OSUNA GONZALEZ Y ASOCIADOS, S.C.
ABOGADOS - ATTORNEYS AT LAW
A Mexican Law Firm Specializing in Cross-border Dispute Resolution and Arbitration
by Alejandro Osuna, LLM, FCIArb
On March 1, 2013, The United Nation`s Convention on the Use of Elecronic Communications in International Contracts came into force, with Dominican Republic, Honduras and Singapore as States parties to the Convention, with sixteen other signatories pending internal approval. This article is a brief description of the E-Commerce Convention's salient features.
With a view to providing impetus to e-commerce, on November 23 of 2005, the General Assembly of the United Nations adopted the United Nations Convention on the use of Electronic Communications in International Contracts (hereinafter the "E-Commerce Convention"), which opened for signature in 2008.
The E-Commerce Convention builds upon its predecessor, the UN Model Law on Electronic Commerce, that so far has been adopted, or legislation has been enacted based on said Model Law in Australia, China, Colombia, Dominican Republic, Ecuador, France,
India, Ireland, Jordan, Mauritius, Mexico, New Zealand, Pakistan, Panama, Philippines, Republic of Korea, Singapore, Slovenia, South Africa, Sri Lanka, Thailand, United Arab Emirates, Venezuela and Vietnam. Most States in the USA have also adopted some form of
legislation based the Model Law.
The purpose of the Convention
Pursuant to its Preamble, the Convention seeks to remove obstacles to the use of electronic communications in international contracts, including those that may result from current
international trade law instruments, in order to enhance legal certainty and commercial predictability for international contracts and to help States gain access to modern trade routes.
According to an analysis prepared by the ABA, the E-Commerce Convention provides the following:
1. Legal Recognition of E-Commerce. The Convention provides for the legal recognition of electronic communications, by establishing that an electronic communication or contract cannot be denied validity or enforceability on the sole ground that it is in an
2. Elimination of Legal Barriers to E-Commerce. The Convention eliminates the primary legal barriers to e-commerce by:
(a) Recognizing that electronic records satisfy statutory writing requirements;
(b) Recognizing that electronic signatures satisfy statutory signing requirements;
(c) Defining the criteria for acceptable electronic signatures; and
(d) Recognizing that electronic records satisfy evidentiary requirements for originality.
3. Preserves Freedom of Contract. The Convention embraces the fundamental principle of freedom of contract, and allows the parties to an international electronic transaction to exclude the application of the Convention or derogate from or vary the effect of any of its
4. Default Rules for Electronic Communications. The Convention provides default rules defining the time and place of sending and receipt of electronic communications. In addition, the receipt rule creates only a rebuttable presumption of receipt, allowing, for
example, a defense based on deployment of security methods (e.g., spam and virus filters, etc.), a result sought by the US and confirmed in the official commentary.
5. Recognition of Automated Contracts. The Convention recognizes that enforceable contracts can be created by automated computer processes, such as so-called electronic agents.
6. Default Rules for Human Input Errors in Electronic Communications. The Convention provides default rules for addressing keyboard entry errors made by persons engaging in electronic transactions with the automated system of another party that does not provide an opportunity for error correction.
The Convention is comprised of twenty five articles, divided in IV Chapters. Chapter I has 3 articles, addressing the issues of Scope of Application, Exclusions, and Party Autonomy.
Article 1 (1), states that the CECIC applies to the use of electronic communications in connection with the formation and performance of a contract between parties whose places of business are in different States. According to the Article-by-Article Remarks prepared by UNCITRAL (hereinafter, the "Remarks"), the focus of the Convention is on the relations between parties to an existing or contemplated contract, i.e., a contract that is being negotiated. The Remarks also provide that the Convention also applies to arbitrationagreements in electronic form, even though the New York Convention of 1958 on the Recognition and Enforcement of Arbitral Awards does not use the word contract to refer to them.
