1.    UNIDROIT’s work on [leasing] goes back to February 1974 when the 53rd session of the UNIDROIT Governing Council was seized of a proposal from the UNIDROIT Secretariat recommending the preparation of a preliminary study looking into the desirability and feasibility of drawing up uniform rules on leasing. The Governing Council agreed to this proposal, giving the topic priority status on UNIDROIT’s, work programme for the 1975-77 triennium and empowering the President of UNIDROIT to convene a working group to study an international unification of the applicable rules on the subject.

2.    The preliminary report prepared by the UNIDROIT Secretariat pursuant to this decision was considered by a small working group of the Governing Council which met in Rome on 21 April 1975 to examine the feasibility of drawing up uniform international rules on the leasing contract. This group made a number of policy recommendations: first, to exclude real estate leasing from the scope of the proposed exercise, because of what was seen as the limited incidence of such operations at the international level and the enormous difficulties that would obtrude in any attempt to unify principles of the law of real property and the law of personal property in the same text; secondly, to exclude the leasing of ships, because of the special nature of the contract involved, which was considered to have more in common with charterparties; thirdly, to exclude the leasing of aircraft, also because of the special characteristics of the contract involved and in view of the study then underway within the International Civil Aviation Organization (ICAO) of the problems arising out of the lease of aircraft in international operations; fourthly, not to limit the scope of the work proposed to the tripartite financial leasing transaction but, for the time being at least, to envisage also the bilateral operating lease; fifthly, not to attempt, in view of the enormous difficulties that would be involved, any uniformisation of the law pertaining to exclusively domestic leasing operations but rather to address specifically international leasing. The working group finally recommended the circulation of the Secretariat’s report amongst experts with a request for comments and the gathering of further information on the precise nature of international leasing transactions

3.    Following the endorsement of these recommendations by the Governing Council at its 54th session in April 1975, the Secretariat sent out a questionnaire to leasing operators and experts the world over, designed both to clarify certain legal problems peculiar to leasing transactions in general and to throw light on cross-border leasing in particular. Replies came in from all four corners of the world and were analysed by the Secretariat in a paper submitted to the Governing Council at its 55th session in September 1976. One of the major facts to emerge from this inquiry, as has been indicated. above, was that the successful mounting of truly cross-border leasing transactions, as opposed to indirect international leasing transactions concluded through subsidiaries of the lessor incorporated in the country into which the latter wished to lease or by means of joint ventures, was still a rare occurrence, even if the sums involved in the small number of transactions actually mounted successfully were enormous, and that this was in no small measure due to the varying legal treatment accorded leasing from one country to another. Interest among those responding to the questionnaire leaned accordingly more towards a uniform international regulation of the rules governing leasing transactions in general rather than rules cast with international leasing specifically in mind. The primary purpose of the drafting of uniform rules was therefore seen as the resolution of the legal vacuum affecting leasing at the domestic level with a view to facilitating and thereby extending the possibilities for the use of this means of financing international trade.

4.    Twin doubts nevertheless persisted in. the minds of members of the Governing Council regarding the aptness of this subject for unification, as regards first the feasibility of disentangling the private law aspects of leasing from its fiscal aspects, given the generally agreed unsuitability of the latter for an attempt at unification, all the more so in the. same text as its private law aspects, and, secondly, the desirability of dealing with leasing separately from the general body of security interests in movables, a subject then being studied by the United Nations Commission on International Trade Law (UNCITRAL). In order to clarify these doubts the Governing Council set up a restricted exploratory working group drawn from amongst its own membership but assisted by consultant experts from the world of leasing practice. The working group gave positive answers to both questions when it met in Rome from 16 to 18 March 1977. As regards the first problem, it was of the opinion that, notwithstanding the considerable importance of fiscal, considerations in specifically international leasing transactions, there was a sui generis derivation of private law in tripartite financial leasing which merited the framing of special rules cast with its particular characteristics in mind and that it would. be possible in the drafting of such rules to steer clear of those aspects of leasing which rather fell within the competence of the revenue authorities, the philosophies underlying revenue law and private law being quite distinct. As regards the second problem, the group felt that it was perfectly feasible to formulate a legal framework around the sui generis leasing transaction without such a definition bringing the transaction automatically under the scope of Article 9 of the Uniform Commercial Code. of the United States of America and similarly inspired security interest legislation. In particular, security interests being closely tied to an underlying sale contract, the only potential security interest in the sui generis type of financial leasing would be the purchase money security, interest relating to the sale. contract between supplier and lessor. The relationship between lessor and lessee under the leasing agreement itself, on the other hand, did not establish a security interest so long as no transfer of title took place.

