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The description of adjust-dateTime-to-timezone says "If $arg is the empty sequence, then the function returns the empty sequence.". But the return type in the signature says "xs:dateTime", which does not allow it to be the empty sequence.
Thanks for pointing this out. I shall treat the correction as editorial, since it results from an editorial error; the spec clearly allowed an empty sequence in the XQ1.0/XP2.0 version of the spec; and the function prototype contradicts the prose.