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LUCA G. RADICATI DI BROZOLO
1. INTRODUCTION
307
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308 THE AMERICAN JOURNAL OF COMPARATIVE LAW [Vol. 48
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2000] INTERNATIONAL PAYMENTS 309
national payment" used here is thus broader than the one used by the
UNCITRAL model law which considers only the fact that the banks in-
volved are in different countries.
An international payment may give rise to countless problems,
and consequently disputes, possibly needed to be solved by legal rules
or principles. These may have to do with the payment instructions
given by the originator (or any party further along the chain) - for
example, in what form are the instructions to be given; how are they
to be interpreted; how and until what point are they revocable or
modifiable and at what points do they become final and irrevocable;
how and when may a stop payment order be given). They may have
to do with the payment (where and at what moment is it supposed to
be made and is it actually considered to be made). They may have to
do with the consequences of a failure to carry out the instructions
correctly (what remedies are available in case of late or erroneous
payment such as underpayment, payment to the wrong beneficiary:
entitlement only to interest or also to damages, and the amount
thereof, etc.).
Although it is these problems that practitioners will first seek
concrete answers, I will not deal with them. This is not so much be-
cause of their difficulty but because they are the domain of substan-
tive lawyers and not of a conflicts lawyer. It is because any attempt
to do so in the abstract would be meaningless.
Indeed, notwithstanding that the problems posed by interna-
tional payments are not in principle different from the ones posed by
purely domestic ones. However, there is one very significant differ-
ence. Also with regard to domestic payments the rules and solutions
may not necessarily be clear, but there is at least certainty as regards
to the legal system within which they are to be sought, this being
obviously the one of the country with which the payment has its only
contacts. Even this certainty is lacking with regard to international
payments. Since there is no single set of rules dealing (automatically
or prima facie) with all international payments,5 or for that matter
with any given international payment, at least in theory each pay-
ment can be analyzed from the perspective of more than one legal
system. The consequence is that there is no single solution to any of
the problems mentioned above and that actually there is a potentially
different solution for each one of these problems depending on the
legal system in the light of which it is analyzed.
It is thus obvious that whatever attempt to seek the solution of
any specific legal problem arising from an international payment
must be preceded by a conflicts of laws analysis aimed at identifying
the legal system (or systems) against the backdrop of which the pay-
5. The reasons why not even the Uncitral model law provides such a set of rules
will be discussed further on.
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310 THE AMERICAN JOURNAL OF COMPARATIVE LAW [Vol. 48
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20001 INTERNATIONAL PAYMENTS 311
However, quite apart from the fact that no State has yet adopted
legislation based on the model law, even this instrument by no means
eliminates conflicts of laws problems.
First of all, the very application of the model rules depends on
conflict rules. This is particularly so because this instrument is a
model law and not an international convention. Consequently, its
rules are not automatically applicable even where the substantive
question to be solved arises before the court of a state which has
adopted it. Indeed, the model rules will be applicable only if they are
part of the law of the state whose law is considered applicable under
the forum's conflict rules. This is unless, under the law of the forum
State which has adopted them, the model rules are considered
mandatory (i.e., "regles d'application immediate") in that they are ap-
plied to any international payment, regardless of the law designated
by the conflict rules as the governing law of a specific transaction.
Since nothing is said on this issue in the model law, the question is
left entirely open. In practice, the model rules may be applicable in a
given case if this arises in a country which has adopted the law. The
solution depends on the conflict rules of the forum.
Secondly, recourse to conflict rules remains necessary to address
issues not covered by the model law, since this does not provide solu-
tions to all substantive issues arising from international payments.
This is because the model law does not deal with all international
payments, on account of the fact that it adopts a restrictive interpre-
tation of the term international payment; because is does not deal
with debit transfers; and because, even with regard to credit trans-
fers, it does not provide definite solutions to all conceivable problems.
Moreover, since a model law is precisely only a "model" for states
wishing to enact legislation, and these remain free to adapt it to their
individual peculiarities, there could remain significant differences
even between the laws of states which have adopted legislation based
on the model law, thereby leaving additional scope for conflicts
problems.
