Uniform law of electronic commerce: fundamentals, …...commercial predictability where electronic communications are used across borders. • The e-CC contributes to enabling paperless

UNCITRAL United Nations Commission on International Trade Law

Uniform law of electronic

commerce: fundamentals, recent

developments and opportunities to

support innovation

Luca Castellani

Secretary, UNCITRAL Working Group IV

(Electronic Commerce)


The mandate of UNCITRAL

• The core legal body of the United Nations system in the

field of commercial law.

• Has operated for 50 years on the basis of universal

membership.

• UNCITRAL's business is the modernization and

harmonization of rules on international business.

• UNCITRAL started working on legal aspects of electronic

commerce already in the 1980s:

– Electronic Data Interchange (EDI), cross-border electronic

payments.


UNCITRAL texts on electronic commerce


UNCITRAL work on electronic commerce

• UNCITRAL Model Law on Electronic Commerce, 1996

– Definition of fundamental terms and notions.

• UNCITRAL Model Law on Electronic Signatures, 2001

– Additional guidance on e-signatures (two-tier approach).

• United Nations Convention on the Use of Electronic

Communications in International Contracts, 2005:

– Specifically made for cross-border transactions;

– Complements and updates MLEC.

• UNCITRAL Model Law on Electronic Transferable Records, 2017.

• Current work of UNCITRAL Working Group IV:

– legal aspects of identity management and trust services;

– contractual aspects of cloud computing.


• The UNCITRAL Model Law on Electronic

Commerce (MLEC) aims to enable the commercial

use of modern means of communications and

storage of information.

• It is based on the three fundamental principles of

technology neutrality, non discrimination and

functional equivalence in electronic media for paper-

based concepts such as "writing", "signature" and

"original".

• It also establishes rules for the formation and

validity of contracts concluded electronically and for

the attribution and retention of data messages.

• Enacted in over 70 States.

UNCITRAL Model Law on Electronic Commerce (MLEC)


• The UNCITRAL Model Law on Electronic

Signatures (MLES) aims at bringing additional legal

certainty to the use of electronic signatures.

• It establishes criteria of technical reliability for the

equivalence between electronic and hand-written

signatures.

• It follows a technology-neutral approach, which

avoids favoring the use of any specific technical

product.

• It establishes basic rules for assessing possible

responsibilities and liabilities for the signatory, the

relying party and trusted third parties intervening in

the signature process.

• Enacted in over 30 States.

UNCITRAL Model Law on Electronic Signatures (MLES)


• The e-CC builds up on and updates the

provisions of UNCITRAL Model Laws.

• It aims at enhancing legal certainty and

commercial predictability where electronic

communications are used across borders.

• The e-CC contributes to enabling paperless

trade by, among others: 1) validating the legal

status of electronic transactions by setting

general functional equivalence requirements of

“writing”, “original” and “signature”; 2)

preventing medium and technology

discrimination; 3) enabling cross-border

recognition of electronic signatures; 4)

permitting the use of electronic means in

alternative dispute resolution mechanisms.

• Status: 18 signatories, 9 State parties.

UN Electronic Communications Convention (e-CC)


• Adopted in July 2017, the MLETR legally

enables the use of electronic transferable

records, which are electronic equivalents of

documents or instruments incorporating the right

to delivery of goods or payment of sums of

money (bills of lading; bills of exchange;

warehouse receipts; promissory notes).

• Technology-neutral and specifically compatible

with the use of blockchain.

• The MLETR allows to issue a single electronic

record replacing transport, finance and customs

documents.

• The MLETR enables paperless trade facilitation

since bills of lading contain accurate, updated

and complete information on the goods shipped

and are therefore valuable data sources for

single window submissions.

UNCITRAL Model Law on Electronic Transferable

Records (MLETR)


Fundamental principlesunderlying UNCITRAL texts


A communication shall not be denied validity on the sole ground

that it is in electronic form.

Conclusion of contract

(Writing, Signature)

Non-discrimination against electronic communications


• Establishes criteria under which purposes and functions of

paper-based requirements (e.g. writing, signature, original,

archived) may be satisfied.

Functional equivalence


• Different technologies (EDI, e-mail, Internet, instant messaging, fax,

etc.) should receive equal legislative treatment.

• This approach prevents barriers to the use of future technologies.

• Issue with PKI-based electronic signatures.

EmailInstant

MessagingSMS & MMS

Future Technology

Technology neutrality


Party autonomy

Parties should be free to choose:

• whether to use (or not) electronic communications;

• the technology and security level appropriate for their

transactions.


UNCITRAL texts on e-commerce in the EU

• A number of provisions have been inserted in UNCITRAL texts to

facilitate the use of electronic communications in various fields

(e.g., arbitration, public procurement, maritime transport).

• UNCITRAL texts on electronic commerce are widely considered

as global standards in all regions of the world except Europe;

– Why?

– Is this creating a barrier to electronic commercial exchanges

between EU and non-EU States?


Example: e-commerce directive (2000/31/EC)

• Article 9. Treatment of contracts

– 1. Member States shall ensure that their legal system allows

contracts to be concluded by electronic means. Member States shall

in particular ensure that the legal requirements applicable to the

contractual process neither create obstacles for the use of electronic

contracts nor result in such contracts being deprived of legal

effectiveness and validity on account of their having been made by

electronic means.

