After extensive work on transferable electronic documents, a model law was adopted on July 13, 2017 during the 50th session of the Commission. These documents now benefit from consistent and harmonized legal standards. The purpose of the UNCITRAL Model Law on Electronic Transferable Documents is to secure international transactions based on it.
These provisions are intended to legally allow the use of electronic transferable documents both at the level of the legal systems of the States that will adopt legislative texts in their domestic law and at the international level in general, for example in matters of arbitration. The text is primarily intended to apply to transferable electronic documents understood as functional equivalents of transferable paper documents or instruments. These documents are the ones that carry property rights over them, so ownership of the goods can be transferred by transferring the document.
As examples, this includes negotiable instruments such as warehouse receipts, bills of lading, and multimodal transport documents. It is important, when dealing with such documents, that there is only one document (“original”) authorizing its holder to demand the issuance of the underlying property. In addition, the DTEs also refer to other negotiable documents: commercial paper such as bills of exchange and promissory notes where the holder benefits on the due date of the payment of an amount by the drawee.
How useful is it?
Transferable documents and instruments are essential business tools. Its availability in electronic form can greatly contribute to facilitating electronic commerce, for example by improving the speed and security of transmission, allowing multiple uses of data and automating certain operations through “smart contracts” within the framework of supply chains. blocks.
Electronic transferable documents can play a particularly important role in certain areas such as international transactions, transport and logistics, as well as finance and be of great interest to developing countries wishing to create a market for depository receipts. Electronic systems to facilitate farmers’ access to credit.
Content of the model law
The Model Law provides several definitions: the terms “electronic document”, “transferable electronic document” and “transferable paper document or instrument”. This last term designates a document or instrument issued on paper that grants the holder the right to demand compliance with the obligation specified therein and to transfer this right by transferring possession of said document or title.
It incorporates several classic general provisions, such as the interpretation or autonomy of the parties or even the legal recognition of a transferable electronic document that cannot be deprived of legal effects or validity simply because it is presented in electronic format.
This instrument is based on the well known principle in UNCITRAL of functional equivalence: chapter II, but also in its article 15 on endorsement or article 16 on the modification of the document.
The essential points
Let us highlight two essential points of the model law: control (article 11) and the reliability of the method used (article 12). According to the first, the equivalence of a transferable paper document is obtained if a reliable method is used to: a) establish the exclusive control of a person over this electronic transferable document; b) identify that person as the person in control.
It is expected that if the method used is sufficiently reliable, it can generate legal effects. The text suggests a set of measures and users can decide if they are satisfied.
For articles 9 (signature), 10 (identification, control capacity throughout their life cycle, integrity), 11 (control), 13 (indication of date and place), 16 (modification), 17 (paper document that becomes electronic) and 18 (electronic document becomes paper), the envisaged method must be reliable enough to fulfill the function for which it is used, in light of all relevant circumstances which may include:
(i) Any relevant operating rules for the reliability assessment;
(ii) ensure the integrity of the data;
(iii) The ability to prevent unauthorized access and use of the system;
(iv) hardware and software security;
(v) the regularity and extent of the audits carried out by an independent body;
vi) the existence of a statement from a control body, accreditation body or voluntary program on the reliability of the method;
(vii) Any applicable sectoral standard (…).
Since the Model Law is technologically neutral, it does not limit how these reliability standards can be achieved. To ensure the management of rights (registrations and transfers), the notion of registration has been considered especially for bills of lading and maritime title documents since the 1980s. Today, when we talk about registration, the general ledger solution The distributed system that embodies the blockchain seems to be the most relevant medium in operational terms since it allows fulfilling the functions related to reliability and control.
While the model law does not prohibit blockchains, it implicitly supports them as token systems. Therefore, we can estimate that the blockchain will be the optimal solution for the management of transferable electronic documents. Good news for the market and for blockchains, in October 2021, the G7 countries pledged to change their laws and align with the UNCITRAL Model Law on Electronic Transferable Documents.
Eric A. Caprioli, lawyer at the Court of Paris, doctor of law
Law firm member of the JurisDéfi Network
Expert opinions are published under the full responsibility of their authors and do not bind the editorial staff in any way.
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