Finally, it is worth pointing out that, although the problem of
conflict of laws itself has been touched upon by UNCITRAL, as will be
shown further on this has been done only incidentally and in a far
from satisfactory manner.
citral model law," in W. Hadding & U. Schneider (eds.), Legal Issues in International
Credit Transfers 451 (1993); Vasseur, "Les transferts internationaux de fonds: la loi
type des Nations Unies sur les virements internationaux, les cartes de d6bit," in Col-
lected Courses of the Hague Academy of International Law, vol. 239 (1993-lI), p. 117
seq. See also Effros, "ABanker's Primer on the Law of Electronic Funds Transfer," in
105 Banking L. J. 510 (1988).
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312 THE AMERICAN JOURNAL OF COMPARATIVE LAW [Vol. 48
4. CONFLICTS OF JURISDICTION
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2000] INTERNATIONAL PAYMENTS 313
13. See the judgement of the European Court of Justice of March 28, 1995, Case
C-346/903 and Kleinwort Benson v. City of Glasgow City Council, 1995 ECR 1-615;
and Radicati di Brozolo, "La ripetizione dell'indebito nel diritto internazionale privato
e processuale," in Collisio legum: Festschrift fur Gerardo Broggini 421 (1996).
14. J. Kropholler, Europaisches Zivilproze/3recht (5th ed., 1996).
15. P. Kaye, Civil Jurisdiction and the Enforcement of Foreign Judgments (1987);
H. Gaudemet Tallon, Les Conventions de Bruxelles et de Lugano (1996); R. Geimer &
R. Schutze, Europaisches Zivilverfahrensrecht. Kommentar zum EuGVU und zum
Lugano Abkommen (1997); L. Mari, II diritto processuale civile della Convenzione di
Bruxelles (1999); F. Salerno, La convenzione di Bruxelles e la sua revisione (2000).
16. On these two issues see the judgements of the European Court of Justice re-
spectively of September 28, 1999 in Case C-440/97, GIE Groupe Concorde v. The
Master of the Vessel Suhadiuwarno Panjan, and of October 5, 1999 in case C-420/97,
Leathertex Divisione Sintetici spa v. Bodetex BVBA (both as yet unreported in ECR).
These problems are unlikely to simplified to any significant extent by the adoption of
the amendment referred to in note *** above.
17. On the subject of characterization, and of its practical impact in international
conflict of laws cases, see Forsyth, "Characterisation Revisted: An Essay in the The-
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314 THE AMERICAN JOURNAL OF COMPARATIVE LAW [Vol. 48
ory and Practice of the English Conflict of Laws," in 114 Law Quarterly Rev. 141
(1998).
18. For a discussion of this point see M. Vasseur, Les transferts internationaux de
fonds, cit., especially p. 183 seq.
19. M. Vasseur, loc. cit.
20. Pelichet, "Note on the problem of the law applicable to international credit
transfers," in Hague Conference on Private International Law, Proceedings of the
Seventeeth Session 1995, p. 63 seq.; M. Vasseur, Les transferts internationaux 350-55.
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2000] INTERNATIONAL PAYMENTS 315
Were the payment to be viewed as a single transaction, it would
be necessary to identify the place of performance of the overall obliga-
tion, as determined by the lex causae pointed to by the forum's con-
flict rules. Where the dispute deals with the obligations directly
inherent to the payment (for instance was the payment timely and for
the correct amount, etc.) this place would most likely be held to be at
the location of the beneficiary's bank where the account to be credited
is held. The situation might be less clear where the dispute relates
instead to the obligation of the bank (or banks) to pay damages or
interest in the event of failure on their part correctly to carry out the
originator's instructions, although here too the place of performance
might probably be held to be at the location of the beneficiary's ac-
count rather than at the domicile of the originator.
The advantage of this solution is that there would in principle be
a single forum for the entire transaction, regardless of the party
against which the action is brought. The disadvantage would be that
this forum might in some cases be rather remote from at least some of
the parties most closely involved in the transaction. Such would be
the case, for instance, of a dollar payment from an Indian originator
to a Greek beneficiary, both with accounts at small local banks. In all
likelihood this payment would transit through a considerable number
of banks located in different countries, some of which certainly would
be in the United States, and most of which would find it strange and
inconvenient to be sued in Greece.
