By: Luca Castellani
In the year 2021, G7 member States committed to adopting legal frameworks enabling the use of electronic transferable records based on the UNCITRAL Model Law on Electronic Transferable Records (MLETR). Electronic transferable records are commercial documents in electronic form incorporating the right to payment of money or delivery of goods. When on paper, these trade documents may be called transferable documents and instruments, or, in civil law jurisdictions, documents of title. Bills of lading, bills of exchange, and promissory notes are examples of such documents.
Based on the G7 commitment, which was reiterated in 2022, significant legislative activity has taken place, leading to the adoption of new laws in France and in the United Kingdom, to legislative amendments in Germany (where additional work is ongoing) and in the United States, and to the preparation of a bill, possibly limited to bills of lading, in Japan.
Regarding Canada, all but two Provinces and Territories enacted the Uniform Electronic Commerce Act (UECA) of 1999, including the provisions enabling the use of electronic bills of lading. However, those provisions have not been implemented or otherwise used in business practice. The UECA is based on the UNCITRAL Model Law on Electronic Commerce, which the MLETR complements.
To allow the use of electronic transferable records, the Enabling Digital Trade Act (the Act) has been introduced this week in the Canadian Parliament as part of an omnibus bill, Bill C-39. The Act is based on the three fundamental principles of legal recognition of (or non-discrimination against) electronic trade documents, technology neutrality and functional equivalence. The requirements for functional equivalence are the same as in the MLETR, i.e., control, singularity, and integrity. Most other provisions of the MLETR are also reproduced in the Act.
The Act applies to all trade documents capable of being controlled, and explicitly mentions possession, endorsement, and other features typical of transferable documents and instruments. It requires the use of a reliable method, and allows adopting regulations to assist in determining reliability, without however requiring the existence of such regulations for the Act to be applied. This leaves flexibility to commercial parties in the choice of the most suitable trade documents management methods and systems. Finally, the Act repeats principles and provisions on private international law found in MLETR. Additional guidance may come from ongoing work at the Hague Conference on Private International Law.
Importantly, the Act goes beyond enabling digitalisation of transferable documents and instruments. Its Part 2 pertains to the “Provision by Electronic Means of Information Related to Importation or Exportation”, allowing for the submission to government entities of any import and export trade-related information in electronic form. This process lies at the core of paperless trade facilitation: electronic trade documents do not operate in a vacuum but interact in the digital trade ecosystem regardless of whether the transaction is commercial (B2B) or regulatory (B2G).
The Enabling Digital Trade Act is a welcome development based on a holistic approach to trade digitalisation, in line with current trends as reflected in the WTO Agreement on Electronic Commerce and other digital trade agreements, as well as uniform regional legislation such as the Commonwealth Model Law on Digital Trade. This vision is instrumental to implementing end-to-end trade digitalisation.
