UNIDROIT: An Independent International Institute for the Unification of Private Law

By Bijan Kasraie

Dr. Bijan Kasraie has over 30 years of legal and executive business experience in several industries, including banking, finance, energy, real estate, manufacturing, recycling, IT, and pharmaceuticals. He has resolved legal, financial, corporate, and political issues around the world. He holds several degrees, including a Ph.D. in engineering and a J.D. He is the national chair for the International Law Section of the Federal Bar Association.

At the end of World War I and when the League of Nations was being formed, it became apparent that the world had changed. Business among so many countries with different legal, economic, and political systems and various cultural backgrounds needed to be standardized. It was also clear that such a task required extensive study first. Therefore, UNIDROIT was formed as an auxiliary organ to the League of Nations. But, as the League of Nations fell apart, so did UNIDROIT. However, in 1940, UNIDROIT was reestablished as The International Institute for the Unification of Private Law. Interestingly enough, unlike most other international organizations, which are located in Geneva, Switzerland, UNIDROIT’s headquarters is in Rome.

Structure

UNIDROIT has three sections: the Secretariat, a Governing Council, and a General Assembly.

The Secretariat is the executive part of UNIDROIT and is responsible for carrying out its work program. UNIDROIT’s president recommends an individual as secretary-general to the Governing Council, where the council ordinarily appoints that candidate to lead the office of the Secretariat. As of 2022, UNIDROIT consists of 63 member entities.

The Governing Council is a combination of the previous ex officio members of the institute, the president of the institute, and 25 people, mostly judges and attorneys. The members of the council are elected every five years by the General Assembly. The president is the chairperson of the Governing Council. The function of the Governing Council is to outline a work program for the Office of the Secretariat and supervise its execution.

The General Assembly of UNIDROIT consists of one representative from each member state. The organization makes all critical decisions, such as the institute’s budget and work program approval, and elects the Governing Council. Its president is chosen among the members for one year, and it rotates annually.

Achievements

During the past several years, UNDIROIT has drafted several instruments involving international conventions, principles, legal and contractual guides, and model laws. Some of these have been adopted and are already in use today. Usually, member states of the UNIDROIT adopt a convention through diplomatic conferences.

Some UNIDROIT studies have been used as the basis for other international organizations’ instruments. Some of these instruments have already been approved and are in use.

UNIDROIT’s fundamental goal is to prepare uniform and, if possible, harmonized rules that are understandable in a broad sense. However, UNIDROIT frequently gets involved with public law when member states request it. These circumstances occur when transactional law and regulatory law tangle with one another.

UNIDROIT’s independent status among intergovernmental organizations has enabled it to pursue working methods that have made it a particularly suitable forum for tackling more technical and correspondingly less political issues.

UNIDROIT has been designated as the Depositary to its most recent instruments: the 2001 Cape Town Convention (pursuant its Article 62(1)) and the 2001 Aircraft Protocol (pursuant to its Article XXXVII(1)), both entering into force on 1 March 2006; the 2007 Luxembourg Rail Protocol (pursuant to its Article XXXIV(1)); the 2012 Space Protocol (pursuant to its Article XLVIII(1)); and the 2019 MAC Protocol (pursuant to its Article XXXVII(1)), none of which have entered into force; as well as the 2009 UNIDROIT Convention on Substantive Rules for Intermediated Securities (pursuant to its Article 48 (1) (also not yet in force).

UNIDROIT’s responsibilities as Depositary under those instruments are specified in each instrument and include the operation of a system for the receipt and notification of all instruments of ratification, declarations, and other documents lodged with the Depositary. UNIDROIT provides information for the assistance of States that are contemplating becoming the Contracting States to them.1

Factors Determining the Eligibility of Subjects for Uniform Law Treatment

With the development of new technologies and the new mode of international business transactions, it became necessary to create a common practice among the parties involved. However, such harmonization greatly depends on the willingness of the member states. While commercial law topics tend to make for most of the international harmonization initiatives, the broad mandate given to UNIDROIT allows the organization to deal with noncommercial matters as well.

