Singapore has become the second country to adopt the UNCITRAL Model Law on Electronic Transferable Records (MLETR) into domestic legislation, a move which sees the city-state grant electronic trade documents such as promissory notes and electronic bills of lading (eBLs) the same legal standing as their paper-based counterparts.

As part of the amendment to its electronic documents act last week, Singapore’s Parliament outlined that electronic transferable documents – specifically the digital versions of promissory notes, bills of exchange and bills of lading – will be considered functionally equivalent to paper-based transferable documents or instruments.

Singapore’s Electronic Transactions Act (ETA) has been in force since May 2010, and since then has been working to facilitate electronic transactions through the recognition of electronic signatures and records. But certain matters – including promissory notes, bills of exchange and bills of lading – had been excluded from the scope of the ETA.

The MLETR amendment brings these instruments within the remit of the ETA, and allows for the use of cross-border documents in a provision detailing that electronic documents will be classed as valid whether they are issued or used in Singapore or abroad.

Bryan Tan, a partner at law firm Pinsent Masons, says the electronic documents will, however, have to meet certain requirements.

“The technology needs to contain the same information as the offline document – like the bill of lading – and importantly, there needs to be a reliable method to identify the immutability, the integrity and the originality of the record,” he explains to GTR.

The move comes nearly a year after a call from the International Chamber of Commerce (ICC) for governments to lift legal barriers and put in place frameworks for electronic documents, as banks and businesses – confronted by stay-at-home orders and travel restrictions – worked to hurriedly digitalise their trade processes.

Michael Vrontamitis, co-chair of the ICC working group on digitalisation in trade finance, says that the amendment is a “very significant” step in the digital trade roadmap and will allow for the digital transfer of assets in Singapore, a process not currently backed by legislation in most countries globally.

Vrontamitis adds that in practical terms, this means companies looking to use electronic trade instruments in Singapore – such as the eBL – now do not have to be on the same platform and all signed up to the same agreement, as the rules have been “enshrined into law”.

Previously in Singapore – and as is currently still the case in most jurisdictions – companies or other players involved in trade relied on contract law when using digital instruments such as the eBL, which meant that all parties involved in a transaction had to be onboarded onto a single platform.

The move has been hailed by providers of eBLs, with paperless trade enabler essDocs labelling the amendment a “major milestone” for digital trade. Singapore has become the “first of the world’s leading maritime and trading hubs” to grant an eBL the same legal status as its paper equivalent, the firm adds in a statement.

Paul Mallon, director of legal and regulatory affairs at Bolero International, tells GTR that the amendment is a “significant development” and will lend confidence to SMEs.

“This is extremely helpful. It gives more confidence to typically smaller organisations who might be a little bit reticent to participate. The larger organisations are relatively confident and comfortable in moving forward with digitalisation anyway, but it paves the way for mass market acceptance,” he says.


By MLETR of the law

Alongside digital standards, reforming legal infrastructure has proven to be a thorn in the side of trade digitalisation.

Figureheads in the industry have long voiced concerns over the lack of legal protocols, and have called on governments to adopt the MLETR to remedy these issues and accelerate the digitalisation of trade. Prior to Singapore’s law amendment, Bahrain was the only other nation to have adopted the model law.

Speaking to GTR late last year, Steven Beck, head of trade and supply chain at the Asian Development Bank (ADB), said: “Without having this legal framework in place, we are only going to be able to move so far on the digital agenda.”

With Singapore now giving eBLs, electronic promissory notes and bills of exchange legal footing, there are hopes that governments around the world could follow suit and put in place the legal infrastructure for digital trade.

Vrontamitis says the amendment could act as a template for other common law countries looking to adopt MLETR. “Hopefully, the speed at which they can now adopt it will be faster than before.”

Meanwhile, he points to efforts being carried out in India, South America, the US and the UK, to give legal standing to electronic transferable records.

The Peruvian government, for instance, issued a decree mandating the adoption of eBLs in May last year in response to Covid-19 logistics issues, while the UK Law Commission, is actively working with the ICC to update the Bills of Exchange Act of 1882 to include electronic transferable records.

But Vrontamitis admits there will only be a tipping point for the MLETR when the top 10 – 15 trading nations – who account for 80% of global trade – incorporate it into domestic legislation.

The adoption of the model law by the likes of China, the European Union, Japan, Dubai, the UK and US will be crucial for the digitalisation of trade, he adds.


Further obstacles 

While Singapore’s electronic transaction law amendment is a sign that progress is being made on the rollout of legal frameworks for digital trade documents, Vrontamitis says that there are two further key strands – or “jigsaw pieces” – which need to be in place for trade to transition away from paper.

Digital standards, for one, need to be addressed. He points to the work being done through the ICC’s Digital Standards Initiative (DSI), which was formalised as an entity in March 2020, and launched with seed funding from Singapore and the Asian Development Bank (ADB) later that year.

The initiative aims to create open trade standards to facilitate interoperability among the various blockchain-based networks and technology platforms that have emerged in the trade space over the past few years. In September, Oswald Kuyler joined the initiative as managing director, and at the same time, the ICC also revealed the “operational launch” of the DSI.

Currently, blockchain and other technology platforms in the trade space often cannot connect with one another, or integrate with banks’ existing systems.

Vrontamitis says that a third key hurdle for the digitalisation of trade will be proving or convincing all the various players in a value chain that digital trade has commercial benefits.

“For a transaction between East Africa and Europe, for instance, there’s more than 30 actors involved with hundreds of hand-offs. Given some of these companies will be using paper-based documents and making money regardless, there needs to be a demonstration showing it is possible to continue gaining a profit from the electronic transfer of information, rather than paper.”