UNCITRAL Model Law on Electronic Transferable Records

The UNCITRAL Model Law on Electronic Transferable Records (“MLETR”) is a uniform model law that has been adopted by the United Nations Commission on International Trade Law (UNCITRAL) in 2017.[1] Its scope is to allow the use of transferable documents and instruments in electronic form. Transferable documents and instruments typically include bills of lading, warehouse receipts, bills of exchange, promissory notes and cheques. National law qualifies a document or instrument as transferable.

Transferable documents and instruments allow to request delivery of goods and payment of a sum of money based on possession of the document or instrument. However, it has been difficult to reproduce the notion of possession, which has to do with control over tangible goods, in an electronic environment. The MLETR addresses that legal gap.

The adoption of the MLETR to facilitate the use of electronic bills of lading has been recommended in a report by law firm Clyde & Co and the ICC Banking Commission.[2]

Under the MLETR each dematerialised document does not need to be managed in a separate information system, but the same system could manage multiple documents, or also all documents related to a business transactions. This may allow to merge logistics and supply chain, or even commercial and regulatory documents, in a single electronic transferable record.[3]

Main provisions

The MLETR is divided in four chapters: general provisions; provisions on functional equivalence; use of electronic transferable records; and cross-border recognition of electronic transferable records.

General provisions

The MLETR is built on the same fundamental principles of other UNCITRAL texts on electronic commerce, namely functional equivalence (articles 8-11 MLETR), technology neutrality and non-discrimination against the use of electronic means (article 7 MLETR).

The MLETR is also model-neutral and may be implemented by using registries, tokens or distributed ledgers.[4] The Explanatory Note to the MLETR provides some guidance on the use of distributed ledgers in implementing the MLETR and is therefore considered an early example of legislative text facilitating the use of blockchain.[5][6]

Article 2 MLETR defines the notion of electronic transferable record as an electronic record that complies with the requirements of article 10 MLETR. It also defines "transferable document or instrument" as a document that entitles its holder to the payment of a sum of money or the delivery of goods.

Article 6 MLETR legally recognizes the possibility of including metadata in electronic transferable records. It is therefore considered a smart contract enabler.[7]

Provisions on functional equivalence

Articles 8 and 9 MLETR provide functional equivalence rules, respectively, for the paper-based notions of "writing" and "signature". Those articles do not need to be enacted if national law, for instance an electronic transactions act, already contains those notions and they are made applicable by reference to electronic transferable records.

Article 10 MLETR establishes the conditions for functional equivalence between paper-based transferable documents and instruments, on the one hand, and electronic transferable records, on the other hand. Those conditions are: 1) the electronic transferable record shall contain all information required for the corresponding paper-based transferable document or instrument; 2) a reliable method shall be used: a) to identify the electronic transferable record as such; b) to render the electronic transferable record subject to control throughout its life-cycle; c) to retain the integrity of the electronic transferable record throughout its life-cycle.

Article 11 MLETR establishes the functional equivalence rule for possession of a transferable document or instrument. The conditions to satisfy that requirement are the use of a reliable method to establish exclusive control of the electronic transferable record and the identification of the person in control.

Article 10 and 11 MLETR are based on the notions of "control" and "singularity" of the electronic transferable record.[8]

Use of electronic transferable records

In general, all events that may occur in relation to a transferable document or instrument may also occur in relation to an electronic transferable record.[9] Articles 15 and 16 MLETR reaffirm that general rule with respect to, respectively, endorsement and amendment of an electronic transferable record. The amendment should be identified as such as otherwise the electronic nature may not make the amendment easily recognisable.

Article 12 MLETR contains a non-exclusive list of elements relevant to assess the reliability of the method used. It contains also a safety clause that indicates that a method is reliable in fact if it has fulfilled the function it pursued, alone or with other evidence.

Cross-border recognition of electronic transferable records

Article 19 MLETR contains a provision on geographic non-discrimination of the electronic transferable record. The provision does not affect private international law rules.

