Abstract

In 1968, at its first session, the United National Commission on International Trade Law (UNCITRAL) decided to make one of its priority projects the harmonization and unification of the law of international payments and, in particular, the law of negotiable instruments. In 1987, UNCITRAL formally adopted a final draft of its proposed Convention on International Bills of Exchange and International Promissory Notes* (hereinafter referred to as the “Convention”).1

I. Introduction

In 1968, at its first session, the United National Commission on International Trade Law (UNCITRAL) decided to make one of its priority projects the harmonization and unification of the law of international payments and, in particular, the law of negotiable instruments. In 1987, UNCITRAL formally adopted a final draft of its proposed Convention on International Bills of Exchange and International Promissory Notes* (hereinafter referred to as the “Convention”).1

However, during 1968–87, while UNCITRAL debated, the world did not stand still. A whole new system for payments—electronic funds transfers, or EFTs—was created, and that EFT system is not within the proposed Convention. Further, the principal paper-based payments mechanism, the check, was deliberately excluded from this Convention,2 even though the Convention does cover other types of bills of exchange and drafts. Thus, the final draft of the Convention is not likely to have a major impact on payments systems actually in use today. That is why the-UNCITRAL Working Group is now focusing on Model Rules for International EFTs.

However, one should not conclude from these initial observations that the proposed Convention has no practical utility. Negotiable instruments have historically had two different uses: as a mechanism for payment and as a mechanism for credit transactions. The proposed UNCITRAL Convention can have a major impact on the latter use.

From 1968 to 1987, negotiable instruments increasingly fell into disuse in credit transactions. This reduced use was not always apparent, since many credit transactions included the use of pieces of paper which looked like negotiable instruments but were, in fact, not negotiable under any applicable law. These credit instruments included those permitting repayments in installments, payable in European currency units (ECUs) or SDRs, or with variable interest rates (e.g., the London interbank offered rate (LIBOR)). Promissory notes with variable interest rates are not considered to state a “sum certain” for payment and therefore are not negotiable under the statutes of any of the major legal systems.3 Promissory notes payable in SDRs or ECUs may not be considered to be payable in “money” or “currency,” and installment notes are not negotiable under the Geneva Convention system.4

Such provisions, and the resultant lack of promissory notes’ negotiability, did not prevent the making of the original loans between creditor and debtor. However, they did restrict the transferability of the promissory notes from the original creditor to subsequent holders—promotion of easy transferability has always been the primary purpose of negotiability. Thus, the world financial markets have had increasing difficulty, owing to the fact that originating creditors were “locked into” very large amounts of debt and did not want to make further loans to their debtors. Only now, and with considerable difficulty, are attempts being made to create a secondary market for such debts and debt instruments. In that secondary market, the discounts are remarkably large—a factor which originating creditors must take into account in setting the original interest rates for such loans.

The lack of negotiability in the instruments used in the actual credit transactions in international commerce is one reason, but only one out of many, for the difficulties encountered in creating a secondary market. Thus, a principal problem for those designing a law for international negotiable instruments is to bring back into the international credit transaction a promissory note or bill of exchange which is truly and certainly negotiable and which has the benefits of free transferability. This can be done only if the new international promissory note meets the needs of the parties in actual transactions—if it can be used in a loan whose terms include a variable interest rate or repayment in monetary units of account or in installments. Further, the international promissory note cannot be subject to the vagaries and restrictions imposed by local law, including choice-of-law issues. The proposed UNCITRAL Convention would permit such promissory notes to be used and to be negotiable—and therefore to be offered for sale to subsequent holders in a secondary market.

The purpose of this paper is to review the development of the proposed UNCITRAL Convention, including the changes in its perceived use, and to evaluate its utility in today’s international market.

II. The Problems as Perceived by UNCITRAL in 1968

When UNCITRAL began this project, its primary concern was to “bridge the gaps” among the different negotiable-instruments doctrines of the various different legal systems of the world. There is a tendency to portray the world in terms of only two legal systems—civil law and common law—but this is an oversimplification. Both the civil-law and common-law systems encompass multiple variations on the approaches to negotiable-instruments doctrines. The common-law jurisdictions are themselves split between those which use the 1882 Bills of Exchange Act (BEA) of the United Kingdom and those which use the Uniform Commercial Code (UCC) of the United States; and there are also variations within each subgroup. Not all civil-law jurisdictions have adopted the Geneva Convention of 1930, so there are regional variations on that approach. Further, even among those jurisdictions which have adopted the Geneva Convention, there are significant differences concerning how its language should be interpreted.5

Thus, the task of unification and harmonization of the law of negotiable instruments was perceived as involving the development of a system of doctrines which would be practical and workable within all of these different legal systems. The UNCITRAL approach was intended to be different from any existing system and to produce a “product”—a new international negotiable instrument—which could function within each of those systems. The goal was not to displace the domestic negotiable-instruments law of any jurisdiction but rather to create an alternative system which would be flexible enough to function well in several different legal environments.