With regards to the geographic scope of the Convention, Article 1(1) provides that it will apply provided the parties have their places of business in different States, but avoids any mention of a requirement that both States be signatory. The UNCITRAL explains that the two main reasons for doing away with the two Contracting State formulation, as used in the CISG, was to make the application of the CECIC easier. However, the Convention does provide for a declaration to reduce the scope of application only to those cases where both parties are located in contracting States.
Article 1(2) of the Convention, provides that the fact that parties have their places of business in different States is to be disregarded whenever this fact does not appear either from the contract or from dealings between the parties or from information disclosed by the
parties at any time before or at the conclusion of the contract.
Article 1 paragraph 3 of the CECIC provides language that clearly traces CISG article 1 paragraph 3, regarding the application of the Convention to parties regardless of their nationality, or the civil or commercial character of the parties or of the contract. The purpose of this clause is to avoid the conflicts that usually occur in countries that have a "dualistic" system, which distinguishes between the civil and commercial character of the parties or the transaction, and those countries that do not. (See Remarks ¶. 68)
Transactions Excluded from the CECIC
Article 2 provides a list of excluded transactions. Paragraph a) excludes contracts concluded for personal, family or household use. The reasons are that some of the E-Convention's rules may not be appropriate under its context, for example, consumers may
not be able to retrieve their e-mails frequently, and they could adversely affected by the receipt rule provided for under the E-Convention. Also, Consumer's may not be able to distinguish between legitimate commercial messages and so called "Spam".
Furthermore, there was also the concern that the E-Convention's rules could conflict with local consumer protection laws. (See Remarks ¶ 72 ).
Paragraph b) i) excludes transactions on a regulated exchange. Paragraph b) ii) leaves out foreign exchange transactions; while b) iii) excludes inter-ban payment systems, interbank payments or clearance and settlement systems relating to securities or other financial assets or instruments. Paragraph b) iv) excludes the transfer of security rights in sale, loan or holding of or agreement to repurchase securities or other financial assets held with an
intermediary. The reason behind the exclusion is that these are markets that are already well regulated including on issues concerning electronic commerce.
Paragraph 2 of Article excludes negotiable instruments and similar documents. Because these could be duplicated ---and potentially any bearer has the right to claim delivery of the goods or the payment of a sum of money--, it would be necessary to develop mechanisms that would ensure their singularity. Article 19 of the E-Convention allows States to make specific exclusions by making a declaration pursuant to article 21.
Consistent with the nature of this Convention, its Article 3, recognizes the principle of party autonomy, allowing them to exclude the application of the Convention, or to even derogate
from or vary the effect of any of its provisions. The language of this provision tracks that of Article 6 of the CISG. It should be noted however, that the fact that the parties may vary of exclude the provisions in the E-Convention does not mean that they may exclude other provisions that may be mandatory at the local level, for example, the use of specific methods of authentication, or those relating to a party's obligation to disclose information.
Article 4 of the CECIC provides a list of definitions. The definitions contained in the Convention substantially track the language used in the Model Law on Electronic Commerce.
Paragraph (a) defines Communication as any statement, declaration demand, notice or request, including an offer and the acceptance of an offer, that the parties are required to
make or choose to make in connection with the formation or pefromance of the contract.
Article 4(b) defines "Electronic Communication" means any communication the parties make by means of a "data message".
Per Article 4 (c ), a "Data message" includes all types of messages that are generated, stored or communicated in essentially paperless form. It not only covers electronic mail, but also older means such as fax or telecopy. Data message focuses on the communication itself, and not so much on the means of transmission. For example, an electronic record, a CD, delivered via a courier would fall within the scope of a data message.
Article 4(d) defines "Originator" of an electronic communication as a party by whom, or whose behalf, the electronic communication has been sent or generated prior to storage, if any, but it does not include a party acting as an intermediary with respect to that electronic communication.
Article 4(e) defines an addressee of an electronic communication as a party who is intended by the originator to receive the electronic communication.
