учебный год 2023 / Wires , Retention of Title Clauses in International Trade Law

Under the first optional protocol, countries such as the UK and Australia, which do not require the registration of ROTs, can adopt a policy of reciprocity. That is, they can mutually recognise that retention of title clauses shall be effective against third parties in each other’s countries. The Model Law would then annex a draft clause that parties can incorporate into contracts, which shall automatically be deemed to be a valid method of retaining title in all of the countries which have signed the first optional protocol.

Of course, the draft clause would need to provide for protection in all of the various situations that may arise in normal trade dealings. This would include simple retention of title clauses that protect against a buyer on-selling goods, but also more complex dealings where parties use goods supplied to manufacture a new good.

While achieving such a consensus may prove difficult (as it would require countries such as France to alter their position that title cannot be retained in goods which have been mixed in a manufacturing process), at a minimum ensuring protection for simple retention of title clauses is reasonably achievable.

Sellers dealing with buyers in countries who have signed the first optional protocol can then take the draft clause and implement it into the contract with certainty that it will be enforced. Furthermore, simply checking who has ratified the first optional protocol informs international sellers of all the countries it can sell to on credit without having to worry about registering their interest.

Under the second protocol, countries such as Canada and the United States, who require the registration of ROTs as security interests, can create a central public register to record all security interests created pursuant to a retention of title provision. This would provide prior secured creditors and future creditors with notice (or at least constructive notice) of the transaction and that the goods remain either the property of the sellers, or are subject to a security interest.

The ROT register would by no means be unique. It would operate in a similar fashion to the World Intellectual Property Organisation’s (WIPO’s) register, which has created a centralised approach to registering intellectual property internationally. WIPO allows for the registration with one central organisation to be deemed as registration in all other signatory countries. In the retention of title

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context, this allows for sellers to only have to deal with one organisation as opposed to registering the clause in each buyers country (a task which Usinor rightfully argued is absurd to force upon international sellers).

As a result of the two optional protocols or optional articles to sign onto, sellers are better protected from the risk of losing title to their goods. Likewise, the cost of administering the registration of the clauses is vastly reduced. It may also be projected that by having established the first optional protocol, more countires will be inclined to ‘join the group’ so as to increase the ease of international trade for its importers and exporters.

Regional Reform

Failing any greater global reform via UNCITRAL’s model law, regional trading blocs can still try to promote better integration with regard to ROTs. For example, the above noted amendments for UNCITRAL’s Model Law could equally be inserted into the North American Free Trade Agreement (NAFTA), or other regional trading communities.

Technological Reform: Reducing Administrative Costs

The incorporation of modern technology into any central register created under the above mentioned second optional protocol can greatly aid in tackling the administrative burden imposed on international sellers. For example, in Australia certain public registrars are slowly adopting computer based systems, publicly accessible and updatable in real time. Some are now primarily accessed through the internet and B2G connections, but also operate through SMS, call centre and physical lodgement channels.52

Such technological advancements in the lodgment process is a key element to reducing administrative costs for international sellers in registering their interest in any central register. Sellers can protect their interests far easier if all it takes in an email or SMS to register a new ROT clause with UNTCITRAL’s public register.

52 Attorney-General’s Department (Australia), Personal Property Securities Register (2009) Attorney-General’s Department (Australia) <http://www.ag.gov.au/www/agd/agd.nsf/Page/ Consultationsreformsandreviews_personalpropertysecuritiesreform_PersonalPropertySecuritiesRegister> at 20 July 2009.

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Is Australian Reforming in the Wrong Direction?

Australia is currently in the process of adopting personal property and security legislation that closely mimics the Canadian and American approach, turning ROTs into registrable security interests.53 The push for the reform has largely been advocated for by the banking industry via the Banking Law Association (BLA),54 who will benefit from sellers both domestically and internationally having to register their security interests created by way of ROT’s. That is, banks will be able to maintain their priority as charge holders over sellers who purport to have retained title. As a result of the proposed reforms, the battle of priority in insolvency cases will more often sway in favour of banks as opposed to sellers with retention clauses.

The Attorney-General of Australia predicts the reforms will be implemented by May 2011.55

However, it is unlikely that the Attorney-General has considered the profound impact the reforms will have on international trade. For instances, the decision in the Australian case of Roder (noted above) would likely be reversed. An Australian judge would have no option but to rule in a similar fashion to the finding in Usinor in the United States.