In evaluating that alternative system, it is not useful to judge the UNCITRAL product on whether it varies significantly from the domestic law of any particular jurisdiction. It is, however, quite proper to ask whether the financial system operating within a particular jurisdiction can adjust itself to handle properly the instruments arising under the UNCITRAL Convention. There is a reservoir of understanding of, and good will toward, this process in the United States, because of our own experience in unification of the commercial laws of the 50 states. This was accomplished not through any action by the federal government but through the work, at the state-government level, of the National Conference of Commissioners on Uniform State Laws that has led to 49 enactments of the UCC.

The doctrinal divergences among current legal systems are extremely wide. Under the Geneva Convention system, a signing of the payee’s name by a person who is not the payee is an effective endorsement, and subsequent transferees are holders who are entitled to payment and who are free from most defenses.6 Under common-law systems, a signature by anyone who is not the payee (or an authorized agent) is not effective, and no subsequent transferee can be a holder or be entitled to receive payments.7 The common-law systems also provide an endorsee with warranties against forgery or alteration by the endorser or any prior endorser, and these warranties are part of negotiable-instruments law.8 Under the Geneva Convention system, the extent of warranty liability is uncertain, because it is “off the instrument” and not part of negotiable-instruments law.

An offshoot of the difference concerning forged endorsements is the difference in risks by a guarantor under different legal systems. A common-law “guarantor” undertakes the risks related to the creditworthiness of his principal, but he is not necessarily deprived of any defenses concerning the authority of his principal or the authenticity of the principal’s signature.9 In other words, the common-law “guarantor” is entitled to the actual signature of his principal or of an authorized agent. Under the Geneva Convention system, the maker of an aval not only undertakes credit risks but also risks related to the authority to sign and the authenticity of the principal’s signature, even if the avaliste signs before the principal does.10

The common-law “holder-in-due-course” concept does not exist under the Geneva Convention system. Under the latter, a “holder” receives greater protection in cutting off defenses of prior parties than does the “holder in due course.” Also, under the Geneva Convention system, a holder who, in acquiring the instrument, “has knowingly acted to the detriment of the debtor” receives significantly greater protection in cutting off defenses of prior parties than does any common-law holder who is not a holder in due course.11

Finally, on the one hand, most civil-law systems regard negotiable-instruments law as “mandatory law” which may not be avoided by the parties and which is not the proper subject of choice-of-law clauses. On the other hand, most common-law jurisdictions seem to allow some party autonomy with regard to negotiable instruments and are willing to apply doctrines which select the law most likely to validate an instrument, even in the absence of choice-of-law clauses.

III. Drafting History of the Convention from 1968 to 1982

The full membership of UNCITRAL and its secretariat carried out preliminary studies from 1969 to 1971, using questionnaires to gather information from bankers concerning current practices regarding, and uses of, negotiable instruments, subsequently evaluating these responses. During 1971–72, the UNCITRAL Secretariat drafted a set of uniform rules for negotiable instruments, which was then presented to the Commission. From 1973 to 1979, this initial draft of “uniform rules” was reformulated and redrafted into the 1982 Draft Convention on International Bills of Exchange and International Promissory Notes12 by a Working Group of eight members (Egypt, France, India, Mexico, Nigeria, the U.S.S.R., the United Kingdom, and the United States) (and many observers), usually chaired by the representative of France.

The 1982 Draft Convention proposed the creation of a new international negotiable instrument which would be subject only to the rules and doctrines contained in the UNCITRAL Convention, regardless of where it was circulated. Thus, the law governing the instrument would not change as this instrument was transferred from party to party, or from jurisdiction to jurisdiction. Further, the applicability of the Convention could be determined merely by examining the face of the instrument and answering the following questions: (1) Does the instrument state on its face that it is subject to the Convention? (2) Does it state on its face that it is drawn, made, or received by the payee or is payable in at least two different states? and (3) Does it meet criteria stated in the Convention for the form of a negotiable instrument? If all three questions are answered in the affirmative, and the Convention has gone into force, the Convention would govern the instrument.