Information system (article 4(f)), means a system for generating, sending, receiving, storing or otherwise processing data messages. According to the Remarks, it could include a communications network, an electronic mailbox, email, or even a telecopier (fax machine).
Article 4(g), defines an "automated message system" is a system for the automatic negotiation and conclusion of contracts without involvement of a person, at least on one end of the negotiation chain.
The Convention defines "place of business" a that place where a party maintains a non transitory establishment to pursue an economic activity other than the temporary provision of goods or services out of a specific location. This provision signifies a departure at least from the CISG's perspective, though it was used in the Model Law on Cross Border
With regards to "Insolvency" the scope of this expression, is limited to the purposes of the E-Commerce Convention.
Interpretation of the Convention
The CECIC's Article 5 is an interpretation clause that has become standard, and can be found in the CISG, and other UNCITRAL instruments:
In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.
Questions concerning matters governed by this Convention which are nt expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.
This clause is an invitation to those who will interpret the Convention to take into account the fact that it was conceived for international transactions, which requires interpreters (i.e., judges and arbitrators), from looking at the CECIC as a domestic statute,
with whatever that would entail, for example, the reliance on local case law or local legal principles to interpret an international law.
The need to promote uniformity requires an interpreter to consider the Convention within its four corners, as Professor Bruno Zeller has written. These are 1) the text; 2) preliminary work, (drafts, working group discussions, etc.); 3) scholarly opinion; 4) and
case law. Thanks to the Internet, much of this information is readily available at "uncitral.org".
The promotion of good faith in international trade is an invitation for the judge or arbitrator to favor in their decisions a sense of international justice, disfavoring interpretations that may lead to favor an abusive party. Oftentimes, lawyers and judges
read the language concerning "promotion of good faith in international trade", and construe it as an imposition on the parties to conduct themselves in a specific manner; however, a careful reader will note that the duty is on the interpreter of the CECIC, and not on the players.
If I should make one critique about this provision: it did not follow the language used in the UN Convention on the Assignment of Account Receivables adopted on 12 December of 2001, which made reference to that Convention's object and purpose as set
forth in its' preamble as an aid for interpretation. The Preamble does a good job at restating the main objectives and principles of the CECIC, which include the enhancement of trade,
the removal of legal obstacles to e-commerce, as well as the principles of party autonomy, technological neutrality and functional equivalence.
In other instruments, such as the CISG, its drafters admittedly acknowledged that its preamble was added at the last not minute; therefore it should be given much weight. This did not seem to be the case with this Convention. What is more surprising is that in the Article-by-article remarks put together by the UNCITRAL, par. ¶ it is clearly written out that the preamble is intended to serve as a statement of the general principles on which CECIC is based, and that it may be used to fill the gaps left open in the Convention.
Gap Filling under the CECIC
Again, Article 5´s rule gap filling trace the language used in previous UNCITRAL documents, such as the CISG´s Article 7.Matters not specifically addressed in the Convention are to be settled in accordance with the general principles on which it is based
or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.
The main principles embodied in the CECIC are Technological neutrality, which means that the Convention is intended to provide for coverage of all factual situations where information is generate, stored or transmitted in the for of electronic communications,
irrespective of the technology or the medium used. They do not rely or assume that a specific type of technology and could be applied to communication and storage of all types of information. Another reason for this principle is to avoid having the law become outdated.
Another principle is that of Functional Equivalence, one that has been used previously by UNCITRAL in the Model Law on Electronic Commerce. Functional equivalence is a principle of non discrimination vis-à-vis paper based documents, by extending the scope of notions such as "writing", "signature", or "original". The approach is based on the analysis of the purposes and functions of paper based form requirements, with a view to providing criteria, that once met by electronic communication, enable such communications to enjoy the same kind of recognition given to paper documents with the same function.
