The International Sphere of Application of the 1988 Ottawa Convention on International Factoring

The International Sphere of Application of the 1988 Ottawa Convention on International Factoring

Description

Although the trend towards a worldwide unification of international trade law is at least one hundred years old, as confirmed by the fact that in 1993 the Hague Conference on Private International Law celebrated the centennial anniversary of its first session, unification efforts are associated particularly with the latter half of this century. This trend is not a surprise considering that in the 20th century “[t]he globalization of most national economies has resulted in a dramatic increase in transnational commerce” and in a consequent need for a corresponding legislative policy designed to regulate such transnational commerce. To put it succinctly, a growing demand arose for a body of law governing business transactions linked to a plurality of legal systems. In order to reach the goal of unification of international commercial law (for the sake of certainty of law), it has been necessary to overcome what has been considered its biggest obstacle, i.e., the existence of a “myriad” of distinct domestic laws. In short, it has been crucial to “reduce the impact of national boundaries,” “the international merchants' and traders' worst enemy.” Thus, there has been a continuing effort to promote international trade through the unification (and harmonization) of international commercial law. In this respect, the unification of the law of the international sale of goods, the commercial contract par excellence, is a significant achievement. Indeed, in 1980 after more than fifty years of preparatory work and two not overly successful conventions on the subject, the unification efforts in this field led to the United Nations Convention on Contracts for the International Sale of Goods (CISG) which became effective on January 1, 1988. The CISG was elaborated by the United Nations Commission on International Trade Law, UNCITRAL, one of the permanent institutions that promotes the unification of international commercial law. This very important Convention has now been enacted in nearly fifty countries. While the unification of international sales law has long been considered a primary goal because of its importance for the flow of international trade, unification attempts in other areas of the law have also been made. The International Institute for the Unification of Private Law (UNIDROIT) has, since the 1970s, sought to draft uniform rules on factoring, mainly in response to the increasing economic importance of factoring as a means of financing international trade and the fact that “divergences in national law and the frequent uncertainty as to the law applicable to a given transaction . . . create problems which the factoring industry must constantly face and which it seeks to overcome by passing on to suppliers the increased cost of its services.” UNIDROIT's work led initially to the 1983 Preliminary Draft Uniform Rules on Certain Aspects of International Factoring, then to the 1987 Draft Convention on International Factoring, and finally culminated in the 1988 Ottawa Convention on International Factoring, which became effective on May 1, 1995, after the expiration of six months from the date of deposit of the third instrument of ratification, acceptance, approval, or accession. This brief article focuses not so much upon the Ottawa Convention's substantive law provisions36 as upon its personal, spatial, and temporal sphere of application (articles 2 and 21). Section I discusses the Convention's sphere of application ratione materiae and its definition of “international” factoring contracts. Section II examines the Convention's “direct” applicability. Section III investigates the Convention's “indirect” (private international law-based) applicability.

Source Publication

Developments in European, Italian and Israeli Law

Source Editors/Authors

Alfredo Mordechai Rabello, Andrea Zanotti

Publication Date

2001

The International Sphere of Application of the 1988 Ottawa Convention on International Factoring

Share

COinS