Electronic bill of lading – are you and your country ready for it? – Part 2

12:06am 19th February 2021

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In Part 1 of this article, I wrote a bit about the history of globalization and trade and its connection with the bill of lading and the road to Electronic Bills of Lading.

I also posed the question of whether you and your country are ready for an electronic bill of lading.

Just to refresh about a bill of lading and electronic bill of lading, a Bill of Lading (B/L) is one of the most important commercial documents in the whole shipping and freight chain fulfilling 3 functions.

1. Evidence of contract of carriage
2. Receipt of Goods
3. Document of title to the goods

Traditionally (and even currently), the bill of lading, especially a negotiable one is issued as a physical paper document signed and stamped by the carrier, with a set number of originals.

An electronic bill of lading is a paperless bill of lading that is issued electronically said to fulfill the above functions in the same manner as a traditional paper bill of lading.

Many believe that the electronic bill of lading will be a game-changer in the shipping industry with its faster, efficient transactions, reduction in costs with greater security and less risk.

While various countries have various regulations and legislations which allow contracts to be created and signed electronically, the legal status of the electronic bill of lading seems clear as mud.

UNCITRAL and Model Law on Electronic Transferable Records (2017)

The United Nations Commission on International Trade Law (UNCITRAL) is the core legal body of the United Nations system in the field of international trade law with universal membership specializing in commercial law reform worldwide for over 50 years.

UNCITRAL’s business is the modernization and harmonization of rules on international business and through a Resolution adopted by the General Assembly on 7 December 2017, created the Model Law on Electronic Transferable Records (MLETR).

The aim of MLETR is to enable the legal use of electronic transferable records such as bills of lading, bills of exchange, promissory notes, and warehouse receipts that are functionally equivalent to transferable documents or instruments.

Transferable documents and instruments are essential commercial tools and the availability of these tools in electronic form may be greatly beneficial for facilitating electronic commerce by improving speed and security of transmission, permitting the reuse of data, and automating certain transactions through “smart contracts“.

Electronic transferable records may be particularly relevant in certain business areas of transport and logistics as they make an important contribution to easier and quicker trade facilitation.

According to the MLETR, an electronic transferable record is functionally equivalent to a transferable document or instrument if that record contains the information required to be contained in a transferable document or instrument, and a reliable method is used to:

1. identify that electronic record as the electronic transferable record;
2. render that electronic record capable of being subject to control from its creation until it ceases to have any effect or validity, and (c) retain the integrity of that electronic record.

Adoption of UNCITRAL Model Law on Electronic Transferable Records

Since the adoption of MLETR on 13 July 2017, only 1 country, Bahrain, has adopted this model as legislation and incorporated it into their country’s law.

Bahrain adopted this model in 2018 as part of a series of sweeping reforms aimed at bolstering the digital readiness of the GGC region’s $1.5 trillion economies.

In strategic cooperation with the UNCITRAL Secretariat, Bahrain also revised its existing Electronic Transactions Law with new provisions that align with the United Nations Convention on the Use of Electronic Communications in International Contracts and renamed it the Electronic Communications and Transactions Law.

At the time of the enactment, Khalid Al Rumaihi, Chief Executive of the Bahrain Economic Development Board (EDB), said 

“Bahrain continues to lead the way in digital reforms. The latest achievement of being the first country in the world to adopt the UNCITRAL Model Law on Electronic Transferable Records gives us an unrivaled advantage in the GCC region.

The new laws are a key step forward in achieving the Bahrain Vision 2030 and The Economic Vision 2030 for Bahrain.”

“From a regional perspective, Bahrain has achieved many firsts in its 47-year history – from discovering oil to diversifying its economy, as well as driving innovation through the GCC region’s first FinTech sandbox. We are confident that the new legislation will revolutionize the way we do business, develop talent and create a sustainable trading environment.” Al Rumaihi added.

On the same occasion, Luca Castellani, Secretary of Working Group IV (Electronic Commerce) of the United Nations Commission on International Trade Law (UNCITRAL), “Bahrain is the first country in the world enacting the Model Law on Electronic Transferable Records, which establishes a modern legislative framework for a digital-first economy by legally enabling, for example, the use of blockchain in fintech and logistics.

The adoption of UNCITRAL texts, including the incorporation of additional provisions in the revised Electronic Transactions Law, helps to create confidence in overseas traders and investors that Bahrain is committed to upholding modern commercial law standards and places Bahrain at the forefront of innovation and business-friendliness.”

Singapore becomes the second country to adopt MLETR

In February 2021, Singapore became the second country to adopt this model when they passed The Electronic Transactions (Amendment) Bill in Parliament, to amend the Electronic Transactions Act (ETA), and make consequential and related amendments to the Bills of Lading Act and the Contracts (Rights of Third Parties) Act.

A report on the passing of this bill said “To facilitate electronic transactions for businesses and citizens in Singapore and help businesses benefit from more convenient and secure electronic transactions, the Ministry of Communications & Information (MCI) and the Infocomm Media Development Authority (IMDA) have amended the ETA to adopt the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Transferable Records (MLETR) with modifications into Singapore law, and for the ETA to apply to transferable documents or instruments such as Bills of Lading.”

The ETA facilitates the use of electronic transactions and e-commerce transactions by consumers and businesses. Among other things, the ETA amendments will enable the creation and use of electronic Bills of Lading (eBLs) that are legally equivalent to paper-based Bills of Lading.

Singapore has been encouraging the adoption of eBLs and has conducted technical trails through the TradeTrust digital utility as they realized that adopting this globally harmonized framework will enable the creation and use of ETRs under the law and allow alignment with Singapore’s trading partners, benefitting both domestic and international industry players across the shipping, finance and legal sectors.

The shift from paper-based to digitally-enabled trade will speed up trade processes and promote business confidence, supporting the digital transformation of Singapore as a financial, trading, and maritime hub.

Conclusion

While there is still a long way to go for the wholesale adoption of Electronic Bills of Lading in the industry, initiatives such as these, prove that the industry is well and truly on its way to adopting this on a larger scale.

It must be remembered that the Model Law is an enabling instrument and does not deal with regulatory matters, which should be addressed in the legislation of individual countries. The MLETR comes with several suggestions and information about how electronic bills can be equated to paper bills of lading.

The Model Law permits freedom of choice of third-party service providers, as well as of the type of services requested and of their technology because the expected developments in technology and business practice recommend a flexible approach when assessing the conduct of third-party service providers who provide the services of electronic bills of lading.

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