September 1998, JurPC Internet-Zeitschrift für Rechtsinformatik und Informationsrecht,
JurPC Web-Dok. No. 05/1999 <www.jurpc.de/rechtspr/19990005.htm (29 November
2007).
166
Id.
167
In a decision on a case referred to it by the Bundesgerichtshof of Germany (Federal Court of
Justice), the Gemeinsamer Senat der obersten Gerichtshöfe des Bundes (Joint Chamber of the
Highest Federal Courts of Germany) noted that form requirements in court proceedings were
not an end in themselves. Their purpose was to ensure a sufficiently reliable (“hinreichend
zuverlässig”) determination of the content of the writing and the identity of the person from
whom it emanated. The Joint Chamber noted the evolution in the practical application
of form requirements to accommodate earlier technological developments such as telex
or facsimile. The Joint Chamber held that accepting the delivery of certain procedural
pleas by means of electronic communication of a data message with a scanned image of
a signature would be in line with the spirit of existing case law (Gemeinsamer Senat der
obersten Gerichtshöfe des Bundes, GmS-OGB 1/98, 5 April 2000, JurPC Internet-Zeitschrift
für Rechtsinformatik und Informationsrecht, JurPC Web-Dok. No. 160/2000 <www.jurpc.
de/rechtspr/20000160.htm (29 November 2007).
168
For example, Colombia, which has adopted the MLEC, including the general provisions
of its article 7, but has established a legal presumption of authenticity only in respect of
digital signatures (Ley de comercio electrónico, supra note 130, art. 28).
187
the electronic communications used methods that allowed otherwise for the
identification of the parties.169
Case law on electronic signatures is still rare and the small number of court
decisions to date does not provide a sufficient basis to draw firm conclusions.
Nevertheless, a brief review of existing precedents reveals several trends. It seems
that the legislative approach taken to electronic signatures and authentication,
as discussed below, has influenced the attitude of courts on this issue. Arguably,
the legislative focus on electronic “signatures,” without an accompanying gen-
eral rule on attribution, has led to excessive attention being paid to the identity
function of authentication methods. This has, in some countries, engendered
a certain degree of mistrust vis‑à‑vis any authentication methods that do not
satisfy the statutory definition of an electronic “signature.”
It is therefore doubtful that the same courts that have adopted a liberal approach
in the context of judicial or administrative appeals would be equally liberal in
respect of signature requirements for the validity of contracts. Indeed, while in
a contractual context a party might be faced with the risk of repudiation of the
agreement by the other party, in the context of civil proceedings it is typically
the party using electronic signatures or records that is interested in confirming
its approval of the record and its contents.
Chapter II. Electronic Signature and

Authentication Methods
Information and computer technology have developed various means for linking
information in electronic form to particular persons or entities, for ensuring
the integrity of such information, or for enabling persons to demonstrate their
entitlement or authorization to obtain access to a certain service or repository
of information. These functions are sometimes referred to generically either as
electronic “authentication” or electronic “signature” methods.
Sometimes, however, distinctions are made between electronic “authentica-
tion” and electronic “signature.” The use of terminology is not only inconsistent,
but to some extent misleading. In a paper-based environment, the words
Colombia, Juzgado Segundo Promiscuo Municipal Rovira Tolima, Juan Carlos Samper v.
169
Jaime Tapias, 21 July 2003, Rad. 73-624-40-89-002-2003-053-00. The Court found

that the process undertaken via electronic means was valid notwithstanding that the
e-mails were not digitally signed because (a) the sender of the data messages could be
fully identified; (b) the sender of the data messages consented to and affirmed the content
of the data messages sent; (c) the data messages were safely kept in the Tribunal; and (d)
the messages could be reviewed at any time <www.camara-e.net/_upload/80403 – 0-7-
diaz082003.pdf> (3 December 2007).
188
“authentication” and “signature” and the related actions of “authenticating”

and “signing” do not have exactly the same connotation in different legal systems
and have functionalities that may not necessarily correspond to the purpose and
function of the so-called electronic “authentication” and “signature” methods.
Furthermore, the word “authentication” is sometimes generically used in con-
nection with any assurance of both authorship and integrity of information, but
some legal systems may distinguish between those elements. A short overview
of differences in terminology and legal understanding is therefore necessary
with a view to narrowing the limits of the present discussions.
A. Notion of Electronic “Authentication” and “Signature”

The terms “electronic authentication” or “electronic signature” are used to
refer to various techniques currently available on the market or still under
development for the purpose of replicating in an electronic environment some
or all of the functions identified as characteristic of handwritten signatures or
other traditional authentication methods.
A number of different electronic authentication and signature techniques
have been developed over the years. Each technique aims at satisfying different
needs and providing different levels of security, and entails different technical
requirements. Electronic authentication and signature methods may be classified
in three categories: those based on the knowledge of the user or the recipient
(e.g. passwords, personal identification numbers (PINs)), those based on the
physical features of the user (e.g. biometrics) and those based on the possession
of an object by the user (e.g. codes or other information stored on a magnetic
card).170 A fourth category might include various types of authentication and
signature methods that, without falling under any of the above categories, might
also be used to indicate the originator of an electronic communication (such
as a facsimile of a handwritten signature, or a name typed at the bottom of an
electronic message). Technologies currently in use include digital signatures
within a PKI, biometric devices, PINs, user-defined or assigned passwords,
scanned handwritten signatures, signature by means of a digital pen, and
clickable “OK” or “I accept” boxes.171 Hybrid solutions based on the combina-
tion of different technologies are becoming increasingly popular, such as, for
instance, in the case of the combined use of passwords and TLS/SSL (transport
layer security/secure sockets layer), which is a technology using a mix of public
See Report of the Working Group on Electronic Commerce on the Work of Its Thirty-second
170
Session (Vienna, 19-30 January 1998) (U.N. document A/CN.9/446), paras. 91 and ff.
171
189
and symmetric key encryptions. The features of the main techniques currently
used are described below.
1. Functions of Electronic “Authentication” and Electronic “Signature”

As is often the case, technology developed long before the law entered this area.
The resulting gap between law and technology leads not only to varying levels
of expert knowledge, but also inconsistent use of terminology. Expressions
that were traditionally used with a particular connotation under national laws
started to be used to describe electronic techniques whose functionality did not
necessarily coincide with the functions or characteristics of the corresponding
concept in legal usage. The usage in the information technology industry, which
evolved essentially around concerns over network security, however, does not
necessarily apply the same categories as legal writings.
In some cases, the expression “electronic authentication” is used to refer to
electronic techniques that, depending on the context in which they are used,
may involve various elements, such as identification of individuals, confirmation
of a person’s authority (typically to act on behalf of another person or entity)
or prerogatives (for example, membership in an institution, or subscription to a
service) or assurance as to the integrity of information. In some cases, the focus
is on identity only,172 but sometimes it extends to authority,173 or a combination
of any or all of those elements.174
172
The Technology Administration of the United States Department of Commerce, for
example, defines electronic authentication as “the process of establishing confidence in
user identities electronically presented to an information system” (United States, Depart-
ment of Commerce, Electronic Authentication Guideline: Recommendations of the National
Institute of Standards and Technology, NIST Special Publication 800-63, version 1.0.2
(Gaithersburg, Maryland, April 2006)) <csrc.nist.gov/publications/nistpubs/800-63/
SP800-63V1_0_2.pdf> (4 April 2007).
173
For example, the Government of Australia developed an electronic authentication framework
that defines electronic authentication as “the process of establishing a level of confidence
in whether a statement is genuine or valid when conducting a transaction online or by
phone. It helps build trust in an online transaction by giving the parties involved some
assurance that their dealings are legitimate. These statements might include: identity details;
professional qualifications; or the delegated authority to conduct transactions” (Australia,
Department of Finance and Administration, Australian Government e-Authentication Framework:
An Overview (Commonwealth of Australia, 2005) <www.agimo.gov.au/infrastructure/
authentication/agaf_b/overview/introduction#e-authentication> (4 April 2007).
174
The Principles for Electronic Authentication prepared by the Government of Canada, for
instance, define “authentication” as “a process that attests to the attributes of participants
in an electronic communication or to the integrity of the communication.” “Attributes”
in turn are defined as “information concerning the identity privilege or rights of a par-
ticipant or other authenticated entity” (Canada, Industry Canada, Principles for Electronic
190
Neither the MLEC nor the MLES use the term “electronic authentication”, in
view of the different meaning of “authentication” in various legal systems and
the possible confusion with particular procedures or form requirements. The
MLEC uses instead the notion of “original form” to provide the criteria for the
functional equivalence of “authentic” electronic information.175
The definition of “electronic signature” in UNCITRAL texts is deliberately
broad, so as to encompass all existing or future “electronic signature” methods.
As long as the methods used are “as reliable as was appropriate for the purpose
for which the electronic communication was generated or communicated, in
the light of all the circumstances, including any relevant agreement”,176 they
should be regarded as meeting legal signature requirements. UNCITRAL texts
relating to electronic commerce, as well as a large number of other legislative
texts, are based on the principle of technological neutrality and therefore aim at
accommodating all forms of electronic signature. Thus, UNCITRAL’s definition
of electronic signature would cover the entire spectrum of “electronic signature”
techniques, from higher-level security, such as cryptographically based signature
assurance schemes associated with a PKI scheme (a common form of “digital
signature” to lower levels of security, such as unencrypted codes or passwords.
The simple typing of the author’s name at the end of an e-mail message, which
is the most common form of electronic “signature,” would, for instance, fulfil
the function of correctly identifying the author of the message whenever it was
not unreasonable to use such a low level of security.
Apart from this, UNCITRAL has not otherwise dealt with issues related to
access control or identity verification. This was also in keeping with the fact
that, in a paper-based environment, signatures may be signs of identity but are
necessarily attributive of identity. The MLEC deals, however, with the conditions
under which the addressee of an electronic communication is entitled to assume
that the message actually originated from its purported originator. Indeed, article
13 of the MLEC provides that as between the originator and the addressee, an
electronic communication is deemed to be that of the originator if it was sent: (a)
by a person “who had the authority to act on behalf of the originator in respect
of that data message”; or (b) by “an information system programmed by, or on
Authentication: a Canadian Framework (Ottawa, May 2004) <strategis.ic.gc.ca/epic/site/

ecic-ceac.nsf/en/h_gv00240e.html> (4 April 2007).
According to article 8 of MLEC, where the law requires information to be presented or
175
retained in its original form, that requirement is met by a data message if: (a) There exists
“a reliable assurance as to the integrity of the information from the time when it was first
generated in its final form, as a data message or otherwise;” and (b) Where it is required
that information be presented, that information “is capable of being displayed to the
person to whom it is to be presented.”
MLEC, article 7, subparagraph 1 (b).
176
191
behalf of, the originator to operate automatically.” As between the originator and
the addressee, an addressee is entitled to regard an electronic communication
as being that of the originator, and to act on that assumption, if: (a) in order to
ascertain whether the electronic communication was that of the originator, “the
addressee properly applied a procedure previously agreed to by the originator for
that purpose;” or (b) the electronic communication as received by the addressee
resulted from the actions of a person whose relationship with the originator or
with any agent of the originator enabled that person to gain access to a method
used by the originator to identify electronic communications as its own.
As a whole, these rules allow a party to infer someone else’s identity, whether
or not the message was electronically “signed” and whether or not the method
used for attributing the message to the originator could be validly used for
“signature” purposes. This conforms to current practice in the paper-based
environment. Checking someone else’s voice, physical appearance or identity
papers (for example, a national passport) may suffice to conclude that the person
is who he or she purports to be for the purpose of communicating with the
person concerned, but would not qualify as a “signature” of such person under
most legal systems.
Besides the confusion that has been caused by the fact that technical and
legal usage of terms in the paper-based and in the electronic environment do
not coincide, the various techniques mentioned earlier can be used for differ-
ent purposes and provide a different functionality, depending on the context.
Passwords or codes, for example, may be used to “sign” an electronic document,
but they may also be used to gain access to a network, a database or another
electronic service, in much the same way as a key may be used to unlock a safe
or open a door. However, while in the first instance the password is a proof of
identity, in the second instance, it is a credential or sign of authority, which, while
ordinarily linked to a particular person, is also capable of being transferred to
another. In the case of digital signatures, the inappropriateness of the current
terminology is even more patent.
The digital signature is widely regarded as a particular technology for “signing”
electronic documents. However, it is at least questionable whether, from a legal
point of view, the application of asymmetric cryptography for authentication
purposes should be referred to as a digital “signature,” as its functions go beyond
the typical functions of a handwritten signature. The digital signature offers
means both to “verify the authenticity of electronic messages” and “guarantee
the integrity of the contents.”177 Furthermore, digital signature technology
“does not merely establish origin or integrity with respect to individuals as is
177
Babette Aalberts and Simone van der Hof, “Digital Signature Blindness: Analysis of Legisla-
tive Approaches Toward Electronic Authentication”, (November 1999), p. 8 <rechten.
uvt.nl/simone/ Digsigbl.pdf> (3 December 2007).
192
required for signing purposes, but it can also authenticate, for instance, serv-
ers, websites, computer software, or any other data that is distributed or stored
digitally,” which gives digital signatures “much broader use than an electronic
alternative for handwritten signatures.178
2. Main Methods of Electronic Signature and Authentication

For the purposes of this discussion, four main signature and authentication
methods will be discussed: digital signatures, biometric methods, passwords
and hybrid methods, and scanned or typed signatures.
(a) Digital Signatures Relying on Public Key Cryptography

“Digital signature” is a name for technological applications using asymmetric
cryptography,179 also referred to as public key encryption systems, to ensure the
authenticity of electronic messages and guarantee the integrity of the contents
of these messages.180 Public key cryptography, is based on the use of algorithmic
functions to generate two different but mathematically related “keys”181 which
is why this technology is called “asymmetric cryptosystem.” One such key is
used for creating a digital signature or transforming data into a seemingly
unintelligible form, and the other key is used for verifying a digital signature
or returning the message to its original form. Although the keys of the pair are
mathematically related, it is virtually impossible to derive the private key from
knowledge of the public key.182
178
Id.
179
Cryptography is the branch of applied mathematics that is concerned with transforming
information into a seemingly unintelligible form and then back into their original form.
180
While the use of cryptography is one of the main features of digital signatures, the mere
fact that a digital signature is used to authenticate a message containing information in
digital form should not be confused with a more general use of cryptography for purposes
of confidentiality. Confidentiality encryption is a method used for encoding an electronic
communication so that only the originator and the addressee of the message will be able
to read it. In a number of countries, the use of cryptography for confidentiality purposes
is limited by law for reasons of public policy that may involve considerations of national
defense. However, the use of cryptography for authentication purposes by producing a
digital signature does not necessarily imply the use of cryptography to make any informa-
tion confidential in the communication process, since the encrypted digital signature may
be merely appended to a non-encrypted message.
181
Typically large numbers produced using a series of mathematical formulae applied to
prime numbers. Other mathematical techniques are currently used or under development,
such as cryptosystems relying on elliptic curves, which may offer a high degree of security
through the use of significantly reduced key-lengths.
182
Certain existing standards refer to the notion of “computational unfeasibility” to describe
the expected irreversibility of the process, that is, the hope that it will be impossible to
193
(i) Digital Signature Creation and Verification

The “private key,” which should be kept secret, is used by the signatory to create
the digital signature, while the “public key,” which is ordinarily more widely
known, is used by a relying party to verify the digital signature. The private key
is likely to be kept on a smart card or to be accessible through a personal identi-
fication number (PIN) or a biometric identification device, such as thumbprint
recognition.
To sign a document or any other item of information, the signatory first
determines precisely the limits of the information that is to be signed. Then a
hash function183 in the signatory’s software establishes a hash result unique
to the information to be signed. The signatory’s software transforms the hash
result of the electronic communication into a digital signature by encrypting it
with the signatory’s private key. The resulting digital signature is thus unique to
both the information being signed and the private key used to create the digital
signature. Typically, a digital signature is attached to the message and stored
or transmitted with that message. However, it may also be sent or stored as a
separate data element, as long as it maintains a reliable association with the
corresponding message. Since a digital signature is unique to its message, it is
inoperable if permanently disassociated from the message.
Verification of a digital signature is accomplished by establishing a new hash
result for the original message, by means of the same hash function used to
derive a user’s secret private key from that user’s public key. “‘Computationally unfeasible’
is a relative concept based on the value of the data protected, the computing overhead
required to protect it, the length of time it needs to be protected, and the cost and time
required to attack the data, with such factors assessed both currently and in the light of
future technological advance.” (American Bar Association, Digital Signature Guidelines:
Legal Infrastructure for Certification Authorities and Secure Electronic Commerce 9 (Chicago,
American Bar Association, 1 August 1996), note 23 <www.abanet.org/scitech/ec/isc/
dsgfree.html> (5 April 2007).
A “hash function” is a mathematical process, based on an algorithm that creates a digital
183
representation or compressed form of the message (often referred to as a “message

digest” or “fingerprint” of the message), in the form of a “hash value” or “hash result”
of a standard length that is usually much smaller than the message but nevertheless
substantially unique to it. Any change to the message invariably produces a different
hash result when the same hash function is used. In the case of a secure hash function,
sometimes called a “one-way hash function”, it is virtually impossible to derive the original
message from knowledge of its hash value. Another basic feature of hash functions is
that it is also virtually impossible to find another binary object (i.e. different from the one
from which the digest was originally derived) producing the same digest. Hash functions
therefore enable the software for creating digital signatures to operate on smaller and
more predictable amounts of data, while still providing robust evidentiary correlation to
the original message content, thereby efficiently providing assurance that there has been
no modification of the message since it was digitally signed.
194
create the digital signature. Using the public key and the new hash result, the
verifier checks whether the digital signature was created using the corresponding
private key and whether the newly established hash result matches the original
hash result that was transformed into the digital signature during the signing
process. The verification software will confirm the digital signature as “verified”
from a cryptographic viewpoint if (a) the signatory’s private key was used to
sign digitally the message, which is known to be the case if the signatory’s
public key was used to verify the signature because the signatory’s public key
will verify only a digital signature created with the signatory’s private key; and
(b) the message was unaltered, which is known to be the case if the hash result
computed by the verifier is identical to the hash result extracted from the digital
signature during the verification process.
(ii) Public Key Infrastructure and Certification Services Providers

To verify a digital signature, the verifier must have access to the signatory’s
public key and have assurance that it corresponds to the signatory’s private key.
However, a public-key and private-key pair has no intrinsic association with any
person; it is simply a pair of numbers. An additional mechanism is necessary to
associate reliably a particular person or entity to the key pair.
The required level of confidence may exist between parties who trust each
other, who have dealt with each other over a period of time, who communicate
on closed systems, who operate within a closed group or who are able to govern
their dealings contractually, for example in a trading partner agreement. In a
transaction involving only two parties, each party can simply communicate
the public key of the key pair each party will use. However, the same level of
confidence may not be present when the parties deal infrequently with each
other, communicate over open systems such as the Internet, and are not bound
by a prior agreement, such as a trading partner agreement.
One solution to some of these problems is the use of one or more third parties
to associate an identified signatory or the signatory’s name with a specific public
key. That third party is generally referred to as a “certification authority” or
“certification services provider” in most technical standards and guidelines. To
associate a key pair with a prospective signatory, a certification services provider (or
certification authority) issues a certificate, which is an electronic record that lists
a public key together with the name of the certificate subscriber as the “subject”
of the certificate, and which may confirm that the prospective signatory identified
in the certificate holds the corresponding private key. The principal function of
a certificate is to bind a public key with a particular signatory. A “recipient” of
the certificate desiring to rely upon a digital signature created by the signatory
named in the certificate can use the public key listed in the certificate to verify
that the digital signature was created with the corresponding private key.
195
To assure the authenticity of the certificate with respect to both its contents
and its source, the certification services provider digitally signs it. The issu-
ing certification services provider’s digital signature on the certificate can be
verified by using the public key of the certification service provider listed in
another certificate by another certification services provider (which may, but
need not, be on a higher level in a hierarchy), and that other certificate can in
turn be authenticated by the public key listed in yet another certificate, and so
on, until the person relying on the digital signature is adequately assured of its
genuineness.
In a number of countries, certification services providers are organized as
a “public key infrastructure” (PKI). Certification services providers within a
PKI can be established in a hierarchical structure, where some certification
services providers only certify other certification authorities, which provide
services directly to users. In such a structure, some certification authorities are
subordinate to other certification authorities.
PKIs organized in a hierarchical structure are scalable in the sense that they
may incorporate entire new PKI “communities” simply by having the “root
authority” establish a trust relationship with the new community’s “root”.184 The
root authority of the new community may be incorporated directly under the
“root” of the receiving PKI, thus becoming a subordinate certification services
provider within that PKI or be incorporated at a lower level. A drawback of
hierarchical PKIs is that, as a consequence of reliance on a single trust point, if
the root authority is compromised, the entire PKI is compromised. Furthermore,
some countries have found it difficult to select one single entity as a root authority
and to impose such a hierarchy on all other certification services providers.185
The so-called “mesh” PKI is an alternative to a hierarchical PKI. Under this
model, certification services providers are connected in a peer-to-peer relation-
ship. Certification services providers will issue certificates to each other; the pair
of certificates describes their reciprocal trust relationship. The lack of hierarchy
in such a system means that certification services providers cannot impose
conditions governing the types of certificate issued by other certification services
providers. If a certification services provider wishes to limit the trust extended
to other certification services providers, it must specify these limitations in the
184
William T. Polk and Nelson E. Hastings, “Bridge Certification Authorities: Connecting B2B
Public Key Infrastructures”, National Institute of Standards and Technology, September
2000, <csrc.nist.gov/groups/ST/crypto_apps_infra/documents/B2B-article.pdf > (3
December 2007).
185
Id. Note that in the United States of America, it was very difficult to single out one agency
of the Federal Government to assume the overall authority over the federal PKI.
196
certificates issued to its peers,186 which creates a risk of disharmony in conditions

and limitations of mutual recognition.
A third alternative structure is built around the so-called “bridge” certifica-
tion services provider. Unlike a certification services provider in a “mesh” PKI, a
“bridge” certification services provider does not issue certificates directly to users.
Instead, the “bridge” certification services provider establishes peer-to-peer trust
relationships with the different user communities, thus allowing the users to
keep their natural trust points within their respective PKIs. The “bridge of trust”
that joins two or more PKIs through their mutual relationship with a “bridge”
certification services provider enables users from the different user communities
to interact with each other through the “bridge” certification services provider
with a specified level of trust.187
(b) Practical Problems in Public Key Infrastructure Implementation

Setting up a PKI is a way to provide confidence that (a) a user’s public key has
not been changed and in fact corresponds to that user’s private key; and (b) the
cryptographic techniques being used are sound. To provide the confidence de-
scribed above, a PKI may offer a number of services, including the following:
(a) managing cryptographic keys used for digital signatures;
(b) certifying that a public key corresponds to a private key;
(c) providing keys to end users;
(d) publishing revocation information of public keys or certificates;
(e) managing personal tokens (e.g. smart cards) that can identify the user
with unique personal identification information or can generate and store
an individual’s private keys;
(f) checking the identification of end users and providing them with
services;
(g) providing time-stamping services; and
(h) managing cryptographic keys used for confidentiality encryption where
the use of such a technique is authorized.
Id.
186
The “bridge” certification services provider was the structure eventually chosen to set up
187
the PKI system for the United States Federal Government (Polk and Hastings, supra note
184). This was also the model followed to develop the PKI system of the Government of
Japan.
197
Despite the considerable knowledge of digital signature technologies and the

way they function, the implementation of public key infrastructures and digital
signature schemes has, in practice, faced some problems that have kept the level
of use of digital signatures below expectations.
Another area where digital signatures and PKI schemes may give rise to
practical problems concerns data security and privacy protection. Certification
services providers must keep safe the keys used to sign certificates issued to their
customers and may be exposed to attempts by outsiders to gain unauthorized
access to the keys. Furthermore, certification services providers need to obtain
a series of personal data and business information from persons applying for
certificates. This information needs to be stored by the certification services
provider for future reference. Certification services providers must take the
necessary measures to ensure that access to such information is in accordance
with applicable data protection laws.188 However, unauthorized access remains
a real threat.
3. Biometrics
A biometric is a measurement used to identify an individual through his or her
intrinsic physical or behavioural traits. Traits that may be used for recognition in
biometrics include DNA, fingerprint, iris, retina, hand or facial geometry, facial
thermogram, ear shape, voice, body odour, blood vessel pattern, handwriting,
gait and typing patterns.
The use of biometric devices typically involves capturing a biometric sample
of a biological feature of an individual in digital form. Biometric data is then
extracted from that sample to create a reference template. Eventually, the biometric
data stored in the reference template is compared with the one extracted from the
end user for the purpose of verification, so that it is possible to indicate whether
or not an identification or verification of identity has been achieved.189
See OECD Guidelines on the Protection of Privacy and Transborder Flows of Personal Data
188
(Paris, 1980) <www.oecd.org/document/18/0,2340,en_2649_34255_1815186_1_1_

1_1,00.html> (30 November 2007); Council of Europe Convention for the Protection of
Individuals with regard to Automatic Processing of Personal Data (E.T.S. 108) <conven-
tions.coe.int/ Treaty/ en/Treaties/Html/108.htm> (30 November 2007); United Nations,
Guidelines for the regulation of computerized personal data files (General Assembly
resolution 45/95) <193.194.138.190/html/menu3/b/71.htm> (7 February 2007);
and Directive 95/46/EC of the European Parliament and of the Council of 24 October
1995 On the Protection of Individuals With Regard to the Processing of Personal Data
and on the Free Movement of Such Data (Official Journal of the European Communities, L
281, 23 November 1995) <eur-lex.europa.eu/ LexUriServ/LexUriServ.do?uri=CELEX:3
1995L0046:EN:HTML> (30 November 2007).
International Association for Biometrics (iAfB) and International Computer Security
189
Association (ICSA), 1999 Glossary of Biometric Terms < www.afb.org.uk/docs/glossary.
198
A number of risks relate to the storage of biometrical data since biometric

patterns are typically not revocable. When biometric systems have been com-
promised, the legitimate user has no recourse but to revoke the identification
data and switch to another set of uncompromised identification data. Therefore,
special rules are needed to prevent unauthorized access or misuse of biometrics
databases.
The accuracy of biometric techniques cannot be absolute since biological
features tend to be inherently variable and any measurement may involve
deviation. In this respect, biometrics are not considered unique identifiers but
rather semi-unique identifiers. To accommodate those variations, the accuracy
of biometrics may be manipulated by setting the threshold for matching the
reference template with the extracted sample. However, a low threshold may bias
the test towards false acceptance while a high threshold may tend towards false
rejections. Nevertheless, the accuracy of authentication provided by biometrics
may be adequate in the majority of commercial applications.
Moreover, data protection and human rights issues arise in relation to the
storage and disclosure of biometrical data. Although data protection laws may
not refer expressly to biometrics, they aim at protecting personal data relating
to natural persons. It is precisely the processing of such data both in their raw
form and as templates that is at the core of biometrics technology.190 Moreover,
measures may be required to protect individuals against risks generated by the
private use of biometric data, as well as in case of identity theft. Other legal
domains, including labour and health law, may also come into play.191
Technical solutions might assist in addressing some concerns. For instance,
storage of biometrical data on smart cards or tokens may protect from unauthor-
ized access, which could occur if the data is stored on a centralized computer
system. Moreover, best practices have been developed to reduce risks in different
areas such as scope and capabilities; data protection; user control of personal
data; and disclosure, auditing, accountability and oversight.192
Despite these problems, biometric devices are generally considered as offering
a high level of security. While they are compatible with a range of uses, their
htm > (30 November 2007).

190
Paul de Hert, Biometrics: Legal Issues and Implications, background paper for the Institute
for Prospective Technological Studies of the European Commission (European Communi-
ties, Directorate General Joint Research Centre, 2005), p. 13 <http://cybersecurity.jrc.es/
pages/ ProjectlibestudyBiometrics.htm > (30 November 2007).
191
For instance, in Canada, the use of biometrics was discussed with respect to the application
of the Personal Information Protection and Electronic Documents Act (2000, c. 5) in the
workplace (see Turner v. TELUS Communications Inc., 2005 FC 1601, 29 November 2005
(Federal Court of Canada)).
192
See, for an example of best practices, the International Biometric Group BioPrivacy Initia-
tive, Best Practices for Privacy-Sympathetic Biometric Deployment <www.bioprivacy.org>.
199
current main scope is on Government applications, particularly law enforcement

applications such as immigration clearance and access controls. Commercial
applications have also been developed, where often biometrics are used in the
context of a two-factor authentication process requiring provision of an element
in possession of the individual (biometrics) and an element in the knowledge
of the individual (typically, a password or a PIN). Moreover, applications were
developed to store and compare the characteristics of a person’s handwritten
signature. Digital-based pen tablets record the pen pressure and duration of
the signing process. The data are then stored as an algorithm to be used for
comparison against future signatures.
4. Passwords and Hybrid Methods

Passwords and codes are used both for controlling access to information or services
and for “signing” electronic communications. In practice, the latter use is less
frequent than the former, because of the risk of compromising the code if it is
transmitted in non-encrypted messages. Passwords and codes are however the
most widely used method for “authentication” for purposes of access control and
identity verification in a broad range of transactions, including most Internet
banking, cash withdrawals at automatic teller machines and consumer credit
card transactions.
It should be recognized that multiple technologies can be combined to
“authenticate” an electronic transaction. Several technologies or several uses
of a single technology can be utilized for a single transaction. For example,
signature dynamics for authentication can be combined with cryptography
for message integrity. Alternatively, passwords can be passed over the Internet,
using cryptography (e.g. SSL in browsers) to protect them, in conjunction with
the use of biometrics to trigger a digital signature (asymmetric cryptography),
which, on receipt, generates a Kerberos ticket (symmetric cryptography).
5. Scanned Signatures and Typed Names

The main reason for legislative interest in electronic commerce in the private law
area has been concern about how new technologies may affect the application
of rules of law that were conceived for other media. This attention to technol-
ogy has often led, deliberately or not, to a focus on sophisticated technologies
that offer a higher level of security for electronic authentication and signature
methods. It is often neglected, in that context, that a very large number, if not
the majority, of business communications exchanged throughout the world do
not make use of any particular authentication or signature technology.
In day-to-day practice, companies around the world are often satisfied, for
instance, with exchanging e-mails without the use of any form of authentication
or signature other than the typed name, title and address of parties at the bottom
of their communications. Sometimes a more formal appearance is given by the
200
use of facsimile or scanned images of handwritten signatures, which of course

constitute only a copy in digitalized form of a handwritten original. Neither
typed names on unencrypted e-mails nor scanned signatures offer a high level
of security or can definitely prove the identity of the originator of the electronic
communication in which they appear. Nevertheless, business entities freely
choose to use these forms of “authentication” in the interest of ease, expediency
and cost-effectiveness of communications.
B. Legal Treatment of Electronic Authentication and

Signatures
A significant volume of electronic commercial transactions is performed in closed
networks, that is, groups with a limited number of participants accessible only
to previously authorized persons or companies. Closed networks support the
operation of a single entity or an existing closed user group, such as financial
institutions participating in the inter-bank payment system, securities and com-
modities exchanges, or an association of airlines and travel agents. In these cases,
participation in the network is typically restricted to institutions and companies
previously admitted to the group. Most of these networks have been in place for
several decades, use sophisticated technology and have acquired a high level of
expertise in the functioning of the system. The rapid growth of electronic com-
merce in the last decade has led to the development of other network models,
such as supply chains or trade platforms.
Although these new groups were originally structured around direct
computer-to-computer connections, as were most of the closed networks already
in existence at that time, there is an increasing trend towards using publicly
accessible means, such as the Internet, as a common connection facility. Even
under these more recent models, a closed network retains its exclusive character.
Typically, closed networks operate under previously agreed contractual standards,
agreements, procedures and rules known by various names such as “system
rules,” “operation rules,” “trading partner agreements” or voluntary codes of
conduct that are designed to provide and guarantee the necessary operational
functionality, reliability and security for the members of the group.193 These
See, for example, Economic Commission for Europe, United Nations Centre for Trade
193
Facilitation and Electronic Business, recommendation No. 32, entitled “E-commerce

self‑regulatory instruments (codes of conduct)” (ECE/TRADE/277) <www.unece.org/
cefact/recommendations/ rec_index.htm> (28 March 2007. Many initiatives at the
national and international levels aim at developing model contracts. See, for example,
Economic Commission for Europe, Working Party on the Facilitation of International
Trade Procedures, recommendation No. 26, entitled The Commercial Use of Interchange
Agreements for Electronic Data Interchange (TRADE/WP.4/R.1133/Rev.1); and United
201
rules and agreements often deal with matters such as recognition of the legal
value of electronic communications, time and place of dispatch or receipt
of electronic communications, security procedures for gaining access to the
network and authentication or signature methods to be used by the parties.194
Within the limits of the contractual freedom under applicable law, such rules
and agreements are usually self-enforcing.
However in the absence of contractual rules, or to the extent that applicable
law may limit their enforceability, the legal value of electronic authentication
and signature methods used by the parties will be determined by the applicable
rules of law, in the form of default or mandatory rules. The various options used
in different jurisdictions to develop a legal framework for electronic signatures
and authentication are discussed in the present chapter.
In developing legal and policy frameworks to deal with these technologies,
consideration should be given to the role of multiple technologies. Legal and
policy frameworks for electronic authentication will need to be flexible enough to
cover hybrid technology approaches, as those that focus on specific technologies
could impede the use of multiple technologies.195 Technology neutral provisions
would facilitate the acceptance of such hybrid technology approaches.
Stringent requirements for electronic authentication and signature, in
particular the imposition of a particular method or technology, may inadvert-
ently cast doubt as to the validity and enforceability of a significant number of
transactions that are entered into every day without the use of any particular
kind of authentication or signature. That, in turn, may stimulate parties act-
ing in bad faith to avoid the consequences of obligations they freely assumed
by questioning the authenticity of their own electronic communications. It is
unrealistic to expect that imposing a certain high level of authentication and
signature requirements would eventually lead all parties to actually use them
on a daily basis. Recent experience with sophisticated methods, such as digital
signatures, has shown that concerns about cost and complexity often limit the
practical use of authentication and signature techniques.
Nations Centre for Trade Facilitation and Electronic Business, recommendation No. 31,
entitled Electronic Commerce Agreement (ECE/TRADE/257), both available at <www.unece.
org/cefact/recommendations/rec_index.htm> (30 November 2007).
For a discussion of issues typically covered in trading partner agreements, see Amelia H.
194
Boss, “Electronic Data Interchange Agreements: Private Contracting Toward a Global

Environment”, 13 Nw. J. Int’l L. & Bus. (1992) 45.
Foundation for Information Policy Research, Signature Directive Consultation Compilation,
195
28 October 1998, which provides a compilation of responses made during consultations

on the European Union draft directive on electronic signatures, prepared at the request of
the European Commission <www.fipr.org/publications/sigdirecon.html> (30 November
2007).
202
Electronic authentication legislation and regulation has taken many dif-

ferent forms at the international and domestic levels. Three main approaches
for dealing with signature and authentication technologies can be identified:
(a) the minimalist approach; (b) the technology specific approach; and (c) the
two-tiered or two-pronged approach.196
1. Minimalist Approach
Some jurisdictions recognize all technologies for electronic signature, following
a policy of technological neutrality.197 This approach is also called minimalist,
since it gives a minimum legal status to all forms of electronic signature. Under
the minimalist approach, electronic signatures are considered to be the functional
equivalent of handwritten signatures, provided that the technology employed
is intended to serve certain specified functions and in addition meets certain
technology-neutral reliability requirements.
The MLEC provides the most widely used set of legislative criteria for estab-
lishing a generic functional equivalence between electronic and handwritten
signatures: the signature method must be able to identify the signatory and
must offer a level of reliability commensurate with the purposes for which the
electronic communication was generated.198 This provision contemplates the
two main functions of handwritten signatures: to identify the signatory, and
to indicate the signatory’s intent with respect to the signed information. Any
technology that can provide these two functions in electronic form should, ac-
cording to the MLEC, be regarded as satisfying a legal signature requirement.
The MLEC is therefore technologically neutral; that is, it does not depend on or
presuppose the use of any particular type of technology and could be applied
to the communication and storage of all types of information.
This general principle has been incorporated into the laws of many countries.
The principle of technological neutrality also permits accommodation of future
technological developments. Furthermore, this approach gives prominence
to the freedom of the parties to choose technology that is appropriate to their
needs. The onus is then placed on the parties’ ability to determine the level of
196
Susanna F. Fischer, “Saving Rosencrantz and Guildenstern in a virtual world? A Comparative
Look at Recent Global Electronic Signature Legislation”, 7 B.U. J. Sci. & Tech. L. (2001)
229, 234.
197
For example, Australia and New Zealand.
198
Article 7, paragraph 1, of the MLEC provides: “(1) Where the law requires a signature
of a person, that requirement is met in relation to a data message if: “(a) a method is
used to identify that person and to indicate that person’s approval of the information
contained in the data message; and“(b) that method is as reliable as was appropriate for
the purpose for which the data message was generated or communicated, in the light of
all the circumstances, including any relevant agreement.”
203
security that is adequate for their communications. This may avoid excessive
technological complexity and its associated costs.199
Except in Europe, where legislation has been primarily influenced by directives
issued by the European Union,200 most countries that have legislated in relation
to electronic commerce have used the MLEC as their template. With very few
exceptions,201 countries enacting the MLEC have preserved its technologically
neutral approach and have neither prescribed nor favoured the use of any
particular technology. Both the MLES, which was adopted in 2001, and the
more recent ECC follow the same approach, although the MLES contains some
additional language.
When legislation adopts the minimalist approach, the issue of whether
electronic signature equivalence has been proven normally falls to a judge,
arbitrator or public authority to determine, generally by means of the so-called
“appropriate reliability test.”
A wide array of legal, technical and commercial factors may be taken
into account in determining whether, under the circumstances, a particular
authentication method offers an appropriate level of reliability. They include
any of the following:
(a) the sophistication of the equipment used by each of the parties;
(b) the nature of their trade activity;
(c) the frequency with which commercial transactions take place between
the parties;
(d) the nature and size of the transaction;
(e) the function of signature requirements in a given statutory and regulatory
environment;
(f) the capability of communication systems;
(g) compliance with authentication procedures set forth by intermediaries;
Stephen Mason, “Electronic Signatures in Practice”, 6 J. High Tech. L. (2006) 148, 153.
199
In particular, Directive 1999/93/EC of the European Parliament and of the Council

200
on a Community framework for electronic signatures (Official Journal of the European

Communities No. L 13, of 19 January 2000, p. 12) (hereafter “the Electronic Signatures
Directive”). This directive was followed by a more general one, Directive 2000/31/EC of
the European Parliament and of the Council of 8 June 2000 on certain legal aspects of
information society services, in particular electronic commerce, in the Internal Market
(Electronic Commerce Directive) (Official Journal of the European Communities, No. L 178, 17
July 2000, p. 1), dealing with various aspects of the provision of information technology
services and some matters of electronic contracting.
Colombia, Dominican Republic, Ecuador, India, Mauritius, Panama and South Africa.
201
204
(h) the range of authentication procedures made available by any

intermediary;
(i) compliance with trade customs and practice;
(j) the existence of insurance coverage mechanisms against unauthorized
messages;
(k) the importance and the value of the information contained in the electronic
communication;
(l) the availability of alternative methods of identification and the cost of
implementation; and
(m) the degree of acceptance or non-acceptance of the method of identifica-
tion in the relevant industry or field both at the time the method was
agreed upon and the time when the electronic communication was
communicated.202
2. Technology-Specific Approach
Under a technology-specific approach, the law imposes the use of a specific
technology to fulfil the legal requirements for the validity of an electronic sig-
nature. This is the case, for instance, where the law, aiming at a higher level
of security, demands PKI-based applications.203 Since it prescribes the use of a
specific technology, it is also called the “prescriptive” approach.
The disadvantages of the technology-specific approach are that, in favouring
specific types of electronic signature, it “risks excluding other possibly superior
technologies from entering and competing in the marketplace”.204 Rather than
202
203
One of the earliest examples was the Utah Digital Signature Act, which was adopted in
1995, but was repealed effective 1 May 2006 by State Bill 20 <www.le.state.ut.us/~2006/
htmdoc/sbillhtm/sb0020.htm> (30 November 2007). The technology bias of the Utah
Act can also be observed in a number of countries where the law only recognizes digital
signatures created within a public key infrastructure (PKI) as a valid means of electronic
authentication, which is the case, for example, under the laws of Argentina, Ley de firma
digital (2001) and Decreto No. 2628/2002 (Reglamentación de la Ley de firma digital);
Estonia, Digital Signatures Act (2000); Germany, Digital Signature Act, enacted as article 3
of the Information and Communication Services Act of 13 June 1997; India, Information
Technology Act 2000; Israel, Electronic Signature Law (2001); Japan, Law concerning
Electronic Signatures and Certification Services (2001); Lithuania, Law on Electronic
Signatures (2000); Malaysia, Digital Signature Act 1997; Poland, Act on Electronic
Signature (2001); and Russian Federation, Law on Electronic Digital Signature (2002).
204
Stewart Baker and Matthew Yeo, in collaboration with the secretariat of the International
Telecommunication Union, Background and Issues Concerning Authentication and the ITU,
briefing paper presented to the Experts Meeting on Electronic Signatures and Certification
205
facilitating the growth of electronic commerce and the use of electronic authen-
tication techniques, such an approach may have an opposite effect. Technology
specific legislation risks fixing requirements before a particular technology
matures.205 The legislation may then either prevent later positive developments
in the technology or become quickly outdated as a result of later developments. A
further point is that not all applications may require a security level comparable
with that provided by certain specified techniques, such as digital signatures. It
may also happen that speed and ease of communication or other considerations
may be more important for the parties than ensuring the integrity of electronic
information through any particular process. Requiring the use of an overly
secure means of authentication could result in wasted costs and efforts, which
may hinder the diffusion of electronic commerce.
Technology-specific legislation typically favours the use of digital signatures
within a PKI scheme. The way in which PKIs are structured, in turn, varies from
country to country according to the level of Government intervention.
3. Two-Tiered or Two-Pronged Approach

In this approach, the legislation sets a low threshold of requirements for electronic
authentication methods to receive a certain minimum legal status and assigns
greater legal effect to certain electronic authentication methods (referred to
variously as secure, advanced or enhanced electronic signatures, or qualified
certificates). At the basic level, legislation adopting a two-tiered system generally
grants electronic signatures functional-equivalence status with handwritten
signatures, based on technologically neutral criteria. Higher-level signatures, to
which certain rebuttable presumptions apply, must comply with specific require-
ments that may relate to a particular technology. Currently, legislation of this
type usually defines such secure signatures in terms of PKI technology.
This approach is typically chosen in jurisdictions that consider it important
to address certain technological requirements in their legislation, but wish, at
the same time, to leave room for technological developments. It can provide a
balance between flexibility and certainty in relation to electronic signatures, by
leaving it to the parties to decide, as a commercial judgement, whether the cost
and inconvenience of using a more secure method is suitable to their needs. These
texts also provide guidance as to the criteria for the recognition of electronic
signatures in the context of a certification authority model. It is generally possible
to combine the two-tiered approach with any type of certification model (whether
Authorities: Issues for Telecommunications, Geneva, 9 and 10 December 1999, Document

No. 2 <www.itu.int/osg/spu/ni/esca/meetingdec9-101999/briefingpaper.html> (30
November 2007).
However, in view of the fact that PKI is today fairly mature and established, some of these
205
concerns may no longer apply with the same force.
206
self-regulated, voluntary accreditation or a Government-led scheme), in much

the same way as might be done under the technology-specific approach. Thus,
while some rules may be flexible enough to accommodate different electronic
signature certification models, some systems would only recognize licensed
certification services providers as possible issuers of “secure” or “qualified”
certificates.
The first jurisdictions to have passed legislation adopting the two-tiered ap-
proach include Singapore206 and the European Union.207 They were followed by
a number of others.208 The MLES allows an enacting State to set up a two-tiered
system through regulations, even though it does not actively promote it.
206
Section 8 of the Electronic Transactions Act of Singapore admits any form of electronic
signature, but only secure electronic signatures that meet the requirements of section 17
of the Act (i.e. those which are “(a) unique to the person using it; (b) capable of identify-
ing such person; (c) created in a manner or using a means under the sole control of the
person using it; and (d) linked to the electronic record to which it relates in a manner
that if the record was changed the electronic signature would be invalidated”) enjoy the
presumptions listed in section 18 (inter alia, that the signature “is of the person to whom
it correlates” and that the signature “was affixed by that person with the intention of
signing or approving the electronic record”). Digital signatures supported by a trustworthy
certificate that complies with the provisions of section 20 of the Act are automatically
considered to be “secure electronic signatures” for the purposes of the Act.
207
Like the Electronic Transactions Act of Singapore, the EU Directive on Electronic Signatures,
distinguishes between an “electronic signature” (defined in art. 2, para. 1, as “data in
electronic form which are attached to or logically associated with other electronic data
and which serve as a method of authentication”) and an “advanced electronic signature”
(defined in art. 2, para. 2, as an electronic signature that meets the following requirements:
“(a) it is uniquely linked to the signatory; (b) it is capable of identifying the signatory; (c)
it is created using means that the signatory can maintain under his sole control; and (d)
it is linked to the data to which it relates in such a manner that any subsequent change
of the data is detectable”). The Directive, in article 5, paragraph 2, mandates the States
members of the European Union to ensure that an electronic signature “is not denied
legal effectiveness and admissibility as evidence in legal proceedings solely on the grounds”
that it is “in electronic form, or not based upon a qualified certificate, or not based upon a
qualified certificate issued by an accredited certification-service-provider, or not created by
a secure signature-creation device.” However only advanced electronic signatures “which
are based on a qualified certificate and which are created by a secure-signature-creation
device” are declared to “(a) satisfy the legal requirements of a signature in relation to
data in electronic form in the same manner as a handwritten signature satisfies those
requirements in relation to paper-based data; and (b) are admissible as evidence in legal
proceedings.” (see art. 5, para. 1, of the Directive).
208
For example, Mauritius and Pakistan.
207
Part Two
Electronic Communications in Contract
Formation and Performance
Chapter I. Contract Formation through

Electronic Communications
Already at the time of the drafting of the UNCITRAL Model Law on Electronic
Signatures (MLES), there were calls for another round of legislation, an inter-
national convention on electronic commerce, to achieve further harmonization
of national laws. Underlying those proposals is the recognition that, despite the
wide acceptance of the MLEC, it could not simply be assumed that its principles
have already achieved universal application through domestic legislation.
Another justification for further work in the form of an international conven-
tion was that only a binding instrument could effectively remove obstacles to
electronic commerce that might derive, for example, from form requirements
contained in other international conventions.209 Furthermore, the earlier UN-
CITRAL Model Law on Electronic Commerce (MLEC) does not address aspects of
contract formation and performance that may be affected by the ways in which
electronic transactions are currently structured and by the ways in which those
structures are being changed to facilitate electronic commerce. For example,
does the fact that the contract is formed by interaction between a person and
an automated information system (“electronic agent”210) have any influence
on the rules of contract formation? How should the law deal with mistakes
and errors that may occur in the course of dealings between a person and an
automated information system or between two automated information systems?
See Legal Aspects of Electronic Commerce, Proposal by France (United Nations document
209
A/CN.9/WG.IV/WP.93, 1 March 2001).

An “electronic agent” has been defined in section 2 (6) of the United States Uniform
210
Electronic Transactions Act (UETA) as “a computer program or an electronic or other

automated means used independently to initiate an action or respond to electronic records
or performances in whole or in part, without review or action by an individual”. A similar
definition is also used in section 19 of the Uniform Electronic Commerce Act of Canada
(UECA).
208
Also, should there be special rules governing offers of goods and services over
open networks, for example as regards to the availability and accessibility of
contract terms? How do international conventions on trade-related matters
whose field of application is typically conceived in strictly geographical terms
apply to electronic commerce transactions in which national boundaries are
increasingly fluid? Also, how are documentary and other formal requirements
that might be provided in such conventions to be met?
Needless to say, proposals to deal with these issues in a new international
instrument were met with some scepticism from circles concerned with the
dangers of excessive or rigid state-driven regulation who warned against the
possible disadvantages of limiting party autonomy through an international
binding instrument.211 The narrow scope of this paper does not allow for a
discussion of the various arguments in favour and against state regulation of
electronic commerce and Internet activities.212 It is sufficient to point out the
complementary nature of legislation and contractual rules in private law mat-
ters, a fact that has traditionally been acknowledged by UNCITRAL through
the recognition of party autonomy in nearly all its instruments. However, party
autonomy has its limits:
“An offer posted on the Internet is open to everyone everywhere, and it
is it is difficult to know another party’s location, especially when the
contract will be performed entirely electronically. Yet it can be difficult or
nearly impossible to tailor one’s online practices to conform to the laws
of every state and nation in which one could conceivably be haled into
See, for example, the comments by an expert group set up by the International Chamber
211
of Commerce to consider the desirability of an international uniform instrument on

electronic contracting by UNCITRAL (U.N. document A/CN.9/WG.IV/WP.96, 11 December
2001).
See Timothy D. Casey and Jeff Magenau, “A Hybrid Model of Self-regulation and Govern-
212
mental Regulation of Electronic Commerce”, 19 Sta. Clara Comp. & High Tech. L. J. (2002)
1, 23. The authors point out that “belief in the continued existence of self- regulation may
simply be an unrealistic expectation in many areas of electronic commerce. Congress,
which once chanted the mantra ‘we’re not going to regulate the Internet,’ has changed
its tune and proposed and implemented a whole slew of new invasive regulations. Ad-
ditionally, doubts can be raised about the effectiveness of industry self-regulation. The
case of Toysmart.com, which attempted, as part of its bankruptcy proceeding, to sell its
customer lists in violation of its own privacy policy, suggests some of the ways that self-
regulation can break down. A cause of particular dismay for advocates of self-regulation
was the failure of third party certification agency TRUSTe to stop one of its licensees from
violating their agreement.” (Casey and Magenau, “A Hybrid Model of Self-regulation …”,
pp. 28-29.)
209
court. These difficulties impose serious legal transaction and litigation

costs as well, especially for small online businesses.”213
Following a series of studies and other preparatory work undertaken by its

secretariat, in 2002 UNCITRAL started to consider two new topics in the area of
electronic commerce: a possible international convention to deal with selected
issues of electronic contracting,214 and proposals for removing legal obstacles
to electronic commerce in existing international trade-related instruments.215
The UNCITRAL Working Group on Electronic Commerce devoted six sessions
to the consideration of these topics, which soon were merged into one single
project: a new international convention dealing with electronic communica-
tions in contract formation and performance.216 The final draft of the new
convention was circulated to governments and international organizations for
comments217 and, with some final amendments, was approved by UNCITRAL
at its 38th session (Vienna, 4-15 July 2005)218 and officially adopted by the
U.N. General Assembly with the title “United Nations Convention on the Use of
Electronic Communications in International Contracts” (hereafter “the ECC”) on
23 November 2005.219 The ECC was opened for signature on 16 January 2006
213
Christopher T. Poggi, “Electronic Commerce Legislation An Analysis of European and
American Approaches to Contract Formation”, 41Va. J. Int’l L. (2000) 224.
214
See Legal Aspects of Electronic Commerce – Electronic Contracting: Provisions for a Draft
Convention, note by the Secretariat (U.N. document A/CN.9/WG.IV/WP.95, 20 September
2001).
215
See Legal Barriers to the Development of Electronic Commerce in International Instruments
Relating to International Trade, note by the Secretariat (U.N. document A/CN.9/WG.IV/
WP.94, 11 February 2002).
216
See Reports of the Working Group on Electronic Commerce on the Work of Its Thirty-eighth
session (New York, 12-23 March 2001), U.N. document A/CN.9/484; id., Thirty-ninth
session (New York, 14-15 March 2002), U.N. document A/CN.9/509; id., Fortieth session
(Vienna, 14-18 October 2002), U.N. document A/CN.9/527; and id., Forty-first session
(New York, 5-9 May 2003), U.N. document A/CN.9/528; id. Forty-second session (Vienna,
17-21 November 2003), U.N. document A/CN.9/546; id., forty-third session (New York,
15-19 March 2004), U.N. document A/CN.9/548; and id., Forty-fourth session (Vienna,
11-22 October 2004), U.N. document A/CN.9/571 (all reports and other document
relating to the work of UNCITRAL in the area of electronic commerce are available in
the six official languages of the United Nations at <http://www.uncitral.org>).
217
The comments received by UNCITRAL are reproduced in documents A/CN.9/578 and ad-
denda 1-17, which were circulated at the 38th annual session of UNCITRAL, in 2005.
218
The deliberations of UNCITRAL are reflected in the report on the work of that session (See
Official Records of the General Assembly, Fiftieth Session, and Supplement No. 17 (U.N.
document A/60/17, paras. 12 to 167).
219
General Assembly resolution 60/21, of 23 November 2005.
210
and has already attracted significant interest from governments.220

The following discussion of legal issues related to contract formation and
performance through electronic focuses on the issues dealt with in the EEC and
draws further on the international experience gained with the application of
the United Nations Convention on Contracts for the International Sale of Goods
(“U.N Sales Convention”),221 one of the most successful international instruments
in the area of uniform commercial law.222
A. Applicable Law in International Electronic Contracting

The operation of rules of private international law nearly invariably requires
that persons or their acts be associated with a geographic location. According to
some systems of private international law, a contract is governed by the law of
the place where it was concluded. The place of contract formation is generally
either the place where the contracting parties where actually located at the time
of reaching an agreement, or the place of their residence or place of business,
if the contract was by correspondence or telecommunication. Other systems
subject a contract to the law of the country that has the “closest connection with
a contract or its performance”, which is in most cases the law of the country
where the party required to perform the act that characterizes the contract (in
220
As of 3 December 2006, the Convention has been signed by the Central African Republic,
China, Colombia, Iran (Islamic Republic of), Lebanon, Madagascar, Montenegro, Panama,
Paraguay, Philippines, Russian Federation, Saudi Arabia, Senegal, Sierra Leone, Singapore,
and Sri Lanka. At a special event held in connection with the 39th annual session of
UNCITRAL, Mexico, Spain and the United States had also joined some of those States in
declaring their intention to obtain the necessary domestic approvals to sign the Convention
in the near future (see “China, Singapore, Sri Lanka Sign United Nations Convention on
Use of Electronic Communications in International Contracts,” Press Release available at
<www.uncitral.org/uncitral/en/about/news.html#news> (3 December 2007).
221
1489 UN.T.S. 25567, p. 3, also available at <www.uncitral.org/english/texts/sales/CISG.
htm>.
222
As of 28 November 2007, the U.N. Sales Convention had been ratified by the following 70
States: Argentina, Australia, Austria, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria,
Burundi, Canada, Chile, China, Colombia, Croatia, Cuba, Cyprus, Czech Republic, Denmark,
Ecuador, Egypt, El Salvador, Estonia, Finland, France, Gabon, Georgia, Germany, Greece,
Guinea, Honduras, Hungary, Iceland, Iraq, Israel, Italy, Kyrgyzstan, Latvia, Lesotho,
Liberia, Lithuania, Luxembourg, Mauritania, Mexico, Moldova, Mongolia, Montenegro,
Netherlands, New Zealand, Norway, Paraguay, Peru, Poland, Republic of Korea, Romania,
Russian Federation, Saint Vincent and the Grenadines, Serbia, Singapore, Slovakia, Slove-
nia, Spain, Sweden, Switzerland, Syrian Arab Republic, The former Yugoslav Republic of
Macedonia, Uganda, Ukraine, United States of America, Uruguay, Uzbekistan and Zambia
(the list of Contracting States to the U.N. Sales Convention is available at <www.uncitral.
org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html>).
211
case of a sales contract, for example, the delivery of the goods) has its residence
or place of business.
A similar geographic focus can also be found in most international uniform
law rules. Most international commercial law conventions have their field of
application circumscribed to “international” transactions. The solutions adopted
at both the national and international levels for defining an “international”
contract range from general criteria, such as the contract having “significant
connections with more than one State” or relating “to international commerce,”
to more specific factors, such as the fact that the parties have their “places of
business” or habitual residence in different countries.223 If a party has more than
one place of business, those instruments refer to the place that has the closest
relationship to the contract and its performance.224
Transposing traditional notions of conflicts of laws to a purely electronic
environment may pose a number of problems,225 however, as discussed below.
1. Elements to Determine the Applicable Law

When the parties to a contract concluded electronically clearly indicate where
their relevant place of business is located, that indication is to be taken into ac-
count as an important criterion, if not the most important one, in determining
the “international” character of a contract.226 However, this rule is of little help
if no such indication has been made, since the location of the parties may not
be evident from the electronic communications they exchange.
The question then arises as to whether the technology used for electronic
commerce requires an adjustment of concepts or suggests the need for taking
additional factors into account for determining the parties’ location. This question
223
For example, U.N. Sales Convention, article 1, paragraph 1; Convention on the Limitation
Period in the International Sale of Goods (“U.N. Limitation Convention”) (1511 U.N.T.S.
26119, p. 1), article 2, subparagraph (a); and article 1, subparagraph (a), of the United
Nations Convention on Independent Guarantees and Stand-by Letters of Credit (“U.N.
Guarantees and Stand-by Convention”) (Official Records of the General Assembly, Fiftieth
Session, Supplement No. 17 and corrigendum (A/50/640 and Corr.1, annex). See also
UNIDROIT Convention on International Financial Leasing, article 3, subparagraph 1
(a) (<www.unidroit.org/english/conventions/c-leas.htm>) and UNIDROIT Convention
on International Factoring, article 2, subparagraph 1 (a) (<www.unidroit.org/english/
conventions/c-fact.htm>).
224
E.g. U.N. Sales Convention, article 10 (a); U.N. Limitation Convention, article 2 (c); U.N.
Guarantees and Stand-by Convention, article 4, paragraph 2 (a); UNIDROIT Convention
on International Financial Leasing, article 3, paragraph 2; and UNIDROIT Convention
on International Factoring, article 2, paragraph 2.
225
See, generally, Sylvette Guillemard, Le Droit International Privé Face au Contrat de Vente
Cyberspatial (Montréal: Éditions Yvon Blais, 2006).
226
For instance, under the U.N. Limitation Convention or the U.N. Sales Convention.
212
was extensively debated within UNCITRAL during the negotiation of the ECC.
Even if transmission protocols of electronic communications do not usually
indicate where the parties are located, they often include a number of other types
of apparently objective information, such as Internet Protocol (IP) addresses,227
domain names228 or information pertaining to intermediary information systems.
The question then is what value, if any, could be attached to such information
for the purpose of determining the physical location of the parties.
(a) Location of Information Systems

The location of the equipment and of its supporting technology are not adequate
factors for determining the location of the parties, since they do not provide
sufficient indication as to the ultimate parties to the contract. They may also
change over time and may not be known or apparent to the parties during their
communications. The management and operation of an information system
may be entirely outsourced or run by a third party. For example, a contract made
on behalf of the seller may be automatically concluded with the buyer by the
computer of the Internet service provider (ISP) that hosts the seller’s web site.
Reliance on the location of equipment may thus lead to the undesirable
result of linking a contract to a geographical location that, although related to
the path followed by the electronic messages exchanged by the parties, bears
perhaps little or no relationship to their actual location.229 Another undesirable
result would be that a person’s place of business, when negotiating a contract
electronically, may end up being different from the same person’s place of busi-
ness when negotiating through other means.230
The Internet Protocol (IP) address is a 32-bit number (128 according to IP version 6)
227
that identifies each sender or receiver of information that is sent in packets across the
Internet.
A domain name is a name assigned to a numerical IP functioning as part of a uniform
228
resource locator (URL).

The need to retain the same definitions that are used for off-line transactions is also
229
mentioned in the EU Electronic Commerce Directive, supra note 200, where it is stated that:
“The place at which a service provider is established should be determined in conformity
with the case-law of the Court of Justice according to which the concept of establishment
involves the actual pursuit of an economic activity through a fixed establishment for an
indefinite period; … the place of establishment of a company providing services via an
Internet website is not the place at which the technology supporting its website is located
or the place at which its website is accessible but the place where it pursues its economic
activity.”
The risks of establishing a dual regime for business, depending on the media being used,
230
has been one of the main concerns expressed by the International Chamber of Commerce
in connection with UNCITRAL’s current work on electronic contracting (see U.N. docu-
ments A/CN.9/WG.IV/WP.96 and A/CN.9/WG.IV/WP.101).
213
Nevertheless, it is conceivable that electronic commerce and the “new economy”

may involve activities that are entirely or predominantly carried out through the
use of information systems, without a fixed “establishment”231 or without any
connection to a physical location other than, for instance, the registration of its
articles of incorporation at a given registry. It has been argued that it would not
be reasonable to apply to those so-called “virtual companies” the same criteria
traditionally used to determine a person’s place of business. In other words, the
question is whether it is appropriate to give legal significance to the location of
the equipment and technology supporting the information system or the places
from which such a system may be accessed in order to establish where such a
“virtual company” has its place of business.
The issue of location of entities offering goods and services through elec-
tronic means was considered by the Organisation for Economic Cooperation
and Development (OECD) in the context of its work on international aspects of
taxation. On 22 December 2000, the OECD Committee on Fiscal Affairs adopted
changes to the commentary on article 5 of the Model Tax Convention on Income
and on Capital (“the OECD Model Tax Convention”) to deal with the issue of
the application of the definition of permanent establishment, as understood in
the context of the OECD Model Tax Convention, in connection with electronic
commerce.232
The OECD Committee on Fiscal Affairs points out that, while a location where
automated equipment is operated by an enterprise “may constitute a permanent
establishment in the country where it is situated”, a distinction needs to be
made “between computer equipment, which may be set up at a location so as
to constitute a permanent establishment under certain circumstances, and the
data and software which is used by, or stored on, that equipment”. According
to that interpretation, an Internet web site, which is a combination of software
and electronic data, “does not in itself constitute tangible property and therefore
does not have a location that can constitute a ‘place of business’ as there is no
‘facility such as premises or, in certain instances, machinery or equipment’ … as
far as the software and data constituting that web site is concerned”. On the other
hand, the OECD Committee on Fiscal Affairs points out that a “server on which
the web site is stored and through which it is accessible is a piece of equipment
Thibault Verbiest and Maxime Le Borne, “Le Fonds de Commerce Virtuel: Une Réalité
231
Juridique?” <www.droit-technologie.org>, 24 May 2002 (30 November 2007).

Organisation for Economic Cooperation and Development, Clarification on the Application
232
of the Permanent Establishment Definition in E-Commerce: Changes to the Commentary on the

Model Tax Convention on Article 5 (<www.oecd.org/dataoecd/46/32/1923380.pdf> (30
November 2007).
214
having a physical location and such location may thus constitute a ‘fixed place
of business’ of the enterprise that operates that server”.233
OECD justifies the distinction between a web site and the server on which the
web site is stored and used on the following grounds:
“… the enterprise that operates the server may be different from the
enterprise that carries on business through the web site. For example,
it is common for the web site through which an enterprise carries on
its business to be hosted on the server of an Internet Service Provider
(ISP). Although the fees paid to the ISP under such arrangements may
be based on the amount of disk space used to store the software and
data required by the web site, these contracts typically do not result in
the server and its location being at the disposal of the enterprise …, even
if the enterprise has been able to determine that its web site should be
hosted on a particular server at a particular location. In such a case,
the enterprise does not even have a physical presence at that location
since the web site is not tangible. In these cases, the enterprise cannot
be considered to have acquired a place of business by virtue of that
hosting arrangement. However, if the enterprise carrying on business
through a web site has the server at its own disposal, for example it owns
(or leases) and operates the server on which the web site is stored and
used, the place where that server is located could constitute a permanent
establishment of the enterprise if the other requirements of [article 5
of the OECD Model Tax Convention]234 are met.”
Id., para. 42.2.

233
Article 5, paragraph 1 (“Permanent establishment”) of the OECD Model Tax Convention

234
define “permanent establishment” as “a fixed place of business through which the business
of an enterprise is wholly or partly carried on.” The term “permanent establishment”
includes especially: “a) a place of management; b) a branch; c) an office; d) a factory; e)
a workshop, and f) mine, an oil or gas well, a quarry or any other place of extraction of
natural resources” (paragraph 2). However, it does not include: “a) the use of facilities
solely for the purpose of storage, display or delivery of goods or merchandise belonging
to the enterprise; b) the maintenance of a stock of goods or merchandise belonging to
the enterprise solely or the purpose of storage, display or delivery; c) the maintenance
of a stock of goods or merchandise belonging to the enterprise solely for the purpose of
processing by another enterprise; d) the maintenance of a fixed place of business solely
for the purpose of purchasing goods or merchandise or of collecting information, for
the enterprise; e) the maintenance of a fixed place of business solely for the purpose of
carrying on, for the enterprise, any other activity of a preparatory or auxiliary character;
f) the maintenance of a fixed place of business solely for any combination of activities
mentioned in subparagraphs a) to e), provided that the overall activity of the fixed place
of business resulting from this combination is of a preparatory or auxiliary character
(paragraph 4).
215
For the purpose of distinguishing between a web site and the server on which
it is stored, the OECD Committee on Fiscal Affairs stresses the importance of
identifying the place of performance of the core functions of a business entity, as
opposed to ancillary activities (e.g. provision of a communications link between
suppliers and customers, advertising of goods or services, relaying information
through a mirror server for security and efficiency purposes, gathering market
data for the enterprise or supplying information). In that connection, OECD
provides the following clarification:
“What constitutes core functions for a particular enterprise clearly depends
on the nature of the business carried on by that enterprise. For instance,
some ISPs are in the business of operating their own servers for the
purpose of hosting web sites or other applications for other enterprises.
For these ISPs, the operation of their servers in order to provide services
to customers is an essential part of their commercial activity and can-
not be considered preparatory or auxiliary. A different example is that
of an enterprise (sometimes referred to as an ‘e-tailer’) that carries on
the business of selling products through the Internet. In that case, the
enterprise is not in the business of operating servers and the mere fact that
it may do so at a given location is not enough to conclude that activities
performed at that location are more than preparatory and auxiliary. What
needs to be done in such a case is to examine the nature of the activities
performed at that location in light of the business carried on by the
enterprise. If these activities are merely preparatory or auxiliary to the
business of selling products on the Internet (for example, the location is
used to operate a server that hosts a web site which, as is often the case,
is used exclusively for advertising, displaying a catalogue of products or
providing information to potential customers), … the location will not
constitute a permanent establishment. If, however, the typical functions
related to a sale are performed at that location (for example, the conclu-
sion of the contract with the customer, the processing of the payment
and the delivery of the products are performed automatically through
the equipment located there), these activities cannot be considered to
be merely preparatory or auxiliary.”
The above clarification shows the narrow conditions under which a server may
be regarded as a permanent establishment for taxation purposes. While the
term “place of business,” as generally defined in private law does not necessarily
coincide with the notion of “establishment” under domestic and international
tax law, the clarification provided by the OECD Committee on Fiscal Affairs offers
elements that are also useful in a private law context. They confirm the perception
216
that by and large the location or information systems may be of limited use for
determining where a company has its place of business.235
(b) Domain Names and Electronic Addresses

Another related question is the extent to which the address from which the
electronic messages are sent could be taken into account to determine a party’s
location. Thus, in the case of addresses linked to domain names connected to
specific countries (such as addresses ending with “.at” for Austria, “.nz” for New
Zealand, etc.) the party could be presumed to have its place of business in the
corresponding country.
In some countries, the assignment of domain names is only made after veri-
fication of the accuracy of the information provided by the applicant, including
its location in the country to which the relevant domain name related. For those
countries, it may be appropriate to rely, at least in part, on domain names for
ascertaining a party’s location. However, in countries where no such verifica-
tion takes place, an electronic mail (e-mail) address or a domain name cannot
automatically be regarded as the functional equivalent of the physical location
of a party’s place of business.236 Moreover, in certain branches of business it is
common for companies to offer goods or services through various regional web
sites bearing domain names linked to countries where such companies do not
have a “place of business” in the traditional sense of the term. Furthermore,
goods being ordered from any such web site may be delivered from warehouses
maintained for the purpose of supplying a particular region, which may be
physically located in a country other than those linked to the domain names
involved. An additional level of uncertainty is created by the use of “generic”
“Il serait … erroné de penser que le lieu où se trouve l’ordinateur o sont stockés les informations
235
diffusés sur Internet puisse être pris en considération aux fins de la détermination de la résidence,
du domicile, de l’établissement ou des activités d’un opérateur. En effet, d’une part, les informations
digitales ne sont pas des res dont on peut vérifier l’emplacement physique, d’autre part, les données
peuvent être facilement déplacées d’un ordinateur à un autre et l’utilisateur ignore dans lequel
d’entre eux elles sont stockées.” (Draetta, “Internet et commerce électronique”, supra note
14, at 223).
According to the Internet Corporation for Assigned Names and Numbers (ICANN), the
236
assignment of top-level domain (TLDs) names including a country code (ccTLDs) is

“delegated to designated managers, who operate the ccTLDs according to local policies
that are adapted to best meet the economic, cultural, linguistic, and legal circumstances
of the country or territory involved” (<www.icann.org/tlds/>). Needless to say, each
country develops its own detailed rules for assigning domain names within its jurisdiction.
The Swedish domain name registration system, for instance, seems to require proof of a
company’s claim to the domain name and its link to the country, whereas more “liberal”
systems, such as that of Germany, only require the existence of a “contact person” in
the country. See Frederik Roos, “First Come, Not Served: Domain Name Regulation in
Sweden”, 17 Int’l Rev. L. Comp. & Tech. (2003) 63, 70.
217
top-level domains237 such as “.com” or “.net”. These types of domain name

and e-mail address do not show any link to a particular country, which is not
surprising since the system of assigning domain names for Internet sites was
not conceived in strictly geographical terms.238
Domain names and electronic addresses are, therefore, not capable of being
reliably used as sufficient criteria for determining the location of contract parties
in isolation of other evidence.239
(c) The Continued Usefulness of the Traditional Notion of “Place of Business”

The above discussion has shown that peripheral information related to electronic
messages, such as an IP address, domain names or the geographical location of
information systems, have limited value for determining the physical location of
the parties. Accordingly, the default rules on place of receipt and dispatch of an
electronic communications in article 15 of the MLEC and article 10 of the ECC
disregard elements such as domain names or location of information systems
and refer back to the notion of “place of business.” The basic reason for these
rules is that a party should not be regarded as being located in two different
places depending on the media used for negotiating various contracts.
Nevertheless, one of the central concerns of UNCITRAL has been the need for
enhancing legal certainty and predictability for electronic commerce. UNCITRAL
felt that it would be desirable to formulate uniform international provisions
offering elements that allow the parties to ascertain beforehand the location of
their counterparts.240 The ECC contains a set of rules for that purpose. They do
not contemplate a duty for the parties to disclose their places of business, but
establish a certain number of presumptions and default rules aimed at facilitating
a determination of a party’s location. The ECC attributes primary – albeit not
absolute – importance to a party’s indication of its relevant place of business.
The ECC takes a cautious approach to peripheral information related to elec-
tronic communications, such as IP addresses, domain names, or the geographic
237
“Generic” TLDs are registered directly through ICANN-accredited registrars (for further
information on the system, see <www.iana.org/cctld/cctld.htm>).
238
“… seuls certains sites Internet sont rattachables à un certain Etat, grâce au suffixe utilisé. D’autres
utilisent des suffixes neutres du point de vue de la localisation, tels que ‘com’ ou ‘net’. En second
lieu, l’adresse Internet est ‘logique’, non pas ‘physique’, et n’a rien à voir aves l’emplacement
correspondant d’une partie.” (Draetta, “Internet et commerce électronique”, supra note 14
at 222-223).
239
It remains to be seen whether other technologies, such as geo-identification, if widely
used, may offer a technical device for establishing location online (see Dan Svantesson,
“Geo-identification and the Internet – A New Challenge for Australia’s Internet Regula-
tion”, 14 Murdoch U. eLaw J. (2007) 155.
240
See U.N. document A/CN.9/484, para.103.
218
location of information systems that, despite their apparent objectivity, have

little, if any, conclusive value for determining the physical location of the par-
ties. Depending on the way that information systems are set up or how domain
names are assigned, they may lack any reliable connection to a person’s physical
location.241 Moreover, UNCITRAL was mindful of the need to avoid situations
where a person’s place of business, when negotiating a contract electronically,
might end up being different from the same person’s place of business when
negotiating through other means.242
(d) A Duty to Disclose the Place of Business?

Some international instruments require the parties to electronic transactions
to clearly indicate the location of their relevant places of business. However,
during the negotiation of the ECC that proposition raised a number of questions,
such as the extent to which such a duty, which does not exist for international
paper-based transactions, might result in a duality of legal regimes.243 Another
concern is what kind of legal consequence, if any, should be attached to the lack
or inaccuracy of such information and how an international uniform instrument
on electronic contracting could deal with that issue without unduly interfering
with the underlying contract law.244
Accordingly, article 6 of the ECC merely creates a presumption in favour of a
party’s indication of its place of business, which is accompanied by conditions
under which that indication can be rebutted and by default provisions that apply
if no indication has been made. The article is not intended to allow parties to
invent fictional places of business that do not meet the definition of “place of
business” of its article 4, subparagraph (h).245 This presumption, therefore, is
not absolute, and it was understood that the ECC does not uphold an indication
For an overview of this discussion, see Jose Angelo Estrella Faria, “Harmonizing the Law
241
of International Electronic Contracting: Adjust the Rules but Don’t Rewrite Them”, in
Andrea Schulz (ed.), Legal Aspects of an E-Commerce Transaction, International Conference
in The Hague, 26 and 27 October 2004 (Sellier European Law Publishers GmbH, 2006),
73, 77-79.
The risks of establishing a dual regime for business, depending on the media being used,
242
has been one of the main concerns expressed by the International Chamber of Commerce
in connection with UNCITRAL’s current work on electronic contracting (see U.N. docu-
ment A/CN.9/WG.IV/WP.96; see also the Note by the Secretariat of 25 February 2003
transmitting subsequent comments on UNCITRAL’s work by a task force established by
the International Chamber of Commerce (U.N. document A/CN.9/WG.IV/WP.101).
See U.N. document A/CN.9/509, para. 63.
243
Id., paras. 44‑50 and 62-65; see also U.N. document A/CN.9/528, paras. 83-91.
244
Article 4, subparagraph (h) defines “place of business” as “any place where a party
245
maintains a non-transitory establishment to pursue an economic activity other than the

temporary provision of goods or services out of a specific location.”
219
of a place of business by a party even where such an indication is inaccurate

or intentionally false.
2. Substantive Applicable Law: Sales Law and “Virtual” Goods

One particularly difficult question raised by electronic commerce concerns
the appropriate legal treatment for contracts involving products that can be
electronically delivered and how to treat such products for commercial law
purposes. Software and other “virtual goods” have been identified as a good
example of a situation where the intersection between “goods” and “services”
has become increasingly blurred. In the past, these types of products crossed
physical borders embodied on a tangible medium, and while new means of
delivery have developed, the underlying characteristic of the product has not.
Today, these products can flow across global networks and can be permanently
retained on someone’s computer, and still retain the underlying function as if
they were sent in physical form.
(a) Computer Software under the UN Sales Convention

Determining what substantive body of law applies to these transactions is par-
ticularly important because only international contracts for the sale of goods are
subject to a truly universal uniform legal regime under the U.N. Sales Convention.
However, it is generally accepted that the U.N. Sales Convention embodies a rather
conservative concept of “goods.” According to most commentators, intangible
rights, such as patent rights, trademarks, copyrights, a share of a limited liability
company, as well as know-how, are not to be considered “goods” under the
Convention.246 Nevertheless, considerable argument exists concerning the ap-
propriate classification of software and other computer-related information.
For a number of years now, courts in Germany have regarded software as
“goods”247 and have applied German sales law to transactions involving standard
software.248 The decisive test has been whether the buyer had the right to keep
and use the software without limitation after having paid the price, irrespective
of whether or not the software is incorporated in a tangible medium.249 Legal
writings have followed suit and considered sales law at least mutatis mutandis
246
Franco Ferrari, “1 Vendita Internazionale di Beni Mobili”, 52-53, in Scialoja/Branca (eds.)
1 Commentario del Codice Civile (Bologna, Zanichelli,1994).
247
Bundesgerichtshof (BGH) 4 November 1987, BGHZ 102, p. 135 (at 144).
248
Bundesgerichtshof (BGH) 22 December 1999, Neue Juristische Wochenschrift (2000)
1415.
249
Id., pp. 99-100.
220
applicable to the purchase of standard software.250 Some authors expressly affirm

the equivalence between software and “goods” (Ware),251 although some scholars
regard the incorporation into a tangible medium (such as a disk) as an essential
element for this analogy.252 Thus, it is not surprising that German courts have
also taken the view that the sale of software can be covered by the U.N. Sales
Convention as well. In obiter dictum, a German court of appeal stated that the
sale of standard software could be considered a sale of goods, at least where the
software was not custom-made.253 A German court of first instance reached the
same result in a later case.254 Most German255 and Austrian256 commentators
have also affirmed the applicability of the U.N. Sales Convention to software sales,
at least as long as they are embodied on a tangible medium.257
250
For an overview of the discussion in Germany, see Abbo Junker and Martina Benecke,
Computerrecht (Baden-Baden, Nomos Verlaggesellschaft, 3rd edn., 2003) pp. 120-124,
Nos. 157-165 (who, however, underscore the difference between the intellectual property
(software) and the tangible medium, sole element capable of being regarded as “good”
and stress the applicability of sales law “by analogy only” (p. 122, No. 159). See also
Heinrich Dörner and Dirk Ehlers, Rechtsprobleme der EDV (Neuwied-Frankfurt, Metzner,
1989) 13 et seq.; Friederich Graf von Westphalen and Ulrich Seidel, Aktuelle Rechtsfragen
der Software-Vertrags- und Rechtspraxis (Köln: RWS Verlag Kommunikationsforum, 3rd
edn., 1992), p. 12.
251
M. Michael König, “Software (Computerprogramme) als Sache und deren Erwerb als
Sachkauf ”, Neue Juristische Wochenschrift (1993) 3121-3124; Rigo Wenning, “Die
Behandlung von Standardsoftware im Wiener Übereinkommen über den Warenkauf
von 1980” <archiv.jura.uni-saarland.de/projekte/online/evertrag.html> (30 November
2007), at II. 3.
252
von Westphalen/Seidel, Aktuelle Rechtsfragen, supra note 250, 12.
253
Oberlandesgericht (OLG) Koblenz, 17 September 1993, Recht der internationalen Wirtschaft
1993, p. 934 (English abstract published in Case Law on UNCITRAL Texts (CLOUT), case
No. 281 (abstracts of this and all other cases compiled through the CLOUT system are
published under at <www.uncitral.org> under “Case Law-CLOUT”).
254
Landgericht (LG) München, 8 Feb. 1995, Case No. 8 HKO 24667/93 = CLOUT case No.
131.
255
Burghard Piltz, “Internationales Kaufrecht – Das UN-Kaufrecht (Wiener Übereinkommen
von 1980)”, in Praxisorientierter Darstellung (München: C.H. Beck, 1993), p. 30 No. 48;
Michael Bothe and Wolfgang Kilian, Rechtsfragen Grenzüberschreitender Datenflüsse (Köln:
Dr. Otto Schmidt, 1992) 370; Ernst von Caemmerer and Peter Schlechtriem, Kommentar
zum Einheitlichen UN-Kaufrecht (München: C. H. Beck, 2nd edn., 1995), Art. 1 No. 21;
Ulrich Magnus, “Wiener UN-Kaufrecht (CISG)”, Art 1 CISG No. 44, in Julius von Staudinger
(ed.), II Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetz und Nebengesetzen,
(Berlin: Sellier, de Gruyter, 12th edn., 1994).
256
Martin Karollus, UN-Kaufrecht, Eine systematische Darstellung für Studium und Praxis
(Wien-New York: Springer Verlag, 1991) 21.
257
G. Beate Czerwenka, Rechtsanwendungsprobleme im Internationalen Kaufrecht: das Kollision-
srecht bei Grenzüberschreitenden Kaufverträgen und der Anwendungsbereich der Internationalen
221
The applicability of the U.N. Sales Convention to software sales, at least when
embodied in a tangible medium, and for the same reasons that have influenced
the debate in Germany, has also been affirmed in other countries with a similar
tradition of private law, such as Italy.258 The same conclusion has also been
proposed in Mexico, where, however, software transmitted electronically has
been said to fall outside the scope of the Convention, since it can be assimilated
to electricity, which is expressly excluded from the Convention.259
A slightly different approach seems to be taken by courts and scholars in
France. The applicability of the U.N. Sales Convention to software transactions
does not seem to have been put to test before French courts, and the position of
French commentators is not clear. For purely domestic contracts, French courts
seem to pay more attention to the parties’ intention in each concrete case rather
than to abstract classifications. The result, however, accommodates both those
who categorically reject260 the notion of software as “goods” to those who are
willing to accept it, at least in respect of standard software incorporated on a
tangible medium.261 As regards the U.N. Sales Convention, there is sufficient
agreement concerning the exclusion of intangible goods (“biens immatériels”)
from its scope of application.262 Even though the French text of the U.N. Sales
Kaufrechtsübereinkommen (Berlin: Duncker & Humblot, 1988) 148; Peter Schlechtriem,

provides additional information the original understanding of the term “ goods” in the
U.N. Sales Convention: “There are certainly good reasons to enlarge the sphere of applica-
tion of the Convention by understanding the concept of goods liberally not literally, but
as far as I remember from the Vienna Conference, there was a strong conviction among
many delegations that the sale and transfer problems of intellectual property and the like
were not within the mandate of the Conference. This alone, of course, cannot answer the
question whether computer software can be regarded as movables. It is a problem much
dealt with in German literature not only in regard to the application of sales law provisions
but also in regard to product liability. If the contract concerns so-called standard software,
i.e. a program not designed especially to meet a specific customer’s demands, and if this
program is recorded on a disk or tape, one could argue that the object of the sale falls
under the Convention since it is movable and therefore ‘goods’” (“Uniform Sales Law – The
Experience with Uniform Sales Law in the Federal Republic of Germany”, Juridisk Tidskrift
(1991/92) 1, 8.
258
See, for example, Franco Ferrari, “Vendita internazionale”, supra note 246, 52-53.
259
Diego Ricardo Galán Barrera, El ámbito de aplicación en la Convención de las Naciones Unidas
sobre los Contratos de Compraventa de Mercaderías, Part 2 <cisg.tij.uia.mx/ambito03.html>
(30 November 2007).
260
See the critical analysis of French case law by Michel Vivant et al., Droit de l’informatique
et des raiseaux (Paris: Lamy, 1999), Nos. 813- 833 and Nos. 969-994.
261
For instance, Jérôme Huet and Herbert Maisl, Droit de l’informatique et des télécommunica-
tions (Paris: Litec, 1989), No. 461.
262
Vincent Heuzé, La vente internationale de marchandises (Paris: L.G.D.J., 2000), No. 5, at pp.
5-6.
222
Convention uses the plain term “marchandises”, rather than the technical, and
somewhat narrower, expression “biens mobiliers corporels”, which was used in
the French text of the Convention’s predecessor instrument, the Hague Uniform
Sales Law,263 it is generally accepted that the U.N. Sales Convention applies to
“tangible movable goods.” Nevertheless, there are also advocates of a broader
interpretation of the notion of “goods” under the U.N. Sales Convention so as
to encompass at least standard software.264
Although the United Kingdom is not a Contracting Party to the U.N. Sales
Convention, the position taken by British courts on the matter may be indicative of
the way in which other common law jurisdictions, including countries that have
ratified the U.N. Sales Convention, might approach the problem. St Albans City
and District Council v. International Computer Ltd. was the first case to address the
issue of electronic software.265 In that case, an employee of the software vendor
went to the premises of the other party and installed software on a computer
system. The court considered whether electronic software constituted a “good”
under the Sale of Goods Act of 1979. Focusing on the definition of a good, which
is “all personal … chattels other than things in action and money,”266 the court
concluded that software without a disk was not a good. Since the employee of
the software vendor personally installed the software rather than delivering it on
a disk, the court concluded that the software contract is not the sale of a good.
As could be expected in the country with the world’s largest software industry
and the largest domestic market for electronic commerce, the discussion over the
classification of “virtual goods” in the United States has been extensive, although
not entirely settled. As was the case in other countries, the focus of the discussion
in the United States has been on definition of software for purposes of domestic
law. At the outset, the question was raised in connection with the application of
tax law, when IBM announced in 1969 that it was separating the pricing of its
software and services from the pricing of its hardware.267 For the taxing authorities
263
Convention portant loi uniforme sur la vente internationale des objets mobiliers corporels
(Convention Relating to a Uniform Law on the International Sale of Goods (The Hague, 1 July
1964) <www.unidroit.org/french/conventions/c-ulis.htm>.
264
For instance, Jean Thieffry and Chantal Granier, La vente internationale (Paris: Centre français
du commerce extérieur, 2nd edn., 1992) 39; and Vicent Heuzé (La vente international,
supra note 262, Nos. 22 and 84), who, however, emphasizes the need for an analysis of
the adequacy of the substantive provisions of the Convention for dealing with software
transactions, which he concedes.
265
St Albans City and District Council v. International Computer Ltd., Court of Appeal [1996]4
All ER 481, 26 July 1996.
266
Id. (quoting the Sale of Good Act 1979 and Supply of Goods and Services Act 1982).
267
For an account of the evolution of the debate, see James Mogey, “How Technology Has
Affected the Legal System: Software as UCC Goods: a Critical Look”, 34 Howard L.J. (1991)
299.
223
and ultimately the courts, the key question posed by IBM’s action was whether
such detached software was tangible personal property and, therefore, taxable,
or intangible intellectual property not subject to taxation. In answering that
question, two opposing lines of authority emerged: one asserting that software
is essentially tangible, and the other declaring it to be intangible.268
When transposed to the context of private law the debate eventually led to
the conclusion that, despite its inherently intangible nature, software should be
regarded as “goods” for the purpose of Article 2 of the U.S. Uniform Commercial
Code (UCC), dealing with sales of “goods.” At least initially, this was justified by
the tangibility of the medium in which software was stored, much the same way
as books or music records.269 But the more passionate advocates of extending UCC
Article 2 treatment to computer software regarded the analogy between software
and books or records as superficial and ultimately irrelevant, the important
characteristics of a good for UCC application being “movability, transferability,
and identification at the time of sale.”270 American commentators of the U.N.
Sales Convention point out that the classification of computer software under
the U.N. Sales Convention is a “borderline case” that has led to much controversy
as software seemed “difficult to distinguish from an exceedingly compact book
or phonograph record.”271 Other writers expressly affirm the applicability of
the U.N. Sales Convention, on the basis of its legislative history, inner logic and
purpose, and in light of comparative law, stressing also the benefits of the U.N.
Sales Convention’s uniform regime for international software transactions.272
268
By the early 1990s, the tension between the opposing camps was such “that the cases
did not even agree as to which was the majority view” although a survey of available
decisions indicated that the arguments for software as an “intangible” were prevailing
(id., 300).
269
“Note: Computer Programs as Goods Under the U.C.C.”, 77 Mich. L.Rev. (1979) 1149,
1150-1151; Duncan M. Davidson, “Protecting Computer Software: A Comprehensive
Analysis”, Ariz. St. L. J. (1983) 611.
270
Bonna Lynn Horovitz, “Computer Software as a Good under the Uniform Commercial
Code: Taking a Byte out of the Intangibility Myth”, 65 B.U.L. Rev. (1985) 129, 152. The
author summarizes her position as follows: “Whether computer programs are classified as
tangible or intangible should ultimately be irrelevant to the decision of UCC applicability.
While the UCC does distinguish between goods and things in action, excluding the latter
from coverage, software, no matter how it is classified, should not fall within this exclusion.
Software is unlike other intangibles. It is unlike intangible legal rights, intangible laws and
principles, and intangible assets. A program is intangible in the sense that it cannot be
touched or felt, but not in the sense that it cannot be moved and identified to a contract.”
(Id., at 162).
271
John Honnold, Uniform Law for International Sales under the 1980 United Nations Convention
(Deventer: Kluwer, 2nd edn., 1991) 56.
272
L. Scott Primak, “Computer Software: Should the U.N. Convention on Contracts for the
International Sale of Goods Apply? A Contextual Approach to the Question”, 11 Comp.
224
(b) A Special Legal Category for “Virtual Goods”?