If, on the other hand, the payment were construed as a set of
individual juxtaposed transactions, the obligation "in question"
would have to be considered having regard to each one of the seg-
ments. Although the solution might vary depending on the applica-
ble law, the place of performance of each segment might well be
considered to be the place of business of the next bank along the
chain. For instance, as regards to the relationship between the origi-
nator and its bank, the place of performance of the obligation of the
latter to make funds available to a correspondent bank for the ac-
count of the originator could well be seen to be the place of business of
the correspondent bank or of the third bank with which both banks
involved maintain correspondent accounts, or even of the system
through which the transaction is cleared. The traditional view would
thus obviously result in a multiplicity of fora, each having jurisdic-
tion only on a fraction of the overall transaction, for what is from a
substantive and economic viewpoint a single transaction. In any case
it would lead to a considerable additional uncertainty without neces-
sarily permitting jurisdiction to be allocated in each case to the court
most ideally suited to hear the case.
The conclusion might be that in the context of international pay-
ments it would perhaps be best if the only forum were the one of the
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316 THE AMERICAN JOURNAL OF COMPARATIVE LAW [Vol. 48
21. See for instance, Hill, "Jurisdiction in Matters Relating to a Contract Under
the Brussels Convention," Int'l & Comp. L.Q. 591 (1995).
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2000] INTERNATIONAL PAYMENTS 317
ties and having fairly loose contacts with the tasks performed by each
one of them.
5. CONFLICTS OF LAWS
22. M. Pelichet, Note on the problem of the law applicable to international credit
transfers (supra n. 20).
23. See generally M. Vasseur, Les transferts internationaux, cit., p. 355.
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318 THE AMERICAN JOURNAL OF COMPARATIVE LAW [Vol.48
24. On the Rome Convention see generally Richard Plender, The European Con-
tracts Convention (1991); Peter Kaye, The New Private International Law of Contract
(1993); with specific reference to its application with regard to banking transactions
see L.G. Radicati di Brozolo, Operazioni bancarie internazionali e conflitti di leggi
(1984).
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2000] INTERNATIONAL PAYMENTS 319
25. The two protocols conferring the jurisdiction to interpret the convention on
the European Court of Justice are not yet in force.
26. For the U.S. perspective see Sommer, supra n. 10.
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320 THE AMERICAN JOURNAL OF COMPARATIVE LAW [Vol.48
The overall payment as a succession of distinct contractual
relationships
From the perspective of conflicts of laws the characterization of a
payment as a single transaction is seen to have the advantage or per-
mitting the entire transaction to be governed by a single law.27
Under the Rome Convention this result would not a priori be ruled
out even if payments were characterized as consisting of distinct
transactions, with the consequence that each one is a separate con-
tract with its own governing law to be identified on the strength of
one or the other of the two rules mentioned above.
Contrary to expectations, this could not be accomplished so much
by the rule which considers the primary connecting factor the will of
the parties regarding the governing law (as seen above this same con-
necting factor naturally appears also in UNCITRAL'S "suggested" rule).
This is essentially for the same reasons already exposed with regard
to the parallel issued of conflicts of jurisdiction. It is unrealistic to
expect that, assuming the parties to an international payment (viz.
the parties to each of the contracts making up the chain leading to
the payment) deal with the matter, they will all choose the same law.
Were the parties to consider the issue of governing law - which they
might well do in the context of general conditions and not with regard
to specific payments - they would do so on a purely bilateral basis,
without regard to the links between their relationship and the more
complex transactions of which it becomes a part in the context of each
individual payment. Although it might appear superfluous, it is
worth stressing that any choice is relevant only for the segment of the
transaction with respect to which it is made.
The "unification" of the governing law could instead, at least in
the abstract, be brought about by means of the connecting factor of
Article 4. Unlike in the situation examined above, when this provi-
sion is applied to each segment of the transaction, taken by itself, it is
possible to identify the "characteristic performance" - this being the
one of the bank or other institution receiving the payment instruc-
tions - and thereby the law of the presumption of Article 4, para. 2.
