Uniform law of electronic commerce: fundamentals, recent developments and opportunities to support innovation

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1 Uniform law of electronic commerce: fundamentals, recent developments and opportunities to support innovation Luca Castellani Secretary, Working Group IV (Electronic Commerce)

2 The mandate of 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. 's business is the modernization and harmonization of rules on international business. started working on legal aspects of electronic commerce already in the 1980s: Electronic Data Interchange (EDI), cross-border electronic payments.

3 texts on electronic commerce

4 work on electronic commerce Model Law on Electronic Commerce, 1996 Definition of fundamental terms and notions. 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. Model Law on Electronic Transferable Records, Current work of Working Group IV: legal aspects of identity management and trust services; contractual aspects of cloud computing.

5 Model Law on Electronic Commerce (MLEC) The 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 paperbased 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.

6 Model Law on Electronic Signatures (MLES) The 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.

7 UN Electronic Communications Convention (e-cc) The e-cc builds up on and updates the provisions of 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.

8 Model Law on Electronic Transferable Records (MLETR) 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.

9 Fundamental principles underlying texts

10 Non-discrimination against electronic communications A communication shall not be denied validity on the sole ground that it is in electronic form. Conclusion of contract (Writing, Signature)

11 Functional equivalence Establishes criteria under which purposes and functions of paper-based requirements (e.g. writing, signature, original, archived) may be satisfied.

12 Technology neutrality Different technologies (EDI, , 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. Instant Messaging SMS & MMS Future Technology

13 Party autonomy Parties should be free to choose: whether to use (or not) electronic communications; the technology and security level appropriate for their transactions.

14 texts on e-commerce in the EU A number of provisions have been inserted in texts to facilitate the use of electronic communications in various fields (e.g., arbitration, public procurement, maritime transport). 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?

15 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, ) on legal issues.

16 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)

17 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.

18 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 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 texts bring legal clarity and predictability? Would the adoption of texts promote the use of electronic means in trade?

19 Recent developments and opportunities to support innovation

20 The e-cc as global e-commerce enabler The Convention establishes a common legislative core for crossborder 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 ( e-commerce law 2.0 ).

21 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 The MLETR is a fundamental component of e- commerce law 2.0 Public consultation for its adoption has been conducted in Singapore.

22 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.

23 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).

24 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 e- commerce law 2.0, are enablers of that transformation.

25 Thank you! Děkuji! For more information on the work of in the area of electronic commerce, or on other topics, please visit our web site