The discussion in the preceding section shows that, at a time “when the Internet
has created an unquestionable need for harmony in international contract law”,
the goal of uniformity as regards the legal treatment of software “is but a distant
dream for the international community.”273 Most of the debate under domestic
law took place before the exponential development of the Internet during the
mid-to-late 1990s. Technological evolution showed, however, that software and
other “virtual goods” could be transmitted entirely online, without the need for
storage in any tangible medium. Continued application of the tangibility test
would eventually mean that transactions involving the same software might be
qualified differently depending on whether the software is downloaded from a
web site or purchased over the counter. An indicator of this dichotomy, which
may have practical consequences for domestic private law, but also for the ap-
plicability of international uniform instruments, is the definition of nearly all
conceivable types of on-line transactions as “services” for the purposes of the
EU internal market.274
In view of this controversy, it is not surprising that after having being
proposed as a topic for future work that might be undertaken by UNCITRAL275
the issue of classification and legal treatment of “virtual” or “digitalized goods”
from the perspective of the U.N. Sales Convention was discarded as a topic for
international harmonization.276
L.J. (1991) 197.

273
Such is the conclusion of Trevor Cox, Chaos Versus Uniformity: the Divergent Views of Software
in the International Community (<www.cisg.law.pace.edu/cisg/biblio/cox.html>).
274
The rather complex system established by the EU Directives is based on the notion of
“Information Society service”, which is understood as meaning “any service normally
provided for remuneration, at a distance, by electronic means and at the individual re-
quest of a recipient of services”, except for a few exceptions such as radio and television
broadcasting (see article 1, paragraph 2 and the indicative list of activities not covered
by the definition in Appendix V, Directive 98/34/EC of the European Parliament and of
the Council of 22 June 1998 laying down a procedure for the provision of information
in the field of technical standards and regulations (Official Journal of the European Com-
munities vol. L 204, 21 July 1998, pp. 37-48), as amended by Directive 98/48/EC of the
European Parliament and of the Council of 20 July 1998, Official Journal of the European
Communities vol. L 217, 5 August 1998, pp. 18-26.).
275
See Report of the United Nations Commission on International Trade Law on the Work
of its Thirty-third Session, (Official Records of the General Assembly, Fifty-fifth session,
Supplement No. 17 (U.N. Document A/55/17), para. 384
276
The report of UNCITRAL on the work of its 36th annual session, refers to the Working
Group’s understanding that its work was not concerned “with the question of whether and
to what extent ‘virtual goods’ were or should be covered by the United Nations Convention
225
One possible avenue to escape the nearly unsolvable quarrel over the clas-
sification of “virtual goods” could have been the development of a separate
legal regime for software contracts and transactions involving other types of
intangible information. This alternative had been proposed in view of the alleged
inadequacy of sales law in general, and the U.N. Sales Convention in particular,
to deal with contracts involving on-line databases, artificial intelligence systems,
software, multimedia, and Internet trade in information, where the emphasis is
not upon tangible goods, but upon intangibles and rights in those intangibles.277
Commentators criticize in fact the use of the expression “software sales” as being
misleading, since transactions in software and “virtual goods” take the form of
licenses, not sales.278
One of the proposals for future work by UNCITRAL that were made in 1999
was to consider “the extent to which uniform rules could be extrapolated from
the U.N. Sales Convention to govern dealings in services or ‘virtual goods’, that is,
items (such as software) that might be purchased and delivered in cyberspace.”279
If pursued to its ultimate consequences, that proposal might have involved the
preparation of a new set of rules to deal with those transactions that might
have obviated the need for their private law classification as either “goods” or
“services.”
Such was the course that the law in the United States seemed about to take
at that time. Since the mid-1990s, the National Conference of Commissioners
for Uniform State Laws (NCCUSL) and the American Law Institute (ALI) had
been involved in drafting various proposals for a new Article 2B of the UCC.
The motivation for the work was the perception that UCC Article 2, which deals
with sales of goods, fits poorly with licensing of software and other computer
information.
on Contracts for the International Sale of Goods” (Id., Fifty-eighth session, Supplement No.
17 (U.N. Document A/58/17), para. 214.
Marcus G. Larson writes that “[f]orcing an addendum to the CISG raises the specter of
277
consumer goods being relevant to the Vienna Convention – which is a highly unlikely
prospect in light of its drafting history. Therefore, the logical course is the pursuit of an
international convention on computer software transactions and information licensing
which would be a separate entity from the CISG. This distinction will allow the drafters
to include consumer transactions in this convention without tinkering with the existing
CISG provisions” (“Comment: Applying Uniform Sales Law to International Software
Transactions: the Use of the CISG, Its Shortcomings, and a Comparative Look at How
the Proposed UCC Article 2b Would Remedy Them”, 5 Tulane J. Int’l & Compar. L. (1997)
445, 487.
Michel Vivant et al., supra note 260.
278
Report of the United Nations Commission on International Trade Law on the Work of its
279
Thirty-third Session, Official Records of the General Assembly, Fifty-fifth session, Supplement
No. 17 (U.N. Document A/.55/17), para. 384.
226
That project was not uncontroversial, though. From the beginning, the proposed
new article 2B of the UCC was subject to attacks by academics, consumer groups
and industry representatives.280 The criticism focused on the extent to which
the proposed statute expanded the power and scope of contracts over existing
law, especially with respect to its treatment of mass-market licenses. Critics also
argued that the proposed uniform law interfered with the operation of numerous
federal laws, including those relating to intellectual property, bankruptcy, and
in particular, consumer protection.281 On 7 April 1999, the ALI and NCCUSL
announced that they were abandoning the attempt to make the proposal part
of the UCC. Instead, the NCCUSL announced that it was moving forward with a
freestanding uniform act, the Uniform Computer Information Transactions Act
(UCITA), which was eventually adopted by NCCUSL on 29 July 1999.
Its advocates stress that UCITA went a long way to clarify the law governing
computer information transactions and established a coherent basis of contract
law tailored for the types of transactions that characterized the information
industry. Furthermore, UCITA was said to address some long-standing legal issues
related to software and computer information transactions, such as the debate
over the validity of “shrink-wrap” licenses.282 UCITA further addressed issues of
formation and terms of contracts, transfer of rights and interests, performance,
warranties, and remedies. However, to protect the computer information owner,
UCITA clearly established the relationship between selling a copy of computer
information, and retaining the underlying intellectual property rights in the
computer information.
Despite some initial enthusiasm about UCITA, opposition to its implementa-
tion grew steadily, mainly out of a perception of UCITA as being an enforcement
280
For an overview of the debate, see Maureen A. O’Rourke, Progressing Towards a Uniform
Commercial Code for Electronic Commerce or Racing Towards Nonuniformity?”, 14
Berkeley Tech. L. J. (1999) 635.
281
Michael Froomkin concludes his analysis of draft Article 2B as follows: “Article 2B’s
enormously ambitious strategy of providing a full regime for the sale and delivery of
licenses in information resembles one of these self-installing software suites. While
some of the rules regarding electronic contracting may be defensible, or even sensible,
the total package makes a series of policy choices, especially those displacing consumer
law for online transactions and enacting a national law on non-repudiation for digital
signature-based e-commerce which do not seem to be required to achieve the end of
rationalizing the law of information licenses (“Article 2B as Legal Software for Electronic
Contracting – Operating System or Trojan Horse?”, 13 Berkeley Tech. L.J. (1998) 1023,
1061.
282
For some commentators, UCITA’s recognition of “shrink-wrap” licenses alone would have
sufficed as grounds for rejecting the act (for example, Roger E. Schechter, “The Unfairness
of Click-on Software Licenses”, 46 Wayne L. Rev. (2000) 1735.
227
mechanism for software developers to the detriment of consumer interests.283

Over time, the arguments evolved into a discussion of whether a new body
of contract law is at all necessary for computer information, the information
industry, and the Internet.284
Leaving aside the controversial content of many of its provisions, UCITA
had the merit of offering a number of ingenious solutions for handling novel
issues. UCITA ended the debate on whether software and “virtual goods” are
“goods” or “services” by using the conceptual category “computer information,”
acknowledging the fact that “there are similarities as well as differences between
information and goods contracts.”285 Even if one would disagree with the merits
of its solutions, it is undeniable that UCITA could have offered a number of useful
ideas to address electronic contracting issues on a global scale.
Its failure to prosper in the United States, however, threw a negative light on
UCITA as a whole and made it hard to promote even its less contentious provi-
sions as a source of inspiration for international uniform law.286 Seen against
this background, it is not difficult to understand the decision by UNCITRAL
to put aside any proposals for developing “a substantive law framework” for
transactions involving “virtual goods.”287
B. Contract Formation through Electronic Communications:

Substantive Issues
The present section discusses how traditional notions of offer and acceptance
may be applied to contract negotiation through electronic means. The discussion
of these issues in the following paragraphs uses the U.N. Sales Convention as a
paradigm of substantive transnational contract law.
For an overview of the criticism, see Bruce H. Kobayashi and Larry E. Ribstein “Uniform-
283
ity, Choice of Law and Software Sales”, 8 George Mason L. Rev. (1999) 261. The authors
attribute part of UCITA’s failure to its drafting process. After analyzing costs and benefits
of the uniform law process, offer the alternative of contractual choice of law as a better
solution (at 294)
Gregory E. Maggs, “The Waning Importance of Revisions to U.C.C. Article 2”, 78 Notre
284
Dame L. Rev. (2003) 595.

Amelia Boss, “Taking UCITA on the Road: What Lessons Have We Learned?”, 7 Roger
285
Williams L. Rev. (2001) 167, 173.

“It is highly unlikely that UCITA would ever be found amenable to wholesale adoption on
286
the international level.”(Id. at 199).

Report of the United Nations Commission on International Trade Law on the Work of its
287
Thirty-sixth Session, Official Records of the General Assembly, Fifty-eighth session, Supplement
No. 17 (U.N. Document A/58/17), para. 214.
228
1. Qualification of Parties’ Intent: Offers and Invitations to Make Offers

Article 14, paragraph 1, of the U.N. Sales Convention provides that a proposal
for concluding a contract that is addressed to one or more specific persons
constitutes an offer if it is sufficiently definite and indicates the intention of the
offeror to be bound in case of acceptance. Paragraph 2 of that article provides,
however, that a proposal other than one that is addressed to one or more specific
persons is to be considered merely as an invitation to make offers, unless the
contrary is clearly indicated by the person making the proposal. Whether the
parties negotiate by e-mail, electronic data interchange (EDI),288 or through
more traditional means, the nature and legal effect of their communications
will be established by their intention.
In a paper-based environment, advertisements in newspapers, on the radio
and television and in catalogues, brochures and price lists are generally regarded
as invitations to submit offers (according to some legal writers, even in cases
where they are directed to a specific group of customers), since in those cases
the intention to be bound is considered to be lacking.289
(a) “Offers” and “Advertisements” in Electronic Commerce

If the notion of “offer” of the U.N. Sales Convention is transposed to an electronic
environment, a company that advertises its goods or services on the Internet or
through other open networks should be considered to be merely inviting those
who access the site to make offers. Thus, an offer of goods or services through
the Internet would not prima facie constitute a binding offer.290
288
The Working Party on Facilitation of International Trade Procedures (WP.4) of the Economic
Commission for Europe, which is the United Nations body responsible for the development
of UN/EDIFACT technical standards has defined “Electronic Data Interchange” as “the
electronic transfer from computer to computer of information using an agreed standard
to structure the information.” This definition is also used in article 2 of the MLEC.
289
Honnold, supra note 271, 195; von Caemmerer and Schlechtriem, supra note 255, art. 14,
Nos. 13-15, pp. 144-146; Peter Schlechtriem, Commentary on the UN Convention on the
International Sale of Goods (CISG) (Oxford: Clarendon Press, 1998) art. 14, Nos. 13-15, pp.
111-112; Heinrich Honsell, (ed.), Kommentar zum UN-Kaufrecht (Berlin/Heidelberg/New
York: Springer, 1997), art. 14, Nos. 17-19, p. 121; Fritz Enderlein and Dietrich Maskow,
International Sales Law (New York/London/Rome: Oceana, 1992) 83; Maria del Pilar Perales
Viscasillas, La Formación del Contrato de Compraventa Internacional de Mercaderías (Valencia:
Tirant lo blanch, 1996) 289. A few commentators argue, however, that catalogue mailings
addressed to named recipients might be regarded as binding offers, since such mailings
could not be regarded as being to “non-specified persons” (Heuzé, supra note 262, No.
175, p. 156; see also Bernard Audit, La Vente Internationale de Marchandises (Paris: L.G.D.J.,
1990), No. 62, p. 58, and Jean Thieffry and Chantal Granier, supra note 264 at 89.
290
Jens Werner, “E-Commerce.co.uk – Local Rules in a Global Net: Online Business Transactions
and the Applicability of Traditional English Contract Law Rules”, 6 Int’l J. Communications
229
The difficulty that may arise in this context is how to strike a balance between
a trader’s possible intention (or lack thereof) of being bound by an offer, on
the one hand, and the protection of relying parties acting in good faith, on the
other. The Internet makes it possible to address specific information to a virtu-
ally unlimited number of persons and current technology permits contracts to
be concluded nearly instantaneously, or at least creates the impression that a
contract has been so concluded.
In legal literature, it has been suggested that the “invitation-to-treat” paradigm
may not be suitable for uncritical transposition to an Internet environment. One
possible criterion for distinguishing between a binding offer and an invitation to
treat may be based on the nature of the applications used by the parties. Legal
writings on electronic contracting have proposed a distinction between web
sites offering goods or services through interactive applications and those which
use non-interactive applications. If a web site only offers information about a
company and its products and any contact with potential customers lies outside
the electronic medium, there would be little difference from a conventional
advertisement. However, an Internet web site that uses interactive applications
may enable negotiation and immediate conclusion of a contract (in the case
of virtual goods even immediate performance). Legal writings on electronic
commerce have proposed that such interactive applications might be regarded,
therefore, as an offer “open for acceptance while stocks last,” as opposed to an
“invitation to treat.”291
This proposition is at least at first sight consistent with legal thinking for
traditional transactions. Indeed, the notion of offers to the public that are bind-
ing upon the offeror “while stocks last” is recognized also for international sales
transactions.292 However, the potentially unlimited reach of the Internet and
the risk of errors in electronic communications, including in posting price and
other product information on a web site, compounded by the use of automatic
reply functions that do not provide an opportunity for review and correction of
errors, seem to call for caution.293
L. & Policy (2000/2001) 1, 5.

Christoph Glatt, “Comparative Issues in the Formation of Electronic Contracts”, 6 Int’l J.
291
L. & Information Tech. (1998) 34, 50.

Von Caemmerer and Schlechtriem, supra note 255, 144; Perales Viscasillas, supra note
292
289 at 295 and the example of Spanish legislation given in footnote 41 supra.
Werner highlights the practical importance of the distinction between invitations to
293
treat and offers with the following example: “E-tailer Argos offered by mistake a Sony TV
for £3.00 instead of £299.99. People who spotted the bargain placed numerous orders
for TVs which would constitute an acceptance (and thus conclude a contract) if the
webvertisement of Argos could be regarded as a genuine offer” (“E-Commerce.co.uk”,
supra note 290 at 5).
230
In support of this approach, it has been argued that parties acting upon
offers of goods or services made through the use of interactive applications
might be led to assume that offers made through such systems were firm offers
and that by placing an order they were be validly concluding a binding contract
at that point in time.294 Those parties, it has been said, should be able to rely on
such a reasonable assumption in view of the potentially significant economic
consequences of contract frustration, in particular in connection with purchase
orders for commodities or other items with highly fluctuating prices. Attaching
consequence to the use of interactive applications could help enhance transparency
in trading practices by encouraging business entities to state clearly whether
or not they accepted to be bound by acceptance of offers of goods or services or
whether they were only extending invitations to make offers.295
UNCITRAL considered these arguments carefully. The final consensus was
that attaching a presumption of binding intention to the use of interactive
applications would be detrimental for sellers holding a limited stock of certain
goods, if the seller were to be liable to fulfil all purchase orders received from a
potentially unlimited number of buyers.296 In order to avert that risk, companies
offering goods or services through websites that use interactive applications
enabling negotiation and immediate processing of purchase orders for goods or
services frequently indicate in their websites that they are not bound by those
offers. UNCITRAL felt that, if this was already the case in practice, the ECC should
not reverse it.297 In keeping with the principle of media neutrality, UNCITRAL
took the view that the solution for online transactions should not be different
This seems to be the view taken by the High Court in Singapore, which has held that “[i]n
294
an Internet sale, a prospective purchaser is not able to view the physical stock available.
The web merchant, unless he qualifies his offer appropriately, by making it subject to
the availability of stock or some other condition precedent, could be seen as making an
offer to sell an infinite supply of goods. A prospective purchaser is entitled to rely on the
terms of the web advertisement. The law may not imply a condition precedent as to the
availability of stock simply to bail out an Internet merchant from a bad bargain, a fortiori
in the sale of information and probably services, as the same constraints as to availability
and supply may not usually apply to such sales. Theoretically the supply of information is
limitless. It would be illogical to have different approaches for different product sales over
the Internet. It is therefore incumbent on the web merchant to protect himself, as he has
both the means to do so and knowledge relating to the availability of any product that is
being marketed. As most web merchants have automated software responses, they need to
ensure that such automated responses correctly reflect their intentions from an objective
perspective.”(Chwee Kin Keong and others v. Digilandmall.com Pte Ltd, [2004] SGHC 71, 12
April 2004).
295

296
See U.N. document A/CN.9/509, para. 82; see also U.N. document A/CN.9/528, para.
297
116.
231
from the solution used for equivalent situations in a paper-based environment.

Therefore, the ECC provides, as a general rule, that a company that advertises
goods or services on the Internet or through other open networks should be
considered as merely inviting those who accessed the site to make offers. Thus,
an offer of goods or services through the Internet does not prima facie constitute
a binding offer
According to the ECC, the general principle that offers of goods or services that
are accessible to an unlimited number of persons are not binding applies even
when the offer is supported by an interactive application. Typically an “interactive
application” is a combination of software and hardware for conveying offers of
goods and services in a manner that allows for the parties to exchange information
in a structured form with a view to concluding a contract automatically. The
expression “interactive applications” focuses on what is apparent to the person
accessing the system, namely that it is prompted to exchange information through
that information system by means of immediate actions and responses having an
appearance of automaticity.298 It is irrelevant how the system functions internally
and to what extent it is really automated (e.g. whether other actions, by human
intervention or through the use of other equipment, might be required in order
to effectively conclude a contract or process an order).299
(b) Special Cases: “Click-Wrap” Agreements and Internet Auctions

There are, however, special situations where electronic contracting models
may well suggest that a person is making a binding offer. One such line of
jurisprudence comprises cases dealing with so-called “click-wrap” agreements
in the United States. Most – if not all – of those cases have involved contracts
with Internet service providers or online purchases of software or other digitized
information through web sites that allowed online download of software or
immediate connection to a provider of Internet access services.300 Users were
typically presented with messages on their computer screens requiring that they
manifest their assent to the terms of the licence agreement by clicking on an
icon. The products could not be obtained or used unless and until the icon was
clicked. The main issue in such cases was the enforceability of contract terms
purported to have been incorporated by reference and the conditions under
which a consumer may be validly bound by such terms. While the cases did not
Id., para. 87.

298

299
See Lawrence Groff v. America Online, Inc., LEXIS 46, WL 307001 (R.I. Super., 1998)
300
<legal.web.aol.com/decisions/dlother/groff.html> (3 December 2007); Hotmail Corp. v.

Van$ Money Pie, LEXIS 10729, WL 3888389 (N.D. Calif. 1998); Steven J. Caspi, et al. v.
The Microsoft Network, L.L.C., et al., 323 N.J. Super. 118 (1999); and I. Lan Systems, Inc.
v. Netscout Service Level Corp., 183 F. Supp. 2d 328 (D. Mass. 2002).
232
directly dealt with the nature of the seller’s offer (i.e. whether it was a true offer
or merely an invitation to treat), the reasoning used by the courts to deal with
such cases implies a certain understanding of the nature of the communications
from which a qualification of the “offers” may be inferred.
Firstly, the courts that have thus far dealt with “click-wrap” cases, even those
which have denied their enforceability – as a whole or only of some of their
terms – against consumers,301 have not questioned the seller’s intention to be
bound by its Internet offer of a software or similar product. Furthermore, while
some courts have questioned the effectiveness of clicking on an icon or “I agree”
button for the purpose of indicating assent to the terms of the vendor’s software
licence agreements, the courts have not required a subsequent act of the vendor
as a condition for a contract to be concluded. Nor have the courts denied the
existence of a contract on the ground that the consumer’s action represented
a contract offer that needed to be accepted by the buyer. It is in fact implicit in
the reasoning of the courts that – at least in theory – a valid contract could
be formed once the consumer had validly indicated the intention to purchase
the software. The courts have not regarded the customer as the actual offeror
and have, albeit not expressly, clearly treated the web site offerings as a binding
commitment on the vendor and not a mere invitation to treat.
It may be argued that the fact that the products or services being offered
allowed for immediate delivery by the vendor or immediate enjoyment by the
customer was a decisive factor for the courts’ affirmation of contract formation
through customer action without requiring subsequent “acceptance” by the
vendor, even though no such mention is made by the courts in those cases.
The second body of case law deals with Internet auctions and involves both
business-to-consumer and business-to-business auctions. In an early case,
a district court in Germany found that a person offering goods through an
Internet auction platform had not made a binding offer, but had merely invited
offers in respect of the goods during a set period of time.302 That decision was
later reversed by the court of appeal, which found that the display of goods for
auction purposes through an Internet auction platform constituted more than
an invitation to treat and should be regarded as a binding contract offer.303 Such
301
For instance, Specht v. Netscape Communications Corp., 150 F. Supp. 2nd 585, affirmed in
Specht v. Netscape Communications Corporation and America Online, Inc., (306 F. 3rd 17 (2d
Cir. 2002), aff ’d 306 F. 3d 17 (2d Cir. 2002).
302
Landgericht Münster, Case No. 4 O 424/99, 21 January 2000, JurPC-Internet Zeitschrift
für Rechtsinformatik, JurPC WebDok 60/2000 <www.jurpc.de/rechtspr/20000060.htm>
(30 November 2007).
303
Oberlandesgericht Hamm, Case No. 2 U 58/00, 14 December 2000, JurPC-Internet Zeitschrift
für Rechtsinformatik, JurPC WebDok 255/2000 <www.jurpc.de/rechtspr/20000255.
233
an offer did not represent an open-ended commitment to accept an unlimited

number of offers, as it was limited to the acceptance of the highest bid remain-
ing at the end of the auction period. The electronic auction process allowed for
sufficient determination of the price, so that all essential elements of a binding
offer to conclude a sales contract were present.
That understanding was followed by other German courts304 and was also
affirmed by the Federal Court (Bundesgerichtshof), which expressly affirmed the
principle that an offer of goods for auction purposes through an Internet auc-
tion platform with the indication that the seller was committed to accepting the
highest effective bid constituted a valid anticipatory acceptance of the highest
bid and not only an invitation to treat.305
A court of appeals in the United States reached essentially the same conclu-
sion in a case involving the auction of a domain name though the Internet. The
court held that a party’s ex post facto characterization of the contents of its web
site as a “mere advertisement” did not by itself exclude the binding nature of a
commitment to sell a certain item to the person offering the highest bid within
a set period.306
UNCITRAL recognized that in some situations such as those described above
it may be appropriate to regard a proposal to conclude a contract that was sup-
ported by interactive applications as evidencing the party’s intent to be bound
in case of acceptance. Some business models are indeed based on the rule that
offers through interactive applications are binding offers. In those cases, possible
concerns about the limited availability of the relevant product or service are
often addressed by including disclaimers stating that the offers are for a limited
quantity only and by the automatic placement of orders according to the time
they were received.307 UNCITRAL also noted that some case law seemed to
support the view that offers made by so-called “click-wrap” agreements and in
Internet auctions may be interpreted as binding.308 However, the extent to which
such intent indeed exists is a matter that, in the view of UNCITRAL, should be
assessed in the light of all the circumstances (for example, disclaimers made
by the vendor or the general terms and conditions of the auction platform).
As a general rule, UNCITRAL considered that it would be unwise to presume
304
Amtsgericht Hannover, Case No. 501 C 1510/01, 7 September 2002, JurPC-Internet Zeit-
schrift für Rechtsinformatik, JurPC WebDok 299/2002 <www.jurpc.de/rechtspr/20020299.
305
Bundesgerichtshof, Case No. VIII ZR 13/01, 7 November 2001, JurPC-Internet Zeitschrift
306
Je Ho Lim v. The TV Corporation International, 99 Cal. App. 4th 684 (2002).
307
308
Id., para. 109.
234
that persons using interactive applications to make offers always intend to

make binding offers, because that presumption would not reflect the prevailing
practice in the marketplace.309 This general rule does not exclude the possibility,
however, that on a given case the automated system is set up in such a way so
as to suggest that there is such intention.
2. Time of Receipt and Dispatch of Electronic Communications and

Contract Formation
When business parties deal through more traditional means, the effectiveness
of the communications they exchange depends on various factors, including the
time of their receipt or dispatch, as appropriate. Although some legal systems
have general rules on the effectiveness of communications in a contractual
context, in many legal systems general rules are derived from the specific rules
that govern the effectiveness of offer and acceptance for purposes of contract
formation. From a legislative point of view, it is important to consider how to
formulate rules on time of receipt and dispatch in a manner that adequately
transposes the existing rules for traditional means of communication to an
electronic environment.
(a) Rules on Contract Formation

Rules on contract formation often distinguish between “instantaneous” and
“non-instantaneous” communications of offer and acceptance or between
communications exchanged between parties present at the same place at the
same time (inter praesentes) or communications exchanged at a distance (inter
absentes). Typically, unless the parties engage in “instantaneous” communica-
tion or are negotiating face-to-face, a contract will be formed when an “offer”
to conclude the contract has been expressly or tacitly “accepted” by the party
or parties to whom it was addressed.
Leaving aside the possibility of contract formation through performance or
other actions implying acceptance,310 which usually involves a finding of facts,
the controlling factor for contract formation where the communications are not
“instantaneous” is the time when an acceptance of an offer becomes effective.
There are currently four main theories for determining when an acceptance
becomes effective under general contract law, although they are rarely applied
in pure form or to all conceivable situations.311
309
Id., para. 112.
310
See the commentary to article 2.6 of the UNIDROIT Principles of International Commercial
Contracts (Unidroit, Rome, 1994).
311
See the overview of the existing common law and civil law rules on contract formation
in Perales Viscasillas, supra note 289 at 178 et seq.
235
Pursuant to the “declaration” theory,312 a contract is formed when the of-

feree produces some external manifestation of its intent to accept the offer, even
though this may not yet be known to the offeror. According to the “mailbox
rule”, which is traditionally applied in most common law jurisdictions,313 but
also in some countries belonging to the civil law tradition,314 acceptance of an
offer is effective upon dispatch by the offeree (for example, by placing a letter in a
mailbox). In turn, under the “reception” theory, which has been adopted in several
civil law jurisdictions,315 the acceptance becomes effective when it reaches the
offeror. Lastly, the “information” theory requires knowledge of the acceptance
for a contract to be formed.316 Of all these theories, the “mailbox rule” and the
reception theory are the most commonly applied for business transactions.
In some legal systems, both theories may be invoked, according to the context.317
The notion of “receipt” is sometimes understood not only as a question of time
but also as a question of form or maybe even content of the communication of
acceptance. Thus, for example, the rules of the German Civil Code318 on the legal
effectiveness of legally relevant communications or “declarations of will” upon
their receipt have been understood by German doctrine and case law to the effect
that a communication has not only to reach the addressee’s sphere of control
but it also has to be in such a form as to ensure the possibility for the addressee to
Which seems to be the general rule for contract formation in Switzerland, where the
312
formation of a contract occurs “lorsque les parties ont, réciproquement et d’une manière
concordante, manifesté leur volonté” (Code des Obligations, art. 1).
The mailbox rule was first adopted by the King’s Bench in 1818 in order to avoid the need
313
for successive confirmations of receipt as that might continue “ad infinitum” (see Adams
v. Lindsell, [1818] 160 ER 250). Despite some criticism, the mailbox rule has been nearly
unanimously adopted in common law jurisdictions (see the references in Paul Fasciano,
“Internet Electronic Mail: A Last Bastion for the Mailbox Rule”, 25 Hofstra Law Review
(1997) 971, footnote 20.
For instance, Argentina (Código Civil, art. 1154) and Brazil (Código Civil, art. 434).
314
Such as in Austria (Allgemeines Bürgerliches Gesetzbuch (ABGB), art. 862) and Germany
315
(Bürgerliches Gesetzbuch (BGB), sect. 130).

For instance, Spain (Código Civil, art. 1262) and Venezuela (Código de Comercio, art. 120,
316
para. 1). The “information” theory is the general rule for contract formation in Italy, where
the contract is concluded when the offeror “has knowledge” of the acceptance by the
offeree (Codice Civile, art. 1326). However, knowledge is presumed when the acceptance
is received at the offeror’s address (Codice Civile, art. 1335), which in practice brings the
Italian system closer to the “reception” theory.
This seems to be the case in France, where the Commercial Chamber of the Cour de cassa-
317
tion, in a judgment of 7 January 1981, affirmed the dispatch theory, but commentators
continue to maintain the validity of the receipt theory (François Chabas, “Note”, Revue
Trimestrielle de Droit Civil (1981) 849).
BGB, sect. 130 (1).
318
236
become aware of it.319 The latter element has been further subdivided into various
substantive requirements, such as, for example, accessibility of the language of
the communication320 or delivery within normal working hours.321
The U.N. Sales Convention adopted the “reception” theory as a general rule.322
Under the U.N. Sales Convention, a contract is concluded “at the moment when
an acceptance of an offer becomes effective”,323 which happens when “the
indication of assent reaches the offeror”.324 For the purposes of the Convention’s
provisions on contract formation, an offer, declaration of acceptance or any
other indication of intent “reaches” the addressee “when it is made orally to
him or delivered by any other means to him personally, to his place of business
or mailing address or, if he does not have a place of business or mailing address,
to his habitual residence”.325
The notion of “receipt” has been understood by commentators to mean the
time when the communication enters the “sphere of control” of the addressee.
Until that time, the originator of the communication (in case of acceptance, the
offeree) must ensure that the communication reaches the addressee and that
it arrives within the required time. Where the notion of “dispatch” is relevant,
the crucial moment is when the communication leaves the sphere of control of
the originator. From that moment on, the originator would be relieved of the
risk of loss or delay in the communication, with which instead the addressee
would be concerned.
Commentators of the U.N. Sales Convention have observed that the notion
of “reach” in article 24 of the Convention was made dependent upon “external,
easily provable facts” and was meant to relieve the originator of the “risk of
319
Otto Palandt, Bürgerliches Gesetzbuch (München” C.H. Beck, 60th edn., 2001), 103, No. 3
(commentary on sect. 130 by H. Heinrichs); and Münchener Kommentar zum Bürgerlichen
Gesetzbuch, vol. 1 (München: Beck’sche Verlagsbuchhandlung, 3rd edn., 1993), 1055,
No. 10 (commentary on sect. 130 by H. Förschler).
320
Transposed to the context of the U.N. Sales Convention, this requirement has led to the
conclusion, for example, that standard contract conditions could not be relied upon if
they have been sent in a language different from the one used during the negotiations
(Amtsgericht Kehl, 6 October 1995 <cisgw3.law.pace.edu/cases/951006g1.html> (3
December 2007)).
321
See the authorities cited elsewhere (Palandt, supra note 319, Bürgerliches Gesetzbuch
103, No. 3 and Münchener, supra note 319, Kommentar No. 12).
322
However, “dispatch” is also relevant for the operation of a number of provisions of the
Convention, such as articles 19, paragraph 2 (notice of objection to additional terms
proposed by offeree); 20 (period of time for acceptance); and 21 (conditions for effective-
ness of late acceptance).
323
U.N. Sales Convention, art. 23.
324
U.N. Sales Convention, art. 18, para. 2.
325
237
defective communications of a declaration within the recipient’s organizational

sphere”; circumstances that indicated that the provisions of article 24 – contrary
to the strict rules followed in some domestic laws – should be interpreted to the
effect that “they generally do not require an opportunity for the recipient to gain
awareness of the declaration”.326 Other ways of applying the article, for example,
by attempting to take “national public holidays and customary working hours”
into consideration were said to “lead to problems and to legal uncertainty in a
law governing international situations”.327
(b) Timing of Dispatch and Receipt of Electronic Communications

The above considerations are equally important for the formation of contracts
through electronic communications. Indeed, despite some early suggestions that
contract negotiation through electronic means, in particular in an electronic
data interchange (EDI) environment, replicates the pattern of “face-to-face”
or “instantaneous” communications,328 the exchange of electronic messages,
at least when electronic mail (e-mail) techniques are used, seems to be more
analogous to exchange of postal correspondence.329
In any event, default rules on time and place of dispatch and receipt of
electronic communications should supplement national rules on dispatch and
receipt by transposing them to an electronic environment. Such provisions
should be sufficiently flexible to cover both cases where electronic communica-
tion appears to be instantaneous and those where electronic messaging mirrors
traditional mail. The following paragraphs analyse the way this has been done
by the MLEC and in domestic legislation.
(i) The Rule in Article 15 of the MLEC

Article 15, paragraph 1, of the MLEC defines the time of dispatch of an electronic
communication (“data message” in the MLEC terminology) as the time when
326
Peter Schlechtriem, Commentary on the UN Convention on the International Sale of Goods
(CISG) (Oxford: Clarendon Press, 1998) art. 24, Nos. 13-14, pp. 167-168; see also von
Caemmerer and Schlechtriem, supra note 255, art. 24, Nos. 13-14, pp. 202-203.
327
Id.
328
For example, Michael S. Baum and Henry H. Perritt, Jr., Electronic Contracting, Publish-
ing and EDI Law (New York: Wiley Law Publications, 1991) 323, No. 6.8. The authors,
however, recognize various factual circumstances that might lead to a different conclu-
sion, such as “a certain non-instantaneous characteristic of computerized offers and
acceptances, regardless of whether mailboxes or store-and-forward techniques are used
in the transmission”.
329
“Despite common belief, [the transmission of Internet electronic mail] does not take place
in a substantially instantaneous manner. Rather, it will typically take minutes, hours or
in some cases days” (Fasciano, supra note 313, 1000-1001).
238
the electronic communication enters an “information system”330 placed “outside

the control of the originator”,331 which may be the information system of an
intermediary or an information system of the addressee. Under that provision,
an electronic communication should not be considered to have been dispatched
if it merely reached the information system of the addressee but failed to enter
it.332
For the time of receipt, paragraph 2 of the same article distinguishes between
a few factual situations: (a) where the addressee designates a specific informa-
tion system, which may or may not be his own, for the receipt of a message, the
electronic communication is deemed to have been received when it enters the
designated system;333 (b) if the electronic communication is sent to an information
system of the addressee that is not the designated system, “receipt” occurs when
the electronic communication is retrieved by the addressee; and (c) if the addressee
has not designated an information system, receipt occurs when the electronic
communication enters an information system of the addressee.
The distinction between “designated” and “non-designated” information
systems is intended to establish an appropriate allocation of risks and responsi-
bilities between originator and addressee. The person who designates a specific
information system for the receipt of electronic communications, even if it is a
330
“Information system” is a defined term under article 2, subparagraph (f), of the MLEC
and means “a system for generating, sending, receiving, storing or otherwise processing
data messages”. Depending on the factual situation, this may indicate “a communications
network, and in other instances could include an electronic mailbox or even a telecopier”
(Guide to Enactment of the MLEC, supra note 105, para. 40).
331
The notion of “control” over an information system should not be understood as requiring
the information system to be located on the premises of the addressee, since “location of
information systems is not an operative criterion under the MLEC” (Guide to Enactment
of the MLEC, supra note 105, para. 40).
332
It should be noted that the MLEC, as pointed out in its Guide to Enactment of the MLEC, supra
note 105, (para. 104): “does not expressly address the question of possible malfunctioning
of information systems as a basis for liability. In particular, where the information system
of the addressee does not function at all or functions improperly or, while functioning
properly, cannot be entered into by the data message (e.g. in the case of a fax that is
constantly occupied), dispatch under the MLEC does not occur. It was felt during the
preparation of the MLEC that the addressee should not be placed under the burdensome
obligation to maintain its information system functioning at all times by way of a general
provision.”
333
By “designated information system” the MLEC means a system that has been specifically
chosen by a party, for instance in the case where an offer expressly specifies the address to
which acceptance should be sent. Paragraph 102 of the Guide to Enactment of the MLEC,
supra note 105, clarifies that a “mere indication of an electronic mail or telecopy address
on a letterhead or other document should not be regarded as express designation of one
or more information systems”.
239
system operated by a third party, should be expected to bear the risk of loss or delay
of messages that effectively entered that system. However, if the originator chooses
to ignore the addressee’s instructions and sends the message to an information
system other than the designated system, it would not be reasonable to consider
the message delivered to the addressee until the addressee has actually retrieved
it. The rule in the event that no particular system was designated assumes that
for the addressee it was indifferent to which information system the messages
would be sent, in which case it would be reasonable to presume that it would
accept messages through any of the information systems it uses.
For both the definition of dispatch and that of receipt, an electronic commu-
nication enters an information system at the time when it becomes available for
processing within that information system. It is not necessary for the recipient
to know that the message has been received and there is no additional require-
ment that the recipient actually read or even access the message. If it reaches
the recipient’s “mailbox,” receipt has occurred.
Whether the electronic communication is intelligible or usable by the addressee
is intentionally outside the purview of the MLEC, which does not set intend to
overrule provisions of national law under which receipt of a message may occur
at the time when the message enters the sphere of the addressee, irrespective of
whether the message is intelligible or usable by the addressee.334
(ii) Electronic Communications in Domestic Enactments of the MLEC

At the domestic level, there seems to be little disagreement with the proposition
that, from a purely factual point of view, the time when an electronic communi-
cation enters an information system within the addressee’s control or enters an
information system outside the sender’s control represent the evident electronic
equivalents of the “sphere of control” tests used to define “receipt” and “dispatch”
under both the “reception” and the “mailbox” rules.
Except for France,335 the jurisdictions that have thus far adopted the MLEC
have included provisions on time and place of dispatch and receipt of electronic
334
The Guide to Enactment of the MLEC, supra note 105, (para. 103) adds that the MLEC is
also not intended “to run counter to trade usage, under which certain encoded messages
are deemed to be received even before they are usable by, or intelligible for, the addressee.
It was felt that the MLEC should not create a more stringent requirement than currently
exists in a paper-based environment, where a message can be considered to be received
even if it is not intelligible for the addressee or not intended to be intelligible to the ad-
dressee (e.g. where encrypted data is transmitted to a depository for the sole purpose of
retention in the context of intellectual property rights protection)”.
335
The French enactment of the MLEC (Loi no. 2000-230 du 13 mars 2000 portant adaptation
du droit de la preuve aux technologies de l’information et relative à la signature électronique)
deals essentially with recognition and evidentiary legal value of electronic records, but
does not deal with their communication.
240
communications. Without exception, all enactments of the MLEC have adopted

the distinction between designated and non-designated systems.336 This is also the
case in those countries in which uniform law has been prepared on the basis of
the MLEC, such as Canada337 and the United States.338 That distinction, however,
is not explicit in the U.S. Uniform Electronic Transactions Act (UETA), which
contemplates, in addition to a “designated” information system, an information
system that the recipient “uses for the purpose of receiving electronic records or
information of the type sent and from which the recipient is able to retrieve the
electronic record”.339 Notwithstanding that the language used in UETA differs
from article 15 of the MLEC, both instruments distinguish between a system
that was positively chosen by a party for the receipt of a particular message or
type of message and other (non-designated) information systems merely used by
the recipient. The latter category, in much the same way as the non-designated
system under article 15 of the MLEC, was included in UETA out of a concern
to “[allow] the recipient of electronic records to retain control over where they
would be sent and received”.340 Court decisions in the United States suggest that
336
Australia (Electronic Transactions Act 1999, sect. 14, subsects. (3) and (4)); Colombia (Ley
Número 527 de 1999: Ley de comercio electrónico, art. 24, subparas. (a) and (b)); Ecuador
(Ley de comercio electrónico, firmas electrónicas y mensajes de datos of 2002, art. 11, subpa-
ras. (a) and (b)); India (Information Technology Act 2000, sect. 13); Ireland (Electronic
Commerce Act, 2000, sect. 21, paras. (2) and (3)); Jordan (Electronic Transactions Law
(No. 85) of 2001, art. 17); Mauritius (Electronic Transactions Act 2000, sect. 14 (2));
Mexico (Decreto por el que se reforman y adicionan diversas disposiciones del Código Civil para.
el Distrito Federal of 26 April 2000, art. 91); New Zealand (Electronic Transactions Act
2002, sect. 11, paras. (a) and (b)); Pakistan (Electronic Transactions Ordinance 2002,
sect. 15, para. (2)); Philippines (Electronic Commerce Act 2000, sect. 22, paras. (a) and
(b)); Republic of Korea (Framework Law on Electronic Commerce, 1999, art. 6, para.
(2)); Singapore (Electronic Transactions Act 1998, sect. 15, subpara. (2) (a)); Slovenia
(Electronic Commerce and Electronic Signature Act, 2000, art. 10, para. 2); Thailand
(Electronic Transactions Act 2002, sect. 23); and Venezuela (Decreto no. 1024 de 10 de
febrero de 2001 – Ley sobre mensajes de datos y firmas electrónicas, art. 11). The same rules
are also contained in the laws of the Bailiwick of Jersey (Electronic Communications
(Jersey) Law 2000, art. 6), and the Isle of Man (Electronic Transactions Act 2000, sect.
2), both Dependencies of the British Crown; in the British overseas territories of Bermuda
(Electronic Transactions Act 1999, sect. 18, para. 2) and Turks and Caicos (Electronic
Transactions Ordinance 2000, sect. 16 (2) and (3)); and in the Hong Kong Special Ad-
ministrative Region of China (Electronic Commerce Ordinance 2000), sect. 19 (2)).
337
Uniform Electronic Commerce Act (UECA), supra note 131, sect. 23 (2).
338
Uniform Electronic Transactions Act (UETA), supra note 132, sect. 15 (b).
339
This formulation is also used in section 23 (b) of the Electronic Communications and
Transactions Act 2002 of South Africa.
340
The drafters of UETA recognized the fact that “many people have multiple e-mail addresses
for different purposes. [Subsection 15 (b) of UETA] assures that recipients can designate
the e-mail address or system to be used in a particular transaction. For example, the
241
a designation of an electronic address may also be inferred from the fact that a
company structured its business in such a way that it could be contacted only
via its e-mail address and listed no easily discoverable street address.341
Domestic enactments of the MLEC are also remarkably uniform in defining
the time of receipt of electronic communications sent to a designated system.
Nearly all enactments reproduce the rule of paragraph 2 (a) (i) of article 15 of
the MLEC, namely, that a message sent to a designated system is received when
it enters that system.
Minor domestic variations exist with regard to cases in which either the
addressee has not designated a particular information system or the origina-
tor sends the message to a system other than the designated system. Most
domestic enactments of the MLEC make that distinction.342 In those countries,
the consequences are generally the same as in article 15 of the MLEC, that is,
a message sent to an information system other than the designated one is only
deemed to be received upon retrieval by the addressee,343 whereas a message
sent in the absence of a designated system is deemed to be received upon entry
recipient retains the ability to designate a home e-mail for personal matters, work e-mail
for official business, or a separate organizational e-mail solely for the business purposes of
that organization. If A sends B a notice at his home which relates to business, it may not
be deemed received if B designated his business address as the sole address for business
purposes. Whether actual knowledge upon seeing it at home would qualify as receipt is
determined under the otherwise applicable substantive law” (Amelia H. Boss, supra note
114).
341
Rio Properties, Inc. v. Rio International Interlink, 284 F.3d 1007 (9th Cir. 2002). This case
involved various trademark infringement claims by an American company against a
foreign Internet business entity. After failed attempts to serve the defendant by conventional
means in the United States of America, the claimant brought an emergency motion to
effectuate alternative service of process by e-mail, which had been identified as being the
defendant’s preferred means of communication. The Court of Appeals concluded that
not only was service of process by e-mail proper – that is, reasonably calculated to apprise
the defendant of the pendent action and afford it an opportunity to respond – but, in this
particular case, it was the method of service most likely to reach the defendant. The Court
noted in that connection that the defendant “structured its business such that it could
be contacted only via its e-mail address” and that it “listed no easily discoverable street
address”. Rather, on its web site and print media, the defendant “designated its e-mail
address as its preferred contact information”.
342
E.g. Bermuda, Colombia, Ecuador, India, Jordan, Mauritius, Mexico, Pakistan, the Philip-
pines and the Republic of Korea.
343
Some enactments, as in Bermuda, require, instead of “retrieval”, that the message “come
to the attention of the addressee”. This does not, in practice, alter the substance of the
rule.
242
into an information system of the addressee. However, in two countries in that

group344 the law explicitly requires retrieval in both situations.
The laws of other countries contemplate only cases where an addressee has
not designated an information system.345 In those countries, receipt normally
occurs once the message is “retrieved” or “comes to the attention” of the addressee,
but in one country346 receipt occurs upon entry in a system “regularly used by
the addressee”. Two countries contemplate only the hypothesis of a message
being sent to an information system other than the designated system, in which
case receipt occurs upon retrieval.347 It is not clear, for that group of countries,
whether a message sent to one particular system despite an express designation
of another system would follow the same rule. Arguably, both situations would
be treated in the same manner, as is suggested by the law of one country that
expressly provides that for all cases other than designated systems, the message
is received when it comes to the addressee’s attention.348
The only apparently significant deviations from article 15 of the MLEC are
found in UETA and the Uniform Electronic Commerce Act (UECA) of Canada.
Both texts require that the electronic communication be capable of being
retrieved and processed by the addressee in addition to entering the addressee’s
system.349 It has been pointed out, in that connection, that the emphasis in the
MLEC is on timing.350 Under the MLEC, the message enters a system when it is
available for processing, “whether or not it can in fact be processed”. For UETA
and UECA, on the other hand, proper receipt requires that the recipient should
be able to retrieve the record from the system and that the message be sent in a
form that the addressee’s system can process. Nonetheless, “there is arguably no
inconsistency between the UETA and the MLEC”, as it may be understood that
the MLEC “defers to national law on the ‘processability’ issue”.351 Legal analysis
and comparison of UETA and the MLEC has indicated, indeed, that, despite the
different formulation, both instruments achieve the same result, as shown in
the following example:352
“Consider the situation where, because of a power failure or system failure,
the system becomes inaccessible, precluding the recipient from ever
Mauritius and Mexico.

344
E.g. Australia, Canada, Ireland and Venezuela.

345
Venezuela.
346
E.g. Slovenia and Thailand.

347
New Zealand.
348
UETA, sect. 15 (b) (1) and (2); UECA, sect. 23 (2) (a).
349
Boss, supra note 114 at 328.

350
Id.
351
Id. at 330-331.
352
243
retrieving the record. The question would be (under both products): when
did the failure occur? If it occurred before the electronic record entered
the system, then no receipt has yet occurred under either formulation.
If the message enters the system, the question initially under the UETA
is whether the recipient is able to retrieve it. If the recipient is able to
retrieve it, albeit for an instant, receipt has occurred. Subsequent failure
of the system should not ‘undo’ what has already occurred. The mere
inability of the recipient to retrieve the electronic record at a later point
in time is irrelevant once receipt has occurred.”
Another situation where both UETA and UECA seem at first sight to differ from
the MLEC is when the recipient has designated an information system, but the
sender sends the electronic record to another information system. Unlike the
MLEC, UETA and UECA do not have specific rules for such a case, which would
have to be solved in the light of their more general provisions. The result would
probably not be substantially different from the result under the MLEC. If the
information system, although not the designated system, was one used by the
recipient for electronic records of this type, the record would be deemed to have
been received (whether or not it was “actually” retrieved or received). If the system
was not generally used for messages of this type, the presumption established
by UETA would not apply. Arguably, that presumption would not be needed if
the record was actually retrieved by the recipient, which would mean that in
practice the result under the MLEC and UETA would be the same. If, however, the
record entered an information system of the recipient that was neither the one
designated by the recipient, nor the one used by the recipient for such messages,
and the record was never retrieved by the recipient, it is claimed that the two
laws would again produce the same result: “there would be no receipt under the
MLEC (because there was no retrieval), and none under the UETA (because it
was not sent to the correct address)”.353
(iii) Electronic Communications in Other Domestic Laws

The situation in countries that have not adopted the MLEC is not easily ascertain-
able in view of the scarcity of legal authorities. For the purposes of the present
analysis, those countries may be placed in two broad groups: member States of
the European Union (EU) and non-EU member States.
Very few countries outside EU other than enacting States of the UNCITRAL
MLEC have specific legislation on the types of issue related to electronic commerce
that have been dealt with by UNCITRAL. Typically, where written laws exist,
they deal only with digital signatures (sometimes also other forms of electronic
Id.
353
244
signatures) and certification services354 and rarely with issues of electronic

contracting.355 The survey done by the Secretariat has not identified legislative
provisions on time of dispatch and receipt of electronic communications in
those countries.
The situation is different within the EU. EU member States are bound to
implement the principles set forth in the various Directives relevant for electronic
commerce, in particular Directive 2000/31/EC (hereafter “EU Electronic Com-
merce Directive”).356 Article 11 of the EU Electronic Commerce Directive provides
that EU member States shall ensure, “except when otherwise agreed by parties
who are not consumers”, that a customer’s order and the acknowledgement of
receipt of the order by the merchant “are deemed to be received when the parties
to whom they are addressed are able to access them”. Under the EU legislative
system, member States are left with the choice of the means to achieve the result
envisaged by the EU Electronic Commerce Directive.
When, however, are the parties “able to access” electronic communications
and which kind of “ability” is meant by the EU Electronic Commerce Directive? Is
it sufficient that the parties have the abstract possibility of gaining access to the
electronic communication, or is it necessary for the addressee to be actually in a
position to retrieve the message? The preamble to the EU Electronic Commerce
Directive does not explain the precise meaning of the words “able to access”.
While a number of language versions favour a more general formulation,357
354
This is the case, for example, of the laws of Argentina (Ley No. 25.506 – “Ley de Firma
Digital” and Decreto No. 2628/2002 (Firma Digital), Reglamentación de la Ley No. 25.506);
Estonia (Digital Signatures Act, 2000); Israel (Electronic Signatures Act, 2000); Japan
(Law concerning Electronic Signatures and Certification Services, 2001); Lithuania
(Law on Electronic Signatures, 2000); Malaysia (Digital Signatures Act, 1997); Poland
(Electronic Signatures Act, 2001); and Russian Federation (Law on Electronic Digital
Signature (Federal Act No. 1-FZ) of 10 January 2002).
355
One example is Tunisia, which enacted legislation on electronic commerce (Loi relative
aux échanges et au commerce électroniques of 9 August 2000) that contains provisions on
electronic contracting inspired by Directive 97/7/EC of the European Parliament and of the
Council of 20 May 1997 on the protection of consumers in respect of distance contracts
(Official Journal of the European Communities, No. L 144, 4 June 1997, pp. 19-27).
356
Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on
certain legal aspects of information society services, in particular electronic commerce, in
the internal market (Official Journal of the European Communities, No. L 17, 17 July 2000,
p. 1).
357
This seems to be the case for the French (“lorsque les parties … peuvent y avoir accès”), Italian
(“quando le parte … hanno la possibilità di acerdervi”), Portuguese (“quando as partes … têm
possibilidade de aceder a estes”) and Spanish (“cuando las partes … puedan tener acceso a los
mismos”) texts.
245
some of them seem to imply that the addressee must be actually able to retrieve
the message.358
Arguably, the linguistic nuances in the various language versions of the EU
Electronic Commerce Directive are not substantive. The main difficulty in fact
seems to be that the formulation in article 11 of the EU Electronic Commerce
Directive does not provide a presumption or indication of the time from which
a party should be deemed to have been “able to access” a message. In legisla-
tion enacted to implement the EU Electronic Commerce Directive, Austria,359
Denmark,360 Germany,361 Ireland,362 Italy,363 Spain364 and the United Kingdom,365
for instance, have reproduced the formulation used in article 11 of the EU
Electronic Commerce Directive with only slight changes.366
It is not entirely clear which rule applies in countries such as Ireland367 and
Italy368 that already had statutory provisions on time of dispatch and receipt of
electronic communications before the adoption of the EU Electronic Commerce
Directive. The Irish law contains essentially the same rule as article 15 of the
MLEC. The new law implementing the EU Electronic Commerce Directive provides
that the specific rule on receipt of an “order” applies “notwithstanding” the
earlier law. The rule in Italy is that an electronic document is deemed to have been
358
For instance, the German text (“wenn die Parteien, für die sie bestimmt sind, sie abrufen
können”).
359
See “Bundesgesetz mit dem bestimmte rechtliche Aspekte des elektronischen Geschäfts- und
Rechtsverkehrs geregelt (E-Commerce-Gesetz – ECG) und Änderung des Signaturgesetzes sowie
der Zivilprozessordnung” (Bundesgesetzblatt für die Republik Österreich, 21 December 2001,
p. 1977), sect. 12.
360
See Lov om tjenester i informationssamfundet, herunder visse aspekter af elektronisk handel,
sect. 12 (2).
361
Article 11 of the EU Electronic Commerce Directive, supra note 200, has been incorporated
in the new section 312e(1) of the German Civil Code (BGR).
362
See European Communities (Directive 2000/31/EC) Regulations 2003, sect. 14 (1) (b).
363
See Decreto legislativo 9 aprile 2003, n. 70, art. 13, para. 3.
364
See Ley 34/2002, de 11 de julio, de servicios de la sociedad de la información y de comercio
electrónico, art. 28, para. 2.
365
See Electronic Commerce (EC Directive) Regulations 2002 (Statutory Instrument 2002
No. 2013), sect. 11 (2).
366
Section 312e(1) of the German Civil Code provides that an order and the acknowledge-
ment of its receipt are deemed to have been received when the parties to whom they are
addressed are able to retrieve them “under normal circumstances” (“unter gewöhnlichen
Umständen”). The same formulation is used in the Austrian law. The Spanish law refers
to the addressee’s ability to become aware (“tener constancia”) of the message, rather than
“access” (“tener acceso”) the message.
367
Electronic Commerce Act 2000, sect. 13, paras. (2) (a) and (b)).
368
Decreto del Presidente della Repubblica 10 novembre 1997, n. 513, art. 12, para. 1.
246
dispatched by the originator and received by the addressee if it is “transmitted

to the electronic address” indicated by the addressee.369 Although different in
formulation, this rule would arguably lead in most cases to the same result as
that of article 15 of the MLEC.
Most of the countries that have implemented the EU Electronic Commerce
Directive, however, did not have statutory rules on time of dispatch and receipt of
electronic communications, although case law in some of them already provided
criteria for the transposition to an electronic environment of traditional rules
on dispatch and receipt. The result is typically consistent with article 15 of the
MLEC. This is true even in countries which have not enacted the MLEC, such as
Germany, where the courts have regarded the delivery of a message to a party’s
e-mail address, for instance, as the equivalent of “receipt”, regardless of whether
or not the party had actually accessed the message.370 Incomplete delivery
of the text of an electronic communication, owing, for instance to technical
malfunctioning of the receiving equipment, does not exclude “receipt” if there is
evidence that the message was transmitted entirely in electronic form.371 While
proof of proper dispatch of an electronic communication may be regarded as
369
“Il documento informatico trasmesso per via telematica si intende inviato e pervenuto al desti-
natario se trasmesso all´indirizzo elettronico da questi dichiarato” (Decreto del Presidente della
Repubblica 10 novembre 1997, n. 513).
370
See, for example, Landgericht Nürnberg-Fürth, Case No. 2 HK O 9431/01, 7 May 2002,
JurPC – Internet Zeitschrift für Rechtsinformatik, JurPC WebDok 158/2003 <www.jurpc.
de/rechtspr/20030158.htm> (30 November 2007) In this case, the claimant’s contract
was terminated by the defendant through registered mail, which was later confirmed by
an electronic message sent to the claimant’s e-mail address. The claimant challenged
the effectiveness of the e-mail message, arguing that he had not been able to retrieve it,
since the message was sent during his holiday and his e-mail account was not accessible
through ordinary web browsers. The court held that the claimant had effectively received
the message, as it had been delivered to his e-mail address. From that time on, the claimant
bore the risk of loss of the message or delay in retrieving the message, for instance due to
difficulties in accessing his e-mail account, as such a risk occurred within the claimant’s
sphere of control.
371
See Bundesgerichtshof, Case No. XII ZR 51/99, 14 March 2001, JurPC – Internet Zeitschrift
(30 November 2007)In this case, a court of appeals had rejected an appeal because the
facsimile received did not contain counsel’s signature, which would have been contained
in the fourth page of the statement of appeal, which the court did not receive. The Federal
Court disagreed with the position taken by the court of appeals that only the pages received
by it could be taken into account in determining whether the statement of appeal had
been delivered within the deadline for its submission. The Federal Court held that when a
document was completely (“vollständig”) transmitted as a data message (“durch elektrische
Signale”) from the appellant’s facsimile to the court’s machine, but did not get printed
completely and without errors, possibly as a result of technical malfunctioning at the
destination, the document was deemed to have been received at the time of its transmission
247
prima facie evidence of its effective receipt by the other party,372 the courts have
also stressed that the originator of an electronic communication is not entitled
to rely on mere dispatch of the message, which creates no presumption that the
message was actually received.373
The fact, however, that the EU Electronic Commerce Directive introduced
the “accessibility” criterion to determine the time of receipt of electronic com-
munications has caused some concern, as it was felt that the rule in the EU
Electronic Commerce Directive should not be carried so far as to require actual
retrieval of messages, a result that would conflict with existing case law. Indeed,
it appears from the consultation process preceding the implementation of the
EU Electronic Commerce Directive in some countries that some of the changes
introduced in domestic legislation were intended to avoid the impression that
receipt of a message required actual retrieval by the addressee. The final rule,
it was said, should instead make it clear that only the “technical possibility” of
retrieval was relevant, and not the addressee’s “availability” for retrieving the
message.374
(iv) The Debate during the Negotiation of the EEC

The original draft of the EEC375 followed closely the structure and formulation
of article 15 of the MLEC. This was a natural choice in view of the wide ac-
ceptance of that provision of the MLEC. It also had the additional advantage of
as a facsimile, as long as the entire content of the document could be established through
other means.
In particular in the case of highly reliable transmission methods, in view of the current
372
stage of technological development, such as facsimile transmissions (see Oberlandesger-

icht München, Case No. 15 W 2631/98, 8 October 1998, JurPC – Internet Zeitschrift für
Rechtsinformatik, JurPC WebDok 153/1999 <www.jurpc.de/rechtspr/19990153.htm>
(9 September 2003).
See Oberlandesgericht Düsseldorf, Case No. 23 U 92/02, 4 October 2002, JurPC – Internet
373
Zeitschrift für Rechtsinformatik, JurPC WebDok 167/2003 <www.jurpc.de/rechtspr/

20030158.htm> (30 November 2007), in a case involving e-mail messages.
This point was made expressly in the explanatory note to the draft bill introduced to
374
implement the EU Directive in Austria. The Austrian Bar Association, in its comments on
the draft bill, proposed that the law clearly provide that the only controlling factor was the
technical “retrievability” (Abrufbarkeit) and that neither technical malfunctioning on the
addressee’s part nor the addressee’s absence nor any other obstacle within the addressee’s
sphere of control should hinder the effective receipt of the message (Rechtsanwaltskammer
Wien, Stellungnahme zum Bundesgesetz mit dem bestimmte rechtliche Aspekte des elektronischen
Geschäfts- und Rechtsverkehrs geregelt werden (E-Commerce-Gesetz – ECG), 31 August 2001
<www.rakwien.at/import/documents/stellungnahme _ecommerce_fuer_homepage.pdf>
(30 November 2007).
U.N. document A/CN.9/WG.IV/WP.101, annex.
375
248
its compatibility with article 24 of the U.N. Sales Convention.376 Surprisingly

enough, no other provision of the EEC caused grater debate than the definition
of the time of receipt of electronic communications.377
One criticism was that the provision is overly complex and that there may
be no practical need for distinguishing between designated and non-designated
information systems. That criticism was formulated in the following terms in
a statement by the German Bar Association on the preliminary draft of the
ECC:378
“A point requiring clarification seems to be the [distinction] between an
information system designated by the addressee for the receipt of data
messages and a system other than the designated system. This distinc-
tion is more relevant for Electronic Data Interchange (EDI), but not for
e-mail communications. The consequence is that, in the context of e-mail
communications, the decisive factor should be the actual entry of the
data message in the recipient’s computer station ….
On the basis of [article 4, subparagraph (f)], an ‘information system’
means ‘a system for generating, sending, receiving, storing or otherwise
processing data messages’. This wide definition encompasses not only a
provider’s web server, but also the computer stations of the provider’s
clients, from which they retrieve their messages or through which they
forward their messages to the provider for transmission to the addressees.
It is important in this connection to clarify whether the entry in the
provider’s server is sufficient to establish the receipt of the message, or
whether the data message needs to be actually retrieved by the addressee
at its computer station.
This distinction depends on whether the addressee has designated a
particular information system for the receipt of the data message and
which is the designated system. Normally, the user does not make use
of system-specification (Systembenennung) as a ‘receipt-address’ (Zustel-
ladresse), but rather uses an e-mail address, from which no specified
system is recognizable. A specification should not in fact be necessary,
since, in protocol-based Internet data communication, messages are
376
Sieg Eiselen, “E-Commerce and the CISG: Formation, Formalities and Validity”, 6 Vindobona
J. Int’l Comm’ L. & Arb. (2002) 310.
377
See U.N. documents A/CN.9/509, paras. 93-98, and A/CN.9/528, paras. 141-151.
378
Stellungnahme der Bundesrechtsanwaltskammer: UNCITRAL-Übereinkommensentwurf über
internationale Verträge, die mit elektronischen Mitteln geschlossen oder nachgewiesen werden,
submitted in March 2002 by the Committee on Private International Law and International
Procedural Law (Ausschuss Internationales Privat- und Prozessrecht) <www.brak.de/seiten/
pdf/EndfUNCITRAL-Uebereinkentwurf.pdf> (30 November 2007).
249
transmitted without empty signs through special computers that use

appropriate destination tables.
On this technical basis, [the rules on receipt in the ECC], would become
idle, because the originator is not provided with a specific system of
destination, and only requires an e-mail address, which is independent
from a computer station. The transmission of the message to another,
non-designated system … does not occur, since to that end there should
have been a designated system in the first place.”
The problems identified in that analysis might in fact be significant if the notion
of “information system” was understood to refer to the telecommunication
channels and infrastructure used to transport messages to their final destination,
rather than to the “electronic address” designated by a party for the purpose
of receiving messages. As understood by UNCITRAL, however, the notion of
“information system” was intended to cover “the entire range of technical means
used for transmitting, receiving and storing information”, which, depending on
the factual situation, may be “a communications network, and in other instances
could include an electronic mailbox or even a telecopier”.379
Another criticism was that the rule of article 15 of the MLEC might be
excessively rigid because the entry of a message in the addressee’s system or
another system designated by the addressee did not always allow the conclusion
that the addressee is capable of accessing the message. It was proposed that
the notion of “entry” should be rendered more flexible by adding the notion of
“accessibility” of the electronic communication, which would be given when the
communication is capable of being “processed and retrieved by the addressee”.380
One proposal would have linked the receipt to “the time when the retrieval of that
electronic communication by the addressee” could “normally be expected”.381
However, there were also objections to that proposal, as the reference to the
time when the addressee could “normally be expected” to “retrieve” might
deviate from the accepted notion of “availability” of the message for processing
within an information system, as an objective test, towards a more subjective
approach.382
In considering those issues, UNCITRAL noted that there was no disagreement
with the general objective of developing default rules on dispatch and receipt of
messages that aim at establishing a fair allocation of risks and responsibilities

379
See U.N. document A/CN.9/509, paras. 94 and 96.

380

381
Id., para. 149.

382
250
between the originator and the addressee.383 It should not be difficult to reach
international consensus on the principle that a person who manages an information
system, or designates a specific information system for the receipt of electronic
communications, even if it is a system operated by a third party, should bear the
risk of loss or delay of messages that have effectively entered that system.
Where no specific system has been designated, the rule to be ultimately adopted
should be such that it would allow a judge or arbitrator called to decide upon a
dispute on the time of receipt of an electronic communication to apply a test of
reasonableness to the choice of an information system by the originator in the
absence of a clear designation by the addressee.
(v) The Rule in the ECC
UNCITRAL considered at length various options to bridge the gap between the
opposing views on that aspect of the ECC. One possibility, which had been proposed
even in connection with systems that follow the “information theory” for the
purposes of contract formation, might be to attach a presumption of knowledge
(in the sense of “accessibility” or “possibility of knowledge”) of an electronic
communication to the effective delivery of a communication to the addressee’s
information system. It would thus be for the addressee to adduce evidence that,
through no fault of its own or of any intermediary of its choosing, it could not
access the communication.384
As eventually agreed, the time of “receipt” of an electronic communication
under the ECC was defined in article 10, paragraph 2, as the time when the
electronic communication “becomes capable of being retrieved by the addressee
at an electronic address designated by the addressee.” This is presumed to occur
when the electronic communication reaches the addressee’s electronic address.
The rule in this article, too, is based on a similar rule of the MLEC.385 The dif-
ferences in wording between the ECC and the MLEC are more evident in this
provision than in the definition of “dispatch.” In essence, however, both texts
should achieve the same result.
Id., para. 145.

