A well-designed warehouse receipt system can provide benefits for all participants in the commodity market, whether in agriculture or other industries, including producers, warehouse operators, traders, and creditors. Notably, it can facilitate access to credit and lower its cost by creating secure collateral, thereby attracting private sector investments to a particular sector. An effective warehouse receipt system also allows for smallholders to participate in commodity markets by providing them with the possibility to consolidate their produce and sell jointly further down the value chain. Moreover, the incorporation of new technologies stimulates and facilitates market transactions and international trade, enabling participants to access real-time inventory data, execute instant transactions, and access a larger market.
A number of countries have recently initiated legislative reforms to modernise their national legal framework and accommodate the use of new technologies. Such reforms have often been supported by international organisations such as the World Bank Group, the United Nations Food and Agriculture Organization, and the European Bank for Reconstruction and Development.
However, no intergovernmental organisation has yet adopted a model law on warehouse receipts that would assist States in undertaking reforms. Such an instrument would not only help strengthening their national legal frameworks but also increase international harmonisation, thereby facilitating cross-border transactions.
BACKGROUND OF THE PROJECT
In 2019, the Secretariat of the United Nations Commission on International Trade Law (UNCITRAL) invited the UNIDROIT Secretariat to consider legislative joint work on warehouse receipts, with particular focus on the possible drafting of a Model Law. Several reasons motivated this initiative, including the growing importance of warehouse receipts in supply-chain and value-chain financing; constraints in access to credit limiting economic growth, particularly in developing countries and emerging markets; a lack of norms governing warehouse receipts in many jurisdictions; and the need to harmonise existing standards on warehouse receipts promoted by international organisations.
On 26 March 2020, UNCITRAL and UNIDROIT co-organised a Webinar on a Model Law on Warehouse Receipt Project to discuss the proposal of developing such an international instrument. The Webinar gathered input from a multidisciplinary group of experts from various geographic regions representing academia, stakeholders, institutional actors, and international organisations active in the field. The conclusions and recommendations of the Webinar confirmed the desirability and potential benefits of a Model Law that would be endorsed at the international level.
At its 99th session in April/May 2020, the UNIDROIT Governing Council approved the project for the 2020-2022 Triennial Work Programme as a high priority project (UNIDROIT C.D. (9) A.8), followed by UNCITRAL’s Commission at its 53rd session in September 2020 (UN Doc. A/75/17).
It is envisaged that the Model Law shall consist of a set of black letter rules covering the private law aspects of a warehouse receipt system. Importantly, the Model Law will contemplate the issuance and transfer of electronic warehouse receipts, including through the use of electronic platforms, distributed ledger technology systems, and other technological mechanisms. It is anticipated that it will be a standalone instrument for adoption by States seeking to reform their national legislation. As all UNCITRAL and UNIDROIT instruments, the Model Law shall be compatible with both common law and civil law jurisdictions.
Upon the project’s completion, consideration will be given to complementary work on a guide to enactment, including commentaries on the model provisions as well as on secondary legislation that may be deemed necessary to implement the Model Law at the country level.
The Model Law will be developed in a harmonised manner with UNCITRAL’s related existing instruments, in particular the UNCITRAL Model Law on Secured Transactions (2016), the UNCITRAL Legislative Guide on Secured Transactions (2007) and the UNCITRAL Model Law on Electronic Transferable Records (2017).
WORKING GROUP SESSIONS AND CURRENT STATUS
The Working Group on A Model Law on Warehouse Receipts
The project consists of two phases. First, UNIDROIT will lead the joint preparatory work through a UNIDROIT Working Group, developing a first comprehensive draft for a Model Law on Warehouse Receipts over the period 2020-2022. Once completed, the draft Model Law shall be submitted for intergovernmental negotiations through an UNCITRAL Working Group.
As consistent with the Institute’s established working methodology, the Working Group is composed of experts selected for their expertise related to warehouse receipt systems. Experts participate in a personal capacity and represent different legal systems and geographical regions. The Working Group is composed of the following expert members:
- Eugenia Dacoronia, Professor of Civil Law, University of Athens (Greece) (Chair)
- Nicholas Budd, former partner and head of the Trade & Commodity Finance Groups, White & Case (France)
- Adam Gross, Director, Darhei Noam Limited (United Kingdom)
- Keith Mukami, Director, Head of Africa: Banking & Regulatory, CMS-RM Partners (South Africa)
- Dora Neo, Associate Professor and Director, Centre for Banking & Finance Law, National University of Singapore (Singapore)
- Jean-François Riffard, Professor of Civil Law, University Clermont Auvergne (France)
- Teresa Rodriguez De Las Heras Ballell, Associate Professor of Commercial Law, Universidad Carlos III de Madrid (Spain)
- Hiroo Sono, Professor of Law, University of Hokkaido (Japan)
- Andrea Tosato, Associate Professor of Commercial Law, University of Nottingham (United Kingdom); Lecturer in Law, University of Pennsylvania (USA)
In addition, several intergovernmental organisations with interdisciplinary expertise in the field of warehouse receipt systems have been invited to participate in the Working Group as observers, with the objective to assist in both the development and the implementation of the Model Law once it has been adopted:
- Food and Agriculture Organization of the United Nations (FAO)
- International Fund for Agricultural Development (IFAD)
- Organization of American States (OAS)
- Organisation for the Harmonisation of Business Law in Africa (OHADA)
- United Nations Conference on Trade and Development (UNCTAD)
- World Bank Group (WBG)
Finally, several public and private sector stakeholders have been invited to participate in the Working Group as observers, with the aim to ensure that the instrument will address the stakeholders’ needs:
- Association of General Warehouses, Mexico
- Bsystems Limited
- GrainChain Inc.
- Indonesia Commodity & Derivatives Exchange
- Information Services Corporation, Canada
- International Warehouse Logistics Association
- Kozolchyk National Law Center (NatLaw)
- Sberbank Hungary Ltd.
- Secured Finance Network
- SMBC Bank International PLC
- United States Department of State
- VOCA Consult
Moreover, given the project’s important synergies with the ongoing UNIDROIT Project on Digital Assets and Private Law which aims to provide legislative guidance relating to the transfer and use of digital assets, experts involved in that project may be invited to assist the Warehouse Receipts Working Group on particular topics related to new technologies. There is a direct relationship with the project as far as the issuance and transfer of electronic warehouse receipts is concerned, as one of the categories of digital assets to be examined in the Digital Assets Project concerns digital tokens which are linked to an external, non-digital asset.
First Session of the Working Group (2 – 4 December 2020)
The first session of the Working Group took place in a hybrid manner on 2 – 4 December 2020. All members and observers were invited to participate in this first session.
The documents for the first session are available below:
- Study LXXXIII – W.G.1 – Doc. 1 – Work Plan
- Study LXXXIII – W.G.1 – Doc. 2 – Annotated Draft Agenda
- Study LXXXIII – W.G.1 – Doc. 3 – Issues Paper
- Study LXXXIII – W.G.1 – Doc. 4 – Background Paper
Second Session of the Working Group (10 – 12 March 2021)
The second session of the Working Group will take place in a hybrid manner on 10 – 12 March 2021.