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Each place where the Schema spec invokes XPath evaluation, it needs to specify what goes into the static context. Fuller details are given by Mike Kay at http://lists.w3.org/Archives/Member/w3c-xml-schema-ig/2007Mar/0109.html (member-only link). N.B. this includes specifying the namespace bindings in force for the evaluation, which means this issue subsumes that raised in bug 4303.
*** Bug 4303 has been marked as a duplicate of this bug. ***
>specify what goes into the static context and the dynamic context, too.
The requirement is to specify the entire context, not just the static context. Accordingly, I'm changingthe summary of the issue.
The WG reached consensus, in a series of calls in May and June 2007, on rules for evaluating XPath expressions in the context of schema-validity assessment, including both specification of how to type the XDM instance or leave it untyped (bug 4416) and specification of the static and dynamic contexts (bug 4419). A wording proposal reflecting that consensus is at http://www.w3.org/XML/Group/2004/06/xmlschema-1/structures.b4419.200707.html (member-only link). Accordingly, I'm changing the status of this issue to needsReview.
The wording proposal mentioned in comment #3 was discussed and adopted by the WG during our call of 3 August 2007. With that decision, this issue has been successfully resolved, and I am setting its status accordingly.