I.A Electronic transactions law: general principles

This section is aimed at identifying the general features of electronic transactions law, including whether they implement internationally recognized general principles.

I.A.1 What is the legal status of electronic transactions?

Electronic transactions are transactions of a commercial or non-commercial nature that take place through electronic means, i.e. by exchanging data messages. “Data message” means information generated, sent, received or stored by electronic, optical or similar means (MLEC art. 2(a)). Examples of electronic means include e-mail, messaging, electronic data interchange (EDI), short message system (SMS) and fax.

National law may accord full or partial legal validity to electronic transactions. This may happen because of a law, regulation or other written legislative text, through judicial decisions or by application of general legal principles.

Article 5 MLEC establishes legal recognition on the basis of the principle of non-discrimination against the use of electronic means.

Article 5. Legal recognition of data messages

Information shall not be denied legal effect, validity or enforceability solely on the grounds that it is in the form of a data message.

Legislation based on the same approach as the uniform model may differ in the language used.

See subsection 8(1) of the Electronic Transactions Act 1999 (Cth) of Australia:

8. Validity of electronic transactions

1) For the purposes of a law of the Commonwealth, a transaction is not invalid because it took place wholly or partly by means of one or more electronic communications.

Other laws take a different approach, recognizing only those electronic transactions that comply with certain requirements.

See section 4 of Nepal’s Ordinance No. 32 of the year 2061 B.S. [2005 A.D.], An Ordinance to provide the provisions for Electronic Transactions:

4. Legal Recognition of Electronic Record:

Where the law in force requires any information, documents, records or any other matters to be kept in written or printed typewritten form, then, if such information, documents, records or the matters are maintained in an electronic form by fulfilling the procedures as stipulated in this Ordinance or the Rules made hereunder, such electronic record shall also have legal validity.

I.A.2 If an electronic transactions law exists, is it based on uniform models?

In several countries, legislation dealing with electronic transactions (often called Electronic Transactions, Electronic Commerce or Electronic Signatures Law) is based on uniform law, i.e. on model legislation that has been prepared by an international body. Uniform law, which may include international standards with or without direct legal effect, can be global or regional. The UNCITRAL Model Laws are examples of global uniform law.

Adoption of model laws indicates the desire of the country to harmonize its laws with those of other countries, which facilitates cross-border electronic exchanges. UNCITRAL legal texts on electronic transactions such as the MLEC and the MLES are examples of laws that are being widely adopted by countries to achieve global harmonization.

I.A.3 What are the conditions, if any, for the legal recognition of electronic transactions?

Laws on electronic transactions may be neutral or specific about the electronic technology to be used in order for them to be recognized as legally valid. “Technology neutral” laws do not prescribe or favour the use of any particular technology, method or product for electronic transaction.

In contrast, “technology specific” laws recognize only those electronic transactions that use a specific technology, method or product – for instance, transactions signed with PKI-based digital signatures, or PKI-based digital signatures originating in the country of origin or from service providers that are licensed by an oversight authority.

Normally, technology neutral laws do not contain an explicit label with this characterization. Rather, it is the whole law that is drafted in a technology neutral manner.

See Article 3 MLES for an example of technology neutral uniform law provision dealing with electronic signatures:

Article 3. Equal treatment of signature technologies

Nothing in this Law, except article 5, shall be applied so as to exclude, restrict or deprive of legal effect any method of creating an electronic signature that satisfies the requirements referred to in article 6, paragraph 1, or otherwise meets the requirements of applicable law.

Technology specific requirements may apply to all types of electronic transactions.

Alternatively, technology specific requirements may apply only to some transactions, such as those exchanged in a certain field (for example, banking) or with certain participants (for example, government and other public agencies). Such requirements may be imposed because security or reliability are considered especially important. In those cases, there may be a law of general application that enables the use of information in electronic form under technology neutral standards, while electronic transactions in certain fields or with special form requirements need to use specified technology.

Article 3 of the Digital Signature Act 1999 of the Republic of Korea deals with the legal effect of a digital signature:

3. Effect, etc. of digital signature.

(1) In cases where a signature, signature and seal, or name and seal is, under other Acts and subordinate statutes, required to be affixed on a paper-based document or letter, it shall be deemed that such requirements are satisfied if there is a certified digital signature affixed on an electronic message.

Paragraph 3 of the same Act introduces an exception to accommodate party autonomy.

(3) A digital signature other than a certified digital signature shall have such an effect of a signature, signature and seal, or name and seal, as is agreed between the parties concerned.

I.A.4 Does the law establish functional equivalence between paper documents and electronic communications?

The law may adopt a “functional equivalence“ approach to give electronic communications the same legal effect as paper-based documents. The principle of functional equivalence establishes that, when certain conditions are met, the legal value of electronic communications is equivalent to that of paper-based documents because they satisfy the same policy function as the paper. This approach allows a legal system not to alter its traditional rules about paper-based documents. It also avoids creating a special legal regime for electronic communications (a so-called “dual regime” approach).