383
Giovanni Comandé and Salvatore Sica, Il commercio elettronico (Turin: G. Giappichelli,

384
2001) 57. The authors propose this approach as a combined interpretation of articles
1136 (which requires the offeror’s “knowledge” of the acceptance for contract formation)
and 1135 (which provides that the party’s knowledge is presumed when the acceptance
was communicated to an appropriate address), both of the Italian Civil Code, and article
12, subparagraph (l), of Decree No. 513/1997 (which provides that an electronic docu-
ment is deemed to have been received by the addressee when it has been “transmitted” to
the electronic address indicated by it). The authors point out that such an interpretation
would also be in line with the notion of “accessibility” of a data message for the purposes
of the EU Directive.
Article 15, paragraph 2.
385
251
Indeed, the requirement that an electronic communication should be capable

of being retrieved should not be seen as adding an extraneous subjective element
to the rule contained in article 15 of the MLEC. In fact, “entry” in an information
system is understood under article 15 of the MLEC as the time when an electronic
communication “becomes available for processing within that information
system,”386 which is arguably also the time when the communication becomes
“capable of being retrieved” by the addressee.
Whether or not an electronic communication is indeed “capable of being
retrieved” is a factual matter outside the ECC. UNCITRAL took note of the
increasing use of security filters (such as “spam” filters) and other technologies
restricting the receipt of unwanted or potentially harmful communications (such
as communications suspected of containing computer viruses). The presumption
that an electronic communication becomes capable of being retrieved by the
addressee when it reaches the addressee’s electronic address may be rebutted
by evidence showing that the addressee had in fact no means of retrieving the
communication.387
Following the example of a number of domestic laws, the ECC uses the term
“electronic address” instead of “information system,” which was the expression
used in the MLEC. In practice, the new terminology, which appears in other inter-
national instruments such as the Uniform Customs and Practices for Documentary
Credits (UCP 500) – Supplement for Electronic Presentation (eUCP),388 should
not lead to any substantive difference. Indeed, the term “electronic address”
may, depending on the technology used, refer to a communications network
and, in other instances, could include an electronic mailbox, a telecopy device,
or another specific “portion or location in an information system that a person
uses for receiving electronic messages.”389
The notion of “electronic address,” like the notion of “information system,”
should not be confused with information service providers or telecommunications
carriers that might offer intermediary services or technical support infrastructure
for the exchange of electronic communications.390
The ECC retained the distinction made in article 15 of the MLEC between
delivery of messages to specifically designated electronic addresses and delivery
of messages to an address not specifically designated. In the first case, the rule
of receipt is essentially the same as under article 15, paragraph (2)(a)(i), of the
MLEC, that is, a message is received when it reaches the addressee’s electronic
See Guide to Enactment of the MLEC, supra note 105, para. 103.
386
See Official Records of the General Assembly Sixtieth Session, Supplement No. 17 (UN. docu-
387
ment A/60/17), para. 80. See also U.N. document A/CN.9/571, paras. 149 and 160.
See James E. Byrne and Dan Taylor, ICC Guide to the eUCP (Paris: ICC, 2002) 54.
388

389

390
252
address (or “enters” the addressee’s “information system,” in the terminology of

the MLEC). The ECC does not contain specific provisions as to how the designation
of an information system should be made or whether the addressee could make
a change after such a designation.
In distinguishing between designated and non-designated electronic addresses,
paragraph 2 aims at establishing a fair allocation of risks and responsibilities
between originator and addressee. In normal business dealings, parties who own
more than one electronic address could be expected to take the additional care
of designating a particular one for the receipt of messages of a certain nature
and to refrain from disseminating electronic addresses that they rarely use for
business purposes. By the same token, however, parties should be expected not
to address electronic communications containing information of a particular
business nature (e.g. acceptance of a contract offer) to an electronic address that
they knew or ought to have known would not be used to process communications
of such a nature (e.g. an e-mail address used to handle consumer complaints).
It would not be reasonable to expect that the addressee, in particular large
business entities, should pay the same level of attention to all of the electronic
addresses that it uses.391
One noticeable difference between the ECC and the MLEC, however, concerns
the rules for receipt of electronic communications sent to a non-designated
address. The MLEC distinguishes between communications sent to an informa-
tion system other than the designated one and communications sent to any
information system of the addressee in the absence of any particular designation.
In the first case, the MLEC does not regard the message as being received until
the addressee actually retrieves it. The rationale behind this rule is that if the
originator chose to ignore the addressee’s instructions and sent the electronic
communication to an information system other than the designated system,
it would not be reasonable to consider the communication as having been
delivered to the addressee until the addressee has actually retrieved it. In the
second situation, however, the underlying assumption of the MLEC was that,
for the addressee, it was irrelevant to know in advance to which information
system the electronic communication would be sent. In such a case, it would be
reasonable to presume that it would accept electronic communications through
any of its information systems.
In this particular situation, the ECC follows the approach taken in a number
of domestic enactments of the MLEC and treats both situations in the same
manner. Thus for all cases where the message is not delivered to a designated
electronic address, receipt under the ECC only occurs when (a) the electronic
communication becomes capable of being retrieved by the addressee (by reaching

391
253
an electronic address of the addressee) and (b) the addressee actually becomes
aware that the communication was sent to that particular address.
In cases where the addressee has designated an electronic address but the
communication is sent elsewhere, the rule in the ECC is not different in result
from article 15, paragraph (2)(a)(ii), of the MLEC, which itself requires, in
those cases, that the addressee retrieves the message (which in most cases
would be the immediate evidence that the addressee has become aware that the
electronic communication has been sent to that address). The only substantive
difference between the ECC and the MLEC, therefore, concerns the receipt of
communications in the absence of any designation. In this particular case,
UNCITRAL agreed that practical developments since the adoption of the MLEC
justified a departure from the original rule. It also considered, for instance, that
many persons nowadays have more than one electronic address and could not
be reasonably expected to anticipate receiving legally binding communications
at all of the addresses that they maintain.392 The addressee’s awareness that the
electronic communication has been sent to a particular non-designated address
is a factual manner that could be proven by objective evidence, such as a record
of notice given otherwise to the addressee or a transmission protocol or other
automatic delivery message stating that the electronic communication had been
retrieved or displayed at the addressee’s computer.
The rules on dispatch of electronic communications under the ECC were far
less contentious than the definition of time of receipt. Article 10, paragraph 1,
of the ECC defines the “dispatch” of an electronic communication as the time
when it: leaves an information system under the control of the originator or of
the party who sent it on behalf of the originator or, if the electronic communica-
tion has not left an information system under the control of the originator or of
the party who sent it on behalf of the originator, the time when the electronic
communication is received.
This provision follows, in principle, the rule on “dispatch” set out in article
15, paragraph 1, of the MLEC.393 One minor difference is that the formulation
finally adopted in the EEC refers to the time when the electronic communication
leaves an information system under the control of the originator, rather than
the time when the electronic communication enters an information system
outside the control of the originator, as had been used in the MLEC. This shift
in focus was done so as to more closely mirror the notion of “dispatch” in a
non-electronic environment, which is understood in most legal systems as
392
Official Records of the General Assembly Sixtieth Session, Supplement No. 17 (U.N. document
A/60/17), para. 82.
393
“Unless otherwise agreed between the originator and the addressee, the dispatch of a data
message occurs when it enters an information system outside the control of the originator
or of the person who sent the data message on behalf of the originator.”
254
the time when a communication leaves the originator’s sphere of control.394

In practice, the result under the EEC should be the same as under article 15,
paragraph 1, of the MLEC, since the most easily accessible evidence to prove
that a communication has left an information system under the control of the
originator is the indication, in the relevant transmission protocol, of the time
when the communication was delivered to the destination information system
or to intermediary transmission systems. Another minor difference is that article
10 of the ECC also covers situations where an electronic communication has not
left an information system under the control of the originator. This hypothesis,
which was not covered in article 12 of the MLEC, may happen, for example,
when the parties exchange communications through the same information
system or network so that the electronic communication never really enters a
system under the control of another party. In such cases, dispatch and receipt
of the electronic communication coincide.
3. Automated Information Systems

Automated computer systems, sometimes called “electronic agents,” are being
increasingly used in electronic commerce and have caused extensive theoretical
discussion.395 They have made some scholars revisit traditional common law
theories of contract formation to assess their adequacy to contracts that come
into being without human intervention.396
Existing uniform law conventions do not seem in any way to preclude the use
of automated systems, for example, for issuing purchase orders or processing
purchase applications. This seems to be the case in connection with the U.N. Sales
Convention, which allows the parties to create their own rules,397 for example,
in an EDI trading partner agreement regulating the use of “electronic agents”.
The MLEC, too, lacks a specific rule on the matter. While nothing in the MLEC
seems to create obstacles to the use of fully automated systems, it does not deal
specifically with those systems, except for the general rule on attribution in
article 13, paragraph 2 (b).398

394
See generally Fabio Bravo, Contrattazione telematica e contrattazione cibernetica (Milan,

395
Giuffrè, 2007) 170-347, and the literature cited in p. 182, note 18.
See Anthony J. Bellia, Jr., “Contracting with Electronic Agents”, 50 Emory L. J. (2001)
396
1047.
397
Article 13, paragraph 2 (b), of the MLEC provides that, as between the originator and the
398
addressee, a data message is deemed to be that of the originator if it was sent “by an informa-
tion system programmed by, or on behalf of, the originator to operate automatically”.
255
(a) Responsibility for Automated Information Systems

In an early discussion of the matter, UNCITRAL was of the view that, while the
expression “electronic agent” had been used for purposes of convenience, the
analogy between an automated system and a sales agent was not appropriate.
General principles of agency law (for example, principles involving limitation
of liability as a result of the faulty behaviour of the agent) could not be used
in connection with the operation of such systems. UNCITRAL was also of the
view that, as a general principle, the person (whether a natural person or a
legal entity) on whose behalf a computer was programmed should ultimately
be responsible for any message generated by the machine.399
At present, the attribution of actions of automated information systems to a
person or legal entity is based on the paradigm that an automated information
system is capable of performing only within the technical structures of its preset
programming. However, at least in theory it is conceivable that future genera-
tions of automated information systems may be created with the ability to act
autonomously, and not just automatically. That is, through developments in
artificial intelligence, a computer may be able to “learn through experience, modify
the instructions in their own programs, and even devise new instructions”.400
That possibility has led some commentators to go as far as to advocate the at-
tribution of at least some elements of legal personality to automated computer
systems401 or to a transposition of the general theory of agency to computer
transactions.402 Other commentators, however, seem less inclined to impose
liability upon machines and prefer to apply general principles of law, such as
“reliance” and “good faith,” to establish the link between the computer and the
person on whose behalf it functions.403
Even if no modification appears to be needed in general rules of contract law,
it was felt that it would be useful for a new international instrument to make it
clear that the actions of automated systems programmed and used by people will
399
See Report of the Working Group on the work of its thirty-eighth session (New York,
12-23 March 2001) (U.N. document A/CN.9/484), paras. 106 and 107.
400
Tom. Allen and Robin. Widdison, “Can Computers Make Contracts?”, 9 Harv. J. L. & Tech.
(1996) 25.
401
For instance, Lawrence B. Solum, “Legal Personhood for Artificial Intelligences”, 70 N.C.L.
Rev. (1992) 1231; and Leon E. Wein, “The Responsibility of Intelligent Artifacts: Toward
an Automated Jurisprudence”, 6 Harv. J. L. & Tech. (1992) 103.
402
David D. Wong, “The Emerging Law of Electronic Agents: E-commerce and Beyond”, 33
Suffolk L. Rev. (1999) 83.
403
See Jean-François Lerouge, “The Use of Electronic Agents Questioned Under Contractual
Law: Suggested Solutions on a European and American Level”, 18 John Marshall J. Comp.
& Info. L. (1999) 403. Similarly, from a common law perspective, see C. C. Nicoll, “Can
Computers Make Contracts?”, 1998 J. Bus. L. (1998) 42.
256
bind the user of the system, regardless of whether human review of a particular
transaction has occurred. Accordingly, article 12 of the ECC recognizes that
contracts may be formed as a result of actions by automated message systems
(electronic agents), even if no natural person reviewed each of the individual
actions carried out by the systems or the resulting contract.
(b) Errors in Messages and Communications

Closely related to the use of automated computer systems is the question of
mistakes and errors in electronic commerce. Such errors may be either the
result of human actions (for example, typing errors) or the consequence of
malfunctioning of the information system used.
(i) Human Errors

The MLEC was not concerned with substantive issues that arise in contract
formation. Therefore, it did not deal with the consequences of mistake and er-
ror in electronic contracting. However, uniform legislation enacting the MLEC,
such as the UECA in Canada and UETA in the United States, contain provisions
dealing with errors made by natural persons when dealing with an automated
computer system of another person. The relevant provisions in UECA (sect. 22)
and in UETA (sect. 10) set out the conditions under which a natural person is
not bound by a contract in the event that the person made a material error.
The rationale for provisions such as those contained in UECA and in UETA
seems to be the relatively higher risk that an error made in transactions involving
a natural person, on the one hand, and an automated computer system, on the
other, might not be noticed as easily in transactions that involve only natural
persons. Errors made by the natural person in an entirely automated environ-
ment may become irreversible once acceptance is dispatched.
In favour of formulating a substantive rule on the consequences of computer
errors, it could be said that other international texts deal with the consequences
of errors for the validity of the contract, albeit restrictively.404 However, a
counter-argument could be that a provision of that type would interfere with
well-established notions of contract law and might not be appropriate in the
context of an instrument specifically concerned with electronic commerce, in
view of the risk of duplication of legal regimes.
A slightly different approach might be to envisage only provisions that pro-
mote best business practices, such as provisions that would induce businesses
to make available procedures for detecting and correcting errors in electronic
Such as the UNIDROIT Principles of International Commercial Contracts (see arts. 3.5
404
and 3.6).
257
contract negotiation, without dealing with the consequences of errors for the
validity of the contract.
For example, article 11, paragraph 2, of the EU Electronic Commerce Direc-
tive creates such an obligation for providers of “information society services”.
It is recognized, however, that, in implementing the EU Electronic Commerce
Directive, States have added various consequences for a party’s failure to provide
procedures for detecting and correcting errors in electronic contract negotia-
tion. For example, in Austria,405 Ireland,406 Italy407 and Spain,408 such failure
constitutes an administrative offence and subjects the infringer to payment of
a fine.409 In Germany,410 the consequence is an extension of the period within
which a consumer may avoid a contract, which only begins to run from the
time when the merchant has fulfilled its obligations. A similar consequence
is provided in the United Kingdom, where the customer is entitled “to rescind
the contract unless any court having jurisdiction in relation to the contract in
question orders otherwise on the application of the service provider”.411
UNCITRAL considered carefully the various possibilities. The view that eventu-
ally prevailed was that, while the ECC should avoid interfering with the law of
mistake, it was important to deal with the a type of error specific to electronic
commerce, in view of the relatively higher risk of human errors being made in
communications exchanged with automated message systems.412 Article 14 of
the ECC does not oblige the operators of automated message systems to make
available procedures for detecting and correcting errors in electronic contract
negotiation. Nevertheless, it authorizes a party who makes an error to withdraw
the portion of the electronic communication where the error was made if the
automated message system did not provide the person with an opportunity to
correct errors. This right is subject to two general conditions: the person must
notify the other party as soon as possible and must not have used or received
any material benefit or value from the goods or services received from the other
party.
405
E-Commerce-Gesetz – ECG, sect. 26, para. 4.
406
European Communities (Directive 2000/31/EC) Regulations 2003, regulation 13 (5).
407
Decreto legislativo 9 aprile 2003, n. 70, art. 21, para. 1.
408
Ley 34/2002, de 11 de julio, de servicios de la sociedad de la información y de comercio electrónico,
arts. 38 and 39.
409
410
Bürgerliches Gesetzbuch, sect. 312e, para. 1, first sentence.
411
Electronic Commerce (EC Directive) Regulations 2002 (Statutory Instrument 2002 No.
2013), regulation 15.
412
See U.N. documents A/CN.9/509, para. 105 and A/CN.9/548, para. 17.
258
(ii) Errors Generated by Information Systems

Another issue considered by UNCITRAL was whether the ECC should deal
with errors made by the automated system itself. At its initial discussion of the
issue, UNCITRAL was of the view that errors made by any such system should
ultimately be attributable to the persons on whose behalf they operated. Nev-
ertheless, UNCITRAL recognized that there might be circumstances that justify
a mitigation of that principle, such as when an automated system generates
erroneous messages in a manner that could not have reasonably be anticipated
by the person on whose behalf the messages were sent. It was suggested that
elements to be taken into account when considering possible limitations for the
responsibility of the party on whose behalf the automated system was operated
include the extent to which the party had control over the software or other
technical aspects used in programming the system.413
The complexity of the issues involved can be illustrated by three very similar
cases where German courts arrived at opposing results.414 The cases related to
sales of goods erroneously offered over the Internet for a price below the price
intended by the seller. They all involved interactive applications that generated
automatic replies from the seller stating that the customer’s “order” (Auftrag)
would be immediately “carried out” (ausgeführt). It was surmised that the errors
were computer-made and had occurred during processing and posting of the
seller’s information on web sites maintained by independent Internet service
providers. The courts affirmed the principle that automated communications were
attributable to the persons on whose behalf the system had been programmed
and in whose names the messages were sent. The courts consistently regarded the
advertisement of goods via the Internet as a mere invitation to treat (invitatio ad
offerendum) and considered that a binding contract would only come into being
once the seller had accepted the buyer’s bid (offer). The courts further affirmed
the legal value of the messages sent by the automatic reply function as binding
expressions of intention (Willenserklärung) and valid acceptances for purposes
of contract formation.
Nevertheless, one court of appeals found that the pricing error in the Internet
advertisement vitiated the seller’s acceptance and rendered it invalid.415 Two
413
See U.N. document A/CN.9/484, paras. 108.
414
Oberlandesgericht Frankfurt, 20 November 2002, JurPC – Internet Zeitschrift für Rechtsinformatik,
JurPC WebDok 91/2003 <www.jurpc.de/rechtspr/20030091.htm>; Landgericht Köln,
16 April 2003, JurPC – Internet Zeitschrift für Rechtsinformatik, JurPC WebDok 138/2003
<www.jurpc.de/rechtspr/20030138.htm> and Amtsgericht Westerburg, Case No. 21 C
26/03, 14 March 2003, JurPC – Internet Zeitschrift für Rechtsinformatik, JurPC WebDok
184/2003 <www.jurpc.de/rechtspr/20030184.htm> (30 November 2007).
415
“Die unrichtige Übermittlung der ‘invitatio ad offerendum’ wirkte bei der infolge der entsprechenden
Programmierung automatisch erstellten und dann an den Rechner des Klägers elektronisch
259
district courts, in turn, regarded the invitation to treat expressed through the
Internet advertisement as a separate legal act from the eventual acceptance of
the buyer’s offer, so that the error in the first instance did not affect the validity
of the seller’s acceptance.416 While some factual differences between the cases
might have influenced their outcome,417 the discrepancy between the judge-
ments seems to result from conflicting views regarding the allocation of risks
for malfunctioning of commercial web sites.
Courts in Singapore, in turn, have tended to consider a number of factors
before deciding on an appropriate allocation of the risk of errors in electronic
commerce, including (a) the need to observe the principle of upholding rather
than destroying contracts, (b) the need to facilitate the transacting of electronic
commerce, and (c) the need to reach commercially sensible solutions while
respecting traditional principles applicable to instances of genuine error or
mistake.418 Court hold that the party “who selects the means of communication
should bear the consequences of any unexpected events.” However, the general
law on errors still applied and the risk may be shifted to the other party. In doing
so, the courts also take into account the conduct of the beneficiary party and
consider whether such party knew or ought to have known that an error had
been made by the system.419
übermittelten Annahmeerklärung der Beklagten noch fort” (Oberlandesgericht Frankfurt).

“Eine auf diesen Irrtum gestützte Anfechtung kommt gleichwohl nicht in Betracht, weil der
416
Irrtum nach dem klägerischen Sachvortrag allenfalls bei der Einstellung der Preisangaben ins
Internet, nicht aber zum massgeblichen Zeitpunkt der Abgabe der Willenserklärung vorgelegen
hat” (Landgericht Köln; similarly, Amtsgericht Westerburg).
Such as the fact that in the Frankfurt case the erroneously advertised price represented
417
1 per cent of the ordinary value of the product, whereas in the Cologne case the court
found that the price, which arguably fell some 50 per cent below the ordinary market
price, was not extraordinary (keine Seltenheit) for an Internet sale.
Chwee Kin Keong and others v. Digilandmall.com Pte Ltd, High Court, [2004] SGHC 71, 12
418
April 2004, confirmed by the Court of Appeals ([2005] SGCA 2, 13 January 2005).
Id. In this case, a website operated in Singapore by Digiland, a Singapore company (the
419
respondent), advertised on sale a laser printer worth Singapore dollars (S$) 3,854 for
only S$ 66. This pricing error was due to the uploading on the website of a set of figures
prepared for a training template. By the time the mistake was discovered a few days later
784 individuals (six of whom were the appellants for this case) had already placed 1008
purchase orders via the Internet for 4086 laser printers. In total, they ordered 1,606
printers for a total price of S$ 105,996 against a market value of S$ 6,189,524. After the
discovery of the pricing error on the website, Digiland refused to honour the contracts on
the basis that there was a mistake in the posted price. The courts found that each of the
six buyers had actual knowledge that there was a mistake in the pricing on the websites,
and that the contracts were void on the ground of unilateral mistake. VK Jajah, JC noted
that “[t]he stark gaping difference between the price posting and the market price of the
260
4. Incorporation and Availability of Contract Terms

One additional question concerning contract formation through the interven-
tion, in whole or in part, of automated information systems is the legal effect
of the incorporation by reference of contractual clauses accessible through
a “hypertext link”. Another issue relates to the availability and retention or
reproduction of contract terms.
(a) Incorporation of Terms and Conflicting Contract Terms

The question of incorporation of contract terms is dealt with in article 5 bis of
the MLEC. That provision sets out the general rule that information shall not
be denied validity or enforceability solely because it has been incorporated by
reference.
Domestic laws typically go beyond that general rule and set down the substan-
tive conditions for the enforceability of terms incorporated by reference. In doing
so, it seems that courts make a distinction between terms formulated by one
party, which seeks to enforce them against the other party, and terms established
by a third party and intended to apply to all transactions being negotiated in a
particular market or through a particular facility offered by such third party.
In the first situation, courts in many legal systems seem not to automatically
assume a party’s acceptance of the terms incorporated by reference. Courts have
in fact required a specific act of incorporation and held that the mere existence
of such terms in an easily accessible resource (such as a party’s web site) was
not sufficient to effectively incorporate those terms into a contract in which they
were not otherwise referred to.420 The courts do not seem to have categorically
excluded the possibility of incorporating terms by the mere clicking of an “I agree”
button on a computer screen.421 Yet, courts have often required unambiguous
demonstration that the accepting party either had an opportunity to actually
access and read those terms or that the party was adequately alerted, through
a conspicuously placed notice or otherwise, of the existence of those terms and
their relevance for the transaction in question.422
laser printer would have made it obvious to any objective person that something was
seriously amiss.”
Hanseatisches Oberlandesgericht Hamburg, Case No. 3 U 168/00, 13 June 2002, JurPC
420
– Internet Zeitschrift für Rechtsinformatik, JurPC WebDok 288/2002 <www.jurpc.de/

rechtspr/20020288.htm> (30 November 2007).
See supra note 300.
421
For instance, Specht v. Netscape Communications Corp., 150 F. Supp. 2d. 585, affirmed in
422
Specht v. Netscape Communications Corporation and America Online, Inc., 306 F. 3d 17 (2d
Cir. 2002).
261
In some legal systems, courts seem to establish a distinction between con-

tractual terms developed by one of the parties and contract terms developed by
another entity (a third party) that offers the electronic platform for the parties
to conduct their negotiations.
This question has arisen, for instance, in connection with Internet auctions
in Germany. In an early case, a district court in Germany found that a person
offering goods through an Internet auction platform had not made a binding
offer, but had merely invited offers in respect of the goods during a set period
of time.423 The fact that the general conditions of the operator of the auction
platform qualified the offer of goods for auction as “binding and irrevocable” was
not regarded as being controlling. That decision was later reversed by the court
of appeal, which found that there was no need for the parties to specifically refer
to or otherwise incorporate into their communications the general conditions of
the operator of the auction platform, which highlighted the binding character
of offers of goods for auction. Both parties should be deemed to have accepted
those general conditions beforehand.424 This understanding was followed by
other courts425 and was also affirmed by the Federal Court (Bundesgerichtshof),
which held that the seller could have avoided, if it had wished, the impression of
being bound by its offer by introducing an appropriate statement in its automatic
reply messages. However, a reservation to the general conditions that was not
recognizable as such by the addressees of the offer could not be held against
them.426
Another question concerning contract formation through automated informa-
tion systems is the legal effect of contract terms displayed on a video screen but
not necessarily expected by a party. Directly related to this question is the issue
of the “battle of the forms”, which may be a serious problem in the context of
electronic transactions, in particular where fully automated systems are used
and no means are provided for reconciling conflicting contractual terms.
Neither of these issues is dealt with in article 5 bis of the MLEC, which only
contains a general provision intended to uphold the legal effect of information
423
Landgericht Münster, 21 January 2000, Case No. 4 O 424/99, JurPC – Internet Zeitschrift
(30 November 2007).
424
Oberlandesgericht Hamm, 14 December 2000, Case No. 2 U 58/00, JurPC – Internet Zeit-
425
Amtsgericht Hannover, 7 September 2002, Case No. 501 C 1510/01, JurPC – Internet Zeit-
426
Bundesgerichtshof, 7 November 2001, Case No. VIII ZR 13/01, JurPC – Internet Zeitschrift
262
incorporated by reference. Furthermore, neither the MLEC nor the U.N. Sales
Convention expressly provides a solution for the well-known problem of “battle
of the forms”.427
The magnitude of the problem and the profound differences, both in policy
and approach, in the manner in which those issues are addressed under domes-
tic laws428 suggest that there would be significant obstacles for international
harmonization. UNCITRAL therefore decided to leave these questions outside
the scope of the ECC.
(b) Availability of Contract Terms

Except for purely oral transactions, most contracts negotiated through traditional
means result in some tangible record of the transaction to which the parties can
refer in case of doubt or dispute. In electronic contracting, such a record, which
may exist as an electronic communication, may only be temporarily retained
or may be available only to the party through whose information system the
contract was concluded. Thus, some recent legislation on electronic commerce,
such as the EU Electronic Commerce Directive, requires that a person offering
goods or services through information systems accessible to the public should
provide means for storage or printing of the contract terms.
The rationale for creating such specific obligations seems to be an interest
in enhancing legal certainty, transparency and predictability in international
transactions concluded by electronic means. Thus, it may not be unreasonable
to require certain information to be provided or technical means to be offered
in order to make available contract terms in a way that allows for their storage
and reproduction, in the absence of a prior agreement between the parties, such
as a trading partner agreement or other type of agreement.
No similar obligations exist under the U.N. Sales Convention or most interna-
tional instruments dealing with commercial contracts. During its deliberations
on the ECC, UNCITRAL was therefore faced with the question of whether, as a
matter of principle, it should propose specific obligations for parties conducting
business electronically that may not exist when they contract through more
traditional means. One objection to the inclusion of disclosure obligations in
a new international uniform law instrument was that the consequences of a
The U.N. Sales Convention offers an implicit solution for the question in article 19,
427
paragraph 2. Specific rules on the matter can be found in the UNIDROIT Principles of
International Commercial Contracts, Unidroit, Rome, 1994.
An overview of the differences between American and European law can be found in
428
James R. Maxeiner, “Standard Terms Contracting in the Global Electronic Age: European
Alternatives”, 28 Yale J. Int’l L. (2003) 109.
263
party failing to comply with any such obligation would have to be considered
and well defined.429
The EU Electronic Commerce Directive does not prescribe what the consequences
are if “information society services” fail to comply with its provisions on this
point. In the absence of uniform sanctions, EU member States have provided a
variety of different consequences in their national laws.430 The laws of Austria,431
Ireland,432 Italy433 and Spain,434 for example, provide that failure to make the
contract terms available constitutes an administrative offence and subject the
infringer to payment of a fine.435 In the United Kingdom, the law distinguishes
between disclosure of information and availability of contract terms. In the first
case, those duties “shall be enforceable, at the suit of any recipient of a service,
by an action against the service provider for damages for breach of statutory
duty”.436 In the second case, the customer “may seek an order from any court
having jurisdiction in relation to the contract requiring that service provider to
comply with that requirement”.437 In Germany, the consequence is an extension
of the period within which a consumer may avoid the contract, which does not
begin to run until the time when the merchant has complied with its obligations.438
In most cases, these sanctions do not exclude other consequences that may be
provided in law, such as sanctions under fair competition laws.439
429
See Legal aspects of electronic commerce – Electronic contracting: provisions for a draft conven-
tion – Comments by the International Chamber of Commerce (U.N. document A/CN.9/WG.IV/
WP.96), annex, p. 6.
430
This has been one of the arguments put forward by the International Chamber of Com-
merce in its criticism of the corresponding provision in an early draft of the convention
(U.N. document A/CN.9/WG.IV/WP.101, p. 6).
431
432
European Communities (Directive 2000/31/EC) Regulations 2003, regulation 7 (2).
433
Decreto legislativo 9 aprile 2003, n. 70, art. 21, para. 1.
434
Ley 34/2002, de 11 de julio, de servicios de la sociedad de la información y de comercio electrónico,
arts. 38 and 39.
435
436
2013), sect. 11 (2), regulation 13.
437
2013), sect. 11 (2), regulation 14.
438
Bürgerliches Gesetzbuch, sect. 312e, para. 1, first sentence.
439
German courts have decided, for example, that failure by a company to disclose its name
and address, as required under the German Distance Sales Law (Fernabsatzgesetz), which
is based largely on another EU directive, represented an act of unfair competition against
which the violator’s competitors could seek an injunction (Oberlandesgericht Frankfurt,
Case No. 6 W 37/01, 17 April 2001, JurPC – Internet Zeitschrift für Rechtsinformatik, JurPC
WebDok 135/2001 <www.jurpc.de/rechtspr/20010135.htm> (30 November 2007).
264
But what kind of sanctions could be contemplated in a uniform commercial

law instrument? On the one hand, rendering commercial contracts invalid
or unenforceable for failure to comply with disclosure obligations may be an
undesirable and unreasonably intrusive solution. On the other hand, providing
for other types of sanctions, such as tort liability or administrative sanctions,
would probably be outside the scope of the work that UNCITRAL had done so
far. Moreover, the operation of sanctions of this type presupposes administrative
structures and enforcement measures that cannot be provided in an international
uniform law instrument.
The views within UNCITRAL were for some time divided between two groups.
On the one side were those who believed that obligations to disclose certain
information should be left for international industry standards or guidelines, or,
at the national level, for regulatory regimes governing the provision of online
services, especially under consumer protection regulations, but should not be
included in an international convention dealing with electronic contracting.440
On the other side were those who believed that disclosure obligations of certain
basic information about a business entity would promote good business practices
and enhance confidence in electronic commerce.441 The first group eventually
prevailed within UNCITRAL, and the final text of the ECC defers the matter to
domestic law by providing, in its article 13, that nothing in the ECC affects the
application of any rule of law that may require a party that negotiates some or
all of the terms of a contract through the exchange of electronic communica-
tions to make available to the other party those electronic communications that
contain the contractual terms in a particular manner or relieves a party from
the legal consequences of its failure to do so.
Chapter II. Particular Issues in

Government Contracting
Electronic communications are being increasingly used in public procurement,

and it is generally believed that they help to increase competition and streamline
public purchasing, particularly in terms of time and costs savings.442

440

441
See, Directive 2004/17/EC of the European Parliament and of the Council of 31 March
442
2004 coordinating the procurement procedures of entities operating in the water, energy,
transport and postal services sectors (Official Journal of the European Union, No. L 134, 30
April 2004, p. 1), Preamble paragraph 20; see also Directive 2004/18/EC of the European
265
Many procurement laws were adopted long before the development of new
information and communications technologies or at a time when they were not
yet very widely used. Thus, procurement laws are often not primarily concerned
with legal issues related to the use of new technologies, and the wording of a
number of domestic procurement rules indicates that they were conceived against
the background of communications, record-keeping and evidentiary systems
that were largely based on information recorded on tangible media (essentially,
written on paper).443
Like in other areas of the law, legislators and policymakers had to adapt
existing rules and procedures, which to a very large extend rely on, or presup-
pose, paper-based communications, to an electronic environment. General
legislation on electronic commerce, such as legislation based on the MLEC
may provide some guidance in respect of some of those issues. However, more
specific solutions may be needed to enable electronic procurement. In practice,
countries do not seem to rely exclusively on the general legislation on electronic
transactions to enable electronic communications in the procurement process.
Indeed, in some countries, general rules on electronic communications may be
excluded in connection with procurement activities of public bodies,444 or have
been incorporated into the existing framework for private law in such a way that
they do not seem to apply automatically to government functions.445
The reason for this particular treatment is that procuring entities in many
countries have an interest in establishing conditions for the use of electronic
communications taking into account their respective levels of sophistication,
security concerns and other relevant factors. Some countries have enacted both
rules governing the use of electronic communications in Government (including
procurement), and general legislation on electronic commerce, some of which
is declared to apply to the public sector, while other aspects do not seem to have
been conceived for Government use. In a number of other countries, however,
general legislation on electronic commerce and electronic transactions is expressly
intended to bind Government, except for a number of specifically excluded
Parliament and of the Council of 31 March 2004 coordinating the procurement procedures
of entities operating in the water, energy, transport and postal services sectors (Official
Journal of the European Union, No. L 134, 30 April 2004, p. 114), Preamble para. 12.
Examples include references to “documentary evidence” and similar concepts, or rules
443
on preparation, modification, withdrawal, submission and opening of tenders, particu-

larly in view of common requirements, such as that tenders be submitted in a “sealed
envelope”.
United States (Electronic Signatures in Global and National Commerce Act, Public Law
444
106-229, June 30, 2000, sect. 102(b)).

This is the case, for example, in France (see Loi no. 2000-230, of 13 March 2000, Journal
445
officiel, 14 March 2000) and Mexico (see Decreto por el que se reforman y adicionan diversas
disposiciones del Código Civil para. el Distrito Federal of 26 April 2000).
266
areas,446 but even in countries that follow this approach electronic commerce
legislation often contains specific rules for the use of electronic communica-
tions in governmental functions,447 or contemplate the enactment of specific
regulations for that purpose.448 Lastly, some countries – not all of which have
adopted a general framework for electronic commerce and electronic transac-
tions – have enacted detailed provisions on electronic communications in the
procurement process.449
The use of electronic applications in the procurement process may fall gener-
ally under two broad categories: electronic tendering and electronic purchasing
systems.450
“Electronic tendering systems” can be defined as systems developed to support
“carefully regulated competitive bidding processes based on detailed bidding
documents and technical specifications.”451 Electronic tendering systems are said
to be particularly suitable for procurement of large public works, of production
capabilities such as a power plant, of performance capabilities such as large
446
Australia (Electronic Transactions Act 1999); Ireland (Electronic Commerce Act, 2000);
and New Zealand (Electronic Transactions Act 2002).
447
India (Information Technology Act, 2000, sect. 4-10); Ireland (Electronic Commerce
Act, 2000, sect. 12); Mauritius (Electronic Transactions Act 2000, sect. 40); Philippines
(Electronic Commerce Act 2000, sect. 27-29); and Singapore (Electronic Transactions
Act 1998, sect. 47).
448
Republic of Korea (Framework Law on Electronic Commerce 1999, art. 27); Thailand
(Electronic Transactions Act 2001, sect. 35); and Venezuela (Decreto no. 1024 de 10 de
febrero de 2001 – Ley sobre mensajes de datos y firmas electrónicas, art. 3).
449
In the Philippines, in addition to general legislation on electronic commerce (Electronic
Commerce Act 2000), there are specific rules concerning the use of electronic com-
munications in the procurement process under Republic Act No. 9184 (known as “The
Government Procurement Reform Act” <www.procurementservice.net/English/ AboutEPS/
RepublicAct9184-GPRA.pdf> and its Implementing Rules and Regulations <www.ato.gov.
ph/Downloads/RA9184_rules.pdf> (12 November 2007)). Brazil, however, does not have
general legislation on electronic commerce or the legal value of electronic communications,
but has enacted specific legislation on certain procurement application of information
technologies, such as electronic reverse auctions and on electronic catalogues under Lei
no. 10.520, of 17 July 2002 <www.planalto.gov.br/ ccivil_03/Leis/2002/L10520.htm>)
and Decreto no. 3.697, of 21 December 2000 <www.planalto.gov.br/ccivil_03/decreto/
D3697.htm>).
450
See Eduardo Talero, Electronic Government Procurement: Concepts and Country Experiences,
World Bank Discussion Paper (September 2001), paras. 30-40 <wbln0018.worldbank.
org/OCS/egovforum.nsf/c3c9b2819079a45d852569bc007722a0/e5596442988c
ccfd85256af5006af56a/$FILE/ATTUQ5LL/egpdiscpaperdraft16.pdf> (12 November
2007). See also Elaine Curran, Andrea Bernert, Anke Wiegand, Electronic Procurement in
the Public Sector: Factsheet on Latest Developments in E-procurement in the EU and its Member
States <www.eic.ie/downloads/e_procurement.pdf> (12 November 2007).
451
Talero, supra note 450, para. 31.
267
information systems, or of sophisticated services such as design and manage-

ment of virtual private communication networks. Electronic tendering systems
may provide various types of support functions for the conduct of procurement
proceedings. Depending on the extent of use of information technology in a
country, the systems may evolve through the following stages:
(a) First stage: In this stage, the use of electronic communications is es-
sentially limited to making procurement-related information available
through electronic means, such as Internet web sites. Such a system is
not very complex technologically and requires minimum or no legislative
change;
(b) Second stage: In this stage, invitations to prequalify and solicitation docu-
ments are made available electronically and may be either downloaded
by suppliers from a designated website or are transmitted by e-mail upon
request. In addition, a number of other actions may be carried out elec-
tronically, such as the online registration of suppliers and contractors
and notices of impending business opportunities through electronic mail
based on supplier profiles;
(c) Third stage: This stage involves conversion to full electronic processing and
requires substantially more complex technology, operating capabilities and
legal and regulatory infrastructure. In this stage, all pre-bidding steps are
accomplished electronically – invitation to participate in the procurement,
registration, supply of solicitation documents, clarifications, modifications
to process or substance of the procurement. Furthermore, submission of
bids, opening of bids, filing of minutes of the bidding session, recording
of the award decision, reception and filing of complaints, and notice of
disposition of complaints, may all de done electronically;
(d) Fourth stage: The last stage involves, in addition to the capabilities covered
by the third stage, highly developed support and oversight functions,
including functions such as settlement of transactions made through the
procurement platform; advanced demand aggregation services (whereby
the procurement platform operator identifies aggregation possibilities for
public sector demand of particular goods or services and actively markets
electronic auctions designed to capture associated economies of scale);
or advanced buyer support services (whereby the procurement platform
operator develops procurement profiles for individual government agencies,
particularly for recurrent purchases, and custom tailors market research
and transaction facilities that improve the efficiency and economy of those
purchases).452
Id., supra, para. 106.

452
268
Countries might be at varying stages in the use of electronic communications.

Even within the same country different procuring entities may not be at an
equal level of sophistication as regards the use of information technology in
the procurement process, although this situation may rapidly change as more
experience is gained and technology becomes more widely used. Those disparities
affect uniformity and may cause a number of practical problems as a result, for
instance, of lack of interoperability between systems set independently by various
procuring entities at different levels of technological advancement.
For electronic procurement systems to function properly, complex technology,
operating capabilities, legal and regulatory infrastructure, and systems that allow
for the submission and opening of bids electronically should be in place. These
systems should also ensure security, reliability, and accessibility of the process.
Implementation costs, in particular in connection with designing appropriate
software or adapting generic software to local conditions, may be significant
and of concern, especially if the costs are not commensurate with the value
of procurement, or if the use of electronic procurement is not so extensive to
ensure that the system will pay for itself in the long term. Another concern is
that, in the countries where Internet penetration is low, electronic procurement
systems may have a potentially discriminatory effect on suppliers depending on
their access to new technology and on quality of the connection
The following sections discuss general issues related to the use of electronic
communications in the procurement process and particular issues arising out
of the use of certain electronic procurement methods.
A. General Issues in Connection with the Use of Electronic

Communications in the Procurement Process
There are two broad categories of general issues related to the use of electronic
communications in the procurement process. The first category concerns the
publication of procurement related information. This covers both general informa-
tion as well as information relating to specific procurement opportunities. The
main issue here is safeguards that are needed to avoid discrimination among
potential bidders. The second category relates to the actual use of electronic
communications during the procurement process. In this respect, concerns
about possible discrimination among bidders are coupled with concerns to
ensure transparency, data protection and integrity of communications. These
matters are discussed in the following sections.
1. Publication of Procurement-Related Information

Electronic publication of procurement-related information may provide wider
dissemination of such information than would be achieved through traditional
269
paper means by making it more accessible to a potentially larger group of suppliers.

This helps promote transparency and public authorities should be encouraged to
disseminate electronically the information they are required by law to publish.
A significant issue in this regard is the extent to which electronic publication
should be mandatory or optional, that is, in a particular case effected by electronic
means alone, or by electronic means as an addition to traditional paper-based
means.
Publications relating to contract opportunities may take the form of general
information on forthcoming procurement opportunities, or may extend to invita-
tions to participate in specific procurement proceedings.
Information of the first category is typically of a non-binding nature and
serves general purposes such as to promote better planning of Government
procurement or to allow potential suppliers to make advance arrangements for
participation in forthcoming procurement processes. Not many laws currently
require the publication of such information. Typically, procuring entities would
issue periodically (e.g. once every year) general information on their forecasted
procurement needs for the relevant period, without any commitment on their
part to actually procure the goods or services indicated. This information is be-
ing increasingly disseminated through electronic publication, and may appear
on both procurement entities’ individual websites, or in centralized electronic
systems covering many entities.
Furthermore, many countries and entities now use electronic means to publish
invitations for suppliers to participate in specific procurements (including those
required to be published by law).453 Electronic publications may be valuable
means to enhance transparency and competition, and in domestic practice, there
seems to be an interest in replacing paper publications entirely with electronic
publications.454 Procuring entities are also typically required to publish notices
Argentina (<onc.mecon.gov.ar>), Australia (<www.tenders.gov.au/federal/index.sht-

453
ml>>), Brazil (<www.comprasnet.gov.br>), Canada (<www.merx.com>), Chile (<www.

chilecompra.cl>), the European Union (<ted.europa.eu>), France (<www.journal-officiel.
gouv.fr>), Mexico (<web.compranet.gob.mx>), the Philippines (<www.procurementservice.
net/Default.asp>), Singapore (<www.gebiz.gov.sg>), United States (<www.fedbizopps.
gov>).
“Permitting electronic notice of business opportunities … as a substitute for the cur-
454
rently required paper publication … is key to agencies’ ability to realize the efficiencies in
electronic processes that justify agency investments in these processes” (United States,
Interim Rule of 16 May 2001, Federal Register, vol. 66, No. 95 (66 FR 27407). In Chile,
article 24 of the Reglamento de Ley no. 19.886 de Bases sobre Contratos Administrativos de
Suministro y Prestación de Servicios (Decreto no. 250, of 9 March 2004, modified by Decreto
no. 1.562, of 25 December 2005 and Decreto no. 20, of 12 January 2007) already requires
all procuring entities to publish invitations to participate in procurement through the
electronic tendering system. Article 62 of the Decreto admits tendering in paper form
only in exceptional circumstances (available under “Orientación normativa” at <www.
270
of contract awards above a certain threshold in the manner specified by the

law. Some countries already publish this information electronically, which is
believed to greatly enhance transparency. Some go even further and publish in
electronic form other information, such as information on the status of ongoing
procurement proceedings.
The essential legal question that arises in connection with either type of pub-
lication is the extent to which a procuring entity may use electronic publication
of contract opportunities and contract awards without discriminating among
suppliers and members of the general public. Publications of this type were
traditionally made by some official channel, such as a government’s gazette or
even local or national newspapers. These publications typically enjoyed a pre-
sumption of general knowledge, that is, no one could claim not having received
notice when a procurement notice was published in the government’s gazette,
for example. Transposing the same degree of authority to electronic publications
is a policy matter that ultimately depends on satisfaction that electronic means
are sufficiently widespread so as to enjoy a presumption of general accessibility.
In order to avoid discrimination, domestic laws usually required that the means
of publication should not compromise the general principle of accessibility.455
2. Use of Electronic Communications in the Procurement Process

Electronic communications may be used in any procurement process conducted
electronically, even if the particular procurement method used was not specifically
designed for electronic application. They may also be used in special procurement
chilecompra.cl> (12 November 2007)). (The Reglamento defines “Information System”

as “an information system for public procurement and electronic contracting … which is
composed as software, hardware and electronic communications and support infrastructure
that allows to conduct procurement”).
455
Domestic laws on electronic publications in procurement often provide such a requirement.
In France, for example, Décret no. 2006-975 du 1er août 2006, article 56, I, authorizes the
publication of invitations to tender in an “information network” (“raiseau informatique”)
from which “any interested person” should be able to download the invitation and related
documents (Journal officiel, No. 179, 4 August 2006, p. 11627). A similar requirement exists
in Austria, where § 3(1) of the Verordnung der Bundesregierung betreffend die Erstellung und
Übermittlung von elektronischen Angeboten in Vergabeverfahren (E-Procurement-Verordnung)
requires the procuring entity to choose the means of communication for the transmission
of electronic offers and the electronic address to which they shall be transmitted “in a
non-discriminatory manner” (Bundesgesetzblatt für die Republik Österreich, 28 April 2004,
part II). In the United States, procuring entities must ensure “that any notice of agency
requirements or agency solicitation for contract opportunities is provided in a form that
allows convenient and universal user access through a single, Government-wide point
of entry” (United States Code Service, title 41, chapter 7, section 426(c)(4) (41 U.S.C.S.,
§ 426 2004)).
271
techniques that are primarily conceived for use in electronic form. The discussion
in the following paragraphs applies to both situations.
(a) Electronic Qualification and Suppliers’ Lists

Suppliers’ lists are established for use as a pool of readily available informa-
tion about listed suppliers in more than one procurement process. In paper
or electronic form, they are employed around the globe for various purposes.
Electronic procurement systems and techniques have expanded and diversified
the recourse to them for procurement and non-procurement purposes, and
made their maintenance and operation more efficient and less costly for both
procuring entities and suppliers. Especially in electronic procurement systems,
the use of some type of registration lists is to some extent indispensable for the
operation, safety and security of electronic systems.456
Depending on how registration on the list affects the eligibility of suppliers
to participate in a procurement process, lists may be mandatory or optional.
Lists are mandatory when registration on them is required for participation in
procurement covered by the list. Where the absence of registration on the list
does not affect the right of suppliers to participate in procurement proceedings
covered by the list, lists are optional.
At the one end of the spectrum are lists that often operate as mailing lists,
where prior registration does not involve any assessment of eligibility of suppliers
to participate in procurement: all those suppliers with an interest in the contracts
covered by the list are included in the list and qualification are checked in the
context of specific procurements.
At the other end of spectrum are suppliers’ lists the main purpose of which
is to screen potential suppliers for future procurements. The degree of screening
may vary from an initial assessment of minimum information on the eligibility
of suppliers to participate in procurement generally,457 to prequalification of
all or some criteria that potential suppliers have to meet for participation in
For instance, so that the system can identify and register potential suppliers, provide
456
them with access rights to the electronic procurement portal, differentiate those rights,
communicate with suppliers by sending information to and/or validating the information
received from them.
E.g. Compranet registration requirements in Mexico (<www.compranet.gob.mx/), and
457
CCR registration requirements in the United States (<www.ccr.gov/handbook.asp#info).

Requirements to provide minimum information for listing are also found, for example, in
Argentina and in article 92 of the Public Procurement Act of the Slovak Republic (Act
No. 523/2003 of 24 October 2003 on Public Procurement and on Amendment of Act.
No. 575/2001 Coll. on the Organisation of Activities of the Government and on the
Organization of Central State Administration, as amended). The information in these
systems is usually limited to basic data about suppliers (e.g. identification information,
legal form, goods supplied, contact information).
272
procurements covered by the list.458 These types of lists are often referred to as
“qualified suppliers’ lists” or “lists of approved or qualified suppliers”.
In electronic procurement systems, the distinction between qualified suppli-
ers’ lists and simple registration lists may not necessarily be clear. For instance,
some electronic registration lists, initially operating as a “yellow pages business
catalogue”, where suppliers were listed and identified by their basic data (such as
name, address and types of goods and services offered) have evolved into more
complex systems. Some of them are being linked to trade, professional or other
registries and systems (in particular, tax and social security payment systems),
which allows registration on the list with simultaneous automatic assessment
of at least basic data. With more technology possibilities, other more complex
functionalities may be integrated into electronic suppliers’ lists, allowing for
automatic evaluation of other qualification elements, such as checking perform-
ance history and ranking suppliers accordingly.459
One problem in the operation of suppliers’ lists is that they may substantially
restrict access to procurement and reduce competition by excluding from the
procurement suppliers who are not registered. The greatest risks for transparency
and competition in procurement arise with lists that operate in a disguised non-
transparent manner. Concerns are often expressed that not all essential elements
in the operation of suppliers’ lists are disclosed to the public in general or to the
suppliers concerned. For instance, conditions for excluding suppliers from a list or
blocking suppliers’ admittance into a list are rarely set out in detail. In addition,
under procurement regimes that authorize some but not all suppliers on the list
to be solicited in any given procurement proceeding, systems employed for the
selection from the lists (rotation, chronological order of registration on the list
or other systems) are also rarely made public, leading to uneven distribution
of procurement opportunities contradictory to the principles of transparency,
equality and non-discrimination among potential suppliers.
458
Requirements to provide more detailed information are found, for example, in Brazil (Law
No. 8.666 of 21 June 1993, article 35), China (Interim Measures of the Public Procure-
ment Centre for Central Government Authorities Regarding Registration of Suppliers’
Qualifications, article 5), Chile (Law 19.886, article 94), Costa Rica (Decreto No. 25038-H,
Reglamento General de Contratación Administrativa of 6 March 1996, article 59.2). Criteria
for listing in those systems may extend to experience, technical, managerial and financial
capacity, organization and availability of equipment, staff and skills.
459
E.g. the Government Electronic Procurement System in the Philippines (GEPS, <www.
procurementservice.net), which operates on the basis of a registry of suppliers, includes
a “performance tracking” mechanism (IRR-A, section 9.1.5). In Brazil, as well, under
article 36 § 2 of Law No. 8.666, the supplier’s conduct in the performance of its obligations
shall be mentioned in the respective registry. Similarly, in Hong Kong, the Environment,
Transport and Works Bureau, which maintains a list of approved contractors, also
maintains a contractor performance report system.
273
Concerns have also been raised that qualified suppliers’ lists are difficult to
maintain in practice, which may lead to obsolescence or the information.460
Lists could also involve administrative costs, which in some cases may be high,
for both suppliers and procuring entities when suppliers that are not likely to
win contracts register or seek to register. For example, combining open access
to lists with screening that requires maintaining an ongoing status review for a
long list of suppliers when only a few will be qualified for a specific procurement
may be expensive. However, if such an ongoing review is not in place, the value
of information on the list, or submitted for registration on the list, would be
questionable as it would not reflect changes in capacity achieved by potential
suppliers and in other data on which registration had relied. As a result, contracts
could be awarded to bidders without adequate qualifications or qualified bidders
could be excluded, particularly in the context of market segmentation.461
Domestic regulations on supplier’s lists aim at mitigating concerns arising
from the use of the lists, in particular, their potential anti-competitive effect and
risks of corruption. Commonly found controls specify conditions for the use of
suppliers’ lists and require:
(i) open approach to market for the establishment of a list;
(ii) continuous publicity of lists, rules regulating their operation, criteria for
listing and delisting and amendments thereto;
(iii) objective, non-discriminate, transparent and proportionate criteria for
listing that are assessed in objective manner;
(iv) open access to lists at any time;
(v) regular updating, including by limiting validity of entries on the list;
and
(vi) due process (proper notifications of decisions related to listing, debriefing,
reasonable timeframe for taking decisions and availability of appropriate
challenge mechanisms).462
460
See Strengthening Procurement Capacities in Developing Countries. International Benchmarks
and Standards for Public Procurement Systems (Paris: OECD/DAC – World Bank Roundtable,
22-23 January 2003) 3.
461
Id.
462
Some or all of these requirements are set forth, for instance, in Australia (Financial Manage-
ment Guidance No. 13, pp. 56-57); Brazil (Law No. 8.666, article 34 § 1); Chile (Executive
Guidelines to Law 19.886, article 97 <www.chilecompra.cl/portal/centro_informaciones/
fr_ley_compras.html>); China (Interim Measures of the Public Procurement Centre for
Central Government Authorities Regarding Registration of Suppliers’ Qualifications,
article 12); Colombia (Law 598); Costa Rica (Decreto No. 25038-H, Reglamento General
de Contratación Administrativa, article 59, section 3); the European Union (EU directive
274
Provided that these safeguards are in place, the enhanced transparency and
speed of communications that result from the use of information technology
for procurement purposes helps procuring entities benefit from the practical
advantages of a continuously available qualification system while at the same
time avoiding or reducing the discriminatory or improper impact that the opera-
tion of suppliers has had in the past.
(b) Electronic Supply of Solicitations and Other Documents

Some countries expressly authorize procuring entities to transmit solicitation
documents, including specifications, project description, draft contracts and other
related information by electronic means, subject to a number of controls, such
as that there must be a record of the date and time of transmission and receipt
of the content of the transmission and that proper identification of originator
and addressee be provided.463
Another way of supplying solicitation documents that, depending on the
technology supporting electronic procurement, may become widely used is the
posting of documents on an accessible database or information system – such
as a special web site – from which suppliers can download them. The invitation
to tender may even incorporate those documents by reference, similarly to
what commercial entities do in respect of general conditions of contract made
available through the Internet. For the avoidance of doubt, the laws of some
countries clearly state that a procuring entity’s duty to provide the solicitation
documents may be met by making those documents available through a publicly
accessible electronic information system from which they can be downloaded
or printed by the suppliers.464
(c) Form of Other Communications during the Procurement Process

Once electronic procurement is authorized, it should be possible for the procur-
ing entity to deliver notices and other communications that it may be required
2004/17/EC, articles 41 (3), 49 (5) and 53 and annex XIV, and EU directive 2004/18/
EC, article 52 (6)); Hong Kong (Tender Procedures for Government Procurement (Chapter
III of the Stores and Procurement Regulations, section 320 (c)); Mongolia (article 37 of
the Public Procurement Law); Serbia (Public Procurement Law, article 53); and in the
United States (FAR 9.202(a)(2), 9.204(a), (c) and (d), and 205).
Spain, Real Decreto 1098/2001 (Reglamento general de la Ley de Contratos de las Adminis-
463
traciones Públicas), of 12 October 2001, article 80, paragraph 2 (Boletín oficial del Estado,
No. 257, 26 October 2001, p. 39252).
In Mexico, for example, article 31 of the Ley de Adquisiciones, Arrendamientos y Servicios
464
del Sector Público provides that solicitation documents are made available at the address
indicated by the procuring entity as well as by electronic means of publication established
by the Government.
275
to send to all bidders (such as, for example, an addendum to the solicitation
documents, invitations to meetings of suppliers, and notices of the extension
of deadlines for submission of tenders) to the electronic addresses provided by
the suppliers. Depending on the technology used by the procuring entity, it may
however appear more expeditious to post those notices and documents on an
accessible database or information system – such as a special web site – from
which suppliers can download them. Recognizing that possibility, as some
countries already do,465 helps avoiding bid protests by excluded suppliers on
grounds of insufficient notice.
A more delicate issue relates to the conduct of meetings with suppliers or
contractors and the manner of handling requests for clarifications of solicitation
documents and responses thereto. The principle of non-discrimination requires
that a procuring entity must communicate clarification and modifications to
bidding documents to all suppliers or contractors to which the procuring entity
has provided those documents. The situation may be more complex in connec-
tion with meetings with suppliers or contractors, insofar as the word “meeting”
usually suggests the physical presence of persons at the same place and time.
Some countries have therefore, introduced enabling provisions that authorize
procuring entities to dispense with the requirement of an actual meeting, as
long as it is possible for the procuring entity and the suppliers to establish some
other form of simultaneous communication, such as by using teleconferencing
facilities.466
(d) Electronic Submission of Tenders, Proposals and Quotations

In some countries, procuring entities have the right to choose when tenders may
be submitted electronically467 and, if so, whether or not tenders may be submitted
465
For example, sect. 8.4 of the Implementing Rules and Regulations of Republic Act No.
9184 of the Philippines, which provides that requests for clarification from bidders “may
be sent electronically”. “Supplemental Bid Bulletins” as well as all other notices to be
made to the bidders or prospective bidders “shall be posted in the [government electronic
procurement] bulletin board and sent electronically to the e-mail address indicated in
the bidder’s registration.”
466
For example, sect. 8.4 of the Implementing Rules and Regulations of Republic Act No.
9184 of the Philippines, which provides that the requirement for face-to-face bidding
conferences “may be replaced once videoconferencing or similar technology becomes the
norm in business transactions in the country. Procuring entities with videoconferencing
capabilities that have manufacturers, suppliers, distributors, contractors and/or consultants
that also have videoconferencing capabilities may conduct their pre-bidding conferences
electronically.”
467
In Germany, for example, public procurement regulations require procuring entities to inform
potential suppliers of the means of communication chosen, which may include mail, faxes,
direct communications, electronic means or any combinaiton thereof (Verdingungsordnung
276
in paper form as well, which in some countries is generally admitted unless the
invitation to tender states otherwise.468 However, in those countries suppliers
are not allowed to switch from one medium to the other or to use both media to
submit tenders or parts thereof.469 A somewhat different approach is taken by
countries in which procuring entities are given the right to choose the means of
communications with suppliers, including electronic communications, but the
procuring entity may not refuse offers and tenders that the suppliers choose to
submit through other means.470 Lastly, some countries require procuring entities
to accept tenders and other documents submitted electronically, as long as they
are authenticated with methods prescribed by the law.471
Certain methods of procurement (such as electronic reverse auctions or
dynamic purchasing systems) are nearly always conducted by electronic means
only.472 It is indeed an essential element of those procurement methods that all
suppliers are required to submit their bids by electronic means only. Accord-
ingly, once the conditions for use of any such special procurement method are
für Leistungen (VOL/A), § 16(4); Verdingungsordnung für freiberufliche Leistungen (VOF),

§ 4(6); Vergabe- und Vertragsordnung fuer Bauleistungen (VOB/A), § 1(1) (2006 versions
available at <www.bmwi.de/BMWi/Navigation/Service/gesetze,did=191324.html>).
468
In Austria, § 43, paragraph 3 of the Bundesgesetz über die Vergabe von Aufträgen (Bundesver-
gabegesetz 2006 – BvergG) provides that electronic submission of tender is possible where
the means chosen are compatible with generally used information and communications
means. If the procuring entity “has made no declaration on the possibility to deliver
offers electronically, the delivery of offers by electronic means is not permitted” (§91,
paragraph 1). Where the submission of tenders by electronic means is admitted, §91,
paragraph 2 requires the invitation to tender to state whether tenders can be delivered
only electronically or whether they can be submitted either electronically or in paper form.
If the procuring entity has made no declaration on this, the delivery of offers is allowed
either by electronic means or in paper form (Bundesgesetzblatt für die Republik Österreich,
Teil I. Nr. 17/2006, 31 January 2006, p. 1).
469
Austria, Bundesvergabegesetz 2002, § 113, paragraph 3: “If the delivery of offers by
electronic means is permitted, the bidders that have delivered an electronic offer may not
make an offer or parts of an offer in paper form. The foregoing does not apply to parts of
offers such as [documentary evidence require by the law] as far as these parts of the offer
are not available electronically”.
470
This is the case, for example, in France until 1 January 2010, when procuring entities
will generally have the right to requir submission of tender in electronic form only (see
Décret no. 2006-975, article 56, II)
471
This is the case, for example, in Argentina (see Decreto delegado No. 1023/2001 con
las modificaciones introducidas por los Decreto Nros. 666/2003 y 204/2004 y por la Ley
25.563. Régimen General. Contrataciones Públicas Electrónicas. Contrataciones de Bienes y
Servicios. Obras Públicas. Disposiciones Finales y Transitorias <onc.mecon.gov.ar>, under
“Normativa”(12 November 2007), article 21.
472
Only a few countries admit reverse auctions outside the context of electronic procurement.
One of them is Brazil, where the matter is regulated in Lei no. 10.520, of 17 July 2002.
277
met, the procuring entity must have the right to refuse to accept bids submitted
by other means. Even for procurement methods which do not by their nature
require the use of electronic communications, the procuring entity might have
a legitimate interest, for purposes of economy or efficiency, to take advantage
of fully or partly automated devices for receiving and processing tenders, such
as a specially designated portal or Internet web site.
Another problem is that procurement laws often require that tenders must
be submitted “in writing, signed and in a sealed envelope”.473 Requirements of
this nature are intended to guard the confidentiality of tenders and prevent
‘opening’ of the tenders prior to the deadline for submission of tenders. This
question is closely related to the issue of control over the use of electronic com-
munications, in particular as regards security, confidentiality and authenticity
of submissions, and integrity of data.
Efficient and reliable electronic procurement systems indeed require appropri-
ate controls as regards security, confidentiality and authenticity of submissions,
and integrity of data, for which special rules and standards might need to be
formulated. Current regulations and practices allow identifying a number of
general principles and goods practices in the area.
UNCITRAL is currently working on a revision of its Model Law on Procure-
ment of Goods, Construction and Services, inter alia, to accommodate electronic
procurement methods. Already at an early stage of this work, there was agree-
ment on a number of principles that provide a good basis for the formulation of
specific rules, standards or guidance on the matter.474 The main such principles
are the following:
(a) The procuring entity should apply procedures to make it possible to
establish the origin and authenticity of communications. The means and
mechanisms used should also be such as to ensure that the integrity of
data is preserved;475
473
E.g. UNCITRAL Model Procurement Law, article 30(5)(a).
474
See UNCITRAL, Report of Working Group I (Procurement) on the work of its sixth session
(Vienna, 30 August-3 September 2004) (U.N. document A/CN.9/568), paras. 41 and
42.
475
Directive 2004/17/EC, in its Annex XXIV provides that devices for the electronic receipt
of tenders, proposals or quotations must at least guarantee, through technical means and
appropriate procedures, inter alia, that electronic signatures relating to tenders, requests
to participate and the forwarding of plans and projects comply with national provisions
adopted pursuant to the Electronic Signatures Directive.
278
(b) There should be technical means in place to determine the time of receipt
of documents, when the time of receipt is significant in applying the rules
of the procurement process;476
(c) The means and mechanisms used by the procuring entity should also
ensure that tenders and other significant documents are not accessed by the
procuring entity or other persons prior to any applicable deadline.477
(d) Lastly the confidentiality of information submitted by, or relating to,
other suppliers should be maintained throughout the procurement
process.478
In a number of countries recourse to electronic procurement is only allowed after

the interested procuring entities have certified that they possess the capability to
ensure that their electronic communications provide the same level of reliability
that is generally assumed to exist in the case of paper-based communications. 479
476
EU Directive 2004/17/EC, Annex XXIV (requiring that devices for the electronic receipt
of tenders, proposals or quotations must, inter alia, offer means to determine precisely the
exact time and date of the receipt of tenders, requests to participate and the submission
of plans and projects).
477
See, for example, EU Directive 2004/17/EC, Annex XXIV (requiring that devices for the
electronic receipt of tenders, proposals or quotations must at least guarantee, through
technical means and appropriate procedures, inter alia, that no one must have access
to data before the applicable deadlines and that any infringement of access restriction
must be clearly detectable; that only authorized persons may set or change the dates for
opening data received; and that simultaneous action by authorized persons must give
access to data transmitted only after the prescribed date). In Mexico, article 27 of Ley de
Adquisiciones, Arrendamientos y Servicios del Sector Público provides that tenders submitted
electronically shall use technology that ensures the confidentiality and inviolability of the
information and that an agency of the Government shall provide certification services to
support the electronic identification methods used by suppliers and contractors.
478
See, for example, EU Directive 2004/17/EC, Annex XXIV, requiring that devices for the
electronic receipt of tenders, proposals or quotations must guarantee that during the
different stages of the contract award procedure access to all data submitted must be pos-
sible only through simultaneous action by authorized persons and that data received and
opened in accordance with these requirements must remain accessible only to authorized
persons.
479
In the United States, sect. 4.502 of the Federal Acquisition Regulations requires the heads
of procuring agencies before using electronic commerce to “ensure that the agency systems
are capable of ensuring authentication and confidentiality commensurate with the risk
and magnitude of the harm from loss, misuse, or unauthorized access to or modification
of the information”. In the Philippines, government electronic procurement systems
(G-EPS) are subject to a number of general requirements set forth in sect. 8.1.2 of the
Implementing Rules and Regulations of Republic Act No. 9184, including that the Bid
Awards Committee “shall have complete control of the bidding process” and “sole author-
ity to open bids”, that the systems must be “virus-resilient and must provide sufficient
279
Another matter relates to the conditions for functional equivalence between

written tenders submitted in a sealed envelope and electronic tenders is the
manner of opening tenders. Some countries have introduced enabling provisions
that contemplate opening of tenders through an electronic information system
that would automatically transmit the information that is usually announced
at the opening of tenders.480
(e) Procurement Contracts and Electronic Signatures

In domestic practice, some countries authorize the notice of acceptance of a tender
to be sent electronically.481 In principle, it should be possible for a procuring entity
in a country where the law does not create obstacles to the legal recognition of
contacts negotiated through electronic means to accept electronically executed
procurement contracts. However, countries may also wish to prescribe the
manner in which the parties will sign or otherwise authenticate a procurement
contract concluded electronically.482
security” such as “firewall and encryption devices”, that they must provide for the use
of electronic signatures “and other current electronic authentication devices” and have
“sufficient redundant back-up facilities.”
In Chile, for example, article 33 of Decreto no. 250, of 9 March 2004 provides that the
480
opening of tenders shall be effected through an “Information System”, which shall au-
tomatically release and open the tenders at the date and time provided in the solicitation
documents.” It provides further that “the Information System shall ensure certainty as
to the date and time of opening and shall allow the tenderers to know at least the follow-
ing conditions of the remaining tenders: (a) identity of tenderer; (b) basic description of
good or service tendered; (c) initial and global price of tender; (d) identification of tender
security, if any”.
United States Code Service, title 41, section 253 b (c) (41 U.S.C.S. § 253b (2004)): “The
481
award of a contract shall be made by transmitting, in writing or by electronic means,

notice of the award to the successful bidder. Within 3 days after the date of contract
award, the executive agency shall notify, in writing or by electronic means, each bidder
not awarded the contract that the contract has been awarded.”
In Austria, § 131 of the Bundesvergabegesetz 2006 provides in paragraph 2 that notice of
482
award can be sent to suppliers and contractors electronically. However, § 134, paragraphs
1, 2, and 3 contemplate the execution of the procurement contract through the exchange
of paper documents by registered mail tenders, while paragraph 3 of that provision only
authorizes the Federal Government to issue regulations on “contract execution” (“Ver-
tragsabschluss”) by electronic means, including regulations to guarantee the confidentiality,
authenticity and integrity of data transmitted electronically by means of secure electronic
signatures, as well as their confidentiality.” Rules on the authenticity and integrity of
electronic tenders are contained in regulations issued recently (the aforementioned
E-Procurement-Verordnung 2004). Although the regulations do not expressly refer to the
execution of the procurement contract, the same requirements would arguably apply.
280
To the extent that a procurement contract would be formed by the exchange

of electronic communications between the procuring entity and the selected
supplier, the time of contract formation should follow the general rules on the
matter. By the same token, at least in theory, there is no reason why procurement
laws should make specific signature requirements beyond and above, or at vari-
ance with, the general rules on electronic authentication and signature in force
in the country. However, the type of authentication methods that a procuring
entity is capable of accepting may be limited for various reasons, including
concerns over the appropriate level of reliability and availability of supporting
technology. Lastly, issues related to the interoperability of information systems,
both at the national level and as within a given region, suggest that countries
should have broad latitude in determining which methods of authentication
they would accept in the procurement process.483
B. Legal Issues arising out of Specific Electronic Procurement

Techniques
By and large, the legal issues that have arisen in connection with the conduct of
government procurement through electronic means, as described in the follow-
ing sections, are not intrinsically related to the electronic medium. Indeed, most
of the same issues would also arise if the procurement process was conducted
through traditional means.
Nevertheless, the fact electronic communications and automated devices
make it easier or more economical to carry out certain procurement methods
than would have been the case with traditional means, possibly leading to
their overuse, may exacerbate the risks and problems that these procurement
methods already have. This may call for caution in their use and stress the
need for safeguards to ensure that the overall objectives of sound government
procurement (transparency, non-discrimination, integrity and value-for-money)
are preserved.
1. “Electronic Reverse Auctions”

An electronic reverse auction (ERA) can be defined as an online, real-time
dynamic auction between a buying organization and a number of suppliers
who compete against each other to win the contract by submitting successively
483
See Christine Kirchberger and Jon Ramón y Olano, “Issues of Security and Interoperabiity
in Electronic Public Procurement”, 47 Scandinavian Studies of Law (2004) 51.
281
lower priced bids during a scheduled time period.484 ERAs are used in both the
private and public sectors.
A traditional selling auction involves a single seller and many buyers, the
latter bidding for the right to purchase and the former using market forces to
drive buyers to raise the price of purchase, in a reverse auction. In an ERA,
by contrast, there is a single buyer and many suppliers: the buyer indicates its
requirement, and suppliers progressively bid downwards to win the right to
supply. In this instance, the buyer uses market forces to drive suppliers to lower
prices.
(a) The Extent of Use of ERAs

The extent of the use of ERAs is determined to a large degree by the extent of
electronic commerce activity in the overall economy. In countries where electronic
commerce is widespread, the trend towards the use of ERAs in public procure-
ment is strong. Countries in which application of ERAs to public procurement
has been pioneered include in particular Australia,485 Brazil,486 Canada, France,
Singapore, Thailand, the United Kingdom487 and the United States.488
See Stewart Beall et al., Role of Reverse Auctions in Strategic Sourcing (Center for Advanced
484
Purchasing Studies (CAPS Research), 2003) <www.capsresearch.org/publications/

pdfs-public/beall2003es.pdf> (3 December 2007).
485
Australia has had an integrated national electronic procurement framework since May
1999 (see the “Framework for National Cooperation on Electronic Commerce in Government
Procurement” <www.apcc.gov.au/docs/NationalECFramework.pdf>). This framework
consists of Commonwealth initiatives developed to promote electronic procurement. State
governments have also established business centres to encourage acceptance of online
procurement and have developed their own online portals for e-procurement, including
New South Wales (<www.cpsc.nsw.gov.au/e-procurement/links.htm), Victoria (<www.
ec4p.dtf.vic.gov.au/domino/web_notes/ec4p/ec4p.nsf/ frameset/EC4P?OpenDocument)
and Queensland (<www.qgm.qld.gov.au/prc/English/ prc_intro.htm).
In Brazil, ERAs were introduced to public procurement by Decree 3.697 of 21 December
486
2000. In 2001, 3.2 per cent of the total volume of goods and services procured by the
Federal Government were procured through ERAs, growing to 12 per cent, in 2003, and
to approximately 20 per cent, in 2004. COMPRASNET (<www.comprasnet.gov.br>) is
the web platform for e-Government Procurement of the Federal Government in Brazil.
See the website of the Office of Government Commerce in the United Kingdom (OGC)
487
(<www.ogc.gov.uk>).
For news on experience in the United States and elsewhere in governments’ use of ERAs,
488
see <www.egov.vic.gov.au/Research/OnlineAuctions/auctions.htm>. For a discussion

group on successes and failures in the use of ERAs in U.S. procurement, see <www.wifcon.
com/arc/forum62.htm>.
282
Regulations on ERAs may be found in statutes (such as legislation implement-

ing the EU Directives and in Brazil489) or in provincial regulations (such as in
China490). In other countries, guidance on the conduct of ERAS is given in internal
documents of procuring agencies (such as in Singapore491), or in centralized
regulatory guidelines (such as in Australia492 and the United Kingdom493). In the
United States,494 the procedures are largely determined on an agency-by-agency
basis, and sometimes on a procurement-by-procurement basis.
Regulations provide for two ways of using ERAs: either as a stand-alone
method of procurement or as an optional phase in other methods of procure-
489
Federal Law No. 10.520/2002 of 17 July 2002, complemented by Law 8.666 to the extent
it does not conflict; Decrees 1.094/94, 3.555/00, 3.693/00, 3.697/01 and 3.784/01;
and Internal Instructions (Portarias) SAF/PR 2.050 and MARE 5.
490
See the Nanning City Interim Measures for the Management of Online Public Procurement
Bidding of 18 June 1999; the Zhejiang Province Interim Measures for the Management
of Online Public Procurement Bidding of 1 September 2000; the Hefei City Interim
Measures for the Management of Online Public Procurement Bidding of 13 March 2001;
the Wuxi City Interim Measures for the Management of Online Public Procurement Bid-
ding of 1 April 2001; the Zhuhai City Interim Measures for the Management of Online
Public Procurement Bidding of 27 June 2002; the Shenzhen City Interim Measures for
the Management of Online Public Procurement Bidding of 15 October 2003; and the
Shanghai Interim Measures for the Management of Online Public Procurement Bidding of
December 2004. The text of the latter in Chinese and its unofficial translation in English
are available with the UNCITRAL secretariat.
491
See, for example, the Administrative guidelines for assisted reverse auction event of the
Ministry of Defense (the “Singapore Guidelines”).
492
In Australia, regulation is currently limited to policy documents, non-statutory procure-
ment guidelines and broad statutory provisions about electronic procurement. New South
Wales remains the only State to provide any specific guidance on topic. See the NSW
Government Procurement Guidelines on Reverse Auctions of March 2001 <www.dpws.
nsw.gov.au/ NR/rdonlyres/ezac4yppqkqqzaj5qdjgerv3aj62n4ishpa3xhofh4fdl3cqut4m-
7l4ibv3a2w67sslw5zuhmjpois43joel4ees4xe/Reverse+Auctions.pdf>) (the “Australian
Guidelines”).
493
In the United Kingdom, rules on public procurement are mainly limited to those of the
EU law. The British Government has considered that the EU current directives allow scope
for ERAs in public procurement and has endorsed their use. OGC, in promoting the use
of ERAs in government procurement, has issued the on-line guidance <www.ogc.gov.uk/
index.asp?docid=1001034>.
494
Attempts to formulate centralized binding rules have not yet been successful, reportedly
because of industry opposition and because there is no consensus on when reverse auc-
tions should be used. See, for example, Susan L. Turley, “Wielding the Virtual Gavel – DOD
Moves Forward with Reverse Auctions,” 173 Military L. Rev. (2002) 1, 25-31, (discussing
sources of industry opposition to ERAs).
283
ment.495 The latter approach is taken by the EU Directives,496 in Australia,497

Singapore498 and the United States.499 In most of those cases, an ERA is a final
stage preceding the award of a public contract, while in some jurisdictions, like
in Brazil and China, an ERA is a distinct procurement method. In the latter case,
ERAs can be conducted in an open market to all suppliers or to a limited number
of pre-selected or pre-qualified suppliers.
However, it is generally recognized that not all types of procurement are ap-
propriate for ERAs. The primary factor to consider in deciding whether a certain
type of procurement is appropriate for ERA is the level of product or service
complexity for the procurement and with what level of accuracy the procurement
can be specified (i.e. whether suppliers can easily understand the requirement
or the requirement can only be defined superficially and needs early supplier
intervention). Other factors considered are: (a) predicted value of procurement
to determine whether procurement would be attractive to suppliers; (b) market
competition (whether it is high enough to ensure the participation of sufficient
number of suppliers in the ERA);500 and (c) award procedure (to what extent
the procurement award criteria are quantifiable).
There has been a general tendency in international practice to confine the
use of this procurement technique to standardized goods and some simple types
of services. In Australia, for example, the use of ERAs is restricted to products
495
Although this means that ERAs can be used in open tendering proceedings, it has been
observed that, in practice, the restricted procedure will normally be used when an ERA is
involved. ERAs are likely to be used only rarely in negotiated procedures since many of the
grounds permitting recourse to such procedures are concerned with situations in which
specifications and other conditions cannot be easily set in advance, something which is
generally essential for an auction (See Sue Arrowsmith, “Electronic Reverse Auctions
Under the EC Public Procurement Rules: Current Possibilities and Future Prospects”, 11
Pub. Procurement L. Rev. (2002) 299.
496
EU Directive 2004/18/EC, article 54 (2).
497
Under the Australian Guidelines, ERAs could be used as part of the tender process, as a
means of obtaining quotes from suppliers, and as the second stage of a two-stage tender
process where price is the remaining selection criteria.
498
Section 1.1 of the Singapore Guidelines.
499
In the United States, in the absence of explicit prohibition, ERAs could be used in combination
with any available procurement methods and is also used in the context of frameworks
and dynamic purchasing systems.
500
Some systems specifically address a minimum number of participants in the ERA while in
other systems general provisions of procurement law apply. The requirement of at least
three participants in an ERA is commonly found in the regulations. See, for example, article
22 of the Shanghai Interim Measures for the Management of Online Public Procurement
Bidding. It has been observed that a higher number of participants effectively prevents
the risk of collusion. In Austria, participation in ERA of minimum ten participants is
required (see Purchase Contract Awards Act 2002, para. 116.7).
284
or commodities with no or little value-added or service component, capable of

description in homogeneous terms, available in a competitive market, with price
as a primary selection criterion.501In some countries, for example in Brazil,502
the use of ERAs is also allowed for the procurement of simple services.
Works, however, are usually excluded from ERAs.503 In some countries, such
as Canada and the United States, grave concerns have indeed been expressed
particularly over the use of ERAs for the procurement of construction.504 In
some states of the United States, such as Pennsylvania and Kansas, state pro-
curement regulation explicitly prohibits procurement of construction contracts
through ERAs.505 It has been observed, however, that some construction works
and services (e.g. road maintenance) may be appropriately procured through
ERAs. Under the EU Directives, any purchases can be procured through ERAs
provided that “specifications can be established with precision,” such as recur-
ring supplies. “Intellectual” works or services, such as the design of works, are
explicitly excluded.506
(b) Procedural Aspects of ERAs
(i) Auction Stage

At the auction stage the participating bidders access a screen by logging in to the
auction address provided in the notice of auction or invitation to the auction,
as applicable, using their respective identification and personal password that
permits them to participate in the auction. The object of the ERA and the auction
The Australian Guidelines.

501
Under article 1 of Law No. 10.520 of 17 July 2002, auctions can be used only for “com-
502
mon” goods and services, defined as those for which quality and performance standards
can be objectively and precisely defined according to standard specifications used in the
market.
Brazilian regulations do not mention works in the list of eligible items for ERAs. Under
503
the Australian Guidelines as well, the use of ERAs is to be restricted to the procurement
of products or commodities only.
Special Bulletin of the Canadian Construction Association, December 2001 <www.
504
cca-acc.com/news/committee/rag/rag-owner.pdf> (28 November 2007).

See AGC’s white paper, Reverse Auctions Over the Internet: Efficiency – At What Cost?,
505
2003.
See article 1(7) of EU Directive 2004/18/EC that defines “reverse auction”. It explicitly
506
provides that certain service contracts and certain works contracts having as their subject-
matter intellectual performances, such as the design of works, may not be the object
of electronic auctions. Recital paragraph 14 explains that “only elements suitable for
automatic evaluation by electronic means, without any intervention and/or appreciation
by the contracting authority, may be the object of electronic auctions, that is the elements
which are quantifiable so that they can be expressed in figures or percentages.”
285
rules (i.e., start time, duration, minimum bid, the method of termination, etc.)
are announced and the call for bids is the communicated simultaneously to all
bidders.
A minimum period of time is usually required to elapse between the issuance
of the notice of auction or invitation to the auction, as the case may be, and the
opening of the auction.507 In practice, the more complicated the procurement,
the longer such a period usually is.
Usually, regulations provide flexibility to procuring entities with respect to
the closure of the auction. For example, under the EU Directives, auctions may
be closed in one or more ways: (a) at the date and time fixed in advance as com-
municated to tenderers in the invitation; (b) when contracting authorities receive
no more new prices or new values which meet the requirements concerning
minimum differences; or (c) when the number of phases fixed in the invitation
has been completed.508 The end of the bidding session may be set electronically
or, as in Brazil, if expressly provided in the notice of auction, announced by the
auctioneer.509 The Brazilian system permits bidders to challenge the time fixed
for the auction and request extensions of the auction. However, it is within the
discretion of auctioneer to satisfy such a request.510
In practice, the greater the value and complexity of the procurement, the
longer the duration of the ERA. ERAs rarely close after a fixed duration of time
has expired (what is called “hard close time”). Usually, the closing time of the
ERA is automatically extended for a specified period of time (e.g. 5 minutes) if
a new lowest bid or a bid that changed top bid rankings (usually one of the top
three ranked bids) is received in the last few minutes (e.g. within 2 minutes of
the closing time). Such extensions may be continuous for an indefinite period
of time (known as “unlimited soft close”) or limited in the amount of overtimes
(e.g. maximum of three 5-minute extensions). This process continues until
there are no longer any lower bids being submitted within the stated period
prior to closing.
(ii) Bidding Requirements

When the price only is subject to ERA, it is usually required that the value of
each bid has to be necessarily lower than the value of the last bid registered by
507
See Law No. 10.520 of Brazil (requiring at least 8 days after the notice of auction is given);
EU Directive 2004/18/EC, article 54(4) (providing that ERAs may not start sooner than
two working days after the date on which invitations are sent out).
508
EU Directive 2004/18/EC, article 54(7)
509
Decree 3.697.
510
Auctioneer’s discretion in this regard has been criticized by some analysts, as well as by
multilateral development banks, which prefer fully automated systems without little, if
at all, human intervention.
286
the system. In some countries, participants who did not bid at all or did not vary
their bids within the fixed increment are excluded after each round of bids.511
In Brazil, no provisions on exclusion of bidders by the auctioneer are found but
bidders are permitted to withdraw their bids at any time and, if they are not
interested in continuing, disconnect at any time. The time of disconnection is
automatically registered and this comes out in the records of the ERA.
(iii) Disclosure of Information during the Auction

One of the inherent features of an ERA is that it enables current information
about the status of the auction to be provided to bidders automatically and
instantaneously as an auction unfolds. It has been observed that, unless prop-
erly regulated, this feature of ERAs gives rise to concerns, especially from the
standpoint of competition law.512
Most regulations are flexible with respect to the extent of information disclosure.
Some systems, generally require that participating bidders be provided certain
basic information about the progress of an auction on an on-going basis, such
as information that allows bidders to ascertain their current relative rankings,513
the number of bidders participating in the proceeding,514 and the time remaining
for the reverse auction. To determine relative ranking, some systems require
real-time disclosure of the lowest price to be bid515 while in other systems, only
ranking but not prices are disclosed.516 Under the EU Directives, information
about other prices or values submitted may be disclosed if the specifications or
auctions rules, as applicable, provide for the disclosure of that information.517
See Austria, Bundesvergabegesetz 2006, § 147, paragraph 4(5).

511
See Ciara Kennedy-Loest and Ruth Kelly, “The EC Competition Law Rules and Electronic
512
Reverse Auctions: A Case for Concern?”, 12 Pub. Procurement L. Rev. (2003) 27.
Article 54(6) of EU Directive 2004/18/EC requires contracting authorities to instanta-
513
neously communicate to all tenderers at least sufficient information to enable them to

ascertain their “relative rankings” at any moment.
See, for example, EU Directive 2004/18/EC, article 54(6).
514
See, for example, Austria, Bundesvergabegesetz 2006, § 148, paragraph 2.

515
See, for example, the Shanghai Interim Measures for the Management of Online Public
516
Procurement Bidding. According to the analysts of the EU competition law rules, showing
during the auction overall ranking instead of prices is preferable from competition law
prospective. See Kennedy-Loest and Kelly, supra note 512 at 29.
EU Directive 2004/18/EC, article 54(6).
517
287
(iv) Contract Award

Depending on the permitted criteria for the award of a contract procured through
ERAs, two systems are found: those based on the lowest price alone and those
that permit additional criteria.
In the systems where the price is the only permitted criterion for the award,
as in Brazil and China,518 quality requirements are limited and factored in the
bidding documents as minimum qualification requirements, which, if met, put
suppliers in an equal footing. In addition, in Brazil, quality requirements of the
goods being procured are established in advance when the goods and services
were included in the appropriate catalogues, but the bidder offering the lowest
bid may be later disqualified in the course of evaluation of its qualifications,
which takes place after the auction.519 In China, some quality requirements,
such as ability to provide quality after-sale service and complete technical
maintenance, are evaluated upon the application for the membership in the
online public procurement bidding system, without which no participation in
ERAs is possible.520 Quality aspects are also taken into account in the event of a
price tie, when a supplier with a higher credibility is selected.521
By contrast, the EU Directives differentiate two types of auctions: simple ERAs,
in which the price is the only award criterion; and other types of ERAs where
the technically and financially “most advantageous” offer is given the award on
the basis of evaluation of all award criteria fixed in the tender documents.522
The values of only those features that are quantifiable and can be expressed in
figures or percentages can be the subject of ERAs.523 However, all features of
the tender, auctionable and non-auctionable, are to be evaluated prior to the
auction in accordance with their relative weightings.524 The outcome of the full
evaluation of each bidder is made known before the ERA in the invitation to
This approach has also been advocated by the multilateral development banks.
518
Law 10.520 and Decree 3.697.