5.    The-working group accordingly recommended to the Governing Council that a study group should be set up with the assignment of drafting international uniform rules on the sui generis type of leasing transaction. It was felt that international uniform rules would realise a dual advantage in making it possible to leave the choice of the final form which the rules would take until a later stage, leaving open both the possibility that they be used to clarify the situation at the domestic level and the possibility that they be addressed to specifically international situations. The group also made a preliminary examination of the ground to be covered in the uniform rules, concluding with a number of policy recommendations to the Governing Council, among which the following may be singled out as being worthy of special mention:

(i)    Clear concepts should be employed in the uniform rules so as to avoid an a posteriori  classification of a lease as contemplated by the uniform rules under some quite different schema.

(ii)    The principal aim of the uniform rules should be to regulate the tripartite leasing transaction in view of its sui generis characteristics in relation to the existing schemata with one or other of which it had hitherto generally been assimilated. Bipartite leasing operations should only find a place in the uniform rules to the extent that such operations did not fit within the schema of a nominate contract.

(iii)    Leasing could be defined negatively for the purposes of the uniform rules, as neither a credit transaction nor a sale nor a financing transaction, but rather a special form of rental providing for the use of goods. The definition of leasing to be devised in such uniform rules could be based either on an identification of those characteristics which differentiated leasing from the existing contractual schemata with which it had hitherto been bracketed or on an enumeration of the requirements to be fulfilled before a transaction could be considered a leasing transaction for the purposes of the uniform rules, in the manner of the definition of “bill of exchange” in `the 1930 Geneva Convention on Bills of Exchange and Promissory Notes, or else on an amalgam of the two.

(iv)    The scope of the uniform rules should be limited to capital goods, thus to the exclusion of consumer transactions.

(v)    The parties to the transaction should be professional parties and the item leased should have been leased for professional purposes only.

(vi)    There was a case: for excluding the. leasing of aircraft, ships and rolling stock from the scope of the uniform rules, on the basis of the arguments advanced in the previous small working group of the Governing Council.

(vii)    The leasing agreement to be addressed in the uniform rules should cover the use of an item leased for a length of time corresponding to its economic working life.

(viii)    The lessor should remain the owner of the item leased, whatever agreements might be made with regard to the termination of the leasing agreement.

(ix)    The lessee should not be obliged to purchase the item leased at the expiry of the leasing agreement, whereas equally the parties should be left free to include an option to purchase the item leased in the leasing agreement.

(x)    Unless the contract provided otherwise, the lessee should have a direct right of action against the supplier in the event of the item leased not proving to be in conformity with the specifications given by the lessee.

(xi)    The lessee should bear the physical risks arising in connection with the item leased, in view of the special situation obtaining in tripartite financial leasing. The general rule of the law of products liability according to which a lessor would be liable qua owner for any damage caused to a third party by the item leased should not apply to the special situation of the lessor jn tripartite financial leasing.

(xii)    Some means of protection of third party creditors of the lessee should be found, be it only in the form of a minimum requirement laying down the principle of registration but leaving the modalities of registration to be established by each country.

6.    The working group’s recommendation that a study group should be set up was endorsed by the Governing Council at its 56th session in May 1977. This study group, manned by eminent experts from legal and economic systems as diverse as those of Belgium, Brazil, France, Hungary, Italy, the Netherlands, Nigeria, Switzerland, the United Kingdom, the United States of America and Yugoslavia, held four sessions in Rome, from 17 to 19 November 1977, on 1 and 2 February 1979, from 30 September to 2 October 1980 and from 27 to 30 March 1984. The Study Group elected Mr László Réczei, Professor of Law in the University of Budapest and at that time a member of the UNIDROIT Governing Council, as its chairman. Mr Réczei chaired all four sessions of the Study Group.

7.     The first session of the Study Group was devoted to consideration of a list of questions drawn up by the UNIDROIT Secretariat and the definition of equipment leasing agreed upon after many years of debate by Leaseurope at its annual working meeting in Oslo that same year. The list of questions was designed to pinpoint the matters to be dealt with in the uniform rules. On the basis of the Leaseurope definition the Study Group was moreover able to draw up a provisional draft definition of the sui generis form of equipment leasing generally known as financial leasing, on which it has decided to concentrate its attention. Two other significant policy decisions were taken at this first session, to wit, first, that the Study Group should seek to provide rules for leasing operations in general rather than address specifically international leasing situations, given that there could be no solution to the problems bedevilling the development of international leasing so long as there remained no solution to the problems bedevilling leasing at the national level, and, secondly, that aircraft, ships and rolling stock should be included in the general scope of the uniform rules.

8.    The provisional draft definition agreed at the first session of the Study Group provided the starting point for the tentative draft uniform rules an the sui generis form of leasing transaction that were drawn up subsequently by the UNIDROIT Secretariat- in tandem with .the Chairman of the Study Group. For the other articles of this, tentative draft the drafters sought to follow the general lines of the answers given by the Study Group to the aforementioned list of. questions which it had considered at its first session. The provisions on public notice were, on the other hand, modelled on the equivalent, provisions of the Uniform Commercial Code and the similarly inspired Personal Property Security Act of Ontario of 1967.