In terms of protecting international sellers, the Australian reforms will certainly be a step backwards. The wider question arises as to whether the Australian reforms are establishing a trend for other countries to follow. Should the trend that ROT clauses must be registered as security interests be further established, the importance of a central registrar under the Model Law will be evermore essential. In fact, it will be one of the few remaining solutions to protect international sellers selling on credit, without slowing international trade in a time where credit has become so sparse.

Conclusion

By in large, retention of title clauses have received little attention in the international context. No trading bloc, let alone international convention, has managed to create any sense of uniformity or reciprocity in recognising even simple retention of title clauses across borders.

53Ibid. See also the Personal Property Securities Bill 2008 (Cth).

54David E. Allan, ‘Uniform Personal Property Security Legislation for Australia: Introduction to the Workshop on Personal Property Security Law Reform’ (2002) 14(1) Bond Law Review, 4. Available online at <http:// epublications.bond.edu.au/blr/vol14/iss1/1>.

55Above n 51.

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As a result, each country applies its own domestic law to determine the validity of ROT’s, which as illustrated, is often problematic for sellers unaware of registration requirements for purchase money securities in the buyer’s jurisdiction.

The current approaches that countries take can be divided into two main systems. There are those countries which require registration, and those which, by a properly worded contract, allow for the reservation of title in not only goods supplied, but also the proceeds from on-selling or manufacturing.

As a result of the decentralised system, sellers in countries such as France56 and Germany,57 who trade with countries which require the registration of ROTs, have unwittingly lost title to their goods, and have even been charged with conversion for improperly repossessing what they believe to be their own goods.58 Likewise, sellers who have managed to protect their goods via registration have done so only with the great administrative burden of registering each contract of sale they enter, in each of their buyer’s jurisdictions.

The author has advocated for a two tier solution under optional protocols as amendments to UNCITRAL’s Model Law on Cross-Border Insolvency. As countries which require registration of ROT clauses will likely not change their position (and indeed the trend seems to be for more countries to move in the direction of mandatory registration) it it is best for international law to deal with the countries who require registration separate from those that do not.

However, of greatest importance is the establishment of a central registrar which utilises modern technology to make the registration of ROTs, and other security interests, fast and easy. In the mean time, international sellers who sell of credit to their buyers must understand the securities laws of the countries they trade with, because choice of law provisions have little effect in a buyer’s insolvency court.

56Usinor

57See for example Hong Kong and Shanghai Banking Corp., Ltd. (HSBC) v. HFH USA Corp., 805 F. Supp. 133 (W.D.N.Y. 1992).

58Ibid.

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Bibliography

1. Articles/Books/Reports

Allan, David E, ‘Uniform Personal Property Security Legislation for Australia: Introduction to the Workshop on Personal Property Security Law Reform’ (2002) 14(1) Bond Law Review. Available online at <http:// epublications.bond.edu.au/blr/vol14/iss1/1>.

Attorney-General’s Department (Australia), Personal Property Securities Register (2009) Attorney-General’s Department (Australia) <http://www.ag.gov.au/www/agd/agd.nsf/Page/ Consultationsreformsandreviews_personalpropertysecuritiesreform_PersonalPropertySecuritiesRegister> at 20 July 2009.

Bridge, Michael G., Macdonald Roderick A., Simmonds Ralph L., and Walksh, Catherine, ‘Formalism, Functionalism and Understanding the Law of Secured Transactions’ (1999) 44 MCGLJ 567.

Lin, Joyce Lee Suet, ‘Company Charges Under Singapore Law: Legal and Practical Implications’ (2003) 14(1)

International Company and Commercial Law Review, 3.

Kritzer, Albert H., ‘Passage of Risk: Comments on Passage of Risk Under National Rules, Under CISG, Under Incoterms’ Pace Law School Institute of International Commercial Law. Available online at <http:// www.cisg.law.pace.edu/cisg/text/passage.html >.

Laemmli, Thomas,‘Transfer of Ownership in International Sales of Goods’ (2007).

The Law Reform Commission (Ireland), ‘Report on Debt Collection: Retention of Title. Available online at <http:// www.lawreform.ie/publications/data/volume7/lrc_51.html>.

Menendez, Uria, ‘Spain: Retention of Title Arrangements as Security Interest in Spanish Related Financing’ Mondaq (2002), at 3.2. Available online at <http://www.mondaq.com/article.asp?articleid=15949>.