519
See, for example, the Shanghai Interim Measures for the Management of Online Public
520
Procurement Bidding”, article 6, and the Zhejiang Province Interim Measures for the
Management of Online Public Procurement Bidding”, article 8.
See the Shanghai Interim Measures for the Management of Online Public Procurement
521
Bidding, article 19; and the Zhejiang Province Interim Measures for the Management of
Online Public Procurement Bidding, article 22. Factors considered to assess suppliers’
credibility are inter alia a good record of legal compliance, past performance, business
integrity, strong credit standing, considerable capital strength and sound financial
status.
522

523
Id., article 54(4).

524
288
the auction. The invitation also states the mathematical formula525 to be used
in ERA to determine automatic reranking on the basis of the new prices or new
values submitted.
Except in those auction models that admit an evaluation of the “non-auction”
elements of the bid after closing of the auction phase – a possibility which is the
object of some controversy – the winning bidder should be known in the end of
the auction and would normally be the bidder offering the lowest bid. However,
even in auction without subsequent evaluation of “non-auction” elements of
bids, there may be situations in which the lowest bid is not necessarily the win-
ning bid. Some systems allow the notice on ERA or the terms and conditions of
auctions to state that the final decision to accept the offer rests with the procuring
entity allowing it to ascertain if the product meets the standards required and
whether the supplier is able to proceed with the supply.526
Existing regulations usually allow the procuring entity to accept the second
best offer, if for legitimate reasons it rejected the lowest bid, provided that such a
possibility was disclosed in advance to the bidders.527 In other systems, however,
if the lowest bid is invalidated, the procuring entity has to reconduct ERA or
adopt other methods of procurement.528
525
Id., article 54 (5). That formula incorporates the weightings of all criteria fixed to determine
the most economically advantageous tender, as indicated in the contract notice or in the
specifications; for that purpose, any ranges shall be reduced beforehand to a specified
value. Where variants are authorized, a separate formula is provided for each variant.
526
See, for example, in China, the Shanghai Interim Measures for the Management of Online
Public Procurement Bidding, articles 22 and 27; the Shenzhen City Interim Measures
for the Management of Online Public Procurement Bidding, article 31; the Zhuhai City
Interim Measures for the Management of Online Public Procurement Bidding, article 29;
and the Hefei City Interim Measures for the Management of Online Public Procurement
Bidding, article 25.
527
In China, for example, the lowest bid may be invalidated by the procuring entity, for instance,
if it is higher than the market price or abnormally low or in case of a misconduct of the
winning bidder during the bidding process or the registration (See the Liuzhou City Rules
of Implementation for Public Procurement through Online Procurement, article 19). The
Brazilian system permits an auctioneer to approach the bidder who submitted the second
lowest bid if the winning bidder is disqualified or the bid is deemed to be unacceptable or
non-responsive
528
See, in China, the Shanghai Interim Measures for the Management of Online Public
Procurement Bidding, article 22; the Shunyi District of Beijing Interim Measures for the
Management of Online Public Procurement Bidding, article 20; and the Liuzhou City
Rules of Implementation for Public Procurement through Online Procurement”, article
22.
289
(c) Benefits and Concerns

In the view of some analysts, if used properly, ERAs have the potential to improve
value for money,529 efficient allocation of resources,530 and transparency in the
process of awarding contracts.531 It has also been observed that they can make
governmental systems more accessible and user-friendly, allow governments
to keep up with changes in technology, business practices and prices found in
the private sector, gain better knowledge of the market and open government
bidding markets to suppliers who had not enjoyed access to them previously.532
The potential of ERAs to exert a positive effect on competition, in particular by
dismantling preferential purchasing patterns in some member States of the
European Union, has been recognized in the 2004 EU Directives.533
Most analysts agree that ERAs are successful for goods and services that
can clearly be specified, whose non-price criteria can be quantified, for which
switching costs (e.g. replacement of suppliers) are acceptable, and for which a
competitive market exists. In contrast, it is generally considered that for one-of
products where quality is more important than price, and for strategic items, for
which alliance level supplier relationships are critical, they are not suitable.534
In some countries where ERAs have been introduced, there have been con-
cerns that, at least for some types of procurement, ERAs seldom provide benefits
comparable to currently-recognized selection procedures. For instance, it has
been suggested that ERAs:
See Andrew Stein and Paul Hawking, “Reverse Auction E-procurement: A Suppliers’
529
Viewpoint”, <ausweb.scu.edu.au/aw02/papers/refereed/stein/paper.html> (28 November

2007). See also David C. Wyld, “Auction Model: How the Public Sector Can Leverage the
Power of E-commerce Through Dynamic Pricing”, Price Waterhouse Cooper Endowment
for the Business of Government, 2000 <www.businessofgovernment.org/pdfs/WyldReport.
pdf> (28 November 2007); and Curran, Bernert and Wiegand, supra note 450. Also OGC’s
“E-procurement: Cutting Through the Hype” <www.ogc.gov.uk>.
See CAPS Research Focus Study, Role of Reverse Auctions in Strategic Sourcing (2003).
530
Shortened time frames for actions in the context of ERAs have already been reflected in
some legislative texts. On the other hand, it is observed that such a pattern may impact
other methods of procurement where, however, reduction of time frames for certain acts
may not be justifiable.
See Ohad Soudry, “Promoting Economy: Electronic Reverse Auctions Under the EC Direc-
531
tives on Public Procurement”, 4 J. Pub. Procurement (2004) 340, 354. See also Wyld, supra
note 529.
See CAPS Research Focus Study, supra note 530 and Wyld, supra note 529.
532
See Ohad Soudry, supra note 531 at 340-342.

533
See, for example, the OGC guidance <www.ogc.gov.uk/index.asp?docid=1001034> (28

534
November 2007). Also, CAPS Research Focus Study, supra note 530.
290
(a) do not guarantee the lowest responsible and responsive price535 and
continued savings in subsequent ERAs;536
(b) may encourage imprudent bidding and thus create a higher risk of
abnormally low bids;537
(c) do not adequately handle non-price factors, such as quality of performance
and buyer-supplier relationships;538
(d) are more vulnerable than traditional bidding processes to collusive be-
haviour by bidders, especially in projects characterized by a small number
of bidders, or in repeated bidding in which the same group of bidders
participate;539 and
(e) have negative effects on the market, including an anti-competitive impact.540
In addition, some analysts question the legality of ERAs on the grounds
that their inherent features conflict with traditional procurement principles
535
Id. It is suggested that in ERAs, each bidder recognizes that it will have the option to provide
successive bids and therefore has a little incentive to offer its best price and subsequently
may never offer its best price. Consequently, the winning bid may be simply an established
increment below the second lowest bid rather than the lowest responsible and responsive
bid.
536
Id.
537
For the analysis of existing approaches for handling the risk of abnormally low prices,
including in ERAs, see U.N. document A/CN.9/WG.I/WP.36.
538
Jeffrey K. Liker and Thomas Y. Choi, “Building Deep Supplier Relationships”, Harv. Bus.
Rev. (2004) 104, 106.
539
Collusion can occur in the ERA when two or more bidders work in tandem to manipulate
the price of an auction, or, alternatively, when a seller uses shells to enter fake bids and
drive up the asking price. As a result, contracting authorities might face higher prices
and the members of the cartel will enjoy profits above the competitive prices. See Soudry,
supra note 531, 360-66.
540
See generally, Peter Trepte, “Electronic Procurement Marketplaces: The Competition Law
Implications”, 10 Pub. Procurement L. Rev. (2001) 260, (discussing anti-competitive
concerns in the context of an electronic government procurement market). See also Ciara
Kennedy-Loest and Ruth Kelly, supra note 512: (the authors discuss three main areas of
concerns identified by the European Commission in relation to the compatibility of elec-
tronic marketplaces (and, by analogy, ERAs) with the EU competition rules: information
exchange, in particular because the auction marketplace provides a forum for competitors
to exchange commercially sensitive information; access and foreclosure issues (has a
marketplace or auction been set up to exclude certain competitors or to require them to
participate on an exclusive basis?); and the aggregation of purchasing power (does the
auction or marketplace facilitate joint purchasing or joint selling by participants in an
auction?)). The use of ERAs in the private sector has also been questioned, in particular
as it carries the risk of abuses of monopoly or dominant positions (See Draetta, supra note
14 at 169-173).
291
and practices, such as rules forbidding the disclosure of information on

other bids, pre-closing negotiations or bid-shopping.541
The risk of collusion is probably the main reason why auctions are not used in
traditional procurement methods. One of the reasons why the use of ERAs has
been advocated is because technology allows for the conduct of auctions in a
situation of nearly absolute anonymity, and only an adequate assurance of
anonymity can justify the use of a method where so much sensitive information is
shared during the bidding process. Therefore, it is general practice, often required
by law, that the identity of those submitting particular tenders in the auction
phase not be disclosed to other bidders.542 In some systems, the identity is not
disclosed to the procuring entity.543 Usually anonymity requirements apply until
the closure of ERA and are ensured through computerized or automatic means.
In some systems, anonymity of bidders is preserved also after the auction.
2. Dynamic Purchasing Systems

Dynamic purchasing systems can be described as arrangements where one or more
suppliers who were selected on the basis of their responses to request for proposals
undertake to supply certain goods or services, or range of goods or services for a
certain period of time pursuant to periodic orders that are subsequently placed
with the supplier or suppliers chosen as particular requirements arise.
Dynamic purchasing systems are a type of framework agreement, but
differ in that they are conducted exclusively by electronic means.544 Dynamic
541
The extension of bid closing times and the ability to resubmit prices as allowed by ERAs can
be interpreted as a form of pre-closing negotiation or bid-shopping which may compromise
a fair and open competitive process. See Pierre Boucher, “Technology Versus Industry
Practices”, February 2003 <www.findarticles.com/p/articles/mi_qa4088/is_200302/
ai_n9176581>(28 November 2007).
542
See, for example, EU Directive 2004/18/EC, article 54(6).
543
In Brazil, the system only provides an identification number of the bidders, so that the
reverse auctioneer may control the receiving of bids from the different bidders, but not
be able to identify them physically. The bidders themselves have sufficient information to
perceive only which is the lowest bid and if it is theirs or not.
544
A framework agreement is defined in EU Directive 2004/17/EC, article 1(4) as “an agree-
ment between one or more contracting entities … and one or more economic operators,
the purpose of which is to establish the terms governing contracts to be awarded during
a given period, in particular with regard to price and, where appropriate, the quantities
envisaged.” A dynamic purchasing system, in term, is defined in article 19(5) of the
directive as a “completely electronic process for making commonly used purchases, the
characteristics of which, as generally available on the market, meet the requirements of
the contracting entity, which is limited in duration and open throughout its validity to any
economic operator which satisfies the selection criteria and has submitted an indicative
292
purchasing systems further differ from classical framework agreements under

EU Directive 2004/18/EC in that they permit a system that is ongoing, open to
all qualified suppliers, and to which new suppliers can be added (which means
that the systems is not binding as between the procuring entity and the initial
suppliers). Dynamic purchasing systems are also related to suppliers’ lists drawn
up in anticipation of procurements. Both identify suppliers for future awards
of procurement contracts, and although framework agreements (of which
DPS are a species) and suppliers’ lists have been described from a commercial
point of view as shades on a single spectrum,545 there are significant differences
between the two.546 They can be distinguished in that in the case of a dynamic
purchasing system, like generally in framework agreements, there is an initial
invitation to tender or other invitation to participate in a procurement that
contains a specification of the goods to be procured and other requirements for
the procurement; and the terms and conditions upon which the various suppliers
will supply the goods (such as price and delivery charges and times).
Dynamic purchasing systems are most commonly used for goods, services
or construction for which a procuring entity has a repeated need, in particular
standardized goods (such as stationery or spare parts) or simple works and services
(bulk shipment, transportation, cleaning services), but for which delivery times
and quantities are not known at the time of the initial invitation. Other uses
include the purchase of items from more than one source, such as electricity and
medicines, and centralized purchasing for several procuring entities. Under the
system introduced by EU Directive 2004/18/EC, for example, dynamic purchas-
ing systems may be used for the purchase of commonly used goods, works or
services, the characteristics of which, as generally available on the market, meet
the requirements of the contracting authority.547
(a) Scope and Duration of Dynamic Purchasing Systems

Dynamic purchasing systems are too new a phenomenon to have already given
rise to established practices. To the extent that they are a special type of frame-
work agreement, some of the same principles may apply. Under a framework
agreement a procuring entity may or may not be bound to place any orders at
tender that complies with the specification.” Identical definitions are contained article 1
(4) and 1(5) of EU Directive 2004/18/EC.
Sue Arrowsmith, “Framework Purchasing and QualificationLlists under the European
545
Procurement Directives: Part I”, 8 Pub. Procurement L. Rev. (1999) 115.

It is true, however, that some types of dynamic purchasing system and some types of
546
suppliers’ lists can be difficult to classify.

As with dynamic purchasing systems, its use is not confined to specific goods or
547
services.
293
all, depending on the legal system.548 Where the terms of dynamic purchasing
systems do not oblige the procuring entity to make purchases under the dynamic
purchasing system, the entity could purchase outside the agreement if more
favourable terms are available elsewhere.
Some systems require framework agreements to set minimum and maximum
quantities or values of purchases under the framework, and to this extent, the
dynamic purchasing systems are binding on the procuring entity. In the United
States, for example, the Federal Acquisition Regulations require all task‑and‑delivery
order contracts, which are a form of framework agreement, to specify the period
of the contract, the maximum quantity of goods or services to be purchased,
and although the agreement must also stipulate a minimum monetary value
that will be purchased under the agreement, the amount is typically low and
of little real significance. Regulations specific to dynamic purchasing systems,
such as those introduced by the 2004 EU Directives, do not appear to establish
a similar obligation, which is understandable in view of the non-specialized
nature of the supplies they typically cover.
Like framework agreements, dynamic purchasing systems are also usually
subject to a maximum duration, the most common being one year, or ranging
from three to five years.549
(b) The Operation of Dynamic Purchasing Systems

It is likely that the types of recurrent purchases for which dynamic purchasing
systems are commonly used will dictate the use of an open and competitive
procurement method. Following the conclusion of the procurement proceedings,
the procuring entity includes the selected suppliers into the dynamic purchasing
system with one or more suppliers.
It is common under more complex dynamic purchasing systems with several
components or variables that the identity of the supplier whose offer will turn
out to be the lowest-priced or lowest evaluated when a purchase order is placed
not to be known at the time the dynamic purchasing system is concluded. For
example, where the dynamic purchasing system covers more than one product
(for example, a range of computer equipment), not all suppliers are able to offer all
products, and the best price for each product may be offered by different suppliers.
For practical reasons, dynamic purchasing systems therefore allow suppliers to
A European Commission guidance paper on the operation of framework agreements

548
under EU Directive 2004/18/EC notes indeed that whether or not the procuring entity
is bound to place orders under a framework agreement, and the supplier to fulfill them,
is a matter of national law (European Commission, Directorate General Internal Market
and Services Public, Procurement Policy, CC/2005/03_rev 1, of 14 July 2005, page 3).
EU Directive 2004/18/EC, in article 33 (7), provides that “a dynamic purchasing system
549
may not last for more than four years, except in duly justified exceptional cases”.
294
revise their prices and other terms of their tenders, without necessarily calling
for a formal tender phase.
Typically, the procuring entity chooses the best offer existing at the time of
a particular order, possibly refining the specification as it does so. Observers
have noted the advantages of this mechanism, including that the costs of full
re-tendering in such circumstances might be disproportionate and the use of
a dynamic purchasing system consequently could be seen to be cost-effective.
It is also common that this type of system is open, such that new suppliers can
be admitted to the dynamic purchasing system at any time. This type of system
may take the form of an electronic catalogue in which procuring entities can
search for suppliers’ current prices. Such facilities enable prices to be changed
regularly, and their increasing use (which also helps reduce the transaction costs
involved in changing suppliers) has provided more impetus for the use of dynamic
purchasing systems generally. Electronic catalogues therefore allow procuring
entities to select goods and services swiftly, while still exerting competition.
Dynamic purchasing systems differ from classical framework agreements

under EU Directive 2004/18/EC in that they permit a system that is ongoing,
open to all qualified suppliers, and to which new suppliers can be added (which
means that the systems is not binding as between the procuring entity and
the initial suppliers). The rules provide that tenders can be altered at any time,
and that there must be a second phase competition for each specific contract.
Also, unlike in framework agreements, before issuing the invitation to tender, a
procuring entity must publish a simplified contract notice inviting all interested
suppliers to submit an indicative tender and a procuring entity may not proceed
with tendering until it has completed evaluation of all the indicative tenders
received within a fixed time limit. Only then may a procuring entity invite all
tenderers admitted to the system to submit a tender.
(c) Benefits and Concerns

The main purposes of dynamic purchasing systems include the reduction of
transaction costs and transaction time, and assuring the security of supply. As
in dynamic purchasing systems the suppliers are identified, their qualifications
assessed and the specification, terms and conditions of the future procurement
established before an order is placed, recurrent costs can be avoided and purchases
can be made with lower overall transaction costs and shorter delivery times than
would be the case were each purchase procured separately. The types of dynamic
purchasing systems in which all competition takes place in the first phase of
the award process are straightforward to operate in the second award phase,
and thus the potential for savings in transaction costs and times is significant,
particularly where individual purchase orders under the dynamic purchasing
system are made electronically. In addition, observers have commented that
295
dynamic purchasing systems, as is generally the case with framework agreements,

can also lower inventory costs (as supplies are ordered only when needed), and
allow the procuring entity greater flexibility in scheduling requirements, both
in terms of timing and quantity.550
Dynamic purchasing systems may be useful to ensure rapid and secure supply
of items to be procured (for example, the agreement may require the supplier to
fulfil all orders placed and to keep a permanent stock of a product available). It
has also been observed that one of the benefits of the use of dynamic purchasing
systems in the procurement process is that, similarly to framework agreements,
they allow a procuring entity to realize “the benefits of an ongoing competitive
environment throughout the duration of the contract,”551 and to seek price
reductions through the anticipated volume of orders.
Whether as a single or multi-supplier system, whenever a range of products
is covered, which is often the case, it is unlikely that the suppliers admitted to
the dynamic purchasing system will during the entire lifetime of the system be
able to supply the whole range of products and that they will maintain their
cost advantage as compared to supplies from outsiders. This is a dilemma for the
procuring entity, which is known from experience with framework agreements.
Allowing procurement from outsiders removes the incentive for participating
in the system. Prohibiting outside competition locks the procuring entity into
commercial terms that may, over time, lo longer reflect the best offers available
on the market. The system established by EU Directive 2004/18/EC aims at
ensuring the widest possible choice for the procuring entity, therefore requir-
ing a dynamic purchasing system to remain open to any potentially interested
supplier throughout its duration.552 However, the short duration of the system,
compounded with the absence of any purchase obligations on the side of the
procuring entity has caused fears that the system may be of limited practical
use.553
550
Dynamic purchasing systems are considered by some commentators to be better than
suppliers’ lists for urgent procurement in cases such as utilities (which might otherwise
be conducted using the request for quotations method envisaged by the UNCITRAL Model
Law on Procurement of Goods, Construction and Services, also known as “shopping”).
However, particularly so far as utilities are concerned, other commentators stress the
quality risks that arise in such outsourcing.
551
U.S. Office of Management & Budget, Office of Federal Procurement Policy, Best Practices
for Multiple Task and Delivery Contracting 7 (Washington, D.C., July 1997).
552
553
Roger Bickerstaff and Helen Kingston, “The New Procurement Law Regime: Implementa-
tion in the United Kingdom”, (8 March 2006) <www.twobirds.com/english/publications/
articles/The_New_ Procurement_Law_Regime.cfm?RenderForPrint=1> (3 December
2007).
296
Dynamic purchasing systems may also share some other shortcomings of

framework agreements. A procuring entity would usually be under a general duty
to afford the suppliers a “fair opportunity” to compete.554 Practical experience
with framework agreements has shown, however, that procuring entities often fail
to make use of a second phase competition, demonstrating a certain propensity
for single source awards. Observers of framework agreements have cited various
reasons for such non-competitive second-phase awards, including continuity
of supplier (initial low-value awards being followed by others of greater value),
practical considerations such as timing and lack of adequate notice favouring
incumbent contractors, collusion, biased or inadequate technical specifications
and inadequate assessment of prices submitted.555 EU Directive 2004/18/EC aims
at ensuring maximum competition by requiring the procuring entity to issue
invitations to tender for each specific contract to be awarded under a dynamic
purchasing system.556
Dynamic purchasing systems may also enable a central procuring entity
or an external purchasing body to undertake procurement on behalf of or for
a number of entities. Such aggregated purchasing can lead to bulk purchase
discounts, enhancing value for money, and offering freedom of choice for end-
users where contracts are entered into with several suppliers with differing
products. However, experience with framework agreements shows that there is
a risk that a central or external purchasing body may accommodate customer
agencies by reducing competition, and that may, in turn, mean using competitive
techniques, or technical requirements, or prequalification requirements that
favour a specific firm and which unreasonably restrict competition, and may
lead to suppliers gaining effective monopolies.557 Further, a dynamic purchas-
ing system may be of long duration and wide in coverage, closing off markets
from the periodic competition contemplated by the procurement regulations
(for example, effectively securing the market for a certain group of suppliers).
To this extent, dynamic purchasing systems could compromise the common
procurement objectives of fair and equitable treatment, integrity and public
FAR 16.505 (b)(1). See, further, paragraph 30.

554
U.S. General Accounting Office, Contract Management: Not Following Procedures

555
Undermines Best Pricing Under GSA’s Schedule Report No. GAO-01-125 (28 November
2000) <www.ogc.doc.gov/ogc/contracts/cld/papers/GAO1-125.pdf> (4 December 2007);
Benjamin, “Multiple Award Task and Delivery Order Contracts: Expanding Protest Grounds
and Other Heresies”, 31 Pub. Contract L. J. (2002) 429.
556
It should be noted that certain systems, such as the EU under Directive 2004/18/EC, do
557
not permit contracts between entities other than parties to the initial dynamic purchasing
system (article 32 (2)), and therefore ad hoc centralized purchasing is not possible. However,
in the United States, for example, many government agencies permit other organizations
to place orders on their multiple-award contracts.
297
confidence in the procurement system if their operation is not appropriately

regulated and overseen.
Chapter III. Contract Performance through

Electronic Means
Contracts are performed by the delivery of the goods sold or the services promised.
There is in principle no difference between contracts negotiated by electronic
means or otherwise. In either situation, contract performance means that a new
right over the object of performance is created to the benefit of the purchasing
or hiring party, or an existing right is assigned to that party. Generally the rule
is the same, whether contract performance involves rights to a tangible thing
(such as such as moveable or immovable property), or an immaterial good (such
as technical or professional advice or other form of information). Differences
exist, however, as regards the manner in which such rights must be created or
transferred in order to produce the intended legal effect.
Perfection and transfer of rights is one of the areas of contract performance
where existing law may pose obstacles to the use of electronic means. Typically,
such problems will be the result of the possessory nature of some security interests
or of the requirement of a tangible medium to effect the assignment. As used in
this chapter, the expression “rights in tangible goods” refers to property rights
or security interests in corporeal moveable property, including particularly
commodities and manufactured goods, other than the money in which the price
(in case of a sales contract) is to be paid. The expression “other rights” refers to
intangible assets (other than property rights in tangible goods or intellectual
property rights558), which have an economic value that makes them capable
of being negotiated in the course of business, including in particular trade or
financial receivables, investment and other securities.
A. Traditional Methods for Transfer and Perfection of Rights

The challenge for the establishment of workable systems for electronic transfer
of rights in tangible goods and other rights consists in how to devise adequate
electronic methods that are functionally equivalent to the transfer methods
recognized by the law. For a better understanding of the problems raised by the
558
This chapter does not deal with electronic delivery of “digitized goods” or on-line software
licensing.
298
use of electronic communications in connection with creation and perfection

of rights, it is useful, therefore, to briefly recapitulate the essential rules for the
transfer of rights by traditional means.
1. Transfer of Rights in Tangible Goods and Other Rights

Methods for transfer of property interests in tangible property are generally
based on two legal concepts, namely, the principle of consent559 and the principle
of delivery.560 Additional methods include registration and symbolic delivery.
Although these additional methods are usually regarded as conceptual variants
of either the principle of consent or the principle of delivery, they are presented
hereafter separately for ease of reading.
(a) Transfer by Consent

According to the principle of consent, the property passes from the transferor
to the transferee by means of a contract between them implying the transfer
of property.561 In legal systems that follow the principle of consent, all that is
required for the transfer of property under a validly concluded sales contract
is the parties’ agreement about sale of the goods and their status as buyer and
seller. However, some legal systems give special emphasis to the intention of the
parties with respect to the transfer of property.562 Those legal systems require
clear evidence of the parties’ agreement upon the ownership of the transferee.
Such intention may be expressed in the underlying contract (such as a sales
contract) but is to be understood individually. It may even be concluded without
559
Transfer by consent is the prevailing method in common law legal systems and, within
the civil law tradition, in jurisdictions influenced by French law. For a comparative over-
view of methods of transferring moveable property, see Rodolfo Sacco, “Le transfert de
la propriété des choses mobilières détérminées par acte entre vifs”, in Akadémiai Kiadó,
Péteri and Lamm (eds.), General Reports to the 10th International Congress of Comparative
Law (Budapest, 1981) 247; see also Ulrich Drobnig, “Transfer of Property”, in Hartkamp
et al. (eds.), Towards a European Civil Code (The Hague/London/Boston: Kluwer, 2nd ed.
1998) 495; information on various legal systems may further be found in Alexander von
Ziegler et al. (eds.), Transfer of Ownership in International Trade (Paris/New York: Kluwer,
1999).
560
Transfer by delivery is the general rule in civil law jurisdictions that follow the Roman law
distinction between title (titulus) and form (modus) of transfer, such as most Ibero-American
legal systems, and in jurisdictions influenced by the German law or in codifications inspired
by the German Civil Code.
561
E.g. France (Code Civil, Articles. 1138, 1583, 938); Italy (Codice Civile, Art. 1376), Japan
(Civil Code, Art. 176).
562
This is particularly the case in common law jurisdictions, such as Australia (Alexander
von Ziegler, supra note 559 at 12), the common law provinces of Canada (id., at 83),
England (id., at. 135).
299
a contract of sale. However, in some of those legal systems transfers of property

in general, or in respect of specific goods, while valid and effective as among the
transferor and the transferee, may not be enforceable against third parties until
the transfer is registered in a registry system, or until the goods are actually
delivered to the transferee.
Apart from tangible goods, the consent of the parties is in many legal sys-
tems sufficient for the transfer of other property (intangibles) as well. Special
rules are often found, however, in respect of assignments of payment claims
(receivables).563 Indeed, while an assignment may be valid and binding on the
assignor and the assignee, it has no effects on the debtor, unless the debtor has
acquired knowledge of the assignment. In this respect, legal systems differ as
to whether a notice to the debtor is required or whether any other act results in
the debtor acquiring knowledge of the assignment.
(b) Transfer by Registration

Based also on consent is the principle of registration, which requires consent of
the parties and registration by an office with statutory rights to take records.564
The transfer is completed with the inclusion of a corresponding record of the
transaction in the registry system. Registration serves to ensure legal certainty
especially when the achieved ownership cannot be primarily shown by physically
shifting possession (e.g. with immovables).
Transfer by registration is sometimes needed in respect of certain forms of
intangible property. For example, transfer of shares or other securities issued by
companies may need to be effected through appropriate records in the company’s
books, at least for the purpose of becoming effective vis-à-vis the company or third
parties. Some jurisdictions have also established a system of filing information
about assignments of trade receivables for the purpose of providing evidence
of title to the receivables, notice about assignment to interested third parties or
a method for determining priorities.565
Legal Aspects of Receivables Financing: report of the Secretary-General (U.N. document

563
A/CN.9/397), para. 30 (Yearbook of the United Nations Commission on International

Trade Law, Volume XXV: 1994 (United Nations publication, Sales No. E.95.V.20), part
two, chap. V, sect. A).
E.g. Germany (Bürgerliches Gesetzbuch (BGB), § 873 sect. 1) for immovable property.
564
U.N. document A/CN.9/397, para. 30.

565
300
(c) Transfer by Delivery

The principle of delivery is also based on consent but requires in addition the physi-
cal delivery of the asset to the transferee.566 Countries take different approaches
as to the relationship between the underlying consent expressed in the contract
and an additional consent about the transfer of goods itself (“real agreement”)
which comes with the delivery. As far as the underlying contractual consent is
the basis for the transfer by delivery, the validity of the transfer is affected by
the validity of the contract itself.567 On the other hand, an independent “real
agreement” to transfer is not affected by the contract, the validity of the transfer
is in this case determined independently (doctrine of abstraction).568
Transfer by delivery is the norm for the effective transfer of certain types
of intangible property. Negotiable instruments, such as bills of exchange and
promissory notes, are typically negotiated by transfer of possession, whether
voluntary or involuntary, of the instrument by a person other than the issuer to
a person who thereby becomes its holder. Except for negotiation by a remitter, if
an instrument is payable to an identified person, negotiation requires transfer
of possession of the instrument and its endorsement by the transferor. If an
instrument is payable to bearer, it may be negotiated by transfer of possession
alone.569
(d) Transfer by Symbolic Delivery

Even in countries that build on the principle of delivery, physical delivery of
the goods is not always necessary. Possession of the goods can be left with the
transferor or an agent of the transferor, where the parties agree on a legal
relationship that assigns indirect possession to the transferee.570 Property rights
in goods may also be deemed to have been transferred when the transferee is
given the means for exercising or claiming control over the goods. For example,
E.g. Austria (Allgemeines bürgerliches Gesetzbuch (ABGB), § 426, Germany (BGB, §

566
929 sect. 1), Greece (Civil Code Art. 1034), Netherlands (Civil Code book 3, Art. 3:84
para. 1), Russian Federation (Civil Code, Art. 223, sect. 1), Spain (Código Civil, Art. 609),
Switzerland (Civil Code, Art. 714, sect.1).
Netherlands.
567
Germany.
568
Article 13 of the U.N. Convention on International Bills of Exchange and International

569
Promissory Notes, for example, reflects this principle by providing that an instrument
is transferred by endorsement and delivery of the instrument by the endorser to the
endorsee; or by mere delivery of the instrument if the last endorsement is in blank. The
same principle can be found in articles 11 and 16 of Annex I to the Convention Providing
a Uniform Law on Bills of Exchange and Promissory Notes (Geneva, 7 June 1930) (League
of Nations, Treaty Series, vol. CXLIII, p. 259, No. 3313 (1933-1934).
E.g. Austria (ABGB, § 427), Germany (BGB, § 930).
570
301
in many jurisdictions, the transfer of the bill of lading operates as a transfer of

the constructive possession of the goods, and may operate as a transfer of title
to the goods.571 Other examples include surrendering to the transferee the keys
of a warehouse where the goods are stored or surrendering to the transferee
the documents (such as a warehouse receipt) necessary to claim delivery of the
goods from a bailee holding such goods to the order of the holder.
2. Security Interests in Tangible Goods and in Intangible Property

This section briefly describes the main methods for creating and perfecting
security interests.572 For that purpose, it is important to distinguish between
formal requirements, if any, for a security agreement to be binding as between
the parties and those requirements that need to be met in order for the security
creditor to be able to enforce the security against third parties.
Except for a few jurisdictions that dispense altogether with form requirements
for all or at least for certain kinds of security interests, such as purchase money,
security agreements are in most cases subject to certain form requirements and
typically need to be in writing.573 In most legal systems, a formal contract, whilst
necessary, does not exhaust the legal requirements; it must be supplemented
by other means of publication. If the secured party does nothing more than
to enter into the security agreement with the debtor, that security interest is
“unperfected.” An unperfected security interest may be completely valid and
enforceable against the debtor, but may not be effective against third parties or
may be subordinate to the rights of certain third parties, such as the trustee in a
bankruptcy proceeding or creditors of the debtor. The ways in which a security
571
In Sanders Bros v. Maclean & Co. (1883) 11 QBD 327, at 341, the court stated: “A cargo at
sea while in the hands of the carrier is necessarily incapable of physical delivery. During
this period of transit and voyage, the bill of lading by the law merchant is universally
recognised as its symbol, and the indorsement and delivery of the bill of lading operates as
a symbolical delivery of the cargo. Property in the goods passes by such indorsement and
delivery of the bill of lading, whenever it is the intention of the parties that the property
should pass, just as under similar circumstances the property would pass by an actual
delivery of the goods.”
572
The information provided in this section draws on conclusions reached at an earlier study
by the Secretariat on security interests (U.N. document A/CN.9/131, Yearbook of the
United Nations Commission on International Trade Law, Volume VIII: 1977 (United Nations
publication Sales No. E.78.V.7), part two, chap. II, sect. A) and on an earlier note by the
Secretariat on article 9 of the Uniform Commercial Code of the United States of America
(Id., part two, chap. II, sect. B). Although some details of the information contained in those
documents may be dated, the basic principles and concepts set out in those documents
are still relevant.
573
U.N. document A/CN.9/131, (UNCITRAL Yearbook 1977), supra note 572 at 180.
302
interest can be perfected typically depend on the nature of the collateral and
the underlying transaction.
(a) Perfection by Possession

Transfer of possession used to be (and in some legal systems still is) the main
method for perfecting security interests in tangible goods. The secured party
usually has possession from the moment the collateral is in its physical possession
or in the physical possession of a third person who holds it for the secured party’s
account. Perfection by possession serves two important purposes. Firstly, possession
by the secured creditor serves as a notice to third parties that the creditor has a
security interest in the goods in its possession. Secondly, because no two persons
can physically possess the same goods at the same time, perfection by possession
effectively avoids the creation of conflicting security interests in the same goods,
thus guaranteeing the singularity of the creditor’s security interest.
However, with a view to alleviating the limitation to the debtor’s ability to
trade the goods pledged as security, in many legal systems, perfection by pos-
session has been increasingly replaced with other methods, and has become
of reduced commercial significance. Nevertheless, even in such legal systems,
transfer of possession remains essential for the creation of security interests in
respect of negotiable instruments, bills of lading, warehouse receipts and other
negotiable documents of title. In each case possession of the paper document
creates a security interest in the claim, the rights or the goods represented by
that document.
(b) Perfection by Registration

Another method for perfecting security interests is registration. Generally,
a security agreement that is otherwise in accordance with the appropriate
requirements has the effect of giving rise to a legal relationship between the
contracting parties even before registration. However, registration, where
required, is typically a condition precedent for giving effect to a security interest
vis-à-vis third persons.574
As the need for credit for businesses in particular expanded, and businesses came
to generate and make use of intangible assets, countries were obliged to develop
other mechanisms for recording security rights. Many countries “ultimately came
to rely on the concept of registration as the primary mechanism for recording
security rights in movable property.”575 One reason for this preference is that
registration facilitates searches by third persons. It also avoids, on the part of the
Id., at 182.
574
Security Interests: Draft Legislative Guide on Secured Transactions – Note by the Secretariat
575
(U.N. document A/CN.9/631, add.3, of 11 June 2007), para. 3.
303
creditor, all doubts about the proper place of registration, and avoids refiling in
case of removal of the debtor’s domicile or the location of the goods.
(c) Other Methods

Formalities other than a contract or registration mainly take the form of marking
the encumbered goods or of advertising the security interest. Marking of the
encumbered goods with the secured creditor’s name is prescribed for certain
goods in some jurisdictions either in addition to, or in place of, registration;
rarely is it the exclusive method of publication. Much the same way as the
registration of security interests, marking of encumbered goods is intended to
warn third parties against the existence of security interests; it may also help
to prevent unauthorized dispositions by the debtor. In some countries private
systems of collecting and publishing information on security interests seem, in
effect, to combine registration with advertisement. Indeed, in some countries
the registration of security interests is published in private trade journals.
Advertisement of security interests may serve as the basis of private registers
kept by credit agencies.
B. Transfer or Creation of Rights by Electronic Means of

Communication
1. General Legal Obstacles

Legal obstacles to the electronic transfer of property rights in tangible goods
and intangible property or to the creation of security interests in either type
of property may result from form requirements for the validity, effectiveness or
proof of the agreements to transfer or create the rights in question. Additional
obstacles may relate to difficulties in establishing the functional equivalence
between the transfer or creation method in a paper-based environment and its
electronic analogous.
All methods for transferring both property rights in tangible goods and
intangible property or for creating security interests in either type of property
presuppose at least the agreement of the parties on the transfer of such property
or creation of the security interest. The spectrum of form requirements for the
validity of the agreement may range from a written document signed by the
parties, which in some jurisdictions may be made by a stamp or mechanical
means as well as by hand, to a public deed drawn by a notary public. Intermediate
requirements include other formalities, such as a certain number of witnesses
or authentication of signatures by a notary public. In some legal systems, a
statutory contract form is required.
304
The replacement of paper-based methods for transferring rights in tangible

goods, transferring intangible property or creating security interests in tangible
goods or intangible property with electronic equivalents presupposes therefore
the resolution of the following legal issues: the satisfaction of writing and
signing requirements; the evidential value of electronic communications; the
determination of the place of contract formation. These issues were discussed in
detail in chapter I above. The following sections will therefore focus on particular
challenges posed by electronic negotiability.
2. Electronic Equivalents of Negotiable Instruments and Documents of Title

Surmounting the issues of writing and signature in an electronic context does
not solve the issue of negotiability which has been said to be “perhaps the most
challenging aspect” of implementing electronic commerce in international trade
practices.576 Where the law requires physical delivery of goods for the purpose
of transferring property or perfecting security interests in such goods, a mere
exchange of electronic messages between the parties would not be sufficient for
effectively transferring property or perfecting a security interest, however evident
the parties’ intention to transfer the property or perfect the security interest
might have been. Therefore, even in jurisdictions where the law recognizes the
legal value and effectiveness of electronic communication or records, no such
communication or record could alone effectively transfer property or perfect
a security interest without an amendment of the law governing transfer of
property or perfection of security interests.
(a) Basic Conditions for Electronic Negotiability

The prospects for developing electronic equivalents of acts of transfer or perfec-
tion might be more positive where the law has at least in part dispensed with
the strict requirement of physical delivery, for instance, by attributing to certain
symbolic acts the same effect as the physical delivery of certain goods. One such
example may be where the law attributes to the transferee or secured creditor the
constructive possession of the goods transferred or pledged by virtue of an act
of the parties that confers on the transferee the means for claiming control over
the goods. Conceivably, the law could attribute the same effect to the entry of the
transfer agreement into a registry system administered by a trusted third party
or to an acknowledgement sent by the party in physical possession of the goods
that these are held to order of the transferee or the secured creditor. Rights in
goods represented by documents of title are typically conditioned by the physical
See Jeffrey B. Ritter and Judith Y. Gliniecki, “International Electronic Commerce and
576
Administrative Law: The Need for Harmonized National Reforms”, 6 Harv. J. L. & Tech.
(1993) 263, 279.
305
possession of an original paper document (the bill of lading, warehouse receipt,

or other similar document). Early analysis of the legal basis for the negotiability
of documents of title had indicated that “[t]here is generally no statutory means
in place by which commercial parties, through the exchange of electronic mes-
sages, can validly transfer legal rights in the same manner possible with paper
documents.”577 This conclusion is also essentially valid for rights represented by
negotiable instruments. Moreover, the legal regime of negotiable instruments “is
in essence based on the technique of a tangible original paper document, susceptible
to immediate visual verification on the spot. In the present state of legislation,
negotiability cannot be divorced from the physical possession of the original
paper document.”578
Thus, the main obstacle to accommodating electronically transmitted docu-
ments of title
“is to generate them in such a way that holders who claim due negotia-
tion will feel assured that there is a document of title in existence, that
it has no defects upon its face, that the signature, or some substitute
therefore is genuine, that it is negotiable, and that there is a means to
take control of the electronic document equivalent in law to physical
possession.”579
The practical significance of requiring transfer of actual or constructive possession

of tangible goods, or of the physical surrender of a document that represents
goods, or embodies other rights is to prevent conflicts between parties claiming
entitlement to the same goods or rights. As no two persons can possess certain
goods or hold a given document or negotiable instrument at the same time, the
requirement of possession ensures the regularity of the chain of negotiation.
Ultimately, the law aims at ensuring that only one person can effectively exercise
control over the goods, the document that represents them or the negotiable
instrument. Based on that premise, one could conceive the formulation of rules
that establish the conditions under which electronic systems can replicate that
function.
One set of general rules to that effect is contained in the United States Uniform
Electronic Transactions Act (UETA). The rationale for including such a provision
in UETA is explained in the official commentary to UETA as follows:
Id.
577
See K. Bernauw, “Current Developments Concerning the Form of Bills of Lading – Bel-
578
gium”, in A.N. Yannopoulos (ed.),Ocean Bills of Lading: Traditional Forms, Substitutes and
EDI Systems (The Hague: Kluwer Law International, 1995) 87, 114.
Donald B. Pedersen, “Electronic Data Interchange as Documents of Title for Fungible
579
Agricultural Commodities”, Idaho L. Rev. (1995) 719, 726.
306
“Paper negotiable instruments and documents are unique in the fact that
a tangible token – a piece of paper – actually embodies intangible rights
and obligations. The extreme difficulty of creating a unique electronic
token which embodies the singular attributes of a paper negotiable
document or instrument dictates that the rules relating to negotiable
documents and instruments not be simply amended to allow the use of an
electronic record for the requisite paper writing. However, the desirability
of establishing rules by which business parties might be able to acquire
some of the benefits of negotiability in an electronic environment is
recognized by the inclusion of this section on Transferable Records.”
Section 16, “Transferable records” of UETA establishes the criteria for the legal
equivalence of electronic records to notes or records under Articles 3 and 7,
respectively, of the Uniform Commercial Code (UCC). The essential criterion for
such equivalence is that the electronic record needs to be of such nature that
a person may exercise “control” over the record. Under Section 16 acquisition
of “control” over an electronic record serves as a substitute for “possession”
of an analogous paper negotiable instrument. More precisely, “control” under
Section 16 serves as the substitute for delivery, endorsement and possession of a
negotiable promissory note or negotiable document of title. Section 16(b) allows
control to be found so long as “a system employed for evidencing the transfer
of interests in the transferable record reliably establishes [the person claiming
control] as the person to whom the transferable record was issued or transferred.”
The key point, as indicated in the official commentary, is that “a system, whether
involving third party registry or technological safeguards, must be shown to
reliably establish the identity of the person entitled to payment.”
A person is considered to have control of a transferable record under UETA
if a system employed for evidencing the transfer of interests in the transferable
record “reliably establishes that person as the person to whom the transferable
record was issued or transferred”.580 A person having control of a transferable
record acquires the status of holder of the record, for the purposes of Section
A system satisfies this requirement, and a person is deemed to have control of a transferable
580
record, if the transferable record is created, stored, and assigned in such a manner that:
“(1) a single authoritative copy of the transferable record exists which is unique,
identifiable, and, except as otherwise provided in paragraphs (4), (5), and (6),
unalterable;
“(2) the authoritative copy identifies the person asserting control as the person to
which the transferable record was issued; or the authoritative copy indicates that
the transferable record has been transferred, the person to which the transferable
record was most recently transferred;
“(3) the authoritative copy is communicated to and maintained by the person
asserting control or its designated custodian;
307
1-201(20) of the UCC, and has the same rights and defences as a holder of an
equivalent record or writing under the UCC, including the rights and defences
of a holder in due course, a holder to which a negotiable document of title has
been duly negotiated, or a purchaser, respectively. Delivery, possession, and
endorsement are not required to obtain or exercise any of the rights under this
subsection.
The official commentary to UETA suggests that control requirements may
be satisfied through the use of a trusted third party registry system, but “a
technological system which met such exacting standards would also be permitted
under Section 16.” According to the official commentary, section 16 “provides
legal support for the creation, transferability and enforceability of electronic
note and document equivalents, as against the issuer/obligor.”
A similar provision is contained in the draft convention on the carriage
of goods, which is being considered by UNCITRAL since 2001 (hereafter the
“UNCITRAL Draft Carriage of Goods Convention”).581The UNCITRAL Draft
Carriage of Goods Convention includes provision to the effect that the issuance,
control, or transfer of an electronic transport record shall have the same effect as
the issuance, possession, or transfer of a paper document. A condition for such
same effect is that the use of a negotiable electronic transport record must be
subject to procedures that, amongst others, provide for (a) a method to effect the
exclusive transfer of that record to an intended holder; (b) an assurance that the
negotiable electronic transport record retains its integrity; and (c) the manner
in which the holder is able to demonstrate that he is the holder. Furthermore,
the draft makes any provision that applies to a transport document, equally
applicable to the corresponding electronic version of it.
These rules constitute an electronic supplement to the negotiability system
envisaged by the UNCITRAL Draft Carriage of Goods Convention. To support
the operation of transport documents both in paper and in electronic form, the
UNCITRAL Draft Carriage of Goods Convention deals with a number of questions
thus far not dealt with by any existing international maritime convention, with a
“(4) copies or revisions that add or change an identified assignee of the authoritative
copy can be made only with the consent of the person asserting control;
“(5) each copy of the authoritative copy and any copy of a copy is readily identifiable
as a copy that is not the authoritative copy; and
“(6) any revision of the authoritative copy is readily identifiable as authorized or
unauthorized.”
581
The latest version of the “draft convention on the carriage of goods [wholly or partly]
[by sea]” is contained in U.N. document A/CN.9/WG.III/WP.101. The latest summary of
the preparatory work is contained in the provisional agenda for the twenty-first session
of UNCITRAL Working Group III (Transport Law) (U.N. document A/CN.9/WG.III/
WP.100). Both documents are available <www.uncitral.org/uncitral/en/commission/
working_groups/3Transport.html>.
308
view to clarifying who is in control of the goods during their carriage. Therefore,
the UNCITRAL Draft Carriage of Goods Convention includes a comprehensive
set of rules about the right of control under the contract of carriage. The right
of control is defined in such a way that it should satisfy the requirements that
may exist under national law for the validity of a pledge on the goods. It includes,
among other attributes, the right of the controlling party to change the name of
the consignee and to demand delivery of the goods at an intermediate place en
route before their arrival at destination. Second, the UNCITRAL Draft Carriage
of Goods Convention clarifies who is the controlling party, provides for rules on
the transferability of the right of control as well as for the – qualified – obligation
of the carrier to follow the instructions given by the controlling party.
Both UETA and the UNCITRAL Draft Carriage of Goods Convention were
formulated at a level of generality that should accommodate both electronic
registries and a “technical device” such as an electronic token or unique elec-
tronic record. The certainty created by rules of this nature should provide “the
requisite incentive for industry to develop the systems and processes, which
involve significant expenditures of time and resources, to enable the use of such
electronic documents.”582
This is the point where the imagination of the law-maker meets the limits of
science. Modern technology makes it possible to transmit information in electronic
form satisfactorily down a chain of parties. The same process could conceivably
be used by any of the parties to transmit the information that it renounces its
title in favour of another person, thus amounting to an endorsement of the
instrument. However, if a person is to receive an exclusive benefit, such as pos-
sessory title, by receiving a particular electronic communication or record, the
addressee will need to be satisfied that no identical communication or record
could have been sent to any other person by any preceding party in the chain,
creating the possibility of other claimants to the title. It is true that no electronic
communication or record can be actually the very same as another electronic
communication or record; but as long as it is technically possible, with no pos-
sibility of detection, to replicate an electronic communication or record exactly
and send it to someone else, there cannot be a guarantee of singularity.
582
R. David Whitaker, “Rules under the Uniform Electronic Transactions Act for an Electronic
Equivalent to a Negotiable Promissory Note”, 55 Bus. Law. (1999) 437, 449. The author
notes, however, that meeting the standards of UETA section 16 “will not be an easy task,
and will require a carefully designed and supervised set of systems and practices. Meet-
ing those standards will not be an easy task, and will require a carefully designed and
supervised set of systems and practices. The key element will be data integrity. Courts
evaluating the control of a transferable record may be expected to focus on the systemic
protections – e.g. division of labour, complexity of backup systems, activity logs, and
security of copies stored offsite to verify content – which make it difficult to tamper with
the record without detection.”
309
As we have seen, the main difficulty in developing electronic negotiability

systems is how to create an electronic equivalent of possession of goods, negotiable
instruments or documents of title. At least in theory, these problems could be
solved if computer technology were able to create a “unique” electronic record
that could be exclusively held by a holder and transferred to another without of
replication at some point down the negotiating chain.583 Unfortunately, computer
technology has not yet been able to create such a “unique’ electronic record.
This means that, for the time being, all electronic negotiability systems rely
on electronic registries. Electronic registries have been in place for some time
now, with more or less success, depending on the industry affected. The fact that
they have not yet entirely replaced traditional negotiation methods, despite the
sophistication of some of them, is a result of some of their limitations, which
are discussed below.
(b) Practical Experience: Electronic Registry Systems

Recognizing that electronic communications lack the tangibility that character-
izes traditional negotiable instruments and documents of title, registry systems
attempt to replace both paper documents and their physical transfer with
electronic records. Typically, there will be one or more electronic records that
contain essentially the same information that would otherwise be contained
in the paper document. This information would be kept in permanent records
maintained by the registry. Furthermore, there would be a series of electronic
communications recording transactions in the goods, rights or receivables
represented by the electronic record.
In essence, an electronic registry system is not different from traditional
registry systems, such as a land registry system. The difference is the intended
purpose of substituting entries in a registry for the physical delivery of a negoti-
able instrument or document of title. A few examples of such systems are given
in the following paragraphs to illustrate their functioning.
(i) Dematerialized Securities

The system of using dematerialized securities essentially seeks to enable
transactions of securities to be conducted and completed electronically using
a system of account transfers without any physical exchange of documents,
such as share certificates and transfer deeds.584 These securities systems are
See a theoretic discussion in Robert E. Kahn and Patrice A. Lyons, “Representing Value
583
as Digital Objects: A Discussion of Transferability and Anonymity”, 5 J. Telecom. & High

Tech. L. (2006) 189.
Dematerialization has become an essential feature of modern trade in securities by
584
settlement systems such as Euroclear in Brussels, Cedel in Luxembourg, the Depository
310
designed to reduce the paperwork, expense and risks associated with physical
documents, which are replaced with records in electronic form. Besides the basic
system of using dematerialized securities, some securities systems also offer an
immobilization system, that is, they retain the physical security in a vault and
give the holder dematerialized rights to the security by virtue of the holder being
the account-holder.
Although there are variations between jurisdictions, the key participants in a
dematerialized securities system are the depository (sometimes also referred to as
“custodian”), the issuer, trading intermediaries and the investor. The depository
is an organization whose primary function is to maintain an electronic system
of accounts in a central registry. This central registry contains a record of the
holdings of dematerialized securities and the rights and restrictions arising
therefrom, which are held by depository participants on behalf of investors at
any time. Trading intermediaries are normally financial institutions, brokers
and other entities authorized to be members of the depository and who hold
accounts with the depository.
In any securities transaction, investors who trade in dematerialized securi-
ties through their trading intermediaries will do so in a recognized securities
market, such as the stock exchange. Details of these transactions on any given
day will normally be transmitted automatically to the depository for clearing
and settlement585 and, if not, trading intermediaries will inform the depository
on their own accord. Once details of these transactions are transmitted to the
depository, the clearing and settlement process begins and trading intermediaries
will begin to deal directly with the depository.
The clearing and settlement process is normally based on a “delivery versus
payment” principle, which means that by the announced “settlement day” (usu-
ally a number of days after the trading day) payments will have to be made by
the buying investors, and securities will have to be transferred from the selling
investors to the buyers. In the interim period, the depository will have informed
all trading intermediaries of every buy and sell order made on the day of trading
Trust Corporation in the United States, CREST and the Central Gilts Office in the United
Kingdom, SICOVAM in France, Monte Titoli in Italy and numerous comparable systems
elsewhere.
Apart from maintaining the central registry and any immobilization of securities, the
585
depository may also undertake the function of clearing and settlement where this is not
undertaken by another organization. Clearing refers specifically to the processing of a trade
and establishing what the investors owe each other as a result of that trade. Settlement
refers to the transfer of value between the investors so as to complete the transaction. If
a separate organization is used for clearing and settlement, the role of the depository is
limited to the maintenance of the central register of information. In the United States, for
example, a separate organization known as the “National Securities Clearing Corporation”
has been set up to undertake this function.
311
in accordance with electronic reports received from the securities market and the
trading intermediary. The purpose of this is to allow the depository participants
to confirm the transactions and make corrections to the records. The depository
will then proceed to process the net securities traded and the net amounts due by
each trading intermediary, or rather the balance of securities and payments due or
owed by each trading intermediary on behalf of their respective investors.586
On settlement day, the depository causes the accounts of each trading inter-
mediary to reflect the net settlement of securities by re-allocating securities from
the accounts of the net sellers to the net buyers by electronic means. Trading
intermediaries also meet the net financial obligations of each investor by wiring
funds between designated settling banks. The intended transfer of dematerial-
ized securities is completed when the latest securities holding information is
entered into the central register at the depository but the transfer of ownership
is recognized as of the date of the transaction.
A legal arrangement created for entirely dematerialized securities may take
one of several approaches. The fungible nature of book-entry securities may be
explicitly recognized, leading to a new characterization of the investor’s property
interest. The investor may be treated as a co-owner of all the securities of the type
it has purchased that are held by the intermediary. The investor then retains a
specific property interest in the securities but can only claim it on a proportional
basis. However, where a different model is used, the legal arrangement may
instead deprive the investor of its property interest in the securities and place it
in a debtor/creditor relationship with the intermediary. In that case, the deposit
of securities becomes analogous to a bank deposit with special characteristics.
In such an arrangement, the investor’s interest may be further refined. The
investor’s claim may be secured with the specific assets held for the investor
serving as collateral for the claim. Alternatively, the investor may become part
of a preferred class of creditors, with a claim that is secured generally by all
securities held by the intermediary for customers.
A study by the Bank for International Settlements587 indicates that market
participants have made considerable efforts to simplify the flow of securities across
borders through the development of global custody networks, international central
securities depositories and links between national central securities depositories.
The transmission of instructions and information during the clearing and settlement
586
process is conducted through various secure communication networks such as S.W.I.F.T.

or Cedcom. These instructions may be checked against validation rules such as the In-
ternational Securities Identification Number (ISIN) to ensure its accuracy. ISIN is a code
that uniquely identifies a specific securities issue. The organization that allocates ISINs
in any particular country is the National Numbering Agency (NNA), which is typically
a recognized stock exchange.
Cross-border Securities Settlement (Bank for International Settlements, March 1995) at
587
46.
312
The availability of book-entry settlements makes it possible for settlement systems,

securities depositories and custodians to offer comparable settlement services
in a wide range of national markets. However, the comparability of settlement
services masks important distinctions between the legal frameworks that may
be applied to the same securities in different countries.
(ii) Electronic Registries as a Replacement of Paper Bills of Lading

A bill of lading performs a number of functions in connection with the contract
of carriage, the underlying sales contract and the documentary credit issued to
facilitate payment. In its basic function, the bill of lading is an acknowledgement
by the carrier of the receipt of the goods indicated in the bill of lading and their
loading on board a vessel. The bill of lading also evidences the contract of car-
riage and embodies its essential terms. These two functions are also common to
non-negotiable transport documents, such as the seaway bill. The bill of lading
performs however one additional and unique function, in that it allows for
negotiation of goods represented by the bill of lading while there are in transit.
It is this function that explains the central role played by the bill of lading in the
documentary credit system: by embodying rights to the goods, the bill of lading
is capable of being pledged as collateral for loans or letters of credit issued to
secure payment to the seller.
Replicating the first two functions of the bill of lading in an electronic environ-
ment is a relatively simple task, and in many trades seaway bills have already
been effectively replaced with electronic communications. It is the negotiability
function of the bill of lading that gives rise to most difficulties, mainly because
it is impossible to physically “hold,” “endorse” or “deliver” an electronic record.
These functions must therefore be fulfilled by other means capable of establish-
ing, at any time, who is the rightful “holder” of the electronic equivalent of the
bill of lading, that is, who has the right to give instructions to the carrier for the
deliver of the goods, who may transfer that right to another person and who is
entitled to claim delivery of the goods when they arrive at destination.
During the past decades, many attempts have been made by a number of
international organizations, whether intergovernmental or non-governmental,
and by various groups of users of electronic communication techniques to
reproduce the functions of a traditional paper-based bill of lading in an electronic
environment.588 The following paragraphs describe one such system, the Bill of
588
For an overview of various developments, see Marek Dubovec, “The Problems and Possibili-
ties for Using Electronic Bills of Lading as Collateral”, 23 Ariz. J. Int’l & Comp. L. (2006)
437, 466. Information on earlier initiatives, such as the Sea Docs experiment and the CMI
Rules for Electronic Bills of Lading can be found in earlier studies done by UNCITRAL (see
U.N. document A/CN.9/WG.IV, WP.69) (UNCITRAL Yearbook 1996, part two, chap. II,
sect. B).
313
Lading for Europe (Bolero).589

The Bolero system, which became operational in September 1999, relies on a
messaging system, where users communicate with each other through a central
registry application with standard EDI messages. It is a closed system in that only
subscribers are permitted to use it.590 One of the key components of the Bolero
system is a registry for Bolero Bills of Lading, which will store data on behalf of
the users of the Bolero system. A Bolero Bill of Lading is designed to replicate
the essential business functions of a bill of lading via electronic communications
recorded in a central database operated by a trustworthy third party.
The Bolero Bill of Lading is an electronic record that contains essentially the
same information as a conventional bill of lading issued by a carrier to a shipper,
and is designed to replicate the functions of a physical bill of lading as evidence
of a contract of carriage, a receipt for the goods, and a document representing
the entitlement to possession of the goods. Transactions involving a Bolero
Bill of Lading are effected through the Bolero Title Registry Record. The Title
Registry holds a record for each consignment, which is updated when instruc-
tions are received from the holders of rights to the consignments represented
by a Bolero Bill of Lading. The registry requires the holder to demonstrate its
rights by means of the identification and authentication procedures set forth
in the Bolero Rulebook591 in order for the instructions to be registered. These
instructions may establish a right in the favour of a third party (for example
a pledge to the benefit of a bank issuing a documentary credit), communicate
a transfer of ownership to the consignment represented by the Bolero Bill of
Lading, or confirm the delivery of the cargo and “surrender” of the Bolero Bill
of Lading. The designation of a new holder becomes effective by means of an
acknowledgement, by the carrier, that from that time on it holds the goods
described in the Bolero Bill of Lading to the order of such new holder. The new
holder (either owner or secured creditor) then replaces the previous holder and
is issued the authentication devices (cryptographic keys) for communicating
For an extensive discussion of the Bolero system, see Tobias Eckardt, The Bolero Bill of
589
Lading Under German and English Law (Frankfurt: Quadis/Sellier, 2004).

Users of the Bolero System are required to accept the terms of the Bolero Rulebook.
590
Appended to the Rulebook are the Operating Procedures, which is a detailed description
of Bolero System operations with a few specific and technical rules to ensure that the
technology and legal infrastructure mesh together without gaps or inconsistencies.
Operational Service Contracts provide for the services that Bolero International supplies,
as well as for system security, information dissemination and retention, and similar rights
and duties involved in a central information service. A service contract governs the rights
and obligations of the Bolero Association and its members and participants (for further
information, see <www.boleroassociation.org/dow_docs.htm>).
<www.boleroassociation.org/downloads/rulebook1.pdf>.
591
314
with the registry. Taken together, these messages and instructions replicate the
physical transfer of a paper bill of lading.
The legal relationships among all parties involved are set forth in the Bolero
Rulebook,592 which deals, inter alia, with the validity of electronic transactions
and the legal effect of Bolero Bills of Lading. The Bolero Rulebook establishes
security procedures to ensure that the entitlements are generated, authenticated
and transferred only by the authorized holder.593 As bailor, the shipper is declared
to have “constructive possession” of the goods represented by the Bolero Bill of
Lading, which may be transferred by the designation of a new holder (either as a
new “holder-to-order”, “pledgee holder”, “bearer holder”, or “consignee holder”).
The designation of a new holder becomes effective by means of an acknowledge-
ment, by the carrier, that from that time on it holds the goods described in the
Bolero Bill of Lading to the order of such new holder. As regards the contract
of carriage, the system envisages its transfer through novation: each carrier in
the Bolero System appoints Bolero International to act as its agent, and Bolero
International re-makes each contract of carriage on behalf of the carrier with
each new transferee.594
Id.
592
For instance, Section 2.2.1 of the Rulebook requires all users of the Bolero system to
593
digitally sign their messages, which is done by using private keys duly certified for use
within the system. By adhering to the terms of the Rulebook, Bolero users agree to ac-
cept the evidential admissibility of electronic data and messages and are estopped from
repudiating Bolero messages they send. The Rulebook makes it possible to incorporate,
directly or by reference, the provisions of underlying contracts, notably the carriage
contract and the letters of credit, so as to bind parties who are liable and to benefit those
intended to receive the rights.
Thus, an example of a sale of goods financed with a documentary credit using the Bolero
594
system may be as follows: Upon receipt of the cargo from the seller, the carrier creates a
Bolero Bill of Lading and designates the seller as the “shipper and holder” of the Bolero
Bill of Lading and the importer as the “to order party”. The seller sends a message to
the registry designating the confirming bank of the documentary credit as the pledgee
holder of the Bolero Bill of Lading and sends on the required documents via digitally
signed Bolero messages. The confirming bank examines the Bolero Bill of Lading, finds it
in order, credits the seller’s account, and designates a bank that issued the documentary
credit as the new pledgee holder. The issuing bank performs any additional checking of
the documents that it requires and charges the importer’s account. The issuing bank then
relinquishes its pledge and, by message to the registry, designates the importer as the holder
of the Bolero Bill of Lading. The importer is already “to order party” for the bill, and now,
as holder also, can transfer the bill. On behalf of the carrier, Bolero International notifies
the importer that the carrier holds the goods to its order. The importer sells the goods in
transit. Accordingly, the importer designates the buyer as the “holder-to-order” (i.e. both
holder and “to order party”) of the Bolero Bill of Lading. On behalf of the carrier, Bolero
International notifies the holder-to-order that the carrier holds the goods to its order. The
goods arrive at the destination port and the buyer surrenders the Bolero Bill of Lading. No
315
(iii) The International Registry of Security Interests on Mobile Equipment

A more recent example of an electronic registry system is the International
Registry for the recording of international interests in aircraft objects, which
was established in Shannon, Ireland, in June 2004, to carry out the registry
functions under the Convention on International Interests in Mobile Equip-
ment (also known as “the Cape Town Convention”),595 and the Protocol to the
Convention on International Interests in Mobile Equipment on Matters specific
to Aircraft Equipment (“the Aircraft Protocol”).596
The Cape Town Convention was adopted to facilitate the efficient financing of
mobile equipment.597 Traditionally, many countries would subject the constitution
and effects of consensual and non-consensual proprietary interests in movables
to the law of the place where they are located. In a practical sense, however,
mobile equipment does not have a specific location. Therefore, the traditional
rule is considered to be inadequate when applied to objects that are continu-
ously moving from country to country in the ordinary course of business. In
the case of space assets, such as telecommunication satellites, these objects are
not connected to a country at all. Consequently, an international framework
providing for the recognition, enforcement and priority of proprietary rights in
mobile equipment was needed.
The Cape Town Convention establishes a system for the perfection of
international interests in mobile equipment by means of registration in the
further Bolero-based transactions are now possible for the Bolero Bill of Lading. Bolero
International gives notice of surrender to the carrier and confirms surrender to the buyer.
The buyer’s representative appears at the port with the proof of identification required by
the carrier or port. The carrier delivers the goods to the buyer’s representative.
The Convention was adopted at a diplomatic conference convened under the joint
595
auspices of the International Institute for the Unification of Private Law (UNIDROIT)
and the International Civil Aviation Organization (ICAO) at Cape Town, South Africa
on 16 November 2001 (see the text at <www.unidroit.org/english/conventions/mobile-
equipment/main.htm>). The Cape Town Convention entered into force on 1 April 200
and had, as of 6 December 2007, 20 Contracting States (see <www.unidroit.org/english/
implement/i-2001-convention.pdf>). See also Roy M. Goode, The Official Commentary on
the Convention on International Interests in Mobile Equipment and Protocol Thereto on Matters
Specific to Aircraft Equipment (Rome: UNIDROIT, 2001).
Protocol to the Convention on International Interests in Mobile Equipment on Matters
596
specific to Aircraft Equipment (Cape Town, 16 November 2001) (see the text at <www.
unidroit.org/english/conventions/mobile-equipment/main.htm>). The Aircraft Protocol
entered into force on 1 March 2006 and had, as of 6 December 2007, 19 Contracting
States (see http://www.unidroit.org/english/implement/i-2001-aircraftprotocol.pdf>).
In general, the term “mobile equipment” encompasses objects that by their very nature
597
are used internationally. Examples of such objects are aircraft, satellites, trains, movable
oil-rigs and containers.
316
international registry system. In this manner, international creditors will be

provided with a secure system to record their interests in aircraft objects, and
to establish the priority of their interests vis-à-vis competing creditors within
and outside the insolvency of the debtor. The Convention/Protocol provides the
holders of international interests with a range of default and insolvency-related
remedies.
The international registry operates under a supervisory authority, a body with
legal personality under public international law and enjoying the privileges and
immunities usually granted to international organizations, such as immunity
from legal process and enforcement measures. The registration system is an
electronic, internet-based service. It will be available on-line without interruption.
According to article 16 of the Cape Town Convention, access to the international
registry is open to all parties that comply with the registration requirements,
regardless of whether they are located in Contracting States or non-Contracting
States. The system is designed, however, to prevent the recording of interests
without the required prior electronic consent. The checking of the registration
applications, the registrations themselves, and the responses to searches will be
processed automatically, without requiring human involvement.
The registration of an interest is “complete upon entry of the required
information into the international registry data base so as to be searchable.”598
Thus, any risk associated with interruption of services provided by the registry
system will be allocated depending upon the point in the process of registration
when the services became unavailable. If that happened before the registration
data have been entered into the database, the risk is borne by the party submit-
ting the data for registration. If it occurs after that point, the risk is borne by a
person searching the registry.599
(c) Limitations and Problems of Registry Systems

The establishment of electronic equivalents to paper-based registration systems
raises a number of particular problems. They include the satisfaction of legal
requirements on record-keeping, the adequacy of certification and authentica-
tion methods, possible need of specific legislative authority to operate electronic
registration systems, the allocation of liability for erroneous messages, commu-
nication failures, and system breakdowns; the incorporation of general terms
and conditions; and the safeguarding of privacy.
Cape Town Convention, article 19, paragraph 1.Pursuant to article XX of the Aircraft
598
Protocol, the search criteria for an aircraft object include at least “the name of its manu-
facturer, its manufacturer’s serial number and its model designation, supplemented as
necessary to ensure uniqueness.”
Ronald C.C. Cuming, “The International Registry for Interests in Aircraft: An Overview
599
of Its Structure”, 11 Uniform L. Rev. (2006) 18, 38.
317
Record-keeping, written form and signature requirements have been discussed

previously. The following analysis will focus, therefore, on two main aspects:
liability and functionality of electronic registries.
(i) Liability for System Failure

A registry system may be exposed to a number of risks. The registry may delay
the recording or notification of entries in the system, which may deprive a
secured creditor or holder from the protection it hoped to enjoy in the event,
for example, of the debtor’s insolvency prior to the perfection of its security
interest. There may also be errors in entering information into the system (for
example, by attributing the right to a person other than the legitimate holder, or
by misrepresenting the amount of the debt or the value of the goods). Also, the
registry may fail to apply appropriate identification procedures, thus making it
possible for an unauthorized person to impersonate a bona fide holder. Information
and records kept in the registry may be compromised by unauthorized access by
parties not entitled to deal with the registry, or may even be completely lost, for
example, as a result of a system breakdown if appropriate recovery procedures
are not in place.
To some extent these risks are not specific to the electronic environment, and
might occur in connection with the operation of any system whereby a person
or entity is entrusted with safekeeping of legally relevant record and other in-
formation and with recording transactions concerning the assets covered by the
registry. Thus for example, a land registry is exposed to the risk that the records
are lost by fire or looting, and a notary public may be held liable for effecting
transactions done by unauthorized person due to negligence in confirming their
identity or powers.
What makes electronic registries different is the reliance on information
technology, which due to its inherent capability of connectivity, increases
their exposure to outside attacks.600 Attacks from outsiders may aim both at
defrauding the system and effecting unauthorized transactions, as well as at
causing the system to collapse. The potential damage that can be caused by loss
of information, transactions delay or interruption caused by deliberate attacks
can be hardly overestimated. The risk of security threats is compounded by the
risk of unintended system failure, such as for instance, a crash down in the
In connection with electronic real estate registry systems, for example, it has been said
600
that one indirect cost “is the risk of different types of fraud and theft. While individual
fraud may be less likely with electronic than with paper documents, the new electronic
databases of official real estate records will create an attractive new target for sophisticated
cyber-criminals and will require additional security to prevent attacks” (Sam Stonefield,
“Electronic Real Estate Documents Context: Unresolved Cost-Benefit Issues and a Recom-
mended Decisional Process”, 24 W. N. Eng. L. Rev. (2002) 205, 233-234.
318
supporting computer systems, or unavailability of telecommunication by no

fault of the registry.601
It is not surprising, therefore, that liability becomes an important issue in
the development of registry systems.
Under the Cape Town Convention, for example, the registrar is liable for “com-
pensatory damages for loss suffered by a person directly resulting from an error
or omission of the registrar and its officers and employees or from a malfunction
of the international registration system except where the malfunction is caused
by an event of an inevitable and irresistible nature, which could not be prevented
by using the best practices in current use in the field of electronic registry design
and operation, including those related to back-up and systems security and
networking.”602 However, the registrar is not liable for factual inaccuracy of
registration information received by the registrar or transmitted by the registrar
in the form in which it received that information nor for acts or circumstances
for which the registrar and its officers and employees are not responsible and
arising prior to receipt of registration information at the international registry.
The Cape Town Convention requires the registrar to “procure insurance or a
financial guarantee” covering its liability.603 The instruments governing the
functioning of the international registry do not expressly establish a monetary
ceiling for the registrar’s liability.
In the case of the Bolero system, the liability of Bolero International Ltd., under
whose authority the system is run, is subject to the limitations and conditions set
forth in the Operational Service Contract, which is entered into between individual
users and Bolero International Ltd. Liability in connection with misdirection or
loss of messages, delay in sending messages, alteration, incorrect identification,
false creation, breach of confidentiality or other errors in connection with
messages processed by Bolero International Ltd. is generally subject to a limit
of US$ 100,000 per user per occurrence. The same limit applies to errors and
service failures in connection with certificates issued by Bolero International Ltd.
However, in the event that all certificates issued by Bolero International become
unreliable or unsuitable for usage as stated in their documentary forms, and,
as a direct result, the user suffers loss, Bolero International undertakes to pay
damages to the user up to the limit of US$1,000,000. The aggregate limit of
loss per calendar year is US$ 10,000,000 irrespective of the number of claims
or of the number of users entitled to claim in any calendar year.
For a few practical examples of business interruption in the on-line securities market, see
601
Anna Lee, “Insuring Cyberspace: Why Traditional Insurance Policies Are Not Enough:
The Nature of Potential E-Commerce Losses and Liabilities”, 3 Vand. J. Ent. L. & Pract.
(2001) 84.
Cape Town Convention, article 28, paragraph 1.
602
Cape Town Convention, article 28, paragraph 4.

