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• Nature And Scope Of The Convention
• Current Situation At New Zealand Law
• Impact Of Adoption On New Zealand Parties
• Recommendation

5 United Nations Convention on International Bills of Exchange and International Promissory Notes

NATURE AND SCOPE OF THE CONVENTION

61 THE UNITED NATIONS CONVENTION on International Bills of Exchange and International Promissory Notes, adopted by the General Assembly on 9 December 1988, has not yet entered into force. It will do so only after 10 States have deposited instruments of acceptance. To date, only Guinea and Mexico have acceded to the Convention, while Canada, the Russian Federation and the United States have signed it (indicating an intention to ratify).

62 The Convention applies only to international bills of exchange and promissory notes, which are defined in article 3, and is intended to provide a comprehensive set of rules governing these instruments.⁶² Articles 7–11 of the Convention deal with the interpretation of formal requirements.

63 If a bill or note is dishonoured by non-acceptance or non-payment, the holder has recourse only after the instrument has been protested in accordance with articles 60–62.⁶³ The Convention relaxes the precise common law rules on protest, allowing for a short form and extending the period usually allowed to make protest.⁶⁴

64 Generally a bill or note must be paid in the currency in which the sum payable is expressed. If there is an express provision that payment should be made in some other currency, and no exchange rate is specified, the amount is to be calculated according to the rate of exchange for sight drafts on the date of maturity.⁶⁵ Article 9 of the Convention specifies when an instrument is payable; it also allows for payment in instalments, which is a new feature in relation to these instruments.⁶⁶

65 Rules concerning the procedure to be followed when an instrument is lost (whether by destruction, theft or otherwise) are detailed in articles 78–83.

CURRENT SITUATION AT NEW ZEALAND LAW

66 In New Zealand, the Bills of Exchange Act 1908 (BOEA) regulates both bills of exchange and promissory notes. Unlike the Convention, the BOEA also applies to cheques.

67 The BOEA applies to both inland and foreign bills (section 4) and notes (section 84). A bill is “inland” if it is both drawn and payable in, or upon a resident of, what are quaintly described in section 4(1)(a) as the “Australasian colonies”. The Acts Interpretation Act 1924 defined “Australasian colonies” as “the Commonwealth of Australia as now or hereafter constituted, together with New Zealand and Fiji”. However the 1924 Act was repealed by the Interpretation Act 1999, which contains no definition for “Australasian colonies”. Any bill of exchange that is not an inland bill is a foreign bill (section 4(1)(b)). A promissory note is an “inland” note if it is made and payable in New Zealand. All other notes are “foreign” notes (section 84(4)).

68 Under the BOEA, the duties of the holder with respect to presentment for acceptance or payment, or a protest or notice of dishonour, are determined by the law of the place where the act is done or the bill is dishonoured (section 72(c)). Section 51(2) provides further that where a foreign bill has been dishonoured by non-acceptance or non-payment, it must be protested; otherwise the drawer and indorsers may be discharged. This rule is consistent with article 59 of the Convention.

69 A foreign bill payable in New Zealand, but not expressed in New Zealand currency, should (in the absence of any express provision) be calculated according to the rate of exchange for sight drafts at the place of payment on the day the bill is payable (section 72(d)). This rule is consistent with article 75 of the Convention. The due date of a foreign bill is determined according to the law of the place where it is payable (section 72(e)).

70 Sections 69 and 70 of the BOEA establish the parties’ respective rights regarding lost instruments.

IMPACT OF ADOPTION ON NEW ZEALAND PARTIES

71 Parties in Contracting States are bound only if the Convention is expressly incorporated into the bill of exchange or promissory note (article 1(1) and (2)). The provisions of the Convention are optional even where a State adopts it, and New Zealand parties are already free to incorporate its terms into these instruments, so adoption would make very little practical difference to whether parties incorporated the terms.

RECOMMENDATION

72 The Commission believes it would not be useful for New Zealand to adopt this Convention, for the following reasons. First, none of our major trading partners is party to the Convention at present; the United States is yet to ratify its signature. Secondly, the Convention aims to resolve tension between the civil and common law traditions regarding these instruments. New Zealand’s law derives from the Bills of Exchange Act 1882 (UK) which also formed the basis for the legislation of most other Commonwealth countries in relation of these instruments, so there is already a degree of harmonisation between New Zealand’s domestic law and that of many of our trading partners.

73 Regarding the current Bills of Exchange Act 1908, the Commission recommends that the lack of definition for the term “Australasian colonies” should be addressed. As the BOEA is the only statute still in force which uses the term, we recommend that the section 4 definition of “inland” bill be amended to state in modern terms exactly which countries it encompasses. The Commission has made this recommendation to the Ministry of Justice; together with the Reserve Bank of New Zealand which is responsible for administering the BOEA, the Ministry is considering the proposed amendment.