Part 1: MLETR, the Model Law on Electronic Transferable Records

Part one of Havona’s three-part series on the frameworks that underpin digital trade and the transfer of electronic records in international trade.

This introduction looks at the role of the United Nations Commission on International Trade Law (UNCITRAL) in developing international frameworks that promote electronic methods in business dealings. The Model Law on Electronic Transferable Records (MLETR) is the framework that gives electronic transferable records (ETRs) legitimate legal footing in domestic and international trade.

Facilitating digital commerce

The goal of the MLETR is to make it possible to use electronic transferable records that are legally binding and can be used in the same way as paper documents or instruments to transfer rights to performance following a transfer of possession. Warehouse receipts, promissory notes, bills of lading, and bills of exchange are all examples of documents that can be transferred this way.

By enabling digital trade transactions, the framework has the potential to make commerce faster and more secure, and to automate steps in a transaction through a rules engine — without depending on any particular technology. The MLETR is expected to be especially helpful for developing economies that want to establish electronic warehouse receipts so farmers can gain access to finance.

Functional equivalence and technology neutrality

Non-discrimination, functional equivalence, and technological neutrality are the cornerstones on which the MLETR is built. An electronic transferable record must meet the same criteria as a paper document or instrument, including being reliably identifiable, capable of being rendered, and kept in its original, unaltered form.

The MLETR places a premium on the concept of control, which is analogous to legal possession of a transferable document or instrument. To establish who holds an electronic transferable record and enforce exclusive control over it, a reliable method must be used. When one party can be positively identified as the controller, possession is established. This is precisely the property Havona enforces cryptographically — exclusive control through a two-of-three institutional signing quorum recorded on the Canton institutional ledger.

Conclusion

The MLETR establishes the rules for the legitimate exchange of electronic records across national borders. With its emphasis on non-discrimination, functional equivalence, and technological neutrality, it enables the widespread use of digital commercial transactions — and supports the use of electronic transferable records in a paperless setting by defining trustworthy methods for identifying, rendering, and protecting the integrity of that data.