Relationship to other UNCITRAL texts

The MLETR complements existing UNCITRAL texts on electronic commerce, namely the UNCITRAL Model Law on Electronic Commerce and the UNCITRAL Model Law on Electronic Signatures, with whom it shares the same fundamental principles.[10]

Status

The MLETR has been enacted in Bahrain[11] and in Singapore.[12]

The adoption of the MLETR in Bahrain has taken place in conjunction with a review of the Electronic Transactions Act, which was originally passed in 2002 and is based on the UNCITRAL Model Law on Electronic Commerce. [13]

Singapore had conducted two public consultations prior to enactment, the first in March 2017[14] and the second in summer 2019, in the broader framework of the review of the Electronic Transactions Act.[15]

A bill enacting, among other UNCITRAL texts, the MLETR has been introduced in the House of Representatives of Paraguay.[16]

Czechia has conducted a public consultation on MLETR adoption.[17]

References
  1. "MLETR webpage". UNCITRAL. United Nations. Retrieved 28 December 2018.
  2. "The Legal Status of E-Bills of Lading". Clyde & Co. Retrieved 28 December 2018.
  3. "Bahrain enacts the UNCITRAL Model Law on Electronic Transferable Records". UNIS. 5 December 2018. Retrieved 3 February 2019.
  4. UNCITRAL (2017). Explanatory Note to the UNCITRAL Model Law on Electronic Transferable Records (PDF). Paragraph 18. Retrieved 27 January 2019.CS1 maint: location (link)
  5. UNCITRAL (2017). Explanatory Note to the UNCITRAL Model Law on Electronic Transferable Records (PDF). Paragraphs 66, 78, 117. Retrieved 27 January 2019.CS1 maint: location (link)
  6. Takahashi, Koji. "Relevance of the blockchain technology to the draft Model Law on Electronic Transferable Records (as acknowledged by the latest official document)". Blockchain, Cryptocurrency, Crypto-asset and the Law. Retrieved 12 February 2019.
  7. Ng, Irene. "UNCITRAL E-Commerce Law 2.0: Blockchain and Smart Contracts". LawTech.Asia. Retrieved 28 December 2018.
  8. UNCITRAL (2017). Explanatory Note to the UNCITRAL Model Law on Electronic Transferable Records (PDF). Paragraph 83. Retrieved 11 January 2019.CS1 maint: location (link)
  9. UNCITRAL (2017). Explanatory Note to the UNCITRAL Model Law on Electronic Transferable Records (PDF). Paragraph 11. Retrieved 11 January 2019.CS1 maint: location (link)
  10. UNCITRAL (2017). Explanatory Note to the UNCITRAL Model Law on Electronic Transferable Records (PDF). Paragraph 44. Retrieved 11 January 2019.CS1 maint: location (link)
  11. Takahashi, Koji. "Bahraini legislation based on the UNCITRAL MLETR". Blockchain, Cryptocurrency, Crypto-asset and the Law. Retrieved 12 February 2019.
  12. Electronic Transactions (Amendment) Bill, Bill No. 1/2021
  13. "Queen Mary experts contribute to legal reform in Bahrain". QMUL. 14 December 2018. Retrieved 13 January 2019.
  14. "Public Consultation on the Draft UNCITRAL Model Law on Electronic Transferable Records" (PDF). IMDA. Singapore Government. Retrieved 28 December 2018.
  15. "CONSULTATION PAPER ISSUED BY THE INFOCOMM MEDIA DEVELOPMENT AUTHORITY ON REVIEW OF THE ELECTRONIC TRANSACTIONS ACT (ETA) (CAP. 88) 27 June 2019" (PDF). IMDA. Retrieved 19 September 2019.
  16. Prensa – Dirección de Comunicación. "Presentan proyecto que permitirá seguridad jurídica a las transacciones electrónicas". Honorable Cámara de Diputados del Paraguay. Retrieved 20 September 2020.
  17. "Veřejná konzultace k možnosti zavedení elektronického ekvivalentu cenného papíru, který není investičním nástrojem". Ministerstvo průmyslu a obchodu. Ministerstvo průmyslu a obchodu. Retrieved 28 December 2018.

Šafranko, Zvonimir (2016). "The Notion of Electronic Transferable Records". InterEULawEast : journal for the international and european law, economics and market integrations. 3 (2): 1–31. Retrieved 11 January 2019.

Herd, Jake (2018). "'Blocks of Lading' Distributed Ledger Technology and the Disruption of Sea Carriage Regulation". QUT Law Review. 18 (2): 306–317. doi:10.5204/qutlr.v18i2.755. Retrieved 2 April 2019.

Luca Castellani; Sin Yong LOH; Louise Taylor-Digby (moderator) (5 Oct 2020). "Joining forces for trade digitisation: SWIFT, the United Nations, and the Singapore Government". SWIFT.

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