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It had everything. The Joint Session of the UNIDROIT General Assembly and the UNIDROIT Committee of governmental experts for finalisation and adoption of a draft model law on leasing, held in Rome from 10 to 13 November 2008, provided the first instance of the business of the General Assembly being extended beyond its traditional statutory functions, to permit those member States not having a seat on the UNIDROIT Governing Council to get more involved in the life of the Institute. Under the chairmanship of South Africa, the Joint Session came out with a product specifically designed to make the lot of developing countries and countries engaged in the transition to a market economy easier; indeed, it learned that some developing countries had already taken the draft model law as the basis of new domestic legislation designed to encourage the development of leasing within their jurisdiction. Not entirely surprisingly, it even had a cliff-hanger finale, with delegations scuttling from one corner of the room to another in a mad, last-minute effort to secure agreement on what had proven to be a particularly divisive point.

The Joint Session got underway under the chairmanship of Her Excellency Mrs Amanda Vanstone, Ambassador of Australia in Italy and the sitting President of the General Assembly. Once the business reached the point of substantive discussion of the draft model law on leasing transmitted for finalisation and adoption by the Governing Council at its 87th session, the Ambassador of Australia, however, handed over to Mr John Makhubele, Chief Director of the Chief Directorate for International Legal Relations of the Department of Justice and Constitutional Development of South Africa, South Africa having been appointed to the chair of the Committee of governmental experts at the first session of that Committee, held in Johannesburg in May 2007. Mr Makhubele then chaired the proceedings right through until the final afternoon meeting, when the Ambassador of Australia returned for the formal adoption proceedings. Mr Ronald M. DeKoven, a longstanding correspondent of Unidroit, who had acted as Reporter throughout the development of the draft model law, also acted as Reporter to the Joint Session. Thirty-three States participated in the Joint Session; six of these were non-member States, evidence of the decision taken by the Governing Council to broaden the composition of the Committee of governmental experts beyond the Institute’s membership with a view to ensuring that the type of country primarily identified as beneficiary of the projected model law also be involved as far as possible in its negotiation, notwithstanding the Institute’s under-representation among such countries. Two intergovernmental Organisations, including the International Finance Corporation (I.F.C.), were represented at the Joint Session, as also two international non-governmental Organisations and three professional associations.

The main business of the Joint Session was to polish up the text of the draft model law, both in the light of the comments submitted by Governments and Organisations and in particular with a view to improving the concordance of the French-language version with the English. The principal issues on which the Joint Session focussed were three in number, first, whether or not to accept the joint proposal submitted by the UNIDROIT Secretariat and the Aviation Working Group regarding the application of the projected model law in respect of aircraft transactions, secondly, how best to reconcile the ambition of the drafters to enhance the access of developing countries and transition economies to lease finance while preserving the lessee’s right to terminate the leasing agreement where the lessor had committed a fundamental default and, thirdly, while relieving the lessor in a financial lease, qua lessor and owner, from liability to the lessee or third parties for death, personal injury or damage to property caused by the leased asset or use thereof, how best to make it clear that such relief should not affect any liability that it might have for acts committed fraudulently or fault nor any liability that might be incumbent upon it under international Conventions, such as the International Convention on Civil Liability for Oil Pollution Damage adopted in Brussels in 1969 and amended in London in 1984.

On the first issue, there was general agreement that leases or supply agreements for large aircraft equipment (of the type covered by the Protocol to the Convention on International Interests in Mobile Equipment on Matters specific to Aircraft Equipment, adopted in Cape Town in 2001, i.e. airframes, aircraft engines and helicopters of a certain size) should be excluded from the sphere of application of the proposed model law, unless the lessor, the lessee and the supplier otherwise agreed in writing. At the same time, the draft model law was amended with a view to removing what was seen as a potential source of conflict between the proposed model law and the Convention on International Interests in Mobile Equipment in general.

On the second issue, while there was concern that the special nature of the lessor’s role in a financial lease should be preserved, it was, nevertheless, recognised that the concern with coming up with a balanced instrument highlighted by the Deputy Minister of Justice and Constitutional Development of South Africa when opening the first session of governmental experts required the lessee in a financial lease to be able to terminate the lease in the event of a fundamental default by the lessor in respect of its warranty of quiet possession; that special case apart, once the leased asset had been delivered to, and accepted by the lessee, the lessee in a financial lease would not be entitled to terminate the lease upon fundamental default by the lessor or the supplier.

On the third issue, there was agreement that in a financial lease the lessor should be relieved from liability to the lessee or third parties for death, personal injury or damage to property caused by the leased asset or use thereof when acting in its capacity of lessor and as owner within the limits of the transaction, as documented under the supply agreement and the lease.

The draft model law was formally adopted, as the UNIDROIT Model Law on Leasing, by the Joint Session at the closing meeting on the afternoon of 13 November 2008. The Joint Session passed a Resolution, enjoining the preparation of a commentary on the Model Law by the UNIDROIT Secretariat, acting in close co-operation with Mr DeKoven, as Reporter, Mr Brian Hauck, who had acted as Secretary to the Joint Session, Mr Makhubele and members of the Drafting Committee.

As mentioned above, the Model Law in its form as a preliminary draft, following the second session of governmental experts, has already served as the basis of national legislation in a number of developing countries where the I.F.C. is active in using leasing as a means of developing the private sector, in particular Jordan, Tanzania and Yemen. It is the I.F.C.’s intention to continue recommending use of the Model Law in its countries of operations, as a best practice reference. The I.F.C. will, furthermore, incorporate all the key principles of the Model Law in its new edition of Leasing Guidelines. The Commonwealth Secretariat has also declared its interest in working with UNIDROIT to recommend implementation of the Model Law in Commonwealth jurisdictions.

 

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