Seventh Inter-American Specialized Conference on Private International Law (in planning)    
Topics

� Proposals

PERMANENT COUNCIL OF THE ORGANIZATION OF AMERICAN STATES COMMITTEE ON JURIDICAL AND POLITICAL AFFAIRS

OEA/Ser.G
CP/CAJP-2094/03 add. 7
26 February 2004
Original: English

Permanent Mission of the united states
to the
Organization of American States 

The Permanent Mission of the United States of America to the Organization of American States presents its compliments to the Ambassador of Panama, as Chair of the Committee on Juridical and Political Affairs, the General Secretariat and the Secretariat for International Legal Affairs, and, pursuant to Resolution AG/RES. 1923(XXXIII-0/03), is pleased to propose the following topics for the agenda of the upcoming Seventh Inter-American Specialized Conference on Private International law (CIDIP-VII).

In making these proposals, the Mission would note that it believes that it is important that such topics be selected on the basis of regional needs and the background of the States of the Americas, and not necessarily be limited by what has been done or may be done in other bodies, especially when the latter may be focused more on other regions and not the Americas, or where the States of the Americas are not as fully involved in those bodies as they may be in the work of the Organization of American States.

Bearing in mind the important progress made at the last Specialized Conference on Private International Law (CIDIP-VI) that concluded its work in February 2002, we would propose two related economic enhancement projects for CIDIP-VII that would extend that work.  We take into account that fact that at the conclusion of CIDIP-VI, almost all States which made proposals for future work listed one topic in common, i.e. electronic commerce.  We would therefore propose the following two topics, which can be pursued separately or as parts of an overall project on electronic commerce, each of which can have very significant value for OAS States in all regions:

-- First, new uniform rules on cross-border investment securities transactions should be formulated, which could be acceptable in model law form but may be most useful in the form of an Inter-American treaty.  This could cover the electronic creation of investment securities (stocks, bonds, etc.), their registration, pledge, clearance and settlement of transactions and related transaction rights, as well as the rights and responsibilities of securities intermediaries and of other holders of rights in these securities.  This subject has become very important over the last several years because of the growth of securities transactions across borders via computers, and adoption of modern private law in this area can have very substantial effects on liquidity of collateral and investments in all States.  It can also link transactions between States throughout the hemisphere, and in sub regions as well.  The economic importance of this topic cannot be overstated.

-- Secondly, rules should be formulated in the form of an Inter-American Treaty, although a model law would also be acceptable if preferred by other States, to provide for electronic filings, searches and certifications in connection with local or regional electronic commercial registries.  This could cover matters such as secured financing and other transactions, which could then be recognized across the borders of all participating States.  This would modernize such transactions for the computer age and enhance the economic performance in all States that participate.  It would in addition implement the new Inter-American Model Law on Secured Finance, which was adopted recently at CIDIP-VI.

Both of these proposed topics, which as noted above can be separate projects or parts of one overall electronic commerce topic, are now important because of the need for capital market growth and new sources of investment in all States.   They reflect the efficiencies and growth that computer assisted transactions can produce, especially with regard to cross-border commerce.

-- In addition, and as part of the above topics, we would propose that the draft Inter-American Rules on Electronic Documents and Signatures, which had substantial support at CIDIP-VI, but were not adopted due to time constraints, be again reviewed and finalized as model rules.   These rules incorporate some work done in other bodies, but are formulated to take into account the applications to commerce in the Americas.

The Mission has noted with interest the several proposals for work on international private law in areas other than economic development, and CIDIP-VII can accommodate a range of possible topics.  We would be pleased to discuss the details of those proposals.  CIDIP-VII offers a basis for the Organization of American States to enhance the quality of economic and social development in our hemisphere, and we welcome the opportunity to support that effort.

Additional details on the proposals stated above are set out in an addendum.

The Permanent Mission of the United States of America to the Organization of American States avails itself of this opportunity to convey to the Ambassador of Panama, as Chair of the Committee on Juridical and Political Affairs, the General Secretariat and the Secretariat for International Legal Affairs its renewed assurances of its highest consideration. 

Washington, DC

February 26, 2004 

ADDENDUM TO PROPOSALS FOR THE AGENDA OF CIDIP VII

BY THE MISSION OF THE UNITED STATES OF AMERICA 

 First Proposal for CIDIP VII. 

Harmonization and Modernization of Securities Ownership, Transfer and Pledge Laws 

A movement in many countries is underway to harmonize and modernize commercial laws that govern the ownership, transfer and pledge of investment securities.  Investment securities (Titulos Valores, Valores Bursatiles o Valores Mobiliarios in Spanish and Valores in Portuguese) transactions are now increasingly global and very commonly flow between States of the Americas, where laws support that movement, and are conducted in a manner that local law could not have visualized even 15 years ago. 