(Principle of non discrimination of electronic means)

• Recital 58

– This Directive is without prejudice to the results of discussions within

international organisations (amongst others WTO, OECD,

UNCITRAL) on legal issues.


Example: e-IDAS (EU Regulation 910/2014)

• Recital 27

– This Regulation should be technology-neutral. The legal effects it grants should be

achievable by any technical means provided that the requirements of this

Regulation are met.

(Principle of technology neutrality)

• Recital 49

– This Regulation establishes the principle that an electronic signature should not

be denied legal effect on the grounds that it is in an electronic form or that it does

not meet the requirements of the qualified electronic signature. However, it is for

the national law to define the legal effect of electronic signatures, except for the

requirement provided in this Regulation according to which a qualified electronic

signature should have the equivalent legal effect of a handwritten signature.

(Principle of non discrimination + principle of functional equivalence)

• Article 2

– 2. This Regulation does not apply to the provision of trust services used

exclusively within closed systems resulting from national legislation or from

agreements between a defined set of participants.

(Principle of party autonomy)


Example: e-IDAS international aspects

• Article 14. International aspects

– 1. Trust services provided by trust service providers established in a third

country shall be recognised as legally equivalent to qualified trust services

provided by qualified trust service providers established in the Union if the

trust services originating from the third country are recognised under an

agreement concluded between the Union and third countries or international

organisations in accordance with Article 218 TFEU.

• Recital 67

– […] this Regulation should not impede the use of other means or methods to

authenticate a website not falling under this Regulation nor should it prevent

third country's providers of website authentication services from providing

their services to customers in the Union. However, a third country’s provider

should only have its website authentication services recognised as qualified

ones, according to this Regulation, if an international agreement between the

Union and the country of establishment of the provider has been concluded.


Czech law on e-commerce

• Czech law on e-commerce seems to be limited to the enactment

of European Community law

– Discussion on advanced and qualified electronic signatures

but a number of commercial and non-commercial transactions

do not use them

• No adoption of UNCITRAL texts or enactment of the fundamental

principles underlying them

– What about rules on e-contracting?

– What about transactions with commercial partners outside the

EU?

– Would the adoption of UNCITRAL texts bring legal clarity and

predictability?

– Would the adoption of UNCITRAL texts promote the use of

electronic means in trade?


Recent developments and opportunities to support innovation


The e-CC as global e-commerce enabler

• The Convention establishes a common legislative core for cross-

border transactions.

• It explicitly enables smart contracts by recognizing the use of

automated message systems (art. 12 e-CC):

– The contract is valid and enforceable also when no natural

person reviewed or intervened in the actions carried out by the

automated message system.

• It facilitates the use of electronic communications across borders,

in particular:

– in connection with treaties concluded before the wide diffusion

of electronic means; and

– with respect to cross-border recognition of electronic

signatures.

• It is a fundamental component of the second generation of e-

commerce laws (“UNCITRAL e-commerce law 2.0”).


The MLETR as fintech enabler

• Commission decided in 2011 to deal with ETR

• Few existing national texts with different approach and

content:

– Most of the existing laws are technology-specific and/or

establishing ETR not based on functional equivalence;

– All existing laws deal with only one type of transferable

document or instrument;

• This approach may be effective at the domestic level

but does not promote cross-border use of ETR and

business process reengineering.

• Model Law on ETR with explanatory note adopted by

Commission in 2017.

• The MLETR is a fundamental component of “UNCITRAL e-

commerce law 2.0”

– Public consultation for its adoption has been conducted in

Singapore.


Fundamental features of the MLETR

• Technology neutrality:

– compatible with registry-, token- and blockchain based

systems.

• Built around functional equivalence rules

– does not affect substantive law and party autonomy as

applicable to the corresponding document or instrument

• All that may be done on paper is possible with an ETR

– amendment, reissuance, division and consolidation,

issuance in multiple originals.

• No additional information requirements, but possible to add

additional dynamic information if so wished

– smart contracts enabler.

• ETR may circulate by delivery or delivery + endorsement

– Anonymity for the purpose of chain of transfer is possible.


MLETR and business process re-engineering

• Dematerialisation of commercial documents does not imply

that business processes shall remain as they are

– Rather, it provides an occasion to reengineer

• The MLETR allows to include all information relevant for

cross-border trade in a single electronic record.

• That information may be selectively shared with all business

partners.

• The data contained therein offers the highest quality as it

provides a high level of reliability of being:

– Complete;

– Updated;

– Authentic (i.e. attributable to the purported originator).


Vision: what may come next?

• Dematerialisation of certain commercial documents is a

necessity

– Example of Bank Payment Obligations (BPO)

• The commercial transaction is one: do we really need to

create several commercial documents?

• Efficient and effective supply chain management may foresee

merging finance and transport commercial documents

– Possibly, on a third-party platform.

– Maybe using blockchain – but see here

• Information may be re-used for regulatory purposes

– Will regulation drive innovation?

• The MLETR and the e-CC, and more generally UNCITRAL e-

commerce law 2.0, are enablers of that transformation.

http://dilbert.com/strip/2017-10-17


Thank you! Děkuji!

For more information on the work of UNCITRAL in the area of electronic commerce, or on other

topics, please visit our web site http://www.uncitral.org/

http://www.uncitral.org/

Documents

Uniform law of electronic commerce: fundamentals, …...commercial predictability where electronic communications are used across borders. • The e-CC contributes to enabling paperless