603
319
(ii) Effectiveness of Electronic Communications for Transfer of Rights

From a legal point of view, perhaps the most interesting issue in connection
with electronic registry systems is the interplay between the medium used for
registration and the nature of the rights being registered. Experience shows
that, if the starting point of most initiatives was merely to render a negotiating
mechanism more efficient by replicating electronically the transactions that
used to be done by other means, the result sometimes was that the very nature
of the rights being registered ended up being affected by the disappearance of
the tangible medium to represent those rights.
This interplay between medium and substantive law became particularly
evident as a result of the expanding trade in dematerialized securities, which
raised various questions regarding the nature of the securities and the relation-
ships between the parties involved. In some instances, the new medium led to
a redefinition of legal concepts traditionally applied in securities transactions,
including, in some cases by legislative action. A study conducted some time
ago by the French National Council of Credit and Securities,604 for example,
identified the following main issues, and the answers, as appropriate, that were
given to them in practice:
(a) Legal nature of securities. Investment securities issued in paper form had
traditionally been regarded as corporeal moveable goods that incorporated
or represented certain rights (e.g. a credit against the issuing company or
shareholder’s rights). Without the paper support, it became necessary to
reclassify investment securities as intangible property;605
(b) Nature of rights established by a book entry. As long as investment securi-
ties were regarded as tangible property, the rights of the holder in the
securities were typically regarded as property rights. That understanding
was questioned in the case of dematerialized securities, which often
604
Conseil National du Crédit et du Titre, Problèmes juridiques liés à la dématéralisation des
moyens de payement et des titres (Paris, Banque de France, 1997), p. 122.
605
This, in term, affects the remedies available to the holder under the laws of the forum. For
instance, where securities have the nature of rights in rem, the holder can easily escape
the consequences of the intermediary’s insolvency proceedings by claiming restitution of
the securities. If, however, the securities are only treated as creating rights ad personam,
the holder would be forced to file a claim as any other unprivileged creditors of the
insolvent intermediary (See generally, Steven L. Schwarcz, “Intermediary Risk in a Global
Economy”, 50 Duke L. J. (2001) 1541; Kon Sik Kim, “A Civil Law Jurist’s Perspective on
Intermediary Risk in the Indirect Holding System For Securities: A Comment on Schwarcz
& Benjamin”, 12 Duke J. Comp. & Int’l L. (2002) 335; for a discussion of conflicts of law
issues in connection with capital markets, see Herbert Kronke, “Capital Markets and the
Conflict of Laws”, 286 Recueil des Cours de l’Académide de Droit International de La Haye
(2000) 245.
320
are not individualized, being sometimes not even susceptible of being

individualized;
(c) Effect of book entry. The introduction of an intermediary between the issuer
of the securities and their holder has raised the question as to whether the
record of issuance or transfer of the securities in the depository’s accounts
(book entry) was simply a means of evidencing the rights of the holder
or whether it was constitutive of such rights;
(d) Nature of contract between depository and investor. As long as investment
securities were represented by paper documents, it had been held that the
relationship between the holder and the depository of the certificates was
assimilated to the relationship between a bailor and a bailee. The absence
of a tangible instrument capable of being physically or constructively
possessed by either party has given rise to doubts as to the nature of the
contract between depository and investors and the extent of the latter’s
remedies in case of breach by the depository.
A study on issues of cross-border securities settlements prepared by the Bank

for International Settlements in 1995606 points out that there are considerable
differences among countries with regard to the legal framework applying to the
ownership, transfer and pledging of securities. The legal framework for multi-tiered
systems falls into one of two general types: one applies the conventional legal
framework for securities to book-entry systems by presuming the existence of
physical securities; the other builds a new legal framework for “dematerialized”
securities that are issued solely in electronic form. The first type of arrangement
relies on a legal fiction to fit book-entry securities into a paper-based legal theory.
The law pretends that the securities exist in physical form. Ownership rights and
the transfer and pledging of book-entry securities are then explained in terms
of “possession” and “delivery” through the mechanisms of immobilization or
global certificates, in which physical securities are deemed to be deposited and
kept in fungible (interchangeable) form. An investor shown on the books of
the intermediary is regarded as having “physical possession” of the respective
securities and, as a consequence, acquires a “property interest” in them. The
completion of book entries is deemed to have the same effect as physical delivery
of the relevant securities.
Domestic variations in the legal underpinnings of the systems for dematerialized
securities lead to inevitable conflicts in connection with cross-border securities
settlements.607 In addition to legal issues arising out of the involvement of the
Cross-border Securities Settlement (Bank for International Settlements, March 1995), at

606
50.
Id., 47-57.
607
321
intermediaries608 or relating the accounting practices and safekeeping procedures

employed by the custodian and sub-custodians609 the Bank for International
Settlements noted a wide variation among countries in their legal treatment of
securities, which raises significant issues for cross-border securities transactions.610
Other issues identified by the Bank for International Settlements include systemic
risks, conflict-of-laws problems, difficulties in establishing finality of delivery
and payment and problems related to the bankruptcy of participants in the
system. Although these problems are not specifically related to or caused by the
use of electronic records or messages, they are aggravated by the complexities
of dematerialization.
Recent international efforts have aimed at eliminating or at least reducing some
of these legal problems by harmonizing conflicts of law rules and introducing
uniform substantive rules for securities held by intermediaries.
The Hague Conference on Private International Law has a prepared an
international convention that determines the law applicable to a number of
issues in respect of securities held with an intermediary (hereafter “The Hague
Securities Convention”).611 The Hague Securities Convention was negotiated
in view of the practical need in a large and growing global financial market to
provide legal certainty and predictability as to the law applicable to securities
608
E.g. that the intermediaries may become insolvent, act negligently or commit fraud. The
issuer seeks discharge of its obligations, but risks performing to the wrong party.
609
E.g. the risk that custodians and sub-custodians, although making appropriate debits and
credits to the investor’s accounts, may not have sufficient securities to support the total
number of accounting entries they make. Shortfalls in custodial holdings may develop for
a number of reasons: inefficiencies in the settlement process, poor accounting controls,
or intentional fraud.
610
For example, dematerialized securities issued in one country may be handled in the
book-entry system of a second country that relies on an immobilization scheme and the
legal fiction of possession. In that case, it may be unclear whether the dematerialized
securities qualify as securities in the second country. If they do not, the transferee of the
dematerialized security may acquire a legal interest, which is significantly different from
the one it expected. The question of a security’s status under the law becomes critical if an
intermediary becomes insolvent. Further difficulties arise in connection with depository
receipts, which are issued in one country to establish entitlement to a security held in
custody in another country. Depository receipts are then traded and settled in the domestic
market in place of the foreign securities that they represent. However, the legal status of
these “quasi-securities” is not always clear. For example, a depository receipt may not
entitle the investor to make a claim on the issuer of the original securities; it may only
symbolize a claim on the intermediary or serve as evidence of a debtor/creditor relation-
ship between the intermediary and the investor. Moreover, it is not clear what happens
to depository receipts if the underlying securities are invalid, or if depository receipts are
over-issued relative to the amount of the underlying securities.
611
Convention on the Law Applicable to Certain Rights in respect of Securities held with an
Intermediary (The Hague, 5 July 2006), not yet in force.
322
that are held through clearing and settlement systems or other intermediaries.
The Hague Securities Convention established uniform rules for determining the
law applicable in respect of the following issues:
(a) the legal nature and effects against the intermediary and third parties of
the rights resulting from a credit of securities to a securities account;
(b) the legal nature and effects against the intermediary and third parties of
a disposition of securities held with an intermediary;
(c) the requirements, if any, for perfection of a disposition of securities held
with an intermediary;
(d) whether a person’s interest in securities held with an intermediary
extinguishes or has priority over another person’s interest;
(e) the duties, if any, of an intermediary to a person other than the account
holder who asserts in competition with the account holder or another
person an interest in securities held with that intermediary;
(f) the requirements, if any, for the realization of an interest in securities
held with an intermediary; and
(g) whether a disposition of securities held with an intermediary extends to
entitlements to dividends, income, or other distributions, or to redemption,
sale or other proceeds.
By harmonizing conflicts of law rules in those areas, the Hague Securities Con-
vention helps reduce legal risk, systemic risk and associated costs in relation to
cross-border transactions involving securities held with an intermediary so as
to facilitate the international flow of capital and access to capital markets.
The new conflicts of law rules provided by the Hague Securities Convention
will be supplemented in the future by a discrete set of substantive rules that are
currently at the final stages of negotiation at the International Institute for the
Unification of Private Law (UNIDROIT).612 The new international convention being
prepared by UNIDROIT aims to promote internal soundness and cross-border system
compatibility by providing the basic legal framework for intermediated securities
Preliminary Draft Convention on Substantive Rules Regarding Intermediated Securities

612
(hereafter “the Preliminary Draft Convention”) was prepared by the UNIDROIT Study
Group on Transactions on Transnational and Connected Capital Markets (UNIDROIT
Study Group LXXVIII) and is currently being considered by UNIDROIT Committee of
Governmental Experts for the Preparation of a Draft Convention on Substantive Rules
Regarding Intermediated Securities The latest version of the Preliminary Draft Convention
was adopted by the Committee oat its fourth session (Rome, 21-25 May 2007) and is
available at <www.unidroit.org/english/publications/proceedings/2007/study/78/s-
78-94-e.pdf> (10 December 2007).
323
holding systems. Within the context of holding securities with an intermediary,

the draft UNIDROIT convention sets forth the rights resulting from the credit of
securities to a securities account and establishes the minimum characteristics
for the acquisition and disposition of securities and for the provision of securities
as security or collateral. The new draft UNIDROIT convention also clarifies the
rules regarding finality of book entry transfers and irrevocability of instructions
by declaring that a book entry is effective when made and precludes “upper-tier
attachment”. Furthermore, the draft UNIDROIT convention: establishes a priority
ranking among competing interests with respect to securities; protects the good
faith holder of securities from adverse claims; declares the rights of the account
holder and the responsibilities of the intermediary in the event of insolvency;
establishes a regime for loss allocation; and clarifies the legal relationship between
the collateral taker, the intermediary and the account holder in situations where
the latter provides its securities as collateral.
No such general legal framework exists for the electronic transfer of rights
in tangible goods as a substitute for the documents of title currently used. This
has been recognized as a serious limitation to international negotiation of goods
in transit through electronic means whenever an equivalent of a traditional
document of title (such as a bill of lading) is needed for trading or financing
purposes. Transfer of title to tangible goods, or creation of security interests in
tangible goods often require transfer of physical or symbolic possession of such
goods. The development of documents that represent such goods has greatly
facilitated the movement of goods in international trade. That result was legally
possible by legislative recognition of the function of transport and warehousing
documents as substitutes for physical delivery of the goods. A similar conclusion
may be reached in connection with the function of the endorsement of negotiable
instruments such as letters of exchange and promissory notes.
Systems whereby title to goods and receivables might be transferred by means
of electronic messages, without creation and circulation of paper documents,
might result in significant savings in the overall cost of trade transactions. To
a large extent, practical solutions may be crafted by contractual arrangements
binding upon the users of any such systems. However, voluntary rules, upon
which some systems may be based, give way when they conflict with a State’s
laws and may not be enforceable against or binding upon third parties.613 This
The lack of success of some registry systems developed thus far can be explained by a
613
reluctance of the industry, in particular the banking industry, to accept electronic equiva-
lents of paper bills of lading as adequate collateral under a letter of credit. Developers
of technological solutions take the view that “the acceptance of electronic documents
is not a matter of changing transportation law to enable electronic documentation, but
is predominantly a matter of gaining the trust and security of the customers who use
shipping documents in their trade relations.” (Dubovec, supra note 588, at 465). This may
be partly true, but the trust and security of those customers would be strengthened “by
324
becomes even more of a problem where documents of title and other negotiable
instruments are used to support trading and financing transactions that take
place outside a regulated exchange accessible only to pre-registered participants.
The experience with trade in dematerialized securities shows that, although
electronic trading systems can be established at a national or regional level,
their smooth operation in a globalized economy sooner or later demands the
adoption of international rules on conflicts of laws, as well as some uniform
substantive law rules.
Indeed courts may be inclined to accept electronic book entries as the func-
tional equivalent of endorsement and physical transfer of a document of title
as between persons and entities that participate in a closed negotiation system
where all parties agree in advance to be bound by the rules of that system. The
result may differ, however, in situations where the courts are asked to enforce
rules of an electronic system against a third party that did not expressly agree
to be bound by those rules.
For example, the administrator in insolvency proceedings of a company that
sold goods in transit to another participant in an electronic system shortly before
becoming insolvent would be expected to try to obtain delivery of the goods to
the benefit of the insolvency estate. When faced with a concurring claim by a
buyer admitted to the electronic system, the insolvency administrator would
very likely refuse being bound by rules that he or she has not accepted and that
are not statutorily enforceable against him or her. The insolvency administra-
tor would likely insist that the court should apply the laws of the place where
the goods are located to determine whether a transfer of property had validly
occurred. In such a case, unless the applicable law recognizes the validity of the
negotiability rules of the electronic system, the court would likely hold that only
the actual endorsement of a bill of lading, a nearly universally accepted means
of transferring the right to claim delivery of the goods, could have granted that
right to the alleged holder.
The difficulty in such a situation is that most general cargo in international
shipping is not negotiated in established exchanges and, therefore, is not subject
to trade-specific rules. The introduction of a general statutory recognition of
electronic systems for the transfer of rights in goods in transit, as contemplated
by the UNCITRAL Draft Carriage of Goods Convention, will possibly ease some
of the legal concerns that currently exist. It remains to be seen, however, how
clear legal rules enacted by state legislators, and not with the confusing legal structure
created by some registry systems.” It has been said that one of the reasons why the use of
electronic commerce is not developing in line with technological capability is that “there
is little law governing its use.” The exchange of data electronically does not itself pose a
problem. However, “when the data represents negotiable documents that cover valuable
assets, an established legal structure is needed.”(Id.).
325
these systems will be set up in practice, how commodity-specific systems will

interplay with carriers’ and bankers’ practices, how trading systems can be
developed for cargo not ordinarily negotiated in established exchanges, and
whether communications and information technology will be able to offer an
alternative to electronic registry systems.
The same considerations apply, mutatis mutandis, to the negotiation of
traditional negotiable instruments, such as bills of exchange and promissory
notes.
326
Conclusion
Information and communications technology have revolutionized the way busi-

ness is conducted both at the national and international level. The extraordinary
growth in the world’s economic output and the expansion of international trade
that we have witnessed in the past decades would have been inconceivable without
the supporting role of technology. This has led not only to increased efficiency
in business, both in terms of time and cost savings, but also to the emergence
of new industries and business models.
Called upon to develop a legal and regulatory environment to facilitate electronic
commerce, legislators and policymakers around the world soon discovered the
limitations of the legal concepts and principles inherited from times when paper
documents represented the paradigm for legally relevant communications and
records. They soon realized that the intrinsically borderless nature of electronic
communications challenged the territorial nature of State law.
Switching from a paper-based to an electronic communications system has
therefore demanded an adaptation of legal concepts so as to ensure the legal
recognition of contracts negotiated electronically and the evidentiary function of
electronic records. UNCITRAL made a significant contribution to assist countries
in that transition, by offering principles and rules that permitted the application
of existing laws to the new electronic environment.
Technology has its limits, however. The advantages brought by the ease and
speed of communication are balanced by the difficulty in replicating all the
features of traditional documents with a comparable level of simplicity. This is
particularly the case when it comes to enabling contract performance through
electronic means. Here new structures were needed to provide legal certainty for
the sometimes complex procedures that must be in place to satisfy the security
needs of the international trading and financing systems. Achieving that result
in a manner that does not tie the law to the technology of the day – bound to
become obsolete faster than the law could be changed – has been one of the
greatest legislative challenges of the past years. The fact that not all obstacles
have yet been removed means that the law – like the technology whose operation
it intends to support – will remain a work in progress for some time.
327
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331
Horovitz, Bonna Lynn,“Computer Software as a Good under the Uniform Commercial

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332
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49 South Carolina Law Review (1998) 787-846.
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333
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Soudry, Ohad, “Promoting Economy: Electronic Reverse Auctions under the EC
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Trepte, Peter. “Electronic Procurement Marketplaces: The Competition Law Implica-
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334
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Werner, Jens, “E-Commerce.CO.UK: Local Rules in a Global Net: Online Business
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III.Cases
Canada
Turner v. TELUS Communications Inc., Federal Court of Canada (2005 FC 1601),29
November 2005.
Colombia
Juzgado Segundo Promiscuo Municipal Rovira Tolima, Juan Carlos Samper v. Jaime
Tapias, 21 julio 2003, Rad. 73-624-40-89-002-2003-053-00.
France
Court d’appel de Paris, 11th Chamber, Section A, 10 November 1999, Presdok et
Siline Gmbh D.J. v. F.C.O. fiduciaire SA <www.juriscom.net/documents/capa-
ris19991110.pdf> (3 December 2007).
Tribunal de Grande Instance de Paris, Ordonnence de réferé, 22 May 2000, Union
des Etudiants Juifs de France (UEJF) et La Ligue contre le racisme et l’antisémitisme
(LICRA) c/. Yahoo! Inc. et Yahoo France <www.juriscom.net/txt/jurisfr/cti/
tgiparis20000522.htm>.
Germany
Amtsgericht (District Court) Bonn, Case No. 3 C 193/01, 25 October 2001, JurPC
Internet-Zeitschrift für Rechtsinformatik und Informationsrecht, JurPC Web-Dok. No.
332/2002 <www.jurpc.de/rechtspr/20020332.htm> (11 September 2003).
335
Amtsgericht Erfurt, Case No. 28 C 2354/01, 14 September 2001, JurPC – Internet-

Zeitschrift für Rechtsinformatik und Informationsrecht, JurPC Web-Dok. No. 71/2002
<www.jurpc.de/rechtspr/20020071.htm> (25 August 2003).
Amtsgericht Hannover, Case No. 501 C 1510/01, 7 September 2002, JurPC – Internet
Zeitschrift für Rechtsinformatik, JurPC WebDok 299/2002 <www.jurpc.de/
Amtsgericht Westerburg, Case No. 21 C 26/03, 14 March 2003, JurPC – Internet
Bundesgerichtshof (Federal Court of Justice), Case No. XI ZR 367/97, 29 September
1998, JurPC – Internet-Zeitschrift für Rechtsinformatik und Informationsrecht,
JurPC Web-Dok. No. 05/1999 <www.jurpc.de/rechtspr/19990005.htm (29
November 2007).
Bundesgerichtshof, Case No. XII ZR 51/99, 14 March 2001, JurPC – Internet
Bundesgerichtshof, Case No. VIII ZR 13/01, 7 November 2001, JurPC – Internet
Hanseatisches Oberlandesgericht Hamburg, Case No. 3 U 168/00, 13 June 2002,
JurPC – Internet Zeitschrift für Rechtsinformatik, JurPC WebDok 288/2002 <www.
jurpc.de/rechtspr/20020288.htm> (30 November 2007).
Landgericht Köln, 16 April 2003, JurPC – Internet Zeitschrift für Rechtsinformatik,
JurPC WebDok 138/2003 <www.jurpc.de/rechtspr/20030138.htm>.
Landgericht (Land Court) Konstanz, Case No. 2 O 141/01 A, 19 April 2002, JurPC
– Internet Zeitschrift für Rechtsinformatik und Informationsrecht, JurPC Web-Dok.
No. 291/2002 <www.jurpc.de/rechtspr/20020291.htm> (25 August 2003).
Landgericht Münster, Case No. 4 O 424/99, 21 January 2000, JurPC – Internet
Landgericht Nürnberg-Fürth, Case No. 2 HK O 9431/01, 7 May 2002, JurPC –
Internet Zeitschrift für Rechtsinformatik, JurPC WebDok 158/2003 <www.jurpc.
de/rechtspr/20030158.htm> (30 November 2007).
Oberlandesgericht (Court of Appeal) Frankfurt, 20 November 2002, JurPC – Inter-
net Zeitschrift für Rechtsinformatik, JurPC WebDok 91/2003 <www.jurpc.de/
rechtspr/20030091.htm>.
Oberlandesgericht Frankfurt, Case No. 6 W 37/01, 17 April 2001, JurPC – Internet
336
Oberlandesgericht Hamm, Case No. 2 U 58/00, 14 December 2000, JurPC – Internet

Oberlandesgericht Karlsruhe, Case No. 14 U 202/96, 14 November 1997, JurPC
– Internet Zeitschrift für Rechtsinformatik und Informationsrecht, JurPC Web-Dok.
No. 09/1998 <www.jurpc.de/rechtspr/19980009.htm> (29 November 2007).
Oberlandesgericht München, Case No. 15 W 2631/98, 8 October 1998, JurPC –
Internet Zeitschrift für Rechtsinformatik, JurPC WebDok 153/1999 <www.jurpc.
de/rechtspr/19990153.htm> (9 September 2003).
Singapore
Chwee Kin Keong and others v. Digilandmall.com Pte Ltd, High Court, [2004]
SGHC 71, 12 April 2004.
Chwee Kin Keong & Others v. Digilandmall.com Pte Ltd., Court of Appeal,
[2005] SGCA 2 13 January 2005.
Sm Integrated Transware Pte Ltd v. Schenker Singapore (Pte) Ltd, High Court, [2005]
2 SLR 651, 30 March 2005.
United Kingdom
Bonnier Media Ltd v. Greg Lloyd Smith and Kestrel Trading Corporation, Scotland, Court
of Session, Outer House, 2002 SCLR 977, 1 July 2002.
Brennan v. Kinjella Pty Ltd., Supreme Court of New South Wales, 24 June 1993,
1993 NSW LEXIS 7543, 10.
Hall v. Cognos Limited (Hull Industrial Tribunal, Case No. 1803325/97) (unreported)
Hill v. Hill, Court of Appeal, [1947] Ch 231, 5 December 1946.
Hill v. Regem, UK, King’s Bench Division [1945] KB 329, 1 March 1945.
Lazarus Estates, Ltd. v. Beasley, Court of Appeal [1956] 1 QB 702, 24 January 1956.
Lobb v. Stanley, UK, Queen’s Bench, (1844) 5 Q.B. 574, 114 E.R. 1366.
London County Council v. Vitamins Ltd, Court of Appeal [1955] 2 QB 218, [1955] 2
All ER 229, 31March 1955.
Lyell v. Kennedy (No 3), UK, Court of Appeal [1881-1885] All ER Rep 814, 8 April
1884.
Mehta v. J. Pereira Fernandes S.A., Chancery Division, [2006] EWHC 813 (Ch), [2006]
2 Lloyd’s Rep 244, 7 April 2006.
Pretty Pictures Sarl v. Quixote Films Ltd., Queen’s Bench [2003] EWHC 311 (QB),
30 January 2003.
Sanders Bros v. Maclean & Co (1883) 11 QBD 327, at 341.
St Albans City and District Council v. International Computer Ltd., Court of Appeal
[1996]4 All ER 481, 26 July 1996.
The Queen v. Joseph Marijancevic, 1991 VIC LEXIS 452.
337
Tucker & Co., Ltd. v. Board of Trade, UK, Chancery Division [1955] 2 All ER 522, 19
May 1955.
United States
Bensusan Restaurant Corp. v. King, U. S. District Court Southern District of New York,
(937 F. Supp. 295), 9 September 1996.
Caspi et al. v. The Microsoft Network, L.L.C., et al, Superior Court of New Jersey, Ap-
pellate Division, 2 July 1999 (323 N.J. Super. 118).
Central Illinois Light Company (CILCO) v. Consolidation Coal Company (Consol), United
States District Court for the Central District of Illinois, 30 December 2002 (235
F. Supp. 2d 916), 30 December 2002.
Cloud Corporation v. Hasbro, Inc., US Court of Appeals for the Seventh Circuit (314
F. 3d 296) 26 December 2002.
Commonwealth Aluminum Corporation v. Stanley Metal Associates, United States District
Court for the Western District of Kentucky, 9 August 2001 (186 F. Supp. 2d 770).
Compuserve, Inc. v. Patterson, United States Court of Appeals for the Sixth Circuit (89
F.3d 1257, 1261), 22 July 1996.
Edwards, LLC v. Fiddes & Son, Ltd., US District Court for the District of Maine (245
F. Supp. 2d 245), 14 February 2003.
Farm Credit Bank of St. Paul v. William G. Huether, US, Supreme Court of North
Dakota (454 N.W.2d 710, 713), 12 April 1990.
Fix My PC, LLC d/b/a Fixx My PC v. N.F.N. Associates, Inc., United States District
Court For The Northern District Of Texas, Dallas Division (48 F. Supp. 2d 640),
26 March 1999.
Gorman v. Ameritrade Holding Corp., United States Court of Appeals for the District
of Columbia Circuit (293 F.3d 506, 5112-513).
Groff Lawrence v. America Online, Inc., Superior Court of Rhode Island, 27 May 1998,
LEXIS 46 (R.I. Super., 1998) <legal.web.aol.com/decisions/dlother/groff.html>
(30 November 2007).
Gutnick v. Dow Jones & Co Inc [2001], Supreme Court of Victoria, VSC 305, 28
August 2001.
Hotmail Corp. v. Van$ Money Pie, United States District Court for the Northern District
of California, 16 April 1998, U.S. Dist. LEXIS 10729 (U.S. Dist., 1998).
I. Lan Systems, Inc. v. Netscout Service Level Corp., United States District Court, District
of Massachusetts, 2 January 2002 (183 F. Supp. 2nd 328).
Inset Systems Inc. v. Instruction Set, Inc., United States District Court for the District
of Connecticut (937 F. Supp. 161), 17 April 1996 (D. Conn. 1996).
Lim v. The TV Corporation International, (State) Court of Appeal of California, 24 June
2002 (99 Cal. App. 4th 684).
Machulsky v. Hall, United States District Court for the District of New Jersey (210 F.
Supp. 2d 531), 9 July 2002.
338
Metcalf v. Lawson, Supreme Court of New Hampshire (148 N. H. 35).

Mieczkowski v. Masco Corp., United States District Court for the Eastern District of
Texas, Texarkana Division, 997 F. Supp. 782, March 18, 1998.
Millennium Enterprises, Inc. v. Millennium Music, LP, United States District Court for
the District of Oregon, 33 F. Supp. 2d 907, January 4, 1999.
Rio Properties, Inc. v. Rio International Interlink, United States Court of Appeals for
the Ninth Circuit (284 F.3d 1007), 20 March 2002.
Sea-Land Service, Inc. v. Lozen International, LLC, United States Court of Appeals for
the Ninth Circuit, 3 April 2002 (285 F.3d 808).
Shattuck Jonathan P. v. Klotzbach David K., Superior Court of Massachusetts, 11
December 2001 (14 Mass. L. Rep. 360).
Specht v. Netscape Communications Corporation and America Online, Inc., United States
Court of Appeals for the Second Circuit, 1 October 2002 (306 F. 3rd p. 17).
Superhighway Consulting, Inc. v. Techwave, Inc., United States District Court for the
Northern District of Illinois, Eastern Division, 16 November 1999 (1999 U.S.
Dist. LEXIS 17910).
Weber v. De Cecco Dante, United States, New Jersey Superior Court (1 N.J. Super. 353,
358), 14 October 1948.
Winfield Collection Ltd. v. Mccauley, United States District Court for the Eastern District
of Michigan, Southern Division (105 F. Supp. 2d 746, 751), 24 July 2000.
Yahoo! Inc. v. La Ligue contre le Racisme et l’antisémitisme, United States District Court
for the Northern District of California, San Jose Division (169 F. Supp. 2d 1181,
1192), 7 November 2001.
Yahoo! Inc. v. La Ligue contre le Racisme et l’antisemitisme, United States Court of
Appeals for the Ninth Circuit (379 F.3d 1120), 23 August 2004.
Yahoo! Inc. v. La Ligue Contre le Racisme et l’Antisemitisme, United States Court of
Appeals for the Ninth Circuit (399 F.3d 1010), 10 February 2005.
Zippo Manufacturing Company v. Zippo Dot Com, Inc. United States District Court for
the Western District of Pennsylvania (952 F. Supp. 1119), 16 January 1997.
339
The Elusive Pro-Arbitration Priority in
Contemporary Court Scrutiny of
Arbitral Awards
by
Tibor Várady
Contents

List of Principal Publications 348
A. Selected Books 348
A.1. In English 348
A.2. In Serbo-Croatian 348
A.3. In Hungarian 349
B. Selected Articles 349
B.1. In English, French and German 349
B.2. In Other Languages 352
I. Introduction 353
II. The Impact of Party Autonomy on the Scope of Court Scrutiny of
Arbitral Awards 362
A. Introductory Remarks 362
B. Contractual Restriction of Judicial Review 363
B.1. Contractual Restriction of Court Review based on Explicit
Legislative Provisions 363
B.2. Contractual Restriction of Judicial Review in the Absence of
Explicit Legislative Provisions 368
C. Extension of Judicial Control by Party Agreement? 370
C.1. A Case which Prompted Wide Attention 370
C.2. Some Other U.S. Cases 376
C.3. The Implications of Recognizing or not Recognizing
Stipulations on Expanded Judicial Review 381
C.3.1. Hypothesis a): Party agreement on expanded judicial
review is disregarded 381
C.3.2. Hypothesis b): Party agreement on expanded judicial
review is observed 389
C.3.3. Concluding remarks 393
III. Flexibility, Relevance, and Waiver as Points of Reliance 394
A. Introduction 394
B. The Issue of Relevance 398
B.1. Should Relevance be Relevant? 398
B.2. Translation and the Issue of Relevance 403
C. The Question of Waiver 407
C.1. The Principle 407

C.2. Waiver and Related Concepts 409
C.3. Issues Connected with Waiver and Related Concepts 411
C.3.1. No objection, or imperfect objection 411
C.3.2. Knowledge, or presumed knowledge of facts on which an
objection could have been based 413
C.3.3. Procedural imperfection as an opportunity 414
C.4. A Further Issue: The Distinction between Permissible and
Impermissible Waivers 416
C.4.1. Do party stipulations and waiver have the same limits? 422
C.5. A Concluding Remark 426
IV. Developments Regarding Interaction Between Various Instances of
Scrutiny 427
A. The Modern Standard: Two Possible Recourses 427
B. Revision: A Supplement to, or an Exception from the Modern
Standard 429
C. The Relationship Between two Standard Recourses Against Arbitral
Awards 431
C.1. The Abandoning of Double-Exequatur, and Some Ensuing
Questions 431
C.2. The Impact of the Circumstance that Setting Aside was not
Initiated 433
C.3. Setting Aside Proceedings Pending 436
C.4. Setting Aside Proceedings Completed 438
C.4.1. A trend hinted by two controversial decisions 438
C.4.2.The aftermath of Hilmarton and Chromalloy 446
C.5. Court Decisions Denying Arbitral Jurisdiction, and their Impact
on Recognition of Foreign Awards 450
C.6. What Interrelation between the Two Recourses is Pro-
Arbitration? – And in particular, is the Recognition of
Annulled Awards Pro-Arbitration? 453
V. Concluding Observations 459
Table of cases 465
Austria 465
Canada 465
China 465
Egypt 465
England 466
France 466
Germany 467
Italy 467
New Zealand 467
344
The Elusive Pro-Arbitration Priority in Contemporary Court Scrutiny of Arbitral Awards
Russia 467
Switzerland 468
The Netherlands 468
United States 469
European Court of Human Rights 470
European Court of Justice 470
International Court of Justice 470
Bibliography 471
345
Biographical Note
Born in Zrenjanin (Serbia), on May 25, 1939.

Legal education: Law Graduate, Belgrade University Faculty of Law (1962);
LL.M. Belgrade University Faculty of Law (1967); S.J.D. Harvard Law School
(1970).
Teaching positions at universities: Assistant Professor, Associate Professor,
and Professor of Law at the Novi Sad University, Yugoslavia (1963 – 1992);
Professor of Law, Central European University Legal Studies, Budapest Hungary,
Chairman of the International Business Law Program (since 1993); Tenured
Professor of Law at Emory University School of Law (since 1999, teaching each
Spring); Visiting Professor at University of Florida College of Law (Spring 1981);
Emory University School of Law (Spring 1988, 1990, 1992, 1994, 1996, 1998);
University of California, Berkeley (Spring 1991); Cornell Law School (Spring
1993, 1995, 1997).
Lectures: Gave more than 200 individual lectures in different countries including
the United States, France, United Kingdom, Germany, The Netherlands, Austria,
Belgium, Bosnia-Herzegovina, Croatia, Spain, Hungary, the Czech Republic,
Slovakia, Slovenia, Poland, Singapore, P.R. of China (mostly at universities).
Membership in scholarly and professional institutions: Serbian Academy of
Sciences and Arts – regular member; Hungarian Academy of Sciences – member
with “consultative status”; International Academy of Comparative Law – as-
sociate member; American Bar Association – associate member; Member of the
ILA; Member of the Société de la Legislation Comparé; Member of the Society
of European Contract Law (Secola).
Membership in arbitral institutions: Member of the Hague Permanent Court
of Arbitration.
Membership on lists of arbitrators: Foreign Trade Court of Arbitration at the
Serbian Chamber of Commerce; Court of Arbitration at the Hungarian Chamber
of Commerce; Court of Arbitration at the Croatian Chamber of Commerce; Court
of Arbitration at the Chamber of Commerce of Bosnia and Herzegovina; Court
of Arbitration Regional Center for Commercial Arbitration in Cairo; Regional
Center for Commercial Arbitration in Kuala Lumpur; Court of Arbitration at
the Macedonian Chamber of Commerce.
346
International practice: Since 2001 acted as agent counsel and advocate in

10 cases before the International Court of Justice.
Also acted as arbitrator in more than 200 international commercial arbitration
cases.
Languages used in professional activities: English, French, German, Serbian
(Croatian, Bosnian), and Hungarian.
347
List of Principal Publications
A. Selected Books
A.1. In English
Joint Ventures: Long-Term Economic Cooperation with Foreign Firms (with N. Balog,,
Belgrade, 1979). International Commercial Arbitration: A Transnational Perspec-
tive (with Arthur Von Mehren & John Barcelo, Documents Supplement and a
Teacher’s Manual West Group 1999; Thomson & West 2d edn, 2003; Thomson
& West 3d edn, 2006).
Language and Translation in International Commercial Arbitration (T.M.C. Asser Press,
2006).
A.2. In Serbo-Croatian
Veliki pravni priručnik – Deo o Medˉunarodnom privatnom pravu sa naslovom “Ostvarivanje
i zaštita prava sa elementom inostranosti” (Great Legal Handbook – Part on Private
International Law under the title “Implementation and Protection of Rights Containing
Foreign Elements”) (Belgrade, 1972; Belgrade 2d edn, 1977).
Arbitražno rešavanje sporova (Settlement of Disputes by Arbitration) (with S. Triva, B.
Poznić & N. Vorgić, Novi Sad, 1973).
Medˉunarodne i unutrašnje kolizione norme (International and Internal Conflict Rules)
(Belgrade, 1975).
2 Enciklopedija imovinskog prava i prava udruženog rada – Tekstovi o opštem delu
Medˉunarodnog privatnog prava i o Medˉunarodnom stvarnom pravu (Encyclopedia
of the Law pertaining to Property Relations and of the Law of Associated Labor –
Author of the texts concerning the General Part of Private International Law and on
International Property Law) (Belgrade, 1978).
1 Zaključivanje ugovora sa stranim partnerima (Concluding Contracts with Foreign Partners)
(Novi Sad, 1979) (editor and author of 4 contributions).
2 Zaključivanje ugovora sa stranim partnerima (Concluding Contracts with Foreign Partners)
(Novi Sad, 1979) (editor and author of 3 contributions).
Osnovi medˉunarodnog privatnog prava (Fundamentals of Private International Law)
(Novi Sad, 1977).
Medˉunarodno privatno pravo II (Private International Law II) (Novi Sad, 1980).
Medˉunarodni transfer tehnologije u jugoslovenskom pravu (International Technology
Transfer under Yugoslav Law) (Belgrade, 1980).
348
Medˉunarodno privatno pravo (Private International Law) (Novi Sad, 1983; 2d edn, 1987;
3d edn, 1990; 4th edn, 1996; with B. Bordás & G. Knežević, 5th edn, 2001;
with B. Bordás & G. Knežević, 6th edn, 2003; with B. Bordás and G. Knežević,
7th edn; B. Bordás, G. Knežević & V. Pavić, 8th edn, 2007).
A.3. In Hungarian
Történelemközelben (In the Nearness of History) (Újvidék/Novi Sad, 1995).
B. Selected Articles
B.1. In English, French and German

“Resolving the Merits of the Disputes in the Practice of the Arbitration Tribunal at
the Federal Economic Chamber”, 2-3 Jugoslovenska revija za medˉunarodno pravo
(1970) 349.
“Internal Conflict of Laws in Yugoslavia”, 2 Netherlands International Law Review
(1976) 137.
“Technical Checking and Expertise within the Process of Institutionalization of
International Trade Arbitration”, in Collection of the International Congress on
Arbitration Materials, (Moscow, 1972) 373.
“Application of Foreign Law by Non-Judicial Authorities”, in Essays on the Law of
International Trade (1976) 204.
“Der rechtliche Rahmen für ausländische Investitionen in Jugoslawien: Zehn Jahre
nach dem Anfang”, 1 Jahrbuch für Ostrecht (1978) 111.
“Immunity of State Property from Execution in the Yugoslav Legal System”, Netherlands
Yearbook of International Law (1979) 85.
Brochure, “Die Grundmerkmale des neuen Gesetzes über langfristige Produktions-
kooperation, geschäftlich-technische Zusammenarbeit sowie den Erwerb und
überlassen materiellen Rechts auf Technologie” (Belgrade, 1979).
“Neue Entwicklungen bei Investitions-und Kooperationsverträgen mit ausländische
Partner”, in Die jugoslawische Investitions-und Kooperationsgesetzgebung (1979)
30.
“Foreign Law Before Domestic Authorities: Realities and Gestures”, Festschrift Zajtay
(Tübingen, 1982) 489.
“Transfert de téchnologie dans les contrats Yougoslaves de coopération industrielle
à long terme avec un partenaire étranger”, Journées de la Société de législation
comparé (Paris, 1982) 337.
“Les développements nouveaux concernant la reconnaissance et l’ exécution des
sentences arbitrales en Yougoslavie”, 2 Revue de l’arbitrage (1983) 163.
“Some Observations on the New Yugoslav Private International Law Code”, 1 Rivista
di diritto internazionale privato e processuale (1983) 69.
349
“Notes sur le nouveau Réglement de la Cour d’Arbitrage auprès de la Chambre

économique de Yougoslavie”, 1 Revue de l’arbitrage (1984) 171.
“New Developments with respect to the Recognition and Enforcement of Foreign
Court Decisions in Yugoslavia”, in Current Trends of Conflicts of Laws in Central-
Eastern Europe (1984) 137.
“On the First Yugoslav Private International Law Code”, 3 Yugoslav Law (1984)
203.
“Zur Anerkennung deutscher Scheidungsurteile in Jugoslawien”, 3 IPRax (1984)
249.
“On the Management Structure of Enterprises with Foreign Participation in Socialist
Countries, with Special Reference to Yugoslavia”, in The Legal Structure of the
Enterprise (1985) 473.
“Selbstverwaltung in jugoslawischen Arbeitsorganisationen und ihre rechtliche
Grundlagen, mit besonderer Rücksichtigung der aussenwirtschaftlichen
Organisationen”, in Theoretische Fragen des Wirtschaftsrechts (1986) 261.
“Chronique de jurisprudence yougoslave”, 3 Journal du droit international (1986)
745.
“Die Eigenarten der internen Gesetzkollisionen in Jugoslawien”, 1 Zeitschrift für
Rechtsvergleichung (1987) 38.
“Conflits de lois – Yougoslavie”, 2 Juris classeurs: Législation comparé (1989).
“L’obligation alimentaire en Droit international privé: Yougoslavie”, in 2 L’obligation
alimentaire en Droit international privé (1987) 129.
“Anerkennung und Vollstreckung ausländischer Entscheidungen in Jugoslawien:
Das neue Recht und die Rechtsprechung”, 4 Rabels Zeitschrift (1987) 632.
“On Appointing Authorities in International Commercial Arbitration”, 2 Emory
Journal of International Dispute Resolution (1988) 311.
“Assumptions of Compatibility and Correspondance in Post-War Yugoslav Private
International Law”, in Liber Memorialis Francois Laurent (1989) 1151.
“Yugoslavia: National Report”, in Der Schadenersatz in Ost-West-Außenwirtschafts-
verhältnissen (1990) 141.
“Civil Codes and Administrative Regulations in International Trade Relations”,
Questions of Civil Law Codification (1990) 175.
“Provisional Measures in International Commercial Arbitration, with Special
Reference to Yugoslav Standpoints”, in 8 Hague-Zagreb-Ghent Essays on the Law
of International Trade (1991) 147.
“On the Foreign Investment Legislation in Yugoslavia”, 4-5 Revue de Droit des Affaires
Internationales (1990) 631.
“Arbitration Despite the Parties?”, in Law and Reality: Essays on National and International
Procedural Law (1992) 351.
350
“Collective Minority Rights and Problems in Their Legal Protection: The Example of
Yugoslavia”, 6 East European Politics and Societies (1992) 260-282.
“On the Position of International Law in the Process of Transformation in Europe:
An Essay in Realism and Idealism”, 3 Jugoslovenska revija za medˉunarodno pravo
236 (1993); 3-4 35 Acta Juridica Hungarica (1993) 121.
“Survey of Presidential Powers in Eastern Europe: ex-Yugoslavia”, East European
Constitutional Review (1994) 75 (with Nenad Dimitrijevic).
“One Life in Many Countries”, 29 War Report Oct./Nov. 1994 20.
“Remarks on Cultural Pluralism and Multiethnicity in Ethnic Societies”, in Intercul-
turality in Multiethnic Societies (1995) 39.
“The Emergence of Competition Law in (Former) Socialist Countries”, 47 American
Journal of Comparative Law (1999) 229.
“Minorities, Majorities, Law, and Ethnicity: Reflections of the Yugoslav Case”, 19
Human Rights Quarterly (1997) 9.
“Collective Rights of Minorities and Majorities within the Context of International
Law”, in Dual Images: Multiculturalism on Two Sides of the Atlantic (1996) 113.
“The Predicament of Peacekeeping in Bosnia”, 28 Cornell International Law Review
(1995) 701.
“Nation States, Ethnic Societies, and Minorities”, Paper submitted to the II. Confer-
ence organized by the Hungarian Academy of Sciences and the Royal Society
of Canada, in Quebec, (1996).
“The Courtesy Trap: Arbitration ‘if no amicable settlement can be reached’”, 14
Journal of International Arbitration (1997) 5.
“On the Chances of Ethnocultural Justice in Central-Eastern Europe, with Comments
on the Dayton Agreement”, in Can Liberal Pluralism be Exported? (2002) 135.
“International Commercial Arbitration in Hungary”, 1 Review of Arbitration in
Central and Eastern Europe (2000) 11.
“Remuneration of Arbitrators as a Threshold Issue: Economic Sense and Procedural
Realities”, in Corporations, Capital Markets and Business in the Law: Liber Amicorum
Richard M. Buxbaum (2000) 585.
“Chances for Ideas in a Post-Dissident Intellectual Environment”, 14 New Moment
(2000) 142.
“Notes on Ideological Precepts as Formants of Private law in Central-East European
Countries”, 2 Global Jurist Frontiers (2002), <http://www.bepress.com/gj/
frontiers/vol2/iss2/art1>; in Opening Up European Law (2007) 127.
“The Language Issue in International Commercial Arbitration: Notions and Ques-
tions”, Prawo Priwatne Czasu Przemian (Festchrift Soltysinski) (2005) 923.
“Challenge of Arbitral Awards in Recognition Proceedings on Grounds of Shortcom-
ings Pertaining to Language”, in Balancing of Interests – Liber Amicorum Peter
Hay (2005) 435.
351
“Language-Related Strategies in Preparing Arbitration”, 7 Across Languages and

Cultures (2006) 209.
“On the Option of a Contractual Extension of Judicial Review of Arbitral Awards
or: What is Actually Pro-arbitration”, 56 Zbornik Pravnog fakulteta u Zagrebu 2;
(2006) 253.
B.2. In Other Languages

Published more than 100 articles in Serbo-Croatian and Hungarian.
352
The Elusive Pro-Arbitration Priority in

Contemporary Court Scrutiny of
Arbitral Awards
Tibor Várady
I. Introduction
The June 2006 issue of the Journal of International Arbitration devoted two articles
to an English case dealing with the limits of court control over an arbitral award.
Neelanjan Maitra1 and Adam Samuel2 focus on a 2005 decision of the House of
Lords in Lesotho Highlands Development Authority v. Impregilo S.p.A.3 The problem-
pattern which characterizes the case – and which prompted the comments – is
the following: An International Chamber of Commerce (ICC) partial award
was rendered in London in favor of a consortium consisting of Impregilo S.p.A.
and other contractors, against Lesotho Highlands Development Authority. The
award was challenged before English courts. The court of first instance upheld
the challenge. Judge Morison held that the arbitrators had exceeded their powers
under s. 68(2)(b) of the 1996 Arbitration Act applicable in England, Northern
Ireland and Wales (hereinafter: the “English 1996 Act”). It was explained that
the arbitrators did so by expressing the award in currencies other than those
stipulated in the contract, and by awarding interest in circumstances not permitted
under Lesotho law – the law chosen by the parties to govern the contract and
the law identified in the Terms of Reference as the applicable substantive law.4
Judge Morison remitted the decisions on currency and interest to the arbitration
1
Neelanjan Maitra, “Domestic Court Intervention in International Arbitration: The English
View”, 23 J. Int’l Arb. (2006) 239.
2
Adam Samuel, “Lesotho Highlands: ‘Denaturing’ an Arbitration Statute and an Express
Choice of Law does not Involve the Arbitrator Exceeding his Powers”, 23 J. Int’l Arb.
(2006) 259.
3
Lesotho Highlands Development Authority v. Impreglio S.p.A. et al., [2005] UKHL 43 (U.K.).
4
Lesotho Highlands Development Authority v. Impreglio S.p.A. et al., [2002] EWHC 2435
(Comm) (U.K.).
353
tribunal with directions as to how they ought to carry out their task. The Court
of Appeal upheld this decision on July 31, 2003. In a unanimous decision, the
Court of Appeal confirmed that rendering an award in a currency other than that
provided for the contract, and awarding interest in circumstances not permitted
under the applicable law, justified the conclusion that the arbitrators exceeded
their powers under section 68(2)(b).5
Impregilo and the other contractors lodged another appeal, and the case
reached the House of Lords. This appeal was upheld, and the order for remission
of the award was set aside. It is interesting to note that in his opinion Lord Steyn
devoted a section (Section XI) to “The ethos of the 1996 Act”. He explained that
the English 1996 Act adopted a new philosophy, and cited Lord Wilberforce
explaining the essence “of the new philosophy enshrined in it”. In the words of
Lord Wilberforce: “I would like to dwell for a moment on one point to which I
personally attach some importance. That is the relation between arbitration and
the courts. I have never taken the view that arbitration is a kind of annex, appendix
or poor relation to court proceedings. I have always wished to see arbitration,
as far as possible, and subject to statutory guidelines no doubt, regarded as a
freestanding system, free to settle its own procedure and free to develop its own
substantive law – yes, its substantive law. I have always hoped to see arbitration
law moving in that direction.” Referring to the earlier English Arbitration Act
preceding the 1996 Act, Lord Wilberforce added: “The difference between our
system and that of others has been and is, I believe, quite a substantial deterrent
to people to sending arbitrations here …”.6
Explaining policy reasons behind a deferential attitude towards arbitral
awards, Lord Steyn stated in the Lesotho Highlands case that “[i]f the tribunal
erred in any way, it was an error within its power.” He added that granting the
appeal (and re-instating the award):
“[i]s consistent with the legislative purpose of the 1996 Act, which is
intended to promote one-stop adjudication. If the contrary view of the
Court of Appeal had prevailed, it would have opened up many opportunities
for challenging awards on the basis that the tribunal exceeded its powers
in ruling on the currency of the award. Such decisions are an everyday
occurrence in the arbitral world. If the view of the Court of Appeal had
been upheld, a very serious defect in the machinery of the 1996 Act
would have been revealed. The fact that this case has been before courts

5
Lesotho Highlands Development Authority v. Impreglio S.p.A. et al., [2003] EWCA Civ. 1159
(U.K.).

6
Lesotho Highlands Development Authority v. Impreglio S.p.A. et al., [2005] UKHL 43 (U.K.),
¶ 18.
354
at three levels and that enforcement of the award has been delayed for
more than three years reinforces the importance of the point”.7
This line of reasoning has become fairly mainstream on the international

scene. Arbitration awards – and awards rendered in international commercial
arbitration – have been treated by courts with increasing deference. A pro-
arbitration trend has become more and more pronounced. To cite an example
from a different part of the world, I shall refer to an Egyptian judgment rendered
about the same time as the House of Lords rendered its decision in the Lesotho
Highlands case. On July 27, 2005, the Court of Appeals of Cairo considered
the request for annulment of an arbitral award rendered in Egypt.8 Granting
annulment would have been quite plausible, since one of the parties turned
directly to arbitration (and the arbitrators accepted jurisdiction) although the
agreement of the parties provided for conciliation as a preliminary step. The
Egyptian court stated, however, that the 1994 Egyptian Arbitration Act has a
restricted number of grounds for setting aside specified in Article 53, and none
of these grounds deals with the situation at issue. In his comments on this
decision, El-Ahdab states that the position taken by the Cairo Court of Appeals
represents a turning point, which was inspired by the pro-arbitration drift (“un
courant de faveur pour l’arbitrage”) of French courts, and by the Cour de cassation
in particular. In the words of El-Ahdab:
“Cet arrêt consacre un tournant important dans la conception que le juge
retient pour les voies de recours en matière d’arbitrage. En effet, l’arbitrage
souffre dans les pays arabes d’un ‘malentendu’ qui conduit souvent les juges à
exercer un contrôle exagérément sévère et formaliste, ce qui porte préjudice à
l’efficacité de l’arbitrage, paralysé par cet abus dans les voies de recours. Une
jurisprudence d’avantage tournée vers l’efficacité de l’arbitrage est de nature
à pousser les parties vers l’exécution volontaire des sentences arbitrales, car
elles constatent que les voies de recours ne permettent pas d’assurer le succès
des manœuvres dilatoires”.9
It is well known that there are more and more court cases world-wide in which
the courts are taking a deferential position towards arbitral awards. I would like
to join those who have praised this trend. And yet one has to mention that some
doubts have also been voiced. Among these voices the most intriguing are those
7
Lesotho Highlands Development Authority v. Impreglio S.p.A. et al., [2005] UKHL 43 (U.K.),
¶¶ 33-34.
8
Cour d’appel de Caire (Ch. 91, com.), 27 juillet 2005, 2 Revue de l’arbitrage (2006) 475
(reporting court decision: Société T3A Industrial v. Société des Entrepreneurs arabes).
9
Abdul-Hamid El-Ahdab, “Note – Cour d’appel du Caire (Ch. 91, com.), 27 juillet 2005”,
2 Revue de l’arbitrage (2006) 477.
355
which do not contest the need for a pro-arbitration drift, but raise the question
whether what is happening is actually pro-arbitration. To cite some examples,
let me return to the comments on the Lesotho Highlands case. Adam Samuel,
for example, notes that after Lesotho Highlands, the English position is clear:
the arbitrators can ignore the parties’ agreement as to the applicable law. His
concluding sentences, however, raise a question: “It is tempting to see this as a
great ‘triumph’ for arbitration in England. However, a sense of unease remains.
Should arbitrators be allowed the temptation of riding roughshod through
choice-of-law provisions designed to help the parties settle their cases with some
degree of certainty about the likely result?”10
In a similar vein, the author of the other article (N. Maitra) concludes that
“Those who feel that it [the decision of the House of Lords in the Lesotho case]
augments London’s position as a favoured arbitration centre have welcomed
the decision. … Critics of the decision have equally valid claims. Parties to an
arbitration need a stable system of domestic courts to fall back on if the arbitra-
tors ‘get it wrong’.”11
The questions raised prompt a glance at the history of the relationship between
arbitration and courts. It is well known that there was a period of “judicial
hostility” towards arbitration. Explaining the history of the relationship between
courts and arbitration, Judge Frank states in the Kulukundis case in 1942:
“The English courts, while giving full effect to agreements to submit
controversies to arbitration after they had ripened into arbitrators’
awards, would – over a long period beginning at the end of the 17th
century – do little or nothing to prevent or make irksome the breach of
such agreements when they were still executory.”12
Judge Frank explains further:

“An effort has been made to justify this judicial hostility to the executory
arbitration agreement on the ground that arbitrations, if unsupervised
by the courts, are undesirable, and that legislation was needed to make
possible such supervision.”13
Endeavoring to identify the motives behind hostility, Judge Frank paraphrases the
explanation given by Lord Campbell in the 1856 Scott v. Avery case.14 According
to Lord Campbell, the doctrine:
Samuel, supra note 2, at 263.

10
Maitra, supra note 1, at 248.

11
Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F.2d 978, 982 (2d. Cir. N.Y. 1942).
12
13
Scott v. Avery [1843-1860] All ER Rep 1 (U.K.).

14
356
“[h]ad its origin in the interests of the judges. There was no disguising the
fact that, as formerly, the emoluments of the Judges depended mainly, or
almost entirely, upon fees, and as they had no fixed salaries, there was
great competition to get as much as possible of litigation into Westminster
Hall, and a great scramble in Westminster Hall for the division of the
spoil … And they had great jealousy of arbitrations whereby Westminster
Hall was robbed of those cases which came not into Kings Bench, nor the
Common Pleas, nor the Exchequer. Therefore they said that the courts
ought not to be ousted of their jurisdiction, and that it was contrary to
the policy of the law to do so.”15
Judge Frank adds that perhaps the true explanation is “the hypnotic power of
the phrase ‘oust the jurisdiction’”. He concludes “Give a bad dogma a good name
and its bite may become as bad as its bark.”16
To cite another well-known case exemplifying antagonism towards arbitration,
I shall mention the 1843 decision of the French Cour de cassation in L’Alliance
v. Prunier.17 In this case, the Cour de cassation opted not to give effect to a “clause
compromissoire” (a clause in the contract submitting future possible disputes to
arbitration). One of the key reasons on which this decision was based, was the
fact that the arbitrators were not named.
The same circumstance was also relied upon by Justice Story (then Circuit
Justice) in Tobey v. County of Bristol.18 Plaintiff sought to compel arbitration
on the basis of an arbitration clause in the contract. Justice Story established
as a matter of principle that “It is certainly the policy of the common law, not
to compel men to submit their rights and interests to arbitration, or to enforce
agreements for such a purpose.”19
Explaining his position, Justice Story raises the question:
“Ought then a court of equity to compel a resort to such a tribunal, by
which, however honest and intelligent, it can in no case be clear that
the real legal or equitable rights of the parties can be fully ascertained
or perfectly protected?”20
15
Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F.2d 978, 983-984 (2d. Cir. N.Y.
1942).
16
17
Tibor Várady, Arthur Von Mehren & John Barcelo, International Commercial Arbitration: A
Transnational Perspective (Thomson & West, 3d edn, 2006) 39 (English text of L’Alliance
v. Prunier, Cour de cassation, Chambre civile, 10 July 1843).
18
Tobey v. County of Bristol, 23 F.Cas. 1313 (C.C.D., Mass. 1845).
19
Tobey v. County of Bristol, 23 F.Cas. 1313, 1321 (C.C.D., Mass. 1845).
20
357
Concluding his arguments, Justice Story focuses – just as the Cour de cassation did
in L’Alliance v. Prunier – on the fact that the arbitrators were not named in the
arbitration clause, and finds that this always makes the arbitration agreement
inoperative:
“So that we abundantly see, that the very impracticability of compelling
the parties to name arbitrators, or upon their default, for the court to
appoint them, constitutes, and must forever constitute, a complete bar
to any attempt on the part of a court of equity to compel the specific
performance of any agreement to refer to arbitration. It is essentially,
in its very nature and character, an agreement which must rest in the
good faith and honor of the parties, and like an agreement to paint a
picture, or to carve a statute, or to write a book, or to invent patterns for
prints, must be left to the conscience of the parties, or to such remedy in
damages for the breach thereof, as the law has provided”.21
Regarding the position taken by Justice Story, let me mention that in his Com-
mentaries22 he already speaks of a change of attitude of the courts with respect
to arbitration. Speaking of court control of arbitral awards (rather than of
compelling arbitration on the grounds of an arbitration clause) he states that
courts of equity formerly exercised a large jurisdiction in matters of awards, “[b]
ut, by means of statutes, which have been passed both in England and America,
the jurisdiction has become, in a practical sense, although not in a theoretical
view, greatly narrowed, and is now a rare occurrence”.23 Following the same line
of thought, Story adds: “An award will not be set aside in equity on account of
discreditable misconduct before the arbitrators, if the misconduct of the arbitra-
tors was merely permissive, and the result of pardonable weakness and want of
character to enable them to maintain proper decorum during the trial”.24
The dimensions and the forms of appearance of the hostility of courts
towards arbitration varied, but it is common ground that a period of hostility
existed. There was hostility towards arbitral awards – and even more so towards
arbitration agreements, which threatened to “oust” the jurisdiction of courts.
If this is common ground, it is also common ground that this period of hostility
is over, and it has been over for some time. Several reasons may explain this
change of attitude. To begin with, there is no real basis for rivalry anymore.
Judges are getting salaries, and they are not competing with arbitrators for fees.
21
22
Joseph Story, 2 Commentaries on Equity Jurisprudence as Administered in England and America
(Little, Brown, and Company, William S. Hein & Company, 12th edn, 1984) (1877).
23
Story, supra note 22, at 702 ¶ 1450.
24
Story, supra note 22, at 7005-706 ¶ 1452b.
358
Furthermore, overburdened courts have become a world-wide phenomenon,

and under these circumstances, arbitration becomes a relief. Speaking of the
situation in the U.S., Richard Posner notes: “An economist would consider it
natural that a surge in federal caseloads should have led the judiciary and the
legal profession to seek to encourage substitute methods of dispute resolution
for full-scale federal litigation”.25
But the woes of the courts with crowded dockets are not the only reason behind
the change of attitude. It is also an uncontested fact that arbitration developed
and matured; it acquired a different weight, and a different reputation. This is
particularly true with regard to international commercial arbitration which is in the
focus of these lectures. It is quite clear, for example, that today, ordering specific
performance of an arbitration agreement (referring the parties to arbitration)
on the basis of an arbitration agreement without named arbitrators is not such
a futile exercise as ordering specific performance of an undertaking to paint a
picture or to carve a statute, or to write a book, or to invent patterns for prints.
Today, a substitute mechanism for appointment is normally provided by the arbitral
institution to which the parties submitted their dispute. This mechanism set by
institutional rules becomes part of the party agreement by reference. In case
of ad hoc arbitration, the UNCITRAL Model Rules also provide for a substitute
mechanism for appointment. Within this new environment, appointment by
courts has also become an available option.
Substitute appointment of arbitrators (in case the parties would not appoint
the arbitrators themselves) is just one of the many junctures at which significant
changes took place. A new structure has been shaped, and has been consolidated
by a wave of international agreements and national acts. International agree-
ments (first of all the New York Convention on Recognition and Enforcement of
Foreign Arbitral Awards)26 have brought about an international value of arbitral
awards that is actually higher than the international value of court decisions.
We have also witnessed a most successful process of international harmonization
of rules and statutes pertaining to arbitration world wide (in which process the
UNCITRAL enactments – the 1976 UNCITRAL Arbitration Rules and the 1985
UNCITRAL Model Law – have played a prominent role). International commercial
arbitration has also become a prestigious environment with built-in incentives
to perform high quality service.
Hostility has been replaced by a policy orientation favoring arbitration. Some
judges and scholars are sometimes still swayed by the old rhetoric swing, and
25
Richard A. Posner, The Federal Courts: Challenge and Reform (Harvard University Press,
1996) 237.
26
New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, June
10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38 (ratified by 142 countries according to the
UNCITRAL update in August 2007).
359
speak about the need to reverse hostility towards arbitration, but this battle has
already been won. It is neither fair nor necessary anymore to invoke sympathies
which traditionally gravitate towards the underdog. International commercial
arbitration has become the dominant method of settling international trade
disputes; courts do not view arbitration as an enemy anymore, not even as a
rival, but rather as a rescuer who will assume part of the increasingly heavy
load of crowded dockets.
There is still, of course, room (and need) for improvement, but the issues
are somewhat different – and probably more subtle. The environment and the
context have changed. Within the new setting of a consolidated environment
it is sometimes not easy to establish what is support for arbitration, what is
“pro-arbitration”. A few decades ago – prior to the adoption of Article II of the
New York Convention – when the issue arose whether courts should be obliged
to refer to arbitration parties who have executed a valid and viable arbitration
agreement, it was not difficult to perceive what was pro-arbitration. Likewise, it
was clearly pro-arbitration to push for the recognition of the clause compromissoire
in addition to the compromis. In a similar vein, partisans of international com-
mercial arbitration were practically unanimous in advocating the separability of
the arbitration clause from the rest of the contract. Or, to take another example,
it was not difficult to tell that the drive to reduce the variety of recourses against
arbitral awards to basically two (setting aside and opposition to recognition
and enforcement) was, indeed, pro arbitration; and so was the endeavor to
restrict within these two recourses the number of possible grounds on which
an arbitral award may be challenged. Today, in a new environment, after the
main battles have been won, more and more dilemmas emerge like that of the
Lesotho Highlands case. Not only specific cases, but problem-patterns have also
emerged regarding which it is just not easy to say what solution works in favor
of arbitration.
Speaking of the challenges of our time, it is interesting to mention that while at
the time of Tobey v. Bristol, or L’Alliance v. Prunier, the most vulnerable part within
the construct of arbitration was the arbitration agreement (and in particular the
clause compromissoire) rather than the award; this has changed. Today, somewhat
more problems arise in connection with awards. There are remaining (and new)
problems regarding the treatment of arbitral awards by courts, which need and
deserve attention. These lectures will focus on some of these problems, particularly
on those which lead to the question as to what is actually pro-arbitration. Today,
there are emerging problem-patterns in regard to which the question needs to
be raised as to whether upholding a party stipulation regarding arbitration, or
upholding an award is always and necessarily pro-arbitration. Will it always
contribute to the standing and reliability of arbitration as a method of settlement
of disputes? In the following chapters (chapters II, III, and IV), I would like to
360
focus on three emerging problem-patterns which have become distinctive features

of contemporary court scrutiny of arbitral awards.
1. The impact of party autonomy on standards of court scrutiny. Here, the
question has arisen as to whether the established boundaries of judicial
review may or may not be modified by the parties. In other words, whether
the grounds on which a judicial scrutiny of an arbitral award may be
initiated represent a numerus clausus, or whether these grounds are subject
to party intervention in one or the other direction. Conflicting positions
have been taken (like e.g. in the Kyocera case), and opposite solutions
have been advocated with reliance on the same policy, that of favoring
arbitration.
2. Developments testing the flexibility of grounds for challenge. Important
developments have also been taken place regarding the interpretation of
some well-established and standard grounds on which arbitral awards
may be challenged. I would like to focus in particular on two instruments
through which flexibility has gained ground. First, one may discern a trend
of giving more weight to the institution of waiver, i.e., to disallow challenges
where a ground for challenge exists but were not relied upon in due time.
Second, the question has arisen as to whether the relevance or impact of a
transgression may be considered in deciding upon a challenge. A scrutiny
of the impact of a departure from the procedure set by the parties (or by
the lex arbitri) may lead to the conclusion that the actual relevance and
impact of the transgression is negligible, and such an analysis may save
the award. At the same time, such an approach may imply an analysis
which goes beyond the regular boundaries of court scrutiny of arbitral
awards. Once more, the question has arisen as to which attitude could
be qualified as more pro-arbitration.
3. Interaction between various instances of scrutiny. The question has also arisen
about how various avenues of control could be harmonized, and whether it
is rational and advisable to speak of recognition of foreign arbitral awards
which were annulled in the country where they were rendered. The most
prominent example of this problem is the Hilmarton case, but Chromalloy
and other more recent cases have also demonstrated the importance of the
dilemma. It is clear that consistency in the treatment of the same award
is highly desirable not only within the same legal system, but also on the
international level. It is also clear that recognition of arbitral awards is
equally desirable. The question is whether the existing framework of rules
can yield both consistency and increased recognition. And again, it has
become an issue as to which of the possible approaches is actually more
pro-arbitration.
361
II. The Impact of Party Autonomy on the Scope of Court

Scrutiny of Arbitral Awards
A. Introductory Remarks
One of the key results of the consolidation of the position of arbitration (and
of international commercial arbitration in particular) was the enlargement of
maneuvering room for party autonomy, and reduction of court control. Parties
have gained right to structure and organize arbitral proceedings without court
interference (but with possible court assistance), and court control of the awards
became restrained. The possible avenues of court control have essentially been
reduced to two, and within these two instruments of control (scrutiny prompted
by a motion for setting aside, and scrutiny in the process of recognition and
enforcement) the possible grounds for challenge have also been restricted.
In the wake of the New York Convention and following the standards set by
the UNCITRAL Model Law, a situation has been created which is by and large
consistent with the aspirations of international commercial arbitration. There
remain, however, unresolved questions, and some of them quite consequential.
The question has arisen, for example, as to whether the remaining domain of
court control of the awards could and should be influenced by party autonomy
– and how to deal with emerging party endeavors to influence the scope of
judicial review. Within this problem-pattern a number of specific issues have
arisen. The treatment of these questions in practice is generally marked by a
pro-arbitration orientation – but also by some hesitation in deciding which of
the possible answers is actually pro-arbitration.
There are essentially two ways in which the parties may influence judicial
control: they may either enlarge or reduce its scope. One may also mention some
instances of party influence which cannot be qualified as either enlargement
or reduction of court control, but have some influence on its accessibility. An
example belonging to this last category is the option given to the parties by Article
1059 of the 1998 German Arbitration Act27 which states that an application
for setting aside may be submitted within three months “unless the parties
agreed otherwise”.
I would like now to turn attention to the most important variants of party
influence on judicial control: party agreements which either extend or restrict
judicial review.
Civil Procedure Statute [Zivilprozessordnung ZPO] bk. X, as amended by the Act on

27
the Reform of the Law relating to Arbitral Proceedings [Gesetz zur Neuregelung des
Schiedsverfahrensrechts] 22 December 1997, Federal Law Gazette [Bundesgesetzblatt BGBl]
pt. I art. 1 no. 7 at 3224 (F.R.G.).
362
B. Contractual Restriction of Judicial Review

One of the emerging questions is whether court review of arbitral awards may or
may not be reduced by the parties to arbitration. There are various possible ways
of reducing court control. First, the parties may conceivably exclude any and all
control whatsoever. Another option is to restrict the scope of judicial review by
limiting the grounds on which an award may be set aside (or recognition and
enforcement may be refused). A further variant is the limitation of court control
to scrutiny by the court of first instance, excluding recourse to an appellate level.
I would like to investigate these options in two settings: a) party limitation of
court control on the grounds of explicit legislative provisions, and b) steps taken
by the parties in the absence of explicit legislative authorization.
B.1. Contractual Restriction of Court Review based on Explicit Legislative Provisions

Most arbitration acts are silent on the question whether the grounds on which
judicial scrutiny of an award may be initiated represent a numerus clausus, or
whether the grounds set by the lex arbitri are subject to party interventions.
Likewise, most arbitration acts do not state whether the parties may influence
judicial review of awards in any other way. One could argue that since the
pertinent norms are typically mandatory norms, they are beyond the reach of the
parties. One may further argue that after a considerable reduction of the scope
of court’s scrutiny took place, the remaining standards of a minimum scrutiny
represent a territory which cannot be influenced by party agreement. It is a fact,
however, that some legislators have allowed party intervention affecting this
territory. These are all examples of further limitation of judicial scrutiny.
The 1996 English Arbitration Act28 states in Section 69(1) that “on a question
of law arising out of an award” a party may lodge an appeal to the court, “unless
otherwise agreed by the parties”. The 1996 Act does not leave room, however,
for challenges as to substantive jurisdiction (Section 67) and challenges on the
grounds of “serious irregularity affecting the tribunal, the proceedings, or the
award” (Section 68). In other words, under the 1996 English Arbitration Act, a
contractual restriction of judicial control is only possible with regards to grounds
which are on the top of those which represent today an international standard.
It has to be mentioned that within this quite limited domain, English courts
took a rather permissive approach towards acknowledgment of contractual
stipulations. In the Lesotho case the fact that the parties agreed on ICC Rules
was held sufficient to trigger the waiver allowed in Section 69(1).29
28
Arbitration Act, 1996 c. 23 (U.K.).
29
Lesotho Highlands Development Authority v. Impreglio S.p.A. et al., [2005] UKHL 43 (U.K.)
(holding that by accepting the ICC Rules, which includes Article 28(6), the parties have
“otherwise agreed”, and hence waived appeal on questions of law. Article 28(6) of the
363
The 1987 Swiss Private International Law Act took a more consequential
step allowing contractual limitation of judicial control with regard to any and
all grounds. Article 192 of this Act allows the parties to waive completely or to
restrict the recourse of annulment, but only if none of the parties have their
domicile, habitual residence, or business establishment in Switzerland.30 This
solution received a mixed response. In his comments on this provision, K. Siehr,
states that Article 192 belongs to the “most controversial” (“wohl umstrittensten”)
norms of the Swiss Act. He adds that it is doubtful whether it will achieve its
goals.31 It is important to mention that the Swiss Act incorporates a safeguard
for situations in which the award is enforced in Switzerland. In such a case, a
control of the award becomes possible, given that in this situation “[t]he New
York Convention of June 10, 1958 on the Recognition and Enforcement of
Foreign Arbitral Awards applies by analogy” (Article 192/2).32
For a considerable time period, however, the option foreseen in Article 192
of the Swiss Act was not applied in practice. In a comment in the ASA Bulletin,
Scherer states that “[f]or more than a decade this provision remained ‘lettre
morte’”.33 As a matter of fact, the issue has been raised in a number of judgments
since 1990. These judgments always held, however, that the alleged stipulation
on waiver of an action for annulment was either missing or imperfect. The
Swiss Federal Tribunal had held in about ten cases that clauses stating that the
dispute would be “finally settled” by arbitrators or a reference to arbitration
rules waiving the right to any form of recourse do not satisfy the conditions set
by Article 192. In one of the cases, the provision at issue went beyond the usual
“final” or “final and binding” formulation. In this case the arbitration agreement
contained a provision stating that “the application to the State Courts are [sic]
excluded”. This provision was also held to fall short of an effective waiver because
1998 ICC Rules states that by submitting their dispute to these Rules, the parties “[s]hall
be deemed to have waived their right to any form of recourse insofar as such waiver can
validly be made”).
30
According to Article 192(1) of the Federal Code on Private International Law [Bundesgesetz
über das Internationale Privatrecht, Loi fédérale sur le droit international privé, Legge
federale sul diritto internazionale privato] Dec. 18, 1987, “If neither of two parties has a
domicile, habitual residence, or business establishment in Switzerland, the parties may, by
an express statement in the arbitration agreement or by a subsequent written agreement,
waive completely the action for annulment, or they may limit it to one or more of the
grounds listed in Article 190, subsection 2.”
31
See Daniel Girsberger et al., Zürcher Kommentar zum IPRG (Vischer & Volken eds., 2d edn,
2004) 2098.
32
Federal Code on Private International Law [Bundesgesetz über das Internationale Privat-
recht, Loi fédérale sur le droit international privé, Legge federale sul diritto internazionale
privato], Dec. 18, 1987, art. 192 ¶ 2 (Switz.).
33
M. Scherer, 24 ASA Bulletin No. 2 (2006) 268.
364
it did not indicate the exact right the parties were waiving.34 It was only in its
decision of February 4, 2005 that the Swiss Federal Tribunal accepted a waiver
under Article 192, after a thorough analysis of the wording of the waiver. The
pertinent provision in the arbitration agreement read: “All and any awards or
other decisions of the Arbitral Tribunal shall … be final and binding on the
parties who exclude all and any rights of appeal from all and any awards insofar
as such exclusion can validly be made…”35 In another 2005 decision, the Swiss
Federal Tribunal accepted as a valid waiver the following (quite unequivocal)
contractual provision: “The decision of the Arbitral tribunal shall be final, and
the parties waive all challenge of the award in accordance with Art. 192 of the
Private International Law Statute.”36 These decisions did not bring a change
of attitude regarding standard “final and binding” clauses. In a 2006 decision,
(decision of September 7, 2006), the Federal Tribunal held that the provision in
the arbitration clause stating that “such decision [of the arbitral tribunal] shall
be final and binding upon the parties to the dispute” does not amount to a valid
waiver under Article 192.37
Article 192 of the Swiss Act has only a few followers. Tunisia, Peru and
Sweden opted to follow the Swiss solution, including its “safety valve”, which
allows for some court control in cases where the parties waived the action for
annulment, and seek enforcement in Switzerland. In such cases, according to
Article 192(2) of the Swiss Act, the New York Convention applies by analogy
to recognition of domestic awards.38 The only difference between the Swiss
and other acts is that while the Swiss Act refers to the New York Convention by
analogy, the respective provisions of the 1993 Tunisian Arbitration Code, the
1996 Peruvian General Arbitration Act, and the 1999 Swedish Arbitration Act
refer are modeled after the New York Convention.39
34
Swiss Federal Tribunal, First Civil Court, Judgment of 4 February 2005, Case 4P.236/2004
(translation), 23 ASA Bulletin, No. 3 (2005) 508 (describing history of ten cases; the
Federal Tribunal also quotes Swiss authors who have approved such restraint).
35
Swiss Federal Tribunal, First Civil Court, Judgment of 4 February 2005, Case 4P.236/2004
(translation), 23 ASA Bulletin, No. 3 (2005) 508, 517. See also F. Perret, “Note – Swiss
Federal Tribunal, First Civil Court, Judgment of 4 February 2005, Case 4P.236/2004”,
23 ASA Bulletin, No. 3 (2005) 520, 521 (commenting that Article 192 is “certes une
disposition malhereuse”).
36
Decision of October 31, 2005 ATF 4P 198/2005 (Switz.) (Motorola v. Uzan).
37
Tschechische Republik v. X, Schweizerisches Bundesgericht, I. Zivilabteilung, 4P.114/2006
bie, September 7, 2006.
38
The Swiss Act has no norms of its own on recognition and enforcement, but it contains
in Article 194 a provision stating that recognition and enforcement are governed by the
New York Convention. Hence there is need to refer to the New York Convention.
39
The Tunisian Act, the Peruvian and the Swedish acts track the formulation adopted by
the Swiss Act, with the exception of the reference to the New York Convention.
365
Endeavoring to create a more favorable climate for international arbitration,

Belgium went even a step beyond the Swiss standard. It was stated in the 1985
version of the Judicial Code that a Belgian court may only hear a request for
annulment, if at least one of the parties has relevant ties with Belgium.40 (In other
words, a possible exclusion of annulment was not left to the parties; setting aside
was excluded ex lege if none of the parties had Belgian nationality, residence, or
seat in Belgium.) On a second thought, the Belgian legislator took a step back, and
in the May 19, 1998 modifications of the Belgian Judicial Code adopted a Swiss
type solution, with two differences. Article 1717 of the Belgian Act only allows
the parties to waive completely the action for annulment, it does not foresee a
possibility of restricting it to some grounds; furthermore, there is no reference
to the application of the norms of the New York Convention by analogy.41
According to Article 78(6) of the 1993 Tunisian Arbitration Code [Law 93-42]: “The
parties who have neither domicile, principal residence nor business establishment in
Tunisia may expressly agree to exclude totally or partially all recourse against an arbitral
award.
If they request recognition and enforcement in Tunisia of an arbitral award made subject
to this exclusion in Tunisia, Articles 80, 81 and 82 of this Code apply mandatorily.”
(Articles 80-82 deal with recognition and enforcement of awards.)
According to Article 126 of the 1996 General Arbitration Law of Peru [Law No. 26572]:
“When none of the parties to the arbitration is of Peruvian nationality or has its domicile
or habitual residence in Peru, the parties may expressly agree in the arbitration agreement
or in a later written document to waive the right to request the setting aside or to limit
the grounds for setting aside to one or more of the grounds contained in Article 123.
When the parties waive the recourse of setting aside and the award is sought to be
executed in Peru, the provisions of Chapter Eight of this Section on the Recognition and
Enforcement of Foreign Arbitral Awards shall apply by analogy.”
According to Article 51 of the 1999 Swedish Arbitration Act [LAG OM SKILJEFÖRFARANDE,
SFS 1999:116]: “Where none of the parties is domiciled or has its place of business in
Sweden, such parties may in a commercial relationship through an express written
agreement exclude or limit the application of the grounds for setting aside an award
as are set forth in section 34. An award which is subject to such an agreement shall be
recognized and enforced in Sweden in accordance with the rules applicable to a foreign
award.”
40
Belgian Judicial Code [Code Judiciaire Belge], as amended on March 27, 1985 Art. 1717
(Belgium).
41
According to Article 1717(4) of the Belgian Judicial Code [Code Judiciaire Belge], as
amended May 19, 1998, “Les parties peuvent, par une déclaration expresse dans la convention
d’arbitrage ou par une convention ultérieure, exclure tout recours en annulation d’une sentence
arbitrale lorsque aucune d’elle n’est soit une personne physique ayant la nationalité belge ou une
résidence en Belgique, soit une personne morale ayant en Belgique son principal établissement
ou y ayant une succursale.”
366
The Belgian hesitations show that we have reached a point where it becomes
debatable whether less judicial control and more party governance are or are not
in line with the interests of arbitration. One may submit that while too much
judicial control obviously impedes the arbitration process (and discourages
the parties from resorting to arbitration), some judicial control may inspire
confidence in the arbitration process. Limited court control – like the one
framed by the New York Convention – has become a part of a respectable and
successful system. Further restriction (or complete absence) of court control
may speed up the process, but would also pass over some safety guarantees. The
Swiss approach retains some balance, because the award is not left without any
judicial control. If recognition and enforcement is sought outside Switzerland,
a scrutiny under the New York Convention remains relevant. If recognition is
sought in Switzerland (where the award is deemed domestic) the norms of the
New York convention will apply by analogy. It is also important that the Swiss
judicial practice has exercised restraint in qualifying contractual provisions
which purportedly exclude the action for annulment.
A sensitive situation arises, however, under both the Swiss (Tunisian, Swedish
Peruvian) and the Belgian approach regarding one type of awards. These are
awards denying the relief sought. When we are dealing with awards which
grant the claim (or part of the claim), even if setting aside were excluded, a
possibility for challenge remains if recognition and enforcement is sought in a
country other than the country where the award was rendered. (In Switzerland,
Sweden, Tunisia and Peru, the New York Convention will apply by analogy even
with regard to the recognition of a domestic award.) The situation is different,
however, when the award at issue is a declaratory award denying the claim.
Here, if setting aside is barred, opposition to recognition and enforcement does
not offer a last opportunity for judicial control, because the winning party has
no interest to seek recognition and enforcement. In the ensuing situation, the
winning party is satisfied with the res judicata effect and has no reason to seek
recognition and enforcement, while the losing party has no recourse available
for challenging the award, not even on grounds of violation of due process. One
could only imagine the following situation in which the award might become
the subject matter of discussions. The losing party addresses a court seeking the
same relief which was denied by the arbitral award, and thereupon the party
which prevailed in arbitration objects asserting that the award denying the
claim represents res judicata. The question would then arise whether an award
isolated from court control may become res judicata. Arguments could possibly
be raised both ways, but the participants would find themselves outside the
standard setting, and without sufficient guidance.
367
B.2. Contractual Restriction of Judicial Review in the Absence of Explicit

Legislative Provisions
In a number of cases in comparative arbitration practice, the parties attempted
to exclude judicial review in the absence of authorization given by the lex arbitri.
At this point, a distinction needs to be made. It is quite common that the parties
state in their arbitration agreement that the award shall be “final and binding”,
and subject to no appeal. These and similar phrases are normally interpreted as
a stipulation regarding the arbitration proceedings proper, the structuring of
which is clearly in the hands of the parties themselves. Thus, “final and bind-
ing” means in fact that the arbitration process has one level only. As we have
seen, the Swiss Federal Tribunal has been very much mindful of the distinction
between clauses stating that the arbitral award is final and subject to no appeal,
and contractual stipulations aiming specifically to exclude or limit post-award
court scrutiny. Stipulations belonging to the latter category are not common,
but they did give rise to some interesting decisions. I would like to concentrate on
cases in countries which do not have legislative provisions allowing contractual
restriction of judicial review.
I would first like to mention a 2004 decision of the Court of Appeal of New
Zealand,42 in which a section was devoted to the question “to what extent, if
any, can review be excluded by contract”? What added to the intricacies of this
case was the fact that decision-making was confided to an “Independent Expert”,
and it was not entirely clear whether the mechanism designed by the parties
was actually arbitration or expertise. This circumstance and its relevance were
emphasized by the court of first instance (the High Court of Auckland) which
stated: “It is clear that parties to a dispute can contract out of a right to review
for breach of natural justice by the simple expedient of adopting a process other
than arbitration for its determination. One option is mediation. Another is expert
determination.”43 After they qualified the proceedings designed by the parties
and the activities of Mr. Spellman as arbitration, both the High Court of Auckland
and the Wellington Court of Appeal reached the conclusion that they cannot
observe the stipulation in the arbitration agreement which stated that “… there
shall be no appeal against any decision of the Independent Expert except if the
decision was induced or affected by fraud or corruption.” In its analysis, the
Wellington Court of Appeal referred to the legislative history of the UNCITRAL
Model Law, which served as a model to the 1996 New Zealand Arbitration Act.
It stressed that “The UNCITRAL material and the Law Commission’s report
provide no support for the view that contractual exclusion of curial review was
Methanex Motonui Ltd. v. Spellman, CA 171/03, 3 NZLR 454 (2004).