UNCITRAL texts rely on a functional equivalence approach to determine how the purposes and functions of paper-based documents can be fulfilled by electronic communications. For example, the requirement of a document “in writing” aims at making the information contained in that document available beyond the moment of the transaction.

Where the law requires information to be in writing, that requirement is met by a data message if the information contained therein is accessible so as to be usable for subsequent reference. (Article 6(1) MLEC).

I.A.5 What is the legal status of electronic contracts?

Some national laws contain provisions on the legal status of contracts made and performed by electronic means. These provisions aim to ensure that the electronic form of a contract is not in itself a reason to invalidate it. Other legal systems have decided that validating electronic communications will validate contracts in electronic form without mentioning them specifically.

The Electronic Transactions Act 2010 (Cap. 88) of Singapore recognises the legal validity of electronic communications in concluding contracts.

Section 11. Formation and validity of contracts

1. For the avoidance of doubt, it is declared that in the context of the formation of contracts, an offer and the acceptance of an offer may be expressed by means of electronic communications.

2. Where an electronic communication is used in the formation of a contract, that contract shall not be denied validity or enforceability solely on the ground that an electronic communication was used for that purpose.

Moreover, laws can contain other provisions that do not modify the general law of contract but clarify how it can be applied in a digital environment. For instance, they can determine the time of dispatch and receipt of offer, acceptance and other contract-related communications, or they can confirm the validity of the use of automated agents in contract formation and performance. This is the approach taken in UNCITRAL texts, where the rules on electronic contracts are found especially in the MLEC and the ECC.

For instance, S. 14a of the Australian Electronic Transactions Act 1999 (Cth), based on article 10 (2) ECC, specifies the time of receipt of an electronic communication:

14A Time of receipt

(1) For the purposes of a law of the Commonwealth, unless otherwise agreed between the originator and the addressee of an electronic communication:

  1. (a) the time of receipt of the electronic communication is the time when the electronic communication becomes capable of being retrieved by the addressee at an electronic address designated by the addressee; or

  2. (b) the time of receipt of the electronic communication at another electronic address of the addressee is the time when both:

    1. (i) the electronic communication has become capable of being retrieved by the addressee at that address; and

    2. (ii) the addressee has become aware that the electronic communication has been sent to that address.

Section 15 of the Electronic Transactions Act 2010 (Cap. 88) of Singapore adopts verbatim article 12 of the ECC, which provides legal validity to a contract formed by automated message systems:

A contract formed by the interaction of an automated message system and a natural person, or by the interaction of automated message systems, shall not be denied validity or enforceability on the sole ground that no natural person reviewed or intervened in each of the individual actions carried out by the automated message systems or the resulting contract.

As a general rule, therefore, provisions on electronic contracts do not alter the substantive law of contract, whether the law is technology neutral or technology specific.

See Article 9 of the ECC for a technology-neutral provision dealing with a form requirement of an electronic contract.

Article 9. Form requirement

1. Nothing in this Convention requires a communication or a contract to be made or evidenced in any particular form.

For an example of technology specific legislative provision, see rule 3 of the Electronic Transactions Rules 2064 (2007) of Nepal, complementing section 4 of the Ordinance No. 32 of 2005.

3. To Certify Electronic Record

(1) A person intending to certify the electronic record or the information kept in electronic form by digital signature may certify such record or information by fulfilling the following procedures:

(a) by creating hash result by the use of hash function by means of software contained in one’s computer, and

(b) by creating a digital signature from the result under Clause (a) by the use of private key of the person affixing the digital signature by means of software.

(2) Any electronic record certified by digital signature created under Sub-rule (1) and the digital signature certifying such record shall be deemed to be a legally recognized electronic record and digital signature.

I.A.6 Are there special rules for the use of electronic communications in paperless trade?

By definition, trade is paperless if electronic communications are used, so no special rules may be thought to be required for trade once e-communications themselves are validated. However, a large part of paperless trade involves public entities, whether customs authorities or other regulatory agencies protecting the integrity of the national economy and environment. As noted, electronic communications exchanged with public entities may be subject to special requirements.

Accordingly, States may decide to apply general electronic transactions law also to paperless trade or may decide to establish a special legal regime for it. The first approach has the advantage of facilitating the exchange of information between private and public sectors, promoting technical as well as legal interoperability. The second approach may be seen as more secure and better suited for the management of a border operations such as a “single window”.

Often, States decide to introduce safeguards in addition to the general electronic transactions law applying to paperless trade. It is then important to minimize occasions in which the special requirements hinder the flow of trade-related data.

For instance, section 25 of the Electronic Transactions Act 2010 (Cap. 88) of Singapore extends the application of the Act to the use of electronic records by public agencies in that country. Note subsection (2), with relatively restrictive provisions for some cases.