A wide disparity now exists among countries in the hemisphere with respect to the law governing these transactions.  To the extent that these laws and practices do not work well with newer standards and electronic methods of doing business, the country in question as well as its debtors, creditors, investors and underwriters do not gain comparable access to international sources of liquidity.  Even safe and attractive government bonds or private evidences of interests such as securities are often today not able to be placed or pledged from a number of countries in the region in the international marketplace, except with a substantial discount and loss of potential value, simply because they were issued or transferred only in a paper-based mode, or their laws do not support or leave uncertain the validity of the movement of electronic interests. 

Consultations on such an effort has been undertaken by the National Law Center for Inter-American Free Trade (NLCIFT) involving financial associations and commercial sectors in various countries of the OAS.  The project would be to prepare a draft Treaty for consideration by the OAS CIDIP-VII, which would cover the creation, transfer, pledge and extinction of rights in investment securities in Latin America, the Caribbean and North America.  Of special interest is the cross-border pledging of paperless securities and its governing law, including bankruptcy provisions.  Preliminary research indicates that existing law in the Americas could be harmonized to handle:  

a) the creation, holding, transfer and extinction of entitlements in investment securities other than by their �original� or �historical� owners; 

b) the creation of security interests in entitlements (as contrasted with rights of ownership), as well as rules related to priority, reduced formalities, proceeds, substitution, reuse, re-hypothecation, top-up and closeout;

c) the legal status of and rights and duties created by clearing corporations, intermediaries, entitlement holders and issuers;  

d) the insolvency of debtors holding entitlement rights in investment securities, as well as of intermediaries, and corresponding rights of creditors, including issues such as no-stay rules, preference, segregation, avoidance and fraudulent conveyance; and 

e) choice of law rules applicable to cross-border transactions. 

The goal would be to take advantage of proven systems and principles and create a harmonized set of effective, yet simple and adaptable, treaty rules for each jurisdiction to implement.   Such a project would build on work completed at the Hague Conference on the new Convention on Law Applicable to Securities Intermediaries as well as work at the study phase of Unidroit which involves some, but not all of the issues outlined above.  The proposed OAS CIDIP project would have a scope wider than that of the work in the above organizations, and will focus on developments relevant to the Inter-American markets and trade arrangements.  

Second Proposal for CIDIP VII. 

      Cross-Border Rules on Recognition of Electronic Registries and Filings      

 This topic could form a sub-topic along with that described above as an overall topic on electronic commerce, or be pursued separately.  This sub-topic should be the formulation of Inter-American rules in treaty form that will make it possible to give full faith and credit to electronic filings, searches, cancellations of recordings and certifications of the above in electronic commercial registries.  The principles could be applied to land and other registries at the option of participating States.  This topic is of enormous importance for new developments in cross-border arrangements and the flow of commercial finance, and would facilitate the securitization of mortgage or trust deeds (fideicomisos de garantia) backed assets.  It would also provide effective implementation of the CIDIP-VI Inter-American Law of Secured Transactions, for those States or subregions that adopt its provisions.

The rules that would be formulated would make possible the operation of one or more electronic registry systems that would operate in similar or compatible fashion among participating States in the Americas, and would facilitate the operations of regional credit markets by allowing filings of security interests from anywhere amongst participating States, as well as searches, issuances of certificates of liens or lack thereof, cancellations and so on.  Part of this sub-topic would be basic rules on the enforcement of filings, amendments and cancellations on a reciprocal basis throughout the hemisphere.  

Registrations by computer, which are searchable in any participating State, have been demonstrated to sharply lower the costs and risk attendant to granting financing commitments backed by assets or interests in another jurisdiction of the Americas.  The combination of such rules, which would support development of computer-based registries, together with the rules of the new OAS Model Law on Secured Finance, would enhance access to finance by all levels of business entities.  This would clearly affect medium and smaller entities, as well as larger entities, which can promote a broader base of business development, which in turn directly affect capacity building in countries for whom that is an important goal.

Additional Component of the above Topics.

Adoption of the Inter-American Rules on Electronic Documents and Signatures

Among the recommendations of CIDIP VI was that member nations consider the adoption of the United Nations Model Law on Electronic Commerce (MLEC) and the United States Delegation�s proposal of Inter-American Rules for Electronic Documents and Signatures (IAREDS).  The IAREDS draw on the work of other bodies, and had wide support at CIDIP-VI.  As part of the above topics, these rules should be again reviewed and adopted as recommendations to States so that modernization of e-commerce law may be promoted in a harmonized fashion, particularly since some countries of the OAS have been examining IAREDS for possible adoption and private sector organizations have begun referring to it in their transactions.