Location of the Parties
Due to the fact that the Internet is ubiquitous -it is here, there, everywhere, and I would add "no where" at the same time--, it is difficult to pin point where a merchant or his place of business are located.Article 6 of the CECIC sets forth rules in an attempt to assist on the determination of where a merchant has his or her place of business. Article 6(1) accepts the presumption that a party is presumed to be located where he or she says he or she is, unless
the other party proves otherwise. According to the UNCITRAL Remarks, the rebuttable presumption of location serves an important purpose, and is not meant to depart from the notion of "place of business". An Internet vendor maintaining several warehouses at different locations from which to ship goods to fulfill a single order made by electronic means, may need to indicate one of such locations at its place of business for a given contract.
In cases where a party does not indicate where his place of business is or if he has more than one place of business, Article 6(2) provides that the place of business will be the one having the closest relationship to the relevant contract, having regard to the
circumstances known to or contemplated by the parties at any time contemplated by the parties at any time before or at the conclusion of the contract. This provision is very similar to article 10 of the CISG.
Article 6(3) provides that if a person does not have a place of business, reference will be made to the person's habitual residence.
According to Article 6(4), a location is not a place of business merely because that is where he may locate his equipment and technology supporting a parties information system. Also, where the information system may be accessed by other parties. The CECIC
approaches with caution the issue of equipment location as a means to determine the place of business.
Pursuant to Article 6(5), the sole fact that a party makes use of a domain name or electronic email connect to a specific country does not create a presumption that its place of business is located in that country. The approach taken by the Convention concerning
peripheral information related to electronic messages is cautious. The fact that an e-mail has a termination such as "mx", "fr", would by itself does not mean that the email was sent from Mexico nor from France, however it would not by itself mean that any such
information cannot be taken into account.According to UNCITRAL, the difference in national standards and procedures for the assignment of domain names would make such an element unfit for establishing a presumption. Furthermore, the procedures for domain name assignment were not always transparent to the public, which made it difficult to ascertain the level of reliability of each national procedure.
No interference with Information Requirements under Local Law
Article 7 of the CECIC provides that it does not affect the application of any rule of law that may require parties to disclose their identities, place of business or other information, nor does it relieve the parties from the legal consequences of making inaccurate, incomplete or false statements in that regard.
Article 13 of the E-Commerce Convention concerns the non interference with local laws that may require a provider of goods or services to make the contract terms available for storage or printing. This provision was added because some States had included provisions when they enacted their domestic laws on electronic commerce that businesses offering goods or services through information systems to the public should provide means
for storage or printing of the contract terms. It was the intention of the UNCITRAL not to interfere with these local laws, nor was it the intention to make the provision of contractual terms mandatory under the E-Commerce Convention, as to not create a dual system,
different from that which occurs in the world of paper based transactions. It was left more or less as a reminder, much like article 7. The UNCITRAL could have avoided repetition had they included a provision including both the texts of article 7 and 13 of the E-Commerce Convention.
The Principal of Non discrimination of electronic Communications
Paragraph 1 of article 8 of the CECIC restates a principle that has is part of UNCITRAL'S Model Law on Electronic Commerce. The principle does not mean that all electronic communications are to be rendered effect -the same discrimination is reasonably made with
regard to paper documents--, it simply seeks to place electronic communications on the same standing as paper based communications.
Paragraph 2 of article 8 provides that the parties are not under an obligation to use or accept electronic communications, but the agreement of a party may be inferred by his conduct.
Paragraph 1 of Article 9 makes it clear that nothing in the Convention requires a communication or a contract to be made or evidenced in any particular form.
Paragraph 2 provides that if the law requires that a communication or a contract should be in writing, or provides consequences for the absence of writing, that requirement is met by an electronic communication if the information contained is accessible so as to be usable for subsequent reference.
The word "Law" should be understood, not only national codes or specific local legislation, but also international treaties and local case law.