42
Methanex Motonui Ltd. v. Spellman, High Court of Auckland, CL 3/03, 1 NZLR 95 (2004)
43
para. 127.
368
contemplated; … Article 34 [which, just like Article 34 of the Model Law states
the grounds for setting aside] is not capable of being excluded by contractual
provision to the contrary”.44
The issue of contractual limitation of judicial review has emerged in U.S. court
practice as well. The cases we shall refer to are not international cases, but they
test those provisions of the 1925 Federal Arbitration Act (hereinafter “FAA”)
which apply to both domestic and international cases. In Hoeft v. MVL Group Inc.,
the parties provided that the award was not “subject to any type of review or
appeal whatsoever”.45 The party prevailing in arbitration sought confirmation of
the award, while the defendant challenged the award on the grounds of manifest
disregard of law. Plaintiff argued that no challenge was possible, because judicial
review was contractually excluded. The Second Circuit held that that one cannot
claim the benefits of judicial confirmation of the award without incurring the
risk of vacatur under the FAA. It stressed that the non-appealability provision
cannot deprive federal courts of the ability to apply the standards set forth in
the FAA.46 Two years after the Hoeft decision, a modifying nuance was added
by the Tenth Circuit. In Mactec v. Gorelick,47 the parties adopted a more modest
restriction of court review.48 According to their stipulation “Judgment upon the
award rendered by the arbitrator shall be final and nonappealable and may be
entered in any court having jurisdiction thereof ”. In other words, in this case
the parties did not endeavor to put the award beyond reach of court review, but
provided instead that the first degree court decision would be nonappealable.
The agreement preserved district court review under the FAA, but attempted to
exclude an appeal against a district court ruling. The Tenth Circuit distinguished
this case from Hoeft and reached the following conclusion:
“What we have here is something less than full judicial review of the
arbitrator’s decision; but we do not have a situation in which there is no
judicial review at all, …. It is, in a sense, a compromise whereby the litigants
trade the risk of protracted appellate review for a one-shot opportunity
before the district court. Indeed, courts routinely enforce agreements
that waive the right to appellate review over district court decisions. …
We see no reason to treat district court decisions concerning arbitration
awards differently than any kind of district court judgment”.49
44
3 NZLR 454 (2004) para. 116
45
Hoeft v. MVL Group, Inc., 343 F.3d 57, 60 (2d Cir. 2003).
46
47
MACTEC, Inc. v. Gorelick, 427 F.3d 821 (10th Cir. 2005).
48
MACTEC, Inc. v. Gorelick, 427 F.3d 821 (10th Cir. 2005).
49
MACTEC, Inc. v. Gorelick, 427 F.3d 821, 830 (10th Cir. 2005).
369
One does not have to have a pro-arbitration bias in order to accept as a fact
that court control of the arbitral award has to be limited. The development
and the success of international commercial arbitration have given evidence
that arbitration deserves to be an essentially self-sufficient and autonomous
mechanism. This mechanism of dispute settlement has proved capable of
handling a major share of international commercial disputes. It would amount
to a serious impediment if the opinion and decision of the arbitrators could be
easily replaced by the opinion and judgment of some other decision-makers,
the courts. The endeavor of safeguarding and enhancing the authority and
viability of international commercial arbitration has led to the restriction of
court control regarding both the possible avenues of court scrutiny and the
grounds on which an award may be challenged. The dilemmas regarding further
contractual restriction (or even exclusion) of judicial control show, however, that
we have approached the rational limits of restriction. The fight for recognition
of the integrity of arbitration yielded a mindset which might still be prevailing,
every inch less of court control might still appear as more territory gained for
arbitration, but it is time to reinvestigate the inherited impulses in the light of
present facts. As far as contractual interference with the present standards of
judicial control is concerned, the question arises whether this inspires more or
less confidence in the process. Some conceptual questions and problems also
emerge. Party autonomy in connection with arbitration has hitherto normally
been perceived as autonomy regarding the arbitration proceedings proper, rather
than party autonomy regarding court control of the award. Can and should
party autonomy be extended to court control; and in particular, can this be
done without legislative authorization? And finally, the question arises whether
a contractual elimination of court control over due process would or would not
benefit arbitration. The reluctance of courts to heed contractual restriction of
judicial review (in the absence of permission by the legislator) is understandable.
On may qualify this attitude as well as pro-arbitration.
C. Extension of Judicial Control by Party Agreement?
C.1. A Case which Prompted Wide Attention

We have seen hesitations with regard to contractual restriction of judicial review.
The same hesitations have accompanied a proposition in the opposite direction,
which touches, however, upon the same problem – that of the limits of judicial
review. If it is difficult – if possible at all – to contract out some judicial safeguards
of due process, the question arises whether a party stipulation could possibly
expand judicial review. Here, the framework of the discourse has not been set by
legislative initiatives, but rather by court interpretation of party stipulations. The
option of expanding judicial review by party agreement is the issue to which I
would like to devote more attention during these lectures.
370
The possibility of extending (rather than restricting) judicial control by party

agreements was tested by a most interesting sequence of conflicting decisions
of California courts in the same case. The Kyocera case was not the first of this
kind in U.S. practice,50 but it presented the options and dilemmas in a ripened
form, and it inspired a portentous number of scholarly comments and scrutinies.
A dispute between LaPine Technology Corporation (a U.S. corporation) and
Kyocera (a Japanese company) was settled by an ICC arbitration award issued
on August 24, 1994. Kyocera was ordered to pay $257 million51 to LaPine.52
The winner moved to confirm the award before the U.S. District Court for the
Northern District of California. Kyocera opposed confirmation, and moved to
“vacate, modify and/or correct” the award. Under the FAA, confirmation may
be denied – and a motion to vacate granted – on grounds stated in Para. 10.
What made this case special was a provision in the arbitration agreement of the
parties. Section 8.10(d) of the “Definitive Agreement” of the parties stated:
“The United States District Court for the Northern District of California
may enter judgment upon any award, either by confirming the award or
by vacating, modifying or correcting the award. The Court shall vacate,
modify, or correct any award: (i) based upon any of the grounds referred
to in the Federal Arbitration Act, (ii) where the arbitrators’ findings of
fact are not supported by substantial evidence, or (iii) where the arbitrators’
conclusions of law are erroneous.” (emphasis added)
It is clear that this provision attempted to expand statutory judicial review. It added
two important grounds on the top of those stated in the FAA. One may argue that
such provisions are ill-advised and may jeopardize some comparative advantages
of the arbitration process, such as speed or finality.53 But this argument is based
50
See, e.g. Fils et Cables d’Acier de Lens v. Midland Metals Corp., 584 F.Supp. 240 (D.C.N.Y.
1984) (allowing party-designed extended judicial review); Gateway Technologies, Inc. v.
MCI Telecommunications Corp., 64 F.3d 993 (5th Cir. 1995) (allowing party-designed
extended judicial review); Chicago Typographical Union No. 16 v. Chicago Sun-Times, Inc.,
935 F.2d 1501 (7th Cir. 1991) (holding that parties cannot contract for judicial review
of arbitral awards).
51
The figure of $257 million is stated in Mealey’s Arbitration Reports, July 1996 (7 Mealey’s
Int’l Arb. Rep. 9)
52
Mealey’s International Arbitration Report, “Kyocera Corp. Claims District Court Rewrote
Contract”, 11-7 Mealey’s Int’l Arb. Rep. (1996) 5 (stating the figure of $257 million
Mealey’s Arbitration Reports, July 1996).
53
See Tom Cullinan, “Contracting for an Expanded Scope of Judicial Review in Arbitration
Agreements”, 51 Vand. L. Rev. (1998) 395 (advancing arguments pro and con recognition
of stipulations on expanded judicial review, and concluding in favor of recognition of
such stipulations); Hans Smit, “Contractual Modification of the Scope of Judicial Review
of Arbitral Awards”, 8 Am. Rev. Int’l Arb. (1997) 147 (taking a strong position against
371
on coordinates that are different from those which usually provide a setting for
a pro-arbitration line of reasoning. Advocates of arbitration usually claim more
room for party autonomy. In this case, however, the exact opposite might also
appear to be pro-arbitration. It is tempting to disregard a party stipulation which
yields more intrusive court control. The really difficult question is what serves
better the interests of arbitration once the (arguably undesirable) provision is
present and has to be dealt with. Should it be disregarded? (can it be disregarded?),
or should it rather be followed as part of the arbitration agreement?
In its decision of December 11, 1995, the U.S. District Court for the Northern
District of California came to the conclusion that the parties cannot expand
the statutory limitations of judicial review because “[t]his would amount to
statutory amendment by private person”.54 The District Court endeavored to
find an interpretation which would foster rather than hamper the cause of
arbitration, and decided to disregard the provision which purported to expand
statutory judicial review. Judge Ingram stated:
“It appears to this court that the contractual provisions existing in this
case wherein the parties choose and specify the scope of judicial review
to pertain in their arbitration is offensive to the public policy which sup-
ports arbitration and those aspects of arbitration which are beneficial
to the parties as well as to the courts whose responsibilities are eased by
alternative forms of dispute resolution.”55
Following Judge Ingram’s line of reasoning, the basic benefits of arbitration

from the point of view of the parties (and from the point of view of the judicial
system as well) are matters of public policy, which deserve protection even against
some elements of the party agreement itself. Following this line of thinking, the
District Court restricted its review to the grounds stated in the FAA, found that
those were not infringed, and confirmed the award.
Upon appeal, the Ninth Circuit also followed a pro-arbitration inspiration,
but it wound up with a different analysis.56 Kyocera argued that its position
was in line with the interests of international commercial arbitration, because
the District Court’s decision may place in jeopardy “the ability of parties to
multinational arbitrations to rely on the enforceability of their written agree-
expanded judicial review); Di Jiang-Schuerger, “Perfect Arbitration = Arbitration plus

Litigation?”, 4 Harv. Negot. L. Rev. (1999) 231 (taking position against expanded judicial
review ); Stephen A.Hochman, “Judicial Review to Correct Arbitral Error – An Option to
Consider”, 13 Ohio St. J. Disp. Res. (1997) 103 (arguing that in some cases – labor cases
in particular – an expanded judicial review may be a desirable choice).
Lapine Technology Corp. v. Kyocera Corp., 909 F. Supp. 697 (N.D.Cal. 1995).
54
Lapine Technology Corp. v. Kyocera Corp., 909 F. Supp. 697, 706 (N.D.Cal. 1995).
55
Lapine Technology Corp. v. Kyocera Corp., 130 F.3d 884 (9th Cir. 1997).
56
372
ments”. Judge Fernandez held that the FAA does not prevent enforcement of
agreements to arbitrate under different rules than those set forth in the Act
itself, and concluded: “Indeed, such a result would be quite inimical to the FAA’s
primary purpose of ensuring that private agreements to arbitrate are enforced
according to their terms”.57 In the same vein, Judge Fernandez stressed that
the court can expand its review if the parties so agree. “To do otherwise would
make hostility to arbitration agreements erumpent under the guise of deference
to the arbitration concept”.58
In his concurring opinion, Judge Kozinski expressed caution, saying “I find the
question presented closer than most”. He continued; “In general, I do not believe
parties may impose on the federal courts burdens and functions that Congress
has withheld”. He added, nevertheless, that the Court must enforce arbitration
agreements according to their terms. Judge Kozinski found important that the
terms of the party-designed extended review were reasonable. He stated: “I would
call the case differently if the agreement provided that the district judge would
review the award by flipping a coin or studying the entrails of a dead fowl”. He
concluded that “given the strong policy of party empowerment in the Arbitration
Act” the given provision on extended judicial review was probably not against
the policy of the Arbitration Act.59
Judge Mayer dissented. In his opinion, parties may specify contractually whether
to arbitrate, how to arbitrate, and when to arbitrate, but they cannot dictate
how a court must review an arbitral award. In Judge Mayer’s opinion, should
the parties desire more scrutiny, they can contract for an appellate arbitration
panel, but they cannot contract for an expanded judicial review.60
The case was returned to the district court, which rendered a new decision on
April 4, 2000.61 This time, the Court conducted an extended review of findings
of both facts and law in line with the terms of the arbitration agreement, but
stated that in its review of the factual conclusions reached by the arbitrators
the Court would apply a deferential “substantial evidence” standard. The district
court distinguished two awards rendered by the arbitrators: a Phase I decision
(award on contract formation) and a Phase II decision (an award on damages).
As far as the Phase I decision is concerned, the district court concluded that the
arbitrators did not make any errors of law, and their conclusions were supported
by facts. The motion to vacate was denied, and the award was confirmed. As far
as the Phase II award was concerned, the district court issued a new order on
57
Lapine Technology Corp. v. Kyocera Corp., 130 F.3d 884, 888 (9th Cir. 1997).
58
59
60
61
Lapine Technology Corp. v. Kyocera Corp., Not Reported in F. Supp. 2d, 2000 WL 765556
(N.D. Cal. 2000).
373
October 2, 2000. In this order the court partially confirmed the Phase II award.
It vacated, however, one fact finding (Finding of Fact 135) on the ground that
the accounting record showed an operating loss for 1987 at La Pine, rather
than an operating profit. This matter was remanded to the arbitral tribunal “for
its consideration as to the effect, if any, of the vacation of Finding of Fact 135
on its damage award”.62 This led to new complications. The arbitrators were
to reconsider their award, but in the meantime one member of the arbitration
panel had become deceased. The two surviving members issued a letter dated
November 22, 2000, stating that the vacatur of the Finding of Fact 135 had
no effect on the damages awarded. Thereupon, on March 6, 2001, the district
court denied Kyocera’s motion to vacate and confirmed the whole award on
damages.63
Let me mention that the path traced by the partial vacatur may actually lead
to consequential dilemmas. The question can be raised, for example whether
– even if one were to accept as a possibility a contractual expansion of court
control – the remand of a question of fact to the arbitrators is within the logic of
contemporary court control of arbitral awards (and whether it is, in particular,
within the logic of the FAA). One may also ask whether the arbitrators still have
power to act after the award was rendered, or whether they are functus officio.
The arbitrators normally have a power to correct the award, or to make an
additional award on party motion – but is this such a case? And finally, assuming
that the court can return to the arbitrators an issue of fact for reconsideration,
and assuming that the arbitrators have power to do this, can this be done by
two of the three arbitrators?
Some of these arguments were raised by Kyocera. On July 23, 2002, the
U.S. Court of Appeals, Ninth Circuit, reviewed the April 4, 2000 and October 2,
2000 decisions of the district court on remand.64 Kyocera argued that the district
court had erred both with regard the procedure and with regard the substance
of its scrutiny. It submitted first that remanding the case to the arbitrators for
clarification of one particular issue of fact was not an option permitted by the
FAA and/or the agreement of the parties; and added that the arbitrators were
functus officio. The Ninth Circuit rejected this argument, holding that the language
of the stipulation of the parties covers this option, since it provides that the
court may “vacate, modify or correct” the award. In the opinion of the Ninth
Circuit the “modify or correct” language includes the possibility of remanding
62
Kyocera Corp. v. Prudential-Bache Trade Servs, 299 F.3d 769, 778 (9th Cir. 2002) (referring
to district court’s order on October 2, 2000 to confirm Phase II Decision).
63
Kyocera Corp. v. Prudential-Bache Trade Servs, 299 F.3d 769, 778 (9th Cir. 2002) (referring
to district court’s decision on March 6, 2001 to deny of Kyocera’s motion to vacate and
to grant Prudential’s and LaPine’s motion to confirm).
64
Kyocera Corp. v. Prudential-Bache Trade Servs, 299 F.3d 769 (9th Cir. 2002).
374
an issue to the arbitrators. The Ninth Circuit added “Recommitting an issue to

an arbitrator for clarification and interpretation does not effectuate an appeal
to the arbitrator, a new trial, or an opportunity to relitigate the issues. None of
these situations are within the policy which forbids an arbitrator to redetermine
an issue which he has already decided”.65 At this point some doubts and dilem-
mas may, and probably will, emerge. One may question whether the remand
of an issue of fact to the arbitrators by a court can be equated with post-award
clarification and interpretation on party motion. It is also a question whether the
remand of a specific issue to the arbitrators is, indeed, a matter of “clarification
and interpretation”, rather than redetermination of an issue which has already
been decided. After it took a position finding that the district court did not err in
remanding the case to the arbitrators, the Ninth Circuit conducted de novo an
expanded review as agreed by the parties. After a detailed analysis it concluded
that there was no basis on which annulment could and should be granted. The
award was confirmed once again.66
This is, however, not the end of the Kyocera story. The basic dilemma which
pervaded the case prompted further reconsiderations. New decisions followed,
which did not introduce new options, but they have repeatedly demonstrated
how difficult it is to choose between the two existing solutions. Another impor-
tant decision of the Ninth Circuit was rendered on August 29, 2003.67 What
prompted this new decision was that Kyocera applied for rehearing en banc, and
the Ninth Circuit granted this request. During the rehearing the Ninth Circuit
reinvestigated once again the basic dilemma regarding party-designed expansion
of judicial control. As a result, it completely reversed its position, and returned to
the original (1995) position of the district court. In its 2003 decision, the Ninth
Circuit analyzed the treatment of this issue in various circuits, and concluded
that the Third and Fifth Circuits allow the extension of judicial review by party
agreement, while the Seventh, the Eighth and the Tenth Circuits have rejected
this option.68 After this analysis the Ninth Circuit decided to overrule its earlier
decision, and held that: “[a] federal court may only review arbitral decisions on
the grounds set forth in the Federal Arbitration Act. Private parties have no power
to alter or expand those grounds, and any contractual provision purporting to
do so is, accordingly, legally unenforceable”.69 Once again, the court explained
its position as an endeavor to protect the interests of arbitration, and to promote
65
Kyocera Corp. v. Prudential-Bache Trade Servs, 299 F. 3d 769, 795 (9th Cir. 2002).
66
Kyocera Corp. v. Prudential-Bache Trade Servs, 299 F.3d 769, 769 (9th Cir. 2002).
67
Kyocera Corp. v. Prudential-Bache Trade Servs, 341 F.3d 987 (9th Cir. 2003).
68
It may be mentioned that unlike the Kyocera case, most of the cases analyzed by the various
circuits were not cases of international commercial arbitration, yet this was not pointed
out as a distinguishing factor.
69
375
a pro-arbitration stance. It emphasized: “Broad judicial review of arbitration

decisions could well jeopardize the very benefits of arbitration, rendering informal
arbitration merely a prelude to a more cumbersome and time-consuming judicial
review process”.70 Having taken this position, the Ninth Circuit had to investigate
whether the provision in the arbitration clause on expanded judicial review was
separable from the rest of the arbitration agreement. After a somewhat more
thorough analysis than that of the District Court in 1995, the Ninth Circuit held
that the provision on expanded judicial review was separable, because “the terms
of the appellate review did not permeate any other portion of the arbitration
clause”.71 The Ninth Circuit added: “Although Kyocera asserts that the potential
for expansive appellate review was critical to the entire agreement, its briefs cite
absolutely no evidence that supports this assertion”.72
There was another attempt made by Kyocera to bring about a reinvestigation
of the problem, but in January 2004 the Supreme Court of the United States
dismissed the petition for a writ of certiorari.73
C.2. Some Other U.S. Cases

The Kyocera saga appeared to have sidelined one of the options in dealing with
party stipulations on expanded juridical review – at least for the Ninth Circuit.
Yet the problem of the treatment of contractual extension of court control has
remained very much alive, particularly in the United States. I would like to deal
briefly with some cases decided shortly before or after the final Kyocera decision
of the Ninth Circuit.
Two years before the final position was taken in the Kyocera case, one of the
most articulate decisions denying the possibility of a contractual extension of
court review is the judgment of the Tenth Circuit in Ernest Bowen and Mary
Bowen v. Amoco Pipeline rendered in 2001, two years before the final position was
taken in the Kyocera case.74 In the Amoco case, pro-arbitration sympathies may
have coincided with sympathies usually engaged on the side of citizens suffering
from pollution and confronting a multinational company. An oily sheen appeared
in a creek located on the property of Mr. and Mrs. Bowen. Experts retained by
Amoco found that this was not caused by Amoco, but another expert retained
by Mr. Bowen found that the pollution was the consequence of a leak from
Amoco’s pipelines. The case was brought to arbitration, and the arbitration
agreement provided i.a. that the parties had a right to appeal to the district
70
71
72
Kyocera Corp. v. Prudential-Bache Trade Servs, 504 U.S. 1098 (9th Cir. 2004).
73
Bowen v. Amoco Pipeline Co., 254 F.3d 925 (10th Cir. 2001).
74
376
court “on the grounds that the award is not supported by the evidence” – which
clearly implies a review beyond the standard set by the FAA.75 The arbitrators
rendered a several million dollars award in favor of Mr. and Mrs. Bowen, and
Amoco moved to vacate the award. Addressing the issue of standard of review,
the Tenth Circuit analyzed conflicting precedents of various circuits, and stressed
that “[t]he Supreme Court has repeatedly acknowledged that Congress’s intent
in enacting the FAA was to ensure judicial enforcement of private arbitration
agreements”.76 The Tenth Circuit concluded nevertheless that “[a]lthough
Amoco presents a difficult question, we conclude the purposes behind the FAA,
as well as the principles announced in various Supreme Cases, do not support
a rule allowing parties to alter the judicial process by private contract”.77 It is
interesting to mention that the issue of severability of the stipulation of expanded
court control was not raised as an issue in this case; in other words, it was not
questioned whether the arbitration agreement continues to bind the parties if
one of its parts is declared illegal or inoperative.
The issue of severability was raised in another 2002 case decided by the U.S.
District Court N.D. California.78 This is an interesting case, because here the issue
of expanded judicial review was not raised in post-award proceedings, but upon
a motion to compel arbitration. The party opposing arbitration argued that since
the stipulation on expanded judicial review was unlawful, this rendered the entire
arbitration agreement unenforceable. Severability thus became a central issue.
What is also significant is that the question emerged in a setting which was free
from some burdensome considerations. In a post-award setting, declaring the
whole arbitration agreement unenforceable (or null and void, or inoperative)
has ponderous consequences, because the arbitration proceedings have already
taken place consuming time, energy and money. Also, in cases in which the issue
of the validity (and of the severability) of clauses on expanded judicial review
has been raised in post-award proceedings, the parties were typically unaware
of the problem, and went through the arbitration process without raising the
issue of the validity of the entire arbitration agreement. Thus, one could say that
it is easier to take a dispassionate look at the issue of severability in cases when
it emerges before the arbitration proceeding has run its course. In this case, the
California district court held that the clause on extended judicial review was,
indeed, unenforceable, because it unlawfully expands the jurisdiction of the
reviewing court. Facing the issue whether the arbitration agreement remains
binding after one of its stipulations was declared unlawful, the district court
cited a number of California decisions and stated that “[s]ince public policy
75
Bowen v. Amoco Pipeline Co., 254 F.3d 925, 930 (10th Cir. 2001).
76
77
78
SI V, LLC v. V. FMC Corp., 223 F.Supp.2d 1059 (N.D.Cal. 2002).
377
dictates a strong preference for the enforcement of arbitration agreements,

many California courts have ruled in favor of severing unenforceable provisions
from these agreements”. Identifying this point of reliance, the district court did
not distinguish between cases in which the issue was raised prior or after the
arbitration proceedings took place. The district court opted for severability, but
it also relied on a circumstance which may possibly distinguish this case from
others. The court used as an argument the fact that the contract had a “severance
clause”. This clause read: “[i]f any provision of this Agreement is, or hereinafter
is adjudged to be, for any reason void, unenforceable, or invalid, it is the specific
intent of the parties that the remainder thereof shall be and remain in full force
and effect”. This quite unequivocal (and not typical) formulation of a specific
intent of the parties may limit the range of the holding of this case.79
In a more recent (2005) case, between the Trombettas and Raymond James
Financial Services, the arbitration agreement provided for a de novo court review
not of any award, but of certain possible awards (award of damages that exceed
$100,000, award of punitive damages, etc).80 The stipulation of the parties
also contained some instructions regarding the manner in which a de novo
review should be conducted. It was stated that “[a] court having jurisdiction
‘will conduct a “de novo” review of the transcript and exhibits of the arbitration
hearing’”.81 After a scrutiny of the various positions taken by various circuits,
the Pennsylvania court opted not to enforce the stipulation on extended review,
and added some interesting observations regarding the position in which the
court would find itself in implementing a party-designed court review. The court
also described dilemmas regarding the nature of the “product”, the result of a
party-designed review. It stated:
“Also, the de novo review sought through a petition to vacate an arbitra-
tion award is outside the scope of the tasks that judges perform, so there
are no established procedures governing the role of the courts. Does
the trial judge enter an award, a decision, or a judgment? Is the trial
court required to make findings of fact and conclusions of law; does this
depend on whether the arbitrators were required to do so? Are there any
additional steps that must be taken by a party who is satisfied with the
ruling of the trial judge, such as filing a petition to confirm an arbitra-
tion award? Does a party who is dissatisfied with the ruling of the trial
court file a petition with the trial court to vacate the arbitration award,
a motion for post-trial relief, or a direct appeal to the appellate courts?
SI V, LLC v. V. FMC Corp., 223 F.Supp.2d 1059, 1064 (N.D.Cal. 2002).

79
Trombetta v. Raymond James Fin. Servs, 71 Pa. D. & C.4th 12 (Pa. County Ct. 2005) (C.P.
80
Pa. 2005).
Trombetta v. Raymond James Fin. Servs, 71 Pa. D. & C.4th 12, 20 (Pa. County Ct. 2005).
81
378
What issues may be presented to the appellate courts and how are they
raised/preserved? What is the role of the appellate courts?
Judicial resources should not be utilized to address these procedural
issues created by an agreement of the parties that would place a court
in an unfamiliar setting. Thus, courts should not enforce agreements
that will place a court in this position”.82
A year later, this case reached on appeal the Superior Court of Pennsylvania
which held that the clause on de novo review was unambiguous, but it also
held that “as a matter of first impression” de novo review clauses contained in
arbitration agreements are not enforceable as a matter of law.83
In another 2005 case between Puerto Rico Telephone Company and U.S.
Phone Manufacturing Corporation, the Puerto Rico party filed a motion to
vacate an award of the American Arbitration Association.84 The plaintiff argued
that the parties stipulated an extended review by agreeing that the arbitration
panel “shall meet in Puerto Rico and apply the law of the Commonwealth of
Puerto Rico”.85 The First Circuit joined those who recognize, in principle, a
party-designed extended court review, but found that such a review was not
effectively stipulated in this case. The First Circuit held:
“We agree with other circuits that have concluded that the parties can by
contract displace the FAA standard of review, but that displacement can
be achieved only by clear contractual language. The contract here, even
if sufficient under Puerto Rican law, is far short of the explicit language
required by federal law to displace the FAA standard of review …”.86
In a 2006 case, the arbitration agreement contained a provision stating: “The

arbitrators shall not have the power to commit errors of law or legal reasoning,
and the award may be vacated or corrected on appeal to a court of competent
jurisdiction for any such error”.87 The court of appeal decided to disregard this
stipulation, holding that “[n]othing in the FAA purports to give private parties
the power to expand by contract the statutorily conferred jurisdiction of courts
to vacate arbitral awards”.88
82
Trombetta v. Raymond James Fin. Servs, 71 Pa. D. & C.4th 12, 36 (Pa. County Ct. 2005).
83
Trombetta v. Raymond James Financial Services, 907 A. 2d 550 (Pa. Super. Ct. 2006).
84
P.R. Tel. Co. v. U.S. Phone Mfg Corp., 427 F.3d 21 (1st Cir. 2005).
85
P.R. Tel. Co. v. U.S. Phone Mfg Corp., 427 F.3d 21, 22 (1st Cir. 2005).
86
P.R. Tel. Co. v. U.S. Phone Mfg Corp., 427 F.3d 21, 31 (1st Cir. 2005).
87
Cable Connection, Inc. v. DIRECTV, Inc., 143 Cal. App. 4th 207, 213 (Cal. App. 2d Dist.
2006).
88
Cable Connection, Inc. v. DIRECTV, Inc., 143 Cal. App. 4th 207, 223 (Cal. App. 2d Dist.
2006).
379
This short – and, of course, selective – survey of recent cases shows the
complexity of the issue, and the ensuing hesitations. According to the somewhat
ironic title of a 2004 commentary on the Kyocera cases “Arbitration Clauses
Should Be Enforced According to Their Terms – Except When They Shouldn’t
Be”.89
As a result of a most important recent development this uncertainty has
come to an end in the United States. On May 29, 2007 the U.S. Supreme
Court finally granted certiorari in Hall Street Associates v. Mattel, another case
dealing with party-designed expanded judicial review of arbitral awards.90 It is
worth mentioning that in its Amicus Curiae Brief of September 14, 2007, the
American Arbitration Association pleaded strongly in favor of disregarding
party stipulations on extended judicial review. The title of the argument of the
AAA is: “Enforcement of Agreements for Expanded Judicial Review of Arbitral
Awards Would Erode the Benefits of the Arbitral Process, Frustrate Congress’s
Intent to Limit Judicial Intervention Into Arbitral Awards, and Violate the Plain
Terms of the FAA”.91 The case was decided on March 25, 2008, and the Supreme
Court took a position against expanded judicial review.92 Delivering the opinion
of the Court Justice Souter stated:
“Hall Street is certainly right that the FAA lets parties tailor some, even
many features of arbitration by contract, including the way arbitra-
tors are chosen, what their qualifications should be, which issues are
arbitrable, along with procedure and choice of substantive law. But to
rest this case on the general policy of treating arbitration agreements
as enforceable as such would be to beg the question, which is whether
the FAA has textual features at odds with enforcing a contract to expand
judicial review following the arbitration”.
Having raised the critical question, Justice Souter gave an explicit answer: “To
that particular question we think the answer is yes, that the text compels a read-
ing of the §§ 10 and 11 categories as exclusive”.93 This simply means that the
grounds for judicial control of arbitral awards set by the U.S. Federal Arbitration
Jonathan R. Bunch, “Arbitration Clauses Should Be Enforced According to Their Terms

89
– Except when They Shouldn’t Be: The Ninth Circuit Limits Parties’ Ability to Contract
for Standards of Review of Arbitration Awards”, 2004 J. Disp. Res. (2004) 461.
Hall Street Associates L.L.C. v. Mattel Inc., 127 S.Ct. 2875 – May 29, 2007 (unlike the
90
Kyocera case, Hall Street v. Mattel lacks the international dimension – which has so far
not been perceived as a distinguishing factor under the FAA).
Brief of Amicus Curiae American Arbitration Association in Support of Affirmance at
91
5, Hall Street Associates L.L.C. v. Mattel Inc., 128 S. Ct. 1396 (U.S. 2008) (No. 06-989).
Hall Street Associates L.L.C. v. Mattel Inc., 128 S. Ct. 1396 (U.S. 2008).
92
Hall Street Associates L.L.C. v. Mattel Inc., 128 S. Ct. 1396, 1404 (U.S. 2008).
93
380
Act are exclusive; they cannot be expanded by party agreement. There is only
one small door left open. The March 25, 2008 decision of the Supreme Court
includes the following caveat:
“In holding that §§ 10 and 11 provide exclusive regimes for the review
provided by the statute, we do not purport to say that they exclude more
searching review based on authority outside the statute as well. The FAA
is not the only way into court for parties wanting review of arbitration
awards: they may contemplate enforcement under state statutory or
common law, for example, where judicial review of different scope is
arguable. But here we speak only to the scope of the expeditious judicial
review under §§ 9, 10, and 11, deciding nothing about other possible
avenues for judicial enforcement of arbitration awards”.94
Given that arbitration in the U.S. – and international commercial arbitration in

particular – normally takes place within the framework of the FAA, this caveat
will probably not gain any significant practical relevance.
At any rate, the arguments and perceptions developed in the Kyocera case and
in other U.S. cases contributed both to the visibility, and to a better understanding
of the problem of party-designed expanded judicial review. They also showed
the way towards a preferred solution.
C.3. The Implications of Recognizing or not Recognizing Stipulations on Expanded

Judicial Review
The Kyocera case and other cases discussed above have pointed to the difficulties
to which party stipulations on expanded judicial review may give rise. There is
practically a consensus with regard to the guiding principle which should show
the way. The decisions mentioned have had different outcomes, but they were
searching for an outcome which is in line with a pro-arbitration policy. The ques-
tion is which way is shown by this guiding principle, which direction should one
take in order to reach a pro-arbitration effect. On the following pages, I would like
to continue the discussion of stipulations on expanded judicial review focusing
on options and the implications of these options. I shall consider the two basic
hypotheses: a) party agreement on expanded judicial review is disregarded; and
b) party-designed expanded judicial review is accepted.
C.3.1. Hypothesis a): Party agreement on expanded judicial review is

disregarded
If the provisions of the arbitration agreement on expanded review are held
invalid, the first and most important question that arises is what the finding’s
94
Hall Street Associates L.L.C. v. Mattel Inc., 128 S. Ct. 1396, 1406 (U.S. 2008).
381
impact should be on the arbitration agreement as a whole. In its 1995 Kyocera

decision, the district court considered this issue, but did not perceive it as a dif-
ficult one. It cited only one case, and this is one in which severance was actually
denied on the ground that clauses of the arbitration agreement which were
“blatantly illegal”95 were part of an “integrated scheme to contravene public
policy”.96 The district court held that Kyocera was distinguishable, and found
that the invalid provision was divorceable, because it dealt with review of the
arbitration procedure conducted by the court, while the rest of the arbitration
agreement was devoted to the arbitration procedure conducted by the arbitra-
tors. On ground of these considerations, the District Court concluded that “The
contents of § 8.10(d)(ii) of the Definitive Agreement are clearly severable”.97
One could mention at this point that the arguments advanced by the parties
suggested another focus of the debate, which the district court chose to avoid.
The parties did not ask the question whether the contested stipulation was or
was not “part of an integrated scheme” of illegality, but rather whether the
parties would or would not have concluded the contract without the given
provision.98 Kyocera pointed out that the disputed provision was an integral
part of the arbitration agreement, and that there was no basis to suppose that
the parties would have agreed to arbitrate at all, absent that provision. In turn,
LaPine argued that Kyocera would have agreed to arbitrate even without this
provision, rather than subject itself to the financial liability and hazard of trial
by jury. These arguments take us to the difficult question of how important the
provision on expanded judicial review was to the parties, that is, whether the
parties would or would not have concluded the arbitration agreement (and the
contract) without that provision.
In 2003 the Ninth Circuit devoted somewhat more attention to the issue of
severability, concentrating on the central purpose of the contract, a part of which
was tainted by illegality. It cited a decision of the California Supreme Court in
which the following criterion was set:
“[i]f the central purpose of the contract is tainted with illegality, then
the contract as a whole cannot be enforced. If the illegality is collateral
to the main purpose of the contract, and the illegal provision can be
extirpated from the contract by means of severance or restriction, then
such severance and restriction are appropriate.”99
Lapine Technology Corp. v. Kyocera Corp., 909 F. Supp. 697, 706 (N.D. Cal. 1995).
95
Graham Oil Co. v. Arco Prods. Co., 43 F.3d 1244, 1249 (9th Cir. 1994).
96
97
98
Little v. Auto Stiegler, Inc., 63 P.3d 979, 986 (Cal. 2003).

99
382
Applying this standard, the Ninth Circuit held that the arbitration clause and
its review provision are not interdependent, and added that no evidence was
submitted supporting Kyocera’s contention that the appellate review was critical
to the entire agreement. In Hall Street Associates v. Mattel, the Supreme Court of
the United States did not deal with the issue of the severability of the stipulation
providing for expanded judicial review.
Viewed in a comparative perspective, however, the problem is quite sensitive,
and the invalidation of the arbitration agreement as a whole is not an unlikely
option. The basic approach follows the same orientation, but the guidelines given
are usually quite broad, allowing different conclusions. It is common ground
in most legal systems that an invalid provision may, but need not affect the rest
of the contract. Whether it will, depends on rules of contract construction and
interpretation provided by national laws or courts. The guidelines usually invite
a scrutiny of the basic purpose of the contract (would it remain the same if the
contested clause was separated?), or of the intentions of the parties (would they
have concluded the contract without the provision in question?). Legislative
guidelines are not always given. Among those legislative provisions that have
devoted explicit attention to the issue one might point out the Swiss Code of
Obligations, which focuses on the question whether the parties would or would
not have concluded the contract without the provision which was set aside.100
To mention other examples, the 1978 Yugoslav Act of Obligations included a
special article devoted to the issue of partial nullity. According to Article 105:
“Nullity of a contractual provision shall not imply nullity of the entire contract,
if it can stand without the null provision, and should such provision be neither
a requirement for the contract nor a decisive motive for making it”.101 Like in
the Yugoslav case, the provisions of the former Czechoslovak Civil Code are now
rules of the Czech and Slovak civil codes respectively. According to Article 41
of both codes: “If the reason of invalidity only affects a part of a legal act, only
that particular part shall be invalid, unless the nature of a legal act its content
or its circumstances make it impossible to separate such an invalid act from the
rest of the contract.”102 The Civil Code of the Russian Federation (as amended
100
According to art. 20 ¶ 2 of the Swiss Code of Obligations [Schweizerisches Obligationenrecht,
Code des obligations, Codice delle obligazioni ] March 30, 1911, SR 220, RS 220, “[s]i le
contrat n’est vicié que dans certaines de ces clauses, ces clauses sont seules frappées de nullité, à
moins qu’il n’y ait lieu d’admettre que le contrat n’aurait pas été conclu sans elles”.
101
Since the dissolution of Yugoslavia this Act is not in force anymore, but most of its provi-
sions – including Article 105 – were adopted in the successor States: Bosnia-Herzegovina,
Croatia, Macedonia, Montenegro, Serbia and Slovenia. In Serbia for example, the text of
Article 105 of the Yugoslav Code is now Article 105 of the Serbian Act on Obligations.
102
The codes still carry dates prior to dissolution. The Czech Civil Code is in Act No. 40/1964,
the Slovak Civil Code is also in Act 40/1964 as amended and recodified on April 13,
2006.
383
through 2003) offers a solution in the same spirit, putting emphasis on the
investigation of the circumstance whether the deal would or would no have
come into effect without the part which was invalidated. According to Article
180: “The invalidity of a part of the deal shall not entail the invalidity of its other
parts, if it may be supposed that the deal could have been effected without the
incorporation into it of the invalidated part”.103
One might also refer here to Para. 134 of the German Civil Code (Bürgerliches
Gesetzbuch) which is pertinent, although it does not address the issue directly.
According to Para 134: “A legal transaction which violates statutory prohibition
is void, unless a different intention may be inferred from the statute”.104 In his
comments on Para 134, Kropholler states that partial nullity may also be an
option if this is supported by teleological considerations.105
One may submit that neither of the legislative provisions cited above would
have offered an unequivocal answer to the question raised in Kyocera (and other
like cases in which the parties contracted for expanded judicial review). If the
parties accept arbitration providing at the same time that issues of law and fact
remain subject to court review,106 it is not easy to establish whether consent to
arbitrate would or would not have come to existence in the absence of the contested
provision. LaPine argued that from Kyocera’s point of view, arbitration without
expanded judicial review was probably still better than trial by jury, since this
was, in all likelihood, much more alien to a Japanese party. But this is, of course,
speculation. Speculating further, one has to note that Kyocera had another
option – not to conclude the contract at all, if it does not include an arbitration
agreement to its liking. Hans Smit argues that “it would appear appropriate” to
conclude that had the parties realized that the provision on scope of review was
invalid, they would have accepted the arbitration agreement without it as well.
He also offers an alternative reasoning yielding the same result: “Alternatively,
the strong policy favoring arbitration embodied in the applicable arbitration
statute may be given substance by endorsing that conclusion”.107 This logic is
contested by Judge Fernandez from the 9th Circuit, who stresses that disregarding
the clause on expanded review would yield “hostility to arbitration agreements
erumpent under the guise of deference to the arbitration concept”.108 We are
back to the initial question: What is actually pro-arbitration under the given
Civil Code [Grazhdanskii Kodeks RF, GK], art. 180.

103
Civil Code [Bürgerliches Gesetzbuch, BGB] Aug. 18, 1896.

104
Jan Kropholler, Studienkommentar BGB (6th edn, 2003) 64.

105
In Kyocera, the same condition also appeared in the wording of the terms of reference
106
adopted by the ICC Tribunal. This circumstance is an added emphasis, and it enhances
the significance of the provision on expanded judicial review.
Smit, supra note 61, at 152.
107
108
384
circumstances? Would arbitration become a more or less appealing option if

the parties knew that their arbitration agreement would be upheld even if some
parts of it were declared invalid?
Let us turn now to some cases outside the United States. In a case decided
by the Paris Cour d’appel (decision of October 27, 1994 in Société de Diseno v.
Société Mendes109) the parties inserted into their arbitration clause a provision
stating that they retained the right to lodge an appeal against the arbitral award
before the court of appeal.110 After the award was rendered, Diseno appealed,
but alternatively also moved to set aside on ground of nullity of the arbitration
agreement. The 1981 French Code of Civil Procedure limits recourses against
awards rendered in France in international arbitral proceedings to setting aside
(Article 1504); appeal remains a possibility in domestic cases. Diseno tried to
cover all grounds. It suggested that the case should be qualified as a domestic
case, which characterization would allow appeal. The alternative motion to
set aside was based on another theory: the case is an international case, the
provision on appeal is void, and thus the arbitration agreement is also void,
and this yields annulment. The Cour d’appel de Paris found that the case was
an international case, and held that the parties cannot create recourse outside
the Code of Civil Procedure.111 Up to this point, the logic followed by the Paris
Court of Appeals is the same as that adopted by the Ninth Circuit in the 2003
Kyocera decision. At this juncture, however, the question arose as to whether the
arbitration agreement (and the award) may survive the nullity of the provision
of the arbitration agreement on expanded review. The Cour d’appel held that
the provision on appeal constituted an “essential element” of the arbitration
agreement by which the parties intended to submit their dispute to “two levels
of jurisdiction” (which intention became frustrated), and that under these
109
Cour d’appel de Paris (1re Ch. C), 27 octobre 1994, 2 Revue de l’arbitrage (1995) 263
(reporting court decision: Société de Diseno v. Société Mendes).
110
Cour d’appel de Paris (1re Ch. C), 27 octobre 1994, 2 Revue de l’arbitrage (1995) 263,
263 (finding that the clause read: “les parties se réservent toutefois le droit de faire appel de
la sentence arbitrale devant la Cour d’appel”).
111
Cour d’appel de Paris (1re Ch. C), 27 octobre 1994, 2 Revue de l’arbitrage (1995) 263, 266
(holding that “[c]onsidérant qu’en conséquence seul est ouvert contre les sentences rendues en
France en matière d’arbitrage international le recours en annulation selon les modalités prévues
par les articles 1504 et 1502 du nouveau Code de procédure civile, à l’exclusion d l’appel, les
parties a un arbitrage international n’ayant pas le pouvoir de créer une voie de recours que la loi
impérative du pays où elles ont entendu situer le règlement conventionnel de leur litige ne prévoit
pas”).
385
circumstances the whole arbitration clause was invalid.112 The same position
was taken in other French cases as well.113
In a somewhat peculiar case which reached the Supreme Court of Austria,
a different position was taken. In this case the stipulation on court review
endeavored to identify an appellate instance, but – unlike in Diseno, and unlike
in the American cases considered above – this stipulation did not have any
coherence and referred to an unidentifiable entity. Section 1 of the arbitration
clause submitted all disputes to the Court of Arbitration at the Federal Economic
Chamber of Yugoslavia in a coherent fashion. Section 2 of the same clause
represented the problem, because it read: “The next instance for the settlement of
disputes is the competent international law court” (“völkerrechtliche Gericht”). The
Yugoslav Court of Arbitration rendered an award, and recognition was requested
in Austria. The party opposing recognition argued that the whole arbitration
clause was void, because it contained an unclear wording referring to a second
instance which did not exist. The case reached the Supreme Court of Austria
which decided on September 9, 1987 that the ineffective (and meaningless)
clause was severable.114
To take another French example which also reached the Supreme Court
(of France), the issue of the distinction between domestic and international
arbitration (combined with the question of expanded judicial review) was raised
in Société Buzichelli Holding v. Hennion.115 The dispute arose between two French
subcontractors in connection with works executed outside of France. The issue of
the international or domestic character of the award was not equally complex in
Diseno as in the Buzichelli case. In Diseno v. Mendes, the international character
of the dispute was more obvious. One party was French, the other Spanish, while
the subject of the dispute was distribution of French goods – products of Yves
Saint-Laurent – in Spain. In the Buzichelli case, both parties were French, both
wanted to qualify the process as domestic arbitration, and both were ready to
embark on appeal procedures under articles 1484 and 1485 of the French Code
112
Cour d’appel de Paris (1re Ch. C), 27 octobre 1994, 2 Revue de l’arbitrage (1995) 263, 267
(holding that “[c]onsidérant que cette clause est en conséquence frappée d’une nullité qui affecte
dans son ensemble la convention d’arbitrage dont elle constitue un élément essentiel, déterminant
du consentement des parties qui ont ainsi affirmé leur volonté de soumettre leur litige à deux
degrés de juridiction”).
113
See Laurence Franc, “Contractual Modification of Judicial Review of Arbitral Awards:
The French Position”, 10 Am. Rev. Int’l Arb. (1999) 215.
114
Supreme Court [Oberste Gerichtshof, OGH], 9 Sept., 1987, 3 Ob 80/87, IPRax 1989
(Austria) (including critical comment by K. Heller “Zur Vollstreckung eines jugoslawisches
Schiedsspruchs in Österreich”); see also Tibor Várady, “Arbitration Despite the Parties”, in
Law and Reality (Martinus Nijhoff Publishers, 1992) 351.
115
Cour de cassation (1re Ch. Civ.), 6 avril 1994, 2 Revue de l’arbitrage (1995) 263 (reporting
court decision: Buzichelli Holding v. Hennion).
386
of Civil Procedure which envisage domestic arbitration. The Cour d’appel, however,
qualified the case ex officio as an international case, and annulled the award. The
Cour de cassation upheld this qualification, holding that party autonomy does not
extend to the qualification of the nature of arbitration process as domestic or
international. In his note on this case, Patrice Level raises the question whether
a better solution would have been to adopt the “souplesse” of the 1987 Swiss
Private International Law Act, which allows the parties to choose the domestic
regime of arbitration (and cantonal law) instead of the regime of the Private
International Law Act itself.116 (Such a switch, of course, makes sense only in
countries where the applicable lex arbitri recognizes separate regimes for domestic
and international arbitration.)
Speaking of the distinction between domestic and international arbitration,
mention should be made of the fact that a number of legislations adopt a more
expanded regime of control with regard to awards rendered in domestic arbitration.
This is the case, for example, in China. Cai Hongda, the Deputy Secretary General
of the China Maritime Arbitration Commission (CMAC) explains this difference
by stating that the two Chinese arbitral institutions dealing with international
cases (the CIETAC and the CMAC) “[h]ad dealt with a lot of external arbitration
cases for 40 years. The two commissions had a body of high-ranking and highly
qualified arbitrators with abundant experiences at home and abroad”. He adds
that “foreign-related” arbitration must observe international conventions.117
Thus, the quality achieved over years and the safeguards provided in an inter-
national setting justify a more deferential attitude towards awards rendered in
international cases.
Returning to the issue of severability, one could ask whether upholding the
contested provision on expanded judicial review in Diseno was more or less
difficult than following the disputed provision in the earlier Kyocera decision. In
Diseno, the parties did not interfere with the pattern of judicial control; they did
not try to rewrite the grounds on which recourse against arbitral awards may be
lodged. Instead, the parties relied on a different type of recourse, not recognized
in international arbitration, but accepted in domestic arbitration. Suppose the
116
Patrice Level, “Note – Cour de Cassation (1re Ch. Civ.) 6 avril 1994 – Société Buzichelli
Holding v. Hennion et autre”; “Note – Cour d’appel de Paris (1re Ch. C) 27 octobre 1994
– Société Diseno v. société Mendes”, 2 Revue de l’arbitrage (1995) 263 (commenting on
court decisions); Bundesgesetz über das Internationale Privatrecht, Loi fédérale sur le
droit international privé, Legge federale sul diritto internazionale privato [Federal Code
on Private International Law], Dec. 18, 1987, art. 176 no. ¶ 2 (Switz.) (holding that the
provisions of this chapter shall not apply where the parties have agreed in writing that
the provisions of this chapter are excluded and that the cantonal provisions on arbitration
shall apply exclusively).
117
Cai Hongda, “Judicial Supervision of Arbitration in China”, 17 J. Int’l Arb. (2000) 71,
77.
387
parties did not try to introduce a new type of recourse, but attempted to modify
the existing one. Following the gist of the decision of the Cour d’appel, the result
would probably remain the same.118 The French court insists on the mandatory
nature of the French provisions, and stresses that the only recourse permitted is
“setting aside according to the modalities provided in Article 1504 and 1502 of
the New Code of Civil Procedure”. This implies that the grounds set and limited
in Article 1502 are beyond the reach of the parties, and different modalities
cannot be designed by party agreement. Modifying the given remedies is probably
a more egregious interference with legislative competencies than choosing an
existing legislative pattern of remedies (provided for domestic cases).
Another question that may be raised with respect to the Diseno case is, whether
reliance on the doctrine of estoppel or the venire contra factum proprium principle
could have tilted the court toward rescuing the arbitration agreement – and
the award. (In the same recourse, Diseno tried to rely at the same time both on
the validity of the provision on appeal, and on the invalidity thereof.) The first
question is, of course whether we do have an estoppel-like situation in case of
alternative reliance on opposite assumptions. But even if estoppel may have
rescued the award in this case, it does not provide a general solution. Depending
on the circumstances of the case, estoppel may or may not become an issue; and
if it becomes an issue, it may or may not influence the decision. The key issue
remains the same: can the arbitration agreement survive the invalidation of its
provision on extended judicial review? In his comments on the Diseno case, Level
asks whether priority should be given to the intention of the parties to arbitrate
(and to consider as non-existent the provision on appeal) or whether one should
give more weight to the mistrust the parties expressed towards arbitration without
judicial supervision.119 What is in the interest of the cause of arbitration? The
position eventually taken in Kyocera may very well be qualified as being more
“pro-arbitration” in the given case, because it saves an arbitration agreement
(although it sacrifices some parts of it). But is it “pro-arbitration” in the long
run? The confidence of the parties in the arbitration process is very much based
on the assumption that the terms of their agreement will be followed. Would
parties have the same confidence in arbitration if they knew that arbitration will
validly proceed even if some terms of their bargain cannot be observed?
If one follows the option to disregard party agreement on expanded judicial
review, one has to reckon with an uncertain fate of the arbitration agreement
proper. The strong policy favoring arbitration may offer some backing, but it
will certainly lose at least some of its strength when arbitration which would
get support is not the same as the one designed by the parties. It is probably
impossible to agree on a firm principle covering all cases. The question boils
See Franc, supra note 127, at 222.

118
Level, supra note 130, at 273.

119
388
down to contract interpretation. The circumstances of the case – along with

the rules and policies of the forum – will probably lead to different decisions in
different cases within the same country, and even more so in different countries.
In other words, in the broad arena of international commercial arbitration, there
is no guarantee that the arbitration agreement will survive the invalidity of its
provision on expanded judicial review.
Let me add that in the hypothesis of striking and severing the provision on
expanded judicial review, another jeopardy might emerge if the international
dimension is added. The U.S. courts did not find the international character
of some of the cases dealt with above to be a distinctive feature. This may be
in line with Article 10 of the FAA. In an international setting, however, some
specific consequences may nevertheless emerge, because one has to consider
the option that recognition is sought in another country. Suppose Kyocera’s
assets are in Japan, and LaPine is compelled to seek recognition and enforce-
ment in Japan. Kyocera objects, and states, referring to Article V(1)(d) of the
New York Convention that the arbitration agreement was not observed. (It
provided for an extended appeal, and this provision was disregarded.) Such a
case would represent an interesting challenge to the construction of Article
V(1)(d) In this hypo, a strict reading of Article V(1)(d) might provide a narrow
escape. The New York Convention permits denial of recognition if the “arbitral
procedure was not in accordance with the agreement of the parties” (emphasis
added). In our case, the agreement of the parties was infringed with regard to
the “post arbitral procedure”. A line of argument opposing recognition could
also be based on Article V(1)(a). This provision allows refusal of recognition
and enforcement if the arbitration agreement “[i]s not valid under the law to
which the parties have subjected it or, failing any indication thereon, under the
law of the country where the award was made”. In the Kyocera case a part of
the arbitration agreement was, indeed, held invalid under the applicable law.
This takes us to the question whether invalidity of a provision of the arbitration
agreement may be qualified as invalidity of the arbitration agreement within
the context of Article V(1)(a).
C.3.2. Hypothesis b): Party agreement on expanded judicial review is

observed
It appears that the voiding of the provision on extended judicial review reduces
the arbitration agreement to a precarious position. Let us now follow the other
hypothesis, the upholding and observance of the stipulation on expanded judicial
review. The facts of the Kyocera case offer again a suitable starting point for
analysis. In the Kyocera case, the “Definitive Agreement” provided for extended
grounds for “vacating, modifying or correcting the award” – allowing “vacating
modifying or correcting” not only on grounds stated by the FAA, but also “where
the arbitrator’s findings are not supported by substantial evidence”, or where
389
“the arbitrator’s conclusions of law are erroneous”. It is important to point out

that under Paragraph 11 of the FAA, modifications and corrections are only
possible in technical matters. This is consistent with the idea of limited review
restricted essentially to procedural grounds; and this confines the outcome of
court scrutiny to essentially two options: confirming or setting aside the award.
Under the FAA – just like under most arbitration acts – the court is not posited as
an appellate level that can change the decision on the merits. The stipulation on
expanded judicial review endeavors to put the reviewing court into a different
position, essentially identical to that of an appellate court. The question arises
whether this is possible. In its earlier decision (the 1997 decision upholding the
stipulation on expanded judicial review), the 9th Circuit did not address this issue
head on, and did not raise the question of a possible modification of the merits
of the award. (The problem did not emerge later either, since after rehearing the
case, the District Court and the Ninth Circuit confirmed the award instead of
setting it aside or modifying it). Nevertheless, since the 1997 holding of the 9th
Circuit approved the whole text of Article 8.10(d) of the “Definitive Agreement”,
it follows that modification of the award became one of the contemplated options.
This may give rise to a further problem (in addition to the fact that it is difficult
to reconcile this position with Article 11 of the FAA). Suppose the district court
modified the award, and held that – instead of $257 million as awarded by the
ICC Panel – Kyocera owes LaPine let us say $163 million from the moment of the
ICC award, and that in turn, LaPine owes Kyocera $35 million from the moment
of the decision of the District Court. How should one qualify the “product”? Is
this still an arbitral award within the purview of the New York Convention, or
is it simply a court decision? Could LaPine seek recognition and enforcement of
the hypothetical holding of the District Court in another country on the theory
that this is an arbitral award? Could Kyocera seek recognition of the part of the
“arbitral award” which goes in its favor, or set it off against the portion of the
decision which goes in favor of LaPine? Or would in turn the original ICC award
still have a chance if submitted for recognition outside the U.S.? Once again,
the wording and the concepts of the New York Convention would be put on a
difficult trial. Article I(2), recognizing both ad hoc and institutional arbitration,
gives (at least indirectly) a definition of arbitral awards:
“The term ‘arbitral awards’ shall include not only awards made by
arbitrators appointed for each case but also those made by permanent
arbitral bodies to which the parties have submitted”.
The focus here is not on our fact-pattern, but the bottomline is, that – either in
an institutional or in an ad hoc setting – arbitral awards are decisions made by
arbitrators. One could very well argue that this implies that a final decision made
by a court (which decision departs from the arbitrator-made award) may not be
qualified as an “arbitral award”.
390
Staying with the issue of the characterization of the “product”, the following
question also arises: When does the (original) award become binding in case of a
Kyocera-type stipulation, assuming that the stipulation providing for extended
judicial review is considered as valid. Within a standard setting, an award is final
and binding when it is rendered; the fact that annulment remains a possibility
does not prevent a party from seeking recognition of the award in a New York
Convention country. Recognition cannot be denied on the grounds of Article
V(1)(e) which allows refusal of recognition if “the award has not yet become
binding on the parties”.120 If, however, the parties agreed on an appellate level
arbitration, recognition of the first level award may possibly be refused on the
ground of Article V(1)(e), since the award is not yet final and binding. (At least
not before the appeal was dealt with, or before the time limit had expired.) Where
does our situation belong? In Kyocera, the parties agreed on an extended judicial
control, which converts the standard setting aside examination into a scrutiny
of an appellate level. Arguably, considering the provision on expanded judicial
scrutiny, the ICC award rendered in Kyocera is not a final and binding award.
Again, it is difficult to accommodate the contractually expanded judicial review
within the established conceptual framework of international commercial
arbitration, and this gives rise to uncertainties and disorientation.
Let us now follow some other possible implications of the observance of
stipulations on expanded judicial review. In its earlier holding, the Ninth Circuit
stated quite emphatically that the FAA does not prevent the enforcement of agree-
ments to arbitrate under different rules than those set forth in the Act itself, and
continued: “Indeed, such a result would be quite inimical to the FAA’s primary
purpose of ensuring that private agreements to arbitrate are enforced according
to their terms”.121 Judge Fernandez relied on the decision of the Supreme Court
in Volt Info. Sciences Inc. v. Board of Trustees of Leland Stanford Junior University
where it was held with regard to party autonomy: “Just as they may limit by
contract the issues which they will arbitrate, so too may they specify by contract
the rules under which that arbitration will be conducted”.122 But the point is that
what we have here, are party-designed rules specifying the modalities of judicial
review. The contested rules of the arbitration agreement in Kyocera and in like
cases, are not “rules under which arbitration will be conducted”. The question
is whether we have here just “an agreement to arbitrate” defining the powers
of the arbitrators, or also an agreement about court proceedings, defining the
powers of the judges.
120
Recognition proceedings may possibly be suspended if setting aside proceedings are under
way as defined in Article VI.
121
122
Volt Info. Scis. v. Bd. Of Trs., 489 U.S. 468, 479 (U.S. 1989).
391
Even if one were to accept such a most extensive (and probably incorrect)
interpretation of the “agreement to arbitrate”, extending it to an agreement to
design court proceedings as a post-arbitral phase, the question emerges as to what
are the limits of party interference with the judicial proceedings. Judge Kozinski
was aware of the problem and qualified his concurring opinion by stating that
the present terms (review of findings of facts and of conclusions of law) may be
acceptable, but flipping a coin or studying the entrails of a dead fowl might not.
In this comparison, the provisions of the actual party agreement appear to be
quite acceptable. But a host of variations is imaginable between the provision
of the “Definitive Agreement” in the Kyocera case, and entrails of a dead fowl.
Once you allow the parties to shape the judicial proceedings, the question arises
against what standards will one compare specific party provisions? Constitutional
standards of due process are an obvious touchstone. Is this sufficient?
The “Definitive Agreement” stated that the award may be “vacated, modi-
fied or corrected”, where “the arbitrator’s findings of fact are not supported by
substantial evidence”. The fact-finding mechanism of ICC arbitration is quite
different from the fact- finding procedures of California courts. The first is es-
sentially arbitrator-driven, the latter is basically party-driven. Instruments are
different, or have different relative values. An appellate review supposes control
within a coherent system of compatible values. On rehearing the Kyocera case
at the time when the stipulation on expanded judicial review was held valid,
the District Court of the Northern District of California tried to alleviate this
problem by applying a deferential “substantial evidence” standard in reviewing
facts. This may have been helpful in the given case, but the general problem
of compatibility remains. In the New England Utilities v. Hydro-Quebec case, for
example, the court decided to follow party agreement on expanded judicial
review, but also stated – referring to Judge Kozinski – that it need not do so
if the party provision “require[d] diversion from the court’s normal mode of
operation”. In the given case, the court found that issues of law on appeal were
“thankfully straightforward”, which tilted the court towards allowing review
of these issues.123 To return to another example, in the Trombetta case, the
party-designed control was, again, way less exotic than an invitation to find the
roadmap to justice in the contours of the entrails of a dead fowl. The parties
stated that the court should conduct a de novo review, but on the grounds of
the transcripts and exhibits of the arbitration hearing. The Pennsylvania courts
refused, however, to give effect to this stipulation.124
Uncertainty is definitely one of the consequences of party-designed court
control. Furthermore, it has to be pointed out that the standard structure of the
123
New Eng. Utils. v. Hydro-Quebec, 10 F. Supp. 2.d 53 (D.Mass. 1998).
124
Trombetta v. Raymond James Fin. Servs, 71 Pa. D. & C.4th 12 (Pa. County Ct. 2005); Trombetta
v. Raymond James Financial Services, 907 A. 2d 550 (Pa. Super. Ct. 2006).
392
whole mechanism of arbitral settlement of disputes is that of party-designed

arbitration supplemented with a restricted judicial control carefully drafted by
the legislator. Elements of party-drafted judicial control may endanger the basic
structure and balance.
C.3.3. Concluding remarks

It is not easy to take a position with respect to stipulations which endeavor to
regulate the scope of judicial review. The difficulties increase if the stipulation
does not rely on a clear legislative permission – which has invariably been the
case with examples of contractual extension of judicial review. The only conclu-
sion which is not risky (and not very helpful either) is the observation that no
matter whether you accept the logic of the courts which upheld stipulations on
expanded judicial review or whether you endorse the reasoning of those courts
which held that such stipulations are illegal, uncertainty, disorientation, and
problems will (or at least might) emerge.
If one had to choose between the two options, it appears that non-observance
of the disputed stipulation is somewhat closer to the structure and to the interests
of the arbitration process. This position is compatible with the mandatory
character of norms on judicial control, and it is congruent with the fact that rules
on arbitration contemplate party autonomy regarding the arbitration process,
rather than with respect to judicial control of arbitration (unless some autonomy
regarding judicial control were explicitly permitted under specific conditions, as
stated in the Swiss, Tunisian, Peruvian, Swedish and Belgian legislative acts). The
final position taken in the Kyocera case, confirmed by the Supreme Court of the
U.S. in Hall Street Associates v. Mattel, also appears to be closer to realities in the
arena of comparative law. This position finds further support in the UNCITRAL
Model Law which has been setting standards for modern arbitration acts, and
which makes clear that the norms on judicial review are mandatory. According
to Article 34(1): “Recourse to a court against an arbitral award may be made
only by an application for setting aside in accordance with paragraphs (2) and
(3) of this article”. It follows that the only recourse permitted is setting aside, (not
appellate proceedings, for example). This sole recourse can only be relied upon
in accordance with the norms of the Act; i.e. in accordance with paragraph (2)
of Article 34 which sets out a list of grounds for setting aside, and in accordance
with paragraph (3) which defines the time limit within which a motion to set
aside may be submitted. The only (but serious) drawback of non-observance is
that the arbitration agreement becomes vulnerable. Severability posits itself as
a consequential issue. The outcome will depend on the specific content of the
provision on extended judicial control, and on subtle and rather unpredictable
interpretation of standards like “essential element of the agreement”, “the
purpose of the contract”, or “would the parties have concluded the agreement
without the contested provision”.
393
If one recognizes and follows the stipulation on extended judicial control,

an option will emerge that is more difficult to square with statutory norms. It
avoids the issue of severability, but at the same time, it leads us toward uncharted
ground regarding the range and character of possible party interference with
the judicial process. It becomes questionable whether the award is final and
binding if an appellate-like procedure is contracted for. Furthermore, if courts
are posited as an appellate level to arbitration, tensions might very well emerge
between structural characteristics of arbitration and of judicial decision-making
respectively. A Kyocera type extension of judicial control might also yield court
ordered modifications of the award, in which case it becomes questionable
whether the product is still an award, and whether the benefits of the New York
Convention remain available.
The problem would be considerably alleviated if a clear position were taken
– particularly if this were a clear position denying recognition of stipulations
on expanded judicial review (as this was done in Hall Street Associates v. Mattel).
A position admitting contractual expansion of court review would raise a host
of other problems and would necessitate a redesigning and re-evaluation (one
could also say devaluation) of international commercial arbitration. The process
would be extended, the notion of a final and binding award would have to be
reconsidered. The applicability of the New York Convention on Recognition and
Enforcement of Foreign Arbitral Awards would become at best questionable
with regard to court decisions which modify an award as a result of an appellate
scrutiny. The price of accommodating some idiosyncratic party stipulations ap-
pears to be way too high. At the same time, if a clear position were taken against
stipulations on expanded judicial control, this would send a warning signal, and
would protect parties (or at least well-informed parties) from the quandary of
severability. Given that stipulations providing for expanded judicial review are
quite rare, the unavailability of this troublesome option would not discourage
any significant number of parties who are contemplating agreeing to arbitrate.
Thus, a refusal to recognize stipulations on expanded judicial control appears
to be closer to the interests of arbitration.
And finally, the basic problem is with the contractual provision itself. Party
agreements on expanded judicial review of arbitral awards are ill-advised.
Pro-arbitration is the avoidance of this clause.
III. Flexibility, Relevance, and Waiver as Points of Reliance
A. Introduction
Staying with the question as to what is actually pro-arbitration, I would also
like to ask what attitude is pro-arbitration. It is usually submitted that taking a
flexible attitude yields pro-arbitration results. If one gives a flexible interpretation
394
to norms on court control, more awards may pass the test. I would like to take
a closer look at this assumption. The point I would like to make is that one has
to allow room for some flexibility even in the evaluation of flexibility. Let me try
to explain this point through an example.
In a case decided by the Cairo Court of Appeals (already referred to in
Chapter I) the parties to the contract provided that all controversies regarding
the execution of the contract should be settled by way of conciliation guided by
a “consultant”, and if one of the parties were to refuse such conciliation, the
dispute should be settled by arbitration.125 In spite of this arrangement, one of
the parties submitted the dispute directly to arbitration, without prior recourse
to conciliation. The ad hoc arbitrators proceeded in spite of the objections of
the other party, and rendered an award on August 5, 2004. This award was
challenged by the Appellant in setting aside proceedings, and the case reached
the Cairo Court of Appeals. The Court held that the error did not justify setting
aside under a strict reading of Article 53 of the 1994 Egyptian Arbitration Act.
It was held that Article 53 (which sets the grounds on which an award may
be set aside) must be interpreted strictly, without giving room to analogy or
extensive interpretation. The Court found that the arbitral tribunal did commit
an error because it proceeded contrary to the arrangement which provided for
conciliation as the first step, but it also found that this error is not one of those
enumerated in Article 53 which allow setting aside. The provision at issue was
that of Section 1(a) of Article 53, which states that an award may be annulled
“if there is no arbitration agreement, if it was void, voidable or its duration had
elapsed”. In this case, there was an arbitration agreement making part of a more
complex agreement on dispute settlement, which agreement was not properly
observed. Yet, it was held that a strict reading of Article 53(a)(1) does not cover
the situation at issue. There is one more provision of the 1994 Egyptian Act
which may had been relevant. Article 53(1)(e) states that the award may be
annulled “if the composition of the arbitral panel or the appointment of the
arbitrators had been undertaken in violation of the Law, or contrary to the
parties’ agreement”. A somewhat broader interpretation could have yielded the
conclusion that the appointment of the arbitrators did not take place according
to the agreement of the parties which allowed such appointment only after
the failure of conciliation. It would not have been implausible to extend either
Article 53(1)(a) or 53(1)(e) to a case in which the arbitration agreement was
conditional, and the condition did not materialize. The Cairo Court of Appeals,
gave, however, a strict and narrow interpretation to Article 53, and rejected the
125
(reporting court decision: Société T3A Industrial v. Société des Entrepreneurs arabes), Cour
d’appel de Caire (Ch. 91, com.), reported in Revue de l’arbitrage (2006) 475.
395
motion for setting aside. In his comments in the Revue de l’arbitrage, Abdul-Hamid
El-Ahdab states:
“Cet arrêt consacre un tournant important dans la conception que le juge
retient pour les voies de recours en matière d’arbitrage. … Ainsi le présent
arrêt a rejeté la demande d’annulation et a donc consacré une règle qui, on
l’espère, influencera la jurisprudence des autres pays arabes. Cette règle
consiste à considérer que le recours en annulation n’est pas un appel mais un
recours fondé sur des griefs limitativement énumérés dans l’article 53 de la
loi égyptienne sur l’arbitrage”.126
The distinction between annulment and appellate proceedings was pointed out
by the Cairo court itself. The Cairo Court of Appeals stated:
“Le pouvoir du juge ne s’étend pas au bien-fondé de l’appréciation, à la
justesse de la décision des arbitres dans leur compréhension de la réalité ou
leur interprétation de la loi ou son application, ni à la portée et la véracité des
faits parce que tous ces éléments sont du ressort du juge de l’appel et non de
l’annulation …”.127
This case – and the comment on this case – certainly does not suggest an orienta-
tion which would be opposed to the pro-arbitration trend. This is very much a
pro-arbitration case, and so is the comment. What is interesting is the line of
argumentation. Usually, the term “pro-arbitration” is in a rhetoric cohabitation
with notions like “flexibility”, “elasticity”, or “broad interpretation”. In the Cairo
case it was exactly a strict, narrow (one could also say “rigid”) interpretation
which yielded a pro-arbitration result. Is this a rule? One could say, of course,
that if a norm specifies instances in which an arbitral award may be set aside or
refused recognition, the more broadly one interprets this norm, more awards may
be set aside or refused recognition; and by the same token, the more narrowly
one interprets this norm, the fewer awards will be set aside or denied recognition.
But there are different settings; problems may be raised in various contexts. In a
case 1994 decided by the Supreme Court of Hong Kong, High Court, the parties
agreed on CIETAC arbitration in Beijing, yet the claimant applied to CIETAC
Shenzhen, and the award was rendered by the Shenzhen Sub-Commission.128
Enforcement was sought in Hong Kong. Judge Kaplan stated that “I conclude,
therefore, somewhat reluctantly, that technically the arbitrators did not have
El-Ahdab, supra note 9, at 477.

126
Cour d’appel de Caire (Ch. 91, com.), 27 juillet 2005, 2 Revue de l’arbitrage (2006) 475,
127
476 (reporting court decision: Société T3A Industrial v. Société des Entrepreneurs arabes).
Supreme Court of Hong Kong, High Court, No. MP 2411 13 July 1994, XX Yearbook
128
Commercial Arbitration (1995) 671 (reporting court decision: China Nanhai Oil Joint Service
Corporation Shenzen Branch v. Gee Tai Holdings Co. Ltd.).
396
jurisdiction …” (because the parties agreed on Beijing, rather than on the

Shenzhen branch of the CIETAC).129 Nevertheless, the award was recognized,
after Judge Kaplan found that the respondent was estopped from relying on
the fact that the tribunal was wrongly constituted, since it participated in the
proceedings without really contesting jurisdiction. Furthermore, Judge Kaplan
held that the “may” language of Article V of the New York Convention allows
discretion. He stated:
“To exercise my discretion against enforcement on the facts of this case
would be a travesty of justice. Had I thought that the defendant’s rights
had been violated in any material way, I would, of course, have taken
a different view. However, this is an obvious case where the court can
exercise its discretion to enforce the award notwithstanding a ground
of opposition in the New York Convention being made out”.130
To cite a similar example, in a case in which the recognition and enforcement

of an ICC award was sought before a U.S. court, the party opposing recognition
argued that the ICC Rules of Arbitration were violated because legal costs were
not included into the draft award submitted to the Court, but were added after the
draft award had been approved by the ICC Court.131 The District Court rejected
the objection. It is interesting to note that in addition to questioning whether
violation of the ICC Rules (which would amount to a violation of Article V(1)
(d) of the New York Convention) actually took place, the district court raised
the question of the appropriate standard of review, and pointed out: “Rather,
the Court believes that a more appropriate standard of review would be to set
aside an award based on a procedural violation only if such violation worked
substantial prejudice to the complaining party”.132
The point I would like to make is that there is no unconditional allegiance
between the notion of flexibility on the one hand, and a pro/arbitration orientation
on the other hand. If the question is whether a pattern of facts (on which the
objection is based) may or may not find shelter under one of the grounds stated
in Article V of the New York Convention, the prospects of the award are better
129
Supreme Court of Hong Kong, High Court, No. MP 2411 13 July 1994, XX Yearbook
Commercial Arbitration (1995) 671, 673.
130
Supreme Court of Hong Kong, High Court, No. MP 2411 13 July 1994, XX Y.B. Com. Arb.
(1995) 671, 679.
131
Compagnie des Bauxites de Guinee v. Hammermills, Not Reported in F. Supp. 1992 WL
122712 (D.D.C. 1992).
132
Compagnie des Bauxites de Guinee v. Hammermills, Not Reported in F. Supp. 1992 WL
122712, 5 (D.D.C. 1992); see also Tibor Várady, Arthur Von Mehren & John Barcelo,
International Commercial Arbitration: A Transnational Perspective (Thomson & West 3d edn,
2006) 851.
397
if the interpretation of the wording of Article V is more strict, more narrow,

because such a restrictive interpretation may leave the objection against the award
outside the shelter. If, on the other hand, the question is whether an established
infringement may or may not be disregarded, a broad and flexible interpretation
of the vehicles for such disregarding (estoppel, waiver, lack of relevance) will
yield pro-arbitration (or, at least, pro-enforcement) results.
In this context, “flexibility” mentioned in the title of this Chapter receives
a more specific (one could say “more narrow”) meaning. I would like to talk
about flexibility in the interpretation of those rules and principles which allow
the upholding of the award even when some facts meet the description of one
of the grounds for refusing recognition (or for setting aside). There are two main
principles which have served as instruments ensuring the survival of the award
in spite of a procedural imperfection. These principles were relied upon in both
the Hong Kong case and in the U.S. case referred to above. One of these is estoppel
or waiver133 which may neutralize a procedural error on the grounds that the
proceedings including this error were tacitly accepted. The other instrument is
the consideration of relevance (or lack of relevance), i.e. an investigation whether
as a result of the procedural impropriety “the defendant’s rights were violated
in any material way” – as Judge Kaplan says; or, in other words, whether the
procedural violation “worked substantial prejudice to the complaining party”
as it was stated in the Hammermills case.
B. The Issue of Relevance
B.1. Should Relevance be Relevant?

The question whether the relevance of the procedural violation should or should
not be heeded is a quite sensitive one. In his commentaries on the New York
Convention, van den Berg cites in this context a 1975 decision of the Hamburg
Court of Appeal.134 Let us take a closer look at this case.135 Recognition of a
U.S. award was sought in Germany. The case was arbitrated under the rules of
the American Arbitration Association, and the sole arbitrator decided on the
133
Waiver and estoppel are not synonyms, but they are instruments based on the same logic.
I am opting to focus primarily on waiver, because this notion is much more commonly
used in arbitration acts – and it is also used in the UNCITRAL Model Law (Article 4).
The distinction between the two will, nevertheless, be dealt with in section C.2 of this
chapter.
134
A.J. van den Berg, The New York Arbitration Convention of 1958 (Kluwer, 1981) 301.
135
Oberlandesgericht Hamburg [OLG] [Hamburg Federal Court of Appeals], 3 April, 1975,
29 Monatsschrift für deutsches Recht 11 (1975) 940 (F.R.G.); Oberlandesgericht Hamburg
3 April 1975, II Y.B. Com. Arb. (1977) 241 (English text of Firm P (U.S.A.) v. Firm F
(F.R.G.)).
398
grounds of documents only. There was no oral hearing. It has to be mentioned

that the New York Convention was not applied in the case, because the United
States had ratified the Convention in 1970 – after the contract between the
parties was concluded; the German courts relied instead on the 1954 German-
American Treaty of Friendship, Commerce and Navigation. Nevertheless, the
issue raised – and the analysis given by the courts – could have been the same
under the New York Convention as well. The main argument against recognition
was the following. The U.S. firm submitted a letter to Arbitrator “M” who did not
forward it to the German party, and thus the German respondent was unable
to take a position regarding this piece of evidence. Thus, there was unilateral
communication. The arbitrators had some communication with one of the
parties without giving an opportunity to the other party to state his position.
Recognition was granted by the Court of First Instance (Landesgericht), but the
Court of Appeals (Oberlandesgericht) refused recognition, holding that the arbitra-
tor did not observe due process, and that this amounted to a violation of public
policy. The Court of Appeals made a distinction between possible infringements
of German mandatory norms stating that not all such infringements amount
to a violation of public policy. It stated that only in extreme cases where a party
had not been able to present his case would German public policy be violated,
and it concluded that the present case was such a case. (“Ein solcher extremer
Fall liegt hier vor”.)
What makes this case interesting for the purpose of our considerations is the
circumstance that the Court of Appeals raised the question whether a violation of
due process could or could not be cured by lack of relevance of the infringement.
In other words, the question was raised whether the court should or should not
consider whether the violation had an impact on the outcome of the case. The
German court decided that a violation of due process cannot not be remedied
by the fact “that the arbitral decision would not have been otherwise if there
had been a fair trial” (i.e. if the German party had had a chance to respond, and
the arbitrators had examined and considered the document submitted by the
German party). It is important to add, however, that the reasoning adopted by
the Hamburg Court of Appeals does not completely exclude consideration of
relevance. The Court did say that a violation of due process cannot be remedied
by the fact that a fair trial would not have yielded a different decision. It added,
however, that a violation is present “as soon as it cannot be excluded that a hear-
ing (of the German firm F) could have led to a more favourable decision (for
the German firm F)”136 (emphasis added). Thus a rather subtle distinction was
made between cases in which the absence of a violation would not, and cases in
which such absence could not have yielded a different outcome. Taking note of
136
Oberlandesgericht Hamburg 3 April 1975, II Y.B. Com. Arb. (1977) 241, 241 (English
text of Firm P (U.S.A.) v. Firm F (F.R.G.)).
399
this distinction, van den Berg suggests that “[i]f it were beyond doubt that the
arbitral decision would have been the same, a serious violation might not lead
to a refusal of enforcement of the award”.137
The question whether the relevance (or impact) of the infringement should
or should not be considered takes us again to the question as to what is actually
pro-arbitration. One could argue that considering relevance is pro-arbitration,
because this would allow recognition even in the presence of a procedural
deficiency which amounts to a ground for denying recognition (or for setting
aside) if it can be demonstrated that this deficiency had no relevance, had no
impact on the outcome on the merits. But this is only one side of the coin. In the
Hamburg case a more thorough analysis could have possibly shown that the
procedural infringement did not actually result in an unjust or improper decision.
A deeper scrutiny of the award could thus have saved the award, by showing
that the mistake was not consequential. But there are also drawbacks to this
approach. One of the important achievements of modern arbitration regimes
has been to limit court scrutiny of an award essentially to form and procedure,
without allowing courts to second guess the arbitrators’ decision on the merits
(unless public policy were at stake). A green light for court scrutiny of the merits
in order to assess the weight of a procedural error might save some awards, but
at the expense of the principle of restrained court examination of awards. The
principle which might be impaired by a thorough scrutiny of relevance has
been expressed many times. I would like to cite as an example the point made
by a U.S. Federal Court:
“The whole point of arbitration is that the merits of the dispute will not be
reviewed in the courts, wherever they be located. Indeed, this principle is
so deeply imbedded in American, and specifically, federal jurisprudence,
that no further elaboration of the case law is necessary. That this was
the animating principle of the Convention, that the Courts should
review arbitrations for procedural regularity but resist inquiry into the
substantive merits of awards, is clear from the notes on this subject by
the Secretary-General of the United Nations”.138
The Hamburg decision appears to heed this principle, but it allows for some
flexibility by saying that the award may be upheld in spite of a procedural
deficiency if it can be ruled out that the absence of the shortcoming would have
led to a different outcome. In other words, the deficiency may be disregarded if
it is obvious that it could not have been relevant. When is this obvious? When
can such a conclusion be reached without an actual scrutiny of the merits? It
Van den Berg, op. cit. (The New York Convention…) 301-302.
137
International Standard Elec. Corp. v. Bridas Sociedad Anonima Petrolera, Indus. Y Comercial,
138
745 F. Supp. 172, 178 (S.D.N.Y. 1990).
400
is not easy to identify such cases. I would like to suggest a hypo which is close
to the facts of an actual case in which I acted as a co-arbitrator. Suppose the
arbitrators inform both parties that the Respondent is accorded 30 days to
submit its statement of defense. The Respondent writes to the arbitrators asking
for an extension. The request is granted, and this invokes a quite vocal protest
from the Claimant. Before the extended time-limit expires, the attorney for the
Respondent submits to the arbitrators another request for extension explain-
ing that he has to attend the wedding party of a close friend. In order to avoid
another outburst, the arbitrators do not inform the Claimant of this request,
they just write back to the Respondent stating that the request is denied. What
we have here is unilateral communication (just as in the Hamburg case); the
principle of equal treatment is not strictly respected. What distinguishes this
hypothetical example from the Hamburg case is that in the Hamburg case, the
unequal treatment could have had an impact on the merits. Only an analysis of
the decision – including the merits – could reveal whether the failure to submit
the letter to the German party actually did or did not have such an effect. In the
hypothetical case it is difficult to imagine how the consequences of the one-sided
communication could have had an impact on the merits.
Let me try to follow this issue through some more examples. The recurring
question is whether the actual (or conceivable) weight and impact of an irregular-
ity should, or should not be considered. This question arises in various settings
crafted by various possible grounds for challenge of the award. These settings also
matter. Let us first consider the issue in the setting of recognition and enforcement
proceedings. In a 2006 decision, the Italian Supreme Court considered an appeal
regarding recognition of an award of the Court of Arbitration at the Hungarian
Chamber of Commerce and Industry.139 This time, opposition to recognition
was couched in terms of Article V(1)(b) of the New York Convention, and it was
alleged that the Italian respondent was “otherwise unable to present his case”.
The specific issue which reached the Italian Supreme Court was the following.
Article 39(1) of the Rules of the Court of Arbitration at the Hungarian Chamber
of Commerce and Industry provides that “If the arbitral tribunal is satisfied that
the circumstances of the dispute have been sufficiently clarified, it shall declare
the taking of evidence completed. After having heard the closing arguments of
the parties, the arbitral tribunal shall close the hearing and render its decision”.
In this case, the Hungarian tribunal issued a procedural order whereby it notified
the parties of the comments of the experts, and reserved its right either to call a
new hearing, or to issue the award. The tribunal opted later to issue an award.
139
Cass., sez. un., 30 May 2006, n. 12973 (court decision: Profil (Hungary) v. Technofrigo
(Italy)); Da Berti Jacchia Franchini Forlani Studio Legale, Inability to Present a Case: Grounds
for Contesting a foreign Award?, International Law Office, March 15, 2007, <http://www.
internationallawoffice.com/Newsletters> (newsletter) (summarizing court decision).
401
The Italian Supreme Court established that Article 39 of the Hungarian Rules
was not properly followed, since there was no procedural order stating explicitly
that the taking of evidence was completed, and the parties were not invited to
present their closing arguments. At the same time, the Italian Supreme Court
also established that Technofrigo had ample opportunity to present its case during
the arbitral proceedings, and it also had (and used) opportunities to present its
case regarding the reports of the experts. It concluded that the procedural defect
did not amount to a violation of the right of defense. Once again, the decision
was guided by the (ir)relevance of the procedural imperfection. Let me mention
here that the setting offered by Article V(1)(b) of the New York Convention is
more conducive to considering relevance than, for example, the setting crafted by
Article V(1)(d). Article V(1)(d) focuses on the arbitral procedure proper, and allows
refusal of recognition if the procedure was not in accordance with the agreement
of the parties (or with the lex arbitri), while Article V(1)(b) puts into focus the
result of a procedural imperfection (inability to present one’s case), rather than
the procedural imperfection itself. In the case decided by the Italian Supreme
Court it was relatively easy to reject the challenge, because the failure to follow
precisely Article 39 of the Hungarian Rules did not result in inability to present
one’s case. An argument under Article V(1)(d) stating that the procedure was
not in accordance with the agreement of the parties (because this agreement
encompasses the Hungarian Rules including its Article 39) would have represented
a more difficult challenge. In this hypothetical case, there would have been no
direct justification for considering relevance, or in other words, there would
have been no direct prompting to focus on the impact of the procedural error (to
investigate whether it thwarted the party in presenting his case). Nevertheless,
relevance could have been taken into account in this hypothetical case as well,
with reliance on the language of Article V which states that a court may refuse
recognition if it establishes one of the deficiencies enumerated in Article V. Since
refusal of recognition is not mandated, the weight, impact and relevance of the
transgression could be taken into account in deciding whether the court will or
will not actually refuse recognition.
The same problem-pattern has also emerged in setting aside cases. Here –
outside the domain of the New York Convention – specific national norms are
sometimes offering more explicit guidance. This is the case, for example, under
the 1996 English Arbitration Act which provides in Section 68 that “serious
irregularity” represents a ground for setting aside only if it yields “substantial
injustice”. Without such a specific point of reliance, the situation in annulment
cases is the same as that in recognition cases considered in the setting of the New
York Convention. General principles may guide the court towards considering
the weight and relevance of some procedural imperfections. Let us take as an
example a case decided by the Swiss Supreme Court on November 10, 2005
between the Republic of Lebanon on the one side, and the French Telecom
402
company (FT) and its local subsidiary (FTML) on the other.140 The dispute was
submitted to an arbitral tribunal organized under ICC Rules, and the award was
challenged in Switzerland on several grounds. The ground which is important
for our considerations pertains to a correction of the award. The copy of the
correction which was sent to the Republic of Lebanon was signed by one of the
two co-arbitrators, and was not signed by the chairman. (The other co-arbitrator
did not sign it either, because he dissented). It was not alleged, let alone dem-
onstrated that the chairman did not agree with the correction. The challenge
was based on the simple fact that the chairman did not sign the correction. It
is interesting to observe in what terms this challenge was couched. Lebanon
relied on Article 190(2)(a) of the 1987 Swiss Private International Law Act,
which states that the award may be challenged when “… the arbitral tribunal
was constituted irregularly”. The Swiss Supreme Court stated that an absence of
signature may only be relevant if it actually indicates that the arbitrator did not
participate in the decision.141 It was held that under the given circumstances the
absence of the signature only amounts to an “inadvertance formelle”, and does
not amount to a basis for setting aside. It is clear that in reaching its decision,
the Swiss Supreme Court was guided by the weight and impact, the (ir)relevance
of the given procedural error.
B.2. Translation and the Issue of Relevance

Mistranslation and lack of translation are deficiencies which may very well justify
the challenge of an arbitral award. At the same time, these are deficiencies which
often put into focus the question of relevance. Suppose one of the key issues in a
case is whether a contract was or was not signed. The Claimant says that it was,
but the signed original is in the possession of the Respondent. The Respondent
says it was never signed. A witness is called. He does not speak the language of
the proceedings, so he makes his statement with the assistance of an interpreter.
The translated statement reads. “I was there when the contract was signed”.
But what the witness actually said was “I was there when the contract was
supposed to be signed”. So we have a mistranslation. This may become relevant
in post-award proceedings, and the most likely setting for a challenge is violation
of due process. One could argue that the losing party was thwarted (by this
140
Tribunal fédéral, Ière Cour civile, arrêt de 10 novembre 2005 (4P. 154/2005), 24 ASA
Bulletin, No. 1 (2006) 106 (reporting court decision: République du Liban v. Y. et Z.)
141
Tribunal fédéral, Ière Cour civile, arrêt de 10 novembre 2005 (4P. 154/2005), 24 ASA
Bulletin, No. 1 (2006) 106, 110 (holding that “… l’absence de la signature d’un arbitre n’a
d’incidence que dans la mesure où elle constitue un indice propre à démontrer que cet arbitre n’a
pas participé à la décision”).
403
mistranslation) in presenting its case.142 Let us suppose that the award goes in
favor of the Claimant, and it is based on the finding that the contract was signed.
One could conceivably argue that the arbitrators would have reached the same
conclusion even without the given mistranslation, and hence the procedural
error was irrelevant. Should the court heed such an argument? Probably not. In
order to establish (if it can be established at all) whether the arbitrators would
have reached the same conclusion even without the mistranslation, one would
obviously have to enter into an analysis of the case, and to second guess what
could have and should have guided the arbitrators. This would be clearly contrary
to the principle of limited court control of arbitral awards. But suppose that
award goes in favor of the Claimant, but on a ground which bypasses the issue
whether the contract was or was not signed. The arbitrators may conclude that
whether it was signed or not, the contract was concluded by conduct. In this case
it is quite clear – without any serious scrutiny of the merits – that the arbitrators
would have reached the same conclusion even without the mistranslation. Or
let us take an even more convincing example. Suppose that the award goes in
favor of the Respondent, because the arbitrators find that the witness evidence
is not sufficient – not even in its distorted form – to establish that the contract
was indeed signed. In this setting, a correct translation would have obviously
only strengthened (rather than altered) the conclusion reached by the arbitra-
tors – and the mistranslation had obviously no relevance.
The question is, again, in what settings could an imperfect translation (or
absence of translation) appear as a possible ground for challenging the award.
Finding a fitting shelter for language-related shortcomings (or alleged shortcom-
ings) may not be easy. There are basically three settings in which the language
used (or not used) during the arbitral proceedings may become – and has in
practice become – a cause for denial of recognition and enforcement under the
New York Convention. The first is offered by subsection 1(b) of Article V, which
states that recognition may be denied if the party against whom the award is
invoked “was not given proper notice of the appointment of the arbitrator or
of the arbitration proceedings or was otherwise unable to present his case”.
The second possible setting is offered by subsection 1(d) of Article V, which
provides that recognition may be refused if “[t]he arbitral procedure was not in
accordance with the agreement of the parties, or, failing such agreement, was
not in accordance with the law of the country where the arbitration took place”.
At this point let me mention that just as with regard to challenges in general,
Article V(1)(d) makes it more difficult to consider relevance when language-based
challenges are at issue. If the arbitration agreement states that the language
142
Another conceivable argument would be that the arbitral procedure was not in accordance
with the agreement of the parties (or with the lex arbitri), but it would be more difficult
to fit the given hypo into the setting of this ground for challenge.
404
of arbitration is, say, Spanish, and a party argument or witness statement is

made in Cantonese without translation, we have a violation of Article V(1)(d).
But what if we have incomplete translation? There are imperfections which are
obviously inconsequential. If a translator omits the introductory phrase of a
witness who first says that he wishes good morning to all participants, this can
hardly be a ground for setting aside or for refusal of recognition. Some deficien-
cies of translation may be identified as irrelevant without any scrutiny of the
merits, and should be disregarded even within the setting of Article V(1)(d). A
further possible setting is offered by Article V(2)(b). One may possibly argue
that some impropriety concerning language amounts to a violation of public
policy within the meaning of Article V(2)(b) of the New York Convention. It is
difficult, however, to find such cases, and it is even more difficult to find cases in
which a language related argument could not have been couched in terms of
Article V(1)(b) or Article V(1)(d), but only in terms of V(2)(b). As far as setting
aside proceedings are concerned, the grounds defined in Article V(1)(b), V(1)(d),
and V(2)(b) are adopted in most national statutes covering setting aside. Quite
often, the wording is exactly the same, or essentially the same.
In addition to these possible settings which, of course, apply outside the realm
of language and translation as well, Article IV(2) of the New York Convention
also provides a specific shelter for language-based challenges. Article IV sets
formal conditions for the submission of an award for recognition, and specifies
that “[i]f the said award or agreement is not made in an official language of the
country in which the award is relied upon, the party applying for recognition
and enforcement of the award shall produce a translation of these documents
into such language”.
At this point I would like to devote attention to Article IV of the New York
Convention as a setting, since some of the requirements posed by Article IV are
only pertinent to language and translation. It is clear that under the New York
Convention courts do not have to consider an award which was not translated
into the official language of the court. The main purpose – although not the
only purpose143 – of this requirement is understanding. The judge has to see the
award (and the arbitration agreement) in a language he/she understands. But
what if the judge does understand the language of the original. Is translation
still relevant? Can lack of translation be disregarded as irrelevant under the
circumstances? There are, indeed, some cases in which it was held that translation
need not be provided if the judge understands the original – and these cases may
be classified among those in which considerations of relevance prevailed over
formal requirements. For example, in a case decided by a Norwegian court in
Vardǿ the party seeking recognition and enforcement did not submit a Norwegian
143
See Tibor Várady, Language and Translation in International Commercial Arbitration (T.M.C.
Asser Publ., 2006) 82-85 (commenting on possible purposes of translation).
405
translation of the ICC award rendered in English.144 The Norwegian party who
opposed recognition relied on this omission and asked the court to reject the
claim for recognition. The Norwegian court opted to follow a different logic. It
held that recognition is possible on grounds of the English text of the award,
and even pointed out some advantages of reliance on the original award. It was
stated in the Norwegian decision that:
“[the court] does not deem that the New York Convention sets an absolute
requirement for a translation. The original language of the award is
English, and if the court has sufficient command of this language to
understand the relevant wording with regard to the award’s conclusions,
the cost of translation seems unreasonably high compared to what a
translation may achieve”.145
In a similar vein, a Dutch court held that the arbitration agreement does not have
to be submitted in a Dutch translation as long as the agreement is written “in an
understandable language” (understandable to the court). Following this logic, the
Zutphen Court of First Instance (Arrondissementsrechtbank) recognized a Chinese
(CIETAC) award against a Dutch party, in spite of the fact that the arbitration
agreement was not submitted in a Dutch translation.146 Another Dutch court,
the District Court of Amsterdam, was even more explicit in deciding on the
recognition and enforcement of an arbitral award rendered between Southern
Pacific Properties (Middle East) Ltd. and the Arab Republic of Egypt.147 In its
1984 decision the District Court of Amsterdam stated:
“Petitioner has submitted duly certified copies of the arbitral award and the
arbitration agreement. The afore-mentioned award and agreement are
drawn up in the English language which language we master sufficiently
to have taken full cognizance of the contents of these documents. We
therefore consider that the provisions of Art. IV, para. 2, of the applicable
144
Norway 2. Enforcement Court, Vardǿ, 10 July 2002, XXVIII Y.B. Com. Arb. (2003) 821
(reporting court decision: Pulsarr Industrial Research B.V. (Netherlands) v. Nils H. Nilsen
A.S. (Norway)).
145
Norway 2. Enforcement Court, Vardǿ, 10 July 2002, XXVIII Y.B. Com. Arb. (2003) 821,
824 (reporting court decision: Pulsarr Industrial Research B.V. (Netherlands) v. Nils H. Nilsen
A.S. (Norway)).
146
Court of First Instance [Arrondissementsrechtbank], Zutphen, 11 November 1998,
XXIV Y.B. Com. Arb. (1999) 724, 725 (reporting court decision: China Packaging Design
Corporation v. SCA Recycling Reukema Trading B.V).
147
President of the District Court of Amsterdam, July 12 1984, X Y.B. Com. Arb. (1985) 487
(reporting court decision: SPP (Middle East) Ltd. v. Arab Republic of Egypt).
406
Convention on the Recognition and Enforcement of Foreign Arbitral