9.    This tentative draft was considered by the Study Group at its second session. Various proposals were put forward for its amendment at that session, notably regarding what was considered to be too detailed a public notice requirement for an intended international instrument. These proposals provided the inspiration for the subsequent work of revision carried out by the UNIDROIT Secretariat.

10.    This revised text was then the subject of consultation both among the members of the Study Group and within a working group set up by Leaseurope. This process of consultation yielded alternative revised texts, on the one hand, from two members of the Study Group and, on the other hand, from the Leaseurope working group. A third alternative revised text was then drawn up by the UNIDROIT Secretariat in tandem with the Chairman of the Study Group in an effort to reconcile the different trends evidenced in these various alternatives. A preamble was added to the original draft in accordance with the wish expressed by the Study Group at its second session that it should be made clear that the uniform rules were only designed to deal with the private law aspects of leasing ands did not presume to invade the specific competence normally reserved by the legislator in respect of the fiscal and accounting aspects of leasing.

11.    The alternative revised drafts were considered by the Study Group at its third session. At this session the Group was able, subject to some drafting improvements which it was agreed could be worked out between the different members of the Study Group, to adopt a set of preliminary draft uniform rules on the sui generis form of leasing transaction. While the title of the draft still referred to uniform rules, underlining the original intention of the drafters to approach the problem from the angle of seeking to remove the differences in legal treatment existing from one jurisdiction to another, seen as one of the major obstacles to international leasing’s realisation of its full potential, the preamble and the scope of application provisions were couched in the form of a draft international Convention and the uniform rules addressed specifically international leasing situations. This change of approach was prompted, on the one hand, by recognition of the reluctance of certain States to become parties to international instruments in respect of any other than international transactions and, on the other hand, by the desire to indicate the Study Group’s opinion that the uniform rules greatest chance of success lay with their embodiment in an international Convention, the feeling being that a model law would not greatly improve the present situation of considerable differences of legal treatment of leasing from one jurisdiction to another.

12.    The Study Group, in adopting the text of preliminary draft uniform rules, recommended that, instead of following the usual course of transmitting the text prepared by the Study Group directly to a committee of governmental experts for the hammering out of a final text for adoption at a diplomatic Conference, the UNIDROIT Governing Council should rather first give the uniform rules maximum exposure along the business and legal practitioners familiar with the everyday realities of leasing, inter alia by the organisation of symposia in different parts of the world. The purpose of these symposia would be to enable the text to be presented to and discussed by practitioners. The unripeness of the uniform rules for consideration by governmental experts pending such time as they had been given such exposure among practitioners was considered to flow principally from two, not wholly unrelated factors: first, the continuing sparseness of attempts at the domestic level to legislate in this field and, secondly, the continuing evolution of the leasing mechanism in view of its well proven flexibility to meet constantly newly appearing market needs. Since this continuing process of evolution was largely the work of the denizens of the financial and business world, it was considered desirable to sound first the opinion of those responsible for’ this ongoing evolutionary process, in order to ascertain whether and to what extent the solutions advanced by the preliminary draft uniform rules were consonant with the realities of leasing practice.

13.     The UNIDROIT Governing Council at its 60th session in April 1981 endorsed this recommendation of the Study Group for the holding of symposia designed to give exposure to the uniform rules and the first in what was envisaged as a programme of symposia was held in New York on 7 and 8 May 1981. This symposium was sponsored by the American Law Institute-American Bar Association Committee on Continuing Professional Education. The audience assembled in New York was essentially- composed of bankers, businessmen and practising lawyers having expertise in international leasing, mostly from the United States but also including some who had journeyed from Europe. Invitational in character, the symposium was structured in such a way as to permit a panel of speakers, largely made up. of members of the Study Group, to introduce the provisions of the preliminary draft uniform rules and the audience to raise questions and indicate any criticism.

14.     The second in the programme of symposia, sponsored by Industrie-Leasing. AG, the leasing subsidiary of the Swiss Bank Corporation and held in Zürich on 23 and 24 November 1981, was addressed essentially to an audience of Western and Eastern European .bankers, businessmen and practising lawyers, although some participants came from further afield, from Egypt for instance.

15.    Presentation of the uniform rules to, and discussion thereof among a numerous Far Eastern audience was also possible at the First World Leasing Convention, organised by Leasing Digest Conferences in ‘conjunction with the Hong Kong Equipment Leasing Association in Hong Kong from 10 to 12 January 1983.


16.    Further presentation and discussion of the uniform rules was also possible at the seminar on international equipment leasing organised for French-speaking African lawyers by the International Development Law Institute in Rome from 6 to 17 February 1984.

