Filling in the Gaps: Legislation
The legislative route to recognising the ability of electronic records and processes to have 10.38 equivalent effects to the issue and transfer of certain trade documents could, of course, preclude the need by parties to have resort to the incorporation of convention terms, novation, and attornment within contractual frameworks underlying digital alternatives.
Legislation would also address any uncertainties that cannot be resolved contractually. Two major projects of the United Nations Commission on International Trade Law (‘UNCITRAL’) have attempted to provide avenues for nations to adopt legislation in this space.The United Nations Convention on Contracts for the Carriage of Goods Wholly or Partly by 10.39
Sea 2008 (‘the Rotterdam Rules’) includes provisions on negotiable electronic transport records:size=1 color=black face="Times New Roman">[1073] provided certain requirements are satisfied,[1074] these electronic records are treated as equivalents of negotiable transport records[1075] (or transferable paper bills of lading). The Rotterdam Rules also provide for procedures[1076] to transfer rights against a carrier that make no reference to any paper document.[1077] Both of these sets of provisions can support the replacement of the paper bill of lading with electronic data and processes, precluding the distinct legal treatment of any electronic alternative as long as it complies with relevant requirements. At the time of writing, twenty-five states have signed the Rotterdam Rules, and five have ratified them. The Rotterdam Rules will not come into force until they have gained twenty ratifications,[1078] but in the meantime those provisions could provide legislators, who wish to adopt rules recognising digital equivalents to paper bills of lading, with a reference point.
10.40 Another reference point may be found in the UNCITRAL Model Law on Electronic Transferable Records 2017 (‘MLETR’),[1079] which sets out the requirements that electronic alternatives must satisfy in order to be recognised as capable of achieving the same legal effects, in terms of parties’ rights and liabilities, as paper documents of title and negotiable instruments. If domestic legislation were to be modelled on the MLETR’s provisions and its requirements were fulfilled, then the legal status of digital alternatives to both paper bills of lading and cargo insurance certificates would be clarified.
The principle of technological neutrality ensures that so long as the relevant functional equivalence requirements are satisfied, any technology may be used, including DLT.VII. Conclusion
10.41 This chapter discusses the implications that replacement of paper bills of lading and paper cargo insurance certificates with digital alternatives would have on a financing bank within the current legal environment. It also examines the steps that can be taken to resolve any uncertainties as to such a bank’s legal position as secured creditor. This chapter argues that the majority of these uncertainties may be addressed through carefully designed contractual frameworks. The current embryonic state of the law should not, therefore, stall efforts to introduce, and transact on the basis of, digital alternatives to these commonly used paper documents. This transition is desirable in view of its potential to reduce the costs and delays that diminish the attractiveness of the letter of credit as a financing tool.