Milo, Michael, ‘Retention of Title in European Business Transaction’ (2003) 43 Washburn L.J. 121.

Omar, Paul J., ‘The UNCITRAL Model Law on Cross-Border Insolvency’ 10(8) (1999) International Company and Commercial Law Review.

Ong, Denis S. K., ‘Romalpa Clauses’ Bond Law Review, Vol.4 [1992], Iss. 2, Art. 5.

Pauly, Clemens W., ‘Is Avoidance Under CISG Article 64 A Powerful Remedy? Comparison Of The CISG Remedy With Third-Party Rights’. Available online at <http://www.langstadtpauly.com/site/uploads/CISG%20essay %20Pauly.pdf.>.

Phillips, Mark and Seraya, Amir, ‘Israel: Sale of Goods - Retention of Title Clauses’ (2003) International Company and Commercial Law Review.

Tribe, John ‘The Morality of Romalpa Clauses in Corporate Insolvency: A Case for Reform? Tolley's Insolvency Law and Practice (2001) Vol 17, No 5 IL&P 166 1 September 2001.

Watt, Benjamin, ‘The Sprit Of Insolvency In France: A Study Of Gallic Charm From A Scots Perspective’ (1996) 7(7)

International Company and Commercial Law Review.

Wood, Philip R, ‘Comparative Law of Security Interests and Title Finance’ 2nd Ed (2007).

Ziegel, Jacob S., ‘Comment on Roder Zeltund Hallenkonstruktionen GmbH in Review of the Convention on Contracts for the International Sale of Goods’ (1998), Kluwer Law International Pace ed. (1999), 53-54. Available online at <http://www.osgoode.yorku.ca/cisg/writings/ziegelfour.htm >.

Ziegler, Alexander von, ‘Transfer of Ownership in International Trade’ (1999).

2. Case Law

Australia

Roder Zeltund Hallenkonstruktionen GmbH v. Rosedown Park Party Ltd. (1995) 57 Fed. Ct. Rep., 216-240; CLOUT No. 308.

England

Aluminium Industry Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676.

Borden v Scottish Timber Products [1981] CL 25.

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Re Peachdart [1983] 3 All ER 204.

European Union

Commission of the European Communities v Italian Republic Judgment of the Court (Second Chamber) [2006] ECR I-10597.

Germany

Oberlandesgericht Koblenz decision from 16.01.1992, 5 U 534/91, RIW 1992, 1019-1021). Summary available online at <http://cisgw3.law.pace.edu/cases/920116g1.html>.

United States

Gordon v Clifford Metal Sales Co. Inc. 602 A.2d 535 (1992).

Hong Kong and Shanghai Banking Corp., Ltd. (HSBC) v. HFH USA Corp., 805 F. Supp. 133 (W.D.N.Y. 1992).

Italverde Trading, Inc. v. Four Bills of Lading, 485 F. Supp.2d 187 (E.D.N.Y. 2007).

Usinor Industeel v. Leeco Steel Products, Inc., 209 F.Supp.2d 880 N.D.Ill.,2002. March 28, 2002.

3. Bills and Legislation

Companies Act (Singapore) 1967.

Bankruptcy and Insolvency Act R.S.C. 1985.

Personal Property Security Act R.S.O. 1990.

Personal Property Securities Bill 2008 (Cth).

The Sale of Goods Act (Qld) 1896.

The Sale of Goods Act (UK) 1973.

The Sale of Goods Act (UK) 1893.

Switzerland's Federal Code on Private International Law. Private translation of the official text by UMBRICHT Attorneys, Switzerland, © by Dr. Robert P. Umbricht, LL.M.

4. International Treaties and Materials

Council Regulation (EC) No 1346/2000 of 29 May 2000 On Insolvency Proceedings. Directive 2000/35/EC (On Combating Late Payment in Commercial Transactions).

The New York Convention On The Recognition and Enforcement of Foreign Arbitral Awards, opened for signature 1958, 330 UNTS 3, (entered into force 7 June 1959).

UNCITRAL, ‘Model Law on Cross-Boarder Insolvency (1997).

United Nations Convention on Contracts for the International Sale of Goods 1980 (CISG).

The Vienna Convention on the Laws of Treaties, opened for signature 23 May 1969, UNTS Vol. 1157. (entered into force on 27 January 1980).

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