Acceptance of electronic filing and issue of documents

25.—(1) Any public agency that, pursuant to any written law —

(a) accepts the filing of documents, or obtains information in any form;

(b) requires that documents be created or retained;

(c) requires documents, records or information to be provided or retained in their original form;

(d) issues any permit, licence or approval; or

(e) requires payment of any fee, charge or other amount by any method and manner of payment, may, notwithstanding anything to the contrary in such written law, carry out that function by means of electronic records or in electronic form.

(2) In any case where a public agency decides to perform any of the functions in subsection (1) by means of electronic records or in electronic form, the public agency may specify —

(a) the manner and format in which such electronic records shall be filed, created, retained, issued or provided;

(b) where such electronic records have to be signed, the type of electronic signature required (including, if applicable, a requirement that the sender use a particular type of secure electronic signature);

(c) the manner and format in which such signature shall be affixed to the electronic record, and the identity of or criteria that shall be met by any specified security procedure provider used by the person filing the document;

(d) such control processes and procedures as may be appropriate to ensure adequate integrity, security and confidentiality of electronic records or payments; and

(e) any other required attributes for electronic records or payments that are currently specified for corresponding paper documents.

The provision is operationalised in the Singapore Customs Act 2004 (Cap. 70).

Computer service

86.—(1) The Director-General may establish and operate a computer service and make provision for any manifest, return, list, statement, declaration, direction, notice, permit, receipt or other document required or authorised by this Act to be made, served or submitted by electronic transmission (referred to in this Act as an electronic notice).

Declarations to give a full and true account

96.—(1) The declarations referred to in sections 37, 59 and 80 shall, unless the Director-General allows under subsection (2), be made and submitted by an electronic notice in accordance with section 86 and such declaration shall give a full and true account of such particulars as are required by the Director-General.

It is also important to bear in mind the relevant provisions of evidence law. (Electronic evidence is discussed below in part I.E.4.) In the case of Singapore, those are found in the Evidence Act, 1997 (Cap. 97).

The Customs Act 1901 – CEO Determination No. 1 of 2006 in Australia makes a specific provision for electronic communications between businesses and public agencies.

Customs Act 1901 – CEO Determination No. 1 of 2006.

Part 3.02. General requirements for electronic communications

a. A person must communicate with Customs using Public Key Infrastructure (‘PKI’) in accordance with the Commonwealth’s Gatekeeper strategy administered by the Australian Government Information Management Office (within the Department of Finance and Administration).

For information on other States, see the APEC publication Review on Regulations and Policies for E-Port and Single Window in APEC Economies (2016), available at http://www.apmenet.org/wp-content/uploads/2016/07/Review-on-Regulations-and-Policies-for-E-Port-and-Single-Window-in-APEC-Economies.pdf

I.A.7 In particular, are there special rules for the use of trade-related data and documents  in electronic form such as certificates of origin, invoices and phytosanitary certificates?

Even if the law has a technology neutral approach that applies to both private and public sector, special requirements may arise for the use in electronic form of certain types of commercial and trade-related documents.

In particular, the law, including administrative regulations, may set out special requirements for the submission to a single window of documents that are particularly relevant for paperless trade such as manifests, certificates of origin, invoices and phytosanitary certificates. The special requirements may apply to certain kinds of documents only when they will be exchanged across borders.

I.A.8 Are there special rules for the use of electronic transferable records such as bills of lading?

Certain commercial documents are transferable, i.e. they incorporate the entitlement to the delivery of goods that they describe (for example, bills of lading, warehouse receipt) or the payment of money (for example, checks, promissory notes). Bills of lading are particularly relevant for paperless trade facilitation and for logistics. Other transferable documents relate to financing and are relevant for national trade platforms.

Because of their need for special features, notably non-duplication and control (“possession” when on paper), the law requires special rules for their use in electronic form. UNCITRAL has prepared the MLETR to deal with those documents in line with UNCITRAL principles of technology neutrality and functional equivalence.

In certain jurisdictions, special legal regimes exist to enable the use of specific types of electronic transferable records. For example, article 862 of the revised Commercial Act 2016 of Republic of Korea gives legal validity to electronic bills of lading complying with certain requirements.

Article 862. Electronic bills of lading

1. A carrier may issue an electronic bill of lading by means of registration with the registry agency designated by the Ministry of Justice with the consent of a consignor or charterer in lieu of issuance of a bill of lading referred to in Article 852 or 855. In such cases, an electronic bill of lading shall have the same legal effect as bills of lading referred to in Articles 852 and 855.

The related Regulation on the Implementation of the Provisions of the Commercial Act Regarding Electronic Bills of Lading provides details on how electronic bills of lading should be managed and on the requirements by which a registry agency may be licensed.