Awards, done at New York, June 10, 1958 … are complied with”.148
Mention has to be made of the fact that in the context of Article IV there is no
danger that allowing the court to consider relevance would yield a more intrusive
court scrutiny of the merits of the case. At the same time, it may be debatable
how much flexibility is allowed by the wording of Article IV. Unlike Article V of
the New York Convention, which states that a court may refuse recognition if
one of the grounds set by this Article are proven, Article IV says that the party
applying for recognition shall produce appropriate translations. In this connection
a further question also arises. Supposing that the duty to provide translation
may be disregarded when the court does not need translation, the question
arises whether this may be done even if the party opposing recognition seeks
translation. Is the position taken by the opposing party relevant? Does Article
IV create a right of the party opposing recognition? It is difficult to recognize a
legitimate interest of any of the parties to insist on translation, since the original
of the award is drafted in the language in which the parties conducted their
arbitration proceedings – and this is also the language agreed upon (directly or
indirectly) between the parties. Nevertheless, the “shall” language used in Article
IV mandates caution with regard to flexible interpretation, particularly when
such an interpretation is opposed by one of the parties, and hence flexibility is
not supported by waiver as an additional argument.
C. The Question of Waiver
C.1. The Principle

According to Article 4 of the UNCITRAL Model Law:
“A party who knows that any provision of this Law from which the parties
may derogate or any requirement under the arbitration agreement has
not been complied with and yet proceeds with the arbitration without
stating his objection to such non-compliance without undue delay or,
if a time-limit is provided therefor, within such period of time, shall be
deemed to have waived his right to object”.
This rule offers, quite clearly, an added chance for the survival of the award.
It is also in line with principles of fairness. Objections should be made while
corrections are still possible, and procedural errors should not be kept as
hidden weapons, to be dragged in and brandished if the award turns out to be
unfavorable. Giving room to the institution of waiver has become a mainstream
148
President of the District Court of Amsterdam, July 12 1984, X Y.B. Com. Arb. (1985)
487, 488 (reporting court decision: SPP (Middle East) Ltd. v. Arab Republic of Egypt).
407
attitude in contemporary international commercial arbitration, and Article 4 of

the Model Law has found wide acceptance in legislation.149 Similar provisions
are also contained in arbitration rules.150 The New York Convention does not
contain explicitly any similar provision, but it allows interpretation which
would give room for waiver. In the opinion of Van den Berg, a foothold for such
an interpretation may be found in the “may” language of Article V, and this
“[p]ermissive language can be taken as a basis for those cases where a party
asserts a ground for refusal contrary to good faith”.151 In a fair number of cases
awards were indeed recognized relying on the fact that the objection was not
raised in due time. Let me cite as an example an American decision in which
recognition of an ICC award was sought before a U.S. court under the New York
Convention.152 Recognition was granted with reliance on the concept of waiver.
In most simple terms, the bone of contention was an expert report. Bridas (the
party who later sought enforcement) opposed the appointment of the expert in
quite strong terms, but ISEC (the party who later opposed enforcement) did not.
During recognition proceedings, it was ISEC who raised objections on the grounds
of alleged improprieties in the appointment of the expert. The court held that
ISEC cannot do this, and offered a quite spirited explanation. It held that:
“ISEC cannot now seek the refuge of its adversary’s arguments when,
during the heat of that engagement, it stood utterly silent on the merits
of the matter, lent no voice or encouragement, and by tactics and tone
sought to thereby ingratiate itself with the panel …. Such cleverness is
the bane of judges the world over. This is what led Hamlet as he reflected
on the skull of Yorick to mock the profession so cruelly. We understand
149
Let me just cite examples from enactments in this new century. Provisions identical or
comparable to that of Article 4 of the Model Law have been adopted in Article 579 of the
2006 version of the Austrian Arbitration Act (Section IV of the Code of Civil Procedure),
in Article 5 of the Bulgarian Arbitration Act as amended in 2001, in Article 5 of the 2001
Croatian Arbitration Act, in Article 27 of the 2003 Japan Arbitration Act, in Article 4 of
the 2006 Act on International Commercial Arbitration of the Republic of Macedonia,
in Articled 43 of the 2000 Arbitration Act of the Islamic Republic of Mauritania, in
paragraph 1(4) of the 2004 Norwegian Arbitration Act, in Article 1193 of the 2005
version of the Polish Arbitration Act, in Article 43 of the 2006 Serbian Arbitration Act,
in Article 6 of the 2003 Spanish Arbitration Act, and in Section 8 of the 2002 Thailand
Arbitration Act.
150
E.g. Article 25 of the 2003 American Arbitration Association International Rules, Article
8 of the 2005 CIETAC Rules, Article 33 of the 1998 ICC Rules of Arbitration, Articles 23.2
and 32.1 of the 1998 LCIA Rules, Article 30 of the 2004 Swiss Rules of International
Arbitration, and Article 58 of the 2002 WIPO Rules.
151
Van den Berg, supra note 148, at 185.
152
745 F. Supp. 172, (S.D.N.Y. 1990).
408
our obligation not to allow a party to impeach on later review a decision

of a trial judge, or as here, an arbitral panel, where that party had full
opportunity to contest it, and full notice of the vigorous argument of
an adversary contesting it, and chose instead not to associate himself
with the argument, and not to contest the matter…. Accordingly, we hold
that no objection to the appointment procedure used in the selection
and consultation of the expert on New York law was made, that any
objections ISEC in fact had were waived, and ISEC will not now be heard
to complain about it”.153
C.2. Waiver and Related Concepts

In addition to waiver, which has become a broadly accepted instrument, other
similar instruments and concepts have has also been relied upon with some
frequency in international commercial arbitration. Among these concepts are
“estoppel”, “preclusion”, “foreclusion”, or “acquiescence”. The origin of these
concepts is outside the realm of international commercial arbitration, and this
is why details and controversies have also been shaped in a broader arena –
particularly in the arena of public international law. It has been questioned how
important it is (and whether it is important at all) to make distinction between
these notions. In his separate opinion in the Temple of Preah Vihear case, speaking
of the principle (or doctrine) referred to by the terms of “estoppel”, “preclusion”,
“foreclusion”, or “acquiescence”, Judge Alfaro stated:
“Whatever term or terms be employed to designate this principle such as
it has been applied in the international sphere, its substance is always
the same: inconsistency between claims or allegations put forward by a
State, and its previous conduct in connection therewith, is not admissible
(allegans contraria non audiendus est)”.154
The Travaux préparatoires of the UNCITRAL Model Law also demonstrate that
the drafters of Article 4 on waiver endeavored to give expression to general
principles. It is stated in the Seventh Secretariat Note that
“Where a procedural requirement, whether laid down in the model law
or in the arbitration agreement, is not complied with, any party has a
right to object with a view of getting the procedural defect cured. Article
153
745 F. Supp. 172, 180 (S.D.N.Y. 1990).
154
Temple of Preah Vihear (Cambodia v. Thailand), 1962 I.C.J. 39 (June 15).
409
4 implies a waiver of this right under certain conditions based on general

principles such as ‘estoppel’ or ‘venire contra factum proprium’”.155
It is, nevertheless, important to mention that the various conceptualizations

of the essentially same idea did yield some technical differences which may
influence decisions. I shall only say a few words about the concept of estoppel,
because it has an important place in common law – and because in the sphere
of arbitration it has also gained recognition in countries outside the common
law system. In France, for example, in the case Golshani v. The Islamic Republic
of Iran, estoppel was clearly accepted by the Supreme Court (Cour de cassation)
as a concept which is relevant in international commercial arbitration.156
Estoppel is certainly quite close to waiver; the purpose of the two instruments is
essentially the same, but the conditions to their application are not exactly the
same. According to a classic definition of estoppel adopted by the International
Court of Justice its essential elements are “[a] statement or representation made
by one party to another and reliance upon it by that other party to his detriment
or to the advantage of the party making it”.157 Thus, estoppel implies a certain
conduct of both parties – unlike the concept of waiver which focuses on the
conduct of one party. In the Golshani case, the French Supreme Court followed
the very same logic as that espoused by the International Court of Justice. In
this case, Golshani (an American citizen of Iranian origin) started arbitration
against Iran seeking damages in the amount of 1.7 billion U.S. dollars on the
grounds of alleged expropriation. The Iran-US Claims Tribunal denied the claim,
and in its award obliged Golshani to pay to the Iranian Government $50 000 as
compensation for costs and expenses. The award was granted “exequatur” in
France, but Golshani submitted a challenge on the basis of Article 1501 of the
French New Code of Civil Procedure, alleging that there was no valid arbitration
agreement justifying the jurisdiction of the arbitral tribunal. The Cour de cassation
found that Golshani was estopped from raising this objection and established that
the circumstances of the case met all requirements of estoppel. Golshani was
the party who seized the arbitral tribunal on the basis of the (now contested)
arbitration agreement. Iran relied on this to its own detriment (the detriment
being the cost and the risk of the arbitration proceedings in which Golshani
155
Seventh Secretariat Note, Analytical Commentary on Draft Text A/CN.9/264 (25 March
1985) – in Holtzmann-Neuhaus, A Guide to the UNCITRAL Model Law on International
Commercial Arbitration (Kluwer, 1989) pp. 208-209.
156
Cour de cassation (1re Ch. Civ.), 6 juilliet 2005, 4 Revue de l’arbitrage (2005) 993 (reporting
court decision Golshani v. Gouvernement de la République Islamique d’Iran).
157
Land, Island and Maritime Frontier Dispute (El Salvador v. Honduras), 1990 I.C.J. (Sept.
13).
410
sought 1.7 billion dollars). Golshani was thus estopped from returning to the
issue of jurisdiction after he initiated and lost the case.
The question may be raised whether the instrument of estoppel is neces-
sary in addition to waiver. In his comments on the Golshani case in the Revue
de l’arbitrage, Pinsolle gives a cautious answer. He states that “[l]es mêmes
circonstances peuvent de fait être envisagées à la fois sous l’angle de l’estoppel et sous
celui de la renonciation”.158 Yet he concludes that estoppel cannot and should
not replace the existing solutions under French law, it should rather be added
to the palette of procedural instruments which tend to protect legitimate trust
(confiance légitime).159 Keeping estoppel on the “palette of procedural instru-
ments” is probably more justified in legal systems which have not adopted an
explicit norm on waiver.
C.3. Issues Connected with Waiver and Related Concepts
C.3.1. No objection, or imperfect objection

Turning attention towards waiver, let me first say that in a quite significant
number of cases, awards tainted by some procedural irregularity survived court
scrutiny based on the fact that the party challenging the award had waived its
right to rely on a given procedural defect. I would like to illustrate this with a
few examples, which also yield some questions. Let me first take a rather simple
case. An arbitral award rendered by the Arbitration Institute of the Stockholm
Chamber of Commerce was challenged in Russia.160 One of the arguments
raised was that the proceedings took place in Stockholm instead of Moscow as
required by the arbitration agreement. The Russian court established, however,
that the Respondent had participated in the Stockholm proceedings, and that
there was no indication that the respondent objected to the change of venue.
The challenge failed. It is important to note that the 1993 Russian Arbitration
Act accepted the institution of waiver by adopting verbatim Article 4 of the
Model Law.161 In this case, lack of objection and conduct (participation in the
Stockholm proceedings) amounted to waiver.
158
Ph. Pinsolle, “Note – Cour de cassation (1re Ch. civ.), 6 July 2005”, 4 Revue de l’arbitrage
(2005) 994, 1002.
159
Id. at 1010.
160
William R. Spiegelberger, “The Enforcement of Foreign Arbitral Awards in Russia: An
Analysis of Relevant Treaties, Laws, and Cases”, 16 Am. Rev. Int’l Arb. (2005) 261, 293
(citing case No. 5G01-142, Supreme Court – RF, November 9, 2001).
161
It is Article 4 in the Russian Act as well.
411
In a somewhat similar case which reached the French Cour de cassation162 an

ICC award was rendered after the expiry of the time limit of six months set by
Article 24(1) of the ICC Rules. It is well known, of course that Article 24(2) of
the Rules allows the Court of Arbitration to extend this time limit – and this is
being done with quite some frequency. In this case, the Court did extend the time
limit, but this was only notified to the arbitrators, not to the parties. This was
the basis of the argument that there was no valid extension, and the award was
rendered after the expiry of the time-limit set by the ICC Rules. AIC-El Amiouny
(the loosing party in the arbitration case) moved for setting aside on this ground.
This motion was rejected by the Paris Court of Appeal on March 6, 2003, and
the decision of the Court of Appeal was confirmed by the Cour de cassation. The
French courts held that by failing to raise objections, by participating in the
proceedings until the award was rendered, and by paying fees, AIC-El Amiouny
waived its right to rely on the given procedural error.
In the Russian and French cases mentioned above there was no objection
raised at all with regard to the procedural irregularity. The situation is more
complicated if there is some protest and the question is whether the given protest
is sufficiently unequivocal, or whether it is timely. There are also situations in
which the party who later raises the challenge initially takes an ambiguous
position (possibly on purpose) with regard to the procedural imperfection. In the
Egyptian case mentioned in the beginning of this chapter163 the Cairo Court of
Appeal rejected a challenge on the grounds of a strict reading of the Egyptian
Arbitration Act. The agreement of the parties stated that disputes should be
first confided to a consultant, and arbitration would only follow as the next
step if one of the parties were to refuse the decision of the “consultant”. One of
the parties initiated arbitration without prior attempt with the consultant. The
other party objected, but the arbitrators proceeded in spite of this objection. In
the opinion of the Cairo Court of Appeal, this irregularity had no shelter under
any of the provisions of the Egyptian Arbitration Act pertaining to setting aside,
and the motion for annulment was denied. At this point, I would like to refer
to an additional argument of the Cairo Court, which was not mentioned in the
introductory pages of this chapter. It was stated in the judgment that the Appellant
(the party seeking annulment) had also waived its right to object, because it did
not present its opposition to arbitration in due time, in line with Article 8 of the
Egyptian Act (which adopts a wording very close to that of Article 4 of the Model
Law). The judgment stresses that the plaintiff “persisted while being aware of
Cour de cassation (1re Ch. civ.), 6 juillet 2005, 2 Revue de l’arbitrage (2006) 429 (report-
162
ing court decision: Société AIC-El Amiouny international contracting & trading v. Société
Skanska).
163
(reporting court decision: Société T3A Industrial v. Société des Entrepreneurs arabes).
412
the infraction” (“[a] persévéré malgré sa connaissance de l’infraction…”).164 The facts

stated in the excerpts published in the Revue de l’arbitrage do not offer all details
which may be relevant for the assessment of this additional argument. Article
8 of the Egyptian Act – just as Article 4 of the Model Law, and corresponding
provisions in many other legislative acts – do not only require objection, but
also timely objection. In this case, the excerpts show that the plaintiff objected
to arbitration on March 11, 2004, pointing out that it was taking place contrary
to the agreement of the parties, since no conciliation guided by the “consultant”
was attempted. The award was rendered on August 5, 2004. The excerpts do
not show when the arbitration proceedings started. The waiver argument points
out that the objection was raised late, and that the objecting party “persevered”
in spite of its knowledge of the infraction. It would be easier to qualify these
facts as waiver on the assumption that the proceedings started well before
March 11, 2004, and the objections were only presented at a late stage of the
arbitral proceeding. It would be more difficult to accept waiver on the basis of
“perseverance” if this meant continued participation after a timely objection
was made. The waiver argument is closely linked to the principle of good faith.
One can indeed expect a party in good faith to raise procedural objections in
due time after he/she becomes aware of the infraction. But good faith does not
imply a duty to put all eggs in one basket, and to desist from arguments on the
merits once a procedural objection has been made.
C.3.2. Knowledge, or presumed knowledge of facts on which an objection

could have been based
The concept of waiver is based on the assumption that a party was aware of
some procedural imperfection, but failed to raise it in due time. The question
arises whether the precondition is actual awareness. In other words, should
one be deemed to have waived his/her rights to object only if one was actually
aware, or also if one could have and should have been aware of the procedural
imperfection. The wording of Article 4 of the Model Law could suggest a more
strict reading, since it speaks of a party who knows that some provision or some
requirement has not been complied with. One could also argue, however, that
the basic underlying idea of waiver and related concepts is good faith, and on
this ground one could possibly equate what was known with what should have
been known to a diligent party. A recent (August 2006) decision of the Swiss
Federal Tribunal adopted a quite extended – maybe even too extended – concept
of relevant awareness.165 A party sought setting aside of a decision of the Geneva
164
Cour d’appel de Caire (Ch. 91, com.), 27 juillet 2005, 2 Revue de l’arbitrage (2006) 475,
476 (reporting court decision: Société T3A Industrial v. Société des Entrepreneurs arabes).
165
Tribunal fédéral, Ière Cour civile, arrêt du 4 août 2006 (4P.105/2006), 25 ASA Bulletin
(2007) 105 (reporting court decision: X v. I. Y. et al.).
413
Court of Arbitration for Sport (CAS) relying inter alia on the circumstance that
one of the arbitrators (Carrard) and counsel of one of the parties (Bernasconi)
sat together as co-arbitrators in another CAS case. The Federal Tribunal held that
this circumstance was not sufficient to challenge the impartiality of arbitrator
Carrard, and added that in any case, the party cannot rely on this circumstance
because the objection was not raised during the arbitration proceedings. The
Federal Tribunal established that although it was not proven that the Appellant
knew about this circumstance before the award was rendered on March 9,
2006, it was clear that the CAS decision in which arbitrator Carrard and counsel
Bernasconi were co-arbitrators was published on the website of the CAS on
December 5, 2005. The Federal Tribunal concluded that with proper diligence,
the Appellant could have known this, and could have relied on this earlier.
C.3.3. Procedural imperfection as an opportunity

I would like to turn now towards possible tactics which perceive a procedural
imperfection as an opportunity. It is known that inconsistent behavior might lead
to sanctions. Options cannot be kept endlessly open; they have to be exercised. If
the arbitration agreement is on shaky ground, a party may challenge jurisdiction,
and might also opt not to challenge it in the hope of prevailing on the merits; but
it cannot arbitrate without challenging jurisdiction, and then later challenge
the award on grounds of lack of jurisdiction if the decision on the merits turns
out to be an unfavorable one. There is a broad consensus that this pattern of
behavior is not acceptable. A recent explicit confirmation of this position was
given by the Supreme People’s Court in China. In Article 27 of their August
23, 2006 “Several Issues Relating to the Application of the People’s Republic
of China Arbitration Law, Interpretation” it is stated:
“Where a party has not raised any objection to the validity of the arbitra-
tion agreement in the arbitration procedures but requests to vacate the
arbitral award or raises defense for non-enforcement after the arbitral
award is made on the ground that the arbitration agreement is invalid,
the people’s court shall not uphold such request or defense”.166
The duty to exercise options is based on considerations of fairness. As waiver

has become a broadly established principle, we have witnessed some endeavors
to circumvent its consequences. The threat of loss of rights due to a failure to
exercise options has led in some cases to dilatory tactics with the endeavor of
Several Issues Relating to the Application of the People’s Republic of China Arbitration
166
Law, Interpretation [最高人民法院关于适用《中华人民共和国仲裁法》若干问题的解

释, zui gao ren min fa yuan guan yu shi yong zhong hua ren min gong he guo zhong cai
fa ruo gan wen ti de jie shi], promulgated by the Standing Comm. Nat’l People’s Cong.,
Aug.23, 2006, effective Aug. 23, 2006, art. 27 (P.R.C).
414
maintaining options as long as possible – and maybe even longer than possible.
An interesting example of such tactics was scrutinized by the Vienna Court of
Appeal in 1999.167 In this case the moving party had doubts about the validity
of the arbitration agreement, and was thus hesitant whether to commence
arbitration or to file its claim before an Austrian court. In order to clarify the
situation, the party who wanted to initiate the case sent a letter to the other party
offering to execute a new arbitration agreement in order to avoid doubts about
the validity of the existing arbitration agreement. The interesting question is
whether in such situations the opposing party (the defendant in the court case)
is obliged to cooperate (to the extent of contributing to the clarification of the
issue whether arbitration is or is not a viable avenue). A tempting option for the
opposing party is to maintain the doubt, and to maintain opportunities to both
oppose arbitration (on the grounds that the arbitration clause is imperfect), and
also to oppose litigation (on the grounds that the parties agreed to arbitrate). This
was the tactic followed by the Defendant, who did not answer for six weeks; and
after six weeks answered that it did not want to prejudge the (future) Plaintiff ’s
decision as to where to file the case, but it maintained all arguments. Is this a
legitimate tactic? It is clear that waiver, estoppel, acquiescence and other akin
concepts disallow inconsistent positions. Do they also sanction the avoidance
of taking a position and the maintenance of doubts? This does not necessarily
follow from the wording of Article 4 of the UNCITRAL Model Law (or of many
legislative acts which have adopted the concept of waiver formulated in Article
4). It is also true, at the same time, that there is some basic similarity between
the two patterns. In the Austrian case, the Defendant did not both rely on the
arbitration clause and contested the same arbitration clause, but endeavored
to maintain an option to argue both that there was and that there was no valid
arbitration clause. After the defendant refused to cooperate in the verification
of the arbitration clause, the plaintiff submitted the case to an Austrian court
– and the defendant opposed jurisdiction relying on the arbitration agreement.
The Vienna Court of Appeal rejected this argument as abusive, and held that
the defendant had no legitimate interest to reserve its position until after the
commencement of the court proceedings.
Is the ground for this decision waiver? Article 4 of the Model Law – just as
Article 579 of the Austrian Code of Civil Procedure – speak of waiver in the context
of proceeding with arbitration without objection.168 In this case, the behavior
167
Andreas Reiner, “Some Recent Austrian Court Decisions in the Field of Arbitration”, 17 J.
Int’l Arb. (2000) 85, 88-89 (OLG Wien, Dec. 15, 1998, docket no. 13 R 154/98 g, ecolex
1999/96 (1998) (Austria)).
168
Article 579 contemplates waiver with regard to situations in which “the arbitral tribunal
has not complied with a procedural provision”. Thus, the context is, again is that of arbitral
proceedings proper.
415
at issue did not take place within arbitration proceedings – such proceedings
never started. Thus, a strict reading of Article 4 of the Model Law (or of Article
579 of the Austrian Code of Civil Procedure) would not provide a foothold
for the decision of the Vienna Court. Nevertheless, this decision has a sound
basis because it is based on the principle of procedural fairness. As was pointed
out earlier, waiver is just one of the existing conceptualizations of procedural
fairness. In the realm of arbitration it is the most important one, and the one
which has been spelled out most clearly – but not the only one. One may have
to proceed with more caution when one relies on a procedural principle without
an articulated legislative guidance (such as that given in Article 4 of the Model
Law), but the Vienna decision shows no lack of caution. The court argues quite
convincingly that it simply disallowed an abuse. Is the outcome a pro-arbitration
result? Not directly, because what was confirmed was the jurisdiction of a court
against (abusive) reliance on a doubtful arbitration agreement. Yet, in a broader
perspective, it is a pro-arbitration outcome, because one of the underlying
assumptions of the holding is a respect towards the arbitration agreement. It
follows from the Vienna decision that the existence of an arbitration agreement
(even if it is a questionable one) gives rise to an obligation of fairness. One may,
of course, take different positions towards an arbitration agreement, but one
cannot take inconsistent positions, and if prompted by a reasonable request,
one has to take a position, rather than to maintain an option both to deny the
arbitration agreement and to rely on it.
C.4. A Further Issue: The Distinction between Permissible and Impermissible

Waivers
The essence of the institution of waiver is the loss of the right to challenge the
award on the grounds of some procedural deficiency because of inconsistent
behavior and/or lack of timely objection. It is practically common ground that
the institution of waiver may indeed neutralize some deficiencies of the award,
and may counteract a challenge to the award. The question is whether waiver
can neutralize any deficiency. What follows after this question is not common
ground anymore. One could say that there is a basic understanding that waiver
has limits. It is much more difficult to agree where those limits exactly lie. Article
4 of the Model Law which sets a standard says that waiver applies to provisions
of the lex arbitri “from which the parties may derogate”, (or to “requirements of
the arbitration agreement”). But it is not a simple matter to identify the norms
from which the parties may derogate as opposed to norms from which they may
not derogate. The French practice – relying on general principles rather than
on the standard set by the Model Law – does not restrict waiver (renonciation) to
procedural shortcomings within the domain of norms “from which the parties
416
may derogate”.169 Nevertheless, Fouchard suggests some limitations by stating

that norms belonging to the realm of international public policy (and only
these norms) are beyond reach – and violations of international public policy
cannot be ratified in any way.170 (Which suggests that there are exceptions; there
are some violations which cannot be remedied by waiver.) Swiss practice has
also confirmed a rather broad understanding of waiver, making it clear that it
nevertheless has some limits. In a dictum the Swiss Federal Tribunal stated that
waiver cannot extend to particularly severe violations (vices particulièrement
graves) which are considered ex officio and which may be invoked until the end
of the case. The question is, of course, when a violation is or is not “particularly
severe”. The Federal Tribunal cites one example of issues falling into the category
of “particularly severe”: the capacity of being a party to arbitration.171
An interesting contribution to the definition of the possible domain of waiver
was offered by the European Court of Human Rights (“ECHR”). In Suovaniemi v.
Finland, the ECHR faced the issue whether it is possible to waive rights granted
under Article 6 of the European Convention for the Protection of Human Rights
and Fundamental Freedoms.172 Article 6(1) of the Convention is generally
considered as a formulation of basic due process. The question arose whether
these rights may be waived in the arbitration process. The specific issue which
reached the ECHR was whether the waiver of the right to challenge an arbitrator
was acceptable (on the understanding that the circumstances which raised
doubts about the impartiality of the arbitrator were known to the parties). The
ECHR made a distinction between “permissible” and “not permissible” waivers,
stating that “[w]aiver may be permissible with regard to certain rights but
not with regard to certain others”. It held in the Suovaniemi case that it was
permissible to waive the right to challenge an arbitrator. The distinction made
between permissible and non-permissible waivers is a consequential one, but
the guidelines offered are scarce.173 Speaking of the contributions of the ECHR,
169
See Loïc Cadiet, “La renonciation à se prévaloir des irrégularités de la procédure arbitrale”,
1 Revue de l’arbitrage (1996) 35 (making a survey of French practice, and stating explicitly
that the French approach is broader, and it is not restricted to norms from which the
parties may derogate).
170
“Seul le grief de violation de l’ordre public international n’est, par nature, susceptible d’aucune
ratification.” Fouchard-Gaillard-Goldman, Traité de l’arbitrage commercial international
(Paris, 1996) 942.
171
Federal Court [Bundesgericht, BGer], Apr. 3, 2002, 4P 282/2001 (Switz.).
172
Suovaniemi v. Finland, No. 31737/96 (1999), <http://www.echr.coe.int/echr> (follow
“Case-Law” hyperlink; then search “Decisions” under “HUDOC Collection” for “Suovaniemi
and others v. Finland” hyperlink) (deciding as to admissibility).
173
The ECHR mentioned some examples, saying e.g. that the right to public hearing can
be waived, but it stopped short from formulating a criterion for the distinction between
permissible and non-permissible waivers.
417
it should be mentioned that the ECHR stated in a number of its decisions that a
waiver of a right guaranteed by the Convention – insofar as it is permissible – must
be established in an unequivocal manner.174
Staying with the issue of the distinction between permissible and impermissible
waivers, I would like to return once again to the rules of Article IV of the New
York Convention. If the procedural irregularity which threatens the award is
one of those described in Article V of the New York Convention (or Article 34
of the Model Law), the focus is on the arbitration proceedings, and a possible
waiver pertains to lack of objection within the arbitral proceedings. If Article IV
is at issue, the problem emerges in a different time-frame; the irregularity which
is scrutinized relates to submission of documents to the court in post-award
proceedings – and a possible waiver pertains to lack of objection in post-award
court proceedings.
Under Article IV, the party seeking recognition is supposed to produce a duly
authenticated original award, or a duly certified copy thereof; if the award was not
drafted in the official language of the court, a certified translation of the award
(and of the arbitration agreement) is needed. There are several reasons behind this
requirement. The first and most simple reason is that the court which considers
these documents needs to have an authentic document and a reliable version
in the language it understands. A further reason pertains to the equities of the
parties. An uncertified copy may be unreliable. A translation may be imprecise,
it may even be biased; it could impose more (or less) burden on one of the parties
than what would follow from the original award. Hence, it is important to have
a dependable original, and a translation as reliable as possible. But what if the
submitted un-certified copy of the award or its un-certified translation is not
contested between the parties? Would insistence (by the court) on certification
make any practical sense under these circumstances? Could lack of contestation
amount to a waiver (and relieve the party submitting the award of the duty to
submit a certified copy of the award and a certified translation)?
Several courts have opted not to seek certification on the basis of the fact that
the content of the translated document was not contested. In its decision of 17
August 2000, the German Supreme Court (Bundesgerichtshof) took a position
regarding the nature of Article IV(1) of the New York Convention. It held that
the rule which requires the submission of “a duly authenticated original award
or a duly certified copy thereof ” is actually a provision concerning evidence.175
It becomes relevant when authenticity is disputed. In the given case between
a German investor and the Republic of Poland, Poland opposed recognition
See Oberschlick v. Austria, 204 Eur. Ct. H.R. (ser. A) at 23 (1991); Pfeifer v. Austria, 227
174
Eur. Ct. H.R. (ser. A) at 16 (1992).

Federal Court of Justice [Bundesgerichtshof, BGH] Aug. 17, 2000, III ZB 43/99 (F.R.G.),
175
available at <http://www.bundesgerichtshof.de>.
418
and enforcement of a Swiss award in Germany, alleging, i.a., that the German
party did not submit duly certified documents. The Supreme Court held that it
was not necessary to discuss whether the award was or was not duly certified,
since its authenticity was not disputed. The Court stated that Article IV of the
New York Convention should be interpreted as a mere rule on evidence (blosse
Beweismittelregelung) and it would be an empty formality (leere Förmelei) to request
certification when the content of the submitted award was not contested.176 The
same logic was followed in a 2001 decision of the German Supreme Court.177 In
a case in which the German party opposed the recognition of an award of the
London Maritime Arbitrators Association (hereinafter “LMAA”), the Bundesgericht
stated i.a. that a possible shortcoming in legalization (certification) would be
without consequences, since the existence and the authenticity of the award
were not disputed.178
A flexible interpretation of Article IV will be compatible even with the letter
of the Convention when an additional foothold is given under Article VII, i.e.
when more favorable rules of the lex fori can apply. If Article VII does not lead to a
more favorable regime, the question might be asked whether waiver is compatible
with the wording of Article IV. The parties may waive rights which they have.
Are we talking here about rights of the parties only? As far as translation into
the official language of the court is concerned, it also serves as a confirmation
of one of the attributes of sovereignty (the official language of the State). One
also has to bear in mind that the courts have some ex-officio duties under the
New York Convention. The court will consider ex-officio issues of arbitrability
and public policy, even if these issues were not raised by the party opposing
recognition. Thus, the court needs to have for its own purposes a reliable certified
version of the award – and a translation it can trust, if the award is not drafted
in an official language of the court. In a Swiss case, the court (Obergericht Zug),
describing the ratio legis behind Article IV(2), stated that the reason and the aim
176
Federal Court of Justice [Bundesgerichtshof, BGH], Aug. 17, 2000, III ZB 43/99, at 5 (F.R.G.),
available at <http://www.bundesgerichtshof.de> (holding: “Hier hat die Antragsgegnerin
nicht in Zweifel gezogen, daß der von der Antragstellerin vorgelegten Abschrift des Schiedsspruchs
eine damit übereinstimmende authentische Urschrift zugrunde liegt. Es wäre eine leere Förmelei,
von der Antragstellerin dennoch zu Verlangen, daß sie die –unstreitige – Existenz und Authentizität
des abschriftlich mitgeteilten Schiedsspruchs zusätzlich mittels der in Art. 4 Abs. 1 lit. a UNÜ
genannten Urkunden nachweist”).
177
Federal Court of Justice [Bundesgerichtshof, BGH], Feb. 1, 2001, III ZR 332/99 (F.R.G.),
available at <http://www.bundesgerichtshof.de>; Bundesgerichtshof, 1 February 2001,
19 ASA Bulletin 325 (2001).
178
Federal Court of Justice [Bundesgerichtshof, BGH], Feb. 1, 2001, III ZR 332/99, at 6-7
(F.R.G.), available at <http://www.bundesgerichtshof.de> (holding: “Möglicherweise
bestehende Legalisationsmängel des Schiedsspruchs wären unschädlich. Denn die Existenz und
die Authentizität des abschriftlich mitgeteilten Schiedsspruchs sind unstreitig…”).
419
of this provision is to provide a firm ground to the judge who has no command
of the language of the original, and who has the duty to investigate not only the
objections raised by the debtor, but also the grounds described in Article V(2)
of the New York Convention which have to be observed ex officio.179 Thus, the
parties cannot waive certification or translation, because the duties of the courts
are also implicated. One may note that while the point is well taken, the practical
relevance of the caution expressed by the Zug court is limited. Article V(2) of
the New York Convention refers to arbitrability and to public policy. Arbitrability
rarely represents a ground on which awards are questioned. Furthermore, it is
difficult to imagine a case in which the authenticity of the award is not contested
by either party, yet the award is actually different from the one which is actu-
ally rendered. In the same way, although this is not inconceivable, it is again
difficult to imagine a real-life case in which the translation of the “dispositif” of
the award is not contested (it is not contested which claims are awarded and
which are denied), yet some mistranslation nevertheless hid the problem with
arbitrability. Such cases would imply either a collusion of the claimant and of
the respondent, or an extremely careless attitude of one of the parties – not
impossible, but a quite unlikely hypotheses. As far as public policy is concerned,
while it is true that the court may deny recognition on this ground proprio
motu, in the overwhelming majority of cases the party opposing recognition
will also object where an arguable violation of public policy exists. Thus, while
it is true that safeguards for authenticity of the award (and for the accuracy of
the translation) do not only serve to shield the party opposing recognition, the
practical relevance of this fact is quite limited. If the submitted inauthentic or
mistranslated award yields a result which might violate public policy, it is highly
unlikely that this issue would not be raised by the aggrieved party. In cases in
which the party opposing recognition does not contest the accuracy of the
award it is just not realistic to assume that an inexactitude or mistranslation
could exist which would amount to violation of public policy. (Again, collusion
or extreme carelessness of the losing party may create an exception, but these
are quite unlikely hypotheses.)
The distinction between permissible and impermissible waivers remains a
delicate issue. The primary purpose of court scrutiny of arbitral awards is to
protect legitimate rights of the parties, which rights may have been impaired
by some imperfection of the award. Thus, when the rights of parties are at
stake, the concept of waiver certainly makes sense. Distinguishing between
179
Obergericht, Zug, 27 Februar 1998, 18 ASA Bulletin 363 (2000) (holding: “Sinn und Zweck
dieser Bestimmung ist es, dem der Sprache der Urschrift nicht mächtigen Anerkennungs- und
Vollstreckungsrichter eine sichere Grundlage in die Hand zu geben, um neben den vom Schuldner
eingewendeten auch über die von Amtes wegen zu beachtenden Verweigerungsgründe gemäss
Art. V Abs 2 NYǗ befinden zu können…”).
420
situations in which waiver is or is not permissible, the argument can be made

that waiver actually has an impact on the gravity of the situation itself. If one
party is invited to comment on an expert opinion and the other party is not,
this may very well be qualified as a violation of due process, and the award may
be set aside or refused recognition. Could waiver neutralize such a violation?
It probably could. If the party who was not invited to submit his comments
knows that the other party had this opportunity and receives the comments
of the other party, yet raises no objection and continues to proceed, he may
be deemed to have waived his right to equal treatment regarding this specific
occurrence. There may be several reasons for not raising the objection. The
party who was not offered an opportunity to comment may be satisfied with
the export report and has nothing to add. Or, he/she may think that the expert
report is irrelevant and it is not worth commenting. Another possible hypothesis
is that the party is not handling its case with proper diligence. In all of these
hypotheses one may submit that some unequal treatments exist; but can we also
say that the party is a victim of unequal treatment? Can a party just take note of
a procedural error (and store it for use in case of emergency) instead of taking
steps to protect his/her rights? It is important to note that it follows from the
wording of Article 4 of the Model Law that lack of objection may only amount
to waiver if the party knew that a violation took place. This means that in our
hypo waiver could only be effective if the party who was not invited to comment
on the expert opinion knew that the other party was invited (and that unequal
treatment took place), but nevertheless failed to object. This concept of waiver
is in line with the wording of Article V(1)(b) of the New York Convention which
allows refusal of recognition if a party was “unable to present his case”. One
may very well argue that one cannot speak of inability to present one’s case if
the party concerned failed to object to impairment at a point when it was still
possible to remedy such impairment – when the party still had a chance to get
an appropriate opportunity to present its case.
An irregularity which would amount to a violation of due process without
waiver certainly does not have to amount to a violation of due process if the
party failed to object and acquiesced. The impairment is not the same; the
violation is not the same. The question still remains whether there are cases in
which the party knew that a violation took place and failed to object, but such
waiver cannot be heeded due to public policy considerations. The range of such
fact-patterns is certainly quite narrow. We have seen an example with regard to
Article IV of the New York Convention. Requirements regarding the authenticity
of the award and of the translation do not only pertain to the equities of the
parties, but also to the rights and duties of the court. This is the logic which led
the Swiss court in Zug to insist on the observance of the requirements of Article
IV notwithstanding the behavior of the parties. Could waiver also be thwarted
with regard to those procedural irregularities which are identified in Article V of
421
the New York Convention? Within the setting of the New York Convention, both
observance of waiver and disregard of waiver are guided by general principles.
Among the grounds set in Article V (and in national legislative acts following the
same logic) those which are typically relevant from the point of view of waiver
are grounds pertaining to jurisdiction, to due process, and to the observance
of the applicable rules. In these areas waiver will typically sanction a situation
which could have been created by party agreement as well. The parties can agree
on jurisdiction in an arbitration agreement, and by the same token, a party will
waive its right to contest jurisdiction in post award proceedings if it accepted
to arbitrate without objection in the absence of a valid arbitration agreement.
Waiver will thus supersede grounds for challenge under Article V(1)(a) of the
New York Convention. Likewise, the parties may agree to conduct the proceedings
in any language. If the proceedings are conducted in a different language other
than the one agreed upon, and both parties proceed without objection, this may
very well be qualified as a functional equivalent to party agreement to conduct
the proceedings on that different language – and waiver will trounce grounds
for challenge under Article V(1)(b), or maybe under Article V(1)(d).
C.4.1. Do party stipulations and waiver have the same limits?

There are limits to what parties can agree upon. The question arises whether
these limits remain the same when party stipulations are confirmed by waiver.
The motives behind limitations on party stipulations certainly have an impact
on the question whether lack of objection can or cannot modify such limitations.
If the limitation is inspired by the vulnerable situation of a special category of
parties to contracts, the basic rationale behind the restriction will in most cases
continue to exist even in the absence of timely objection by the protected party.
This is exactly the type of situation which was faced in a 2006 decision of the
European Court of Justice (hereinafter: “ECJ”). In Claro v. Centro Móvil Milenium,
reference was made to the ECJ by a Spanish court for a preliminary ruling. The
question referred for preliminary ruling was the following:
“May the protection of consumers under Council Directive 93/13/EC…
require the court hearing an action for annulment of an arbitration
award to determine whether the arbitration agreement is void and to
annul the award if it finds that that arbitration agreement contains an
unfair term to the consumer’s detriment, when that issue is raised in
the action for annulment but was not raised by the consumer in the
arbitration proceedings?”180
Case C-168/05, Mostaza Claro v. Centro Móvil Milenium SL, 2006 OJ C326/9, available at
180
<http:/europa.eu.int>.
422
Thus, the relevance of waiver became the key issue in a most direct manner. The
Spanish court held that the arbitration clause in a mobile telephone contract
was contrary to the applicable mandatory norms on consumer protection. The
question remained whether the limits imposed on possible party stipulations
will remain the same after the protected party enters into arbitration, and does
not raise any objection until the award was rendered. The mobile telephone
company argued that allowing annulment on the grounds of the alleged illegality
of the arbitration clause, even if no plea to that effect was entered within the
prescribed time-limit, would be highly prejudicial to the requirement of efficiency
and certainty in arbitration decisions. The ECJ did not accept this argument,
and did not recognize the impact of waiver on the limitation imposed on party
stipulations. The European Court ruled:
“Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer
contracts must be interpreted as meaning that a national court seised
of an action for annulment of an arbitration award must determine
whether the arbitration agreement is void and annul that award where
that agreement contains an unfair term, even though the consumer has
not pleaded that invalidity in the course of the arbitration proceedings,
but only in that of the action for annulment”.181
The decision of the ECJ is quite clear. The question remains whether the position
of the European Court will become persuasive outside its scope of authority – and
whether it also applies to situations other than those in which the limitation
aims to protect a special category of parties (like consumers).
There are cases which do not imply consumer protection (or protection of
some other identified category of parties), in which the court nevertheless opted
to disregard waiver which would have remedied an imperfect stipulation. The
argument was made that the observance of such waiver would sanction a situa-
tion which is contrary to public policy or mandatory norms. For example, in an
earlier (1976) case decided by the Court of Appeal in Cologne (Oberlandesgericht
Köln), the agreement of the parties provided for arbitration in Denmark under
the Rules of the Copenhagen Arbitration Committee for Grain and Feed Stuff
Trade.182 These Rules had some rather peculiar and atypical provisions. The
arbitrators were to decide without an oral hearing, and no information was
given to the parties regarding the identity of the arbitrators. The parties did
receive a list of potential arbitrators, and were allowed to protest against one or
more arbitrators on the list, but these protests were considered by the President
181
Case C-168/05, Mostaza Claro v. Centro Móvil Milenium SL, 2006 OJ C326/9, C326/10,
available at <http:/europa.eu.int>.
182
Oberlandesgericht Köln, June 10 1976, IV Y.B. Com. Arb. (1979) 258 (reporting court
decision: Danish buyer v. German (F.R.) seller).
423
of the Arbitration Committee, and the parties were not informed whether their
protests were heeded or not, nor who ended up being arbitrators. An award was
rendered in favor of the Danish buyer against the German seller. The Danish
buyer sought recognition in Germany, and the German seller raised a number of
objections under the New York Convention. One of these objections was that the
procedure of appointment of the arbitrators lacked guarantees of impartiality,
and this amounted to a violation of public policy. This argument was accepted
by the German court. The Cologne Court of Appeal held that the procedural
means for the implementation of impartiality is the institution of challenge,
and this institution can only be effective if the parties know the names of the
arbitrators. In this case the mechanism of appointment was one agreed upon
by the parties. Furthermore, both parties participated in the constitution of the
arbitral tribunal in accordance with the rules agreed upon, and without objection.
Hence, waiver represented an added argument in favor of recognition, but the
court held that the arrangement effected by both contractual stipulation and
conduct was contrary to mandatory principles and recognition was denied.
In an interesting case decided in 2005 by the Supreme Court of Austria,183 the
court investigated an arbitration agreement in the setting of Article 583(2) of the
Austrian Code of Civil Procedure,184 which allowed rescission of the arbitration
agreement under certain circumstances. Among other issues, the Supreme
Court of Austria considered the validity of a specific provision in the arbitration
agreement. This stipulation provided that the third arbitrator would be chosen
by the party-appointed arbitrators, and if they failed to agree, he/she would be
appointed by the president of one of the parties. (The dispute arose between an
attorney on one side, and the Vienna Bar Association – Rechtsanwaltskammer
Wien – on the other. According to the arbitration agreement, the third arbitrator
had to be appointed by the President of the Rechtsanwaltskammer Wien in the
absence of an agreement reached between the party-appointed arbitrators.)
The Supreme Court of Austria held that this arrangement regarding substitute
appointment represented an infringement of the principle of equality of the
parties, and amounted to a blatant violation of the principle of fair trial set
in Article 6 of the European Convention for the Protection of Human Rights
and Fundamental Freedoms.185 The question I would like to raise is whether
183
OGH Case No. Ob41/04z of March 17, 2005, reported in Juristische Blätter, 2005/12, p.
801.
184
Article 582 applied until the adoption of the new Austrian Arbitration Act. The new
2006 Act applies to arbitration agreements concluded on or after July 1, 2006.
185
“Die Regelung über die Besetzung des Schiedsgerichtes bei Nichteinigung durch Ernennung eines
Vorsitzenden durch ein Organ einer Partei des Schiedsverfahrens verstösst eklatant gegen die
Grundsätze des fair trial nach Art. 6 MRK und ist daher nach §879 ABGB nichtig.” Juristische
Blätter 2005/12, p. 801, at p. 803.
424
we would have the same “blatant violation of the principle of fair trial” if the
issue is raised in a different setting, and waiver is implicated. Let us assume that
the mechanism for substitute appointment becomes an issue in setting aside
proceedings after an award has been rendered (rather than in court proceed-
ings regarding rescission of the arbitration agreement before the arbitration
proceedings have effectively started). The Austrian Supreme Court held that a
stipulation which allows one of the parties to make substitute appointment of
the chairman amounts to a violation of Article 6 of the European Convention
for the Protection of Human Rights. Suppose the imperfect mechanism yields a
choice (the substitute appointment is made), thus the appointee becomes known
and other party has an opportunity to submit a challenge, but fails to do so.
Does the level of threat to fairness remain the same? Some differences do exist.
Unlike in the case between the Danish buyer and the German seller, where the
lack of opportunity for challenge persisted after the arbitrators were appointed
(because their names were not disclosed), in this hypo the situation changes after
the appointment has been made. What is in focus is not the unfair stipulation
anymore (or a result which remains secret), but rather the unconcealed result
of this stipulation which can be evaluated on its own merits. Furthermore, we
do not only have consent which crafted the stipulation, but also consent (lack
of objection) regarding the effect of the stipulation.
A distinction can plausibly be made between cases in which the stipulation
itself and its potentials are at issue (like in the Austrian case), and cases in which
we are faced with the actual consequences of the stipulation against which
no timely objection was raised. To take as a further example, I would like to
refer to one of the rare legislative provisions regulating the content of possible
arbitration agreements. According to Article 1678 of the Belgian Judicial
Code: “An arbitration agreement shall not be valid if it gives one of the parties
thereto a privileged position with regard to the appointment of the arbitrator or
arbitrators.”186 One may argue that if, for example, the parties cannot stipulate
that one of them will appoint one arbitrator, and the other will appoint two, then
presumably this pattern will remain illegal if it is created or confirmed by conduct
that is by absence of objection. But can the two situations really be equated? The
stipulation providing that one party will appoint one arbitrator while the other
will appoint two, clearly opens the gate for unfair appointments and an unfair
result. Does the situation remain the same after the appointments have been
made – and accepted without protest? It is at least conceivable that the party
who has the right to appoint two arbitrators will not abuse this entitlement, but
will appoint two well-known neutral arbitrators. Waiver becomes relevant at a
later point in time (in our case after rather than before actual appointments),
186
Judicial Code [Code Judiciaire], July 4, 1972, as amended May 19, 1998, art. 1678
(Belgium).
425
and it is exercised (if it is exercised) on the grounds of more information. When

waiver is at issue, what is faced is not the threat of unfairness which was made
possible by the stipulation, but a specific choice which may be evaluated, and
which may or may not be unfair. The tacit acceptance of this choice by the other
party, who opts to proceed without objection, does not yield the same impairment
or jeopardy as the unfair stipulation itself.
Lack of timely objection has an impact on the balance of (un)fairness, because
an informed party who fails to object acts contrary to principles of good faith.
Furthermore, in post-arbitral proceedings when waiver becomes an issue, the
perspective is different, and one can focus on the actual consequences rather
than on the potential implications of a stipulation. The distinction is not an easy
one, but one may submit that party stipulations and waiver need not always have
the same limitations – particularly not, when the limitation is not prompted by
the need to protect a vulnerable category of parties like consumers.
C.5. A Concluding Remark

Just as party stipulations are subject to some limitations, crafting of effects by
conduct and lack of objection should also have some limits. This is what clearly
follows from the wording of Article 4 of the Model Law which recognizes and
articulates the institution of waiver, but also limits its impact to norms from
which the parties may derogate. Having said this, it is important to add that
there is every reason to interpret limitations in a restrictive way, that is to give
a broad maneuvering room to waiver and like concepts. This is in line with a
pro-arbitration stance, and it is also in line with basic procedural fairness. In
the words of Lauterpacht:
“The absence of protest may … in itself become a source of legal right
inasmuch as it is related to – or forms a constituent element of – estoppel
or prescription. Like these two generally recognized legal principles, the
far-reaching effect of the failure to protest is not a mere artificiality of
the law. It is an essential requirement of stability – a requirement even
more important in the international than in other spheres; it is a precept
of fair dealing…”.187
Hersch Lauterpacht, “Sovereignty over Submarine Areas”, 27 Brit. Y.B Int’l L. (1950)
187
376, 395-396.
426
IV. Developments Regarding Interaction Between Various

Instances of Scrutiny
A. The Modern Standard: Two Possible Recourses

One of the key criteria for distinguishing between modern and pre-modern times
in international commercial arbitration lies in the number of available recourses
against arbitral awards. A hallmark of pre-modern times was the multitude of
avenues for challenge. Modern times are characterized by a reduction of possible
recourses to two: motion for setting aside and opposition to recognition and
enforcement. The turning point on a global scale cannot be tied to a specific
date. In individual countries this is easier. To take an example, in France the
watershed is the enactment of the New Code of Civil Procedure in 1981. As a
matter of general orientation, one may submit that the regime which is nowadays
dominant was shaped after the enactment of the 1958 New York Convention,
and even more so, after the drafting of the 1985 UNCITRAL Model Law.
In the simplest terms, the essence of the modern system of recourses against
arbitral awards is the following. There are two ways to obtain judicial review of
an arbitral award: a) one may attack the award with a claim for setting aside
in a country in which the award was made, or that considers the award to be
domestic; b) one may oppose recognition and enforcement in a country in which
the winner chooses to rely on the award. What is quite important is that there
is a strong convergence of standards of court control. As far as recognition and
enforcement is concerned, international standards have been set by the New
York Convention. The grounds for setting aside are not regulated by the New
York Convention (or by any other convention), but rather by the procedural law
of the forum country; yet in practice, the grounds that may be advanced in the
two types of proceedings are becoming very similar or practically identical in
most legal systems. The anchor point of this line of development is the fact that
the standards adopted by the New York Convention for recognition were also
adopted in the Model Law for both recognition and setting aside.
In addition to setting aside and recognition and enforcement, “remission” is
also mentioned sometimes as a variant of court control. Section 68(3) of the 1996
English Arbitration Act provides that “if there is shown to be serious irregularity
affecting the tribunal, the proceedings or the award”, the court has several
options. One option is to “remit the award to the tribunal” for reconsideration.
(Another option is setting aside.) It may be debatable whether remission may
be qualified as a separate remedy, or is it just one of the options within the same
recourse under the English Arbitration Act. The UNCITRAL Model Law also
provides for remission, and this solution was accepted in a number of countries
427
which adopted the Model Law.188 The Model Law – and enactments based on
the Model Law – makes it clearer that remission is not a distinct recourse, but
rather an interim step, a possible option within the recourse of setting aside. The
Model Law speaks of remission in Article 34, and in the title of this Article it is
strongly emphasized that setting aside is the only recourse against (domestic)
awards. The title reads: “Application for setting aside as exclusive recourse
against arbitral award”. Remission appears as a possibility within this “exclusive
recourse”, and it is clear from the context as well that this is a possibility within
setting aside proceedings. Article 34(4) states that the court “when asked to set
aside the award” may suspend setting aside proceedings and remit the award
to the tribunal in order to “give the arbitral tribunal an opportunity to resume
the arbitral proceedings or to take such other action as in the arbitral tribunal’s
opinion will eliminate the grounds for setting aside”. Thus, remission deserves to
be distinguished, but only as a variation within the recourse of setting aside.
Focusing on new developments with regard to the two contemporary avenues
of court control, I would like to stay within the ambit of the basic question
which these lectures endeavor to face: the question as to what is actually
pro-arbitration. It is rather obvious that the reduction of recourses to two, just
like the harmonization of possible grounds for challenge, are pro-enforcement
developments. One could also say that these trends are pro-arbitration, but
here, a caveat may be needed. In a standard setting – and according to standard
logic – what is pro-enforcement is also pro-arbitration. Yet, as the Hilmarton
cases have shown, the link between pro-enforcement and pro-arbitration is more
complex than a simple line of syllogism.189 New developments have typically
heeded pro-arbitration considerations, and often they have been prompted by a
pro-arbitration motivation. Yet, these developments have also shown hesitations
at junctures where the question has arisen what the impact of setting aside
proceedings should be on recognition and enforcement. New developments have
also brought to surface the question whether limiting recourses to two is the
solution which serves best the integrity of the arbitration process, or whether
the introduction of other recourses may yield a pro-arbitration result. This latter
question is the one on which I would like to dwell first.
For example, Article 36(4) of the 2001 Croatian Arbitration Act, Article 34(4) of the
188
1987 Cyprus International Commercial Arbitration Act, Article 35(4) of the Macedonian
Act on International Commercial Arbitration, Article 59(2.2)(b) of the 2000 Arbitration
Act of the Islamic Republic of Mauritania, Article 1209 of the 2005 Polish Arbitration
Act (Part Five of the Code of Civil Procedure as amended in 2005), Article 34(4) of the
1993 Russian Arbitration Act, Article 60 of the 2006 Serbian Arbitration Act.
I shall return to the Hilmarton cases in section C.3.1.
189
428
B. Revision: A Supplement to, or an Exception from the Modern Standard

An important new development is the emergence of a new recourse in the practice
of the Swiss Federal Tribunal (the Supreme Court of Switzerland). Without an
explicit foothold in Swiss legislation, and without a basis in the 1987 Swiss
Private International Law Act (hereinafter “Swiss PIL Act”) in particular, the
Swiss Federal Tribunal created room for a third recourse against arbitral awards
(in addition to setting aside and opposition to recognition and enforcement).
This new option is revision which was recognized as a possibility in a decision
of March 11, 1992.190 In a case in which company P. requested revision of an
arbitral award, the Federal Tribunal took note of the fact that the Swiss PIL Act
restricted the number of possible recourses against arbitral awards, and does
not mention revision as a possible recourse. Nevertheless, the Federal Tribunal
found that “such silence of the legislator does not bind the Court”, but represents
a gap in the statute (“Gesetzeslücke”, “lacune de la loi”) which may be remedied
by the court. The Federal Tribunal stressed that parties submitting their case to
arbitration cannot be deemed to have accepted an award rendered under the
influence of a crime, or by way of ignoring essential facts or decisive evidence.191
After it admitted revision as a matter of principle, the Federal Tribunal neverthe-
less denied the given request, holding that the circumstance relied upon by the
party seeking revision did not meet the requirements of Swiss law. It was only in
a recent August 2006 case that the Federal Tribunal actually granted a request
for revision.192 The facts of this case fit perfectly into the general pattern of
revision. During the arbitration proceedings, it was alleged that the purchase of
shares was a part of a money laundering scheme. This allegation was considered
relevant, but was not proven. An award was rendered on August 16, 2004.193
The loosing party sought annulment in line with Article 190 of the Swiss PIL
Act, but the Federal Tribunal denied the challenge on December 14, 2004.194
The request for revision relied on newly discovered evidence emerging from
an affidavit of January 13, 2006 submitted to the English Privy Council. It is
important to point out that the applicant sought revision of the arbitral award,
190
Tribunal federal Suisse, 11 mars 1992, 1 Revue de l’arbitrage (1993) 115 (reporting court
decision: société P. v. société S Ltd.).
191
Tribunal federal Suisse, 11 mars 1992, 1 Revue de l’arbitrage (1993) 115, 116 (reporting
court decision: société P. v. société S Ltd.) (holding: “Et malgré cette restriction au niveau des
possibilités de recours, la partie qui accepte de se soumettre à un arbitrage ne s’accomodera pas
pour autant d’une sentence influencée par un crime ou un délit ou rendue dans l’ignorance de
faits essentielles ou de preuves décisives”.
192
Federal Court [Bundesgericht, BGer], Aug. 29, 2006, 4 P. 102/2006/rou (Switz.).
193
Other awards were also rendered between the same parties, but it is the award of August
16, 2004 which gave rise to revision.
194
Federal Court [Bundesgericht, BGer], Dec. 4, 2004, 4 P. 208/2004/lma (Switz.).
429
and not of the court decision denying annulment. The newly discovered facts
were facts which already existed prior to the rendering of the arbitral award, but
were not known to the applicant, and such ignorance was not due to negligence.
The newly discovered facts were also of a decisive nature.195 These circumstances
satisfied the requirements of Article 137 of the Judicial Organization Act which
deals with revision of Supreme Court Judgments, and which was applied here by
analogy.196 Revision was granted, and the case was sent back to the arbitrators
for a new decision.
The difficult question is whether this decision which yielded a fair result is
also pro-arbitration. It is certainly in the interest of any decision-making process
to maintain instruments which are capable of eliminating grave errors. Let me
add that under Swiss law (and many other laws) revision may not only be sought
on the grounds of newly discovered decisive facts, but also in cases in which the
decision was influenced by a crime or misdemeanor (for example, if it turns out
that one of the arbitrators was bribed). One could argue that in egregious cases
like, for example, bribery, the basic integrity of the arbitration process requires
some remedy. At the same time, the point can be made that revision is not the
only conceivable instrument of rectification in extreme situations. Staying with
the example of bribery, sanctions against the arbitrator may be imposed in
appropriate court proceedings; and the party against whom the corrupt award
was rendered may possibly seek relief in a tort action. It is more difficult to find
alternative remedies in case of newly discovered relevant facts.
It is not easy to make a choice between the juxtaposed considerations. If one
accepts revision as an option, we shall have an additional instrument securing a
just final outcome. At the same time, being subject to an extraordinary recourse
normally available against court decisions rendered in the forum State, arbitral
awards will become a part of the judicial system of the country of their origin in
a more pronounced way – which may very well yield controversies. Furthermore,
once revision is an option, it may be both used and abused, and some comparative
advantages of arbitration might be impaired. The question also arises as to what
would be the impact of revision on consistency on an international scale. Could
a successful revision could have an impact on recognition already granted in a
foreign country. The answer is probably negative, unless the country in which
recognition was granted would allow another revision (this time against the
195
Federal Court [Bundesgericht, BGer], Aug. 29, 2006, 4 P. 102/2006/rou (Switz.) (explaining
this requirement by stating “[d]ie neuen Tatsachen müssen erheblich sein, das heisst sie müssen
geeignet sein die tatsächliche Grundlage des angefochtenen Urteils zu verändern, so dass sie bei
zutreffender rechtlicher Würdigung zu einer anderen Entscheidung führen können”).
196
Bundesgerichtsgezetz [BGG] [Federal Supreme Court Act] June 17, 2005, SR 173.110
(Switz.) (replaced by the Supreme Court Act of January 1, 2007, which retained the
norms of the Judicial Organization Act regarding revision.
430
court decision on recognition). Let me add that the UNCITRAL Model Law does
not contemplate revision as a possible recourse against arbitral awards. The
dangers opened by a third recourse might very well outweigh its benefits.
C. The Relationship Between two Standard Recourses Against Arbitral Awards
C.1. The Abandoning of Double-Exequatur, and Some Ensuing Questions

I would like now to turn towards the two recourses which are uncontested: setting
aside and opposition to recognition and enforcement. The question arises what
is the relationship between the two recourses. Earlier, the courts of the country
which perceived the award as domestic retained a role in the shaping of a final
and binding decision which was fit to be recognized abroad. This led to a system
which was labeled as “double exequatur”. In order to be recognized (to receive
exequatur) abroad, an arbitral award had first to pass a scrutiny and to receive
exequatur on home ground; hence the term “double exequatur”. One of the
breakthroughs effected by the New York Convention was the elimination of this
system. Under the New York Convention, an award need not pass a scrutiny in
the country in which it is perceived to be domestic in order to be fit for recognition
abroad. But if there is no need anymore to bring evidence of a prior exequatur to
the country in which recognition is sought, the question still remains what are
the effects of an ongoing or of a completed scrutiny prompted by a motion for
setting aside. In other words, the question arises whether recognition should be
influenced by the circumstance that in the home country of the award setting
aside proceedings are ongoing – or that setting aside was granted. An answer
to these questions may be inferred from articles V(1)(e) and VI of the New York
Convention. The question may also be raised – and was raised in Germany
in particular – what are the consequences of not challenging the award in
the country in which it is perceived to be domestic. The recurring question is
whether the two recourses are interdependent, or independent of each other,
and if there is some interdependence, what legal consequences are engendered
by this relationship.
The interrelation between the two remedies is certainly influenced by various
concepts regarding the legal nature of the arbitral award. Court decisions are
shaped within the stricture of a given legal system, and according to the norms of
that legal system. Whether a decision is valid, whether an appeal is still possible,
depends on the procedural rules of the system. As far as arbitral awards are
concerned, the situation is not that clear. There are theories about a-national
awards. There is also the fact – even if one does not accept theories about a-national
awards – that there are more ways in which an award may be linked to a country,
and hence, an award may possibly be linked to more than one country. Speaking
of annulment which is relevant (and which may impede enforcement), Article
V(1)(e) of the New York Convention relies on two criteria: the place of making
431
the award, and the (procedural) laws under which the award was rendered.
The country where the award was rendered, and the country the procedural
law of which applied, may but need not coincide. Dilemmas engendered by the
plurality of possible linkages have nowadays a reduced relevance as a result of
the emergence of a clearly dominant linkage – that with the country where the
award was rendered. Nevertheless, the legal background of arbitral awards is
not as unequivocal as that of court decisions; the dependence of arbitral awards
on a given background is less pronounced – and more controversial. To take an
example, a court decision that was set aside in its home country loses its only
source of authority, and after annulment cannot be presented for recognition in
a foreign country. This may be clear, but it is much less clear whether the same
applies to an arbitral award where the primary source of authority is the will of
the parties, yet this source of authority is in cohabitation with the authority of
the State where the award was rendered (and possibly with the authority of the
State the procedural law of which was applied). The abandoning of the system
of double exequatur is also an indication of the distinctive nature of arbitral
awards, since they are recognizable abroad even without any contact with the
judicial authorities of their country of origin. A thorough analysis of the nature
and of possible linkages of the arbitral award would take us beyond the limits of
these lectures. I just want to take note of the problem, since it has an impact on
the shaping some specific questions which have emerged with regard to setting
aside and recognition and enforcement.
There are two angles under which the correlation between setting aside and
recognition and enforcement may be examined. One may examine the impact
of setting aside on recognition and enforcement, and one could also investigate
the correlation under the reverse angle, scrutinizing the bearing of recognition
on setting aside. The first angle is by far more relevant. This angle is the one
which received legislative attention, which prompted attention of the drafters
of the New York Convention, and which led to interesting cases in practice. The
reverse angle (the impact of recognition on setting aside) has a much more
limited significance. Nevertheless, there are some legislative provisions which
devote attention to the impact of recognition and enforcement on setting aside.
One example is Article 36(4) of the 1999 Korean Arbitration Act which states
that “[a]n application for setting aside the award may not be made after the
judgment for recognition or enforcement of the award rendered by a court of
the Republic of Korea becomes final and conclusive”.197 This rule posits the
judgment on recognition as a prior judgment, and investigates its impact on
possible setting aside proceedings. It has to be stated, however, that Article 36(4)
197
See Jae-Ho Choe & Kanaga Dharmananda, “The Enforcement of Arbitral Awards in Korea:
Procedure and Potential Challenges”, 2 Asian Int’l Arb. J. (2006) 60, 72 (commenting on
recognition and enforcement under the 1999 Korean Act).
432
contemplates a domestic situation, a Korean judgment on recognition, which

would preempt a motion for setting aside before a (Korean) court. Article 1061
of the 1998 German Arbitration Act (Book 10 of the Code of Civil Procedure)
contains a norm which contemplates an international setting. According to
Article 1061(3), “[i]f the award is set aside abroad after having been declared
enforceable, application for setting aside the declaration of enforceability may
be made”.198 This is only in part an example of those rare instances in which
the judgment on enforcement is posited as a prior judgment. The hypothesis
of Article 1061(3) is indeed setting aside which occurred after the award was
declared enforceable, but the primary focus of the norm is on the impact of
setting aside on an (already rendered) judgment on enforceability.
Staying with the angle which is much more relevant (that of the impact of
setting aside on recognition and enforcement), I would like to concentrate on
the possible consequences of three situations: 1) where setting aside was not
initiated; 2) where setting aside is pending; and 3) where a decision in setting
aside proceedings was rendered.
C.2. The Impact of the Circumstance that Setting Aside was not Initiated
Neither the New York Convention nor the Model Law link consequences (regarding
recognition and enforcement) to the fact that setting aside was not attempted
in the country in which the award is considered to be domestic. Nevertheless, a
position was taken in German practice according to which a party is precluded
from opposing recognition in Germany if setting aside in the home country of
the award is tied to a time limit, and if the party opposing recognition did not
seek setting aside within this time limit. This position became contested after the
adoption of the 1998 Arbitration Act (Book Ten of the Code of Civil Procedure)
which has adopted the New York Convention as part of German law, stating in
Article 1061 that recognition and enforcement of foreign awards shall be granted
in accordance with the New York Convention. Focusing on this new setting, an
authoritative position against preclusion was taken by Geimer in one of the best
known commentaries on the German Code of Civil Procedure.199
In the post 1998 German practice, the issue emerged in an interesting
case decided by the Oberlandesgericht (OLG) Karslruhe on March 27, 2006.200
198
Civil Procedure Statute [Zivilprozessordnung, ZPO], bk. X, as amended by the Act on
the Reform of the Law relating to Arbitral Proceedings [Gesetz zur Neuregelung des
Schiedsverfahrensrechts] 22 December 1997, Bundesgesetzblatt [BGBl] pt. I, art. 1 no.
7 at 1061 (F.R.G.).
199
See von Reinhold Geimer, Reinhard Greger & Richard Zöller, Zivilprozessordnung (ZPO)
(25th edn, 2005) §1061.
200
Karlsruhe Federal Court of Appeals [Oberlandesgericht Karlsruhe, OLG], 27 Mar. 2006,
2005, 9 Sch 2/06 (F.R.G.).
433
Recognition and enforcement of a Swiss arbitral award was sought and contested
in Germany. The Plaintiff (the party seeking recognition) submitted that the
Defendant (the opposing party) was precluded from relying on objections against
recognition, because it failed to challenge the award in due time in its country
of origin (Switzerland). The Defendant argued that it was not precluded from
raising grounds to refuse the declaration of enforceability. The grounds advanced
by the Defendant included alleged violation of due process and violation of ordre
public, referring to articles V(1)(b) and V(2)(b) of the New York Convention. It
was not contested between the parties that the Defendant did not seek setting
aside in Switzerland within the time limit set. The question was whether this
yields preclusion, whether the Defendant is or is not allowed to oppose recogni-
tion and enforcement after not having challenged the award in Switzerland.
The OLG Karlsruhe took note of the fact that the New York Convention – which
represents German law after 1998 – does not posit the failure to seek setting
aside as a basis for preclusion. It also took note of the fact that some German
commentators took a position according to which the appropriateness of earlier
court practice became questionable after the enactment of the 1998 Arbitration
Act. In balance, the OLG Karlsruhe pointed out that the New York Convention
does not prevent a practice which would be more pro-recognition. (“Das UNÜ
verhindert keine anerkennungsfreundlichere Praxis nationalen Rechts”.) The German
court concluded that the logic of the pre-1998 practice is still pertinent, and
it held that the Defendant was precluded from raising objections after having
failed to challenge the award in Switzerland within 30 days.201
The decision of the OLG Karlsruhe is based in essence on the concept of
waiver. We have seen that a failure to object during the arbitral proceedings
against an irregularity which takes place during these proceedings may amount
to waiver; it may impede the right to rely on such irregularity in post-award
proceedings. The question is whether the failure to take advantage of a possible
recourse amounts to a waiver of the right to use another recourse. A failure to
seek annulment of the award in Switzerland within 30 days clearly results in
the loss of the right to seek annulment in Switzerland. Does such a failure also
yield a loss of the right to oppose recognition in Germany? One could argue quite
persuasively that if a party becomes aware of a procedural irregularity during
the arbitral proceedings, good faith requires him to let this be known; the party
should seek remedy, and thereby offer a chance for correction to be made. If, for
example, a party was not invited to comment on an expert opinion, he should
assert his right and try to obtain an opportunity for comment, rather than to
store this argument and to use it if the award turns out to be an unfavorable
The time limit set by Article 89 of the Judicial Organization Act [Bundesgesetz über die
201
Organisation des Bundesrechtsplege] art. 89 (F.R.G.) (this Act was replaced on January
1, 2007 by the Supreme Court Act).
434
one (and when there is no more chance for correction). Waiver is essentially
based on a failure to act in good faith. Does good faith also requires a party to
seek annulment before opposing recognition? At this juncture, there is no more
opportunity to calculate, the award is known, and the procedure is completed. The
party who failed to seek annulment cannot be blamed for purposefully ignoring
the irregularity, and for keeping it as a hidden weapon against the contingency
of getting an unfavorable award.
I would like to submit that waiver on the grounds of a failure to seek setting
aside does not have a convincing support in the underlying principles of good
faith – comparable to the support of waiver contemplated with regard to failure
to object during the arbitration proceedings proper. Furthermore, waiver is
usually tied to participation in the arbitral proceedings without objection.202
It is difficult to extend this qualification to the situation where the arbitration
proceedings are over, and a party does not move for setting aside. The question
may also be raised whether the party who does not seek setting aside has any
guidance in either rules, or standards, or conscience, regarding the possible
consequences of not seeking annulment. There is no warning signal in the
applicable rules in force, because such waiver is without a basis in statutes in
force. Furthermore, it would be difficult to say that a party who does not seek
setting aside is acting in an abusive way, and should expect a warning signal at
least from his/her conscience.
In his comments on the OLG Karlsruhe decision, W. Gruber raises the question
whether waiver by way of not seeking annulment – if accepted at all – could
extend to grounds described in Article V(2) of the New York Convention, which
have to be scrutinized ex officio.203 In the same vein, a further doubt could be
added – again, assuming that waiver by way of not seeking annulment is accepted
at all. The question may namely be raised whether waiver could possibly extend
to all grounds that allow refusal of recognition, including those which are not
foreseen as grounds for setting aside in the home country of the award. One
cannot be penalized for not taking an opportunity if the opportunity did not exist.
Furthermore, the public policy ground appears to be beyond reach of a possible
waiver for two reasons. First, it has to be scrutinized ex officio, and this scrutiny
cannot be waived by party conduct. Second, grounds which are not identical
with the grounds for setting aside in the home country of the award necessarily
include public policy. It may be true that public policy is foreseen practically
everywhere as a ground for both setting aside and for refusing recognition, but
different countries have different public policies. The public policy ground is
202
In the wording of Article 4 of the Model Law: “… yet proceeds with the arbitration without
stating his objection …”.
203
W. Gruber, “Zur Präklusion von Anerkennungsverweigerungsgründen im Rahmen der
Vollstreckbarkeitserklärung ausländischer Schiedssprüche”, 5 SchiedsVZ (2006) 281.
435
specifically tied to the fundamental values of one distinct legal system. Thus,
the public policy ground in the home country of the award is not the same as
that in the country of enforcement.
In the well known Paklito v. Klöckner case, Judge Kaplan takes a quite clear-cut
position against treating as waiver the absence of an action for setting aside.
Judge Kaplan stressed that there is nothing in the New York Convention
“[w]hich specifies that a defendant is obliged to apply to set aside an award
in the country where it was made as a condition of opposing enforce-
ment elsewhere … It is clear to me that a party faced with a Convention
award against him has two options. Firstly, he can apply to the courts of
the country where the award was made to seek the setting aside of the
award … Secondly, the unsuccessful party can decide to take no steps to
set aside the award but wait until enforcement is sought and attempt to
establish a Convention ground of opposition”.204
Waiver based on failure to seek setting aside in the home country of the award
may be qualified as a pro-enforcement concept; it could increase the number of
cases in which enforcement is granted, and therefore it might also be qualified
as pro-arbitration. At the same time, it stands on a much more precarious legal
ground than conventional waiver (the one described in Article 4 of the Model
Law). The range and possible limits of waiver by way of not seeking annulment
are also uncertain – and the concept is not uncontested in Germany either (the
country in which it gained most recognition). For these reasons, the position
taken by the OLG Karlsruhe remains controversial – and there is more firm
ground behind the logic of Judge Kaplan.
C.3. Setting Aside Proceedings Pending

There are ongoing discussions about the proper meaning and weight of the
term “may” in Article V of the New York Convention.205 The question is whether
there was a deliberate option in favor of discretion behind the rule stating that
recognition “may” be refused if proof is furnished that one of the grounds for
refusing enforcement exists. There are no such discussions regarding Article
VI, where it is clear that discretion was meant. According to Article VI of the
New York Convention:
204
Supreme Court of Hong Kong, High Court, 15 January 1993, No. MP 2219, XIX Y.B.
Com. Arb. (1994) 664, 672-673 (reporting court decision: Paklito Investment Limited v.
Klockner East Asia Limited).
205
See e.g. Jan Paulsson, “May or Must under the New York Convention: An Exercise in Syntax
and Linguistics”, 14 Arb. Int’l (1998) 227.
436
“If an application for the setting aside or suspension of the award has
been made to a competent authority referred to in article V(1)(e), the
authority before which the award is sought to be relied upon may, if it
considers it proper, adjourn the decision on the enforcement of the award
and may also, on the application of the party claiming enforcement of
the award, order the other party to give suitable security”.
Here the word “may” cannot be put into different contexts; it is explained, and
tied to one meaning by the “if it considers it proper” additional explanatory
wording. In order words, the fact that setting aside proceedings were initiated in a
country which is considered by the New York Convention as a competent country,
may yield adjournment of the decision on recognition. Whether it actually will,
depends on the assessment of the court which is deciding on recognition. The
question arises what considerations should guide the court in deciding whether
“it is proper” to stay proceedings and to adjourn the decision. It is, of course, not
possible to define and to tie discretion to strict parameters, because in that case
this would not be discretion anymore. It is possible, however, to identify some
guiding principles. This was done in a quite apposite way in a 2004 Canadian
decision. In Powerex Co. v. Alcan, the trial court (British Columbia Supreme Court)
decided to suspend recognition proceedings in Canada concerning a $100 million
award in favor of Powerex, due to setting aside proceedings pending in the U.S.
At the same time, the court obliged Alcan to post as security to whole amount
of the award, and obliged Powerex to provide satisfactory security to guarantee
possible repayment. Judge Brown spelled out the considerations by which she
was guided in applying Article VI of the New York Convention. She stated:
“[T]he party seeking an adjournment must meet the threshold test of
establishing that there is a serious issue to be tried. Then the court
weighs the balance of convenience and irreparable harm. The remedy is
discretionary. The applicant must show that proceedings to set aside the
award have been commenced in the appropriate court of the originating
jurisdiction.
In weighing the balance of convenience and irreparable harm, the
court will give heed to judicial comity and the possibility of inconsistent
judgments. The court will recognize that a party seeking to enforce the
arbitration award will necessarily be prejudiced by delay. Also, there is
a potential prejudice to the party seeking the adjournment should the
court refuse the adjournment and enforce the award, only to have the
original jurisdiction set aside the award.
In assessing the balance of convenience, the court will consider a
number of factors, including the estimated time to complete the case in
the originating jurisdiction; whether the party opposing enforcement
is merely delaying the inevitable; whether a court in the originating
437
jurisdiction has already refused to set aside the award; the availability of
security and the possibility of asset removal prior to enforcement; and
the willingness of the party resisting enforcement to undertake diligent
prosecution of the action in the originating jurisdiction”.206
Applied to given circumstances, these considerations may – and do – lead towards

various results. One may add that probably more adjournment may be expected
in countries in which annulment in the country of origin generally yields refusal
of recognition, and which thus give more weight to annulment proceedings. At
the same time, if annulment in the “right” country may prompt revocation of
recognition (as this is explicitly stated in Article 1061/3 of the 1998 German
Arbitration Act), adjournment may be more easily denied, because this would not
cause irreparable harm (although it may still yield inefficient proceedings).
There are various party tactics not compatible with the spirit of fair arbitration
which could be countered by either granting, or by not granting adjournment.
It is quite possible – and it happens with some frequency – that setting aside is
sought without solid grounds, and for the only purpose of delaying enforcement.
If this is the case, denying adjournment is the right answer. It is also possible,
however, that the award has failures which make setting aside likely, and the
party favored by the award runs to seek recognition, in order to preempt setting
aside. In this case, adjournment appears to be the right option. It follows that
what is pro-arbitration in the process of application of Article VI is not always
one and the same option, but a good choice made between the two options in
specific individual cases. (It is, of course, easier to prescribe “good choice” as the
best solution than to exercise the right choice in complex situations.)
C.4. Setting Aside Proceedings Completed
C.4.1. A trend hinted by two controversial decisions

It is beyond doubt that the question of the impact of setting aside on recognition
proceedings is the most consequential (and the most controversial) issue in the
domain of the relationship between the two recourses against arbitral awards.
After the limited grounds on which recognition and enforcement of an award may
be opposed became standardized on the basis of the New York Convention, the
Powerex Corp. v. Alcan Inc. 2004 BCSC 876, June 30, 2004. It has to be mentioned that
206
Alcan appealed against this decision alleging that Judge Brown had no authority or
jurisdiction to make the order (obliging Alcan to deposit the full amount of the award),
and alternatively, that she exercised her discretion unreasonably. The British Columbia
Court of Appeals decided not to grant a leave to appeal regarding the alleged misuse of
discretion, given the wide discretion the court has under Article VI, and since no error of
principle was alleged. It granted a leave to appeal, however, regarding the jurisdictional
issue. (Powerex v. Alcan, 2004 BCCA 504, October 4, 2004).
438
question has arisen as to whether it is in line with the interests of international

commercial arbitration to recognize awards which were properly annulled in the
country where they were rendered. The issue received high visibility due to two
high profile – and quite controversial – cases decided in the nineties, and after
the debate which followed these cases. The Hilmarton and Chromalloy cases
are very well known, they have been widely commented, and I would first like
to summarize the essential facts.207
The Hilmarton case (sequences of Hilmarton decisions)

The quite unique sequence of Hilmarton decisions starts with a 1988 Geneva
award between Hilmarton and Omnium de Traitement et de Valorisation SA
(OTV). Hilmarton agreed to act as a legal and tax consultant to OTV, and in that
207
See e.g. Philippe Fouchard, “La portée internationale de l’annulation de la sentence
arbitrale dans son pays d’origine”, 3 Revue de l’arbitrage (1997) 329; Emmanuel Gaillard,
“L’exécution des sentences annulées dans leur pays d’origine”, Journal du droit international
(1998) 645; Emmanuel Gaillard, “The Enforcement of Awards Set Aside in the Country
of Origin”, 14 ICSID Rev.: Foreign Investment L.J. (1999) 16; Emmanuel Gaillard, “The
Enforcement of Awards Set Aside in the Country of Origin: The French Experience”, in
9 ICCA Congress Series: Improving the Efficiency of Arbitration Agreements and Awards:
40 Years of Application of the New York Convention (Albert Jan van den Berg ed., 1999)
505; Ena-Marlis Bajons, “Enforcing Annulled Arbitral Awards: A Comparative View”, 7
Croatian Arb. Y.B. (2000) 55; Krešimir Sajko, “Recognition and Enforcement of Foreign
Annulled Awards: A Dilemma”, 7 Croatian Arb. Y.B. (2000) 71; Dana H. Freyer, “United
States Recognition and Enforcement of Annulled Foreign Arbitral Awards: The aftermath
of the Chromalloy Case”, 17 J. Int’l Arb. (2000) 1; Dana H. Freyer & Hamid G. Gharavi,
“Finality and Enforceability of Foreign Arbitral Awards: From ‘Double Exequatur’ to the
Enforcement of Annulled Awards: A Suggested Path to Uniformity Amidst Diversity”, 13
ICSID Rev.: Foreign Investment L.J. (1998) 101; Hamid G. Gharavi, “Chromalloy: Another
View”, 12-1 Mealey’s Int’l Arb. Rep. (1997) 21; D. Brian King, “Enforcing Annulled Awards:
U.S. Court Chart Their Own Course”, 15-1 Mealey’s Int’l Arb. Rep. (2000) 15; Pierre
Lastenouse, “Why Setting Aside an Arbitral Award is not Enough to Remove it from the
International Scene”, 16 J. Int’l Arb. (1999) 25; William W. Park, “Duty and Discretion in
International Arbitration”, 93 Am. J. Int’l L. (1999) 805; Jan Paulsson, “Rediscovering the
N.Y. Convention: Further Reflections on Chromalloy”, 12-4 Mealey’s Int’l Arb. Rep. (1997)
20; David W. Rivkin, “The Enforcement of Awards Nullified in the Country of Origin: The
American Experience”, in 9 ICCA Congress Series: Improving the Efficiency of Arbitration
Agreements and Awards: 40 Years of Application of the New York Convention (Albert Jan van
den Berg ed., 1999) 528; Marc J. Goldstein, “International Legal Developments in Review:
1999: International Commercial Arbitration”, 34 Int’l Law. (2000) 519; Christopher R.
Drahozal & David Fraser, “Enforcing Vacated International Arbitral Awards: An Economic
Approach”, 11 Am. Rev. Int’l Arb. (2000) 451; Albert Jan van den Berg, “Enforcement
of Annulled Awards?”, 9 ICC Bull. (1998) 15; Thomas Webster, “Evolving Principles in
Enforcing Awards Subject to Annulment Proceedings”, 23 J. Int’l Arb. (2006) 201; Vesna
Lazić, “Enforcement of an Arbitral Award Annulled in the Country of Origin”, 13 Croatian
Arb. Y.B. (2006) 179.
439
capacity to assist OTV in obtaining a construction contract in Algeria. OTV won

the contract and – according to the consultancy agreement – was obliged to pay
Hilmarton 4% of the construction contract price. OTV paid only 2% (one half
of the agreed consultancy fee), and Hilmarton brought a claim in arbitration
for the full amount. In his award of August 19, 1988, the sole arbitrator found
that Hilmarton’s activities were contrary to Algerian statutory rules, that these
activities amounted to “traffic in influence”, and thereby violated Swiss public
policy.208 Hilmarton’s claim was denied. On motion by Hilmarton, on November
17, 1989 the award was annulled by the Geneva Court of Appeal.209 From this
point on, we have a number of parallel and inconsistent developments, and a
number of missed (or ignored) opportunities to bring about some standardization
of results. The only common feature of numerous incongruent decisions was
a pro-recognition inclination(!) One line of development is that pertaining to
the recognition of the 1988 award in France. In spite of a first-degree decision
granting annulment in Switzerland (against which an appeal was pending before
the Swiss Supreme Court), on February 26, 1990, the Paris Tribunal de grande
instance (TGI) recognized the award (granted exequatur). This decision was
confirmed by the Paris Cour d’appel (Court of Appeal) on December 19, 1991,210
and it was confirmed once again by the Cour de cassation (the Supreme Court of
France) on March 23, 1994.211 In these three decisions, the French courts followed
the following logic in avoiding reliance on Article V(1)(e) or on Article VI of the
New York Convention: According to Article VII of the New York Convention, the
Convention shall not deprive any party of any right granted by other treaties,
or by statutes of the country where the award is relied upon. The 1981 French
Code of Civil Procedure (CCP) sets specific grounds for refusal of recognition and
208
Bribery was also alleged, but was not proven.
209
Compare Cour de Justice du canton de Genève, 17 novembre 1989, 2 Revue de l’arbitrage
(1993) 342 and Court of Appeal [Cour de Justice], Geneva, 17 November 1989, XIX Y.B.
Com. Arb. (1995) 214 (reporting court decision: Hilmarton v. Omnium de Traitement et de
Valorisation) with Supreme Court [Tribunal Fédéral], 17 April 1990, XIX Y.B. Com. Arb.
(1994) 214 (reporting court decision by the Swiss Supreme Court confirming decision
of Geneva Court of Appeal).
210
See Ordinary court of original jurisdiction [Tribunal de grande instance, T.G.I.] Paris,
Feb. 27, 1990 (Fr.) (holding to grant exequatur requested by Omnium de Traitement et
de Valorisation of arbitral award reached at Geneva on Aug. 19, 1988); Cour d’appel de
Paris (1re Ch. Suppl.), 19 décembre 1991, 2 Revue de l’arbitrage (1993) 300, translated
in Court of Appeal [Cour d’appel], Paris, 19 December 1991 90 – 16778, XIX Y.B. Com.
Arb. (1994) 655 (reporting court decision: Hilmarton v. Omnium de Traitement et de
Valorisation).
211
Cour de cassation (1re Ch. Civ), 23 mars 1994, 2 Revue de l’arbitrage (1994) 327, translated
in Supreme Court [Cour de cassation] 23 March 1994, XX Y.B. Com. Arb. (1995) 663
(reporting court decision: Hilmarton v. Omnium de Traitement et de Valorisation).
440
enforcement of “arbitral awards rendered abroad or in international arbitration”.