The international negotiable instrument thus proposed was never intended for mandatory use, however. First, by its own terms, it could not apply to purely domestic negotiable instruments but rather only to instruments intended to be used in international transactions. Second, even in international transactions, the parties can choose either to make the negotiable instrument subject to the domestic law of the various states involved, or subject to the Convention. Further, it is impossible to become subject to the Convention inadvertently when a note form is silent on the choice of an applicable law, because the Convention requires that an instrument affirmatively state that the instrument is governed by the Convention. In the jargon of the trade, this is an “opt-in” statute, not an “opt-out” statute.

The 1982 Draft Convention was distributed to governments for their comments; official governmental comments were received, collated, and, in turn, distributed by the UNCITRAL Secretariat. Most of these official comments recognized the benefits of the 1982 Draft and acknowledged the skill demonstrated by the Working Group in producing a set of self-contained rules which would not need to be supplemented by the domestic negotiable-instruments law of a forum. The general reaction was typified by the comments of one representative from a civil-law background, who stated that the Draft presented a balanced set of compromises between the doctrines of the different legal systems and the various competing policies espoused by each, as well as a compromise in drafting style between the lack of detail in the Geneva Convention and the enormous amount of detail in the UCC. A few governments dissented from this view and pointed out that the rules of the Convention were very different from their own domestic laws, which they preferred, and expressed the view that the Convention should be rewritten to conform to their concepts. They did not, however, consider whether the Convention might be preferable to the law of some other jurisdiction or whether it would be preferable to the uncertainties of conflicting choice-of-law doctrines.

The UNCITRAL Secretariat published both a compilation of the governmental comments13 and an analysis of them.14 The latter listed three “grand compromises” which had been created by the Working Group and adopted in the 1982 Draft Convention, and which would be the subject of intensive debate in subsequent meetings. These compromises concerned forgeries, warranties, and the “protected holder.”

The grand compromise concerning forgeries comprised several elements. First, the 1982 Draft adopted the civil-law concept that an “endorsement” in name of the payee (or special endorsee) by a person who was not the payee (or endorsee) would effectively pass rights in the instrument, including the right to payment, to subsequent parties. Second, representatives of major legal systems agreed that the person whose signature had been forged had a cause of action against the forger, and therefore that principle was incorporated into the Draft Convention. Third, the 1982 Draft provided that the person whose signature was forged had a cause of action against the person who took the instrument from the forger—that is, the first transferee who accepted the forgery as valid. This incorporated the crucial part of the relevant common-law concept that every, transferee should “know your endorser” without also adopting the remainder of the common-law concept, which imposes liability on every endorser for all prior signatures. This compromise may be preferable to any present domestic doctrines. The 1982 Draft imposed warranty liability to subsequent holders on transferors “by mere delivery” and not on endorsers, which was a strange result—one explained as placing reliance on the general law of warranty to cover endorsers’ liabilities. This provision was the subject of much subsequent redrafting. (See below.)

The Working Group decided very early not to adopt the common-law concept of “holder in due course,” which applies to a good-faith purchaser for value without notice. But it did need to distinguish between those holders who would receive more, and those who would receive less, protection. Professor John Honnold, a former UNCITRAL Secretary, suggested the term “protected holder” for the person who receives more protection. Unlike the “holder in due course,” who must be a good-faith purchaser for value without notice, the “protected holder” is defined basically as a purchaser without knowledge of a claim to, or defense upon, the instrument at the time of purchase. In contrast to the common-law rule, neither good faith nor value is a requisite.

In addition, the protected holder is free of all defenses against remote parties except for incapacity, fraud in the factum, forgery, alteration, non-presentment, and the statute of limitations. This list of defenses available against a protected holder is longer than the comparable list of defenses available against a holder under the Geneva Convention system but much shorter than the list of “real defenses” available against a “holder in due course” in all common-law systems.

The 1982 Draft comprised two proposed conventions: one for international bills of exchange and promissory notes, the other for international checks. However, the check convention was not acceptable, because of the different customs and uses of checks in different business systems. In the view of the Geneva Convention systems, where checks are less used, it portended checks which might circulate, even though provisions for “crossed checks” were included. In the view of the United States, where checks are used very extensively, the 1982 Draft did not incorporate the strict time limits for handling such items which were believed necessary to make this usage workable. Thus, the check convention was tabled, and it is not likely to be revived. Because of that action and the changes in international payments transactions which occurred during the 1970s, the 1982 Draft of the UNCITRAL Convention had little to do with 1982 payments transactions.

