ABA Section of Business Law

The United Nations Commission on International Trade Law (UNCITRAL) has for more than 20 years been concerned with facilitating the legal effectiveness of electronic communications among member countries. It has published numerous research papers and reports on the topic, and has adopted two model legislative texts and an international treaty. This article looks at two UNCITRAL documents, the Model Law on Electronic Commerce of 1996 and the 2005 Convention on the Use of Electronic Communications in International Contracts, known popularly as the Electronic Communications Convention. It considers perceived difficulties facing U.S. ratification of the Convention, and possible ways around those difficulties.

The Model Law on Electronic Commerce
The Model Law on Electronic Commerce proposed to member states of the United Nations legal rules to help remove legal barriers to the effective use of electronic communications.

Before the Model Law, there was some doubt whether electronic communications could satisfy a legal requirement that a record should be in writing, or be signed, or serve as an original. The Model Law offered a solution to this doubt through the approach of functional equivalence. It does not define electronic records as writing, or as an original. Nor does it define an electronic signature as a signature, though for reasons beyond the scope of this article that might be more justified than doing it for the other form requirements. Instead, the Model Law says what characteristics an electronic record must have in order to serve the same policy functions sought by the rule requiring writing, etc.

Thus, where the law requires that information must be in writing, an electronic record (called in the Model Law a "data message") satisfies that requirement if the information is accessible so as to be usable for subsequent reference. Likewise, where the law requires an original, an electronic record satisfies that requirement if it offers reasonable assurances of its integrity (i.e., it has not been altered) from the time it first appeared in final form until the time of reference. An electronic signature satisfied a signature requirement if it was a method of identifying the signer and indicating the signer's approval of the information in the signed record.

The Model Law has been implemented in a substantial number of countries, including most of those with a common law tradition. Most of them have kept the basic principles, though the details have varied.

In the United States, implementation has been accomplished largely through the Uniform Electronic Transactions Act (UETA), adopted by the National Conference of Commissioners on Uniform State Laws (now known as the Uniform Law Commission) in 1999. UETA has been enacted in 46 states, not always in a strictly uniform manner. A federal statute, the Electronic Signatures in International and Global Commerce Act (E-Sign), harmonizes American law in this field by preempting state law to the extent that state law does not conform to the official text of the UETA. In other words, the federal government was willing to allow state law precedence but only if the principles of that law were acceptable to it. The federal principles are arguably very close to those expressed in the UN Model Law. (Some of the complexities of the federal/state relationship in E-Sign are beyond the scope of this article.)

The E-Communications Convention
The Convention puts into binding treaty form many of the rules about electronic records that originated in the Model Law.The Convention is intended to harmonize world law by providing a less-flexible legal tool for removing barriers to e-communications than the Model Law. In addition, some countries find it easier to adopt conventions than to amend their domestic legislation, so the Convention can provide a faster route to modernization.

The basic rules in the new Convention are the same as those in the Model Law, with respect to the functional equivalents of writing, signatures, and originals. The scope of the Convention is narrower: it applies to international contracts and not to other commercial uses covered by the Model Law, and it expressly excludes consumer transactions (and a few others beyond the scope of this discussion). The wide implementation of the Model Law in the United States shows that the Convention also should be acceptable in policy terms in the United States.

While the Convention is acceptable, it is arguably not really needed in U.S. law since much of it is already there. American lawyers have moved on from electronic records and signatures to the challenges of electronic payment systems and electronic evidence, notably e-discovery, among other issues. The principal argument for U.S. ratification is to serve as an example to other countries whose laws have not been made compatible with e-communications. It is sometimes awkward legally to deal with such countries if their law applies to the transaction because the use of e-communications creates uncertainty. It would be helpful to the United States to have the Convention widely adopted, to lessen this uncertainty.

However, a number of such countries are waiting to see what the United States does before moving themselves to ratify. If the United States does not ratify, it may appear that the United States thinks the Convention is not appropriate or safe. In that case the other countries may not adopt it either. It is up to the United States to make the first move. (As of October 2008, 18 countries have signed the Convention, but none has ratified it. Signing is an indication of favorable inclination but has no legal effect.)

Ratification: Domestic Practicalities
Ratifying a convention obliges the ratifying state under international law to comply with it. The United States will want to be sure, before ratification, that its laws that apply to international contracts are consistent with the convention. This consideration applies to federal and state laws, if the subject matter of the convention can be affected by both levels of legislation. The form requirements for valid electronic contracts are a matter of both federal and state law.

The United States thus needs to consider whether state law conforms with the Convention, or, put another way, whether the E-Communications Convention requires the states to do anything different from what their current law says. The answer appears to be that the states that have implemented the UETA are very largely in compliance with the Convention, except perhaps for a minor provision on the status of online offers. The Convention specifies that proposals for transactions made to the general public are not offers in the contract law sense but rather invitations to the public to make offers (in common law parlance, invitations to treat). This may be state law now, but in the absence of legislation or definitive case law, it is not completely certain.

The four states that have not implemented the UETA are bound by E-Sign if their laws are inconsistent with it. However, E-Sign lacks not only a provision about invitations to treat but also, and more important, an equivalent to article 10 of the Convention, which provides for the time and place of sending and receipt of electronic messages. (Interestingly, UNCITRAL got the idea for an article on this topic from the UETA!) Thus, the non-UETA states, depending on other provisions of their state laws, may not conform with the Convention. Further, states that have enacted the UETA might in theory repeal it. How can one be more certain of compliance?

