The UNCITRAL Model Law on Electronic Transferable Records (“MLETR”) is a uniform model law that has been adopted by the United Nations Commission on International Trade Law (UNCITRAL) in 2017. Its scope is to allow the use of transferable documents and instruments in electronic form. Transferable documents and instruments typically include bills of lading, warehouse receipts, bills of exchange, promissory notes and cheques. National law qualifies a document or instrument as transferable.
Transferable documents and instruments allow to request delivery of goods and payment of a sum of money based on possession of the document or instrument. However, it has been difficult to reproduce the notion of possession, which has to do with control over tangible goods, in an electronic environment. The MLETR addresses that legal gap.
Under the MLETR each dematerialised document does not need to be managed in a separate information system, but the same system could manage multiple documents, or also all documents related to a business transactions. This may allow to merge logistics and supply chain, or even commercial and regulatory documents, in a single electronic transferable record.
Economic benefits
A study on the impact of the adoption of a law aligned to the MLETR in the United Kingdom has quantified the benefits of such adoption. Besides economic benefits, which include up to £224 billion in efficiency savings, adoption of such legislation may reduce the number of days needed for processing trade documents by up to 75%.
The impact assessment of the Electronic Trade Documents Bill (see below) prepared by the UK Government estimates in the next 10 years economic benefits ranging from a low estimate of 249.8 million pounds to a high estimate of 2,049.7 million pounds, with a best estimate of 1,137.0 million pounds.
Main provisions
The MLETR is divided in four chapters: general provisions; provisions on functional equivalence; use of electronic transferable records; and cross-border recognition of electronic transferable records.
General provisions
The MLETR is built on the same fundamental principles of other UNCITRAL texts on electronic commerce, namely functional equivalence (articles 8-11 MLETR), technology neutrality and non-discrimination against the use of electronic means (article 7 MLETR).
The MLETR is also model-neutral and may be implemented by using registries, tokens or distributed ledgers. The Explanatory Note to the MLETR provides some guidance on the use of distributed ledgers in implementing the MLETR and is therefore considered an early example of legislative text facilitating the use of blockchain.
Article 2 MLETR defines the notion of electronic transferable record as an electronic record that complies with the requirements of article 10 MLETR. It also defines "transferable document or instrument" as a document that entitles its holder to the payment of a sum of money or the delivery of goods.
Article 6 MLETR legally recognizes the possibility of including metadata in electronic transferable records. It is therefore considered a smart contract enabler.
Provisions on functional equivalence
Articles 8 and 9 MLETR provide functional equivalence rules, respectively, for the paper-based notions of "writing" and "signature". Those articles do not need to be enacted if national law, for instance an electronic transactions act, already contains those notions and they are made applicable by reference to electronic transferable records.
Article 10 MLETR establishes the conditions for functional equivalence between paper-based transferable documents and instruments, on the one hand, and electronic transferable records, on the other hand. Those conditions are: 1) the electronic transferable record shall contain all information required for the corresponding paper-based transferable document or instrument; 2) a reliable method shall be used: a) to identify the electronic transferable record as such; b) to render the electronic transferable record subject to control throughout its life-cycle; c) to retain the integrity of the electronic transferable record throughout its life-cycle.
Article 11 MLETR establishes the functional equivalence rule for possession of a transferable document or instrument. The conditions to satisfy that requirement are the use of a reliable method to establish exclusive control of the electronic transferable record and the identification of the person in control.
Article 10 and 11 MLETR are based on the notions of "control" and "singularity" of the electronic transferable record.