Signature Requirement and Original Documents under the E-Commerce Convention Paragraph 3 of article 9 provides a rule with regards to the satisfaction of a signature requirement, or the consequences of the absence of a signature. It sets out that the signatur requirement is satisfied with regards to an electronic communication if:
a) A method is used to identify the party and to indicate that parties intention in respect
of the information contained in the electronic communication, and:
b) The method used is either:
i. As reliable as appropriate for the purpose for which the e-communication was generated or communicated, in light of the circumstances, including any relevant agreement; or
ii. Proven in fact to have fulfilled the functions described in subparagraph (a) above, by itself or together with further evidence
Paragraphs 4 and 5 of article 9 deal with the issue of original documents. When the law requires that a communication or a contract be made available or retained in its original form, or provides consequences for the absence of an original, that requirement is met in relation to en electronic document if:
a) there exists a reliable assurance as to the integrity of the information it contains from the time when it was first generated in its final form, as an electronic communication or otherwise
b) Where it is required that the information it contains be made available, that information is capable of being displayed to the person to whim it is to be made available
Criteria for assessing integrity shall be whether the information has remained complete and unaltered, apart from the addition of any endorsement and any change that arises in the normal course of communication, storage and display. In the case of email, for example, an electronic message that is sent accumulates all the information relating to the computers systems at the start and finish of an electronic communication.
Time and Place of Dispatch and Receipt of Electronic Communications
Article 10 of the E-Commerce Convention deals with the issues of time and place of dispatch and receipt of electronic communications, and though similar, are slightly different
from the MLEC. Paragraph 1 of article 10 provides that the time of dispatch of an electronic communication is the time when it leaves the information system under the control of the originator or of the party who sent on behalf of the originator.
Paragraph 2 of article 10 of the E-Commerce Convention deals with the time of receipt of an electronic communication. The time of receipt is the time when it becomes capable of being retrieved by the addressee at an electronic address designated by the addressee.When the originator dispatches a communication to a no designated electronic address, the time of receipt is considered to be the time when the electronic communication is retrievable and
the addressee has become aware that the electronic communication has been sent to that electronic address. It should be noted that this provision is a departure from article 15 of the MECL, since under that régime, the time when the electronic communication was
deemed to have been received was when the date message entered the information system designated by the addressee, and when it was sent to another information system, when the
addressee actually retrieved it.
The E-Commerce Convention creates a presumption that an electronic communication is deemed to be dispatched where the originator has his place of business and where the addressee has his place of business.
Invitations to Maker Offers
Article 11 of the E-Commerce Convention is very similar in wording to article 14 paragraph 1 of the CISG. Article 11 provides that a proposal to conclude a contract through one or more electronic communications which is not addressed to one or more specific
parties, are to be considered invitations to make offers. This is so, even if there are interactive applications allowing for the placement of orders through such information systems.
Article 12 of the E-Commerce Convention addresses the issue of automated message systems. These "electronic agents", are being used increasingly in electronic commerce, and have caused scholars to rethink about traditional contract theories on contract
formation. The general rule is not to deny validity or enforceability on the sole ground that no natural person intervened or reviewed the individual actions carried out by the automated message system.
Error in Electronic Communications
Article 14 of the E-Commerce Convention deals with the issue of error in electronic communications. Paragraph 1 of article 14 provides that where a natural person makes an input error in an electronic communication exchanged with the automated message system of another party and the AMS does not provide the person with an opportunity to correct the error, that person, or the party on whose behalf that person was acting, has the right to withdraw the portion of the electronic communication in which the input error was made.
However, this right is subject to two conditions:
a) the person, or the person on whose behalf that person was acting, notifies the other party of the error as soon as possible after having learned of the error and indicates that he or she made an error in the electronic
b) the person, or the party on whose behalf that person was acting,
has not used or received any material benefit or value from the goods or services, if any received from the other party.
Pursuant to paragraph 2, rules concerning the consequences of error (i.e., validity) remain unaffected.
Communications exchanged under other international Conventions.
Article 20 of the E-Commerce Convention provides that it applies to the use of electronic communications in connection with the formation or performance of a contract, as provided for under the following Conventions:
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