MODEL LAW ON WAREHOUSE RECEIPTS

STUDY LXXXIII – MODEL LAW ON WAREHOUSE RECEIPTS

STUDY LXXXIIIA – GUIDE TO ENACTMENT FOR THE MODEL LAW ON WAREHOUSE RECEIPTS

 

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 strengthen their national legal frameworks but also increase international harmonisation, thereby facilitating cross-border transactions.

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).

The project consisted of two phases. First, UNIDROIT led the joint preparatory work through a UNIDROIT Working Group, developing a first comprehensive draft for a Model Law on Warehouse Receipts over the period 2020-2023. Once completed, the draft Model Law was submitted for intergovernmental negotiations through UNCITRAL Working Group I in 2023.

It was agreed 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 contemplates the issuance and transfer of electronic warehouse receipts, including through the use of electronic platforms, distributed ledger technology systems, and other technological mechanisms. It was conceptualised as a stand-alone 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.

Furthermore, the Model Law shall be accompanied by a Guide to Enactment, including commentaries on the model provisions as well as guidance on secondary legislation that may be deemed necessary to implement the Model Law at the country level.

The Model Law was 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).

DEVELOPMENT OF THE MODEL LAW

 

The UNIDROIT Working Group on a Model Law on Warehouse Receipts

As consistent with the Institute’s established working methodology, a UNIDROIT Working Group was established to develop a comprehensive draft for the Model Law. The Group was composed of experts selected for their expertise related to warehouse receipt systems. Experts participated in a personal capacity and represented different legal systems and geographical regions. The Working Group was composed of the following expert members:

  • Eugenia Dacoronia, Professor of Civil Law, University of Athens (Greece) (Chair)
  • Paula María All, Professor of Private International Law, Universidad Nacional del Litoral (Argentina)
  • Nicholas Budd, former partner and head of the Trade & Commodity Finance Groups, White & Case (France)
  • Adam Gross, Director, Darhei Noam Limited (United Kingdom)
  • Yu Guo, Associate Professor, Director of the Maritime Law Research Centre, Beijing University
  • 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, Hokkaido University (Japan)
  • Andrea Tosato, Associate Professor of Commercial Law, University of Nottingham (United Kingdom); Lecturer in Law, University of Pennsylvania (USA)
  • Bruce Whittaker, Senior Fellow, University of Melbourne

In addition, several intergovernmental organisations with interdisciplinary expertise in the field of warehouse receipt systems had 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 had 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 had been invited to participate in the Working Group as observers, with the aim to ensure that the instrument would 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)
  • Secured Finance Network
  • SMBC Bank International PLC
  • United States Department of State
  • York University, Canada

Moreover, given the project’s important synergies with the UNIDROIT Project on Digital Assets and Private Law, which aimed to provide legislative guidance relating to the transfer and use of digital assets, experts involved in that project were invited to assist the Warehouse Receipts Working Group on particular topics related to new technologies. There was a direct relationship with the project as far as the issuance and transfer of electronic warehouse receipts was concerned, as one of the categories of digital assets that were examined in the Digital Assets Project concerned digital tokens, which are linked to an external, non-digital asset.

Between December 2020 and March 2023, the Working Group held six sessions dedicated to the draft Model Law text. All members and observers were invited to participate in the sessions. The dates and all documents for the sessions are available below.

 

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.

 

Second Session of the Working Group (10 – 12 March 2021)

The second session of the Working Group took place in a hybrid manner on 10 – 12 March 2021.

 

Third Session of the Working Group (1 – 3 September 2021)

The third session of the Working Group took place on 1 – 3 September 2021.

 

Fourth Session of the Working Group (28 February – 2 March 2022)

The fourth session of the Working Group took place in a hybrid manner on 28 February – 2 March 2022.

 

Fifth Session of the Working Group (5 – 7 December 2022)

The fifth session of the Working Group took place in a hybrid manner from 5 to 7 December 2022.

 

Sixth Session of the Working Group (1 – 3 March 2023)

The sixth session of the Working Group took place in a hybrid manner from 1 to 3 March 2023.

 

Following the sixth session of the Working Group, the final version of the draft Model Law on Warehouse Receipts was presented to the Governing Council at its 102nd session on 10-12 May 2023 (Model Law available in the Annexe to document C.D. (102) 4 rev.). The Governing Council unanimously adopted the draft Model Law as presented and agreed to its submission to UNCITRAL for State negotiations and completion.

 

Negotiation of the draft Model Law on Warehouse Receipts by UNCITRAL Working Group I

Following the approval of the draft Model Law by the UNIDROIT Governing Council, the text was submitted to UNCITRAL for intergovernmental negotiation, where it was assigned to Working Group I. The Group considered the draft Model Law on 25-29 September 2023 at its 40th session in Vienna, as well as on 5-9 February 2024 at its 41st session in New York, where it also considered the draft Guide to Enactment. At the end of its 41st session, Working Group I agreed to recommend the Model Law with the Guide to Enactment to the UNCITRAL Commission for adoption at its 56th session on 3-21 July 2024.

Following adoption of the draft Model Law by the UNIDROIT Governing Council at its 102nd session on 10-12 May 2023 for submission to UNCITRAL for State negotiations, and based on the work of the Group over the past two years, the same UNIDROIT Working Group prepared a comprehensive draft of the Guide to Enactment for the Model Law.

 

Session of the Working Group for consideration of the draft Guide to Enactment (13-15 November 2023)

The Working Group held one session to consider the draft Guide to Enactment, which took place in a hybrid format on 13–15 November 2023.

The documents for the session are available below.