Factors Determining the Choice of Instrument to Be Prepared

Originally, UNIDROIT created its rule by drawing from existing international laws. Such rules always consider the commercial laws of the member states. However, more and more member states became agreeable to working with new model laws. However, parties are not bound to such model laws, and unique harmonization can be used.

Working Methods2

Preliminary Stage

A given subject is entered into the work program. Then, the Secretariat, with the help of the experts in the respective fields, decides if the given law needs to be harmonized and, if so, prepares a draft and presents it to the Governing Council. After studying the report, if the council accepts it, it will formally ask the Secretariat to draft a whole convention.

Intergovernmental Negotiation Stage

Once the study group presents the result to the Government Council, the group asks the council for advice and guidance regarding the next appropriate steps. The council usually refers the matter to the Secretariat. The Secretariat invites member state experts to finalize the convention for presentation to the member state conference for final approval.

All UNIDROIT member states have the authority to contact the committee of member state experts. The final convention will be presented to the Governing Council for approval by member state experts.

Cooperation With Other International Organizations3

Throughout the years, UNIDROIT has cooperated with other international organizations, such as the Hague Conference on Private International Law and the United Nations Commission on International Trade Law (UNCITRAL). Frequently, such organizations have asked UNIDROIT to study and prepare legal conventions to harmonize specific private laws.

UNIDROIT’S Primary Concentration

UNIDROIT’S primary foci are Agriculture, Capital Markets, Civil Procedure, Contracts, Cultural Property, Factoring, Secured Transactions, and Law & Technology

Agriculture4

Food security is one of the main concerns of UNIDROIT in the agriculture sector. To regulate the International Commercial Contract (ICT) regarding agricultural production, trade financing, and investment, UNIDROIT has developed several instruments.

In recent years, to make financing in the agricultural field easier by facilitating access to warehouse receipts, UNIDROIT created sets of instructions for different member state legislative bodies.

Furthermore, between 2020 and 2022, UNIDROIT set up a work group to advise agricultural businesses on what business model works best for them and the challenges and opportunities they may face in multinational agrarian trades.

Capital Markets5

UNIDROIT’s efforts in capital markets are primarily focused on private law. In 2001, UNIDROIT established several procedures in order to facilitate access to cross borders capital for small to medium size entities. This was titled work in capital markets, focusing on private law aspects of the holding and transfer of securities, intending to identify best practices and enhance legal certainty in the sector.

Civil Procedure6

One of the main principles of UNIDROIT is to harmonize the civil procedural rules intended to apply in transnational disputes and to guide domestic law reforms.

In 2004, UNIDROIT and the American Law Institute adopted the first instrument in this area. UNIDROIT also worked with the European Law Institute and developed a Model Rules of Civil Procedure.

Contracts7

Several models and conventions in the fields of international financial leasing, international factoring, international commercial contracts, model franchise disclosure law, and international master franchise arrangements have been developed by UNIDROIT’s Principles of International Commercial Contracts.

Cultural Property8

UNIDROIT has also worked to create uniformity of laws for certain criminal acts. For example, the theft of works of art has been around for centuries and is a significant crime across the globe. Unfortunately, different states have different sets of laws dealing with this crime. UNIDROIT has been working to find a solution to this diversity of laws and come up with a uniform response in dealing with this crime.

Factoring9

Throughout the ages, factoring has been a procedure in which a business may receive immediate cash or cash equivalent against that business account receivable. However, every culture has its own system. As companies became more international, it became necessary that a harmonized procedure be developed. UNIDROIT, from 1976 to 1987, had developed more than 30 models to help global business factoring contracts.

Secured Transactions10

UNIDROIT has been very successful in this field. It has developed several conventions, model laws, legislative guides, and other instruments in this area. One of the most important achievements of continued on page 24