17.    The UNIDROIT Secretariat in the meantime employed its best offices to ensure that the uniform rules received the maximum exposure world wide by the publication of regular articles thereon in the annual editions of the World Leasing Yearbook from 1980 onwards and, where possible, in the press. Regular and close ties of co-operation have at all stages of UNIDROIT’s work on this subject been maintained with the national, supranational and regional associations and federations representative of the leasing industry, most notably Leaseurope,  the Asian Leasing Association, the American Association of Equipment Lessors and the Federación Latino Americana de Leasing (Felalease). On 12 June 1984 the Italian Finance Houses Association (Associazione Tecnica delle Società Finanziarie di Leasing e di Factoring), in conjunction with the law journal “Nuovi Investimenti”, organised a one-day seminar on the UNIDROIT draft in Milan. The audience, made up of Italian leasing specialists, was thus able to hear presentation of the draft and make such criticism and comments as they saw fit.

18.    At its fourth session the Study Group considered the case for the amendments proposed during the course of the programme of symposia and gave especial attention to the improvement of the drafting of the text. It had before it a revised version of the text adopted in October 1980 which had been prepared in Budapest in December 1983 by the UNIDROIT Secretariat in tandem with the Chairman of the Study Group. The aim of this revision was to give effect to the proposals for the amendment of the uniform rules made during the programme of symposia and other meetings. The major decisions taken at the finial session of the Study Group were, apart from that of rejecting a proposal made at the New York symposium for the widening of the scope of the uniform rules to embrace bilateral leasing arrangements, in particular operating leases, first, to reintroduce that provision which had maintained its place right through the Study Group’s work prior to the symposia and which sought to highlight the financial nature of the sui generis type of lease by indicating that the duration of the leasing agreement took account of the period of amortisation of the leased asset (Article 1(2)(d) of the text adopted in October 1980); secondly, the deletion of Article 2 of the text adopted, in October 1980, a provision that had aroused much criticism on the occasion of the symposia, mainly on account of what was considered to be its obscure drafting, but which sought to ensure that once a given transaction was regarded as subject to the uniform rules under the law of the State in which the leasing agreement was concluded or under the proper law of that agreement, then it was automatically subject to the uniform rules in any other Contracting State; thirdly, the deletion of Variant II of Article 4 of the text adopted in October 1980 following much criticism of `that variant during the symposia on the ground that it would put the risk of loss of title too heavily on the lessor; fourthly, the introduction of a clause requiring the lessor to elect between the exercise of the remedies given it under the then Article 12(1) of the uniform rules and the benefit of a clause accelerating its entitlement to all or any of the lease rentals upon the lessee’s default; fifthly, the introduction of an article by now common in international commercial law Conventions designed: to ensure, on the one hand, that the uniform rules are interpreted in accordance with their international uniform character and not on the: basis of the legal principles and traditions of the legal system of the judge or arbitrator called upon to decide a given case and, on the other hand, the observance of good faith.

19.    The’ preliminary draft uniform rules on international financial leasing as adopted by the Study Group at its fourth session were then, in accordance with UNIDROIT tradition, submitted for approval to the Governing Council at its 63rd session held in May 1984. This approval was given and the Council accordingly authorised the convening of a committee of governmental experts to hammer out the text of a draft Convention suitable to be submitted for adoption to a diplomatic Conference.

20.    Three sessions of this committee. were held. in Rome-from 15 to 19 April 1985, from. 14 to 18 April 1986 and from 27 to 30 April 1987. 40 UNIDROIT member States, five non-member States, six intergovernmental. organisations, two international. non-governmental organisations; three international professional associations and five national professional associations were represented in the committee’s work. Mr Lászlo Réczei, the representative of Hungary, was again elected chairman, Mr Royston M. Goode, a representative of the United Kingdom, was. elected deputy chairman and chairman of the drafting committee. A drafting committee was set up at the first session of the committee of governmental experts. At the first session this drafting committee was manned by the chairman of the committee of governmental experts and the representatives of France and the United Kingdom, whereas at the second and third sessions it was enlarged to take in also one representative each from the delegations of Belgium, China, Finland and the United States of America. The committee of governmental experts gave the text adopted by the Study Group three readings as a result of which, at its final sitting on 30 April 1987, it was able, subject to reservations regarding certain provisions which it was agreed should be placed in square brackets for decision at the diplomatic Conference, to adopt the text of the draft Convention on international financial leasing […].

(Excerpt from document UNIDROIT 1987 – Study LIX – Doc. 48)

The draft Convention on International Financial Leasing, together with its sister draft Convention on International Factoring, was laid before a diplomatic Conference hosted by the Government of Canada and held in Ottawa from 9 to 28 May 1988.