Ratification: The Law in Evolution
Has the federal government the right to insist that state laws conform to a Convention, in the absence of direct federal legislation or a direct statement of Senate intent to that effect? This has been widely thought to be the case, given article VI of the Constitution (". . . all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land . . .") and the Supreme Court's decision in Missouri v. Holland, 250 U.S. 416 (1920). That case held that the federal government's ratification of the Migratory Birds Convention created binding obligations that displaced contrary state law. In the absence of the treaty, the federal government had been held not to have the power to legislate on that subject.

However, the recent decision of the Supreme Court in Medellin v. Texas, 552 U.S. ___ (2008), Supreme Court docket 06-984, has raised issues concerning this assumption. In that case, the State of Texas had not complied with the Vienna Convention on Consular Relations, which gives an arrested foreign national the right to contact a consular official of his or her own country. Mr. Medellin disputed his conviction because the state of Texas, in arresting him, had not complied with the Convention, to which the United States is a party. The International Court of Justice had held (in the Avena case, 2004 I.C.J. 12) that such a right must be provided, and President George W. Bush had issued a Presidential Order that the Convention was self-executing and thus binding on the states. The Texas courts and the Supreme Court held that the Convention gave individuals no rights enforceable against the states. The International Court's decisions had no effect on the United States, and the president cannot make a treaty self-executing merely by saying so.

The Court noted at least two ways by which the federal government can make treaties binding on the states: enact direct federal legislation implementing it for all purposes (as had been done in Holland) or ensure that the treaty was self-executing, i.e., by its terms it necessarily had to apply to all domestic jurisdictions. However, neither method was followed for the Convention at issue in Medellin.

Getting to Ratification
In light of the current case law, two main options have been proposed for the United States to ensure its ability to comply with the Convention, to clear its way for ratification. The first is for the federal government to declare the Convention to be self-executing, and state that that is meant to effectuate the provisions of the Convention without any additional act being necessary, so it becomes the law of the land on ratification.

Some comfort may be taken in this approach because of the resemblances between the E-Communications Convention and the 1980 Convention on the International Sale of Goods (CISG). This latter convention also covers international contracts, though with substantive rather than formal rules. The CISG is widely considered to be the archetype of self-executing contracts. It does not require member states to do anything; it simply declares the law that is to be applied in member states. The same can be said of the E-Communications Convention.

Two problems arise with this option, however. First, it appears to be a firmer hand on state decision making than the Bush administration, at least, chose to exercise. In particular, it is inconsistent with the deference to state law shown in the rather delicate E-Sign/UETA interaction. Second, this power may be limited by Medellin. On the other hand, it is possible that the Medellin rule might be mitigated in practice by including in the Senate's resolution of advice and consent a specific statement of intent to bind the states to the treaty. Such a statement was not considered necessary on ratification of the UN Consular Convention at issue in Medellin, though the case itself suggests that a different choice should have been made.

The other option is to legislate the Convention's provision(s) that are missing from domestic laws. The obvious place to do that is in E-Sign. A narrowly focused amendment could be prepared to that end. The risk of this option is that once E-Sign is opened for amendment, a number of interests may come forward to ask for other amendments to suit their ends. When E-Sign was passed in 2000, several consumer associations, for example, expressed concerns about its potential impact on consumers. Although these concerns have not been borne out in practice since then, those issues could reemerge.

Through the Section of Business Law, draft amendments to E-Sign have been prepared for submission to the Departments of Commerce and State, with supporting documentation. If it is still thought necessary to ensure compliance by the states of the United States through legislation, these drafts will serve that purpose. This option raises the challenge of timing. There is a risk that proposing any amendments to E-Sign would inspire others to propose additional amendments, particularly in consumer protection matters that were much debated when E-Sign was originally enacted. This in turn would risk opening large-scale political and legal battles and delay passage, and thus ratification, for a long time. Since the Convention expressly excludes consumer transactions, consumer interests would not be affected by the focused amendments and by ratification. Consumer issues with E-Sign, if any remain, can be addressed at a different time.

An alternative or perhaps a parallel route to ratification may open up through the Uniform Law Commission. Its 2008 meeting formed a committee to implement the Convention. According to the Commission, this committee "will recommend the most appropriate methods for implementing the Convention, including whether any state or federal legislation is necessary," and then will prepare any necessary legislation and work with governments and others to get the Convention ratified. This initiative is a manifestation of a new inclination on the part of the Commission to assert a state role in international matters affecting state law.

The Uniform Law Committee met at the end of October 2008 but has not yet formulated a recommendation on implementation. In any event, it could take years for uniform legislation to be widely adopted. As noted earlier, without assurance that all domestic jurisdictions will apply law consistent with the Convention, the federal government will hesitate to ratify it.

Conclusion
The Electronic Communications Convention is the logical next step toward making the international legal system receptive to the use of such communications in commercial matters. Its principles are now well established in a number of countries and are widely enacted as law for domestic purposes in the United States. American ratification of the Convention would help promote similar actions among countries that have yet to adopt these principles, and thus would increase harmony and certainty in modern trade.

Despite the clear advantages of ratification to U.S. national interests, however, the nature of contemporary American federalism raises challenges to taking this action. Considerations of federal-state relations and the decision of the Supreme Court have added some complexity to the formerly straightforward process of adopting international norms. The efficiencies that business hopes to achieve through electronic commerce are not completely reflected in the legal processes necessary to support those hopes.