If this presumption were given effect to, the result would be the same
as the one prescribed by UNCITRAL'S "suggested" conflict rule: the gov-
erning law of each bilateral relationship making up the overall pay-
ment would be the one of the bank receiving the instructions.28
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2000] INTERNATIONAL PAYMENTS 321
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322 THE AMERICAN JOURNAL OF COMPARATIVE LAW [Vol. 48
the "best" law. But the real world leaves all concerned in the most
severe uncertainty.3'
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2000] INTERNATIONAL PAYMENTS 323
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324 THE AMERICAN JOURNAL OF COMPARATIVE LAW [Vol. 48
The present conflict rules, and notably the Rome Convention, can
be interpreted so as to provide a workable solution to the problem of
the law governing international payments. It remains nevertheless
indisputable that - although the situation is probably not more seri-
ous than with respect to certain other types of complex international
transactions which are equally fraught with conflicts of laws
problems36- this solution is not particularly satisfactory, at least
from the viewpoint of legal certainty and even more so from that of
the overall consistency of the regime of the rights and obligations of
all the parties involved.
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2000] INTERNATIONAL PAYMENTS 325
The outlook for the quest for harmonized rules capable of over-
coming these problems does not look particularly good either, as it is
doubtful that any new ad hoc rule could be devised which would pro-
vide universally satisfactory rules to all the problems.
It may be added that even once an appropriate conflict rule for
the designation of the lex causae (or of the leges causae?) of interna-
tional payments were found, conflicts problems would not be entirely
eliminated or resolved. On a first level, there would remain the class-
ical question of determining which matters are governed by the lex
causae. On the second level the questions are: what other laws affect
an international payment? Which matters do they govern? On the
basis of which conflict rules or other conflict solving mechanisms well
known to conflict lawyers (regles d'application immediate, unilateral
conflict rules, regles de droit international prive material, pubic pol-
icy) do they apply? The first issues which come to mind are the ones
relating to the position of consumers and to other questions governed
by mandatory or public policy rules of the forum state or possibly
even of a third state. Cases in point are the validity of blocking or-
ders, the relevance of events relating to the currency of the payment
and of laws on money laundering, the effects of bankruptcy and so on.
Another example is the very important question of which law deter-
mines whether the actual sender of a payment order has the author-
ity to bind the purported sender, which is explicitly excluded from the
scope of the lex causae designated by the conflict rule "suggested" by
UNCITRAL. Yet other examples are the question whether one party to
the chain may bring action against another party of the chain to
which it is not directly linked. For instance whether the originator
can bring an action against the bank of the beneficiary,37 and more
generally issues of tort and the relationships between claims in tort
and in contract.
Leaving aside the more philosophical issue of whether there is
merit in not stifling competition and innovation between legal sys-
tems by means of harmonization,38 the conclusion could be that it
would be more efficient to attempt to harmonize the substantive law
rather than to seek specific harmonized solutions at the level of con-
flicts of laws, such substantive harmonization would have to be
achieved by means of international conventions, rather than by soft
law mechanisms such as the UNCITRALmodel law. However, as
demonstrated by UNCITRAL'sefforts, and perhaps even more the fail-
ure by states to adopt legislation based on the model law, this might
prove to be an even more daunting task.
37. For some general thoughts on this issue see Leclerc, "Les chaines de contrats
en droit international prive6," in Journal de droit international 267 (1995).
38. A. Ogus, "Competition Between National Legal Systems: A Contribution of
Economic Analysis to Comparative Law," (1999) Int'l & Comp. L. Q. 405; U. Mattei,
Comparative Law and Economics (1997).
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326 THE AMERICAN JOURNAL OF COMPARATIVE LAW [Vol. 48
39. Such as the European Convention on the place of payment of money liabilities
of May 16, 1972 of the European Convention on foreign money liabilities of December
11, 1967, both of which drafted under the auspices of the Council of Europe but not in
force.
40. Official Journal of the European Communities, L 166 of June 11, 1998, p. 45.
41. See for instance Article 3, para. 3.
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