IV. Changing Transaction Patterns During the Drafting Period (1968–82)

While the Working Group had been wrestling with these compromises, the world of international transactions had been changing around them. The combined effect of many changes was that even though the number and amount of international financial transactions had mushroomed, use of negotiable instruments had not had a similar growth, either in international payments transactions or in international credit transactions.

In payments transactions, a substitute for the bill of exchange had been found, and its use increased continuously during the period—and is still increasing. The substitute was the EFT. Even in the cash documentary sale, the use of the bill of exchange declined as use of telexed letters of instruction rose. Thus, modern technology made negotiable instruments (and the Convention) irrelevant to many cash and payments transactions. However, where a time draft was to be used in a credit documentary sale, as in back-to-back credits or revolving credits, the bill of exchange continued to be used. This example illustrates the type of situation in which negotiable instruments continue to have a function, since modern technology has not yet furnished a substitute.

International credit transactions also grew in both number and total amount, and most such transactions used promissory paper—but that paper was often not negotiable. Negotiable-instrument concepts have a standard requirement that such an instrument contain a promise or order to pay “a sum certain” or “a determinate sum of money” in order to be negotiable.15 A promissory note which seeks to allocate the risks of changes in fluctuating interest rates through a variable interest rate term (LIBOR, or the Citibank “Basic Rate”) has often been held not to provide a sum certain and, therefore, may not be negotiable.16 A promissory note which seeks to allocate the risks of currency fluctuations by repayment in SDRs or ECUs encounters the doctrine that “money” includes only currencies issued by governments and not “units of account,” and consequently such an instrument may not be negotiable. Under the Geneva Convention system, the debtor must issue a series of promissory notes, increasing both bulk and risks,17 if payments are to be made in installments. Since the majority of international credit transactions involve one or more of those three provisions, most of the paper arising out of such transactions is not negotiable under the current domestic laws of negotiable instruments.

V. Actual Current Problems in International Credit Transactions

Would the introduction of negotiable paper into current international credit transactions have any impact on how the markets work? To answer that question, one must first examine the current transactions and their markets and then ask whether they present any problems or difficulties.

As stated in the introduction to this paper, one of the major problems related to international credit markets is that until recently, there was no effective secondary market for many types of international debt. Such a secondary market would allow current creditors to avoid becoming “locked into” very large amounts of debt, and an effective secondary market would permit creditors to transfer notes without having to sell them at huge discounts. An effective secondary market, for example, would make it easier for a creditor to sell the paper representing such debt to another person (buyer) who wished to propose an equity swap to the debtor or some other imaginative, practical payment option.

Thus, for some types of international credit, the current secondary markets are either nonexistent or else new and fragile. There are many factors which affect this fragility, one of which arises out of traditional negotiable-instruments law—namely, that negotiable paper is designed to be easily transferred in a mass market and easy transfer is not facilitated by use of non-negotiable paper, especially in a mass market.

For example, if a purported promissory note is not negotiable, what law does govern its terms, especially the terms relating to transfer of the obligation? Is it to be governed by some remnant of negotiable-instruments law or by the basic contract-law concepts? In either case, does one consult the choice-of-law rules concerning negotiable instruments (which often employ mandatory-law concepts) or the choice-of-law rules concerning ordinary contracts (which permit party autonomy)? Can the maker’s defenses be cut off by appropriate contract clauses, or do such clauses contravene public policy? And, finally, is there a fast payment-collection procedure available if needed, or is collection subject to all the delays of a cause of action on an ordinary contract?

As long as these risks cannot be allocated with certainty, the potential buyer of promissory notes in any secondary market will assume that the risks involved are likely to be adverse to him. He therefore will either refuse to buy the notes at all or will buy them only at an additional discount which will compensate him for these risks. If the originating creditor knows that no sale in a secondary market is possible, the amount of credit made available to debtors by that creditor may be limited. Alternatively, if the originating creditor knows that sales in secondary markets can be made only at a large discount, so that he will realize less from the sale of such a note, then he must charge the original debtor more. Thus, the development of free transferability and effective secondary markets aids all parties, including debtors, by reducing risks.