These specific grounds, stated in Article 1502, do not include a ground like the one
stated in Article V(1)(e) of the New York Convention. In other words, annulment
of the award in the country where it was rendered is not one of the grounds on
which recognition may be denied under Article 1502 of the French CCP. The
Court of Appeals stressed: “The French law on international arbitration does not
compel French courts to take into account a setting aside decision rendered in a
foreign legal system”.212 The question of principle also arose whether an award
set aside in its country of origin remains in existence at all. To this question, the
French courts gave the following answer: “… the award rendered in Switzerland
is an international award, which is not integrated in the legal system of that
State, so that it remains in existence even if set aside …”.213 The outcome of this
sequence of Hilmarton decisions is undeniably a pro-recognition outcome (and
arguably a pro-arbitration outcome).
But the Hilmarton case produced a second, and also a third sequence of
developments. The second sequence pertains to new arbitral proceedings in
Switzerland (after the first award was annulled) and to recognition of the new
award, which was rendered on April 10, 1992, and which granted the claim of
Hilmarton. This second award was also recognized in France by the Nanterre
TGI on February 25, 1993 (although it reached the opposite conclusion to the
first award which was confirmed three times, including confirmation by the Cour
de cassation). And there was a third sequence as well. The Swiss court decision
which annulled the 1988 Hilmarton award may had no shelter under the New
York Convention (since this was a court decision, not an arbitral award), but it
did have a point of reliance in a bilateral treaty (the Franco-Swiss Convention
on Judicial Matters), and the Swiss court decision on set aside was recognized by
the Nanterre TGI on September 22, 1993. Both decisions of the Nanterre TGI
(one recognizing of the second award, and the other one recognizing annulment
of the first award) were confirmed by the Versailles Cour d’appel on June 29,
1995.214 In sum, everything was recognized. French courts recognized the first
Swiss award which denied the claim of Hilmarton, they recognized the Swiss
court decision which set aside this award, and they also recognized the second
award which granted Hilmarton’s claim. Moreover, in 1999, the second award,
212
Court of Appeal [Cour d’appel], Paris, 19 December 1991 90 – 16778, XIX Y.B. Com.
Arb. (1994) 655, 657.
213
Supreme Court [Cour de cassation], 23 March 1994, XX Y.B. Com. Arb. (1995) 663,
665.
214
Cour d’appel de Versailles, 29 juin 1995, 4 Revue de l’arbitrage (1995) 630 (reporting 2
court decisions: Omnium de Traitement et de Valorisation v. Hilmarton).
441
(the one which went in favor of Hilmarton) was recognized in England as well.215
Persistent pro-recognition attitudes yielded blatantly inconsistent outcomes.
In France, the Cour de cassation eventually found a way out of this disarray,
and brought about some (belated and limited) consistency. On June 10, 1997,
based on a recourse submitted by OTV, the French Supreme Court dismissed
and cancelled both Versailles decisions (the one which recognized the Swiss
annulment and the one which recognized the second award).216 The Cour de
cassation held that the existence of an irrevocable French decision – that on
recognition of the first award – prevents the acknowledgment in France of an
incompatible arbitral or judicial decision rendered in the same subject‑matter.
After this, only the first award remained valid in France. Inconsistency within
France was finally eliminated, but inconsistency between France and England
remained. The English recognition remains clearly at odds with the end‑result
reached in France. In France, the award in favor of OTV received exequatur
and was kept valid; while in England, it was the second award – that in favor of
Hilmarton – which gained recognition.
The Chromalloy cases

In Chromalloy, another high profile case, an award which was rendered and
later annulled in Egypt, was recognized both in France and in the United States.
The key issue was again that of the relevance of annulment in later recognition
proceedings. The award was rendered in Egypt on August 24, 1994, ordering
the State of Egypt to pay to Chromalloy about $ 17 million with interest, and
ordering in turn Chromalloy to pay to Egypt about 600.000 pounds sterling
with interest. On November 13, 1994, Egypt moved for annulment before the
Egyptian Court of Appeal, and annulment was granted on December 5, 1995,
on the grounds of failure to apply Egyptian administrative law.
In the French case, exequatur was granted by the court of first instance
on May 4, 1995. Egypt appealed, referring to Article V(1)(e) of the New York
Convention, and also relying on other alleged procedural shortcomings (absence
of proper motivation, and Egypt’s inability to present its case). The Paris Cour
d’appel took the same position as in the Hilmarton case.217 Relying on Article
VII of the New York Convention, it did not consider annulment in Egypt as an
impediment to recognition, since Article VII directs the court to apply the more
favorable French rules on recognition of foreign awards, which do not contain
215
Omnium de Traitement et de Valorisation SA v. Hilmarton Ltd., [1999] 2 Lloyd’s Rep. 222
Q.B.D. (Com. Ct.) (U.K.).
216
Cour de cassation (1re Ch. civ.), 10 juin 1997, 3 Revue de l’arbitrage (1997) 376 (reporting
court decision: Omnium de Traitement et de Valorisation v. Hilmarton).
217
Cour d’appel de Paris (1re Ch. C), 14 janvier 1997, 3 Revue de l’arbitrage (1997) 385
(reporting court decision: République arabe d’Egypte v. Société Chromalloy Aero Services).
442
a provision like that of Article V(1)(e). The Cour d’appel also reiterated that the
award rendered in Egypt is an international award, which is by definition not
integrated into the legal system of the State in which it was rendered, and hence
remains in existence in spite of annulment.218 Thus, annulment in Egypt was
not considered as a defense against recognition. Other defenses were considered,
but were not accepted, and recognition was confirmed by the Paris Cour d’appel
on January 14, 1997.
In the U.S. Chromalloy case, Chromalloy sought recognition and enforcement
before the U.S. District Court, District of Columbia on October 28, 1994.219 This
was about two weeks before Egypt moved for annulment before the Egyptian Court
of Appeal. On March 1, 1995, Egypt filed a motion with the U.S. District Court
to adjourn recognition and enforcement. On December 5, 1995, the Cairo Court
of Appeal annulled the award. Hence, just as in the Hilmarton case, set aside
was ordered by a court of the country which is identified in Article V(1)(e) of
the New York Convention as a relevant country (the country in which the award
was made). Egypt sought refusal of recognition under Article V(1)(e) of the New
York Convention. As in the French Chromalloy case, this argument was rejected.
The reasoning of the French and of the American courts have similarities, but
they are not identical. The District Court held that Article V(1)(e) only states
that a court may refuse recognition, while Article VII of the Convention, instead
of providing for a discretionary standard, provides that the Convention shall not
deprive any party from relying on the laws of the country in which recognition
is sought. The Court stated: “Article VII, on the other hand, mandates that this
Court must consider CAS’ claims under applicable U.S. Law”.220 The District Court
also considered the fact that the arbitration agreement included the following
stipulation: “The decision of the said court shall be final and binding and cannot
be made subject to any appeal or other recourse”. (In this context, “said court”
clearly refers to the court of arbitration.) In the opinion of the District Court, this
provision excluded annulment by Egyptian courts. “In other words, the parties
agreed to apply Egyptian Law to the arbitration, but, more important, they agreed
that the arbitration ends with the decision of the arbitral panel”.221
The Chromalloy cases – and the American Chromalloy case in particular – gave
rise to many comments and controversies. I would like to spell out two possible
arguments against the reasoning of the District Court. First, reliance on Article
VII of the New York Convention is justified if the country where recognition is
218
Id. at 395 (explaining that “La sentence rendue en Egypte étant une sentence internationale
qui, par définition, n’était pas intégrée à l’ordre juridique de cet Etat de sorte que son existence
est demeurée établie malgré son annulation …”).
219
Chromalloy Aeroservices v. Egypt, 939 F. Supp. 907 (D.D.C. 1996).
220
Id. at 914.
221
Id. at 913.
443
sought has its own norms on recognition and enforcement of foreign awards, other
than the norms of the New York Convention. This is indeed the case in France,
since Book IV/Title VI/Chapter I of the 1981 Code of Civil Procedure contains
such norms under the title “The Recognition and Enforcement of Arbitral Awards
Rendered Abroad or in International Arbitration”.222 The U.S. Arbitration Act,
however, does not contain such separate norms. The District Court applied § 10
of the U.S. Federal Arbitration Act (9 U.S.C.) and concluded that it does not allow
the vacating of the award on the ground that it was set aside in its country of
origin. But § 10 does not speak of foreign arbitral awards! It speaks of the power
of a U.S. court to vacate an award rendered within a given U.S. district. Within
the system of the U.S. Arbitration Act, recognition and enforcement of foreign
arbitral awards is contemplated in Chapter 2 of the U.S. Arbitration Act, which
simply adopted the New York Convention, stating in § 201: “The Convention on
the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958
shall be enforced in the United States courts in accordance with this chapter [9
U.S.C. §§ 201 et seq.]” Hence, the privileged grounds which could possibly be
relied upon under Article VII are not those stated in § 10 of the U.S. Act; in the
case of the United States (as in many other countries) Article VII is actually not
relevant, because it leads to the very same grounds as those which are listed in
Article V of the New York Convention.
There is also a problem with the line of reasoning according to which the
stipulation on a final and binding award, subject to no appeal or other recourse,
amounts to an exclusion of the remedy of annulment. First of all, court scrutiny is
normally beyond the control of the parties. As was discussed earlier, only a small
number of countries (not including Egypt) allow contractual restriction of court
review.223 Furthermore, in Switzerland – the country which first introduced into
its legislation the option of a contractual restriction of court review – courts took
a quite cautious attitude towards clauses which purportedly limit judicial review.
Formulations stating that the award is “final and binding”, or that “application
to state courts is excluded”, were not accepted as sufficient.224 Wordings which
were accepted in Swiss practice as a valid waiver are wordings like “[t]he parties
waive all challenge of the award in accordance with Art. 192 of the Private
International Law Statute”.225 This approach is logical, because the “final and
binding” wording is commonly used to exclude any appellate level – but not to
exclude setting aside proceedings. In the Chromalloy case, the wording of the
222
N.C.P.C. tit. VI, ch. Ier. (1981) (“La reconnaissance et l’exécution forcée des sentences arbitrales
rendues à l’étranger ou en matière d’arbitrage international”).
223
See, supra ch. II, subsec. B.1.
224
See Swiss Federal Tribunal, First Civil Court, Judgment of 4 February 2005, Case
4P.236/2004 (translation), 23 ASA Bulletin, No. 3 508 (2005).
225
Decision of October 31, 2005 ATF 4P 198/2005 (Switz.) (Motorola v. Uzan).
444
waiver is somewhat more specific (“final and binding and cannot be made subject
to any appeal or other recourse”), but still close to general formulations which do
not even aim to exclude setting aside as a specific recourse. Furthermore, even
assuming that it was the specific intent of the parties to exclude setting aside, such
contractual restriction of Egyptian court control could not have been effective,
since it is not allowed under Egyptian law. As a matter of fact, it is not allowed
under U.S. law either. There is no provision in the U.S. Arbitration Act permitting
such contractual restriction, and contractual exclusion of judicial review has
no support in U.S. court practice either. The issue was raised in the Hoeft v. MVL
Group Inc. case, which was already discussed in Chapter II.226 The Hoeft case is
a domestic case, but the logic followed by the court clearly applies (or maybe a
fortiori applies) to international cases as well. In Hoeft v. MVL the parties to the
arbitration agreement provided that that award was not “subject to any type of
review or appeal whatsoever” (a wording probably even somewhat stronger than
the one contemplated in the Chromalloy case). The Second Circuit held:
“In urging us to enforce the parties’ apparent agreement to insulate the
substance of the arbitration award from judicial review, the Hoefts rely
on the general principle of freedom of contract and the more specific
canon of deference to private agreements to arbitrate. But the freedom
to contract, like any freedom, has its limits, and the Hoefts’ reliance on
the federal policy favoring arbitration overlooks several key assumptions
that undergird that policy. It is in part because arbitration awards are
subject to minimal judicial review that federal courts voice such strong
support for the arbitral process”.227
Continuing the same line of thinking, the Second Circuit points out the importance
of a balance between the flexibility of private dispute resolution mechanisms
and the need for some limited but critical safeguards, formulated as reasons for
challenge. Following this line of thinking, the Second Circuit added:
“This balance would be eviscerated, and the integrity of the arbitration
process could be compromised, if parties could require that awards,
flawed for any of these reasons, must nevertheless be blessed by federal
courts. Since federal courts are not rubber stamps, parties may not, by
private agreement, relieve them of their obligation to review arbitration
awards…”.228
226
Hoeft v. MVL Group, Inc., 343 F.3d 57 (2d Cir. 2003).
227
Id. at 63.
228
Id. at 64.
445
C.4.2.The aftermath of Hilmarton and Chromalloy

The Hilmarton and the Chromalloy cases have placed France and the United
States into a position of frontline alliance regarding the treatment of annulled
awards. This alliance has become questionable, however, in the light of new cases
and new developments. The French position has not changed, it was actually
confirmed by some new decisions recognizing awards which were set aside in
the country of their origin.229 A considerable change has taken place, however,
in the United States; one could actually qualify this change as a turnaround.
Seeking an explanation for divergent new developments, one could take note of
the fact that, although it was not less controversial than the French Hilmarton
case, the U.S. Chromalloy case had less solid ground under U.S. law than the
Hilmarton cases had under French law. (Let us repeat that the Chromalloy court
scrutinized the Egyptian award under § 10 of the U.S. Arbitration Act which does
not cover recognition of foreign awards. It also relied on a contractual provision
which purportedly excluded setting aside, although party stipulations cannot
exclude setting aside in Egypt; not even if they were meant to do so – which
was also questionable). But it is important to point out that new U.S. cases do
not only bring a criticism of the reasoning of the District Court in Chromalloy;
they also re-raise the basic issue of the treatment of annulled awards. Three
years after the Chromalloy decision, the Second Circuit opted in Baker Marine to
refuse recognition of two Nigerian awards which were set aside by the Nigerian
High Court. The Nigerian court concluded that in the Chevron award, the
arbitrators had improperly awarded punitive damages, gone beyond the scope
of the submissions, incorrectly admitted parole evidence, and made inconsistent
awards.230 The trial court refused recognition on the grounds of Article V(1)(e)
of the New York Convention. On appeal, relying on the Chromalloy case, Baker
Marine argued that recognition should be granted under Article VII of the New
York Convention, which allows the application of more favorable domestic (U.S.)
norms. Baker Marine pointed out that the pertinent Nigerian set aside grounds
were not available under the U.S. Federal Arbitration Act. The Second Circuit
did not accept this argument. In reaching its conclusions, the Second Circuit did
not directly overrule Chromalloy, and did not completely exclude the possibility
of recognition of annulled awards, but it took a strong position of principle in
229
See e.g. Cour d’appel de Paris (1re Ch. C), 29 septembre 2005, 3 Revue de l’arbitrage (2006)
695 (reporting court decision: Direction générale de l’aviation civile de l’Emirat de Dubai v.
Société International Bechtel).
230
Baker Marine, Ltd. v. Chevron, Ltd., 191 F.3d 194, 196 (2d. Cir. 1999) (refusing recognition
of two awards: one in the amount of $2.23 million in favor of Baker Marine against Danos,
and another one, awarding Baker Marine $750,000 against Chevron).
446
favor of respecting annulment in the country where the award was made.231
Citing Van den Berg, the Second Circuit stressed:
“[A]s a practical matter, mechanical application of domestic arbitral
law to foreign awards under the Convention would seriously under-
mine finality and regularly produce conflicting judgments. If a party
whose arbitration award has been vacated at the site of the award can
automatically obtain enforcement of the awards under the domestic
laws of other nations, a losing party will have every reason to pursue
its adversary ‘with enforcement actions from country to country until
a court is found, if any, which grants the enforcement’”.232
In the same year when the Baker Marine decision was rendered, a New York
district court refused to recognize an award which had been annulled in Italy. In
Spier, an Italian arbitration panel rendered an award in favor of the American
party (Spier) against the Italian company Calzaturificio Tecnica.233 The award
was set aside in Italy on the grounds that the arbitrators had exceeded their
authority. The set aside was confirmed by the Italian Supreme Court (Corte di
cassazione). In 1996 (after set aside was initiated, but before the proceedings in
Italy were completed) Spier sought recognition in New York. The district court
first stayed proceedings until the Italian litigation was completed. In spite of
annulment in Italy, Spier returned to the Southern District to seek enforcement.
The Southern District considered both Chromalloy and Baker Marine, and decided
to follow Baker Marine – again without explicitly overruling Chromalloy.234 The
231
The Second Circuit rather than directly overrule Chromalloy chose to distinguish it on
two grounds of a questionable relevance. In Chromalloy the party seeking recognition
was a U.S. citizen, while Baker Marine was not. (This is a distinction without a direct
basis in the New York Convention.) The Second Circuit also found a distinguishing factor
in the circumstance that in Baker Marine, there was no provision in the contract which
could have been perceived as a stipulation precluding judicial review. (This distinction is
also of questionable relevance, since numerous authors – many of them referred to in
footnote 19 – have pointed out that the stipulation in Chromalloy was not unequivocal,
and even if it would have been, it could not have displaced the statutory norms of the
place of arbitration).
232
191 F.3d 194, at 197 n.2. The quote indicated in the last two lines is a quote from Van den
Berg, The New York Arbitration Convention of 1958: Towards Uniform Judicial Interpretation
(1981) p. 355.
233
Spier v. Calzaturificio Tecnica, S.p.A., 71 F. Supp.2d 279 (S.D.N.Y. 1999).
234
In Spier, the district court took note of the fact that the party seeking recognition was a
U.S. citizen, just like in the Chromalloy case – and unlike in Baker Marine. Thus, citizen-
ship of the party requesting recognition could not have been posited as a distinguishing
factor in this case. The stipulation purportedly excluding judicial review (relied upon in
Chromalloy) remained, however a factor distinguishing Spier from Chromalloy.
447
district court concluded that Spier provided “[n]o adequate reason for refusing
to recognize the judgments of the Italian courts”.235
The departure from the logic of Chromalloy (again, without its formal
rejection) received another most convincing confirmation in the TermoRio case
decided on May 25, 2007.236 In this case, an arbitral award of $60 million was
rendered in favor of TermoRio, a contractor, against Electranta, a public utility
owned by the Colombian government. The award was set aside in Colombia by the
Consejo de Estado (“Council of State”), Colombia’s highest administrative court.
The ground for setting aside was not really in line with contemporary trends
in international commercial arbitration. The parties agreed on arbitration “in
accordance with the Rules of Conciliation and Arbitration of the International
Chamber of Commerce”. The Consejo de Estado held that arbitration with its
seat in Colombia had to be conducted in accordance with Colombian law, and
Colombian law in effect at the date of the contract did not permit the use of ICC
procedural rules.237 One may safely assume that it was not the persuasiveness
of the ground for annulment in the given case that prompted the U.S. courts to
deny recognition and enforcement. What we have here is rather a clear change
of perspective (since Chromalloy) with regard to annulled awards. In reaching
their conclusions, both the trial court and the appellate court were mindful of
the well-established federal policy in favor of arbitration. In its “Analysis” the
Court of Appeals devoted a subsection to “The Validity of a Foreign Judgment
Vacating an Arbitration Award”, and introduced this subsection with a number of
pro-arbitration quotations from prominent Supreme Court decisions (Mitsubishi,
Scherk, Dean Witter Reynolds).238 The District of Columbia Circuit stated, for
example, that the Supreme Court has recognized an “emphatic federal policy
in favor of arbitral dispute resolution” (Mitsubishi), that “federal policy applies
with special force in the field of international commerce” (Mitsubishi); a passage
from the Scherk case was also quoted stating that the purpose of the New York
Convention was to “encourage the recognition and enforcement of commercial
arbitration agreements in international contracts and to unify the standards by
which agreements to arbitrate are observed and arbitral awards are enforced in
Spier v. Calzaturificio Tecnica, S.p.A., 71 F. Supp.2d 279, 287 (S.D.N.Y. 1999).

235
TermoRio S.A. E.S.P. v. Electrificadora del Atlantico S.A. E.S.P., 421 F. Supp. 2d 87 (D.D.C.
236
2006), aff ’d TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928 (D.C. Cir.. 2007) (reaching
U.S. Court of Appeals for the District of Columbia Circuit on appeal by TermoRio and
Leaseco.
The arbitration clause specified Barranquilla, Colombia, as the seat of arbitration.
237
Compare TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 930-932 (D.C. Cir.. 2007)
238
with Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614 (U.S. 1985),
Scherk v. Alberto-Culver Co., 417 U.S. 506 (U.S. 1974), and Dean Witter Reynolds Inc. v. Byrd,
470 U.S. 213 (U.S. 1985).
448
signatory countries”.239 Having identified this point of departure, the District of

Columbia Circuit took a position according to which the observance of Article
V(1)(e) is in compliance with pro-arbitration policies. The Court stated that the
“appellants are simply mistaken in suggesting that the Convention policy in
favor of enforcement of arbitration awards effectively swallows the command of
Article V(1)(e)”.240 Dismissing the claim for recognition, the District of Columbia
Circuit relied on two arguments, both pointing towards the same result – although
not in perfect harmony with each other. The first argument is a more radical
one, and it was formulated in the following sentence: “For us to endorse what
appellants seek would seriously undermine a principal precept of the New
York Convention: an arbitration award does not exist to be enforced in other
Contracting States if it has been lawfully ‘set aside’ by a competent authority
in the State in which the award was made”.241 This would actually exclude any
discretion and maneuvering room in applying Article V(1)(e). According to the
logic of the quoted sentence, if a country with “primary jurisdiction” over an
arbitral award sets the award aside, the award does not exist anymore, hence
recognition is not possible.242 This “principal precept” would have made further
scrutiny unnecessary. Nevertheless, the District of Columbia Circuit undertook
an investigation as to whether the Colombian annulment could be considered as
violating U.S. public policy. This analysis is not fully consistent with the position
that an award set aside in a primary State does not exist; or, at least, it creates
some room for exceptions. The position taken by the Court was that public policy
considerations could lead towards disregarding an annulment by a court with
primary jurisdiction, but the standard should be very high, implicating “basic
notions of justice to which we subscribe”. The Court conceded that “there is a
narrow public policy gloss on Article V(1)(e) of the Convention”, but concluded:
“[t]he test of public policy cannot be simply whether the courts of a secondary
State would set aside an arbitration award if the award had been made and
enforcement had been sought within its jurisdiction”.243
239
TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 933-934 (D.C. Cir.. 2007) (quoting
Mitsubishi and Scherk).
240
Id. at 937.
241
Id. at 936.
242
Karaha Bodas Co., L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bunni, 364 F.3d
274 (5th Cir. 2004) (elaborating carefully the notion of relevant country as “country
with primary jurisdiction”. The TermoRio decision (just as several earlier U.S. decisions)
refers to this notion, which under Article V(1)(e) defines which annulment (annulment
in which country) is relevant).
243
TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 939, (D.C. Cir.. 2007).
449
C.5. Court Decisions Denying Arbitral Jurisdiction, and their Impact on Recognition
of Foreign Awards
It has been said – and this is certainly not a discovery – that one of the hallmarks
of modern treatment of international commercial arbitration is the reduction
of possible avenues of judicial review to two: setting aside, and opposition to
recognition and enforcement. What characterizes the relationship between primary
and secondary jurisdiction is the correlation between these two recourses – and
this pattern of correlation is in the main focus of this subchapter. There are,
however, correlations between primary and secondary jurisdiction which do
not exactly fall into this pattern. I would like to refer to a German case in which
the court investigated the impact of a court decision rendered in China (the
country where the arbitral award was rendered) on recognition of the award
in Germany. Thus, the basic mold is again that of the impact of a court decision
rendered in the country with primary jurisdiction on recognition in the country
with secondary jurisdiction. But there was a difference too. The court decision
rendered in China may have had effects close to setting aside, but it was not a
decision on annulment.
In this case, a party sought in Berlin recognition of an arbitral award rendered
in Shanghai.244 Jurisdiction of the arbitrators was based on a contested arbitration
clause which read: “Arbitration 15.3 IIC Rules, Shanghai shall apply”.245 The
respondent challenged the validity of this arbitration clause on the grounds that
Chinese law requests the specification of the arbitral institution or tribunal, rather
than just a specification of the applicable rules. In order to clarify the matter, the
claimant approached the People’s Court of Wuxi, seeking a declaratory judgment
regarding the validity of the arbitration agreement. The Wuxi court issued a
“final and binding order” on September 2, 2004, stating that the arbitration
agreement was invalid under Chinese law. In the meantime, the arbitral award
was rendered on March 30, 2004, and the claimant applied for recognition and
enforcement in Germany. The arising problem had similarities with the problem
of recognition of annulled awards, but there was also an important difference.
German courts have generally refused recognition of awards set aside in their
country of origin,but in this case, the Berlin court was in no position to rely on
Higher Regional Court of Berlin [Kammergericht Berlin], May 18, 2006, 20 Sch 13/04
244
(F.R.G.) (concentrating on the issue of reciprocity between Germany and China); Axel
Neelmeier, Anmerkung zu KG Urteil 20 Sch 13/04 v. 18.05.2006, 2 SchiedsVZ 102
(2007) (commenting court decision); Philipp Beckers, “German Court takes First Step on
the Road to Mutual Recognition with China”, International Law Office, May 31, 2007,
<http://www.internationallawoffice.com/Newsletters> (newsletter) (commenting also
court decision).
Article 15.3 represented a reference to an arbitration clause in the FIDIC Green Book.
245
450
Article V(1)(e) of the New York Convention.246 The Wuxi decision was not a
decision on annulment contemplated in Article V(1)(e). The emerging option
was the recognition of the Wuxi decision as a foreign court decision, without
reliance on Article V(1)(e). It is interesting to mention at this point that in a
number of U.S. decisions mentioned above, the court speaks of recognition of
foreign court decisions (referring to the decision of the foreign court which an-
nulled the award).247 Such articulation may technically be debatable, although it
does not change the outcome. Article V(1)(e) actually does not impose or imply
formal recognition of the foreign court decision on annulment; it rather allows
refusal of recognition (of the award) simply by way of heeding the fact that the
award was set aside in a country with primary jurisdiction. (Of course, in order to
establish whether the award was set aside in a country with primary jurisdiction
as defined in Article V(1)(e), the recognizing court has to undertake a scrutiny
which boils down to a control of jurisdictional requirements.)
In the Berlin case, Article V(1)(e) was not pertinent, because the Wuxi decision
was not a decision regarding annulment of the award prompted by a motion
of the Respondent (the losing party). It was instead a decision prompted by a
motion of the Claimant (the party which prevailed), and it was a decision which
dealt with the validity of the arbitration agreement, rather than with the award.
One may submit that the Berlin court had an option to deal with the issue of
jurisdiction through the vehicle of Article V(1)(a), and to investigate itself the
validity of the arbitration agreement under Chinese law. The Berlin court did
not leave this option out of sight, but concentrated on another course of action,
and – within proceedings on recognition of a foreign arbitral award – subjected the
Wuxi decision to a formal scrutiny according to the German rules on recognition
of foreign court decisions.248 The Wuxi court decision was recognized, and the
Shanghai award was denied recognition on the grounds that the arbitration
agreement was invalid according to the final and binding decision of the Wuxi
court. Article V(1)(a) was heeded in a supporting argument. The Berlin court
246
See Vesna Lazić, “Enforcement of an Arbitral Award Annulled in the Country of Origin”,
13 Croatian Arb. Y.B. (2006) 179, 189-191; Felix Weinacht, “Enforcement of Annulled
Foreign Arbitral Awards in Germany”, 19 J. Int’l Arb. (2002) 313, 336 (stating that
“German courts will want to be satisfied that the foreign court decision itself does not fall
short of the minimum jurisdictional and due process requirements as generally required
by the German rules applicable to the recognition of foreign court decisions”).
247
Compare Baker Marine, Ltd. v. Chevron, Ltd., 191 F.3d 194, 197 (2d. Cir. 1999) (stating that:
“Baker Marine has shown no adequate reason for refusing to recognize the judgments
of the Nigerian court”) with Spier v. Calzaturificio Tecnica, S.p.A., 71 F. Supp.2d 279, 288
(S.D.N.Y. 1999) (stating that “Spier has shown no adequate reason for refusing to recognize
the judgments of the Italian courts”).
248
Considering in particular the conditions set in § 328 of the German Code of Civil
Procedure.
451
did address the issue of the validity of the arbitration clause under V(1)(a), yet
it decided not to rely on expertise (Gutachten) which would have been ordered
in the German recognition proceeding itself, but rather on the decision of the
Wuxi court. It took a deferential attitude towards the findings of the Chinese
court regarding arbitral jurisdiction, stating that the Chinese position had to
be accepted, since it was not obviously wrong (“offenkundig falsch”) but rather
represented an arguable option (“eine gut vertretbare Möglichkeit”).249
Court interference with arbitral proceedings (rather than with the award)
is generally not available, but the issue of the validity of the arbitration agree-
ment itself appears before courts with some frequency. This happens in either
“embedded suits” (when a party seeks remedy from a court while the other party
opposes the jurisdiction of the court relying on an arbitration agreement), or in
“independent suits” (when a party addresses a court seeking an order referring
the parties to arbitration). The question arises what should be the impact of such
court decisions on recognition proceedings. An interesting new amendment of
the Swiss Private International Law Act has dealt with a related issue. According
to Article 186/1bis (in force since March 1, 2007), an arbitral tribunal “shall
decide on its jurisdiction notwithstanding an action on the same matter between
the same parties already pending before a state court or another arbitral tribunal,
unless there are serious reasons to stay the proceedings”.250 Thus, an arbitral
tribunal may proceed in spite of a pending court case where the issue is that of
arbitral jurisdiction. Our question is whether the court deciding on recognition
could and should defer to a foreign court decision holding that the arbitration
agreement is not valid. According to Article V(1)(a) of the New York Convention,
the recognizing court can, of course, scrutinize itself the validity of the arbitration
agreement. Can it also defer to a scrutiny which was undertaken by another court?
According to Article V(1), recognition may only be refused if the party opposing
recognition “furnishes proof ” that one of the grounds for denying recognition
exists – in our case, when it furnishes proof that the arbitration agreement was
not valid. Is the decision of a court of primary jurisdiction such a proof? And
more importantly, should the recognizing court scrutinize, or recognize such
proof? Let me try to explain the difference. When the Berlin court recognized the
Wuxi decision, it investigated essentially the formal side of the Chinese court
order, in line with established modern standards of recognition of foreign court
Axel Neelmeier, “Anmerkung zu KG Urteil 20 Sch 13/04 v. 18.05.2006”, 2 SchiedsVZ

249
(2007) 102, 102 (commenting court decision).

This new provision may have been prompted by a 2001 decision of the Swiss Federal
250
Tribunal in the Fomento case, in which the Federal Tribunal set aside a preliminary award
on jurisdiction, because the arbitrators did not stay their proceedings pending a ruling on
jurisdiction of the Supreme Court of Panama. Federal Court [Bundesgericht, BGer] May
14, 2001, ATF 127 III 279, 4P 37/2001 (Switz.) (Fomento de Construcciones y Contratas
S.A. v. Colon Container Terminal S.A.).
452
decisions. These standards led the Berlin court to focus on the question whether
the Wuxi court had jurisdiction, whether it observed due process, and whether
the reciprocity issue posed and impediment to recognition. The question whether
the arbitration agreement was actually valid under Chinese law, and whether,
accordingly, the arbitrators had jurisdiction, was not faced independently by the
Berlin court itself. What the Berlin court did was to undertake a proper scrutiny
of the Wuxi court decision under § 328 of the German Code of Civil Procedure,
and to establish that the conclusion of the Wuxi court regarding arbitral
jurisdiction was not “obviously wrong”. This is different from reaching its own
conclusions regarding the validity of the arbitration agreement on the basis of
proof submitted by the parties. The argument can be made that the approach
of the Berlin court yields more deference towards the court decision, and less
deference towards the arbitral award than would follow from the standard set
by the New York Convention.
C.6. What Interrelation between the Two Recourses is Pro-Arbitration? – And in

particular, is the Recognition of Annulled Awards Pro-Arbitration?
Since the number of recourses against arbitral awards has been reduced to two,
we have witnessed some (rather cautious) steps in the direction of an extension
of the list of possible avenues of challenge. Revision has been introduced as an
option in Switzerland, and recognition of a foreign court decision (other than a
decision on annulment) was posited in Germany as a possible ground for refusing
recognition of the arbitral award. On the preceding pages some reservations
have been stated regarding these options.251 Let me add that steps towards the
extension of the list of possible recourses were taken in very few countries, and the
number of cases implementing such steps is also quite small. There are many more
cases dealing with the interrelation between the two recourses, demonstrating
a shift of the scene of search for pro-arbitration results. During the past one or
two decades, what has prompted most discussion, ideas, and controversies, is
not the number or the profile of the possible recourses, but rather the issue of
their interdependence (or lack of interdependence). In various contexts, both
independence and interdependence may be posited – and were indeed posited – as
pro-recognition and pro-arbitration. The Karlsruhe court which held that a failure
to seek setting aside in Switzerland amounts to a waiver of the right to oppose
recognition in Germany built its reasoning on an assumption of interdependence,
and emphasized that this was “recognition-friendly” (“anerkennungsfreundlich”).
In the Hilmarton and Chromalloy cases the underlying assumption was that of
independence (annulment in the country with primary jurisdiction was perceived
as not having impact on recognition in a country with secondary jurisdiction);
251
See Section B and subsection C.5 in this Chapter.
453
and this was again qualified as a pro-recognition and pro-arbitration approach.

The U.S. cases departing from Chromalloy (Baker Marine, Spier, TermoRio and
others) have also endeavored to identify their position and their arguments as
pro-arbitration. A pattern has arisen which has some basic similarity with the
Kyocera blueprint. The dispute is not between two sides one of which is pro-
arbitration while the other has reservations towards arbitration. The debate is
between two sides, both pro-arbitration, who cannot agree as to what is actually
pro-arbitration.
And the question is a difficult one. Let us return for a moment to Hilmarton
and Chromalloy as examples. One could argue that recognition of those awards
the acceptance of which is not mandated by the New York Convention is
arbitration-friendly, since it gives more credit to foreign awards than required
by the standard set by the Convention. But there is another side to the coin.
Vacatur in the country of origin of the award allows new arbitral proceedings
and a new (possibly different) award in the same case. If the first award were
recognized in spite of annulment, we may wind up with two different awards
in the same case, both with a chance of worldwide recognition. This is one of
the lessons from the Hilmarton cases, and this result is not arbitration-friendly.
Once annulment in the country of origin is not heeded, the recognition of two
opposite awards rendered in the same dispute becomes possible. All court deci-
sions in the Hilmarton case show deference toward arbitration, yet the result
is confusing and does not help the reputation of the arbitration process. With
hindsight one might ask whether it would not have been more pro-arbitration
to show less deference at the outset, to stay the first recognition proceedings
in accordance with Article VI of the New York Convention, and to observe the
outcome of setting aside procedures in Switzerland.252
Focusing on the issue which has gained most attention (that of recognition
of annulled awards), I would like to distinguish some types of solution which
have emerged in practice and in scholarly writings.
a) One option is adherence to the position that an arbitral award set aside in
the country of primary jurisdiction simply does not exist anymore, and
hence, cannot be recognized. The problem with this approach is that it
too readily equates arbitral awards with court decisions. It is true that
the uncontested distinction between primary and secondary jurisdiction
shows that arbitral awards do have an anchor, or at least do have ties
which are more relevant than others. Within the setting of the New York
Convention, rejection of the award in the country of primary jurisdiction
It has to be added that the French rules applicable by virtue of Article VII of the New
252
York Convention do not provide for refusal of recognition on the grounds of annulment
itself. The Swiss annulment could have provided, however, arguments in favor of refusal
of recognition based on Article 1502 of the French New Code of Civil Procedure.
454
(setting aside) matters, and represents a ground for refusing recognition

in another country; at the same time, rejection of the award in a country
of secondary jurisdiction is not posited in Article V(1)(e) – or anywhere
else in the New York Convention – as a ground for refusing recognition
elsewhere. But, as this was mentioned earlier, Article V(1)(e) contemplates
more than one relevant link which may establish a primary jurisdiction,
and this in itself diminishes the relevance and weight of these links when
they are compared with one unequivocal anchor, attachment to one
legal system. Furthermore, the arbitrators (and their award) owe their
authority to the parties; an arbitral award is recognizable abroad even if
it had no contact with any judicial authority of the country of primary
jurisdiction. Thus, the existence or non-existence of the award does not
simply flow from the judicial system of the country of origin. The 1961
European (Geneva) Convention on International Commercial Arbitration
provides another argument demonstrating that the anchor of arbitral
awards cannot be equated with that of court decisions. Article IX of this
Convention speaks of the relevance of setting aside in recognition proceed-
ings. It states – like the New York Convention does – that only setting aside
in the right country (country with primary jurisdiction) is relevant, and
it defines the right country in the same way the New York Convention
does. But – unlike the New York Convention – Article IX sets an added
precondition to refusing recognition on the grounds that the award was
set aside. According to Article IX, setting aside shall constitute a ground
for refusal of recognition only if it took place in the right country, and for
the right reason (i.e. for one of the reasons listed in Article IX, which are
actually identical with the grounds listed in Article V/1 of the New York
Convention). This clearly implies that an award annulled in its country
of origin is not simply non-existent; it may have effects in other countries
depending on the ground on which setting aside was ordered.
b) The remaining difficult question is when can a court disregard annulment
rendered in the “right” country if the question arises outside the realm of
the Geneva Convention (which has 31 member States). The answer given
in the Hilmarton case – which has remained the French answer – is the
most radical one. One has to note that this approach is not just the result
of a flexible interpretation of the New York Convention; it is based on some
specific rules of the French Code of Civil Procedure which provide distinct
norms on recognition of foreign arbitral awards – and these norms do not
include an equivalent of Article V(1(e). In other words, the French approach
is not a world-wide option on the basis of the New York Convention, it is
an option created by distinctive norms of one legal system. One cannot
deny that the French approach may bring about more recognition. This
approach has also been criticized by many authors who have pointed out
455
its disadvantages – and responses to such criticism (by Gaillard and others)
have also been given in scholarly writings.253 One of the key objections
is that of inconsistency. Gaillard points out that awards which are valid
in one country and not valid in another country may be called “limping
awards”, just as there are “limping marriages” and “limping divorces”.
He adds that “International law is replete with examples of this type of
situation”.254 This is certainly true. Non-observation of annulment in the
country of origin will not yield a unique type of situation, it will rather
yield a solution belonging to a broader category. But this broader category
is a cluster of undesirable solutions. “Limping awards”, just as “limping
marriages”, “limping divorces” and like phenomena, are problems; they
represent a disadvantage, which could be weighed against the advantage
of more recognition. The disadvantage will increase if a second award is
rendered after the first one was annulled. This situation may be compared
with one of the ramifications of limping marriages and divorces: the
conclusion of a second marriage, in spite of the fact that the divorce is
limping, that the divorce is recognized in some countries, while in other
countries the first marriage is still valid. When a second award is rendered,
the option is not between supporting or not supporting the result of the
arbitration process; instead, a choice has to be made between two awards
based on the same agreement to arbitrate. The French approach grants
priority to the first award. This raises some questions. The first question is
on what grounds a court could refuse recognition of the second award. In
the Hilmarton case, the Cour de cassation refused recognition of the second
award on the grounds that the recognition of the first award created a res
judicata situation. This may be a logical way to consistency, but only after
one has missed an opportunity to assure consistency within the setting of
the New York Convention proper – by way of reliance on Article V(1)(e).
One could add that if one gives some credit to the courts of the country of
origin, it becomes likely that the French approach will often yield recognition
of the wrong award (of the award which was set aside for some defect in
the country of primary jurisdiction). Furthermore, one could also argue
that it is the second award which is closer to the agreement of the parties,
on the understanding that the lex arbitri (which yielded the annulment
of the first award) was chosen by the parties.
See e.g. Emmanuel Gaillard, “The Enforcement of Awards Set Aside in the Country of
253
Origin: The French Experience”, in 9 ICCA Congress Series: Improving the Efficiency of
Arbitration Agreements and Awards: 40 Years of Application of the New York Convention (Albert
Jan van den Berg ed., 1999) 505 (summarizing critical observations and responses to
these observations).
Id. at 523.
254
456
c) The solution offered by the 1961 European Convention has some clear
advantages. It replaces discretion with rather clear-cut rules by way of
identifying the “right reasons”, and thus distinguishing between those
annulments which will and those which will not be observed in recognition
proceedings. It also represents a pressure towards unification of grounds
for annulment by setting an international standard for annulment of
awards. This pressure would, of course, be much greater if the wording
of Article IX of the European Convention were to find place in the New
York Convention,255 which is at this time – August 2007 – ratified in 142,
rather than in only 31 countries. The setting of an international standard
for annulment of awards has also found support in scholarly writings.256
One also has to point out that Article IX of the European Convention
does not eliminate the problem of “limping awards” and conflicting
awards – certainly not before an international standard becomes widely
accepted.
d) A further option would be reliance on one of the points of support in
Chromalloy, the one which has not been formally overruled. This point
of reliance is the contractual provision which stated that the decision of
the court of arbitration shall be final and binding and cannot be made
subject to any appeal or other recourse. In the opinion of the district
court, “the parties agreed to apply Egyptian law to the arbitration, but,
more important, they agreed that the arbitration ends with the decision
of the arbitral panel”.257 The district court held that this was an exclusion
of further court scrutiny, and that it was effective. This reasoning may
not have been followed in other cases, but it was not overruled either.
The stipulation on exclusion of recourse – or rather the absence of such
stipulation – was mentioned as a distinguishing circumstance in cases
which did not follow Chromalloy and refused recognition of annulled
awards. It has already been pointed out in these lectures that there are
strong reasons against party interference with the extent of court scrutiny
of arbitral awards (unless such interference is specifically permitted by
255
U.N. GAOR, 54th Sess., Supp. No. 17, U.N. Doc. A/54/17 ¶ 376 (May 17-June 4, 1999)
(considerering this option as a possibility).
256
See e.g. Pieter Sanders, Quo Vadis Arbitration? Sixty Years of Arbitration Practice (Kluwer,
1999) 73; Pierre Jean Pointet, “The Geneva Convention on International Commercial
Arbitration”, 3 Union Internationale des Avocats, International Commercial Arbitration (Pieter
Sanders ed., 1965) 263; Jan Paulsson, “Enforcing Arbitral Awards Notwithstanding a Local
Standard Annulment”, 9 ICC Bulletin (1998) 1; Thomas Webster, “Evolving Principles
in Enforcing Awards Subject to Annulment Proceedings”, 23 J. Int’l Arb. (2006) 201,
226.
257
Chromalloy Aeroservices v. Egypt, 939 F. Supp. 907, 912 (D.D.C. 1996).
457
law).258 The proposition that the parties may impose on the recognizing
court standards of interpretation of Article V(1)(e) has not received
support in either practice or in scholarly writings. An interesting excep-
tion is the opinion of Drahozal, who does not give unqualified support to
Chromalloy, but permits the possibility of a contractual determination of
the relevance of setting aside in recognition proceedings.259 Unlike the
Chromalloy court, Drahozal submits that non-enforcement of vacated
awards should be the default rule. He also puts forward that the specific
contractual provision relied upon by the Chromalloy court is not suitable
to effect enforceability of vacated arbitral awards. Drahozal suggests,
however, that contractual provisions with such an effect are possible,
and offers an example of such a stipulation: “The arbitral award may
be enforced even if set aside by a competent authority in the country
in which the award was made”,260 It is important to note that while the
Chromalloy court appears to allow stipulations which would effectively
contract out setting aside (even in countries like Egypt which – like most
countries – does not allow contractual interference with annulment),
the Drahozal argument has a narrower focus. He does not argue in favor
of the option of a contractual elimination of setting aside, he speaks of
a contractual restriction of the effects of setting aside in countries with
secondary jurisdiction. This more subtle version of contractual interference
with court scrutiny still faces a major stumbling block. With very few
limitations, party autonomy extends nowadays to the whole arbitration
process – but does not extend to court scrutiny. The contracting States
of the New York Convention instructed (or, at least, empowered) the
courts to refuse recognition of awards set aside in a country with primary
jurisdiction. The question arises whether private parties to a contract can
simply overrule the “may” language of Article V and replace it with “must
not”. There is also a policy reason against contractual interference with
the remaining limited court scrutiny. The point was made in the Hoeft
decision that one must not overlook the assumptions that “undergird”
the federal policy favoring arbitration “It is in part because arbitration
awards are subject to minimal judicial review that federal courts voice
such strong support for the arbitral process”.261
258
See Chapter II, and Chapter IV.C.4.1 discussing the Chromalloy case.
259
Christopher R. Drahozal & David Fraser, “Enforcing Vacated International Arbitral Awards:
An Economic Approach”, 11 Am. Rev. Int’l Arb. (2000) 451.
260
Id. at 475.
261
458
e) A realistic option is the one which has been exemplified in the post-
Chromalloy U.S. decisions. This is the option of positing non-recognition
of awards set aside in a country with primary jurisdiction as a default
rule, yet permitting recognition in exceptional circumstances when public
policy considerations are at stake. This approach might strike a balance
between the need for consistency and the need for more recognition,
which are both important ingredients of the reputation of international
commercial arbitration. If non-recognition of annulled awards remains a
strong default rule, this could eliminate (or reduce to a minimum) conflict-
ing awards, and conflicting treatment of awards. At the same time, more
pro-recognition maneuvering room will be created by departing from the
precept that annulled awards do not exist, and by allowing recognition of
annulled awards in truly exceptional cases. The TermoRio court speaks of
a “narrow public policy gloss on Article V(1)(e) of the Convention”.262 In
the words of Park: “The touchstone for deference to court judgments about
arbitration, as to arbitral awards themselves, lies in the absence of fraud
and undue influence, and conformity with basic notions of international
public policy”.263 Other formulations expressing the same basic idea may
be (and will be) found. Pro-arbitration results will very much depend on
the courts deciding on recognition, and on their sense for balance.
V. Concluding Observations
It is logical that at various junctures of judicial control of arbitration awards
the interests of arbitration have been spelled out, reckoned with, supported and
contested. Court control of arbitral awards is the articulation of a compromise
between various interests, including, of course, the interests of arbitration. For a
long time the divide between juxtaposed quests and interests was rather clear-cut.
Arbitration was striving for some territory of its own, and this territory had to be
taken from the domain of the courts. As it was explained by Lord Campbell in Scott
v. Avery, what was at stake was – at least for a certain period – not only territory,
but also money.264 Without fixed salaries and depending upon fees, judges were in
competition with arbitrators who were also hoping to get a chunk of the available
fees. This juxtaposition of interests yielded stances and attitudes which became
characteristic traits of the historic development of arbitration. One may submit
that attitudes shaped in the pursuit of arbitration were more distinct and more
262
TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 939, (D.C. Cir.. 2007).
263
William W. Park, “Duty and Discretion in International Arbitration”, 93 Am. J. Int’l L.
(1999) 805, 823.
264
See supra note 22 and the text linked to footnote 14 in Chapter I.
459
persistent – which is understandable, since it was arbitration which had to break

new ground. The key endeavor within the quest for arbitration was the endeavor
to have more autonomy. Autonomy was needed, first of all, in order to be able to
shape an alternative method of dispute settlement. The struggle for autonomy
implied a confrontation (or at least rivalry) with courts, and was combined with
an endeavor to achieve a distinct reputation. The conquest has been successful,
and this success has shaped a new reality. A considerable autonomy has indeed
been gained, and a system was built with strong reliance on party autonomy.
Today, we have a world-wide pattern of international commercial arbitration
shaped through the vehicle of party autonomy, but also through international
conventions (most importantly the New York Convention) which have given
international value to arbitral awards. Another important contribution to the
shaping of this world-wide pattern was yielded by a process of harmonization
supported by UNCITRAL enactments, and also by a growing awareness of
the need to follow successful standards. Years of pursuit have demonstrated
that autonomy (first of all, party autonomy) is the winning card: the more
autonomy, the more chances for arbitration. A pro-autonomy stand has become
a deep-rooted instinct of the supporters of arbitration. This instinct was logical
and justified while party autonomy had powerful opposition, and while it had
to break new ground on which a viable system of alternative dispute resolution
could be shaped. But now that such a system has become a reality, things have
become more complex, and some established value-judgments and slogans have
been put in a new perspective. Nowadays, there are more and more instances in
which party autonomy appears in opposition to the newly shaped system – and
this is where it is much more difficult to take sides (even for those who identify
themselves as partisans of arbitration).
This is the problem-pattern which perplexed the Kyocera courts. In its first
decision in 1997, the 9th Circuit followed the established impulse, and stated that
“the primary purpose of the FAA [Federal Arbitration Act] is to ensure enforce-
ment of private agreements to arbitrate, in accordance with the agreements’
terms”.265 In this perspective, the observance of a party agreement on extended
judicial review was posited as just another victory for party autonomy and for
arbitration. But six years later, the 9th Circuit looked at the same problem-pattern
(and at the same case) from another perspective, and reached the following
conclusion: “Private parties may design an arbitration process as they wish,
but once an award is final for the purposes of the arbitration process, Congress
has determined how the federal courts are to treat that award”.266 I would like
to add that in this new decision, the pro-arbitration rhetoric – and commitment
– remained intact. But the pro-arbitration objective was no longer equated with
265
266
460
the objective of lending support to party autonomy. Instead, the interests and
benefits of an established system were weighed against the specific expression of
autonomy (against a stipulation on expanded judicial review). In explaining why
this new and different decision was nevertheless pro-arbitration, the 9th Circuit
stated: “Broad judicial review of arbitration decisions could well jeopardize the
very benefits of arbitration, rendering informal arbitration merely a prelude to
a more cumbersome and time-consuming judicial review process”.267
One might observe that in the Kyocera case, there were specific reasons for
questioning the synergy between pro-autonomy and pro-arbitration inclinations.
In Kyocera, the contested new ground which was envisaged in the party stipulation
was actually new ground for the courts, and not for the arbitrators. But this is
not the whole explanation. Cases and legislative steps which have emerged in the
contemporary period have shown that a certain tension has emerged between
the pursuit of autonomy on one hand, and the interests of arbitration on the
other hand. Further steps along the path which had led to victories have recently
encountered more reluctance than applause. We have seen that a negative
attitude prevailed in international practice regarding those party stipulations
as well, which – in the absence of specific legislative authorization – endeavored
to restrict, rather than to extend judicial control. Recent legislative attempts to
restrict judicial control have also been marked by caution, and some hesitations.
In 1985, following established inclinations, and endeavoring to posit Belgium as
a distinctively arbitration-friendly environment, the Belgian legislator abolished
setting aside as an option altogether, if none of the parties had nationality,
residence, or seat in Belgium. But this radical foray did not push Belgium ahead
on the list of countries competing for more international arbitration cases. The
1985 Belgian Act gave rise to wavering, and this prompted the legislator to take
a step back in 1998, to a more cautious second frontline crafted by the 1987
Swiss PIL Act, and joined by only four countries (Belgium, Peru, Sweden and
Tunisia). After a successful system was established, it is just not simple and clear
anymore whether less judicial control and more party governance will further
improve, or rather jeopardize the system.
In recent times, dilemmas have emerged regarding attempts to modify
the system, and also with respect to interpretation of established standards.
Among attempts to modify the system, we have discussed some initiatives which
represent an attempt to bring about some modest expansion of judicial control,
like for example, the decision of the Swiss Supreme Court to introduce revision.
It is too early to evaluate responses to this Swiss initiative, but its is important
to mention that the emerging objections are not only rooted in the fact that
court control is expanded by another avenue, but also in the concern that an
267
Id. at 998.
461
established balance may become jeopardized.268 This is the same concern which
led to hesitation and change of attitude in the post-Chromalloy U.S. decisions.
It has come to awareness that the present modest level of judicial control is not
the enemy anymore, but a part of the system, and a part of the compromise
which had prompted a broad pro-arbitration inclination.
The point I am making is not that arbitration has been brought to perfection,
and that any change will only put at risk a well-designed balance. There is, of
course, room for changes, for new ideas, and improvements. What I am trying to
say is that the revolutionary phase (or, let us be more cautious, a revolutionary
phase) is over. One of the signals indicating that the revolution is over is the
number of the “revolutionaries”, of the advocates of a pro-arbitration orienta-
tion. By now, their number has reached a quite comfortable majority. Just like
the number of people opposing communism nowadays in former communist
countries, compared with the number of dissidents in communist times.
The cases and legislative acts scrutinized in these lectures are developments
which have taken place during the past two decades – and this is the time period
which I would label as “contemporary”.269 These contemporary developments
show that the pro-arbitration priority has become somewhat more elusive, and
more complex than it was earlier. The Chromalloy case was decided under the
banner of arbitration, but it gave a pause to the supporters of arbitration (and
divided them too) when the effects and implications of the decision were more
carefully analyzed. The post-Chromalloy decisions also heed pro-arbitration
considerations (like consistency, or the logic of a successful system), but at a price.
It would really be difficult, for example, to qualify the specific outcome of the
TermoRio case as a victory for arbitration. A characteristic of the contemporary
environment of arbitration is a world-wide reduction of grounds for setting
aside (following the standard set by the New York Convention). Yet the number
of exceptions is not negligible, and the ground on which the Colombian Consejo
de Estado set aside the award is not in line with harmonization, and does not
follow the international standards. The Geneva (European) Convention offers
a quite efficient vehicle against aberrant setting aside, but this vehicle is only
available within the 31 Member States of that Convention. Within the system of
the New York Convention it is much more difficult to balance legitimate interests.
And again, the dispute is not between a pro-arbitration side, and another side
which has reservations towards arbitration. The debate is between two sides,
both pro-arbitration, who cannot agree as to what is actually pro-arbitration.
Issues which are nowadays on the agenda – and which have attracted wide at-
tention – are typically not issues which yield easy distinctions between partisans
The first case in which request for revision was granted is a 2006 case.
268
With the exception, of course, of some cases considered in the introductory chapter with
269
the purpose of indicating historic parallels.
462
and opponents. Most participants in the debates clearly gravitate toward the
pro-arbitration side, and identify it as “our side”; but the question emerges as
to which side is our side.
The “which side is our side” quandary has not only emerged in cases dealing
with possible expansion or reduction of judicial control. The same dilemma has
also characterized interpretation of standards which are within the uncontested
realm of judicial control, but which have an impact on the actual borders (as
well as on the outcome) of such control. It has been relatively easy to follow a
pro-arbitration drift in the interpretation of waiver, estoppel, and related concepts.
Some hesitations did emerge, for example with regard to the distinction between
permissible and impermissible waivers, but by and large, contemporary cases
show more reliance on waiver, which typically yields more recognition – and
more procedural fairness. It is more difficult to identify the truly pro-arbitration
side with regard to consideration of the relevance of some transgression within
the arbitration proceedings. One could argue – and it has been argued – that
considering relevance is pro-arbitration, because this would allow recognition
even in the presence of a procedural deficiency which amounts to a ground
for denying recognition (or for setting aside), if it can be demonstrated that
this deficiency had no relevance (that it had no impact on the outcome on the
merits). But in order to establish whether a deficiency did or did not have an
impact on the merits, one has to undertake a scrutiny of the merits. A green light
for court scrutiny of the merits in order to assess the relevance of a procedural
error might save some awards, but at the expense of the principle of restrained
court examination of awards. Faced with this type of problem, what advances
the cause of arbitration is not a simple push for more recognition of arbitral
awards, but a careful search for balance.
There are not many easy questions left. The easy questions have been answered.
Of course, whether a question is easy or not, depends very much on historical
circumstances, on the level of information, and on established priorities at the
time when the question is raised. What looks clear and simple now may not have
looked clear and simple before the enactment of the New York Convention half
a century ago. But even considering this necessary caveat, one may submit that
before the contemporary period, while it may not have been easy to stand up
for the cause of arbitration, it was not really difficult for those who adopted a
pro-arbitration preference to take sides. Following a pro-arbitration drift, it was
rather easy to take sides when the issue was whether the parties can or cannot
submit to arbitration disputes which may arise in the future, whether courts should
or should not have the right to reinvestigate the merits of the arbitral decision,
or whether all recourses allowed against court decisions should also be allowed
against arbitral awards. It was obvious that arbitration could not develop a distinct
ADR character, and could not build up its comparative advantages deprived of
any sovereign maneuvering room. I would add that it is likewise clear that a total
463
absence of judicial control would not enhance confidence, and would not be in
the interest of arbitration as a system for resolving disputes. Enforceability and
international credence require some input from the State (from courts), and this
cannot take place otherwise than through some limited control. Furthermore,
a built-in opportunity to correct some egregious mistakes increases the value
of the system, as long as the manner of control is shaped in such a way as to
exclude (or reduce to a minimum) chances for foot-dragging and abuse.
In the contemporary period (which one could also call “post-revolutionary
period”) new patterns of discourse have come to the fore. When faced up to
issues which characterize contemporary judicial scrutiny of arbitral awards,
the pro-arbitration priority is nowadays typically not contested, it is rather
shared by two sides who are arguing for different results. By the same token,
the pro-arbitration priority has become more elusive.
464
Table of Cases
Austria
OLG Wien, Dec. 15, 1998, docket no. 13 R 154/98 g, ecolex 1999/96 (1998)
(Austria).
Oberste Gerichtshof [OGH] [Supreme Court] 9 Sept., 1987, 3 Ob 80/87, IPRax
1989 (Austria).
Oberste Gerichtshof Case No. Ob41/04z of March 17, 2005, reported in Juristische
Blätter, 2005/12, p. 801
Canada
Powerex Corp. v. Alcan Inc., [2004] BCSC 876 (Can.).
Powerex Corp. v. Alcan Inc., [2004] BCSC 504 (Can.).
China
Supreme Court of Hong Kong, High Court, 15 January 1993, No. MP 2219, XIX
Y.B. Com. Arb. (1994) 664 (reporting court decision: Paklito Investment Limited
v. Klockner East Asia Limited).
Supreme Court of Hong Kong, High Court, No. MP 2411 13 July 1994, XX Y.B.
Com. Arb. (1995) 671 (reporting court decision: China Nanhai Oil Joint Service
Corporation Shenzen Branch v. Gee Tai Holdings Co. Ltd).
Cour d’appel de Caire (Ch. 91, com.), 27 juillet 2005, 2 Revue de l’arbitrage (2006)
475 (reporting court decision: Société T3A Industrial v. Société des Entrepreneurs
arabes).
Egypt
Cour d’appel de Caire (Ch. 91, com.), 27 juillet 2005, 2 Revue de l’arbitrage (2006)
475 (reporting court decision: Société T3A Industrial v. Société des Entrepreneurs
arabes).
Ministry of Defense of the Republic of Egypt v. Chromalloy Aeroservices Inc. – Cairo
Court of Appeal, decision of December 5, 1995, XXIVa YCA 265 (1999)
465
England
Omnium de Traitement et de Valorisation SA v. Hilmarton Ltd., [1999] 2 Lloyd’s
Rep. 222 Q.B.D. (Com. Ct.) (U.K.).
Lesotho Highlands Development Authority v. Impreglio S.p.A. et al., [2002] EWHC
2435 (Comm) (U.K.).
Lesotho Highlands Development Authority v. Impreglio S.p.A. et al., [2003] EWCA
Civ. 1159 (U.K.).
Lesotho Highlands Development Authority v. Impreglio S.p.A. et al., [2005] UKHL
43 (U.K.).
France
L’Alliance v. Prunier, Cour de cassation, Chambre civile, 10 July 1843 (English
text found in Tibor Várady, Arthur Von Mehren & John Barcelo, International
Commercial Arbitration: A Transnational Perspective (Thomson & West 3d edn,
2006) 39).
Cour d’appel de Paris (1re Ch. Suppl.), 19 décembre 1991, 2 Revue de l’arbitrage
(1993) 300, translated in Cour d’appel [Court of Appeal], Paris, 19 December
1991 90 – 16778, XIX Y.B. Com. Arb. (1994) 655 (reporting court decision:
Hilmarton v. Omnium de Traitement et de Valorisation).
Nanterre TGI, decision of February 25, 1993.
Cour de cassation (1re Ch. Civ), 23 mars 1994, 2 Revue de l’arbitrage 327 (1994),
translated in Cour de cassation [Supreme Court] 23 March 1994, XX Y.B. Com.
Arb. (1995) 663.
Cour de cassation (1re Ch. civ.), 10 juin 1997, 3 Revue de l’arbitrage (1997) 376
(reporting court decision: Omnium de Traitement et de Valorisation v. Hilmarton).
Cour de cassation (1re Ch. Civ.), 6 avril 1994, 2 Revue de l’arbitrage (1995) 263
(reporting court decision: Buzichelli Holding v. Hennion).
Cour d’appel de Paris (1re Ch. C), 27 octobre 1994, 2 Revue de l’arbitrage (1995)
263 (reporting court decision: Société de Diseno v. Société Mendes).
Cour d’appel de Paris (1re Ch. C), 14 janvier 1997, 3 Revue de l’arbitrage (1997)
385 (reporting court decision: République arabe d’Egypte v. Société Chromalloy
Aero Services).
Cour de cassation (1re Ch. Civ.), 6 juilliet 2005, 4 Revue de l’arbitrage (2005)
993 (reporting court decision Golshani v. Gouvernement de la République Islamique
d’Iran).
466
Cour de cassation (1re Ch. civ.), 6 juillet 2005, 2 Revue de l’arbitrage (2006)
429 (reporting court decision: Société AIC-El Amiouny international contracting
& trading v. Société Skanska).
Cour d’appel de Paris (1re Ch. C), 29 septembre 2005, 3 Revue de l’arbitrage (2006)
695 (reporting court decision: Direction générale de l’aviation civile de l’Emirat de
Dubai v. Société International Bechtel).
Germany
Oberlandesgericht Hamburg [OLG] [Hamburg Federal Court of Appeals], 3 April,
1975, 29 Monatsschrift für deutsches Recht 11 (1975) 940 (F.R.G).
Oberlandesgericht Köln, June 10 1976, IV Y.B. Com. Arb. (1979) 258 (reporting
court decision: Danish buyer v. German (F.R.) seller).
Bundesgerichtshof [BGH] [Federal Court of Justice] Aug. 17, 2000, III ZB 43/99
(F.R.G.), available at <http://www.bundesgerichtshof.de>.
Bundesgerichtshof [BGH] [Federal Court of Justice] Feb. 1, 2001, III ZR 332/99
(F.R.G.), available at <http://www.bundesgerichtshof.de>; Bundesgerichtshof,
1 February 2001, 19 ASA Bulletin (2001) 325.
Oberlandesgericht Karlsruhe [OLG] [Karlsruhe Federal Court of Appeals] 27
Mar. 2006, 2005, 9 Sch 2/06 (F.R.G.).
Kammergericht Berlin [Higher Regional Court of Berlin], May 18, 2006, 20
Sch 13/04 (F.R.G.) (concentrating on the issue of reciprocity between Germany
and China).
Italy
Cass., sez. un., 30 May 2006, n. 12973 (court decision: Profil (Hungary) v.
Technofrigo (Italy)).
New Zealand
Methanex Motonui Ltd. v. Spellman, High Court of Auckland, CL 3/03, 1 NZLR
95 (2004).
Norway 2. Enforcement Court, Vardǿ, 10 July 2002, XXVIII Y.B. Com. Arb. (2003)
821 (reporting court decision: Pulsarr Industrial Research B.V. (Netherlands) v.
Nils H. Nilsen A.S. (Norway))
Russia
No. 5G01-142, Supreme Court – RF, November 9, 2001 (cited in William R.
Spiegelberger, “The Enforcement of Foreign Arbitral Awards in Russia: An
467
Analysis of Relevant Treaties, Laws, and Cases”, 16 Am. Rev. Int’l Arb. (2005)
261, 293).
Switzerland
Tribunal Fédéral [Supreme Court], 17 April 1990, XIX Y.B. Com. Arb. (1994)
214 (reporting court decision by the Swiss Supreme Court confirming decision
of Geneva Court of Appeal).
Tribunal federal Suisse, 11 mars 1992, 1 Revue de l’arbitrage (1993) 115 (reporting
court decision: société P. v. société S Ltd.).
Obergericht, Zug, 27 Februar 1998, 18 ASA Bulletin (2000) 363.
Bundesgericht [BGer] [Federal Court] May 14, 2001, ATF 127 III 279, 4P
37/2001 (Switz.) (Fomento de Construcciones y Contratas S.A. v. Colon Container
Terminal S.A.).
Bundesgericht [BGer] [Federal Court] Apr. 3, 2002, 4P 282/2001 (Switz.).
Bundesgericht [BGer] [Federal Court] Dec. 4, 2004, 4 P. 208/2004/lma
(Switz.).
Swiss Federal Tribunal, First Civil Court, Judgment of 4 February 2005, Case
4P.236/2004 (translation), 23 ASA Bulletin, No. 3 (2005) 508.
Motorola v. Uzan (ATF 4P 198/2005) – Swiss Federal Tribunal, Decision of
October 31, 2005
Tribunal fédéral, Ière Cour civile, arrêt de 10 novembre 2005 (4P. 154/2005),
24 ASA Bulletin, No. 1 (2006) 106 (reporting court decision: République du
Liban v. Y. et Z.).
Tribunal fédéral, Ière Cour civile, arrêt du 4 août 2006 (4P.105/2006), 25 ASA
Bulletin (2007) 105 (reporting court decision: X v. I. Y. et al.).
Bundesgericht [BGer] [Federal Court] Aug. 29, 2006, 4 P. 102/2006/rou
(Switz.).
Tschechische Republik v. X, Schweizerisches Bundesgericht, I. Zivilabteilung,
4P.114/2006 bie, September 7, 2006.
The Netherlands
SPP (Middle East) Ltd. v. Arab Republic of Egypt (reported in President of the
District Court of Amsterdam, July 12 1984, X Y.B. Com. Arb. (1985) 487).
468
Arrondissementsrechtbank [Court of First Instance], Zutphen, 11 November

1998, XXIV Y.B. Com. Arb. (1999) 724 (reporting court decision: China Packaging
Design Corporation v. SCA Recycling Reukema Trading B.V.).
United States
Tobey v. County of Bristol, 23 F. Cas. 1313 (C.C.D., Mass. 1845).
Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F. 2d 978 (2d. Cir. N.Y.
1942).
Scherk v. Alberto-Culver Co., 417 U.S. 506 (U.S. 1974).
Fils et Cables d’Acier de Lens v. Midland Metals Corp., 584 F. Supp. 240 (D.C.N.Y.
1984).
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614 (U.S.
1985).
Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (U.S. 1985).
Volt Info. Scis. v. Bd. Of Trs., 489 U.S. 468 (U.S. 1989).
International Standard Elec. Corp. v. Bridas Sociedad Anonima Petrolera, Indus. Y
Comercial, 745 F. Supp. 172 (S.D.N.Y. 1990).
Chicago Typographical Union No. 16 v. Chicago Sun-Times, Inc., 935 F.2d 1501
(7th Cir. 1991).
Compagnie des Bauxites de Guinee v. Hammermills, Not Reported in F. Supp. 1992
WL 122712 (D.D.C. 1992).
Graham Oil Co. v. Arco Prods. Co., 43 F.3d 1244 (9th Cir. 1994).
Gateway Technologies, Inc. v. MCI Telecommunications Corp., 64 F.3d 993 (5th
Cir. 1995).
Kyocera Corp. v. Prudential-Bache Trade Servs, 504 U.S. 1098 (9th Cir. 2004).
Chromalloy Aeroservices v. Egypt, 939 F. Supp. 907 (D.D.C. 1996).
New Eng. Utils. v. Hydro-Quebec, 10 F. Supp. 2.d 53 (D.Mass. 1998).
Baker Marine, Ltd. v. Chevron, Ltd., 191 F.3d 194 (2d. Cir. 1999).
Spier v. Calzaturificio Tecnica, S.p.A., 71 F. Supp. 2d 279 (S.D.N.Y. 1999).
Bowen v. Amoco Pipeline Co., 254 F.3d 925 (10th Cir. 2001).
SI V, LLC v. V. FMC Corp., 223 F. Supp. 2d 1059 (N.D.Cal. 2002).
469
Little v. Auto Stiegler, Inc., 63 P.3d 979 (Cal. 2003).

Hoeft v. MVL Group, Inc., 343 F.3d 57 (2d Cir. 2003).
Karaha Bodas Co., L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bunni, 364
F.3d 274 (5th Cir. 2004).
Trombetta v. Raymond James Financial Services, 907 A. 2d 550 (Pa. Super. Ct.
2006).
P.R. Tel. Co. v. U.S. Phone Mfg Corp., 427 F.3d 21 (1st Cir. 2005).
MACTEC, Inc. v. Gorelick, 427 F.3d 821 (10th Cir.2005).
Cable Connection, Inc. v. DIRECTV, Inc., 143 Cal. App. 4th 207 (Cal. App. 2d Dist.
2006).
TermoRio S.A. E.S.P. v. Electrificadora del Atlantico S.A. E.S.P., 421 F. Supp. 2d
87 (D.D.C. 2006).
TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928 (D.C. Cir.. 2007).
European Court of Human Rights

Oberschlick v. Austria, 204 Eur. Ct. H.R. (ser. A) at 23 (1991).
Pfeifer v. Austria, 227 Eur. Ct. H.R. (ser. A) at 16 (1992).
Suovaniemi v. Finland, No. 31737/96 (1999), <http://www.echr.coe.int/echr>
(follow “Case-Law” hyperlink; then search “Decisions” under “HUDOC Collection” for
“Suovaniemi and others v. Finland” hyperlink) (deciding as to admissibility).
European Court of Justice

Case C-168/05, Mostaza Claro v. Centro Móvil Milenium SL, 2006 OJ C326/9,
available at <http:/europa.eu.int>.
International Court of Justice

Temple of Preah Vihear (Cambodia v. Thailand), 1962 I.C.J. (June 15) 39.
Land, Island and Maritime Frontier Dispute (El Salvador v. Honduras), 1990 I.C.J.
(Sept. 13).
470
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COLLECTED COURSES

The Xiamen Academy of International Law

ISBN 978 90 04 18093 2

Copyright 2009 by Koninklijke Brill NV, Leiden, The Netherlands.

printed in the netherlands

Aspects de la question des sources du droit international 1

The Paradigms of Universalism and Particularism in the Age of

Legal Aspects of Electronic Commerce: Rules of Evidence, Contract

The Elusive Pro-Arbitration Priority in Contemporary Court Scrutiny

Né le 22 juin 1940 à Bordeaux ;

« L’ONU et l’OEA en Haïti et le droit international », in Annuaire français de droit

« L’Organisation des Nations Unies », in Répertoire de droit international 2004

Aspects de la question des sources

La même démarche peut être transposée dans l’ordre international dont la

international. Dans le premier cas, on est en présence d’une simple évolution

contraire, de nouveaux sujets de droit international seront parties prenantes à

II. Sources écrites

1. Le rôle direct de l’Etat

2. Rôle indirect de l’Etat

B. Le rôle de l’organisation internationale

2. En matière d’actes unilatéraux

en définitive la continuation de la volonté des Etats. Dans son étude, Geneviève

C’est nous qui ajoutons.

Monographs in International Law, Oxford University Press, 2005).

La composition de l’organe est d’ailleurs elle-même changeante …

L’Assemblée générale des Nations Unies de 1974, présidée par A. Bouteflika,

La même variété ne peut guère s’appliquer aux systèmes juridiques dans la

Le cours général de Pierre-Marie Dupuy à l’Académie de droit international (RCADI 297

(2002)) déjà cité est une illustration de ce « positivisme raisonnable ».

On notera par ailleurs que la Cour internationale de Justice comme d’autres

l’élaboration de novo du droit international. Théoriquement bien distinctes, ces

par certaines dispositions inscrites à l’article 15 du statut de la Commission du

international44, il a été parlé indifféremment de l’un et de l’autre. Sans doute

IV. Soft Law

l’enseignement technique et professionnel, adoptée par la Conférence générale de

dispose de la personnalité juridique en droit international et qui, comme telles,

rapports examinés par des organes internationaux comme en matière de droits

Ibid., pp. 20-21.

compte précisément des législations, réglementations et pratiques adoptées et

tional (Thèse, Paris 1, 2009, miméogr. 677p. + annexes).

le champ du droit international économique et du commerce. Le développement

Armin von Bogdandy and

I. Objectives of the Course and its Place in Legal Scholarship 53

IV. Universalism: The Possibility of Global Order 99

I. Legal Philosophy and Theory

II. European Union Law

III. International Law

IV. German and Comparative Public Law

“Europäische und nationale Identität: Integration durch Verfassungsrecht?”, Ver-

For further publications see: <http://www.mpil.de/ww/de/pub/organisation/

The Paradigms of Universalism and

I. Objectives of the Course and its Place in Legal Scholarship

1. Three Main Objectives

history to two competing paradigms. A paradigm consists of the fundamental

2. International Legal Scholarship: Tasks, Methods, and the Role of Theory

a. Practical Legal Scholarship and Conceptual Thought

interpretation. It requires a norm to be interpreted in a way that its objectives

an informed standpoint in this respect. Yet, any convincing argument on “ac-

b. Theoretical Legal Scholarship

A. Pellet, “Art. 38”, in Zimmermann,Tomuschat, Oellers-Frahm (eds.), The Statute of the

International Court of Justice. A Commentary (2006), 677-792, paras 245-264.

arrangement of the legal material.13 In crafting such concepts, legal scholarship

as essayistic speculation, but also contributions that draw on established humani-

Né le 22 juin 1940 à Bordeaux ;

« L’ONU et l’OEA en Haïti et le droit international », in Annuaire français de droit

« L’Organisation des Nations Unies », in Répertoire de droit international 2004

(2002)) déjà cité est une illustration de ce « positivisme raisonnable ».