For an effective secondary market to develop for international credit instruments, several conditions must be met. First, as with any other secondary financial market, the notes should be freely transferable, which probably means negotiable. Second, the notes should not be subject to changes in legal regime if they are transferred from one country to another, and thus they cannot be subject to the domestic law of the forum. The best method of avoiding that domestic law is through the use of positive international law, such as a multilateral convention. Third, the notes must be commercially acceptable. Thus, they must be able to incorporate the terms which the marketplace requires, including terms which allocate the risks arising from interest rate and currency fluctuations. All three of these elements are not present under any current negotiable-instruments law, but all three can be available under the proposed UNGITRAL Convention.

VI. Redrafting History Since 1982 (Second Working Group)

There were numerous governmental comments on the details of the 1982 Draft. The UNCITRAL Secretariat proposed dividing the discussion of the comments into the subjects related to (1) the three “grand compromises” (discussed earlier in Section III) and (2) “all others.” The latter comments would be taken up article by article, but would be discussed seriously only if they were raised by an individual representative.

The membership of the Working Group was first doubled to 16, and then more than doubled again to include all 36 UNCITRAL members. The meetings were also attended by several dozen representatives of observers. The French chairman of the First Working Group retired, and the Second Working Group was usually chaired by Professor Willem Vis of the Netherlands, who had been UNCITRAL’s Secretary when the first draft was created. The major surprise in the procedure of the Second Working Group was that the evaluation of comments and redrafting often went faster than the Secretariat had planned.

Several results arose from the redrafting. First, none of the grand compromises was overturned. Second, many small ambiguities (and some large ones) were discovered, and details were added to the general compromises incorporated in the 1982 Draft. Third, the substantive result of most of these additional details was to move the substantive rules of the proposed Convention more toward civil-law concepts. Fourth, the addition of these details, and the finely balanced compromises they represented, required that they be incorporated into the language of the Convention. Thus, during the five-year redrafting process, the addition of one small detail after another (to incorporate more partial civil-law concepts) made the drafting style and language begin to move more toward the common-law style of drafting statutes. Fifth, and last, the final draft has provisions which allow the use of negotiable international variable-rate installment notes payable in units of account.

Let me give five examples of this redrafting:

The common-law holder who is not a “holder in due course” is subject to all claims and defenses. Under the Geneva Convention system, even a holder who “has knowingly acted to the detriment of the debtor” is subject only to those claims and defenses of which he had knowledge.18 The 1982 Draft made the holder who was not a protected holder—that is, a holder who took the instrument with knowledge of a defense—subject to all claims and contract defenses. This was subjected to intensive redrafting, however, and the final draft of the Convention makes this non-protected holder subject to (1) defenses raised by his immediate transferor, (2) defenses he knew about when he took the instrument, (3) the defense of fraud, if he used fraud to obtain the instrument, and (4) all defenses available against a protected holder.19 This non-protected holder therefore has greater protection than is available to the common-law holder, and the provision has shifted toward the Geneva Convention system’s substantive concepts. However, the compromises are not simple, and they cannot be stated in general terms, so the drafting style has shifted toward common-law techniques.

A more important example may arise out of the grand compromise on forged endorsements. The 1982 Draft had sidestepped several issues and relegated the liability of the drawee and collecting banks to local law. Further discussion showed that the concept would not work and, in fact, might make all of the forged-endorsement provisions unworkable. The final draft makes drawees and collecting banks liable only if they have taken the instrument directly from the forger. Even then, a drawee or collecting bank is not liable unless it either knew of the forgery before it paid the forger or received reimbursement, or failed to discover the forgery owing to its negligence or lack of good faith.20 Again, the substance of the change tends toward the Geneva Convention system, because the drawee and collecting banks are less likely to incur liability. But the new rule is not simple, and it cannot be stated simply in general terms; consequently, the final draft incorporates many more details of the compromises reached and has changed stylistically, shifting toward the common-law approach.

The warranty provisions required extended discussion. However, once the Working Group recognized that the Convention required an exclusive list of warranties, and that local law could not apply at all without undermining uniformity, the solution became apparent. Every endorser would make warranties to all subsequent parties, and a transferor “by mere delivery” would make warranties only to his immediate transferee.21 Since the primary goal was to give an immediate (pre-maturity) right of action to the holder if there was a serious defect in the paper, the list of warranties could be kept short: forgery, alteration, and knowledge of a defect or a defense good against the transferee.

At the Twenty-First Session of the Commission (which prepared the final draft of the Convention), an ambiguity was discovered in the article on “guarantors” which necessitated a further set of compromises. This ambiguity had been present, but undiscovered, for about 15 years. Everyone thought that the language referred to the type of guarantor or aval which arose under their domestic laws. (See the previous discussion of this topic in Section II.) A study group with members representing Canada, France, the Federal Republic of Germany, Italy, the United Kingdom, and the United States was appointed to redraft the provision. That group had three basic choices: (1) adopt only one system’s liability standard, making the Convention unworkable in the other system; (2) create a new and unfamiliar hybrid, resulting in disadvantages from the perspective of both systems; or (3) preserve both the “guarantor” and the “aval,” letting the parties choose which type of liability they desired according to their commercial needs, customs, and practices. The study group chose the last option, and after a thorough discussion, UNCITRAL agreed.

Under the resulting compromise, the parties may use either the Geneva Convention system “aval,” guaranteeing the principal’s creditworthiness, authority, and authenticity of signature, or the common-law “guarantor,” guaranteeing only the principal’s creditworthiness.22 Either type can be chosen by indicating the words “aval” or “guarantor.” When those specific words are used on the instrument, the rules can be expressed quite simply. However, the rules applicable to the party who signs without using either of the designated words, or similar ones, are quite complex and cannot be stated simply, as the final draft of the Convention’s Article 48 illustrates.

Finally, the UNCITRAL Convention permits the use of variable interest rates in instruments and also permits those instruments to be negotiable.23 The Convention also permits use of instruments payable in installments,24 as well as in units of account.25 However, the inclusion of a variable-rate provision cannot be simple, because it was necessary to build in several provisions to protect debtors in such transactions. One such provision requires that the index rate must be “published or otherwise available to the public.” Another provision prohibits use of an index rate which the creditor can unilaterally control, directly or indirectly.

Thus, a bill of exchange with interest at the LIBOR aggregate rate would be negotiable. Likewise, a promissory note with interest at Citibank’s Basic Rate would be negotiable, if issued to the Bank of America as payee. However, a promissory note with interest at Citibank’s Basic Rate and issued to Citibank as payee would not qualify. In such cases, the Convention does not destroy the validity of the note or even its negotiability. Instead, it nullifies the variable interest rate term of the note and substitutes a rate established by statute.26 These debtor protections are equivalent to those which have been given to consumer-borrowers in the United States in variable-rate transactions.

[Author’s Note: In 1988, the Convention was reviewed by a special working group of the Sixth (Legal) Committee of the UN General Assembly, which introduced amendments that somewhat narrowed the scope of application of the Convention. After incorporation of these amendments, the Convention still creates a set of rules for a new, specialized international negotiable instrument which indicates on its face both that it will circulate internationally and that it is subject to the Convention. Thus, it does not apply to domestic instruments, and it applies only if the issuer “opts in” to the application of the Convention. Although the UNCITRAL draft of the Convention required that the instrument indicate on its face that it was issued, received by the payee, or payable in at least two different states, neither of those states were required to be Contracting States. The Sixth Committee amendments, however, do require that one of the places indicated on the instrument be a Contracting State. For a promissory note, the place of payment must be in a Contracting State. For a bill of exchange, either the place of issuance or the place of payment must be in a Contracting State. No other changes were made in the draft during the consideration which led to its adoption by the General Assembly.]

VII. Who Would Use the Instruments Issued Under the UNCITRAL Convention?

The decision to issue international negotiable instruments under the Convention will be a complex one. However, creditors desiring to obtain paper with both commercially attractive terms (variable rates, units of account, installments) and enhanced potential for resale in a secondary market (negotiability) should be interested in experimenting with it. Such paper will include both time bills of exchange and promissory notes.

A second group of potential users would be those whose domestic negotiable-instruments laws are dated, but who do not wish to use the domestic laws of other parties. Use of one’s own domestic law may be costly, either because it raises the interest rate or because it inhibits further transfer of the paper. Issuance of the paper under the UNCITRAL Convention may be a useful compromise that will enable a party to avoid costly use of its own law or protracted negotiations over choice-of-law issues. It may also be useful to governments, governmental agencies, and international agencies by enabling them to avoid protracted negotiations over choice-of-law issues.

Finally, the treasurers of multinational enterprises which issue paper from several different geographical locations may determine that their firms will benefit by having all their commercial paper subject to the same set of rules. The simplification available in paper-handling instructions to employees around the globe could be attractive.

Addendum

Since this paper was presented, the UN General Assembly has formally adopted the Convention (in December 1988) and opened it for signature and ratification. It has been signed by Canada, the United States, and the U.S.S.R. The ratification process is expected to take longer. In the United States, the Convention has been evaluated by the American Bar Association, which subsequently recommended its ratification.